the mac property Pre-Feasibility Study

Aron Tyab – 29242112, Aiden Wu - 31103120, Frank Shen - 52168135

mineit consulting   Date of Submission: March 29, 2018

Table of ContentList of Equations..........................................................................................................................................................................2

Executive Summary...................................................................................................................................................................3

Property Description and Location................................................................................................................................3

Access, Climate, Local Resources, Infrastructure, Physiography......................................................................3

Geological Setting and Mineralization..........................................................................................................................3

Deposit Classification...........................................................................................................................................................3

Exploration............................................................................................................................................................................... 4

Drilling........................................................................................................................................................................................ 4

Sample Preparation and Data Verification.................................................................................................................4

Mineral Resource Estimates.............................................................................................................................................4

Mineral Reserve Estimates................................................................................................................................................5

Mining Methods......................................................................................................................................................................5

Mineral Processing and Recovery Methods...............................................................................................................5

Project Infrastructure.......................................................................................................................................................... 5

Market Studies and Contracts..........................................................................................................................................5

Capital and Operating Costs..............................................................................................................................................6

Economic Analysis.................................................................................................................................................................6

Environmental Studies and Permitting........................................................................................................................6

Community Engagement.................................................................................................................................................... 6

Recommendations.................................................................................................................................................................7

Introduction.................................................................................................................................................................................. 7

Property Description and Location....................................................................................................................................8

Access, Climate, Local Resources, Infrastructure, Physiography........................................................................11

Geological Setting and Mineralization............................................................................................................................12

Geology.................................................................................................................................................................................... 12

Mineralization...................................................................................................................................................................... 13

Deposit Classification.............................................................................................................................................................13

Exploration................................................................................................................................................................................. 14

Exploration History............................................................................................................................................................14

Exploration............................................................................................................................................................................ 15

Drilling.......................................................................................................................................................................................... 15

Sample Preparation and Data Verification...................................................................................................................24

Sample Preparation............................................................................................................................................................24

Data Verification..................................................................................................................................................................24

Duplicate Samples...............................................................................................................................................................25

Reference Material............................................................................................................................................................. 26

Mineral Resource Estimate..................................................................................................................................................27

Mineral Reserve Estimates..................................................................................................................................................29

Mining Methods........................................................................................................................................................................32

Open Pit Mine Design........................................................................................................................................................32

Mine Scheduling...................................................................................................................................................................39

Waste Dump Design...........................................................................................................................................................40

Haul Road Design................................................................................................................................................................ 43

Fleet Requirements............................................................................................................................................................44

Mineral Processing and Recovery Methods.................................................................................................................45

Processing Methodology..................................................................................................................................................45

Proposed Flowsheet Design...........................................................................................................................................45

Mill Equipment Selection.................................................................................................................................................47

Project Infrastructure............................................................................................................................................................ 48

Market Studies and Contracts............................................................................................................................................ 49

Market Studies......................................................................................................................................................................49

Smelter Contracts................................................................................................................................................................50

Capital and Operating Costs................................................................................................................................................51

Capital Cost............................................................................................................................................................................ 51

Mine Capital Cost............................................................................................................................................................52

Mill Capital Cost.............................................................................................................................................................. 53

Operating Cost......................................................................................................................................................................53

Mining Operating Cost.................................................................................................................................................54

Milling Operating Cost.................................................................................................................................................55

Economic Analysis...................................................................................................................................................................57

Base Case................................................................................................................................................................................ 57

Sensitivity Analysis............................................................................................................................................................ 58

Environmental Studies and Permitting..........................................................................................................................62

Environmental Permitting.............................................................................................................................................. 63

Water Quality....................................................................................................................................................................... 64

Wildlife Resources............................................................................................................................................................ 64

Climate.................................................................................................................................................................................... 64

Air Quality.............................................................................................................................................................................. 64

Noise........................................................................................................................................................................................ 64

Community Engagement...................................................................................................................................................... 64

Recommendations...................................................................................................................................................................67

Bibliography...............................................................................................................................................................................68

List of TablesTable 1: Mac Property Mineral Claims 1.....................................................................................10Table 2: Mac Property Mineral Claims 2.....................................................................................11Table 3 Summary Statistics Mo & Cu Soil Samples....................................................................15Table 4:: Significant Drill Core Intersection for Mo and Cu 1.......................................................18Table 5: Significant Drill Core Intersections for Mo and Cu 2......................................................19Table 6: Resource Estimate for Indicated Resources.................................................................29Table 7: Resource Estimate of Inferred Resources.....................................................................29Table 8: Cut-Off Grade Estimation..............................................................................................30Table 9: Reserve Estimate for Pit 2 Design.................................................................................31Table 10: Vulcan Pit Optimiser Inputs.........................................................................................33Table 11: Pit Optimiser Commodity Price....................................................................................33Table 12: Life of Mine Production Schedule................................................................................40Table 13: Life of Mine Waste Material.........................................................................................41Table 14: Haul Road Design Criteria...........................................................................................43Table 15: Daily Production Estimate using MMcKK Queue Model..............................................44Table 16: Mine Fleet Requirements............................................................................................45Table 17: Mill Process Plant Equipment......................................................................................48Table 18: Smelter Contract Terms..............................................................................................51Table 19: Mac Property Total Capital Cost Estimate...................................................................52Table 20: Total Capital Cost Breakdown for Mining....................................................................52Table 21: Development Cost Breakdown....................................................................................53Table 22: Mill Capital Cost...........................................................................................................53Table 23: Mac Property Total Operating Cost Estimate..............................................................54Table 24: Mine Operating Cost Breakdown.................................................................................54Table 25: Mine Daily Consumables.............................................................................................54Table 26: Hourly Personnel Requirements for Mine Operations.................................................55Table 27: Salaried Personnel Requirements for Mine Operations..............................................55Table 28: Mill Operating Cost Breakdown...................................................................................56Table 29: Mill Daily Consumables...............................................................................................56Table 30: Hourly Personnel Requirements for Mill Operations...................................................56Table 31: Salaried Personnel Requirements for Mill Operations.................................................57Table 32: Project Economics Base Case....................................................................................58

List of Figures Figure 1: Location Map for Mac Property......................................................................................9Figure 2: New Drill Access Trail..................................................................................................20Figure 3: Drill Hole Compilation...................................................................................................21Figure 4: East Contact Zone Mineralization Cross Section.........................................................22Figure 5: North West Contact Zone Mineralization Cross Section..............................................23Figure 6: Blank Sample Performance for Mo..............................................................................25Figure 7: Blank Sample Performance for Cu...............................................................................25Figure 8: Mac Moly Property Core Logging Facility.....................................................................26Figure 9: Mac Moly Property Core Cutting Facility......................................................................27Figure 10: Mac Property Block Model of Indicated Resources:...................................................28Figure 11: 0.05% Mo Orebody Triangulation...............................................................................31Figure 12: Mac Property Indicated Resources Grade Shell........................................................32Figure 13: Pit Optimiser Scenario 1.............................................................................................34Figure 14: Pit Optimiser Scenario 2.............................................................................................35Figure 15: Pit Optimiser Scenario Analysis.................................................................................36Figure 16: Pit 2 Design Scenario Plan View................................................................................38Figure 17: Pit 2 Design Scenario Section View...........................................................................38Figure 18: Pit 2 Design Triangulation..........................................................................................39Figure 19: Life of Mine Ore Grade Variability..............................................................................40Figure 20: Waste Dump Plan View..............................................................................................41Figure 21: Waste Dump Section View.........................................................................................42Figure 22: Waste Dump Design Triangulation.............................................................................43Figure 23: Mac Property Mo/Cu Flowsheet.................................................................................47Figure 24: Long Term Molybdenum Oxide Price in $USD..........................................................49Figure 25: Long Term Copper Price in $USD..............................................................................50Figure 26: Base Case Discounted Cash Flow Model..................................................................58Figure 27: Capital Cost Sensitivity Analysis................................................................................59Figure 28: Operating Cost Sensitivity Analysis............................................................................60Figure 29: Discount Rate Sensitivity Analysis.............................................................................60Figure 30: Molybdenum Price Sensitivity Analysis......................................................................61Figure 31: Copper Price Sensitivity Analysis...............................................................................61Figure 32: Economic Case Discounted Cash Flow Model..........................................................62Figure 33: Ambient Water Quality Guidelines.............................................................................63

List of Equations Equation 1: Cut-Off Grade...........................................................................................................30Equation 2: Taylor’s Formula for Optimum Mine Tonnage Rate.................................................36Equation 3: Total Production for Fleet using MMcKK Queue Parameters 44

Executive Summary

Property Description and Location

The Mac Property mineral claims, spanning for 18,948 hectares of land, are situated in the Omineca Mining Division of Central British Columbia. For point of reference, the claims are located 80 km north-west of Fort St. James and 40 km east of Granisle. There are a total of 57 mineral claims on the property. The area is predominantly dominated by forestry operations and the surrounding area has several mines, both closed and operating.

Access, Climate, Local Resources, Infrastructure, Physiography

The property is easily accessible through forestry roads, and during the exploration stage of the project, a 12 km access road was constructed directly to the site. A power transmission extension has been identified 40 km east of the property in Granisle. The major supply centers in the area are Fort St. James, Smithers and Burns Lake, and skilled labor exists in the surrounding communities. The most well defined mineralization within the Mac Property is the Camp Zone, which lies close to the surface. The distance of the orebody relative to surface shows promise for open-pit operations with a low stripping ratio. There is sufficient space for the development of potential mine operations within the property claims. The area has moderate topography, and large variations of temperature and precipitation over the year. The property is snow free for six months, which must be considered during the construction phase of the project, should it progress into development.

Geological Setting and Mineralization

The Mac mineral claims are situated within the Cache Creek Complex, a geological assemblage made up of volcanics and clastic sedimentary rocks. The geology is known for its well defined thrust faults and intrusive ultramafic and alkali rich granitic rocks. The mineralization is similar to what is found at the Endako deposit, so inferences can be made from this operation. Within the main geological formation, there is a 500 by 300 meter quartz monzonite intrusion stock work. The stock is fine grained and porphyritic, hosted in the green schist metamorphosed rocks. The potassic alteration zones within the stock work are where the mineralization is concentrated. The degree of alteration decreases with depth, such that the high grade material is closest to the surface. This type of mineralization is ideal for open pit mining methods. The Camp Zone is

made up of two lenses of high grade mineralization at East and North West contact zones. These lenses are linked to lower grade molybdenite within the stock work. The molybdenite occurs as disseminations within the massive stock work. Chalcopyrite is also present as two lenses within the stock work, centralized within its core as disseminations.

Deposit Classification

The mineralization of the Camp Zone within the Mac Property is classified as a Low F-Type Porphyry Molybdenum deposit. This type of deposit is characterized by stock work of molybdenite bearing veinlets and fractures. The low grade ore is disseminated within the massive stock work, and typically mined using high tonnage methods. This deposit is typically formed as a result of hydrothermal fluid exsolved from magma. This fluid strips molybdenum, copper and sulfur ions from depth and as it rises through the crust, precipitates as quartz, molybdenite, chalcopyrite and pyrite within fractures. This porphyry deposit is commonly located at subduction zones.

Exploration

Exploration history at Mac has indicated significant porphyry molybdenum and copper minerals in both alkali-rich rocks and hornfelsed volcanic rocks. The minerals at Mac are characterized as “quartz molybdenite veinlet stock work” and in terms of alteration patterns and size, qualify as “Porphyry Mo”, according to Sinclair (1995) in B.C. Mineral Deposit Profiles. Pond, Camp and Peak Zones are three major Mo-Cu enriched areas that have been identified and drill tested.

