tvi resource development (phils) inc. technical … ore at the agata north nickel laterite deposit...

AGNDSO-TR-30 August 2013

TVI Resource Development (Phils) Inc.

Technical Report for the Agata North Nickel Laterite DSO Project, Mindanao, Philippines

30 August 2013


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Title Page

The “Technical Report for the Agata North Nickel Laterite DSO Project, Mindanao, Philippines” (Technical Report) is produced at the request of Mr Jake Foronda, VP Operations of TVI Resources Development (Phils) Inc. (TVIRD). The Project includes the development, mining and direct shipping of high iron limonite ore at the Agata North nickel laterite deposit which is located in an established mining district of Surigao in Northern Mindanao in the Philippines.

Independent Qualified Persons:

Mark Gifford M.Sc. (Hons), FAusIMM, Geological Consultant

Dallas Cox, B.Eng (Mining), MAusIMM(CP), Principal Consultant of Crystal Sun Consulting Limited (CSC)

Michael Conan-Davies, BSc (Hons) Geology, MSc Mineral Economics, MAusIMM(CP), Director of MCD Geo Pty Ltd

Effective Date:

30 August 2013

Submitted to:

TVI Resources Development (Phils) Inc.

Distribution:

Jake Foronda, TVI Resources Development (Phils) Inc.

Clifford M. James, TVI Pacific Inc.


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Table of Contents

1 Summary 6 1.1 Description of Property 6 1.2 Location 6 1.3 Project Ownership 7 1.4 Seismicity 7 1.5 Geology and Mineralisation 8 1.6 Deposit type 9 1.7 Exploration 9 1.8 Mineral Resource Estimate 10 1.9 Mineral Reserve Estimate 11 1.10 Mining 12 1.11 Investigations 13 1.12 Direct Shipping Operations 14 1.13 Port Loading Facility location 15 1.14 Environment and Community 16 1.15 IFC Performance Standards on Social and Environmental Sustainability 16 1.16 Philippine Environmental Impact Statement System 16 1.17 Environment Inputs and Controls 17 1.18 Social and Community 17 1.19 Economic Analysis 17 1.20 Capital Costs 18 1.21 Operating Costs 19 1.22 Sensitivity Analysis 19

2 Introduction 21 2.1 For Whom the Report Has Been Prepared 21 2.2 Purpose of the Report 21 2.3 Sources of Information 21 2.4 Scope of Personal Inspections 21

3 Reliance On Other Experts 22 3.1 Ownership and Land Tenure 22 3.2 Statutory Fees and Taxation Information Statutory Fees and Taxation Information22 3.3 Environmental Baseline Study 22

4 Property Description and Location 23 4.1 Location 23 4.2 Land Tenure 24

5 Accessibility, Climate, Local Resources, Infrastructure and Physiography 25 5.1 Topography 25 5.2 Accessibility 26 5.3 Climate 26

6 History 28

7 Geological Setting and Mineralisation 29 7.1 Introduction 29 7.2 Geological Setting 30

8 Deposit Types 32

9 Exploration 34

10 Drilling 35 10.1 BHP-Billiton (2006) 35 10.2 MRL phase 1 (2007) 36 10.3 MRL phase 2 (2007/08) 36


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10.4 MRL phase 3 (2008) 36 10.5 MRL phase 4 (2010) 36

11 Sample Preparation, Analyses and Security 38 11.1 Sampling Method and Approach 38 11.2 MRL sampling protocols 38 11.3 MRL core sampling 38 11.4 Sample Preparation, Analysis and Security 40 11.5 Laboratory protocols 41 11.6 McPhar Geoservices (Phil.), Inc. 41 11.7 Intertek Testing Services Phils., Inc. 42 11.8 Internal check assays (McPhar and Intertek) 42 11.9 External check assays (MRL) 43 11.10 Nickel standards 43 11.11 Field duplicates 44 11.12 Coarse rejects 45 11.13 Pulp rejects analysed by primary laboratory 47 11.14 Pulp rejects analysed by umpire laboratory 48 11.15 Summary 48

12 Data Verification 49 12.1 Data Verification 49 12.2 Bulk density determinations 50

13 Mineral Processing and Metallurgical Testing 53

14 Mineral Resource Estimate 54 14.1 Geometric Interpretation 54 14.2 Exploratory Data Analysis 56 14.3 Variography and Estimation 62 14.4 Resource Classification 68 14.5 Interpretation and Conclusions 74

15 Mineral Reserve Estimate 76 15.1 Introduction 76 15.2 Pit Optimisation 76 15.3 Pit Design Parameters 76 15.4 Mineral Reserves 77

16 Mining Methods 78 16.1 Introduction 78 16.2 Site preparation 78 16.3 Grade control 78 16.4 Excavation and Haulage 78 16.5 Ore Stockpiling and Drying 79 16.6 Topsoil and Overburden Disposal 79 16.7 Road Sheeting 79 16.8 Fleet selection 79 16.9 Ore Haulage 80 16.10 Drainage and sediment control 80 16.11 Environment and rehabilitation 80

17 Recovery Methods 82 17.1 Introduction 82 17.2 Port Loading Facility 82 17.3 Design basis 82 17.4 Design concepts 82 17.5 Location 82 17.6 Design criteria 83 17.7 Introduction 83


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17.8 Assay Laboratory 90 17.9 Design Basis 90 17.10 Buildings 92 17.11 Power, Water and Utilities 93

18 Project Infrastructure 94 18.1 Introduction 94 18.2 Infrastructure Study 95 18.3 Transport Infrastructure 96 18.4 Road summary 96 18.5 Access roads 96 18.6 Site roads 97 18.7 Water Supply 99 18.8 Power 100 18.9 General Service Buildings and Ancillary Facilities 101 18.10 Buildings 101 18.11 Base Camp accommodation 102 18.12 Buildings 103 18.13 Base Camp services 106 18.14 Construction camp 106 18.15 Water 107 18.16 Sewerage 107 18.17 Communications & IT Summary 107 18.18 Radio communications 107 18.19 Conventional multi service network 107

19 Market Studies 108 19.1 Recent History of DSO 108 19.2 Recent high iron DSO Market Situation 109 19.3 Forecast Iron Market Situation 111 19.4 High Iron DSO off takers 111 19.5 DSO Sales Agreement 112

20 Environmental Studies, Permitting, and Social or Community Impact 114 20.1 Overview 114 20.2 Regulatory Requirements 116 20.3 Environmental and Social Baseline Studies 119 20.4 Land Resources 120 20.5 Water Resources 128 20.6 Air Quality, Climate and Noise 143 20.7 Conservation Values 145 20.8 Social and Community Issues and Effects 152 20.9 Closure Plans 157

21 Capital and Operating Costs 160 21.1 Scope of Estimate 160 21.2 Accuracy of Estimate 160 21.3 Summary of Capital Cost Estimate 160 21.4 Exclusions 161 21.5 Summary of Operating Cost Estimate 161 21.6 Operating cost estimate 161 21.7 Mining operating cost estimate 165 21.8 Exclusions 165

22 Economic Analysis 166 22.1 Introduction 166 22.2 Economic Model Input Parameters 166 22.3 Capital Costs 167 22.4 Operating Costs 167


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22.5 Life of Mine Project Financials 169 22.6 Sensitivity Analysis 172

23 Adjacent Properties (MRL) 174

24 Other Relevant Data and Information 175 24.1 Mine Operating Costs 175 24.2 Introduction 175 24.3 Operating hours 175 24.4 Equipment productivity 175 24.5 Site Preparation 177 24.6 Mining Operations 177 24.7 Barging Costs 177 24.8 Environment and rehabilitation 179 24.9 Manning 179 24.10 Equipment requirements 181 24.11 Equipment hours Equipment hours 181 24.12 Mining Schedule 181

25 Interpretations and Conclusions 185 25.1 Geological Setting and Mineralisation 185 25.2 Drilling 185 25.3 Sample Preparation, Analyses and Security 185 25.4 Data Verification 186

26 Recommendations 187 26.1 Geological Setting and Mineralisation 187 26.2 Drilling 187 26.3 Sample Preparation, Analyses and Security 187 26.4 Data Verification 187 26.5 Mining 187 26.6 Integrated Mining Study 188 26.7 Permitting 188

27 References 189

AGNDSO-TR-30 August 2013 6

1 Summary

1.1 Description of Property

1.2 Location

The Agata North Nickel Laterite DSO Project (ANDP) is located within the northern part of Agusan del Norte province in Northeastern Mindanao, Republic of the Philippines. It lies within the Western Range approximately 10 km south of Lake Mainit. The Project falls within the political jurisdiction of the municipalities of Tubay, Santiago and Jabonga. The Project is located 47 km north of Butuan City and 73 km south of Surigao City. The ANDP is centred at 125

o32’,

9o17’.

