NI 43 – 101 PRELIMINARY ECONOMIC ASSESSMENT · ni 43 – 101 preliminary economic assessment . virginia uranium inc. virginia energy resources inc. coles hill uranium property

NI 43 – 101 PRELIMINARY ECONOMIC ASSESSMENT VIRGINIA URANIUM INC.

VIRGINIA ENERGY RESOURCES INC.

COLES HILL URANIUM PROPERTY PITTSYLVANIA COUNTY, VIRGINIA

UNITED STATES OF AMERICA

PREPARED FOR:

Virginia Uranium Inc.

P.O. Box 399 231 Woodlawn Heights

Chatham, VA 24531 USA

Virginia Energy Resources Inc. Suite 611

675 West Hastings Street Vancouver, BC

Canada V6B 1N2

PREPARED BY:

Lyntek Inc.

1550 Dover Street Lakewood, CO 80215

With Contributions From:

Mr. Robert D. Maxwell, CPG BEHRE DOLBEAR & COMPANY, LTD.

Ms. Betty L. Gibbs, QP Mr. Thomas C. Pool, PE 67 Yonge Street, Suite 1201 Toronto, Ontario M5E 1J8 CANADA

Mr. K. Scott Keim, CPG MARSHALL MILLER AND ASSOCIATES, INC.

534 Industrial Park Road Bluefield, Virginia 24605 USA

Dr. Peter A. Christopher, P. Eng PAC GEOLOGICAL CONSULTING INC.

3707 West 34th Avenue Vancouver, British Columbia V6N 2K9 CANADA

December 2010

Preliminary Economic Assessment on the Coles Hill Uranium Property December 2010

Project 10001 i Lyntek, Inc.

T A B L E OF C ONT E NT S

ITEM 3. SUMMARY ...................................................................................................................... 1 3.1 INTRODUCTION ........................................................................................................................................ 1 3.2 PROPERTY OWNERSHIP AND TERMS OF AGREEMENT ................................................................... 4 3.3 MINING AND PROCESSING .................................................................................................................... 4 3.4 GEOLOGICAL SETTING AND MINERALIZATION .............................................................................. 4 3.5 DEPOSIT TYPE AND EXPLORATION CONCEPT .................................................................................. 4 3.6 STATUS OF EXPLORATION, DEVELOPMENT, AND OPERATIONS ................................................. 5 3.7 CONCLUSIONS AND RECOMMENDATIONS ....................................................................................... 5

3.7.1 Conclusions ............................................................................................................................................. 5 3.7.2 Recommendations .................................................................................................................................... 6

ITEM 4. INTRODUCTION ............................................................................................................ 8 4.1 TERMS OF REFERENCE AND PURPOSE ............................................................................................... 8 4.2 SOURCE OF INFORMATION AND DATA .............................................................................................. 8 4.3 PERSONNEL ............................................................................................................................................... 8

ITEM 5. RELIANCE ON OTHER EXPERTS ............................................................................. 10 ITEM 6. PROPERTY DESCRIPTION AND LOCATION .......................................................... 11

6.1 PROPERTY AREA AND TERMS OF AGREEMENT ............................................................................. 11 6.2 PROPERTY LOCATION .......................................................................................................................... 12 6.3 LEGAL SURVEY ...................................................................................................................................... 12 6.4 ENVIRONMENTAL LIABILITIES .......................................................................................................... 13 6.5 WORKINGS ON THE PROPERTY .......................................................................................................... 13 6.6 TITLE AND AGREEMENTS .................................................................................................................... 13

6.6.1 Coles Lease and Bowen Lease ............................................................................................................... 13 6.6.2 Land Acquisition and Option Agreements ............................................................................................. 14 6.6.3 Marline Property Purchase ..................................................................................................................... 14 6.6.4 Additional Property Purchase of October 10, 2007 ............................................................................... 14 6.6.5 Additional Property Purchase of October 31, 2007 ............................................................................... 14 6.6.6 Additional Contiguous Property Purchase of November 6, 2007 .......................................................... 15 6.6.7 State Road 690 (Coles Road) ................................................................................................................. 15

ITEM 7. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY .............................................................................................................................. 16

7.1 ACCESS TO THE PROPERTY AND PROXIMITY TO POPULATION CENTER(S) ............................ 16 7.2 CLIMATE AND LENGTH OF OPERATING SEASON .......................................................................... 17 7.3 AVAILABILITY OF SURFACE RIGHTS, POWER, WATER, AND MINING PERSONNEL .............. 17 7.4 INFRASTRUCTURE ................................................................................................................................ 17 7.5 PHYSIOGRAPHY ..................................................................................................................................... 17

ITEM 8. HISTORY ....................................................................................................................... 19 8.1 HISTORICAL DRILLING ........................................................................................................................ 20 8.2 HISTORICAL RESOURCE AND RESERVE ESTIMATES .................................................................... 24

ITEM 9. GEOLOGICAL SETTING ............................................................................................. 27 9.1 REGIONAL GEOLOGICAL SETTING .................................................................................................... 27 9.2 STRUCTURAL SETTING AND LOCAL GEOLOGY ............................................................................. 27

ITEM 10. DEPOSIT TYPES ........................................................................................................... 29 ITEM 11. MINERALIZATION ...................................................................................................... 30

11.1 TYPE OF HOST ......................................................................................................................................... 30 11.2 MINERALS ............................................................................................................................................... 32 11.3 EQUILIBRIUM ......................................................................................................................................... 32

ITEM 12. EXPLORATION ............................................................................................................. 33 ITEM 13. DRILLING ...................................................................................................................... 34 ITEM 14. SAMPLING METHOD AND APPROACH .................................................................. 41

14.1 SURFACE SOIL SAMPLING ................................................................................................................... 41 14.2 DRILL HOLE SAMPLING ....................................................................................................................... 41


Project 10001 ii Lyntek, Inc.

ITEM 15. SAMPLE PREPARATION, ANALYSIS, AND SECURITY........................................ 43 ITEM 16. DATA VERIFICATION ................................................................................................. 45

16.1 SOIL SAMPLE .......................................................................................................................................... 45 16.2 VIRGINIA URANIUM DRILL HOLE RESULTS .................................................................................... 45 16.3 CONFIRMATION OF MARLINE GEOPHYSICAL RP DATA............................................................... 50 16.4 CONFIRMATION OF MARLINE CORE ASSAY ................................................................................... 50

16.4.1 Assay Versus Down Hole Radiometric Charts .................................................................................. 54 16.5 ROCK DENSITY ANALYSIS .................................................................................................................. 55 16.6 DRILL HOLE DRIFT ANALYSIS ............................................................................................................ 58

16.6.1 Core Hole Drift Data ......................................................................................................................... 58 16.6.2 Rotary Percussion Hole Drift Data .................................................................................................... 59 16.6.3 Combined Rotary Percussion and Core Holes ................................................................................... 61

ITEM 17. ADJACENT MINERAL PROPERTIES ........................................................................ 62 ITEM 18. MINERAL PROCESSING AND METALLURGICAL TESTING ............................... 63

18.1 RESOURCES ............................................................................................................................................. 63 18.1.1 Ore Resources.................................................................................................................................... 63 18.1.2 Water Resources ................................................................................................................................ 63

18.2 PRODUCTION AND MINE LIFE ............................................................................................................ 63 18.3 METALLURGICAL TEST WORK RESULTS ......................................................................................... 64 18.4 PROCESS DESCRIPTION ........................................................................................................................ 64

18.4.1 Crushing and Grinding ...................................................................................................................... 64 18.4.2 Alkaline Leach .................................................................................................................................. 65 18.4.3 Counter Current Decantation (CCD) ................................................................................................. 65 18.4.4 Tailings Disposal ............................................................................................................................... 65 18.4.5 Uranium Precipitation, Drying and Packaging .................................................................................. 65

18.5 CAPITAL AND OPERATING COSTS ..................................................................................................... 66 18.5.1 Processing Capital ............................................................................................................................. 66 18.5.2 Tailings Capital Costs ....................................................................................................................... 67 18.5.3 Processing Operating Costs ............................................................................................................... 68 18.5.4 Tailings Operating Costs ................................................................................................................... 70

ITEM 19. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES .......................... 71 19.1 MODELING METHODOLOGY ............................................................................................................... 71 19.2 DATA AND LOG PROCESSING ............................................................................................................. 71 19.3 RESOURCE MODELING AND ESTIMATION ...................................................................................... 72 19.4 CIM MINERAL RESOURCE ESTIMATES ............................................................................................. 72

ITEM 20. OTHER RELEVANT DATA AND INFORMATION ................................................... 79 ITEM 21. INTERPRETATION AND CONCLUSIONS ................................................................ 80 ITEM 22. RECOMMENDATIONS ................................................................................................ 82

22.1 SCOPE OF INVESTIGATION .................................................................................................................. 82 22.1.1 Resources .......................................................................................................................................... 83 22.1.2 Metallurgical Testing, Process Selection, and Study ......................................................................... 83

22.2 PHASES ..................................................................................................................................................... 83 22.2.1 Phase 1 Delineation and Pre-Feasibility Studies ............................................................................... 83 22.2.2 Phase 2 Delineation and Feasibility Studies ...................................................................................... 84

22.3 OPINION OF MERIT AND RECOMMENDATIONS .............................................................................. 84 22.3.1 Opinion of Merit ................................................................................................................................ 84 22.3.2 Additional Study................................................................................................................................ 84

ITEM 23. REFERENCES AND SOURCES OF INFORMATION ................................................ 85 ITEM 24. DATE AND SIGNATURE ............................................................................................. 87 ITEM 25. ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES ........................................................................ 96

25.1 MINE PLAN .............................................................................................................................................. 96 25.1.1 GEOLOGIC SETTING ..................................................................................................................... 96 25.1.2 ASSUMPTIONS ............................................................................................................................... 96


Project 10001 iii Lyntek, Inc.

25.2 MINERAL RESOURCES AVAILABLE FOR MINING .......................................................................... 98 25.3 MINING RATE .......................................................................................................................................... 98

25.3.1 MINING METHOD UNDERGROUNG MINING ........................................................................... 99 25.4 CUT-OFF GRADE................................................................................................................................... 102 25.5 MINE VENTILATION ............................................................................................................................ 103 25.6 MINE MANPOWER ............................................................................................................................... 103 25.7 MINE DEVELOPMENT AND SCHEDULE .......................................................................................... 104

25.7.1 CAPITAL AND OPERATING COSTS .......................................................................................... 105 25.8 VIRGINIA TAX INFORMATION .......................................................................................................... 107 25.9 CASH FLOW MODEL FOR 3, 000 TPD ................................................................................................. 108

ITEM 26. ILLUSTRATIONS ....................................................................................................... 111

L I ST OF T A B L E S

Table 3.1 Resource Estimates - June 4, 2008 ............................................................................................... 3Table 6.1: Property Ownership and Lease .................................................................................................. 11Table 8.1: SCHD and NCHD Historical “Uranium Reserve” Estimates After PAH Study ....................... 25Table 8.2: Historical Estimate Comparisons, South Area ........................................................................... 26Table 13.1: Virginia Uranium Drilling Summary ....................................................................................... 34Table 16.1: Results of 2008 Core Holes(S-601, S-602, and S-603) ........................................................... 45Table 16.2: Chemical Test Results of Selected Samples From Energy Labs and SRC .............................. 49Table 16.3: Comparison of old Marline Versus new Virginia Uranium Assays ........................................ 51Table 16.4: Comparison of Assay and Gamma Log Data .......................................................................... 54Table 16.5: Rock Density Analyses ............................................................................................................ 56Table 16.6: Density of Weakly Mineralized Samples Versus All Samples ................................................ 57Table 16.7: Core Drill Statistics .................................................................................................................. 58Table 16.8: Rotary Percussion Drill Statistics ............................................................................................ 60Table 16.9: Combined Drill Hole Statistics ................................................................................................ 61Table 18.1: Primary Processing Production Assumptions .......................................................................... 63Table 18.2: Alkaline Processing Capital Summary .................................................................................... 67Table 18.3: Tailings Impoundment Cost Summary .................................................................................... 68Table 18.4: Summary of Processing Operating Costs for 3,000 tpd Alkaline Process ............................... 68Table 18.5: Processing Labor Requirement ................................................................................................ 69Table 19.1: Resource Estimates – June 4, 2008 (Millions of Tons and Pounds In-Place) .......................... 74Table 19.2: Comparison of Model Results South Coles Hill Deposit (SCHD) .......................................... 77Table 19.3: Comparison of Model Results North Coles Hill Deposit (NCHD) ......................................... 78Table 22.1: Phase 1 - Program and Budget (9 to 12 months) ..................................................................... 83Table 22.2: Phase 2 – Program and Budget (12 to 24 Months) .................................................................. 84Table 25.1: Summary of Mineral Resource Available for Mining ............................................................. 98Table 25.2: Summary of Underground Mining Cost Estimate ................................................................. 102Table 25.3: Cutoff Grade Calculation Operating Costs Only ................................................................... 103Table 25.4: Manpower for Mining Labor Requirements .......................................................................... 104Table 25.5: Summary of Mining Initial Capital Costs (in $000) .............................................................. 106Table 25.6: Summary of Mining Operating Costs for 3,000 tpd .............................................................. 107Table 25.7: Summary of Alkaline 3,000 tpd Economic Model ................................................................ 109Table 25.8: Annual Operating Expenses ................................................................................................... 110Table 25.9: NPV and DCFROR Matrix .................................................................................................... 110


Project 10001 iv Lyntek, Inc.

L I ST OF F I G UR E S

Figure 3.1: Virginia Uranium Properties under lease or purchased .............................................................. 1Figure 6.1: General location of Coles Hill Uranium Deposit in Pittsylvania County, Virginia ................. 12Figure 7.1: Topographic plan, Coles Hill Area, Pittsylvania County, Virginia .......................................... 16Figure 8.1: Drill holes used to evaluate Coles Hill Uranium Project (CHUP) ........................................... 21Figure 8.2: Drill holes used to evaluate South Coles Hill Deposit (SCHD) ............................................... 22Figure 8.3: Drill holes used to evaluate North Coles Hill Deposit (NCHD) .............................................. 23Figure 9.1: Regional geologic and tectonic setting of the CHUP ............................................................... 27Figure 9.2: Chatham Fault-bounded gneissic wedge which hosts CHUP deposit (Jerden, 2001) .............. 28Figure 11.1: Hematitic and mylonitic Leatherwood Granite ...................................................................... 30Figure 11.2: Hematitic amphibolites ........................................................................................................... 30Figure 11.3: Reflected light: Uranium minerals are developed on pyrite and titanium oxide, and associated with chlorite.(S-602, 505 to 508 feet) ........................................................................................ 31Figure 11.4: Microprobe, backscatter electrons: Titanium oxides are rimmed and impregnated by Uranium and associated with apatite and chlorite (S-603, 282.3 to 283.0 feet) ......................................... 31Figure 13.1: Drill hole locations, South Coles Hill Deposit (SCHD) ......................................................... 38Figure 13.2: Drill hole locations, North Coles Hill Deposit (NCHD) ........................................................ 39Figure 13.3: Planned drill hole locations, overall, Coles Hill Uranium Deposit (CHUD) ......................... 40Figure 16.1: Chemical assays for drill hole S-601 from Energy Labs and radiometric equivalent from MM&A ....................................................................................................................................................... 46Figure 16.2: Chemical assays for drill hole S-602 from Energy Labs and radiometric equivalent from MM&A ....................................................................................................................................................... 47Figure 16.3: Chemical assays for drill hole S-603 from Energy Labs and radiometric equivalent from MM&A ....................................................................................................................................................... 48Figure 16.4: Chemical test results for selected samples from Energy Labs and SRC ................................ 50Figure 16.5: Current versus historical chemical data for selected Marline drill holes ................................ 54Figure 16.6: Assay and gamma log comparison for selected Marline drill holes ....................................... 55Figure 16.7: Rock Density versus Chemical Assay .................................................................................... 57Figure 16.8: Drift deviation per core drill hole versus depth ...................................................................... 59Figure 16.9: Core drill hole statistics .......................................................................................................... 59Figure 16.10: Drift deviation per percussion drill hole ............................................................................... 60Figure 16.11: Percussion drill hole statistics .............................................................................................. 61Figure 19.1: Plan view of deposit from merged block model, 0.1 wt % U3O8 grade shell shown in red .. 75Figure 19.2: Vertical cross-section with 3-D view of the 0.1 wt % grade shell, looking west, 0.1 wt % U3O8 grade shell shown in red. Line of cross-section shown in Figure 19.1 ........................................... 76Figure 19.3: Vertical cross-section with 2-D view of block grade estimations, looking west. Grade intervals are wt % U3O8. Line of cross-section shown in Figure 19.1 ....................................................... 76Figure 25.1: Sub Level Open Stope Schematic .......................................................................................... 97Figure 25.2: Plan View of South Coles Hill Underground ....................................................................... 100Figure 25.3: Isometric View of South Coles Hill Underground, Cross Section 440 A ............................ 101


Project 10001 1 Lyntek, Inc.

ITEM 3. SUMMARY 3.1 INTRODUCTION Virginia Uranium, Inc. (Virginia Uranium) acquired the Coles Hill Uranium Property (CHUP) situated on privately controlled lands that hold the mineral rights in Pittsylvania County, Virginia (Figure 3.1). The surface radiometric anomaly associated with the CHUP was found in the late 1970s by Marline Uranium Corporation (Marline), a wholly-owned subsidiary of Marline Oil Corporation. Mr. Walter Coles, Sr, is currently Chairman and Chief Executive Officer of Virginia Uranium.

Figure 3.1: Virginia Uranium Properties under lease or purchased

The property was drilled from 1979 until 1984 with 182 rotary-percussion holes (totaling 124,799 feet) and 74 NQ core holes (totaling 65,082 feet), totaling 256 holes and 189,881 feet. In 2008, Virginia Uranium completed the drilling of seven rotary-percussion (RP) holes (totaling 8,758 feet) and three NQ core holes (totaling 4,510 feet). Historical “reserve” estimates (non-NI 43-101 compliant and not relied upon by Virginia Uranium were completed for Marline by Pincock, Allen and Holt (PAH) for the South Coles Hill Deposit (SCHD) and the North Coles Hill Deposit (NCHD) in August 1982. PAH estimated that contained uranium (U3O8) by percent-weight in the SCHD varied from about 21 million pounds to about 55 million pounds as the cutoff grade was decreased from 0.150% U3O8 to 0.025% U3O8 by weight. PAH estimated that the



contained U3O8 in the NCHD varied from about 4 million pounds to about 54.5 million pounds as the cutoff grade was decreased from 0.150% U3O8 to 0.025% U3O8 by weight. PAH completed reserve estimates using accepted 1982 methodology. The category of “reserve” used by PAH (1982) is not equivalent to a “mineral reserve” as is currently defined in the Canadian Institute of Mining, Metallurgy, and Petroleum (CIM) Definition Standards on Mineral Reserves and Mineral Resources. Accordingly, it is not a current reserve or compliant with Canadian National Instrument (NI) 43-101 and should be treated as historical information that should not be considered as current reserves. A 1984 historic resource estimate performed by UMETCO Minerals Corporation (UMETCO), a subsidiary of Union Carbide Corporation (Union Carbide), provided detailed studies of the SCHD to Marline. In 1982, the project contained sufficient “reserve” estimates for the Commonwealth of Virginia to hold hearings and establish the Uranium Administration Group (UAG). The UAG was charged with examination of uranium development at Coles Hill. The 1980s price downturn in the uranium market and nuclear industry resulted in the project being abandoned due to economic reasons and uranium regulations considered unnecessary, with leased mineral rights eventually returned to the land owners. Virginia Uranium has leased or purchased the mineral rights to approximately 2,940 acres that includes associated surface rights to 2,296 acres covering the SCHD and the NCHD, as well as areas for exploration, mining operations, milling, waste management areas, and set-backs. An area (the “Protected Area”) of about 648 acres exists around the Coles Hill historical buildings and cultural areas where only underground mining is allowed (Table 6.1). Virginia Uranium has access to the complete data and information that were compiled as a result of the drilling in the period 1979 to 1984. The data includes assay data, down hole gamma logs, and most of the details of the PAH and UMETCO reserve estimates. In 2008, Virginia Uranium completed a drilling campaign of three core and seven rotary drill holes to confirm the early findings. In 2007, Virginia Uranium retained Dr. Peter A. Christopher, PhD, P.Eng. (PAC) to prepare a NI 43-101 technical report on the historical technical work carried out on the CHUP. PAC conducted a field examination of the CHUP and viewed reports on the CHUP in Chatham, Virginia. Additional reports obtained from the Virginia Museum of Natural History (VMNH) in Martinsville and the Virginia Department of Mines, Minerals and Energy (DMME) in Charlottesville, Virginia regarding the CHUP were reviewed and found to be consistent with the previously reviewed information. On November 6, 2007, PAC prepared and filed an historical NI 43-101 resource report regarding this deposit. Subsequently, Virginia Uranium retained Behre Dolbear & Company, Ltd. (Behre Dolbear), Marshall Miller & Associates (MM&A) and PAC to prepare a current NI 43-101 technical report, which was completed on June 30, 2008. Lyntek Inc. is responsible for the overall preparation of this updated report and Lyntek Inc. was solely responsible for Item 3.3 Mining and Processing, Item 25.1 – Mine Plan, ITEM 18– Mineral Processing and Metallurgical Testing, and Item 25.9 – Cash Flow Model for 3000 TPD. ITEM 19– Mineral Resource and Mineral Reserve Estimates was prepared by Marshall Miller & Associates (MM&A). MM&A created a MAPTEK VulcanTM model of the deposit for ITEM 19, using historical Marline data and Virginia Uranium drill data. The VulcanTM model allowed estimation of current resources, which are summarized in Table 3.1. Behre Dolbear was responsible for the oversight of the mineral resource estimates reporting that was prepared by MM&A and the remainder of the report beyond Lyntek’s work was prepared by PAC.