Drilling

There are three principal Mo-Cu enriched areas being identified and variably drill tested: Pond, Camp and Peak Zones. According to drill hole data base which consists of historic exploration drilling and recent drilling, there are about 41,000 ft. of drilling in 67 holed planned. This includes 18 holes where are about 9,000 ft. on adjoining ground. The most recent drill program discovered the Camp zone deposit 70,360,000 indicated tonnes grading 0.063% Molybdenum and 0.100% Copper and 177,934,000 inferred tonnes with grading 0.042% Molybdenum and 0.050% copper. This drill program was a 44 hole HQ diamond program with drilling totaling 10,067 m.

Sample Preparation and Data Verification

Samples were collected and analyzed by different labs to meet industry standards. The analytical procedure and security protocols are very strict. Duplicate samples and reference materials methods are used to ensure samples are accurate to the actual results.

Mineral Resource Estimates

The block model developed from the drilling data by Giroux Consultants was used to produce a Mineral Resources Estimate of molybdenum and copper. The estimates include both inferred and indicated resources. The inferred resources are based on significantly lower geological confidence than indicated, such that inferred resource cannot be included within the pre-feasibility study. The indicated resources are the basis for most of the engineering work performed in the subsequent sections. Assuming a cut-off molybdenum grade of 0.05%, the total indicated resources equate to 45,168,000 tonnes with grades of 0.077% and 0.12% for molybdenum and copper, respectively.

Mineral Reserve Estimates

Based on the operating costs determined for the proposed mine design, the cut-off grade is assessed at 0.05% molybdenum. The Maptek Vulcan program is used to create a mine plan based on the operating parameters and design criteria. This mine plan is used to determine the tonnage of minable reserves. The indicated resources were converted into probable reserves, which is the basis for the Mineral Reserve Estimate. The total probable reserves, assuming a cut-off grade of 0.05% is 29,250,173 tonnes, with grades of 0.088% and 0.13% for molybdenum and copper, respectively.

Mining Methods

Open-pit mining methods were evaluated for this design, due to the orebody’s close proximity to the surface, as well as the high grade material being closest to the surface, and decreasing with depth. The Vulcan Pit Optimiser function produced pit extents for multiple prices of molybdenum and copper, and the scenario with the highest discounted cash flow was selected as the basis for the pit design. Using Taylor’s rule, the daily ore production is estimated to be 5,000 tonnes per day. The overall strip ratio for the design is roughly 2.0. The life of mine assuming the ore production rate is 17 years, which is the basis for the project economics. The waste dump design was based on the total volume of swelled waste material, equating to 32,980,000 m3. Using the MMcKK Queue Model, four 90 tonne haul trucks and one 8.1 m3 bucket hydraulic shovel were the main fleet requirements to sustain 15,000 tonnes of production.

Mineral Processing and Recovery Methods

The process methodology is limited due to the lack of metallurgical characterization carried out prior to this study being completed. Due to the mineralization of the deposit, flotation operations must be designed to both concentrate and separate the molybdenum and copper into separate products. The process flowsheet utilizes a conventional open crushing stage, a closed circuit grinding stage composed of one SAG Mill and one Ball Mill. As well, flotation includes three stages, Rougher, Cleaner and Scavenger Flotation. The final concentrate is dewatered using thickeners and filter presses, and the tailings from the mill are enclosed within a tailings embankment, where water is recovered and recycled back into the process.

Project Infrastructure

The project infrastructure required for the construction and future operation of this mine consists of mining and plant process buildings, the Tailings Storage Facility, an explosives magazine and electric power transmission line extension 40 km east of the property. The infrastructure represents the majority of the capital cost for the project.

Market Studies and Contracts

The price of the primary revenue driver, molybdenum is at $7.00 per pound, a career low for this metal. The current copper price, $3.00, is moderate based on the market history. The assumptions for the subsequent economic analysis for molybdenum and copper price is $7.50 and $3.00 per pound, respectively. The concentrates will be transported to smelter via rail to Endako for molybdenum, and via port to an international smelter for copper. The transportation cost for the concentrate has been benchmarked at $0.68 per pound. The total selling cost for molybdenum and copper, including refining and treatment costs, is $0.84 and $0.46 per pound, respectively.

Capital and Operating Costs

The majority of the capital cost and operating cost estimates were derived from Cost Mine. The open-pit surface mining model for a 5,000 tonne per day ore production was used for the mining portion, at a strip ratio of 2. The 5000 tonne per day flotation model was the basis for the milling costs. The total capital costs for the entire project is computed to be $77,233,332. The mining capital costs contribute $20,000,000 to the costs, $45,000,000 is allocated for milling, and 20% of the total costs represent the contingency. The total operating cost per tonne of ore is $19.31; $8.19 from mining and $11.12 from milling.

Economic Analysis

Using base economic parameters defined in the report, the net present value of the project is negative $43,602,752 and the internal rate of return is negative 8%, assuming a discount rate of 8%. These methods of mine project valuation show that the project is not worth investing in because NPV and IRR are both negative. Sensitivity analyses were performed on the capital cost, operating cost, discount rate and metal prices to determine what could potentially drive the project’s NPV to a positive value. Based on the analysis, the project is most sensitive to molybdenum price. If the molybdenum price increases from $7.00 to $11.70, the net present value of the project will exceed the value of total investment, such that it would be worth investing in.

Environmental Studies and Permitting

The Mac Property is regulated by many policies and institute including Mine Act, Health Safety and Reclamation Code, the Ministry of Energy and Mines, the Ministry of Environment, and the

Federal Government. Water quality including ground water and surface water need to monitored closely, as well as air quality, noise and wildlife influence.

Community Engagement

Mining projects can be lucrative for business owners, and provide an improved local economy through employment, local spending on goods and services, and an increased tax contribution to the local government. However, mining also has significant environmental impacts on woods, water, and the human communities that surround the mine. This is especially the case where molybdenum and copper are concerned. Further, while the company may be able to acquire the appropriate permits to begin operations, it may be facing serious opposition from community members. Thus, their spokesperson must be prepared to mend broken relationships from past bad experiences between mining operations and communities, while engaging the community to face current challenges involving the project’s development.

Recommendations

In order to increase the geological confidence of the Mac Camp Zone resource, higher density drilling needs to take place to increase the number of measured and indicated resources. As well, sufficient geotechnical mapping and characterization programs should be implemented to develop acceptable design criteria, and assign suitable factors of safety to open-pit operations. A metallurgical test program needs to be conducted on drill core samples to quantify the recovery, as well as optimize the process design. The improved knowledge of the metallurgy will likely improve the quantity and quality of data necessary for the design of a tailings storage facility. At current economic conditions, it is not recommended to invest in the Mac project. Instead the project should be put on hold, until the price of molybdenum increases past $11.70 per pound, such that the proposed operation becomes profitable and a favorable investment option, compared to other deposits.

IntroductionMineIt Consulting has contracted MINE 491 Group 3, a team of three mining engineering students, to complete a pre-feasibility study on the Mac molybdenum deposit in Central British Columbia. The purpose of this report is to provide a detailed engineering study on developing the Mac deposit into a commercial mining operation. Successful completion of this project would generate significant revenue to the owners of the operation should it move forward to the development stage. The development of the proposed mine would stimulate the Canadian economy and create additional jobs for the people in the surrounding communities.

There are eight sections of this report that were covered in the scope of the 43-101 Technical Report of the Mac Molybdenum-Copper Resource Estimate, prepared by Giroux Consultants Ltd. The basis for these eight sections is largely taken from the bulk of the technical report. These sections are:

Property Description and Location

Access, Climate, Local Resources, Infrastructure and Physiography Geological Setting and Mineralization Deposit Classification Exploration Drilling Sample Preparation and Data Verification Mineral Resource Estimate

There are ten main sections that make up the additional engineering scope of work for this pre-feasibility study:

Mineral Reserve Estimate Mining Methods Mineral Processing and Recovery Methods Project Infrastructure Market Studies and Contracts Capital and Operating Costs Economic Analysis Environmental Studies and Permitting Community Engagement Recommendations

These sections were developed using geological data provided by former owners of the Mac Property, Stratton Resources. This geological data includes topography, drill hole data and a block model. The block model and topography are the basis of the mineral reserve estimate and mining methods section of the report. Cost Mine was the primary source of costing information used to develop the Capital and Operating Costs. The remaining sections of the report were derived from benchmarking similar projects in the surrounding area, as well as other online sources.

Property Description and LocationThe Mac Property, is located in Central British Columbia in the Omineca Mining Division. The property is 75 km N/NE of Burns Lake, 80 km NW of Fort St. James and 40 km E of Granisle. The site area extends 22 km north to South and 8 km East to West, so the entire claim area is approximately 18,948 hectares. The property is close to a number of lakes and small ponds, such as Klaytahnkut, Fleming, Elliot and Trembleur Lakes. As well, the property is in an area that was dominated by forestry and logging activities, and some of the area is regulated by the Ministry of Forests for the areas within the Omineca Forest and Skeena Forestry Regions. The location map for the property is presented in Figure 1.

Figure 1: Location Map for Mac Property

There are a total of 57 claims for the entire property, 36 registered to Kelly Funk and held on the behalf of private shareholders. The remaining 21 claims were registered to Stratton Resources, however upon the significant drop in molybdenum in 2011, the claims are now for sale on the open market. The claims are presented in the following tables:

Table 1: Mac Property Mineral Claims 1

Table 2: Mac Property Mineral Claims 2

As of 2011, there has been no information to suggest that there is significant environmental liabilities from the exploration work that has been done on the Mac mineral claims. This is likely the case should commercial mining operations commence. There have been no archaeological studies conducted on the land, so it will likely need to be performed in order to be in compliance with the agreements with First Nation Bands, documented in the Community Engagement section of this report. There are no First Nation reserves within the proximity of the property, however the claim area is within an overlapping region of two claimed traditional territories: Tl’azt’en and Lake Babine. There have been memorandum of understanding agreements made with the First Nation groups during exploration, outlining the shared goals between the mining company and the community (Giroux & Moore, 2012).

Access, Climate, Local Resources, Infrastructure, PhysiographyThe Mac Property resides within an area originally dominated by forestry and logging activity, so the roads are well maintained by the Ministry of Forests. The property is easily accessible from Fort St. James via Cunningham Road onto Babine Forest Products Road. The other option for accessing the claim property is Canfor Leo Creek Road crossing the Fort St. James Forest District into Nadina Forest District. There are also several forestry roads that provide easy access to the southern portion of the property. The access road is 12 km long from the main highway, with 7 km of it being new road, and 5 km being previously rehabilitated road.

Within the Omineca Mining District, the climate is characteristic of central interior British Columbia. There is a wide temperature range and it is important to note that the property is free

of snowfall precipitation from May to October. This is an important consideration for additional exploration drilling, construction, infrastructure development and tailings embankment construction.

During the exploration phase of the project, Stratton Resources constructed a main access road leading to the most promising area of mineralization, the Camp Zone. For local supply centers, the main ones are Fort St. James, Smithers and Burns Lake. The surrounding area has a lot of mining activity with Mt. Milligan, Equity Silver and former mining operations, so there is a considerable supply of skilled labor available. In order to provide electricity for the operation, a power transmission line must be extended from former mine site Granisle 40 km west of the property.

The property has very moderate terrain, and the orebody lies close to the surface topography, which allows for simple mining operations, and likely a reduced stripping ratio. There is also adequate space for mining operations, plant facilities, tailings storage and waste dumps. The area has an overall relief of 900 meters, and lies between 800 - 1600 meters above sea level. For water supply, there are several lakes and ponds in the area that can easily be drawn from via surface for mining and milling operations (Giroux & Moore, 2012).