Figure 1: Project Location


1.3 Project Ownership

TVI Pacific Inc. (TVI) is a publicly-traded Canadian company that, through affiliate TVI Resource Development (Phils.), Inc. (TVIRD), is focused on the production, development, exploration and acquisition of resource projects in the Philippines. TVI produces copper and zinc concentrates from the Canatuan mine, is in pre-development at the Balabag gold and silver project, and is carrying out exploration programs on other North Zamboanga tenements. TVI also has an interest in an offshore Philippine oil property.

MRL Nickel Philippines, Inc (MRL) is a Philippine subsidiary of Mindoro Resources Limited (Mindoro); a company incorporated in Alberta, Canada which is are listed on the TSX Venture Exchange (as MIO), the Australian Securities Exchange (as MDO) and the Frankfurt Stock Exchange (as WKN 906167). MRL, formerly as MRL Gold Philippines, Inc has been working in the Philippines since 1997 in partnership with various Philippine companies. MRL entered into an agreement in 1997 with Minimax Mineral Exploration Corporation (Minimax) on several projects in the Philippines. MRL subsequently generated 20 porphyry copper-gold prospects, 5 epithermal gold prospects and five nickel laterite prospects, which are at various stages of evaluation of development.

TVI announced in July 2012 that it has entered into a Heads of Agreement (HOA), dated July 6, 2012, which set out the terms of various proposed transactions with Mindoro. The proposed transactions consisted of a loan to, investment in, and joint ventures with, Mindoro (or affiliates/subsidiaries of Mindoro). The joint ventures involve TVIRD.

Under the HOA, TVI, through its affiliate TVIRD, has the exclusive right or option to enter into joint venture arrangements with Mindoro (and its affiliates) with respect to the Agata North Nickel Laterite DSO Project (ANDP) and the Pan de Azucar Project. The HOA provides that all joint ventures entered into between TVIRD and Mindoro will be operated by TVIRD and will be overseen by a management committee that includes representatives of TVI and Mindoro in proportion to their joint venture interests (provided that during the earning period of the joint ventures, TVIRD will control each management committee).

The HOA contemplates that stage one of the proposed TVIRD joint venture will involve a direct shipping ore (DSO) operation. TVIRD is required to fund 100% of the required expenditures to enable the project to advance the DSO operation, upon the completion of which TVIRD is to earn a 60% interest in the DSO operation (subject to a minimum expenditure of $2 million within 12 months of the joint venture agreement and DSO operations having commenced within three years of the date of that agreement).

Mindoro will retain a 15% interest in the Agata Joint Ventures and has an Option Agreement over the remaining 25% interest held by private Philippines company Minimax Mineral Exploration Corporation.

The Agata nickel laterite deposit is secured by the Mineral Production Sharing Agreement MPSA 134-99-XIII and Exploration Permit EP 00021-XIII registered to Minimax and Estrella Bautista respectively. Application has also been made for the Agata Extension EP 107-XIII to the south and east of the Agata MPSA. The MPSA is a form of Mineral Agreement for which the government grants the contractor exclusive right to conduct mining operations within, but not title over, the contract area during a defined period. An Exploration Permit (EP) is an initial mode of entry in mineral exploration allowing a Qualified Person to undertake exploration activities for mineral resources in certain areas open to mining in the country.

1.4 Seismicity

Mindanao is located in the southern portion of the Philippine Archipelago. Two main fault systems: the Philippine Fault and Mindanao Fault and hundreds of fault splay and lineaments


criss-cross the region. The Philippine Trench borders the eastern side of the archipelago and the Philippine Fault traverses the Philippines in a north-west direction. The presence of tectonic structures within and around Mindanao accounts for intense seismic activities in the island.

At the proposed project site, ground shaking effects on the rock and soil components are estimated to yield Peak Ground Acceleration (PGA) values ranging from 0.38g in rock and 0.87g in soft soil.

1.5 Geology and Mineralisation

The Agata North lateritic nickel resource in the Philippines forms part of the resource base of MRL and has been under active exploration by this company since 1997, with the first lateritic nickel resource drilling program completed in 2006. This is the fourth mineral resource estimate for the ANDP located within the northern areas of Mindanao, the southernmost Island within the Philippines (Figure 2).

Figure 2: Map of the Philippines Showing MRL Project Areas Mineralisation

Nickeliferous laterite deposits in the Agata area are a series of mineralised plateaus along the western range of the Surigao region of Mindanao. They form specific terrains within the range atop of the predominant underlying ultramafic rocks.

The laterites have been developed over ultramafic rocks that lie along the Western Range and are variably mineralized. The rock types within the ultramafics are harzburgite, serpentinised


harzburgite, peridotite, serpentinised peridotite, pyroxenite, serpentinised pyroxenite, serpentinite with localised lenses of dunite or serpentinised dunite.

Nickel laterites are the products of intense chemical weathering of the ultramafic rocks, especially the olivine-rich varieties like harzburgite and dunite. The high rainfalls and intense weathering breaks down the easily weathered harzburgite and dunite and the more mobile elements of Mg and Si tend to leave the profile at a much faster rate than the less mobile Fe and Ni or Co. Thus high Fe laterite and limonite zones overlie the weathered saprolite of the ultramafic rocks and, where erosion of the upper Fe laterite is low, significant depths of weathering (>10m) can occur within the saprolitic zone.

Nickel mineralisation is predominantly at the base of the Fe laterite and the top of the saprolite and in more primary, Mg rich clays (saponite and stevensite) in the ultramafic saprolite. When weathering is very deep then more Ni can be located in the Fe laterite, but the greatest Ni enrichment is predominantly within the saprolite of the underlying ultramafic rock near the contact zone with the Fe laterite.

1.6 Deposit type

The Agata Nickel Laterite deposits located along the western range of the Surigao region, Mindanao Island all have had significant laterite formation and consequent nickel enrichment. The mineralisation can occur in both low and high relief terrains with the high relief terrains generally having lower limonite thicknesses and some exposure of bedrock. The low relief terrain however has no exposures of bedrock on its hillcrests, with the laterite being well developed and containing thick and highly mineralised limonite or saprolite and on occasions a transitional unit. Some boulders occur within the laterite profile and this is predominantly related to harder residual rocks within the laterite profile.

1.7 Exploration

Lateritic nickel mineralisation was known within the ANDP area since the early 1990s and grades were confirmed in the development of test pits in 1997. In June 2004, Taganito Mining Corporation was selected from several interested parties and granted the non-exclusive right to assess the nickel laterite potential of the ANDP. Taganito carried out two phases of evaluation and reported encouraging results. Subsequently, MRL elected to allow Queensland Nickel Phils., Inc. (QNPH) to proceed with a reconnaissance drill program in 2006 under an undefined option arrangement. QNPH elected not to pursue the opportunity. Subsequently MRL has conducted four drilling programs, the initial three testing the Agata North nickel laterite only and the most recent 2010/2011 program also testing regional prospects up to 20 km to the north of Agata including definition of new resources at Bolobolo and Karihatag, and 5 km to the south of Agata North at Agata South.

All drilling to date has been completed by the use of small open-hole NQ coring rigs, which are highly mobile in difficult to access terrain. Recovery from these drill rigs is high, with losses generally occurring where there are changes in the hardness of the drilled material. A variety of contractors have been used over time, with the drilling rate being the only variation with regards to their performance and sampling rate.


1.8 Mineral Resource Estimate

The Agata North nickel laterite deposit has an estimated combined measured and indicated resource of 33.9M dmt at 1.10% Ni using a cut-off grade of 0.5% Ni for limonite and 0.8% Ni for saprolite.

Table 1: Agata North Mineral Resource Estimate 1 April 2013

Classification Horizon M

dmt Ni Co Fe Al Mg SiO2 CaO Cr2O3 MnO

Measured

Limonite 0.24 1.00 0.11 48.1 3.05 1.0 4.9 0.05 3.58 1.00

Saprolite 0.48 1.19 0.03 11.3 0.39 17.9 41.6 0.32 0.89 0.23

Sub Total 0.72 1.13 0.06 23.5 1.27 12.3 29.4 0.23 1.78 0.49

Indicated

Limonite 9.76 0.94 0.11 46.3 3.39 1.0 5.1 0.22 3.05 0.90

Saprolite 23.46 1.16 0.03 11.9 0.55 16.5 40.3 0.35 0.91 0.25

Sub Total 33.22 1.10 0.05 22.0 1.38 11.9 30.0 0.31 1.54 0.44

Measured + Indicated

Limonite 10.00 0.94 0.11 46.3 3.38 1.0 5.1 0.22 3.06 0.90

Saprolite 23.94 1.16 0.03 11.9 0.55 16.5 40.3 0.35 0.91 0.25

Total 33.94 1.10 0.05 22.0 1.38 11.9 30.0 0.31 1.55 0.44

Inferred

Limonite 0.26 1.08 0.11 44.0 3.25 1.8 10.5 0.06 3.03 0.90

Saprolite 1.83 1.04 0.03 12.4 0.63 16.2 41.5 0.35 0.99 0.26

Total 2.09 1.04 0.04 16.3 0.96 14.4 37.7 0.32 1.24 0.34


1.9 Mineral Reserve Estimate

The DSO Mineral Reserve is based on the designed pits at Agata North. The general layout of the DSO pit and facilities is shown in Figure 3.

