feed report

IMPORTANT NOTICE

This report was prepared exclusively for Minera Panamá, S.A. (MPSA)

by AMEC Americas Limited (AMEC). The quality of information,

conclusions and estimates contained herein is consistent with the level

of effort involved in AMEC’s services and based on: i) information

available at the time of preparation, ii) data supplied by outside

sources and iii) the assumptions, conditions and qualifications set forth

in this report. This report is intended to be used by MPSA only, subject

to the terms and conditions of its contract with AMEC. Any other use

of this report by any third party is at that party’s sole risk.

MINERA PANAMA, S.A.MINA DE COBRE PANAMÁ PROJECT

FEED STUDY

E X E C U T I V E S U M M A R Y

Project No.: 155529 TOC i March 2010

C O N T E N T S

1.0 INTRODUCTION ...................................................................................................... 1-1 1.1 Purpose and Objective of the FEED Report ................................................. 1-1 1.2 Terms of Reference ...................................................................................... 1-1 1.3 Scope of Facilities ........................................................................................ 1-2 1.4 Production Summary .................................................................................... 1-4 1.5 Project Background and History ................................................................... 1-5 1.6 Property Description and Location ............................................................... 1-6 1.7 Legal Status .................................................................................................. 1-6

2.0 TECHNICAL SUMMARY .......................................................................................... 2-1 2.1 Geology ........................................................................................................ 2-1 2.2 Mining ........................................................................................................... 2-4 2.3 Metallurgy ..................................................................................................... 2-7 2.4 Waste and Water Management .................................................................... 2-8 2.5 Process Plant ............................................................................................. 2-10

2.5.1 Plant Site Location .......................................................................... 2-10 2.5.2 Process Description ........................................................................ 2-12 2.5.3 Tailings Disposal ............................................................................. 2-14 2.5.4 Port Site Process Facilities ............................................................. 2-15

2.6 Infrastructure/Ancillary Facilities ................................................................. 2-15 2.6.1 Mine/Plant Site ................................................................................ 2-19 2.6.2 Eastern Infrastructure Area ............................................................. 2-19 2.6.3 Port Site Infrastructure .................................................................... 2-20

2.6.3.1 On-Shore Facilities ............................................................ 2-20 2.6.3.2 Marine Facilities ................................................................ 2-20

2.6.4 Security Buildings ........................................................................... 2-21 2.6.5 On-Site Roads ................................................................................ 2-21 2.6.6 Access Roads to Site ...................................................................... 2-21 2.6.7 Other Services and Facilities .......................................................... 2-22

2.6.7.1 Water Supply ..................................................................... 2-22 2.6.7.2 Power Supply .................................................................... 2-23 2.6.7.3 Pipeline Systems ............................................................... 2-23 2.6.7.4 Diesel Storage ................................................................... 2-24 2.6.7.5 Solid Waste Management ................................................. 2-24 2.6.7.6 Sewage Treatment ............................................................ 2-24 2.6.7.7 Communications Services ................................................. 2-25

2.7 Power Generating Plant ............................................................................. 2-25

3.0 SOCIAL AND ENVIRONMENTAL IMPACT ASSESSMENT ................................... 3-1 3.1 Sustainability Objectives ............................................................................... 3-1 3.2 The ESIA ...................................................................................................... 3-1


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Project No.: 155529 TOC ii March 2010

3.3 Stakeholder Consultations and Engagement ............................................... 3-2 3.4 Baseline Studies ........................................................................................... 3-2

3.4.1 Scope of Studies ............................................................................... 3-2 3.4.2 Existing Environmental Conditions ................................................... 3-2 3.4.3 Existing Socioeconomic Conditions .................................................. 3-2

3.5 Impact Assessment ...................................................................................... 3-3 3.5.1 Valued Ecosystem Components ....................................................... 3-3 3.5.2 Potential Environmental Impacts ...................................................... 3-3 3.5.3 Potential Socioeconomic Effects ...................................................... 3-3 3.5.4 Measures to Limit/Mitigate Project Impacts ...................................... 3-4 3.5.5 Residual Impacts and Mitigation ....................................................... 3-4

4.0 MARKETING AND MARINE TRANSPORT OF CONCENTRATE ........................... 4-1 4.1 Concentrate Production ................................................................................ 4-1 4.2 Copper Concentrate ..................................................................................... 4-1 4.3 Molybdenum Concentrate ............................................................................ 4-2

5.0 PROJECT EXECUTION ........................................................................................... 5-1 5.1 Project Delivery ............................................................................................ 5-1 5.2 Engineering and Procurement ...................................................................... 5-2 5.3 Access and Transportation ........................................................................... 5-3 5.4 Safety, Environmental, and Community Affairs (SECA) Program ................ 5-3 5.5 Scheduling Considerations ........................................................................... 5-4 5.6 Temporary Infrastructure .............................................................................. 5-5 5.7 Construction Workforce ................................................................................ 5-6 5.8 Security ......................................................................................................... 5-6

6.0 LOGISTICS .............................................................................................................. 6-1 6.1 Introduction ................................................................................................... 6-1 6.2 Inbound Freight Volumes ............................................................................. 6-1 6.3 Ocean Transport ........................................................................................... 6-3

6.3.1 Ports in Panamá ............................................................................... 6-3 6.3.2 Colón Marshalling Yard .................................................................... 6-3 6.3.3 Barging and Crew Supply Vessel ..................................................... 6-3 6.3.4 Punta Rincón .................................................................................... 6-3

6.4 Road Transport ............................................................................................. 6-4

7.0 CAPITAL COST ESTIMATE .................................................................................... 7-1

8.0 OPERATING COST ESTIMATE .............................................................................. 8-1

9.0 FINANCIAL EVALUATION ....................................................................................... 9-1 9.1 Introduction ................................................................................................... 9-1 9.2 Base Case .................................................................................................... 9-1 9.3 Levered Case ............................................................................................... 9-3 9.4 Performance Statistics .................................................................................. 9-4

10.0 KEY RISKS AND OPPORTUNITIES ..................................................................... 10-1


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Project No.: 155529 TOC iii March 2010

T A B L E S

Table 1-1: Mine Production Summary .............................................................................................. 1-4 Table 1-2: Mill Production Details ..................................................................................................... 1-5 Table 2-1: Summary of Mina de Cobre Panamá Resource ............................................................. 2-3 Table 2-2: Mine Production Schedule .............................................................................................. 2-5 Table 2-3: Mineral Reserve Estimates by Classification and Ore Type ........................................... 2-6 Table 2-4: Concentrator Production Summary ................................................................................. 2-8 Table 6-1: Inbound Freight Volumes* (tonnes) ................................................................................ 6-1 Table 7-1: Summary of Capital Costs .............................................................................................. 7-2 Table 8-1: Summary of Operating Cost Estimate ($/t milled) ........................................................... 8-1 Table 9-1: Long-Term Metal Price Assumptions .............................................................................. 9-1 Table 9-2: Summary of Key Financials (base case) ......................................................................... 9-2 Table 9-3: Impact of Metal Price Change ......................................................................................... 9-3 Table 9-4: Levered Case Financial Results ..................................................................................... 9-4 Table 9-5: Summary of Base Case Performance Statistics ............................................................. 9-4 Table 9-6: Summary of Levered Case Performance Statistics ........................................................ 9-4 Table 10-1: Key Higher-Risk Items for Project Development ........................................................... 10-1

F I G U R E S

Figure 1-1: General Arrangement of Project Facilities ...................................................................... 1-3 Figure 2-1: Regional Geology and Deposit Locations ....................................................................... 2-2 Figure 2-2: Mineral Resources by Category ...................................................................................... 2-3 Figure 2-3: Layout of Process Plant Area ........................................................................................ 2-11 Figure 2-4: Process Flow Diagram .................................................................................................. 2-13 Figure 2-5: Layout of Mine/Plant Site .............................................................................................. 2-16 Figure 2-6: Layout of Eastern Infrastructure Area ........................................................................... 2-17 Figure 2-7: General Arrangement of Port Site Facilities .................................................................. 2-18 Figure 2-8: Locations of Electricity Supply Components ................................................................. 2-27 Figure 2-9: Power Plant and Port Site ............................................................................................. 2-29 Figure 6-1: Inbound Volumes by Material Type (tonnes/quarter) ...................................................... 6-2 Figure 6-2: Inbound Volumes by Access Points (tonnes/quarter) ..................................................... 6-2 Figure 6-3: Coclecito Access Road – Average Number of One-way Trips Each Day ....................... 6-4 Figure 9-1: Sensitivity of After-Tax NPV @ 8% ................................................................................. 9-2 Figure 9-2: Sensitivity Spider Graph for After-Tax IRR ..................................................................... 9-3


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E X EC U T I V E S U M M A R Y

Project No.: 155529 ES 1-1 March 2010

1.0 INTRODUCTION

1.1 Purpose and Objective of the FEED Report

The purpose of the FEED Study (Front End Engineering Design) is to describe the status of the Mina de Cobre Panamá project, in the Donoso District of Panamá, as of 12 March 2010 in sufficient detail for MPSA to pursue international financing options and move on to the next stage of project delivery. AMEC was retained in early 2007 to develop the Draft Interim FEED Report (AMEC, 2008), a study produced for Teck Cominco to bring the Mina de Cobre Panamá project (then known as the Petaquilla project) to full feasibility level. This FEED Study follows on from that body of work.

The objective of the FEED Study is to produce a capital cost estimate with an accuracy of +15%/-15% with a confidence level of 80% of estimated final cost based on 10% completion of engineering.

1.2 Terms of Reference

The FEED Study addresses the mineral resource, mine plan, processing and support facilities, management of tailings, water, and waste rock, site access, transportation of materials and equipment, port requirements, power supply, environmental aspects, and project execution. MPSA commissioned AMEC to prepare this report with input from MPSA, Inmet, and their various consultants, as listed below.

Inmet/MPSA WLR Consultants, Inc. Sim Geological Inc. AMEC SGS Mineral Services Limited G&T Metallurgical Services Ltd. Pocock Industrial, Inc. Sandwell Inc. Swiss Energy LLC Golder Associates Ltd. Pipeline Systems Inc. (PSI) DJB Consultants Inc. Estudios Electricos.


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E X EC U T I V E S U M M A R Y


1.3 Scope of Facilities

The mine plan has been developed for the life of mine and includes three open pit areas: Botija, Colina, and Valle Grande. The FEED Study develops the project facilities sufficiently to commence production from Botija. In the early years of production, both Colina and Valle Grande will be brought into production well before the process plant expansion planned for Year 10.

The copper concentrate will be pumped as a slurry through a pipeline to the port site for filtration, storage, and loading into ocean-going vessels for shipment to market destinations. The molybdenum concentrate will be dewatered at the mine / plant site and bagged for truck delivery to the port site.

The new project port site at Punta Rincón will cover close to 28 ha, approximately one-third of which will be used for laydown and container storage. The power plant, including ash storage facilities, covers an area of 61 ha. The port will be used for material import, including coal for the new power generating plant adjacent to the port site, and for concentrate export. Marine facilities will include a causeway and jetty, a radial shiploader, a shore-based crane, a main berth for ships from 30,000 dwt to 65,000 dwt in size, a separate berth for barges and costal vessels, and a tug pen.

Both the mine/plant site and port site operations will be supported by equipment maintenance shops, warehouses, container storage areas, administration and security facilities, potable water supply, sewage treatment plants, and gravel batch plants for use during both construction and operations. A permanent camp will be established at the mine / plant site for personnel working in both operating areas.

The independently owned and operated coal-fired power station will generate 300 MW of electricity for distribution to the project and connection to the Panamanian power grid.

A new access road will be constructed between the mine/plant site and the port site. Three pipelines will be buried in the shoulder of the road, one for pumping the copper concentrate to the port site, one for diesel fuel delivery to the mine, and the third for returning filtrate water from the dewatered concentrate, together with fly ash from the power plant, back to the tailings management facility (TMF) at the mine / plant site.

Another new access road will be constructed from approximately 5.2 km west of Coclecito to the southeast corner of the TMF. This will permit project traffic to access the mine site from the Pan-American Highway via the existing road from Penonomé and avoid the Molejón mine site.

All facilities are designed to operate continuously, 24 h/d, 365 days per year.

A general arrangement drawing of the project facilities is provided in Figure 1-1.

MINERA PANAMA, S.A. MINA DE COBRE PANAMÁ PROJECT

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E X EC U T I V E S U M M A RY


Figure 1-1: General Arrangement of Project Facilities


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1.4 Production Summary

Ore from the Botija, Colina, and Valle Grande pits will be treated in a large concentrator using current technology to produce a copper concentrate and a molybdenum concentrate for sale on the world market. The concentrator will initially treat a nominal 150,000 t/d of ore supplied from the Botija pit; later, ore will be received from the Colina and Valle Grande pits. From Year 10, the concentrator ore throughput will be increased by 50%, to a nominal 225,000 t/d, to maintain production of concentrate despite a falling head grade. Crushing, grinding, bulk rougher flotation, water, and air systems will increase in capacity by 50% to accomplish the increase in ore treatment rate; all other systems will remain at the same size.

The metallurgical testwork supports a conventional flowsheet of crushing, grinding, differential flotation, and filtration designed to process a nominal 150,000 t/d of ore at a head grade of up to 0.7% copper and 0.013% molybdenum.

The metallurgical results indicate that the concentrates will be of good quality with no significant levels of deleterious constituents. A total of 27.289 million dry tonnes of copper concentrate at a grade of 28% Cu, containing 7.641 million tonnes of copper, 2.690 million troy ounces of gold, and 45.228 million troy ounces of silver, is scheduled to be produced over the 30-year life of the mine. Production of molybdenum concentrate is expected to total 185,648 dry tonnes at a grade of 52%, containing 96,537 tonnes of molybdenum. The molybdenum concentrate will also contain 520 g/t of rhenium.

Project cash costs are estimated to average US$0.78/lb during Years 2 to 16 and US$0.90/lb LOM.

Annual metal production over the life of the mine is shown in Table 1-1, followed by mill production details in Table 1-2.

