Constancia Technical Report Ni 43 101

Norsemont Mining Inc.

CONSTANCIA COPPER PROJECT Definitive Feasibility Study Technical Report NI 43-101 Revision 0 28 September 2009

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Important notice This Constancia Copper Project Technical Report (Technical Report or Report) has been prepared for Norsemont Mining Inc. (Norsemont) by GRD Minproc Limited (GRD Minproc). The Technical Report is intended to be used by Norsemont subject to the terms and conditions of its definitive feasibility study contract with GRD Minproc. That contract permits Norsemont to file this report as a Technical Report with Canadian Securities Regulatory Authorities pursuant to provincial securities legislation. Except for the purposes legislated under provincial securities laws, any other use of this Report by any third part is at that party’s sole risk. The Technical Report should be read in the context of the methodology, procedures and techniques used and GRD Minproc's assumptions, and the circumstances and constraints under which the Technical Report was prepared. The Technical Report is to be read as a whole, and sections or parts of it should not be read or relied upon out of context. GRD Minproc has, in preparing the Technical Report, followed methodology and procedures, and exercised due care consistent with the intended level of accuracy of the study on which it is based, using its professional judgment and reasonable care. However, no warranty is given regarding the accuracy of estimates and other assumed values. It should also be borne in mind that all figures contained in the Technical Report are valid only as at the date of the Technical Report and may vary thereafter. GRD Minproc does not take responsibility for or adopt as its own sections of the Report prepared by or for information supplied by third persons or Qualified Persons not employed or engaged by GRD Minproc. This notice, which is an integral part of the Report, must accompany every copy of the Report.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Title Page Project Name: Title: Location:

Constancia Copper Project Definitive Feasibility Study Technical Report Province of Chumbivilcas, Department of Cusco, Peru

Effective Dates: Effective Date of Technical Report: Effective Date of Mineral Reserves: Effective Date of Mineral Resources:

28 September 2009 28 September 2009 28 September 2009

Qualified Persons: 

David D. (Dan) Greig, B.Sc, M.A.I.G. (1684-1722), employed by GRD Minproc Limited as Principal Geologist, was responsible for overall preparation of the report.



Lynn Widenbar, B.Sc. (Geology), M.Sc., MAusIMM, employed by GRD Minproc Limited as a Geological Consultant, was responsible for data quality verification (Section 14) and for resource modelling and reporting (Section 17).



Ross Oliver, B.Eng (Mining), Aus.I.M.M. 105137, employed by GRD Minproc Limited as Manager Mining & Geology, was responsible for the preparation of Section 17.14 on Mineral Reserves and Section 18.1 covering Mining.



Greg Harbort, B.Eng (Met), University of Qld, 1985; Ph.D. University of Qld, 2005; MAusIMM Principal Process engineer for GRD Minproc Limited, was responsible for Mineral Processing and Metallurgical Testwork (Section 16), and for Plant Operating Costs and site infrastructure operating costs (Section18.14).



Craig Cuttriss, B.Sc, M.Eng, R.P.E.Q., MAusIMM, Principal Process Engineer and Study Manager for GRD Minproc Limited,was responsible for GRD Minproc’s engineering aspects of the Project as contained in Section 18.4, Section 18.9, Section 18.11, Section 18.13 and Section 18.17.



Thomas F. Kerr, M.Sc., President of Knight Piésold and Co. USA, Registered Professional Engineer (Civil and Geotechnical), P.Eng., in British Columbia (#14906) and Ontario (#90407230) and P.E. in California (#C49260) and Alaska (#10969), was responsible for information relating to the site geotechnical investigations, and design and costing of the Tailings Storage Facility and water management systems as described in Section 18.2 (excluding Section 18.2.2), Section 18.6, Section 18.7 and Section 18.13.5.



Robert Cummings, M.Sc. Geol. Eng., Registered Professional Engineer in Arizona, Geotechnical Consultant and Principal of Saguaro Geoservices, was responsible for development of pit slope stability analyses and design parameters in Section 18.1.3 and Section 18.2.2.

Other Expert contributors: 

Carol Fries, Vice President of Health, Safety, Environment and Community Relations for Norsemont Mining Inc., responsible for the preparation of the Environmental Social Impact Assessment and the preparation of information provided in Sections 5 and 18.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0



Gaston Loyola, MAusIMM, Vice President Exploration for Norsemont Mining Inc. is responsible for Norsemont’s exploration, drilling, sampling and data quality activities as described in Sections 7 to 13, and for Norsemont’s geological modelling (Section 17).



Christopher Gilmour, B.Eng (Civil), R.P.E.Q. (7126), M.I.E.Aust, CP.Eng, Operational Manager for GRD Minproc Limited, Brisbane, was responsible for the preparation of the capital costs estimate as detailed in Section 18.13.



Alan Ekstrom, Dip.E.Eng, R.P.E.Q. (9013), M.I.E. Aust. Leading Electrical and Instrumentation Engineer for GRD Minproc Limited, responsible for electrical, instrumentation and controls engineering as described in Section 18.4.3 and Section 18.4.4.



Ross Oliver, B.Eng (Mining), Aus.I.M.M. 105137, employed by GRD Minproc Limited as Manager Mining and Geology, responsible for preparation of the pre-tax financial model (part of Section 18.16).



Jorge Picon financial consultant to Norsemont is responsible for preparation of the post-tax financial model (part of Section 18.16).



David Evans, M.App.Sc. University of New South Wales, Australia, Principal Hydrogeologist for MWH Peru, was responsible for hydrogeological components of the environmental impact assessment and feasibility study.



Jean Cho, Ph.D. Princeton. P.Eng. British Columbia, Canada (Registration number 24635), was responsible for the numerical hydrogeological modeling and impact analysis.



Luis Yafac, B.Sc. Eng., Univ. National de Ingeniera (Mining), Project Manager of SIGT S.A., a Columbian consulting company which provides services in design and supervision of roads and highways, supervised the design and costing for the access road to the project (Section 18.5.1).



Mario Rojas Garay, B.Sc. Eng Universidad Nacional de Ingeniería, Engineer in Projects and Power Generation and Transmission for Cesel Ingenieros S.A., undertook design and costing for the Constancia project sub-stations in Section 18.5.4.



Pablo Lozano Ramon Chavez, B.Sc. Eng Universidad Nacional de Ingeniería, electrical engineer and Head of studies for Cesel Ingenieros S.A., was responsible for the design and costing of the HT power line in Section 18.5.4.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table of Contents Important notice ............................................................................................................ i 1. 1.1 1.2

1.3

1.4

1.5

1.6

1.7

SUMMARY............................................................................................................. 19 INTRODUCTION...............................................................................................................................19 GEOLOGY AND MINERAL RESOURCES.......................................................................................21 1.2.1 Geological setting, mineralisation and alteration...............................................................21 1.2.2 Exploration.........................................................................................................................22 1.2.3 Mineral resource estimation ..............................................................................................23 1.2.4 Mineral resources ..............................................................................................................24 MINING .............................................................................................................................................25 1.3.1 Introduction ........................................................................................................................25 1.3.2 Pit optimisation and pit design...........................................................................................25 1.3.3 Mineral reserve ..................................................................................................................26 1.3.4 Mine and process schedules .............................................................................................27 1.3.5 Mine fleet assessment .......................................................................................................27 1.3.6 Mine capital costs ..............................................................................................................28 1.3.7 Mine operating cost ...........................................................................................................31 GEOTECHNICAL INVESTIGATIONS ..............................................................................................31 1.4.1 Site investigations..............................................................................................................31 1.4.2 Pit geotechnical design......................................................................................................32 1.4.3 Subsurface conditions .......................................................................................................35 1.4.4 Construction materials .......................................................................................................35 1.4.5 Seismic conditions .............................................................................................................35 METALLURGICAL TESTWORK.......................................................................................................36 1.5.1 Testwork sample selection ................................................................................................36 1.5.2 Comminution testwork .......................................................................................................36 1.5.3 Flotation testwork...............................................................................................................37 PROCESS DESCRIPTION AND PLANT DESIGN...........................................................................38 1.6.1 Throughput ........................................................................................................................40 1.6.2 Crushing ............................................................................................................................41 1.6.3 Grinding .............................................................................................................................41 1.6.4 Copper flotation .................................................................................................................42 1.6.5 Molybdenum flotation.........................................................................................................42 1.6.6 Copper thickening and filtration .........................................................................................42 1.6.7 Molybdenum thickening and filtration ................................................................................42 1.6.8 Tailing thickening ...............................................................................................................43 1.6.9 Tailing water reclaim..........................................................................................................43 1.6.10 Concentrate storage and loadout ......................................................................................43 1.6.11 Water services ...................................................................................................................43 1.6.12 Reagents ...........................................................................................................................43 1.6.13 On stream analysis and laboratory....................................................................................43 WASTE MANAGEMENT...................................................................................................................44 1.7.1 Waste rock facility (WRF) ..................................................................................................44 1.7.2 Tailings management facility (TMF) ..................................................................................45

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.8

1.9

1.10

1.11

1.12 1.13

1.14

1.15 1.16

1.17

1.7.3 Topsoil and unsuitable material stockpiles ........................................................................46 INFRASTRUCTURE .........................................................................................................................46 1.8.1 Access roads .....................................................................................................................46 1.8.2 Water supply......................................................................................................................47 1.8.3 Power supply .....................................................................................................................48 1.8.4 Internal roads.....................................................................................................................50 1.8.5 Buildings ............................................................................................................................50 1.8.6 Construction and accommodation camp ...........................................................................51 1.8.7 Concentrate transport and shipping ..................................................................................51 WATER MANAGEMENT ..................................................................................................................51 1.9.1 Process water ....................................................................................................................52 1.9.2 Water balance....................................................................................................................53 1.9.3 Non-process water.............................................................................................................53 ENVIRONMENTAL AND SOCIAL CONSIDERATIONS...................................................................54 1.10.1 ESIA...................................................................................................................................54 1.10.2 Stakeholder mapping.........................................................................................................55 1.10.3 Status of land ownership in the communities of Uchucarco and Chilloroya......................56 1.10.4 Impact identification and evaluation ..................................................................................56 1.10.5 Environmental management plan......................................................................................56 1.10.6 Resettlement Action Plan (RAP) .......................................................................................57 1.10.7 Community relations plan ..................................................................................................57 1.10.8 Health, safety and environment (HSE) management and monitoring plan .......................58 1.10.9 Closure plan.......................................................................................................................59 PROJECT IMPLEMENTATION PLAN..............................................................................................60 1.11.1 Approach and strategy.......................................................................................................60 1.11.2 Quality assurance ..............................................................................................................61 1.11.3 Project implementation schedule.......................................................................................61 1.11.4 Civil construction fleet........................................................................................................63 PROJECT OPERATIONAL PLAN ....................................................................................................64 CAPITAL COST ESTIMATE .............................................................................................................65 1.13.1 Initial project capital ...........................................................................................................65 1.13.2 Sustaining capital...............................................................................................................66 OPERATING COST ESTIMATES ....................................................................................................66 1.14.1 Mine operating cost ...........................................................................................................67 1.14.2 Plant and infrastructure costs ............................................................................................67 1.14.3 General and administration ...............................................................................................68 1.14.4 Off-site charges .................................................................................................................68 1.14.5 Royalties ............................................................................................................................69 MARKETING, PRODUCT PRICING AND TREATMENT CHARGES ..............................................69 PROJECT FINANCIAL ANALYSIS...................................................................................................70 1.16.1 Background........................................................................................................................70 1.16.2 Summary ...........................................................................................................................73 1.16.3 Pre-tax analysis .................................................................................................................73 1.16.4 Post-tax analysis................................................................................................................74 CONCLUSIONS................................................................................................................................77 1.17.1 Project overview ................................................................................................................77

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.18

1.17.2 Risks and opportunities .....................................................................................................77 RECOMMENDATIONS.....................................................................................................................79 1.18.1 Mineral resources ..............................................................................................................79 1.18.2 Mining and mineral reserves .............................................................................................79 1.18.3 Geotechnical and hydrogeological studies ........................................................................79 1.18.4 Process testwork and plant design....................................................................................80 1.18.5 Environmental and permitting............................................................................................80

2. 2.1 2.2 2.3 2.4 2.5 2.6

INTRODUCTION.................................................................................................... 81 BACKGROUND ................................................................................................................................81 SCOPE OF WORK ...........................................................................................................................81 SOURCES OF INFORMATION ........................................................................................................82 SITE INSPECTIONS.........................................................................................................................82 CONTRIBUTORS TO THE REPORT ...............................................................................................83 DISCLOSURE OF INTEREST ..........................................................................................................85

3.

RELIANCE ON OTHER EXPERTS .......................................................................... 86

4. 4.1 4.2 4.3 4.4

PROPERTY DESCRIPTION AND LOCATION ......................................................... 87 GENERAL LOCATION......................................................................................................................87 PERUVIAN MINING LAW .................................................................................................................87 CONSTANCIA MINING CONCESSIONS.........................................................................................88 MINERAL RIGHTS OWNERSHIP ....................................................................................................91 4.4.1 Rio Tinto purchase.............................................................................................................91 4.4.2 Mitsui Mining and smelting purchase ................................................................................93 SURFACE RIGHTS ..........................................................................................................................93 ENVIRONMENTAL REGULATIONS ................................................................................................95

4.5 4.6 5. 5.1 5.2 5.3 5.4

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ................................................................................................... 97 ACCESSIBILITY ...............................................................................................................................97 CLIMATE AND VEGETATION..........................................................................................................97 LOCAL RESOURCES AND INFRASTRUCTURE............................................................................98 GEOMORPHOLOGY ........................................................................................................................99

6.

HISTORY............................................................................................................. 100

7. 7.1 7.2

GEOLOGICAL SETTING ...................................................................................... 101 DISTRICT GEOLOGY.....................................................................................................................101 PROPERTY GEOLOGY .................................................................................................................102 7.2.1 Stratigraphy .....................................................................................................................103 7.2.2 Intrusions .........................................................................................................................104 7.2.3 Alteration..........................................................................................................................105 7.2.4 Structural geology............................................................................................................106

8.

DEPOSIT TYPES ................................................................................................. 108

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

9. 9.1 9.2

MINERALISATION AND ALTERATION ................................................................ 109 CONSTANCIA.................................................................................................................................109 SAN JOSÉ ......................................................................................................................................110

10. 10.1 10.2 10.3

EXPLORATION.................................................................................................... 111 SURFACE MAPPING AND SAMPLING .........................................................................................111 GEOPHYSICS ................................................................................................................................111 EXPLORATORY DRILLING ...........................................................................................................117

11.

DRILLING ............................................................................................................ 119 11.1.1 Collar location ..................................................................................................................120 11.1.2 Rig setup..........................................................................................................................121 11.1.3 Downhole survey .............................................................................................................121

12. 12.1

12.4

SAMPLING METHODS AND APPROACH ............................................................. 122 DRILLHOLE SAMPLING METHODS NORSEMONT 2007-2008...................................................122 12.1.1 Sample collection.............................................................................................................122 12.1.2 Drillhole logging ...............................................................................................................123 12.1.3 Density measurements ....................................................................................................123 12.1.4 Sample preparation, analysis and security......................................................................123 CORE SAMPLING ..........................................................................................................................124 QAQC PROCEDURES ...................................................................................................................124 12.3.1 Field duplicates................................................................................................................124 12.3.2 Blanks ..............................................................................................................................124 12.3.3 Standards ........................................................................................................................125 12.3.4 Other QAQC samples......................................................................................................125 12.3.5 Referee laboratory ...........................................................................................................126 STATEMENT ON SAMPLE PREPARATION AND ANALYSIS ......................................................126

13.

SAMPLE PREPARATION, ANALYSES AND SECURITY ....................................... 127

14. 14.1

DATA VERIFICATION.......................................................................................... 128 NORSEMONT INTERNAL DATA VERIFICATION.........................................................................128 14.1.1 Collar location ..................................................................................................................128 14.1.2 Downhole survey .............................................................................................................128 14.1.3 QAQC data verification ....................................................................................................128 14.1.4 Database generation and validation ................................................................................128 GRD MINPROC DATA VERIFICATION .........................................................................................129 14.2.1 Drilling ..............................................................................................................................129 14.2.2 Sampling..........................................................................................................................129 14.2.3 QAQC data verification ....................................................................................................129 14.2.4 Collar location ..................................................................................................................138 14.2.5 Downhole survey .............................................................................................................138 14.2.6 Sample database integrity ...............................................................................................139 14.2.7 Independent samples ......................................................................................................139 14.2.8 Core recovery considerations..........................................................................................139

12.2 12.3

14.2

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

15.

ADJACENT PROPERTIES.................................................................................... 141

16. 16.1

MINERAL PROCESSING AND METALLURGICAL TESTING ................................ 142 PRE-DFS TEST WORK ..................................................................................................................142 16.1.1 Iditec-Chile.......................................................................................................................142 16.1.2 Plenge Laboratories.........................................................................................................142 16.1.3 SGS Chile test work.........................................................................................................145 16.1.4 SGS Canada flotation variability tests .............................................................................146 DFS METALLURGICAL TESTWORK ............................................................................................148 16.2.1 Mineralogy .......................................................................................................................149 16.2.2 Comminution....................................................................................................................150 16.2.3 Flotation ...........................................................................................................................152 PROCESS DESIGN CRITERIA......................................................................................................164 16.3.1 Grinding ...........................................................................................................................164 16.3.2 Copper flotation ...............................................................................................................165 16.3.3 Molybdenum flotation.......................................................................................................166 16.3.4 Copper thickening and filtration .......................................................................................168 16.3.5 Molybdenum thickening and filtration ..............................................................................168 16.3.6 Tailings thickening ...........................................................................................................168 16.3.7 Concentrate storage ........................................................................................................169 16.3.8 Water services .................................................................................................................169 16.3.9 Reagents .........................................................................................................................170 PROCESS PLANT DESCRIPTION ................................................................................................170 16.4.1 Overview..........................................................................................................................170

16.2

16.3

16.4

17. 17.1 17.2 17.3 17.4

17.5

17.6 17.7

17.8

MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ............................ 172 INTRODUCTION.............................................................................................................................172 DATA PROVIDED TO GRD MINPROC..........................................................................................172 DATA PREPARATION....................................................................................................................173 SURFACE AND SOLID WIREFRAME DATA GENERATION........................................................174 17.4.1 Lithology model................................................................................................................174 17.4.2 Mineralisation domain model...........................................................................................180 17.4.3 Copper grade shell model................................................................................................184 17.4.4 Zinc grade shell model.....................................................................................................186 17.4.5 Skarn ore type domain.....................................................................................................188 17.4.6 Topography......................................................................................................................196 SAMPLE CODING ..........................................................................................................................198 17.5.1 Flagging by lithology domain ...........................................................................................198 17.5.2 Flagging by mineralisation domain ..................................................................................198 17.5.3 Flagging by copper and zinc grade shells .......................................................................198 DATA COMPOSITING ....................................................................................................................198 STATISTICAL ANALYSIS AND VARIOGRAPHY ..........................................................................200 17.7.1 Statistical analysis by domain..........................................................................................200 17.7.2 Outlier analysis (capping) ................................................................................................200 17.7.3 Variography .....................................................................................................................207 BLOCK MODEL CONSTRUCTION ................................................................................................210

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

17.9

17.10 17.11 17.12 17.13 17.14 18. 18.1

18.2

18.3

18.4

17.8.1 Preparation ......................................................................................................................210 17.8.2 Lithological modelling (LITH) ...........................................................................................211 17.8.3 Mineralisation modelling (ZONE).....................................................................................212 17.8.4 Cu grade shell modelling (02CU) ....................................................................................214 17.8.5 Zn grade shell modelling (ZNZONE) ...............................................................................214 17.8.6 Sub-model consolidation .................................................................................................214 GRADE ESTIMATION ....................................................................................................................214 17.9.1 Domain control on estimation ..........................................................................................215 17.9.2 Search strategy................................................................................................................215 17.9.3 Unfolding..........................................................................................................................216 17.9.4 High grade capping..........................................................................................................217 17.9.5 Other parameters.............................................................................................................217 DENSITY ASSIGNMENT................................................................................................................217 RESOURCE CLASSIFICATION .....................................................................................................218 MODEL VALIDATION .....................................................................................................................222 MINERAL RESOURCE REPORTING ............................................................................................228 MINERAL RESERVES....................................................................................................................236 OTHER RELEVANT DATA AND INFORMATION .................................................. 237 MINING STUDIES...........................................................................................................................237 18.1.1 Introduction ......................................................................................................................237 18.1.2 Pit optimisation ................................................................................................................238 18.1.3 Pit design .........................................................................................................................243 18.1.4 Mineral Reserve...............................................................................................................251 18.1.5 Mine and process schedules ...........................................................................................253 18.1.6 Ore types and batching....................................................................................................258 18.1.7 Mine fleet assessment .....................................................................................................259 18.1.8 Mine operating cost .........................................................................................................262 18.1.9 Mine capital cost ..............................................................................................................265 GEOTECHNICAL STUDIES ...........................................................................................................268 18.2.1 Introduction ......................................................................................................................268 18.2.2 Open pit geotechnical investigations, design parameters and slope angles...................273 18.2.3 Geotechnical investigations at the TMF, PAG WRF and plant site.................................281 18.2.4 Borrow materials..............................................................................................................283 18.2.5 Natural hazards and slope stability..................................................................................283 18.2.6 Seismic risk analysis........................................................................................................284 HYDROGEOLOGICAL STUDIES...................................................................................................285 18.3.1 Introduction ......................................................................................................................285 18.3.2 Hydrogeological investigations and results .....................................................................286 18.3.3 Numerical seepage modelling and affects analysis ........................................................288 18.3.4 Open pit seepage and dewatering...................................................................................289 18.3.5 Tailings management facility seepage ............................................................................290 18.3.6 Waste rock facility seepage.............................................................................................290 PROCESS PLANT DESIGN ...........................................................................................................291 18.4.1 General layout and description........................................................................................291 18.4.2 Facility description ...........................................................................................................292

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

18.5

18.6

18.7

18.8

18.9

18.10

18.11 18.12

18.13

18.4.3 Electrical ..........................................................................................................................303 18.4.4 Instrumentation and control .............................................................................................309 18.4.5 Buildings ..........................................................................................................................310 INFRASTRUCTURE .......................................................................................................................314 18.5.1 Access road .....................................................................................................................314 18.5.2 Water supply....................................................................................................................320 18.5.3 Accommodation camp .....................................................................................................321 18.5.4 Power supply ...................................................................................................................322 WATER MANAGEMENT ................................................................................................................326 18.6.1 Introduction ......................................................................................................................326 18.6.2 Process water ..................................................................................................................328 18.6.3 Water balance..................................................................................................................329 18.6.4 Non-process water...........................................................................................................331 WASTE MANAGEMENT.................................................................................................................332 18.7.1 Waste rock facility............................................................................................................332 18.7.2 Tailings management facility ...........................................................................................334 18.7.3 Topsoil and unsuitable material stockpiles ......................................................................339 PORT AND TRANSPORT ..............................................................................................................339 18.8.1 Introduction ......................................................................................................................339 18.8.2 Management of concentrates ..........................................................................................340 18.8.3 Transportation..................................................................................................................340 18.8.4 Port management ............................................................................................................340 PROJECT IMPLEMENTATION PLAN............................................................................................341 18.9.1 Approach and strategy.....................................................................................................341 18.9.2 Quality assurance ............................................................................................................343 18.9.3 Project construction fleet .................................................................................................344 18.9.4 Project implementation schedule.....................................................................................346 18.9.5 Permits and licences........................................................................................................348 PROJECT OCCUPATIONAL HEALTH, SAFETY, ENVIRONMENT AND SECURITY..................349 18.10.1 Occupational health and safety .......................................................................................349 18.10.2 Security ............................................................................................................................349 PROJECT OPERATIONAL PLAN ..................................................................................................350 ENVIRONMENTAL CONSIDERATIONS........................................................................................351 18.12.1 Legal framework ..............................................................................................................351 18.12.2 Environmental impact assessment..................................................................................352 18.12.3 HSE management and monitoring plan...........................................................................363 18.12.4 Closure plan.....................................................................................................................364 CAPITAL COST ..............................................................................................................................367 18.13.1 Summary .........................................................................................................................367 18.13.2 Mining capital cost estimate ............................................................................................369 18.13.3 Process plant and associated infrastructure capital cost estimate..................................369 18.13.4 Indirect cost estimate (EPCM).........................................................................................370 18.13.5 Waste management facilities and water infrastructure capital cost estimate..................372 18.13.6 Infrastructure capital cost estimate..................................................................................372 18.13.7 Owners civil construction costs .......................................................................................374 18.13.8 Owners cost estimate ......................................................................................................375

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

18.17

18.13.9 Contingency.....................................................................................................................375 OPERATING COSTS......................................................................................................................376 18.14.1 Summary .........................................................................................................................376 18.14.2 Mining - operating cost estimate......................................................................................377 18.14.3 Process plant and associated infrastructure - operating cost estimate...........................378 18.14.4 General and administration - operating cost estimate.....................................................381 18.14.5 Off-site operating cost estimate.......................................................................................384 18.14.6 Royalty – cost estimate....................................................................................................384 MARKETING, TREATMENT CHARGES AND PRODUCT PRICING ............................................385 PROJECT FINANCIAL ANALYSIS.................................................................................................388 18.16.1 Summary .........................................................................................................................388 18.16.2 Key project assumptions..................................................................................................388 18.16.3 Pre-tax analysis ...............................................................................................................392 18.16.4 Post-tax Analysis .............................................................................................................398 RISK ASSESSMENT ......................................................................................................................402

19.

INTERPRETATION AND CONCLUSIONS............................................................. 406

20. 20.1 20.2 20.3 20.4 20.5 20.6 20.7

RECOMMENDATIONS FOR FURTHER WORK ..................................................... 409 RESOURCES .................................................................................................................................409 MINING ...........................................................................................................................................409 GEOTECHNICAL AND HYDROGEOLOGICAL STUDIES.............................................................409 METALLURGICAL TESTWORK.....................................................................................................410 INFRASTRUCTURE .......................................................................................................................411 ESIA AND PERMITTING ................................................................................................................411 PROJECT IMPLEMENTATION ......................................................................................................411

21.

REFERENCES...................................................................................................... 412

22.

DATE AND SIGNATURE PAGE ............................................................................ 413

23.

ADDITONAL REQUIREMENTS FOR TECHNICAL REPORTS ON PRODUCTION AND DEVELOPMENT PROPERTIES .................................................................... 415

24.

ILLUSTRATIONS................................................................................................. 416

25.

ANNEXURES ....................................................................................................... 417

18.14

18.15 18.16

List of Attachments Appendix 1 Permits Appendix 2 Picon & Asociados Tax Opinion

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

List of Tables Table 1.1 Constancia Project Global Mineral Resource Estimate (0.25% Cu Cut-off)...........................24 Table 1.2 Constancia Project Global Mineral Resource Estimate (0.20% Cu Cut-off)...........................24 Table 1.3 Constancia Project Global Mineral Resource Estimate (0.15% Cu Cut-off)...........................25 Table 1.4 Constancia Project Mineral Reserves....................................................................................26 Table 1.5 Equipment Fleet, Capital and Hourly Operating Costs ..........................................................28 Table 1.6 Mine Capital Costs by Component ........................................................................................29 Table 1.7 Mine Capital, Sustaining and Replacement Costs ($ M)........................................................30 Table 1.8 Expected Elemental Recoveries ............................................................................................38 Table 1.9 Theoretical Maximum Throughput For Each Ore Type..........................................................40 Table 1.10 Plant Design Throughput Rate ............................................................................................41 Table 1.11 Civil Construction Fleet........................................................................................................64 Table 1.12 Constancia Project Capital Cost Estimate ...........................................................................65 Table 1.13 Summary Operating Cost Estimate .....................................................................................66 Table 1.14 Mine Operating Costs ..........................................................................................................67 Table 1.15 Plant and Associated Infrastructure Operating Cost Estimate .............................................68 Table 1.16 G&A Operating Cost Estimate .............................................................................................68 Table 1.17 Off-site Operating Costs ......................................................................................................69 Table 1.18 Royalty Costs.......................................................................................................................69 Table 1.19 Operating Cost Inputs to Financial Model............................................................................70 Table 1.20 Metal Price Assumptions in Cashflow Model .......................................................................71 Table 1.21 Production Schedule for Cashflow Model ............................................................................72 Table 1.22 Constancia Project After Tax Analysis Summary.................................................................73 Table 1.23 Tax and Depreciation Rates ................................................................................................75 Table 1.24 Post-tax Project Sensitivity Analysis ....................................................................................76 Table 2.1 Contributors to Constancia DFS Technical Report ................................................................84 Table 4.1 Constancia Concessions .......................................................................................................90 Table 4.2 Constancia Concession Grants .............................................................................................91 Table 4.3 Option Exercise Schedule .....................................................................................................92 Table 4.4 Private Lands Summary ........................................................................................................93 Table 5.1 Travel Distance and Time to Constancia ...............................................................................97 Table 11.1 Drilling Programmes by Year (in metres drilled) ................................................................119 Table 11.2 Drilling Programmes (to 6 June 2009) ...............................................................................120 Table 12.1 Recommended Values for Standards ................................................................................125 Table 16.1 Iditec-Chile Flotation Recoveries .......................................................................................142 Table 16.2 Plenge Laboratories Phase 1 Locked Cycle Test Results – Hypogene Ore ......................143 Table 16.3 Plenge Laboratories Phase 1 Supergene Locked Cycle Test Results...............................143 Table 16.4 Plenge Laboratories Phase 1 Locked Cycle Test Results – Skarn Ore .............................143 Table 16.5 Plenge Laboratories Phase 2 Locked Cycle Test Results (July 4, 2008)...........................144 Table 16.6 Plenge Laboratories Phase 2 Selected Locked Cycle Test Results ..................................145 Table 16.7 Historical SGS Chile Comminution Test Work ...................................................................145 Table 16.8 SGS Canada Rougher Flotation Variability Testing Conditions .........................................146 Table 16.9 SGS Canada Rougher Flotation Variability Testing Results – Supergene Ore..................146 Table 16.10 SGS Canada Rougher Flotation Variability Testing Results – Hypogene Ore.................147 Table 16.11 SGS Canada Rougher Flotation Variability Testing Results – Skarn Ore........................147

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Table 16.12 Ore Zone Samples...........................................................................................................148 Table 16.13 Collectors Evaluated in Supergene Rougher Flotation ....................................................152 Table 16.14 Conditions for Supergene Locked Cycle Tests ................................................................153 Table 16.15 Results from Variability Testing on Supergene Ore Samples ..........................................154 Table 16.16 Test Conditions for the Hypogene Locked Cycle Test Work............................................155 Table 16.17 Results From Hypogene Locked Cycle Tests..................................................................155 Table 16.18 Results from Variability Testing on Hypogene Ore Samples ...........................................156 Table 16.19 Deep Hypogene Samples Tested at 75 µm and 106 µm .................................................156 Table 16.20 Conditions Used in Locked Cycle Test Work on Medium-Zinc Skarn Ore .......................157 Table 16.21 Results from Medium-Zinc Locked Cycle Tests...............................................................158 Table 16.22 Simulated Molybdenum Grade/Recovery as a Function of Cleaning Stages...................159 Table 16.23 Anticipated Molybdenum Concentrate .............................................................................160 Table 16.24 Final Molybdenum Product Elemental Composition ........................................................161 Table 16.25 Pressure Filtration Results...............................................................................................164 Table 16.26 Summary of Design Ore Parameters – Grinding .............................................................165 Table 16.27 Summary of Copper Flotation Design Criteria .................................................................165 Table 16.28 Molybdenum Flotation Recovery and Concentrate Grade ...............................................166 Table 16.29 Summary of Molybdenum Flotation Design Criteria.........................................................167 Table 16.30 Copper Concentrate Thickening and Filtration Specification ...........................................168 Table 16.31 Molybdenum Concentrate Thickening and Filtration Specification...................................168 Table 16.32 Tailings Thickening Specification.....................................................................................169 Table 16.33 Concentrate Storage Specification ..................................................................................169 Table 16.34 Water Services Specification ...........................................................................................169 Table 16.35 Reagent Specification Summary......................................................................................170 Table 17.1 Quantities of SK2 Skarn in Model ......................................................................................195 Table 17.2 Variogram Model Parameters ............................................................................................208 Table 17.3 Model Prototype Parameters .............................................................................................210 Table 17.4 Search Parameters............................................................................................................216 Table 17.5 Density Assignment ...........................................................................................................218 Table 17.6 Resource Classification Criteria.........................................................................................219 Table 17.7 Statistical Comparison between Means of Composite and Model Data – Lithology Model............................................................................................................................223 Table 17.8 Statistical Comparison between Means of Composite and Model Data – Lithology Model............................................................................................................................224 Table 17.9 Statistical Comparison between Means of Composite and Model Data – Mineral Zonation Model.............................................................................................................224 Table 17.10 Constancia Project Global Mineral Resource Estimate 0.25% Cu Cut-off .......................229 Table 17.11 Constancia Project Global Mineral Resource Estimate 0.20% Cu Cut-off .......................229 Table 17.12 Constancia Project Global Mineral Resource Estimate at Various Cu Cut-off .................230 Table 17.13 Constancia Project Global Mineral Resource Estimate – Constancia Main Orebody ......231 Table 17.14 Constancia Project Global Mineral Resource Estimate – San José Orebody..................232 Table 17.15 Constancia Project Global Mineral Resource Estimate – Domain MP1...........................233 Table 17.16 Constancia Project Global Mineral Resource Estimate – Domain Skarn.........................234 Table 17.17 Constancia Project Global Mineral Resource Estimate – Domain Supergene.................235 Table 17.18 Constancia Project Global Mineral Reserve Estimate .....................................................236 Table 18.1 Pit Optimisation Parameters - NSR Calculation.................................................................239

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 18.2 Optimisation Parameters - Operating Costs and Throughput Rates..................................240 Table 18.3 Pit Optimisation Parameters - Concentrator Recoveries ...................................................241 Table 18.4 Pit Optimisation Parameters - Concentrate Grades...........................................................242 Table 18.5 Pit Design Inventories........................................................................................................247 Table 18.6 Constancia Project Global Mineral Reserve Estimate .......................................................251 Table 18.7 Constancia Project Mineral Reserve by Pit Stage .............................................................251 Table 18.8 Constancia Project Mineral Reserve by Ore Type .............................................................252 Table 18.9 Constancia Project Mineral Reserve by Operating Margin ................................................252 Table 18.10 Low Margin Mineralisation excluded from the Mineral Reserve.......................................253 Table 18.11 Annual Mining and Processing Schedule ........................................................................256 Table 18.12 Key Operating Cost Inputs...............................................................................................262 Table 18.13 Equipment Fleet and Hourly Costs ..................................................................................263 Table 18.14 Mining - Capital, Sustaining and Replacement Costs ($ M).............................................266 Table 18.15 Mine Capital Costs by Component ..................................................................................267 Table 18.16 Equipment Unit Capital Cost - Mining Fleet .....................................................................268 Table 18.17 Major Structures System in Constancia Pit Area .............................................................275 Table 18.18 Inter-ramp Slope Angles – Constancia Open Pit .............................................................280 Table 18.19 Construction Materials Summary.....................................................................................283 Table 18.20 Key Hydrogeologic Issues and Mitigative Measures........................................................285 Table 18.21 Design Return Periods for Hydraulic Structures ..............................................................317 Table 18.22 Access Road Summary of Capital Costs .........................................................................320 Table 18.23 Power Supply Capital Cost Estimate ...............................................................................325 Table 18.24 Construction Fleet Requirements ....................................................................................346 Table 18.25 Disturbance Areas ...........................................................................................................365 Table 18.26 Reclamation Cost Estimate Summary .............................................................................367 Table 18.27 Capital Cost Estimate Summary ......................................................................................368 Table 18.28 Mining Capital Cost Estimate Summary ..........................................................................369 Table 18.29 Plant Capital Cost Estimate Summary.............................................................................369 Table 18.30 Process Plant Area Summary Capital Cost .....................................................................371 Table 18.31 Waste and Water Infrastructure Capital Cost Estimate Summary ...................................372 Table 18.32 Access Road Capital Cost Estimate Summary ................................................................372 Table 18.33 Accommodation Camp Capital Cost Estimate Summary.................................................373 Table 18.34 HV Power Supply Capital Cost Estimate Summary .........................................................373 Table 18.35 Owners Civil Construction Fleet Capital Cost Estimate Summary ...................................374 Table 18.36 Owners Cost Estimate Summary.....................................................................................375 Table 18.37 Operating Cost Estimate Summary .................................................................................377 Table 18.38 Mining Operation Cost Estimate ......................................................................................378 Table 18.39 Process Plant Operating Cost Estimate...........................................................................379 Table 18.40 General and Administration Operating Cost Estimate Summary .....................................381 Table 18.41 General and Administration Operating Cost Estimate .....................................................383 Table 18.42 Transport and Off-site Treatment Charges ......................................................................384 Table 18.43 Off-site Operating Cost Estimate .....................................................................................384 Table 18.44 Royalty Cost Estimate Summary .....................................................................................385 Table 18.45 Prices and Charges Used in Constancia DFS .................................................................387 Table 18.46 Project After Tax Analysis................................................................................................388 Table 18.47 Production Schedule........................................................................................................389

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 18.48 Table 18.49 Table 18.50 Table 18.51 Table 18.52 Table 18.53

Operating Cost Summary ................................................................................................390 Key Project Metrics..........................................................................................................395 Project Sensitivity Analysis (pre-tax)................................................................................396 Tax and Depreciation Assumptions .................................................................................398 Key Post-tax Project Metrics............................................................................................399 Post Tax Project Sensitivity Analysis ...............................................................................400

List of Figures Figure 1.1 Constancia Project Location.................................................................................................19 Figure 1.2 Ultimate Pit – Plan View .......................................................................................................26 Figure 1.3 Annual Ore Production by Ore Type.....................................................................................27 Figure 1.4 Mine Operating Costs over Time ($/t)...................................................................................31 Figure 1.5 Overall Site Plan...................................................................................................................32 Figure 1.6 Proposed Design Sectors, Inter-ramp and Bench Slopes ....................................................34 Figure 1.7 Constancia Process Flowsheet ............................................................................................39 Figure 1.8 Constancia Plant Layout.......................................................................................................40 Figure 1.9 Project Implementation Schedule .........................................................................................62 Figure 1.10 Pre-tax Cashflow Sensitivity Analysis (NPV – 8% discount rate)........................................74 Figure 1.11 Post-tax NPV Sensitivity (8% discount rate).......................................................................77 Figure 4.1 Project Location....................................................................................................................87 Figure 4.2 Concession Boundaries........................................................................................................89 Figure 4.3 Surface Rights ......................................................................................................................94 Figure 7.1 Simplified Geology of the Andahuaylas-Yauri Area ............................................................102 Figure 7.2 Geological Map of the Constancia Deposit.........................................................................103 Figure 10.1 Constancia Project – Exploration Targets ........................................................................112 Figure 10.2 Pampacancha Geology Map ............................................................................................113 Figure 10.3 Pampacancha Prospect – Exploratory Drilling..................................................................114 Figure 10.4 Pampacancha Prospect – Main Drilling Intercepts ...........................................................115 Figure 10.5 Chilloroya South – Geological Map ..................................................................................116 Figure 14.1 Cu Blanks (%)...................................................................................................................130 Figure 14.2 Mo Blanks (ppm) ..............................................................................................................130 Figure 14.3 Ag Blanks (ppm) ...............................................................................................................131 Figure 14.4 Au Blanks (ppb) ................................................................................................................131 Figure 14.5 Pb Blanks (ppb) ................................................................................................................132 Figure 14.6 Zn Blanks (%) ...................................................................................................................132 Figure 14.7 Cu Standard MV700041 ...................................................................................................133 Figure 14.8 Cu Standard MV700040 ...................................................................................................134 Figure 14.9 Cu Standard MV700039 ...................................................................................................134 Figure 14.10 Cu Standard MV00038 ...................................................................................................135 Figure 14.11 Cu ICP Field Duplicate Correlation Plot..........................................................................135 Figure 14.12 High Grade Cu Field Duplicate Correlation Plot .............................................................136 Figure 14.13 Mo Field Duplicate Correlation Plot ................................................................................136 Figure 14.14 Ag Field Duplicate Correlation Plot.................................................................................137

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Figure 14.15 Zn Field Duplicate Correlation Plot .................................................................................137 Figure 14.16 CO-0501 Collar Monument.............................................................................................138 Figure 14.17 Core Recovery................................................................................................................140 Figure 14.18 Core Recovery Distribution in Mineralised Samples.......................................................140 Figure 16.1 Drop Weight (DWi) and Bond Work (BWi) Index Test Results for Supergene Ore...........150 Figure 16.2 Drop Weight (DWi) and Bond Work (BWi) Index Test Results for Hypogene Ore ............151 Figure 16.3 Drop Weight (DWi) and Bond Work (BWi) Index Test Results for Skarn Ore ...................152 Figure 16.4 Concentrate Settling Tests ...............................................................................................162 Figure 16.5 Tailing Settling Tests ........................................................................................................163 Figure 16.6 Predicted Plant Production Rates Years 1-16 ..................................................................171 Figure 16.7 Predicted Average Copper Recovery and Copper Concentrate Grade ............................171 Figure 17.1 Orthographic View Looking NE, Showing the Skarn and Marble Units.............................175 Figure 17.2 Plan View Showing the Constancia Skarn Geometry .......................................................176 Figure 17.3 Sectional View Showing the San José and Constancia Skarn Bodies .............................177 Figure 17.4 Plan View Showing the Geological Model for the Constancia Project ..............................178 Figure 17.5 Lithological Wireframes- Plan View ..................................................................................179 Figure 17.6 Lithological Model Looking North West ............................................................................180 Figure 17.7 Sectional View 100m Wide Looking NE ...........................................................................181 Figure 17.8 Plan View Showing the Surface Extent of Supergene Enrichment ...................................182 Figure 17.9 Mineralisation Domains - Plan View .................................................................................183 Figure 17.10 Mineralisation Domains, Looking Northwest...................................................................183 Figure 17.11 Plan View Showing the 0.2% Cu Grade Shell and Drill Strings ......................................185 Figure 17.12 Orthographic View Looking NE Showing the 0.2% Cu Grade Shell and Drill Strings .....185 Figure 17.13 Plan View Showing the 1500 ppm Zn Shell....................................................................186 Figure 17.14 Orthographic View Looking NE Showing the Relationship between Skarn Lithology (green) and the 1500 ppm Zn Shell (light blue) ............................................................187 Figure 17.15 Plan View Showing the Relationship between the Skarn Lithology (green) and the 1500 ppm Zn Shell (light blue)......................................................................................187 Figure 17.16 Orthographic View Looking North Showing the 1500 ppm Zn Shell ...............................188 Figure 17.17 Skarn Wireframe (blue) and the Supergene Wireframe (yellow) ....................................189 Figure 17.18 Skarn Wireframe (blue) and the Supergene Wireframe (yellow), with a better View of Overlap Areas ..........................................................................................................189 Figure 17.19 Plan View of Skarn and Supergene Wireframes.............................................................190 Figure 17.20 Supergene and Skarn, with High Zn Domains Highlighted.............................................191 Figure 17.21 Supergene and Skarn, with High Zn Domains Highlighted – Plan View .........................192 Figure 17.22 SK2 in Resource Model Blocks (highlighted in red)........................................................193 Figure 17.23 Plan View of SK2 in Resource Model Blocks (highlighted in red) ...................................193 Figure 17.24 SK2 Areas - 50x50x25 m Blocks ....................................................................................194 Figure 17.25 SK2 Areas - 100x100x40 m Blocks ................................................................................195 Figure 17.26 Topographic Contours and Features ..............................................................................196 Figure 17.27 Topographic Surface Plan ..............................................................................................197 Figure 17.28 Topographic Surface Model Looking Northwest .............................................................197 Figure 17.29 Histogram of Assay Interval Length................................................................................199 Figure 17.30 Histogram of Composite Interval Length ........................................................................199 Figure 17.31 Cu Log Probability Plot Overlay of Domains...................................................................201 Figure 17.32 Mo Log Probability Plot Overlay of Domains ..................................................................202

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Figure 17.33 Ag Log Probability Plot Overlay of Domains ...................................................................203 Figure 17.34 Au Log Probability Plot Overlay of Domains ...................................................................204 Figure 17.35 Zn Log Probability Plot Overlay of Domains ...................................................................205 Figure 17.36 Pb Log Probability Plot Overlay of Domains ...................................................................206 Figure 17.37 S Log Probability Plot Overlay of Domains.....................................................................207 Figure 17.38 Lithology Model – Plan View ..........................................................................................211 Figure 17.39 Lithology Model Northing Section ...................................................................................212 Figure 17.40 Mineral Zonation Model Plan ..........................................................................................213 Figure 17.41 Mineral Zonation Model Northing Section.......................................................................213 Figure 17.42 Data before Unfolding.....................................................................................................217 Figure 17.43 Data in Unfolded Space..................................................................................................217 Figure 17.44 Resource Classification Schematic Level 4300 mRL .....................................................220 Figure 17.45 Resource Classification Schematic Level 4200 mRL .....................................................220 Figure 17.46 Resource Classification Schematic Level 4100 mRL .....................................................221 Figure 17.47 Resource Classification Schematic Level 4000 mRL .....................................................221 Figure 17.48 Resource Classification Schematic - Transform Section ................................................222 Figure 17.49 Cu Grade Model Validation - Section 202050 East ........................................................226 Figure 17.50 Cu Grade Model Validation - Transform Section Cu Validation......................................227 Figure 17.51 Cu Grade Model Validation - Level Plan 4225 mRL .......................................................228 Figure 17.52 Constancia Resource Reporting by Confidence Classification .......................................231 Figure 18.1 Design Sectors and Proposed Inter-ramp and Bench Slopes ..........................................245 Figure 18.2 Ultimate Pit Design Plan View ..........................................................................................247 Figure 18.3 Constancia Stage 1 Design Plan View .............................................................................248 Figure 18.4 San José Pit Design Plan View ........................................................................................248 Figure 18.5 Constancia Stage2 Design Plan View ..............................................................................249 Figure 18.6 Constancia Stage 3 Pit Design Plan View ........................................................................249 Figure 18.7 Constancia Stage 4 Pit Design Plan View ........................................................................250 Figure 18.8 Constancia Ultimate and Staged Pit Designs Plan View ..................................................250 Figure 18.9 Mining by Pit Stage (Mt) ...................................................................................................254 Figure 18.10 Ore Mining by Material Type (Mt) ...................................................................................254 Figure 18.11 Float Ore Processing Plant Feed by NSR Range (Mt) ...................................................257 Figure 18.12 Closing Ore Stockpile Inventories (Mt) ...........................................................................257 Figure 18.13 Haul Truck Requirements...............................................................................................261 Figure 18.14 Operating Costs by Time ($/t).........................................................................................264 Figure 18.15 Mine Operating Costs Components................................................................................265 Figure 18.16 Geotechnical Site Investigation ......................................................................................270 Figure 18.17 General Geologic Map....................................................................................................271 Figure 18.18 Pit Structural Map ...........................................................................................................274 Figure 18.19 Design Sectors and Proposed Inter-ramp and Bench Slopes ........................................278 Figure 18.20 Relationship Between Inter-ramp Angle, Overall Angle, Bench Face Angle, and Catch Bench Width.......................................................................................................279 Figure 18.21 TMF Geotechnical Investigation and Geologic Map .......................................................281 Figure 18.22 Site Layout .....................................................................................................................292 Figure 18.23 Processing Plant Layout.................................................................................................293 Figure 18.24 Constancia Project Location and Access Road ..............................................................315 Figure 18.25 Typical Section of Upgraded Access road......................................................................316

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Figure 18.26 Figure 18.27 Figure 18.28 Figure 18.29 Figure 18.30 Figure 18.31 Figure 18.32 Figure 18.33 Figure 18.34 Figure 18.35 Figure 18.36 Figure 18.37 Figure 18.38 Figure 18.39 Figure 18.40 Figure 18.41 Figure 18.42 Figure 18.43 Figure 18.44 Figure 18.45 Figure 18.46 Figure 18.47 Figure 18.48 Figure 18.49

Water Management Schematic ......................................................................................327 General Water Balance Schematic.................................................................................330 PAG Waste Rock Facility Stage 5 (Ultimate) Loading Plan............................................333 Tailings Management Facility Final Configuration Plan ..................................................335 Tailings Management Facility – Typical Staged Embankment Sections.........................336 Delivery Model................................................................................................................342 Project Implementation Schedule ...................................................................................347 Wind Rose ......................................................................................................................354 Location of Water Quality Sampling Sites ......................................................................356 Capital Cost Estimate Probability Profile ........................................................................376 Year by Year Metallurgical Costs ...................................................................................380 Unit Process Operating Costs Per Tonne Milled ............................................................380 LME Long Term Copper Price Predictions (BH) .............................................................386 Copper Spot Price, July 2008-June 2009 .......................................................................386 Ramp up Recovery Assumptions ...................................................................................391 Plant Feed Grade ...........................................................................................................391 Payable Metal.................................................................................................................392 Estimated Cash Costs ....................................................................................................394 Pre-tax NPV Sensitivity (@8%) ......................................................................................397 Pre-tax IRR Sensitivity....................................................................................................397 Pre-tax NPV Sensitivity (@8%) ......................................................................................398 Post-tax NPV Sensitivity (@8%).....................................................................................401 Post-tax IRR Sensitivity ..................................................................................................401 Post-tax NPV Sensitivity (@8%).....................................................................................402

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.

