PT INCO Ni Laterite Block Modeling_2010!08!23

PT. International Nickel Indonesia – Mines & Exploration

PT. INTERNATIONAL NICKEL INDONESIA LATERITE GEOLOGICAL BLOCK MODELING AND RESOURCE ESTIMATION

Mineral Resources & Mineral Reserves Group – PT.INCO, August 2010

Presentation Outlines PT. International Nickel Indonesia – Mines & Exploration

1. Regional & Local Geology 2. Introduction: Block Modeling & Resource Estimation 3. Data Validation and Geological Validation 4. Geological Domaining and EDA 5. Wireframing, Sample Selection and Compositing 6. Variography 7. Estimation Parameters 8. Block Model Check 9. Volume Variance Correction 10. Ore definition 11. Resource Classification

Regional & Local Geology PT. International Nickel Indonesia – Mines & Exploration

Jakarta

Makassar

peridotites that have been serpentinised to varying degrees. In Sorowako and Petea the rocks are dominantly harzburgite and lherzolite with lesser dunite and rare pyroxenite.

Regional & Local Geology PT. International Nickel Indonesia – Mines & Exploration

Geomorphology Matano Lake

Petea

Sorowako

Towuti Lake

Regional & Local Geology PT. International Nickel Indonesia – Mines & Exploration

West Type Deposit - Profile

Regional & Local Geology PT. International Nickel Indonesia – Mines & Exploration

West Type Deposit – Bedrock Pinnacle

Regional & Local Geology PT. International Nickel Indonesia – Mines & Exploration

East Type Deposit - Profile

Regional & Local Geology PT. International Nickel Indonesia – Mines & Exploration

Ore Type Classification CLASS PARAMETERS Main ore types Ultramafic rock Level of serpentinisation

WEST BLOCK ORE TYPES -1” Type-1

-1” Type-2

EAST BLOCK & PETEA ORE TYPES

-1” Type-3

Generally harzburgite with some dunite Nil 60%

Very high

1.6 – 1.8

1.4 – 1.6

High: 20-24%

Low: 15-18%

-1”

-1”

-1”

-6”

-18”

25-30%

35%

35%

50%

60%

Alternate screen size

No alternate size available

No alternate size

-6”

-18”

Entire ROM

Screen recovery at alternate size

No alternate size available

No alternate size

50%

60%

67%

Medium hard

Medium hard

Soft

Soft

Screen rec. ROM to DKP

Hardness of boulders Fracture density

Extremely hard

Very hard

Very low

Medium

Medium

Medium

High

Very high

Very high

Difficulty of mining

High

Medium(+)

Medium(-)

Low

Low

Low

Low

Saprolite thickness (auger)

4.5m

Medium

Medium

Medium

Olivine content in the benf. ore Olivine content in the rocky frc.

High

Note used for classifying East Block ore types Low

Low

Low

Low

High

Low

Low

Low

OB thickness

Medium

Generally high except at Petea

Ore thickness

High

Medium

PT. International Nickel Indonesia – Mines & Exploration

Geological Block Modeling and Resource Estimation

PT.INCO Strategic Mineral Resources & Mineral Reserves PT. International Nickel Indonesia – Mines & Exploration

PTI Strategic Planning

Exploration

PTI MRMR

Project Development

Mine Planning / Design

LOM

Public Reporting (Stock Exchanges)

Expansion Projects

Introduction PT. International Nickel Indonesia – Mines & Exploration

The following slides summarized the geological block modeling and resources estimation activity at PT International Nickel Indonesia. Improvement and development are conducted continuously based on: 1. The yearly MRMR readiness assessment and review 2. An external audit findings and recommendations; AMEC (2005, 2007, 2008) and Golder (2010) 3. Continuous studies to support the operation and to improve resources estimation best practices.

PT.INCO Block Models PT. International Nickel Indonesia – Mines & Exploration

PT. INCO Block Models 80

Block model production increases as the exploration, drilling activities, and project development increase in all PTI concession area.

70

block model

manpower

week

Frequency

60 50 40 69 30 20

40 29

10

20

3

21

14 3

23

24 12 3

3

25 6

33 35 6

0 2004

2005

2006

2007

2008

2009

Year Notes: 2004-2005

Sorowako Project Area (SPA)

2006

SPA and Bahodopi

2007

SPA, Bahodopi, and Pomalaa

2008

SPA, Bahodopi, Pomalaa, SOA, and SCD

Block Modeling duration increases as there are improvements in best practice protocols and raising of major and trace elements

Introduction PT. International Nickel Indonesia – Mines & Exploration

Key Factors: 1. The quality of the interpretation (geological domaining) and subsequent modelling is predicated by a thorough validation of the drill hole data with emphasis on chemistry. 2. The quality of the geologic interpretations/wire frames will reflect on the quality of the block model and any conclusions derived from it. 3. There is no sophisticated geostatistic technique to correct for a poor interpretation. Be rigorous in validating the resultant models as mistakes are easy to make but at times hard to detect.