Table 1-1: Mine Production Summary

Average Annual Metal Production Total

Metal Years 2–16 Life of Mine Life of Mine

Copper (tonnes) 289,069 254,695 7,640,850

Gold (oz) 108,325 89,674 2,690,230

Silver (oz) 1,544,468 1,507,612 45,228,358

Molybdenum (tonnes) 3,604 3,218 96,537


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Table 1-2: Mill Production Details

Year kt NSR $/t Cu% Mo% Au g/t Ag g/t RCu %* RMo %* RAu g/t* Ag Rec % Y1

Y1 Q1 5,775 15,04 0.41 0.010 0.08 1.31 0.36 0.006 0.05 47.3 Y1 Q2 10,580 17.47 0.47 0.008 0.11 1.35 0.42 0.005 0.07 47.3 Y1 Q3 12,739 18,99 0.52 0.009 0.11 1.30 0.46 0.006 0.07 47.3 Y1 Q4 13,351 19.69 0.53 0.010 0.11 1.53 0.48 0.006 0.07 47.3

Total Y1 42,445 18.29 0.50 0.009 0.11 1.39 0.44 0.006 0.06 47.3 Y2

Y2 Q1 14,857 20.40 0.55 0.010 0.12 1.43 0.49 0.007 0.07 47.3 Y2 Q2 14,674 20.75 0.56 0.009 0.12 1.42 0.51 0.006 0.07 47.3 Y2 Q3 14,056 19.66 0.53 0.010 0.11 1.31 0.48 0.006 0.07 47.3 Y2 Q4 14,600 20.62 0.56 0.010 0.11 1.51 0.51 0.006 0.06 47.3

Total Y2 58,187 20.37 0.55 0.010 0.11 1.42 0.50 0.006 0.07 47.3 3 57,221 20.73 0.56 0.011 0.11 1.41 0.50 0.007 0.07 47.3 4 57,106 20.67 0.56 0.010 0.11 1.46 0.51 0.006 0.07 47.3 5 55,906 22.00 0.59 0.011 0.11 1.61 0.54 0.007 0.07 47.3 6 57,104 21.88 0.59 0.011 0.11 1.69 0.54 0.007 0.07 47.3 7 56,811 20.61 0.56 0.008 0.14 1.74 0.50 0.005 0.09 47.3 8 56,676 19.23 0.53 0.009 0.09 1.73 0.47 0.006 0.06 47.3 9 54,800 18.74 0.52 0.010 0.09 1.67 0.46 0.006 0.05 47.3 10 80,187 15.47 0.43 0.008 0.08 1.48 0.38 0.005 0.04 47.3 11 82,601 14.22 0.41 0.007 0.06 1.37 0.35 0.004 0.03 47.3 12 82,601 14.22 0.41 0.007 0.06 1.37 0.35 0.004 0.03 47.3 13 82,601 14.22 0.41 0.007 0.06 1.37 0.35 0.004 0.03 47.3 14 82,600 14.22 0.41 0.007 0.06 1.37 0.35 0.004 0.03 47.3 15 82,600 14.22 0.41 0.007 0.06 1.37 0.35 0.004 0.03 47.3 16 84,078 14.22 0.40 0.008 0.08 1.39 0.35 0.005 0.04 47.3 17 84,078 14.22 0.40 0.008 0.08 1.39 0.35 0.005 0.04 47.3 18 84,078 14.22 0.40 0.008 0.08 1.39 0.35 0.005 0.04 47.3 19 84,079 14.22 0.40 0.008 0.08 1.39 0.35 0.005 0.04 47.3 20 84,079 14.22 0.40 0.008 0.08 1.39 0.35 0.005 0.04 47.3 21 73,879 11.97 0.35 0.006 0.05 1.50 0.30 0.004 0.03 47.3 22 73,879 11.97 0.35 0.006 0.05 1.50 0.30 0.004 0.03 47.3 23 73,879 11.97 0.35 0.006 0.05 1.50 0.30 0.004 0.03 47.3 24 73,879 11.97 0.35 0.006 0.05 1.50 0.30 0.004 0.03 47.3 25 73,880 11.97 0.35 0.006 0.05 1.50 0.30 0.004 0.03 47.3 26 81,120 10.12 0.32 0.006 0.05 1.29 0.24 0.003 0.02 37.5 27 81,120 10.12 0.32 0.006 0.05 1.29 0.24 0.003 0.02 37.5 28 81,120 10.12 0.32 0.006 0.05 1.29 0.24 0.003 0.02 37.5 29 81,120 10.12 0.32 0.006 0.05 1.29 0.24 0.003 0.02 37.5 30 38,938 10.12 0.32 0.006 0.05 1.29 0.24 0.003 0.02 37.5 Total 2,142,652 14.60 0.41 0.008 0.07 1.43 0.36 0.005 0.04 45.8

* Recovered grade

1.5 Project Background and History

The potential of the Mina de Cobre Panamá project has been investigated since 1968. A preliminary feasibility report was prepared by Panamá Mineral Resources Development Co. Ltd. in 1977 and updated in 1979. In 1994 and 1995, Kilborn Engineering Pacific Ltd. issued a prefeasibility study and update for Adrian Resources Ltd., a precursor of Petaquilla Minerals Ltd. and Petaquilla Copper Ltd. In November 1996, H.A. Simons,


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now AMEC, produced a feasibility study for Teck Corporation with a subsequent update in January 1998.

In May 1998, the updated January 1998 document was submitted to Dirección General de Recursos Minerales (General Directorate of Mineral Resources, DGRM) of the Panamanian Ministry of Industry and Commerce, and was accepted as the official Feasibility Study to satisfy concession law requirements for the delivery of a feasibility study. The Petaquilla (Mina de Cobre Panamá) concession rights had been granted to Minera Petaquilla, S.A., now Minera Panamá, S.A. (MPSA), under Panamanian Law No. 9 on 26 February 1997. At that time the shareholders of MPSA were Petaquilla Copper Ltd., Teck Cominco, and Inmet Mining Corporation.

In September 2008 Inmet acquired Petaquilla Copper Ltd., and in November 2008 Inmet acquired Teck Cominco’s remaining share in MPSA, taking Inmet to a 100% interest in MPSA.

In October 2009 Inmet announced an option agreement with LS-Nikko Copper Inc. under which LS-Nikko has the right to acquire a 20% interest in the Minera de Cobre Panamá copper project. If LS-Nikko exercises the option, it will receive an equity interest in MPSA.

The name of the project was changed to Mina de Cobre Panamá in 2009.

1.6 Property Description and Location

The Mina de Cobre Panamá Concession in Colón Province is approximately 20 km north of the Continental Divide that bisects the northern and southern parts of Panamá. The process plant site location is N8°50' and W80°38'; the port site location at Punta Rincón is N9°02' and W80°41'.

The Concession Area is characterized by rugged topography with heavy rainforest cover. The dominant landforms are relatively narrow ridges that parallel major geological structural trends and are bisected by numerous surface water drainages.

Climatic conditions are equatorial, with a high average precipitation level of approximately 4,700 mm/a, high humidity, and relatively high temperatures of 25°C to 30°C year-round.

1.7 Legal Status

Inmet Mining Corporation, directly and through several wholly-owned subsidiaries, owns 100% of the shares of Minera Panamá, S.A. (MPSA). Korea Panamá Mining Corp, a wholly-owned subsidiary of LS-Nikko Copper Inc., has an option to earn a 20% interest in MPSA by funding its pro rata share of MPSA’s ongoing development costs, to a maximum


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of US$150 million, until a production decision is made, and re-imbursing its prorata share of past expenditures.

Under Panamanian Ley Petaquilla, or Law No. 9, 1997, the concession rights to the Mina de Cobre Panamá (then Petaquilla) property were granted to Minera Panamá, S.A. (then Minera Petaquilla, S.A.). This project-specific law gave MPSA rights over the gold, copper, and other mineral deposits for the purposes of exploring, extracting, processing, transporting, and marketing of all base or precious minerals located in the 13,600 ha Concession Area. The Molejón Gold Project Agreement, executed 1 June 2005 by and between Teck Cominco Limited, Petaquilla Minerals Ltd. (PTQ), Inmet Mining Corporation, and Minera Petaquilla, S.A. (now Minera Panamá, S.A.), assigns to PTQ the surface and mineral rights over 600 ha located within the Concession Area (the Molejón Concession) to permit PTQ to independently develop the Molejón gold deposit as the first phase of a multiphase development of the Concession Area. PTQ was also given the right to explore and mine gold deposits in the larger Concession Area, while MPSA retains the right to develop any copper deposits on the Molejón Concession.

MPSA will exercise its rights under Law No. 9, 1997, to acquire or lease state lands located in the proposed TMF area. MPSA has undertaken an investigation of existing private holders of surface rights and will initiate negotiations for the acquisition of these properties according to the procedures established by Law No. 9 and other applicable laws. In the event that lands are occupied, MPSA will adhere to International Finance Corporation’s Performance Standard 5 in connection with relocation and resettlement of affected persons and communities. MPSA will also conform with the requirements of IFC PS 6 regarding protected areas, since the proposed TMF is located within the Donoso Multiple-Use Area, a form of protected area in Panamá.

At Punta Rincón, where the proposed port site facilities are located, MPSA purchased surface title to much of the land required for construction and permanent use of the site between 1998 and 2000. Additional land will be acquired as above.

MPSA is entitled under Law No. 9 to an easement for the Coast Road between the Concession and Punta Rincón.

In accordance with current Panamanian legislation, MPSA must submit an Estudio de Impacto Ambiental Category III (ESIA, or Environmental and Social Impact Assessment) to the environmental authority, Autoridad Nacional del Ambiente (ANAM, or the National Environmental Authority). ANAM’s approval of the ESIA is the key element of the permitting process.

More than 150 additional permits have been identified as being required for development activities such as tree clearing, use of water, and general construction. Other regulatory agencies include the maritime authority for port facilities and the municipality of Donoso


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for general construction. Application for these permits will proceed in parallel with and immediately following the ESIA approval process.


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2.0 TECHNICAL SUMMARY

2.1 Geology

Copper-gold-molybdenum porphyry-style mineralization was discovered in central Panamá during a regional survey by the United Nations in 1968. Exploration by several companies has since outlined three large deposits and several smaller ones. Drill programs have been conducted by United Nations Development Program (1968-1969), Panamá Mineral Resources Development Company (PMRD), a Japanese consortium (1970-1980), Inmet-Adrian Resources-Teck (1990-1997), Petaquilla Copper (2006-2008), and Minera Panamá (MPSA) (2007-2009). A total of 1,275 diamond drill holes (230,555 m) have been completed.

The porphyry deposits occur at the southern margin of a large granodioritic batholith of mid-Oligocene age (36.4 Ma), in a WNW-ESE-oriented zone with dimensions of 9 km x 4.5 km (Figure 2-1). The three main deposits are Botija, Colina, and Valle Grande. There are also a number of smaller zones, the most significant being Brazo and Botija Abajo.

All of the porphyry-style mineralization on the property is hosted in granodiorite, feldspar-quartz-hornblende porphyry, and adjacent andesitic volcanic rocks. At Botija, a number of north-dipping feldspar-quartz-hornblende porphyry dikes cut the granodiorite. Two roof pendants of andesitic volcanic rocks occur in the central and eastern margin of the deposit. At Colina, mineralization is associated with an east-southeasterly trending, shallow, north-dipping, 2.5 km x 1 km feldspar-quartz-hornblende porphyry sill and dike complex that intrudes granodiorite and andesitic volcanic rocks. The Valle Grande zone is associated with a southeast-trending feldspar-quartz-hornblende porphyry lopolith bounded to the north and south by andesitic volcanic rocks and minor granodioritic dikes. At Brazo and Botija Abajo, the host rocks are dominantly feldspar-quartz or feldspar-quartz-hornblende porphyries.

Hydrothermal alteration along the Cobre mineral trend is primarily silica-chlorite, which is interpreted to be a form of propylitic alteration. Potassic alteration, consisting of salmon coloured potassium feldspar and secondary biotite, is seen in the central parts of Botija. Argillic and phyllic alteration is patchy in the three main deposits, with the latter variety being most prevalent near the tops of the deposits. At Brazo, pervasive sericite, clay, and pyrite are associated with well-developed quartz stockworks.

Hypogene sulphides occur as disseminations, micro-veinlets, fracture fillings, and quartz-sulphide stockworks. Chalcopyrite is the dominant copper mineral, with lesser bornite. Traces of molybdenite are commonly found in quartz veinlets. There is no significant zone of supergene enrichment at Botija, Colina, or Valle Grande. At Brazo, supergene mineralization consisting of chalcocite-coated pyrite and rare native copper is found to a depth of at least 150 m.


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Figure 2-1: Regional Geology and Deposit Locations

The mineral resources for the porphyry deposits on the Mina de Cobre Panamá Concession were estimated using the entire drill hole and assay database that exists for the project and a pit shell defined with a copper price of $2.30 per lb and a Cu cutoff grade of 0.15%. The resources are summarized in Table 2-1 and Figure 2-2.


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Table 2-1: Summary of Mina de Cobre Panamá Resource

Deposit Category Tonnes

(Mt) Cu (%) Mo (%) Au (g/t) Ag (g/t)

Botija Measured 261 0.56 0.009 0.13 1.50

Indicated 907 0.33 0.007 0.06 1.00

Inferred 407 0.21 0.004 0.03 0.70

Colina Indicated 1,178 0.35 0.007 0.05 1.50

Inferred 1,090 0.24 0.005 0.03 1.20

Valle Grande Indicated 671 0.34 0.006 0.04 1.30

Inferred 1,141 0.24 0.005 0.03 1.00

Botija Abajo Indicated 184 0.28 0.004 0.09 0.90

Inferred 287 0.22 0.005 0.07 0.90

Brazo Indicated 71 0.43 0.004 0.12 0.70

Inferred 269 0.27 0.004 0.07 0.60

All Areas Measured 261 0.56 0.009 0.13 1.50

Indicated 3,010 0.34 0.006 0.06 1.20

Measured + Indicated 3,271 0.36 0.007 0.06 1.30

Inferred 3,194 0.24 0.005 0.04 1.00

Figure 2-2: Mineral Resources by Category

Note: Tick marks at 1 km spacing


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2.2 Mining

The mine plan was initially developed from the deposit models produced by MPSA and Inmet Mining as of 1 November 2009. A series of floating cone analyses were conducted to determine economic pit limits and the mining phase development sequence for three mineral deposits in the project Concession Area: Botija, Colina, and Valle Grande. Botija is immediately northeast of the proposed process plant site, Colina is about 2 km to the west-northwest, and Valle Grande is roughly 1 km to the southwest.

The floating cone evaluations, mine design, and reserve estimates are based on metal prices of $2.00/lb Cu, $12.00/lb Mo, $750/oz Au, and $12.50/oz Ag. Recoveries for Cu, Mo, and Au vary by grade, ore type, and deposit, while Ag recovery is generally fixed except for deductions for saprock ore. Over the life of the project, concentrator recoveries will average about 86% for Cu, 59% for Mo, 54% for Au, and 46% for Ag. Weighted average mining costs of $1.33/t were used in the pit limit analyses, along with base ore processing and general/administration costs of $3.88/t and $1.49/t, respectively. Grinding rates will vary by ore type and deposit, which affects the unit ore processing and G&A costs and, therefore, the cutoff grades used for reserve estimation.