SUMMARY

1.1

INTRODUCTION

Norsemont Mining Inc (Norsemont) is developing the Constancia Copper, Molybdenum, Silver Project in Southern Peru, approximately 100 km south of the city of Cusco (Figure 1.1). Figure 1.1 Constancia Project Location

GRD Minproc Limited (GRD Minproc) was appointed by Norsemont to undertake and manage a Definitive Feasibility Study (DFS) which has included a resource update, comprehensive metallurgical testwork, mine design, plant and infrastructure design and development of capital and operating costs. The DFS forms the basis of this Technical Report. The Constancia deposit is a large-scale porphyry deposit located 4100 metres above sea level (masl) in the Andes mountain range. Norsemont holds 100% rights to the mining concessions and surface rights covering the Constancia deposit, subject to a 3.5% net smelter return (NSR) royalty.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

The proposal is to develop a project comprising open pit mining and flotation of sulphide minerals, to produce commercial grade concentrates of copper and molybdenum. Silver and a small quantity of gold at payable levels will report to the copper concentrate. Annual production rates vary, but average 70 533 t/a copper metal and 54.5 t/a silver metal contained in the copper concentrate. Copper concentrate ramps up from 350 000 t/a in the first year to a peak of 450 000 t/a in Year 3. Production then drops to around 300 000 t/a until Year 10, after which it falls to 200 000 t/a and below until mine closure in Year 15. Molybdenum concentrate production ramps up from 2400 t/a in Year 1 to a peak of 4800 t/a in Year 3. It fluctuates between 2500 and 3000 t/a until another high is reached in Years 9 and 10, after which it drops to 2000 – 2500 t/a. The Project is largely self-contained, with mine, mill, maintenance facilities, administration and fully serviced accommodation camp located on the mine site. Supporting infrastructure includes grid supplied power from an upgraded supply point at Tintaya, 70 km away, and new transmission line from there to the mine. The public road to site will be upgraded to meet demands of extra traffic, particularly concentrate trucks and freight services. Raw water will be extracted from bores surrounding the open pit, and a tailings dam will be constructed within 5 km of the mine, on land owned freehold by Norsemont. The site has access by road to the port of Matarani via existing national roads through Arequipa, Yauri/Espinar, and Velille. Norsemont provided all the necessary drilling, sampling, analytical and geological data to GRD Minproc for Mineral Resource modelling and estimation purposes. Mine design, scheduling and costing for open pit operations were completed by GRD Minproc. Drill core samples were selected by GRD Minproc and sent to Lakefield SGS Laboratories in Chile for metallurgical testing. The results of this testwork were used by GRD Minproc to determine a process flowsheet and design criteria, and design the process plant. Geotechnical studies were completed for the process plant site by Knight Piésold Consulting (Knight Piésold). The same company carried out the design of the water and tailings management systems including the Tailings Management Facility (TMF), as well as the Potentially Acid Generating (PAG) Waste Rock Facility (WRF). Knight Piésold also provided geotechnical recommendations related to the pit walls while Saguaro Geoservices provided technical review and input on the pit walls. MWH Peru undertook hydrogeological investigations and modelling of the site, and provided pit dewatering information. Peruvian consultants CESEL and SIGT undertook design and costing for power supply and upgrading the access road to site, respectively. The accommodation camp for construction and operations personnel was based on estimates provided by experienced Peruvian suppliers.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Capital cost estimate data for the plant was obtained from reputable equipment suppliers and Peruvian contractors, relying on technical specifications and material quantity takeoffs provided by GRD Minproc. Operating cost information and selected input parameters for the economic evaluation were obtained from market pricing and from Norsemont. GRD Minproc undertook pre-tax cashflow modeling, while post-tax financial analysis was completed by Norsemont. Note that all dollars referenced in this report are United States dollars. 1.2

GEOLOGY AND MINERAL RESOURCES

1.2.1

Geological setting, mineralisation and alteration

The Constancia deposit is a porphyry copper-molybdenum system which includes copper-bearing skarn mineralisation. Multiple phases of monzonite and monzonite porphyry have intruded a sequence of sandstones, mudstones and micritic limestone of Cretaceous age. The majority of the mineralisation is associated with potassic alteration and quartz veining, occurring as chalcopyrite-(bornite)-molybdenite-pyrite mineralisation in “A” and “B” type veinlets, and also replacing ferromagnesian minerals or filling fractures. Copper grades typically vary from 0.2% up to 4%, and are highest where fracture-filling style copper mineralisation is superimposed on earlier disseminated copper mineralisation. The high-grade hypogene copper mineralisation is hosted by a dense A-veinlet stockwork developed in an early porphyry phase. Pyrite/chalcopyrite ratio is typically low, being in the order of 1:1 to 2:1. Molybdenite commonly increases with depth, related to “B” veinlets. Bornite occurs sporadically especially at deeper levels, sometimes associated with some gold values. Propylitic alteration is peripheral to the potassic alteration and extends more than one kilometre from the porphyry intrusive contacts. The propylitic alteration mineral assemblage includes epidote-chloritecalcite-pyrite-rhodochrosite. Subordinate chalcopyrite is also present, filling fractures or replacing mafic minerals. Sphalerite-galena veinlets and veins are distributed as a halo to the copper-molybdenum mineralisation within the propylitic alteration halo, occurring at distances of up to 3 km away from the porphyry copper system. Phyllic alteration forms a pervasive carapace surrounding and sometimes overprinting potassic alteration. The phyllic alteration accompanies almost complete destruction of primary rock textures; the mineral assemblage includes sericite-quartz-pyrite, limited amounts of chalcopyrite and associated occasional “D” veins and veinlets. At the contact between the intrusives and limestones, magnetite ± garnet skarn develops, while a pyroxene–diopside (garnet–epidote) association is more common in calcareous sandstones and arkoses of the Chilloroya Formation. Skarn mineralisation is volumetrically much smaller, but grades are normally higher.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Structural deformation has played a significant role in preparing and localising the hydrothermal alteration and copper-molybdenum-silver-gold mineralisation, including skarn formation. Major interand post-mineral fracture systems in the deposit area strike northeast, and include the Barite fault system. This is represented by a number of nearly parallel vein-faults carrying base metal sulphides and barite, which have been exploited by artisanal workings throughout the property. A second important system strikes north-south. It appears to be more recent than the Barite system, and controls part of the San José Pit mineralisation and most of the silicified breccias (sometimes mineralised) in the system. This is the same direction as that of the post-mineral dykes, and may have originated as tension gashes to the Barite direction. Oxide copper mineralisation occurs locally. While shallow, it is volumetrically small and, therefore, is not considered relevant to exploitation at this stage of Project development. Supergene enrichment occurs immediately beneath, and occasionally as remnants within, a leached cap. The highest copper grades in the Constancia porphyry are typically associated with this and with the skarn zone. Transitional (Mixed) mineralisation is present over a limited interval where the supergene and hypogene mineralisation co-exist. Two individual porphyry-style deposits are known within the project area, Constancia and San José, separated by some 350 m. The total mineralised zone extends about 1200 m in the north-south direction and 800 m in the east-west direction. Mineralisation occurs to surface at San José, but is deeper at Constancia. Glacial moraines cover the northern and eastern margins of the Constancia deposit: to the east these moraines cover potentially important extensions of copper mineralisation along broad east-west structural zones. Several additional exploration targets have been identified in the surrounding area, these being highlighted by Induced Polarisation (chargeability/resistivity) and ground magnetometry geophysical surveys. 1.2.2

Exploration

As of 18 June 2009, a total of 132 130.35 m (451 holes) have been drilled in the Constancia Project, including 7484.15 m drilled by Rio Tinto prior to 2005. The total also includes metallurgical, geotechnical and condemnation drilling programmes. Drilling comprises both diamond drilling and reverse circulation percussion drilling; diamond drilling constitutes 90% of the total. Exploration has been conducted to conventional industry standards, including surface and downhole surveying of drillholes, geological and geotechnical core logging, cutting and sampling of drill core, sample preparation and assaying. GRD Minproc has reviewed the methods used in the drill programs and considers them appropriate for a mineral resource estimate. A total of 1108 density measurements have been made for core from the Constancia-San José area. The density measurements were conducted by ALS Chemex, and are representative of the different rock and mineralisation domains.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

QAQC control for the assay data is based on inclusion of blank, standard and duplicate (1/4 core, coarse duplicate and pulp duplicate) samples with routine samples. A referee laboratory has been used to provide supporting analyses. Samples are securely stored before being loaded onto covered and secured trucks for transport to the laboratory in Lima. Chain of custody documents is maintained, with signatures of delivering and receiving parties and the names of persons accompanying the samples at all times. GRD Minproc is of the opinion that the Norsemont QAQC sampling protocol is rigorously set up and is continuously monitored to identify potential sampling and assaying problems. 1.2.3

Mineral resource estimation

Resource estimation for Constancia is based on integrated geological and assay interpretations of information recorded from diamond core logging and assaying. The database used was current as of 30 January 2009. Topographic and drillhole survey data, assay data and interpretative wireframes were supplied by Norsemont, including recently updated wireframes prepared by Atticus Associates, Lima using the Leapfrog (Version 2.1) software package. These wireframes comprised grade shells (0.2% Cu and 0.15% Zn), mineral zonation (hypogene, mixed, supergene, oxide and leached), lithological and alteration wireframes. The data was checked by GRD Minproc for internal consistency. Thereafter, assay data was desurveyed and coded by domain according to the lithology, mineral zonation and grade shell wireframes. Coding was checked rigorously against the wireframes. Assay data was composited into 2 m intervals. Statistical analysis of the composite data indicated differences between populations according to mineral zonation domains and 0.2% Cu grade shell, and these were maintained as hard boundaries for determination of top-cuts, geostatistical analysis and grade interpolation. Top-cuts were determined for Cu, Mo, Ag and Zn for each mineral zonation domain. Variographic analysis was undertaken for Cu, Mo, Ag, Au, Zn, Pb and S within each mineral domain inside the 0.2% Cu grade shell to determine directions of maximum grade continuity, and to model variogram parameters for grade interpolation. A fully coded 25x25x15 m (ExNxRL) block model was constructed representing all mineral zonation domains, lithological and grade shell subsets, by applying constraints using relevant surface and solid wireframes. Sub-celling to 2.5x5x3 m was allowed, to honour interpretative boundaries. Grade estimation was undertaken for Cu, Mo, Ag,Pb, Au, S and Zn by Ordinary Kriging using hard boundaries based on mineralisation type and further subdivided by inside/outside 0.2% Cu grade shell (and 0.15% Zn grade shell for Zn interpolation). A third layer of sub-domain occurs within the hypogene caused by the need to separate out the barren late-stage dykes as defined by the lithology domains.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Kriging neighbourhood analysis was completed on the domain-coded Cu data in the Constancia zone to determine optimal parameters for grade estimation, i.e. block size, number of discretisation points, search ellipse dimensions, minimum and maximum sample numbers employed in a search plan. Inverse distance squared interpolation was also carried out for each element and domain, using the same search parameters as for the Ordinary Kriging estimate. This was used to aid in validation of the final resource model. Average density values were determined for each of the modelled lithological units, taking mineral zonation type into account, and applied to the block model. Resources were classified in line with the Canadian National Instrument 43-101, taking account of the quality and reliability of raw data, drillhole spacing, confidence in the geological interpretation, the number, spacing and orientation of intercepts through mineralised zones, and grade continuity information gained from observations and variography. GRD Minproc considers that there is sufficient drilling and sampling information, and that this information is of sufficient quality to classify the mineral resource in Measured, Indicated and Inferred categories over different parts of the deposit. The grade model was validated visually, statistically by comparison with declustered input (composite) data for each domain, and by comparison with the Inverse Distance Squared model generated from the same data using the same search parameters. 1.2.4

Mineral resources

The Mineral Resources are reported in Table 1.1, Table 1.2 and Table 1.3 for the combined Constancia and San José zones. The economic cut-off is an NSR value that varies depending on ore type and depth, and thus cannot be equated directly with a copper cut-off grade. Table 1.1 Constancia Project Global Mineral Resource Estimate (0.25% Cu Cut-off) Category

Cut off

Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

MEASURED

0.25

119.2

0.47

0.014

3.73

0.05

INDICATED

0.25

195.3

0.48

0.010

4.17

0.06

MEAS+IND

0.25

314.5

0.47

0.012

4.00

0.05

INFERRED

0.25

28.5

0.45

0.009

4.75

0.07

Table 1.2 Constancia Project Global Mineral Resource Estimate (0.20% Cu Cut-off) Category

Cut off

Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

MEASURED

0.20

138.3

0.44

0.013

3.54

0.04

INDICATED

0.20

254.2

0.42

0.010

3.81

0.05

MEAS+IND

0.20

392.5

0.42

0.011

3.72

0.05

INFERRED

0.20

48.8

0.35

0.008

3.82

0.06

Page 24

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 1.3 Constancia Project Global Mineral Resource Estimate (0.15% Cu Cut-off) Category

Cut off

Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

MEASURED

0.15

146.8

0.42

0.013

3.46

0.04

INDICATED

0.15

376.2

0.34

0.008

3.24

0.05

MEAS+IND

0.15

523.0

0.36

0.009

3.30

0.04

INFERRED

0.15

144.6

0.23

0.006

2.53

0.04

Further reporting by domain and for different cut-off grades are included in Section 17. It is important to note the following when considering the grade and tonnage estimates: 

Mineral Resources that are not Ore Reserves do not have demonstrated economic viability.



Measured and Indicated Mineral Resources are that part of a Mineral Resource for which quantity and grade can be estimated with a level of confidence sufficient to allow the application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit.



An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade can be estimated on the basis of geological evidence and limited sampling, and reasonably assumed but not verified continuity.

1.3

MINING

1.3.1

Introduction

The Constancia deposit is massive and relatively near-surface, making it amenable to open pit mining. It is, however, at high altitude (up to 4500 masl). Groundwater is present, and there is significant rainfall during the wet season (October to March). Rock strengths are moderate to hard. 1.3.2

Pit optimisation and pit design

Pit optimisation was undertaken on a regularised version of the resource model with 25x25x15 m blocks. Optimisation input parameters were based on preliminary information, including then current geotechnical information, specifically overall slope input (45° to 50°), and a copper price of $1.80/lb. Ultimate and staged pit designs were developed by GRD Minproc from optimisation shells. Four pit stages were selected for Constancia deposit and a single stage for San José. Pit access ramps are 30 m wide with 1:10 gradient and are designed to accommodate 220 t sized trucks including allowances for the construction of safety windrows and drainage. A 15 m single lane ramp has been designed for the last 60 vertical metres of pits and sub-pits. A minimum mining width of 50 m is maintained. The ultimate pit design is shown in Figure 1.2.

Page 25

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 1.2 Ultimate Pit – Plan View

1.3.3

Mineral reserve

The Constancia Mineral Reserve is the Measured and Indicated Resource contained in the open pit mine that can be processed at a profit and is scheduled for treatment in the DFS Life-of-Mine (LOM) plan. The Mineral Reserve estimate including Proven and Probable categories is summarised in Table 1.4. Since revenue is derived from four payable components (copper, molybdenum, silver plus minor payable gold) the reserve reporting cut-off is based on a Net Smelter Return (NSR) cut-off that is estimated using the metal prices and other treatment, recovery and concentrate realisation parameters as detailed elsewhere in the report. Table 1.4 Constancia Project Mineral Reserves Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

PROVEN

Category

161.8

0.45

0.012

3.68

0.05

PROBABLE

115.6

0.40

0.011

3.70

0.05

TOTAL

277.4

0.43

0.012

3.69

0.05

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.3.4

Mine and process schedules

Mine and process scheduling was carried out on a monthly basis for the pre-strip (Year-1) and first year of production, quarterly for years 2 through 5 and annually thereafter. The schedule is based on an annual mining rate of 45 Mt. Figure 1.3 shows annual mining production by ore type. Figure 1.3 Annual Ore Production by Ore Type 35

High Zn  Mt 30

Skarn 2  Mt Skarn 1  Mt

25

Supergene  Mt Hypogene  Mt

20

15

10

5

Yr 25

Yr 24

Yr 23

Yr 22

Yr 21

Yr 20

Yr 19

Yr 18

Yr 17

Yr 16

Yr 15

Yr 14

Yr 13

Yr 12

Yr 11

Yr 10

Yr 9

Yr 8

Yr 7

Yr 6

Yr 5

Yr 4

Yr 3

Yr 2

Yr 1

Yr‐1

0

Three principal ore types are present at Constancia, namely Supergene, Hypogene and Skarn. However testwork has shown that high zinc zones, particularly high zinc Skarn, tend to produce elevated zinc levels in resultant copper concentrates. Consequently, the mining blocks were re-coded according to Zn/Cu ratio for reporting. High zinc material will require blending with lower zinc ores. Testwork also indicates that metallurgical performance and copper concentrate quality are optimised if high zinc and Supergene ores are kept separate, whereas mixing of other ores is not an issue. The mine design and schedule allows for a degree of in-pit control of plant feed, while allowance has been made for stockpiling and rehandling to allow batch treatment of the different ore blends. 1.3.5

Mine fleet assessment

The following equipment has been selected to undertake large-scale bulk mining on 15 m benches:

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0



32 m3 capacity electric shovels. Electric shovels are preferred given the altitude of the Project.



220 t class haul trucks.



Crawler-mounted electric drills, capable of drilling 15 m benches on a single pass.



Support equipment including dozers, graders, excavator and water truck.

Fleet numbers were determined to achieve the required production of 45 Mt/a, based on haul profiles and load/haul cycles. Equipment numbers are included in Table 1.5. Table 1.5 Equipment Fleet, Capital and Hourly Operating Costs

Type

Equipment Class

Shovel 32 m3 Dump Truck 220 tonne FEL 18 m3 Track Dozers 391 kW Wheel Dozers 362 kW Graders 209 kW Water Truck 91 kl Integrated Tool Carrier 2.5 m3 Rock Breaker H130S Hammer Excavator General Duties 12m3 Cable Reeler Production Drill Diesel 279 mm Pre‐split Drill 127 mm Service Truck Tyre Handler Low Loader Light Vehicle Passenger Bus Lighting Plants 9m Hydraulic Mast

1.3.6

Fleet Units

2 13 1 2 1 2 2 1 1 1 1 3 1 1 1 1 14 2 8

Operating Operating Purchase  Hours Costs Price Hrs/yr US$/hr US$M     6 701     6 701     5 585     5 046     4 840     5 606     3 723     3 723     2 234     3 723     1 489     4 906     5 957     3 723     2 102      491     1 862     1 862     3 723

     283.99      267.28      345.81      129.11      183.38      114.18      105.66        44.29        54.62      188.65      118.75      276.64      159.68        20.00        32.86      103.54           9.45        11.20           8.17

Expected Life Hrs

       16.29     100 000           3.43     65 000           3.74     50 000           0.94     30 000           0.82     30 000           0.67     30 000           1.54     60 000           0.23     40 000           0.42     35 000           2.79     60 000           0.86     30 000           1.54     60 000           0.70     25 000           0.17     25 000           0.15     30 000           0.63     20 000           0.03     10 000           0.27     15 000           0.03     25 000

Mine capital costs

Mine capital costs were developed based on supplier quotes, and include provision for replacement units (Table 1.7). Total costs are $164.93 M, including $119.51 M of initial capital. Table 1.6 outlines the major components of the mine capital costs estimated for the project. Mine capital costs do not include the infrastructure costs related to the mine including a $1.0 M provision to provide initial fuel, explosive and workshop facilities for the civil fleet. Those costs are included under general infrastructure facilities.

Page 28

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 1.6 Mine Capital Costs by Component

CAPITAL COSTS Units ITEMS Equipment Purchases Replacement Purchases & Overhauls Start up Spares Trailing Cables Replacement & Repair - Electric Shovel Cable Towers and Crossing Ramps, cable trays Tyres ( one set only) Crane rental for equiment commisioning Survey Equipment Shovel dipper Truck Tray Mining Software & Systems Heavy Equip Assembly ‐ Crane hire, transport etc Blasting Contractor Mob/Demob Dispatch and fleet management system Prestrip Total

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

Total 99 580 055 37 591 030 2 761 760 1 008 000 1 000 000 252 387 180 000 80 000 500 000 891 292 150 000 600 000 136 000 1 200 000 19 002 416 164 932 941

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 1.7 Mine Capital, Sustaining and Replacement Costs ($ M) Mine Area

Yr-1

Loading

36.73

Hauling

45.63

0.45

3.86

1.54

Drill & Blast Support

7.11

Other

7.19

Prestrip

19. 0

Total:

119.51

Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

Yr 6

Yr 7

Yr 8

Yr 9

0.06

0.31

0.06

0.06

0.26

0.06

0.06

3.98

0.45

Yr 11

Yr 12

Yr 13

Yr 14

0.06

0.06

0.26

0.06

0.06

4.03 0.36

0.61

0.23

Total 42.04 70.44

0.35

0.61

Yr 15

23.91

2.79 0.34

Yr 10

0.07

5.82

3.62

17.56

0.73

10.08 19.0

0.34

5.45

0.31

0.51

0.42

4.29

0.67

0.06

3.98

24.55

4.41

0.26

0.06

0.06

0.07

164.93

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.3.7

Mine operating cost

The mine equipment will be owned and operated by Norsemont. Third parties will manage explosive supply and diesel supply/storage/dispensing. Key operating cost drivers include diesel at $0.66/L and ANFO at $533/t. Powder factors are expected to range from 0.30 kg/t in oxide and NPAG waste to 0.40 kg/t in hypogene ore. Mine operating costs over life of mine are shown in Figure 1.4. Average cost is $1.19/t mined, including the pre-strip period. Figure 1.4 Mine Operating Costs over Time ($/t)

$4.00 $3.50 $3.00

Other

Labour

Support Equip

Blast

Drill

Hauling

Loading

$2.50 $2.00 $1.50 $1.00 $0.50

1.4 1.4.1

Yr15

Yr14

Yr13

Yr12

Yr11

Yr10

Yr9

Yr8

Yr7

Yr6

Yr5

Yr4

Yr3

Yr2

Yr1

Yr‐1

$0.00

GEOTECHNICAL INVESTIGATIONS Site investigations

Geotechnical investigations were carried out at the site in order to (1) map and characterise the geologic units and structures, (2) gain an understanding of the subsurface soil and rock types, their depths and engineering properties, (3) characterise underlying geotechnical and subsurface conditions to support THE hydrogeological program, (4) identify and characterise potential borrow material sources to evaluate their suitability for use as construction materials, and (5) obtain soil and rock samples for laboratory testing. The field work was conducted in phases between October 2007 and June 2009 and focused on areas where the main project structures will be located. These included the open pit, tailings management facility (TMF), Potential Acid Generating (PAG) Waste Rock Facility (WRF), and the process plant (Figure 1.5).

Page 31

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 1.5 Overall Site Plan

The geotechnical investigations included geologic site mapping and reconnaissance, excavation and sampling of test pits, Dynamic Probing Light (DPL) testing to determine the depths of soft, wet organic deposits in certain areas, geotechnical drilling and sampling at selected sites, Standard Penetration Testing (SPT) in the geotechnical drillholes, in-situ permeability testing in the geotechnical drillholes, piezometer installations and monitoring in the geotechnical drillholes and sample recovery and testing for index, compressibility, strength, and permeability properties. 1.4.2

Pit geotechnical design

In the Constancia pit area approximately 85% of the rock consists of intrusive rocks; 5% consists of sandstones and 10% of skarn. Structurally the Constancia pit area is controlled by four major systems expressed as regional faults and local faults, some of which follow regional trends. These structures

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

influence the quality of the rock mass and therefore the slope stability of the pit walls, which influences the allowable slope angles of the walls. To assist in characterizing the rock mass and structures, a geotechnical database was developed using geotechnical site data obtained from exploration and geotechnical programs over the period of 2005 to 2009. The RMR classification data by core run in this database showed that 58% of the values corresponded to “poor” rock, 38% to “fair” and 4% to “good” rock. Pit slope stability analyses for the ultimate pit configuration were based on a geotechnical pit slope investigation program. Nine pit design sectors were established to group areas of the proposed pit having similar geometric, geological and rock mass quality characteristics. Methods used to develop the stability assessments for each sector included detailed kinematic stability, limit equilibrium analysis at bench face and inter-ramp scales, probabilistic analysis by the equilibrium limit method; and, in certain design sectors, stress analysis using finite element methods. The pit slope geometries for each design sector have been determined based on acceptance criteria according to each of these design methods and the expected maintenance operational cost. The maximum recommended angle is the flattest angle meeting either the catch bench or inter-ramp acceptance criteria. The minimum acceptable factors of safety (FoS) adopted for the Constancia pit walls were selected in accordance with the current engineering practice and Peruvian regulations. A value of 1.2 was adopted for static conditions; and 1.0 was adopted for earthquake loading using the peak ground acceleration for a 100-year return event. Overall, the probability of failure ranges between 8 and 27% in about 77% of the bench faces, which conforms to the chosen acceptance criteria (less than 35%). However, in the southwest and west pit sectors a probability of failure of 55% could be expected in about 23% of the bench face slopes. An evaluation of the operational cost needs to be developed considering this failure probability. The recommended overall slope in each sector was selected based on either catch bench integrity (catch bench design) or by global stability considerations. Stability analysis results indicate that a bench face angle of 65-70o or steeper is expected to be achievable at most places. The mining configuration considered for pit development consists of 30 m high double benches and berm widths of 11.5 m minimum. Recommended inter-ramp slope angles range from 48-54o depending on the design sector. Figure 1.6 presents the proposed design sectors and proposed inter-ramp and bench slopes. Pit optimisation and design performed by GRD Minproc as outlined in Section 1.3.2 was based on preliminary pit slope recommendations. After pit slope optimisation studies were performed and a specific pit wall configuration had been developed, the stability factors were checked according to the geologic conditions projected to occur in those specific pit wall configurations and locations. For design sectors VI and VII, it was found that slopes at the angles assumed in the optimisation studies held greater risk of instabilities. Slope flattening would mitigate the risk, but after assessment of the impacts, and due to timing considerations, the steeper preliminary pit slopes were used for the study. Additional slope management measures, as outlined in Section 18.1.3, were incorporated into the planned mining approach and the mining cost estimate, to offset the increased slope failure risk.

Page 33

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 1.6 Proposed Design Sectors, Inter-ramp and Bench Slopes

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.4.3

Subsurface conditions

Subsurface conditions at the locations of the TMF, PAG WRF, and plant sites are closely related to the geologic units present as well as topographic features associated with erosion and glaciation. Bedrock at the site is mainly comprised of sedimentary rock of the Cretaceous period and intrusive rock of the Paleogene period. More recent soil formations are of the Quaternary period, and include organic bogs with some laccustrine deposits, alluvium and glacial till deposits. Under the site of the TMF bedrock consists of diorite and sandstone. The TMF site features two prominent south to north orientated valleys and in these valley bottoms the bedrock is overlain by bog deposits. The bogs are generally only a few meters deep but reach depths of up to 12 m in their centres. Current development plans for the TMF call for completely removing the bog deposits. It is estimated that a suitable foundation for the TMF embankment will be reached at depths of approximately 2 to 5 m below the existing ground surface and below the bottoms of the bogs. In the diorite however, the bedrock appears to be extremely weathered to depths greater than 20 m in some areas. Further investigations will be required to evaluate the need for removing the diorite to significant depths under the embankment. Bedrock under the site of the PAG WRF also consists of diorite and sandstone; however, a large portion of the site is overlain by consolidated glacial till deposits which vary in thickness from between 25 and 95 m. In the lowest lying areas of the site, bog and alluvial soils were encountered. Unsuitable foundation soils are currently planned for removal from beneath the critical slopes of the PAG WRF in order to maintain adequate stability of the slopes At the site of the process plant, foundation materials consist of sandstones, diorites and monzonites. Competent rock was found at depths between 7 and 10 m under the locations of the main structural components of the plant. Overlying the more competent bedrock, residual soils and very poor quality rock were found, which will most likely need to be removed during construction. 1.4.4

Construction materials

During the geotechnical investigations, potential sources for random/common fill, structural fill, drainage material, low permeable/core material, filter material wearing course and rip-rap were identified for construction materials. Current plans call for the non-PAG waste rock mined from the pit to be used for constructing a large portion of the TMF embankment, as well as for haul roads and access roads at the site. 1.4.5

Seismic conditions

The site is located in a zone that has experienced historical seismicity mostly related to the subducting Nazca plate passing under the South American plate. The province is located within Zone 2 (intermediate) of the 2003 Peruvian Seismic Resistance Code. Two potentially significant earthquakes have been identified as potential Maximum Design Earthquakes (MDEs) as follows: Magnitude 8.0 deep intraplate subduction earthquake, producing a mean plus one standard deviation PGA at the site of 0.38 g and Magnitude 7.0 shallow crustal earthquake artificially

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

located 25 km directly below the site, producing a mean plus one standard deviation PGA at the site of 0.25 g. The natural slopes in the areas of proposed project structures appear stable and display no observed risk of mass displacement, sliding or landslides from historic events. 1.5

METALLURGICAL TESTWORK

An extensive laboratory testwork campaign was undertaken to evaluate metallurgical performance of the Constancia deposit at a DFS level of detail. In addition, a 25 t pilot campaign was conducted to provide concentrate for molybdenum flotation evaluation, settling, regrind and filtration tests. The sample collection and testwork were directed by GRD Minproc with assistance from Transmin Metallurgical Consultants (Lima). 1.5.1

Testwork sample selection

Representative samples were selected for metallurgical testwork, taking into account variations in lithology, mineralisation type, grade and three-dimensional location. To facilitate location and depth discrimination, the ore body was divided into “metblocks”, each metblock being a 100 m cube. Continuous core runs within the metblocks that met the sample selection criteria were then identified. From the available suitable core, a sample set that provided broad spatial representation and was relevant to the likely mine plan for the ore body was selected. 1.5.2

Comminution testwork

Comminution testwork was conducted on samples representing Supergene, Skarn and Hypogene ore types. The testwork campaign was conducted at SGS Lakefield Research in Chile during 2008, and included Bond abrasion, rod mill and ball mill work index, SMC and JK Drop Weight Index tests. Supergene material was classified as the least competent ore type at Constancia with an 80th percentile DWi of 3.7 kWh/m3. In terms of ore hardness for ball milling, Supergene ore is of moderate hardness with an 80th percentile BWi of 13.1 kWh/t. Hypogene ore is classified as the most competent ore type at Constancia with an 80th percentile DWi of 7.5 kWh/m3. In terms of ore hardness for ball milling, Hypogene ore is also the hardest with an 80th percentile BWi of 16.3 kWh/t. Skarn samples were analysed as two groups, medium-zinc Skarn (soft) and high-zinc Skarn (hard). The soft Skarn is located in the upper part of the orebody and the hard Skarn is deeper. There were eight samples representing medium-zinc Skarn (soft) and only three representing high-zinc Skarn (hard). Soft Skarn is classified as the least competent ore type at Constancia with an 80th percentile DWi of 3.8 kWh/m3. In terms of ore hardness for ball milling, Skarn is the softest with an 80th percentile BWi of 10.6 kWh/t. Hard Skarn is classified as competent as hypogene with an 80th percentile DWi of around 7.5 kWh/m3. In terms of ore hardness for ball milling, hard Skarn is slightly harder than soft Skarn with an 80th percentile BWi of around 11.5 kWh/t.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.5.3

Flotation testwork

The first flotation testwork campaign focused on identifying optimum processing parameters to produce a bulk copper / molybdenum concentrate. It evaluated the impact of grind size, reagents and pH on recovery, flotation kinetics and concentrate grades for the three main ore types. Variability and locked cycle tests were conducted and deportment of zinc and other impurities investigated. Supergene ore had a low metallurgical complexity with moderate variability. The locked cycle test produced concentrate grades of 28.6% to 30.2% Cu, at 86% recovery. Deleterious elements, including zinc, were all below penalty levels, however, zinc was present in sufficient quantity to have a material affect on transport and smelting charges. Hypogene ore had a low metallurgical complexity with moderately high variability. Copper recovery decreased at depth and recoveries are based on upper Hypogene ore and lower Hypogene ore, respectively. Upper Hypogene ore exhibited low variability, while lower Hypogene ore exhibited moderately high variability. The locked cycle test produced concentrate grades of 23.1% to 25.7% Cu, at 88% recovery. With the exception of zinc and lead, other elements were well below possible penalty limits. Zinc (1.62 % of concentrate) and lead (0.2 % of concentrate) were below expected penalty levels, but comprise a sufficient portion of the concentrate to have a material effect on transport and smelting charges. Skarn ore had a moderate metallurgical complexity with high variability. The locked cycle test produced concentrate grades of 18.9% to 24.7%Cu, at 85% recovery, depending on the zinc to copper ratio in the feed. Cadmium and bismuth were at values close to their penalty limits at 0.0325% Cd and 0.029% Bi, and will require monitoring during operation. Zinc at 9.9%-19.9% of concentrate weight is well above penalty limits. Depression tests showed that zinc sulphate could be used to lower the zinc content of the concentrate, with some loss in copper recovery. Expected elemental recoveries for the different ore lithologies are shown in Table 1.8

Page 37

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 1.8 Expected Elemental Recoveries Copper Concentrate

Cu

%

87.00%

After yr10

Hypogene

Cu

%

91.40%

Up to yr10

Zn

%

30.00%

Ag

%

80.00%

Au

%

60.00%

Pb

%

25.00%

Cu

%

89.00%

Zn

%

80.00%

Ag

%

80.00%

Au

%

60.00%

Pb

%

25.00%

Cu

%

89.00%

Zn

%

30.00%

Ag

%

80.00%

Au

%

60.00%

Pb

%

25.00%

Supergene

Skarn

Samples were also generated to evaluate the effect of blending and treating different ore lithologies within the concentrator. The blending of Supergene and Skarn ore produced a blend that had a high metallurgical complexity with high variability. Activation of sphalerite by soluble copper or sulpho-salts was suspected, leading to high levels of zinc content in the copper concentrate. Depression tests showed that sodium cyanide could be used to lower the zinc recovery, however, the loss in copper recovery was significant. Other ore blends showed no detrimental effects on grade or recovery. All ore types require a regrind of rougher concentrate, with P80 varying from 25 µm to 40 µm. Rougher concentrate mass recoveries varied from 10% to 20%, depending on ore type. Recovery of molybdenum was simulated using floatability component modelling. This indicated a recovery to molybdenum product of 55% at a grade of 40% Mo. The presence of talc resulted in lower grade molybdenum concentrates. 1.6

PROCESS DESCRIPTION AND PLANT DESIGN

A simplified process flowsheet is shown in Figure 1.7 and the plant layout in Figure 1.8.

Page 38

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 1.7 Constancia Process Flowsheet

Pebble Crushers Primary Cyclones

Primary Crusher SAG Mill

Ball Mills Coarse Ore Stockpile

Copper Roughers

Tailing Thickener

Regrind Cyclones

Regrind IsaMill Mo Flotation Circuit Copper Thickening and Filtration Molybdenum Thickening and Filtration

Page 39

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 1.8 Constancia Plant Layout

1.6.1

Throughput

Throughput rates vary depending on the ore type being treated, as shown in Table 1.9. In the first two years of operation supergene ore is dominant and the highest throughput rates are achieved. In Years 3 and 4, supergene, hypogene and skarn ore are mined in similar quantities. Hypogene ore becomes dominant through to the final years of operation and throughput rate drops progressively. Table 1.9 Theoretical Maximum Throughput For Each Ore Type Ore Type

t/h

t/d

Flotation Feed P80 (µm)

Hypogene

1990

47 760

106

Supergene

2973

71 352

108

Skarn (soft)

3158

75 792

70

Skarn (hard)

2520

60 480

50

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

The mine plan and treatment strategy is based on campaigning separate ore types as much as possible. In most years all three ore types will be mined and this is reflected in lower actual throughputs. Table 1.10 shows the schedule of design throughput rates for the plant. Table 1.10 Plant Design Throughput Rate

1.6.2

Year

t/h

t/d

Mt/a

1

2700

64 800

21.6

2

2738

65 700

21.9

3

2688

64 500

21.5

4

2638

63 300

21.1

5

2450

58 800

19.6

6

2488

59 700

19.9

7

2300

55 200

18.4

8

2150

51 600

17.2

9

2138

51 300

17.1

10

2075

49 800

16.6

11

2013

48 300

16.1

12

2075

49 800

16.6

13

2125

51 000

17.0

14

2113

50 700

16.9

15

1988

47 700

15.9

Crushing

The primary gyratory crusher is fed by rear-dumping from two dump points by haul trucks, or fed by FEL from a stockpile. The crusher dump pocket is fitted with a drive-in ramp allowing FEL and bobcat access into the dump pocket for cleanout prior to maintenance work being undertaken, or for clearing blockages during normal operation. Dust suppression water is sprayed within the dump hopper in conjunction with tipping of each truck load. Crushed ore is conveyed to a 50 278 t open stockpile ahead of the concentrator plant. Three variable speed belt feeders reclaim ore from beneath the stockpile and discharge onto the SAG mill feed conveyor. Air, water and fire suppression services are run in the tunnel. Access and emergency exit tunnels are constructed beneath the stockpile. The main tunnel has feeders, the SAG mill conveyor and carries piping for air, water, fire services and electrical cables. 1.6.3

Grinding

The grinding circuit consists of a single line SABC circuit using a variable speed SAG Mill in closed circuit with pebble crushing and two fixed speed ball mills. The target grind size is a P80 of 106 µm. Steel balls of nominal 125 mm size are added to the SAG feed conveyor. The ball charge will be kept to a level of 12-15%, depending on the ore properties. The slurry in the mill exits through the discharge grate (with pebble ports -65 mm) and passes over the SAG mill discharge screen. Pebbles from the

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

screen oversize are conveyed to the pebble crushing plant. SAG Mill discharge slurry which passes through the screen enters the SAG mill discharge hopper together with the discharge from both ball mills which gravitate through ball mill trommels. Dilution process water is added before slurry is pumped by the cyclone feed pump to the cyclone cluster for classification. 1.6.4

Copper flotation

Copper flotation feed is conditioned with slaked lime to ensure the circuit pH is maintained at its set value. A3302 collector, AF65 frother and ZnSO4 depressant are added to the conditioning tank, as and when required. On-stream analysis of copper and zinc in the flotation feed will be used to determine reagent requirements. The conditioned feed reports to two rougher flotation banks. Flotation concentrate is reground prior to three cleaning stages. The copper cleaner circuit consists of three stages of cleaning and one bank of cleaner scavenger flotation cells. On-stream analysis monitors the zinc and copper grades of the major concentrate and tailing streams to allow performance to be optimised. 1.6.5

Molybdenum flotation

The bulk copper/molybdenum concentrate reports to a thickener for removal of reagents that are present from copper flotation. The thickener underflow is pumped to a molybdenum rougher conditioning tank where NaHS is added to inhibit the flotation of copper minerals and sphalerite, with a light fuel oil promoter added to enhance the flotation of molybdenum. The molybdenum flotation circuit utilises covered, induced air flotation cells, with internal air recirculation. It consists of one roughing stage and seven cleaning stages. 1.6.6

Copper thickening and filtration

The tailing from the molybdenum flotation roughers and molybdenum cleaner scavengers reports to a copper concentrate thickener, via a static screen to remove any tramp material. Flocculant is added to enhance settling. The clarified thickener overflow reports to a molybdenum circuit process water tank and is used as filter cloth wash, flush water, copper thickener spray water and for general use in the molybdenum flotation area. The thickener underflow is removed at 60% solids via a peristaltic pump. The thickened, de-tramped slurry is stored in two agitated tanks. These provide a 24 hour surge capacity, allowing filter maintenance to be conducted without affecting mill throughput. The filter feed is pumped to three pressure filters and filter cake is dropped onto a conveyor and is conveyed to the copper concentrate stockpile. 1.6.7

Molybdenum thickening and filtration

The molybdenum concentrate gravitates to a thickener where it is thickened to 60% solids. The thickener overflow reports to the molybdenum process water tank from where is used as process water in the molybdenum flotation circuit. The thickened concentrate is pumped to a ferric chloride leach tank where copper, zinc and lead present in the concentrate is dissolved to reduce their content to less than 0.5%. The slurry is then pumped to a pressure filter to produce a filter cake of 25% moisture. The filtrate from the filter reports to the tailing thickener. Filter cake is transferred by bobcat to the bagging plant where it is bagged in 1 m3 bulk bags.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.6.8

Tailing thickening

The copper rougher tailing stream flows by gravity from the two rougher lines to a thickener, where it is combined with copper cleaner scavenger tailing and thickened to 52% solids. The thickened underflow is then pumped to the TMF. The thickener overflow gravitates to the main process water tank from where it is used in the grinding and copper roughing circuits. 1.6.9

Tailing water reclaim

Water is reclaimed from the TMF and pumped to a process water pond. From the process water pond it is pumped to the process water tank as required. 1.6.10

Concentrate storage and loadout

The copper concentrate is conveyed to an undercover storage shed. There is a live stockpile with seven days production capacity, and, in addition, a low grade concentrate stockpile with seven days production capacity. The concentrate is transferred from the stockpiles via FEL onto trucks for transport from the mine site to the terminal warehouse facility at the port facilities in Matarani. 1.6.11

Water services

Raw water is pumped from bores to the fire/raw water tank. The raw water tank provides water to the potable water treatment plant. The treated water is pumped to a potable water tank which discharges into the potable water reticulation system and the safety shower water network. Raw water is also piped to the molybdenum flotation area and also provides cooling water to lubrication areas and the gland water system. 1.6.12