Figure 3: General layout of the DSO pit and facilities

The Proven and Probable DSO reserves are based on a cut-off grade of 44 Fe%. A 44 Fe% cutoff was chosen as at this cutoff grade the average grade of Limonite equates to the marketable shipping grade of 48 Fe% in current and historical high iron DSO markets. The Proven and Probable DSO Reserves are shown in Table 2.

There is potential to exploit (in the order of +11M dmt) of the saprolite resource using onsite processing. As the study for this process is still in progress, saprolite ore has not been included in this reserve base.


Table 2: DSO Mineral Reserves

Classification Horizon M dmt M wmt Ni% Co% Fe% Al% Mg% SiO2% Proven

Limonite 0.18 0.26 1.00 0.11 47.1 3.0 1.6 5.6

Saprolite

Subtotal 0.18 0.26 1.00 0.11 47.1 3.0 1.6 5.6 Probable

Limonite 6.61 9.44 0.93 0.11 48.3 3.4 0.5 3.0

Saprolite

Subtotal 6.61 9.44 0.93 0.11 48.0 3.4 0.5 3.0 Proven + Probable

Limonite 6.79 9.70 0.93 0.11 48.0 3.4 0.5 3.0

Saprolite

TOTAL 6.79 9.70 0.93 0.11 48.0 3.4 0.5 3.0

1.10 Mining

The primary mining fleet selected consists of 36 tonne hydraulic excavators and 30 tonne capacity articulated trucks in the pit, hauling to stockpiles on the top of the plateau where it will be dried and blended. A secondary fleet consisting of front end loaders and 18 tonne capacity on-highway trucks will be utilised for haulage of ore to the Loading Facility at Payong-Payong. An ancillary fleet includes dozers, graders and a water truck. A small fleet of excavators, trucks and dozers has been allocated to ancillary works including site preparation, topsoil stripping, drainage, rehabilitation and road maintenance works.

Pit areas were split into 100m x 100m mining panels for scheduling. A total of 230 mining panels at Agata North were scheduled over a life of the DSO project. The mining schedule was scheduled over quarterly periods with a peak mine production rate of 5,400 bcm per day in Year 2.


Figure 4: Mine production- first 4 years

The DSO Mining Inventory was categorised into 4 limonite material types and blended to meet iron and nickel grade shipping targets.

The DSO Shipping schedule allows for the ramp-up of throughput over the first 3 years of operations to 2.5M wmt per annum. Completion of mining was stretched over 10 years to comply with bureaucratic governmental stipulation for approval, however the margins are improved over extraction in a 4 year period. DSO production targets are shown in Table 3.

Table 3: DSO Production Targets

YEAR wmt Ni% Fe%

2013 - - -

2014 2,000,000 0.9 48.0

2015 2,500,000 0.9 48.0

2016 1,800,000 0.9 48.0

2017+ 500,000 0.9 48.0

1.11 Investigations

Since 2010 MRL has commissioned numerous studies and site investigations at the Agata North site.

In 2010 GHD was commissioned to carry out conceptual design and evaluation of the recommended alignment for road development at Agata North.

In 2010 Philipp’s Technical Consultants Corporation were engaged to carry out detailed topographic survey at the northern extents of the Agata North deposit.


In 2010 GHD coordinated a geotechnical and geophysics investigations at the proposed Loading Facility, including the geological and geotechnical profile along the shoreline and into Payong Payong, depth to rock, suitable founding stratum for the foundations of the proposed development concept. Four boreholes were drilled at Payong Payong and offshore seismic investigation extended approximately 1km along the coast and 500m offshore. The seismic survey was completed by sub-contractors Trinav Surveys.

In 2010 A Hydrographic Survey was carried out by EGB and Associates.

In 2010 GHD was commissioned to carry out a Marine Study which included a port engineering review and assessment of the preferred port site at Payong Payong, conceptual drawings of the loading jetty arrangements for barge options, and commentary on the relative merits of different vessel options.

In 2011 GAIA South completed and Environmental Baseline Study for the entire Agata area. This report focused on major environmental and social aspects including Land, Water, Air, and Community. Primary data gathering was accomplished through the conduct of actual survey on-site. Samples for soils, water, and air were collected for analysis in a DENR-accredited laboratory. Observation, identification, and documentation of flora and fauna species were done. Focus Group Discussions and Key Informant Interviews were conducted. Secondary data collection involved the acquisition of documents from related institutions or agencies such as the Barangay Offices and Health Centres, Rural Health Units, and Municipal Offices.

In 2013 Philipp’s Technical Consultants Corporation carried out design cost estimates for the Causeway and Payong Payong Port Facility.

1.12 Direct Shipping Operations

The proposed ore production rate ramps up to 2.5M wmt annually of ferruginous laterite and limonite ore over the first 3 years. Completion of shipping was stretched over 10 years to comply with Philippines Mines and Geosciences Bureau (MGB) stipulation for approval for the Declaration of Mine Production Feasibility for the project, however the margins are improved by acceleration of operations to complete the DSO project in a 4 year period.

Ore will be transported approximately 3.5km from stockpiles on the plateau to the port at Payong-Payong and loaded onto 5,000 wmt barges.

The barges will transport the ore to waiting ships for loading. Ship capacity has been estimated at 50,000 wmt per shipment, but will generally vary between 50,000 - 60,000 wmt per ship. Ore will be shipped to customers in China. Shipping has been scheduled for 10 months per year with reduced shipping rates in the wet season in the December and March quarters.


Figure 5: DSO Shipping Schedule - first 4 years

Table 4: DSO Shipping Schedule

1.13 Port Loading Facility location

The Port Loading Facility will be situated at Payong-Payong, approximately 3.5km from the ore stockpile on the plateau. It will consist of a causeway extending approximately 160m offshore. The design will allow for two barges to be moored and loaded simultaneously with sufficient space for equipment manoeuvrability. Six mooring dolphins will be provided to moor two barges.

The core and armour materials used to construct the causeway will consist of locally sourced rock of suitable sizing.

The causeway will also serve as an unloading area for equipment and supplies transported from Butuan or Cebu.

A shipping office and assay laboratory will be located adjacent to the Port Loading Facility.

DSO ORE SHIPPED 2013 2014 2015 2016 2017+ TOTAL

M wmt - 2.00 2.50 1.80 0.50 9.70

Ni % - 0.93 0.93 0.90 0.90-0.93 0.93

Co % - 0.11 0.11 0.10 0.10-0.11 0.11

Fe % - 48.0 48.0 48.0 48.0 48.0

Mg% - 0.5 0.9 0.6 0.5-0.8 0.7


1.14 Environment and Community

The ANDP is planned to eventually develop into an integrated mining and processing project which will result in some social and environmental impacts. These will require comprehensive assessment and planning of mitigating measures to ensure they are appropriately managed. The Company shall implement this in accordance with the International Finance Corporation Performance Standards on Social and Environmental Sustainability the requirements under Philippine laws and Best Management Practices.

1.15 IFC Performance Standards on Social and Environmental Sustainability

The Company commits to manage the potential social and environmental impacts in a manner consistent with the applicable IFC Performance Standards in addition to the requirements under Philippine laws, regulation, and permits that pertain to social and environmental matters. The Particular Performance Standards to be referenced include the following:

PS1: Social and Environmental Assessment and Management Systems

PS2: Labor and Working Conditions

PS3: Pollution Prevention and Abatement

PS4: Community Health, Safety and Security

PS5: Land Acquisition and Involuntary Resettlement

PS6: Biodiversity Conservation and Sustainable Natural Resource Management

PS7: Indigenous Peoples

PS8: Cultural Heritage

The Company has committed to a Health, Safety, Environment and Community Policy (HSEC) document previously developed jointly with the IFC. The Company has also agreed on an ‘Environmental & Social Action Plan’ to cover all HSEC aspects related to exploration activities, feasibility work and potential future mine development. The Company is also preparing a Stakeholder Engagement Plan which will describe their strategy and program for engaging with stakeholders in a culturally appropriate manner.

1.16 Philippine Environmental Impact Statement System

The Philippine Environmental Impact Statement System (PEISS), established through Presidential Decree (PD) 1586 in 1978, sets a systematic Environmental Impact Assessment (EIA) System. It requires Environmental Impact Statements (EIS) to be submitted to the Environmental Management Bureau (EMB) of the Department of Environment and Natural Resources (DENR) for review, evaluation, and approval. It further stipulates that the President or his duly authorised representative issues the Environmental Compliance Certificate (ECC) for a positive review of the EIA Report for Environmentally Critical Projects (ECP) and projects within Environmentally Critical Areas (ECA). Administrative Order No. 42 specifies that the DENR Secretary has the power to grant or deny ECCs on behalf of the President and further designates the EMB Central and Regional Directors as approving authorities for ECC applications.