T A B L E 3.1 R E SOUR C E E ST I M A T E S - J UNE 4, 2008 (M I L L I ONS OF T ONS A ND POUNDS I N-PL A C E )

Cutoff

% U3O8

Measured1 Indicated1 Total1

Tons2 %

U3O83

Pounds U3O8

Tons2 %

U3O83

Pounds U3O8

Tons2 %

U3O83

Pounds U3O8

South Coles Hill Deposit (SCHD 0.200 0.397 0.301 2.39 2.35 0.264 12.4 2.75 0.270 14.9 0.150 0.562 0.264 2.97 4.56 0.221 20.1 5.12 0.225 23.1 0.125 0.654 0.246 3.22 5.24 0.210 22.0 5.90 0.214 25.2 0.100 0.755 0.228 3.45 5.31 0.209 22.2 6.07 0.211 25.6 0.075 1.35 0.164 4.44 16.7 0.122 40.9 18.1 0.125 45.3 0.050 2.28 0.124 5.65 22.3 0.109 48.7 24.5 0.111 54.3 0.025 6.62 0.064 8.42 44.6 0.071 63.5 51.2 0.070 71.9

North Coles Hill Deposit (NCHD 0.200 - - - 0.519 0.320 3.32 0.52 0.320 3.32 0.150 - - - 0.851 0.262 4.46 0.85 0.262 4.46 0.125 - - - 0.927 0.252 4.67 0.93 0.252 4.67 0.100 - - - 0.959 0.247 4.74 0.96 0.247 4.74 0.075 - - - 7.31 0.103 15.1 7.31 0.103 15.1 0.050 - - - 13.2 0.088 23.1 13.2 0.088 23.1 0.025 - - - 47.5 0.050 47.1 47.5 0.050 47.1

CHUP Project Total (South and North Coles Hill Deposits) 0.200 0.397 0.301 2.39 2.87 0.274 15.7 3.26 0.278 18.1 0.150 0.562 0.264 2.97 5.41 0.227 24.6 5.97 0.231 27.6 0.125 0.654 0.246 3.22 6.17 0.216 26.7 6.82 0.219 29.9 0.100 0.755 0.228 3.45 6.27 0.215 26.9 7.03 0.216 30.4 0.075 1.35 0.164 4.44 24.0 0.116 55.9 25.4 0.119 60.4 0.050 2.28 0.124 5.65 35.4 0.101 71.7 37.7 0.103 77.4 0.025 6.62 0.064 8.42 92.1 0.060 111 98.7 0.060 119

1Total tonnage above cutoff grade and average weight % U3O8 of that tonnage

2Short tons based on a rock density of 2.56 g/cc

3Weight %

The 1982 Process Development Studies prepared by Allison, et al. at the Colorado School of Mines Research Institute provided the basis for ITEM 18 and are augmented by the 1984 UMETCO report.

Currently, the Commonwealth of Virginia does not have uranium mining regulations and until such regulations are developed and allowed by statute, no permits for uranium mining can be accepted by state regulatory agencies. In November 2008, the Virginia Coal and Energy Commission created a sub-committee to evaluate uranium mining. The sub-committee engaged the National Academy of Sciences



to undertake a study with an anticipated duration of 18 months. The Virginia Coal and Energy Commission will make a recommendation to the legislature based on the outcome of the study. Virginia has a bicameral legislature so bills enabling uranium mining regulation development must be approved by both the House and the Senate. The Governor must then sign the bill for it to become enacted into law. The Coal and Energy Commission has also commissioned a socio-economic study which is underway. 3.2 PROPERTY OWNERSHIP AND TERMS OF AGREEMENT The Virginia Uranium position on the CHUP consists of fee simple ownership and leasehold interests in the mineral and surface rights to a portion of the Coles property and the contiguous Bowen property (described in Item 6.0 of this report), as well as other properties. The total mineral rights and leases cover approximately 2,940 acres (1,190 hectares), including about 2,296 acres (929 hectares) in surface rights (Figure 3.1) (Table 6.1). Virginia Energy Resources, Inc. (TSX.V; VAE), currently holds a 28% minority interest in VA Uranium Holdings, Inc. (Holdco), a Yukon corporation. Although Holdco is a private Canadian company, it is predominantly owned by residents of Virginia, USA. Holdco’s 100% owned subsidiary, Virginia Uranium Inc., a Virginia corporation, controls the leasehold development and operating rights of the Coles Hill uranium property in Southside Virginia. 3.3 MINING AND PROCESSING Lyntek, in cooperation with BRS, Inc. evaluated the mining and processing of the ore from the Virginia Uranium ore deposit. All prior work to define the resource was assumed to be valid. In summary, the mining method that is preferable is an underground stoping method. Although surface mining is a viable option, it appears at this point in time that an all underground mine can be effectively employed. The resource definition is adequate for determination of the mining method and acceptable for this report. More definitive discussion for the mining concept is provided in ITEM 25. Both acid and alkaline processing methods were investigated. Due primarily to the cost volatility of sulfuric acid, an alkaline process is the most viable in spite of a slightly lower recovery rate. Adequate information is available for this level of study given the historical efforts that have been employed. Lyntek reviewed this information and believes it is acceptable for this report. More discussion is provided in ITEM 18.

3.4 GEOLOGICAL SETTING AND MINERALIZATION The CHUP, located in the Piedmont physiographic province of Virginia, consists of two approximately 350-meter-long by 250-meter-wide ellipsoidal mineral deposits (NCHD and SCHD). The character of the deposits is shaped by a complex combination of three major factors: faulting, fracture zones, and alteration. The deposits are hosted within a fault-bounded wedge of Precambrian or Paleozoic mylonitic quartzo-feldspathic gneiss and some amphibolite exposed in the footwall of the Chatham fault zone, which forms the northwest limit of the Danville Triassic Basin. The host rocks are Leatherwood granite gneiss and amphibolite, which display hydrothermal alteration by sodium metasomatism, chloritization, argillization, hematization and uranium mineralization. 3.5 DEPOSIT TYPE AND EXPLORATION CONCEPT The CHUP contains a fracture-hosted hydrothermal deposit, with uranium situated in mylonite. The deposit has characteristics of hydrothermal fracture type uranium deposits. Hydrothermal solutions and associated uranium mineralization are presently hypothesized to have been mobilized by tectonic events.



The mechanism of uranium deposition at Coles Hill is similar to that in the Athabasca Basin, as indicated by the presence of alteration minerals hematite, epidote, and chlorite. A similar deposition mechanism in the Athabasca Basin has produced significant-grade uranium mineralization, which might also occur in the untested deeper parts of the Coles Hill Deposits (Jerden 2001). 3.6 STATUS OF EXPLORATION, DEVELOPMENT, AND OPERATIONS Virginia Uranium obtained permits for uranium exploration in November 2007 and started a core and rotary percussion drilling program in December 2007. By May 2008, the Company completed three core holes totaling 4,510 feet, seven rotary percussion holes totaling 8,758 feet, and the re-assaying of about 60 feet of core drilled by Marline. The Virginia Uranium resource estimates in this report are based on the verified, historical Marline data base and the new Virginia Uranium drilling. MAPTEK VULCANTM (Version 7.5) three-dimensional modeling software was used by Marshall Miller under the direction of Behre Dolbear to estimate the current resources summarized in Table 3.1. The estimates were made using a combination of Marline data and Virginia Uranium drilling results as of May 2008.

3.7 CONCLUSIONS AND RECOMMENDATIONS 3.7.1 Conclusions

Lyntek and BRS as a result of this updated study have arrived at the following conclusions:

• Adequate uranium resources are available for an economic venture; • The continuity of mineralization through to the surface in both the north and south deposits could

support either open pit or underground mining, however underground mining is recommended (although open pit is not discounted);

• Underground mining can be performed by sub-level open stoping (SLOS), a historically productive and a safe mining method;

• The dip of the ore bodies’ foliation is around 39 degrees SE and this is below the rill angle of broken rock. Individual stope floor angles will have to be steepened by mining waste to produce a floor angle of 50 degrees. This waste has been included in mined ore and dilutes the overall grade from underground mining by 10%;

• Primary stopes using SLOS will extract 70% of the underground “mineral resource available for mining.” These stopes will be backfilled with cemented fill, and pillars between the stopes will subsequently be extracted using cut & fill mining. Pillar mining will extract 20% of the “mineral resource available for mining” and 10% of the resource will be unrecovered, remaining in the form of crown pillars and some vertical pillars;

• While acid leaching is expected to produce a higher uranium recovery, alkaline leaching is the more cost effective option;

• The overall conceptual economics are favorable for the Coles Hill project. The project shows an IRR (DCFROR) of 36.3%; at a discount rate of 7% the net present value is $404 million;

• The life of the mine is 30 to 35 years. • Including 25% contingency, the initial capital investment prior to production is $173 million,

however, the total capital through the 4th year of production is $204 million. • The initial annual revenue ranges from $100 to $140 million. • The direct and indirect economic benefits are on the order of $240 to $300 million. • Total labor for both the mining and milling operations is forecast at 224 for the mine and 100 for

the milling operations for a total of 324 employees. Of this, it is expected that 218 would be hourly workers and 106 would be staff.



• The annual payroll is forecast at $13 million for mining and $6 million for processing such that the total annual payroll would be $19 million. If the 25% contingency is attributed to this cost, the estimate would be $24 million.

• Salaries are expected to range from $35,000 to $250,000 per annum and hourly rates would range from $20 to $35 per hour.

• Annual material and supply costs are projected to be about $22 million during the primary mining phase such that total annual material and labor costs would roughly range from $41 to $46 million per year.

• It is envisioned during construction that 250 to 350 personnel would be necessary including employees and contractors.

In the previous 43-101 report Behre Dolbear and PAC concluded that the character of the property is of sufficient merit to proceed with Virginia Uranium’s proposed Phase 1 and Phase 2 programs outlined in Item 22.2. The sequence of the work program stages represents a reasonable approach by Virginia Uranium. . 3.7.2 Recommendations

• Further studies are required to evaluate the relative merits of selectively mining higher grade zones early in the mining sequence;

• Underground transport of ore to the surface has been assumed in this study to be by 40 ton trucks

operating in a decline. Alternatives in terms of capital and operating costs that should be evaluated are:

o access via a vertical shaft that may or may not operate in conjunction with a decline; and using an underground portable crusher and conveyor system instead of 40 t diesel trucks.

• It is recommended that exploration bulk sampling of ore be undertaken. The planned initial draw

point is within the South Coles deposit at section 1640A and -130B (Fig.25.2). Access to the area could be developed via a relatively small diameter shaft or decline. The purpose of the recommended exploration activity would be multi-fold including: o Determination of actual mining conditions to complement the information generated by the Colorado School of Mines report etc. This would aid accurate cost estimation, and determine a variety of factors such as ground water conditions, rock strengths, radon concentrations and equipment selection; o Allow access for detailed delineation drilling underground to further evaluate the ore grade shells of the deposit; o Allow access for the collection of a bulk metallurgical sample. This bulk sample would be tested at an off-site licensed facility to:

◊ Determine the Bond Work Index (kWh/t) variability; ◊ Determine the Work Index for semi-autogenous (SAG) mills; ◊ Optimize leach conditions; ◊ Evaluate the viability of processing paste tailings; and ◊ Evaluate alternatives for tailings disposal.

• The Vulcan geologic model should be further refined to allow optimization of the mining concepts; and

• The tailings facilities have been designed for an in-place S.G. of 1.3, however further test-work is required to validate this assumption. It is recommended that the tailings produced from alkaline leaching are tested for physical properties such as bulk density and % solids post-filtration.



Additionally, the option of paste processing all tailings (i.e. surface tailings and underground backfill) should be explored. Using paste tailings in the surface tailings impoundments is beneficial as it limits the infiltration of outside water and the remobilization of the tailings and potentially reduces the size, and therefore cost, of the impoundments themselves; and

• Test work should be conducted to determine the Bond Work Index (kWh/t) variability throughout the North and South ore bodies. The Work Index for SAG mills should also be determined.



ITEM 4. INTRODUCTION 4.1 TERMS OF REFERENCE AND PURPOSE This Preliminary Economic Assessment (PEA) prepared for Virginia Uranium Inc. and Virginia Energy Resources Inc. includes proposals and suggestions for additional delineation of the deposits to further define mineralization, metallurgical and process selection studies, and a pre-feasibility study to support development of the CHUP in Pittsylvania County, Virginia, USA. The report has been prepared in compliance with the requirements of National Instrument 43-101 and Form 43-101F1. The purpose of the report is to provide supporting documentation to be filed with the relevant securities commissions and the Toronto Stock Exchange. 4.2 SOURCE OF INFORMATION AND DATA The majority of the information for this report comes from reports and documents listed under ITEM 23 (References and Sources of Information) of this report. Data were collected from various reports and other data supplied by Virginia Uranium, the Virginia Museum of Natural History, the Virginia Division of Mineral Resources, and extensive reporting of academic studies by faculty and students at Virginia Polytechnic Institute and State University, as well as from access to all known historical Marline data. The Marline data consist of drill logs, maps, process data, and reports. PAC asserted that previous exploration conducted by Marline and Union Carbide used competent personnel for fieldwork and sampling and certified laboratories for analytical work. However, the historical reporting of analytical procedures is not to NI 43-101 standards. Virginia Uranium, with input from Behre Dolbear, established Quality Assurance/Quality Control (QA/QC) protocols to follow CIM recommended best practices for all recent technical work on the project. Diamond drill core was made available by the Virginia Museum of Natural History (VMNH) for review and spectrometer checking of mineralized section. In a formal agreement signed November 2007, VMNH has agreed to have the core available to Virginia Uranium for three years. The agreement can be extended. Dr. Christopher personally examined the geological setting of the CHUP area on January 16, 2007; and, on January 17, 2007, he viewed reports on the CHUP kept by Virginia Uranium in Chatham, Virginia. Dr. Christopher reviewed the geological setting of the CHUP with two experts: (1) Mr. Norm Reynolds, former president of Virginia Uranium and past exploration manager for Marline, and (2) Mr. William Henika, a geologist who originally mapped the area for the Virginia Division of Mineral Resources, Virginia Tech, and predecessor organizations.

4.3 PERSONNEL Dr. Christopher conducted a property examination of the CHUP on February 23, 2007 and February 24, 2006 with Messrs. Norm Reynolds and William Henika with representatives of VMNH providing access to secured and archived historical drill core. Dr. Christopher also conducted a property examination of the CHUP on January 16, 2007 and January 17, 2007 and again on May 12, 2008. Behre Dolbear personnel (Mr. Maxwell, Ms. Gibbs, and Mr. Pool) visited the site on October 12, 2007, and Mr. Maxwell returned for another visit on March 19, 2008. Mr. Pool had direct experience in the 1980s working on the disequilibrium study related to this project while employed with Douglas-Robertson and Associates. During the October 12, 2007 visit and again on March 17, 2008, Mr. Pool reviewed the original Marline data.



The Behre Dolbear personnel inspected the historical Marline data, and Gibbs Associates digitized key portions of it. Behre Dolbear provided the review and options regarding 19.0 (Mineral Resource Estimates). The resource estimate was made by Marshall Miller & Associates with oversight by Behre Dolbear. Lyntek and BRS, Inc. conducted a site visit of the property on April 29, 2010 and provided the analysis regarding the Item 25.1(Mine Plan), ITEM 18(Mineral Processing and Metallurgical Testing) and Item 25.9 (Cash Flow Model for 3000 TPD) under the direction of Mr. John Kyle, PE of Lyntek and Mr Doug Beahm, PE, PG of BRS, Inc.



ITEM 5. RELIANCE ON OTHER EXPERTS Lyntek, Inc. and BRS relied upon the 43-101 compliant work that had been previously generated for the project. This included work from the prior authors: PAC reviewed property and mineral agreements as well as title documents provided by Mr. Norm Reynolds to summarize title and ownership. Legal counsel to Virginia Uranium assisted in drafting the summaries of agreements discussed in Item 6.6 of this report. PAC did not express a legal opinion as to the title or ownership of the CHUP and relied on the opinions of Virginia Uranium’s legal representatives. Behre Dolbear has copies of the property and mineral agreements as well as title documents on file. Behre Dolbear & Company, Ltd. conducted an independent evaluation of the CHUP property in Virginia for Virginia Uranium. Site visits were made to the property and office in Virginia by Behre Dolbear professionals involved in this project. Behre Dolbear has reviewed technical data, reports, and studies produced by other consulting firms, as well as information provided by Virginia Uranium. Behre Dolbear’s review was conducted on a reasonableness basis, and Behre Dolbear has noted herein where such provided information engendered questions. Except for the instances in which Behre Dolbear has noted questions, Behre Dolbear has relied upon the information provided as being accurate and suitable for use in this report. Behre Dolbear and PAC retain the right to change or modify their conclusions if new or undisclosed information is provided that might change their opinion.



ITEM 6. PROPERTY DESCRIPTION AND LOCATION 6.1 PROPERTY AREA AND TERMS OF AGREEMENT Two uranium deposits have been delineated on the CHUP. The SCHD is centered near latitude 36º52’18”N, longitude 79º18’00”W on the Spring Garden USGS 7.5-minute quadrangle topographic map, and the NCHD is centered near latitude 36º52’43”N, longitude 79º18’12”W on the Gretna USGS 7.5-minute quadrangle topographic map. The CHUP consists of fee simple ownership and leasehold interests in the mineral and surface rights to a portion of the Coles property and the contiguous Bowen property, as well as other properties as shown in Table 6.1: Property Ownership and Lease.

T A B L E 6.1: PR OPE R T Y OW NE R SH I P A ND L E A SE

Item

Surface

Rights

(Acres)

Mineral

Rights

(Acres)

Term or

Expiration Date

A Coles Hill, LLC Mineral Lease Dated 4/4/2007 252 904* 12/31/2045

B Bowen Minerals, LLC Mineral Lease Dated

4/4/2007 112 12/31/2045

Total of Parcels A & B 252 1,016

C Crider Option for Surface Rights Related to

Bowen Lease Dated 5/29/2007 112 5/29/2037

D Burt Land Purchase Dated 5/30/2007 767 767 None

E Coles Option Dated 5/31/2007

Parcel 1 148 148 12/31/2045

Parcel 2 206 206 12/31/2045

Total of Parcels 1 and 2 354 354

F Marline Purchase (Recorded 8/9/2007) 8 0 None

G Additional Land (Purchased 10/10/2007) 226 226 None

H Additional Land (Purchased 10/31/2007) 410 410 None

I Additional Land (Purchased 11/6/2007) 167 167 None

Total Contiguous Project Area 2,296 2,940

*Protected Area in the Coles Hill, LLC Mineral Lease restricts surface rights but allows mineral rights

by underground mining on about 648 acres (per 6/8/2007 Amendment)

The use of surface rights has been restricted by the leases in about 652 acres near the historical Coles farm house (Protected Area). The type of mining that is allowed in the Protected Area is limited to



underground mining by the terms of the lease with Coles Hill, LLC. Surveyed land plots are available in Chatham, the county seat. After legal review, Virginia Uranium is satisfied with ownership, title and agreements pertaining to the CHUP. The total mineral rights and leases cover approximately 2,940 acres (1,190 hectares), with about 2,296 acres (929 hectares) in surface rights. No obligations must be met until 2020 to retain any of the above interests.

6.2 PROPERTY LOCATION The CHUP is situated in Pittsylvania County and the Piedmont physiographic province in southside Virginia (Figure 6.1). The property is 6 miles (10 kilometers) northeast of Chatham, the county seat, which has a population of about 1,500 people and is 30 miles (48 kilometers) north of Danville, an independent city bordering Pittsylvania County to the south, with a population of about 45,000 people. The Raleigh-Durham area, North Carolina, population about 1,200,000 people, is about 70 miles (110 kilometers) southeast of Danville, Virginia and 88 miles (140 kilometers) southeast of the CHUP.

Figure 6.1: General location of Coles Hill Uranium Deposit in Pittsylvania County, Virginia

6.3 LEGAL SURVEY Survey plots of the Coles farm lands and the Bowen farm lands are available from the land offices in Chatham, Virginia. The property plan was constructed from legal survey plots obtained from Pittsylvania County.



6.4 ENVIRONMENTAL LIABILITIES Neither Behre Dolbear nor PAC is aware of any environmental liabilities related to the CHUP. Exploration holes drilled by Marline and Virginia Uranium have been abandoned by cementing them from bottom to top as required by Virginia state regulations. Virginia Uranium has abandoned most of its holes by cementing them from bottom to top, but one drill hole was abandoned by turning it into a monitoring well to study the fracture hydrology of the deposit. NCHD and SCHD are mainly covered by a few meters of barren material, and drilling was the only invasive method used to explore the deposits. Other non-invasive methods, such as ground radiometry, magnetic, and gravity, have also been used. Prior to the conduct of new drilling, an exhaustive Uranium Exploration permit was submitted to and approved by the Virginia Department of Mines, Minerals, and Energy (DMME). This permit included an evaluation of the local environment, detailed operations and reclamations plans for drill sites, wetlands delineation, study of critical habitats for endangered or threatened species, and archeological, cultural, and historical resources. During operation and reclamation, the operations were and will continue to be regularly inspected by a DMME mine inspector. 6.5 WORKINGS ON THE PROPERTY No surface workings are present on the CHUP. No new residential, commercial, or industrial property development or construction was observed on or near the site. 6.6 TITLE AND AGREEMENTS Virginia Uranium and their legal counsel have satisfied themselves with respect to ownership and title to the CHUP (Table 6.1) 6.6.1 Coles Lease and Bowen Lease

On April 4, 2007, Virginia Uranium entered into a deed of mineral lease with Bowen Minerals, LLC (Bowen Lease) and a deed of mining lease with Coles Hill, LLC (Coles Lease and collectively with the Bowen Lease, “Leases”). Pursuant to the Leases, Virginia Uranium was granted the sole and exclusive right to drill, quarry, mine, process, store, remove, and sell all of the uranium and all other fissionable source materials located on or under the lands of the two adjoining properties. The Leases expire on December 31, 2045, unless otherwise terminated or extended as agreed between the parties. The Protected Area, as described in the Coles Hill Lease, contains historical sections for preservation on which surface activities are only allowed by written permission from the owners of the Protected Area. On June 8, 2007, Coles Hill, LLC amended their lease to allow for underground mining in the Protected Area as long as the mining does not disturb, harm, or damage the historic or other structures located within the Protected Area or restrict the enjoyment thereof. On November 6, 2007, the owners of the surface rights gave written permission for ten holes to be drilled in the Protected Area. On each anniversary of the Effective Date after December 31, 2020, Virginia Uranium has agreed to pay minimum annual rent (Anniversary Payment) to Bowen Minerals, LLC under the terms of the Bowen Lease and to Coles Hill, LLC under the terms of the Coles Lease. In addition, Virginia Uranium has agreed to pay Coles Hill, LLC and Bowen Minerals, LLC, as applicable, an earned revenue royalty at a fixed percentage of the actual price per pound of U3O8 received by Virginia Uranium for arms length sales to third parties. These costs have been included in the economic analysis.