A construction materials quarry and 11 additional mining phases were designed using pit slope recommendations from AMEC E&E geotechnical engineers and the floating cone pit shells for guidance. Four principal mining phases, or pushbacks, were generated for Botija, four for Colina, and three for Valle Grande. A contractor will excavate and distribute construction materials to project facilities, clear mining areas, and remove saprolite. The Owner’s mining equipment fleet and crews will be active only in the 11 primary phases, focusing almost exclusively on hard-rock mining.

A mine production schedule was developed using a variable NSR cutoff grade strategy to increase early revenues to improve overall project returns. Cutoffs will be elevated significantly during the first seven years of operations and then gradually decline to internal cutoffs around Year 14. A third grinding circuit will be added to the concentrator and will commence operation in Year 10, increasing the base ore processing rate from 150,000 t/d to 225,000 t/d. Owner’s preproduction stripping would commence about 15 months before plant start-up.

After completion of the mining phase designs and the open pit sequence and waste rock storage facility (WRSF) plans, a new model of the Botija deposit was completed in late January 2010 and subsequently released for mine planning purposes. This model includes additional in-fill drill hole data, updated geological interpretations, new metal grade interpolations, minor adjustments to in-situ densities, and updated projections of daily milling rates based on the latest metallurgical testwork. Milling rates for ore types in Colina and Valle Grande were also updated, but no other changes were made to the model of these two deposits (i.e., no new geologic interpretations, densities, or grade


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interpolations from the November 2009 model). Because the milling rates affect unit ore processing and general and administration (G&A) costs, new cutoff grades were determined and applied to the open pit sequence plans to re-estimate the mine production schedule.

Table 2-2 summarizes the resulting mine production and material handling schedule. Mine operations will be scheduled for two 12-hour shifts per day, 365 days per year. The concentrator will operate an estimated 29.5 years and will process about 173 Mt of stockpiled ore during Years 28 to 30.

The changes caused by the new Botija model and milling rates are small. Ore tonnages within the Botija ultimate pit decreased approximately 3% compared to the previous deposit model, but copper grades are about 3% higher, resulting in nearly the same estimates of contained metal. The ore reserves estimated from the open pit sequence plans are generally within 2% to 3% of target levels computed from the variable grinding rates. These differences are within resource/reserve estimation error; consequently, the mining phase designs and open pit sequence plans were not changed.

Table 2-2: Mine Production Schedule

Time Period

Ore to ROM Stockpile or Mill

(kt)

To Saprock Ore Stockpile

(kt)

To Low-Grade Ore Stockpile

(kt)

Waste Rock & Saprolite

(kt) Total Material

(kt) Strip Ratio Contractor

(kt) Owner

(kt)

Prior to M-15 166 1,279 402 55,567 57,414 344.87 57,414 -

PP M-15 to M0 1,306 5,745 4,933 48,902 60,886 45.62 10,021 50,865

Y1 42,445 3,548 16,857 64,674 127,524 2.00 6,729 120,795

Y2 58,187 3,127 20,900 39,745 121,959 1.10 - 121,959

Y3 57,221 - 22,892 25,493 105,606 0.85 2,096 103,510

Y4 57,106 2,504 18,880 34,849 113,339 0.98 10,435 102,904

Y5 55,906 11,425 10,913 31,349 109,593 0.96 6,368 103,225

Y6 57,104 4,610 5,353 40,218 107,285 0.88 8,505 98,780

Y7 56,811 10,782 5,738 52,040 125,371 1.21 12,571 112,800

Y8 56,676 3,725 3,607 60,599 124,607 1.20 7,316 117,291

Y9 54,800 4,220 4,127 57,190 120,337 1.20 - 120,337

Y10 80,187 239 4,365 53,717 138,508 0.73 - 138,508

Y11-Y15 413,003 3,066 - 294,492 710,561 0.72 20,355 690,206

Y16-Y20 420,392 8,484 - 269,593 698,469 0.66 44,664 653,805

Y21-Y25 369,396 2,344 - 135,213 506,953 0.37 - 506,953

Y26-Y30 * 363,418 - - 24,392 387,810 0.07 - 387,810

Total 2,144,124 65,098 118,967 1,288,033 3,616,222 0.69 186,474 3,429,748

* Includes 172,549 kt of ore reclaimed from stockpile in Years 28 to 30


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The Mina de Cobre Panamá project mineral reserve estimates are based on proven and probable ore; all inferred mineral resources were treated as waste. Table 2-3 presents the mineral reserves by classification and ore type, based on cutoff grades that vary by ore type, deposit, and the time period in which the reserves are to be mined.

Total material within the designed ultimate pits is estimated at 3.444 billion tonnes, resulting in a stripping ratio of 0.61:1 (tonnes of waste per tonne of ore). Contained metal is projected at approximately 19.6 billion pounds of copper, 361 million pounds of molybdenum, 4.96 million troy ounces of gold, and 98.7 million troy ounces of silver.

Table 2-3: Mineral Reserve Estimates by Classification and Ore Type

Ore Type kt NSR $/t Cu % Mo % Au g/t Ag g/t

Proven Mineral Reserves

Saprock 4,400 11.78 0.43 0.013 0.11 1.62

Andesite 19,500 16.67 0.45 0.010 0.09 1.05

Porphyry 117,100 24.26 0.64 0.010 0.16 1.74

Granodiorite 104,300 21.25 0.57 0.010 0.13 1.57

Total 245,300 22.15 0.59 0.010 0.14 1.61

Probable Mineral Reserves

Saprock 56,100 9.63 0.39 0.007 0.09 1.49

Andesite 414,700 13.52 0.39 0.007 0.06 1.42

Porphyry 927,500 14.50 0.41 0.007 0.07 1.52

Granodiorite 499,100 12.55 0.36 0.007 0.05 1.20

Total 1,897,400 13.63 0.39 0.007 0.06 1.41

Proven + Probable Mineral Reserves

Saprock 60,500 9.79 0.39 0.008 0.09 1.50

Andesite 434,200 13.66 0.39 0.007 0.06 1.40

Porphyry 1,044,500 15.59 0.44 0.008 0.08 1.54

Granodiorite 603,400 14.05 0.39 0.008 0.07 1.26

Total 2,142,600 14.60 0.41 0.008 0.07 1.43

Note: Estimates based on metal prices of $2.00/lb Cu, $12.00/lb Mo, $750/oz Au, $12.50/oz Ag, and variable NSR cutoff grades

The following primary equipment will be required for the peak mining rates during Years 11 to 20:

7 blasthole drills ................................................ 311 mm diameter, 60 tonne bit loading 4 electric shovels .............................................. 55 m3 2 front-end loaders ............................................ 38 m3 36 off-highway haul truck .................................. 360 t payload 2 crawler dozers ............................................... 635 kW (D11-class) 8 crawler dozers ............................................... 435 kW (D10-class)


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4 rubber-tired dozers ........................................ 370 kW (834H-class) 2 motor graders ................................................ 400 kW (24M-class) 3 motor graders ................................................ 220 kW (16M-class) 3 water trucks ................................................... 80,000 litre (96 tonne)

Mine workforce levels will vary between about 317 and 563 people during the operating years, depending on production rates and haulage distances. This includes both salaried and hourly workers, expatriates, and nationals. Four rotating crews will provide continuous operator and maintenance coverage in the mine.

2.3 Metallurgy

The property has been investigated on behalf of several owners since 1968, and preliminary feasibility studies and prefeasibility studies were done in 1977, 1979, and 1994; feasibility studies were produced in 1994 (updated in 1995), 1996, and 1998. In all of these studies, testwork was done commensurate with the requirements of the times; the study produced in 1997 and published in early 1998 (Teck Corporation Petaquilla Feasibility Study, Simons Project No. U11G, Volume 1, January 1998) built mostly upon work done in the earlier studies.

In 1997, an extensive program of metallurgical testing was designed to confirm earlier work on the metallurgical response of material from the Botija and Colina deposits. Most of the work was done at Lakefield Research Ltd., Lakefield, Ontario. Grinding, flotation, dewatering, and mineralogical work were performed as part of this program. In addition to the Lakefield work, locked-cycle flotation testwork and modal analysis were performed at G&T Metallurgical Services Ltd., Kamloops, B.C. (G&T) to assist in defining grind requirements for both rougher and cleaner flotation. Copper-molybdenum separation by differential flotation was conducted by International Metallurgical and Environmental, Kelowna, B.C. (IME). The metallurgical work done for the present study has built upon the 1997/1998 study with some knowledge of, but no reliance on, work performed before that time.

The testwork before 2007 was based on large composite samples, and the results, particularly for flotation testing, could not be used for interpreting the variability of response for material within the deposits. Consequently, a large sampling program was undertaken in 2008/2009 to bolster the knowledge from previous work and provide the missing insight into the variability of response. A total of 16 special holes for metallurgical grinding and flotation tests were drilled in the Botija, Valle Grande, and Colina orebodies. Sample preparation, flotation testing, and testing of flotation products were done primarily at G&T. Grinding work was conducted at SGS Mineral Services, Lakefield, Ontario, and at Philips Enterprises LLC, Golden, Colorado.


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The program resulted in:

additional geological data a comprehensive suite of grindability parameters, leading to new throughput

estimates additional flotation response data for estimating concentrates production and

operating costs sample materials for marketing purposes additional design data for solid-liquid separation, regrinding, and pipeline design.

The resulting life-of-mine production data are shown in Table 2-4.

Table 2-4: Concentrator Production Summary

Parameter Unit Years 2-20 Years 21-30 Life of Mine

Throughput tonnes 1,367,393,000 732,814,000 2,142,652,000

t/a 71,968,053 73,281,400 71,421,733

t/d 197,173 200,771 195,676

Head Grade % Cu 0.46 0.34 0.41

% Mo 0.008 0.006 0.008

g/t Au 0.08 0.05 0.07

oz/t Ag 1.46 1.39 1.43

Recovery % Cu 88.4 79.5 85.9

% Mo 61.9 53.1 59.0

% Au 57.2 44.6 54.3

% Ag 47.3 42.8 45.8

Copper Concentrate Production t/a 1,033,685 697,813 909,625

% Cu 28 28 28

Molybdenum Concentrate Production

t/a 7,090 4,741 6,188

% Mo 52 52 52

2.4 Waste and Water Management

Three general forms of waste will be generated as a direct result of project construction and mining operations: earthworks construction waste, mine process tailings, and pit waste.

Earthworks construction waste, such as organics, unsuitable foundation material, and over-wet material, will be stored in waste rock storage facilities (WRSFs) or spoil piles, in the TMF, or in separate stockpiles for use during closure and reclamation. Comprehensive erosion and sediment control measures will be implemented to minimize sediment transport downstream of the work areas.


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For the first 22 years of the 30-year mine life, tailings will be stored in the TMF. For the last 8 years, tailings will be deposited in mined-out pits (first Botija, then Colina). Tailings will be transported from the plant site through a pump and pipeline system. Water from the TMF and later the backfilled pits will be recycled to the mill for use as process water.

The TMF will be contained by means of several dams – North, East, West, and South – with a total ultimate length of about 11 km and an average height of approximately 80 m. Saprolite will be used for the North and East starter dams, but the bulk of the structures will be constructed of hydraulically placed cycloned sand produced from the mill tailings. The starter dam for the South Dam, as well as its annual raises, will be constructed of saprolite. The West Dam will be constructed as a water-retaining structure with a saprolite core, granular filters, and upstream and downstream rockfill shells.

In terms of water storage within the TMF, the design for the facility includes provision for contingency storage equivalent to the 1-in-1,000-year return period storm, 24-hour duration rainfall event. Emergency spillways capable of passing the 24-hour PMP will be maintained during operations. The closure spillway will be designed to operate in perpetuity, as required, and to convey the 24-hour PMP. Drainage blankets and collection ponds at the tailings dams will manage construction water from the ongoing cyclone sand operations, the associated runoff from these operations, and rainfall events. Excess water in the TMF will be pumped to a polishing pond by means of an active discharge system and then released to Río del Medio, downstream of the North Dam.

Mine waste, including saprolite, weakly weathered rock, and competent rock, will be placed in the WRSFs developed near the pits. The WRSFs will be constructed by end-dumping. Weaker material – saprolite and weathered rock – will be stored upslope and away from the toe foundation areas. Encapsulation techniques will be used to manage potentially sulphide-rich (reactive) waste rock. The saprolite storage facility will be constructed by end-dumping saprolite and pushing it into place with a dozer. Waste rock roads along low areas and creek bottoms will aid in drainage of the saprolite waste and enhance trafficability on the saprolite.

With nearly 5 m of precipitation falling at the site every year, including very intense rainfall events of considerable duration, water management will be a key and integral part of project construction development and operation.

Water inflows to the open pits will be managed through a series of diversion ditches constructed around the top bench of each pit to route non-contact water from the upstream catchment areas. The diversion structures will be lengthened as the pit shell increases over time. Non-contact water collected in the diversions will be diverted to the environment. Pit water derived from direct precipitation or seepage will be pumped from the pit to the process water reservoir. A sediment pond will be required for pre-stripping


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during preproduction construction, as this water will be released directly to the environment.

The WRSFs will be constructed at the headwaters of Río Botija, Río Petaquilla, and Río del Medio. As such, most of the facilities will require minimal non-contact water diversion ditches. Collection ponds will be needed during operations, however, to collect seepage and runoff from the WRSFs. The collected water will be pumped to the TMF. Sediment ponds will be required for construction of the low-grade ore stockpile and saprolite WRSF during preproduction to manage runoff water, sediment control, and TSS levels, as this water will be released directly to the environment until the TMF is constructed.

Site grading at both the mine/plant and port sites will incorporate sloping, ditching, and sediment ponds as required to manage runoff water.

The access road will incorporate a series of culverts and bridges to handle water from intersected watercourses. Ditches along the road section will concentrate and direct water to the nearest water management structure.

Erosion and sediment control will be a significant issue throughout site development, construction, and operation of the Mine de Cobre Panamá project. The need for such control is based on the climate, surficial geology (primarily saprolite) at the site, local experience, and experience at sites with similar conditions elsewhere. Erosion control measures will include lining all diversions, ditches, and ponds excavated in or constructed using saprolite with processed granular materials such as filters and rip-rap; providing flocculant stations at the sediment ponds; and protecting fill slopes with a combination of geosynthetic liners and vegetation. These structures will need to be maintained and reconstructed throughout the project life.

2.5 Process Plant

2.5.1 Plant Site Location

The locations of the process plant and ancillary facilities at the mine/plant site are shown in Figure 2-3. The facilities are centrally located with respect to the three open pits and associated WRSFs. The available area is rather limited, but the layout has been designed for efficient material flow and personnel access to the buildings.