Reagents

Slaked lime is pumped from a storage tank to the SAG mill, the copper rougher conditioning tank, the copper cleaner conditioning tank and the acidic water neutralisation area. Zinc sulphate is mixed and pumped to the copper rougher and cleaner conditioning tanks, as required. Solid NaHS is mixed and pumped to the molybdenum flotation circuit. Light fuel oil is used to assist flotation of molybdenum minerals in the molybdenum flotation circuit. Hydrochloric acid is used in conjunction with ferric chloride in the leach section of the molybdenum thickening/filtration area. A3302 collector is used for floating copper and molybdenum in the copper flotation circuit with addition to the primary cyclone feed sump, the copper rougher conditioning tank and the copper cleaner conditioning tank. Z-14 SIBX is a secondary collector in the copper rougher circuit. AF65 frother is used to provide a stable froth in the flotation cells. Flocculant is mixed in a dedicated plant and pumped to the copper/molybdenum feed thickener, the copper rougher tailings thickener, the copper concentrate thickener and the molybdenum concentrate thickener. 1.6.13

On stream analysis and laboratory

Two on-stream analysis systems have been included to allow continuous analysis of performance. The copper flotation circuit system will analyse Cu, Fe, Zn and Pb in the rougher feed, rougher concentrate,

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

rougher tailing, cleaner scavenger concentrate and bulk copper/molybdenum concentrate. The molybdenum plant system will analyse Mo, Cu, Fe, Zn and Pb in the flotation feed, rougher concentrate, rougher tailing, cleaner scavenger concentrate and molybdenum concentrate before and after the ferric leach. The laboratory facility is located within the plant site. The laboratory is capable of processing samples for mine grade control, exploration, process plant metallurgical accounting, metallurgical optimisation and environmental control. In addition, the laboratory has the facility to undertake testwork to optimise grinding, flotation, leaching, etc. 1.7

WASTE MANAGEMENT

Major waste management facilities within the project area include the PAG WRF and the TMF. Unsuitable material and topsoil generated during construction site preparation activities will be disposed in dedicated structures or in the major waste management facility. Figure 1.5 presents the Constancia mine overall site plan and the location of these facilities. The major waste management facilities are described in the following sub-sections. 1.7.1

Waste rock facility (WRF)

A PAG WRF will be developed to store waste rock mined from the San José and Constancia Pits. Approximately 295 Mt of waste have been characterised as having the potential to generate acid and will be placed in the PAG WRF. Approximately 55 Mt of waste have been characterised as non-acid generating and will be used as construction material for the TMF embankment, haul roads, construction roads and access roads. The PAG WRF will be located immediately south of the Constancia pit. The PAG WRF has been designed with an ultimate storage capacity of 300 Mt, which will result in the maximum elevation of the facility at 4335 masl and a maximum vertical height of 200 m. Development of the PAG WRF is planned in five stages with the objective of reducing haul distances during the initial years of mining. Loading will start at the northern limits of the facility closest to the pit and will progress southwest towards the ultimate toe of the facility. The hydrogeologic studies and modelling show that the natural groundwater levels and gradients beneath the PAG WRF will provide hydraulic containment for any seepage, which will be directed to a single reporting point below the southwest toe of the facility. This containment precludes the need for a liner. The design does, however, include a robust underdrain system to collect the seepage from the base of the waste rock and direct it to the reporting point. Seepage from the PAG WRF and groundwater under the facility will be directed to a containment pond constructed downstream of the PAG WRF and retention pond. This pond will also contain surface runoff from the PAG WRF. A 28 m high earthfill embankment will provide approximately 600 000 m3 of water storage. The design consists of a cross-valley zoned embankment with a grouted curtain which spans nearly the entire length of the embankment and extends to depths of approximately 40 m into rock. Water stored in the pond will be used as process water for the mill after treatment. During infrequent, extreme wet periods, excess water may accumulate in the containment pond and be pumped to the upper surface of the PAG WRF for recirculation through the dump as a means of adding additional temporary storage. Water from the PAG WRF is not intended to be released; however, a

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

valve controlled outlet pipe has been incorporated into the design to be used only in the event of an emergency in which water levels within the pond need to be rapidly lowered. A retention pond between the toe of the PAG WRF and containment pond will be constructed to contain any rocks falling down over the slope of the WRF and to provide for energy dissipation of the drainage flows. A 5 m high, flow-through, rockfill embankment will be constructed at the downstream end of the retention pond, which will provide an approximate capacity of 24 000 m3. 1.7.2

Tailings management facility (TMF)

The TMF will be developed behind an embankment dam crossing two broad, gently sloped, south to north valleys above the south side of the Chilloroya River as a site 5.2 km southwest of the mine and 3.7 km south of the process plant. The TMF has been designed with an overall storage capacity of 277 Mt (dry) of tailings assuming an average in storage dry density of 1.5 t/m3. The embankment will have an ultimate height of 130 m and length of 2300 m, although additional storage can be developed by raising the TMF above this elevation. The embankment will consist of a zoned earthfill structure that will be constructed in stages out of local borrow materials and selected non-PAG mine waste. During the first two years of operations the embankment will be constructed following a downstream configuration, but from Year 3 onward a modified centreline approach will be adopted. Tailings will be deposited from designated off-take points on a distribution pipeline along the upstream crest of the embankment. The points of active deposition will be rotated frequently to form a thin layered, drained and well consolidated beach that will slope away from the embankment towards the south side of the TMF basin. Initially, prior to beach development, the surface water pond will be in contact with the embankment in the east valley but it will be progressively displaced upward and to the south as the beach becomes established such that after the first two years of operations the beach is expected to have displaced the pond well away from the embankment. The surface water pond will vary in size throughout the life of mine depending on the season, precipitation, and operational requirements. Tailings deposited in the facility will consist of rougher tailings (RT) and cleaner scavenger tailings (CST) from the process. These streams will be combined at the plant at an approximate ratio of 4 to 1 RT to CST, prior to transportation and deposition into the TMF. Although the CST will contain significant sulphide minerals that make it potentially acid generating, the combined stream will have excess alkalinity from the mill such that its pH will initially be in the order of 8 to 9. Geochemical analyses indicate that an exposure period of six months to a year would be necessary for this alkalinity to be consumed, and the tailings deposition plan calls for a fresh layer of tailings to be placed over each previously deposited layer well within this period to reduce the potential for acidic conditions developing. The TMF includes a geomembrane liner over the base of the eastern valley and most of the western valley to provide geomembrane containment in areas where the surface water pond will be in contact with the base at any time over the life of mine. A 50 m wide tailings underdrain will be placed on top of

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

the geomembrane against the upstream toe of the embankment to assist in depressing pore pressures in the tailings against the embankment and to minimise the head on this part of the geomembrane liner. The geomembrane liner has not been extended into the upper, southern reaches of the western valley since the surface water pond will never be located there. However, to assist in intercepting and collecting any small amounts of seepage that may pass beneath the western side of the embankment in the absence of the liner, an intercept trench and drain will be constructed under the embankment across this valley. Groundwater drains will be installed under the geomembrane to intercept groundwater seeps and keep them separate from the geomembrane. A separate foundation drain system will be installed under the embankment to collect water seeping through the embankment, which may include direct precipitation on the embankment and/or small amounts of seepage passing through it, as well as localised groundwater seeps in the embankment foundation. Water collected by the drain systems will be conveyed to sumps located immediately downstream of the embankment in each of the east and west valleys. Monitoring and control systems at the sumps will allow for automated water quality and flow rate determinations to be made. From the sumps, the water will either be released to the Chilloroya River or pumped back to the TMF based on the water quality. 1.7.3

Topsoil and unsuitable material stockpiles

Two main stockpiles, for storage of unsuitable materials and topsoil, are planned for the project. These structures include a combined stockpile (Unsuitable Material/Topsoil Stockpile No. 1), located downstream of the PAG WRF containment pond, which will provide storage capacity for bog, topsoil, and unsuitable materials. A second stockpile (Topsoil Stockpile No. 2) strictly for topsoil will be located directly north of the PAG WRF. The combined stockpile will be developed behind a cross-valley constructed embankment and will provide approximately 2.65 Mm3 of total storage capacity. The topsoil stockpile north of the PAG WRF will predominantly be used for storage of topsoil removed from the pits and WRF. Its capacity will be 0.4 Mm3. 1.8

INFRASTRUCTURE

1.8.1

Access roads

SIGT S.A. Ingenieros Consultores (SIGT), a Peruvian engineering consultant, undertook a study to investigate, design and provide capital costs for improvements to the existing access road required to support construction and operational phases of the Project. The existing access road runs 82.5 km from Yauri to the proposed Constancia Mine, and is unsealed in parts. Width varies from 4-6 m. The topography is typical of high plateaus along the Andes mountain range with small uphill and downhill sections ranging in elevation between 3900 and 4684 masl. Four bridges are present along the route between Yauri and Constancia.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

SIGT’s design provides for an unsealed all-weather road of 6 m width with 0.5 m shoulders and a maximum gradient of 9%. Bridges will be rated to live loads of 48 t, and have asphalt surfacing. The design makes maximum use of the existing alignment and is more than adequate to handle existing traffic plus the additional 50-60 daily truck movements associated with Constancia operations. Geotechnical, geological, hydrological and archeological investigations have been completed, and suitable construction materials identified. Bridge and drainage requirements have been assessed, taking account of extreme rainfall events (500 year return period for major bridges). Pavement works consist of the complete replacement/overlay of the existing pavement with a suitable quarry produced pavement material compliant with the documented design requirements. Drainage is improved through cross-drainage culvert replacement and longitudinal drainage. Signage and other safety improvements will be undertaken. The operating costs for the access road other than the section of road on the Constancia property will be assumed by the government authority. No major environmental constraints have been identified, but attention is required to avoid impacting archeological remnants or other historical buildings, and to minimise the impact of noise, dust and increased likelihood of accidents. The capital cost for the access road is estimated to be $19.00 M, excluding engineering design, construction management and IGV. 1.8.2

Water supply

Total raw water requirements have been estimated at 365 m3/h for process plant, mine and camp operations. Field investigations and groundwater modelling, together with surface water balance calculations, indicate that this will be met by ex-pit and in-pit dewatering operations. This is described in Section 1.9.1. The raw water is of sufficiently high quality to be used directly in the process plant for hose-down, gland water, cooling water and reagent make-up. Up to 11 m3/h of raw water will be diverted to the potable water treatment plant where it will be upgraded by reverse osmosis and ultraviolet treatment, making it fit for human consumption. Process water will be supplied from contaminated water captured by in-pit sumps, the PAG WRF and rain falling on the plant site. Additional requirements will be met by returning tailings dam supernatant water to the plant process water pond.

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1.8.3 1.8.3.1

Power supply Powerline

The design maximum power demand for the Project is 90 MW and the average continuous demand is estimated to be 75 MW. Cesel Ingenieros S.A. (Cesel) completed a power supply study, taking into account current and forecast power demand in the region. A study identified the preferred option is to initially secure supply at 138 kV from the existing Tintaya Substation, with transmission by means of a single circuit supported by lattice steel towers over a route length of 70 km to the Constancia mine site, designed for future operation at 220 kV. It is assumed that 220 kV supply will be available from Tintaya substation in 2012. The transmission line from Tintaya Substation to the Constancia mine site has been designed in accordance with relevant North American and European codes and standards, and in recognition of all environmental, geological, social and cultural considerations related to the land and airspace easement along the proposed route of the line. Topographical and geological surveys and environmental and socio-economic baseline studies were completed along the proposed route and at the Tintaya and Constancia substation sites. Earth resistivity measurements were conducted to obtain the necessary data for the design of the line grounding systems. The transmission line is designed for ultimate operation at 220 kV, will have a design capacity of 150 MW and traverse a route length of approximately 70 km. The transmission line will also include an OPGW or optical fibre composite overhead ground wire serving the multiple functions of earth bonding for the towers, lightning protection shielding for the power conductors and communications via the enclosed 24 optical fibres. The fibre optic communications will provide protection, relaying and control functions for the transmission line and data links from Constancia to the Peruvian communications network. 1.8.3.2

Constancia substation 138/220 kV

The Constancia substation switchyard has been designed with overhead busbar systems, switchgear, metering and protection equipment to control the ultimate installation of two 20 MVA primary transformers to provide the plant with 100% redundancy. Allowance has been made in the design for a bay to accommodate extension of the line or an alternative connection to the Peruvian grid. Initially, one 100 MVA primary transformer has been allowed in the estimate with all associated switchgear, metering and protection equipment to supply the estimated plant maximum demand of 90 MW or 95 MVA at the minimum required COES power factor of 0.95.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Insulation levels and surge protection equipment reflect the elevation of Constancia Substation in excess of 4000 masl and the level of iso-keraunic activity in the region. 1.8.3.3

Tintaya substation 138 kV expansion

For the initial supply to Constancia at 138 kV, an additional switchyard bay at Tintaya substation has been allowed to accommodate the extension of the existing 138 kV double busbar, 45 MVAR of capacitive compensation equipment and all associated switchgear, transformer, metering and protection equipment for the transmission line. The additional bay proposed for Tintaya substation to serve the transmission line to Constancia will be designed for a capacity in excess of 200 MVA. 1.8.3.4

Power supply transfer from 138 kV to 220 kV

The transmission line and Constancia Substation have been designed for ultimate operation at 220 kV in year 2012. The main power transformer and associated metering and protection transformers have been specified with winding tappings to enable operation at either 138 kV or 220 kV. Following initial operation at 138 kV, the transfer to 220 kV in year 2012 will require a shut-down in order to changeover the power, metering and protection transformer tapping connections. The cost of the proposed 220 kV augmentation of Tintaya substation in 2012 has not been included in the estimate for the DFS. 1.8.3.5

Control and communications

Tintaya Substation is operated by Red de Energía del Perú (REP) from its regional control centre in Arequipa. The new transmission line from Tintaya to Constancia will be integrated into the REP SCADA system for purposes of monitoring, control, energy metering and load management. A local area network will form the platform for monitoring and control of the transmission line and Constancia substation and an operator workstation in the Constancia substation will provide access to monitoring and control functions, system protection, energy measurement and alarms. 1.8.3.6

Power supply capital cost estimate

The capital cost for power supply is estimated at $24.45 M, including the design and construction of the power line and the two substations. 1.8.3.7

Operation and maintenance

The power transmission system to the point of supply at the 22.9 kV terminals of the main transformer at Constancia Substation, will be constructed, owned, operated and maintained by REP. Based on information from OSINERGMIN, an annual cost of operation and maintenance (O&M) of 2% of the annual investment has been considered, producing an estimated figure of $588 527.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.8.3.8

Energy consumption and cost

On the basis of an overall average continuous demand of 75 MW at 138 kV and a peak/off-peak ratio of 8/16, the total annual energy consumption is estimated to be 615 GWH. Based on tariff information provided by OSINERGMIN, and an exchange rate of $1=3.2 Soles, this equates to an average cost of ¢4.89/KWH. 1.8.4

Internal roads

Internal roads will be constructed within the Constancia project site. Access between the plant, pit, PAG WRF, and TMF will be on the mine haul roads. Additional access roads will be constructed for connection between the former structures and secondary facilities. 1.8.5

Buildings

A complete inventory of buildings and related facilities has been developed, including: 

Heavy and light vehicle workshop and washbay: the mine office is included in this facility



Heavy vehicle fuel distribution bowser



Mine dispatch centre



Core shed



Process plant industrial buildings to include the milling, pebble crusher, molybdenum flotation, copper and molybdenum concentrate filtration buildings, and the product stockpile. Note, however, that the copper flotation circuit is not enclosed in a building.



Main security and gatehouse building



First aid and fire building



Substation building



Emergency diesel power station



Control rooms for primary crusher and the grinding building



Laboratory and laboratory store



Workshop to support plant operations



Warehouse – including an external fenced compound



Administration building and change-rooms



Kitchen and mess to provide for up to 432 personnel on day shift



Copper flotation blower building



Air compressor house



Reagents and packaging store

The majority of the buildings are of steel frame construction, fully clad, with full length overhead cranes provided for maintenance purposes in the plant buildings. Substations are custom design blockwork

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

buildings, while several other buildings are modular pre-fabricated structure, e.g. laboratory, control rooms, fire station and first aid post, gatehouse etc. 1.8.6

Construction and accommodation camp

Construction and operational workforces are housed in a purpose-built accommodation camp located adjacent to the process plant. The camp is supplied and installed by a single construction contractor with another contractor operating the camp during the construction period. The management of the camp will be transferred to the Owner once the construction phase is complete. The camp is to be self-sufficient, with full sleeping, bathing, dining, laundering and recreational facilities. The camp will be constructed from modular units to minimise cost and expedite delivery. The camp comprises single, double and 4-person accommodation units, camp administration offices, internal access roads, potable water treatment, storage and distribution, medical requirements, a recreation hall, waste management, sewage treatment, laundry, landscaping, IT and communications infrastructure, and site security. The capital cost estimate is $30.27 M for the 1800 bed camp, based on budgetary quotes from specialist Peruvian contractors, and has an accuracy of ±15%. This equates to $16 819 per bed. The operational cost estimate is approximately $15 per person per day, again based on budgetary quotes from Peruvian contractors. 1.8.7

Concentrate transport and shipping

Concentrate will be transported by truck from site to the nearest port, Matarani, located 475 km by road from Constancia. Transportation will be undertaken by a specialist haulage contractor. The long term haulage contract would be competitively bid. Hopper-type trucks with a closed cover system will be used, each with a capacity of 35 t. Travel time per truck is estimated at two days, equating to a running fleet requirement of approximately 70 trucks in peak production years. The concentrate will be stored in Matarani in a warehouse owned and operated by the International South Terminal S.A. (TISUR), a private organisation that has held the port operations contract since 1999. The storage facility will be sized to equal the monthly production for the Constancia project (average 21 000 tonnes of concentrate). TISUR will also be responsible for shiploading services. Correspondence between TISUR and Norsemont indicates that port handling charges of $7.50/t (wet) will apply. 1.9

WATER MANAGEMENT

Water management within the project area is divided into process and non-process water. Process water is water that will be used in the plant or will be conveyed around the site via pipelines. On an annual basis, the process water circuit will be in a surplus condition and to avoid continuous and ongoing accruals of water the excess amounts will be released at a controlled rate each year during the wet season. Releases will be from the TMF into the Chilloroya River and will only occur upon the

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achievement of adequate quality. The wet season discharges will take place when the Chilloroya River has a large assimilative flow. The water will be treated if necessary before release. Non-process water is surface drainage and runoff water that will require management at the site. It will be comprised of two streams: contact and non-contact water. Contact water is water that will come into contact with facilities such as the pit, stockpiles, the plant site, PAG WRF, etc. This water will be collected in designated ponds for treatment, if necessary, prior to its release. To the maximum extent possible this water will be used in the process. Non-contact water will be directed around the facilities via diversion channels and discharged into natural drainages upon the achievement of sediment removal to acceptable levels. Hydrology and hydraulic analyses, including a detailed process water balance, have been completed to determine the types, locations and sizes of the water management structures as well as the times and quantities of discharges. The following sections discuss water management for the project. 1.9.1

Process water

Water for the mill will be supplied from the following sources: groundwater from dewatering wells located behind the pit walls, in pit surface water collected in the pit sumps, drainage from the PAG WRF that will be collected in the containment pond just below the PAG WRF, and reclaimed water from the surface water pond in the TMF. A temporary water reservoir will be available within the TMF in 2011, to collect and impound water to support the start of operations in early 2013. Raw water for sustaining mill operations will be obtained, in part, from pit dewatering wells installed behind the pit perimeter. Based on the current hydrogeologic model, a total of 18 dewatering wells will be installed in and around the pit. Water from these wells will be pumped to a collection box immediately upstream of the plant and then conveyed by gravity to a dedicated tank in the plant. Water from the PAG WRF and in-pit sumps is expected to be acidic and will be neutralised with lime at the process plant before use in the process. When the total volume of water available to the mill from the pit, TMF and PAG WRF exceeds the volume required, the excess amount will be removed from the pit groundwater component and a gravity flow pipeline will convey this from the pit dewatering wells system to the environment upon confirmation of adequate water quality. The priority will be to recycle as much water as possible from the PAG WRF, in pit sumps and TMF. During periods of excess water discharges from the TMF surface water pond, the water will be pumped to a TMF buffer pond located immediately north of, and below, the eastern side of the TMF embankment and then from this pond by gravity flow to the Chilloroya River. Such discharges, when required, will only take place during the wet season, which is between December and April. Results of the current water quality analyses and water balance modeling indicate that during these periods, when runoff flows into the TMF are higher, no water treatment will be necessary. The excess water removal system will be provided with instrumentation to monitor water levels and water quality and releases will only occur upon confirmation of adequate quality.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.9.2

Water balance

A site-wide process water balance model was developed for the project. This model evaluates the amount of stored water in the various components of the mine, as well as water inflows and outflows between the mine facilities on a monthly basis throughout the life of mine. The main objectives of the process water balance are to provide operating guidelines, design flows, and information inputs for the design of various water management facilities. The results also provided input to the environmental management plans for the project. Specific key objectives of the site wide water balance together with results are: 

Evaluate the range of normal operating volumes for the TMF surface water pond; this information is used to determine the pond configurations throughout the life of the facility. The predicted normal operating volumes for the TMF surface water pond vary between 1.8 and 3.3 Mm3.



Evaluate the maximum potential volume for the TMF pond above its normal operating volume to reflect conditions of extreme precipitation; this information is used to establish the minimum required freeboard heights for the TMF embankment at any time. The maximum operational volume for the TMF surface water pond may reach approximately 3.7 Mm3 after a 100 year/24 hr precipitation event.



Evaluate the amount of water to be discharged from the TMF surface water pond to the Chilloroya River via the TMF buffer pond; this information provides the design criteria for the discharge facilities as well as for the analysis of any downstream environmental impacts and mitigation plans. Under extreme precipitation conditions the amounts of water discharged via the TMF buffer pond may reach up to 3000 m3/hr. These discharges will occur only during the wet season and after adequate water quality has been confirmed.



Evaluate flows reporting to the PAG WRF containment pond to determine the required capacity of the containment pond and the pumping recirculation rates under conditions of extreme precipitation. The capacity of the containment pond is 600 000 m3 below a freeboard of 4 m, or 800 000 m3 at the pond crest. Pumping requirements for recirculation under extreme conditions may reach 1100 m3/hr.



Evaluate approximate flows from the in pit sumps and PAG WRF containment pond to determine the needs for treatment at the process plant, as well as the pumping requirements. Normal operating flows from the in pit sumps are expected to be 0 to 400 m3/hr and from the PAG WRF containment pond are expected to be 100 to 800 m3/hr, due to seasonal fluctuations. Maximum operating flows are expected to be between 1200 m3/hr and 1800 m3/hr respectively.



Evaluate the amounts of fresh water from the pit dewatering wells to the operating system. Operating flows expected from the dewatering wells are expected to be at least 330 m3/hr.

1.9.3

Non-process water

Contact water Non-process contact water includes water that has been in contact with areas that generate sediment loads and/or requires treatment before it is released. Diversion channels will be constructed to convey contact water to designated ponds or treatment areas. Contact water with sediment loads will be directed to sediment ponds before being released to natural drainages; these ponds include the pit

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

sediment pond, the main sediment pond, the plant construction sediment pond:, and the crusher sediment pond. Contact water that will require additional treatment will be managed as follows: 

Plant contact water: during operations, water in contact with the plant area will be directed to a dedicated plant contact pond. From this pond, water will be directed for treatment before it is released to a natural drainage, or alternatively it will be directed to the mill process pond. Contact and non-contact water channels will be constructed around the plant to reduce the amount of water directed to the plant contact pond.



PAG WRF contact water: water in contact with the PAG WRF will be directed to the PAG WRF containment pond and will not be released to the environment. Excess water such as water from extreme precipitation events, will be recirculated onto the WRF. To reduce erosion and sediment loads, temporary diversion channels will be constructed as the PAG WRF is expanded.

Non-contact water Non-contact water will be directed around the mining facilities via non-contact water channels from and to natural drainages. Two non-contact water channels are currently contemplated, one upstream of the PAG WRF and the other upstream of the pit. All water channels will be lined for erosion protection with HDPE geomembrane (temporary channels) or rip-rap (permanent channels). The channels have been sized based on average surface runoff volumes and flows, as well as the 100 year storm event. Sufficient freeboard will be included in the permanent channels to contain flows associated with a 500 year storm event. 1.10

ENVIRONMENTAL AND SOCIAL CONSIDERATIONS

1.10.1

ESIA

The Ministry of Energy and Mines (MINEM) is the principal regulatory agency responsible for permitting mining projects in Peru. The project has been designed to consider all relevant legislation applicable to the development of mining projects in Peru including mines, roads, port and transmission lines. Additional legislation that has been considered includes legislation and regulations regarding archaeological areas of significance, endangered and protected species as well as community relations and public disclosure programs. Knight Piésold is undertaking an ESIA for the Constancia Project, which includes baseline studies which have now been completed. Results from the baseline studies indicate: 

Air quality within the project site and the surrounding communities is generally good.



Existing levels of noise and vibrations from static sources are within national standards.



The site is classified as an area with medium seismicity.



Soils are colluvial–alluvial and residual materials. In general the erosion potential of the soil in the area surrounding the project is low to medium.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0



Water quality: in general, results indicate that the water quality within the project area has neutral to alkaline pH and in some locations exceeds the national standards for iron, manganese, copper, lead, zinc and arsenic.



Flora: a total of 494 different species of plants and 10 vegetative formations were identified within the project area. While 18 species of flora are classified as endangered these are not located within the direct area of influence.



Terrestrial fauna: a total of 96 different species of birds, 19 species of mammals, four species of reptiles, and four species of amphibians were identified within the project area. Of these, five species of birds, three species of mammals and one amphibian are listed as protected species.



Aquatic life: three species of trout and two species of catfish (bagre and challhua) were found within these aquatic environments. Challhua was found only in wetland areas. One species of fish belongs to the IUCN Red List of Threatened Species.



Human interest environment: Landscape: some parts of the district are considered to contain medium values of visual quality, due to the presence of lakes and the dominant mountain landscapes in these sectors. Archaeological Heritage: a total of 46 archaeological sites were identified in the area of the future mine site. The process to obtain a certificate of non-existence of archaeological remains of significance from the INC (National Cultural Institute) has been initiated. Environmental liabilities from Previous and Current Mining Activities: five zones were identified where mining-related environmental liabilities exist on Norsemont mining concessions. Traffic: current levels of traffic will be assessed from a survey by SIGT that will identify vehicle types, the daily volume of traffic and the kinds of loads being transported along the existing road networks.

1.10.2

Stakeholder mapping

Stakeholder mapping has been undertaken, identifying the two principal stakeholder groups in the direct area of influence as the communities of Uchucarco and Chilloroya. There are three well-defined groups in each of the communities, namely: 

Community assembly: people from the community



Artisanal miners: from the community and possess land in the community (do not own title of the land).



Youth Groups: (in the case of Chilloroya, represented through the Youth Association), they have higher education than the rest of the local residents and the experience of having lived in other cities; however, they own no land and possess no economic capital.

The youth groups and miners do not have a solid organisational structure, but do have marked interests and represent a significant portion of the population. The association of artisanal miners in Chilloroya is one year old. Benefits from the artisanal mining activities in Chilloroya are not distributed evenly across the population, but are primarily experienced by those members of the population who possess the land where the illegal mining activities are occurring.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Uchucarco has a greater number and variety of organisations inside its community structure; some of 1 which have duties that are independent from the Governing Board, these include: JAAS , the Committee of Water Users (“Comité de Regantes”), among others. In addition, Uchucarco is the most 2 active community in the District of Chamaca , and has more relationships with district and private institutions. In Chilloroya, unlike Uchucarco, the political strength of the Governing Board is weak and the different associations in the community are not well organised. Although there is a varied array of organisations, many are focused on specific tasks and have little political presence, as in the case of women’s and parents’ organisations. 1.10.3

Status of land ownership in the communities of Uchucarco and Chilloroya

The land administration system in Uchucarco and Chilloroya is consistent with the community system of land possession, under which communities have the right to decide upon their territories. These decisions must be made and undertaken by consensus, through a General Assembly of the community. Typically land is divided into plots among the dwellers (as in the case of Chilloroya and Uchucarco), and boundaries marked in the presence of members of the governing board. These plots of land are registered with the community. The dwellers do not have official title to the lands but can enjoy the benefits from the land (growing crops, grazing of livestock, construction of a house or dwellings) etc. The dweller is not permitted to make any transaction or exchange of the land. The project has purchased 4097 ha of private lands to date and has plans to purchase additional lands belonging to the two communities. As a result of the project development, approximately 35 families from the community of Chilloroya will need to be relocated. Norsemont is currently preparing a Resettlement Action Plan (RAP) in accordance with IFC performance standards on involuntary resettlement and Peruvian National legislation. 1.10.4

Impact identification and evaluation

Positive and negative impacts related to the project development phases will be identified and evaluated. Mitigation measures will be proposed and evaluated for their relative level of impact and significance. The process for the evaluation of impacts will be guided by national and international standards, using impact assessment matrices and predictive models. The evaluation of impacts will consider direct, indirect and cumulative impacts. Modelling of noise and vibration, air dispersion, water quality and visual impacts will be undertaken to evaluate the impacts on the local population. 1.10.5

Environmental management plan

As part of the ESIA, an Environmental Management Plan (EMP) will be developed to: 

Identify mitigation and management strategies

1

Water and Sanitation Administration Board (“Junta de Administración de Agua y Saneamiento”)

2

Uchuccarcco is one of the most densely populated districts of Chamaca, in addition to having a privileged economic

standing given the recovery of the mining activity (artisanal and big mining) and the development of livestock breeding.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0



Set objectives and targets



Define performance indicators



Document time frames to achieve targets



Allocate responsibilities and identify the necessary resources for the implementation of the plan



Establish mechanisms to monitor, evaluate and report on progress.

EMPs are important tools for ensuring that the management actions arising from the ESIA are clearly defined and implemented throughout all phases of the Project life cycle. 1.10.6

Resettlement Action Plan (RAP)

A Resettlement Action Plan (RAP) will be developed as part of the ESIA. The RAP will comply with international best practice for involuntary resettlement as promulgated by Equator Principles and IFC Performance Standards. The RAP will specifically address compensation procedures and measures for people undergoing physical and/or economic displacement as a result of project implementation, and will include: 

Census of project-affected people



Cut-off date



Compensation matrix



Framework for development of detailed resettlement actions

1.10.7

Community relations plan

The Community Relations Plan will be prepared taking into account the following requirements: 

Final determination of the Direct and Indirect Areas of Influence of the project, based on the outcomes of the Social Impact Analysis.



The needs in the construction and operation phases, as determined in the Social Impact Analysis.



The State’s requirements, as expressed in the Community Relations Guidelines of the MINEM and the Prior Commitment Act (DS-042-2003-EM).



The requirements of international financial institutions, taking into account as main references the Equator Principles, IFC Performance Standards, APELL for Mining, and, supplementary, social management standards.

Specific social programs will be designed for the mitigation and prevention of identified impacts. Generally, these programs address the following key topics: 

Communication and consultation



Participatory monitoring



Claims and dispute resolution



Local employment

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0



Social investment



Land acquisition and resettlement



Code of conduct for workers.

1.10.8

Health, safety and environment (HSE) management and monitoring plan

Norsemont will develop a comprehensive HSE management plan for the Constancia Project to: 

Ensure HSE compliance



Demonstrate that all hazards are appropriately managed



Achieve continuous improvement in HSE performance.

Periodic and regular monitoring constitute a principal component of the HSE plan for the construction, operation, closure and post closure phases of the project. The plan includes direct monitoring of air and water resources, and indirect monitoring of flora and fauna. The monitoring program will provide information for evaluating actual project impacts and the effectiveness of the mitigation measures in place. This will allow for dynamic adjustments to the mitigation plan as the project progresses. Six air quality monitoring stations have been proposed: four adjacent to the open pit, and one each in Uchucarco and Chilloroya. Strict measures to maintain air quality will be implemented. This will involve, for example, spraying water on access roads for dust control to ensure compliance with legislation regarding airborne particulates. Twelve surface water quality monitoring stations have been proposed in the area. The TMF, PAG WRF, topsoil and unsuitable material stockpiles and all associated ponds will be instrumented for performance monitoring. This will include pore pressures in the tailings and mine waste, as well as in the drain zones and embankment structural zone and foundations. Water flow rates and totalised volumes will be measured as will the water and tailings levels. Monitoring of slope movements and materials settlement will be made. Industrial and hazardous waste will be separated from common domestic waste. Domestic waste will be recycled whenever feasible. Norsemont wIll construct a sanitary landfill for the disposal of domestic wastes. Hazardous waste will be stored temporarily in secondary confinement areas prior to removal to designated facilities for resale, recycling or definitive storage, in accordance with Peruvian regulations. In all cases, storage facilities for fuel and chemical substances will be designed with secondary impermeable containment. These lined and bermed containment areas will be designed to hold 110% of the capacity of the largest tank to avoid spillage of contaminants. No underground storage facilities for fuel are planned.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Sewage treatment facilities will be constructed servicing all project components. Operating procedures, including monitoring discharges, will comply with the corresponding Peruvian standards. Health and safety procedures will be developed in accordance with Peruvian legislation and will be strictly enforced. A restoration program will be developed to re-establish a landscape that is environmentally and aesthetically compatible with the surrounding countryside. All personnel and contractors will be required to comply with the standards and procedures contained in the ESIA for all Project stages. Internal and external audits will be performed periodically to verify compliance. 1.10.9

Closure plan

In accordance with Peruvian National Regulations for the mining sector, a conceptual closure plan will be developed for inclusion in the ESIA. The conceptual plan includes the principal impacts from project closure to the communities in the area of influence, and identifies measures to mitigate these impacts. Reclamation and closure of the project will be conducted in accordance with international best practices, the objective being to return mined lands to conditions capable of supporting prior land use or uses that are equal to or better than prior land use to the extent practical and feasible. In addition, longtem stability and safety issues will be addressed as a priority. The area to be disturbed and reclaimed encompasses approximately 796 ha. Reclamation and closure activities are to be conducted concurrently with mining operations, to the extent practical, to reduce the final reclamation and closure costs and minimise long term environmental liabilities. The key goals of reclamation and closure are to ensure the physical and chemical stability of the TMF and the WRF. The closure plan includes: 

Salvaging, stockpiling and ultimate replacement of topsoil and subsoils in the PAG WRF and process plant areas.



Reclamation of the open pit, including re-contouring, re-grading and re-vegetating of an approximately 30 m wide area surrounding the open pit. After closure the pit lake water will need to be treated in perpetuity, by lime treatment of water prior to discharge into the Chilloroya during the wet season.



WRF: closure of the PAG WRF will include covering the facility with an approximately 1.8 m cap comprising a low permeability layer, a drain layer and 0.3 m of topsoil/growth media. The soil cover will be scarified and seeded.



The upstream diversion channel of the PAG WRF will remain in place at closure. The current closure concept is to pump the seepage and run-off from the WRF to the pit for in-pit treatment, as discussed above.



TMF: the current closure plan is based around de-sulphurising (by pyrite flotation) plant tailings during the last one and half to two years of operations, to form inert tailings. These inert tailings

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

will then be deposited over the existing tailings surface to form an impermeable cover. The pyrite float material will be stored in a lined area of the TSF. A spillway will be constructed in the southeast side of the TMF that has been designed to pass the PMP. A soil cover will be placed on top of the tailings beach and the facility and the dam face will be revegetated. 

Roads will be reclaimed by pushing safety berms down and over roads, removing culverts, backfilling ditches, and re-grading areas to re-establish the natural drainage system. After regrading is completed, road areas will be scarified and seeded.



Infrastructure will be removed from the project area when no longer needed. Concrete foundations will be buried in place, and scrap metal removed. The mill will be decontaminated. Associated yard areas will be ripped to eliminate compacted soils and regraded, after which previously disturbed areas will be scarified and seeded.



Production water wells will be abandoned in accordance with local regulations or transferred to support an approved post-mining land use. Monitoring wells will be abandoned once regulatory officials decide they are no longer necessary for monitoring purposes. Water lines, utility poles, power lines, fuel tanks, generators, transformers and other items remaining in the project area after mine operations cease will be removed from the site and disposed of properly unless they can be used by the communities, or sent to salvage. The non-hazardous sanitary land fill will be closed by placing an inert cap over the facility and removing any infrastructure (fences, platforms, etc.).

Annual reports will be prepared to document the closure and reclamation activities. Revegetation efforts will be monitored biannually by a range specialist to record vegetation success, monitor erosion, and modify reclamation plans if necessary. Groundwater wells and surface water sites will be sampled quarterly to record post-mining water quality. Closure and reclamation activities are anticipated to take place over a five year period. The total estimated cost, is approximately $38.23 M. 1.11

PROJECT IMPLEMENTATION PLAN

1.11.1

Approach and strategy

A project implementation plan has been developed as part of the Study. An Owners team will be formed to deliver the project through the engagement of an EPCM contractor and specialist engineering consultants, suppliers and Peruvian construction contractors. The Owners team will consist of specialist delivery personnel sourced locally and using expatriate resources where appropriate. The Owners team will develop policy and ensure its implementation and compliance through the consultancy, supplier and contractors’ systems in areas such as safety, environment, human and industrial relations and security. The EPCM contractor will be responsible for the delivery of the process plant and associated infrastructure area. The EPCM contractor will provide the underlying framework for systems and procedures for the Owner’s team.

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The Peruvian construction industry has sufficient capability and capacity to carry out the construction works. Foreign contractors would only be used in either high risk or specialist work areas, for example mill and drive construction, lining etc. Fixed price contracts are preferred; reimbursable contracts, where used, will be structured with incentive clauses to encourage performance. Both practices support a reduced level of performance management by the Owner’s team and the EPCM contractor. The Owners team will deliver the mining development work, and ultimately the mine operations. Tailings, waste rock, topsoil and water management facilities will be engineered by a single consultant to minimise interface management. Bulk earthworks across the site will be delivered by a civil construction fleet purchased and managed by the Owner’s team. This fleet will commence construction early in the project, with the majority of the fleet retained through to operations to continue with subsequent construction stages of the tailings management facilities. Construction of the balance of the tailings, waste, topsoil and water management works will be contracted to local specialist contractors. The access road, power supply and accommodation camp will be completed by specialist Peruvian construction contractors. 1.11.2

Quality assurance

A project Quality Plan will be developed for the Project. This Plan will form an integral part of the overall Project Execution Plan and detail how quality assurance will be achieved during engineering, procurement, construction and commissioning. 1.11.3

Project implementation schedule

A project implementation schedule is summarised in Figure 1.9. The schedule shows total project duration of approximately 39 months, including detailed design, procurement, construction and commissioning.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 1.9 Project Implementation Schedule Year Quarter

2009 Q3

2010 Q4

Q1

Q2

2011 Q3

Q4

Q1

Q2

2012 Q3

Q4

Q1

Q2

Q3

Q4

APROVALS Finance Approval ESIA Construction Permit MINE Planning Tender and Award Fleet Supply Assembly /Training Strip and First Ore CIVIL CONST. FLEET Planning Tender and Award Fleet Supply PLANT Design Long Lead Procurement Construction Commissioning TAILINGS STORAGE Design Mine Access Road and Camp Process Plant Pad Mine Area Pad Tailing Management Facility – Initial Stage Tailing Management Facility – Reservoir Fill Tailing Management Facility – Embankment Other Operational Facilities Waste Rock Dump ACCESS ROAD Detailed Design Tender and Award Construction ACCOMMODATION Design and Tender Procurement Complete 500 rooms Complete 1000 rooms Complete 1500 rooms Complete 1800 rooms

X X X

POWER SUPPLY Design Tender and Award Long Lead Procurement Construction

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Key dates for the project are as follows: 

Project Execution commencement – Q4 2009



Environmental approval – Q4 2010



Construction permit and commencement of construction – Q4 2010



Completion of Process Plant commissioning – Q4 2012.

Critical activities that need to commence upon Norsement Board approval are: 

Commence negotiations to secure a power supply agreement or option



Commence detailed design for the access road upgrade and investigate acceleration of its delivery



Commence the Front End Engineering Design which includes process design, flowsheet verification and optimisation, plant layout, and long lead item procurement



Commence detailed design and planning for bulk earthworks and purchase of Owners civil construction fleet



Commence recruitment of key Owners team members



Commence development of the accommodation camp contract and investigate availability of second hand camps



Investigate availability of long lead equipment, i.e. cancelled orders etc



Commence development of project systems. This includes OHS&E requirements and standards, equipment numbering, asset numbering, document numbering, cost control and reporting systems, document control, permit plan development and implementation, and procurement documentation and systems.

1.11.4

Civil construction fleet

A civil construction fleet, owned by Norsemont, will be utilised to construct bulk earthworks associated with the TMF, PAG WRF, water management structures and internal access roads. The basis of the fleet is conventional diesel-powered hydraulic excavators and off-road haul/dump trucks, together with supporting equipment such as FELs, dozers, graders, compactors, water trucks, service trucks, and the like (Table 1.11). Many of these items will be pre-purchased by Norsemont and will service both the mine and construction fleets. Pre-construction earthworks will take place over an approximate two year period with the TMF embankment construction continuing for an additional fourteen years. Most of the construction fleet will be sold after three years with the remaining equipment used on the construction of the TMF embankment and for plant field maintenance operations. The mine truck fleet will be used to provide the embankment material after the construction fleet has been demobilised. A separate contractor will be responsible for constructing the underdrains, geosynthetics, pipework, and small peripheral construction activities during the first three years, as well as the smaller earthworks in the latter years of the mine life.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Aggregate material will be provided for the TMF and PAG WRF, and possibly surfacing rock for mine haul roads. This material will be obtained from quarries using drilling and blasting procedures. Table 1.11 Civil Construction Fleet Type

Equipment Class

Fleet Units

Operating Hours

Operating Costs

Unit Purchase Price

(Hrs/yr)

($/hr)

($M)

Hydraulic Excavator

382 kW

1

5304

149.61

0.827

Wheel Loader with Rock Bucket

597 kW

1

5304

135.18

1.952

LPG Dozer with VR Blade and Ripper

192 kW

1

5304

47.16

0.478

Dozer with CU Blade and Ripper

482 kW

1

5304

92.23

1.227

Soil Compactor

299 kW

2

5304

43.86

0.644

Vibratory Soil Compactor

130 kW

1

5304

43.86

0.113

Articulated Truck

30 T

1

5304

30.85

0.413

Dump Truck

60 T

8

5304

149.02

1.004

Light Duty Dump Truck

19T

1

2652

73.01

0.070

Fuel and Lubrication Truck

43 T

1

1326

8.12

0.585

Water Truck

60 T

2

5304

149.02

1.166

Service Truck

1

1326

8.72

0.175

Tire Truck

1

1326

10.77

0.175

1

5304

87.79

2.083

Motor Grader

397 kW

Utility Backhoe – 4WD

102 kW

1

1856

50.50

0.156

¾ ton Pickup Truck, 4WD

6

5304

5.27

0.027

Onan Light Plant

6

2122

1.68

0.027

Hydraulic Excavator

200 kW

2

5304

131.40

0.445

Carry Dozer with Ripper

698 kW

2

5304

118.85

1.753

Wheel Loader

260 kW

1

5304

39.02

0.395

Motor Grader

221 kW

1

5304

37.72

0.706

1.12

PROJECT OPERATIONAL PLAN

Site operations will generally be run by the Owners staff. Mining will be done by an Owner-operated mining fleet, and the plant operated and maintained by the Owner. Although the plant will have fully equipped maintenance workshops, where possible, maintenance will be performed off-site by suitable contractors (e.g. motor re-winds). Supply will be outsourced for: 

fuel and lime



transport of concentrates



storage and ship-loading of copper concentrate.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

The manning structure will be made up of management and administration staff, technical staff, operators, trades and general labour. The labour numbers will be adjusted to satisfy local requirements. It is estimated that total numbers employed on the site will approach 800. The employment philosophy is based on preferential hiring of local people to fill general labour and operating positions. Preference would be given to Peru Nationals to fill managerial and technical positions, although it is anticipated that some of these may have to be filled by expatriate staff initially. Training is considered to be a key activity before plant start-up, with the need to prepare the local workforce in areas of plant operation, maintenance, operating procedures and workplace health and safety. An Environmental and Social Management Plan will be implemented as part of the overall Operation Plan. This is currently under development by Norsemont, and forms part of the ESIA. 1.13

CAPITAL COST ESTIMATE

1.13.1

Initial project capital

Total initial Project capital cost is estimated to be $845.99 M, with an additional requirement of $147.64 M over the life of the operation (Table 1.12). The capital cost estimate has an accuracy of ±15% and is expressed in Q1 2009 US dollars. No provision has been made for escalation, taxes and project funding. Table 1.12 Constancia Project Capital Cost Estimate Description

Initial

Sustaining

Total Capital

Capital ($M)

Capital ($M)

($M)

Mining

120.51

45.42

165.93

Process plant and associated infrastructure

367.18

0

367.18

Waste and water infrastructure

84.17

46.74

130.90

Offsite infrastructure

87.65

0

87.65

access road

20.17

0

20.17

accommodation camp

43.02

0

43.02

HV power supply

24.45

0

24.45

Owners civil construction fleet

69.39

0

69.39

Project contingency

74.13

0

74.13

Owners costs

42.96

55.47

98.44

845.99

147.64

993.62

Total

GRD Minproc has estimated costs for mining, plant and on-site infrastructure. Knight Piésold estimated costs associated with the civil construction fleet, TMF, site-wide water management and waste rock disposal, while SIGT and Cesel provided capital costs for the access road and power supply, respectively. The cost of the accommodation camp was based on a budget quote from an experienced

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Peruvian contractor. Norsemont provided the Owners cost, which includes allowances for recruitment and manning, purchase and operation of the civil fleet (with inputs from Knight Piésold and GRD Minproc), insurance, marketing, land acquisition and taxes, etc. The plant and on-site infrastructure capital costs include provisions for engineering, procurement, construction and commissioning. Within the plant and associated infrastructure area, accuracy provisions have been applied within the cost estimate by discipline to allow for anticipated increases arising during final design, based on GRD Minproc experience. The EPCM estimate has been developed based on experience with other similar projects in South America. Mine capital costs are built up from vendor budget pricing and are inclusive of freight to site, site assembly, commissioning, and training of personnel. Mining equipment includes electric shovels, a support FEL, a fleet of 220 t class dump trucks plus track dozers, graders and other mine support equipment. A risk-based contingency estimate was developed collaboratively by GRD Minproc, Norsemont and Knight Piésold. At a P80 confidence level, the contingency on capital cost is $74.13 M. 1.13.2

Sustaining capital

Sustaining capital of $147.6 M allows primarily for replacement equipment for the mining fleet and the costs associated with expansions to the TMF dam over the project life. Additional sums are included for replacement of light vehicles, computer hardware and software, etc. 1.14

OPERATING COST ESTIMATES

The operating cost estimate for the entire project is summarised in Table 1.13. The estimate has an accuracy of ±15% and is expressed in Q1 2009 US dollars. No provision has been made for escalation. Table 1.13 Summary Operating Cost Estimate Area

LOM Average Annual Cost $

LOM Average $/t Milled

LOM Average $/lb Cu Metal

Mining

48 405 954

2.62

0.32

Process plant and associated infrastructure

71 216 612

3.85

0.48

General and administration

11 144 200

0.60

0.07

Off-site costs (refining, smelting, transport)

53 533 883

2.89

0.36

Civil Construction Fleet

3 565 905

0.19

0.02

Royalty

7 980 470

0.43

0.05

195 847 024

10.59

1.31

Total

Page 66

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

On a LOM Project basis, the unit operating cost for the Constancia Project is estimated to be $10.59/t ore, or $1.31/lb of copper produced excluding by-product credits. After inclusion of credits for sale of molybdenum, silver and gold the unit cost reduces to $0.92/lb of payable copper. 1.14.1

Mine operating cost

The mining operating costs were determined by GRD Minproc, based on a first-principles build-up of load, haul, drill, blast, support equipment, labour and other costs (Table 1.14). Average cost (excluding pre-strip) is $1.18/t mined, but it varies over the operating life, as was seen in Figure 1.4. Table 1.14 Mine Operating Costs Area

LOM Average Annual Cost $

LOM Average $/t Milled

LOM Average $/lb Cu Metal

Load

3 616 008

0.20

0.02

Haul

19 420 109

1.05

0.13

Drill

3 142 204

0.17

0.02

Blast

10 143 674

0.55

0.07

Support Equipment

7 770 704

0.42

0.05

Labour

3 518 724

0.19

0.02

Other

794 532

0.04

0.01

Total

48 405 955

2.62

0.32

Significant mining operating cost drivers include diesel price, truck tyre life, power cost for electric shovels and explosives costs. 1.14.2

Plant and infrastructure costs

Process plant and on-site infrastructure operating costs were estimated by GRD Minproc, with input for operating the TMF, waste and water management supplied by Knight Piésold. Costs were determined based on labour, mobile equipment fuel, reagents, power and grinding consumables requirements (Table 1.15).