PT.INCO Resource Estimation – General Flow PT. International Nickel Indonesia – Mines & Exploration

Exploration Project

(geological interpretation, mapping, sampling, drilling, logging)

Sample House

(sample preparation, acquire assays data, sample QAQC)

Lab. Process & Technology

Geo-Evaluation & Validation

(acquire drill hole data, geological domains & validation)

3D Modeling & Estimation

(peer review & technical report)

Reconciliation Pit Designing & Planning

Reporting & Classification

(Mineral Resources and Mineral Reserves)

PT. INCO Block Modeling – General Flow PT. International Nickel Indonesia – Mines & Exploration

Geo-Evaluation & Data Validation Assays & Collars

Data Preparation

Wireframing Block Model Prototype

No

Create Drillhole

Yes

Geological Domaining & Exploratory data analysis

Sample Selection & Compositing

Variography and Estimation Parameters

Parameters: Cut-off Grade, Ore and Waste Thickness

Grade Estimation (OK) Ore Definition

Grade Estimation (NN)

Ni Volume Variance Correction

Output: Final Block Model with Grade and Product Technical Report & Peer Review Prepare Block Model to Vulcan format Output: Block Model Ready to be Imported to Vulcan

Validation Automatic Check Visual Check Check using tool

Fatal Flaw

Unfold Composite Samples

Drill hole Database & Data Validation PT. International Nickel Indonesia – Mines & Exploration

HQ3 ~ 2.406’ -6" FRAC

TOT FRAC

REC1

REC6

RECTOT

DW1

DW6

DWTOT

NI1

NI6

NITOT

CO1

CO6

COTOT

FE1

FE6

FETOT

SIO21

SIO26

SIO2TOT

MGO1

MGO6

MGOTOT

CR1

CR6

CRTOT

AL1

AL6

ALTOT

MN1

MN6

MNTOT

CA1

CA6

CATOT

H2O1

H2O6

H2OTOT

Verification

-1" FRAC

Input: Assays

Input: Collars

Create Assays Data Definition

Create Collars Data Definition

Read Assays

Read Collars

Set Grades value < 0.001 to blanks

Output: Assays.dm

Statistics

Univariate Statistics of Assays

Output: Collars.dm

Create Drill holes Database

Output: Drill holes Database (Holes.dm); Drill Holes summary; Drill Holes Errors

Visual Check

Geo Validation PT. International Nickel Indonesia – Mines & Exploration

Topography

Fe-MgO

- geological error. - collars error against topography.

Geological Domain & EDA PT. International Nickel Indonesia – Mines & Exploration

What do we look for? - Does volume properly isolate the domain being evaluated? - Is it consistent with the geological control rule? Only related sample should be used and don’t want to mix population

Geological Domain & EDA PT. International Nickel Indonesia – Mines & Exploration

What do we look for: Outliers, trends, mixed population, bias of any sort & systematic Why it is important: Garbage in Garbage out

Geological Domain & EDA PT. International Nickel Indonesia – Mines & Exploration

indication of misclassification

Geological Model PT. International Nickel Indonesia – Mines & Exploration

- topography as top of limonite - topography as reference for underlying layers

Wireframing – Use GPR (Development) PT. International Nickel Indonesia – Mines & Exploration

Drillhole only for Wireframing

GPR testing at Songko, January 2010 Limonite Saprolite

Bedrock

GPR testing at Songko Quary, January 2010 slagc

Drillhole & GPR for Wireframing

Bloulder

Soft material

Sample Composite PT. International Nickel Indonesia – Mines & Exploration

Drill holes Database

Parameters: composite length, minimum gap, maximum gap, minimum composite length

Capture samples in layer limonite, saprolite and bedrock

Limonite samples

Saprolite samples

Bedrock samples

Sample regularization Composite Drill holes samples

Composited Limonite

Composited Saprolite

Composited Bedrock

Check compositing

Unfolding PT. International Nickel Indonesia – Mines & Exploration

Unfolding illustrations

Truncated

Transforms a set of Cartesian Coordinate System into Unfolded Coordinate System [UCS] as defined by a stratified geological unit. Unfold make a spatial correlation in a proportional space and geometry.