6.6.2 Land Acquisition and Option Agreements

Uranium exploration is regulated by DMME and a permit must be obtained to conduct exploration activity. Virginia Uranium applied for and obtained a permit on November 14, 2007 to conduct exploration activities on 200 acres and to drill 40 holes on the CHUP. This permit allows Virginia Uranium to conduct drilling to a depth in excess of 50 feet for the purpose of determining the location, quantity, or quality of uranium ore. Land acquired pursuant to the terms described in the agreement dated May 22, 2007 between Fred W. Burt and Shirley C. Burt (Burts) and Virginia Uranium was assigned to Southside Cattle Company (SCC), a 100% subsidiary of Virginia Uranium. SCC acquired approximately 767 acres of land contiguous to the South Coles Hill Deposit (Burt Lands), excluding any mineral rights associated with the Burt Lands (Reserved Minerals)(Table 6.1). SCC also acquired an option to lease the Reserved Minerals (Burt Option) from the Burts, which option may be exercised by SCC at any time prior to 2045. Upon exercise of the Burt Option, Virginia Uranium through SCC shall have the right to remove and sever all such Reserved Minerals from the Burt Lands. Pursuant to an option agreement (Crider Option Agreement) dated June 1, 2007, between Roy Crider and Connie Crider (Criders) and Virginia Uranium, the Criders have granted to Virginia Uranium an option to purchase approximately 112 acres of land which covers part of the surface rights of the South Coles Hill Deposit exercisable for a period of 30 years commencing on June 1, 2007. The minerals rights under these 112 acres are covered by the Bowen Minerals LLC Lease. Pursuant to an option agreement (Coles Option Agreement) dated May 31, 2007, among Virginia Uranium, Walt Coles, Senior and Alice C. Coles, Virginia Uranium has acquired an option (Coles Option) to purchase approximately 354 acres of land, which covers the southern portion of the Project area (Table 6.1). It is exercisable for a period commencing after the Virginia General Assembly has enacted and the Governor of Virginia has signed legislation establishing a permitting program for Uranium and Virginia Uranium has received all necessary approvals to mine pursuant to a mining plan. The lease ends on the earlier of the termination or expiration of the Coles Lease. 6.6.3 Marline Property Purchase

SCC, on behalf of Virginia Uranium, purchased 8 acres of land that was owned by Marline and sold at auction for failure to pay taxes to Pittsylvania County in July 2007. The transfer of deed was recorded on August 9, 2007. This purchase conveyed only the surface rights to Virginia Uranium and the mineral rights are retained by the churches that were part of Camp Pitt Church Camp. 6.6.4 Additional Property Purchase of October 10, 2007

SCC, on behalf of Virginia Uranium, purchased the surface rights to approximately 226 acres of then non-contiguous property for set-back purposes on October 10, 2007. The subsequent purchase of land on November 6, 2007 made this land contiguous to the Project site. The original landowner retains the mineral rights but has granted SCC the option to lease the mineral rights at any time prior to the Year 2045 for the same terms as the Coles and Bowen terms. Upon the exercise of the mineral rights option, Virginia Uranium through SCC shall have the right, at any time, to remove and sever the mineral rights from this property for a period of 20 years. 6.6.5 Additional Property Purchase of October 31, 2007

SCC, on behalf of Virginia Uranium, purchased approximately 410 acres of contiguous property on October 31, 2007 for process and set-back purposes. No mineral lease payments are associated with this land purchase.



6.6.6 Additional Contiguous Property Purchase of November 6, 2007

SCC, on behalf of Virginia Uranium, purchased approximately 167 acres of contiguous property on November 6, 2007. At closing, a fee simple title was conveyed to SCC. This property purchase allowed the non-contiguous property purchase of October 10th to be contiguous to the Project site. The original landowner retains the mineral rights but has granted SCC the option to lease the mineral rights at any time prior to the Year 2045. Upon the exercise of the mineral rights option, Virginia Uranium through SCC shall have the right to at any time to remove and sever the mineral rights from this property for a period of 20 years for the same terms as the Coles and Bowen mineral lease terms. 6.6.7 State Road 690 (Coles Road)

The state road that goes through the property is a prescriptive easement in favor of the Commonwealth of Virginia but the mineral rights remain with the landowners. Prior to the relocation or closure of this road, consent will be requested from the Commonwealth of Virginia and/or local authorities.



ITEM 7. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY

7.1 ACCESS TO THE PROPERTY AND PROXIMITY TO POPULATION CENTER(S) The property is accessed by a major north-south highway, U.S. Highway 29, and is between the cities of Danville and Lynchburg. Danville, historically a mill and tobacco town, is about 30 miles (48 kilometers) to the south. Lynchburg, a city that has a significant nuclear industry presence, is about 50 miles (81 kilometers) to the north. The site can be accessed by driving through the towns of Chatham or Gretna, and then secondary roads. From Chatham, Virginia, secondary paved roads such as Chalk Level Road (State Road 685) intersect directly with the gravel Coles Road (State Road 690) that bisects the project area. A number of dirt roads and lanes provide access to the Coles farm land and Bowen farm lands that form the CHUP. The Company has also acquired rights to nearby lands for use in its operations. See Figure 7.1.

Figure 7.1: Topographic plan, Coles Hill Area, Pittsylvania County, Virginia



7.2 CLIMATE AND LENGTH OF OPERATING SEASON The climate in the region is characterized by warm temperatures during the summer months. Cooler temperatures in the winter months produce some freezing and snow, averaging about 10 inches annually from mid-November through mid-March. The area is warm, with average maximum temperatures in Chatham and Danville over 80°F from June through September and average maximum temperatures between 47°F and 52°F from December through February. There is no defined rainy season; however, severe storms accompanied by heavy rain may occur from June through September. Occasional rain and cooler temperatures occur in December and January. The average annual precipitation is about 42 inches, with monthly averages varying from about 3.0 inches to 4.6 inches. The humidity averages about 80%, with higher average values near 90% occurring in August and September. A pleasant climate allows for all-year operation. 7.3 AVAILABILITY OF SURFACE RIGHTS, POWER, WATER, AND MINING

PERSONNEL The CHUP consists of leases on the mineral and surface rights to a portion of the Coles property and the contiguous Bowen property, as well as other properties. The total mineral rights and leases cover approximately 2,940 acres (1,190 hectares), with about 2,296 acres (929 hectares) in surface rights. The use of surface rights has been restricted by the leases covering about 648 acres near the historical Coles farm house (Protected Area). Surveyed land plots are available in Chatham, the county seat. Development of the NCHD and SCHD as a mine may require management of local surface drainage, wetlands and groundwater, and relocation or closure of part of State Road 690, a gravel country road called Coles Road. The Virginia power grid and Williams’ Transco interstate gas pipeline provide a local source of fuel and electrical power. Mining personnel can reasonably be recruited from the local area, as the skill sets needed for miners exist already among people and companies who are comfortable with mining, farming, and heavy equipment. Nearby Virginia Tech, in Blacksburg, Virginia, has a large mining engineering department and a significant geology department that can provide high-quality employees. The Commonwealth of Virginia has a strong mining heritage that is active in the western portion of the state, with many companies providing specialized mining services and veteran mining personnel who can assist in this project. This project site has significant advantages over remote areas for the recruitment and retention of mining personnel as well as local and regional infrastructure. 7.4 INFRASTRUCTURE The Virginia Uranium controlled surface area will be required for the mining of the North and South Coles Hill Uranium Deposits. A number of areas outside the leased area provide suitable sites for tailings management areas and plant sites. Since acquisition of suitable sites is required, Virginia Uranium has about 1,508 acres (609 hectares) of contiguous land under control for potential mine, mill, waste, and tailing management areas, as well as set-back provisions. Reclamation requirements may call for part of the tailings to be returned to the open pit or underground mining areas and non-radioactive overburden used to cover tailings. Additional land may be required to ensure efficient site operations. 7.5 PHYSIOGRAPHY The topography at the CHUP is subdued, with typical rolling hills of the Piedmont Province having elevations ranging from about 560 feet (170 meters) in Mill Creek to approximately 700 feet (213 meters)



at Coles Hill. The area is drained by Mill and Whitethorn Creeks, with Mill Creek entering Whitethorn Creek 1.4 miles (2.2 kilometers) east of Coles Hill.



ITEM 8. HISTORY The Danville Triassic Basin was targeted by Marline in 1977 for uranium exploration because of the location of the basin near possible granitic sources of uranium, the probable existence of stratigraphic traps, and indications of uranium from airborne surveys (Dribus 1978). The history of exploration and development of the Coles Hill Uranium Deposit is highlighted below:

• In June 1977, Marline initiated ground radiometric reconnaissance surveys. This activity was limited to car-borne radiometric surveys.

• Ground radiometric surveys led to discovery of uranium-bearing rocks in mid-1978, and a lease acquisition program was started.

• First Marline mineral leases were acquired in September 1978. • The Coles Hill Lease was acquired in December 1978. • Marline 1978 surface sampling yielded 0.5 weight % U3O8. • Extensive helicopter airborne gamma ray spectrometer and VLF/EM surveys were flown in May

through June 1979. • In 1979, Marline established an operating office in Danville, and in June 1979, exploration

drilling was initiated and continued to May 1982. Marline drilled 74 NQ diamond drill core holes (65,082 feet) and 182 (124,799 feet) rotary holes, which were used to delineate NCHD, SCHD, and adjoining properties. Three NQ holes (4,274 ft) were drilled January through March 1984 between the NCHD and SCHD were not available for incorporation into Marline reports or analyses.

• Pursuant to the Marline uranium discovery, the 1981 Virginia General Assembly directed the Virginia Coal and Energy Commission (CEC) to undertake a study of the issue of uranium development in the Commonwealth, and specifically in Pittsylvania County. The CEC commenced its study in April 1981, and created a Uranium Subcommittee in late summer of 1981.

• On October 1, 1981, the Board of Directors of Marline voted to name the uranium mineral deposits at Coles Hill the Swanson Uranium Project in memory of Mr. Alaster G. Swanson, initial president and chief executive officer of Marline. The historical name Swanson appears in some Marline reports produced after October 1, 1981.

• On July 21, 1982, Marline announced, in a press release, discovery of the Coles Hill deposit estimated to contain 30 million pounds of U3O8 at an average grade of more than 4 pounds per ton of ore and larger quantities of lower grade resources.

• The Uranium Subcommittee recommended in 1982 that Virginia adopt a statute that would regulate exploration for uranium ore. The recommendation was adopted through passage of Virginia Senate Bill 179, which also prohibited any Virginia agency from accepting permit applications for uranium mining before July 1, 1984, or until a program for permitting uranium mining is established by statute.

• On December 1, 1982, Marline and Union Carbide Corporation (Union Carbide) entered into an agreement, with Union Carbide obtaining an 18-month option on the SCHD to complete a feasibility study by June 1984, with a requirement that the option be exercised within that time frame.

• On February 7, 1983, following the Uranium Subcommittee recommendations, Senate Bill 155 (SB 155) established the Uranium Administration Group (UAG), charged with examination of uranium development “at specific sites in Pittsylvania County” and available on October 15, 1983

• On July 13, 1984, UMETCO submitted a detailed feasibility study for Marline and Union Carbide related to development of the Coles Hill Deposit.



• In 1985, the Uranium Subcommittee of the CEC and the UAG reported that, “We now conclude that the moratorium on uranium development can be lifted if essential specific recommendations derived from the work of the Task Force are enacted into law.”

• In August 1990, Marline abandoned the Coles Hill uranium project. Diamond drill core was donated to the Virginia Museum of Natural History and has been cataloged and carefully stored at the site. Samples used for laboratory tests were shipped to a radioactive disposal site in Colorado and are no longer available. Behre Dolbear and PAC have obtained access to the geochemical data base and to radiometric logs.

• From 1984 until the present time, the CHUP has been studied and reported on by researchers at the Virginia Polytechnic Institute and State University. On September 21, 2001, Dr. James L. Jerden, Jr. submitted a doctoral dissertation in geology to Virginia Tech entitled: “Origin of Uranium Mineralization at Coles Hill, Virginia (USA) and its Natural Attenuation within an Oxidizing Rock-Soil-Ground Water System.”

8.1 HISTORICAL DRILLING The Marline drill program lasted from 1979 through 1984. The first campaign, from 1979 to 1982, consisted of 256 total drill holes (182 rotary percussion [RP] holes and 74 continuous diamond drill holes drilled by Boart Longyear Contracting Services). Of these drill holes, 220 were used to develop the historical resource estimates for the Coles Hill Property, as outlined in the PAH Reports.

• PAH completed resource estimates for the SCHD based on the results from 71 RP holes and 57 diamond core holes, as outlined in the South PAH report.

• PAH completed resource estimates for the NCHD based on the results from 80 RP holes and 12 diamond core holes, as outlined in the North PAH report.

• Another 31 RP holes and five diamond core holes were drilled on the CHUP for exploration purposes.

• Core from all the diamond drill holes was geologically logged, and the mineralized sections were split and sent to Hazen Research for analysis.

• The PAH reports detailed a preliminary model of the SCHD, which was developed using 100-foot-spaced cross sections through the deposit.

From 1979 through 1982, Marline drilled 74 NQ (65,082 feet) and 206 6-inch-diameter rotary-percussion holes. Twenty-four RP holes were drilled outside the present boundary of the CHUP. All previously described core and 182 (124,799 feet) rotary holes were used to delineate the Coles Hill Deposits. Exploration of the CHUP was conducted by Marline and Union Carbide to industry’s best practice. A map of drill holes used to define the entire deposit is shown in Figure 8.1, and maps of drill holes used to define the SCHD and NCHD are shown in Figure 8.2 and Figure 8.3, respectively. From January through March 1984 with three NQ holes (4,274 ft) were drilled between the NCHD and SCHD. Data from the holes was not available for incorporation into Marline reports or analyses.



Figure 8.1: Drill holes used to evaluate Coles Hill Uranium Project (CHUP)



Figure 8.2: Drill holes used to evaluate South Coles Hill Deposit (SCHD)



Figure 8.3: Drill holes used to evaluate North Coles Hill Deposit (NCHD)

Analytical methods, analytical procedure, and sample security were discussed in the historical reports. The core was placed in boxes and stored in sturdy racks in a secured corrugated metal building located



immediately west of State Route 690 and about 1 kilometer south of CHUP. PAC and Behre Dolbear toured the CHUP core storage building with Mr. Norm Reynolds, who was the Coles Hill exploration manager for Marline and is former president of Virginia Uranium. Mr. Reynolds described Marline’s procedures (personal communication, 2007) as follows:

“All core was transported by company truck to a core logging and splitting building. The core was logged with the mineralized sections split and the samples placed in bags that were shipped via commercial truck or Federal Express to Hazen Research, Inc. in Golden, Colorado for analysis. When the company abandoned the project, all core was donated to the Virginia Museum of Natural History, which has maintained the core in excellent condition. All core boxes were well labelled as to hole number and the footage markings are still in place and visible.”

The procedures outlined by Mr. Reynolds were consistent with the best industry practices of the time. 8.2 HISTORICAL RESOURCE AND RESERVE ESTIMATES After completion of grid drilling of the deposit, Marline retained PAH in 1982 to estimate resources for the Coles Hill Uranium Deposit. PAH conducted “reserve” estimates using methodology, categories, and classification acceptable in 1982. The PAH “reserve” estimates are summarized in Table 8.1. In developing the reserve estimates for the two deposits PAH (1982) used the following method:

“The measured reserves include material which is within the mineralized outlines and is within 50 feet of a drill hole or is between holes showing continuous mineralization of similar grade up to a distance of 120 feet. The indicated reserves include the balance of the material within the mineralized outlines. To complete the grade information on some sections where drilling is widely spaced, hole information was projected from adjacent sections. The grade information projected was done as discreet grade ranges or as the average of the mineralized column being projected. The selection of the projections was based on a judgment of how well the projections correlated with adjacent material.”

PAC is of the opinion that exploration at CHUP was conducted by Marline and Union Carbide to industry best practice standards at the time.



T A B L E 8.1: SC H D A ND NC H D H I ST OR I C A L “ UR A NI UM R E SE R V E ” E ST I M A T E S A F T E R PA H ST UDY (F R OM R E POR T S T I T L E D “ G E OL OG I C R E SE R V E S C OL E S H I L L SOUT H UR A NI UM DE POSI T

A ND “ G E OL OG I C R E SE R V E S C OL E S H I L L NOR T H UR A NI UM DE POSI T ” B Y PI NC OC K , A L L E N & H OL T , I NC ., A UG UST 1982)1

% U3O8 Cutoff

Measured2 Indicated2 Total2 Million Pounds Million

Tons % U3O8 Million Tons % U3O8

Million Tons % U3O8

South Coles Hill Deposit (SCHD) 0.150 3.28 0.232 1.46 0.209 4.74 0.225 21.3 0.125 3.89 0.217 1.78 0.196 5.67 0.210 23.9 0.100 4.76 0.198 3.69 0.154 8.45 0.179 30.2 0.075 5.62 0.180 8.33 0.116 14.0 0.142 39.6 0.050 8.73 0.137 13.0 0.097 21.7 0.113 49.1 0.025 13.3 0.103 16.4 0.085 29.7 0.093 55.2 North Coles Hill Deposit (NCHD) 0.150 0.557 0.204 0.376 0.225 0.933 0.212 3.96 0.125 1.07 0.170 0.869 0.172 1.94 0.170 6.58 0.100 2.66 0.133 2.97 0.127 5.63 0.130 14.6 0.075 5.30 0.109 6.44 0.104 11.7 0.106 24.9 0.050 11.0 0.085 14.9 0.080 25.9 0.082 42.5 0.025 17.2 0.068 24.7 0.063 41.9 0.065 54.5 1Based on the down hole gamma %(e) U3O8 equivalents and subsequent confirmation by disequilibrium study 2Total tonnage above cutoff grade and average % U3O8 of that tonnage NOTES: Estimates were reported as reserves but, following CIM guidelines, are considered by PAC to be historical measured and indicated resources requiring verification, a current resource estimate and a current feasibility study. The PAH estimates can only be considered historical resources since no feasibility study was completed on the Coles Hill Uranium Deposit. PAH used the cross section method with 100-foot-spaced sections. Virginia Uranium has copies of the PAH historical “reserve estimates” as well as the original assay sheets and some details of the estimation methodology. Therefore, PAC cannot verify the resource or whether the resource estimate made prior to NI 43-101 belongs in the measured and indicated resource categories as defined by the CIM. The historical estimates may not be in compliance with current standards, and should not be relied upon. Virginia Uranium is relying on current estimates presented in Item 19.

PAH U3O8 estimates in the SCHD varied from about 21 million pounds to about 55 million pounds as the cutoff grade was decreased from 0.150% U3O8 to 0.025% U3O8. The PAH U3O8 estimates for the NCHD varied from about 4 million pounds to about 54.5 million pounds as the cutoff grade was decreased from 0.150% U3O8 to 0.025% U3O8. Table 8.2 shows UMETCO’s resource quantities developed with the preliminary polygon and Kriged models, as well as the modified pit reserves.



T A B L E 8.2: H I ST OR I C A L E ST I M A T E C OM PA R I SONS, SOUT H A R E A

% U3O8 Cutoff

PAH, 1982 UMETCO Models, 1984 Preliminary Polygon1 Final Kriged Modified Pit

Reserves 2

Average % U3O8

Pounds U3O8 (Million)

Average % U3O8


Average % U3O8

Pound U3O8s (Million)

Average % U3O8


0.15 0.225 21.3 0.233 16.7 0.213 14.1 0.221 11.2 0.10 0.179 30.2 0.181 24.4 0.160 24.5 0.168 17.9 0.05 0.113 49.1 0.114 38.3 0.103 42.6 0.106 30.9 1Preliminary Polygon and Final Kriged models to minus 400 feet elevation (minus 1,000 feet depth) 2Modified Pit Reserves model to minus 280 feet bottom elevation above mean sea level (880 feet depth) NOTES: Estimates were reported as reserves but, following CIM guidelines, are considered by PAC to be historical measured and indicated resources requiring verification, a current resource estimate and a current feasibility study. The PAH estimates can only be considered historical resources since no recent feasibility study was completed on the Coles Hill Uranium Deposit. PAH used the cross section method with 100-foot-spaced sections. Virginia Uranium has copies of the PAH historical “reserve estimates” as well as the original assay sheets and some details of the estimation methodology. Therefore, PAC cannot verify the resource or whether the resource estimate made prior to NI 43-101 belongs in the measured and indicated resource categories as defined by the CIM. The historical estimates may not be in compliance with current standards, and should not be relied upon. Virginia Uranium is relying on current estimates presented in Item 19

An estimate of NCHD resources by UMETCO was not performed. Virginia Uranium completed NI 43-101 compliant resource estimates found in ITEM 19 (Mineral Resources and Mineral Reserve Estimates) of this report.



ITEM 9. GEOLOGICAL SETTING

9.1 REGIONAL GEOLOGICAL SETTING The regional geologic setting of the CHUP is derived from Jerden (2001) and Henika’s Geologic Map of the Virginia Portion of the Danville 30 by 60 Minute Quadrangle (2002). The project area is situated along the northwestern margin of the Chatham Fault Zone, which separates the Danville Triassic Basin (Mesozoic Basin) on the east from structurally deformed and metamorphosed crystalline rocks of the Piedmont physiographic province to the west (Figure 9.1: Regional geologic and tectonic setting of the CHUP). The Coles Hill uranium deposit is hosted in mylonitic quartzo-feldspathic gneiss of the Leatherwood Granite (440 Ma, Kish et al., 1979), part of the Martinsville Intrusive Suite. In general, gneisses and mica schists of the Fork Mountain Formation and Martinsville Intrusive Suite are mapped as part of the Smith River Allochthon (475 Ma), a thrust-faulted nappe which has transported these formations from their place of origin (Conley and Henika, 1973), (Hibbard et al., 2003).