Page 67

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 1.15 Plant and Associated Infrastructure Operating Cost Estimate Area

LOM Average Annual Cost $

LOM Average $/t Milled

LOM Average $/lb Cu Metal

Fuel & Miscellaneous

1 424 332

0.08

0.01

Labour

2 136 498

0.12

0.01

Maintenance materials

4,985,163

0.27

0.03

Reagents

9 258 160

0.50

0.06

Power

25 637 980

1.39

0.17

Grinding consumables

27 774 479

1.49

0.19

Total

71 216 612

3.85

0.48

The plant operating cost averages $3.85/t ore treated over the LOM. 1.14.3

General and administration

The G&A cost estimate includes both site and Lima office costs, and is summarised in Table 1.16. Table 1.16 G&A Operating Cost Estimate Area

LOM Average Annual Cost $

LOM Average $/t Milled

LOM Average $/lb Cu Metal

Labour

4 538 000

0.24

0.03

Administration

2 229 200

0.12

0.01

Other Costs

4 377 000

0.24

0.03

Total

11 144 200

0.60

0.07

The estimate includes provision for management, administration, community relations, environment and safety, medical, security, procurement, camp and general charges. Also included are the costs associated with transport of labour to and from site, insurance, communications, permits, fees and other government charges, directors fees, consultants, software, road, powerline and camp maintenance. The G&A operating cost averages $0.60/t ore treated over the LOM. 1.14.4

Off-site charges

Off-site costs include transport, port charges, smelting costs and penalties. These costs have been estimated by GRD Minproc or provided as input from Norsemont. The average LOM off-site cost is estimated at $2.89/t of ore treated, or $0.36/lb payable copper, as shown in Table 1.17.

Page 68

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 1.17 Off-site Operating Costs Area Shipping (inc Port Charges) Transport Smelting & Refining Penalties Total

1.14.5

LOM Average Annual Cost $

LOM Average $/t Milled

LOM Average $/lb Cu Metal

11 777 454

0.64

0.08

9 100 760

0.49

0.06

31 584 991

1.71

0.21

1 070 678

0.06

0.01

53 533 883

2.89

0.36

Royalties

Royalties comprise a state royalty ranging from 1% to 3% of NSR depending on the NSR value, plus a 0.5% NSR royalty, capped at $10 M, for the Minera Livitaca and Katanga properties. Annual royalty payments average $7.98 M, equivalent to $0.43/t ore treated, or $0.05/lb copper produced (Table 1.18). Table 1.18 Royalty Costs Area State royalty Minera Livitaca & Katanga royalty Total

1.15

LOM Average Annual Cost $

LOM Average $/t Milled

LOM Average $/lb Cu Metal

7 300 401

0.39

0.05

680 069

0.04

0.00

7 980 470

0.43

0.05

MARKETING, PRODUCT PRICING AND TREATMENT CHARGES

Norsemont has not yet entered into negotiations with potential purchasers of copper and molybdenum concentrates, but has reviewed market reports on copper pricing, treatment and refining charges, and penalties. For the purpose of the DFS, it is assumed that concentrates will be shipped to smelters in Asia for treatment. Norsemont has adopted a single average price of $2.00/lb Cu, $12.00/oz Ag, $800/oz Au and $13.00/lb Mo over the life of the Project for Base Case economic assessment. These prices are less than current spot prices. In common with metal prices, smelting and refining charges have varied widely over the past year, and prediction of future costs is difficult. Norsemont has adopted figures of $65/t and $0.07/lb. Standard metal refining deductions have been applied.

Page 69

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.16

PROJECT FINANCIAL ANALYSIS

1.16.1

Background

GRD Minproc and other consultants provided the capital costs, operating costs and production plan inputs, and prepared the pre-tax cashflow. Norsemont provided inputs regarding taxation, metal prices, royalties and off-site charges, and prepared the post-tax cashflow and financial analysis. In estimating ramp-up, it was assumed that design metal recovery would be achieved eight months after production started. Norsemont advised the basis for working capital was two month debtors. Operating cost inputs to the financial model are summarised in Table 1.19, metal price assumptions in Table 1.20 and the production schedule in Table 1.21. Table 1.19 Operating Cost Inputs to Financial Model Units Average Mining Costs

Processing Costs

Hypogene Supergene Skarn 1 Skarn 2 High Zn

$/t mined $/t ore processed

1.18 2.62

$/t ore processed $/t ore processed $/t ore processed $/t ore processed $/t ore processed

4.31 3.26 2.84 3.13 3.24

Mining Royalties

$60M & $120M Minera Livitaca & Katanga cap (max payment)

%NSR %NSR %NSR %NSR $M

1.00% 2.00% 3.00% 0.50% 10.00

Transport & Shipping Charges

Copper

Road Transport Port Charges Shipping Costs Insurance Transport & Shipping Losses

$/wmt $/wmt $/wmt $/wmt %

32.30 7.50 35.00 1.78 0.50%

Molybdenum

Road Transport Other Charges Insurance Transport & Shipping Losses

$/wmt $/wmt $/wmt %

77.57 5.86 1.78 0.00%

Copper

Treatment Charge Price Participation Upper Escalator Lower De-escalator Refining Charges Cu Ag Au Treatment Charge

$/dmt

65.00

Fixed

$M/a

Treatment & Refining Charges

State

Value

Molybdenum G&A

$/lb % $/lb % $/lb $/oz $/oz $/dmt

1.20 0.90 0.07 0.40 1.20 1,461.65 11.14

Page 70

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 1.20 Metal Price Assumptions in Cashflow Model Units Metals Prices

Copper Silver Gold Molybdenum

$/lb $/oz $/oz $/lb

Value 2.00 12.00 800.00 13.00

Page 71

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 1.21 Production Schedule for Cashflow Model Units Mine Production Ore

Value

2012 -1

2013 1

2014 2

2015 3

2016 4

2017 5

2018 6

2019 7

2020 8

2021 9

2022 10

2023 11

2024 12

2025 13

2026 14

2027 15

m dmt

326.79

0.82

21.95

22.97

23.14

24.59

25.17

24.62

16.89

22.69

23.21

18.79

19.34

24.96

30.57

22.65

4.43

Cu Zn Mo Ag Au Pb Sulphur

% % g/t g/t g/t % %

0.39% 0.11% 107.75 3.46 0.04 0.04% 2.40%

0.37% 0.07% 42.85 3.77 0.08 0.05% 0.53%

0.58% 0.10% 89.79 4.23 0.07 0.04% 2.28%

0.58% 0.11% 116.42 4.43 0.06 0.04% 3.01%

0.63% 0.15% 152.41 5.07 0.05 0.04% 3.40%

0.46% 0.10% 98.35 4.04 0.04 0.06% 2.42%

0.42% 0.10% 88.24 3.58 0.06 0.04% 2.84%

0.39% 0.14% 96.89 3.63 0.05 0.04% 2.86%

0.34% 0.19% 106.79 3.75 0.04 0.06% 2.55%

0.32% 0.12% 110.23 3.15 0.03 0.04% 2.65%

0.33% 0.11% 158.69 3.17 0.03 0.04% 2.29%

0.34% 0.12% 154.38 2.99 0.03 0.03% 2.07%

0.26% 0.05% 90.30 2.51 0.03 0.05% 1.60%

0.27% 0.09% 100.57 3.13 0.04 0.07% 2.05%

0.28% 0.09% 78.43 2.69 0.05 0.04% 2.10%

0.31% 0.06% 86.38 2.31 0.04 0.03% 1.70%

0.41% 0.03% 108.44 2.72 0.06 0.03% 0.86%

Waste TMM SR

m dmt m dmt

300.03 626.82

12.76 13.58

23.60 45.55

21.80 44.78

21.79 44.93

20.33 44.92

19.67 44.84

20.21 44.83

28.02 44.91

22.10 44.79

21.53 44.74

25.99 44.78

25.52 44.86

19.70 44.65

12.34 42.92

4.67 27.32

0.92

15.53

1.07

0.95

0.94

0.83

0.78

0.82

1.66

0.97

0.93

1.38

1.32

0.79

0.40

0.21

Stockpile

m dmt

1.17

8.91

7.04

12.76

23.32

43.27

17.74

16.27

21.76

27.87

30.02

33.24

41.56

55.10

Process Plant Feed

18.35 0.32% 0.18% 102.79 3.72 0.04 0.05% 11.53 2.56 0.92 3.34

17.20 0.37% 0.12% 125.13 3.44 0.04 0.04% 13.81 1.11 0.63 0.02 1.63

17.11 0.38% 0.12% 187.34 3.56 0.03 0.04% 13.98 1.04 0.53 0.00 1.56

16.64 0.36% 0.11% 164.90 3.16 0.03 0.03% 14.65 0.02 0.77 1.19

16.11 0.28% 0.04% 95.89 2.49 0.03 0.04% 15.58 0.14 0.38

16.64 0.31% 0.09% 120.18 3.47 0.05 0.07% 14.58 0.21 0.16 1.69

2031 19

2032 20

-

-

-

-

-

0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00%

4.43

-

-

-

-

-

-

-

-

-

-

-

60.89

49.40

49.40

49.40

49.40

49.40

49.40

17.04 0.35% 0.10% 94.08 3.25 0.06 0.06% 13.88 0.13 1.10 1.93

16.86 0.36% 0.07% 96.09 2.52 0.05 0.03% 14.33 1.47 1.05

15.92 0.25% 0.04% 75.97 2.13 0.04 0.03% 15.92 -

0.00% 0.00% 0.00% -

0.00% 0.00% 0.00% -

0.00% 0.00% 0.00% -

0.00% 0.00% 0.00% -

0.00% 0.00% 0.00% -

277.39

-

21.64

21.89

21.45

21.05

19.64

% % g/t g/t g/t %

0.43% 0.11% 116.67 3.69 0.05 0.04%

0.00% 0.00% 0.00%

0.59% 0.10% 90.08 4.24 0.07 0.04%

0.60% 0.11% 119.81 4.50 0.06 0.04%

0.67% 0.15% 162.14 5.25 0.06 0.04%

0.50% 0.10% 108.16 4.35 0.05 0.06%

0.49% 0.10% 98.70 4.02 0.07 0.04%

Hypogene Supergene Skarn 1 Skarn 2 High Zn

m m m m m

163.55 71.03 14.59 4.73 23.49

-

0.72 18.18 0.04 1.07 1.62

4.40 13.36 0.89 1.50 1.74

5.24 10.18 3.58 0.55 1.90

6.54 11.28 1.36 0.87 1.00

9.58 6.69 0.88 0.70 1.79

19.86 0.44% 0.15% 107.54 3.96 0.06 0.04% 8.81 6.26 2.11 0.01 2.67

% % % % %

91.40% 89.00% 89.00% 89.00% 89.52%

91.40% 89.00% 89.00% 89.00% 89.52%

91.40% 89.00% 89.00% 89.00% 89.52%

91.40% 89.00% 89.00% 89.00% 89.52%

91.40% 89.00% 89.00% 89.00% 89.52%

91.40% 89.00% 89.00% 89.00% 89.52%

91.40% 89.00% 89.00% 89.00% 89.52%

91.40% 89.00% 89.00% 89.00% 89.52%

91.40% 89.00% 89.00% 89.00% 89.52%

91.40% 89.00% 89.00% 89.00% 89.52%

87.00% 89.00% 89.00% 89.00% 89.52%

87.00% 89.00% 89.00% 89.00% 89.52%

87.00% 89.00% 89.00% 89.00% 89.52%

87.00% 89.00% 89.00% 89.00% 89.52%

87.00% 89.00% 89.00% 89.00% 89.52%

% % % % %

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

55.00% 55.00% 55.00% 55.00% 55.00%

357,410

409,705

450,871

332,280

304,351

28.86% 3.55% 205.30 2.45 0.57%

28.77% 2.66% 192.40 1.83 0.49%

28.54% 2.72% 199.90 1.60 0.52%

28.57% 2.79% 220.27 1.77 0.91%

28.26% 2.64% 207.54 2.58 0.63%

287,649 27.18% 3.64% 218.82 2.30 0.75%

210,240 25.63% 5.11% 259.52 1.99 1.17%

211,969 27.02% 3.14% 223.20 1.75 0.82%

215,531 27.39% 2.99% 226.17 1.40 0.75%

196,298 28.12% 2.82% 214.12 1.38 0.57%

134,200 28.99% 1.48% 239.48 2.41 1.34%

163,779 27.58% 2.71% 281.94 2.79 1.83%

190,048 27.65% 2.85% 233.40 3.12 1.24%

183,100 28.63% 2.02% 185.69 2.58 0.62%

118,882 29.17% 1.59% 228.14 2.84 0.96%

0.00% 0.00% 0.00%

0.00% 0.00% 0.00%

0.00% 0.00% 0.00%

0.00% 0.00% 0.00%

0.00% 0.00% 0.00%

Hypogene Supergene Skarn 1 Skarn 2 High Zn

dmt dmt dmt dmt dmt

dmt % % g/t g/t %

3,766,311

Cu Zn Ag Au Pb Tonnes Mo

dmt

44,245

%

Payable Metal Cu Cu Ag Au

Mo

2030 18

m dmt

Concentrate Cu Tonnes

Mo

2029 17

Cu Zn Mo Ag Au Pb

Process Plant Recoveries Cu Hypogene Supergene Skarn 1 Skarn 2 High Zn Mo

t:t

2028 16

Mo

m m m m

lb's oz's oz's lb's

28.09% 2.93% 217.21 2.10 0.79%

2,237.79 22.55 0.13 39.02

0.00% 0.00% 0.00%

-

2,424

3,606

4,782

3,131

2,666

0.00%

40.00%

40.00%

40.00%

40.00%

40.00%

2,937 40.00%

2,594 40.00%

2,960 40.00%

4,406 40.00%

3,772 40.00%

2,124 40.00%

2,749 40.00%

2,204 40.00%

2,227 40.00%

1,663 40.00%

0.00%

0.00%

0.00%

0.00%

0.00%

-

218.36 2.00 0.02 2.14

249.53 2.13 0.01 3.18

272.37 2.45 0.01 4.22

200.90 2.02 0.01 2.76

181.99 1.73 0.02 2.35

165.20 1.74 0.01 2.59

113.58 1.54 0.01 2.29

121.00 1.31 0.01 2.61

124.77 1.35 0.00 3.89

116.77 1.16 0.00 3.33

82.34 0.90 0.01 1.87

95.51 1.32 0.01 2.42

111.11 1.24 0.01 1.94

110.98 0.91 0.01 1.96

73.39 0.75 0.01 1.47

-

-

-

-

-

Page 72

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.16.2

Summary

Post-tax analysis of predicted project cash flows for three metal price scenarios is summarised in Table 1.22. Table 1.22 Constancia Project After Tax Analysis Summary Post Tax

Commodity Price Scenarios

Analysis

Case 1

Case 2

Case 3

Cu Price ($/lb)

2.00

2.25

2.75

NPV (5%)

$496.8 M

$731.9 M

$1277.5 M

NPV (8%)

$303.6 M

$494.2 M

$931.8 M

IRR

15.5%

19.4%

26.9%

Payback

4 yrs

3 yrs

3 yrs

* NPV is quoted after taxes, royalties and profit sharing, and sunk costs.

Case 1 (Base Case): for NI-43-101 reporting purposes, Norsemont has elected to use the following long-term commodity prices: copper $2.00/lb, molybdenum $13.00/lb, silver $12.00/oz and gold $800/oz. Case 2: $2.25/lb copper represents the approximate mean analysts’ long-term copper price assumptions. Other metals remain constant. Case 3: $2.75/lb copper represents the mean copper price forward curve through to mid-2011, which historically has been the most accurate indicator of long-term copper prices. Other metals are based on recent metal prices of $18.00/lb Molybdenum, $14.00/oz silver and $950/oz gold. GRD Minproc provided the capital costs, operating costs and production plan inputs for the financial analysis and prepared the pre-tax cashflow, but expresses no opinion on the post-tax cashflow and financial analysis prepared by Norsemont. The financial analysis and discussion in the following sub-sections are based on the Base Case metal price assumptions outlined above. 1.16.3

Pre-tax analysis

The cashflow projections and financial evaluations assume that capital works commence Jan 2010 and that ore treatment commences January 2013 running to December 2027. Escalation and inflation have been excluded. The financial analysis assumes a 100% equity basis. Based on the assumptions set out above, the project pre-tax NPV at an 8% discount rate is $529.3 M and pre-tax IRR is 19.5%. The project would be expected to pay back the initial capital three years after commencement of production (pre-tax, undiscounted basis).

Page 73

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

The cash break-even copper price is $0.98/lb. The economic break-even copper price (the price at which NPV at 8% equals zero) is $1.55/lb. Total operating costs (including mining royalty, transportation, shipping, treatment and refining costs) are anticipated to average $1.31/lb of payable copper. After silver, gold and molybdenum credits of $0.40/lb of payable copper, the cash cost is estimated at $0.92/lb. Capital development costs are estimated to be $846 M, while deferred and sustaining capital, including closure costs is estimated to be $148 M. 1.16.3.1

Sensitivity analysis (pre-tax)

Figure 1.10 illustrates the sensitivity of the project economics to copper price, silver price, gold price, molybdenum price, mining costs, processing costs and capital development costs on a pre-tax basis. The Project is most sensitive to copper price, which accounts for approximately 84% of payable metal value. A 10% increase in copper price from the base case of $2.00/lb results in an increase in pre-tax NPV at 8% of $235 M, and conversely, a 10% decrease in copper price results in a decrease in NPV by the same amount. Figure 1.10 Pre-tax Cashflow Sensitivity Analysis (NPV – 8% discount rate)

1200

Copper Spot Price

1000

Silver Spot Price

NPV ($M)

800

Gold Spot Price

600

Moly Spot Price

400

Mining Cost

200

Processing Costs

0 ‐25%

‐20%

‐15%

‐10%

‐5%

0%

5%

10%

15%

20%

25%

Development  Costs

‐200

1.16.4 1.16.4.1

Post-tax analysis Key cashflow assumptions (post-tax)

Norsemont procured the opinion of Peruvian tax specialist Picon & Asociados, to assist in determining the impact of tax on the project post-tax cashflows and financial evaluations. The key tax, depreciation and amortisation assumptions are summarised in Table 1.23.

Page 74

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 1.23 Tax and Depreciation Rates Tax and Depreciation Assumptions Units

Value

Corporate Tax Rate

%

30.00%

Profit Distribution to Employees (pre-tax profits)

%

8.00%

Tax Depreciation Rates

Owned

Fixed Plant Buildings

%pa %pa

20% 5%

Leased

Movable Plant Buildings

%pa %pa

50% 20%

Pre-operating Costs 100% deductible in one year

1.16.4.2

Summary of results (post-tax)

Based on the assumptions set out above, the project post-tax NPV at 8% is $303.6 M and post-tax IRR is 15.5%. The project is expected to pay back the initial capital after four years of production. 1.16.4.3

Sensitivity analysis (post-tax)

Table 1.24 illustrates the sensitivity of the project economics to copper price, silver price, gold price, molybdenum price, mining costs, processing costs and capital development costs on a post-tax basis.

Page 75

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 1.24 Post-tax Project Sensitivity Analysis Post-tax NPV@8% Post-tax IRR $M

% Change

Copper

Silver

Gold

Molybdenum

Mining Costs

Processing Costs

Development Costs

Base = $ -20% -10% 0% 10% 20%

2.00 /lb

Base = $ -20% -10% 0% 10% 20%

12.00 /oz

Base = $ -20% -10% 0% 10% 20%

800.00 /oz

Base = $ -20% -10% 0% 10% 20%

13.00 /lb

Undisc Payback years

2 150 304 456 608

8.0% 11.9% 15.5% 18.7% 21.6%

5.00 4.00 4.00 3.00 3.00

286 295 304 313 322

15.1% 15.3% 15.5% 15.7% 15.9%

4.00 4.00 4.00 4.00 4.00

297 300 304 307 311

15.3% 15.4% 15.5% 15.5% 15.6%

4.00 4.00 4.00 4.00 4.00

272 288 304 320 336

14.8% 15.1% 15.5% 15.8% 16.1%

4.00 4.00 4.00 4.00 4.00

Base = $ variable -20% -10% 0% 10% 20%

351 327 304 280 257

16.4% 15.9% 15.5% 15.0% 14.5%

4.00 4.00 4.00 4.00 4.00

Base = $ variable -20% -10% 0% 10% 20%

372 338 304 269 235

16.8% 16.2% 15.5% 14.7% 14.0%

3.00 4.00 4.00 4.00 4.00

Base = $ -20% -10% 0% 10% 20%

417 360 304 247 189

20.2% 17.6% 15.5% 13.6% 12.0%

3.00 3.00 4.00 4.00 4.00

845.99 M

Page 76

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

As with the pre-tax analysis, the post-tax NPV and IRR are most sensitive to copper price (Figure 1.11). A 10% change in copper price results in a change in post-tax NPV at 8% of ±$153 M. Figure 1.11 Post-tax NPV Sensitivity (8% discount rate)

800

Copper Spot Price

700 Silver Spot Price

600

NPV ($M)

500

Gold Spot Price

400 Moly Spot Price

300 200

Mining Cost

100 Processing Costs

0 ‐100

‐25%

‐20%

‐15%

‐10%

‐5%

0%

‐200

1.17

CONCLUSIONS

1.17.1

Project overview

5%

10%

15%

20%

25%

Development  Costs

A DFS has been completed for the Constancia Project, covering all disciplines, i.e. resource modelling, mining, metallurgical testwork, process design, plant and infrastructure design, project implementation, environmental studies, and capital and operating cost estimation to ±15%. A post-tax cashflow model has been prepared by Norsemont, which indicates a Base Case NPV of $300 M and an IRR of 15.3%. However, these values do not take into account the financing costs required to develop the Project, which will now be investigated by Norsemont. Project economics are most sensitive to the long-term copper price: a constant price of $2.00/lb has been assumed for the Base Case cashflow model. Other important economic variables are the total capital cost, treatment charges, the cost of diesel and electricity. 1.17.2

Risks and opportunities

Risk analysis identified the following key issues: 

Power supply - there is potential that all available capacity at the current supply point of Tintaya substation is secured by other parties. Should this occur, Norsemont would have to fund the additional capital cost of obtaining a supply from the more distant Cotaruse Substation.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0



Power Price - the price of electricity paid by Norsemont during operations will be subject to market conditions, hence competition for power may result in the cost of power being higher that the current assumption. Negotiations with the various organisations that generate and transmit power may allow more confidence on power pricing and availability. However, it is understood that firm commitments by government organisations can only be provided closer to the time of supply.



Escalation - the estimate is based on pricing lower than that experienced in late 2008 at the peak of the market. Should commodity prices increase and market competition intensify then it is likely that the project will be exposed to positive escalation.



Political - the upcoming elections will coincide with the execution of the project, this has potential to affect both the project delivery and the project outcome through social conflict and civil unrest.



Pit geotechnical - geotechnical parameters are key criteria in the mine design, in particular the assessment for overall pit slope stability. Additional operational costs would be incurred if the pit slope stability estimates prove to be too optimistic.



Norsemont as Developer/Operator - the implementation strategy is based on Norsemont undertaking the overall project management role for the execution phase of the project, for constructing the bulk earthworks using its construction fleet, and the owner-operator role for the operations phase of the project. Significant project and construction management capabilities will be required by the Owner for this and particularly to ensure the timely completion of the bulk earthworks. This approach risks causing delay to the project schedule and prolongation claims from other contractors with liability falling on Norsemont. Cost increases arising from the need to employ additional staff to provide project management are a further risk.



To avoid delays to the construction schedule the purchase of community lands and the relocation action plan must be implemented at the beginning of 2010. If these activities are delayed then there is a high likelihood that the construction schedule will not be met.

Opportunities exist to improve the Project in the following areas: 

Detailed planning for the bulk earthworks and purchase of the Owners civil construction fleet would provide greater certainty on the capital and operational costs of the fleet.



Investigation of the availability of second hand accommodation camps has the potential to save cost.



The investigation of the availability of new long lead equipment, i.e. cancelled orders etc., may provide schedule opportunities for the project. Currently these long lead items are critical path items, hence a reduction in time of the delivery of key equipment will provide schedule assurance and possibly an overall schedule reduction.



Early execution of Front End Engineering Design of the process plant would provide greater degree of scope definition and more definitive costing.



Detailed design of the improvement works for the access road upgrade will increase the level of confidence around the scope of works. In addition, accelerated completion of the access road upgrade will reduce transportation and travel risks and reduce travel time and delays.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

1.18

RECOMMENDATIONS

1.18.1

Mineral resources

No further work required until a decision has been made to proceed to development. 1.18.2

Mining and mineral reserves

The DFS pit designs include a quadrant where the probability of bench scale failure is 44%. The incremental costs associated with flattening the pit slope in this area should be assessed relative to the corresponding reduced probability of bench scale failures. The fuel (diesel) and explosive unit prices used in the study should be confirmed by following up on the budget pricing submissions already requested from local suppliers. The mining and civil construction fleets should be evaluated to determine any synergies that might improve project value. Electric shovels and diesel drills have been assumed as the basis for the study. Further work should be performed to confirm the best approach considering capital and operating costs, mine operability and productivity to confirm the most suitable mine equipment solution. 1.18.3

Geotechnical and hydrogeological studies

Selected geotechnical investigations are recommended to provide support for detailed engineering. These include: 

Additional field geotechnical investigations within the southern portion of the PAG WRF (limited investigations have been possible to date, due to access restrictions).



Investigations to evaluate the need for removing the extremely weathered diorite to significant depths beneath the TMF embankment.



Additional geotechnical characterisation of the tailings and waste rock materials.



Additional investigations in potential borrow areas to further characterise potential construction materials and refine the quantity estimates.



Within the mine pit, two additional drillholes in Sector VI and one in Sector VII are necessary to investigate the potential that locally observed geological faults may extend through this area.



Risk analyses should be carried out to investigate the probability and consequences of a rock mass slide occurring over the access ramp, thereby removing access to the pit in the Sector VI area.

With regards to hydrogeological studies, further investigations should be completed within the TMF and PAG WRF to confirm the criteria used in the design of these facilities. Within the PAG WRF, the objective will be to confirm the containment capability of the existing regime. An investigation is underway to assess the potential influence of pit dewatering on the lakes and karstic area situated north of the pit. The investigation would include drilling, hydraulic testing and piezometer

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

installations along the Yanak fault and within the lakes catchment area to assess the existing ground water system and the degree of hydraulic continuity and connection between the Yanak fault and lake basins. Due to the risks associated with the availability of groundwater during drought conditions and uncertain water quality, a groundwater exploration program is recommended. Targets include: the Yanak fault south of the pit area and structures paralleling the Chilloroya valley below the glacial valley infill material. The installation of additional groundwater monitoring and sampling wells is recommended for the following locations: (1) within Quebrada Telaracaca to monitor potential seepages from the PAG WRF via fault zones; (2) upgradient and downgradient of the PAG WRF within Quebrada Huayllachane; and (3) downgradient of the proposed plant site. 1.18.4

Process testwork and plant design

Additional testwork is recommended to investigate: 

The potential to recover zinc concentrate as a saleable by-product



Silver recovery to copper concentrates



The potential to reduce the talc/amphibole content of the molybdenum concentrate

1.18.5

Environmental and permitting

Norsemont intends to submit the ESIA in December 2009. ESIA approval is expected in September 2010. Approval for construction is expected October 2010.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

2.

INTRODUCTION

2.1

BACKGROUND

Norsemont is developing the Constancia Cu-Mo-Ag Project in Southern Peru, 100 km south of Cusco. A 43-101 compliant Technical Report was previously prepared by GRD Minproc in May 2008 to support an updated mineral resource and provide preliminary metallurgical testwork information. Following this, GRD Minproc was appointed by Norsemont to undertake and manage a Definitive Feasibility Study (DFS) which has included a further resource update, comprehensive metallurgical testwork, mine design, plant and infrastructure design and development of capital and operating costs. The DFS forms the basis of this Technical Report. The Constancia deposit is a large-scale porphyry copper orebody located 4100 m above sea level (masl) in the Andes mountains. The proposal is to develop a Project comprising open pit mining and flotation of sulphide minerals, to produce commercial grade concentrates of copper and molybdenum. Silver and a small quantity of gold at payable levels would report to the copper concentrate. The Project is largely self-contained, with mine, mill, maintenance facilities, administration and fully serviced accommodation camp located on the mine site. Supporting infrastructure includes a power line to bring power from an upgraded supply point on the national grid at Tintaya, 70 km away. The public road to site will be upgraded to meet demands of extra traffic, particularly concentrate trucks and freight services. Raw water will be extracted from bores surrounding the open pit, and a tailings dam will be constructed within 5 km of the mine, on land owned freehold by Norsemont. The trigger for preparation of the Technical Report was a press release disclosure of the Mineral Resource estimate made by Norsemont on 28 September 2009. This report has been prepared in accordance with form 43-101F (the “Technical Report”) of the Canadian Securities Administrators National Instrument 43-101 (NI 43-101). 2.2

SCOPE OF WORK

GRD Minproc’s scopes of work for the DFS and current NI 43-101 Technical Report were: 

Review and verify Norsemont’s digital models of geology and copper domains



Develop a new resource model to include all new exploration drilling obtained subsequent to the May 2008 NI 43-101 Technical Report



Report resources in accordance with the requirements of NI43-101



Undertake a comprehensive metallurgical test programme on representative core samples of the deposits



Prepare a comprehensive plant design including on-site and off-site infrastructure, and prepare associated capital cost estimates



Prepare an estimate of mining costs and plant operating cash costs, including post-production (i.e. off-site) costs and provide a pre-tax economic evaluation of the Project.

Norsemont engaged the following consultants in addition to GRD Minproc:

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0



Knight Piésold responsible for site geotechnical investigations, and design and costing of the waste rock and tailings storage facilities, and water management systems.



SIGT S.A., a Columbian consulting company which provides services in design and supervision of roads and highways, supervised the design and costing for the access road to the project.



Cesel Ingenieros S.A. undertook design and costing for the Constancia project HT power line and sub-stations.



Jorge Picon, financial consultant to Norsemont, was responsible for the preparation of the post-tax financial model.



Ground Water International undertook hydrogeological studies

2.3

SOURCES OF INFORMATION

Norsemont provided all the necessary drilling, sampling, analytical and geological data to GRD Minproc for mineral resource modelling and estimation purposes. The mineral resource estimate reported here relies on a comprehensive drillhole database that included historical data for the site. The drilling programme is discussed in detail elsewhere in this report. Drill core was selected, in accordance with a sampling plan, from the client’s core shed in Cusco. Core samples were sent to Lakefield SGS Laboratories in Chile for metallurgical testing. The results of this testwork have been relied upon in development of the process flowsheet and plant design. Cost estimate data was obtained from reputable equipment suppliers and Peru-based contractors relying on technical specifications and material quantity take-offs provided by GRD Minproc. Operating cost information and selected input parameters for the economic evaluation were obtained from market pricing and from Norsemont. 2.4

SITE INSPECTIONS

GRD Minproc staff visited the site on several occasions. Lynn Widenbar, consultant geologist for GRD Minproc, has inspected the site, viewed exploration drill core and analysed the geological database at the client’s office in Lima. Ross Oliver (Manager Mining), Craig Cutriss (Principal Process Engineer), Nigel Ricketts (Process Manager), Peter Shaw (Lead Mechanical Engineer) and Rick McCracken (Lead Mechanical Designer) visited site in 2008. Mr David Miranda and Mr. Luis Caldera of GRD Minproc Chile, supervised the laboratory test programme and made frequent visits to the laboratory throughout the test programme. In addition, Mr Miranda inspected the drill core in Cusco and the core samples that were transported to Santiago. Dr Greg Harbort of GRD Minproc Brisbane visited the laboratory in Santiago and supervised a pilot scale test program using a 25 tonne bulk composite sample of Constancia drill core.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Robert Cummings, Principal Geological Engineer for Saguaro Geoservices, subconsultant to Knight Piésold and Co. (USA), visited the site March 12-14, 2008 and September 26-30, 2008. Thomas F. Kerr, President, Knight Piésold and Co. (USA), Senior Geotechnical Engineer, visited the property on several occasions in 2008 and 2009. Gilberto Dominguez, Knight Piésold and Co. (USA), Executive Project Manager, visited the site in February 2009. Olimpio Angeles, Senior Geologist, Knight Piésold Consultores S.A. visited the site on several occasions between 2006 and 2009. Rubén Vargas, Knight Piésold Consultores S.A., Geotechnical Engineer visited the site on several occasions between 2008 and 2009. Lorena Viale (Knight Piésold) Project Manager for the Environmental Impact Assessment visited the site on numerous occasions and has participated in workshops and presentations to communities living within the area of influence. Carol Harrison (Project Manager) and Lucia Avila (Project Coordinator) of Social Capital Group, are responsible for the Social Impact Assessment. They, too, have visited the site on numerous occasions and have participated in workshops and presentations to communities living within the area of influence. 2.5

CONTRIBUTORS TO THE REPORT

The major contributors to this report are listed in the Table 2.1.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 2.1 Contributors to Constancia DFS Technical Report Discipline Overall Compilation of

Section

Responsible Party

Qualified Person

Other Expert

All

GRD Minproc

Dan Greig

Sections 5 to 13, 15

Norsemont

Gaston Loyola

Section 4

Norsemont

Gaston Loyola

Technical Report Background, geology, history of exploration and sampling Mineral concessions and permits Data quality

Section 14

GRD Minproc

Lynn Widenbar

Resources

Section 17

GRD Minproc

Lynn Widenbar

Mineral reserve and Mining

Sections 17.14 and

GRD Minproc

Ross Oliver Robert Cummings

Olimpio Angeles

Tom Kerr

Gilberto

18.1 Geological engineering (pit

Sections 18.1.3 and

Saguaro

slopes)

18.2.2

Geoservices

Site geotechnical

Section 18.2,

Knight Piésold

investigations, waste

excluding the above

Dominguez,

characterisation, waste rock

pit geotechnical

Ruben Vargas

and water management

sections; plus Sections 18.6 and 18.7

Hydrogeological

Section 18.3

MWH Peru

David Evans and Jean Cho

Metallurgy

Section 16

GRD Minproc

Greg Harbort

Plant engineering

Section 18.4

GRD Minproc

Craig Cuttriss

Capital cost estimate (plant

Section 18.13

GRD Minproc

Craig Cuttriss

Chris Gilmour

GRD Minproc/

Greg Harbort

Sean Spraggett

Tom Kerr

Gilberto

and plant infrastructure) Operating cost estimate

Section 18.14

Norsemont Tailings management facility

Section 18.7

Knight Piésold

and waste dumps

Dominguez and Ruben Vargas

Power supply

Section 18.5.4

Cesel

Pablo Lozano and Mario Rojas

Access road

Section 18.5.1

SIGT

Luis Yafac

Environmental and Social

Sections 18.10 and

Knight Piésold

Lorena Viale

18.12

Norsemont

Carol Fries

Social Capital Group

Carol Harrison

Section 18.8

Norsemont

Sean Spraggett

Financial cashflow model

Section 18.16.1 to

GRD Minproc

Ross Oliver

(pre-tax)

18.16.3

Financial cashflow model

Section 18.16.4

Picon

Jorge Picon

Section 18.16

Norsemont

Sean Spraggett

Road transport and port operations

(post-tax) Financial analysis

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

2.6

DISCLOSURE OF INTEREST

GRD Minproc is not an associate or affiliate of Norsemont, or of any associated company. GRD Minproc’s fee for this Technical Report is not dependent in whole or part on any prior or future engagement or understanding resulting from the conclusions of this report. The fee is in accordance with standard industry fees for work of this nature.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

3.

RELIANCE ON OTHER EXPERTS

In preparing this report, GRD Minproc has relied on input from Norsemont and a number of wellqualified independent consulting groups as recorded in Section 2.5, particularly regarding the hydrological/hydrogeological and geotechnical investigations and recommendations, off-site infrastructure engineering, environmental and legal matters. Further, GRD Minproc has relied on results of metallurgical testwork undertaken by a well-credentialled laboratory as a basis for its process flowsheet design. The authors of this Technical Report have relied on input from a number of Experts who would not be considered Qualified Persons under NI43-101, but who have the necessary qualifications and experience to provide input and opinions incorporated into the Report. These include information regarding: 

Status of Mining Concessions



Land ownership and permitting requirements to obtain surface rights, construction and exploitation permits and licences for plant and infrastructure



Environmental studies



Access road upgrade and costs



Post tax financial analysis

Specific information provided by Norsemont and its consultants includes: 

Metal prices



Treatment charges



Transport costs (road, port and shipping)



Access road upgrade costs, through Norsemont’s sub-contractor SIGT



Power cost, including power transmission, through Norsemont’s sub-contractor CESEL



Diesel cost, delivered, including storage and dispensing



Exchange rates



Information concerning operations such as organisational structure, labour conditions (sourcing, salaries and on-costs, transport), camp services and maintenance.

A simplified project cashflow model was prepared by GRD Minproc on a pre-tax, 100% equity basis. Norsemont has provided information regarding taxation, royalties and employee profit sharing, and has undertaken post-tax financial analysis, which was completed by Picon Associates a local firm specializing in Peruvian taxation laws. GRD Minproc does not claim to be expert in financial matters, and has relied on Norsemont with respect to the above.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

4.

PROPERTY DESCRIPTION AND LOCATION

4.1

GENERAL LOCATION

The Constancia Project is located in the southeastern Andes of Peru, in the Chamaca and Livitaca Districts, Province of Chumbivilcas, Department of Cusco on map sheet 29-S Livitaca (Figure 4.1). The property is approximately 600 km southeast of Lima at elevations of 4000 to 4500 masl. Road access to the property is from either Arequipa (7 hours by road) or Cusco (6.5 hours by road). Geographic coordinates at the centre of the property are longitude 71°47’ west and latitude 14°27’ south. Figure 4.1 Project Location

4.2

PERUVIAN MINING LAW

The General Mining Law of Peru defines and regulates different categories of mining activities, from sampling and prospecting to commercialisation, exploitation, and processing. Mining concessions are granted using UTM coordinates to define areas generally ranging from 100 ha to 1000 ha in size. Mining titles are irrevocable and perpetual, as long as the titleholder maintains payment of the “Derecho Vigencia” fees up to date (Ministerio de Energia y Minas, 1998). No royalties or other production-based monetary obligations are imposed on holders of mining concessions; instead, a holder must pay an annual maintenance fee of $3/ha (for metallic mineral concessions) for each concession actually

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

acquired, or for a pending application (petitorio), by June 30th of each year. The concession holder must sustain a minimum level of annual commercial production of greater than $100/ha in gross sales within six years of the grant of the concession (‘’Minimum Required Production’’). If the concession has not been put into production within that period, then the concession holder must make an additional payment in the form of a penalty of $6/ha for the seventh through eleventh year of the grant of the concession, rising to $20/ha thereafter. The concession holder shall be exempted from the penalty if the investment made during the previous year was 10 times the penalty. The holder of a mining concession is entitled to all the protection available to all holders of private property rights under the Peruvian Constitution, the Civil Code, and other applicable laws. A Peruvian mining concession is a property-related right; distinct and independent from the ownership of land on which it is located, even when both belong to the same person. The rights granted by a mining concession are defensible against third parties, are transferable and chargeable, and, in general, may be the subject of any transaction or contract. To be enforceable, any and all transactions and contracts pertaining to a mining concession must be entered into a public deed and registered with the Public Mining Registry. Conversely, the holder of a mining concession must develop and operate his/her concession in a progressive manner, in compliance with applicable safety and environmental regulations and with all necessary steps to avoid third-party damages. The concession holder must permit access to those mining authorities responsible for assessing that the concession holder is meeting all obligations. 4.3

CONSTANCIA MINING CONCESSIONS

Figure 4.2 shows the Constancia and San José mineralised zones on the property in relation to the concession boundaries. Most of the known mineralisation is located in the claims Katanga J, Katanga Q, Katanga K, and Peta 7, although small mineralised outcrops are common throughout the area. Norsemont is the current registered titleholder of the Constancia concessions which comprise 22516.04 ha in thirty-six mineral concessions that are in good standing. All of the concessions have been titled and have also been recorded with the Public Registry.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 4.2 Concession Boundaries

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 4.1 shows the names and sizes of the pertinent concessions, concession dates and the company that holds the title. All the properties are located on the Livitaca (29-S) map sheet. Table 4.1 Constancia Concessions Concession Name

Code

Concession

Concession

Granted

Holder

Hectares

Peta 5

05006089X01

28-11-1989

Livitaca

934.52

Katanga J

05004406X01

29-03-1990

Mitsui

400.00

Katanga Q

05005529X01

09-05-1990

Katanga

150.01

Katanga K

05004407X01

16-07-1990

Mitsui

300.00

Peta 6

05006090X01

29-10-1996

Katanga

Santiago 4

010083495

23-12-1996

Mitsui

34.16

Santiago 3

010083695

25-03-1997

Mitsui

700.58

Santiago 5

010083295

30-04-1997

Mitsui

602.12

Katanga V

010248497

31-10-1997

Mitsui

100.00

Katanga T

010248397

15-11-1997

Mitsui

100.00

Santiago Apostol I

010229294

31-03-1998

Mitsui

424.49

Peta 17

0506198AX01

13-12-1999

Katanga

49.05

Peta 7

05006198X01

13-12-1999

Katanga

351.70

1000.00

Since 14 December 2006 two new claims were added to the pre-existing Katanga “Unidad Economica Administrativa” (UEA), bringing a total of 13 claims (6785.2831 Ha.) to the UEA. The UEA Katanga Este (Code N° 01-00029-83-U) was created by Rio Tinto and transferred to Norsemont Peru S.A.C according to the Resolucion Jefatural N° 5404-2006-INACC/J. Project concessions are currently in good standing and concession fees have been paid for the calendar year 2009. Norsemont confirms that it has renewed the Semi Detailed EIA in January 2009 for a period of 14 months. On November 23, 2007, 11 Mining applications were submitted to Ingemmet to cover new areas with a total of 7700 ha. In addition, the Company also entered into an auction at the Ministry of Energy and Mines for an additional 12 claims in 2007 and received notification in 2008 that the claims were granted to the Company. The mining applications were granted to Norsemont as shown in Table 4.2.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 4.2

Concession Name

Code

Constancia Concession Grants Concession Granted Resolution

Area (Ha)

Constancia 5

01-00253-07

01/03/2007

D.M. Titulado D.L. 708

1000

Constancia 6

01-00254-07

01/03/2007

D.M. Titulado D.L. 708

1000

Constancia 7

01-00255-07

01/03/2007

D.M. Titulado D.L. 708

1000

Constancia 8

01-00256-07

01/03/2007

D.M. Titulado D.L. 708

900

Constancia 9

01-00257-07

01/03/2007

D.M. Titulado D.L. 708

1000

Constancia 10

01-00258-07

01/03/2007

D.M. Titulado D.L. 708

100

Constancia 11

01-00259-07

01/03/2007

D.M. Titulado D.L. 708

1000

Constancia 12

01-00260-07

01/03/2007

D.M. Titulado D.L. 708

1000

Constancia 13

01-00261-07

01/03/2007

D.M. Titulado D.L. 708

1000

Constancia 14

01-00262-07

01/03/2007

D.M. Titulado D.L. 708

1000

Constancia 15

01-00263-07

01/03/2007

D.M. Titulado D.L. 708

1000

Constancia 16

01-00264-07

01/03/2007

D.M. Titulado D.L. 708

300

Constancia 17

01-06147-07

05/05/2008

001061-2008-INGEMMET/PCD/PM

700

Constancia 18

01-06148-07

21/04/2008

000937-2008-INGEMMET/PCD/PM

400

Constancia 19

01-06149-07

12/05/2008

001175-2008-INGEMMET/PCD/PM

700

Constancia 20

01-06150-07

12/05/2008

001234-2008-INGEMMET/PDC/PM

600

Constancia 21

01-06151-07

12/05/2008

001422-2008-INGEMMET/PCD/PM

700

Constancia 22

01-06152-07

12/05/2008

001291-2008-INGEMMET/PCD/PM

600

Constancia 23

01-06153-07

18/04/2008

000872-2008-INGEMMET/PCD/PM

1000

Constancia 24

01-06154-07

17/04/2008

000724-2008-INGEMMET/PCD/PM

800

Constancia 25

01-06155-07

17/04/2008

000717-2008-INGEMMET/PCD/PM

800

Constancia 26

01-06156-07

18/04/2008

000874-2008-INGEMMET/PCD/PM

600

4.4

MINERAL RIGHTS OWNERSHIP

4.4.1

Rio Tinto purchase

On 29 November, 2007, Norsemont exercised its exclusive option to acquire an initial 51% of the Constancia copper project from Rio Tinto Mining and Exploration Ltd (Rio Tinto). Combined with the 30% interest that Norsemont previously acquired from Mitsui Mining and Smelting, this acquisition brought Norsemont’s interest in the Constancia Project to 81% at that time. In order to exercise the initial option, granted in 2005, Norsemont was obligated to completed work expenditures at Constancia of $7.8 M, make $5 M of payments and issue 1 250 000 common shares (or their cash equivalent) to Rio Tinto. All three obligations have been met. Table 4.3 presents the cash payment, share issuance and work expenditure schedule. Under the terms of the same Rio Tinto option agreement, Rio Tinto had 60 days within which to decide whether to claw back a 17% undivided interest in Constancia. This could only be done if, in the

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

reasonable opinion of Rio Tinto, Constancia’s global resource estimate is not less than 4 Mt (8.8 billion pounds) of contained copper. In the event that Rio Tinto were to claw back a 17% interest, they would have had to pay Norsemont 300% of the Company’s net cash payments, work expenditures and share issuances related to the project. Rio Tinto advised Norsemont on 18 January 2008 of its intention not to exercise its claw-back, allowing Norsemont to acquire the remaining 19% interest for $8 M. This payment was made on 26 March 2008. Table 4.3 Option Exercise Schedule Option exercise schedule

Cash ($)

Exploration expenditures ($)

Shares

On signing of LOI

10 000 (1)

-

-

45 days following LOI

90 000 (1)

-

-

150 000 (1)

-

-

April 20, 2005 June 30, 2005

-

250 000 (2)

October 2005

200 000 (1)

500 000

-

April 2006

250 000 (1)

500 000

-

June 30, 2006

-

-

250 000 (2)

October 2006

300 000 (1)

500 000

-

April 20, 2007

400 000 (1)

-

-

June 30, 2007

-

-

250 000 (3)

October 2007

500 000 (1)

1 300 000

-

April 2008

500 000 (1)

1 000 000

-

June 30, 2008

-

-

250 000 (2)

October 2008

750 000 (1)

-

1 500 000

-

October 2009

1 850 000 (1)

2 500 000

250 000 (2)

Total

5 000 000

7 800 000 (4)

1 250 000

(1) Paid (2) Issued (3) Paid $365,169 in lieu of shares (4) Incurred. As of July 2009, the Company has expended in excess of $73 000 297 of qualifying expenditures for exploration.

