Enriched Heavy Rare Earth Kipawa Deposit:

10 Steps to Commercial Rare Earth Production(D. Kingsnorth , 2011)

Metal-Pages: Metal for Energy and the Environment - June 3, 2011

“Developing New Projects”

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when executed, and subject to such limitations and restrictions as may be specified

therein, will have any legal effect.

Disclaimer

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10 Steps to Developing The Enriched HRE Kipawa Deposit IMCOA 2008 2009 2010 2011 2012 2013 2014 2015

2-5 years Step 1: establish resource Spring 2011

1-3 years Step 2: understand mineralogy Fall 2011

1-3 years Step 3: scoping study Summer/Fall 2011

(Ore processing –

started March „10)

2-10 years Step 4-6: pilot plant

•Beneficiation, extraction &

separation

Step 7: environmental approval Baseline Study,

Characterizing the

environmental sensitivity and land use

Step 8: letters of intent Discussions & CA (Started Feb.

‟09)

2-4 years Step 9: DFS & funding

2-3 years Step10: engineering, procurement,

construction

Total average: 10 years Matamec intends to complete these 10 steps in 7 years

D. Kingsnorth (March 2011): The “norm” is that take between 7 to 20 years to develop a project

Source: Dudley Kingsnorth (IMCOA), March 2010.

3

Completed - end 2011

In Progress

Step 1: Establish Resource (2-5 years)

• Grade of the resource and the REO distribution are key to

the viability of the project

• High concentration of the higher value heavy RE is

advantageous

• Location of the deposit with respect to the availability of

supporting infrastructure (transportation, power, water,

chemicals and skilled labour) brings costs down

D. Kingsnorth (March 2011)

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Zeus Property & EHRE Kipawa Deposit - Location

The First Criteria for Industrial Mineral Deposits isLocation Near Infrastructure

•In Quebec, a premier mine

jurisdiction

•Near all weather roads

•Near railway

•Near mining towns with services

•Near electrical power grid

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Enriched Heavy Rare Earth Kipawa Deposit - Growth

Historical Drill Holes – 2Mt (1990) 2009 Drill Program – 39 Mt (June

4, 2010)

2010 Drilling Program – Update

Resource Estimate Completed:

50 Mt (January 20, 2011)

Winter 2011 - Infill Drilling

Program Completed in February

Updated NI 43-101 (June 2011)

NI 43-101

Ressources

(November 2011):

4.9 Mt @ 0.61%

TREO Indicated (33%

HREO+Y2O3)

4.3 Mt @ 0.63%

TREO Inferred (35%

HREO+Y2O3)

+

30.1 Mt @ 0.98%

ZrO2 Indicated

20.9 Mt @ 1.00%

ZrO2 Inferred

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SW NE70% 20%

10%

Kipawa Deposit Schematic Cross-Section

Heavy Rare Earth Enriched Zones: 0.62% TREO (cut-off of Dy2O3 0.016%)

4,920,000 Indicated tonnes + 4,260,000 Inferred tonnes (January 20, 2011, NI43-101)

Zirc

oniu

m Z

one

(with

TR

EO

)

TREO Enriched Zones

37%

HREE/TREE

7

Step 2: Understand Mineralogy (1-3 years)• Most critical step in the early evaluation of a project

• to be carried out in conjunction with resource evaluation

• Identification of the mineral(s) containing the RE

• an important stage in determining the amenability of the ore to cost-effective

processing

• Few RE minerals as bastnaesite, South China clays, monazite, xenotime and

loparite are well-known

• their processing is well understood for the producing deposits

• Liberation size of the RE mineral(s) should not to be too fine

• so that they are amenable to conventional beneficiation techniques such as

flotation, gravity and magnetic separation D. Kingsnorth (March 2011)

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Minerals Mineral Formulas Elements REO - Wt %

Eudialyte (Unique in the world)

Na15(Y,Ca)6Fe6Zr3

(Si26,073)(O,OH,H2O)5

Zr, Y, HREE 10 %

Mosandrite/Yttro-titanite

NaCa2(Ca,Ce,Y)4

Ti(Si2O7)2F5 and

(Y,Ca)TiSiO5

Y, HREE, Ti? 45 %

(Mosandrite)

Britholite

(Ce,Y,Ca)5(SiO4,PO4

)3 (OH,F)

Y, HREE, P2O5 62 %

Vlasovite

Na2ZrSi4O11 Zr

.

