THE MAC PROPERTY PRE-FEASIBILITY STUDY - BC MINING … REPORTS AND... · Executive Summary Property Description and Location The Mac Property mineral claims, spanning for 18,948 hectares

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MINEIT CONSULTING Date of Submission: March 29, 2018

THE MAC PROPERTY PRE-FEASIBILITY STUDY

Table of Content List 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 ........................................................................................................................................................... 4

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 .......................................................................................................................................... 6

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 Tables Table 1: Mac Property Mineral Claims 1 ...................................................................................... 10

Table 2: Mac Property Mineral Claims 2 ...................................................................................... 11

Table 3 Summary Statistics Mo & Cu Soil Samples .................................................................... 15

Table 4:: Significant Drill Core Intersection for Mo and Cu 1 ....................................................... 17

Table 5: Significant Drill Core Intersections for Mo and Cu 2 ...................................................... 18

Table 6: Resource Estimate for Indicated Resources.................................................................. 29

Table 7: Resource Estimate of Inferred Resources ..................................................................... 29

Table 8: Cut-Off Grade Estimation ............................................................................................... 30

Table 9: Reserve Estimate for Pit 2 Design ................................................................................. 31

Table 10: Vulcan Pit Optimiser Inputs .......................................................................................... 33

Table 11: Pit Optimiser Commodity Price .................................................................................... 33

Table 12: Life of Mine Production Schedule ................................................................................ 40

Table 13: Life of Mine Waste Material .......................................................................................... 41

Table 14: Haul Road Design Criteria ............................................................................................ 43

Table 15: Daily Production Estimate using MMcKK Queue Model .............................................. 44

Table 16: Mine Fleet Requirements ............................................................................................. 44

Table 17: Mill Process Plant Equipment....................................................................................... 47

Table 18: Smelter Contract Terms ............................................................................................... 51

Table 19: Mac Property Total Capital Cost Estimate ................................................................... 51

Table 20: Total Capital Cost Breakdown for Mining ..................................................................... 52

Table 21: Development Cost Breakdown ..................................................................................... 52

Table 22: Mill Capital Cost ............................................................................................................ 53

Table 23: Mac Property Total Operating Cost Estimate .............................................................. 53

Table 24: Mine Operating Cost Breakdown ................................................................................. 54

Table 25: Mine Daily Consumables .............................................................................................. 54

Table 26: Hourly Personnel Requirements for Mine Operations ................................................. 54

Table 27: Salaried Personnel Requirements for Mine Operations .............................................. 55

Table 28: Mill Operating Cost Breakdown .................................................................................... 56

Table 29: Mill Daily Consumables ................................................................................................ 56

Table 30: Hourly Personnel Requirements for Mill Operations ................................................... 56

Table 31: Salaried Personnel Requirements for Mill Operations ................................................. 57

Table 32: Project Economics Base Case ..................................................................................... 58

List of Figures

Figure 1: Location Map for Mac Property ....................................................................................... 9

Figure 2: New Drill Access Trail ................................................................................................... 20

Figure 3: Drill Hole Compilation .................................................................................................... 21

Figure 4: East Contact Zone Mineralization Cross Section ......................................................... 22

Figure 5: North West Contact Zone Mineralization Cross Section .............................................. 23

Figure 6: Blank Sample Performance for Mo ............................................................................... 25

Figure 7: Blank Sample Performance for Cu ............................................................................... 25

Figure 8: Mac Moly Property Core Logging Facility ..................................................................... 26

Figure 9: Mac Moly Property Core Cutting Facility ...................................................................... 27

Figure 10: Mac Property Block Model of Indicated Resources: ................................................... 28

Figure 11: 0.05% Mo Orebody Triangulation ............................................................................... 31

Figure 12: Mac Property Indicated Resources Grade Shell ........................................................ 32

Figure 13: Pit Optimiser Scenario 1 ............................................................................................. 34

Figure 14: Pit Optimiser Scenario 2 ............................................................................................. 35

Figure 15: Pit Optimiser Scenario Analysis .................................................................................. 36

Figure 16: Pit 2 Design Scenario Plan View ................................................................................ 38

Figure 17: Pit 2 Design Scenario Section View............................................................................ 38

Figure 18: Pit 2 Design Triangulation ........................................................................................... 39