The facilities will be constructed along ridgelines or on hill tops to maximize the use of gravity for milling, flotation, and tailings discharge, to minimize cut-and-fill quantities, and to place the structures on competent ground.


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Figure 2-3: Layout of Process Plant Area

Primary Crushers

ROM Stockpile

Service Vehicle Shop

Coarse Ore Stockpile

Truck Shop

Main Substation

Flotation

Reagents

Bulk Thickener

Copper Thickener

Site of Future Stockpile

Site of Future 3rd Line

Plant Maintenance Shop

Process Water Pond

Process Water Tanks

Laboratory

Based on analysis of the available geotechnical data, it has been determined that the surface is underlain by approximately 8 m of saprolite followed by 14 m of saprolitic rock above bedrock. Further investigative work will be required to better define the subsurface conditions to optimize foundation design during the next phase of work.


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The plant site ranges in elevation from 194 m at the mill feed end to 168 m at the bulk concentrates thickener at the opposite end. This arrangement enhances the sloping design of the process plant, providing gravity flow through the process from the mill down through the flotation circuit. The elevation of tailings discharge from the plant, at nominally 172 m, also provides gravity flow down to the TMF, although some pumping will be required for tailings distribution around the beaches of the impoundment from Year 10 onward.

Site grading will incorporate sloping, ditching, and sediment ponds as required to manage excess runoff from heavy precipitation events. The stabilized slopes of the final embankments are expected to generate very little sediment load, however, and runoff from non-contact areas will generally be allowed to follow the natural watercourse down to the Botija drainage channels. Contact water will be routed to join drainage from the WRSFs for ultimate disposal in the TMF.

2.5.2 Process Description

Ore from the Botija, Colina, and Valle Grande pits will be treated in a concentrator to produce a copper concentrate and a molybdenum concentrate for sale on the world market. Initially, the concentrator will treat nominally 150,000 t/d of ore supplied from the Botija pit; later, ore will be received from the Colina and Valle Grande pits. From Year 10, the concentrator ore throughput will be increased by 50%, to a nominal 225,000 t/d, to maintain production of concentrate despite a falling head grade. Crushing, grinding, bulk rougher flotation, water, and air systems will increase in capacity by 50% to accomplish the increase in ore treatment rate; all other systems will remain at the same size.

The process plant is designed to process ore at a head grade of 0.7% Cu and 0.013% Mo. These levels are higher than the highest sustained head grades of 0.58% Cu and 0.011% Mo expected to be mined in Year 5, but the design provides the flexibility to accommodate a wide range of head grades over the project life. The plant design also allows for 15% day-to-day fluctuations in throughput. The process includes the following facilities:

crushing and grinding to liberate minerals from the ore froth flotation to separate most of the copper and molybdenum minerals from minerals

of no commercial worth differential flotation to separate the copper and molybdenum minerals from each other facilities to store tailings and provide reclaim water for the process facilities to remove water from the products and to ship concentrates to market.

A simplified flow diagram is provided in Figure 2-4.


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Figure 2-4: Process Flow Diagram

Primary Crusher

Open Pit Mine

SAG Mills (2)

Screens

Coarse Ore

Stockpile

Rougher Flotation (4 banks of 7)

3rd Cleaner Flotation (4)

2nd Cleaner Flotation (6)

1st Cleaner Flotation (2 banks of 8)

1st Mo Clnr

Flotation

Cu Conc.Thickener

Cu ConcStorage Tank

(2)

MainlinePumps (2x5)

Copper Filters (4)

Cu Conc. Loadout

Pipelines (32 km)

Tailings to Impoundment

Regrind Vertimills

(4)

Cu Conc.Storage Tank (2)

Ball Mills (4)

Cyclone Cluster (4)

CycloneCluster (2) Bulk Conc.

Thickener

Bulk Concentrate

Storage Tanks (2)

Mo Conditioner

o/f

Potentially Acid-Generating Tailings to Impoundment

To Process Water

Shiploader

Mo Rougher Flotation Mo Scav.

Flotation

2nd Mo Clnr Flotation

3rd Mo Clnr Flotation

4th Mo Clnr Flotation

5th Mo Clnr Flotation

Mo Conc.PackingMo Dryer

BinsMoFilter

Regrind Vertimill

Pebble Crushers (2)

Mo Concentrate Thickener

Thickener/Clarifier

Overflow

Port

MineSite

Run-of-mine (ROM) ore will be delivered by haul truck to the dump pockets of two primary gyratory crushers installed in a single in-ground concrete structure close to the rim of the Botija pit. A 400,000 tonne ROM stockpile will be located close to the crushers to provide a 2½-day supply of ore for times when weather conditions preclude hauling ore out of the pit. The ROM stockpile will be operated on a first-in, first-out basis to prevent the accumulation of aged ore.


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Separate feeders and take-away conveyors will move the ore from each crusher to a series of conveyors, which will discharge the ore onto a conical coarse ore stockpile at the concentrator. Provision will be made at the transfer point between the two overland conveyors to accept mill feed from future crushed ore sources. The coarse ore stockpile will hold a 2½-day supply for the mill, 15 hours of which will be available to the reclaim feeders without the assistance of a bulldozer.

Two trains of feeders and conveyors will draw ore from below the coarse ore stockpile and feed two parallel wet-grinding lines, each consisting of a semi-autogenous grinding (SAG) mill and two ball mills, all equipped with gearless drives. The SAG mill circuits will be closed by trommel screens followed by washing screens; conveyors will deliver screen oversize to pebble crushers. The pebble crushing circuits will include pebble bins, cone crushers, and a bypass arrangement. Crushed pebbles will return to the SAG mills via the feed conveyors. From Year 10 of operation, another coarse ore stockpile and grinding line will be added to increase the ore treatment rate.

Discharge from each SAG mill will be evenly split between two ball-mill circuits. The four ball-mill circuits will be closed by hydrocyclones. Ground slurry will be directed to a flotation circuit where a bulk sulphide concentrate, containing copper, molybdenum, and gold values, will be collected and concentrated in a rougher followed by three stages of cleaner flotation. The roughers and first cleaners will be tank cells, while the second and third cleaners will be column cells. Before cleaning, rougher concentrate will be reground in vertical stirred mills. From Year 10, a 50% increase in rougher capacity will be required to accommodate the increase in throughout, but the amount of copper will be the same; therefore, no change to the existing downstream regrind and cleaning capacity will be needed.

When the molybdenum head grade warrants operating the molybdenum plant, the bulk concentrate will be thickened in a conventional thickener (with no flocculant) and pumped to a differential flotation plant, where copper minerals will be depressed, and molybdenite will be floated into a molybdenum concentrate. The molybdenum concentrate will be filtered, dried, and packaged in tote bags for shipment to offshore roasters. Tailings from the molybdenum flotation circuit will constitute the copper concentrate, which will be pumped approximately 30 km to a filter plant at the project port site on the Caribbean coast. If the molybdenum head grade is very low, the molybdenum separation plant will be bypassed.

2.5.3 Tailings Disposal

Rougher tailings, found in testwork to be non-acid-generating, will be piped by gravity to a cyclone house at the south end of the TMF. Coarse material in the tails will be used to construct sand dams to contain the tailings; about half of the coarse tailings will need to be cycloned to provide enough material. Cyclone underflow (sand) will be spigotted onto


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the downstream faces of the dam, and cyclone underflow and uncycloned tailings will be distributed around the upstream faces of the dams and onto the beaches of the TMF. Cleaner tails are presumed to be potentially acid generating and will be directed by gravity in a separate line for subaqueous discharge in the TMF.

Direct precipitation into the TMF, together with contact water directed to the facility from the WRSFs and other disturbed land in the area, will result in a net excess of water in the TMF. Some of this water will be recycled back to the process plant by barge-mounted pumps. Excess water will be discharged at a controlled rate to the natural watercourses downstream of the impoundment, via a polishing pond, and will meet all applicable emission limit values and receiving water quality criteria.

2.5.4 Port Site Process Facilities

Copper concentrate will be pumped to the port through a pipeline buried in the shoulder of the Coast Road and directed to a thickener-clarifier, and the thickened underflow will be pumped to concentrate stock tanks. Concentrate from the stock tanks will be filtered in automatic presses. Dry filter cake (8% to 9% moisture) will be stored in a covered building with up to 100,000 tonnes of storage capacity, equivalent to approximately 30 days’ production. Concentrate will be reclaimed from the storage building and fed onto conveyors by front-end loaders for transfer to the berth and loading onto bulk freighters.

Filtrate water from the presses and various concentrate-contact waste streams from the plant will be collected in the thickener-clarifier. Thickener underflow will join the filter feed, and the overflow will be used for process water. Excess water will be pumped through a return water line to the TMF at the mine site; fly ash from the power plant will be slurried and injected into the return water pipeline for disposal in the TMF.

2.6 Infrastructure/Ancillary Facilities

Various project support facilities will be provided at the mine site and the port site. The mine site facilities are divided into two areas: the mine/plant site, which includes buildings and structures for repair and maintenance of mine and plant equipment, and the eastern infrastructure area, which includes facilities for personnel accommodations, administration, and security. The port site includes facilities for concentrate storage and load-out to ocean-going vessels, coal receiving facilities, a barge berth, and inbound/export freight handling and storage facilities.

Layouts of the mine/plant site, eastern infrastructure area, and port site are shown in Figures 2-5, 2-6, and 2-7.


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Figure 2-5: Layout of Mine/Plant Site


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Figure 2-6: Layout of Eastern Infrastructure Area


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Figure 2-7: General Arrangement of Port Site Facilities


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2.6.1 Mine/Plant Site

Support infrastructure for the mine and plant operations includes a truckshop, surface vehicle shop, mill maintenance shop, fuel storage depot, substation, container storage and laydown, facilities for storing and preparing blasting agents, process water pond, process and fire water tanks, and site roads.

The mine truckshop will be the main services complex on site, containing maintenance facilities for the mine mobile equipment fleet, warehouse space, a machine shop, offices, and the mine dispatch centre.

A mine service vehicle shop will be provided for all light- and medium-duty vehicles such as non-mining mobile equipment, road transport vehicles, personnel buses, and pickup trucks.

Facilities for a licensed blasting contractor will be provided on the opposite side of a ridge south of the plant site area. The foundations will be cut into the hillside to provide a natural barrier to protect the mine/plant facilities as well as the nearby Molejón mine property to the southeast.

2.6.2 Eastern Infrastructure Area

The eastern infrastructure area, about 4 km to the east of the plant site, will be used for the mine site construction camp, the permanent camp, the administration building, the construction power plant, and the 230 kV switchyard.

The construction camp will be sized for 3,500 workers and the permanent camp for 1,200 workers, including those employed at the port site during operations. A separate 900-person construction camp will be provided at the port site.

The main administration building will include a reception area, a small training room, and other standard office features. An elevator will be provided for full accessibility. A separate training facility adjacent to the permanent camp will be equipped to provide all training functions for the mine and mill.

A medical clinic will be equipped to treat general injuries and sicknesses, stabilize serious cases for medivac to off-site health facilities, and dispense drugs and medications. The clinic will have 12 beds, 6 of which will be in single rooms with adjoining washrooms. The facilities will include an emergency operating room, recovery room, x-ray room, two consulting/examination rooms, pharmacist’s office, doctor’s office, nurse’s office, nursing station, waiting room, and related support services, including a mortuary-type cold storage drawer. The clinic will initially be installed near the construction camp facility and relocated closer to the operations camp at the end of the construction phase of the project.


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2.6.3 Port Site Infrastructure

The port site is located at Punta Rincón on the Caribbean Sea. Once construction is complete, it will become the main point of entry of supplies and equipment for the entire project site, including coal for the power plant, and the point of export for the copper concentrate.

2.6.3.1 On-Shore Facilities

These will include:

concentrate dewatering, storage, and handling facilities the power plant (to be constructed by an independent power producer) administration, warehouse, and shops complex container storage area and laydown fuel storage and distribution facilities 900-person construction camp (not including IPP camp) medical facilities helipad for emergency medical evacuations.

The administration, warehouse, and shops complex will house all the services, offices, and covered warehouse space required at the port site. The building will include a Panamanian customs office, medical facilities, and a garage for emergency vehicles.

Much of the area within the port areas boundaries will be devoted to the storage of full containers unloaded from ships and empty containers returned from the plant site or other project locations, awaiting transfer to a ship.

2.6.3.2 Marine Facilities

These will include:

causeway access trestle shiploader service platform berthing dolphin and mooring arrangement fuel receiving system coal receiving system barge berth and ramp coastal freighter berth temporary construction quay.


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The main berth is designed to handle ships in the design range from 30,000 dwt to 65,000 dwt for both copper concentrate export and coal import. The copper concentrate will be loaded into the ships by a radial shiploader with the capacity to cover up to three hatches without warping.

The barge and coastal vessel berth is designed to accommodate barges of up to 7,500 dwt and vessel of up to 10,000 dwt. The berth will allow receipt of all supplies for the mine, concentrator, and power plant. Supplies will generally be containerized in 20 ft containers and off-loaded by crane. The berth will be designed to accommodate roll-on/roll-off vessels.

A separate tug pen with sheltered mooring and refuelling facilities will be provided for tugs and line boats stationed at the terminal and for Panamanian coast guard vessels.

2.6.4 Security Buildings

A security office/guard house and a station for the Panamanian police will be constructed at both the mine and port sites. The guard houses, manned by project security staff, will control the road access gates on the properties and be the centres of all site security functions for the facilities.

At the port site, an additional controlled security gate will be installed across the access road to the deep sea berth to provide security and controlled access to the offshore and marine facilities. In addition, the entire port site will be enclosed by a 2.1 m high fence.

The police stations will be used for all police force requirements for the general area and will be located outside the security perimeters of the site boundaries so that the police can provide local law enforcement functions and security support without violating any international, Homeland, or security/access requirements. One officer and eight personnel of other ranks will be assigned to each police station.

2.6.5 On-Site Roads

A network of general vehicle access roads around the facilities and service roads to remote structures will be required at both the mine/plant and port sites; these will often be an extension of yard areas and not always be delineated separately. The general access roads will be two-way and the service roads one-way with pullouts.

2.6.6 Access Roads to Site

Three access roads will serve the project development sites:

existing road from Penonomé via Coclecito and Molejón new Eastern Access Road


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new Coast Road from the port site to the mine site.

The existing road access is from the south, at a turnoff from the Pan-American Highway at Penonomé. This road runs northerly in the direction of the mine/plant site, bypassing the small community of Coclecito and continuing through the Molejón Concession.

MPSA will realign the road through the Molejón property around the mine workings during 2010 and early 2011 for use during the initial construction phase until the permanent Eastern Access Road is ready for use.