Primarily one mineral: Eudialyte - medium grained, well-crystallized and not intergrown

Kipawa Deposit: Simple Mineralogy

99

Step 3: Scoping Study (1-3 years)

• Establish viability to justify undertaking a Definitive Feasibility Study

• Usually includes:

- A resource estimate to an inferred level

- A process proven at a bench scale (possibly two alternatives to be

evaluated in the pilot plant)

- A site selected for the processing facilities

- Baseline environmental studies

- An order of magnitude (+/- 35%) capex and opex indicating the

project is viable

- Support from the local community and by the relevant government

agencyD. Kingsnorth (March 2011)

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Kipawa Rare Earth

Deposit Ore

Processing:

Ore

Crushing

Grinding

Physical

Concentration

Cracking

Leaching

Solid / Liquid Separation

Purification/

Precipitation

Solvent Extraction

Heat

Acid

Water

Stabilization

Products Products

Raffinate or

Barren Liquor

Solid Tailings

Liquor

The physical characteristics of

the Kipawa eudialyte ore allow

for low-cost chemical extraction,

which gives it a competitive

edge against current rare earth

producers

Press releases

- August 9, 2010

- October 18, 2010

- January 20,2011

- March 8, 2011Lab.recoveries

92.8%

TREO

in 52%

of

original

mass8

1

%

T

R

E

O

89.2%

TREO

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4 Steps

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Products: Ore for the Mill/Waste rock in dump

Step 1. Open pit mining

Products: Mixed Rare Earth Concentrate/Tailings in ponds

On Site or in townOn Site

Step 2. Physical Concentration Mill

Crushing

Grinding

Physical

Concentration

Ore

Waste

To Step 3

Dissolution

Separation and

Purification

Precipitation or

Solvent Extraction or

Electrolysis

Products

Liquor recirculation

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Step 3. Chemical Separation Plant

Leaching

Solid / Liquid

Separation

Precipitation

Hea

t Acid

Water

Stab

ilization

Products

So

lid Tailin

gsLiquor

Cracking

Products: Rare Earth concentrate in oxyde

form/Solids in tailings pond

Step 4. Individual Rare Earth Separation

REO Concentrate from Step 3

In town or internationalIn town

Products: 99% pure individual rare earth concentrates

Mixed REE Concentrate

From Step 2

Cost and Schedule of Future Work2011 2012 2013

1- Geology $1.970M $3.630M $1.500M

2- Engineering Studies including Mining

- PEA

- Pre-Feasibility

- Feasibility

$0.300M

$1.100M

$3.850M

3- Mineral Processing and Metallurgy

- Specific Testwork

- Continuous Testwork

- Pilot Plant - Construction

$1.000M$2.500M

$3.750M

4- Environment and Permitting$0.400M $0.600M $0.600M

5- Relation with the Community$0.150M $0.500M $0.850M

6- Market StudyIncl. in the

Eng. Studies- -

Total: $3.820M $8.330M $10.550M $22.700M

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Kipawa REE-Y-Zr Deposit: 3 Year Plan - Budget

Amounts

spent

locally

Step 4-6: Pilot plant(s) - Three stages: beneficiation,

extraction & separation (2-10years)

The heart of developing a successful project which has the

following objectives:

• To demonstrate the technical viability of the project

• To generate data for the DFS

• To produce samples for customer evaluation from a three-

stage pilot plant that has operated continuously for at least 10

days

• To generate the data for the Environmental Impact Statement

( All rare earth minerals contain U and Th for which

acceptable waste disposal techniques have to be

demonstrated)D. Kingsnorth (March 2011)