Upon commencement of commercial production, the Company is required to make the following additional payments to Rio Tinto: 

$250 000 should the Company have between 34% and 50.9% interest in the Constancia Property, or



$500 000 should the Company have a majority interest in the Constancia Property of 51% or greater

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

4.4.2

Mitsui Mining and smelting purchase

On 1st November 2007, Norsemont announced that it had signed an agreement to purchase 30% of the Constancia Project from Mitsui Mining and Smelting (Mitsui). The Mitsui agreement called for a $9.8 M payment over 20 months on the following schedule: Initial payment on signature of the public deed of the agreements:

$100 000

First payment on or before January 31, 2008:

$700 000

Second payment on or before June 30, 2008:

$2 000 000

Third payment on or before December 31, 2008:

$3 000 000

Final payment on or before June 30, 2009:

$4 000 000

Total payments of $9.8 M have now been made, bringing Norsemont’s interest in the Constancia property to 100%. 4.5

SURFACE RIGHTS

Most of the project area is located within private property owned by Norsemont, though adjacent parts of the deposit and infrastructure are within third party land. For rights purposes, Norsemont previously purchased the Fortunia property that covers most of the main resource area (see Figure 4.3). Other areas of interest are being investigated to assess their value to the project. Figure 4.3 displays the private land holdings by Norsemont, which are also summarised in Table 4.4. Table 4.4 Private Lands Summary Name

Area

Land Registered

Titled

Fortunia

974.71

yes

yes

Cristina Velazco

423.38

Yes

yes

Morocota

885.35

yes

yes

Arizona

371.81

Pending

pending

Antonio Velazco 1

943.00

yes

yes

Antonio Velazco Lot B

499.64

Pending

pending

Total

4,097.89

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 4.3 Surface Rights

Additional purchase agreements for private surface land have been signed on the following properties: 

Arizona / Morocota On 31 January 2009, Norsemont signed a purchase agreement for the acquisition of the surface rights which covers the mining concessions Santiago 3, Peta 17, Katanga K and Katanga J. The private lands, totalling 1257.16 ha, are known as Moroccota (885.35 ha) and Arizona (371.81 ha). The previous owners, Enrique Antonio Velasco Torrelio and Giovanna Abuhadba Sayhua, agreed to the sale of the properties for the total amount of $620 000 as a final payment for the transaction. The company provided a certified cheque for the amount of $250 000 at the contract signature, and paid $220 000 at the contract registration in Sicuani, Cusco Public Register on 28 April, 2008, leaving a balance of $150 000 to be paid when Moroccota is registered in the name of Norsemont.



Cristina Velasco On 19 March 2009, Miriam Rozas on behalf of Cristina Velasco; signed the purchase agreement for the Cristina Velasco property (326.09 ha) for the total amount of $200 000. The company advanced a payment of $60 000 at the contract signature, leaving a pending balance of $140 000 to be paid once the property is registered in the name of Norsemont.

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On 21 January 2009, Norsemont signed a modification to the purchase agreement, increasing the value by $50 000 to $250 000. This modification was approved after certification that the land covered an additional 97.29 hectares, i.e. a total of 423.38 ha. The final payment of $190 000 was processed on 31 March 2009, and the property is now registered in the name of Norsemont in the public registers of Sicuani – Cusco. 

San Antonio On 23 March, 2009 Norsemont signed a purchase agreement for the San Antonio property (1442.64 ha) for a total amount of $2 175 000. The property is divided into two portions consisting of a 943 ha parcel that is titled and registered and a 499.64 ha parcel that is registered and in the process of being titled. Norsemont made full payment of 1 421 716 for the 943 ha land parcel and holds 100% title. The company advanced a payment of $112 992.60 at the contract signing for the 499.64 ha land parcel, having a pending balance of $640 291.40 which will be paid when the property is registered in the name of Norsemont.

Other areas of interest are being investigated to assess their value to the project. 4.6

ENVIRONMENTAL REGULATIONS

The General Mining Law of Peru is the primary body of law with regard to mining activities in Peru. The regulation surrounding environmental obligations of mining activities is governed by the Environmental Protection Law (D.S. 016-93 EM). The Law is administered by the Ministry of Energy and Mines (MEM). Depending on the phase of the project the MEM can require a mining company to prepare an Environmental Evaluation (EA), an Environmental Impact Assessment (EIA), a Program for Environmental Management and Adjustment (PAMA), and a Closure Plan. Mining companies are also subject to annual environmental audits. According to Peruvian regulations (S.D. 038-98-EM) the environmental requirements for mining exploration programs are divided into classifications Category 1, 2 and 3. Category 1 is for general exploration activities and requires no authorisation or fees. Classification 2 includes drilling of less than 20 drillholes within a 10 ha area. An application in the form of a sworn declaration must be submitted. Category 3 pertains to mining exploration programs with more than 20 boreholes, exploration areas greater than 10 ha, or construction of more than 50 m of tunnels. Submission and acceptance of an EA (Evaluación Ambiental) is required for approval of Category 3 activities. The MEM has a period of 25 days to review and approve or disapprove the EA; the EA is considered approved if the MEM does not respond within that period. A mining company that has completed its exploration stage must submit an ESIA (Environmental Social Impact Assessment) when applying for a new mining operation or filing for a processing concession, to increase the size of its existing processing operations by more than 50%, or to execute any other mining project. An ESIA is subject to public workshops and audiences with the local communities prior to its approval. A mining company planning to enter into production must also prepare and submit a Closure Plan (Plan de Cierre) prior to the start of its construction phase. The Closure Plan must outline what measures will

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be taken to protect the environment over the short, medium and long term following closure of its operations. The General Mining Law of Peru has in place a system of sanctions or financial penalties that can be levied against a mining company not in compliance with the environmental regulations. The Constancia Project has been designed to consider all relevant legislation applicable to the development of mining projects in Peru, including mines, roads, ports and transmission lines. Additional legislation that has been considered includes legislation and regulations regarding archaeological areas of significance, endangered and protected species, and community relations and public disclosure programs. The ESIA was developed in accordance with the following legislation and standards: 

Peruvian Political Constitution, 1993



Environmental General Law, 2005



Private Investment Growth Law, 1991



Environmental Impact for Works and Activities Evaluation Law, 1997



Sustainable Utilisation of Natural Resources Organic Law, 1997



Environmental Impact Assessment National System Law, 2001



Water Resources Law, 2009



Water Quality National Standards, 2008



Air Quality National Standards, 2008



Noise Quality National Standards, 2003



Health Law, 1997



Environmental Management National System Law, 2004



Cultural Heritage Protection Law, 1985



Solid Waste Law (2004) and modifying (2008)



Forestry and Wildlife Protection Law, 2001



Mines Closure Law, 2003



Public Participation Regulations, 2008



Regulation for Environmental Protection in Mining - Mineral Processing Activities, 1993



Maximum Permissible Levels for Liquid Effluents from Mining – Mineral Processing Activities, 1996



World Bank Environmental and Communities Standards.

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5.

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

5.1

ACCESSIBILITY

The project is accessible from Lima by air, via either Arequipa or Cusco, and then by road over paved and gravel highways. The routes and approximate distances and driving times are shown in Table 5.1. Table 5.1 Travel Distance and Time to Constancia From

Leg

Arequipa

Canahuasi

80

1.25

Imata

63

0.75

103

2.50

68

2.00

Yauri/Espinar Uchucarcco turnoff Project site

Cusco

Time (hours)

20

0.50

Total

334

7.00

Sicuani (paved road)

140

2.00

Descanso

40

1.00

Yauri/Espinar

45

0.75

Uchuccarco turnoff

68

2.00

Project site

20

0.50

313

6.25

Total

5.2

Distance (km)

CLIMATE AND VEGETATION

Climate at the Constancia site can be classified as humid and seasonably cool with well-defined, rainy, and drier seasons. The majority of the precipitation typically occurs over the period of October to April, the summer months. Orographic (elevation) and physiographic effects also have influences on the climate. A design set of climatological data has been developed based on collected site data and data from stations located near the site. Due to the short length of climatological record at the on-site station (18 months), a synthetic precipitation record was developed for the site. A regression analyses was used by correlating the precipitation data from the on-site station with nearby climatological stations located in Santo Tomas, Yauri, Pisac, Livitaca and Imata, which have longer periods of record. Estimates for the design 24 hour storm events were calculated using a theoretical Extreme Type I (Gumbel) probability distribution on precipitation data from the Livitaca station, which is the closest station to the Constancia site and is located within the same drainage basin. Storm events observed at the Livitaca station were also the largest of the nearby stations.

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The following summarises the climatological and hydrologic data adopted for the design: 

Annual Precipitation values: Annual average precipitation – 1172 mm Annual maximum precipitation – 1887 mm Annual minimum precipitation – 485 mm Average wet season (October to April) precipitation – 1078 mm Average dry season (May to September) precipitation – 94 mm



24 hour Storm Event Estimates: 100 year/24 hour storm precipitation – 92 mm PMP/24 hour storm precipitation – 263 mm



Run-off and Infiltration: Average annual runoff – 172 mm Average annual infiltration – 468 mm



Air Temperatures: Daily average maximum – between 13 and 16 °C Daily average minimum – between 1 and 12 °C



Average Annual Evaporations: Potential annual evaporation – 1685 mm Annual evaporation from existing ground – 532 mm Evaporation from dry tailing – 475 mm Evaporation from wet tailing – 1518 mm

Vegetation is sparse and comprises limited brush on the flanks of the valleys. Exploration and mining operations are possible throughout the year. 5.3

LOCAL RESOURCES AND INFRASTRUCTURE

The main economic activity in the area is agriculture and cattle farming. A labour force with basic mining knowledge is present in Espinar. Food and basic supplies can be obtained in Espinar. Arequipa and Cusco are the nearest major centres, and both are over 300 km from the Project site by road. Several small permanently flowing streams, which are adequate for exploration requirements, are present in the area. More significant water sources include the Apurimac and Chilloroya rivers. Infrastructure includes several poorly maintained unsealed roads. All bridges on the access routes have low load capacity.

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Public electricity is available in Uchucarcco and, only recently, in the Chilloroya community. This power is supplied from the main grid via Chamaca. Grid electricity is available at Tintaya, 70 km from the project. Power supply is 138 kV, but there are plans to upgrade this to 220 kV by 2012. A public, but privately managed, landing strip is located at Espinar, about two hours from the project. The air strip is paved and maintained by Xstrata, and Norsemont has authorisation to use the strip. Small commercial and/or charter flight can use the air strip for daytime operations. 5.4

GEOMORPHOLOGY

The Katanga-Constancia district has moderate relief with shallow glacial valleys and low rolling (400-500 m) hills. Two erosion surfaces can be distinguished; an older one overlain by the Tacaza volcanics, and a younger surface that forms the present landscape. This erosion surface has incipient dendritic drainage indicating the beginning of a more intense erosion cycle. The geomorphology of the area suggests that the porphyry intrusives were exposed to an extensive period of weathering associated with an unusually deep oxidation profile compared to other porphyry deposits in the vicinity of similar age. There are abundant indications of glacial activity corresponding to the last glaciation period. This glacial erosion formed the present U-shaped valleys and resulted in the deposition of abundant moraines of up to tens of meters in thickness. Holocene glacial deposits are located on the margins of U-shaped valleys as lateral moraines, or in the centre of the drainage as terminal moraines. Recent alluvial deposits are not common, and are located only at the margins of the larger rivers.

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6.

HISTORY

Katanga was the main mine in the area and is located approximately 3 km northwest of Constancia, outside the Norsemont property boundaries. Copper and gold were exploited at Katanga from early last century to the early 1990s. The deposit consists of narrow skarn bodies developed in the contact between marbles and monzonite stocks, with Cu, Ag and Au mineralisation in hypogene sulphides. Mitsui and Minera Katanga operated the mine at different times between late 1970s to early 1990s. The San José prospect (now part of the Constancia prospect) was explored by Mitsui during the 1980s with a focus on locating more high-grade ore to add to the nearby Katanga mine operation. Exploration consisted of detailed mapping, soil sampling (1949 samples), rock chip sampling (1138 samples), ground magnetic and IP surveys with several drilling campaigns, mainly located in the western and southern sides of the prospect. Mitsui completed 24 drillholes (4190.5 m) and Minera Katanga completed 24 shallow, close-spaced drillholes at San José (1239.8 m). In 1995, reconnaissance prospecting identified evidence for porphyry-style mineralisation exposed over an area of 1.4 km x 0.7 km, open in several directions, with some Cu enrichment below a widespread leach cap developed in both porphyry and skarn. Negotiations with other parties to acquire an interest in the property were unsuccessful at this time. In May 2003, the area was revisited by Rio Tinto and the presence of a leached cap and potential for a significant copper porphyry deposit was confirmed. Negotiations with Mitsui, Minera Livitaca and Minera Katanga resulted in an agreement being signed on October 2003 with the underlying owners. The agreements included a Joint venture (JV) Option between Rio Tinto and Mitsui, and Purchase Option Agreements with Minera Livitaca and Minera Katanga to acquire 100% interests in their property. Rio Tinto commenced exploration in December 2003. The Rio Tinto exploration activities consisted of geological mapping, soil and rock chip sampling, and surface geophysics (magnetics and IP). Rio Tinto completed 24 diamond drillholes for a total of 7484.15 m. Based on this drilling, and using 50x50x10 m blocks with inverse distance squared (250x250x20 m) interpolation, Rio Tinto estimated a resource of 189 million tonnes of 0.68% copper and 200 ppm molybdenum, using a 0.5% copper cut-off. Although considered relevant, this resource can only be considered historical in nature as it does not comply with the guidelines of National Instrument 43-101. In late 2004, Rio Tinto sought partners for the Constancia prospect because the property did not meet their threshold which is nominally a project with potential to produce 200 000 tonnes of copper annually for a minimum of 20 years. Eventually, Norsemont entered into negotiations with Rio Tinto and these negotiations led to an agreement in early 2005. The first Norsemont geologists visited the property in June of 2005.

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7.

GEOLOGICAL SETTING

7.1

DISTRICT GEOLOGY

The oldest rocks in the area (Figure 7.1) correspond to a sequence of white, red, violet or grey mediumgrained sandstones with intercalations of reddish mudstones of the Lower Cretaceous Chilloroya Formation (also referred to as the Murco Formation). The Arcurquina Formation discordantly overlies the Chilloroya Formation and correlates with the Upper Cretaceous Ferrobamba Formation. These rocks are exposed in a north-south elongate area, 15 km long by 5 km wide, comprising a sequence of limestones, calc-arenites and lenses of conglomerates. These sedimentary formations have been intruded by plutonic rocks belonging to the AndahuaylasYauri Batholith of Oligocene age. The batholith varies from dioritic to granodioritic in composition, with plagioclase and orthoclase feldspar, quartz, hornblende, biotite, apatite, zircon and sphene being the main rock-forming minerals. Small mantos, veins and lenses of massive magnetite skarn are common in the area, and are probably related to the batholith emplacement. Several monzonitic stocks, dykes or laccoliths intrude and cross-cut all the lithologies mentioned above. Where these rocks have intruded limestones, it is common to find mineralised skarns, some of which contain Cu-Au-Ag mineralisation such as those at the Katanga mine. Some of the stocks have characteristics typical of porphyry copper deposits such as at Constancia.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 7.1 Simplified Geology of the Andahuaylas-Yauri Area

7.2

PROPERTY GEOLOGY

The Constancia porphyry copper prospect is located on the eastern margin of the Andahuaylas-Yauri Batholith, approximately 3 km southeast of the old Katanga mine (Figure 7.2). Surface geologic mapping by Norsemont between 2005 and 2008 has been greatly aided by the new drill roads and platforms for the 317 drill sites constructed by Norsemont to date. Interpretation of core drilling results has been very useful in improving the surface mapping.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 7.2 Geological Map of the Constancia Deposit

7.2.1

Stratigraphy

The oldest stratigraphic unit recognised on the prospect comprises clastic sediments corresponding to the Chilloroya Formation, consisting of a sequence of white, red, violet and grey medium-grained sandstones with intercalations of reddish mudstones. Immediately overlying this basal unit are massive, grey micritic limestones with minor intercalations of shales, which outcrop sporadically around the prospect and near the contacts with monzonite, sometimes occurring as roof pendants. This unit corresponds to the Arcurquina Formation (locally known as Ferrobamba Formation). When in contact with intrusive rocks, these alter to marble or pyroxene diopside-garnet-magnetite-epidote skarn, with or without sulphides. The limestones and skarns dip gently south-east, away from the principal monzonite in the southern part of the Constancia mineralised zone. The overall thickness of the sedimentary package is unknown. The determination of the base of this limestone unit may be of importance at Constancia, as this potential contact seems to correlate with the favourable skarn horizon at the Tintaya Mine and

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elsewhere in the region. This contact may be found at depth south and east of the presently drilled area, if not intruded by the monzonite. The underlying clastic sediments of the Murco Formation, and possibly the upper parts of the further underlying Hualhuani Formation (locally known as Soraya Formation), which lithologically consist of sandstones and siltstones, with occasional calcareous and quartzite horizons, are known to host copper mineralisation in several copper systems within the belt. At Mitsui’s Quechua deposit near Tintaya, and also at the Antillas porphyry copper deposit near Antabamba (north of Constancia), these rocks are the main host for the copper mineralisation. The same style of mineralisation occurs at Haquira (10 km south of Las Bambas), where Murco sediments are the host for most of the copper oxide resource of the system. At Constancia, these types of clastic sediments, especially the Murco or Chilloroya Formation which is the host for the copper oxide mineralisation at Haquira, have been identified in the southern sector of the property, around the Chilloroya village, where recent surface exploration has identified evidence of porphyry-related copper-gold-molybdenum mineralisation associated with the sediments and altered porphyry rocks. Common to these clastic sediments is their iron-stained colouration, which comes from oxidation of former disseminated pyrite. Glacial moraines cover the northern and eastern margins of the Constancia deposit. To the east these moraines entirely cover potentially important extensions of copper mineralisation along broad east-west structural zones. 7.2.2

Intrusions

Multiple phases of monzonite and monzonite porphyry characterise much of the surface area of the prospect, as well as dominating the rock types observed in the drilling to date. At this stage of the understanding of the deposit, at least four main phases of intrusion are recognised, with the second oldest being associated with the main mineralisation event. From oldest to youngest they are: Diorite: while not part of the intrusive event associated with mineralisation, the Andahuaylas-Yauri Batholith forms the ‘Intrusive Basement’ to the Constancia deposit. Monzonite Porphyry 1 (MP1): this unit outcrops as a large stock on the Constancia hill, extending west to San José. It hosts most of the porphyry-related mineralisation. It is characterised by abundant (40-50%) plagioclase phenocrysts up to 3 mm long. Hornblende constitutes 5-7%, with elongated crystals up to 6 mm long. The matrix is pinkish, with smaller magnetite and orthoclase crystals. The upper parts of this stock are mostly leached, making its recognition difficult. Micro Monzonite Porphyry (MMP): characterised by a fine-grained texture with plagioclase crystals (60-70%) up to 2 mm long. Biotite (1-3%) and magnetite (bio) for about 5-8%. The monzonite porphyry occurs as dykes up to 150 m wide, which strike north-south, possibly with a steep easterly dip. Andesite (AAN): dark-gray, aphanitic rock (greenish from chloritisation), with plagioclase and hornblende phenocrysts, and with magnetite about 1%. This occurs mainly as narrow dyke-like bodies, some of them close to the contacts with quartz monzonite porphyries. Additionally several brecciated units and minor felsic dykes occur in the area. 7.2.3 7.2.3.1

Alteration Potassic alteration

The potassic alteration assemblage is characterised by secondary potassium-feldspar, and by variable amounts of hydrothermal biotite replacing earlier ferromagnesian minerals and rock matrix. Quartz veining is common, especially “A” and “B” type veinlets. Intensity of alteration is variable, ranging from weak to strong. Hydrothermal magnetite is also present as disseminations and associated with A type veinlets in deeper sections. Anhydrite veinlets are also common. Within the potassic alteration zone, chalcopyrite-(bornite)-molybdenite-pyrite mineralisation is present in A and B veinlets, and also replacing ferromagnesian minerals or filling fractures. Copper grades in general vary from 0.2%-4%, and are highest where fracture-filling style copper mineralisation is superimposed on earlier disseminated copper mineralisation. The high-grade (hypogene) copper mineralisation is hosted by a dense A-veinlet stockwork developed in an early porphyry phase. Pyrite/chalcopyrite ratio is typically low and in the order of 1:1 to 2:1. Molybdenite also commonly increases with depth, related to “B” veinlets. Bornite occurs sporadically especially at deeper levels, sometimes associated with gold values. 7.2.3.2

Propylitic alteration

Propylitic alteration is transitional to the potassic alteration and extends more than one kilometre from the porphyry intrusive contacts. The propylitic alteration mineral assemblage includes epidote-chloritecalcite-pyrite-rhodochrosite. Subordinate chalcopyrite is also present, filling fractures or replacing mafic minerals. Sphalerite-galena veinlets and veins are distributed as a halo to the copper-molybdenum mineralisation within the propylitic alteration halo, occurring at distances of up to 3 km away from the porphyry copper system.

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7.2.3.3

Phyllic alteration

Phyllic alteration forms a pervasive carapace surrounding and sometimes overprinting potassic alteration. This alteration accompanies almost complete destruction of primary rock textures. The phyllic alteration mineral assemblage includes sericite-quartz-pyrite, limited amounts of chalcopyrite and associated occasional “D” veins and veinlets. 7.2.4

Structural geology

As with most porphyry copper complexes, structural activity at Constancia has played the most significant role in preparing and localising the hydrothermal alteration and accompanying coppermolybdenum-silver-gold mineralisation, including skarn formation. Major inter- and post-mineral fracture systems in the deposit area strike northeast. One of the best known is the ‘Barite Fault’, and reference is made to the ‘Barite’ direction. The Barite system is formed by a number of nearly parallel vein-faults carrying base metal sulphides and barite. These veins have been exploited by artisanal workings throughout the property. This system is clearly visible in the ground magnetic maps, controlling major features including topographic and shear fabric changes in the San José zone. A second important system strikes north-south. It seems to be more recent than the Barite system, controlling part of the San José deposit and most of the silicified breccias (some of them mineralised) in the system. This is the same direction as that of the post-mineral dykes, and may have originated as tension gashes to the Barite direction. Latest in the sequence is the NNW-SSE oriented fault system, with the Yanak Fault as the main example. These faults generate wide areas of gouge and milled rock, some of which show high hydraulic gradients. 7.2.4.1

Barite fault

The Barite Fault is a late, northeast-southwest striking structure between the Constancia and San José zones. The fault zone is generally 5-10 m in width, and characterised by broken and brecciated monzonite-barite-quartz-copper oxides and galena. In detail, the vein shows an en echelon structure, with tight northeast sections followed by east-northeast and even east-west tension gashes which contain better grade mineralisation. Numerous exploration pits and tunnels are located along this structure for more than 1000 m. Parallel veins occur, showing similar strike and mineralisation. Owing to the scarcity of outcrops and the changing strike, the Barite Fault is defined as a zone with single defined faults as opposed to a shear zone, where the individual faults/veins have not been defined. The Barite Fault has late post-hypogene copper movement that post-dates and limits the Constancia zone on its north-western side. The fault system may also control the San José zone on its south side. It is possible that the San José and Constancia zones may be offset equivalents along a left-lateral Barite Fault. 7.2.4.2

San José pit wall fault

This is a fault that bounds the eastern side of the San José pit. It strikes north-south, but meanders in its northern extension, where it may be associated with the Yanaccaca silicification zones.

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7.2.4.3

Yanak Fault

This fault belongs to the latest structural event in the area. The structure strikes NNW-SSE and is located between the Constancia and San José deposits. It has been recognised for about 3 km, and has developed a zone of influence up to 50 m wide where gouge and milled rock are present. This type of structure commonly shows high water conductivity.

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8.

DEPOSIT TYPES

The Constancia deposit is a porphyry Cu-Mo-Ag system which includes copper-bearing skarn mineralisation. This type of mineralisation is common in the Yauri-Andahuaylas metallogenic belt where several porphyry Cu-Mo-Au prospects have been described but not exploited. The principal porphyry deposits in the belt include Antapaccay (720 Mt @ 0.54% Cu, Xstrata plc Half Yearly Report 2009), Quechua (~260 Mt @ 0.61% Cu, Mitsui Kinzoku press release, Nov 7, 2007 ) and Los Chancas (~200 Mt @ 1% Cu, 0.08% Mo, 0.12 g/t Au). Several other porphyry prospects are also being explored in the district. Historically, the belt was better known for copper skarn deposits such as Tintaya (130 Mt @ 1.7% Cu, 0.26 g/t Au) and Las Bambas (copper skarn-porphyry) where Xstrata recently reported resources of 1100 MT @ 0.77% Cu (Xstrata plc Half Yearly Report 2009)..

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9.

MINERALISATION AND ALTERATION

Five distinct mineral associations are found within the Constancia Project area, namely: 1)

Hypogene, porphyry-style mineralisation including disseminated, quartz-vein stockwork and fracture-controlled chalcopyrite-molybdenite mineralisation in the intrusive

2)

Hypogene chalcopyrite, rare bornite, galena and sphalerite mineralisation in skarns

3)

Supergene digenite-covellite-chalcocite (rare native copper) mainly hosted by intrusive, lying below a leached cap

4)

Transitional (Mixed) including secondary copper sulphides/chalcopyrite in the monzonite (overlap of 1 and 3, above)

5)

Oxide copper mineralisation.

Of these, the hypogene mineralisation (Type 1) constitutes the bulk of the deposit, extending to well below the 3900 m level. Type 2, skarn, is volumetrically smaller, but grades are normally higher, and mineralisation occurs at or near the surface. At the contact between the intrusives and limestones, magnetite ± garnet skarn develops, while the pyroxene–diopside (garnet–epidote) association is more common in calcareous sandstones and arkoses of the Chilloroya Formation. Supergene enrichment (Type 3) occurs immediately beneath, and occasionally as remnants within, the leached cap. The highest copper grades in the Constancia porphyry are typically associated with this and with the skarn zone. Transitional (Mixed) zone (Type 4) corresponds to the zone where the supergene and hypogene mineralisation mix, e.g. both supergene and hypogene sulphides co-exist. Oxide copper mineralisation (Type 5) occurs locally. While shallow, it is volumetrically small and, therefore, is not considered relevant to exploitation at this stage of development. Two areas of porphyry-style mineralisation are known within the project area, Constancia and San José. At Constancia, mineralisation is deeper than that observed at San José which occurs at surface. The mineralised zone extends about 1200 m in the north-south direction and 800 m in the east-west direction. Several new exploration areas were identified in the surroundings of Constancia, other than “Yanaccaca” and “Old Adits” already mentioned in the December 2007, NI 43-101 Technical Report. The new areas include the Pampacancha, Eastern Uchucarco and South Chilloroya, all of them highlighted by the recent Induced Polarisation (chargeability/resistivity) and ground magnetometry geophysical surveys carried out on the property during 2008. Some exploratory holes were drilled at the Pampacancha area during August-September 2008. 9.1

CONSTANCIA

The Constancia porphyry has been evaluated by 317 diamond drillholes, some to depths of more than 600 m, with a maximum of 675.80 m (CO-08-133). The majority of the mineralisation occurs as

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disseminations, quartz vein stockworks and fracture filling of sulphides, mainly associated with the “Monzonite Porphyry 1 (MP1). When mineralised, MP1 shows either extensive quartz-sericite or potassic alteration. Copper mineralisation is best developed in the central part of the deposit within the monzonite porphyry and is open at depth below the level 3800 m (e.g. CO-06-083, CO-07-105, CO-08-233, CO-08-278 and CO-08-288). Oxidation and leaching are intense, with almost no fresh sulphides occurring at surface. A leached cap occurs to variable depths, up to a maximum of 100 m where fracturing is more intense, or in rocks with intense stockwork development. Oxidation decreases towards the margins of the prospect and in the magnetite skarn, reaching only a few tens of meters depth. The main iron-oxide minerals are jarosite and goethite with lesser amounts of hematite after supergene chalcocite. Typical copper grades in the leached cap are in the order of 100-200 ppm, values considered as strongly geochemically anomalous. Molybdenum and gold values in the leached cap are generally similar to hypogene grades. 9.2

SAN JOSÉ

The San José zone lies some 350 m west-northwest of the western limit of the Constancia deposit and is separated from it by the Barite Fault Zone. Sixty drillholes have been completed in the area; most of them intended to identify the extension and depth of the mineralisation. Major controls for the area appear to be two faults that bound it on the east (San José Fault) and west. These two faults strike generally north-south, but would merge into one at the Yanaccaca zone. Mineralisation in this area corresponds mostly to hypogene type assemblages, with skarn mineralisation playing a secondary role.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

10.

EXPLORATION

Exploration is currently underway in the project area, and is focused on areas/targets described in the following sub-sections. 10.1

SURFACE MAPPING AND SAMPLING

During the first months of 2007, geological mapping at 1:1000 scale was conducted at and surrounding the Constancia deposit, covering an area of approximately 450 hectares. Owing to the scarcity of outcrops, most of this mapping was made along roadcuts, and combined with information from some trenches. First rock intercepts from drillholes were also used to help define the different rock types at surface. Locations were based on GPS measurements. From April to October 2008, surface mapping was focused on the areas where geophysical anomalies were identified at depth as well as the surface reconnaissance of the projected waste dump and plant facilities. By October 2008, additional 2200 hectares were mapped at 1:2000 and 1:5000 scale including the collection of +900 rock samples and 41 stream sediment samples, the latter in the eastern sector of the Constancia deposit where scattered gold occurrences were observed in an area of 4.5 km by 0.8 km, now known as the Pampacancha prospect. Surface mapping resumed on mid February 2009 to the south of the Pampacancha prospect (SE of the Constancia deposit), and the Arizona and San Antonio areas (the latter recently acquired by Norsemont), where the tailings storage facility (TMF) is planned to be built. By 31 March 2009, an additional 1500 ha had been mapped and about 350 rock samples collected. From April to June 2009 mapping was carried out in the Chilloroya South area, where several evidences of porphyry-related copper-gold-molybdenum were found. This area is still under evaluation. Summarizing, from year 2007 to June 2009, about 5540 ha were mapped in the Constancia project at several scales, including 1:1000, 1:2000 and 1:5000; this represents some 25% of the total Norsemont mining concessions in the area. Additionally, 1890 rock samples and 41 stream sediments samples were collected during this period. 10.2

GEOPHYSICS

An in-house interpretation of the geophysical data along with interpretation of available surface mapping and rock and stream sediment geochemistry helped identify several targets within the project area. Currently, the most important ones are the anomalies associated with the Pampacancha prospect, the chargeability-magnetic anomalies observed in the Chilloroya South prospect and the chargeability anomalies located in Uchucarco, at 3.8 km northeast of the Constancia porphyry.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 10.1 Constancia Project – Exploration Targets

10.2.1.1

Pampacancha prospect

The Pampacancha prospect is located 3 kilometres SE of the Constancia porphyry. The prospect was identified past May 2008 after a stream sediment survey revealed a 27 sq-km, Au-Ag-Cu anomalous area, which was subsequently corroborated by mapping and rock sampling conducted on the area.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 10.2 Pampacancha Geology Map

Pampacancha is also coincident with a striking NE structural break portrayed by the ground magnetometry survey, along with several chargeability anomalies that occur at depth. The prospect comprises scattered outcrops of limestone and minor fine grained clastic sediments intruded by dioritic and lesser monzonite intrusive which generated magnetite and lesser garnet-calc silicate skarns at their contacts. On surface high grade Au-Ag-(Cu) mineralisation associated with veins, shear zones and limestone replacements occur in an area of about 6 km2. The longest structure can be projected up to one kilometre in length. Gold and silver returned values up to 39 g/t Au and 38 oz/t Ag.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Figure 10.3 Pampacancha Prospect – Exploratory Drilling

Exploratory drilling carried out in Pampacancha South during August-September 2008 defined a high grade skarn and porphyry exploration target with preliminary dimensions of 1,000 by 400 m. Preliminary results indicate at least two zones of skarn mineralisation over this 1,000 m strike length that requires follow-up drilling. Four holes intercepted significant mineralisation (PR-08-008, 009, 011 and 012). The best intercept is in hole PR-08-008 which reported 43.50 m @ 1.70% Cu, 0.1% Mo, 10.35 g/t Ag and 0.76 g/t Au between 112.50 and 156.00 m. Among a number of narrow copper-gold and gold only intercepts encountered in this reconnaissance drilling program, some of the most relevant are those reported in hole PR-08-003, located 950 m NE from hole PR-08-010, where the last 19.5 m (from 235.50 to 255.00 m) averaged 0.78 g/t Au, with the last sample (1.5 m length) assaying 0.81 g/t; and hole PR-08-005, located about 1000 m to the west of hole PR-08-010, which intersected 15 m of highgrade Cu-Mo-Au skarn averaging 0.68% Cu, 0.048% Mo and 0.46g/t Au.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 10.4 Pampacancha Prospect – Main Drilling Intercepts

10.2.1.2

Chilloroya South prospect

This highly prospective area is located 5 km south of Constancia porphyry. Evidence of porphyryrelated copper-gold-molybdenum mineralisation and copper-bearing skarns occur in an area of about 3.5x3.5 km coincident with several composite chargeability and magnetic anomalies at depth. Strong evidence of porphyry-related copper-gold-molybdenum mineralisation occurs at the southern sector in an area of about 2.5x2 km. At the western sector a series of EW-oriented quartz-limonite brecciated structures hosted by feldspathic sandstones occur in an area of about 500x500 m. On the hill crest oxidation and leaching of former sulphides have been strong, leaving limonite crusts and gossanous areas where former sulphides were massive. About 50 m down slope there are green and black copper shows on fractures in feldspathic sandstones, visible at only few tens of centimetres below surface.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 10.5 Chilloroya South – Geological Map

Of 152 rock samples taken from this area, 52% returned values from 0.1 up to 7.84 g/t Au, 85% were anomalous in copper, returning from 70 ppm up to a maximum of 1.33% Cu and 40% were anomalous in molybdenum, with values in the order of 10 up to 446 ppm Mo. This area is coincident with a magnetic high and an 800x900 m chargeability anomaly, the latter extending westward to an area covered by post-mineral quaternary deposits. One kilometre to the south, there is another hill containing several SE-oriented quartz-tourmalinelimonite brecciated structures which occur in an area of 750x340 m. Evidence of multistage brecciation events has been seen in outcrops, including massive quartz-tourmaline replacements, quartztourmaline-limonite (after sulphides) matrix-supported breccias and massive limonite (sulphides) brecciated structures. A total of 48 samples were collected directly from the quartz-tourmaline breccias, where 79% were anomalous in gold, from 0.1 g/t Au up to 5.32 g/t Au; 65% anomalous in copper, from 71 ppm Cu up to 693 ppm Cu and 53% anomalous in molybdenum, from 8 ppm Mo to 75 ppm Mo. This area is coincident with a large, 1000 x 900 m chargeability anomaly at depth, partially coincident with a magnetic high. Extending below the post-mineral quaternary alluvium westward of the edge of the brecciated hills, two composite, NS-oriented, 1200 x 800 m chargeability anomalies occur.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Approximately 2 km to the northeast of the quartz-tourmaline breccias, a 2 m wide, SSW-oriented, quartz-sericite-altered felsic porphyry is emplaced discordantly within fine-grained hornfelsed siltstones. The felsic porphyry is strongly altered, showing randomly-oriented quartz veinlets and carrying pyrite, chalcopyrite and bornite. Three samples taken from the porphyry returned up to 2.1% Cu, 32 ppm Mo and 265 ppb Au. The porphyry is thought to be associated with a 500 x 700 m chargeability anomaly located right to the east of the porphyry outcrop. Several copper occurrences hosted by the Chilloroya sediments associated with shear zones and veinlike structures occur also in the area. At a distance of 500 m southwest of the felsic porphyry there is an open cut exposing green copper oxides with randomly-oriented chalcopyrite veinlets; mineralisation is not well exposed on surface, but starts to be clearly defined just 0.50 m below surface. Five samples taken from this area returned up to 1.49% Cu, 2.88 g/t Au and 521 ppm Mo. The evidence of mineralisation reported for Chilloroya South strongly suggests the presence of a large copper-gold-molybdenum system at depth. Excellent potential exists for the discovery of additional mineralisation of this style and/or porphyry copper-gold-molybdenum mineralisation in other phases of the porphyry bodies. 10.2.1.3

Uchucarco chargeability anomaly – skarn target

This anomaly is located 3.2 km northwest of the Constancia porphyry, consisting of a magnetic anomaly at least 1 km wide and 0.8 km long, coincident with a chargeability anomaly of 0.7 x 0.4 km which remains open below 250 m depth (Figure 10.1). 10.3

EXPLORATORY DRILLING

During year 2008 exploratory drilling was concentrated at the Pampacancha prospect, 3 km southeast of the Constancia porphyry, where 20 holes were drilled totalling 5735.25 m. Some porphyry-related Cu-Mo-Au skarn intercepts were registered in holes PR-08-008, 010, 011 and 012. Additional exploratory drilling is warranted to evaluate this highly prospective area. Preliminary exploration at the Yanaccaca area (about 900 m north of San José) started in early 2007. Yanaccaca is a large (approximately 1000 x400 m) magnetic anomaly with a north-south to N10E orientation, coincident with the border of a similarly oriented resistivity low IP anomaly. Hole CO-07109 intercepted a zone of 38.7 m with an average of 1.6% Cu at a 0.5% Cu cut-off. The host to the mineralisation is a magnetite-bearing skarn. A second hole drilled from a similar location, but directed at 90o from hole 109 failed to intercept the mineralised zone, as it was probably drilled parallel to the main structure. Two additional holes were drilled in this area after November 2008 (holes CO-08-291 and CO-08-293), both failing to intercept significant copper mineralisation. The area is still not well defined and additional exploration is warranted to better define the skarn mineralisation at depth. A number of exploration holes were drilled in the zone between Constancia and San José to assess the continuity of the mineralisation between both areas. This drilling indicates that mineralisation continues between these two zones at depth.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Drilling on the southwestern side of the Constancia resource indicates a continuation of the skarn mineralisation. Hole CO-08-229 returned two high-grade skarn interceptions, 58.50 m @ 1.53% Cu and 54.50 m @ 0.95% Cu. Additional drilling is planned to test the mineral potential of the existing and newly identified anomalous areas and targets, the latter defined after the evaluation of the recently produced geophysical data and information from surface mapping and rock geochemistry.

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11.

DRILLING

As of 18 June 2009, a total of 132 130.35 m (451 holes) have been drilled in the Constancia Project (this includes 7484.15 m drilled by Rio Tinto prior to 2005), in six drilling programs (infill, condemnation, metallurgical, geotechnical, hydrogeological and exploration). Drilling comprises both diamond drilling (core recovery) and reverse circulation (chip recovery). Diamond drilling constitutes 90% of the total metreage. Diamond drilling constituted all the drilling until May 2008 when a reverse circulation rig started on the project. Since 2005, GEOTEC has been drilling on the property and during year 2008 they had six rigs on site (four Longyear 44 and two UDR650 rigs). AK Drilling started operating in May 2008, using a Foremost Prospector 4x4 reverse circulation rig. MCA was the contractor for the geotechnical drilling between May 2008 and February 2009, operating one Atlas Copco CS-1000 rig. Since March 31 2009, two UDR 200-DLS of AK Drilling continued geotechnical drilling in the TMF facility until completion of this work in April 2009. Finally, since May 2009, a Barber Foremost DR24 rig of AK Drilling began drilling of four large diameter water holes along the Chilloroya River and the surroundings of the Constancia pit. Table 11.1 Drilling Programmes by Year (in metres drilled) Company

PQ

HQ

Rio Tinto (2003-2004)

6 965.15

NOM 2005

9 799.05

NOM 2006

19 682.25

NOM 2007 NOM 2008

3 380.75

NOM 2009 (to June 6th) GRAND TOTAL

3 380.75

NQ

RC

519.00

HOLES

TOTAL

24

7 484.15

41

9 799.05

722.15

66

20 404.40

23 863.75

5 197.35

77

29 061.10

39 497.45

7 379.60

12 792.70

219

63 050.50

1 808.50

113.65

409.00

24

2 331.15

101 616.15

13 931.75

13 201.70

451

132 130.35

General characteristics of the drilling programs carried out in Constancia are described below. Infill Drilling ( prefix CO): started prior to 2005 with the holes drilled by Rio Tinto and ended after December 2008, totaling 109 206.75 m distributed in 317 holes (including 7484.15 m, 24 holes, drilled by Rio Tinto). Information gathered from this program is used for resource estimation of the Constancia deposit. All the metreage was diamond drilling. Condemnation Drilling (CR): started in May 2008 and ended in September 2008. Drilling was carried out at the surroundings of the pit outline and sterilisation of the plant facility locations, including the testing of some chargeability anomalies south of the Constancia pit outline. Drilling totaled 8751.70 m in 54 holes. All of this drilling was carried out with a reverse circulation rig.