1.17 Environment Inputs and Controls

Extensive environmental baseline data for the project area and surroundings is available in previous studies prepared in support of the Environmental Impact Statement (EIS). Potential impacts and control/mitigating measures are identified with the EIS. Detailed environmental controls are further identified in the Environmental Protection and Enhancement Plan (EPEP) as required by Philippine regulations.

Impacts and controls are divided into five categories: Land Resources, Water Resources, Noise, Air Quality and Conservation Values. Erosion and Sedimentation are the most prominent impacts expected throughout the phases of the project. This will require significant attention to erosion and water management controls.

Secondary impacts and control measures will focus on air quality and noise associated with the exposure of large surface areas and dust generation. Conservation values associated with the loss of forested areas and gross lands will also require mitigation and control measures relative to biodiversity loss.

As required by Philippine regulations, annual environmental protection programs will be prepared prior to each calendar operation years. In addition to legal environmental management requirements, IFC protocols will also be included in the annual plans and programs.

A final reclamation and closure plan has also been prepared prior to project implementation. Costs associated with this program have been identified and a special fund and deposit schedule will be put into place prior to the start of operations.

1.18 Social and Community

Previous baseline studies have characterized the communities and culture within surrounding of the project area. These data are also available in the project EIS and supporting documents included in the social/community characterization are Heritage and Cultural Values, Social Demographics, Issues and Indigenous Peoples’ issues and Political issues.

Impacts and control strategies are addressed in the Social Development and Management Plan (SDMP) prepared and approved by the National Government prior to project implementation. This document identifies impacts, community development strategies and projects to allow positive community participation. The plans and programs are monitored quarterly and revisions made accordingly.

1.19 Economic Analysis

The Feasibility Study economic model has confirmed that Direct Shipping of High Iron limonite ore from the Agata North DSO resource is economically feasible.

The economic analysis using the discounted cashflow (DCF) methodology has been prepared based on direct shipping high iron limonite ore to customers in China.

The project has an after tax net present value (NPV) of USD 37.9 million, with an internal rate of return (IRR) of 187% using an 10% discount rate and the mining schedules, capital and operating costs estimates provided in this report together with and a long term average selling ore price of USD 22/wmt FOB.

The ANDP is characterised by very strong free cashflow following the initial capital development. Payback is achieved in the first year of operation.

A summary of the Feasibility Study financial model is presented in Table 5.


Table 5: Summary of Financial Analysis Results

High Iron Limonite DSO sale price USD/wmt 22

NPV (10% discount rate) Post Tax USD M 37.9

Payback Years 1.0

IRR Post Tax % 187%

Accelerating mining and shipping rates to complete the Agata North DSO operations, ideally over a 4 years period instead of 10 years, increases the NPV of the project by USD 10.2M; from USD 37.9M to USD 48.1M.

Sensitivity analysis also shows that the project is robust to changes in economic modelling assumptions. The analysis has identified that the project is most sensitive to factors which impact on selling price, followed by operating costs. The project is least sensitive to capital cost estimates.

1.20 Capital Costs

The project capital costs presented in Table 6 were developed by Crystal Sun Consulting based on information provided by local Philippine service providers and suppliers, and are expressed in US dollar (USD) values. The base date of the estimate is April 2013.

Table 6: Capital Cost Estimate for ANDP

Description Capital Costs (Million USD)

Mobilisation 0.15

Site Preparation 0.04

Road Construction/Upgrading/Widening 1.14

Causeway Construction 2.62

Building Construction 1.89

General Services and Transportation 0.21

Mechanical/Electrical Equipment 0.07

Laboratory and Equipment/Apparatus 0.24

Office Equipment 0.06

Miscellaneous Services 0.20

Subtotal 6.62

Working Capital 2.64

Sustaining Capital 0.95

Subtotal 3.59

Contingency 0.93

VAT Payable (@ 12%) 1.31

Total 12.45


1.21 Operating Costs

Operating costs presented in Table 7 were developed by Crystal Sun Consulting based on information provided by local Philippine service providers and suppliers, and are expressed in US dollar (USD) values. The base date of the estimate is April 2013.

Table 7: Operating Cost Estimate

LOM Cost

(Million USD) USD /wmt shipped

Mining & Haulage Cost 33.5 3.45

Ore Drying 6.5 0.67

Stockpile Load & Haulage Cost 16.8 1.73

Barging 21.7 2.24

Roads, Drainage and Rehabilitation 9.7 1.00

G&A 17.9 1.84

Fees & Royalties 7.5 0.78

MPSA Compensation & Rates 3.0 0.31

VAT Payable (@ 12%) 10.9 1.12

TOTAL OPERATING COSTS 127.4 13.14

1.22 Sensitivity Analysis

Sensitivity analysis shows that the project viability is robust to changes in economic modelling assumptions. The analysis has identified that the project is most sensitive to factors which impact on volume and DSO selling price, followed by operating costs.

The project is least sensitive to capital cost estimates. The relative sensitivity of the project to revenue, capital and operating cost estimates is illustrated in the sensitivity chart below.

Figure 6: Sensitivity Analysis


The sensitivity analysis undertaken on the financial model has identified DSO selling price as the highest risk factor in the financial performance of the ANDP.

A summary of risks identified and strategy to mitigate risk is provided in Table 8.

Table 8: Risk Assessment and Mitigation

Risk Factor Mitigant

Revenue

DSO Selling Price Robust project with significant operating margin

Exchange Rate Operating costs and revenue denominated in USD – self hedging

Capital Cost

Contingency Maintain a high level of contingency

Operating Cost

Fees & Compensation

Taxes

Mining Costs

Negotiate agreements with federal, provincial and local jurisdictions

Operating margin is currently in excess of 50%, sufficient risk mitigant built-in

Permitting & Approvals

Mining permitting and access TVI to continue with permitting and land acquisition

Project Delays

Permitting

Construction

Weather

TVI to continue with permitting and land acquisition

Focus on project management

Adequate resourcing for procurement

Maximise production during driest operating conditions


2 Introduction

2.1 For Whom the Report Has Been Prepared

This Technical Report has been prepared at the request of TVI Resources Development (Phils) Inc. (TVIRD). TVIRD is an affiliate of TVI Pacific Inc. (TVI) is a publicly-traded Canadian company .

2.2 Purpose of the Report

This Technical Report has been prepared for the sole use of TVIRD to provide TVI with an estimate of the capital and operating costs to a level of ± 15% for the Agata North Nickel Laterite DSO Project (ANDP). TVIRD intends to use this report as an input to its decision on the future of the Project. TVIRD’s reliance on, or use of, this report extends to the whole of the report and not any part or parts thereof.

2.3 Sources of Information

Three consultants have been involved in the preparation of this report, each acting as independent qualified persons in their respective areas. Each is listed below with their respective items of responsibility and sources of information.

2.3.1 Mark Gifford Consulting

Mark Gifford, a geological consultant, is the independent qualified person responsible for geological and resource estimation aspects of the report.

2.3.2 Crystal Sun Consulting Limited

Dallas Cox of Crystal Sun Consulting (CSC), is the independent qualified person responsible for supervision of the report, the capital and operating cost estimates, and mine design and planning aspects of the report.

2.3.3 MCD Geo Pty Ltd

Michael Conan-Davies of MCD Geo Pty Ltd, is the independent qualified person responsible for the financial modelling aspects of the report.

2.4 Scope of Personal Inspections

2.4.1 Mark Gifford Consulting

Mark Gifford has visited the project area numerous occasions since February 2010, with the last visit to site in July 2011.

2.4.2 Crystal Sun Consulting

Dallas Cox visited the project area in 2007 (July), 2008 (January and November), 2010 (July, August and December) and 2011 (January, April and May).


3 Reliance On Other Experts

3.1 Ownership and Land Tenure

Edsel Abrasaldo, President of MRL Nickel Philippines, Inc provided property description, location, ownership and land tenure information. These are found in Section 4 of this report, dated 30 August 2013.

3.2 Statutory Fees and Taxation Information Statutory Fees and Taxation Information

Luis Jovito A. Santos Jr, Chief Financial Officer of TVI Resources Development (Phils) Inc. reviewed the statutory fees and tax information. This information was used in the derivation of financial metrics found in Section 22 of this report, dated 30 August 2013.

3.3 Environmental Baseline Study

Ebert Bautista, Project Director of Gaia South Inc (Environmental Consultants) completed the environmental baseline study for the Agata Nickel Project prefeasibility study in 2011. This baseline study is referenced in Section 20 of the report dated 30 August 2013.


4 Property Description and Location

4.1 Location

The ANDP is located within the northern part of Agusan del Norte province in Northeastern Mindanao, Republic of the Philippines. It lies within the Western Range approximately 10 km south of Lake Mainit. The Project falls within the political jurisdiction of the municipalities of Tubay, Santiago and Jabonga. The Project is located 47 km north of Butuan City and 73 km south of Surigao City. See Figure 7.