Geological Setting and Mineralization

Geology

The Mac property falls within the Cache Creek Terrane, which contains the Sitlika assemblage and Cache Complex. The Sitlika Assemblage contains bimodal volcanic rocks, and clastic sedimentary rocks dated between Upper Triassic and Lower Jurassic era. The western section of the Cache Creek Complex is made up of ophiolitic sequences, and the eastern section is made up of pelagic metasedimentary rocks and thick carbonate sequences. The entire property lies within areas of well-defined thrust faults.

With regards to the orebody formation, ultramafic and alkali-rich granitic rocks intrude the deposit. These intrusions are similar to what is observed at the Endako formation, 90 km South-east of the Mac property.

There is a Cretaceous granodiorite batholith that intrudes the sedimentary rocks of the Cache Creek Complex in the northern section of the property. On the southern portion, it is dominated by quartz diorite. Andesitic rocks make up the large southwest and central west portion of the property. The volcanics that the Mac property is composed of is primarily basic volcaniclastic rocks that are fine grained and pale to dark green. These rocks are made up of inter-calcated massive fine tuff and fine-coarse lapilli tuff.

There is a 500 meter by 300 meter stock of porphyritic quartz monzonite stock work intruding the Cache Creek rocks. The stock work is steeply dipping to the vertical intrusions. The modal abundance for the stock is 15% feldspar, 25% quartz, 35 - 45% k-feldspar, and 5% biotite,

muscovite, and hornblende. The stock work of the dykes is fine-grained within the quartz monzonite. It is within the quartz monzonite that the stock work is hosted in. Biotite-feldspar porphyry dykes cut the stock work and host volcanics as well.

The dark green host rocks are the result of greenschist grade metamorphism of the volcanic rocks, with high chlorite content and disseminated pyrite. Hornfelsing also occurs along intrusive contracts which alter the massive rock to dark brown green with high biotite, amphibole and finer pyrite. Hydrothermal alteration of the quartz monzonite causes potassic alteration, where the mineralization is primarily concentrated in, and sericitic alteration of the feldspar lead to the development of quartz lenses. The degree of alteration decreases with depth from the surface, so the higher grade mineralization is closest to the surface (Giroux & Moore, 2012).

Mineralization

The mineralization of the Mac property is concentrated in the quartz vein stock work and extends 300 meters by 500 meters below the surface. The texture of the quartz monzonite stock is porphyritic and brecciated, with quartz veins and silicified zones of volcanics. The quartz veinlets are steeply dipping and multi-directional which makes up approximately 15% of the stock work. The veins are 1 - 5 mm in width.

There are three distinct areas of mineralization: Camp, Pond and Peak. The Camp zone has two lenses or lobes of high grade mineralization at the eastern and northwestern contact zones. These high grade mineralized lobes are linked to lower grade core zones of molybdenite mineralization within the stock work. Along the fractures and within vein selvages, the molybdenite is present as coarse and flaky or as coating. The molybdenite also occurs as disseminations or spare rosettes. The exposed quartz monzonite stock on the surface allows for chemical weathering to leach the molybdenum content to form ferri-molybdenite staining within the fractures. The quartz veinlets crosscutting the volcanic rocks carry disseminated molybdenite.

Chalcopyrite is also present as disseminated particles within the siliceous zones of the volcanics. There are two copper-rich lobes within the stock work as well as disseminated within the core of the monzonite stock.

The zone of mineralization extends roughly 50 - 90 meters into the eastern, northern and western contact zones of the stock work. The grades of the molybdenum and copper decrease with depth, which is ideal for an open-pit mining method. The other mineralized zones, Pond and Peak show very little promise based on the drill hole data (Giroux & Moore, 2012).

Deposit ClassificationThe Mac mineralization is quartz molybdenite veinlet stock work and is classified as a Porphyry Mo Low-F-Type deposit. This classification matches the mineralization at Mac, being stock work of molybdenite-bearing quartz veinlets and fractures in intermediate to felsic intrusive rocks and

associated country rocks. The grades for the metals are quite low, below 1% by weight percentage. The ore is massive and occurs as disseminations so it makes sense to mine using high tonnage methods, such as open-pit mining.

This type of mineral deposit is related to subduction zones, arc-continent or continent-continent collisions. This is consistent with the location of the Mac Property, because most of British Columbia is made of porphyry deposits associated with subduction of oceanic plates. There is also tuff and other extrusive volcanic rocks associated with such deposits. The actual mineralization is hosted in granodiorite to granite and quartz monzonite is common as well.

The genetic model of the deposit is that multiple phases of magmatic activity allows for hydrothermal fluid to ex-solve from this magma. The highly saline fluid strips the molybdenum, sulfur, iron and copper ions from the magmatic fluid and deposits it as alteration in the surrounding rocks as it rises within the crust. The fluid deposits as quartz, molybdenite and pyrite in breccia and fractures (Giroux & Moore, 2012).

Exploration

Exploration History

RIO ALGOM EXPLORATION INC: 1982-1984, 1989

In 1982, Rio Algom Exploration Inc. started a lake sediment sampling program in British Columbia. Rio Algom detected molybdenum-copper-silver values in the bottom of the lake which is located within the southern part of the current Mac property.

During the period May-July 1983, 2198 gird soil samples were collected. Quartz monzonite was discovered, and grab samples found between 0.034% and 0.250% molybdenum.

In 1984, Rio Algom had conducted line cutting, solid and stream sediment sampling, ground magnetic surveys, trenching, geological mapping and rock sampling in the Mac property. SPOKANE RESOURCES LTD. 1995-1998

In 1996, Spokane acquired 100% interest in Mac property from Rio Algom. Silvercorp then completed diamond drill holes, IP geophysics, geological mapping and geochemical sampling during 1995 to 1997. AZ Copper 2010

AZ Copper obtained interest in Mac property in May 2010, AZ Copper did reassessment of historical IP geophysical data, soil geochemical data and geological mopping of the area.

Exploration

Stratton completed an exploration program including airborne and ground geophysics, soil geochemical sampling and drilling in 2011. Geotech Ltd. Of Aurora completed magnetic airborne geophysical survey in 2011 August. The survey included 1780 line kilometers of data. The survey used a Z-Axis Tipper Electromagnetic (ZTEM) system and is useful in mapping lithology. A final survey report was submitted to Stratton in September 2011; however, an interpretive report of the survey data was pending. Another survey conducted by Geotronics Consulting Ltd. was induced polarization (IP) survey. Geotronic was able to collect a total of 38.4 line kilometers of IP data. In the end, the Geotronics IP survey results were inconclusive (Giroux & Moore, 2012). A soil geochemical sampling was initiated by Geominex Consultants in December 2011. Samples were collected using a soil auger below the base of the organic horizon, then placed into paper bags and shipped to Acme Labs. The results for molybdenum and copper are listed in Table 3.

Table 3 Summary Statistics Mo & Cu Soil Samples

Mo ppm Cu ppm

Mean 34 100

Median 13 59

Standard Deviation 63 110

Minimum <2 17

Maximum 554 673

DrillingIn 1982, Mac was discovered with deposit of Porphyry molybdenum and copper mineralization.

In 1989, JT600 diamond drill was utilized from set-up to set-up by helicopter. The main area to be drilled is Camp zone. A total of 104 diamond drill holes which is about 22,377 m have been drilled based on property-wide since 1989.

In 1990, a total of 12,306 m in 61 holes were included in the drilling programs. 1,488 m in 12 holes from Rio Algom and 10,818 m in 49 holes from Spokane Resources.

In 1995, the drilling was carried out in 40.7 mm in size. And a skid-mounted JT2000 was utilized.

In 1996, the core diameter was increase to 47.6 mm. And a skid-mounted Longer 38 drill was utilized. For both drill programs in 1995 and 1996, a bulldozer was introduced for dragged drill from set-up to set-up. The data was recorded in metric and stored on site.

In 2001, 2,535 ft. five holes were drilled on the east of the Endako Mine in the Water Tank area. Ore grade intercepts were discovered from this program.

In 2002, there were seven in the south wall of the Endako Pit. 14 holes were drilled with totaling 5,166 ft. of drilling. The ore was sent for metallurgical assessing.

In 2004, there were 3 additional holes drilled for assay and IP geophysics. And they were all located in the north wall of the Denak East Pit.

In 2006, it had been indicated that 35 NQ drill holes were completed during early 2006 amounting to 19,488 ft. of drilling from historical report. The program of drill also identified and delimited mineralization at the northwest of the Denak West Pit, east of the Denak East Pit, and at the Casey Lake area.

In 2007, there were 60 holes with 35,853 feet of drilling from the diamond drilling program. And the Casey Lake Zone, as a determined target tested extensively in previous year, was also the main focus of the 2007 program; 33 holes totaling 20,441 feet were drilled to further test the extent and continuity of Casey Lake mineralization. Wide-spaced exploratory drilling northwest of the Denak West Pit which had 7,824 feet in 17 holes was also done to test continuity of mineralization in this area.

In 2008, drilling was continued with a total of 27,418 feet of 52 holes. And there was an exploration drilling phase continuing at the Denak West Pit and at Casey Lake with 6,996 feet in 11 holes and 2,846 feet in 5 holes respectively. An in-fill phase of drilling adjacent to the Endako, Denak East, and Denak West Pits comprised the bulk of the 2008 program, drilling 17,139 feet in 34 holes.

In 2009, there were no new drill holes added to the data base.

In 2010, drilling amounting to 91 holes totaling 45,145 feet of drilling with 4,540 assay intervals was completed during 2010. The majority of the new drill information which had 82 holes was targeted in the Northwest Extension with the intent of adding confidence and tonnage to the reserve base. Nine of the 2010 drill holes were targeted at the Denak East deposit in order to confirm boundary of the south to southwest side of the deposit.

In 2011, two drill programs are planned. Additional step-out exploration drilling is planned for the Northwest Extension to further extend the known open mineralization. Omineca Diamond

Drilling of Burns Lake is responsible for the program of MAC drilling in 2011. And it applied two drill rigs mounted on skids called multi power Discovery II. The assaying was completed by Acme Analytical Lab of Vancouver, meanwhile Geominex consultants Inc. of Vancouver was responsible for core logging and sampling supervision.

Stratton conducted the diamond drill program from September to December 2011 with 44 holes totaling 10,067 m of HQ-sized drill core which was about 63.5 mm. The primary goal of drilling program is 2011 was to validate, inspect and extend based on the results of historical drilling at the Camp Zone and supply sufficient data base of assay for a 43-101 calculation of compliant resource estimate for the Camp Zone.

There is a specific area for core being measured, examined geologically, logged and marked for sampling purpose, which is defined as purpose-built core logging facility and is located at the camp of exploration close to the drilling area. For selection of core samples, there is half core remaining after sampling being cross-stacked by hole in a cleared area with the cam compound, and then core sample are bagged. The following summary is the weighted averages of significant 2011 intersection of molybdenum and copper based on the reported intersection length of the drill core.

Table 4: Significant Drill Core Intersection for Mo and Cu 1

Table 5: Significant Drill Core Intersections for Mo and Cu 2

In 2012, the drill access trail was developed as one of the main physical work completed. For the Peak Zone, this part of drill trail access will be designed to extend and complete for a proposed next phase of diamond drilling program. Flemming creek contracting of Burns Lake was arranged with Stratton to clear access right-of-way and harvest timber from a 450 m long section of drill access trail. After the drill access trail being decked by faller-buncher, the spruce and pine dominant timber was skidded to a temporary landing area by grapple equipped D-7 dozer where it was loaded on trucks for transport to the Canfor mill (Giroux & Moore, 2012). The following figures show the designed branch of drill access trail and estimate completed in 2012.