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Metallurgical Drilling (CM): started in September 2008 and completed by mid-November 2008. Twenty-one holes were drilled with PQ line totaling 3380.75 m. This drilling allowed the collection of approximately 35 t of samples for metallurgical tests conducted in Chile. Geotechnical Drilling (CG): from May 2008 to April 2009 drilling was completed in the surroundings of the pit, the waste dump and the TMF facilities, totaling 3716.75 m in 26 holes. Hydrogeological Drilling (CH): from January 2009 to May 2009 drilling was completed in the waste dump and TMF facility areas, totalling 928.15 m in 9 holes. Additionally, as of June 18th 4 large diameter holes (water holes) were completed along the Chilloroya River and at the southern part of the Constancia pit, totalling 409 m. Exploration (PO, PR): during 2008, exploration drilling was fully dedicated to the Pampacancha prospect. A total of 20 holes were drilled during August-September 2008, 15 being reverse circulation (4041.00 m) and 5 core drilling (1696.25 m) totaling 5737.25 m. Table 11.2 Drilling Programmes (to 6 June 2009) Program

Company

Constancia Infill (CO)

Norsemont/Rio Tinto

Metreage

Holes

109 206.75

317

Completed

Condemnation (CR)

Status

Norsemont

8 751.70

54

Completed

Metallurgical (CG)

Norsemont

3 380.75

21

Completed

Geotechnical (CG)

Norsemont

3 716.75

26

Completed

Hydrogeological (CH)

Norsemont

928.15

9

Completed

Hydrogeological (CH)

Norsemont

409.00

4

Completed

Norsemont

5 737.25

20

First

132 130.35

451

Barber Rig (water holes) Exploration (PR,PO)

Phase

Completed TOTAL

11.1.1

Collar location

Drillhole locations are initially defined using hand-held GPS. The drillhole collars and elevations are then surveyed by a surveyor every three months or as necessary. The instruments used accord with the date of the survey, with Total Station, and with differential GPS being used mostly. All measurements are tied to the National Grid. UTM coordinates based on the Provisional South America 1956 (PSAD56) datum are used throughout the project.

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11.1.2

Rig setup

The borehole azimuth is set up by marking front and back sights with a Brunton compass. After the rig is set up, the azimuth is checked by the geologist. Inclination is measured with the inclinometer incorporated into the rig. Comparisons between the planned and downhole survey measurements (done between 5 to 20 m below the surface to allow for the casing) have shown variations under 0.5o, with only one case being greater than 1o. Since November 2007, the initial inclination has been measured with a more precise digital inclinometer, and the front and back sights are left in the field to be measured by the surveyors at a later date. Once the rig is positioned, the senior geologist on site approves the location and set-up. During the drilling, a Norsemont-appointed drilling supervisor checks the compliance with the drilling procedures. The same supervisor is responsible for the correct measurements of downhole surveys at the end of the drilling. 11.1.3

Downhole survey

Downhole deviation surveying (showing both dip and azimuth) has been completed at reasonable intervals down the hole for most of the drillholes. Instruments that have been used for this task are the Eastman Single Shot, Flexit and Maxibor. It is clear that measurements in the southern end, where magnetite is more common, should be repeated with a non-magnetic system. In the case of the photographic records (Eastman), these are read by the senior geologist, and entered into the database. Measurements not within range are flagged as invalid in the database. . The Maxibor and Flexit data is delivered both electronically and as in a printout. Flexit data contains measurements of the magnetic field intensity which is used to validate the data. All data is input into the database, and anomalous values are flagged as invalid. Flexit data has been collected at 30 m intervals since January 2007. Prior to this date, the measurements were made at 50 m intervals, proceeding upwards from the base of the hole. A final measurement is made just below the surface casing (5-20 m below surface). If, for any reason, the rods have to be removed prior to completion of the hole, then the hole is surveyed at that time as a safety measure.

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12.

SAMPLING METHODS AND APPROACH

Sampling methodology and approach for Rio Tinto drilling and Norsemont 2005 drilling was detailed in the McCrae (2006) Technical Report. Sampling methodology and approach for Norsemont 2006 to March 2007 drilling was detailed in the Snowden (2007) Technical Report. GRD Minproc has reviewed the methods used in previous drill programs and considers them appropriate for a Mineral Resource Estimate. 12.1

DRILLHOLE SAMPLING METHODS NORSEMONT 2007-2008

12.1.1

Sample collection

Core trays are delivered to the core facility at the camp site where they are digitally photographed and marker blocks and depths checked. A technician records geotechnical measurements. Gross geological intervals are logged. Preliminary 2 m sample breaks are marked, with the geologist deciding on smaller intervals to coincide with geological features where necessary. A minimum sample length of 0.3 m has been specified. Sample numbers are assigned, and then detailed lithological and mineralogical logging takes place. Cut lines are marked on the core by the geologist. For heavily fractured core, a steel bar is used as a divider. The same side of the core is always taken for the sample. Samples for density measurement in each major rock unit are extracted at this stage, at approximately 50 m intervals. Samples are transferred to technicians for splitting into two halves by diamond saw. QAQC control for the project requires the provision of field duplicates. These are obtained by cutting the required samples into quarters. All samples (one half core, two quarter core) are left in the box for the samplers to collect. This takes place in a separate work area; split core is then returned for placement in canvas bags, tagging (inside and out) and weighing. Blank, standard and duplicate samples are inserted, and sample bags are then packed into larger bags for transport. The remaining half core is separately stored, with security guards on site 24 hours a day. Samples are securely stored before being loaded onto covered and secured trucks. Samples were transported on a regular basis to the ALS Chemex shipping point at Arequipa until June 2008, and since July 2008 to date samples have been sent to the SGS shipping point (also in Arequipa) where they are transferred to authorised trucks for shipment to the laboratory in Lima. Chain of custody documents with signatures of delivering and receiving parties and the names of persons accompany the samples at all times. Sampling information, including date, hole, sample interval, sample ID, sample type, QAQC type and sampler is entered on site into Excel spreadsheets, which are ultimately transferred to the database.

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12.1.2

Drillhole logging

The core is geologically and geotechnically logged by site-based geologists, using standard terminology and procedures, which were put in place in October 2006. Previous drillholes (including Rio Tinto holes) have been re-logged and re-coded. Core logging takes place in a sheltered and comfortable core shed, with sufficient space to lay out core trays for several holes. Core logging includes: 

Drillhole summary information, e.g. project details, hole number, logged by, collar coordinates, azimuth and dip, downhole survey information, geological summary and other relevant comments.



A geotechnical log with interval, recovery, RQD, fracture type and fill, frequency, shape, roughness, intensity, width, angle and details of lost core.



Lithology, alteration, mineralisation and structure – type, association, intensity and proportion are recorded for each category.



Sampling details with sample interval and number, and QAQC sampling information.

Data is logged on paper and then entered by hand on site into standardised Excel spreadsheets. Transcription checks are made by Norsemont on one in every 10 records. Data is finally uploaded into a custom-designed Access database in Lima, where further validation and integrity checks are carried out. Only one senior geologist has access to and can change the primary database. Paper logs are periodically photo-copied; originals are retained on site, with copies being sent to the Norsemont office in Lima. 12.1.3

Density measurements

A total of 1247 density measurements have been made for core from the Constancia-San José area. The density measurements are conducted by ALS Chemex and are representative of the different rock and mineralisation domains recognised to date. 12.1.4

Sample preparation, analysis and security

Sample preparation and assaying for Norsemont was carried out by ALS Chemex in Peru until June 2008, after which SGS del Peru continued with this work. Both laboratories are Peru-based registered laboratories, conforming to ISO 9000 and ISO 9001 standards, respectively. Samples are prepared and analysed in Lima following standard procedures. Samples are routinely analysed for gold (Fire Assay, AAS finish, 30 g charge) and 41 elements by ICP (HNO3-HClO4-HF-HCl digestion, HCl Leach). Samples above detection limit are analysed by AAS. All samples with copper values above 0.2% are analysed by a Sequential Copper Method. Analytical data is delivered electronically by the laboratory in Norsemont’s format, and is input directly into the company database.

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12.2

CORE SAMPLING

Individual samples respect geological/mineralogical/structural boundaries, and are generally collected at 2 m intervals. Minimum core length has been established at 30 cm, and the maximum is 3 m. The shortest sample recorded is 0.35 m (CO-06-094) and the longest is 4 m (CO-05-035). Three core saws are used, working two 12 hours shifts when required. The saw facilities are spacious and allow easy handling of the core boxes, which are stored in order before starting the shift. Each saw has a table besides it where the box containing the core to be cut is deposited. Each piece of core is cut along the centre line and, in cases where the core is disaggregated or is easily broken it is wrapped in plastic adhesive tape to facilitate handling. The cut core is then moved to the other side of the room. QAQC control for the project requires the provision of field duplicates. These are obtained by cutting the required samples into quarters. All samples (one half core, two quarter core) are left in the box for the samplers to collect. When a number of boxes have been cut they are re-arranged by number and taken out of the saw shed for sampling. Samplers have been instructed always to take the same side of the core samples. The left half is placed in the pre-numbered canvas bag. Long core pieces are broken to fit in the bag. The sample number is written with black, waterproof marker on both sides of the bag, and one of the sample tags is placed in the sample bag. A written record is kept indicating the drillhole, and the start and end metreage for every shift. 12.3

QAQC PROCEDURES

The Norsemont QAQC procedures include the use of field duplicates, certified standards and blanks. The sample numbers are selected randomly before sampling the core. The sample tickets are appropriately marked and the sample tags ripped off so as to avoid any confusion. All control samples are collected and inserted during the core sampling process. 12.3.1

Field duplicates

Field duplicates are obtained by splitting half core samples, obtaining two quarter core sub-samples, one quarter representing the original sample and the other quarter representing the duplicate sample. These samples are collected to assess the homogeneity of the mineralisation and sampling precision. Field duplicates are inserted by Norsemont at the proportion of 1 in 20. 12.3.2

Blanks

Blanks are introduced at a 1:20 frequency. These samples have been provided by a third laboratory (SGS del Peru) and have been produced from barren material, where particle size is +10 mesh. Originally (up to drillhole CO-06-062, mid-2006) blanks were obtained on-site from country rocks. However these blanks were not homogeneous and at least one of them had high zinc values, making them unsuitable for quality control.

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12.3.3

Standards

Standards (or certified reference materials, “CRM”) are samples with established grades, prepared under special conditions by certified commercial laboratories. The standards for Norsemont have been prepared by SGS in Lima from coarse rejects of previous drilling from Constancia. Norsemont uses four standard levels, characterised by Cu grades of approximately 2000 ppm, 5000 ppm, 7500 ppm and 25 000 ppm. Three generations of standards have been used in the project. During the first phase, Ag and Zn were not reported for the standards. The recommended values are summarised in Table 12.1. Table 12.1 Recommended Values for Standards Period

Standard

Cu_ppm

Mo_ppm

Ag_ppm

Zn_ppm

GQ601193

2452.4

+/-

122.8

86

+/-

5.5

May

GQ601194

5165.7

+/-

316.25

319

+/-

22.4

2006

GQ601195

7383.6

+/-

332.8

65

+/-

8.5

GQ601196

12 500

+/-

550

159

+/-

8.5

MV600011

2052

+/-

122

74

+/-

5.5

2.3

+/-

0.8

1231

+/-

70

November

MV600013

5052

+/-

229.5

127

+/-

10

3.5

+/-

1.1

929

+/-

81

2006

MV600014

7503

+/-

215.5

81

+/-

7

4.8

+/-

0.8

1321

+/-

87

MV600015

24 476

+/-

899

120

+/-

11

6.4

+/-

1.7

138

+/-

20

MV700038

1888

+/-

73

101

+/-

8

5.6

+/-

0.6

280

+/-

10

MV700039

4858

+/-

228

70

+/-

8

3.6

+/-

0.5

778

+/-

27

MV700040

7617

+/-

301

58

+/-

9

3

+/-

0.3

495

+/-

20

MV700041

24 917

+/-

762

117

+/-

14

14.9

+/-

0.9

2242

+/-

GEO-1611

37

+/-

3

9

+/-

2

0.8

+/-

0.4

135

2007-8

62 14

The standards are inserted sequentially into the sample stream at an overall proportion of 1 in 20 (i.e. 1 in 80 for each individual standard). The grades of these samples remain “blind” to the analytical laboratory. The primary (ALS Chemex) and secondary (ACT) laboratories are not involved in the preparation of the standards (SGS Laboratory). 12.3.4

Other QAQC samples



Pulp duplicates are second splits of the pulps. These samples are routinely analysed by the laboratory. While these samples are good indicators of the assay reproducibility (precision) they are not blind for the laboratory, and their value is therefore diminished. These are inserted at a proportion of 1 in 20.



Pulp blanks (internal laboratory samples), are samples of pulverised barren material. These samples provide a check on contamination during assaying. The pulp blanks are inserted immediately after highly mineralised samples. These are inserted at a proportion of 1 in 20.

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

Check samples (same pulp, externally analysed) are second splits of pulps resubmitted to an external certified laboratory under a different sample number. These samples are used to estimate the assay accuracy, together with the standards. These are submitted at a proportion of 1 in 20.



Coarse duplicates (or preparation duplicates) are splits of some samples taken after the first crushing and splitting step; these samples provide information about the sub-sampling variance. These are inserted at a proportion of 1 in 20.

12.3.5

Referee laboratory

ACME has been selected as the referee laboratory for the Constancia drilling program. Pulps and coarse rejects have been sent for check analysis. Standards and blanks are inserted in these check batches as in a standard batch. 12.4

STATEMENT ON SAMPLE PREPARATION AND ANALYSIS

GRD Minproc is of the opinion that Norsemont’s site-based sample preparation procedures are of industry standard. Similarly, the chain of custody and security procedures is considered to conform to industry best practice. GRD Minproc is of the opinion that the Norsemont QAQC sampling protocol is rigorously set up and is continuously monitored to identify potential sampling and assaying problems.

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13.

SAMPLE PREPARATION, ANALYSES AND SECURITY

Sample preparation, analysis and security are detailed as part of the foregoing Section 12.

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14.

DATA VERIFICATION

14.1

NORSEMONT INTERNAL DATA VERIFICATION

14.1.1

Collar location

Drillhole locations are initially defined using hand-held GPS. The hole collars and elevations are later surveyed by a surveyor every three months or as necessary. Collar azimuth and dip set-up are checked and approved by Norsemont geologists; front and back sights are left in place to be checked by surveyors at a later date. 14.1.2

Downhole survey

During drilling, a Norsemont-appointed drilling supervisor checks compliance with the drilling procedures. The same supervisor is responsible for the correct measurements of downhole surveys at the end of the drilling. 14.1.3

QAQC data verification

Analytical results are assessed by Norsemont staff for deviations from the norms; values from duplicate samples are compared, and quality control charts are drawn for standards and blanks. The decision points are as follows: 

For duplicates, if more than three values have variations greater than 30% the batch is rejected



For standards, three values more than 2 standard deviations, or two values if with the same sign, or a constant deviation from the average value are sufficient to reject the batch



For blanks, three or more values above the detection limit, or two consecutive values above the standard deviation are sufficient to reject the batch



Internal laboratory standards are also reported by the main laboratory, and are compared to the assumed values before data entry. The same decision parameters are used for detecting invalid batches.

No major differences have been detected in the analysis issued by the main laboratory. In case of any errors, a complete re-analysis of the batch is requested. 14.1.4

Database generation and validation

All lithologic, alteration, geotechnical and mineralisation data is logged on paper logs that are later entered in spreadsheets from where they are imported into the database. The paper logs have a similar structure to the spreadsheets to facilitate data entry (repetitive information, like logging date and geologist is recorded once per sheet, at the top of the page). The data entry spreadsheets have a number of in-built checks to facilitate the correctness of the data. For example, there are provisions that prevent incorrect or mistyped codes in certain columns. Ranges are checked for consistency, as well as for formatting issues. After the data is delivered to the senior geologist, batch tests are again carried out on the data.

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Before data upload, 10% of the entry rows are checked by comparing the written logs with the typed data. This check is done by a geologist in the field (not the data entry clerk). Upload into the database is through specially written programs that also check the data for consistency. Assay data is delivered by the main laboratory in digital form. Checks for extreme values are made by the senior geologist before data upload. Special programs are used to upload analytical data to the database, checking the data for completeness and formatting. The data are also cross-checked with the sample and collar data previously input into the database. Collar positions are checked visually on plans for correctness in the data entry. Downhole surveys are checked by examining coarse changes in the variables and also graphically in special purpose charts. Check runs are at regular intervals to check consistency of the drilling data. End-of-hole measurements, gaps in sampling and/or logging are revised and corrected when detected. 14.2

GRD MINPROC DATA VERIFICATION

14.2.1

Drilling

GRD Minproc reviewed drill and core handling procedures whilst on site, and concluded that the drilling contractor (Geotec) is carrying out drilling according to industry standards. 14.2.2

Sampling

GRD Minproc reviewed the complete sampling process on site, from the drill rig through to the final bagging of samples for dispatch to the laboratory. GRD Minproc considers that sampling process is carried out to acceptable industry standards. 14.2.3

QAQC data verification

14.2.3.1 Blanks A total of 1727 blank results were reviewed for the time period covering the data used in the resource model. Twenty samples returned >0.02% Cu, with only three of these (or 0.17%of the blanks) reporting above 0.1% Cu. The sequence of Cu blanks is illustrated in Figure 14.1.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 14.1 Cu Blanks (%)

Of 1727 blanks assayed for Mo, 64 returned greater than 10 ppm and 2 above 20 ppm. The sequence of Mo blanks for the Norsemont drilling is illustrated in Figure 14.2. Figure 14.2 Mo Blanks (ppm)

Of 1727 blanks assayed for Ag, 6 returned greater than 1 ppm. The sequence of Ag blanks for the Norsemont drilling is illustrated in Figure 14.3.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 14.3 Ag Blanks (ppm)

Of 1727 blanks assayed for Au, 19 returned greater than 1 ppb. The sequence of Au blanks for the Norsemont drilling is illustrated in Figure 14.4. Figure 14.4 Au Blanks (ppb)

Of 1727 blanks assayed for Pb, 42 returned greater than 10 ppm and nine greater than 20 ppm. The sequence of Pb blanks for the Norsemont drilling is illustrated in Figure 14.5.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 14.5 Pb Blanks (ppb)

Of 1727 blanks assayed for Zn, 13 returned greater than 0.005%. The sequence of Zn blanks for the Norsemont drilling is illustrated in Figure 14.6. Figure 14.6 Zn Blanks (%)

14.2.3.2 Standards Norsemont Standards A total of 1065 standard assays were available and have been reviewed. Apart from a few examples from early stages of the drilling program, most standards fall within two standard deviations of the recommended value. One of the standards used in the early drilling programs (GQ601195) shows a bias in Cu and Mo, and two of the later standards (MV700039 and MV00038) show a slight bias in Cu and Mo.

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Some examples of recent standards are illustrated in Figure 14.7, Figure 14.8, Figure 14.9 and Figure 14.10. Figure 14.7 Cu Standard MV700041

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 14.8 Cu Standard MV700040

Figure 14.9 Cu Standard MV700039

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 14.10 Cu Standard MV00038

14.2.3.3 Field duplicates Field duplicate ICP data (below 1% Cu) have a correlation coefficient of 0.93. A correlation plot is illustrated in Figure 14.11. Figure 14.11 Cu ICP Field Duplicate Correlation Plot

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Field duplicate data for high grade Cu (over 1% Cu, assayed by AAS62) have a correlation coefficient of 1.00. A correlation plot is illustrated in Figure 14.12. Figure 14.12 High Grade Cu Field Duplicate Correlation Plot

Field duplicate data for Mo ppm have a correlation coefficient of 0.89. A correlation plot is illustrated in Figure 14.13. Figure 14.13 Mo Field Duplicate Correlation Plot

Field duplicate data for Ag ppm have a correlation coefficient of 0.88. A correlation plot is illustrated in Figure 14.14.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Figure 14.14 Ag Field Duplicate Correlation Plot

Field duplicate data for Zn ppm have a correlation coefficient of 0.80. A correlation plot is illustrated in Figure 14.15. Figure 14.15 Zn Field Duplicate Correlation Plot

In general, with the additional data acquired as part of the 2007-2008 drilling programs, correlation coefficients have improved.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Pulp duplicates for Cu, Mo, Ag and Zn were reviewed and all had correlation coefficients of 0.99 or 1.00, as should be expected from internal laboratory checks. Coarse duplicate data was not available for analysis. 14.2.4

Collar location

GRD Minproc visited several drillhole platforms whilst on site, but was unable to view drill rig set-up procedures. Recent rig alignment practices use more accurate digital inclinometers, and set-ups are left in place for later checking by surveyors. All Norsemont holes used in the resource estimate have now been independently surveyed by Differential GPS. Permanent concrete monuments are now in place for all holes, and a number of these were viewed during the site visit, including the very first hole drilled by Norsemont at Constancia (Figure 14.16). Figure 14.16 CO-0501 Collar Monument

14.2.5

Downhole survey

GRD Minproc was unable to view downhole surveying on site. The detailed database of all methods of downhole surveying applied to holes at Constancia was, however, reviewed, and it was confirmed that the most appropriate survey data had been used in the resource estimate. Downhole traces of desurveyed data were viewed in section, plan and 3-D in both Micromine and Datamine Studio software. GRD Minproc considers that these traces appear realistic. The downhole survey data itself was also validated to ensure there were no breaks or sharp changes in orientation. GRD Minproc concludes that the downhole survey data is of an appropriate standard for use in the current resource estimation.

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14.2.6

Sample database integrity

GRD Minproc checked the database against ten randomly selected drillholes for transcription errors during data entry; none were found. A random selection of six Microsoft Excel spreadsheets received from the laboratory was compared to the database to check for data transfer/merging problems; none were found. GRD Minproc performed a series of validation steps during the import of data from the CSV and Access database formats provided. This data was imported into both Micromine and Datamine software, and routine checks were carried out as follows: 

Surveyed collar RL location compared with RL projected from topography digital terrain model



Existence of 0 RL azimuth and dip readings



Correct sequence of downhole survey data



Correct sequence of from-to increments in interval files



No missing intervals in interval files



Assignment of nulls/zeroes as appropriate to negative or character (5%. Rougher concentrate mass recovery to the cleaner circuit was approximately double the industry average. Table 16.4 Plenge Laboratories Phase 1 Locked Cycle Test Results – Skarn Ore Test 6449 - 13

Concentrate

Metal Recoveries (%)

Grade

Copper

Silver

Molybdenum

%Cu

88.2

51.6

14.1

26.62

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The Phase 1 Plenge Laboratories test work indicated that the Constancia Project could employ a conventional Cu-Mo porphyry flotation circuit. 16.1.2.2

Plenge Phase 2 flotation test work

The objective of the Plenge Phase 2 test work was to provide additional preliminary design information for the DFS by optimising the flotation response of copper and molybdenum, and evaluating zinc depression. This involved extensive flotation reagent screening, assessing the effect of regrinding on flotation performance and evaluating the use of zinc depressants. Optimum conditions were then used in locked cycle tests to approximate plant metallurgical results. The optimum flotation conditions for selected locked cycle tests are shown in Table 16.5, with flotation performance detailed in Table 16.6. The Phase 2 tests produced comparative concentrate grades and recoveries to those of Phase 1 for Hypogene and Supergene ores. The various molybdenum collectors trialled failed to achieve any significant improvement in molybdenum recovery to the bulk copper-molybdenum concentrate. For Skarn ore treatment the concentrate grade achieved was low due to dilution by zinc and lead, with the use of sodium cyanide proving the most effective zinc depressant. The Skarn ore investigation found that zinc recovery by flotation from the copper tailing may be warranted. Table 16.5 Plenge Laboratories Phase 2 Locked Cycle Test Results (July 4, 2008) Ore Type

Condition Primary Grind d80 (µm) Rougher pH

Supergene

Hypogene

Skarn

150

150

150

9

9

9

Rougher Res. Time (min)

12

12

12

Regrind d80 (µm)

25

27

37

Cleaner pH

11

10.5

7.7 / 10.5

Cleaning Stages

4

3

4

Lime (g/t)

910

910

735

Diesel (g/t)

25

25

25

NaCN (g/t)

50

40

Zinc Sulphate (g/t)

90 650

A-3477 (g/t)

30

30

30

Z-14

18

30

18

Dow 250

30

30

30

MIBC

42

24

30

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 16.6 Plenge Laboratories Phase 2 Selected Locked Cycle Test Results Concentrate

Metal Recoveries (%)

Test Supergene No. 17

Grade

Copper

Silver

Molybdenum

%Cu

83.6

59.3

18.0

27.55

Hypogene No. 26

88.1

63.7

38.9

27.79

Skarn No. 24

85.7

53.3

25.6

21.72

16.1.3

SGS Chile test work

16.1.3.1

Leaching

Twenty-one drillhole core assay reject samples were subjected to bottle roll leach testing at SGS Chile. Results confirmed that leaching recoveries were low compared to flotation, and that leaching/SX-EW was not a viable copper recovery route for the Constancia Project. 16.1.3.2

Comminution

Preliminary comminution tests were also conducted at SGS Chile, with the results shown in Table 16.7. The Hypogene ore had a significantly higher Bond Rod and Ball Mill Work Index compared to both Supergene and Skarn samples. As such, the Hypogene ore was classified as medium-hard while both the Skarn and Supergene ores were classified as medium-soft ores. The Minnovex SPI index showed that Hypogene ore would have the highest resistance to SAG milling with the Skarn sample SPI index somewhat lower and Supergene ore lower still. The Minnovex Crushing index (Ci, derived from the SPI test) is considered by GRD Minproc to have no direct relationship with ore crushing properties and, therefore, was not used for assessment of crushing properties. The Bond Abrasion index for Hypogene ore is significantly higher than either Supergene or Skarn ores, which will result in higher ball consumption and liner wear when processing this ore. Table 16.7 Historical SGS Chile Comminution Test Work Ore Type Test

Hypogene

Supergene

Skarn

Bond Rod Mill Wi

kWh/t

14.3

10.9

11.2

Bond Ball Mill Wi

kWh/t

15.8

12.9

11.2

75.2

39.8

64.5

Test screen size

150 µm

Minnovex SPI

min

Minnovex crushing index, Ci

26

29

15

Bond Abrasion index Ai

0.173

0.1162

0.0922

Specific gravity

2.75

2.75

3.66

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16.1.4

SGS Canada flotation variability tests

Twenty samples of Constancia RC rejects and drill core were supplied to SGS Canada for flotation variability testing and mineralogical analysis. Two sets of conditions were used for rougher flotation variability testing as shown in Table 16.8. Table 16.9 shows the results from the tests on Supergene ore, Table 16.10 shows the results from the Hypogene ore, and Table 16.11 shows the results from Skarn ore tests. Table 16.8 SGS Canada Rougher Flotation Variability Testing Conditions Condition

Grind d80 (µm)

SIBX (g/t)

A3302 (g/t)

pH

Residence

Frother

Time (min) 1

150

10

20

9

16

As required

2

150

40

30

9

16 / 19

As required

Table 16.9 SGS Canada Rougher Flotation Variability Testing Results – Supergene Ore Sample

Condition

Feed Grade

Concentrate

Rougher Copper

(% Cu)

Grade (% Cu)

Recovery (%)

NSC06

1

1.21

4.5

83.4

NSC07

1

1.38

7.3

71.8

NSC08

1

0.52

3.4

92.9

NSC09

1

0.78

4.9

93.4

NSC10

1

0.43

1.5

87.4

NSC11

1

0.42

2.7

81.4

NSC12

1

0.43

1.9

87.9

NSC13

1

0.80

4.4

85.3

NSC14

1

0.52

2.0

70.5

NSC15

1

0.50

3.6

71.0

Average

1

0.7

3.62

82.5

NSC06

2

1.21

4.2

90.9

NSC07

2

1.38

3.6

85.6

NSC10

2

0.43

1.6

90.4

NSC11

2

0.42

3.1

92.1

NSC12

2

0.43

1.5

93.2

NSC13

2

0.80

3.7

91.6

NSC15

2

0.50

3.6

95.1

Average

2

0.74

3.04

91.2

Supergene ore samples varied in head grade from 0.42% Cu to 1.38% Cu. Supergene treatment with the lower collector addition rates produced low copper recoveries, ranging from 70.5% to 93.4%, to achieve an average of only 82.5%. The increase in collector addition in the second series of tests produced a significant increase in rougher copper recovery to 91.1%. In both cases the rougher

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concentrate grade showed marked variation, independent of both feed grade and recovery. appears due to variation in the operator’s flotation technique.

This

Table 16.10 SGS Canada Rougher Flotation Variability Testing Results – Hypogene Ore Sample

Condition

Feed Grade

Concentrate

Rougher Copper

NSC01

1

(% Cu)

Grade (% Cu)

Recovery (%)

0.38

1.8

71.1

NSC02

1

0.88

4.5

81.6

NSC03

1

0.61

3.5

79.2

NSC04

1

0.41

2.3

74.2

NSC05

1

0.84

4.5

76.6

Average

1

0.62

3.32

76.54

NSC01

2

0.38

2.5

84.2

NSC02

2

0.88

5.6

80.8

NSC03

2

0.61

4.6

80.0

NSC04

2

0.41

2.4

92.9

NSC05

2

0.84

2.8

89.7

Average

2

0.62

3.58

85.52

The variation in Hypogene ore head grade was less than that of Supergene, ranging from 0.38% Cu to 0.84% Cu. Increased collector addition in the Hypogene variability tests also resulted in a significant increase in rougher copper recovery from 76.5% to 85.5%. The increase in copper recovery was achieved with no significant effect on rougher concentrate grade. Table 16.11 SGS Canada Rougher Flotation Variability Testing Results – Skarn Ore Sample

Condition

Feed Grade

Concentrate

Rougher Copper

(% Cu)

Grade (% Cu)

Recovery (%)

NSC16

1

0.68

2.1

82.8

NSC17

1

0.21

1.4

82.2

NSC18

1

0.72

3.9

78.1

NSC19

1

0.72

3.0

68.7

NSC20

1

1.10

6.6

72.2

Average

1

0.69

3.4

76.8

NSC16

2

0.68

2.4

89.5

NSC17

2

0.21

1.2

89.6

NSC18

2

0.72

3.4

93.5

NSC19

2

0.72

1.6

86.9

NSC20

2

1.10

3.4

93.7

Average

2

0.62

2.4

90.64

The skarn ore samples exhibited the highest rate of head grade variability, ranging between 0.21% Cu and 1.1% Cu. Again, an increase in collector addition resulted in a significant increase in rougher copper recovery (from 77% to 91%). In the Skarn tests, the increased copper recovery was matched

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by a marked decrease in concentrate grade, from 3.4% Cu to 2.4% Cu. Although zinc assays were not available it is expected that the concentrate grade decrease was caused by greater flotation of sphalerite into the concentrate. 16.2

DFS METALLURGICAL TESTWORK

The DFS metallurgical test program was designed to provide process parameters that could be used in the design of the Constancia plant flow sheet. The test program was conducted at bench scale and pilot scale and consisted of treatment of individual and composite samples, selected on specific mineral zones. In addition a number of samples from mixed zones were supplied for individual sample tests. The ore zones, basic ore type, approximate number of samples and approximate weights are detailed in Table 16.12. Representative samples were selected for metallurgical testwork, taking account of lithology, mineralisation type, grade and three-dimensional location. To facilitate location and depth discrimination, the ore body was divided into “metblocks”, each metblock being a 100 m cube. Continuous core runs within the metblocks that met the sample selection criteria were then identified. From the available core, a sample set that provided broad spatial representation and was relevant to the likely mine plan for the ore body was selected. Composites were prepared from diamond drill core from all ore zones, except the Mixed Zone samples. These composites were used for flow sheet development tests including grinding, flotation and regrinding. The bulk density of the ore to minus 6 mesh size (~ 3.36 mm), specific gravity (picnometer method), natural pH and the consumption of lime to a pH of 12.0 were determined for each composite. Table 16.12 Ore Zone Samples Average Grade

Ore Description % Cu

g/t Mo

% Zn

g/t Ag 4.77

Supergene

1.13

184

0.04

Skarn – Medium Zinc

1.64

240

1.83

Skarn – High Zinc

0.73

70

1.86

Hypogene

0.56

362

0.05

4.00

Mixed Zone

0.90

487

0.10

4.71

Mine Blend

1.28

230

0.93

Pilot Plant

Number of

Total sample

Samples

weight (kg)

13

1092

9

601

4

204

19

1621

6

462

n/a

240

n/a

Bond Ball Mill tests, Bond Abrasion tests and SMC tests were conducted to determine SAG and ball milling requirements. The flotation program include primary grind and regrind optimisation, reagent optimisation and cleaner circuit development. A number of rougher tests were conducted to provide tailing samples for rheological study. The optimum conditions were then used in locked cycle tests. Products obtained from the respective optimisation tests were analysed for Cu, S, Fe, Zn, Pb and Mo.

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The final locked cycle test concentrates were analysed for Al, As, Au, B, Ba, Be, Bi, Ca, Cd, Co, Cr, Hg, K, Li, Mg, Mn, Na, Ni, P, Pb, Sb, Se, Sn, Sr, Ti, Tl, U, V, W, Zn, total sulphur, S as sulphate, carbonates, fluorides, chlorides and Re. In addition they were submitted for mineralogical assessment through QEM-Scan. The rougher tailing and the cleaner scavenger tailing of the locked cycle tests were analysed for Al, As, Au, B, Ba, Be, Bi, Ca, Cd, Co, Cr, Hg, K, Li, Mg, Mn, Na, Ni, P, Pb, Sb, Se, Sn, Sr, Ti, Tl, U, V, W, Zn, total sulphur, S as sulphate, carbonates, fluorides, chlorides and Re. Variability tests were performed on each individual sample using the optimum flotation conditions, to evaluate the behaviour of the deposit to the flowsheet. Products obtained from the respective variability tests were analysed for Cu, S, Fe, Zn, Pb and Mo. In addition SMC and Bond ball mill work index tests were conducted on individual samples to determine the throughput over the mine life of 15 years. The pilot plant test program objective was to generate sufficient sample for a laboratory based molybdenum flotation program. Molybdenum rougher kinetic tests were conducted to determine flotation residence time, molybdenum promoter, NaHS addition. The molybdenum concentrate produced was subjected to mineralogical and chemical analysis. In addition, the copper-molybdenum concentrate was used for regrind tests, production of final copper concentrate, and rheology, thickening and filtration tests. Samples of copper rougher and cleaner scavenger tailings were provided to Knight Piésold for rheology and thickening tests. 16.2.1

Mineralogy

In Supergene ore 63% of the copper present was chalcopyrite, with chalcocite (23%), bornite (10%) and covellite (2%) making up the majority of the remainder. Copper minerals that are not considered recoverable by flotation represented less than 2% of the total copper present. The main non-economic sulphide mineral was pyrite, which amounted on average to 4.17% of the sample. Other sulphides represented less than 0.2% of the sample. Non-sulphide gangue was dominated by quartz and Kfeldspar, although there was also a significant amount of sericite/muscovite. Clays represented approximately 2% of the sample. In Hypogene ore, copper was present predominantly as chalcopyrite (approximately 90% of copper). Minor copper minerals included chalcocite (8%) and bornite (2%). Copper minerals that are not considered recoverable by flotation represented less than 1% of the total copper present. Non-sulphide gangue was dominated by quartz and K-feldspar and there was also a significant amount of sericite/muscovite. Clays represented approximately 2% of the sample mass. Pyrite constituted 3.13% of the sample on average, while other sulphides represented less than 0.1%. In Skarn ore, copper was present predominantly as chalcopyrite (approximately 90%). Minor copper minerals included chalcocite (7%) and bornite (3%). Copper minerals that are not considered recoverable by flotation represented approximately 1% of the total copper present. Pyrite constituted 4.3% of the sample on average. An appreciable amount of other sulphides were present, representing 0.71% of the sample. These were dominated by sphalerite, with an appreciable amount of galena.

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16.2.2

Comminution

The distribution of DWi and BWi results for supergene ore are shown in Figure 16.1. Supergene ore is classified as the least competent ore type at Constancia with an 80th percentile DWi of 3.7 kWh/m3. In terms of ore hardness for ball milling, Supergene ore is in the middle of the range with an 80th percentile BWi of 13.1 kWh/t. Figure 16.1 Drop Weight (DWi) and Bond Work (BWi) Index Test Results for Supergene Ore

100

100 SUPERGENE 13 samples

90

80

Cumulative Freqency (%)

Cumulative Freqency (%)

90

70 60 50 40 30 20 10

80 70 60

SUPERGENE 13 samples

50 40 30 20 10

0

0

0

1

2

3

4

5 3

DWi (kWh/m )

6

7 8 9 10 11 12 13 14 15 16 17 18 BWi (kWh/t)

The average abrasion index for Supergene ore samples was in the medium range at Ai = 0.1146. The distribution of DWi and BWi results for Hypogene ore are shown in Figure 16.2. Hypogene ore is classified as the most competent ore types at Constancia with an 80th percentile DWi of 7.5 kWh/m3. In terms of ore hardness for ball milling, Hypogene ore is also the hardest with an 80th percentile BWi of 16.3 kWh/t.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 16.2

100

100

90

90

80

80

Cumulative Freqency (%)

Cumulative Freqency (%)

Drop Weight (DWi) and Bond Work (BWi) Index Test Results for Hypogene Ore

70 60 50

HYPOGENE 19 samples

40 30 20 10

70 60 50

HYPOGENE 19 samples

40 30 20 10

0

0

0 1 2 3 4 5 6 7 8 9 10 3

DWi (kWh/m )

7 8 9 10 11 12 13 14 15 16 17 18 BWi (kWh/t)

The average abrasion index for Hypogene samples was also the highest, Ai = 0.1863. Skarn samples were analysed as two groups, medium-zinc skarn (soft) and high-zinc skarn (hard). The soft Skarn is located in the upper part of the orebody and the hard skarn is deeper. There were eight (8) samples representing medium-zinc Skarn (soft) and only three representing high-zinc Skarn (hard). The distribution of DWi and BWi results for soft Skarn is shown in Figure 16.3. Soft Skarn is classified as the least competent ore type at Constancia with an 80th percentile DWi of 3.8 kWh/m3. In terms of ore hardness for ball milling, Skarn is the softest with an 80th percentile BWi of 10.6 kWh/t. Hard Skarn is classified as competent as hypogene with an 80th percentile DWi of around 7.5 kWh/m3. In terms of ore hardness for ball milling, hard Skarn is slightly harder than soft skarn with an 80th percentile BWi of around 11.5 kWh/t.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 16.3

100

100

90

90

80

80 Cum Freqency (%)

Cum Freqency (%)

Drop Weight (DWi) and Bond Work (BWi) Index Test Results for Skarn Ore

70 60 50 40

Soft SKARN 8 samples

30

70 60 50

30

20

20

10

10

0

Soft SKARN

40

0

0

1

2

3

4

5

6

7

8

7

DWi (kWh/m3)

8

9

10 11 12 13 14 15 BWi (kWh/t)

The average abrasion index for Skarn samples was also the lowest, Ai = 0.0659. 16.2.3 16.2.3.1

Flotation Copper flotation

Supergene Ore The primary grind / flotation program for the Supergene composite included d80 values of 250 µm, 200 µm, 150 µm, 106 µm and 75 µm. The ground material was subjected to 18 minutes of laboratory batch flotation with lime added to the milling and flotation steps to increase the slurry pH to 10.0. MIBC frother (10 g/t) was used, together with 30 g/t A-3033 collector. Tests to evaluate pH included pH values of 7.53 (as received pH), 9.0, 10.0, 11.0 and 12.0. Six different collectors were evaluated on the Supergene composite, as detailed in Table 16.13. Rougher flotation feed, ground to a d80 of 106 µm was conditioned with the selected collector and floated for 18 minutes at a pH of 10.0, with 10 g/t MIBC used as a frothing agent. Table 16.13 Collectors Evaluated in Supergene Rougher Flotation Product

Description

SNF3330

Sodium isopropyl xanthate

Dosage (g/t) 30

PAX

Potassium amyl xanthate

30

A3477

Sodium isobutyl dithiophosphate

30

A404

Blend of dithiophosphates and mercaptobenzothiazole

30

A3926

Alkyl thionocarbamate

30

A3302

Amyl xanthate ester

30

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

The optimum flotation conditions for the supergene composite were a primary grind d80 of 106 µm, a regrind d80 of approximately 37 µm, using either SNF3330 or A-3302 as a collector at a pH of 9.0, with 12 minutes batch flotation rougher residence time and three stages of cleaning. The conditions for each cycle of the Supergene Composite locked cycle test are shown in Table 16.14. Table 16.14 Conditions for Supergene Locked Cycle Tests Reagents (g/t) Stage Grinding

CaO

A 3302

AF 65

30

15

950

Conditioning Rougher

215

Regrinding

200

Time (min)

Grind d80 µm

Cond

Flot

pH

Cumulative

106 3 10

10

37

Cleaner 1

4

11.5

Scavenger

8

11.5

Cleaner 2

3

11.5

Cleaner 3

3

11.5

The locked cycle test results indicate that when treating Supergene ore a concentrate grade of 29.6% Cu can be achieved with a copper recovery of 86% and a molybdenum recovery of 53%. Using the primary grinding and rougher flotation conditions of the locked cycle test individual Supergene samples were floated to determine the effect of ore variability on rougher flotation. Significant variation was seen in both copper and molybdenum feed grades (Table 16.15). This variation exhibited itself in widely fluctuating rougher concentrate grade, with rougher recoveries being more robust. The average copper rougher stage recovery was 89% (standard deviation = 8%), with an average molybdenum rougher stage recovery of 75% (standard deviation = 11%).