The ANDP’s resources are located in barangays Lawigan and Tinigbasan in the municipality of Tubay, barangay E. Morgado (formerly Agata) and La Paz in the municipality of Santiago and barangay Colorado in the municipality of Jabonga, all in the province of Agusan del Norte. The majority of MRL’s past exploration activities on the Project are located in barangays Lawigan and E. Morgado. The ANDP is centred at longitude 125° 31’ 9” / latitude 9° 17’ 20”.

The location offers several advantages including proximity to established infrastructure, fresh water supply from Tubay River, several sources of limestone supply in close proximity, protected deep ocean access and a short shipping distance to China and other Asian locations.

MRL’s exploration applications total 4,995 hectares.

Figure 7: Project Location


4.2 Land Tenure

The ANDP (including Agata North and Agata South Laterites) was explored under a Memorandum of Agreement signed on 19 January, 1997 between Mindoro and Minimax Mineral Exploration Corporation (Minimax), a 100% Filipino company owned by the De Guzman family of Quezon City and Atty. Roberto San Jose of Manila. The operating rights of Mindoro under the said MOA were eventually assigned to MRL by virtue of a Deed of Assignment by and between Mindoro and MRL, dated 27 June, 1997. Minimax granted MRL the right to operate and conduct exploration activities on its Contract/Permit Areas in Surigao del Norte, Agusan del Norte, and Iloilo. Through this, MRL acquired the option to earn varying percentages of economic interest in Minimax’ Projects. Said Agreements were registered with the Mines and Geosciences Bureau in accordance with the Mining Law of the Philippines.

Minimax applied for a Mineral Production Sharing Agreement with the Mines and Geosciences Bureau Region XIII, denominated as APSA-XIII-007 (Agata APSA), on 04 July, 1997, covering an area of 1,620 ha located in the Municipality of Santiago, Agusan del Norte. The mineral commodities applied for were gold, copper and other minerals. MPSA-XIII-007 was amended on 28 August, 1997 to include additional areas covering 6,480 ha contiguous to the proposed original area (an increase from 1,620 to 8,100 ha). On 26 May, 1999, The Philippine Government, represented by Department of Environment and Natural Resources (DENR) Secretary Antonio H. Cerilles, and Minimax executed MPSA-134-99-XIII (Agata MPSA). This Agreement covers a total area of 7,679 ha situated in the Municipalities of Jabonga, Santiago, and Tubay, Province of Agusan del Norte and was registered with the Mines and Geosciences Bureau Region XIII on 17 June, 1999. On 18 May, 2000, a Notice of Relinquishment for a portion of the Agata MPSA was issued. 2,684 ha was relinquished from the total contract area of 7,679 ha retaining 4,995 ha.

The second and third Exploration Periods for the MPSA were July 23, 2004 to July 22, 2006 and February 7, 2007 to February 6, 2009, respectively. The fourth and last Exploration Period was granted on June 19, 2009 and expired on June 18, 2011. MRL on behalf of Minimax requested for an extension of the Exploration Period, prior to the expiry, on the grounds that it was not economically feasible to conduct mining operations on the ANDP during the fourth Exploration Period. On September 13, 2011, MGB-CO approved the extension for another two (2) years. However, it required MRL/Minimax to submit a Declaration of Mining Project Feasibility on or before the fifth Exploration Period’s expiry on September 12, 2013. Since the first Exploration Period in 1999, submission of all quarterly and annual accomplishment reports and quarterly drilling reports, and the payment of the mandated occupation fees, were accomplished by MRL on behalf of Minimax.


5 Accessibility, Climate, Local Resources, Infrastructure and Physiography

5.1 Topography

Within the ANDP area, the nickel laterite is developed on a broad ridge bounded by the east and west by steep slopes incised by gullies and ravines. Elevations on the plateau range from 200 m to 320 m. The plateau on which the laterite is developed was formerly rainforest. Since being logged it is now open grassland, with a few secondary growth trees lining the streams along the lower levels.

Figure 8 is a photograph taken from the north of the deposit, looking south with Butuan Bay lying along the west.

The photograph in Figure 9 is taken from Butuan Bay, showing limited flat coastal area with steep terrain up to the ANDP deposit and surrounding mountains.

Figure 8: Agata North Deposit – View to the South


Figure 9: Agata North Deposit - View from Butuan Bay

5.2 Accessibility

The Agata laterite deposit is accessible by any land vehicle from Surigao City, Butuan City or Davao City via the Pan-Philippine Highway (AH26). Daily flights are available from Manila and Cebu City to either Butuan or Surigao City. Commercial sea transport is available from Singapore, Jakarta, Manila, Batangas and Cebu to Surigao City or Nasipit ports.

5.3 Climate

The climate of Jabonga, Santiago and Tubay municipalities where the project area is situated belongs to Type II on the Philippines Atmospheric Geophysical & Astronomical Services Administration (PAGASA) Modified Coronas Classification. It has no dry season with very pronounced rainfall months. Climate averages from 1981-2000 show that peak rainfall months are from October to February. The highest mean monthly rainfall is 308 mm during January and the lowest mean monthly rainfall is 104.8 mm during May while mean annual rainfall is 2027 mm.


Table 9: Climate Averages and Extremes 1961 - 20001

Month Rainfall

Temperature RH %

Wind Cloud

Max Min Mean Dry

Bulb Wet Bulb

Dew Pt

Dir Spd Amt

(okta)

Jan 308 21 30.1 22 26.1 25.7 24.2 23.6 88 NW 1 6

Feb 212 15 30.8 22 26.4 26.0 24.2 23.5 86 NW 1 6

Mar 150 16 31.8 22.4 27.1 25.7 24.5 23.7 83 NW 1 5

Apr 107 12 33.1 23.1 28.1 27.7 25.2 24.3 82 ESE

1 5

May 105 14 33.8 23.8 28.8 28.3 25.8 25 82 ESE

1 6

Jun 135 16 33 23.6 28.3 27.8 25.5 24.7 83 ESE

1 6

Jul 158 16 32.5 23.3 27.9 27.5 25.3 24.5 84 NW 1 6

Aug 105 12 32.8 23.5 28.1 27.8 25.4 24.6 82 ESE

2 6

Sep 140 14 32.8 23.3 28.1 27.7 25.4 24.6 83 NW 2 6

Oct 195 17 32.3 23.2 27.8 27.4 25.3 24.6 84 NW 1 6

Nov 194 18 31.6 22.9 27.2 26.9 25.1 24.5 86 NW 1 6

Dec 218 19 30.8 22.5 26.7 26.3 24.7 24.1 88 NW 1 6

Annual 2,027 190 32.1 23 27.6 27.1 25.1 24.3 84 NW 1 6

1 Based on Butuan City Synoptic Station


6 History

The earliest recognised work done within the area is mostly from government-related projects including:

• The Regional Geological Reconnaissance of Northern Agusan reported the presence of gold claims in the region (Teves et al. 1951). Mapped units include sedimentary rocks (limestone, shale and sandstone) of Eocene to mid-Tertiary age.

• Geologists from the former Bureau of Mines and Geosciences Regional Office No. X (BMG-X) in Surigao documented the results of regional mapping in the Jagupit Quadrangle within coordinates 125°29´E to 125°45´ east longitude and 9°10´ to 9°20´ north latitudes. The geology of the Western Range was described as a belt of pre-Tertiary metasediments, metavolcanics, marbleized limestone, sporadic schist and phyllite and Neogene ultramafic complex. (Madrona, 1979) This work defined the principal volcano-sedimentary and structural framework of the region and recognised the allochtonous nature of two areas of ultramafic rocks that comprise serpentinized peridotite in the Western Range, one between the Asiga and Puya rivers in the ANDP area and the other west of Jagupit. These were mapped by Madrona (1979) as blocks thrust westward, or injected into the metavolcanics between fault slices.

• The United Nations Development Program (UNDP, 1982) conducted regional geological mapping at 1:50,000 scale and collected stream sediment samples over Northern Agusan. The UNDP report of 1984 described the geological evolution of this region and included a detailed stratigraphic column for the Agusan del Norte region. Two anomalous stream sediment sites were defined near the ANDP during this phase of work. The Asiga porphyry system that lies east of the Agata tenements was explored by Sumitomo Metal Mining Company of Japan in the 1970’s and 1980’s (Abrasaldo 1999).

La Playa Mining Corporation, financed by a German company in the late 1970’s, explored within the ANDP area for chromiferous laterite developed over weathered ultramafic rocks. There were five (5) test pits dug in the area.

In 1987, Minimax conducted reconnaissance and detailed mapping and sampling. Geological mapping at 1:1,000 scale was undertaken in the high-grading localities, and an aerial photographic survey was conducted and interpreted. MRL established a mining agreement with Minimax in January 1997, and commenced exploration in the same year.

Several artisanal miners are active within the project site since the 1980’s up to the present. These miners are conducting underground mining operations at the Assmicor and American Tunnels area and gold panning of soft, oxidised materials within Assmicor and Lao Prospect areas and of sediments in major streams including that of Tubay River. The region of small-scale mining activity was later named “Kauswagan de Oro” (translated: “progress because of gold”). The majority subsequently left the region for other high-grading areas in Mindanao. In more recent years, a group of copper “high-graders” emerged in the American Tunnels area mining direct-shipping grade copper ore. However, this new trend waned due to the softening of metal prices in the latter part of 2008, and depletion of near-surface high-grade veins.