Figure 2: New Drill Access Trail

Figure 3: Drill Hole Compilation

Figure 4: East Contact Zone Mineralization Cross Section

Figure 5: North West Contact Zone Mineralization Cross Section

Sample Preparation and Data Verification

Sample Preparation

1989-1997

Sample preparation and analysis at Mac between 1989 and 1996 was covered in assessment reports by Cope (1989) and Fox (1996a,1996b). Considering assessment reports were done before National Instrument 43-101 introduced, therefore make no representation as to whether the historical information is complete or wholly accurate. In 1989, core samples were collected by splitting the core with a jaw-type splitter. Then one half of the ore sample was shipped to Chemex Labs of North Vancouver, BC for sample preparation and analysis. Between 1995 and 1996, core samples were collected by splitting the core with jaw-type splitter. Then one half of the ore samples was shipped to Acme Analytical Laboratories in Vancouver, BC. Samples were dried, crushed and pulverized. In the end, ICP analysis was able to detect copper and molybdenum concentrations.

In 2011, core samples were collected in intervals, then they are moved to cutting room. A cut half core sample was then put into a plastic sample bag. According to National Instrument 43-101, each sample bag then secured with a “zap” strap in order to prevent any material entering the bag. The samples were transported to Acme Analytical Labs in Smithers, B.C for sample preparation and assay. The analytical procedures and security protocols used by Acme Analytical Labs are accepted industry practice. The company has produced reliable and appropriate quality samples for resource estimation, therefore, sampling integrity and security were trustable during the 2011 sampling programs (Giroux & Moore, 2012).

Data Verification

Drill Holes from 2011

Blank material was added into the sample stream every 20 samples to ensure the laboratory equipment was cleaned between samples. In total, Stratton assayed 277 blank samples. The Mo and Cu values for the blank samples are showing below. No laboratory contamination was shown in the results.

Figure 6: Blank Sample Performance for Mo

Figure 7: Blank Sample Performance for Cu

Duplicate Samples

The duplicate samples were inserted into one sample of half core to establish sample variance. Duplicate sample analysis for Mo and Cu was good. The duplicate samples for both Mo and Cu were within the acceptable levels of reproducibility.

Reference Material

A standard prepared reference material was used from the Endako Mine in central British Columbia within 90 km of the MAC property. In 279 analyses, a frequency of 5% of the sample analyzed. The standard deviation yields a mean value +/- <2 x which is within accepted standard deviation range. The standard performs within standard deviations, representing reasonable accuracy and trustable quality of data for the purpose of resources estimation (Giroux & Moore, 2012).

Figure 8: Mac Moly Property Core Logging Facility

Figure 9: Mac Moly Property Core Cutting Facility

Mineral Resource EstimateA preliminary resource estimate was conducted by Giroux Consultants on the Camp Zone mineralization based on data from 104 drill holes taken between 1989 - 2011, by Rio Algom, Spokane Resources and Stratton Resources. From the assay data of the drill holes, statistical data for the different rock types: overburden, volcanics, quartz monzonite and dykes were computed. From these statistics, and from the geologist interpretation of the geologic model of the orebody, a variogram was developed for grade continuity. The grade continuity was estimated by kriging using the variograms of each rock type.

The Giroux Consultants generated a block model where the grade continuity was interpolated into each block by ordinary kriging for copper and molybdenum. Blocks are only estimated if there are a minimum of four composites present within the search ellipse. Estimation occurs in a series of passes: first, second, third and fourth. These passes depend on the percent range of the semi-variogram for molybdenum and copper. Blocks estimated in Pass 1 use ¼ of the range, Pass 2 uses ½, Pass 3 uses the full range, and Pass 4 uses twice the range. Blocks estimated using Pass 1 and 2 were classified as indicated resources, and blocks estimated using Pass 3 and 4 were classified as Inferred. There are no measured resources found within this initial resource estimate.

The resources assessed by Giroux Consultants are subdivided into indicated and inferred resources, which are assessed based on varying levels of geological confidence. The limitations with inferred resources is that such resources “must not be included in economic analyses, production schedules, estimated mine life, pre-feasibility, feasibility studies, life of mine plans

and cash flow models of developed mines” (Canadian Institute of Mining, Metallurgy, 2014). Indicated resources have sufficient confidence for mine design and economic analysis. The block model displaying the indicated resources is presented in Figure 10.

Figure 10: Mac Property Block Model of Indicated Resources:

The total mineral resource is estimated from the block model by assessing different cut-off grades for the primary metal product from the deposit, molybdenum. The resource estimate for both indicated and inferred resources using different cut-off grades are presented in Table 6 and Table 7, respectively.

Table 6: Resource Estimate for Indicated Resources

Mo Cut-off Tonnes> Cut-off(%) (tonnes) Mo Cu Mo_Eq Cu_Eq Million Million Million lbs of Million lbs of

(%) (%) (%) (%) lbs of Mo lbs of Cu Mo Equivalent Cu Equivalent0.010 117,000,000 0.045 0.07 0.06 0.25 116.093 180.590 161.241 644.9630.020 89,819,000 0.055 0.09 0.08 0.31 108.928 178.246 153.489 613.9580.030 79,502,000 0.059 0.09 0.08 0.33 103.428 157.772 142.871 571.4840.035 70,360,000 0.063 0.10 0.09 0.35 97.741 155.144 136.527 546.1060.040 61,616,000 0.067 0.10 0.09 0.37 91.028 135.863 124.994 499.9770.045 52,836,000 0.072 0.11 0.10 0.40 83.882 128.154 115.921 463.6830.050 45,168,000 0.077 0.12 0.11 0.43 76.688 119.515 106.567 426.2680.055 38,773,000 0.082 0.12 0.11 0.45 70.105 102.593 95.754 383.0150.060 28,247,000 0.093 0.14 0.13 0.51 57.925 87.198 79.724 318.8970.070 20,429,000 0.103 0.15 0.14 0.56 46.397 67.569 63.290 253.1580.080 14,853,000 0.114 0.17 0.16 0.63 37.336 55.676 51.255 205.0200.090 10,984,000 0.125 0.18 0.17 0.68 30.275 43.595 41.174 164.6940.100 8,250,000 0.135 0.19 0.18 0.73 24.558 34.563 33.199 132.796

Based on Mo Cut-offMAC CAMP ZONE - INDICATED RESOURCE

Grade > Cut-off Contained Metal

Table 7: Resource Estimate of Inferred Resources

Mo Cut-off Tonnes> Cut-off(%) (tonnes) Mo Cu Mo_Eq Cu_Eq Million Million Million lbs of Million lbs of

(%) (%) (%) (%) lbs of Mo lbs of Cu Mo Equivalent Cu Equivalent0.010 336,422,000 0.032 0.04 0.04 0.17 237.379 296.724 311.560 1246.2420.020 275,438,000 0.036 0.05 0.05 0.19 218.643 303.670 294.560 1178.2410.030 226,647,000 0.039 0.05 0.05 0.21 194.905 249.878 257.375 1029.4990.035 177,934,000 0.042 0.05 0.05 0.22 164.785 196.172 213.828 855.3110.040 120,621,000 0.046 0.05 0.06 0.23 122.346 132.985 155.592 622.3680.045 76,504,000 0.052 0.05 0.06 0.26 87.719 84.346 108.806 435.2240.050 47,998,000 0.057 0.06 0.07 0.29 60.326 63.501 76.202 304.8060.055 31,591,000 0.063 0.06 0.08 0.31 43.885 41.795 54.333 217.3330.060 15,167,000 0.072 0.06 0.09 0.35 24.079 20.066 29.096 116.3820.070 6,819,000 0.081 0.07 0.10 0.39 12.179 10.525 14.810 59.2410.080 2,305,000 0.094 0.09 0.12 0.47 4.778 4.574 5.921 23.6850.090 966,000 0.109 0.11 0.14 0.55 2.322 2.343 2.907 11.6300.100 537,000 0.121 0.13 0.15 0.61 1.433 1.539 1.818 7.270

MAC CAMP ZONE - INFERRED RESOURCEGrade > Cut-off Contained Metal

Based on Mo Cut-off

Mineral Reserve EstimatesUsing the mineral resource estimates from the block model developed from Giroux Consultants, the mineral reserves are estimated. The resources are subdivided into indicated and inferred resources. These resources are assessed based on the levels of geological confidence. Resources can be converted into reserves by determining the operating costs of mine and mill operations, which is outlined in the Capital and Operating Cost Section of the report. The

operating cost, as well as the revenue generated from the product of the mining process. The computation of the cut-off grade is presented in Equation 1

Equation 1: Cut-Off Grade

Cut−off Grade=( miningcost per tonne+ processcost per tonnemetal recovery∗(metal sale price per lb−selling cost per lb ) )∗2204.62

This equation computes the cut-off grade based on a single metal product. However, the Mac deposit contains significant copper in addition to molybdenum, so the cut-off grade is put in terms of molybdenum equivalent. The actual molybdenum grade cut-off computation is presented in Table 8.

Table 8: Cut-Off Grade Estimation

mining cost per tonne $ 2.38process cost per tonne $ 11.12metal recovery 95%unit metal sale price per lb. $ 7.50refinery unit cost per lb. $ 0.84cut-off %MoEq 0.10%base Mo price $ 7.50base Cu price $ 3.00cut-off %Mo 0.05%%Cu 0.12%

By applying the cut-off grade for molybdenum to the block model of indicated resources, a grade shell triangulation was created to better visualize the orebody along the surface topography. This is illustrated in Figure 11.

Figure 11: 0.05% Mo Orebody Triangulation

The indicated resources can be converted into probable reserves when applying “modifying factors to deem the resources economic to mine” (Canadian Institute of Mining, Metallurgy, 2014). The reserves are determined from the mine plan developed in the Mining Methods Section of the report. The mineral reserve estimate is presented in Table 9.

Table 9: Reserve Estimate for Pit 2 Design

Mo Cut-off Tonnes> Cut-off(%) (tonnes) Mo Cu Mo_Eq Cu_Eq Million Million Million lbs of Million lbs of

(%) (%) (%) (%) lbs of Mo lbs of Cu Mo EquivalentCu Equivalent0.050 29,250,173 0.088 0.13 0.15 0.34 56.575 86.892 93.815 218.902

Based on Mo Cut-offMAC CAMP ZONE - PROBABLE RESERVES PIT 2 SCENARIO

Grade > Cut-off Contained Metal

Based on the sensitivity analysis, despite the current market conditions for molybdenum, which is the primary revenue driver of this property, a base price of $11.25 was assumed to produce the optimal pit, displayed as Pit 2 in the Figure above. This optimal pit is the basis of the reserve estimation, as well as the mine design. Using this optimal pit, the stripping ratio does increase significantly from the preceding pit, however the revenue also increases due to the higher grade material at further depth.

Mining MethodsOpen pit mining was the only method evaluated for mining the Mac deposit because the mineralization lies just below the surface of the property. As well, the mineralization decreases with depth, so high grade material can be mined immediately. The mineralization of the orebody is presented in Figure 12.

Figure 12: Mac Property Indicated Resources Grade Shell

The mining methods section is primarily developed with the use of Maptek Vulcan software for the design, scheduling, waste dump design and haul road design. The fleet requirements were determined using Cost Mine and the use of MMcKK Excel Queue Models.