Figure 9.1: Regional geologic and tectonic setting of the CHUP

9.2 STRUCTURAL SETTING AND LOCAL GEOLOGY The geology of the CHUP deposit was mapped by Marline and Union Carbide geologists, as well as Henika and Thayer (1983) and modified by Jerden (2001). The Chatham Fault Zone, mapped and studied by Lineberger (1983), delineates the normally-faulted northwest margin of the Danville Triassic Basin. According to Jerden, the uranium deposits are hosted within a fault-bounded wedge of late Precambrian-



early Paleozoic mylonitic quartzo-feldspathic gneiss with lesser amphibolite, which is found along the northwest side of the Chatham Fault (Figure 9.2).

Figure 9.2: Chatham Fault-bounded gneissic wedge which hosts CHUP deposit (Jerden, 2001)

The augen gneiss is most likely a tectonically and hydrothermally altered counterpart of biotite gneiss of the Leatherwood Granite. This fault-bounded wedge shows evidence of hydrothermal events and alteration characterized by sodium metasomatism, chloritization, argillization, and hematization, with associated uranium mineralization. The Leatherwood Granite is bounded on the west by schist and gneiss of the Fork Mountain Formation (Henika, 1998; revised 2002).



ITEM 10. DEPOSIT TYPES The CHUP is a hydrothermal, fracture-hosted deposit, with tectonic events related to the Chatham Fault Zone allowing transport of hydrothermal solutions, alteration, and associated uranium mineralization. Chemical and mineralogical changes in the host gneiss and amphibolite resulted in areas of apatite enrichment, chloritization, and hematization. Oxygen depletion and resultant redox reactions from hematization of iron in magnetite and other mafic minerals neutralized uranium-transporting solutions, allowing for deposition of uranium-bearing minerals. The increased hematite and lowered magnetite content is reflected in anomalously low magnetic signatures for the Coles Hill Deposits. In Dahlkamp (1993), the Coles Hill deposit is classified as Type 3, Class 3.1.1, which is an intragranitic vein deposit, having veins formed within the intrusion. Host rock criteria include highly differentiated leucogranitic rocks of crustal origin, and structural vein control by commonly one or more parallel oriented dilational fracture systems. The uranium deposition mechanism at Coles Hill is similar to that in the Athabasca Basin, as indicated by the presence of alteration minerals hematite, epidote, and chlorite. The deposition mechanism in the Athabasca Basin has produced significant-grade uranium mineralization, which might also occur in the untested deeper parts of the Coles Hill Deposits.



ITEM 11. MINERALIZATION 11.1 TYPE OF HOST Uranium mineralization in the Coles Hill Uranium Property is hosted by three separate textural rock types. These three textural types are: (a) hematitic and mylonitic Leatherwood Granite (Figure 11.1), (b) hematitic amphibolite intrusive into Leatherwood Granite (Figure 11.2), and (c) densely fracture-filled Leatherwood Granite. All of the hosted rock types are found west of the Chatham Fault Zone.

Figure 11.1: Hematitic and mylonitic Leatherwood Granite

Figure 11.2: Hematitic amphibolites

At Coles Hill, one of the host rocks is mylonitized orthogneiss with depleted quartz and structurally controlled Na-metasomatism as albitization along the Chatham fault zone. Uranium is associated with hydrothermally filled fractures and veinlets as rims on and/or rimmed by apatite, chlorite, barite, titanium oxide, hematite, calcite, and pyrite. These are well represented as rims and veinlets in two examples as noted in photomicrographs such as in Figure 11.3, pyrite, titanium oxide, and uranium association and Figure 11.4 apatite, titanium oxide, chlorite, and uranium association.



Figure 11.3: Reflected light: Uranium minerals are developed on pyrite and titanium oxide, and associated with chlorite.(S-602, 505 to 508 feet)

Figure 11.4: Microprobe, backscatter electrons: Titanium oxides are rimmed and impregnated by Uranium and associated with apatite and chlorite (S-603, 282.3 to 283.0 feet)



11.2 MINERALS Uranium minerals identified by Klemm and Wagner (1980) are pitchblende, coffinite, and uraninite. The uranium high-grade shell is concentrated in an ellipsoidal pod or lense, that plunges south at 45° and occurs from the surface to at least 1,500 feet. As determined by downhole mapping, the regional foliation of the Leatherwood Granite gneiss is approximately N30°E, dipping at 45°SE, subparallel to the Chatham Fault. 11.3 EQUILIBRIUM Uranium is defined to be in a state of equilibrium when sufficient time has elapsed for the full series of daughter products of the decay of uranium to have formed. A state of disequilibrium may occur when uranium is mobilized and moved from its original position – most commonly by invasion of oxidizing solutions. The state of equilibrium may be determined by comparing ‘chemical’ assays of uranium to natural gamma radiation from gamma ray emitting daughter products. In practice, this is stated as chemical divided by radiometric equivalent (c/e). A state of equilibrium would be described as c/e = 1. In 2008, Behre Dolbear and PAC reviewed the results of the limited examination of core data and concurred with an assumption that the primary uranium mineralization is close to equilibrium in the area reviewed. The possibility of the occurrence of zones out of equilibrium exists.



ITEM 12. EXPLORATION The CHUP was extensively explored by Marline from 1978 through 1984, and the South Coles Hill Deposit was further explored by a Marline and Union Carbide Joint Venture from 1982 to 1984. Exploration included ground and airborne radiometric surveys and geological mapping that defined targets for an extensive drill program. Descriptions of the preliminary exploration and definition drilling were made available to Behre Dolbear and PAC for review (see ITEM 8 for details of exploration by former operators and ITEM 16 for data verification). Virginia Uranium conducted a drilling program (see ITEM 13 for details and results) from December 2007 to March 2008 during which three core and seven rotary holes were drilled for confirmation and delineation.



ITEM 13. DRILLING Drill information pertinent to the Coles Hill Deposits is based on both the historical Marline drilling done in the 1980s (see ITEM 8) and recent drilling by Virginia Uranium (Table 13.1). Historical Marline geophysical data were verified by re-entering five historical vertical holes using rotary percussion (RP). The holes selected for re-drilling were located in the North Deposit (41-19, 41-21, 41-138, and 41-183) with one in the South Deposit (41-145) and drilled with rotary percussion. The holes were re-logged with modern geophysical probes using Century Geophysical equipment from MM&A. Three of the holes were also re-logged using Schlumberger geophysical probes that included a spectral gamma probe. The 2008 Virginia Uranium drilling program results established that old drill holes can be re-entered to perform directional surveys. The surveys establish the position of mineralization allowing increased confidence in resource estimates. The recent drilling program verified historical drilling results and some portions of previously delineated resources. Locations of the re-drilled and re-entered holes are shown in Figure 13.1, Figure 13.2, and Figure 13.3. The true thickness of mineralization is unknown since the orientation of the mineralization is unknown. Mineralization is controlled by fractures and structure of variable orientation, so the direction of true thickness of mineralization is not known with certainty. Three vertical core holes were also drilled and logged in the SCHD. A summary of the Virginia 2007-2008 drilling program is summarized in Table 13.1.

T A B L E 13.1: V I R G I NI A UR A NI UM DR I L L I NG SUM M A R Y (I NT E R C E PT S W I T H G R A DE G R E A T E R T H A N 0.1% OV E R A 2 F OOT I NT E R V A L )

Hole Location Total Depth Drilled (feet)

Intercepts From (feet)

To (feet)

Interval1 (feet) % eU3O8

2

41-19 NCHD 1,437 62.0 65.0 3.0 0.129 Re-entered 88.5 93.0 4.5 0.135 95.0 97.5 2.5 0.110 106.5 109.0 2.5 0.122 115.5 121.5 6.0 0.123 123.5 127.0 3.5 0.155 131.0 135.0 4.0 0.167 137.5 147.0 9.5 0.158 164.0 169.0 5.0 0.144 177.0 186.5 9.5 0.114 188.5 191.5 3.0 0.109 193.5 197.0 3.5 0.111 211.5 214.0 2.5 0.121 216.5 227.5 11.0 0.204 460.0 470.5 10.5 0.394 494.0 513.5 19.5 0.209






To (feet)


2

689.0 692.0 3.0 0.195 41-21 NCHD 1,510 14.0 20.5 6.5 0.121 Re-entered 22.5 25.5 3.0 0.179 40.5 42.0 1.5 0.131 45.0 46.5 1.5 0.153 84.0 86.0 2.0 0.134 523.0 525.0 2.0 0.123 526.5 530.0 3.5 0.178 586.5 596.5 10.0 0.190 603.5 611.5 8.0 0.145 686.0 687.5 1.5 0.142 1,034.0 1,036.5 2.5 0.117 1,040.0 1,042.0 2.0 0.116

41-138 NCHD 1,500 Re-entered No intercepts > 0.025% (% eU3O8)

41-183 NCHD 200 Obstructed at 200’ – Shut down N-309 NCHD 1,095 91.5 95.5 4.0 0.107 RP offset of 41-183 98.5 104.0 5.5 0.154 106.5 114.5 8.0 0.132 136.0 151.5 15.5 0.158 158.0 167.5 9.5 0.108 248.5 255.0 6.5 0.131 315.5 322.0 6.5 0.124 N-310 NCHD 1,510 69.0 72.5 3.5 0.118 RP offset of 41-183 93.5 113.0 19.5 0.155 126.5 129.5 3.0 0.109 136.0 138.0 2.0 0.118 147.5 150.0 2.5 0.110 154.5 157.5 3.0 0.119 159.5 164.0 4.5 0.123 171.5 174.0 2.5 0.114 182.5 184.5 2.0 0.111 277.5 285.0 7.5 0.199 330.5 332.5 2.0 0.114 334.5 338.0 3.5 0.218 41-145 SCHD 1,506 25.0 52.5 27.5 0.189 Re-entered 113.5 130.0 16.5 0.304 133.0 175.0 42.0 0.122 177.0 189.5 12.5 0.126 191.0 194.0 3.0 0.102






To (feet)


2

201.5 221.0 19.5 0.156 272.0 274.5 2.5 0.112 S-601 SCHD 1,503 211.5 214.0 2.5 0.224 Core 307.0 309.0 2.0 0.110 322.0 325.5 3.5 0.140 329.0 331.0 2.0 0.192 344.5 351.5 7.0 0.137 S-602 SCHD 1,504 70.0 74.5 4.5 0.119 Core 105.5 109.5 4.0 0.187 117.0 122.0 5.0 0.155 127.5 130.0 2.5 0.114 335.5 339.5 4.0 0.258 344.0 346.5 2.5 0.422 348.5 357.0 8.5 0.195 366.0 372.0 6.0 0.221 377.0 378.0 1.0 0.143 420.0 421.5 1.5 0.161 S-603 SCHD 1,503 253.5 255.0 1.5 0.197 Core 261.0 265.5 4.5 0.242 267.5 279.0 11.5 0.368 282.0 298.0 16.0 0.198 309.0 320.0 11.0 0.362 391.0 394.5 3.5 0.153 396.0 402.5 6.5 0.214 458.5 471.5 13.0 0.149 501.5 509.5 8.0 0.154 584.0 589.0 5.0 0.284 593.5 607.5 14.0 0.215 610.5 635.5 25.0 0.133 655.0 660.5 5.5 0.126 665.5 666.5 1.0 0.108 671.5 673.5 2.0 0.101 679.0 685.0 6.0 0.112 692.5 699.5 7.0 0.163 751.0 752.0 1.0 0.115 763.5 766.5 3.0 0.178 838.5 840.5 2.0 0.212 864.5 872.0 7.5 0.121 875.5 878.5 3.0 0.112 Total Depth = 13,268 Percussion Holes = 8,758






To (feet)


2

Core Holes = 4,510 1Intercept length, uncorrected to true depth and thickness 2Radiometric equivalent from down hole natural gamma log

The 2008 Virginia Uranium drilling program results established that old drill holes can be re-entered to perform directional surveys. The surveys establish the position of mineralization so resource estimates are more accurate and therefore can increase the level of confidence. The Virginia Uranium 2008 drilling program also validated historical drilling results and previously delineated resources. Locations of the re-drilled and re-entered holes are shown in Figure 13.1, Figure 13.2, and Figure 13.3. A significant number of 220 drill holes used to define resources, both diamond drill and RP were collared to test the mineralization with an orientation orthogonal to the trend of the mineralization. The reported mineralized drill intercept length of any individual hole may or may not represent true thickness, depending on the attitude of the drill hole. The uranium mineralization is concentrated in ellipsoidal pods or lenses with a strike of N30°E, dip at 45°SE and which plunge south at 45°. The mineralization occurs from the surface and goes to at least 1,500 feet vertical depth. The general true thickness is inherent in the model because the model is based on a geological correlation of the actual three-dimensional mineralized intercepts. Geostatistics and search parameters are applied to estimate only the model blocks encapsulated within this defined geometry. At Coles Hill, the general true thickness direction as shown by the model approximates the steeply plunging axis of the search ellipsoid, orthogonal to the regional strike and dip direction of planar structures in the rocks, which was corroborated by the geostatistical analysis. True thickness direction on a more detailed scale would be expected to be more variable than for the deposit as a whole, and this deposit, in particular, is also more likely to have variable true thickness orientations than other deposits which have uniform stratigraphic or structural boundaries.



Figure 13.1: Drill hole locations, South Coles Hill Deposit (SCHD)



Figure 13.2: Drill hole locations, North Coles Hill Deposit (NCHD)



Figure 13.3: Planned drill hole locations, overall, Coles Hill Uranium Deposit (CHUD)



ITEM 14. SAMPLING METHOD AND APPROACH

14.1 SURFACE SOIL SAMPLING The discovery outcrop is the only radioactive exposure on the CHUP and the only surface site sampled by PAC in 2006. Oxidizing near surface conditions generally remove uranium from saprolite horizons of surface soils and weathered rock, but recent road work exposed a small area of less oxidized and weathered material that retained a substantial uranium value. PAC collected soil sample 0364 from the discovery outcrop on Coles Hill Road on the CHUP February 23 and 24, 2006. The sample was collected in a north-south direction and consisted of 2 kilograms of chips of saprolitic altered gneissic rock. The sample was located at GPS station with UTM coordinates of 17S 0651224 meters N and 4082143 meters E in the westerly drainage ditch along State Route 690 near the main entrance to the Coles Hill Manor house. The sample was placed in a plastic sack, secured and delivered by PAC to ACME Analytical Laboratories, Inc. in Vancouver, British Columbia, an ISO 9001 Accredited Laboratory for Inductivity Coupled Plasma – Mass Spectrometry (ICP-MS) and uranium analysis. The soil sample contained 1,516.8 ppm uranium by ICP-MS.

14.2 DRILL HOLE SAMPLING Virginia Uranium sampling procedure was established with input from Behre Dolbear, MM&A, and PAC. The sampling and security was strictly organized and maintained because of the radioactive nature of the commodity. The general procedural guidelines include:

• Maintain full time chain of custody for all samples; • Emphasize consistency between samples, geologist, technicians and contractors:

1) Use standard forms for Driller’s Daily Log, Core Box and Assay Checklists; and 2) Standard Rock Classifications, Lithologic Log Sheets, Chain of Custody, and Training Sign-off Sheets;

• Double check recording and entry of data; and • Use electronic data entry procedures.

All RP and core holes in 2008 were drilled in a vertical orientation. All core from the core holes was collected in 10 ft intervals from a 10 ft core barrel. Downhole geophysical gamma measurements were continuous and indicate an apparent continuous thickness of mineralization. Core was sampled in 1ft intervals for chemical assay and handheld scintillometer readings were compared to downhole geophysical depths. The 2008 drilling campaign was intended to confirm the results of the historical Marline drilling program from the 1980’s that was on 100 ft spacing. The entire area covered during the 2008 drilling campaign was 20 acres. Of this area, the SCHD had an exploration coverage area of 10 acres that encompassed three core drill holes and one RP hole. The average distance between the 2008 drilled core holes in the SCHD was 500 ft. The NCHD had an exploration coverage area of 10 acres that was comprised with six RP holes of an average spacing of 500 ft. Core drilling recovery factors exceeded 95% and did not materially impact the accuracy and reliability of the results. Sample quality was excellent due to extremely high core recovery and they are believed to be representative since handheld scintillometer results compared favorably to downhole geophysics and chemical assay results. The one foot sample intervals were found to be representative for chemical assay



results. A two-foot maximum deviation between core and geophysics was found and could be easily adjusted for depth. No other factors are believed to have resulted in sample biases. Mineralization was found in granite and amphibolite rocks. The one-foot sampling interval was chosen to differentiate between the rock types and mineralized sections that were detected with a handheld scintillometer. The widths of mineralized zones varied. No mineralization was found in the Triassic rocks or Fork Mountain Schist.



ITEM 15. SAMPLE PREPARATION, ANALYSIS, AND SECURITY A compendium of operating procedures titled “Virginia Uranium, Inc. Standard Operating Procedures for Uranium Exploration Program in Pittsylvania County, Virginia” was prepared on December 7, 2007 with updates and was followed by Virginia Uranium. A copy of the procedures is available on request from the Virginia Uranium office. The procedures have been reviewed and approved by Behre Dolbear. The sample preparation, analysis, and security procedures are defined in the Standard Operating Procedures document and include the following elements:

• General Procedural Guidelines include physical sample and data handling standards that provide an audit trail from point of collection through laboratory analysis and storage.

• Roles and responsibilities are detailed for the Qualified Person/geologist, driller, Virginia Uranium geologist, and the laboratory technician.

• Chain of custody methods and documentation for sample security are specified. • Site radiological survey to determine background radiation is defined.

During the 2008 drilling campaign, all aspects of the sample preparation were conducted by an employee, officer, director, or associate of Virginia Uranium using standard operating procedures approved by Behre Dolbear under the direction of Norman Reynolds, President & CEO, and Joseph Aylor, Chief Geologist for Virginia Uranium. “Blind” standards (spikes), blanks, and duplicates performed by Energy Labs were spot checked by Behre Dolbear. Behre Dolbear believes the sample preparation, security, analytical procedures, and results during the 2008 drilling campaign were adequate and properly documented. For the 2008 drilling campaign, one foot lengths of core were split, bagged and labeled. Samples were always kept secured in a locked area or under direct supervision of Virginia Uranium employees. They were then shipped via express delivery with a chain of custody to Energy Laboratory Inc. (Energy Labs) of Casper, Wyoming. The Energy Labs comprehensive QA/QC program meets or exceeds the rigorous criteria established by the United States Environmental Protection Agency (EPA) and State Agencies (where applicable). Energy Laboratories is certified under the Safe Drinking Water Act by Region VIII EPA, and the States of Idaho, Montana, Nevada, North Dakota, South Dakota, Washington, and Wyoming and Virginia in Region III. Samples received at Energy Laboratories are under a strict monitoring and tracking system from log-in to completion. Samples are logged in immediately upon receipt and are carefully checked for any special handling that may be needed. All analytical procedures, sample handling, and preservation techniques are EPA approved (where applicable) and strictly adhered to. Energy Labs duplicates every tenth sample to measure and control the precision of work. Where applicable, Energy Labs also spikes every tenth sample to test accuracy. Reference samples from the EPA or from private sources are tested by the laboratory with every set of samples to provide a third measure of the performance of equipment and personnel. Information on Energy Labs accreditations and certifications can be found on the Energy Labs website. Where possible, Energy Labs uses EPA, ASTM, APHA, NIOSH, OSHA, or published analytical methods and follows the procedures with strict adherence to described protocol and recommended QA/QC parameters. Actual method operating procedures are described in the Standard Operating Procedures Manual, and are available for review at the laboratory. Details can be found at: http://www.energylab.com/QualityControlList.asp?branch=Casper. The Energy Labs Quality Manual and related quality documentation meets requirements of the National Environmental Laboratory

http://www.energylab.com/QualityControlList.asp?branch=Casper�



Accreditation Program (NELAP) and American Association of Laboratory Accreditation (A2LA) standards. The detailed uranium and closed can gamma procedures used by Energy Labs are as follows: both closed can gamma and chemical analysis splits require drying at ~105°C for >16 hours in a convection oven followed by grinding via a plate pulverizer to -100 mesh. Approximately 200 grams of ground core are required for the closed-can gamma analysis and this mass is placed in a 3” diameter × 1” tall soils tin, which is then sealed with electrical tape. A minimum 15 day in growth interval is employed to establish secular equilibrium between 226Radium and the gamma emitting daughter of interest, 214Bismuth. As radon emanation studies have repeatedly demonstrated that a maximum of only 30% of 222Rn can be removed from a soils matrix using somewhat extreme techniques, the 15-day period ensures at least a 98% complete ingrowth of 214Bi. “Closed Can” uranium analysis works on the premise that, in a particular ore body, the activities of 238U and 226Ra will be in secular equilibrium being that the half-life of uranium is much greater than that of 226Ra. Once the can is sealed with the sample contained, conditions are ideal for attaining secular equilibrium between 226Ra, 222Rn, and 214Bi, which is quantified using a 2 inch NaI detector at the 214Bi 609 Kev energy region. Since 238U is the only possible source of 226Ra, the specific activity of 238U is applied to the tested activity of 226Ra to determine the total uranium concentration. The efficiency of the counting system is determined using certified 226Ra standards in the same geometry and density as the canned core samples. The official method identification used in data reporting, is EPA-901.1. Chemical analysis preparation is conducted on a strong mineral acid digest of the dried and ground core using preparation technique SW3050. After drying, grinding, and blending, a 1-gram subsample is taken and delivered to a digestion vessel. Fifty percent nitric acid is added to the vessel (50 ml centrifuge tube) and the vessel is loosely sealed and heated in a water bath at 95°C for >16 hours. Following the heating period, the volume is adjusted to a known level, typically 50 ml. Uranium analysis (and other metals) is performed on the solution by Inductively Coupled Argon Plasma (ICP) emission spectroscopy against certified commercial standards (such as EPA Method -200.7/200.8/SW6010). Quality control measures were employed to check assay and other check analytical and testing procedures as required by certification requirements and company procedures. Select sample duplicates were sent directly from Energy Labs to Saskatchewan Research Council (SRC) in Saskatoon, Saskatchewan, Canada for external confirmation of the results. SRC has the following certifications: ISO/IEC 17025:2005 accredited by the Standards Council of Canada (scope of accreditation #537). The laboratory also participates in regular inter-laboratory tests. Details related to the SRC laboratory can be found at: http://www.src.sk.ca/html/labs_facilities/geo_labs/uranium/index.cfm. No corrective actions were reported to have been taken by either Energy Labs or SRC related to the 2008 drilling campaign sample analyses. The uranium values obtained by Energy Labs were confirmed by sending via Chain of Custody control a random group of samples that covered three grade ranges of interest to SRC for check assays. The results of these confirmatory tests are shown in Table 16.1 and Figure 16.4.

http://www.src.sk.ca/html/labs_facilities/geo_labs/uranium/index.cfm�



ITEM 16. DATA VERIFICATION 16.1 SOIL SAMPLE PAC’s soil sample contained 1,516.8 ppm uranium and confirmed the location of the Discovery Outcrop. A scintillometer also gave a strong response at the Discovery Outcrop. The sample was secured and delivered by PAC to Acme Analytical Laboratories in Vancouver, British Columbia for uranium determination using Group 1EX with 0.25 gram sample digested with HClO4-HNO3-HCl-HF and analysis by ICP-MS. 16.2 VIRGINIA URANIUM DRILL HOLE RESULTS Significant results from the Virginia Uranium samples sent for chemical assay to Energy Labs from holes S-601, S-602, and S-603 are provided in Table 16.1. Graphs of the chemical assays and down hole gamma data for three core holes are shown in Figure 16.1, Figure 16.2, and Figure 16.3.