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Step 7: Environmental Approval

• Preparation, baseline studies, public review and environmental

approval

• Extraction and separation processes, associated chemical

transport and storage, and radioactive waste management (these

facets of a project are always subjected to detailed study by the

local environmental authority and the public)

•Additional pilot plant studies may be required to satisfy specific

requirements

D. Kingsnorth (March 2011)

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Characterizing the environmental sensitivity and land use before

the introduction of a rare earths mine

Goals

→ Territory Assessment

→ Community Information Gathering

→ First Environmental Study: Baseline

Information gathering from internet, communications, mapping and fieldtrips

Communication conducted through letters, emails and phone calls.

Study of terrestrial (plants and soil) and aquatic (fish, drinking water, surface water

sediments, plants) environments to establish a baseline before the introduction of a

mine

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Sustainable Development - Environmental protection programs

- Implication of the local communities from the beginning

- Harmonization and follow-up table objectives

- Relationship with the First Nations communities of

Eagle Village and Wolf Lake

- Preferential hiring policy for locals

- Small environmental footprint

Step 8: Letters of Intent (LOI)

• To be successful a RE company has to integrate its operation into

the supply chains of its customers, which requires mutual trust

•Customer relations needs to start in the early stages of the

project, as their specifications are the basis for planning the pilot

plant

• Generally, LOIs are required for a substantial portion of the

proposed production prior to the final pilot plant run and the

commencement of the Definitive Feasibility Study (DFS)

D. Kingsnorth (March 2011)

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KIPAWA DEPOSIT GROSS VALUE UNRECOVERED IN THE GROUND

Zone TREO ENRICHED ZONES (Cut-off of Dy2O3 ˃0.016%) – May 30, 2011

Tonnage 4,920,000** 4,260,000**

Classification Indicated t** Value in Situ (USD) Inferred t** Value in Situ (USD)

Lanthanum (147$/kg*) La 4,200 617,400,000 3,600 529,200,000

Cerium (148$/kg*) Ce 8,700 1,287,600,000 7,600 1,124,800,000

Praseodymium (215$/kg*) Pr 1100 236,500,000 900 193,500,000

Neodymium (255$/kg*) Nd 4,000 1,020,000,000 3,500 892,500,000

Samarium (117$/kg*) Sm 900 105,300,000 800 93,600,000

Europium (1580$/kg*) Eu 100 158,000,000 100 158,000,000

Gadolinium (180$/kg*) Gd 900 162,000,000 800 144,000,000

Terbium (1580$/kg*) Tb 200 316,000,000 200 316,000,000

Dysprosium (980$/kg*) Dy 1100 1,078,000,000 1,000 980,000,000

Holmium (101$/kg*) Ho 200 20,200,000 200 20,200,000

Erbium (112$/kg*) Er 800 89,600,000 700 78,400,000

Thulium (N/A) Tm 100 100

Ytterbium (N/A) Yb 700 600

Lutetium (505$/kg*) Lu 100 50,500,000 100 50,500,000

Yttrium (155$/kg*) Y 6,700 1,038,500,000 6,400 992,000,000

Zirconium (4.6$/kg*) Zr 43,400 199,640,000 43,000 197,800,000

6,379,240,000 5,770,500,000*Prices from Metal-Pages , Industrial Minerals and Asian Metals, May 30, 2011. REE oxides 99% min FOB China, Y oxide 99.999% min FOB China and Zr

structural ceramic/electronic grade. 1 CNY = 0.153109 USD.

**Source: SGS Geostat (November 29th, 2010).

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Markets: Rare Earth Supply Chain

Ore OxideMixture ProductMagnetAlloyMetalScrap/

Recycling

China

•China produces 97%:

•Sichuan Mianning Mining

•Jiangxi Copper

•Baotou Steel Rare Earth

•Sichuan Hanxin Mining

Japan•JOGMEC

Australia•Lynas – exp. 2011

USA•Molycorp – exp. 2012

• Etc.