Figure 19: Life of Mine Ore Grade Variability ............................................................................... 40

Figure 20: Waste Dump Plan View .............................................................................................. 41

Figure 21: Waste Dump Section View .......................................................................................... 42

Figure 22: Waste Dump Design Triangulation ............................................................................. 43

Figure 23: Mac Property Mo/Cu Flowsheet .................................................................................. 46

Figure 24: Long Term Molybdenum Oxide Price in $USD ........................................................... 49

Figure 25: Long Term Copper Price in $USD .............................................................................. 50

Figure 26: Base Case Discounted Cash Flow Model .................................................................. 58

Figure 27: Capital Cost Sensitivity Analysis ................................................................................. 59

Figure 28: Operating Cost Sensitivity Analysis ............................................................................ 60

Figure 29: Discount Rate Sensitivity Analysis .............................................................................. 60

Figure 30: Molybdenum Price Sensitivity Analysis ...................................................................... 61

Figure 31: Copper Price Sensitivity Analysis ............................................................................... 61

Figure 32: Economic Case Discounted Cash Flow Model ........................................................... 62

Figure 33: Ambient Water Quality Guidelines .............................................................................. 63

List of Equations

Equation 1: Cut-Off Grade ............................................................................................................ 30

Equation 2: Taylor’s Formula for Optimum Mine Tonnage Rate ................................................. 36

Equation 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 holes 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.

Introduction

MineIt 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 Location

The 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, Physiography

The 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 Classification

The 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

Drilling

In 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 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 Estimate

A 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

Table 7: Resource Estimate of Inferred Resources

Mineral Reserve Estimates

Using 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

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 Equivalent

0.010 117,000,000 0.045 0.07 0.06 0.25 116.093 180.590 161.241 644.963

0.020 89,819,000 0.055 0.09 0.08 0.31 108.928 178.246 153.489 613.958

0.030 79,502,000 0.059 0.09 0.08 0.33 103.428 157.772 142.871 571.484

0.035 70,360,000 0.063 0.10 0.09 0.35 97.741 155.144 136.527 546.106

0.040 61,616,000 0.067 0.10 0.09 0.37 91.028 135.863 124.994 499.977

0.045 52,836,000 0.072 0.11 0.10 0.40 83.882 128.154 115.921 463.683

0.050 45,168,000 0.077 0.12 0.11 0.43 76.688 119.515 106.567 426.268

0.055 38,773,000 0.082 0.12 0.11 0.45 70.105 102.593 95.754 383.015

0.060 28,247,000 0.093 0.14 0.13 0.51 57.925 87.198 79.724 318.897

0.070 20,429,000 0.103 0.15 0.14 0.56 46.397 67.569 63.290 253.158

0.080 14,853,000 0.114 0.17 0.16 0.63 37.336 55.676 51.255 205.020

0.090 10,984,000 0.125 0.18 0.17 0.68 30.275 43.595 41.174 164.694

0.100 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



(%) (%) (%) (%) lbs of Mo lbs of Cu Mo Equivalent Cu Equivalent

0.010 336,422,000 0.032 0.04 0.04 0.17 237.379 296.724 311.560 1246.242

0.020 275,438,000 0.036 0.05 0.05 0.19 218.643 303.670 294.560 1178.241

0.030 226,647,000 0.039 0.05 0.05 0.21 194.905 249.878 257.375 1029.499

0.035 177,934,000 0.042 0.05 0.05 0.22 164.785 196.172 213.828 855.311

0.040 120,621,000 0.046 0.05 0.06 0.23 122.346 132.985 155.592 622.368

0.045 76,504,000 0.052 0.05 0.06 0.26 87.719 84.346 108.806 435.224

0.050 47,998,000 0.057 0.06 0.07 0.29 60.326 63.501 76.202 304.806

0.055 31,591,000 0.063 0.06 0.08 0.31 43.885 41.795 54.333 217.333

0.060 15,167,000 0.072 0.06 0.09 0.35 24.079 20.066 29.096 116.382

0.070 6,819,000 0.081 0.07 0.10 0.39 12.179 10.525 14.810 59.241

0.080 2,305,000 0.094 0.09 0.12 0.47 4.778 4.574 5.921 23.685

0.090 966,000 0.109 0.11 0.14 0.55 2.322 2.343 2.907 11.630

0.100 537,000 0.121 0.13 0.15 0.61 1.433 1.539 1.818 7.270

MAC CAMP ZONE - INFERRED RESOURCE


Based on Mo Cut-off

Equation 1: Cut-Off Grade

𝐶𝑢𝑡 − 𝑜𝑓𝑓 𝐺𝑟𝑎𝑑𝑒 = (𝑚𝑖𝑛𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑡𝑜𝑛𝑛𝑒 + 𝑝𝑟𝑜𝑐𝑒𝑠𝑠 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑡𝑜𝑛𝑛𝑒