T A B L E 16.1: R E SUL T S OF 2008 C OR E H OL E S(S-601, S-602, A ND S-603)

Grade Level Drill Hole Interval % U3O8 Chemical Radiometric

Med S-601 189 0.113 0.035 208-215 0.141 0.075 287-410 0.072 0.049

Med S-602 55-168 0.068 0.061 329-420 0.125 0.087

High S-603 246.5-333 0.317 0.157 385.5-510 0.078 0.054 579.5-878 0.083 0.068



S-601

0

0.1

0.2

0.3

0.4

0.5

0.6

0 200 400 600 800 1000 1200 1400 1600

Depth (ft)

%U

3O8

Chemical dataDownhole radiometric equivalent

Figure 16.1: Chemical assays for drill hole S-601 from Energy Labs and radiometric equivalent from MM&A



S-602

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0 200 400 600 800 1000 1200 1400 1600

Depth (ft)

% U

3O8





S-603

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0 200 400 600 800 1000 1200 1400 1600

Depth (ft)

%U

3O8



Of the Energy Labs samples, the samples shown in Table 16.2 were sent to Saskatchewan Research Council (SRC) for confirmatory results. Both Energy Labs and the SRC are certified testing laboratories.



T A B L E 16.2: C H E M I C A L T E ST R E SUL T S OF SE L E C T E D SA M PL E S F R OM E NE R G Y L A B S A ND SR C

Hole Beginning Depth

Ending Depth

Energy Labs

wt % U3O8

SRC Geoanalytical Laboratories

wt % U3O8 1 S-601 189 190 0.113 0.088 2 S-601 299 300 0.000 0.00 3 S-601 319 320 0.102 0.095 4 S-601 344 345 0.226 0.217 5 S-601 408 409 0.049 0.051 6 S-602 54 55 0.080 0.068 7 S-602 74 75 0.097 0.082 8 S-602 105 106 0.013 0.012 9 S-602 125 126 0.082 0.074 10 S-602 340 341 0.020 0.017 11 S-602 341 342 0.017 0.015 12 S-602 364 365 0.088 0.092 13 S-602 419 420 0.203 0.197 14 S-603 246.5 247.5 0.037 0.000 15 S-603 265.5 266 0.012 0.000 16 S-603 283 284 0.519 0.252 17 S-603 302 303 0.274 0.118 18 S-603 310 311 0.000 0.000 19 S-603 402.5 403 0.222 0.237 20 S-603 464.5 465.5 0.115 0.120 21 S-603 501.5 502.5 0.121 0.133 22 S-603 582.75 584 0.036 0.017 23 S-603 602 603 0.338 0.283 24 S-603 621 622 0.122 0.127 25 S-603 639 650 0.033 0.013 26 S-603 656.5 657 0.130 0.126 27 S-603 674 675 0.057 0.036 28 S-603 694 695 0.074 0.062 29 S-603 712 713 0.055 0.032 30 S-603 730.5 731.5 0.026 0.004 31 S-603 748.5 749.5 0.095 0.067

When the results from the labs are subjected to a least-squares analysis, there is a good correlation, as shown in Figure 16.4 that follows even with two apparent higher assay outliers.



Chemical Assay Confirmation Comparison

y = 0.6405x + 0.0159R2 = 0.7966

0.000

0.050

0.100

0.150

0.200

0.250

0.300

0.350

0.400

0.000 0.100 0.200 0.300 0.400 0.500 0.600

Energy Labs (U3O8 wt%)

SRC

(U3O

8 wt%

)

1:1 slope line

Figure 16.4: Chemical test results for selected samples from Energy Labs and SRC

16.3 CONFIRMATION OF MARLINE GEOPHYSICAL RP DATA Virginia Uranium obtained historical geophysical data related to 251 holes (171 RP and 80 core of which six are cross-over holes – both RP and core for the same hole) from the Virginia Museum of Natural History and the Virginia Department of Mines, Minerals and Energy, as well as from Marline’s private data files. The historical Marline geophysical data was confirmed by re-drilling five historical holes. The RP holes selected for re-drilling were located in the North Deposit (41-19, 41-21, 41-138, and 41-183) with one in the South Deposit (41-145) and drilled with rotary percussion. The holes were re-logged with modern geophysical probes using Century Geophysical equipment at MM&A. Three of the holes were also re-logged using Schlumberger geophysical probes that included a spectral gamma probe with a reconfirmation of MM&A results. 16.4 CONFIRMATION OF MARLINE CORE ASSAY Virginia Uranium re-assayed core from six Marline core holes (three in the North Deposit and three in the South Deposit, with a mix of high, medium, and low assay results) to verify these historical estimates. Historical drill core, donated to the VMNH, was made available to Virginia Uranium for destructive verification purposes. This involved quartering already split and analyzed sections. Virginia Uranium’s operating procedures were reviewed and approved by PAC prior to the commencement of drilling and evaluation. A total of 60 samples representing 1-foot intervals were sent to Energy Labs. Detailed comparison of historical “old” Marline versus “new” Virginia Uranium assays are shown in Table 16.3.



T A B L E 16.3: C OM PA R I SON OF OL D M A R L I NE V E R SUS NE W V I R G I NI A UR A NI UM A SSA Y S

Grade Level

Drill Hole

Interval New

% U3O8 New

Gamma New

Interval Old

% U3O8 Old

Average New % U3O8

Average Old % U3O8

South

Low 41-153

275-276 0.050 0.041 275-276 0.046

0.072 0.067

276-277 0.078 0.059 276-277 0.084 277-278 0.062 0.045 277-278 0.061 278-279 0.078 0.048 278-279 0.048 279-280 0.150 0.078 279-281 0.079 280-281 0.015 0.018

Low 41-86

52-53 0.274 0.074 52-54 0.087

0.094 0.065

53-54 0.061 0.057 54-55 0.039 0.024 54-56 0.039 55-56 0.033 0.031 56-57 0.077 0.053 56-58 0.069 57-58 0.080 0.068

Med 57-9

846-847 0.124 0.095 846-847 0.097

0.148 0.160

847-848 0.137 0.110 847-847.5 0.150 847.5-848 0.220 848-849 0.174 0.139 848-848-5 0.160 848.5-849 0.150 849-850 0.069 0.058 849-849.5 0.081 849.5-850 0.092 850-851 0.236 0.057 850-850.5 0.110 850.5-851 0.440

High 57-9

855-856 0.323 0.219 855-855.5 0.290

0.286 0.266

855.5-856 0.470 856-857 0.284 0.181 856-856.5 0.290 856.5-857 0.200 857-858 0.269 0.160 857-858 0.230 858-859 0.202 0.121 858-859 0.120 859-860 0.458 0.287 859-860 0.380 860-861 0.180 0.120 860-861 0.240

High 41-153

337-338 0.049 0.038 337-337.5 0.033

0.250 0.221

0.111 337.5-338 0.130 338-339 0.130 0.111 338-338.5 0.130 338.5-339 0.059 339-340 0.310 0.187 339-339.5 0.250 339.5-340 0.410 340-341 0.239 0.200 340-340.5 0.240




Grade Level

Drill Hole

Interval New

% U3O8 New

Gamma New

Interval Old

% U3O8 Old

Average New % U3O8

Average Old % U3O8

340.5-341 0.240 341-342 0.523 0.306 341-342 0.360

High 41-154

360.5-361.5 1.19 0.87 360.5-361 0.640

1.018 0.921

361-361.5 1.150 361.5-362.5 0.613 0.387 361.5-362 0.766 362-362.5 0.427 362.5-363.5 0.691 0.426 362.5-363 1.140 363-363.5 0.514 363.5-364.5 0.997 0.710 363.5-364 1.050 364-364.5 1.220 364.5-365.5 1.60 1.27 364.5-365 1.470 365-365.5 0.831

High 41-159

550-551 0.645 0.575 550-550.5 0.679

0.584 0.588

550.5-551 0.871 551-552 0.877 0.618 551-551.5 0.907 551.5-552 0.540 552-553 0.454 0.371 552-552.5 0.595 552.5-553 0.694 553-554 0.508 0.434 553-553.5 0.394 553.5-554 0.242 554-555 0.438 0.226 554-554.5 0.270 554.5-555 0.688

North

Low 41-171

244-245 0.019 0.013 244-246 0.014

0.017 0.020

245-246 0.009 0.007 246-247 0.026 0.015 246-248 0.019 247-248 0.022 0.020 248-249 0.010 0.014 248-250 0.027

Low 41-174

381-382 0.052 0.030 381-383 0.068

0.053 0.058

382-383 0.064 0.040 383-384 0.050 0.040 383-385 0.054 384-385 0.040 0.029 385-386 0.061 0.033 385-387 0.053 386-387 0.052 0.040

Med 41-51

474-475 0.116 0.093 474-476 0.116

0.180 0.159 475-476 0.121 0.100 476-477 0.124 0.096 476-478 0.149 477-478 0.274 0.158




Grade Level

Drill Hole

Interval New

% U3O8 New

Gamma New

Interval Old

% U3O8 Old

Average New % U3O8

Average Old % U3O8

478-479 0.156 0.136 478-480 0.211 479-480 0.291 0.160

Med 41-175

613.5-614.5 0.170 0.099 613.5-614 0.145

0.100 0.122

614-614.5 0.294 614.5-615.5 0.033 0.025 614.5-615 0.027 615-615.5 0.133 615.5-616.5 0.128 0.085 615.5-616 0.081 616-616.5 0.124 616.5-617.5 0.098 0.057 616.5-617 0.091 617-617.5 0.052 617.5-618.5 0.070 0.052 617.5-618 0.076 618-618.5 0.201

In comparing the historical chemical data with the newly re-tested chemical data, both a high correlation factor (R2 = 0.99, Figure 16.5) and resulting slope (0.92) provide a high confidence in the ability to use the historical data and obtain acceptable results.

y = 0.9185x + 0.0067R2 = 0.994

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0.0 0.2 0.4 0.6 0.8 1.0 1.2

New Virginia Uranium, Chemical %U3O8

Old

Mar

line,

Che

mic

al %

U3O

8



Figure 16.5: Current versus historical chemical data for selected Marline drill holes

16.4.1 Assay Versus Down Hole Radiometric Charts

A confirmation of historical data results was also done by comparing results from 11 randomly selected historical core holes in the north and south areas at different ore grades. Laboratory chemical assays and closed-can gamma readings data were compared with geophysical down hole data by Marline. Table 16.4 shows the data used to develop the curves shown in Figure 16.6.

T A B L E 16.4: C OM PA R I SON OF A SSA Y A ND G A M M A L OG DA T A

Drill Hole

Virginia Uranium Assay data Virginia Uranium Closed Can Data Marline Gamma Log Data

% U3O8 (G)

T (Thickness in feet)

GxT product

% U3O8 (G)


GxT product

%(e) U3O8


GxT product

41-171 0.017 5.0 0.086 0.020 6.0 0.120 0.036 5.0 0.179 41-174 0.053 6.0 0.319 0.058 6.0 0.350 0.058 6.0 0.349 41-153 0.072 6.0 0.433 0.066 6.0 0.397 0.089 6.0 0.537 41-86 0.094 6.0 0.564 0.065 6.0 0.390 0.080 6.0 0.477 41-175 0.100 5.0 0.499 0.122 5.0 0.612 0.175 5.0 0.877 57-9 0.148 5.0 0.740 0.160 5.0 0.799 0.318 5.0 1.589 41-51 0.180 6.0 1.082 0.159 6.0 0.952 0.165 6.0 0.991 41-153 0.250 5.0 1.251 0.221 5.0 1.106 0.290 5.0 1.452 57-9 0.286 6.0 1.716 0.266 6.0 1.595 0.275 6.0 1.652 41-159 0.584 5.0 2.922 0.588 5.0 2.940 0.417 5.0 2.086 41-154 1.02 5.0 5.091 0.921 5.0 4.604 0.794 5.0 3.968 Totals and Averages

0.245 60.0 14.703 0.227 61.0 13.865 0.236 60.0 14.156



0.010

0.100

1.000

10.000

1 2 3 4 5 6 7 8 9 10 11

Sample Number

%U3

O8

New Assay Old Assay Old G-Log

Figure 16.6: Assay and gamma log comparison for selected Marline drill holes

Behre Dolbear and PAC have reviewed the results and concur that the deposit is close to equilibrium in the area reviewed. A possibility is that the occurrence of zones out of equilibrium exists and further investigation is recommended. 16.5 ROCK DENSITY ANALYSIS The rock density of samples S-601 and S-602 was measured with the results shown in Table 16.5.



T A B L E 16.5: R OC K DE NSI T Y A NA L Y SE S

S-601 S-602

Interval Density (g/cc)

Chemical % U3O8

Interval Density (g/cc)

Chemical % U3O8

189-190 2.73 0.078 54-55 2.75 0.080 212-213 2.66 0.058 (*) 59-60 2.66 0.055 289-290 2.68 0.033 64-65 2.51 0.044 296-297 2.73 0.089 69-70 2.81 0.041 301-302 2.63 0.098 74-75 2.49 0.097 306-307 2.69 0.090 79-80 2.56 0.045 311-312 2.67 0.102 93-94 2.66 0.082 Average 2.68 97-98 2.50 0.079 105-106 2.53 0.013 112-113 2.62 0.024 117-118 2.63 0.187 121-122 2.47 0.128 159-160 2.61 0.006 168-169 2.48 0.063 329-330 2.56 0.034 334-335 2.47 0.108 339-340 2.51 0.028 344-345 2.67 0.349 349-350 2.68 0.267 354-355 2.55 0.274 359-360 2.66 0.090 364-365 2.60 0.088 369-370 2.67 0.180 374-375 2.80 0.037 379-380 2.47 0.050 414-415 2.67 0.088 420-421 2.76 0.085 Average 2.61 (*) chemical analysis from interpolation

When the average chemical assay was plotted against the density, no correlation resulted as seen in Figure 16.7.



0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

2.45 2.50 2.55 2.60 2.65 2.70 2.75 2.80 2.85

Density (g/cc)

Che

mic

al A

ssay

(%U

3O8)

Figure 16.7: Rock Density versus Chemical Assay

The statistics of the rock density divided between all samples and those essentially with weak mineralization (defined as samples with 0.05% or lower chemical assay) are shown in Table 16.6.

T A B L E 16.6: DE NSI T Y OF W E A K L Y M I NE R A L I Z E D SA M PL E S V E R SUS A L L SA M PL E S

Overall Results for Both S-601 and S-602 Density, g/cc All-Data Average = 2.62 Standard Deviation = 0.10 Minimum = 2.47 Maximum = 2.81 Data With Below 0.05% U3O8 Average = 2.61 Standard Deviation = 0.11 Minimum = 2.47 Maximum = 2.81



The rock density value of 2.56 g/cc used by Virginia Uranium for resource modeling is based on one developed by UMETCO (1984). The use of the UMETCO factor (about 2.3% less dense than the results of Virginia Uranium analyses) provides a slightly more conservative resource estimate than would the use of recent analyses. The importance of the Virginia Uranium analysis is that it validates the use of the UMETCO factor. 16.6 DRILL HOLE DRIFT ANALYSIS To provide additional comfort with regard to the drill drift data, an analysis was performed to see how much deviation from the ideal vector of a given collar occurred from measured core drift (i.e., the ideal drift of a hole was computed given the surface collar coordinates, and it was compared to the measured drift). A key metric technique was used to determine the point at which the drift of the holes deviated more than 50 feet, as this is the distance used to define a measured resource. The deviations measured for core holes and rotary holes were generally comparable; however, core holes deviated less overall. 16.6.1 Core Hole Drift Data

As shown in Table 16.7 and Figure 16.8 and Figure 16.9, 50 feet of deviation is not experienced on average until around 500 feet of depth. The maximum deviation of 50 feet occurs at 700 feet to 800 feet; at three standard deviations (sigma) at 400 feet; and at six sigma at 200 feet to 300 feet. The data used in this analysis came from 46 core drill holes, 40 from the southern deposit and six from the northern deposit.

T A B L E 16.7: C OR E DR I L L ST A T I ST I C S

Deviation from Ideal Computed Drift (feet)

Standard Deviation (Sigma) from Average (feet)

Hole Length in Feet (~depth)

Minimum Measured

Maximum Measured Average Standard

Deviation Average +1 Sigma

Average +3 Sigma

Average +6 Sigma

100 0 12 3 2 5 10 17 200 0 26 7 5 12 22 38 300 0 37 10 8 19 35 60 400 0 55 16 12 28 53 90 500 3 79 24 17 41 76 128 600 3 126 34 25 60 110 186 700 4 223 52 42 94 178 303 800 5 320 70 57 127 241 413 900 16 438 103 79 181 339 575 1,000 26 519 148 126 274 527 906



Figure 16.8: Drift deviation per core drill hole versus depth

Figure 16.9: Core drill hole statistics

16.6.2 Rotary Percussion Hole Drift Data

The rotary percussion drill holes do not go beyond 50 feet deviation until around 500 feet, as shown in Table 16.8 and Figure 16.10 and Figure 16.11. Forty-two rotary percussion drill holes were used in this analysis.



T A B L E 16.8: R OT A R Y PE R C USSI ON DR I L L ST A T I ST I C S



Standard Deviations from Average (feet)a

Minimum Measured

Maximum Measured Average Standard

Deviation Average +1 Sigma

Average +3 Sigma

Average +6 Sigma

100 0 10 3 3 7 13 23 200 0 32 10 8 18 34 58 300 1 61 20 16 36 67 114 400 2 122 34 28 62 119 204 500 9 163 50 40 90 170 291 600 7 198 7 56 127 238 405 700 12 239 96 71 167 309 521 800 16 320 111 82 193 357 603 900 33 438 136 92 228 411 687 1,000 44 519 154 124 278 527 899

Figure 16.10: Drift deviation per percussion drill hole



Figure 16.11: Percussion drill hole statistics

16.6.3 Combined Rotary Percussion and Core Holes

As shown in Table 16.9, the distance at which core and percussion holes usually reached a 50-foot deviation would be around 600 feet.

T A B L E 16.9: C OM B I NE D DR I L L H OL E ST A T I ST I C S


Combined Core and Percussion


Core Average

Percussion Average

Core Standard Deviation

Percussion Standard Deviation

Average Standard Deviation

100 3 2 3 3 3 3 200 7 5 10 8 8 7 300 10 8 20 16 15 12 400 16 12 34 28 25 20 500 24 17 50 40 37 29 600 34 25 71 56 53 40 700 52 42 96 71 74 56 800 70 57 111 82 91 70 900 103 79 136 92 119 85 1,000 148 126 154 124 151 125



ITEM 17. ADJACENT MINERAL PROPERTIES Behre Dolbear and PAC are not aware of adjacent mineral properties.



ITEM 18. MINERAL PROCESSING AND METALLURGICAL TESTING Considerable test-work and an evaluation study have been performed in the past on the VUI ore. Dravo Engineer and Constructors in 1981 and Pincock, Allen and Holt in January 1982 conducted feasibility studies. Hazen Research conducted acid and alkaline leach studies in 1982. On November 12, 1982, Colorado School of Mines Research Institute (CSMRI) then performed a comprehensive study of the processing characteristics of composite samples from both the North and the South areas. UMETCO (formerly Union Carbide) and Marline Uranium further evaluated the Hazen and CSMRI work in a report titled “Swanson Project Geology, Mine and Mill Design and Environmental Studies” (July 13, 1984). Lyntek’s evaluation draws primarily on the UMETCO summary, as well as some data from the CSMRI study. In the opinion of Lyntek, this work was performed by credible organizations whose work was respected and is worthy of this level of feasibility study. 18.1 RESOURCES 18.1.1 Ore Resources

The mineral resources available for mining are discussed in the Mine Plan in Item 25. These values were used as the basis for the processing plant design and cost development. 18.1.2 Water Resources

The mill process water system will collect precipitation and site run-off collection, mine dewatering and recycle from the tailings system. The alkaline processing method designed maximizes internal plant process water recycling in order to conserve reagent and water consumption. Based on the predicted material balance the required water supply to the plant during standard operations is 270 gpm (0.6 cfs); during startup the required supply is 1000 gpm (2.2 cfs). The water treatment system is located near the mill and will process approximately 300 gpm water. 18.2 PRODUCTION AND MINE LIFE The life of the project as described is projected to be 30 – 35 years, based upon the economics of the current uranium price and the ore grade calculation. Table 18.1 shows the expected production schedule, grade, and recovery assumptions used for the initial production years in the processing plant design and economic model.