7 Geological Setting and Mineralisation

7.1 Introduction

The Agata North lateritic nickel resource in the northern part of the Agata MPSA in the Philippines forms the bulk of the resource base of MRL and has been under active exploration by this company since 1997, with the first lateritic nickel resource drilling program completed in 2006 and subsequent programmes in 2007/2008 and 2010/2011. The latter program also drilled laterite targets and defined resources at Bolobolo and Karihatag located 20km to the north of Agata North, and at Agata South, 5km south of Agata North, which were reported in November 2011.

This portion of the report provides comprehensive discussion of the Agata North resource as it forms the bulk of the resource and resultant reserves. The latest NI43-101 resource estimate for the Agata North deposit was announced to financial markets and posted on SEDAR in April 2013.

Since resource drilling commenced there have been 4 further drill programs completed, with this report summarising and re-evaluating all the historic data as well as including the latest infill drilling results into the resource estimate.

This is the fourth mineral resource estimate for the ANDP located within the northern areas of Mindanao, the southernmost island within the Philippines (Figure10). The first four technical reports were completed from 2008 – 2009 and were compiled by Dallas M. Cox BE (Min) a qualified person as defined by National Instrument 43-101. All drilling programs have been completed so as to aid in the better estimation of the global lateritic nickel resource at Agata– this information is to aid MRL in determining the best approach to exploiting the resource in the short to long term.

Figure 10: Map of the Philippines showing MRL Project Areas


The resource estimate presented in this report has been completed by Mike Job, a qualified geological statistician and Principal Consultant for Quantitative Group (QG) – a geological consulting firm based in Perth, West Australia. The estimation methodology and geochemical modelling used on the resource was defined by discussions with the author and QG so as to provide the most comprehensive and accurate resource estimate possible considering the data spacing and continuity.

7.2 Geological Setting

The principal tectonic element of the Philippine archipelago is the elongate Philippine Mobile Belt (PMB – Rangin, 1991) which is bounded to the east and west by two major subduction zone systems, and is bisected along its north-south axis by the Philippine Fault ( Figure 11). The Philippine Fault is a 2000 km long sinistral strike-slip wrench fault. In the Surigao district, this fault has played an important role in the development of the Late Neogene physiography, structure, magmatism and porphyry copper-gold plus epithermal gold metallogenesis. There has been rapid and large-scale uplift of the cordillera in the Quaternary, and limestone of Pliocene age is widely exposed at 1000-2000 meters elevation (Mitchell and Leach 1991). A cluster of deposits on the Surigao Peninsula in the north consists chiefly of epithermal gold stockwork, vein and manto deposits developed in second-order splays of the Philippine Fault (Sillitoe 1988). The mineralisation-associated igneous rocks in Surigao consist mostly of small plugs, cinder cones and dikes dated by K-Ar as mid-Pliocene to mid-Pleistocene (Mitchell and Leach 1991; Sajona et al. 1994; B.D.Rohrlach, 2005).

The basement rocks consist of the Concepcion greenschist and metamorphic rocks of Cretaceous age overthrusted by the pillowed Pangulanganan Basalts of Cretaceous to Paleogene age, which in turn, were overthrust by the Humandum Serpentinite. Its emplacement probably occurred during the late Cretaceous. The Humandum Serpentinite occupies a large part in the tenement area, and through its subsequent weathering the area has a high potential for nickel laterite mineralisation. (Tagura, et.al., 2007).

The Humandum Serpentinite is overlain by Upper Eocene interbedded limestone and terrigenous clastic sediments of the Nabanog Formation. These are in turn overlain by a mixed volcano-sedimentary package of the Oligocene Nagtal-O Formation, which comprises conglomeratic andesite, wacke with lesser pillow basalt and hornblende andesite, and the Lower Miocene Tigbauan Formation. The latter is comprised of conglomerates, amygdaloidal basalts, wackes and limestones. Intrusive events associated with the volcanism during this period resulted in the emplacement of plutons and stocks that are associated with porphyry copper-gold and precious metal epithermal mineralisation in the region. (Tagura, et.al., 2007)

Lower Miocene Kitcharao Limestone and the lower part of the Jagupit Formation overlie the Tigbauan Formation. The Jagupit Formation consists of conglomeratic sandstone, mudstone and minor limestone. The youngest stratigraphic unit is the Quaternary Alluvium of the Tubay River floodplain.

Mineral deposits within the region are dominated by epithermal precious metal deposits and porphyry copper-gold. There is a rather close spatial and probably genetic association between epithermal precious metals and porphyry deposits. These deposits exhibit strong structural control. First order structures are those of the Philippine Fault system, which play a role in the localisation of the ore deposits, while the second order structures that have developed as a result of the movement along the Philippine Fault system are the most important in terms of spatial control of ore deposition (Tagura, et.al., 2007)

Other mineral deposits are related to ultramafic rocks of the ophiolite suite and comprise lenses of chromite within harzburgite and lateritic nickel deposits that have developed over weathered ultramafic rocks.


Figure 11: Geological Map of Surigao Mineral District


8 Deposit Types

The widespread occurrence of harzburgite, peridotite, pyroxenite, their serpentinised equivalents, serpentinite, and localised lenses of dunite/serpentinised dunite comprise the lithology in the project area. These rocks are confined to broad ridges extending down to the footslopes of the Western Range. The ultramafic bodies are of probable late Cretaceous age, and were emplaced as part of an ophiolite sequence during the Upper Eocene (Abrasaldo, 1999). Schists are also present in the extremities of the laterite area. Several of these rock types were likewise identified in petrographic/mineragraphic analyses of drill core and rock samples as wehrlite (peridotite), serpentinised wehrlite, serpentinised websterites (pyroxenite), websterites, serpentinites and cataclasite. The location of these samples is shown in Figure 12. Lineaments trending NE within the ultramafic (and underlying green schist) are interpreted as either fault splays or zones of weakness in the area.

Figure 12: Local Geological Map of Agata North Area

Geological mapping in the project area showed favorable development of laterite along the broad ridges characterised by peneplane topography. These areas are where the drilling activities are concentrated. In areas with moderate to semi-rugged topography, erosion proceeds much faster than soil development, hence the laterite is thinner.


The ANDP deposits located along the western range of the Surigao region, Mindanao Island all have had significant laterite formation and consequent nickel enrichment. The mineralisation can occur in both low and high relief terrains with the high relief terrains generally having lower limonite thicknesses and some exposure of bedrock. The low relief terrain however has no exposures of bedrock on its hillcrests, with the laterite being well developed and containing thick and highly mineralised limonite or saprolite and on occasions a transitional unit. Some boulders occur within the laterite profile and this is predominantly related to harder residual rocks within the laterite profile. Test pits that were excavated by a previous company showed a maximum depth of 9.40 m and an average depth of 4.96 m. All these test pits have bottomed in limonite. Drilling by QNI, Phils. (QNPH) and MRL showed a thicker laterite profile than was revealed by previous test pitting.


9 Exploration

Lateritic nickel mineralisation was known within the ANDP area since the early 1990’s and grades were confirmed with the development of test pits in 1997. The project since this initial definition has moved ahead so as to better define the resource and to provide better technical information with regards to eventual exploitation.

In June 2004, Taganito Mining Corporation (Taganito) was selected from several interested parties and granted the non-exclusive right to assess the nickel laterite potential of the ANDP. Taganito carried out two phases of evaluation and reported encouraging results. Forty-eight surface laterite and rock samples were collected from an area of about 300 ha within a much more extensive area of nickel laterite mineralisation. Nickel contents range from very low to a high of 2.09%, with most of the values exceeding 0.5%. Taganito considered these values to be within the range that normally cap the secondary nickel enriched zone and recommended a detailed geological survey and drilling. However, MRL elected to allow Queensland Nickel Phils., Inc. (QNPH) to proceed with a reconnaissance drill program in 2006 under an undefined option arrangement. QNPH did not pursue the opportunity.

Subsequent MRL exploration has been carried out by the use of open core drilling on a drill pattern that has been successively closed down with each subsequent drill program so as to enhance the accuracy of the future reported lateritic Ni resource. All drilling to date has been completed by the use of small mobile open hole NQ coring rigs, which are highly mobile in difficult to access terrain. Recovery from these drill rigs is high, with losses generally occurring where there are changes in the hardness of the drilled material, causing material to be disrupted at the bit face. The major ore zone is generally a softer material and losses within the ore zones have been minimal at all stages of the drilling programs. A variety of contractors have been used over time, with the drilling rate being the only variation with regards to their performance and sampling rate.


10 Drilling

Each of the individual drill programs will be discussed and summarised.