Open Pit Mine Design

Maptek’s Vulcan program is able to produce economic pit limits and extents for varying commodity prices, based on the cost and revenue inputs developed by in the Operating Cost and Project Economic Sections of this report. The following parameters were inputted into the Vulcan Pit Optimiser to generate 6 different pit limits, presented in

.

Table 10: Vulcan Pit Optimiser Inputs

Vulcan Pit Optimiser InputsBase Price Mo $ 7.00 USD per lb.Base Price Cu $ 3.00 USD per lb.Selling Cost Mo $ 0.84 USD per lb.Selling Cost Cu $ 0.46 USD per lb.Processing Cost Adjustment Factor 1.0Rock Type Mining Cost Adjustment Factor 1.0Mine Rehabilitation Cost $ - USD per tonneRock Type Processing Cost $ 11.10 USD per tonneMo Processing Recovery 95%Cu Processing Recovery 95%Mo Processing Cost $ - USD per lb., in lieu of rock type processing costCu Processing Cost $ - USD per lb., in lieu of rock type processing costMining Cost $ 2.33 USD per lb.Positional Mining Cost Adjustment Factor 1.0Dilution Factor 1.0Mining Recovery Factor 1.0

The Pit Optimiser produced six different pits, based on base price of molybdenum and copper, and Pit 1 and 2 were selected for further analysis due to the realistic commodity prices they are based on. The commodity prices for each pit are presented in Table 11.

Table 11: Pit Optimiser Commodity Price

Pit Optimiser Commodity Price per PitPit Mo Price Cu Price1 $ 7.50 $ 1.502 $ 11.25 $ 2.253 $ 15.00 $ 3.004 $ 18.75 $ 3.755 $ 22.50 $ 4.506 $ 26.25 $ 5.25

The Pit Optimiser outputs generated for the first two commodity price scenarios are illustrated in Figure 13 and Figure 14, respectively.

Figure 13: Pit Optimiser Scenario 1

Figure 14: Pit Optimiser Scenario 2

The Pit Optimiser is also able to produce a scenario analysis of the base price, and determine the most economic pit. This is presented in Figure 15.

Figure 15: Pit Optimiser Scenario Analysis

Based on the Pit Optimiser sensitivity, the most economic design is Pit Scenario 2. This assumes an optimistic price for molybdenum at current economic conditions. However, this pit provides the highest net present value, and will be used as the preliminary pit design extents.

An initial estimate of the daily production rate can be determined by using Taylor formula as shown below:

Equation 2: Taylor’s Formula for Optimum Mine Tonnage Rate

T=4.88T r

0.75

D yr

T=oremined per operatingday∈short tonsT r=total ore reserves∈short tonsD yr=operatingdays per year

The optimum tonnage rate was computed to be roughly 5000 tonnes of ore per day, assuming a strip ratio of 2.0. An assumed bench height for the proposed open-pit design is 15 meters to sustain this tonnage.

No geotechnical information was provided for the Mac Property as an investigation was not conducted by the previous owners of the mineral claims. Design specifications for the open-pit

were made based on benchmarking the Endako mine, due to the similar mineralization, as well as other operations with similar tonnage rates. It is also important to note that the mineralization is hosted in quartz monzonite stock work, as well as veins within volcanic rocks, so it is assumed the deposit is hosted in strong, competent rock. The following assumptions are made with respect to the mine design:

15 meter bench height 20 meter road width 10 degree road gradient 5 meter berm width 45 degree batter angle 100 meter flat length

Choosing a bench height of 15 meters is based on common industry practices for hard rock mines and is an appropriate height for a hydraulic shovel to dig up to. A 5 meter berm width was assumed. The overall pit slope angle was benchmarked based on the Endako mine at roughly 45 degrees. For the pit roads, the proposed haul truck fleet requires 5 meters of width, and an additional 5 meters for safety. Two lane traffic is usually necessary to optimize the cycle time, so the total road width is assumed to be 20 meters. A common road gradient for most open-pit mines is 10 degrees.

The outline generated from the Pit Optimiser is used to create an operational mine. This is done by creating a section at the bottom level of the pit and beginning the pit road. It is continued upward using 15 meter increments to account for the bench height. The operational pit design for Pit Scenario 2 is presented in both plan and section views, in Figure 16Figure 17.

Figure 16: Pit 2 Design Scenario Plan View

Figure 17: Pit 2 Design Scenario Section View

Triangulations were generated of the pit design, clipped by the topography of the property, for better visual representation of the mine design, presented in Figure 18.

Figure 18: Pit 2 Design Triangulation

Mine Scheduling

Based on the reserve estimate from the Mineral Reserve Estimate Section, the life of mine plan was developed. Triangulations of each bench were generated using Vulcan. By applying the Advanced Reserves Editor, the tonnage of both ore and waste, as well as the metal grades were computed. Assuming a production rate of 5000 tonnes of ore per day, with a stripping ratio of 2.0, the ore production schedule is presented below:

Table 12: Life of Mine Production Schedule

Life of Mine Production ScheduleProduction Year Throughput %Mo %Cu Million lbs of Mo Million lbs of Cu

1 1,750,0000.07

60.10

4 2.94 4.03

2 1,750,0000.08

10.10

8 3.11 4.17

3 1,750,0000.08

50.11

2 3.27 4.31

4 1,750,0000.08

50.11

2 3.27 4.31

5 1,750,0000.09

00.11

8 3.48 4.53

6 1,750,0000.09

00.11

8 3.48 4.53

7 1,750,0000.09

00.11

8 3.48 4.53

8 1,750,0000.09

40.12

8 3.64 4.94

9 1,750,0000.09

40.12

8 3.64 4.94

10 1,750,0000.09

30.13

2 3.58 5.09

11 1,750,0000.09

30.13

2 3.58 5.09

12 1,750,0000.08

90.13

8 3.45 5.32

13 1,750,0000.08

90.13

8 3.45 5.32

14 1,750,0000.08

50.14

7 3.28 5.67

15 1,750,0000.08

50.16

0 3.26 6.17

16 1,750,0000.08

70.16

5 3.34 6.38

17 1,250,1730.08

40.16

6 2.31 4.58

The variability in the ore grade is presented in the Figure 19 below:

0 2 4 6 8 10 12 14 16 180.0000.0100.0200.0300.0400.0500.0600.0700.0800.0900.100

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

0.160

0.180

LOM Mo and Cu Grade

Production Year

%M

o

%Cu

Figure 19: Life of Mine Ore Grade Variability

Waste Dump Design

By following the life of mine plan outlined in the previous section, the total mass and volume of waste material is computed and presented in the following table.

Table 13: Life of Mine Waste Material

Life of Mine Waste Material

Waste (tonnes)Waste (m3)

Swell Factor Swelled Volume (m3) %Mo

%Cu

77,837,440 27,483,167 1.2 32,979,8000.01

20.0

2

Assuming a swell factor of 1.2 for the waste material, the total volume of waste for a proposed waste dump can be computed. The following criteria for waste dump design was benchmarked from the Endako Mine:

30 degree waste dump batter angle 10 meter berm width 10 meter bench height 20 meter road width 10 degree road gradient

The location of the waste dump was selected at the lowest lying area of the Mac Property topography. This is to reduce the consequence of potential waste dump failure. The waste dump design is presented in the figures below:

Figure 20: Waste Dump Plan View

Figure 21: Waste Dump Section View

The waste dump was clipped by the topography surface as a triangulation for better representation in Figure 22.

Figure 22: Waste Dump Design Triangulation

Haul Road Design

The haul roads are designed based on the following criteria:

25 meter road width Density of material 2.0 tonnes per m3 Road cut and fill angle of repose 45 degrees

The roads were designed from the mine to the waste dumps and the crusher facility. The haul trucks in the mine fleet are rated for an approximate 90 tonne payload as a base line assumption. Assuming a road gradient of 10%, the assumed average speed of a haul truck is 20 kilometers per hour. The average service time for the shovel to fill a haul truck is assumed to be 5 minutes. The haul road specifications and cycle times are presented in the following table:

Table 14: Haul Road Design Criteria

Haul Road Specifications

RoadsLength (m)

Average Road Gradient (%)

Average Speed (km/h)

Total Travel Time (min)

Service Time (min)

Mine to Waste Dump 5448 10 20 33 5Mine to Crusher 3940 10 20 24 5

Fleet Requirements

The heavy equipment fleet for this proposed design is required to mine 15,000 tonnes of material, 5,000 tonnes of ore and 10,000 of waste. This is considered a low production rate for an open pit mine, so only one hydraulic shovel is necessary for the daily earth work movement. A common size for most hydraulic shovels at open pit mines are 8.1 m3 bucket shovels.

The total number of haul trucks can be estimated by using the MMcKK Excel Queue model presented in the Appendix. The equation and the inputs for determining the daily production rate of material using the MMcKK Excel Queue Model are presented in Equation 3.

Equation 3: Total Production for Fleet using MMcKK Queue Parameters

Total Production=η×μ× payload×daily operationhours× 60minuteshours

η−utilizationμ−service rate

By using the excel model, the total number of haul trucks to achieve the production rate was iterative multiple times. The calculation of the number of haul trucks required is presented in Table 15.

Table 15: Daily Production Estimate using MMcKK Queue Model

Production CalculationMean Service Time (min) 5.0Total Travel Time (min) 25.0Number of Shovels 1Number of Trucks 4Utilization 0.602

Service Rate0.20

0Truck Payload (tonnes) 90

Daily Production Rate (tph)1559

5

Therefore, the fleet requires only 4 – 90 tonne haul trucks. The remaining equipment which includes rotary drills, graders, water trucks, fuel trucks, service trucks, bulk ANFO trucks, front end loaders, pumps and pickups were benchmarked based on the production rate from Cost Mine.

The total fleet requirements, including their capital cost and specifications are presented in the table below, and are primarily based on Cost Mine models for 5000 tonne per day operations.

Table 16: Mine Fleet Requirements

Equipment Specifications units required Cost per unitHydraulic Shovel 8.1 m3 bucket capacity 1 $ 2,197,600.00Front-end Loaders 3.8 m3 bucket 1 $ 316,550.00Haul Trucks 90.7 MT payload, mechanical drive 4 $ 1,102,600.00Rotary drills 20.0 cm hole, diesel, 7.6 m rod length 2 $ 597,900.00graders 3.7 m blade width 1 $ 373,300.00water tanks 18,927 L tank 1 $ 66,600.00service & tire trucks off-road tire service 3 $ 170,400.00bulk ANFO trucks 770 lb./min capacity 1 $ 214,300.00pumps 1325 liter per minute, at 15.2 m head 2 $ 6,500.00pickup trucks 680 kg 5 $ 20,000.00fuel/lube trucks 2461 L capacity 1 $ 86,200.00

Mineral Processing and Recovery Methods

Processing Methodology

The mineral processing and recovery methodology is limited due to the lack of metallurgical test work performed on drill core samples. For the purpose of this report, the metallurgy relies solely on the knowledge of the mineralization of the Mac deposit, as well as the surrounding geology. Starting points were derived by benchmarking past molybdenum projects and determining the necessary capital and process necessary for producing a saleable concentrate (Marek, 2011).

The Mac Property is a porphyry stock work deposit that formed mineralization as the result of potassic and propylitic alteration of quartz veins from hydrothermal fluids derived from magma. The main ore minerals present are molybdenite as well as chalcopyrite. The ore is disseminated within the massive deposit, so bulk recovery methods are required for separation.