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 16.15 Results from Variability Testing on Supergene Ore Samples Head grade

Sample

Rougher Concentrate Grade

Rougher Recovery (%)

%Cu

%Mo

%Cu

%Mo

Cu

Mo

M-1

1.16

0.030

4.11

0.109

86.58

90.01

M-2

1.12

0.022

2.79

0.058

93.92

74.20

M-3

0.57

0.009

4.90

0.033

94.15

74.79

M-4

1.11

0.004

1.86

0.011

88.60

65.99

M-5

0.62

0.004

1.98

0.012

68.21

60.24

M-6

1.24

0.008

4.02

0.021

91.45

72.06

M-7

1.99

0.035

9.39

0.155

96.81

90.85

M-8

0.69

0.025

3.87

0.110

82.37

62.79

M-9

0.84

0.029

4.23

0.117

90.70

74.24

M-16

0.82

0.006

2.58

0.015

89.50

66.08

M-21

1.84

0.046

5.13

0.122

95.12

88.48

Ave

1.09

0.020

4.08

0.069

88.86

74.52

St dev

0.5

0.014

2.1

0.1

8.0

10.9

Analysis of the Supergene final concentrate showed detrimental elements such as As, Hg, Sb were below detection limits. Bismuth was reported at the low value of 0.011% which is well below normal penalty limits. With the exception of zinc, other elements were well below possible penalty limits. Zinc (0.88% of concentrate) was below expected penalty levels, but comprises a sufficient portion of the concentrate to have a material effect on transport and smelting charges. Molybdenum comprised 0.3% of the concentrate, providing an acceptable feed stock to the molybdenum flotation plant. Carbon analysis was low, indicating that no floatable carbon minerals will impact on the molybdenum concentrate grade. Silver represented the only payable element other than copper and molybdenum in the concentrate. Hypogene Ore Flotation conditions trialled for the Hypogene composite were the similar to those for the Supergene composite. The conditions for each cycle of the Hypogene Composite locked cycle test are shown in Table 16.16.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 16.16 Test Conditions for the Hypogene Locked Cycle Test Work Reagents (g/t) Stage

CaO

Grinding A

0.9

Conditioning

200

Rougher

250

Regrinding

55

A 3302

Time (min)

Grind AF 65

d80 µm

cumulative

75 30

10

3 10

10

4

11.5

8 mins

Cleaner 1 Scavenger Cleaner 2

pH

Flot

Cond

8 60

3

Cleaner 3

11.5

3

The hypogene locked cycle test results (Table 16.17) indicate that when treating predominantly hypogene ore through the concentrator a concentrate grade of 23.4% Cu can be achieved with a copper recovery of 88% and a molybdenum recovery of 75.4%. The lower final concentrate grade is largely due to the high lead content. Table 16.17 Results From Hypogene Locked Cycle Tests Product

Grade (%)

Mass (%)

Cu

Fe

Mo

S

Zn

Pb

Cleaner concentrate

2.13

23.4

22.1

1.0

27.2

1.6

4.3

Combined tailings

97.9

0.07

2.57

0.007

1.04

0.028

0.046

Rougher concentrate

11.05

3.27

6.01

0.18

5.22

0.23

0.62

Calculated head grade

100.0

0.57

2.94

0.03

1.59

0.02

0.14

Product

Recovery (%)

Cleaner concentrate

87.9

15.7

75.4

36.3

55.6

66.8

Combined tailings

12.1

84.3

24.6

63.7

44.4

33.2

Rougher concentrate

91.6

32.6

89.2

52.4

60.0

71.2

Total

100.0

100.0

100.0

100.0

100.0

100.0

Variability tests reported Table 16.18.show significant variation in both copper and molybdenum feed grades. The average copper rougher-stage recovery was 90% (standard deviation = 9%), with an average molybdenum rougher-stage recovery of 83% (standard deviation = 8%). A noticeable decrease in copper recovery was seen for samples deeper within the ore body and the possibility that a 106 µm primary grind was too coarse for the latter years of mine life was considered. To test this, samples M23, M27, M32, M38 and M39 were refloated with a 75 µm primary grind. A comparison of the copper recovery and molybdenum recovery for these two samples is shown in Table 16.19. Grinding to 75 µm produced a 7% increase in rougher copper recovery and an 11 % increase in rougher molybdenum recovery with a lower percentage variation in results.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 16.18 Results from Variability Testing on Hypogene Ore Samples Rgh Concentrate Grade

Rougher Recovery (%)

%Cu

%Mo

%Cu

%Mo

Cu

Mo

M-12

0.65

0.029

3.58

0.19

95.81

88.59

M-13

0.34

0.027

1.24

0.12

91.69

80.25

M-14

0.67

0.017

2.36

0.07

96.44

91.17

M-15

0.83

0.054

3.89

0.28

97.63

94.18

M-17

0.79

0.028

3.94

0.15

94.41

85.47

M-18

1.01

0.014

6.95

0.09

74.75

75.42

M-22

0.74

0.012

3.22

0.06

93.89

87.09

M-23

0.34

0.032

1.34

0.16

93.72

88.04

M-24

0.40

0.072

1.84

0.39

94.97

84.43

M-25

0.53

0.059

2.26

0.33

96.40

89.27

M-26

0.64

0.021

2.71

0.10

93.81

88.86

M-27

0.65

0.032

6.86

0.33

92.15

77.17

M-28

0.65

0.012

2.55

0.04

95.05

74.75

M-29

0.41

0.021

1.51

0.09

94.82

89.26

M-32

0.61

0.021

5.27

0.16

85.79

65.60

M-37

0.42

0.058

2.12

0.33

92.75

83.03

M-38

0.26

0.080

2.76

0.93

82.40

79.24

M-39

0.37

0.003

3.55

0.04

60.93

64.09

M-42

0.42

0.033

1.83

0.17

90.98

87.91

Ave

0.56

0.03

3.15

0.21

90.44

82.83

St dev

0.20

0.02

1.68

0.21

9.06

8.34

Sample

Head grade

Table 16.19 Deep Hypogene Samples Tested at 75 µm and 106 µm Rougher Copper Recovery (%)

Rougher Molybdenum Recovery (%)

106µm

75µm

106µm

75µm

M-23

93.72

95.24

88.04

92.58

M-27

92.15

96.41

77.17

91.14

M-32

85.79

96.50

65.60

87.92

M38

82.40

70.39

79.24

88.62

M-39

60.93

93.50

64.09

71.54

Ave

83.00

90.41

74.83

86.36

St dev

13.12

11.25

10.00

8.49

Sample

In the hypogene final concentrate detrimental elements such as As, Hg and Bi were below detection limits in the final concentrates. With the exception of zinc and lead other elements were well below possible penalty limits. Zinc (1.62% of concentrate) and lead (0.2% of concentrate) were below expected penalty levels, but comprise a sufficient portion of the concentrate to have a material effect on transport and smelting charges. Molybdenum comprised greater than 1.0% of the concentrate, although it is anticipated that this will be reduced to approximately 0.1% following treatment in the molybdenum circuit. Carbon analysis was low, indicating that no floatable carbon minerals will impact

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

on the molybdenum concentrate grade. Silver represented the only payable element other than copper and molybdenum in the concentrate. Skarn Ore The optimum flotation conditions for the Skarn composites were a primary grind d80 of 106 µm, a regrind d80 of approximately 37 µm, using either AX343, A3926 or A-3302 as a collector at a pH of 9.0, with 12 to 16 minutes batch flotation rougher residence time, three stages of cleaning and zinc sulphate as a zinc depressant.. The conditions for each cycle of a medium-zinc Skarn composite locked cycle test are shown in Table 16.20. Table 16.20 Conditions Used in Locked Cycle Test Work on Medium-Zinc Skarn Ore Reagents (g/t) Stage

CaO

Grinding

400

Conditioning

30

A 3302

AF 65

30

40

d80 µm

150

Cleaner 1

90

Scavenger Cleaner 2 Cleaner 3

Cond

Flot

pH

cumulative

106 3

Rougher Regrinding

Time (min)

Grind

10

9.0

4

11.0

4 mins 8

60

3

11.5

3

The locked cycle test results are summarised in Table 16.21 and indicate that when treating predominantly medium-zinc skarn ore through the concentrator with no depressant use, a concentrate grade of 22.8% Cu can be achieved with a copper recovery of 90% and a molybdenum recovery of 56%. The lower final concentrate is largely due to the high zinc content. It is expected that with the use of zinc depressants, copper concentrates of 26% copper, with less than 5% zinc will be achievable, at a copper recovery of approximately 85%.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 16.21 Results from Medium-Zinc Locked Cycle Tests Product

Mass (%)

Grade (%) Cu

Fe

Mo

S

Zn

Pb

Cleaner concentrate

5.67

22.8

24.4

0.2

32.4

9.6

1.4

Combined tailings

94.3

0.15

21.5

0.008

7.4

1.2

0.27

Rougher concentrate

13.0

8.94

20.3

0.127

18.1

3.9

0.56

Calculated head grade

100.0

1.43

21.66

0.023

8.92

1.8

0.33

90.4

6.4

56.3

20.8

31.7

23.6

Combined tailings

9.6

93.6

43.7

79.2

68.3

76.4

Rougher concentrate

89.4

12.8

80.0

28.3

31.9

24.4

Total

100.0

100.0

100.0

100.0

100.0

100.0

Product Cleaner concentrate

Recovery (%)

Elemental analysis of the final concentrate with medium zinc grade skarn ore showed arsenic below detection limits and although values of Hg were reported they were below penalty levels at 0.5 ppm and 0.29%. With the exception of zinc, bismuth and cadmium other elements were well below possible penalty limits. Both cadmium and bismuth were at values around their penalty limits at 0.0325% Cd and 0.029% Bi and will require monitoring during operation. Zinc at 9.9% of concentrate weight is well above penalty limits and if a depression strategy is not enacted may result in either low value or nonsaleable concentrate. Molybdenum comprised less than 0.2% of the concentrate. Carbon analysis was low, indicating that no floatable carbon minerals will impact on the molybdenum concentrate grade. Silver represented the only payable element other than copper and molybdenum in the Cu concentrate. 16.2.3.2

Molybdenum flotation

The addition of NaHS to the rougher feed resulted in 75% of copper minerals becoming non-floatable. The remaining material floated at a flotation rate one fifth of that of molybdenum. Subsequent NaHS addition to the first cleaner transferred 73% of copper minerals in the rougher concentrate to the nonfloating fraction. NaHS addition to the second cleaner was less effective with only 10% of first cleaner concentrate transferred to the non-floating fraction. The copper floating fraction in the second cleaner floated at approximately half the kinetic rate of the molybdenum. It is expected that the parameters in the second cleaner will be repeated in subsequent cleaning stages. A small proportion of lead in the rougher feed was fast floating. The addition of NaHS to the rougher feed resulted in 61% of lead minerals becoming non-floatable. The remaining material floated at a flotation rate slightly faster than that of molybdenum. Subsequent NaHS addition to the first cleaner removed the fast floating fraction and transferred 62% of lead minerals in the rougher concentrate to the non-floating fraction. There was no change in the lead flotation rate in the first cleaner. NaHS addition to the second cleaner was again less effective with only 51% of first cleaner concentrate transferred to the non-floating fraction. There was no change in the lead flotation rate in the second cleaner. Zinc mineral flotation was similar to that for copper, although NaHS addition to the second cleaner resulted in 93% of zinc minerals in the first cleaner being transferred to the non-floating fraction.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Seventy-nine percent of non sulphide gangue in the rougher feed was non-floatable. The remainder floated at a rate similar to molybdenum. In the first cleaner no non-sulphide gangue was transferred to the non-floating fraction, indicating that NaHS was not effective in depressing the floatable non-sulphide gangue. A similar response was witnessed in the second cleaner, with no transfer of floatable material in the first cleaner concentrate to the non-floating fraction. The kinetic rate of non-sulphide gangue did decrease in the cleaning stages, but not sufficiently to prevent it reporting to the molybdenum concentrate. On the basis of the floatability component analysis a series of simulations were conducted with varying numbers of cleaner stages to replicate locked cycle tests. The bulk copper/molybdenum concentrate grade used as a feed to the simulated molybdenum flotation circuit contained 0.22% Mo, 25.0% Cu, 1.0% Pb, 5.0% Zn and 2.0% pyrite. The simulated circuit molybdenum grades and recoveries for the seven stage cleaner circuit are shown in Table 16.22. Molybdenum recovery decreased up to the fifth cleaning stage, after which a recovery of 74.88% with respect to molybdenum circuit feed was maintained. The concentrate grade increased rapidly to seven cleaning stages after which only minimal improvements were achieved above 35.83% Mo. Table 16.22 Simulated Molybdenum Grade/Recovery as a Function of Cleaning Stages Molybdenum Recovery

Concentrate Grade (%Mo)

Molybdenum Circuit Feed

100.00

0.13%

Rougher Concentrate

91.59%

1.71%

Cleaner 1 Feed

199.65%

1.85%

Cleaner1 Concentrate

79.16%

4.08%

Cleaner Sc Concentrate

103.78%

2.81%

Cleaner 2 Feed

101.90%

2.91%

Cleaner 2 Concentrate

97.62%

5.52%

Cleaner 2 Tailing

4.28%

0.25%

Cleaner 3 Feed

105.56%

4.41%

Cleaner 3 Concentrate

82.82%

9.91%

Cleaner 3 Tailing

22.74%

1.46%

Cleaner 4 Feed

96.03%

7.69%

Cleaner 4 Concentrate

88.08%

14.15%

Cleaner 4 Tailing

7.94%

1.27%

Cleaner 5 Feed

92.62%

11.72%

Cleaner 5 Concentrate

79.42%

21.10%

Cleaner 5 Tailing

13.21%

3.19%

Cleaner 6 Feed

80.24%

18.26%

Cleaner 6 Concentrate

75.70%

27.82%

Cleaner 6 Tailing

4.54%

2.71%

Cleaner 7 Feed

75.70%

27.82%

Cleaner 7 Concentrate

74.88%

35.83%

Cleaner 7 Tailing

0.82%

1.30%

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

16.2.3.3

Flotation concentrate quality evaluation

Based on the seven stage cleaner circuit floatability component model and QEMScan analysis, the anticipated molybdenum concentrate is shown in Table 16.23. The significant diluents are expected to be talc, amphiboles, calcite, chlorite and chalcopyrite. Table 16.23 Anticipated Molybdenum Concentrate Mineralogical Content (%)

16.2.3.4

Elemental Content (%)

Molybdenite

59.78

Mo

35.83

Talc

9.49

S

32.78

Amphiboles

7.02

Pb

5.98

Galena

6.91

Si

5.83

Calcite

4.35

Fe

3.23

Chlorites

4.05

Mg

2.74

Chalcopyrite

4.03

Ca

2.50

Ti Oxides

1.13

Cu

1.40

Biotite

0.92

Al

0.86

Fe Oxides/Oxyhydroxides

0.76

Ti

0.36

Zircon

0.62

Zr

0.31

Others

0.38

P

0.05

Apatite

0.30

Na

0.05

Clays

0.26

F

0.01

Sphalerite

0.5%. At this stage of modelling, the only Zn definition available is from the wireframes.

Page 190

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.20 Supergene and Skarn, with High Zn Domains Highlighted

Page 191

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.21 Supergene and Skarn, with High Zn Domains Highlighted – Plan View

The next stage has been to develop a series of block models which can be used to identify skarn zones expected to contain supergene material, and where Zn is also high. A simple overlap of wireframes is not sufficient, since the aim is to try and predict time periods during which skarn will be mined with more than 5% of supergene. Proportions of material types within various block sizes have been generated from the wireframes. Definition of ‘Skarn2’ (SK2) type material can then be defined on a block basis, where the proportion of Skarn (SK) and Supergene (SG) are both greater than a selected threshold, and where the Zn grade is ‘high’. Figure 17.22 and Figure 17.23 show the distribution of normal resource model size blocks (25x25x15 m) where skarn occurs and there is greater than 5% of SG. Most occurs within high-Zn wireframes, and most of the material is also contained within several contiguous areas. This is encouraging in that it suggests meaningful spatial domains can be identified.

Page 192

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.22 SK2 in Resource Model Blocks (highlighted in red)

Figure 17.23 Plan View of SK2 in Resource Model Blocks (highlighted in red)

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

To evaluate this approach using different overall volumes to simulate tonnage mined during various time periods, the same exercise has been carried out for block sizes of: 50x50x25 (approximately 160 000 t) 75x75x30 (approximately 450 000 t) 100x100x40 (approximately 1 000 000 t) Results are illustrated in visual form (Figure 17.24 for 25x25x10 m blocks and Figure 17.25 for 100x100x40 m blocks) and in tabular form (Table 17.1). Figure 17.24 SK2 Areas - 50x50x25 m Blocks

SK2 areas (including MX) 50x50x25

Plan of SK2 areas (including MX) 50x50x25

SK2 areas (excluding MX) 50x50x25

Plan of SK2 areas (excluding MX) 50x50x25

Page 194

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.25 SK2 Areas - 100x100x40 m Blocks

SK2 areas (including MX) 100x100x40

SK2 areas (including MX) 100x100x40

SK2 areas (excluding MX) 100x100x40

SK2 areas (excluding MX) 100x100x40

The proportion of total Skarn which becomes SK2 using these calculations has been summarised in Table 17.1. The amount of Skarn classified as SK2 is shown, and compared to the total Skarn (not just mineralised skarn) of 149.9 Mt. Table 17.1 Quantities of SK2 Skarn in Model SK2 (Inc MX)

SK2 (Exc MX)

SK2 %

SK2 %

Mt

Mt

(Inc MX)

(Ex MX)

Wireframe Overlap

5.3

2.6

4%

2%

25x25x10

6.4

3.5

4%

2%

50x50x25

9.2

5.7

6%

4%

75x75x30

11.1

8.0

7%

5%

100x100x40

15.0

10.0

10%

7%

No account is taken in these calculations of Zn grade. Even though the majority of the SK2 material will be in ‘high’ Zn skarn areas, the grade may not always be above 0.5% Zn.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

It appears that using a 100x100x40 m re-block size and re-classifying Skarn as SK2 within these panels essentially wherever Skarn and Supergene (including Mixed) occur within them, gives two distinct contiguous zones of SK2, one at Constancia, the other, smaller one at San José. Both zones are limited in areal and depth extent, and would appear to give a good first pass approach to defining SK2 material for optimisation purposes. It appears that SK2 as it would be expected to present to the mill, accounts for some 10% of total Skarn, or some 10 to 15 Mt of mineralised SK2. 17.4.6

Topography

The topography DXF files for the area covering the Constancia project were imported into Micromine software as strings, and a 3-D surface digital terrain model was created. This is illustrated in Figure 17.26, Figure 17.27 and Figure 17.28. Figure 17.26 Topographic Contours and Features

Page 196

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.27 Topographic Surface Plan

Figure 17.28 Topographic Surface Model Looking Northwest

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

17.5

SAMPLE CODING

17.5.1

Flagging by lithology domain

The assay interval data was flagged into a LITH field by overlaying the lithological domain solid models. The flagging process was validated by visual inspection on section, plan and in 3-D. 17.5.2

Flagging by mineralisation domain

The assay interval data was also flagged into a ZONE field by overlaying the mineralisation domain solid models. The flagging process was validated by visual inspection on section, plan and 3-D. 17.5.3

Flagging by copper and zinc grade shells

The assay interval data was flagged into a 02CU field by overlaying the 0.2% Cu grade shell solid model. The flagging process was validated by visual inspection on section, plan and 3-D. The assay interval data was also flagged into a ZNZONE field by overlaying the 0.15% Zn grade shell solid model. The flagging process was validated by visual inspection on section, plan and 3-D. 17.6

DATA COMPOSITING

The dominant sample length at Constancia is 2 m, but there are many smaller (and some larger) intervals. To provide valid data for statistical and geostatistical analysis, 2 m composites were generated; these composites honoured the boundaries in the assay data of the lithological and mineralisation domains. Histograms of length distribution in samples and composites are shown in Figure 17.29 and Figure 17.30.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.29 Histogram of Assay Interval Length

Figure 17.30 Histogram of Composite Interval Length

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

17.7

STATISTICAL ANALYSIS AND VARIOGRAPHY

17.7.1

Statistical analysis by domain

An analysis of histograms and log probability plots of composites as coded by the various domains was carried out to determine which domains would be used as hard and soft boundaries during interpolation. A combination of the mineralisation domains and the 02CU grade shell, together with exceptions flagged by late stage dykes (as defined in the lithological domains), was found to provide satisfactory discrimination between the populations. A summary of the distribution of the main domains can be seen in Figure 17.31, Figure 17.32, Figure 17.33, Figure 17.34, Figure 17.35, Figure 17.36 and Figure 17.37. 17.7.2

Outlier analysis (capping)

Outlier analysis was carried for Cu, Mo, Ag and Zn using the following methodology: 

Review of histograms and probability plots to identify significant breaks in populations that may be used to interpret possible outliers.



Investigation of spatial clustering of potential outlier data. High grade composites that exhibit clustering may be considered valid members of the population, while isolated high grade composites were considered as possible outliers, requiring cutting and/or search restriction.



Analysis by combinations of domains as determined from domain statistical analysis (see Section 17.7.1)

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.31 Cu Log Probability Plot Overlay of Domains

No capping was applied

Page 201

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.32 Mo Log Probability Plot Overlay of Domains

Capping Oxide Cu

0.12% Mo

Supergene

0.12% Mo

OP (default) 0.10% Mo Hypogene

0.10% Mo

Skarn

0.16% Mo

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.33 Ag Log Probability Plot Overlay of Domains

Capping Supergene

60 ppm Ag

Oxide Cu

40 ppm Ag

Skarn

70 ppm Ag

Hypogene

50 ppm Ag

OP

35 ppm Ag

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.34 Au Log Probability Plot Overlay of Domains

Capping 1 gm/t for all domains

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.35 Zn Log Probability Plot Overlay of Domains

No capping was applied.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.36 Pb Log Probability Plot Overlay of Domains

No capping was applied.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.37 S Log Probability Plot Overlay of Domains

No capping was applied. 17.7.3

Variography

Variography was approached by initially generating horizontal variogram contour fans, then generating variograms in the direction of best continuity and perpendicular to this direction. The known geological orientations of certain features and domains were taken into account when deciding upon primary orientations. Nugget variances were typically found to be best determined using down-hole variograms, with the nugget value then being applied to the corresponding directional models. Variogram modelling was generally achieved using two structure spherical schemes. Modelled variogram parameters are provided in Table 17.2. Note that the variograms are modelled using the normal experimental values and then the modelled gamma values are re-scaled for compatibility with population variances. Note, too, that variography on the oxide mineralisation domains was carried out in “unfolded” space as described in Section 17.9.3.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 17.2 Variogram Model Parameters HYPOGENE Variable Cu

Mo

Ag

Zn

Pb

S

Au

Axis

Orientation

Nugget

Sill 1

0.55

0.12

Range 1

Sill 2

Major

0° → 000°

Semi-major

0° → 090°

Minor

90° → 000°

145.0

345.0

Major

0° → 000°

46.0

175.0

Semi-major

0° → 090°

Minor

90° → 000°

Major

0° → 000°

Semi-major

0° → 090°

Minor

90° → 000°

85.0

187.0

Major

0° → 000°

269.0

544.0

Semi-major

0° → 090°

Minor

90° → 000°

269.0

544.0

Major

0° → 000°

50.0

187.0

Semi-major

0° → 090°

Minor

90° → 000°

Major

0° → 000°

Semi-major

0° → 090°

Minor

90° → 000°

165.0

360.0

Major

0° → 000°

145.0

264.0

Semi-major

0° → 090°

Minor

90° → 000°

145.0

0.36

0.10

145.0

46.0

345.0 0.33

0.54

46.0

0.46

0.63

0.10

0.06

0.19

85.0

269.0

50.0

0.48

0.18

0.35

0.18

165.0

145.0

187.0

544.0

187.0 187.0

165.0 0.01

175.0 187.0

0.28

50.0 0.37

345.0

175.0

85.0 0.61

Range 2

360.0 0.63

0.47

145.0

360.0

264.0 264.0

SUPERGENE Variable Cu

Mo

Ag

Zn

Axis

Orientation

Major

0° → 055°

Nugget

Sill 1

Range 1

Sill 2

30

Range 2 140

Semi-major

0° → 145°

Minor

90° → 000°

8

36

Major

0° → 000°

40

120

Semi-major

0° → 090°

Minor

90° → 000°

0.16

0.35

0.38

0.25

50

30

0.47

0.40

8

130

200 30

Major

0° → 000°

Semi-major

0° → 090°

Minor

90° → 000°

8

14

Major

0° → 000°

54

298

Semi-major

0° → 090°

30 0.41

0.44

0.12

0.04

45

80

88 0.47

0.52

105

140

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 17.2 Variogram Model Parameters

Variable Cu

Mo

Ag

Zn

Variable Cu

Mo

Ag

Zn

Variable Cu

Mo

Ag

Zn

Axis Major Semi-major Minor Major Semi-major Minor Major Semi-major Minor Major Semi-major Minor

SKARN CONSTANCIA Orientation Nugget Sill 1 0° → 045° 25° → 135° 0.35 0.21 65° → 315° 0° → 045° 25° → 135° 0.13 0.32 65° → 315° 0° → 045° 15° → 135° 0.17 0.52 75° → 315° 0° → 045° 25° → 135° 0.15 0.18 65° → 315°

Range 1 150 195 13 100 164 14 155 206 6 47 71 17

Sill 2

Axis Major Semi-major Minor Major Semi-major Minor Major Semi-major Minor Major Semi-major Minor

SKARN SAN JOSÉ Orientation Nugget Sill 1 0° → 000° 50° → 270° 0.35 0.21 40° → 090° 0° → 000° 50° → 270° 0.13 0.32 40° → 090° 0° → 000° 50° → 270° 0.17 0.52 40° → 090° 0° → 000° 50° → 270° 0.15 0.18 40° → 090°

Range 1 150 195 13 100 164 14 155 206 6 47 71 17

Sill 2

Axis Major Semi-major Minor Major Semi-major Minor Major Semi-major Minor Major Semi-major Minor

Orientation 0° → 000° 0° → 090° 90° → 000° 0° → 020° 0° → 110° 90° → 000° 0° → 000° 0° → 090° 90° → 000° 0° → 000° 0° → 090° 90° → 000°

Range 1 50 30 6 170 145 10 60 100 3.5 25 36 15

Sill 2

OXIDE CU Nugget

Sill 1

0.26

0.45

0.09

0.28

0.07

0.12

0.07

0.13

0.44

0.55

0.31

0.67

0.44

0.55

0.31

0.67

0.28

0.62

0.81

0.80

Range 2 246 205 27 401 310 78 178 243 16 136 191 25

Range 2 246 205 27 401 310 78 178 243 16 136 191 25

Range 2 70 75 8 180 280 20 80 185 19 125 198 57

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 17.2 Variogram Model Parameters

Variable

Axis Major Semi-major Minor Major Semi-major Minor Major Semi-major Minor Major Semi-major Minor

Cu

Mo

Ag

Zn

OXIDE LEACHED Orientation Nugget Sill 1 0° → 020° 0° → 110° 0.25 0.11 90° → 000° 0° → 000° 0° → 090° 0.16 0.08 90° → 000° 0° → 045° 0° → 135° 0.01 0.55 90° → 000° 0° → 000° 0° → 090° 0.08 0.13 90° → 000°

17.8

BLOCK MODEL CONSTRUCTION

17.8.1

Preparation

Range 1 75 77 5.7 45 50 5 95 95 5.5 145 130 13

Sill 2 0.64

0.76

0.44

0.79

Range 2 180 200 16.4 280 170 25 183 200 24 390 400 28

A fully coded cellular (block) model representing all mineralisation, lithological and grade shell subsets was constructed by applying constraints using relevant surface and solid wireframes, with reference to model prototype parameters shown in Table 17.3. The selected parent cell dimensions were based on observations of the typical spatial distribution of data in each of the easting, northing and vertical directions. Minimum sub-cell dimensions were selected so as to reflect the likely geometric resolution of boundary constraints imposed by the various interpretative elements as determined from the overall drillhole spacing. Table 17.3 Model Prototype Parameters Easting

Northing

RL

Model origin (centroid)

200 500

8 399 000

3607.5

Parent cell dimension (m)

25

25

15

Number of cells

100

80

60

Minimum subcell (m)

2.5

5

3

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

17.8.2

Lithological modelling (LITH)

The lithological model was created by an ordered overlaying of sub-models created within the lithological domain solids. Models were sequentially added in the following order: 

MP1



SS



SK



MMP



MP2



QMP

Examples of the model are shown in section and plan in Figure 17.38 and Figure 17.39. Figure 17.38 Lithology Model – Plan View

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.39 Lithology Model Northing Section

17.8.3

Mineralisation modelling (ZONE)

The mineralisation model was created by an ordered overlaying of sub-models created within the mineralisation domain solids. Models were sequentially added in the following order: 

Hypogene



Leached



Mixed



Oxide



Supergene

Examples of the model are shown below in section and plan in Figure 17.40 and Figure 17.41.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Figure 17.40 Mineral Zonation Model Plan

Figure 17.41 Mineral Zonation Model Northing Section

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

17.8.4

Cu grade shell modelling (02CU)

The 0.2% Cu grade shell solid was used to create a single model. 17.8.5

Zn grade shell modelling (ZNZONE)

The 0.15% Zn grade shell solid was used to create a single model. 17.8.6

Sub-model consolidation

The four sub-models were combined to form a single model, and as final step, this model was further overlain with a “rock” model generated beneath the topographic surface to produce a final volume model. 17.9

GRADE ESTIMATION

The block model was generated to include both the San José and Constancia zones. GRD Minproc conducted kriging neighbourhood analysis (KNA) on the domain-coded Cu data in the Constancia zone to determine optimal parameters for grade estimation. Goodness-of-fit statistics were generated to assess the efficiency of the various parameters. primary statistics used were the kriging efficiency (KE) and the slope of regression3.

The

KE calculates the overlap expected between the estimated block grade histogram and the ‘true’ block grade histogram. A high KE indicates a good match between estimated and ‘true’ grades, while as parameters become less optimal, KE drops. The slope of regression estimates the correlation between estimated and ‘true’ grades; a value approaching 1.0 indicates a good fit. In addition, other statistics, such as the percentage of negative weights generated in a kriging plan can be considered. A number of key input parameters can be tested in this way, including: 

Block size



Number of discretisation points



Search ellipse dimensions



Minimum and maximum numbers of samples in a search plan.

Cu, Mo, Ag, Pb, Au, S and Zn were estimated by Ordinary Kriging using individual variograms for each element and domain.

3

The kriging efficiency is calculated as (block variance-kriging variance)/block variance, where block variance is the total sill less the

variance contained within a block. The slope of regression is calculated as (block variance – kriging variance + µ)/ (block variance – kriging variance + 2µ).

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Inverse distance squared interpolation was also carried out for each element and domain, using the same search parameters as for the Ordinary Kriging estimate. This was carried out to aid in validation of the final resource model. 17.9.1

Domain control on estimation

The mineralisation domains are used as the primary domain control on interpolation; however, subdomains are also defined within the hypogene and skarn domains by the 0.2% Cu grade shell (inside and outside). A third layer of sub-domain occurs within the hypogene caused by the need to separate out the barren late-stage dykes defined by the lithology domains QMP and MP2. Zn% estimation also uses further sub-domains as defined by the 0.15% Zn grade shell. 17.9.2

Search strategy

For the mineralised domains, the preferred orientation of the search ellipsoids has been selected to be in the plane of the variograms. Note that the variogram directions are related to observed directions of continuity within each domain. Search distances are related essentially to the drillhole spacing in the plane of the mineralised domain, and to the nature of the grade continuity in the vertical or across-structure direction. For the hypogene and skarn domains the vertical component is a significant proportion of the horizontal components; for the flatter-lying supergene and various oxide domains, the vertical component is smaller (see also Section 17.9.3 on unfolding). The selected search parameters are summarised in Table 17.4.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 17.4 Search Parameters

ZONE

Search Distance

Rotation

Search 1

(m)

(deg)

(no. samples)

Volume

Search 2

Volume

(no. samples)

Search 3 (no. samples)

X

Y

Z

1

2

3

Min

Max

Factor

Min

Max

Factor

Min

Max

Sk Con (min)

75

75

25

45

25

0

12

30

2

12

30

4

2

30

Sk Con (unmin)

75

75

25

45

25

0

12

30

2

12

30

4

2

30

Sk SJ (min)

75

75

25

0

-50

0

12

30

2

12

30

4

2

30

Sk SJ (unmin)

75

75

25

0

-50

0

12

30

2

12

30

4

2

30

Sg

75

75

25

0

0

0

12

30

2

12

30

4

2

30

Hy (min)

75

75

50

0

0

0

12

30

2

12

30

4

2

30

Hy (LG)

45

75

50

0

0

0

12

30

2

12

30

4

2

30

Hy (MP2)

45

75

75

75

-75

0

12

30

2

12

30

4

2

30

Hy (QMP)

45

75

75

75

-75

0

12

30

2

12

30

4

2

30

Mx

75

75

25

0

0

0

12

30

2

12

30

4

2

30

Oxide

75

75

25

0

0

0

12

30

2

12

30

4

2

30

Leached

75

75

25

20

0

0

12

30

2

12

30

4

2

30

Op

75

75

45

0

0

0

12

30

2

12

30

4

2

30

17.9.3

Unfolding

The oxide and leached copper mineralisation domains are essentially undulating, sub-horizontal domains, which present issues with search ellipse orientations. They generally have limited vertical grade continuity and limited vertical thickness, but locally highly variable RL of the domain. Thus to construct a conventional search ellipse which captures sufficient sample numbers for satisfactory grade estimation often means using a vertical search component which can be much larger than the thickness of the domain, thereby causing over-smoothing in the vertical direction. Limiting the vertical search, conversely, will leave many cells unestimated. One simple solution to this issue is “unfolding” or “flattening” of the domain, where the data and block model are re-aligned to a plane representing the top of the domain. This has been performed for the supergene, oxide leach, mixed and oxide copper domains. A comparison of original and “unfolded” supergene blocks on a typical section is illustrated in Figure 17.42 and Figure 17.43. Note that the variography for these domains was carried out on composites in unfolded space.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.42 Data before Unfolding

Figure 17.43 Data in Unfolded Space

17.9.4

High grade capping

The high grade capping analysis is summarised in Section 17.7.2. 17.9.5

Other parameters

Other parameters used in the estimation were: 

Discretisation 3x3x3 (X,Y,Z)



Parent cell estimation



Maximum number of holes = 6.

17.10

DENSITY ASSIGNMENT

The 1108 density measurements taken by Norsemont have been flagged with the mineralisation and lithological models. Average density values were then determined for each of the modelled lithological units, taking mineralisation style into account, and applied to the block model.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

A summary of the average density values applied to the block model is presented in Table 17.5. Table 17.5 Density Assignment Mineralisation

17.11

Lithology

Density

Hypogene

MP1

2.55

Hypogene

MP2

2.63

Hypogene

MMP

2.62

Hypogene

QMP

2.48

Hypogene

Skarn (High Zn)

2.86

Hypogene

Skarn (Low Zn)

3.05

Supergene

Undifferentiated

2.38

Oxide

Undifferentiated

2.37

Leached

Undifferentiated

2.46

Mixed

Undifferentiated

2.39

Unmineralised

MP1

2.62

Unmineralised

MP2

2.63

Unmineralised

MMP

2.62

Unmineralised

QMP

2.48

Unmineralised

Skarn

2.77

Unmineralised

Sandstone

2.48

RESOURCE CLASSIFICATION

Procedures for classifying the resources were undertaken within the context of the Canadian Securities Administrators National Instrument 43-101 (NI 43-101), with consideration of the following criteria: 

Quality and reliability of raw data (sampling, assaying and surveying)



Dill hole spacing



Confidence in the geological interpretation



Number, spacing and orientation of intercepts through mineralised zones



Grade continuity information gained from observations and variography



Search volume and number of samples in search



Overall number of samples and spatial continuity of domain



Kriging variance.

GRD Minproc considers that there is sufficient drilling and sampling information, and that this information is of sufficient quality to classify the mineral resource in Measured, Indicated and Inferred categories.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Criteria for classification are summarised in Table 17.6, and an overview of the classification into Measured, Indicated and Inferred categories is illustrated in Figure 17.44, Figure 17.45, Figure 17.46, Figure 17.47 and Figure 17.48. Table 17.6 Resource Classification Criteria Domain

Lithology

Cu Envelope

Conditions Search Pass 1 Samples=40 Kriging Variance< 0.1 RL > 4000m Search Pass 1 RL > 3780m

Class

Hypogene

MP1

Inside

Hypogene

MP1

Inside

Hypogene

MP1

Inside/Outside

Search Pass 2/3 Search Pass 1 Samples=40 Kriging Variance< 0.1 RL > 4000m Search Pass 1 RL > 3780m

Inferred

Hypogene

MMP

Inside

Hypogene

MMP

Inside

Hypogene

MMP

Inside/Outside

Inferred

Inside

Search Pass 2/3 Search Pass 1 Samples=30 Kriging Variance< 0.2 RL > 4000m

Hypogene

SKARN

Hypogene

SKARN

Inside

Search Pass 1

Indicated

Hypogene

SKARN

Inside/Outside

Search Pass 2/3

Inferred

Hypogene

QMP

Hypogene

MP2

Measured Indicated

Measured Indicated

Measured

Unclassified Unclassified

Supergene

Inside

Supergene

Inside

Mixed Mixed

Search Pass 1 Samples=30 Kriging Variance< 0.4

Measured

Inside

Search Pass 1 Search Pass 1 Samples=30 Kriging Variance< 0.3

Indicated

Measured

Inside

Search Pass 1

Indicated

Leached

Inferred

Oxide

Unclassified

Other

Unclassified

Page 219

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.44 Resource Classification Schematic Level 4300 mRL

Figure 17.45 Resource Classification Schematic Level 4200 mRL

Page 220

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.46 Resource Classification Schematic Level 4100 mRL

Figure 17.47 Resource Classification Schematic Level 4000 mRL

Page 221

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.48 Resource Classification Schematic - Transform Section

17.12

MODEL VALIDATION

Model validation was carried out in several ways: Statistics were generated to confirm that interpolated model cell grade field values fall within acceptable bounds. Results of comparison of composite means with model means are contained in Table 17.7 for Lithology and Table 17.9 for Zonation.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 17.7 Statistical Comparison between Means of Composite and Model Data – Lithology Model Composites

Model Cu

LITH MMP

0.14

0.16

MP1

0.23

0.19

MP2

0.04

0.07

QMP

0.04

0.05

SK

0.45

0.45

SS

0.02

0.03 Mo

LITH MMP

0.004

0.005

MP1

0.007

0.006

MP2

0.001

0.001

QMP

0.002

0.005

SK

0.008

0.008

SS

0.000

0.001 Ag

LITH MMP

2.10

2.41

MP1

2.58

2.38

MP2

0.69

1.05

QMP

0.81

1.95

SK

5.11

5.02

SS

0.79

0.97 Pb

LITH MMP

0.03

0.03

MP1

0.04

0.04

MP2

0.02

0.03

QMP

0.03

0.04

SK

0.07

0.07

SS

0.01

0.04 Zn

LITH MMP

0.05

0.05

MP1

0.06

0.07

MP2

0.04

0.06

QMP

0.06

0.07

SK

0.43

0.41

SS

0.03

0.06

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 17.8 Statistical Comparison between Means of Composite and Model Data – Lithology Model Au

LITH MMP

0.02

0.03

MP1

0.04

0.03

MP2

0.01

0.02

QMP

0.01

0.03

SK

0.07

0.07

SS

0.02

0.02 S

LITH MMP

2.46

2.38

MP1

1.51

1.56

MP2

0.49

0.69

QMP

0.43

0.94

SK

4.77

4.53

SS

1.51

0.85

Table 17.9 Statistical Comparison between Means of Composite and Model Data – Mineral Zonation Model Composites

Model Cu

ZONE HY

0.21

0.19

LX

0.10

0.11

MX

0.50

0.46

OP

0.08

0.06

OX

0.59

0.60

SG

0.58

0.56 Mo

ZONE HY

0.007

0.005

LX

0.007

0.006

MX

0.013

0.010

OP

0.003

0.002

OX

0.004

0.005

SG

0.008

0.008 Ag

ZONE HY

2.31

2.34

LX

3.62

3.35

MX

3.67

3.23

OP

1.53

1.21

OX

3.45

3.78

SG

5.01

4.63

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 17.9 (cont) Statistical Comparison between Means of Composite and Model Data – Mineral Zonation Model Pb

ZONE HY

0.04

0.04

LX

0.05

0.05

MX

0.04

0.04

OP

0.06

0.04

OX

0.05

0.06

SG

0.05

0.05 Zn

ZONE HY

0.10

0.13

LX

0.06

0.06

MX

0.09

0.09

OP

0.11

0.06

OX

0.12

0.14

SG

0.05

0.06 Au

ZONE HY

0.03

0.03

LX

0.04

0.04

MX

0.04

0.05

OP

0.02

0.02

OX

0.08

0.09

SG

0.05

0.05 S

ZONE HY

1.96

2.23

LX

0.31

0.32

MX

1.94

2.15

OP

0.71

0.98

OX

0.23

0.34

SG

1.98

2.02



The grade estimates in the block model were thoroughly scrutinised using graphical visualisation utilities. Model and drillhole data were overlain and viewed in various 2D section and plan view slices, with colour highlighting of grade or zonal attributes. Examples are shown in Figure 17.49 Figure 17.50 and Figure 17.51.



Model grade spatial distribution patterns were also reviewed using 3-D facilities, presented variously as section planes, point clouds and cell faces.



A comparison was carried out with the previous resource estimate (GRD Minproc, 2008). It was found that grades in the current model are generally slightly higher than in the previous estimate. Tonnage has increased approximately 10%.

Page 225

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0



A comparison was carried out against declustered block grades.



A comparison of block grades estimated using Inverse Distance Squared was carried out. Figure 17.49 Cu Grade Model Validation - Section 202050 East

Page 226

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.50 Cu Grade Model Validation - Transform Section Cu Validation

Page 227

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.51 Cu Grade Model Validation - Level Plan 4225 mRL

17.13

MINERAL RESOURCE REPORTING

Computations of global tonnes and grade estimates (Table 17.10 and Table 17.11) were checked and verified using two independent software packages (Micromine and Datamine). The copper cut-off grade of 0.25% corresponds to that currently applied by Norsemont and does not represent any independent assessment by GRD Minproc of an economic cut-off. The resource is also estimated at a variety of cut-off grades, and by area and domain. It is important to note the following when considering the grade and tonnage estimates: 

Mineral Resources that are not Ore Reserves do not have demonstrated economic viability.



Measured and Indicated Mineral Resources are that part of a Mineral Resource for which quantity and grade can be estimated with a level of confidence sufficient to allow the application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit.



An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified continuity.

Page 228

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0



Although 0.25% Cu is considered a potential cut-off grade for this deposit, the actual cut-off grade has not been confirmed by the appropriate economic studies.



The Constancia deposit includes the Constancia and San José zones. Table 17.10 Constancia Project Global Mineral Resource Estimate 0.25% Cu Cut-off Category

Cut off

Tonnes M)

Cu%

Mo%

Zn%

Ag ppm

Pb%

Au ppm

S%

MEASURED

0.25

119.00

0.47

0.014

0.083

3.73

0.039

0.047

2.22

INDICATED

0.25

195.00

0.48

0.010

0.159

4.17

0.047

0.058

2.62

MEAS+IND

0.25

315.00

0.47

0.012

0.130

4.00

0.044

0.054

2.47

INFERRED

0.25

38.00

0.47

0.009

0.212

4.91

0.057

0.072

3.26

Table 17.11 Constancia Project Global Mineral Resource Estimate 0.20% Cu Cut-off Category

Cut off

Tonnes (M)

Cu%

Mo%

Zn%

Ag ppm

Pb%

Au ppm

S%

MEASURED

0.20

138.00

0.44

0.013

0.080

3.54

0.037

0.044

2.15

INDICATED

0.20

254.00

0.42

0.010

0.146

3.81

0.044

0.053

2.43

MEAS+IND

0.20

392.00

0.42

0.011

0.123

3.72

0.042

0.050

2.33

INFERRED

0.20

62.00

0.37

0.008

0.158

4.09

0.048

0.061

2.55

Additional reporting has been completed for a range of cut-off grades, by orebody (Constancia and San José) and by domain (Table 17.12, Table 17.13, Table 17.4, Table 17.5, Table 17.6 and Table 17.17).