10.1 BHP-Billiton (2006)

QNPH, then a subsidiary of BHP-Billiton, conducted reconnaissance drilling over the ANDP from January 23, 2006 to April 26, 2006 at an initial drilling grid of 200m x 200m followed by limited in-fill drilling at 100-metre grid spacing. A full report of the drilling program entitled “Evaluation of Preliminary Exploration on Agata Nickel Laterite prospect of MRL Gold Philippines, Inc,, Agusan del Norte, Philippines” was completed by QNPH in June 2006 and submitted to MRL immediately thereafter. A total of 35 holes were drilled over an area of approximately 80 ha, which is 21% of the 340-hectare ANDP. The drillhole locations are incorporated in the MRL’s AGL Drillhole Location Map (Figure 13).

Figure 13: Agata North Drillhole Location Map – BHP-Billiton and MRL (2007) Drilling

This drilling program was subsequent to a Memorandum of Understanding (MOU) signed between MRL and QNPH on December 5, 2005. The MOU allowed QNPH to conduct exploration in the property, which also include technical review and geological mapping. It was intended to evaluate and establish resource potential of the area and as a possible Yabulu Refinery ore source, and to present a resource model. QNPH were looking for high Ni/high Fe


ore and were not intending to formalise any agreements with MRL until the results of the exploration proved positive.

To evaluate the potential of the ANDP for the Chinese market, MRL commissioned Denny Ambagan to re-evaluate QNPH’s data with the aim of estimating low-grade resources for the Chinese market. Ambagan is a geologist, who worked for Crew Minerals in its Lagonoy and Mindoro nickel laterite exploration areas for three years. An in-house estimate was tabled and QNPH did not take up an option with MRL with regards to the ANDP.

10.2 MRL phase 1 (2007)

The first drilling program in the ANDP managed and developed by MRL was conducted from February 22 to August 3, 2007 with 100 holes completed and a total meterage of 2267.12. Drilling was confined to the area defined for an initial DSO operation. The drilling area related to areas covered by initial Exploration Targets A and B. The drilling rate averaged 3.8 m/day per drill rig and the recovery of drill core over the program was 88.2%.

10.3 MRL phase 2 (2007/08)

A follow-up infill drilling program in ANDP was conducted from December 17, 2007 to May 30, 2008, completing 773.12 m in 48 drill holes (37 new drill holes and 11 twin holes). The purpose of this exercise was to better define the mineralisation and extend the initial resource. The drilling rate averaged 4.6 m/day per drill rig and the recovery of drill core over the program was 93.9%.

10.4 MRL phase 3 (2008)

From June 18, 2008 to September 26, 2008, step-out drilling was carried out with hole spacing widened to 100 m by 100 m centres. Drilling totalled 3,601 meters in 225 holes. This program was aimed to drill out the greater part of Agata North resource potential based on areas covered by Exploration Targets C and D. The drilling rate averaged 11.5 m/day per drill rig and the recovery of drill core over the program was 95.0%.

A total of 408 vertical holes were completed during the first 4 phases of drilling in the ANDP, including the previous BHP-Billiton drilling. The drilling patterns are all located on a 50 m- to 100 m spaced grid. Total meterage is 7,300.83 with an average depth of 17.89 m/per hole, a maximum of 46.6 m, and a minimum of 4.35 m.

10.5 MRL phase 4 (2010)

During 2010 the program MRL continued to infill the resource so as to gain both a greater level of accuracy for the resource estimate, but also to be able to study the variography of the resource within a close spaced pattern combining both high grade limonite and saprolite ores. From April 23, 2010 to July 10, 2010 infill drilling totalled 147 drill holes for 2682 m of drilling. The drilling rate averaged 13.6 m/day per drill rig and the recovery of drill core over the program was 91.5%. Lower recovery is explained by the variably lithified ultramafic in the close spaced pattern to be used for variographical purposes, this is not common throughout the deposit but the location weighting in this program has skewed the recovery data. For the resource being compiled in this report the total number of drill holes completed is 593 for 10,851.84 m of drilling with an average drill hole depth being 18.30 m. All drill holes completed within the ANDP area are located on Figure 14.

.


Figure 14: Agata North Drillhole Location Map – All Drilling Summary

All exploration completed to date has been systematic and appropriate with regards to the development of a resource estimate. The author considers the drilling methodology used within the ANDP area, and the various sample recovery rates, appropriate and accurate with regards to providing a sampling platform for resource estimation.


11 Sample Preparation, Analyses and Security

11.1 Sampling Method and Approach

The ANDP QA/QC Procedures for the whole ANDP drilling program were set up by MRL geologists and followed by all personnel involved in all stages of the program. These were adapted from the QA/QC Protocols of QNPH for the 2006 drill program carried out on the ANDP. Periodically, the protocols were evaluated and improvements implemented. The core handling, logging and sampling procedures applied in the program are briefly described below.

Core checkers, under the supervision of MRL technical personnel, are present on every drill rig during operation. This is to record drilling activities from core recovery, core run, pull-out and put-back, casing and reaming at the drill site. Once a core box is filled, it is sealed with a wooden board then secured with a rubber packing band. This is placed in a sack and manually carried to the core house some 300 m to 1 km m from the drill area.

Core logging was carried out in the core shed by MRL geologists. For standardisation of logging procedures, the geologists are guided by different codes for laterite horizon classification, weathering scale, boulder size, and colour.

After logging, the geologist determines the sampling interval. The core sampling interval is generally at 1-metre intervals down the hole, except at laterite horizon boundaries, when actual boundaries are used. The sample length across the boundaries is normally in the range of 1.0 ± 0.30 m to avoid excessively short and long samples. In the saprolitic rocks and bedrock layers, some sample intervals have lengths greater than 1.30 m to a maximum of 2.00 m.

11.2 MRL sampling protocols

As in all stages of the program, the ANDP QA/QC Procedures were diligently followed during the sample preparation and security procedures. The analyses for the first 2,689 core samples were performed by McPhar Geoservices (Philippines), Inc. (McPhar), which follows internationally-accepted laboratory standards in sample handling, preparation and analysis.

For the rechecking of the integrity of laboratory assays, independent consultant Dr. Bruce D. Rohrlach, also a qualified person, provided MRL geologists with sampling procedures in May, 2007 after several site visits. These were incorporated into the QA/QC Procedures.

Following the recommendations of another qualified person, F. Roger Billington in May, 2008, the sampling protocols were slightly modified. The most important modification was the insertion of pulp rejects in the same batch as the mainstream samples. This is to ensure that all conditions in assaying are similar, if not completely the same, for both the mainstream and check samples. All of the analyses are completed by Intertek Testing Services, Phils., Inc. (ITS) for analysis using the XRF analytical method, and thus all 8,411 core samples since have been analysed by this group.

The ITS Phils. facility is among Intertek’s global network of mineral testing laboratories. It provides high quality assay analysis of mineral samples for nickel deposit exploration projects. Intertek mineral testing laboratories implement quality protocols.

11.3 MRL core sampling

During the first two phases of drilling, whole core sampling was conducted for 132 drill holes, and 17 holes were split-sampled. Whole core was used, considering the relatively small core diameter, and to achieve better precision by assaying the largest possible sample.


Whole core splitting was manually performed. The core was laid on a canvas sheet, pounded and crushed by use of a pick, thoroughly mixed, quartered, then the split sample is taken from two opposite quarter portions. The other two quarters are combined and kept as a duplicate in a properly sealed and labelled plastic bag and arranged in core boxes according to depth. The duplicates are stored in the core house at the Agata Base Camp, some 1.5 km from the drill area.

For the third and latest drilling phase, split-sampling was conducted to ensure the availability of reference samples in the future (except for 45 drillholes from the third drilling phase). The cores were cut in half using either a core saw or spatula. The remaining half is stored in properly labelled core boxes at the Mindoro Camp site in Agata.

The sampling interval is marked in the core box by means of masking tape/aluminium strip labelled with the sampling depth. The sample collected is placed in a plastic bag with dimension of 35 cm x 25 cm, secured with a twist tie. The plastic bag is labelled with the hole number and sample interval.

After the samples are collected, they are weighed then sun-dried for about 5 hours and weighed again before final packing for delivery to the laboratory. In cases where there is continuous rain, the samples are pan-dried for 5-6 hours using a constructed drying facility or wood-fired oven.

MRL prepared its own sample tags for all samples including pulp repeats, pulp standards, and coarse rejects samples. The samples were placed in a rice sack and then in a crate to ensure the security of the samples during transport.

For all of the 2007 cores and batch 2008 AGL 10, the prepared samples were sent to the McPhar laboratory in Makati City, Metro Manila via a local courier (LBC Express). The samples were carefully packed in crates with proper labels, and accompanied by an official Submission Form and a Courier Transmittal Form. The crates were transported to Butuan City where LBC Express branches are present. The transportation of the crates containing the samples is always accompanied by designated MRL staff. The courier received the package and provided MRL with receipts indicating contents. For batches 2008 AGL 1, 3 and 6, the samples were delivered by MRL to McPhar’s sample preparation facility in General Santos City. The assaying was performed in their laboratory in Makati City.