Proposed Flowsheet Design

The ROM ore will be sent through a jaw crusher and conveyed to the mill building. From the mill feed conveyor, the ore will be ground in the Semi-Autogenous Grinding Mill. The SAG Mill product will be discharged onto an inclined dual vibrating screen deck, where the undersize will be fed into the Primary Cyclones via slurry pump, and the oversize will be recycled back into the SAG Mill for further grinding. The overflow from the Primary Cyclones will go into the flotation

circuit, and the underflow will be fed into the Ball. The Ball Mill discharge will re-circulate back to the Primary Cyclone feed.

The Primary Cyclone overflow will go through a 6-cell bank of 20 m3 rougher tank cells. The concentrate from the tank cells will be fed into the Regrind Cyclones via slurry pump, and the tailings will be discharged via slurry pumps to the Tailings Cyclone plant.

The overflow from the Regrind Cyclones will go to the Cleaner Flotation Stage. The regrind cyclone underflow stream will be recycled back to the regrind ball mill. In the Cleaner Flotation stage, the slurry goes through 5 – 6 m3 cells; the concentrate goes to the thickener and the tailings from the cleaners will go to the Scavenger Flotation stage.

In the Scavenger Flotation stage, the slurry goes through 6 – 20 m3 cells; the concentrate gets recycled back to the Cleaner Flotation stage, and the tailings will combine into the same header for the Rougher Flotation tailings and be discharged via slurry pumps to the Tailings Cyclone Plant.

The bulk molybdenum-copper concentrate is fed into the thickener and dewatered using counter-current decantation. The water from the thickener overflow will be recycled back into the Rougher Flotation Stage, and the underflow of each thickener will be fed into a filter press to dewater the concentrate to below 10% moisture.

The tailings from the Rougher and Scavenger Flotation Circuits will enter a separate Tailings Plant outside of the mill building. The tailings will go to the Tailings Cyclones, the underflow will be recycled as material used for the tailings embankment construction, and the overflow will be discharged into the tailings embankment facility. After settling, the supernatant from the tailings will be reclaimed and reused in the mill process. Due to the limited information regarding the ore, and by extension the tailings, there is no proposed tailings facility as of now.

The process flowsheet is presented in the Figure 23.

Figure 23: Mac Property Mo/Cu Flowsheet

The mill recovery is assumed to be 95% for both molybdenum and copper. Due to the limitations of this study, the main recommendation moving forward is to conduct a metallurgical test work program on drill core samples. The purpose of this would be to determine the flotation kinetics and assess the potential of separating the bulk concentrate into separate concentrates to maximize the value of the products. It is assumed this will be incorporated into the flowsheet in future stages of the project. This will affect the market contracts, outlined in the Market Studies and Contracts section of this report.

Mill Equipment Selection

The equipment selection and specifications are presented in the following table, along with the number of required units and capital cost of each unit.

Table 17: Mill Process Plant Equipment

Equipment Specifications units Cost per unit

Jaw Crusher 76 cm x 140 cm 1 316,900.00$

Bin and Feeder 0.91 m x 2.44 m 1 274,500.00$ Conveyor Belt 363 mtph 1 70,000.00$ Bin and Feeder 0.61 m x 2.44 m 1 229,500.00$

SAG Mill 1 2,030,000.00$ Vibrating Screen 2.1 m x 6.0 m 1 102,400.00$

Ball Mill 3.0 m x 5.0 m 1 1,400,000.00$ Cyclones 83.8 cm 6 38,000.00$

Rougher Flotation Cells 20 m3 6 63,800.00$

Scavenger Flotation Cells 20 m3 6 63,800.00$

Cleaner Flotation Cells 5 m3 5 198,400.00$

Ball Mill 3.0 m x 5.0 m 1 360,000.00$

Cyclones 50.8 cm 1 15,000.00$

Thickener 6.1 m 1 26,366.67$ Disk Filter 1.82 m 1 150,100.00$

Front End Loader 2.5 m 1 97,300.00$ Rotary Dryer 15.2 m 1 425,000.00$

Conveyor Belt 363 mtph 3 70,000.00$

Cyclones 25.4 cm 2 3,500.00$

Embankment storage volume 5,000,000 m3 1 8,739,300.00$

Crus

hing

and

Grin

ding

Flot

ation

Regr

ind

Dew

ater

ing

Tailin

gs

Project InfrastructureThe main infrastructure that needs to be constructed for the project to commence operation is the following:

68 kV electrical power transmission line from BC Hydro that connects the power station from Granisle Mine to the Mac Property, 40 km east. It is assumed that BC Hydro will subsidize the entire cost of this transmission line extension.

Mill Processing Plant Building and Equipment Mine Pre-Production and Operation Fleet Tailings Storage Facility Explosives Magazine

Based on the current capital expenditure required for this project, despite the remoteness of the Mac property, a camp for the employees is not feasible at this time. Buses will likely need to shuttle people to site from major supply centers, such as Fort St. James, Granisle, Smithers and Fraser Lake.

Market Studies and Contracts

Market Studies

The main use for molybdenum is to be used as an alloy for steel-making. For copper, it is used primarily as an electrical and heat conductor in wiring and motors. There is constant demand for these base metals, however the current market trend for molybdenum shows that it is at a career low, at roughly $7.00 USD per pound, whereas copper has stabilized to $3.00 USD per pound. The market trends are presented in Figure 24 and Figure 25 below:

Figure 24: Long Term Molybdenum Oxide Price in $USD

Figure 25: Long Term Copper Price in $USD

The assumptions for the majority of the previous sections of the report indicate an assumed base molybdenum and copper price of $7.50 and 3.00 per lb. This is consistent with the current economic conditions. It is important to note that molybdenum price is at a career low, and most molybdenum operations assume a base price of $15.00 (Marek, 2011). The estimate for copper base price is consistent with current economic conditions.

Smelter Contracts

As previously mentioned in the Mineral Processing Section of the report, it is assumed that future plant design after metallurgical test work will allow for the mill to separate the final concentrate into separate molybdenum and copper products. This will maximize the value of the mine and so the transportation and refining costs assume separate products.

The two saleable products from the milling operation are molybdenum and copper concentrate. The molybdenum concentrate would be shipped to the Endako roaster via rail and be processed into molybdenum tri-oxide. From Endako, it would then be shipped to separate steel-making manufacturers. It is important to note that these proposed smelter contract terms are dependent on whether Endako would be able to run their roaster for the Mac Property concentrate, due to it currently being on care and maintenance. Other means of refining have not been considered due to the significant cost for transportation. The copper concentrate would be transported to port via rail to an international smelter, where it would be refined to pure copper. This is

common practice with most mines in the area, due to the lack of available copper refineries in Canada.

The costs associated with roasting, refining, transportation and port fees has been benchmarked based on smelter contract models from mines in the same area, specifically Endako, Red Chris and Mt. Milligan. The costs are presented in Table 18.

Table 18: Smelter Contract Terms

Concentrate Rail Cost per lb. $ 0.68Molybdenum

Roasting per tonne $ 1,102.31Roasting per lb. $ 0.50Molybdenum Selling Cost per lb. $ 0.84

CopperTreatment Cost per tonne $ 80.00Treatment Cost per lb. $ 0.04Refining Charge per tonne $ 176.37Refining Charge per lb. $ 0.08Copper Selling Cost per lb. $ 0.46

Capital and Operating CostsThe total capital and operating costs for the Mac project is based mainly on Cost Mine. The cost models for surface operations with production rates of 5,000 tonnes of ore per day, assuming a strip ratio of 2.0 was used and changed accordingly based on industry standards. For the process plant, the cost model for flotation operations with production rates of 5,000 tonnes of ore per day were used and changed accordingly. These costs were incorporated into the previous sections of the report and reiterated into the cost models to optimize the costs of the entire project.

Capital Cost

The total capital costs for the development of the Mac Property is summarized in .

Table 19: Mac Property Total Capital Cost Estimate

Capital Costs $USDMine Equipment $ 9,484,950.00Mill Equipment $ 11,457,166.67Site Preparation $ 3,761,295.60Buildings and Offices $ 3,339,071.58Installation and Labor $ 7,230,654.99Ancillaries $ 5,100,594.49Instrumentation, Electrical, Insulation $ 2,424,683.44Tailings Embankment $ 8,739,300.00Sustaining Capital $ 1,817,002.93Working Capital $ 3,607,640.17Engineering and Management $ 7,398,750.46Contingency (+20%) $ 12,872,222.06Total Capital Costs $ 77,233,332.39

An additional 20% increase is applied to the capital costs as a contingency, which is common practice for pre-feasibility stages of mine development. The breakdown of the capital costs for both mining and milling are discussed in the subsequent sections of the report.

Mine Capital Cost

The capital costs associated with mine operations is presented in a breakdown in Table 20.

Table 20: Total Capital Cost Breakdown for Mining

Capital Costs for Mining OperationEquipment $ 9,484,950.00Haul Roads/Site Work $ 1,718,655.42Stripping $ 2,042,640.18Buildings $ 730,700.00Sustaining Capital $ 1,817,002.93Working Capital $ 978,386.19Engineering $ 2,515,850.21Total Capital Costs $ 19,288,184.93

The equipment selection and fleet size for the mine were determined in the previous section of the report. The costs associated with each unit were taken from Cost Mine. The haul roads, site work and stripping costs were determined by computing the total mass of material required for development. The associated cost per tonne of material developed is assumed to be the mining cost per tonne of material. The cost calculation is presented in Table 21.

Table 21: Development Cost Breakdown

Pre-Production Stripping (tonnes) 857,869Haul Road Construction (tonnes) 721,802Development Cost per Tonne $ 2.38Total Development Cost $ 3,761,296

The size and cost of the buildings for the mine were taken as estimates from Cost Mine. The sustaining capital, working capital and engineering cost lines were assumed to be percentages of the total capital cost. The percent allocation to sustaining capital, working capital and engineering were assumed to be 13%, 7%, and 18%, respectively.

Mill Capital Cost

The capital cost for the mill is presented in Table 22.

Table 22: Mill Capital Cost

Capital Cost for Milling OperationEquipment $ 11,457,166.67Installation and Labor $ 7,230,654.99Concrete $ 924,135.83Piping $ 3,081,950.08Structural Steel $ 973,466.92Instrumentation $ 694,485.55Insulation $ 354,141.11Electrical $ 1,376,056.78Coatings and Sealants $ 121,041.66Mill Building $ 2,608,371.58Tailings Embankment $ 8,739,300.00Engineering $ 4,882,900.25Working Capital $ 2,629,253.98Total Capital Costs $ 45,072,925.40

The equipment cost is developed from the plant equipment selection, and the costs associated with each unit were benchmarked from Cost Mine. The Installation & Labor, Concrete, Piping, Structural Steel, Instrumentation, Insulation, Electrical, Coatings & Sealants, Mill Building, Tailings Embankment cost lines were estimated from the Flotation Capital Cost for 5,000 tonne per day operations. The engineering and working capital figures were estimated to be a combination of 20% of the total capital cost.

Operating Cost

The total operating cost per tonne of ore mined and processed is summarized in Table 23.

Table 23: Mac Property Total Operating Cost Estimate

Operating Cost $USD per tonne of oreMining $ 7.14Milling $ 10.07General and Administrative $ 2.09Total Operating Cost $ 19.31

The operating cost breakdown for mining and milling will be discussed in the following sections.

Mining Operating Cost

The total mining operating cost breakdown is presented in the Table 24.