Page 229

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 17.12

Category MEASURED

INDICATED

MEAS+IND

INFERRED

Constancia Project Global Mineral Resource Estimate at Various Cu Cut-off Tonnes Au (M) gm/t Cut off Cu% Mo% Zn% Ag gm/t Pb%

S%

0.50

34.2

0.77

0.015

0.12

5.09

0.04

0.07

2.85

0.40

56.2

0.64

0.015

0.11

4.58

0.04

0.06

2.60

0.35

72.5

0.58

0.015

0.10

4.30

0.04

0.06

2.49

0.30

95.1

0.52

0.014

0.09

3.99

0.04

0.05

2.35

0.25

119.2

0.47

0.014

0.08

3.73

0.04

0.05

2.22

0.20

138.3

0.44

0.013

0.08

3.54

0.04

0.04

2.15

0.15

146.8

0.42

0.013

0.08

3.46

0.04

0.04

2.12

0.50

55.5

0.79

0.012

0.26

6.46

0.07

0.09

3.98

0.40

90.2

0.66

0.012

0.22

5.46

0.06

0.08

3.38

0.35

120.0

0.59

0.011

0.19

4.93

0.05

0.07

3.04

0.30

152.6

0.53

0.011

0.18

4.54

0.05

0.06

2.83

0.25

195.3

0.48

0.010

0.16

4.17

0.05

0.06

2.62

0.20

254.2

0.42

0.010

0.15

3.81

0.04

0.05

2.43

0.15

376.2

0.34

0.008

0.13

3.24

0.04

0.05

2.15

0.50

89.7

0.79

0.013

0.21

5.94

0.06

0.08

3.55

0.40

146.4

0.65

0.013

0.17

5.12

0.05

0.07

3.08

0.35

192.5

0.59

0.013

0.16

4.69

0.05

0.06

2.83

0.30

247.7

0.53

0.012

0.14

4.33

0.05

0.06

2.64

0.25

314.5

0.47

0.012

0.13

4.00

0.04

0.05

2.47

0.20

392.5

0.42

0.011

0.12

3.72

0.04

0.05

2.33

0.15

523.0

0.36

0.009

0.11

3.30

0.04

0.04

2.14

0.50

7.5

0.75

0.011

0.32

7.54

0.08

0.09

6.06

0.40

11.7

0.64

0.010

0.30

6.53

0.07

0.08

5.58

0.35

15.5

0.58

0.010

0.27

5.88

0.07

0.08

5.12

0.30

20.8

0.51

0.009

0.25

5.27

0.06

0.07

4.64

0.25

28.5

0.45

0.009

0.22

4.75

0.06

0.07

4.11

0.20

48.8

0.35

0.008

0.16

3.82

0.04

0.06

3.09

0.15

144.6

0.23

0.006

0.09

2.53

0.03

0.04

1.98

Page 230

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 17.52 Constancia Resource Reporting by Confidence Classification

Table 17.13 Constancia Project Global Mineral Resource Estimate – Constancia Main Orebody Category

Cut off

Tonnes (M)

Cu%

Mo%

Zn%

Ag gm/t

Pb%

Au gm/t

S%

MEASURED

0.25

115.2

0.47

0.014

0.08

3.71

0.04

0.05

2.22

INDICATED

0.25

185.4

0.47

0.011

0.16

4.09

0.05

0.06

2.59

MEAS+IND

0.25

300.6

0.47

0.012

0.13

3.94

0.04

0.05

2.45

INFERRED

0.25

26.0

0.45

0.009

0.22

4.63

0.05

0.07

4.00

MEASURED

0.20

133.9

0.43

0.013

0.08

3.52

0.04

0.04

2.15

INDICATED

0.20

238.7

0.42

0.010

0.14

3.75

0.04

0.05

2.40

MEAS+IND

0.20

372.6

0.42

0.011

0.12

3.67

0.04

0.05

2.31

INFERRED

0.20

42.7

0.36

0.008

0.16

3.81

0.05

0.06

3.07

MEASURED

0.15

142.2

0.42

0.013

0.08

3.44

0.04

0.04

2.12

INDICATED

0.15

351.8

0.34

0.008

0.12

3.19

0.04

0.04

2.10

MEAS+IND

0.15

494.0

0.36

0.009

0.11

3.26

0.04

0.04

2.11

INFERRED

0.15

132.0

0.23

0.006

0.08

2.49

0.03

0.04

1.91

Page 231

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 17.14 Constancia Project Global Mineral Resource Estimate – San José Orebody Category

Cut off

Tonnes (M)

Cu%

Mo%

Zn%

Ag gm/t

Pb%

Au gm/t

S%

MEASURED

0.25

4.0

0.66

0.009

0.08

4.25

0.03

0.10

2.29

INDICATED

0.54

0.007

0.18

5.77

0.05

0.09

3.30

0.25

9.9

MEAS+IND

0.25

13.9

0.58

0.008

0.15

5.33

0.04

0.09

3.01

INFERRED

0.25

2.4

0.45

0.006

0.22

5.96

0.06

0.05

5.35

MEASURED

0.20

4.3

0.63

0.009

0.08

4.09

0.03

0.10

2.29

INDICATED

0.20

15.4

0.43

0.008

0.21

4.78

0.05

0.08

2.92

MEAS+IND

0.20

19.7

0.47

0.008

0.18

4.63

0.04

0.08

2.78

INFERRED

0.20

6.1

0.31

0.006

0.14

3.88

0.04

0.05

3.22

MEASURED

0.15

4.5

0.61

0.009

0.07

3.98

0.03

0.09

2.28

INDICATED

0.15

24.4

0.34

0.007

0.24

3.90

0.04

0.07

2.77

MEAS+IND

0.15

28.9

0.38

0.007

0.21

3.91

0.04

0.07

2.69

INFERRED

0.15

12.6

0.24

0.006

0.17

2.90

0.03

0.05

2.70

Page 232

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 17.15 Constancia Project Global Mineral Resource Estimate – Domain MP1 Hypogene MP1 Category MEASURED

INDICATED

MEAS+IND

INFERRED

Cut off

Tonnes (M)

Cu%

Mo%

Zn%

Ag gm/t

Pb%

Au gm/t

S%

0.50

11.6

0.65

0.017

0.07

4.36

0.03

0.07

2.22

0.40

28.4

0.53

0.017

0.06

3.94

0.04

0.06

2.02

0.35

42.0

0.48

0.016

0.06

3.69

0.04

0.05

1.94

0.30

62.4

0.43

0.015

0.06

3.43

0.04

0.05

1.86

0.25

84.9

0.39

0.014

0.06

3.21

0.04

0.04

1.80

0.20

102.4

0.36

0.013

0.05

3.04

0.04

0.04

1.77

0.15

110.2

0.35

0.013

0.05

2.96

0.04

0.04

1.77

0.50

10.8

0.63

0.015

0.09

4.57

0.04

0.08

2.85

0.40

30.5

0.51

0.013

0.07

3.80

0.04

0.07

2.07

0.35

51.3

0.45

0.013

0.06

3.46

0.03

0.06

1.82

0.30

75.0

0.41

0.012

0.06

3.26

0.03

0.05

1.73

0.25

109.0

0.37

0.011

0.05

3.08

0.03

0.05

1.69

0.20

160.4

0.32

0.010

0.05

2.88

0.03

0.05

1.65

0.15

272.7

0.26

0.008

0.05

2.49

0.03

0.04

1.56

0.50

22.4

0.64

0.016

0.08

4.46

0.04

0.07

2.52

0.40

58.9

0.52

0.015

0.06

3.86

0.04

0.06

2.05

0.35

93.3

0.46

0.014

0.06

3.57

0.04

0.06

1.87

0.30

137.4

0.42

0.013

0.06

3.34

0.04

0.05

1.79

0.25

193.9

0.38

0.012

0.05

3.14

0.03

0.05

1.74

0.20

262.8

0.34

0.011

0.05

2.94

0.03

0.04

1.70

0.15

382.9

0.29

0.009

0.05

2.63

0.03

0.04

1.62

0.50

1.6

0.58

0.018

0.16

4.35

0.04

0.07

5.20

0.40

3.2

0.51

0.017

0.14

4.07

0.04

0.07

4.77

0.35

4.9

0.46

0.015

0.11

3.71

0.04

0.06

4.03

0.30

7.7

0.41

0.014

0.09

3.33

0.03

0.06

3.40

0.25

12.9

0.36

0.012

0.07

3.24

0.03

0.06

2.94

0.20

30.9

0.28

0.008

0.04

2.75

0.02

0.05

2.03

0.15

123.8

0.20

0.006

0.04

2.06

0.03

0.03

1.51

Page 233

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 17.16 Constancia Project Global Mineral Resource Estimate – Domain Skarn Skarn Category MEASURED

INDICATED

MEAS+IND

INFERRED

Cut off

Tonnes (M)

Cu%

Mo%

Zn%

Ag gm/t

Pb%

Au gm/t

S%

0.50

5.1

0.91

0.02

0.49

7.36

0.05

0.12

7.63

0.40

6.2

0.83

0.02

0.49

7.00

0.05

0.11

7.67

0.35

7.0

0.78

0.02

0.48

6.73

0.05

0.11

7.72

0.30

7.6

0.74

0.01

0.48

6.53

0.05

0.10

7.66

0.25

8.0

0.72

0.01

0.48

6.40

0.05

0.10

7.61

0.20

8.3

0.70

0.01

0.50

6.29

0.05

0.10

7.58

0.15

8.4

0.70

0.01

0.50

6.26

0.05

0.10

7.56

0.50

21.5

0.88

0.01

0.56

8.92

0.10

0.11

6.67

0.40

29.4

0.77

0.01

0.53

7.85

0.09

0.10

6.17

0.35

34.3

0.71

0.01

0.52

7.36

0.09

0.10

5.94

0.30

39.2

0.66

0.01

0.51

6.98

0.09

0.09

5.75

0.25

44.0

0.62

0.01

0.51

6.64

0.09

0.09

5.54

0.20

48.7

0.58

0.01

0.52

6.36

0.09

0.08

5.41

0.15

55.5

0.53

0.01

0.54

5.99

0.08

0.08

5.19

0.50

26.7

0.89

0.01

0.55

8.62

0.09

0.11

6.86

0.40

35.6

0.78

0.01

0.52

7.70

0.09

0.10

6.43

0.35

41.3

0.72

0.01

0.51

7.25

0.08

0.10

6.24

0.30

46.9

0.67

0.01

0.50

6.90

0.08

0.09

6.06

0.25

52.0

0.63

0.01

0.50

6.60

0.08

0.09

5.86

0.20

57.0

0.60

0.01

0.52

6.35

0.08

0.09

5.73

0.15

63.9

0.55

0.01

0.53

6.02

0.08

0.08

5.50

0.50

5.9

0.80

0.01

0.36

8.40

0.09

0.09

6.29

0.40

8.5

0.69

0.01

0.36

7.45

0.08

0.08

5.88

0.35

10.6

0.63

0.01

0.34

6.89

0.08

0.08

5.63

0.30

13.1

0.57

0.01

0.34

6.40

0.08

0.08

5.36

0.25

15.6

0.52

0.01

0.34

6.00

0.08

0.07

5.08

0.20

18.0

0.48

0.01

0.36

5.66

0.08

0.07

4.91

0.15

20.8

0.44

0.01

0.40

5.33

0.08

0.07

4.77

Page 234

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 17.17 Constancia Project Global Mineral Resource Estimate – Domain Supergene Supergene Category MEASURED

INDICATED

MEAS+IND

Cut off

Tonnes (M)

Cu%

Mo%

Zn%

Ag gm/t

Pb%

Au gm/t

S%

0.50

17.5

0.81

0.014

0.054

4.92

0.037

0.052

1.87

0.40

21.6

0.74

0.013

0.055

4.74

0.038

0.048

1.91

0.35

23.5

0.71

0.012

0.055

4.67

0.039

0.047

1.92

0.30

25.1

0.69

0.012

0.054

4.63

0.039

0.045

1.94

0.25

26.4

0.67

0.012

0.054

4.60

0.039

0.044

1.94

0.20

27.6

0.65

0.011

0.053

4.58

0.039

0.044

1.94

0.15

28.2

0.64

0.011

0.053

4.59

0.039

0.043

1.94

0.50

23.2

0.79

0.012

0.068

5.06

0.044

0.068

2.02

0.40

30.3

0.71

0.012

0.068

4.82

0.046

0.062

1.99

0.35

34.4

0.67

0.011

0.067

4.70

0.046

0.059

1.99

0.30

38.4

0.64

0.011

0.067

4.56

0.047

0.056

2.00

0.25

42.4

0.60

0.010

0.067

4.42

0.046

0.053

2.00

0.20

45.1

0.58

0.010

0.068

4.38

0.048

0.052

1.98

0.15

47.9

0.56

0.010

0.068

4.31

0.048

0.050

1.98

0.50

40.7

0.80

0.013

0.062

5.00

0.041

0.061

1.95

0.40

51.9

0.72

0.012

0.063

4.79

0.043

0.056

1.96

0.35

57.8

0.69

0.011

0.062

4.68

0.043

0.054

1.96

0.30

63.5

0.66

0.011

0.062

4.58

0.044

0.052

1.97

0.25

68.8

0.63

0.011

0.062

4.49

0.043

0.050

1.98

0.20

72.7

0.60

0.010

0.062

4.45

0.045

0.049

1.97

0.15

76.2

0.59

0.010

0.062

4.41

0.045

0.047

1.96

Page 235

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

17.14

MINERAL RESERVES

The Constancia Mineral Reserve is the Measured and Indicated Resource contained in the open pit mine that can be processed at a profit and is scheduled for treatment in the DFS Life-of-Mine (LOM) plan. Since revenue is derived from four payable components (copper, molybdenum, silver plus minor payable gold) the Mineral Reserve reporting cut-off is based on a Net Smelter Return (NSR) cut-off that is estimated using the metal prices and other treatment, recovery and concentrate realisation parameters as detailed in Section 18.15. The Mineral Reserve estimate, comprising Proven and Probable categories, is summarised in Table 17.18. Table 17.18 Constancia Project Global Mineral Reserve Estimate Category

Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

PROVEN

161.8

0.45

0.012

3.68

0.05

PROBABLE

115.6

0.40

0.011

3.70

0.05

TOTAL

277.4

0.43

0.012

3.69

0.05

Further reporting of Mineral Reserves is included in Section 18.1.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

18.

OTHER RELEVANT DATA AND INFORMATION

18.1

MINING STUDIES

18.1.1

Introduction

The Constancia copper porphyry deposit is located in high altitude (4000-4500 masl), with undulating to steep surface topography. Rock strengths are moderate in more weathered supergene and skarn mineralisation to hard in the hypogene ore type. There is some ground-water, and significant rainfall occurs during the wet season from October to March. The copper porphyry deposit is massive which makes it amenable to low cost open pit bulk mining techniques, using shovels mining 15 m benches. Some difficulties result from the relatively low grade and higher cost of mining and processing the hard hypogene ore, and the challenges in removing zinc impurity from the copper concentrates produced from a blend of supergene and skarn ore. Pit optimisation was carried out to maximise the Net Smelter Return (NSR) of the deposit whilst following the geotechnical slope constraints. The resulting mine consists of two adjoining pits: the major Constancia pit and the much smaller San José pit. The Constancia deposit is designed to be mined in four pit stages and San José in a single stage. The cash positive ore blocks were categorised as high, medium, or low NSR blocks based on their profit margins. A number of mining and processing schedule iterations were run. The schedule option which yielded the highest Net Present Value (NPV) was selected. This schedule calls for preferential processing of the high and medium profit margin ore blocks (raised cut-off), supplemented by low margin material when there is a shortfall of high and medium margin ore. Ore mined is hauled and fed directly to the crusher, milled and beneficiated at the processing plant. There is limited surge stockpile capacity at the ROM pad with minimum rehandle envisaged. The bulk of the low marginal material will be carted and stockpiled as part of the long-term potentially acid generating (PAG) waste rock facility (WRF). Low margin material is fed to the plant only during the ramp-up period (the first three months of processing) when metal recoveries are expected to be low, and when there is insufficient high and medium margin ore available to feed the plant, such as during the transition period between pit stages and towards the end of the mine life. Initial waste mined will be non-PAG and will be used to construct haul roads, back-fill pioneering ramps, and build the tailings management facility (TMF) embankment dam. Suitable initial waste mined may also be used to backfill civil construction sites in the mine. PAG waste rock mined will be dumped in the PAG WRF located to the south of the pit. To meet throughput and bulk mining requirements, mining uses 220 t class haul trucks, 32 m3 electric shovels and diesel-powered support equipment. Due to the high altitude, the use of electric mining equipment appears to be advantageous, as performance is not greatly affected by low levels of oxygen. This, however, needs to be weighed against the increased capital cost for such equipment.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Total mining of approximately 45 Mt/a includes concentrator feed and waste rock. The average waste to ore ratio is 0.92:1 (based on inclusion of all low margin ore). Mining operations continue over 15 years, inclusive of an approximate eight month pre-production period. Mine planning activities performed during the course of the DFS included: 

Pit optimisation



Ultimate and staged pit design



Mineral Reserve estimation



Mine and process scheduling



Mine fleet assessment



Estimation of mine operating and capital costs.

18.1.2

Pit optimisation

The resource model prepared by GRD Minproc was based on a 25x25x15 m parent block size with minimum sub-cell size of 2.5x5x3 m. Two regularised mining models were prepared (25x25x10 m and 25x25x15 m) to simulate the impact on dilution and mining losses relative to the in-situ resource model. A comparison between the regularised models shows insignificant difference in grade and metal content. The 15 m model was selected as the basis for mine planning due to the higher productivity associated with operating on 15 m benches. Pit optimisation of the mining model (Measured and Indicated mineralisation only) was carried out using Whittle Four-X software on the NSR of each mining block. Revenue is received from copper and molybdenum concentrates with payable silver and gold in the copper concentrate. Optimisation input parameters were based on then-current information. Overall slope input (varying from 45° to 50° depending on domain – see Figure 18.1) was based on April 2009 advice from Knight Piésold. Metal prices were supplied by Norsemont with a copper price of $1.80/lb, molybdenum price of $12.00/lb, silver price of $11.00/oz and gold price of $750/oz. Processing costs and metal recoveries were provided by GRD Minproc, and mining costs were from the PFS mining cost modelling. The full list of optimisation parameters is shown in Table 18.1 to Table 18.4. A number of different scenarios and sensitivities were investigated to select pit optimisation shells. Ultimate and staged pit designs were developed from the selected optimisation shells, incorporating access ramps.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 18.1 Pit Optimisation Parameters - NSR Calculation Parameter

Unit

Estimate

Copper Price

$/lb

Molybdenum Price

$/lb

Silver Price

$/oz

1.80 12.00 11.00 750.00

Revenue Metal Price

Gold Price Payable Contained Metal Payable Contained Copper

$/oz

Payable Contained Moly

%

Payable Contained Silver

%

Payable Contained Gold Deductions Copper Deduction

%

% Per unit of payable Cu

Moly Discount

% Mo in Moly Con

Minimum Silver Deduction in Cu Concentrate

Ag g/dmt Cu conc

Gold Deduction Payable Metal in Concentrate Payable Copper in Concentrate

Au g/dmt Cu conc

Payable Moly in Concentrate

% Mo in Moly conc

Payable Silver in Copper Concentrate Payable Gold in Copper Concentrate Selling Costs Marketing Costs - Concentrates Transport - Cu concentrates - truck to port

% Cu in Cu conc g payable Ag/dmt Cu conc g payable Au/dmt Cu conc $/t conc $/wmt conc

Transport - Mo concentrates - truck to port

$/wmt conc

Port charges concentrate

$/wmt conc

Insurance

$/wmt conc

Shipping - Cu concentrates

$/wmt conc

Shipping - Mo concentrates Smelting Charges Smelting charges - copper concentrate (dry) Roasting charges - moly concentrate (dry) Price Participation Copper Range Cu Trigger Price Cap and Floor Applicable PP Refining Charges Refining charges - Payable Cu

$/wmt conc $/dmt Cu conc $/dmt Mo conc

% $/lb Cu $/lb Cu $/dmt Cu conc $/lb Cu

Refining charges - Payable Mo

$/lb Mo

Refining charges - Payable Ag

$/oz Ag

Refining charges - Payable Au Royalties State Royalty Minera Livitaca and Katanga

$/oz Au % of NSR % of NSR % of NSR (capped at $10M)

96.5% 100% 90% 98.0% 1.00 0% 30.00 1.00 30.49% 40.00% 209.5

0.00 32.30 77.57 5.86 1.78 35.00 0.00 65.00 1784.0

0% 1.20 0.05 0.00 0.07 0.00 0.40 1.20 3.5% 3.0% 0.5%

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 18.2 Optimisation Parameters - Operating Costs and Throughput Rates Parameter Operating Costs Processing Hypogene

Unit

Estimate

$/t

4.42 3.29 2.59 2.87

Supergene

$/t

Skarn 1

$/t

Skarn 2 Incremental Processing Cost by Element Copper

$/t

Moly

$/lb Mo

Silver

$/oz Ag

Gold

$/oz Au

0.00 0.00 0.00 0.00

$M/year

9.50

$/t concentrator feed

General & Administration Annual G & A Cost G & A Unit Costs Hypogene

$/lb Cu

Supergene

$/t concentrator feed

Skarn 1

$/t concentrator feed

Skarn 2

$/t concentrator feed

0.60 0.40 0.42 0.42

$/t concentrator feed

0.000

$/t mat'l mined

Variable 0.033

Owner's Costs (off-site but project specific) Mining Cost - Open Pit Mining cost ore/waste Incremental mining cost per 10m bench

$/t/bench

Mining Recovery

%

Mining Dilution

%

Scheduling Parameters Grinding Throughput Rate by Ore Type Hypogene (1624 t/h)

100% 0%

Supergene (2703 t/h)

mtpa

Skarn 1 (2880 t/h)

mtpa

Skarn 2 (2880 t/h)

mtpa

16 24 23 23

%

7%

Discount Rate

mtpa

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 18.3 Pit Optimisation Parameters - Concentrator Recoveries Parameter Recoveries into Concentrator Hypogene Ore Concentrator Recovery Copper recovery into Copper concentrate

Unit

Estimate

%

Moly recovery into Moly concentrate

%

Silver recovery into Copper concentrate

%

Gold recovery into Copper concentrate

%

Zinc recovery into Copper concentrate

%

Lead recovery into Copper concentrate Supergene Ore Concentrator Recovery Copper recovery into Copper concentrate

%

89.0% As per formula 80.0% 60.0% 50.0% 25.0%

%

Moly recovery into Moly concentrate

%

Silver recovery into Copper concentrate

%

Gold recovery into Copper concentrate

%

Zinc recovery into Copper concentrate

%

Lead recovery into Copper concentrate Skarn1 Ore Concentrator Recovery Copper recovery into Copper concentrate

% %

Moly recovery into Moly concentrate

%

Silver recovery into Copper concentrate

%

Gold recovery into Copper concentrate

%

Zinc recovery into Copper concentrate

%

Lead recovery into Copper concentrate Skarn2 Ore Concentrator Recovery Copper recovery into Copper concentrate

% %

Moly recovery into Moly concentrate

%

Silver recovery into Copper concentrate

%

Gold recovery into Copper concentrate

%

Zinc recovery into Copper concentrate

%

Lead recovery into Copper concentrate

%

89.0% As per formula 80.0% 60.0% 50.0% 25.0% 85.0% As per formula 80.0% 60.0% 20.0% 10.0% 85.0% As per formula 80.0% 60.0% 25.0% 12.5%

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 18.4 Pit Optimisation Parameters - Concentrate Grades Parameter Concentrate Grades Hypogene Ore Concentrates Copper concentrate grade Copper Molybdenum

Unit

Estimate

% Cu

As per formula n/a As per formula As per formula As per formula As per formula

% Mo

Silver

g Ag/dmt

Gold

g Au/dmt

Zinc Lead Moly concentrate grade Copper Molybdenum

% Zn % Pb % Cu % Mo

Silver

g Ag/dmt

Gold

g Au/dmt

Zinc Lead Supergene Ore Concentrates Copper concentrate grade Copper Molybdenum

% Zn % Pb

% Cu % Mo

Silver

g Ag/dmt

Gold

g Au/dmt

Zinc Lead Moly concentrate grade Copper Molybdenum

% Zn % Pb % Cu % Mo

Silver

g Ag/dmt

Gold

g Au/dmt

Zinc Lead Skarn1 Ore Concentrates Copper concentrate grade Copper Molybdenum

% Zn % Pb

% Cu % Mo

Silver

g Ag/dmt

Gold

g Au/dmt

Zinc Lead Moly concentrate grade Copper Molybdenum

% Zn % Pb % Cu % Mo

Silver

g Ag/dmt

Gold

g Au/dmt

Zinc

% Zn

Lead

% Pb

n/a 40.0% n/a n/a n/a n/a

As per formula n/a As per formula As per formula As per formula As per formula n/a 40.0% n/a n/a n/a n/a

As per formula n/a As per formula As per formula As per formula As per formula n/a 40.0% n/a n/a n/a n/a

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 18.4 (cont) Pit Optimisation Parameters - Concentrate Grades Parameter Skarn2 Ore Concentrates Copper concentrate grade Copper Molybdenum

Unit

Estimate

% Cu

As per formula n/a As per formula As per formula As per formula As per formula

% Mo

Silver

g Ag/dmt

Gold

g Au/dmt

Zinc

% Zn

Lead Moly concentrate grade Copper Molybdenum

% Pb % Cu % Mo

Silver

g Ag/dmt

Gold

g Au/dmt

Zinc

% Zn

Lead

% Pb

Concentrate Moisture Contents Copper Concentrate Moisture Content

%

Moly Concentrate Moisture Content

%

Penalties

n/a 40.0% n/a n/a n/a n/a

7.5% 10.0% No penalties applied

Whittle Four-X software was used to generate optimal pits based on analysis of the resource model. Whittle Four-X allows the generation of a series of nested optimal pits where each successive outline is for a slightly higher product price than the previous one. This is done for a range of prices, from the lowest for which ore can be profitably mined to the highest expected in the future. These pits are then interrogated at the base case costs and prices to establish their respective values. The selection of the optimal pit is based on maximizing the project’s NPV. This selection criterion incorporates time-discounting of money and assumes two extreme mining sequences (best and worst cases) for optimal pit selection. The best-case mining sequence simulates the mining of the nested pits, starting with the smallest pit outline and mining subsequent pits until the largest pit is mined out. The worst-case mining sequence mines to the final pit outline bench by bench. The average of the best and worst possible NPV for each pit shell is calculated, and the pit shell with the maximum average NPV is selected as the optimal pit shell. A number of different scenarios and sensitivities were produced and shells were selected to form the basis for the ultimate and staged pit designs. 18.1.3

Pit design

Ultimate and staged pit designs were created by GRD Minproc from selected optimisation shells incorporating access ramps, catch berms, and internal haul roads. Potential pit design stages are identified by analysing the incremental changes between the series of nested pit shells leading to the selected ultimate pit shell. The incremental analysis of the pit optimisation results is done both

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

numerically and graphically. Significant increases in cash flow and tonnage of ore and waste between succeeding pit shells is also analysed graphically to determine if the pit shell with the notable change lends itself as a basis for designing the next pit stage. The pit shell representing the next pit stage must satisfy the minimum mining width of 50 m and that it can be rationally integrated with the previous and succeeding pit stages. As many pit stages as possible that satisfies the minimum mining width are selected since the higher the number of pit stages, the better the resulting NPV of the project. Four pit stages were identified in the Constancia area while only a single stage was selected in San José due to its small size. The smallest practicable pit shell that can provide two years supply of ore with the highest profit margin and the lowest strip ratio was selected as the basis for the stage 1 or starter pit design. Subsequent pit stages with diminishing profit margins need to satisfy the minimum mining width of 50 m from the previous pit stage. There are instances when pit shells merge to form common walls. Where there is a common wall between pit stages, the accessibility of either side of the merged walls are considered in the design. Where accessibility becomes an issue, the walls of either the current or precursor pit are adjusted allow a minimum mining width of 50 m between the two stages. The pit design parameters were determined in conjunction with what were then current geotechnical slope recommendations from Knight Piésold as shown in Figure 18.1. Ten geotechnical sectors were established by Knight Piésold based on geometric, geological, and rock mass quality characteristics. The geotechnical sectors were then grouped by Knight Piésold into four geotechnical design regions based on the potential mode of failure (i.e. circular and or wedge/planar failures). Final review and analysis of the pit designs were carried out by Knight Piésold according to the pit wall locations defined by the optimisation study, using the specific geotechnical conditions assigned to those pit wall locations. In two of the ten design sectors, these checks showed that catch bench performance and global safety factors would be slightly lower than had been calculated according to the previous, more general geologic interpretations. After further review and assessment, and due to timing constraints, design changes were deferred until the next stage of the study. The revised recommendations are summarised in Section 18.2.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 18.1 Design Sectors and Proposed Inter-ramp and Bench Slopes

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

In recognition of the increased risk associated with this approach the following mining operational considerations and cost allowances have been taken into account in the study: 

Controlled blasting of the interim slopes and presplitting of the final pit perimeter to physically decouple production blasting from the final wall and protect the wall rock structures and joints



Scaling down of bench faces with a small excavator to remove all loose rock prior to the bench face becoming inaccessible other than via berms



Maintaining access to, and regular clean-up of catch berms using small mobile equipment such as a tracked dozer or an excavator



Use of protective devices such as rock fences in critical areas where personnel or equipment may be at risk from a ravelling slope 



Provision in mine plans for alternative access into the pit, should the west pit wall ramp serviceability become affected.

Wall heights are 30 m to be a multiple of the regularised mining model block height of 15 m. Batter angles are 70 degrees. Berm widths were calculated based on the overall slope recommendations from Knight Piésold, and the depth of pit and number of ramps in the walls as per the PFS pit design. Pit access ramps are 30 m wide with 1:10 gradient and were designed to accommodate 220 t class trucks including allowances for the construction of safety windrows and drainage. A 15 m single lane ramp was designed for the last 60 vertical meters of pits and sub-pits. Pit design inventories reported at a zero profit margin reporting cut-off and at an elevated ($3.00 profit margin) reporting cut-off are summarised in Table 18.5. The ultimate and staged pit designs are illustrated in Figure 18.2 to Figure 18.8.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 18.5 Pit Design Inventories

Constancia Pit Stage Scheduling Data at zero profit margin reporting cutoff Pit Stage Const Stg 1a Const Stg 2a Const Stg 3a Const Stg 4a San Jose 1a Total:

Ore (kts) 66 117 63 228 74 699 109 024 13 722 326 790

Cu (%) 0.61% 0.42% 0.33% 0.28% 0.44% 0.39%

Zn (%) 0.13% 0.13% 0.12% 0.07% 0.11% 0.11%

Total Concentrator Feed Inventory Mo Ag Au Pb CuCon (g/t) (g/t) (g/t) (%) (%) 128.5 4.61 0.06 0.04% 29.33% 98.8 3.78 0.04 0.05% 28.65% 131.3 3.34 0.03 0.04% 28.48% 88.9 2.63 0.04 0.05% 28.89% 70.4 3.80 0.09 0.03% 28.64% 107.8 3.46 0.04 0.04% 28.83%

Mo rec Sulphur Ore (%) (%) (kbcm) 55.00% 3.06% 26 794 55.00% 2.69% 25 106 55.00% 2.34% 28 753 55.00% 1.82% 41 653 55.00% 2.82% 5 334 55.00% 2.40% 127 641

Total Waste (kts) 51 846 56 588 79 057 101 773 10 763 300 026

Strip Ratio

Mo rec Sulphur Ore (%) (%) (kbcm) 55.00% 3.09% 25 800 55.00% 2.74% 21 178 55.00% 2.40% 21 394 55.00% 1.91% 24 516 55.00% 2.81% 4 163 55.00% 2.54% 97 050

Total Waste (kts) 54 358 66 712 98 205 146 628 13 791 379 693

Strip Ratio

0.78 0.89 1.06 0.93 0.78 0.92

at $3.00 profit margin reporting cutoff Pit Stage Const Stg 1a Const Stg 2a Const Stg 3a Const Stg 4a San Jose 1a Total:

Ore (kts) 63 605 53 104 55 551 64 168 10 694 247 123

Cu (%) 0.63% 0.47% 0.38% 0.35% 0.52% 0.46%

Zn (%) 0.13% 0.14% 0.12% 0.08% 0.11% 0.12%

Total Concentrator Feed Inventory Mo Ag Au Pb CuCon (g/t) (g/t) (g/t) (%) (%) 131.8 4.68 0.06 0.04% 29.48% 108.7 4.08 0.05 0.05% 28.95% 154.0 3.72 0.03 0.04% 28.87% 106.7 3.03 0.05 0.05% 29.38% 74.1 4.30 0.10 0.04% 29.15% 122.8 3.89 0.05 0.04% 29.19%

0.85 1.26 1.77 2.29 1.29 1.54

Figure 18.2 Ultimate Pit Design Plan View

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 18.3 Constancia Stage 1 Design Plan View

Figure 18.4 San José Pit Design Plan View

Page 248

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 18.5 Constancia Stage2 Design Plan View

Figure 18.6 Constancia Stage 3 Pit Design Plan View

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 18.7 Constancia Stage 4 Pit Design Plan View

Figure 18.8 Constancia Ultimate and Staged Pit Designs Plan View

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

18.1.4

Mineral Reserve

The Constancia Mineral Reserve is the Measured and Indicated Resource contained in the open pit mine that can be processed at a profit and is scheduled for treatment in the DFS Life-of-Mine (LOM) plan. Since revenue is derived from four payable components (copper, molybdenum, silver and minor payable gold) the reserve reporting cut-off is based on a NSR cut-off that is estimated using the metal prices and other treatment, recovery and concentrate realisation parameters as detailed in Section 18.14.5. The Mineral Reserve estimate, comprising Proven and Probable categories, is summarised in Table 18.6. Table 18.6 Constancia Project Global Mineral Reserve Estimate Category

Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

PROVEN

161.8

0.45

0.012

3.68

0.05

PROBABLE

115.6

0.40

0.011

3.70

0.05

TOTAL

277.4

0.43

0.012

3.69

0.05

The Constancia mine consists of a main pit and a small satellite orebody, San José, that overlaps with the Main pit at the end of the mine life. The main Constancia orebody is scheduled to be mined in four consecutive pit stages while the San José pit will be mined in a single stage. Table 18.7 summarises the Mineral Reserve by pit stage. Table 18.7 Constancia Project Mineral Reserve by Pit Stage Category

Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

CONSTANCIA STAGE 1

64.6

0.62

0.013

4.65

0.06

CONSTANCIA STAGE 2

57.0

0.45

0.010

3.94

0.04

CONSTANCIA STAGE 3

63.0

0.36

0.014

3.54

0.03

CONSTANCIA STAGE 4

81.1

0.31

0.010

2.80

0.04

SAN JOSE

11.7

0.49

0.007

4.08

0.10

TOTAL

277.4

0.43

0.012

3.69

0.05

The mineralisation within the Constancia deposit has been sub-divided into three major ore types being Skarn, Supergene and Hypogene. This fundamental sub-division was established during resource modelling and carried through into the mining model to allow the different recovery, concentrate quality and plant throughput impacts associated with each ore type to be properly identified and tracked in the LOM processing schedule. Subsequent to resource modelling, a further ore type based on Zn to Cu ratios (“High Zinc”) was established. Ore types and their metallurgical response are discussed further in Section 16. Table 18.8 summarises the Mineral Reserve by ore type.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 18.8 Constancia Project Mineral Reserve by Ore Type Category SUPERGENE

Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

71.0

0.58

0.011

4.43

0.05

SKARN

19.3

0.64

0.013

5.01

0.08

HYPOGENE

163.6

0.35

0.012

2.95

0.04

HIGH ZINC

23.5

0.40

0.010

5.51

0.07

TOTAL

277.4

0.43

0.012

3.69

0.05

In order to maximise project value, higher operating margin ore was treated preferentially through the LOM processing schedule. In order to achieve this outcome, the in-pit mineralisation was sub-divided and identified in the mining model as being one of three operating margin ranges: 1. $0.00 to $3.00 margin per tonne of ore (“low margin ore”) 2. $3.00 to $5.00 margin per tonne of ore (“ medium margin ore”) 3. >$5.00 margin per tonne of ore (“high margin ore”). Table 18.9 summarises the Mineral Reserve by operating margin. Table 18.9 Constancia Project Mineral Reserve by Operating Margin Category

Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

> $5.00/t

198.9

0.51

0.013

4.20

0.05

>$3.00/t to $5.00/t

48.2

0.26

0.008

2.63

0.03

$0.00/t to $3.00/t

30.3

0.19

0.007

2.02

0.03

277.4

0.43

0.012

3.69

0.05

TOTAL

A number of LOM plan scenarios were developed in order to identify the case that delivers the optimal financial outcome for the project. The adopted strategy treats low margin mineralisation on an opportunistic basis to maintain ore supply to the plant while maintaining total mining at a consistent rate. As a result, some 49 Mt of low margin mineralisation is mined during the project life, but is not scheduled for treatment. Although this mineralisation will theoretically generate a positive operating margin, if processed, it has been excluded from the reserve statement since: 

It is not scheduled for treatment, and associated capital costs (tails dam expansion) have not been allowed in the study



The material is stockpiled for a period of between 1 and 14 years. It is unknown to what extent the flotation response and associated metal recovery will be compromised as a result of oxidation during this protracted period.

This mineralisation represents a potential upside to the project if metal prices, rehandle costs, tails storage costs and flotation recovery at the time result in a favourable economic outcome.

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Low margin mineralisation scheduled to be mined but excluded from the Mineral Reserve statement is summarised in Table 18.10. Table 18.10 Low Margin Mineralisation excluded from the Mineral Reserve Category

Tonnes (M)

Cu%

Mo%

Ag g/t

Au g/t

49.4

0.18

0.006

2.21

0.03

$0.00 to $3.00/t

18.1.5

Mine and process schedules

Bench reporting of reserve information was performed for the pit stages and imported into a purposebuilt mine scheduling spreadsheet. A range of mining rates and flotation plant production profiles was investigated, before a final mining rate of around 45 Mt/a was adopted as the optimum sustainable rate that will bring forward the mining and treatment of higher grade concentrator feed. Ore mined will be hauled and fed directly to the crusher. There is limited surge capacity at the ROM pad with minimal rehandle envisaged. The bulk of the low operating margin material will be stockpiled in the footprint to the long-term PAG waste rock dump. Low margin material is fed to the plant only during ramp-up over the first three months (when plant recoveries are expected to be low) and when insufficient better margin material is available, e.g. during transition between pit stages and towards the end of mine life. Mine and process scheduling was carried out on a monthly basis for the pre-strip (Year-1) and first year of production, quarterly for Years 2 through 5 and annually thereafter. Figure 18.9 illustrates the mining production rate by pit stage over the mine life.

Page 253

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 18.9 Mining by Pit Stage (Mt) 50

Const Stg 4a Mt

45

Const Stg 3a Mt

40

San Jose 1a Mt Const Stg 2a Mt

35

Const Stg 1a Mt

30 25 20 15 10 5

Yr 22

Yr 23

Yr 24

Yr 25

Yr 22

Yr 23

Yr 24

Yr 25

Yr 21

Yr 20

Yr 19

Yr 18

Yr 17

Yr 16

Yr 15

Yr 14

Yr 13

Yr 12

Yr 11

Yr 10

Yr 9

Yr 8

Yr 7

Yr 6

Yr 5

Yr 4

Yr 3

Yr 2

Yr 1

Yr‐1

0

The presentation of potential ore by material type is summarised in Figure 18.10. Figure 18.10 Ore Mining by Material Type (Mt) 35

High Zn  Mt 30

Skarn 2  Mt Skarn 1  Mt

25

Supergene  Mt Hypogene  Mt

20

15

10

5

Yr 21

Yr 20

Yr 19

Yr 18

Yr 17

Yr 16

Yr 15

Yr 14

Yr 13

Yr 12

Yr 11

Yr 10

Yr 9

Yr 8

Yr 7

Yr 6

Yr 5

Yr 4

Yr 3

Yr 2

Yr 1

Yr‐1

0

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

Table 18.11 shows the annual mining production schedule. Concentrator ore processing is shown in Figure 18.11, and long-term ore stockpile inventories are illustrated in Figure 18.12.

Page 255

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Table 18.11 MINING Float Ore Cu Zn Mo Ag Au Pb Sulphur Waste Total Mining Strip Ratio

(kts) (%) (%) (g/t) (g/t) (g/t) (%) (%) (kts) (kts)

Total 326 790 0.39% 0.11% 107.8 3.46 0.04 0.04% 2.40% 300 026 626 816 0.92

CLOSING STOCKPILES High NSR (kts) Medium NSR (kts) Low NSR (kts) Total (kts) PROCESSING Float Ore Cu Zn Mo Ag Au Pb Sulphur

(kts) (%) (%) (g/t) (g/t) (g/t) (%) (%)

277 392 0.43% 0.11% 116.7 3.69 0.05 0.04% 2.46%

CONCENTRATE PRODUCTION - COPPER dry tonnes 3 766 324 Cu (%) 28.1% Zn (%) 2.93% Ag (g/t) 217.2 Au (g/t) 2.10 Pb (%) 0.79% Cu in Con (t) 1 057 992 Ag in Con (kozs) 26 302

Yr-1 822 0.37% 0.07% 42.8 3.77 0.08 0.05% 0.53% 12 763 13 585 15.53

Yr 1 21 952 0.58% 0.10% 89.8 4.23 0.07 0.04% 2.28% 23 597 45 549 1.07

Yr 2 22 971 0.58% 0.11% 116.4 4.43 0.06 0.04% 3.01% 21 804 44 776 0.95

Yr 3 23 143 0.63% 0.15% 152.4 5.07 0.05 0.04% 3.40% 21 786 44 930 0.94

733 58 31 822

527 610 1 138

713 1 505 2 218

783 3 126 3 910

829 6 617 7 445

799 12 176 12 976

751 16 988 17 739

21 636 0.59% 0.10% 90.1 4.24 0.07 0.04% 2.24%

21 892 0.60% 0.11% 119.8 4.50 0.06 0.04% 3.06%

21 451 0.67% 0.15% 162.1 5.25 0.06 0.04% 3.50%

21 055 0.50% 0.10% 108.2 4.35 0.05 0.06% 2.42%

19 642 0.49% 0.10% 98.7 4.02 0.07 0.04% 2.91%

357 411 28.9% 3.55% 205.3 2.45 0.57% 103 154 2 359

409 706 28.8% 2.66% 192.4 1.83 0.49% 117 883 2 534

450 872 28.5% 2.72% 199.9 1.60 0.52% 128 692 2 898

332 281 28.6% 2.79% 220.3 1.77 0.91% 94 943 2 353

2 424 40.0% 970

3 606 40.0% 1 443

4 782 40.0% 1 913

9 457 13 194 946 23 597

10 823 5 513 5 468 21 804

6 775 10 019 4 993 21 786

-

-

CONCENTRATE PRODUCTION - MOLY dry tonnes 44 245 Mo (%) 40.0% Moly in Con (t) 17 698 Waste Mining Summary NPAG (kts) Oxide (kts) Rest (kts) All Waste (kts)

54 877 61 510 183 639 300 026

Annual Mining and Processing Schedule Yr 4 Yr 5 Yr 6 Yr 7 24 590 25 173 24 624 16 886 0.46% 0.42% 0.39% 0.34% 0.10% 0.10% 0.14% 0.19% 98.3 88.2 96.9 106.8 4.04 3.58 3.63 3.75 0.04 0.06 0.05 0.04 0.06% 0.04% 0.04% 0.06% 2.42% 2.84% 2.86% 2.55% 20 326 19 670 20 209 28 022 44 916 44 843 44 832 44 908 0.83 0.78 0.82 1.66

11 463 1 260 40 12 763

Yr 8 22 687 0.32% 0.12% 110.2 3.15 0.03 0.04% 2.65% 22 098 44 785 0.97

Yr 9 23 214 0.33% 0.11% 158.7 3.17 0.03 0.04% 2.29% 21 527 44 741 0.93

Yr 10 18 790 0.34% 0.12% 154.4 2.99 0.03 0.03% 2.07% 25 991 44 780 1.38

Yr 11 19 335 0.26% 0.05% 90.3 2.51 0.03 0.05% 1.60% 25 522 44 857 1.32

Yr 12 24 956 0.27% 0.09% 100.6 3.13 0.04 0.07% 2.05% 19 699 44 655 0.79

Yr 13 30 572 0.28% 0.09% 78.4 2.69 0.05 0.04% 2.10% 12 344 42 916 0.40

Yr 14 22 651 0.31% 0.06% 86.4 2.31 0.04 0.03% 1.70% 4 667 27 318 0.21

Yr 15 4 425 0.41% 0.03% 108.4 2.72 0.06 0.03% 0.86%

16 274 16 274

21 758 21 758

404 27 461 27 866

30 018 30 018

33 244 33 244

41 565 41 565

311 54 788 55 099

60 893 60 893

49 398 49 398

19 860 0.44% 0.15% 107.5 3.96 0.06 0.04% 3.00%

18 351 0.32% 0.18% 102.8 3.72 0.04 0.05% 2.50%

17 203 0.37% 0.12% 125.1 3.44 0.04 0.04% 2.74%

17 106 0.38% 0.12% 187.3 3.56 0.03 0.04% 2.42%

16 638 0.36% 0.11% 164.9 3.16 0.03 0.03% 2.09%

16 109 0.28% 0.04% 95.9 2.49 0.03 0.04% 1.50%

16 635 0.31% 0.09% 120.2 3.47 0.05 0.07% 2.10%

17 038 0.35% 0.10% 94.1 3.25 0.06 0.06% 2.36%

16 856 0.36% 0.07% 96.1 2.52 0.05 0.03% 1.85%

15 920 0.25% 0.04% 76.0 2.13 0.04 0.03% 1.51%

304 352 28.3% 2.64% 207.5 2.58 0.63% 86 010 2 031

287 650 27.2% 3.64% 218.8 2.30 0.75% 78 187 2 024

210 241 25.6% 5.11% 259.5 1.99 1.17% 53 879 1 754

211 970 27.0% 3.14% 223.2 1.75 0.82% 57 279 1 521

215 532 27.4% 2.99% 226.2 1.40 0.75% 59 036 1 567

196 298 28.1% 2.82% 214.1 1.38 0.57% 55 198 1 351

134 200 29.0% 1.48% 239.5 2.41 1.34% 38 899 1 033

163 780 27.6% 2.71% 281.9 2.79 1.83% 45 177 1 485

190 048 27.7% 2.85% 233.4 3.12 1.24% 52 555 1 426

183 100 28.6% 2.02% 185.7 2.58 0.62% 52 429 1 093

118 882 29.2% 1.59% 228.1 2.84 0.96% 34 672 872

3 131 40.0% 1 252

2 666 40.0% 1 066

2 937 40.0% 1 175

2 594 40.0% 1 037

2 960 40.0% 1 184

4 406 40.0% 1 763

3 772 40.0% 1 509

2 124 40.0% 850

2 749 40.0% 1 100

2 204 40.0% 882

2 227 40.0% 891

1 663 40.0% 665

2 976 6 994 10 356 20 326

4 188 6 250 9 233 19 670

3 040 3 886 13 283 20 209

1 272 2 482 24 269 28 022

116 1 039 20 943 22 098

3 258 7 040 11 229 21 527

710 2 410 22 872 25 991

611 1 375 23 536 25 522

126 49 19 524 19 699

38

25

12 305 12 344

4 642 4 667

4 425

Page 256

Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0 Figure 18.11 Float Ore Processing Plant Feed by NSR Range (Mt) 25

Low NSR Mt

20

Medium NSR Mt High NSR Mt 15

10

5

Yr 24

Yr 25

Yr 24

Yr 25

Yr 23

Yr 22

Yr 21

Yr 20

Yr 19

Yr 18

Yr 17

Yr 16

Yr 15

Yr 14

Yr 13

Yr 12

Yr 11

Yr 10

Yr 9

Yr 8

Yr 7

Yr 6

Yr 5

Yr 3

Yr 4

Yr 2

Yr 1

Yr‐1

0

Figure 18.12 Closing Ore Stockpile Inventories (Mt) 70

Low NSR Mt 60

Medium NSR Mt High NSR Mt

50

40

30

20

10

Yr 23

Yr 22

Yr 21

Yr 20

Yr 19

Yr 18

Yr 17

Yr 16

Yr 15

Yr 14

Yr 13

Yr 12

Yr 11

Yr 10

Yr 9

Yr 8

Yr 7

Yr 6

Yr 5

Yr 4

Yr 3

Yr 2

Yr 1

Yr‐1

0

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Constancia Copper Project Definitive Feasibility Study NI 43-101 Technical Report – Rev0

18.1.6

Ore types and batching

The three major ore types identified in the Constancia resource model are Skarn, Supergene and Hypogene. Mineralisation that is high in zinc and proximal to the Supergene ore may be problematic in terms of producing elevated Zn levels in the copper concentrate, potentially affecting its marketability. In order to better understand potential impacts, a spatial/analytical routine was developed to sub-divide Skarn in the resource model into Skarn1 and Skarn2, where Skarn2 mineralisation is high in zinc and proximal to Supergene mineralisation. The resource and regularised mining model were modified to include the resultant skarn sub-division. Constancia ore and waste loading operations are scheduled to be performed using large electric shovels capable of mining on benches with a 15 m face height. This approach minimises mining costs, but results in poor ore type selectivity relative to other mining approaches. To simulate realistic mining selectivity, the resource block model was regularised, meaning that the grade attributes of the constituent ore types within a parent cell were averaged. Ore types in the mining model were then assigned on a majority basis i.e. if a parent block contained more than 50% Supergene it is designated as Supergene. As a result of ore regularisation, those blocks around ore type margins are a mixture of ore types, but are identified only by the majority constituent. Subsequent to creating the mining model, a further “High Zinc” ore type was created. Any ore blocks with a Zn/Cu ratio of greater than 0.66 were designated as high zinc. High zinc ore is principally a subset of the Skarn1 and Skarn2 mineralisation. However, a significant quantity (>20%) was from Hypogene mining blocks, while a lesser amount (