The Eastern Access Road will be roughly 12.6 km long, starting approximately 5.2 km west of the town of Coclecito. A bridge will be installed across Río Botija to allow the road to continue north to the southeast corner of the TMF, where it joins the Coast Road.

The Coast Road, including the reclaim pipeline corridor, will be approximately 30 km long and will be a private road to connect the project port site with the mine/plant site. The road will be suitable for the transport of regular and oversized freight and equipment needed for construction and operation of the mine/plant facilities. The three pipelines (concentrate, diesel fuel, filtrate return) will be buried in the shoulder of the road. Bridges will be required for crossings over Río Uvero and Río del Medio.

Measures to assist wildlife in crossing the roads will include the installation of netting across some sections for species living in the jungle canopy, local crossings over roadside ditches for ground-based species, and specially designed culverts for smaller wildlife.

2.6.7 Other Services and Facilities

2.6.7.1 Water Supply

Raw water for potable and other uses at the mine site will be obtained from a fresh water reservoir filled by surface water runoff and rainwater in a natural valley between the construction and operations camps east of the Botija pit. The water will be pumped to a fresh/fire water tank in the eastern infrastructure area. Fire protection water for the eastern infrastructure area will be stored in the lower portion of the tank. Potable water will be produced by feeding fresh water to a potable water treatment plant (PWTP). A small temporary PWTP will be provided near the mine site for the initial construction workforce on site.

Raw water for potable and other uses at the port site will be obtained from a fresh water reservoir constructed by damming off a small channel just upstream of the port site. Water will be pumped to a fresh/fire water gravity head tank located along the Coast Road and distributed to the port site area through two independent pipelines buried along the Coast Road. Fire protection water will be stored in the lower portion of the tank.


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Potable water will be produced by treating water from the tank in a PWTP. A small temporary PWTP will be provided for the initial construction force at site.

Process water for the plant will come from three sources: overflow water from the copper concentrate and bulk thickeners, pit dewatering water, and reclaim water pumped from the tailings pond. No fresh water will be needed at the plant. Filtered process water will be used for the higher-quality water demands in the plant and for fire water supply to a gravity head tank southwest of the plant site.

2.6.7.2 Power Supply

Power supply for the project will be provided from a new, independently owned and operated 300 MW power plant at the port site (Plant design and start-up are addressed separately in Section 2.7, Power Generating Plant, of this Executive Summary document.) Power will be supplied “over the fence” at 230 kV for transmission to the mine site and on to the Panamanian National Grid through the utility-owned substation at Llano Sánchez.

Backup diesel generators that start automatically on power failure will be installed at critical facilities. These generators will provide emergency power to the permanent camp complex and for essential lighting and plant process loads such as rake drives, agitators, and selected pumps.

2.6.7.3 Pipeline Systems

Three pipelines will run between the mine/plant site and the port site:

a concentrate pipeline to transfer the concentrate slurry from the process plant to a filter plant at the port site for dewatering

a return water line to pump the filtrate from the filter plant at the port site to the south end of the TMF for ultimate disposal. The line will also be injected with fly ash from the coal-fired power generating plant at the port site for ultimate deposition in the TMF.

a diesel fuel pipeline to transfer fuel received at the port to the mine/plant site.

The three pipelines will be buried in a common trench along the shoulder of the Coast Road. The trench will be 1.5 m wide and the pipes buried a minimum of 1 m from the top-of-pipe to the road surface. All pipelines will be equipped with leak protection systems and will be operated through a supervisory control and data acquisition (SCADA) system by remote control. As an additional environmental precaution, the pipelines will be double-walled at river crossings.


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2.6.7.4 Diesel Storage

The main diesel fuel storage tanks will be located at the port site, and a smaller fuel depot will be provided at the mine site. Marine diesel and a small gasoline supply will also be stored at the port site. Fuel will be stored in single-walled, above-ground tanks installed within impermeable, HDPE-lined, bermed enclosures to provide secondary containment for 110% of the largest tank capacity, plus an allowance for rainfall.

The diesel fuel tank at the mine site is sized to store approximately one week’s requirements for the mining and process plant operations.

2.6.7.5 Solid Waste Management

Wastes will be disposed of in an environmentally acceptable manner in accordance with legal requirements to prevent their direct or indirect discharge to any watercourse, groundwater, or the ocean. The waste disposal facilities will include:

a solid waste sorting facility hazardous waste storage buildings incinerators sanitary landfills.

Wastes will be recycled wherever practicable. Materials such as tires, conveyor belting, lead-acid batteries, fluorescent lamp ballasts, and chemicals will be shipped off site for recycling. The materials will be stored in a fenced solid waste sorting facility at the mine site before being removed by a recycling company.

Hazardous waste will be stored temporarily at the mine/plant site in appropriate containers protected by secondary containments before being sent off site for disposal at special handling facilities. Hazardous waste from the port site will be transported to the mine site for storage.

Non-hazardous solid waste that cannot be burned will be disposed of in unlined sanitary landfills. Considering the high levels of rainfall at the site, only inert materials will be placed in the landfills because the cost of leachate collection and disposal facilities associated with a lined landfill would be prohibitively expensive. The landfills will be sited as far from watercourses as practical.

2.6.7.6 Sewage Treatment

Sewage treatment plants (STPs) will be provided at both the mine/plant site and the port site. The plants will be capable of treating sewage from the temporary construction workforces in both areas. Once the workforce decreases for operations, unnecessary tanks will be removed. The STP equipment will be supplied in self-contained units within


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building enclosures that house all mechanical and electrical equipment and include ventilation, lighting, and cooling systems.

2.6.7.7 Communications Services

Before construction begins, the Owner will install and commission a microwave system to provide telephone and Internet service between the mine site, the port site, and the Panamá City office for the construction phase. This system will be left in place for the life of the mine as a backup to the permanent system.

The permanent communications system will be based on a fibre-optic service incorporated into the overhead guard wire of the 230 kV transmission line. Communication modules at both the mine/plant and port sites will contain all hardware necessary to deploy VoIP telephone, VHF 2-way trunked radio communications, Internet services, and site-wide LAN (local area network). Another fibre-optic cable installed alongside the pipelines between the port site and plant site will provide a redundant voice, fax, and data transmission system.

The VHF radio system will allow for communications between operating personnel at the port and concentrator. The operation will require multiple radio frequency channels. Discrete channel frequencies will be required in each operating area and for operational functions. Vehicles that travel beyond the mine area, such as the freight haul trucks, will be capable of multi-channel communications. Operating personnel in the mine, process plant, and associated facilities will also use hand-held radio units with multiple channel selection.

The port site administration office will be equipped with a VHF-FM marine-type radio system. A portable system will also be installed on the tug boat(s) to allow for communication between incoming ships and barges and the tug boat(s).

Provision will be made for a local cellular network provider to establish cellular service at the sites.

2.7 Power Generating Plant

This section describes the power generating plant for the project. This component will be a separate and major undertaking by an independent power producer, Suez Energy Central America, SA (Suez). This summary was prepared by Swiss Energy LLC, the design consultant for the power plant.

The peak electrical load of the Mina de Cobre Panamá project is expected to range from 200 MW to 220 MW during the first 10 years of operation, with a monthly average load factor of 85% to 90%. After Year 10, a third grinding circuit will be added to the mining operation, increasing peak demand to about 275 MW. To supply the electrical peak


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demand and energy for the project, MPSA signed a Joint Development Agreement (JDA) with Suez to develop a new 300 MW steam electric generating plant. The plant will consist of two coal-fired units, each with gross generation capacity of 150 MW. The plant will be located at the project port site at Punta Rincón in the Province of Colón, with interconnection to the Panamanian electrical grid at the Llano Sánchez substation.

The main business of Suez in Panamá is the generation and sale of electricity. As agreed in the JDA, Suez will develop, own, and operate the new plant for the primary purpose of supplying electricity to the Mina de Cobre Panamá project under a 30-year power purchase agreement (PPA). Major terms and conditions of the PPA have already been agreed to by MPSA and Suez in the JDA. Preliminary design of the power plant assumes a base load operation, with purchase and sale of electricity to the project and the Panamanian grid.

Electricity will be delivered to the mine site via a 116 km double-circuit 230 kV transmission line, with interconnections at the mine switchyard and Llano Sánchez substation. Distances from the power plant to the mine switchyard and the mine to the grid are about 22 km and 94 km, respectively. The grid will supply back-up and emergency requirements for the process plant, mine site, and port site. Up to 15 MW of emergency generation will also be provided at the power plant site by diesel-fired units for black-start capability. Load-flow studies have confirmed that interconnection at Llano Sánchez will result in stable operation of the Panamanian electrical grid. This interconnection has been approved by the government-owned regulator, Empresa de Transmisión Eléctrica, S.A. (ETESA). The locations of the power plant, mine site, and Llano Sánchez substation and grid are shown in Figure 2-8 Locations of Electricity Supply Components.

Routing of the transmission line will proceed from the power plant in a southeasterly direction for interconnection at the mine substation. From the mine, the line routing will continue southeast to avoid the Omar Torrijos National Park and then turn to the southwest for interconnection at the Llano Sánchez substation. This national park is an environmentally sensitive area and contains the upper watersheds of Río Grande on the Pacific slope and of Río Belén and Río Coclé del Norte on the Caribbean side. Routing of the line has considered issues addressed by engineering, environmental, and land ownership disciplines.

Each circuit of the transmission line will be capable of delivering the entire electrical load required by the mine and port sites, thereby assuring high reliability of service. The line will be constructed with steel lattice towers, similar to the structures used by ETESA in its double-circuit lines, and will include fibre-optic ground wires capable of transmitting communications between the power plant, the port site, and the mine site. The design of interconnecting facilities at the Llano Sánchez substation will provide for redundant capabilities using breaker and half electrical schemes, with interconnections to all four circuits of the grid that are owned and operated by ETESA.


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Figure 2-8: Locations of Electricity Supply Components

Two major factors will affect the cost of electricity:

engineering, procurement, and construction (EPC) costs for a new coal-fired 300 MW plant

the long-term supply and price of coal.

With regard to EPC costs, Suez conducted an extensive bidding process with international firms. Indicative proposals were received to determine the plant construction schedule as well as EPC costs with 20% accuracy. Subsequent to completion of the


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FEED Report, binding proposals will be requested, leading to the execution of an EPC Contract. This process will provide additional engineering to quantify the benefits and risks associated with the design and construction of the plant.

Site capture and bulk earthworks will be undertaken by the Cobre Panamá project EPC contractor and is scheduled to be completed within 18 months of receipt of required approvals and permits to begin field activities. At that time, the power plant EPC contractor will be given access to the site to commence initial civil work and construction of the plant.

The total construction workforce for the power plant is expected to peak at 1,800 personnel about 18 months after construction has been initiated. Initial delivery of coal is scheduled to provide for initial testing of coal facilities and start-up of the power plant. Coal delivery will be carefully coordinated with construction of the port facilities.

Start-up of the power plant is scheduled to occur prior to the commencement of commissioning of the process plant with the introduction of ore. It is possible that the power plant EPC schedule may be accelerated compared with the mine execution plan, providing the transmission line between the plant and grid has been completed and coal-unloading facilities have been completed at the port. In such event, the plant could sell electricity to the Panamanian grid. If the power plant EPC schedule is delayed, then electricity for the entire peak demand of the project could be purchased from the grid in accordance with the PPA between MPSA and Suez, providing the line between the mine site and the grid has been completed.

Long-term coal market analyses were undertaken to evaluate the international supply and demand for coal, probable origins of coal supply, cost of transportation, and delivered coal price. Based on the analyses, it was determined that coal supply would most probably originate from mines in Colombia, South America. Ocean transportation would be in 55,000 tonne, self-unloading vessels, delivered to the port site. It was estimated that design coal quality would be at least equal to or greater than 5,780 kcal/kg, sulphur content less than 0.85%, and ash content less than 14%.

Technical design of the power plant is based on use of the following:

subcritical pulverized-coal-fired boilers air quality control systems utilizing seawater flue gas desulphurization continuous emissions monitoring systems steam turbine generators with full condensing and reheat turbine water induction prevention condenser cooling via once-through sea water condensate systems boiler feedwater systems


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mechanical and electrical equipment, control systems, coal delivery, handling, and storage, and supporting civil, structural, and architectural features.

While facilities for disposal of bottom ash and fly ash will be provided at the power plant site, preliminary design has included the capability of transporting the fly ash to the mine by converting it into a slurry and injecting it into the filtrate return water pipeline for disposal in the TMF.

The locations of the power plant and port are shown in Figure 2-9. The general arrangement of the plant consists of two units oriented in a northerly direction to minimize the length of circulating water pipes accessing the Caribbean for condenser cooling. Space has also been provided for a future third unit, if needed. Preliminary design of the plant complies with all environmental requirements of Panamanian Law, as well as environmental regulations set forth in World Bank/IFC standards, including international treaties and conventions.

Each unit is expected to have a net generating capability of about 131 MW. Total plant gross generating capability for the two units combined is 300 MW, auxiliary loads total 38 MW, or 13% of gross generation, and net output is 262 MW.

Figure 2-9: Power Plant and Port Site


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To minimize earthwork requirements and pumping losses, the site layout places the turbine generators and boilers on a bench at 20 masl and the coal storage facilities at 30 m. Coal will be unloaded at the port and transported via conveyor to a transfer tower, from which it will be conveyed to short-term or long-term storage facilities, each capable of storing enough coal for 30 days of use. The main power transformers and electrical switchgear will be installed in a substation north of the power plant and will access the 230 kV transmission line between the port and mine.

Based on conditions set forth in the JDA, it was forecast that the total cost of electricity delivered to the project would be $0.08/kWh in 2009 U.S. dollars. The forecast was based on coal being sourced and delivered from Colombia at a delivered cost of US$3.45 per million Btu. The average price of electricity was determined from a demand and energy charge, where the demand charge recovers plant investment, financing costs, and fixed costs, and the energy charge recovers the cost of fuel and variable operating costs. Other criteria in establishing the cost of electricity included the following:

plant gross capacity of 300 MW contract term of 30 years load factor of 85% energy price adjustments based on cost of fuel and U.S. Consumer Price Indices points of delivery at the plant and Llano Sánchez substations sale of electricity on the grid applied as a credit against the cost of electricity pass-through of emergency and back-up power costs from the grid tax rates pursuant to Ley 9–1997.

In summary, installation of a new coal-fired generating plant will provide a low-cost and reliable supply of electricity for the project, as compared with other alternatives such as diesel-fired reciprocating engines, combined-cycle units fired with diesel or liquefied natural gas, or other forms of fossil-fuel generation. Renewable sources of electricity were evaluated but were judged to either be not viable (hydro) or not sufficiently reliable (solar, wind) to provide the needs of the project. Given the high peak demand and load factor requirements of the project, a new coal-fired 300 MW power plant with double-circuit 230 kV interconnection to the grid will be beneficial to the project, the surrounding communities, and the Republic of Panamá.