Table 24: Mine Operating Cost Breakdown

Operating CostsSupplies $ 1.08 per tonneHourly Labor $ 3.72 per tonneEquipment Operation $ 2.35 per tonneSalaried labor $ 1.04 per tonneTotal Operating Cost $ 8.19 per tonne

The mining operating cost is broken down as a function of supplies, hourly labor, equipment operation and salaried labor or general and administrative costs. The supply price estimates were taken from Cost Mine, as well as the quantity of consumables used per day, with the exception of electricity. The electricity, the highest operating cost with respect to the supplies line, is based on the daily power consumption for all the equipment operating in the mine. The breakdown of mine daily consumables is presented in Table 25.

Table 25: Mine Daily Consumables

Supplies and Operation Supply Prices Quantity Per Daydiesel fuel $ 0.52 per L 6,396 Lelectricity $ 0.072 per kWh 117,067 kWhbulk explosives $ 0.71 per kg 4,551 kgcaps $ 6.60 ea. 44primers $ 6.80 ea. 40detonation cord $ 1.20 per m 541 mdrill bits $ 1,400.00 ea. 0.7

The hourly personnel requirements for the mine are primarily based on Cost Mine. However, significant changes to the equipment selection of the fleet reduced the number of personnel required for each position. The hourly rates are estimates from Cost Mine, as well. This information is presented in Table 26.

Table 26: Hourly Personnel Requirements for Mine Operations

Hourly Positions Hourly Rates Personnel Requiredexcavator operator $ 44.80 3electrician $ 44.80 2blaster $ 42.00 2mechanic $ 43.40 2driller $ 40.60 2equipment operator $ 39.90 7truck driver $ 37.10 8maintenance worker $ 36.40 7utility operator $ 33.60 2laborer $ 32.20 5

The general and administrative costs, assumed to be entirely made up of the salaried positions on site are based on personnel requirements and annual salaries from Cost Mine, and presented in Table 27.

Table 27: Salaried Personnel Requirements for Mine Operations

Salaried Positions Annual Rates Personnel Requiredmanager $ 182,000.00 1personnel manager $ 154,000.00 0superintendent $ 147,000.00 1engineer $ 141,500.00 1foreman $ 128,800.00 2environmental spec. $ 133,000.00 2geologist $ 130,700.00 1purchaser $ 117,600.00 0supervisor $ 112,000.00 2accountant $ 116,200.00 0technician $ 89,600.00 2clerk $ 67,200.00 1secretary $ 63,000.00 2

Milling Operating Cost

The total milling operating cost breakdown is presented in

.

Table 28: Mill Operating Cost Breakdown

Operating CostsHourly Labor $ 1.99 per tonneSalaried Labor $ 1.05 per tonneSupplies and Materials $ 8.09 per tonneTotal Operating Costs $ 11.12 per tonne

The majority of the operating cost originates from the supplies and materials aspect of daily mill production. The supply prices for the mill consumables, as well as the quantity of use per day were estimated from Cost Mine, with the exception of electricity. The electricity use per day represents the largest component of the mill operating cost, similar to the mine. The electricity use per day is the sum of all mill equipment power consumption. The mill consumables breakdown is presented in Table 29.

Table 29: Mill Daily Consumables

Supplies and Consumables Supply Prices Quantity Per DayLime $ 1.91 per kg 5,287 kgCollector $ 2.01 per kg 278 kgFrother $ 2.84 per kg 183 kgFlocculent $ 7.70 per kg 30 kggrinding media $ 0.68 per kg 4,961 kgmill liners $ 6.18 per kg 876 kgfuel oil $ 0.49 per kg 2,832 Ldiesel fuel $ 0.52 per kg 6 Lelectricity cost $ 0.072 per kWh 261,650 kWh

The hourly personnel requirements and rates were estimated using Cost Mine and presented in Table 30.

Table 30: Hourly Personnel Requirements for Mill Operations

Hourly Positions Hourly Rates Personnel Requiredelectrician $ 44.10 3control room $ 44.10 2mechanics $ 42.70 3crusher $ 39.90 2grinding $ 37.80 2assayer $ 37.80 2flotation $ 37.80 2dewatering $ 37.80 2laborer $ 28.70 4sampler $ 28.70 2

Similar to the hourly component of the operating cost, the general and administrative costs were estimated using Cost Mine and represent the sum of the product of the personnel requirements and annual salary. This is represented in Table 31.

Table 31: Salaried Personnel Requirements for Mill Operations

Salaried Positions Annual Rates Personnel RequirementsSuperintendent $ 154,000.00 1Senior Met $ 154,000.00 1Maintenance Foreman $ 133,000.00 1General foreman $ 130,000.00 1Metallurgist $ 126,000.00 2Plant Foreman $ 126,000.00 2Process Foreman $ 126,000.00 2Instrument Tech $ 105,000.00 2Process Tech $ 98,000.00 2

Economic Analysis

Base Case

The base price of both molybdenum and copper are assumed to be $7.50 and 3.00 USD, respectively. The discount rate for the subsequent economic analysis is assumed to be 8%, which is realistic due to the location of the project. Using the life of mine schedule, the total cash flow for each production year was discounted over the mine life, and is summarized in Figure 26.

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

-$90,000,000

-$80,000,000

-$70,000,000

-$60,000,000

-$50,000,000

-$40,000,000

-$30,000,000

-$20,000,000

-$10,000,000

$-

$10,000,000

Base Case LOM Discounted Cash Flow

Year

Cash

Flo

w (

$USD

)

Figure 26: Base Case Discounted Cash Flow Model

A summary of the project economics for this base case is presented in Table 32.

Table 32: Project Economics Base Case

Base Case Project EconomicsCapital Cost $ 77,233,332Operating Cost (per tonne) $ 19.31Discount Rate 8%Molybdenum Price (per lb.) $ 7.50Copper Price (per lb.) $ 3.00Net Present Value -$ 43,602,752Internal Rate of Return -8%

The net present value and internal rate of return of the project are both negative. Therefore the project should not progress into development at this point in time.

Sensitivity Analysis

The base case has a negative NPV and IRR, so investing in the project is not recommended with current economic conditions. However, in order to determine what could improve the project economics, sensitivities were performed on the following parameters with respect to the Net Present Value of the project:

Capital cost Operating cost Discount rate Molybdenum price Copper price

The sensitivities are presented in the figures below:

-40% -30% -20% -10% 0% 10% 20% 30% 40%

$(80,000,000.00)

$(70,000,000.00)

$(60,000,000.00)

$(50,000,000.00)

$(40,000,000.00)

$(30,000,000.00)

$(20,000,000.00)

$(10,000,000.00)

$-

Sensitivity of Capital Cost

%Change in Capital Cost

Net

Pre

sent

Val

ue

Figure 27: Capital Cost Sensitivity Analysis

-40% -30% -20% -10% 0% 10% 20% 30% 40%

$(150,000,000.00)

$(100,000,000.00)

$(50,000,000.00)

$-

$50,000,000.00

$100,000,000.00

Sensitivity of Operating Cost

%Change in Operating Cost

Net

Pre

sent

Val

ue

Figure 28: Operating Cost Sensitivity Analysis

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

$(70,000,000.00)

$(60,000,000.00)

$(50,000,000.00)

$(40,000,000.00)

$(30,000,000.00)

$(20,000,000.00)

$(10,000,000.00)

$-

Sensitivity of Discount Rate

Discount Rate (%)

Net

Pre

sent

Val

ue

Figure 29: Discount Rate Sensitivity Analysis

$(5.00) $- $5.00 $10.00 $15.00 $20.00

$(500,000,000.00)

$(400,000,000.00)

$(300,000,000.00)

$(200,000,000.00)

$(100,000,000.00)

$-

$100,000,000.00

$200,000,000.00

$300,000,000.00

$400,000,000.00

Sensitivity Analysis of Molybdenum Price

Molybdenum Price

Net

Pre

sent

Val

ue

Figure 30: Molybdenum Price Sensitivity Analysis

$1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00

$(150,000,000.00)

$(100,000,000.00)

$(50,000,000.00)

$-

$50,000,000.00

$100,000,000.00

Sensitivity Analysis of Copper Price

Copper Price

Net

Pre

sent

Val

ue

Figure 31: Copper Price Sensitivity Analysis

Based on the sensitivity analysis, changes in capital cost and operating costs will not increase the net present value of the project beyond 0. Since the project assumes a conservative

discount rate, and the internal rate of return is still negative, assessing different discount rates do not improve the economics of the project.

The only sensitivities that showed an improvement in the project economics were the increase in either molybdenum or copper price. The project has the highest sensitivity to molybdenum price. Molybdenum is currently at a career low of $7.00 per lb., so if forecasted metal price shows an upward trend, the project could be economical. Copper also improves the economics of the project, but based on the Market Study section of the report, the metal price is moderate, and significantly higher prices in copper are unlikely to be forecasted in the future.

By adjusting the price of molybdenum using Goal Seek on Excel, the mine development for the Mac Property would be economic if the price reached $11.70 per lb. By evaluating the project at this price, the net present value is greater than the required initial investment, and in that scenario, it would be recommended to invest in the project. The life of mine discounted cash flow for this economic scenario is presented in Figure 32.

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

-$100,000,000

-$80,000,000

-$60,000,000

-$40,000,000

-$20,000,000

$-

$20,000,000

Economic Case LOM Discounted Cash Flow

Year

Cash

Flo

w (

$USD

)

Figure 32: Economic Case Discounted Cash Flow Model

Environmental Studies and PermittingAn environmental assessment needs to be completed as part of the Mac Property feasibility study. The study needs to include baseline environmental, social studies, and surveys.

Environmental Permitting

The Ministry of Energy and Mines, the Ministry of Environment, and the Federal Government regulate the mining in the province of British Columbia. All mining projects in BC are required to comply with the Mine Act, Health Safety and Reclamation Code for Mines in BC. The Ministry of Energy and Mines plays a big role in regulating the mining industry. The Ministry of Energy and Mines is mainly responsible for the regulation of mines and mining related activity. For example, The Ministry of Energy and Mines protect employees from unexpected risks in mining activities and also ensure the reclamation of the land and water affected by the mining activities. The Ministry of Environment’s Environmental Protection Division, through the various statutes installed by the Government such as the Environmental Management Act, the Environmental Protection Division of the Ministry of Environment is responsible for authorizing the quantity and quality of any discharge to the environment from mining related activities (Clark, 2015).

In order for the MAC project get approved by the Ministry of Environment, the effluent sediment pond must meet Ambient Water Quality and the Best Achievable Technology Policy. The Ambient Water Quality Guidelines are shown in Figure 33.

Figure 33: Ambient Water Quality Guidelines

The Ambient Water Quality Guidelines sets the acceptable levels of turbidity, and suspended benthic sediments. The Best Available Technology Policy regulates the standards for suspended solids and turbidity.

Water Quality

There is no water quality data for the MAC property, however, Acid Rock Drainage (ARD) is a concern. The main environmental concern related to Acid Rock Drainage is Metal Leaching, elements such as Molybdenum, Chalcopyrite and Pyrite are relatively soluble and may occur in significantly high concentrations. Mac property needs to monitor surface water parameters, such as pH value, conductivity, hardness, turbidity and concentrations of metals. Metals such as arsenic, mercury, selenium and uranium needs to be tested and monitored in surface water.

Wildlife Resources

A biology investigations relate to species at risk (SAR) needs to be conducted in order to support Mac property’s application for amendment to acquire Mine Act Permits. In general, the baseline studies conducted for the project review and approvals were comprehensive for most wildlife species potentially occurring in the project area.

Climate

The Mac Property is a typical climate of British Columbia, with high elevations and large temperature range between each seasons. The summers are generally short in central BC (from late June to late September). Typically, heavy rains or snowstorms can begin in late September.

Air Quality

The project is located in a non‐urban region. Currently, there are no air quality monitoring stations in the region.