𝑚𝑒𝑡𝑎𝑙 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 $ 2.38

process cost per tonne $ 11.12

metal recovery 95%

unit metal sale price per lb. $ 7.50

refinery unit cost per lb. $ 0.84

cut-off %MoEq 0.10%

base Mo price $ 7.50 base Cu price $ 3.00

cut-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

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.



(%) (%) (%) (%) lbs of Mo lbs of Cu Mo EquivalentCu Equivalent

0.050 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


Mining Methods

Open 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.

Table 10: Vulcan Pit Optimiser Inputs

Vulcan Pit Optimiser Inputs

Base 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 1.0 Rock Type Mining Cost Adjustment Factor 1.0 Mine Rehabilitation Cost $ - USD per tonne

Rock Type Processing Cost $ 11.10 USD per tonne

Mo Processing Recovery 95% Cu Processing Recovery 95% Mo Processing Cost $ - USD per lb., in lieu of rock type processing cost

Cu Processing Cost $ - USD per lb., in lieu of rock type processing cost

Mining Cost $ 2.33 USD per lb.

Positional Mining Cost Adjustment Factor 1.0 Dilution Factor 1.0 Mining 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 Pit

Pit Mo Price Cu Price

1 $ 7.50 $ 1.50

2 $ 11.25 $ 2.25

3 $ 15.00 $ 3.00

4 $ 18.75 $ 3.75

5 $ 22.50 $ 4.50

6 $ 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 =4.88𝑇𝑟

0.75

𝐷𝑦𝑟

𝑇 = 𝑜𝑟𝑒 𝑚𝑖𝑛𝑒𝑑 𝑝𝑒𝑟 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑑𝑎𝑦 𝑖𝑛 𝑠ℎ𝑜𝑟𝑡 𝑡𝑜𝑛𝑠

𝑇𝑟 = 𝑡𝑜𝑡𝑎𝑙 𝑜𝑟𝑒 𝑟𝑒𝑠𝑒𝑟𝑣𝑒𝑠 𝑖𝑛 𝑠ℎ𝑜𝑟𝑡 𝑡𝑜𝑛𝑠

𝐷𝑦𝑟 = 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑑𝑎𝑦𝑠 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 Schedule

Production Year Throughput %Mo %Cu Million lbs of Mo Million lbs of Cu

1 1,750,000 0.076 0.104 2.94 4.03

2 1,750,000 0.081 0.108 3.11 4.17

3 1,750,000 0.085 0.112 3.27 4.31

4 1,750,000 0.085 0.112 3.27 4.31

5 1,750,000 0.090 0.118 3.48 4.53

6 1,750,000 0.090 0.118 3.48 4.53

7 1,750,000 0.090 0.118 3.48 4.53

8 1,750,000 0.094 0.128 3.64 4.94

9 1,750,000 0.094 0.128 3.64 4.94

10 1,750,000 0.093 0.132 3.58 5.09

11 1,750,000 0.093 0.132 3.58 5.09

12 1,750,000 0.089 0.138 3.45 5.32

13 1,750,000 0.089 0.138 3.45 5.32

14 1,750,000 0.085 0.147 3.28 5.67

15 1,750,000 0.085 0.160 3.26 6.17

16 1,750,000 0.087 0.165 3.34 6.38

17 1,250,173 0.084 0.166 2.31 4.58

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

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.