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3.0 SOCIAL AND ENVIRONMENTAL IMPACT ASSESSMENT

3.1 Sustainability Objectives

MPSA is proposing to create a mining operation of the highest standards that generates added value in a sustainable manner for the benefit of its shareholders, workers, neighbouring communities, and the country, and that protects the safety and health of its employees, the environment, and the surrounding communities.

MPSA also intends to help establish an enduring economic base that will be viable beyond the life of the mine. To achieve this goal, MPSA will work with the communities in the region to develop sustainable infrastructure and economic activity through the mechanism of a Foundation that will bring together the communities, the regional government, and other representative bodies as partners for development, funded by a structured revenue-sharing arrangement based on MPSA’s mining activities.

At the same time, MPSA recognizes that the project is located in a highly diverse ecosystem – part of the Mesoamerican Biological Corridor (MBC) – that is both sensitive and under threat from anthropogenic activity. MPSA will work with authorities to implement protected areas for the movement of fauna and to maintain habitat for threatened species, and will participate in education programs to help local residents understand the sensitivity of the ecosystem.

MPSA will also work with the communities and agencies to control to the extent possible project-induced in-migration and to create opportunities to alleviate pressures on natural ecosystems. The overall objective is to leave behind, at the end of the mine life, a sustainable system that both supports local inhabitants in a reasonable manner and that maintains – and where possible enhances – the rich biodiversity of the region.

MPSA has developed policies to demonstrate and communicate the company’s commitment to sustainability to all stakeholders:

3.2 The ESIA

MPSA is preparing an ESIA to international standards that identifies and addresses the potential sociological, socioeconomic, and environmental impacts of the Mina de Cobre Panamá project, both positive and negative. The ESIA conforms with the requirements of ANAM (Panamanian) and the International Finance Corporation (IFC) for the assessment of a mining project of this magnitude. The assessment process included extensive consultations with stakeholders about the project, baseline studies of the local socioeconomic and natural environments, identification of concerns and opportunities arising from the field studies and consultations, and consideration of alternatives to and within the project to limit or mitigate potential negative impacts, and plans to address the remaining, residual project impacts.


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3.3 Stakeholder Consultations and Engagement

MPSA’s community relations program started in 2007 and focused on the local communities to provide information on project plans and the alternatives being considered, and to listen to and understand community issues and concerns about the project. MPSA also engaged with external stakeholders, civil society, government agencies, and the media. Public ESIA-related consultations began in early 2008 and included two rounds of discussions with the same groups. In the second round, completed in August 2009, MPSA specifically discussed the expected impacts of the project and the proposed mitigation measures. Stakeholders again had an opportunity to question MPSA representatives and express their concerns.

3.4 Baseline Studies

3.4.1 Scope of Studies

Field and literature studies of the physical, biological, and socioeconomic environments were carried out to determine the existing state of these environments in the immediate area of the project (project development area, or PDA) and in the region surrounding the project (ecosystem region).

3.4.2 Existing Environmental Conditions

The project is located within one of the few remaining intact tracts of primary rainforest within the MBC. Both the PDA and the ecosystem region are relatively pristine. Habitat is intact in 89% of the PDA and in 92% of the ecosystem region.

The ESIA studies identified more than 850 species of flora, including 65 species new to science and 164 potential species of concern.

More than 78 amphibians and reptile species, 262 bird species, 134 butterfly species, and 26 mammal species were found in the study area. In addition, four undescribed robber frog species considered “new to science” and endemic to the footprint were found.

Degraded areas include those of high human use for agriculture, placer mining, village residences along streams, and along exploration roads. Population in-migration and deforestation both appear to be increasing, reducing wildlife habitat and adversely affecting biodiversity.

3.4.3 Existing Socioeconomic Conditions

Approximately 6,000 people reside within a 20 km radius of the proposed mine, mainly in small communities varying in size from 100 to 600 people. Latino and indigenous communities are both present. Most of these communities have no infrastructure, only rudimentary health facilities and basic schooling. Average income ranges from US$300


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to US$400 per month per family, with many families dependent on subsistence agriculture or activities such as artisanal mining. Water resources for human use are abundant, although drinking water quality is poor, with high levels of fecal coliform in many potable water sources.

Social conditions throughout the area are changing in response to perceived opportunities associated with the Molejón (PTQ) and artisanal gold mining activities and as a result of in-migration of indigenous people to the forest. Increasing deforestation resulting from agricultural, mining, hunting, and fishing pressures is leading to local scarcities of some plant and animal species.

A human health and ecological risk assessment (HHERA) found that most combinations of existing receptors and contaminants of potential concern found negligible or low risks to human health and the ecology.

3.5 Impact Assessment

3.5.1 Valued Ecosystem Components

A valued ecosystem components (VEC) approach was used to assess the potential impacts of the project. The selected VECs incorporate both the natural and human environments and in large part reflect the issues and concerns that emerged during the stakeholder consultations.

3.5.2 Potential Environmental Impacts

Direct loss of habitat will primarily result from clearing associated with the project; indirect loss of habitat will primarily result from the in-migration of people to the area, some of which is occurring as a baseline condition and some of which will be induced by project development. This habitat loss will negatively affect the biodiversity of the regional ecosystem as well as the movement of fauna through established forest corridors. Habitat loss and its direct effects on flora and fauna, and particularly on identified species of concern, is the largest biophysical impact of the project on its surroundings.

3.5.3 Potential Socioeconomic Effects

Removal of the forest cover and reduced access to the natural resources of the forest will have negative effects on the populations that depend on these resources for their livelihood. Examples of such resources are construction materials (wood), medicinal plants, fauna, fish, and, in the port area, marine resources. Further deterioration of natural resources could result from long-term project-induced in-migration of people into the area.


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Some individuals and families will be forced to relocate because they are located within the proposed project footprint; these people will be assisted through MPSA’s resettlement plan which will comply with IFC PS 5 and 7.

The project will, however, result in the generation of employment for local communities and of higher income and revenue through new job opportunities, procurement of goods and services, and payment of taxes and royalties – a positive impact.

3.5.4 Measures to Limit/Mitigate Project Impacts

Measures to limit and/or mitigate impacts on the natural and socioeconomic environments have been incorporated into project planning and design.

3.5.5 Residual Impacts and Mitigation

The residual impacts of the project are those negative or positive effects that remain after all mitigations have been implemented. The principal residual biological impact will be the reduction of biodiversity in the region resulting from development within the project footprint. Further mitigation will depend on the success of the project reclamation program designed to restore secondary growth (initially) to the PDA.

The other principal residual impacts will be on the social and economic structures of the region. Whether these are positive or negative will depend on the success of the efforts of the Foundation and other MPSA initiatives to offset social issues and establish a sustainable economic system that extends beyond a dependence on mining.

Further residual impacts will relate to the creation of four large bodies of standing water (the three mine pits and the tailings pond), possible long-term effects on water quality that may persist despite of water treatment, and the long-term stability of the TMF embankments. In all cases, MPSA is committed to ensuring that the mitigation actions remain as effective as possible through the mine life and after closure.

MPSA has developed mitigation plans and actions based on evolving international best practice, particularly in the areas of biodiversity offsets and compensation and of community development. MPSA has developed an environmental and social management system (ESMS) to limit and/or mitigate negative effects and provide positive benefits to the local and national economy.


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4.0 MARKETING AND MARINE TRANSPORT OF CONCENTRATE

The marketing plan for the Mina de Cobre Panamá project is based on updated metallurgical data, ongoing discussions and negotiations with potential customers, and analysis by independent consultants and Inmet Mining’s marketing group. All cost assumptions are based on consistent application of the principle that fuel and treatment charges are linked to the copper price used over the long term.

4.1 Concentrate Production

The metallurgical results reported in the FEED Study indicate that the concentrates will be of good quality with no significant levels of deleterious constituents. A total of 27.3 million dry tonnes of copper concentrate at a grade of 28% Cu, containing 7.64 million tonnes of copper, is scheduled to be produced over the 30-year life of the mine. Production of molybdenum concentrate is expected to total 186,000 dry tonnes at a grade of 52%, containing 96,500 tonnes of molybdenum. The molybdenum concentrate will also contain 520 g/t of rhenium, which is potentially an added-value component.

4.2 Copper Concentrate

Given the slow forecast growth of mine production, expanding smelter capacity, especially in China and India, the lack of new mine developments, and the inability of existing operations to fill the pipeline of new demand, a deficit of up to 6 million tonnes of mined copper is expected by 2020. These factors are fundamental in determining copper prices in the medium to long term.

Long-term average copper prices have been fairly constant in past years, but recent mine production disruptions and market/price-related adjustments have become statistically significant and could substantially alter the market balance in any given year.

Globally, copper ore grades are forecast to fall further as existing mines expand into lower-value resource areas, and energy costs are forecast to rise. In addition, capital costs for new projects have been increasing. After a brief pause, the industry cost curve is predicted to rise, resulting in the need for a higher copper floor price. The Mina de Cobre Panamá project should assume a minimum long-term copper price in the range of US$2.00/lb to $2.20/lb, although medium-term prices could be well in excess of this range depending on supply and demand factors. A review of market consensus long-term price forecasts support this projection; the 28 institutions polled currently forecast an average Cu price of $2.09/lb.

Treatment and refining charges (TCRCs) make up approximately 50% to 60% of smelter revenue. The balance comes from metal premiums, by-product sales such as sulphuric acid, and “free metal,” or metal recovered above the metal content to be paid to the mine.


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The key determinants for future TCRCs are the supply/demand balance for copper concentrates, smelter economics, and spot market activity.

The concentrate market is dependent on the development of major new mine and smelter projects, which is currently difficult to predict past two or three years. Unless there is a significant reduction in smelter capacity, however, there appears to be no fundamental reason for material increases in TCRC’s in the medium term.

At this time, the average TCRC for the Mina de Cobre Panamá copper concentrate is assumed to be around US$70 per dmt and 7.0 cents per pound of payable copper (US$0.188 per pound of payable copper). This is above the price of US$0.162 per pound realized over the past 10 years (December 2009 dollars) but below the levels realized in the 1990s due to:

the fundamental differences in new copper supply in that decade the current shift in supply and demand the inelasticity of the smelting market

Inmet’s forecast for price participation starts at US$2.20/lb by increasing or decreasing the refining charge for copper by 10% of the difference between the market price and $2.20/lb, with a cap and floor of US$0.06 per pound of payable copper.

Inmet has estimated that the Mine de Cobre Panamá concentrate will be sold to smelters in Europe (35%) and Asia (65%). The forecast for average shipping rate for this study is $37/tonne.

4.3 Molybdenum Concentrate

Molybdenum is used for the production of many sophisticated products such as high-grade, flat-rolled stainless steels and high-specification tool steels. Molybdenum demand is price inelastic because there are no real substitutes for it in the steel industry. Similar to other industrial metals, molybdenum demand has grown 3.6% annually since the early 1990s and is projected to increase by around 4% in the future.

Since 2000, just over 50% of molybdenum production has been generated as a by-product of copper mining. Several primary-source molybdenum projects have been under active study and promotion in recent years, particularly in North America, but no development commitments have been made. Technically it is relatively simple for copper mines to recover the contained molybdenum, which means that much of the by-product supply comes from low-cost producers.

The current forecast supply/demand balance for molybdenum shows a modest surplus until 2013 with a possible deficit thereafter. The cost curve for the molybdenum industry is relatively flat but goes up to around US$14/lb. The mean, at about US$6/lb, is low,


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mainly because about half the world’s output comes from copper mines, where molybdenum can be recovered for a cash cost of no more than US$3.00/lb.

Based on the analysis of future projects, an appropriate incentive price to induce primary production by 2020 would be in the order of US$13/lb. From this perspective, it is therefore reasonable to assume a long-run molybdenum price of US$13/lb for project evaluations.

As with copper and precious metals, a review of market consensus long-term price forecasts was undertaken in February 2010. Based on a broad range of 28 institutions polled, the forecast average long-term price of molybdenum is $13.21/lb.

Molybdenum roaster fees vary widely depending on the quality of the material, the status and location of the miner, the involvement of traders and, above all, the type of sales contract – long term or spot.

Assuming a copper content of approximately 1.8% Cu in Mina de Cobre Panamá molybdenum concentrates, the concentrates will need to be leached before being roasted. Roaster charges totalling around US$1.10/lb to $1.20/lb, plus a metallurgical loss allowance of 1% in 2009 dollar terms, is assumed. The high amounts of rhenium present in the concentrates – around 520 ppm – could result in a credit to the roaster fee in the range of US$0.20/lb to $0.30/lb of molybdenum concentrate. Inmet therefore forecasts a total roasting charge of US$1.275/lb.

The project plans to produce a molybdenum concentrate, as opposed to any downstream products, and expects that the concentrates will be sold outright to one or two roaster companies, as opposed to being toll-roasted.

Freight fees for the bagged molybdenum concentrates are expected to be competitive, considering that ship carriers on certain routes that arrive at Colón could have empty space to fill when travelling in the opposite direction. At present, it is assumed that freight rates will be in the order of US$66 per tonne.


FEED STUDY



5.0 PROJECT EXECUTION

The project execution plan describes the assumptions, challenges, keys to success, and sequence of events over the project development period from completion of the FEED report through to shipment of the first concentrate.

There will be several distinct and separate construction areas:

mine site, including the process plant site port site 300 MW power plant (construction and operation by Suez) tailings management facility (TMF) and associated infrastructure Botija pit 230 kV overhead power line Eastern Access Road and upgrades from Llano Grande Coast Road and pipelines.

Each major area will follow a series of construction phases involving site capture, heavy civil works, surface infrastructure, and commissioning.

5.1 Project Delivery

Considering the project challenges related to the environment, logistics, local labour capacity, and competition from other Panamanian projects, the selected method of delivery is an engineering, procurement, and construction (EPC) contract, with some components under a unit-price arrangement. The Owner’s research has indicated that this approach will attract credible industry players.

Up to 50% of the project capital cost may be funded from debt financing. The FEED Study has been prepared to meet the technical, economical, general environmental and social perspective standards of the International Finance Corporation (IFC) and World Bank.

For the purposes of this study, it is assumed that no funding issues will hinder the advancement of engineering and procurement and that the approvals and permits to commence construction will be obtained by September 2011. Should required approvals and permits take longer than this, all dates will need to be adjusted accordingly.