Noise

No information found on background sound levels for the Mac Property area.  Ambient data will be collected during application. These data will be used to have a better understanding of noise levels occurred with the mine during operation. Changes in noise levels have a potential damage for wildlife.

Community EngagementThe regional First Nations group near the Mac property project is the Yekooche First Nation, part of the Dakelh Nation. (Lhtako Dene Nation, 2017). Dakelh Nation territory is comprised of approximately 76,000 km2 in the Interior Plateau region of British Columbia. Traditionally, the Lower Carrier group is comprised of a social organization based largely upon bilateral kinship

groups whose economy is largely based upon fishing. The Yekooche Band traditional territory is located about 85 km northwest of Fort St James British Columbia. It comprises 4 reserves on a total of roughly 180 hectares.

Babine Lake is very important to the Yekooche people. It is a place to catch fish, and it is a link to the other villages. Over the years the water level has gotten very low in the lake and nearby Leo Creek so that they sometimes have to go to other nearby lake to get prepared for winter supply of fish.

Water quality is a serious issue that affects both the environment, public health, and socioeconomic areas. Mine sites are notorious for their water runoff and pollution, illustrated in expensive lawsuits that have been waged throughout North American for decades. However, modern Canadian regulations on the province level not only provide water quality guidance, but are also tested periodically to ensure compliance with provincial policy. The methods and techniques for ensuring clean water, or at least water that meets or exceeds the minimum threshold set by the responsible environmental agency, should be disclosed to citizens to foster a sense of honesty and open communication in a very contentious topic. Further, all certificates and review processes should be noted at community meetings, whether it is concerns the Department of Natural Resource’s issuance of the company’s environmental compliance certificate or any other document noting government compliance. In addition to its vitally integral role in the process of nearly all life on the planet Earth, water has also been intricately tied with the process of mining. This mining and water connection has been completed usually through the process of mining activities like dust suppression, employee usage, and slurry transport. In effect, the requirement of water has always been absolutely essential to the mining process and thus has become intimately tied to all mining projects due to the nature of this substance’s ability to drive many activities.

The environmental perspective has thus become predicated on understanding the legitimate concerns this heavy reliance on water has created. For instance, several components involving water usage have included normal daily operations, governmental regulations, the company’s reputation, and potential expectations from investors. Due to these fundamental concepts and daily concerns involving the use of water in the mining extraction process for the development of mineral obtainment, companies must be aware of these situational realities and make certain changes to their mining activities.

In this respect, mining simply cannot take place with adequate water supply being implemented in nearly all mining activities for any given mining project. In many ways, having enough water, as well as the ability to distribute that water supply, can mean the different life, death, completion of the project, or utter failure when a lack of water has been forfeited during any given project’s life cycle. For example, according to research completed by the World Bank Group’s own Compliance Advisor Ombudsman (CAO), water is generally regarded as such an integral component to mining that much conflict as arisen due to its implementation. This is

more than simple conjecture on the part of this global organization but rather a clearly defined statement of facts, for the application of water for the purposes of mining project has a critically valuable aspect to the entire affair. Taken as a singular entity, having adequate water supplies might be the most important facet of any mining project, due to the many applications therein.

Taking guidance from the Adanac Molybdenum Corporation (2007) report, the mining company should firstly consult with area residents at formal meetings to include stakeholders and others involved in the local community (political leaders, elders, etc.). To gauge what the local populace place value on, company representatives should poll residents to rank their top concerns for environmental impacts. This should be screened using two filters: valued environmental components, along with valued socioeconomic components. Then, the company should take that data and rank the top five or six concerns (or however many occupy the bulk of the idea pool). The environmental impact assessment of these components can then be performed, and presented to stakeholders to address the mitigation of potential issues. It will also be an opportunity to reassure residents that many environmental areas will be unscathed by the operation. For example, while moose are present in the habitat around the MAC site, previous research at other mine sites has suggested that moose adapt to project activities, often migrating into the no-hunting areas upon commencement of the hunting season (Adanac Molybdenum Corporation, 2007). Further, the exact extent of the impact can be discussed at these meetings. For example, while game bird habitat at the Adanac site was affected, the birds themselves were not, instead flocking to nearby habitats and adapting to their new environs.

Located in rural British Columbia, the MAC (molybdenum and copper) site spans nearly 37,000 acres, with evidence of awaruite (a nickel-iron alloy) appearing across the project. Adverse market conditions in 2013 forced the previous mine operators to shut down after failing to meet their financial obligations (“Mac Property,” n.d.). This caused them to forgo their 90% interest in the mine claim. There are some estimated 262+ million pounds of molybdenum on the acreage, along with over 351 million pounds of copper (estimated); the estimated recoverable metal value is over five billion U.S. dollars between molybdenum and copper asset (“Mac Property,” n.d.).

Previous environmental impact assessments included in feasibility studies of mining molybdenum in British Columbia have asserted that numerous areas of the natural ecosystem can potentially be affected. For example, in 2007, the Adanac Molybdenum Corporation (2007) noted that the environmental impact could also impact the socioeconomic impact of residents, since many first nations residents rely on natural goods for income. The impact took into consideration the Taku River Tlingit First Nation along with regulators to gather what components were important to them as residents in a rural area that place a high monetary and social value on various environmental components. Some of these components included game birds, the fish habitat, caribou, sheep, marmot, moose, bear, game birds, water quality, and game birds. The case of the fish habitat is especially concerning in molybdenum and copper mining because operations often cause reduction in water flows to rivers that are downstream.

However, for the sake of transparency, it should be noted that the environmental impact assessment was presented with mining interests ultimately in mind. Other effects are often omitted from such reports, as seen in academically-funded and government-subsidized research that is not associated with mining operations. For example, exposure to molybdenum can cause the short-term health effects of muscle and join pain, headache, and fatigue, while prolonged exposure can cause damage to the liver and kidneys along with anemia (Furness, 2018). There are also reproductive and cancer hazards associated with exposure to molybdenum. While unlikely that molybdenum powder created from extraction would be enough to reach residents over the 37,000-acre site, an explosion or fire from an unexpected event is a possibility, and the risk (however small) should be disclosed to community members. A far more common scenario is the uptake of molybdenum (and copper) by the biosphere, snaking its way into the food chain (Furness, 2018). This is especially true in the MAC mining area’s populace, who may eat fish that ate worms (that further consumed contaminated soil).

There are also health concerns with the mining of copper, which can be best illustrated in Butte, Montana’s Berkeley Pit. Now the biggest toxic site in America (called a Superfund site) as decided by the country’s Environmental Protection Agency, the pit was once filled with 40 billion gallons of acid water (Tucci & Gammons, 2015). In addition, miners of copper often were afflicted with grave health concerns due to heavy metal exposure. From hardened arteries, to lung and bladder cancer, to bone disorders and lead poisoning, workers of the mine are also a concern for the local populace since there will most likely be a pool of local workers aiding with mining operations (Tucci & Gammons, 2015).

The company could also consider establishing a community foundation that addresses community issues to promote positive community development. This has been performed by other molybdenum miners, including Metals Exploration Plc (n.d.), a company that reported that their foundation has been well-received by locals and has served as a trust-building platform that helps community members socially, financially, and professionally. With a mine life of ten years, this decade-long operation has the potential to become a go-to community leader. It is important that communication and transparency in the community development phase is executed with empathy and open listening sessions, which helps build confidence in community leaders and the community at large. 

RecommendationsAt current economic conditions, investment in the construction and development of the Mac deposit is not recommended. The majority of the engineering test work is based on indicated resources, so the confidence in the proposed mine plan is lower than projects with measured resources. It is recommended that a high density drilling program be implemented by any firm that acquires the Mac property. High density drilling will increase the geological confidence of the resource estimate, and expand the total measured, indicated and inferred resources.

The criteria for the open pit mine design is severely limited due the lack of geotechnical data. This data allows for the proper engineering of pit slopes such that sufficient factors of safety exist for commercial operation. The safety of workers is a priority for mining, so benchmarking criteria without sufficient data to support these assumptions presents significant operational risk to personnel. Another recommendation is that a geotechnical mapping program be implemented to characterize the rock strength and assess potential failure surfaces.

For the process design, it is highly recommended that a metallurgical test program be in place to properly characterize the floatability and separation of molybdenum and copper products. The proposed process design is based entirely on assumptions from the Endako mine, an operation with a similar mineralization to the Mac Camp Zone. The minable grades for both the deposits is significantly different, which could affect the metallurgy significantly. As well, test work will be indicative of possibly optimizing the process to maximize the value generated from the mill operation.

As well, due to the lack of characterization of the ore, and by extension the tailings, there is insufficient information to conduct a study on the design of a tailings storage facility. The capital cost of this embankment is benchmarked based on Cost Mine, however a thorough analysis of tailings management must be completed prior to progressing with the project.

The sensitivity analysis in the project economics section of the report indicated that the net present value of the Mac property could become profitable if molybdenum price were to increase. Most molybdenum projects in the surrounding area are in care and maintenance, due to the career low molybdenum price of $7.00 per pound. It is recommended that the Mac project be put on hold until the price of molybdenum increases beyond $11.70, the point at which the project will become profitable. As well, the cut-off grade for the deposit would increase significantly, such that minable reserves would increase, as well as the economic production rate and life of mine.

BibliographyAdanac Molybdenum Corporation. (2007). Feasibility Study Update, Ruby Creek Project.

Northern BC : Adanac Molybdenum Corporation. Retrieved from https://secure.kaiserresearch.com/i/jk/tr16/TRAUA20071201.pdf

Canadian Institute of Mining, Metallurgy. (2014). CIM Definition Standards for Mineral Resources and Mineral Reserves. Ottawa: CIM.

Clark, E. (2015). Developing a Mining Erosion and Sediment Control Plan. Retrieved from http://www2.gov.bc.ca/assets/gov/environment/waste- management/industrial-waste/industrial-waste/mining-smelt- energy/erosion_sediment_control_plan_guide.pdf

Clifford, R., & Berthelsen, D. (2015). NI-43-101 Technical Report Mount Milligan Mine. Vancouver: Thompson Creek Metals.

Cost Mine. (2016). Mining Cost Service. Washington: Info Mine.

Einsiedel, B. D. (2011, July 1). Technical Summary Report Mac Molybdenum-Copper Property Babine Lake Area BC for Turbine Minerals Corp. Retrieved from http://www.komatsu.com/ce/products/pdfs/HD785-7_CEN00136-08.pdf

Furness, R. W. (2018). CRC Press. Feasibility and Resource Update. Retrieved from Metals Exploration PLC: http://www.metalsexploration.com/documentsf3b7.pdf?id=315

Gammons, N. J. (2015). Influence of Copper Recovery on the Water Quality of the Acidic Berkeley Pit Lake. Environmental Science and Technology , 4081-4088.

Gillstrom, G., Anand, R., Robertson, S., & Sterling, P. (2015). 2012 Technical Report on the Red Chris Copper-Gold Project. Vancouver: Imperial Metals Corporation.

Giroux, G., & Moore, M. (2012). Mac Property NI-43-101 Technical Report Molybdenum-Copper Resource Estimate. Vancouver: Giroux Consultants Ltd.

Marek, J. M. (2011). Technical Report Endako Molybdenum Mine. Fraser Lake: Independent Mining Consultants Inc. .

Nicolau, J. M. (2003). Trends in Relief Design and Construction in Open Cast Mining Reclamation. Land Degradation and Development.

Sinclair, W. D. (1995). Porphyry Mo (Low-F-type), in Selected British Columbia Mineral Deposit. In W. D. Sinclair, Cost Mine (pp. 93-96).