T A B L E 18.1: PR I M A R Y PR OC E SSI NG PR ODUC T I ON A SSUM PT I ONS

Operating Hours per Day 24 Scheduled Shifts per day 3 Scheduled Day per week 7 Operating Days per year average

350

Average Head Grade U3O8 0.119%

Processing Recovery U3O8 82.9 %



As the mining progresses later in the production stages, when only pillar extraction mining is being executed, the production rate will drop to about 1/3 of the primary mining rate. Processing operations will be modified to 6 ten-hour or 7 eight-hour operating shifts per week rather than 21 eight-hour shifts. 18.3 METALLURGICAL TEST WORK RESULTS Considerable test-work and an evaluation study have been performed in the past on the VUI material. Hazen Research conducted acid and alkaline leach studies in 1982. Colorado School of Mines Research Institute (CSMRI) then performed a comprehensive study of the processing characteristics of composite samples from both the North and the South areas. UMETCO (formerly Union Carbide) and Marline Uranium further evaluated the Hazen and CSMRI work in a report titled “Swanson Project Geology, Mine and Mill Design and Environmental Studies” (July 13, 1984). Lyntek’s evaluation draws primarily on the UMETCO summary, as well as some data from the CSMRI study. In the opinion of Lyntek, this work was performed by credible organizations whose work was respected and is worthy of this level of feasibility study. Lyntek evaluated both acid and alkaline mills to determine which mill would be the better option. The grade Lyntek selected for the comparative study was 0.188% U3O8. Leach recoveries of 94% and 83.5% were established from the UMETCO report for acid and alkaline leaching, respectively. The actual reagent consumption is expected to be lower, as the UMETCO tests did not recycle any carbonates. This evaluation established that the alkaline method of processing is preferable. 18.4 PROCESS DESCRIPTION This PEA considers a mill and yellowcake facility that includes standard typical ore processing equipment to optimally recover uranium. In this preliminary design, leaching of uranium will be accomplished using carbonate reagents. The overall plant recovery is projected to be 82.9 percent. 18.4.1 Crushing and Grinding

Run-of-Mine (ROM) material will be crushed through a primary jaw crusher before feeding the grinding stage. It is assumed that the crushing plant will operate 2 ten-hour shifts per day at 90% availability, which results in an average operating time of 20 hours per day. The ROM material will be fed to a vibratory grizzly feeder to route fine material past the jaw crusher to the reclaim stockpile. The coarse material will be crushed through the jaw crusher before feeding the reclaim stockpile. A covered overland conveyor system will transport the crushed material from the crushing circuit to the reclaim stockpile that is adjacent to the processing plant. Design will focus upon minimizing dust and noise impacts to the environment. Primary grinding will be performed in a semi-autogenus grinding (SAG) mill. Material will be fed from the ore stockpile via belt feeders and conveyors. The SAG mill discharge will be coarse screened to remove pebbles, if any, and this oversize material will be re-circulated back to the SAG mill. Space has been allowed for retro-fitting of a pebble crusher if required. The secondary grinding circuit is a typical cyclone-ball mill configuration. The primary SAG mill discharge is pumped directly to a cyclone cluster to remove the majority of fine material. The cyclone oversized material is fed to a ball mill in closed circuit. The target cyclone overflow product size is P80 65-mesh (Tyler).



18.4.2 Alkaline Leach

The slurry is pumped from the grinding circuit to a densification thickener. The thickener overflow is re-circulated back to the SAG mill feed as process water. The thickener underflow is pumped to the leaching circuit. The leach process occurs at atmospheric (ambient) pressure in eight (8) agitated tanks. The slurry flows by gravity from tank to tank through the leach circuit. The total retention time for the slurry in the leach circuit is 44 hours. The leach temperature is elevated to 194 ºF and maintained by adding steam to each leach tank. Soda ash (Na2CO3) and sodium bicarbonate (NaHCO3) are added to each leach tank. The leach circuit discharge is then pumped to the counter current decantation (CCD) circuit. Air is the oxidizing agent in the alkaline leach circuit and is added under low pressure through submerged spargers located in each leach tank. 18.4.3 Counter Current Decantation (CCD)

The CCD system is designed to recover the dissolved uranium values from the leached solids, which, after exhaustion, are subsequently disposed of in the tailings impoundment. Countercurrent washing of the leached slurry is carried out in eight (8) high capacity type 70 ft diameter thickeners. The thickeners are arranged at the same elevation, such that both the underflows and the overflows require pumping. The pregnant liquor and slurry solids are pumped from the leach system to the first CCD thickener. The solids settle to the bottom of the thickener and are pumped to the second CCD thickener while the relatively solid-free liquid overflows from the first CCD thickener and is pumped to a ClariCone. The ClariCone underflow is returned to the first CCD thickener while the overflow pregnant liquor is fed to the uranium precipitation stage. The underflow from each thickener is mixed with the overflow from the next unit in line. Wash water is mixed with the feed to the eighth thickener; wash water will be a mixture of fresh water and re-carbonated recycle. The underflow from the eighth thickener is pumped to the tailings facility. 18.4.4 Tailings Disposal

Tailings from a uranium milling facility are classified as 11(e)2 “waste” and as such are regulated by the NRC. To this purpose, the NRC must approve the design of tailings disposal plans, as part of the overall license to operate. Adequate areas have been identified to place the tailings facilities and work is ongoing to finalize the location of the tailings cells. Slurry from the CCD plant will either be pumped to the surface tailings impoundment cells or to the paste plant. In the process, plant waste or tailings will be mixed with approximately 5% cement to produce a paste, which is estimated to contain about 30% moisture. As permitted by regulatory agencies, this paste will be returned to the underground workings as backfill using positive displacement pumps. The paste tailings will solidify, limiting the infiltration of outside water, limiting the remobilization of the tailings and adding structural integrity to allow pillar extraction and thus maximizing the uranium resource recovery. Additional work will need to be conducted to optimize the paste tailings design. 18.4.5 Uranium Precipitation, Drying and Packaging

The pregnant (uranium bearing) liquor from the ClariCone overflow is transferred to the first of three precipitation tanks in the first precipitation circuit. Caustic soda (NaOH) is added to maintain a constant pH in the precipitation stage. Uranium is precipitated as uranium peroxide (UO4·2H2O). The uranium precipitate slurry is pumped from the third precipitation tank to the first yellowcake thickener, where most



of the solution is separated from the uranium oxide solids. The thickener overflow is sent to a re-carbonation stage for recycling to the grinding and leaching circuits. A second stage of precipitation is designed to remove impurities entrained in the first precipitate. The first thickener underflow is fed to the yellowcake re-dissolve tank, where the solids are contacted with sulfuric acid. The uranium is then re-precipitated in a series of three precipitation tanks. The uranium precipitate slurry is pumped from the third precipitation tank to the second yellowcake thickener, where most of the solution is separated from the uranium oxide solids. The thickener overflow is sent to a re-carbonation stage for recycling. The thickener underflow is fed to the yellowcake filter press. In the yellowcake filter press, most of the solution in the uranium precipitate slurry is removed. The resulting filter cake is then washed with water to remove all the remaining dissolved salts so they do not appear in the final product after drying. The dewatered yellowcake falls into a shaftless conveyor where it is re-slurred with clean water then is pumped to rotary paddle vacuum dryer. The off-gasses, mainly water vapor, are drawn through a “sock” type filter to trap dust. The gas system has a condenser to recover the water, which is recycled. Vacuum is provided by a liquid ring vacuum pump, which will act as a scrubber to capture any dust escaping the dryer. Seal water from the vacuum pump will be used elsewhere in the plant, so any uranium reaching the pump will be recycled. The dried yellowcake discharges from the dryer by gravity via a rotary valve and a drum filling system into 55-gal steel drums. The drum filling station includes a weigh scale; a vibrator and controls that fill each drum to a pre-assigned net weight. The yellowcake product drums are transferred by forklift truck to product storage. 18.5 CAPITAL AND OPERATING COSTS 18.5.1 Processing Capital

The processing capital cost for a 3,000 tpd alkaline leach plant is summarized in Table 18.2.



T A B L E 18.2: A L K A L I NE PR OC E SSI NG C A PI T A L SUM M A R Y

Direct Costs $US Material Handling $ 5,253,459 Grinding $ 6,741,655 Leaching $ 6,035,262 CCD and Filtration $ 7,444,840 First Stage Precipitation $ 1,661,475 Precipitation, Filtering and Packaging $ 4,492,214 Reagent System $ 451,872 Utilities $ 3,338,083 Concrete $ 5,202,873 Structural Steel $ 5,465,644 Buildings $ 6,158,525 Electrical $ 2,942,108 Power Substation (5MW) $ 3,000,000 Instrumentation and Control $ 2,051,553 Piping $ 1,612,743 Tailings (reported below) $ - Other $ 1,729,068 Subtotal Direct Costs $ 63,581,374 Indirect Costs Engineering $ 6,321,726 Construction Management $ 1,896,518 Freight $ 1,954,596

Contractor Small Tools and Consumables $ 1,250,941 Subtotal Indirect Costs $ 11,423,781 Subtotal Capital Costs $ 75,005,155 Contingency Contingency at 25% $ 18,751,289 Subtotal Contingency $ 18,751,289 TOTAL CAPITAL $ 93,756,443

18.5.2 Tailings Capital Costs

The tailings impoundment cell costs are outlined in Table 18.3. The cost to build includes all material and labor. The reclamation cost includes material and labor for five feet of cover, six inches of topsoil and re-vegetation. The capital for the cells are included on a schedule based on mining rate, impoundment construction taking place the year prior to need, and no more than two 40 acre cells being disturbed at any given time.



T A B L E 18.3: T A I L I NG S I M POUNDM E NT C OST SUM M A R Y

Cell Capacity Cost/Cell ($) KTons/Cell Build Reclaim Cell 1A – Bottom 2,769 $ 10,232,345 $ 696,125 Cell 1A – Top - $ 5,370,858 Cell 1B 2,769 $ 9,473,559 $ 673,250 Cell 1C 2,769 $ 10,228,434 $ 554,250 Cell 1D 2,769 $ 9,735,749 $ 754,250 Cell 1E 2,769 $ 7,136,183 $ 760,125 Cell 1F 2,769 $ 7,136,183 $ 583,000 Cell 2A 1,550 $ 3,991,668 $ 410,575 Cell 2B 1,105 $ 3,365,936 $ 354,775 Total 19,269 $ 66,670,913 $ 4,786,350

18.5.3 Processing Operating Costs

The processing operating costs are summarized in Table 18.4.

T A B L E 18.4: SUM M A R Y OF PR OC E SSI NG OPE R A T I NG C OST S F OR 3,000 T PD A L K A L I NE PR OC E SS

Area Annual $/ton of ore $/lb U3O8 Raw Materials 6,070,461 $5.78 $3.33 Labor (All inclusive) 5,839,325 $5.56 $3.20 Power 1,697,205 $1.62 $0.93 Water 207,900 $0.20 $0.11 Spare Parts 1,563,677 $1.49 $0.86 Office and Lab Supplies 500,000 $0.48 $0.27 General and Administrative 850,000 $0.81 $0.47 Yellowcake Transportation. 218,725 $0.21 $0.12 Total Operating Costs w/o Cont. $16,947,292 $16.14 $9.30

The manpower for the processing plant is shown below in Table 18.5.



T A B L E 18.5: PR OC E SSI NG L A B OR R E QUI R E M E NT

Position Persons

Salaried Mill Superintendent 1 Asst Mill Superintendent 1 Mill General Foreman 1 Shift Forman 4 Maint Gen Forman 1 Maintenance Forman 4 Instrument Technician 4 Employee Relations Mgr 1 Secretaries 2 Radiation Safety Officer 1 Safety Supervisor 1 Environmental Officer 1 Purchasing Agent 1 Warehouseman 2 Metallurgist 1 Chief Chemist 1 Controller 1 Clerks 2 Total Salaried 30

Hourly Labor Maintenance: Electricians 2 Electrician Helpers 2 Mechanics 10 Mechanics Helpers 10 Subtotal 24 Plant Operation: Plant Technician 2 Site Security 4



T A B L E 18.6: PR OC E SSI NG L A B OR R E QUI R E M E NT (C ONT I NUE D)

Position Persons

Safety and Environmental Tech 3 Laboratory Analysts 3 Loader Operator 4 Crusher Operator 4 Grind/Leach Operator 4 CCD Operator 4 Precip Operator 4 Tailing Operator 4 Plant Helper 4 Utility 2 General Labor 4 Subtotal 46 Total Hourly 70 Total Salaried 30 Grand Total Labor 100

18.5.4 Tailings Operating Costs

The operating cost for the transport of tails from the CCD circuit to the surface tailings impoundments is included in the processing cost for the plant. The operating costs for the tails paste processing and transport of paste for backfill is $2.11/ton of ore mined. These costs include transport, power, fly ash, fuel and expendable items. Labor is accounted for elsewhere.



ITEM 19. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES CHUP has current in-place mineral resource estimates based on historical and current drilling. 19.1 MODELING METHODOLOGY Virginia Uranium supplied MM&A with historical data on about 230 drill holes. MM&A is a full-service geological, engineering, and environmental consulting firm rooted in the mining industry. The company has been in business for over 30 years and has over 200 employees in 12 branch offices in the United States. The Coles Hill resource estimation was performed by Mr. John Eckman, Geologist/Manager Computer Modeling and Mapping, who has been on the staff of MM&A for 14 years. Mr. Eckman has over 15 years of experience modeling mineral reserves and resources with VulcanTM software and five years of experience specifically modeling ore deposits. His supervisor is Mr. K. Scott Keim, CPG, and President of MM&A. Scott Keim was responsible for MM&A preparation of the estimated mineral resources. Betty Gibbs was responsible for Behre Dolbear’s review of the estimated mineral resources prepared by MM&A and was the Qualified Person responsible for the estimated mineral resources. Both Mr. Keim and Ms. Gibbs are independent of Virginia Uranium and/or Santoy as set out in Section 1.4 of NI 43-101. Betty Gibbs has read the definition of “Qualified Person” as set out in NI 43-101 and certified that by reason of her education (graduate of Colorado School of Mines with an Engineer of Mines degree in 1969, and a Master of Science degree in 1972), affiliation with a professional association (registered as a Qualified Person with the Mining and Metallurgical Society of America), and past relevant work experience (work as a mining engineer and ore reserves specialist including direct experience on uranium extraction projects), she fulfills the requirements to be a “Qualified Person” for the purposes of NI 43-101. The drill hole data consisted of geological logs and cross-sections, down hole analog geophysical logs, laboratory assay data, and down hole orientation survey (drift) data. Analog geophysical logs were digitized and supplied to MM&A by Gibbs Associates, supervised by Ms. Betty Gibbs, Behre Dolbear Associate. Additionally, three core holes were drilled by Virginia Uranium and geophysically logged by MM&A. Four Marline holes were reopened by Virginia Uranium and geophysically logged by MM&A. Data from the Virginia Uranium geophysical logs for these four holes were used in this study. 19.2 DATA AND LOG PROCESSING Logs of natural gamma radiation, collected with Minerals Service Company and Century Geophysical Corporation probes, were digitized for 230 drill holes from hard copy logs. Also included were natural gamma digital data from nine surveys by MM&A using Century Geophysical probes. The combined historical and Virginia Uranium surveys totaled 180,973 feet. The natural gamma values were converted to radiometric equivalent U3O8 grade in percent by MM&A using appropriate water factors, casing factors, digitizing scaling factors, and uranium equivalency (K) factors. Laboratory assay data were available for 80 historical core holes and one new Virginia Uranium core hole (S-603 in the South Deposit with the results of S-601 and S-602 arriving after the modeling), totaling 55,311 sampled feet and 20,863 samples. MM&A created a merged file in which radiometric equivalent data were replaced by assay data if they existed. Available down hole orientation (drift) survey data were incorporated in the model for 96 total drill holes, including 87 drill holes for which the historical drift data were used. An analysis of the down hole surveys indicated that the variance from ideal was moderate as there was less than 50 feet difference from ideal down to a depth of 300 feet.



19.3 RESOURCE MODELING AND ESTIMATION The Coles Hill geologic model was generated with Maptek’s Vulcan 3-D geological modeling and mine planning software, Version 7.5. Vulcan is a geological modeling, surveying, and mine planning program that is accepted in the modeling of uranium and other types of deposits. A block modeling method was used to estimate the amount of resources. Two geologic contacts were entered that bound the main host rock, which comprises mylonitic feldspar augen gneiss and amphibolite of the Late Ordovician Leatherwood granite. The upper bounding structure is the Triassic Chatham fault, and the lower contact is between augen gneiss and an underlying Fork Mountain schist unit. A block model was produced based on 20 feet × 20 feet horizontal and 10 feet vertical block sizes within the boundaries of the main ore host lithology. Larger block sizes were used outside the two bounding contacts, and the model was estimated fully in all directions. Two mineralized domains, north and south, were established based on drill hole data and historical modeling. The nominal spacing of drill holes is about 100 feet in both North-South and East-West directions. The nominal sample spacing was 0.5 feet for radiometric equivalent data and 1 to 2 feet for assay data. For both data types, samples were composited in VulcanTM over a 3-foot interval measured along the drill hole. A variographic analysis was performed using the Vulcan geostatistics module, and search parameters were chosen based on the directions of continuity and ranges of influence from this analysis, as well as from visual inspection of the data. One search ellipsoid was used for both deposit domains with three orthogonal axes as follows: a horizontal axis oriented N30°E (strike direction) with a search radius of 250 feet, an axis plunging 40° in a S60°E direction (dip direction) with a search radius of 250 feet and a sub-vertical axis orthogonal to the other two, with a search radius of 50 feet. The selected orientation of the search ellipsoid mimics the strike and dip of compositional layering and flattening foliation in the host rock. Principal radii of 250 feet in strike and dip directions were chosen to be 2.5 times the nominal drill hole spacing. A smaller search radius of 50 feet sub-vertical was chosen because of the greater number of samples in this direction. Searching with declustering of data was performed in octants using a maximum of eight sample points and a minimum of two sample points per octant. Grade estimation was performed with an inverse distance cubed algorithm. Grade shells of 0.20, 0.10, 0.05, and 0.025 wt % U3O8 were used to constrain the grade estimation to accept only composites within the boundaries of that grade shell. Grade estimation was performed on a mass (weight percent) basis. A density value of 0.080 tons/cubic foot (2.56 g/cc) was employed for all rock types, which is typical of a granitoid rock with fracture porosity. This density value was also determined and used by Union Carbide in a July 13, 1984 evaluation of the Coles Hill Deposit. 19.4 CIM MINERAL RESOURCE ESTIMATES Canadian NI 43-101 definitions of mineral resource and mineral reserve refer to the terms as defined by the Canadian Institute of Mining, Metallurgy, and Petroleum (CIM). The CIM definition standards on mineral resources and mineral reserves are as follows: “A Mineral Resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade,



geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.” The definition of a Mineral Reserve is as follows: “A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.” In addition, the CIM definition standards for a technical report are defined as a report that contains the relevant supporting documentation, estimation procedures and description of the exploration information, or the mineral resource and mineral reserve estimate.

“Technical Reports of a Mineral Resource must specify one or more of the categories of ‘Inferred’, ‘Indicated’ and ‘Measured’ and Technical Reports of Mineral Reserves must specify one or both of the categories of ‘Proven’ and ‘Probable’. Categories must not be reported in a combined form unless details for the individual categories are also provided. Inferred Mineral Resources cannot be combined with other categories and must always be reported separately. Mineral Resources must never be added to Mineral Reserves and reported as total Resources and Reserves. Mineral Resources and Mineral Reserves must not be reported in terms of contained metal or mineral content unless corresponding tonnages, grades and mining, mineral processing and metallurgical recoveries are also presented.”

This evaluation classified measured and indicated resource based on the criteria stated below: Measured – within a radius of 50 feet of a drill sample composite. This distance is half the nominal drill spacing of 100 feet. Indicated – within a radius of 50 to 200 feet of a drill sample composite. This distance is twice the nominal drill spacing of 100 feet. Measured resource in this study was restricted to the south domain using only holes that had been chemically assayed and that had been surveyed for down hole drift. Forty holes met the criteria for both chemical and drift data. A three-dimensional block model from these holes demonstrated reasonable continuity of ore grade zones. Consequently, a measured resource of 8.4 million pounds of U3O8 is reported and is subtracted from the indicated resource. Measured and indicated resource estimations from the model are reported in Table 19.1.



T A B L E 19.1: R E SOUR C E E ST I M A T E S – J UNE 4, 2008 (M I L L I ONS OF T ONS A ND POUNDS I N-PL A C E )

Cutoff % U3O8

Measured1 Indicated1 Total1

Tons2 % U3O8

3 Pounds U3O8

Tons2 % U3O8

3 Pounds U3O8

Tons2 % U3O8

3 Pounds U3O8

South Coles Hill Deposit (SCHD) 0.200 0.397 0.301 2.39 2.35 0.264 12.4 2.75 0.270 14.9 0.150 0.562 0.264 2.97 4.56 0.221 20.1 5.12 0.225 23.1 0.125 0.654 0.246 3.22 5.24 0.210 22.0 5.90 0.214 25.2 0.100 0.755 0.228 3.45 5.31 0.209 22.2 6.07 0.211 25.6 0.075 1.35 0.164 4.44 16.7 0.122 40.9 18.1 0.125 45.3 0.050 2.28 0.124 5.65 22.3 0.109 48.7 24.5 0.111 54.3 0.025 6.62 0.064 8.42 44.6 0.071 63.5 51.2 0.070 71.9 North Coles Hill Deposit (NCHD) 0.200 - - - 0.519 0.320 3.32 0.519 0.320 3.32 0.150 - - - 0.851 0.262 4.46 0.851 0.262 4.46 0.125 - - - 0.927 0.252 4.67 0.927 0.252 4.67 0.100 - - - 0.959 0.247 4.74 0.959 0.247 4.74 0.075 - - - 7.31 0.103 15.1 7.31 0.103 15.1 0.050 - - - 13.2 0.088 23.1 13.2 0.088 23.1 0.025 - - - 47.5 0.050 47.1 47.5 0.050 47.1 CHUP Project Total (South and North Coles Hill Deposits) 0.200 0.397 0.301 2.39 2.87 0.274 15.7 3.26 0.278 18.1 0.150 0.562 0.264 2.97 5.41 0.227 24.6 5.97 0.231 27.6 0.125 0.654 0.246 3.22 6.17 0.216 26.7 6.82 0.219 29.9 0.100 0.755 0.228 3.45 6.27 0.215 26.9 7.03 0.216 30.4 0.075 1.35 0.164 4.44 24.0 0.116 55.9 25.4 0.119 60.4 0.050 2.28 0.124 5.65 35.4 0.101 71.7 37.7 0.103 77.4 0.025 6.62 0.064 8.42 92.1 0.060 111.0 98.7 0.060 119.0 1Total tonnage above cutoff grade and average weight % U3O8 of that tonnage 2Short tons based on a rock density of 2.56 g/cc 3Weight %

It should be emphasized that the estimate is strictly an in-place resource with no property restrictions, recovery and dilution factors, or economic considerations applied. Figure 19.1 is a plan view of the deposit from the merged block model. Figure 19.2 and Figure 19.3 are cross-sections respectively of the 0.1 wt % U3O8 grade shell and block grade estimations from the merged model.