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

0.160

0.180

0.000

0.010

0.020

0.030

0.040

0.050

0.060

0.070

0.080

0.090

0.100

0 2 4 6 8 10 12 14 16 18

%C

u

%M

o

Production Year

LOM Mo and Cu Grade

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 32,979,800 0.012 0.02

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


• 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:


• 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

Roads Length (m)

Average Road Gradient (%)

Average Speed (km/h)

Total Travel Time (min)

Service Time (min)

Mine to Waste Dump 5448 10 20 33 5

Mine 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 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 ℎ𝑜𝑢𝑟𝑠 ×60 𝑚𝑖𝑛𝑢𝑡𝑒𝑠

ℎ𝑜𝑢𝑟𝑠

𝜂 − 𝑢𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛

𝜇 − 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 Calculation

Mean Service Time (min) 5.0

Total Travel Time (min) 25.0

Number of Shovels 1

Number of Trucks 4

Utilization 0.602

Service Rate 0.200

Truck Payload (tonnes) 90

Daily Production Rate (tph) 15595

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 unit

Hydraulic Shovel 8.1 m3 bucket capacity 1 $ 2,197,600.00

Front-end Loaders 3.8 m3 bucket 1 $ 316,550.00

Haul Trucks 90.7 MT payload, mechanical drive 4 $ 1,102,600.00

Rotary drills 20.0 cm hole, diesel, 7.6 m rod length 2 $ 597,900.00

graders 3.7 m blade width 1 $ 373,300.00

water tanks 18,927 L tank 1 $ 66,600.00

service & tire trucks off-road tire service 3 $ 170,400.00

bulk ANFO trucks 770 lb./min capacity 1 $ 214,300.00

pumps 1325 liter per minute, at 15.2 m head 2 $ 6,500.00

pickup trucks 680 kg 5 $ 20,000.00

fuel/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

Project Infrastructure

The 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

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$

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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. $ 0.68

Molybdenum

Roasting per tonne $ 1,102.31

Roasting per lb. $ 0.50

Molybdenum Selling Cost per lb. $ 0.84

Copper

Treatment Cost per tonne $ 80.00

Treatment Cost per lb. $ 0.04

Refining Charge per tonne $ 176.37

Refining Charge per lb. $ 0.08

Copper Selling Cost per lb. $ 0.46

Capital and Operating Costs

The 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.