Proportional

Variography PT. International Nickel Indonesia – Mines & Exploration

What do we look for? - Quality of the experimental variograms - Sill vs sample variance - Appropriate model(s) used - Appropriate Ranges Why is it important? - Variogram is foundation of geostatistics - Used as a critical input to Kriging - Used to determine weights in estimation - Process is “Data” driven - 11 elements of experimental variogram in each layer. - Variogram map to evaluate degree of anisotropy. - Zonal anisotropy treatment .

Estimation Parameters PT. International Nickel Indonesia – Mines & Exploration

Estimation parameter

Search strategy

Search ellipsoid

The search strategy should be honored the drillhole spacing

Block Model Check PT. International Nickel Indonesia – Mines & Exploration

What do we look for: - Does the model honor the sample data? - Does the model honor the search ranges? - Do all the blocks have been estimated? Why is it important: - Verify that the estimation parameters were appropriate? - Verify that the correct data was used?

Block Model Check PT. International Nickel Indonesia – Mines & Exploration

Naïve QQ Plot

Global Descriptive Statistics

Parallel Modeling: Regardless of the method, the global mean should still be the same.

Block Model Check PT. International Nickel Indonesia – Mines & Exploration

NN Model

Visual Inspection – Plan View Plan view visual inspection. Compare the grade distribution in NN and OK model. Make sure the estimation run correctly

OK Model

Block Model Check PT. International Nickel Indonesia – Mines & Exploration

Visual Inspection – Section View Compare the grade distribution in NN and OK model. Make sure the estimation run correctly.

NN Model

OK Model

Volume Variance Correction PT. International Nickel Indonesia – Mines & Exploration

Regression methods such as Kriging may result in an over-smoothing or under-smoothing of the grade variability producing a block grade distribution with a variance that is lower or higher than expected. This expected variance can be calculated using Krige’s relationship which states that the dispersion variance for the samples within the deposit is the sum of the dispersion variance of samples within the blocks and the dispersion variance of the blocks within the deposit

To capture the variability within short range (distance), the close space drilling is needed. Also regarding the SMU, the variability within the sort range is needed as the references for the variance inside the SMU.

Volume Variance Correction PT. International Nickel Indonesia – Mines & Exploration

volume variance calculation

Limonite

NN OK COR

Saprolite

NN OK COR

Block Model Ore Definition PT. International Nickel Indonesia – Mines & Exploration

Estimated Block Model

Create Simulated Drill holes

Parameters: Cut-off Grade (cog), Minimum Ore Thickness, Maximum Waste Thickness

Composite Simulated Drill holes in zone LIMONITE and SAPROLITE Using ORE and WASTE criteria Assign ORE and WASTE products to composite using cog Merge with original simulated Drill holes Reclassify WASTE above ORE became OB and WASTE below ORE became BZ Assign BZ product to all bedrock composite PRODUCT Block Model

Create Block Model Product

Block Model Transfer PT. International Nickel Indonesia – Mines & Exploration

Datamine Block Model

The block model ready for external peer review by: - Long-term plan mine engineer - Grade control geologist

Block Model converted to Vulcan

Peer review MRMR, LTP, GC

If there is no serious findings, the block model approved by MRMR geologist, Mine engineers and Grade Control geologist as valid block model.

Resource Classification PT. International Nickel Indonesia – Mines & Exploration

Current resource classification criteria: • +/-15% on tonnes and grade on a quarterly basis for measured, on an annual basis for indicated and on a global basis for inferred (90% level of confidence) • PTI criteria: 25 or 50m for measured, 100m for indicated

Drill spacing (m) Sampling type

Measured

Indicated

Inferred

25 or 50 Core drill

100 Core drill

200 Core and/or Auger drill

Other improvement in resource classification: • Geostatistical drilling • Steep slope denser drilling

PT.INCO Mineral Resources & Mineral Reserves PT. International Nickel Indonesia – Mines & Exploration

Mineral Reserves PTI Mineral Reserves 100

Proven

Probable

90 80

DKP (Mt)

70

Mineral Resources PTI Mineral Resources

50 40 30

600 Measured

Inferred

Indicated

500

DKP (Mt)

60

20 10 0

400

2001

2002

2003

2004

2005

2006

MRMR (year)

300 200 100 0 2001

2002

2003

2004

2005

2006

MRMR (year)

2007

2008

2009

2007

2008

2009

PT. International Nickel Indonesia – Mines & Exploration

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