Figure 19.1: Plan view of deposit from merged block model, 0.1 wt % U3O8 grade shell shown in red



Figure 19.2: Vertical cross-section with 3-D view of the 0.1 wt % grade shell, looking west, 0.1 wt % U3O8 grade shell shown in red. Line of cross-section shown in Figure 19.1

Figure 19.3: Vertical cross-section with 2-D view of block grade estimations, looking west. Grade intervals are wt % U3O8. Line of cross-section shown in Figure 19.1



Table 19.2 and Table 19.3 are tabulations of the comparison of the Virginia Uranium model to the PAH estimates.

T A B L E 19.2: C OM PA R I SON OF M ODE L R E SUL T S SOUT H C OL E S H I L L DE POSI T (SC H D)

Cutoff

% U3O8

Historical Marline (PAH) 1982 Estimate1 Virginia Uranium (MM&A) 2008 Estimate2

Million Tons3,4 % U3O8

5 Million Pounds U3O8

Million

Tons3,4 % U3O8

5 Million Pounds U3O8

0.150 4.74 0.225 21.3 5.12 0.225 23.1 0.125 5.67 0.210 23.8 5.90 0.214 25.2 0.100 8.45 0.179 30.2 6.07 0.211 25.6 0.075 14.0 0.142 39.6 18.1 0.125 45.3 0.050 21.7 0.113 49.1 24.5 0.111 54.3 0.025 29.7 0.093 55.2 51.2 0.070 71.9 1Based on the down hole gamma %(e) U3O8 equivalent and subsequent confirmation by disequilibrium study

2Includes Measured and Indicated Resources

3Weight %

4Total tonnage above cutoff grade and average % U3O8 of that tonnage




T A B L E 19.3: C OM PA R I SON OF M ODE L R E SUL T S NOR T H C OL E S H I L L DE POSI T (NC H D)

Cutoff % U3O8

Historical Marline (PAH) 1982 Estimate1 Virginia Uranium (MM&A) 2008 Estimate2


5

Million Pounds

U3O8


5

Million Pounds

U3O8 0.150 0.933 0.212 3.96 0.851 0.262 4.46 0.125 1.94 0.170 6.58 0.927 0.252 4.67 0.100 5.63 0.130 14.61 0.959 0.247 4.67 0.075 11.7 0.106 24.9 7.31 0.103 15.1 0.050 25.9 0.082 42.5 13.2 0.088 23.1 0.025 41.9 0.065 54.5 47.5 0.050 47.1 1Based on the down hole gamma %(e) U3O8 equivalent and subsequent confirmation by disequilibrium study

2Includes Measured and Indicated Resources

3Weight %

4Total tonnage above cutoff grade and average % U3O8 of that tonnage




ITEM 20. OTHER RELEVANT DATA AND INFORMATION In 1985, a subcommittee of the Virginia Coal and Energy Commission, the Uranium Administrative Group (UAG) made the following recommendation: “Based on all these efforts, we can now conclude that the moratorium on uranium development can be lifted if essential specific recommendations derived from the work of the task force are enacted into law.” Sixteen members of the UAG supported the recommendation with two dissents. The moratorium was not lifted because specific legislation was not introduced due to the drop in uranium prices that eliminated the economic viability of any venture trying to mine uranium in Virginia. Leased mineral rights were eventually returned to the land owners. In September 2007, the executive branch of the state government published the Virginia Energy Plan, which provided a comprehensive analysis for how the state might become more energy independent. The report highlighted that approximately 35% of electricity generation in Virginia comes from nuclear power plants, while all the nuclear fuel (uranium) is currently imported into the state. Due to the presence of substantial uranium resources in Southside Virginia the report recommended that serious consideration be given to the development of a local uranium mining initiative. The following direct quotes from the Virginia Energy Plan refer to the Coles Hill uranium deposit in Pittsylvania County:

“There are sufficient resources to support a uranium mining industry in Pittsylvania County with enough to meet the fuel needs of Virginia's current generation... Virginia should assess the potential value of and regulatory needs for uranium production in Pittsylvania County.”

During the 2008 General Assembly in Virginia, Virginia Uranium supported legislation that proposed a study of uranium development in the state that followed the recommendations of the Virginia Energy Plan that was published in September 2007. While the Virginia Senate approved a uranium study bill on February 12, 2008 by a vote of 36 in favor and 4 opposed, the legislation was subsequently tabled during a hearing of the Rules Committee in the Virginia House of Delegates. Thus, the uranium study bill was not approved. In November 2008, the Virginia Coal and Energy Commission created a sub-committee to evaluate uranium mining. The sub-committee engaged the National Academy of Sciences (NAS) to undertake a study with an anticipated duration of 18 months. The Virginia Coal and Energy Commission will make recommendations to the legislature based on the outcome of the NAS study. Since Virginia has a bicameral legislature, bills must be approved by both the House and the Senate. The Governor must then sign the bill for it to become enacted into law. The nuclear industry has a substantial presence in Virginia. In addition to a relying on the generation of electricity from reactors sited at Surry and North Anna, Virginia has a strong history in other phases of the nuclear fuel industry. Norfolk is home to the U. S. Navy’s, nuclear powered aircraft carriers and submarines. Portsmouth is home to the Northrop Grumman’s shipyard that recently built and commissioned the nuclear aircraft carrier, the USS George H. W. Bush. On October 23, 2008, Northrop Grumman and AREVA announced that they have joined forces to build a new manufacturing and engineering facility in Newport News to establish a world-class facility to manufacture heavy components for the U.S. Evolutionary Power Reactor (EPR), AREVA’s Generation III + nuclear reactor. Lynchburg is home to AREVA and Babcock & Wilcox employing 5,000 people. Nor is mining new to Virginia which, ranked nationally, is tenth in the production of coal and fifth in the production of crushed stone.



ITEM 21. INTERPRETATION AND CONCLUSIONS CHUP is an advanced stage exploration project that was brought to the feasibility study stage by Marline, with joint venture participation by Union Carbide in the SCHD portion of the Project. Behre Dolbear and PAC have reviewed the results from the core data and concur with an assumption that the deposit is close to equilibrium in the area reviewed. The possibility of the occurrence of zones out of equilibrium exists. A potential to delineate additional resources for the NCHD and SCHD exists and expansion should be pursued. Some upgrading of the confidence level of resources from Indicated to Measured may be achieved by re-entering old drill holes and performing a down hole directional survey. The level of confidence and reliability of earlier work is high enough that further confirmation drilling and verification is not important at this stage of development. The following conclusions have been made as a result of this Preliminary Economic Assessment:

• Adequate uranium resources are available for an economic venture; • The continuity of mineralization through to the surface in both the north and south deposits could

support either open pit or underground mining, however underground mining is recommended (open pit is not discounted);

• Underground mining can be performed by sub-level open stoping (SLOS), a historically productive and a safe mining method;

• The dip of the ore bodies’ foliation is around 39 degrees SE and this is below the rill angle of broken rock. Individual stope floor angles will have to be steepened by mining waste to produce a floor angle of 50 degrees. This waste has been included in mined ore and dilutes the overall grade from underground mining by 10%;

• Primary stopes using SLOS will extract 70% of the underground mineral resource available for mining. These stopes will be backfilled with cemented fill, and pillars between the stopes will subsequently be extracted using cut & fill mining. Pillar mining will extract 20% of the mineral resource available for mining and 10% of the resource will be unrecovered, remaining in the form of crown pillars and some vertical pillars;

• While acid leaching is expected to produce a higher uranium recovery, alkaline leaching is the more cost effective option;

• The overall conceptual economics are favorable for the Coles Hill project. The project shows an IRR of 36.3%; at a discount rate of 7% the net present value (NPV) is $404 million.

• The life of the mine is 30 to 35 years. • Including 25% contingency, the initial capital investment prior to production is $173 million,

however, the total capital through the 4th year of production is $204 million. • The initial annual revenue ranges from $100 to $140 million. • The direct and indirect economic benefits are on the order of $240 to $300 million. • Total labor for both the mining and milling operations is forecast at 224 for the mine and 100 for

the milling operations for a total of 324 employees. Of this, it is expected that 218 would be hourly workers and 106 would be staff.

• The annual payroll is forecast at $13 million for mining and $6 million for processing such that the total annual payroll would be $19 million. If the 25% contingency is attributed to this cost, the estimate would be $24 million.

• Salaries are expected to range from $35,000 to $250,000 per annum and hourly rates would range from $20 to $35 per hour.



• Annual material and supply costs are projected to be about $22 million during the primary mining phase such that total annual material and labor costs would roughly range from $41 to $46 million per year.

• It is envisioned during construction that 250 to 350 personnel would be necessary including employees and contractors.



ITEM 22. RECOMMENDATIONS

• Further studies are required to evaluate the relative merits of selectively mining higher grade zones early in the mining sequence.

• Underground transport of ore to the surface has been assumed in this study to be by 40 ton trucks

operating in a decline. Alternatives in terms of capital and operating costs that should be evaluated are:

o access via a vertical shaft that may or may not operate in conjunction with a decline; and o using an underground portable crusher and conveyor system instead of 40 t diesel trucks.

• It is recommended that exploration bulk sampling of ore be undertaken. The planned initial draw

point is within the South Coles deposit at section 1640A and -130B (Fig. 25.2). Access to the area could be developed via a relatively small diameter shaft or decline. The purpose of the recommended exploration activity would be multi-fold including:

• Determination of actual mining conditions to complement the information generated by the

Colorado School of Mines report etc. This would aid accurate cost estimation, and determine a variety of factors such as ground water conditions, rock strengths, radon concentrations and equipment selection;

• Allow access for detailed delineation drilling underground to further evaluate the ore grade shells of the deposit;

• Allow access for the collection of a bulk metallurgical sample. This bulk sample would be tested at an off-site licensed facility to:

o Determine the Bond Work Index (kWh/t) variability; o Determine the Work Index for semi-autogenous (SAG) mills; o Optimize leach conditions; o Evaluate the viability of processing paste tailings; and o Evaluate alternatives for tailings disposal.

• It is recommended that the project be evaluated further, that the Vulcan geologic model be further

refined to allow optimization of the mining concepts, and that other studies be determined.

• The tailings facilities have been designed for an in-place S.G. of 1.3, however further test-work is required to validate this. It is recommended that the tailings produced from alkaline leaching are tested for physical properties such as bulk density and % solids post-filtration. Additionally, the option of paste processing all tailings (i.e. surface tailings and underground backfill) should be explored. Using paste tailings in the surface tailings impoundments is beneficial as it limits the infiltration of outside water and the remobilization of the tailings and potentially reduces the size, and therefore cost, of the impoundments themselves.

• It is further recommended that test-work be conducted to determine the Bond Work Index

(kWh/t) variability throughout the North and South ore bodies. The Work Index for SAG mills should also be determined.

22.1 SCOPE OF INVESTIGATION To provide a basis for a pre-feasibility study, Virginia Uranium proposes the following tasks:



22.1.1 Resources

• Create a preliminary mine development plan using the data available. • Study the reports of prior surface geophysical surveys and, if the results indicate an

association to uranium mineralization or deposit geometry, conduct appropriate surface surveys to better delineate the deposits and/or indicate new ones.

22.1.2 Metallurgical Testing, Process Selection, and Study

• Conduct metallurgical testing to confirm the production of a commercially acceptable product and aid in the selection of a production process. A sample of about 200 pounds per process method may be sufficient to perform this testing.

• Analyze various economic, regulatory, and environmental trade-offs between acid and alkaline leaching under current and expected future conditions.

• Prepare a study on the potential to utilize radiometric sorting and other methods to increase mill feed grade and to assist in equipment design and selection.

22.2 PHASES 22.2.1 Phase 1 Delineation and Pre-Feasibility Studies

Conduct a Phase 1 program to upgrade the project to the pre-feasibility stage by computer modeling using existing data, metallurgical testing, engineering studies, and some pre-permitting activities. Phase 1 will not include any new drilling but may include evaluation of existing core and other studies. The proposed Phase 1 program is estimated to require a budget of about US$3,068,400, Table 22.1and estimated to require 9 to 12 months to complete, with some of the program continuing into Phase 2.

T A B L E 22.1: PH A SE 1 - PR OG R A M A ND B UDG E T (9 T O 12 M ONT H S)

Task Description Amount Estimated Cost (US$)

Staff 1,075,000

Pre-feasibility Studies Mine, mill and tailings management 500,000

Supplies and Equipment 100,000 Permitting and Environmental Exploration permit activities 95,000 Reporting and Engineering 50,000 Data Compilation and Entry 20,000 Resource Estimate 60,000 Metallurgical Study 100,000 Drafting 40,000 General Corporate and Other 517,000 Contingency (20%) 511,400 Total – Phase 1 (US$) 3,068,400



22.2.2 Phase 2 Delineation and Feasibility Studies

Virginia Uranium proposes a Phase 2 program consisting of continuation of baseline environmental studies, further drilling of about 35 holes or 42,000 feet, advanced metallurgical testing, and engineering studies required for a feasibility study. The location of the first set of proposed drill holes is shown on Figure 13.1, Figure 13.2, and Figure 13.3. Once mining regulations are established, a feasibility study will be completed and reserves will be estimated. A budget of US$9,206,400 is estimated for the Phase 2 program (Table 22.2). The amount of Phase 2 drilling required will depend on the success of the Phase 1 program. The Phase 2 drill program will be constructed on the basis of Phase 1 results, with input from the engineering firm selected to complete the pre-feasibility study.

T A B L E 22.2: PH A SE 2 – PR OG R A M A ND B UDG E T (12 T O 24 M ONT H S)

Task Description Amount Estimated Cost (US$)

Staff 1,075,000 Roads, Drill Sites, and Reclamation

Estimated 35 sites at $10,000 per drill site 350,000

Drilling: Core and Rotary Percussion

35 drill holes of an average 1,200 ft depth 42,000 ft 2,100,000

Sampling, Logging and Mapping 42,000 ft at average $10/ft 420,000

Geochemical Cost 20 holes of 100 one-foot samples at $50/sample 100,000

Surface Geophysics Magnetics and other 350,000 Permitting and Environmental 225,000 Feasibility Study 2,500,000 Metallurgy and Mill Study 250,000 General Corporate and Other 302,000 Contingency 1,534,400 Total – Phase 2 (US$) 9,206,400

22.3 OPINION OF MERIT AND RECOMMENDATIONS 22.3.1 Opinion of Merit

The property has sufficient merit to proceed with the proposed Phase 1 and Phase 2 programs. The deposit has sufficient merit to warrant resolving mining regulatory issues before starting a feasibility study. 22.3.2 Additional Study

Study of the geometry, continuity, and equilibrium of uranium mineralization should continue to allow determination of mining techniques and estimation of extraction costs for use in a pre-feasibility study.



ITEM 23. REFERENCES AND SOURCES OF INFORMATION Allison, Jack; Robert Merritt and Hal Peterson. 1982. Process Development Studies for the Swanson

Uranium Project. Prepared for Pincock, Allen & Holt by Colorado School of Mines Research Institute. November 12, 1982.

Barron, T. 1983. Marline Confidential Memorandum. For Marline Uranium Corporation, Draft March 31, 2003.

Burton, R.N. (for Members of Uranium Task Force). 1984. Report of the Uranium Task Force Commonwealth of Virginia. October 1, 1984.

Chemical Assay Results of 86 Holes in Tabular Format as Well as Numerous Laboratory Results Certificates.

Christopher, Peter A. 2007. Technical Report on the Coles Hill Uranium Property Pittsylvania County, Virginia. November 6, 2007.

Conley, J.F. and W.S. Henika, 1973, Geology of the Snow Creek, Martinsville East, Price , and Spreay Quadrangles, Virginia. Virginia Division of Mineral Resources Publication 33

Dahlkamp, F., Reynolds, N.W., Reifenstuhl, R., and Singletary, H. 1980. Geologic Appraisal of the Uranium Occurrences in the Area of the Danville Basin, Virginia. For Marline Oil Corporation. December 31, 1980.

Dahlkamp, Franz, 1993. Uranium Ore Deposits. Springer-Verlag. 460 pages. Dravo Engineers and Constructors Inc. 1981. Report on Feasibility Study CERD-22 Chatham Project,

Virginia, 71 p. Dravo Engineers, Inc. 1984. An Evaluation of Uranium Development in Pittsylvania County, Virginia

(October 15, 1983). Volume I – Technical Summary and 1984 Supplement with Supporting Technical Memoranda. For Marline/Umetco. September 1984.

Dribus, J.R. 1978. Preliminary Study of the Uranium Potential of the Dan River Triassic Basin System, Northern Carolina and Virginia. U.S. Department of Energy GJBX-131(78) Open File Report.

Marline/UMETCO. 1984. An Evaluation of Uranium Development in Pittsylvania County, Virginia (October 15, 1983). Technical Memoranda, Volume 2, Supplements the 1982 Report. September 1984.

Foster, R.W. 1981. Geological Report on The Dan Project, Virginia with particular Emphasis on the Coles Area Uranium Deposits. May 4, 1981.

Halladay, C.R. and Lineberger, H.D. 1982. Geology, Mineralogy and Geophysics of the Coles Hill Uranium Deposits, Pittsylvania County, Virginia. For Marline Uranium Corporation. July 1982.

Henika, W.S. and Thayer, P.A. 1983. Geologic Map of the Spring Garden Quadrangle, Virginia. Virginia Division of Mineral Resources, Publication 48 (GM47D).

Henika, W.S. 1977. Geology of the Blairs, Mount Hemon, Danville, and Ringgold Quadrangle, Virginia, with sections on the Triassic System by Thayer, P.A. Virginia Division of Mineral Resources Publication 2, 45 pages.

Henika, W.S. 2002 (originally issued 1998). Geology Map of Virginia Portion of the Danville 30 × 60 minute Quadrangle. Virginia Division of Mineral Resources Publication 166, Color 1:100,000-scale Map with Text.

Hibbard, James P., Tracy, R.J., and Henika, William S., 2003. Smith Mountain Allochton: A Southern Appalachian Pre-Gondwann Terrane Emplaced Directly on Laurentia. Geology 31: 215-218.

Internal Report, October 15, 1983. An Evaluation of Uranium Development in Pittsylvania County Virginia. Submitted by Marline Uranium Corp. and Union Carbide Corp. to the Virginia Uranium Administrative Group, Pursuant to Section 45.1-285.1 et seq of the Code of Virginia (1983) (Senate Bill 155). October 15, 1983.

Jerden, J.L. and Sinha, A.K. 1999. Geology, Mineralogy and Geochemistry of the Coles Hill Uranium Deposit, Virginia: An Example of a Structurally Controlled, Hydrothermal Apatite-Coffinite-



Uraninite Orebody. Geol. Soc. Am., Abstracts with Programs (National Meeting), v. 31, no. 7, A-69.

Jerden, J.L. 2001. Origin of Uranium Mineralization at Coles Hill Virginia (USA) and Its Natural Attenuation within an Oxidizing Rock-Soil-Ground Water System. Ph.D. Thesis, Virginia Polytechnic Institute and State University. September 21, 2001.

Kish, S.A., Butler, J.R., and Fullager, P.D. 1979. The timing of metamorphism and deformation in the central Piedmont of North Carolina: Geological Society of America Abstracts with Programs, v.11, p. 184-185.

Klemm, D.D., Wagner. 1980. Ore Mineralogy and Petrography of Cores from Coles Hill, Virginia: Marline Uranium Corporation, Internal Report.

Lineberger, D.H. 1983. Geology of the Chatham Fault Zone, Pittsylvania County, Virginia. MS Thesis, University of North Carolina, Chapel Hill, 79 pages.

Mineral Service Co. Boring Logs with Natural Gamma (counts per second), Self-potential (SP, milli-volts) and Resistivity (ohms) of about 251 holes by Mineral Service Co. of Corpus Christi, Texas and Grand Junction, Colorado starting from July 1979.

Park, Ian G., Consulting Geophysicist. 1981. Ground VLF Electromagnetic Tests and Comments on Geophysical Surveys Coles and Frith Properties. Prepared for Marline Oil Corporation. January 12, 1981.

Pincock, Allen & Holt. 1982. Description of the Swanson Uranium Project. Prepared for Marline Uranium Corporation. November 1982.

Pincock, Allen & Holt. 1982. Geologic Reserves Coles Hill North Uranium Deposit Pittsylvania County, Virginia. August 1982 (Stamped by Harry J. Winters, Arizona Professional Engineer 9402).

Pincock, Allen & Holt. 1982. Geologic Reserves Coles Hill South Uranium Deposit Pittsylvania County, Virginia. August 1982 (Stamped by Harry J. Winters, Arizona Professional Engineer 9402).

Pincock, Allen & Holt. 1981. Order-of-Magnitude Study of Coles Hill Project South Orebody. Prepared for Marline Uranium Corporation. September 1981.