The Owner intends to start basic engineering by September 2010, on an open-book, cost-reimbursable basis. After approximately 10 months, basic engineering will have reached 80% completion, and the final project budget will be established. The delivery strategy for the project is through a single EPC contract (excluding the power plant construction, which will be by a third party) under a lump sum turnkey (LSTK)


FEED STUDY



arrangement except for certain components such as earthworks, where a unit-price approach might be implemented.

The FEED capital cost estimate is based on a defined work breakdown structure (WBS) and forms the project budget, which will be updated during basic engineering to reflect any changes in scope, schedule, or execution plans. Work packages have been assigned to the capital cost estimate and schedule for cost control and resource planning purposes.

The initial Botija pit pre-strip will be performed by the EPC contractor, commencing January 2013, and will continue with pre-stripping Botija phase 2 through to start-up while the Owner mobilizes with its own forces and heavy equipment, beginning 15 months before start-up. The Owner will work in parallel with the EPC contractor and self-perform mine development with its own forces when the large mine equipment and electric shovels can be deployed after 230 kV grid power from Llano Sánchez is commissioned. Although the EPC contractor and the Owner will both be operating in the same pit, there will be sufficient bench and physical distance separation between the two operating groups to ensure safety of operation.

The Owner will be responsible for ensuring the safety of mining operations after its own forces and equipment are mobilized.

EPC contractor pre-stripping of Botija phase 2 will continue past start-up under a separate contractual arrangement, under the supervision of the Owner.

The Owner’s project group will be responsible for project delivery and oversight of the EPC contractor. The Owner’s operations group will be responsible for the open pit mine development, operational readiness, and maintenance of corporate functions.

5.2 Engineering and Procurement

The total duration from the start of basic engineering to the completion of detailed engineering is 32 months. Detailed engineering will commence during the final seven months of basic engineering and will overlap the initial construction phase.

The project has placed orders for the SAG mills, ball mills, and gearless mill drives. The remaining long-lead equipment will be ordered upon completion of the basic engineering period. Additional geotechnical investigations are being conducted by the Owner both on- and off-shore at the port site, along the Coast Road alignment, at the TMF, and at the plant site to provide data for basic and detailed engineering.

The governing law (Ley 9) for the Concession allows for a duty exemption for all imported materials and equipment in the project. The EPC contractor will source and purchase all


FEED STUDY



permanent and ancillary material, including bulk materials, on a global basis, taking into consideration quality, delivery time, financial terms, political risk, and logistics.

5.3 Access and Transportation

Subject to permitting requirements, MPSA intends to enhance the existing access to the property before the start of construction, including:

upgrades to the Coclecito road construction of new bridges over Río Coclecito and Río San Juan realignment of the road around the Molejón property mine and process plant geotechnical characterization road to north tailings dam area.

Subject to permitting requirements, the road realignment around the Molejón mine workings and process plant will be completed before the start of construction and will be used during the initial phase of construction until the permanent Eastern Access Road is ready for service in December 2012.

Colón will be the preferred port for the initial import, marshalling, and dispatch of materials for the project, either by road to the mine site or by barge to the project port site at Punta Rincón. A construction dock, causeway, and laydown area will need to be established at the project port site early in the construction program, and the Coast Road to the mine site will need to be complete, before substantial quantities of materials and heavy equipment can be productively shipped from overseas. The heavy transformers, mill shells, and components for the large mine fleet will all be delivered by barge to the port site and trucked to the mine site over the Coast Road.

Most loads delivered over the Eastern Access Road will fit within standard highway shipping dimensions and weights.

5.4 Safety, Environmental, and Community Affairs (SECA) Program

During basic engineering, the EPC contractor will develop its project-specific (SECA) program and environmental and social impact management plans. These will incorporate: the Owner’s Environmental Management and Protection, Occupational Health and Safety, and Biodiversity Action Plans; the EPC contractor’s corporate health and safety plans; the SECA site risk assessment; permit requirements; site regulations; current industry practice; and project-specific commitments derived from the ESIA. Project safety performance will be the key criterion for evaluating the personal and corporate performance of the Owner and the EPC contractor.

The EPC contractor will be required to form a dedicated civil engineering and environmental team to be solely responsible for the management of all construction site


FEED STUDY



water, erosion, and sediment control well in advance of field activities. The specific SECA runoff and sediment control plans will need to be compliant with the project ESIA.

The EPC contractor will hire full-time environmental systems and social managers who will be responsible for developing management systems that conform with Inmet/MPSA requirements and environmental QC, including enforcing, monitoring, and reporting on the erosion and sediment control measures. The Owner will provide overall SECA confirmatory oversight, monitoring, and audit functions. The EPC and Owner’s SECA teams will interact frequently to ensure that the project’s SECA objectives are being met and that social licence is enhanced.

Emergency response and medical facilities will be established at the mine site and the port site at the beginning of the construction phase.

During the construction phase, only areas that need to be fully excavated for the initial operation of the mine, will be cleared and grubbed. No attempt will be made to clear areas designated as saprolite and waste rock storage facilities (WRSFs). Trees within the initial flooded area of the TMF will be felled and left to decay in situ. No timber salvage will be carried out during construction because of the logistical and health and safety issues involved in preferentially recovering merchantable timber. Before clearing operations begin, a flora and fauna rescue plan will be implemented, and reasonable efforts will be made to relocate terrestrial fauna.

Mitigation measures will be implemented during construction of the Coast Road to address fish-spawning areas, and animal crossings will be incorporated into the road design.

5.5 Scheduling Considerations

Efficient execution of the 12-month site capture phases at the mine site and port site are critical to achieving the schedule milestones. Site capture at the mine site is predicated on the Owner establishing an all-season characterization road from the existing road system to the northeast corner of the TMF before the start of construction and by making 250 beds in the existing camp facilities available to the EPC contractor. The Owner will also establish a 50-person tent camp at the port site, near the location of the planned temporary construction dock, before the start of construction.

The heavy civil phase will be challenging, time consuming, and the highest risk to the project. This work will proceed 12 months per year; to account for adverse weather delays, however, efficiencies have been calculated on 10 months per year. No weather delays have been planned for the surface infrastructure construction. Detailed excavations will require temporary rain protection until the concrete has been poured, after which the remaining construction should be able to proceed efficiently.


FEED STUDY



The EPC contractor will be responsible for the heavy civil work associated with the bulk earthworks for the power plant platform. This work will be undertaken in two phases to permit early mobilization of the power plant construction contractor.

Proven quarry locations for competent rock are limited to one each at the port site and the mine site. It is anticipated, however, that additional local quarry sites will be established along the Coast Road alignment. The port site quarry will be converted into the ash handling facility; the mine site quarry will be part of the mine pre-strip development. Preliminary tests indicate that concrete aggregate can be obtained from the proposed quarries, although sand for bedding and concrete will have to be brought in from off site.

Completion of the Coast Road is required for delivery of the heavy transformers, mill shells, and large mine fleet and is therefore critical to the process plant construction and mine pre-stripping.

The schedule provides three months of pre-commissioning and three months of commissioning with ore for the process facilities, with the first shipment of concentrate scheduled for January 2016 (see schedule assumptions in Section 5.1). A number of facilities will need to be commissioned earlier to support the construction and commissioning of other facilities:

The 230 kV overhead power line, the permanent camp, and the truckshop will be needed 18 months before plant start-up to power (from the grid) the electric shovels, house the operations personnel, and maintain the large mine fleet involved in pre-stripping operations.

The coal unloading facilities are required four months before the power plant is commissioned.

The power plant must be operational before process plant commissioning commences.

The TMF must accumulate water for four months to meet initial start-up water requirements for the process plant commissioning.

5.6 Temporary Infrastructure

Temporary facilities to support construction at the mine and port sites include a 3,500-person construction camp at the plant site, a 900-person construction camp at the port site, lunch rooms, offices, reservoirs for water supply, construction mobile equipment, cranes, laydown and storage areas, on-site transportation, road maintenance, borrow and quarry sites, concrete supply, electrical power, waste management (incinerators but no open burning), sewage treatment, and communications. To reduce the extent of the temporary construction facilities, permanent infrastructure will be installed early and used wherever practical in the construction phase.


FEED STUDY



5.7 Construction Workforce

Understanding the industrial relations (IR) issues in Panamá is critical to the project execution and ongoing operations. During basic engineering the EPC contractor will develop a Labour Relations, Training, and Hiring Plan that conforms to Inmet/MPSA requirements, particularly in terms of local workforce recruitment. The EPC contractor will negotiate a Project Collective Agreement (PCA) for the construction of the project with one or more unions before the start of construction.

The execution plan is based on the work being performed on a single day-shift basis, with night shift reserved for maintenance, site services, material movement, and specific areas that are behind schedule.

5.8 Security

The Owner has developed a comprehensive security plan. The main security issues during construction are expected to be unauthorized access, importation of banned substances, and theft. For security reasons, the Owner has specified that the construction and permanent camps be located several kilometres from the plant site area.

The EPC contractor will be responsible for developing and implementing its own security plan within the construction areas; this plan will conform to Inmet/MPSA requirements. The Owner will retain responsibility for security external to the major construction areas as well as liaison with the communities, although the EPC contractor will be held accountable for its SECA performance, particularly in terms of interaction with local residents.

Public access will be to the edge of the Owner’s project boundary, and no public vehicles will be permitted on site. A number of local people live within the mining Concession areas. To maintain safety, buffer zones of 500 m from the pit boundaries and 250 m from WRSFs and stockpiles have been established.

The Owner will negotiate in good faith with project-affected people to acquire the land rights required by the project. Most of the project footprint is on state land within the DUMA-protected area. MPSA already owns most of the required property at the port site. Local residents with informal property rights are scattered throughout the footprint. MPSA will respect these informal rights.


FEED STUDY



6.0 LOGISTICS

6.1 Introduction

Logistics will be integral to construction. Materials and equipment must be delivered to site in good condition, on schedule, and cost effectively. Construction personnel must be provided with transportation so that they move to and from their place of work on time and safely. All of these activities must be achieved in accordance with the requirements of the project’s health, safety, and environmental policies and the commitments made to both internal and external stakeholders.

While many major mining projects source a significant volume of materials and equipment off shore, Panamá has limited capability in these areas; therefore, almost all plant and equipment will need to be obtained from out of the country. Construction of the project will be a major logistical challenge. Hence, an effective construction logistics strategy is essential.

The EPC contractor will assume responsibility for the logistics services required to support the construction phase of the project. Because an independent contractor will assume responsibility for the construction of the power plant, all consideration of the logistics associated with this component of the project is excluded from the project logistics execution plan described herein.

6.2 Inbound Freight Volumes

The total volume of equipment and materials to be transported to all construction sites will be about 651,825 tonnes (Table 6-1), with the peak volume reaching about 67,153 tonnes in the first quarter of 2014. About 60% of the total volume, 389,198 tonnes (equivalent to about 415 ML) will be fuel shipments. The estimates exclude those material volumes associated with works executed by the power plant contractor.

About 161,058 tonnes, or 25% of all inbound volumes, will use the Coclecito access road. The rest, about 490,767 tonnes, will be transported by barge or supply vessel to the project port site at Punta Rincón (Figure 6-2).

Table 6-1: Inbound Freight Volumes* (tonnes)

Description Via Penonomé Via Punta Rincón Total

Project equipment and materials 8,500 88,282 96,782

Bulk materials 28,733 57,249 85,982

Construction equipment and materials 37,172 42,691 79,863

Fuel 86,653 302,545 389,198

Total 161,058 490,767 651,825


FEED STUDY



Figure 6-1: Inbound Volumes by Material Type (tonnes/quarter)

-

18,000

36,000

54,000

72,000

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2011 2012 2013 2014 2015 2016

Inbo

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Bulk Materials

Project Equipment and Materials

DOES NOT INCLUDE POWER PLANT

Figure 6-2: Inbound Volumes by Access Points (tonnes/quarter)

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36,000

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72,000


2011 2012 2013 2014 2015 2016

Inbo

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Punta Rincón

Penonomé


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6.3 Ocean Transport

Panamá is well served by ocean carriers of all types: container lines, break-bulk liners, tramp, roll-on/roll-off, and charter services for heavy lift, special, or consolidated cargoes. Opportunities to use a charter vessel, rather than a liner or tramp service, will be evaluated during later phases of the project.

6.3.1 Ports in Panamá

Panamá has four major ports: Manzanillo International Terminal (MIT), Puerto de Cristóbal, and the Colón Container Terminal, all in Colón, and Puerto de Balboa in Panamá City. All are operated under licence by major international terminal operators who have made major investments in these facilities and infrastructure.

6.3.2 Colón Marshalling Yard

The Colón marshalling yard will be the initial receiving location for all material and equipment imported through Puerto de Cristóbal and MIT. Goods awaiting customs clearance will be stored in a clearly identified and fenced, bonded-goods area, access to which will be limited to authorized personnel only.

6.3.3 Barging and Crew Supply Vessel

Materials and equipment will be transported between Colón and Punta Rincón by barge and crew/supply vessel. No local companies offer coastal barging service. The tugs, barges, and crew/supply vessels needed to support construction at the project port site will therefore have to be acquired from off shore.

6.3.4 Punta Rincón

The port at Punta Rincón will handle a total of about 438,000 tonnes of materials and equipment during construction. Inbound volumes will peak in the third quarter of 2013 at about 56,920 tonnes. Receiving infrastructure and equipment at Punta Rincón will include:

a temporary construction berth

a 10,000 dwt vessel and 7,500 dwt barge berth

mobile cranes

reach trucks and forklifts

construction laydown areas

secure areas for hazardous and dangerous goods

tractor-trailer units for both normal and oversize/overweight loads.


FEED STUDY



The Punta Rincón receiving and laydown areas will be operated by the EPC contractor, who will provide all necessary mobile equipment, supervision, and operators.

6.4 Road Transport

The process plant site is about 292 km by road from the Port of Colón. The existing route follows the Panamá–Colon Highway to Panamá City where it connects with the Pan-American Highway near Panamá City. The existing mine access road intersects the Pan-American Highway at Penonomé. To avoid the congested streets of Penonomé, project cargoes will bypass the town. The road between Coclecito and the plant site, which passes through the Molejón Concession property, will be used until a permanent bypass, the Eastern Access Road, begins service in July 2012.

While traffic using the Coclecito road will favour daylight hours, the project transportation vehicles could operate 24 hours per day, in convoys if necessary. All traffic wishing to use this route will halt at the Penonomé staging area operated by the EPC contractor.

With the Coclecito access road open 7 d/wk, an average of 33 one-way trips will be made each day at the peak of construction traffic, in the second quarter of 2013 (Figure 6-3). Once the Coast Road opens, traffic would fall to three one-way trips per day or less, limited to the transport of consumables and supplies, special and emergency loads, and project and support staff. Peak traffic volumes, however, could be up to twice this volume.