Table 19: Mac Property Total Capital Cost Estimate

Capital Costs $USD

Mine Equipment $ 9,484,950.00

Mill Equipment $ 11,457,166.67

Site Preparation $ 3,761,295.60

Buildings and Offices $ 3,339,071.58

Installation and Labor $ 7,230,654.99

Ancillaries $ 5,100,594.49

Instrumentation, Electrical, Insulation $ 2,424,683.44

Tailings Embankment $ 8,739,300.00

Sustaining Capital $ 1,817,002.93

Working Capital $ 3,607,640.17

Engineering and Management $ 7,398,750.46

Contingency (+20%) $ 12,872,222.06

Total 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 Operation

Equipment $ 9,484,950.00

Haul Roads/Site Work $ 1,718,655.42

Stripping $ 2,042,640.18

Buildings $ 730,700.00

Sustaining Capital $ 1,817,002.93

Working Capital $ 978,386.19

Engineering $ 2,515,850.21


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) 857,869

Haul Road Construction (tonnes) 721,802

Development Cost per Tonne $ 2.38

Total 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 Operation

Equipment $ 11,457,166.67

Installation and Labor $ 7,230,654.99

Concrete $ 924,135.83

Piping $ 3,081,950.08

Structural Steel $ 973,466.92

Instrumentation $ 694,485.55

Insulation $ 354,141.11

Electrical $ 1,376,056.78

Coatings and Sealants $ 121,041.66

Mill Building $ 2,608,371.58

Tailings Embankment $ 8,739,300.00

Engineering $ 4,882,900.25

Working Capital $ 2,629,253.98


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 ore

Mining $ 7.14

Milling $ 10.07

General and Administrative $ 2.09

Total 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 Costs

Supplies $ 1.08 per tonne

Hourly Labor $ 3.72 per tonne

Equipment Operation $ 2.35 per tonne

Salaried labor $ 1.04 per tonne

Total 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 Day

diesel fuel $ 0.52 per L 6,396 L

electricity $ 0.072 per kWh 117,067 kWh

bulk explosives $ 0.71 per kg 4,551 kg caps $ 6.60 ea. 44

primers $ 6.80 ea. 40

detonation cord $ 1.20 per m 541 m

drill 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 Required

excavator operator $ 44.80 3

electrician $ 44.80 2 blaster $ 42.00 2

mechanic $ 43.40 2

driller $ 40.60 2

equipment operator $ 39.90 7

truck driver $ 37.10 8

maintenance worker $ 36.40 7

utility operator $ 33.60 2

laborer $ 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 Required

manager $ 182,000.00 1

personnel manager $ 154,000.00 0

superintendent $ 147,000.00 1

engineer $ 141,500.00 1

foreman $ 128,800.00 2

environmental spec. $ 133,000.00 2

geologist $ 130,700.00 1

purchaser $ 117,600.00 0

supervisor $ 112,000.00 2

accountant $ 116,200.00 0

technician $ 89,600.00 2

clerk $ 67,200.00 1

secretary $ 63,000.00 2

Milling Operating Cost

The total milling operating cost breakdown is presented in

Table 28.

Table 28: Mill Operating Cost Breakdown

Operating Costs

Hourly Labor $ 1.99 per tonne

Salaried Labor $ 1.05 per tonne

Supplies and Materials $ 8.09 per tonne

Total 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 Day

Lime $ 1.91 per kg 5,287 kg

Collector $ 2.01 per kg 278 kg

Frother $ 2.84 per kg 183 kg

Flocculent $ 7.70 per kg 30 kg

grinding media $ 0.68 per kg 4,961 kg

mill liners $ 6.18 per kg 876 kg

fuel oil $ 0.49 per kg 2,832 L

diesel fuel $ 0.52 per kg 6 L

electricity 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 Required

electrician $ 44.10 3 control room $ 44.10 2

mechanics $ 42.70 3

crusher $ 39.90 2 grinding $ 37.80 2

assayer $ 37.80 2 flotation $ 37.80 2

dewatering $ 37.80 2

laborer $ 28.70 4

sampler $ 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 Requirements

Superintendent $ 154,000.00 1

Senior Met $ 154,000.00 1

Maintenance Foreman $ 133,000.00 1

General foreman $ 130,000.00 1

Metallurgist $ 126,000.00 2 Plant Foreman $ 126,000.00 2

Process Foreman $ 126,000.00 2

Instrument Tech $ 105,000.00 2

Process 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.

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 Economics

Capital Cost $ 77,233,332

Operating Cost (per tonne) $ 19.31

Discount Rate 8%

Molybdenum Price (per lb.) $ 7.50

Copper Price (per lb.) $ 3.00

Net Present Value -$ 43,602,752

Internal 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:

-$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

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

Cas

h F

low

($U

SD

)

Year

Base Case LOM Discounted Cash Flow

• Capital cost

• Operating cost

• Discount rate

• Molybdenum price

• Copper price

The sensitivities are presented in the figures below:

Figure 27: Capital Cost Sensitivity Analysis

$(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)

$-

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

Net

Pre

sen

t V

alu

e

%Change in Capital Cost

Sensitivity of Capital Cost

Figure 28: Operating Cost Sensitivity Analysis

Figure 29: Discount Rate Sensitivity Analysis

$(150,000,000.00)

$(100,000,000.00)

$(50,000,000.00)

$-

$50,000,000.00

$100,000,000.00

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

Net

Pre

sen

t V

alu

e

%Change in Operating Cost

Sensitivity of Operating Cost

$(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)

$-

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

Net

Pre

sen

t V

alu

e

Discount Rate (%)

Sensitivity of Discount Rate

Figure 30: Molybdenum Price Sensitivity Analysis

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

$(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

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

Net

Pre

sen

t V

alu

e

Molybdenum Price

Sensitivity Analysis of Molybdenum Price

$(150,000,000.00)

$(100,000,000.00)

$(50,000,000.00)

$-

$50,000,000.00

$100,000,000.00

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

Net

Pre

sen

t V

alu

e

Copper Price

Sensitivity Analysis of Copper Price

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.

Figure 32: Economic Case Discounted Cash Flow Model

Environmental Studies and Permitting

An 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.

-$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

$20,000,000

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

Cas

h F

low

($U

SD

)

Year

Economic Case LOM Discounted Cash Flow

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 Engagement

The 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.

Recommendations

At 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.

Bibliography

Adanac 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).

Documents

THE MAC PROPERTY PRE-FEASIBILITY STUDY - BC MINING … REPORTS AND... · Executive Summary Property Description and Location The Mac Property mineral claims, spanning for 18,948 hectares