Pincock, Allen & Holt. 1982. Geotechnical Survey of Coles Hill Project Area. Prepared for Marline Oil Corporation. February 1981 (Stamped by Lutz Kunze, Arizona Professional Engineer 13376).

Pincock, Allen & Holt Reserve Estimate Printouts and Documents, 1982. Pincock, Allen & Holt. January 1982. Marline Uranium Corp. Feasibility Study, Coles Hill Project., 24

p. Report of the Uranium Task Force Commonwealth of Virginia. October 1, 1984. Soil Descriptions of About 251 Holes by Marline Geologists. UMETCO Minerals Corporation. 1984. Swanson Project Geology, Mine and Mill Design, and

Environmental Studies. July 13, 1984.



ITEM 24. DATE AND SIGNATURE Signed and stamped at Denver, Colorado, this 18th day of November, 2010.

John I. Kyle, PE Lyntek, Inc. Signed and stamped at Denver, Colorado, this 18th day of November, 2010.

Doug Beahm BRS, Inc. Signed and stamped at Denver, Colorado, this 22th day of November, 2010. “Original document signed and sealed by Robert D. Maxwell”

Robert D. Maxwell Behre Dolbear & Company, Ltd. Signed and stamped at Denver, Colorado, this 29th day of November, 2010. “Original document signed and sealed by Betty L. Gibbs”

Betty L. Gibbs Behre Dolbear & Company, Ltd.



Signed and Sealed in Denver, Colorado, USA, the 22nd day of October 2010. “Original document signed and sealed by Thomas C. Pool”

Thomas C. Pool Behre Dolbear & Company, Ltd. Signed and stamped at Vancouver, British Columbia, this 18th day of November 2010. “Original document signed and sealed by Peter A. Christopher, PhD, P.Eng.”

Peter A. Christopher, PhD, P.Eng PAC Geological Consulting, Inc. Signed and stamped at Bluefield, Virginia, this 24th day of November 2010. “Original document signed and sealed by Scott Keim”

K. Scott Keim Marshall Miller & Associates

















ITEM 25. ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES

This section addresses the potential mining development of the Coles Hill uranium deposit. This work develops a mine plan and estimates costs for an overall economic analysis of this project. 25.1 MINE PLAN 25.1.1 GEOLOGIC SETTING

As discussed earlier, the Coles Hill uranium deposit is comprised of two known areas of significant uranium mineralization referred to as the North and South Coles Hill deposits. The Coles Hill deposits are structurally controlled, with ore primarily concentrated in ellipsoidal shells within a granitic host. Mineralization is ten to several tens of feet thick, whereas along the plunge to the south in the south orebody, the ore is continuous over tens to hundreds of feet (UMETCO, July 13, 1984). In both the South and North Coles Hill deposits, the granite gneiss foliation does strike northeast-southwest and dips 30 degrees to the southeast. South Coles Hill plunges approximately 45 degrees to the south and North Coles Hill plunges about 20 degrees to the north. Cross-Sections and Long-Sections generated from the uranium resource block model developed by Marshall Miller, 2008, show that higher grade ore is consistently surrounded by progressively weaker mineralization. In both deposits, mineralization continues to the surface, so the uppermost portions may be amenable to open pit mining. Mineable zones below the potential open pits are generally over 100 ft thick vertically and occasionally up to 200 ft thick. 25.1.2 ASSUMPTIONS

Mining by open pit and underground methods were evaluated as part of this report. Options considered ranged from all open pit mining to all underground mining, with several scenarios which combined open pit and underground methods. A variety of factors including environmental considerations, surface land use, and economics were investigated to determine the best method to address these issues. This analysis suggests that an all underground mining concept be employed, but this does not preclude open pit mining as an acceptable option for further consideration. The depth, continuity, structural attitude of mineralization, and rock strength make the Coles Hill deposits amenable to bulk mining methods such as Sub Level Open Stoping (SLOS). However, the foliation of the deposit will require some waste mining to steepen the footwall and allow broken ore to rill to draw-points. This method appears most suited to this deposit based upon available data. An underground mine option utilizing Sub Level Open Stopes is shown schematically in Figure 25.1. Key assumptions used for an underground plan in this study include:

• Cutoff grade 0.06% U3O8 • 10% dilution for primary stopes at ½ cutoff grade or 0.03% U3O8 • Production rate target at 3,000 tpd for 350 days/year • Primary stoping will extract 70% of the total resource above the cutoff • Pillar retreat will extract an additional 20% of the total resource above the cutoff • Pillar retreat will not be diluted but will have a higher mine cost per ton and a lower production

rate.



Figure 25.1: Sub Level Open Stope Schematic



25.2 MINERAL RESOURCES AVAILABLE FOR MINING “Mineral resources available for mining” in the context of this report represent the portion of the deposits with sufficient grade, size and spatial distribution to be potentially mined at a profit under current foreseeable economic conditions. The estimate of minable resources is based on the current mineral resource Vulcan model (Marshal Miller, 2008) which was provided as the basis for this study. A summary of the mineral resource available for mining is shown in Table 25.1.

T A B L E 25.1: SUM M A R Y OF M I NE R A L R E SOUR C E A V A I L A B L E F OR M I NI NG

Underground Total Cutoff of 0.06%

South Coles Hills Cross Section Pounds Tons Ore Grade

-160 422,311 227,170 0.093 40 2,067,705 1,087,941 0.095

240 2,202,115 1,165,511 0.094 440 3,954,002 2,086,578 0.095 640 4,116,047 1,892,000 0.109 840 6,355,471 2,767,926 0.115

1040 10,884,553 4,367,815 0.125 1240 8,227,267 3,396,719 0.121 1440 5,189,371 1,983,178 0.131 1640 3,518,509 1,246,993 0.141 1840 1,856,479 1,085,659 0.086 2040 870,441 550,815 0.079

Total (South) 49,664,271 21,858,305 0.114 North Coles Hills Cross Section Pounds Tons Ore Grade

2690 906,868 502,578 0.09 2940 1,417,233 690,963 0.103 3190 1,837,824 1,244,385 0.074 3440 3,213,797 1,548,148 0.104 3690 4,671,727 2,234,548 0.105 3940 1,624,917 915,200 0.089

Total (North) 13,672,366 7,135,822 0.096 TOTAL (North & South) 63,336,637 28,994,127 0.109

25.3 MINING RATE



The mining rate for primary stope extraction is estimated at 3,000 tons per day with four mining crews working ten-hour shifts for a total of 350 days per year. Without increasing the work force or scheduled hours the mining rate for pillar extraction is estimated at one third the stoping rate or 1,000 tons per day. The mining rate assumes that work is only occurring in one mine at a time with the general schedule being:

1. South Coles Primary Stoping 2. North Coles Primary Stoping 3. South Coles Pillar Removal 4. North Coles Pillar Removal

25.3.1 MINING METHOD UNDERGROUNG MINING

The underground mining method recommended in this study consists of Sub-Level Open Stoping (SLOS) for the primary stopes and Cut and Fill for the pillars. Both methods are addressed in the MCS publication which has been used to develop mining costs after allowing for increased labor and other additions based on experience in similar sized operations and other studies. A schematic of SLOS is provided in Figure 25.1. Figure 25.2 and Figure 25.3 show the general layout of the South Coles Hill underground mine.



Figure 25.2: Plan View of South Coles Hill Underground



Figure 25.3: Isometric View of South Coles Hill Underground, Cross Section 440 A



T A B L E 25.2: SUM M A R Y OF UNDE R G R OUND M I NI NG C OST E ST I M A T E

Sub-level Open Stope Primary Stopes

Pillar Extraction

Operating Costs/Ton Equipment Operation $ 1.31 $ 1.33 Supplies $ 4.72 $ 16.45 Hourly Labor $ 7.46 $ 20.16 Administration $ 4.81 $ 7.83 Sundries $ 1.78 $ 4.58 Total per Ton $ 20.08 $ 50.35 Per Ton of Material $ 18.25 $ 45.77 Additional allowances Increase Labor $ 4.92 $ 6.65 Total Operating Cost/ton $ 23.16 $ 52.43

25.4 CUT-OFF GRADE Various calculations of geologic resources versus cut-off grade have been made for the Coles Hill deposit. In consideration of the mining rate, milling rate, mining costs and mill recovery estimates, a cutoff grade of 0.060% U3O8 has been used in this study for underground mining via SLOS methods. The determination of a cutoff grade is an iterative process and should be re-visited when more accurate cost and/or price data becomes available. The current selection of the 0.060% U3O8 cutoff is supported by the calculation summarized in Table 25.3.



T A B L E 25.3: C UT OF F G R A DE C A L C UL A T I ON OPE R A T I NG C OST S ONL Y

Primary Stopes

Pillar Extraction

Weighted Average

Underground Mine Cost per ton $23.16 $52.43 $28.55 Milling Cost Per Ton $17.47 $17.47 $17.47 Mill Recovery 82.9% 82.9% 82.9%

U3O8 Price/lb Cut-Off Grade, wt% U3O8 $50.00 0.050 0.085 0.056 $60.00 0.041 0.071 0.047 $70.00 0.035 0.061 0.040

25.5 MINE VENTILATION The main intake ventilation will be the decline, while exhaust air will be drawn off through a series of raise-bore ventilation raises. Some raises will go through to surface and some from level to level. At full production, ventilation volumes are expected to be around 300,000 cfm, a quantity primarily driven by the underground diesel fleet emissions, within regulatory requirements. The velocity of the airflow in a 16’ x 18’ decline for 300,000 cfm is around 12 to 18 ft/sec. 25.6 MINE MANPOWER Manpower estimates for the mine operation, including direct supervision, operating labor and maintenance are provided in Table 25.4. This does not include manpower related to the operation and maintenance of the processing facility or general administrative staff, nor does the manpower estimate make any allowances for ancillary manpower related to equipment and materials suppliers. Most positions can be filled from the local workforce.



25.7 MINE DEVELOPMENT AND SCHEDULE Key assumptions impacting the underground mine development schedule include:

• Only one mine in operation at any given time. • Pre-development will require one to two years depending on equipment availability and other

factors to establish access and ventilation prior to mining. • The initial year of production is estimated to be 2/3 of full production or 700,000 tons.

T A B L E 25.4: M A NPOW E R F OR M I NI NG L A B OR R E QUI R E M E NT S

Hourly Labor Stope Miners/Drillers/Blasters 16 Development Miners 16 Equipment Operators 8 Support Miners 8 Diamond Drillers 2 Crusher/Backfill Operators 8 Electricians 12 Mechanics/Electricians 16 Maintenance Workers 20 Helpers 8 UG Laborers 22 Surface Laborers 12 Total Hourly 148 Supervision (Salaried) Manager 1 Superintendent 3 Foremen 12 Engineer 6 Geologist 6 Shift Supervisors 8 Technician 8 Accountant 4 Purchasing 4 Personnel 4 Administrative Assistant 8 Clerks 12 Total Salaried 76 Total Manpower 224



• Production rate target at 3,000 tons per day, for 350 days/year for primary stopes at full production (1,050,000 tons/year or 2,000,000 lb U3O8/yr).

• Primary stoping will extract 70% of the total resource above the cutoff. • South Coles Hill will begin initial extraction at section 1640 A at a depth of approximately 200

feet from ground surface on the north end of the south ore body. • North Coles Hill will begin initial extraction at section 3670 N, the north end of the north ore

body. • Cementaceous backfill of the stopes will be required to allow pillar extraction. • Pillar retreat will extract an additional 20% of the total resource above the cutoff. • Pillar retreat will not be diluted but will be at a lower production rate of 1,000 per ton without

increasing manpower and equipment. • Pillar retreat will begin in South Coles Hill deposit and finish at North Coles Hill deposit. • 10% of the total resource above cutoff cannot be mined safely.

Given these assumptions annual production is estimated at:

• 700,000 tons mined for the first year; • 1,050,000 tons mined each year for years 2 through 21; and • 350,000 tons mined each for years 22 through 35

Mined grades, including 10% dilution, are projected to range from 0.131 to 0.078% U3O8 over the life of the mine. To the extent practical the current mine planning extracts the higher grade portions of the deposit as early in the schedule as possible. In addition, the lower cost primary stopes in both the South and North Coles Hill deposits are completed prior to pillar extraction in either mine. 25.7.1 CAPITAL AND OPERATING COSTS

25.7.1.1 Mining Capital Costs

Major mine related initial capital costs include costs for mine equipment, development work (declines etc), and support facilities are summarized in Table 25.5.



T A B L E 25.5: SUM M A R Y OF M I NI NG I NI T I A L C A PI T A L C OST S (I N $000)

Type Number Price Total Mining Equipment 2 Boom Drilling Jumbo 1 $ 700 $ 700 Rock Bolters 1 $ 700 $ 700 4 yd LHD 2 $ 500 $ 1,000 40 t Haul Truck 3 $ 800 $ 2,400 Shotcrete Truck 1 $ 350 $ 350 Concrete Truck 1 $ 350 $ 350 Scissor Lift Truck 1 $ 300 $ 300 Other $ 620 Sub Total 6,420 Decline Equipment Stope Drilling Jumbo 2 $ 700 $ 1,400 Rock Bolters 1 $ 700 $ 700 8 yd Remote LHD 3 $ 800 $ 2,400 40 t Haul Truck 3 $ 800 $ 2,400 Scissor Lift Truck 1 $ 250 $ 250 Other $ 1,020 Sub Total $ 8,170 Support Equipment Stores Delivery Truck $ 220 Man Carrier $ 220 Explosives Truck $ 350 Water Truck $ 450 Raise Borer contract $ 2,000 Lube Truck $ 250 U/G Grader $ 600 Light Vehicles 10 x 35K $ 350 Trucks Flatbed $ 50 Communications System $ 300 Sub Total $ 4,790 TOTAL INITIAL CAPITAL $ 19,380

The initial mine capital costs will be incurred over a three year period during the pre-production and startup phase of the project. Ongoing mine capital costs for capital equipment replacement and capitalized mine development expenses (declines, development drifts, and ventilation shafts) will continue to a few years prior to completion of mining. These costs over an approximate 30 year period total in excess of US$70 million bring the total life of mine mining capital cost to approximately US$90 million. Note that the capital cost estimates do not include surface facilities and access incorporated in the plant site costs, nor is any contingency included in these estimates. Contingencies have been incorporated in the costs model as separate line items.



25.7.1.2 Mining Operating Costs

Underground mine operating costs were estimated for Sub-Level Open Stope mining for the primary stopes at a production rate of 3,000 tons per day. Operating costs for pillar extraction were estimated based on cut and fill methods at a mining rate of 1,000 tons per day. The estimated mining operating costs on a per ton basis is summarized in Table 25.6.

T A B L E 25.6: SUM M A R Y OF M I NI NG OPE R A T I NG C OST S F OR 3,000 T PD

Sub-level Open Stope Primary Stopes

Pillar Extraction

Operating Costs/Metric Tonne Equipment Operation $ 1.31 $ 1.33 Supplies $ 4.72 $ 16.45 Hourly Labor $ 7.46 $ 20.16 Administration $ 4.81 $ 7.83 Sundries $ 1.78 $ 4.58 Total per Metric Tonne $ 20.08 $ 50.35 Per Ton of Material $ 18.25 $ 45.77 Additional allowances Increase Labor $ 4.92 $ 6.65 Total Operating Cost/Ton $ 23.16 $ 52.43

Additional costs for paste backfill of mined areas are included as a portion of the tailings operating costs.

25.7.1.3 LEASE AND ROYALTY AGREEMENTS

The lease and royalty costs total approximately $120 million dollars (or $2.60/lb U3O8) over the lifetime of the mine. 25.8 VIRGINIA TAX INFORMATION Virginia’s tax system segregates the local and state sources of revenue by allowing the local governments to collect taxes on real estate, tangible personal property, machinery and tolls used in a mining or manufacturing business and merchants’ capital. The major taxes paid by manufacturers and mining companies are real estate, machinery and tools taxes. The plant equipment in this estimate has been subjected to tax as Business Personal Property. The rate is assessed at 30% of original purchase price in Year 1 and is reduced by 2.5% per year thereafter, until which time the assessed rate reaches 5% and then remains constant. The tax rate is $8.50 per $100.00 assessed value. The maintenance vehicles in this estimate have been subjected to tax by the same methodology as Business Personal Property Tax and are based on the Department of Motor Vehicles original sales price of the vehicle. All mining equipment has been taxed as Machinery and Tools. Tax is assessed at 10% of original capitalized cost and the tax rate is $4.50 per $100 assessed value.



25.9 CASH FLOW MODEL FOR 3, 000 TPD A cash flow model was developed for the alkaline case at 3,000 tpd. This model was based on the design criteria for 3,000 tpd, a 3,000 tpd conceptual mass balance and capital and operating costs for 3,000 tpd. Any apparent rounding differences contained in the tables and values related to the cash flow are due to the number of significant figures contained within the model in Microsoft Excel. The project schedule, sequence of mining, mining rate and mining costs were also used to develop the cash flow model. It is assumed that ore production commences one year after all mining permits and licenses have been received. During the primary mining (years 1-21), mining cost is forecast at $13.60/lb whereas in the final years it is forecast at $27.85 for the pillar recovery operations. Mining costs over the 30 - 35 year mine life average $16.45/lb U3O8 excluding the contingency. Tailings costs are reported as the following:

• Capital: for the Paste Fill Plant, Piping to Impoundment Cells and Tailings Impoundment Cells • Operating: for the Paste fill processing, Cover and Topsoil and Re-vegetation.

The costs are included as a schedule based on mining rate, impoundment construction taking place the year prior to need, and no more than two 40 acre cells being disturbed at any given time. Including 25% contingency, the total capital investment prior to production is $173 million, however, the total capital through the 4th year of production of $204 million is a better estimate of initial capital due to the staging of the tailings cell construction. Including 25% contingency, the total capital spending over the life of the facility is $315 million. This cost estimate excludes any other specific non-project related costs that would be in addition to this project. For example, it would be reasonable to expect that further exploration and research programs could certainly range up to an additional $40 million in an effort to generate additional resources or address other non-project goals. The cash flow model is summarized in Table 25.7. The economic analysis at a yellowcake price of $65/lb shows an internal rate of return of 36.3% before income taxes; at a discount rate of 7% the net present value is $404 million, including a 25% contingency.



T A B L E 25.7: SUM M A R Y OF A L K A L I NE 3,000 T PD E C ONOM I C M ODE L

Initial Capital Total Capital

Capital Expenditures ($000) Yr -1 to 1 LOM Permitting/bonding $ 10,000 $ 10,000 Development (preproduction) $ 5,000 $ 5,000 Mine $ 28,907 $ 89,695 Mill $ 74,563 $ 74,563 Tailings $ $ - Paste Fill Plant and Equipment $ 3,948 $ 3,948 Pipe to Impoundment Cells $ 19 $ 2,429 Tailings Impoundment Cells $ 15,648 $ 66,716 Contingency at 25% $ 34,546 $ 63,088 Initial Capex $ 172,732 Total Capex $ 315,439

* Weighted Average * Primary * Pillar LIFE OF MINE

Operating Costs, $/lb U3O8 Yr 1 to 21 Yr 22 to 36 TOTALS Production (lbs U3O8) 36,952,982 9,222,264 46,175,246 Underground Mining- Primary $ 13.60 $ - $10.88 Underground Mining- Pillars $ - $ 27.85 $ 5.56 Processing $ 9.48 $ 8.58 $ 9.30 Tailings Paste to Underground Backfill $ 0.32 $ 0.37 $ 0.33 Reclamation Impoundment Cell Cover and Topsoil $ 0.09 $ 0.15 $ 0.10 Revegetation $ 0.01 $ 0.02 $ 0.01 Closure costs $ 0.22 $ 0.22 $ 0.22 Administration $ 0.57 $ 1.55 $ 0.77 Contingency at 25% $ 6.07 $ 9.68 $ 0.80 Lease $ - $ - $ - Simple fee royalties $ 2.60 $ 2.60 $ 2.60 Property tax $ 0.23 $ 0.28 $ 0.26 Average Total by Mining Method $ 33.19 $ 51.30 Total Opex $ 36.83

Operating costs can be further broken down as summarized in Table 25.8. Annual expense includes operating costs for mining, milling and reclamation; all estimates for operating expense include a 25% contingency.



T A B L E 25.8: A NNUA L OPE R A T I NG E X PE NSE S

Production Period Annual Expense ($/lb)

25% Contingency ($/lb)

Tax and Royalties ($/lb)

Total Operating ($/lb)

Years 1-10 21.68 5.42 2.90 30.01 Years 11-20 27.84 6.96 2.72 37.52 Years 21-35 38.73 9.68 2.88 51.30 Life of Mine 27.18 6.80 2.86 36.83

The potential overall project economics at various discount rates and uranium contract prices are summarized in Table 25.9.

T A B L E 25.9: NPV A ND DC F R OR M A T R I X

Discount Rate

Uranium $/lb

5% 7% 8% 10%

NPV DCFROR NPV DCFROR NPV DCFROR NPV DCFROR

$55 $278,041 18.3% $213,962 16.1% $187,573 15.0% $143,560 13.0%

$65 $511,797 29.8% $404,133 27.3% $360,549 26.2% $288,763 23.9%

$75 $745,553 40.7% $594,304 38.0% $533,525 36.7% $433,966 34.3%

$85 $979,308 51.3% $784,475 48.4% $706,501 47.1% $579,169 44.4% Total labor for both the mining and milling operations is forecast at 224 for the mine and 100 for the milling operations for a total of 324 employees. Of this, it is expected that 218 would be hourly workers and 106 would be staff. It is envisioned during construction that 250 to 350 personnel would be necessary including employees and contractors. The annual payroll is forecast at $13 million for mining and $6 million for processing such that the total annual payroll would be $19 million. If the 25% contingency is attributed to this cost, the estimate would be $24 million. Salaries are expected to range from $35,000 to $250,000 per annum and hourly rates would range from $20 to $35 per hour. Annual material and supply costs are projected to be about $22 million during the primary mining phase such that total annual material and labor costs would roughly range from $41 to $46 million per year. The direct and indirect economic benefits are on the order of $240 to $300 million.



ITEM 26. ILLUSTRATIONS All illustrations have been imbedded within the report.