Canada/UK•GWMG

China•CAS Key Laboratory

of Rare Earth

Chemistry and Physics

•Neo Materials

Japan•Santoku,

•Shin Etsu

•Etc.

Japan•Aichi Steel

Corp

USA•Allstar

•Quadrant

•Adams

•Bunting

•Etc.

•GM

•Ford

•Toyota

•Nissan

•Hyundai

•Mitsubishi

•Apple

•LG

•Samsung

•Etc.

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Rare earths are not commodities

- they are customer-specific chemicals, produced to precise chemical and physical specifications

A customer needs are continually evolving

- which requires the suppliers to become an integral link in the supply chain

Rare Earths Used in Hybrid Cars: Good Fit for The Car Industry

UV cut glass

・CeriumHV electric motor & generator

・Neodymium

・Praseodymium

・Terbium

・Dysprosium

Glass and Mirrors

polishing powder

・Cerium ・Lanthanum

Diesel Fuel Additive

・Cerium

・Lanthanum

La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y

Catalytic converter

・ Lanthanum

・ Cerium

Battery・ Lanthanum

・ Cerium

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・ Zirconium

Rare Earths Permanent Magnets Used in Hybrid Cars

Motors for electric

power steeringCar navigation hard disk drivesCar speakers

La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y

Starter generator

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Seat belt

sensors

Electric brakesMotors for electric

pumps

Actuator for inter-

vehicular distance

sensorsElectric car air

conditioning

compressor

Drive motors and

generators

Ignition coil

Source: Shin-Etsu Rare

Earth Magnets

Step 9: DFS & Funding (2-4 years)• Definitive Feasibility Study (DFS) is the document upon which

funds are raised for project construction and LOIs are converted to

sales contracts

• Required level of accuracy (+/-15%) for the capex and opex

dictates that 25% of the engineering will have had to be

completed

• A DFS cost of 8-12% of the capex

• For example: cost of a DFS for a project with a capacity of

10,000 tpa REO could well be $30-50M

• Timeline of 18-30 months

• RE resource needs to be upgraded to a measured reserve for

the project to be funded

• Funding of RE project can take 6 to 12 monthsD. Kingsnorth (March 2011)

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Step 10: Engineering, procurement,

construction & start-up (2-3 years)• RE production facility is a complex processing operation that

requires a sophisticated level of engineering more appropriate to a

chemical plant than a mining operation

• This step requires a high level of chemical expertise and RE

operational experience which is not readily available today outside

China

• This final step of the development may well take 2 to 3 years and

the build-up to full operational capacity another 2 to 3 years

D. Kingsnorth (March 2011)

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10 Steps to Developing The Enriched HRE Kipawa Deposit IMCOA 2008 2009 2010 2011 2012 2013 2014 2015

2-5 years Step 1: establish resource Spring 2011

1-3 years Step 2: understand mineralogy Fall 2011

1-3 years Step 3: scoping study Summer/Fall 2011

(Ore processing –

started March „10)

2-10 years Step 4-6: pilot plant

•Beneficiation, extraction &

separation

Step 7: environmental approval Baseline Study,

Characterizing the

environmental sensitivity and land use

Step 8: letters of intent Discussions & CA (Started Feb.

‟09)

2-4 years Step 9: DFS & funding

2-3 years Step10: engineering, procurement,

construction

Total average: 10 years Matamec intends to complete these 10 steps in 7 years

D. Kingsnorth (March 2011): The “norm” is that take between 7 to 20 years to develop a project

Source: Dudley Kingsnorth (IMCOA), March 2010.

2

6

Completed - end 2011

In Progress

The Enriched HRE

Kipawa Deposit

A Timely, High Value and

Low Cost Mine for 2015