Figure 6-3: Coclecito Access Road – Average Number of One-way Trips Each Day

0

9

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36


2011 2012 2013 2014 2015 2016

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Personnel TransportFuelBulk MaterialsConstruction Equipment and MaterialsProject Equipment and Materials

MINERA PANAMA, S.A.MINA DE COBRE PANAMA PROJECT

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7.0 CAPITAL COST ESTIMATE

The total estimated cost to design and build the Mina de Cobre Panamá 150,000 t/d project described in this report is US$4,320 million, including an Owner-provided mining fleet and self-performed preproduction development. This amount covers the direct field costs of executing the project, plus the Owner’s indirect costs associated with design, construction, and commissioning. The estimate is summarized in Table 7-1.

The capital cost estimate is based on an EPCM approach. Mid-way into the study, MPSA requested that AMEC change to an EPC approach, and allowances were made to capture costs associated with an EPC contract, as follows:

EPC contractor procured material – overheads and fees Construction equipment rental – overheads and fees Subcontractor management – overheads and fees.

AMEC was responsible for developing the costs for its scope of work and for assimilating costs provided by other project participants into an overall project capital cost estimate, as follows:

Sandwell Engineering Inc ................. marine facilities design, quantities, and estimates Pipeline Systems International (PSI) .... concentrate, water return, and diesel pipelines Estudios Electricos ........................... 230 kV power line and Llano Sánchez substation MPSA............................................ mining preproduction development and mining fleet MPSA....................................................................................................... Owner’s costs

With the exception of initial earthworks, the estimate does not include capital costs for the power generating plant and associated facilities being constructed by others.

The scope of the project evolved over the course of the FEED Study. Changes made after December 2009 included relocating the construction and permanent camps at the plant site, adding the Eastern Access Road, and modifying the plant site layout to allow for the future third processing train. Where engineering assessment was performed for the changes, the cost impact has been included in the capital cost build-up. Where engineering assessment was not completed to a full FEED level, allowances were made and added to the appropriate cost area.

All costs are expressed in second quarter 2009 (Q2) US dollars. No allowance has been included for escalation, interest, financing fees, taxes, duties, or working capital during construction. The level of accuracy for the estimate is ±15% of estimated final costs, as per AACE Class 3 definition.


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Table 7-1: Summary of Capital Costs

WBS Area (US$000)

1000 Mining 1110 Mine Preproduction Development 191,673 1130 Mine Dewatering and Drainage 25,849 1140 Mine Mobile Equipment 287,510 1150 Blasting Agent Storage 760 1160 Emulsion Plant 4,111 Total Mining 509,903

2000 Process Plant 2100 Primary Crushing and Conveying 120,380 2200 Concentrator 471,839 2300 Tailings System 207,210 Total Process Plant 799,429

3000 Site and Services 3100 Site Preparation and Civil Works 293,325 3200 Plant Site Facilities 75,146 3300 Electrical and Heating Services 94,220 3400 Water Services 22,095 3500 Fuel 4,306 3600 Waste Handling 9,755 3700 Mobile Equipment 43,841 3800 Plant Site Construction Equipment 54,558 Total Site and Services 597,247

6000 Port Site Facilities 6100 Port Concentrate Handling 80,485 6200 Port Site Development 95,727 6300 Port Site Facilities and Services 107,668 6395 Port Site Substation and Power Distribution 10,910 6410 Coal Receiving Hopper 17,401 6500 Port Site – Construction Equipment 7,760 Total Port Site Facilities 319,951

Total Directs 2,226,530

8000 Construction Indirects 8100 Construction Services 592,385 8200 Mobilization and Shipping 139,326

9000 Other Indirects 9100 Start-up and Commissioning 68,069 9200 Owner’s Costs 364,381 9300 EPCM + EPC Allowance 472,002 9345 Transmission Line – EPC 4,786

Total Indirects 1,640,950

9500 Contingency 452,896 9530 Escalation (excluded) - Working Capital (excluded) -

Total Capital Cost 4,320,375


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Sustaining capital for the project includes costs for the installation of the Colina crushing station and associated materials handling infrastructure, replacement of the mine and plant mobile equipment, and installation of the third grinding line to increase production after Year 10. The cost estimate for these major expansions is $1,116 million.

Sustaining costs also include typical items such as ongoing tailings dam construction, water management and treatment facilities, electrical equipment, and community support. Life-of-mine sustaining capital for these items totals $1,723 million.


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8.0 OPERATING COST ESTIMATE

The operating cost estimate (opex) has been prepared as an annual cost for the project from plant start-up to mine closure. The life of the project is 30 years at a nominal processing plant throughput rate of 150,000 t/d (54.8 Mt/a) for the first nine years, followed by an increase to a nominal throughput of 225,000 t/d (82.1 Mt/a) from Year 10 onward.

The operating cost estimate is expressed in constant second quarter 2009 (Q2 2009) U.S. dollars with no allowances for escalation or fluctuation in exchange rates. Costs incurred before plant start-up in Q4 2015 are treated as capital expenditures (capex).

The operating costs are grouped into four cost centres:

Open pit mining Processing Site services General and administration (G&A).

The average costs for the project over the mine life are shown in Table 8-1.

Table 8-1: Summary of Operating Cost Estimate ($/t milled)

Cost Centre Labour Material Power Other Total

Open Pit Mining 0.16 1.69 0.06 0.22 2.14

Processing 0.11 1.44 2.12 0.05 3.72

Site Services 0.12 0.18 0.06 0.38 0.73

G&A 0.09 0.00 0.02 0.52 0.64

Total 0.48 3.31 2.26 1.18 7.23

The total operating cost is $15,490 million over the LOM for a milled feed of 2,143 Mt. The overall unit operating cost is $7.23/t of milled ore.


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9.0 FINANCIAL EVALUATION

9.1 Introduction

Engineering studies have demonstrated the technical feasibility of producing significant quantities of copper, molybdenum, silver, and gold from the Mina de Cobre Panamá project. The economic viability of the project has been evaluated by using a combination of pre-tax and after-tax cash flow analyses, based on the engineering studies and cost estimates discussed herein. Under the metal price assumptions shown in Table 9-1, and using a discount rate of 8%, the pre-tax project net present value (NPV) for the base case is $1,659 million, and the internal rate of return (IRR) is 12.6%. The after-tax NPV is $1,535 million with an IRR of 12.4%.

Another case (levered) assuming $2.16 billion of debt financing, representing 50% of the preproduction capital, was evaluated. This resulted in a project after-tax IRR of 15.1% – a net improvement of 2.7% over the un-levered base case. The cumulative pre-tax undiscounted cash flow value for the project is $12,868 million and the payback period is 5.9 years.

Table 9-1: Long-Term Metal Price Assumptions

Metal Unit Price

Cu US$/lb 2.10

Au US$/oz 885.00

Mo US$/lb 13.00

Ag US$/oz 13.50

All monetary amounts are presented in United States dollars (US$).

For the sake of discounting, cash flows are assumed to occur at the end of each period. All cash flows are discounted to the beginning of Q4 2010.

9.2 Base Case

Table 9-2 summarizes the key project financials for the un-levered base case.

Sensitivity analyses for the project NPV @ 8% and the IRR were performed on a range of metal prices (Cu, Au, Ag, Mo), from -30% to +30%, as well as changes to capital costs, operating costs, steel prices (grinding media), process reagent prices, copper prices, and diesel fuel prices. The results are shown in Figures 9-1 and 9-2.

The project is most sensitive to changes in metal prices (as well as recovery and head grade), less so to capital and operating cost changes, and least sensitive to variations in


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individual commodity pricing for steel, reagents, and diesel. The dramatic effect of price change can be observed in Table 9-3.

Table 9-2: Summary of Key Financials (base case)

Valuation indicator Unit LOM

Pre Tax

Cumulative net cash flow US$M 12,868

NPV (8%) US$M 1,659

Payback period Years 5.9

After Tax

Cumulative net cash flow US$M 11,999

NPV (8%) US$M 1,535

Payback period Years 5.9

IRR and Tax Rate

Effective tax rate % 4.57

IRR before tax % 12.6

IRR after tax % 12.4

Figure 9-1: Sensitivity of After-Tax NPV @ 8%

Sensitivity of After Tax NPV @ 8%

(2,000)

(1,000)

0

1,000

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Change in Factor

NP

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($U

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Capital expenditure Operating expenditure M etal price Steel price Reagents Copper Diesel Fuel


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Figure 9-2: Sensitivity Spider Graph for After-Tax IRR

Sensitivity of After Tax IRR

0%

2%

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6%

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10%

12%

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

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Table 9-3: Impact of Metal Price Change

Item Unit Base + 5% + 10% + 14% + 19% + 24% + 29% + 33%

Copper US$/lb 2.10 2.20 2.30 2.40 2.50 2.60 2.70 2.80

Gold US$/oz 885 927 969 1,011 1,054 1,096 1,138 1,180

Molybdenum US$/lb 13.00 13.62 14.24 14.86 15.48 16.10 16.71 17.33

Silver US$/oz 13.50 14.14 14.79 15.43 16.07 16.71 17.36 18.00

Un-levered Base Case After-Tax Financial Results

Cumulative Net C.F. (US$M) 11,999 13,337 14,677 16,018 17,355 18,691 20,027 21,363

Net Present Value 8% (US$M) 1,535 1,913 2,291 2,669 3,047 3,424 3,802 4,180

Internal Rate of Return (%) 12.4 13.4 14.3 15.2 16.0 16.9 17.7 18.5

9.3 Levered Case

The levered case assumed the following:

debt financing interest rate of 7%

$2.16 billion of debt representing 50% of preproduction capital

debt repayment term of 10 years with a one-year repayment holiday.

The financial results of the levered case at various pricing scenarios are shown in Table 9-4.


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Table 9-4: Levered Case Financial Results

Item Unit Base + 5% + 10% + 14% + 19% + 24% + 29% + 33%

Copper US$/lb 2.10 2.20 2.30 2.40 2.50 2.60 2.70 2.80

Gold US$/oz 885 927 969 1,011 1,054 1,096 1,138 1,180

Molybdenum US$/lb 13.00 13.62 14.24 14.86 15.48 16.10 16.71 17.33

Silver US$/oz 13.50 14.14 14.79 15.43 16.07 16.71 17.36 18.00

Levered After-Tax Financial Results

Cumulative Net C.F. (US$M) 10,945 12,282 13,622 14,963 16,301 17,636 18,972 20,308

Net Present Value 8% (US$M) 1,696 2,074 2,451 2,830 3,207 3,585 3,963 4,340

Internal Rate of Return (%) 15.1 16.5 17.8 19.1 20.4 21.6 22.7 23.9

9.4 Performance Statistics

Inmet cost metrics are summarized in Table 9-5 for the base case and in Table 9-6 for the levered case. The metric items are defined as follows:

Cash costs are the sum of on-site costs, off-site costs, NSR royalty, non-income taxes, and by-product credits divided by recovered copper.

Break-even cash costs are cash costs plus sustaining capital divided by recovered copper.

Financed break-even cash costs are break-even cash costs plus interest expense divided by recovered copper.

Total costs are cash costs plus interest expense divided by recovered copper plus life-of-mine capital divided by life-of-mine recovered copper.

Table 9-5: Summary of Base Case Performance Statistics

Cash Costs Units Year 1 Year 2 Year 3 Avg. Y2-16 LOM

Inmet-Defined Cost Metrics

Cash costs US$/lb 1.01 0.67 0.66 0.78 0.90

Break-even cash costs US$/lb 1.01 0.78 0.86 0.92 1.00

Financed break-even cash costs US$/lb 1.01 0.78 0.86 0.92 1.00

Total costs US$/lb 1.37 1.03 1.02 1.14 1.26

Table 9-6: Summary of Levered Case Performance Statistics

Cash Costs Units Year 1 Year 2 Year 3 Avg. Y2-16 LOM

Inmet-Defined Cost Metrics

Cash costs US$/lbs 1.01 0.67 0.66 0.78 0.90

Break-even cash costs US$/lbs 1.01 0.78 0.86 0.92 1.00

Financed break-even cash costs US$/lbs 1.40 1.02 1.07 1.00 1.06

Total costs US$/lbs 1.75 1.27 1.23 1.23 1.31


FEED STUDY



10.0 KEY RISKS AND OPPORTUNITIES

The two project risk and opportunity sessions held during the FEED Study focused on risks rather than opportunities; the latter will be explored further during basic engineering. While mitigation strategies have been briefly reviewed and in some cases augmented after the risks and opportunities session, all issues need to be considered further in the basic and detail engineering phases of the project.

The greatest number of key higher-risk items fall within the regulatory, project execution, and socio-environmental categories, with a single Level 6 moderate risk noted in each of capital and operating costs, port and marine, tailings, and civil work. Table 10-1 shows the number of significant risk items identified in each category.

Table 10-1: Key Higher-Risk Items for Project Development

Assessed Risk Rating Reg

ula

tory

Tai

ling

s

Po

rt a

nd

Mar

ine

Civ

il W

ork

So

cio

-En

viro

nm

enta

l

Pro

ject

Exe

cuti

on

Cap

ex/O

pex

Level 9 – Extreme 2 - - - - - -

Level 8 – High 5 - - - - 1 -

Level 7 – High 1 - - - 2 4 -

Level 6 – Moderate 4 1 1 1 4 7 1

Mitigating steps in the regulatory category emphasize the need to educate, inform, and continually update specific government agencies and NGOs about the impacts and benefits of the project. Opportunities must be made to build strong and positive ties with the local communities.

An important mitigating step with respect to socio-environmental issues is to submit a detailed ESIA to the Panamanian environmental authority ANAM. This document carefully addresses the issues associated with developing the project as well as how the project is integrated with the environment and local communities. MPSA also has a number of initiatives underway to create a sustainable educational, economic, and environmental legacy in this area of Panamá.

There are socio-environmental opportunities to be developed before and during project execution. Many deal with the shortage of skilled labour in Panamá and the opportunity


FEED STUDY



to provide training facilities to develop a skilled local construction and operations workforce.

Opportunities for the project include:

careful management of late changes to design concepts established in the FEED Study, essential to managing project cost escalation

further investigation and additional geotechnical investigations across the project site to better define soil conditions and saprolite handling and construction techniques

negotiating fuel supply and distribution and blasting agent supply contracts to help mitigate capital cost creep.

Further opportunities exist to improve project economics and significantly extend the mine life. Additional drilling has the potential to convert inferred resources contained in the current pit design to reserves. Significant inferred reserves have been identified outside of the current pit designs. Further drilling has very good potential to expand the current pits and identify new pit areas; additional exploration potential exists outside the areas currently evaluated.

feed report

Documents

feed report

port site process facilities

scope of facilities

shore facilities

marine facilities

plant site location

port site infrastructure

mineplant site