Counting and cross-checking of samples vis-à-vis the McPhar Submission Form were performed by McPhar supervisors. Notice is given to MRL if there are discrepancies, otherwise it is understood that sample preparation and analysis will be carried out as requested. A sample tracking, quality control and reporting system was maintained between MRL and McPhar.

For batches 2008 AGL-13, 16, 18 and onwards, the core samples were delivered to Intertek’s sample preparation facility in Surigao City. Likewise, checking of samples against the list was done upon submission. Once prepared, Intertek-Surigao sends the samples to their assay laboratory in Muntinlupa City, Metro Manila.

The core sampling and logging facility was under the supervision of an MRL geologist or mining engineer at all times. This facility was originally within the drill area and is about 300 m to 1 km from the drill pads, however although logging of the core was completed at the drill rig for the phase 4 drilling, core trays were delivered to barangay E. Morgado base camp for sample splitting preparation under the guidance of MRL staff. A civilian guard secures the base camp premises during the night.

The ANDP drilling was under the direct supervision of James A. Climie, P. Geol., President of MRL Gold Phils., Inc.


11.4 Sample Preparation, Analysis and Security

In addition to stringent sampling protocols, QA/QC procedures were also employed following Dr. B. Rohrlach’s and F.R. Billington’s (MRL independent consultants) guidelines. Standard reference materials, field duplicates, coarse rejects and pulp rejects were resubmitted to the analysing laboratory to check the accuracy of the primary laboratory results. A total of 1269 analyses of check samples were used in confirming the accuracy and repeatability of all assays to be used within the resource estimation of the ANDP. Selection of check samples were spread throughout all holes and in various laterite horizons.

The field duplicates totalled 325 or 2.93% of the 11,100 mainstream core samples of MRL. Normally, 1 in every 20 core samples is duplicated. The duplicate sample is selected to ascertain that the full range of different laterite horizons is systematically covered. The samples were selected to cover the full range of Ni grades at Agata, and to extensively cover the different stages and spatial distribution of the drill program, so as to provide a representative check on the reliability of the original sample splitting process undertaken by MRL at Agata North. Originally, the splitting method is the same as for obtaining duplicates for storage but ¼ part of the prepared sample represents the field duplicate while the ¾ part is the regular sample. For the half-core sampling, the field duplicates were taken by cutting the remaining ½ core into 2. These samples were sent to the laboratory in the same batch and were treated in the same way as the mainstream core samples.

A set of 81 coarse reject samples, comprising 0.73% of the 11,100 core samples, were submitted to the laboratory where the original samples were analysed for resampling and assaying. Resampling was done by taking a duplicate split from the coarse rejects and then placing it back into the assay stream for analysis. Again, as in all duplicates, the submitted samples were chosen to cover the natural range of assays. The reanalysis of the coarse reject samples was undertaken as an internal check on the crushing and sub-sampling procedures of the laboratory to ensure that the samples taken for analysis were representative of the bulk sample.

There were two sets of pulp rejects sent for re-assaying. One was sent to the laboratory where it was originally analysed. A total of 250 pulp rejects were sent under this category. The other set was sent to an umpire laboratory wherein a total of 319 pulp rejects were analysed. This is to establish reproducibility of analysis and determine the presence or absence of bias between laboratories. Samples were taken on all of the different laterite horizons. Originally, pulp rejects were collected and sent in separate batches. Starting on June 2008, pulps were inserted together with the mainstream samples (1 in each set of 40 samples). The pulp rejects for inter-laboratory checking were sent at a later date.

The umpire laboratory for the 2007 drilling program was Intertek in Jakarta. Selected pulp samples were sent by MRL to Intertek’s Manila office, after which they forward the samples to Jakarta at Intertek Cilandak Commercial Estate 103E, JI Cilandak KKO, Jakarta 12560. Intertek (Jakarta) acquired an ISO 17025 2005 accreditation from KAN (National Accreditation Body of Indonesia) denominated as LP 130_IDN, valid until 2010. With the change of primary laboratory to Intertek Phils., McPhar becomes the umpire laboratory. In 2008, McPhar samples/assays were checked by Intertek Phils. and vice-versa.

Nickel standards or certified reference materials are routinely inserted to the batches of core samples sent for assaying. This is done as a double check on the precision of the analytical procedures of McPhar and Intertek on a batch by batch basis. The standards, which have known assay values for Ni, were provided by Geostats Pty Ltd of Australia in pulverized (pulp) form weighing about five grams contained in 7.5 cm X 10 cm heavy duty plastic bags. Originally, one standard sample is inserted for every batch of 40 to 45 samples. However, there were some standards inserted in smaller intervals of 25-35 samples. Starting with Batch 2008 AGL-


18, one standard sample was included in every set of approximately 40 samples. In all, 294 standards equivalent to 2.65 % of the core samples were used.

Eighteen types of Ni standards were used with grade ranging from 0.01% to 2% Ni. Each one comes with a certificate that shows the accepted mean Ni value and standard deviation, which are available on the website of Geostats (www.geostats.com.au). The specific nickel standards and the frequency of using each one are listed in Table 10.

Table 10: Ni Standards used at ANDP and frequency

Ni Standard # Assays %Ni Ni Standard # Assays %Ni

GBM305-9 32 0.25 GBM906-7 6 0.56

GBM307-13 16 2 GBM996-1 5 1.27

GBM901-1 55 0.8 GBM302-8 6 1.08

GBM903-2 27 0.11 GBM397-6 5 0.03

GBM905-13 41 1.51 GBM901-4 6 0.02

GBM906-8 44 0.55 GBM903-5 10 0.18

GBM398-4 5 0.41 GBM995-4 10 0.03

GBM900-9 5 1.16 GBM997-4 5 0.01

GBM901-2 8 0.88 GBM998-3 8 0.03

Standards 233 Standards 61

11.5 Laboratory protocols

11.6 McPhar Geoservices (Phil.), Inc.

McPhar carries out high quality sample preparation and analytical procedures. It is an ISO 9001-2000 accredited laboratory and has been providing assay laboratory services to both local and foreign exploration and mining companies for more than 35 years. It served as the primary laboratory for the ANDP drilling. Its address is 1869 P. Domingo St., Makati City, Metro Manila.

At McPhar’s Geoservices each sample is analysed for nickel (Ni), cobalt (Co), iron (Fe), magnesium (Mg), aluminium (Al), silica (SiO2) and some samples for phosphorous (P). The Ni, Co, Fe, Mg and Al are assayed by dissolving a 25 g charge with a two acid digest using hot hydrochloric (HCl) and nitric acid (HNO3) and reading the results by Atomic Absorption Spectroscopy (AAS). The SiO2 and P are analysed by a gravimetric process.

McPhar has its own Quality Assurance/Quality Control (QA/QC) program incorporated in their sample preparation and analyses procedures. Every tenth sample and samples with "anomalous" results, i.e., samples having abnormally high or low results within a sample batch,


are routinely checked. This is done by preparing a solution different from the solution on the regular sample taken on the same pulp of a particular sample.

11.7 Intertek Testing Services Phils., Inc.

Intertek Testing Services Phils., Inc. is among Intertek’s global network of mineral testing laboratories. It provides quality assay analysis of mineral samples for nickel deposit exploration projects. Measures are taken by Intertek mineral testing laboratories to ensure that correct method development and quality protocols are in place to produce good quality results.

Each sample is analysed for nickel (Ni), cobalt (Co), iron (Fe), magnesium (Mg), aluminium (Al), silica (SiO2), CaO, Cr2O3, K2O, MnO, Na2O, P2O5, and TiO2. Whole rock analyses are performed by XRF. The samples are fused using lithium metaborate. XRF analysis determines total element concentrations that are reported as oxides.

For its internal QA/QC, Intertek performs repeat analyses plus split sample analyses every 15-20 samples. Furthermore, on the average, one sample of standard reference material is inserted in every 40 samples, and one blank in every 60 samples.

11.8 Internal check assays (McPhar and Intertek)

The laboratories of McPhar and Intertek in Manila have QA/QC programs incorporated into their sample preparation and analyses procedures. The two laboratories regularly conduct duplicate analysis of Ni and other elements as a check on analytical reproducibility within their own laboratories. Repeats are routinely conducted on all elements being analysed and are typically on every 10th sample for McPhar and on every 20th sample for Intertek. All in all there are 770 (6.94%) repeat analyses that are spread evenly throughout the entire database.

In analysing the correlation between the original and duplicate sample, the Variance between the primary assay and the duplicate was computed as follows:

Var = (a – b) x 100 a

Where: a - is the original sample analysed b - is the duplicate sample analysed Var - is the percentage relative difference.

To interpret the Variance value, a value of zero means the two values are identical and the duplication is perfect, a negative value means the duplicate is higher, while a positive value means the original is higher. Values less than 10% variance (either negative or positive), are considered excellent when reviewing comparative samples within lateritic Ni deposit assays.

There is an excellent correlation for all of the elements within an internal repeat with all below Variances <1% (0.03 – 0.28%) as shown in Table 11, which is consistent with high precision repeatability. There is generally a very even spread of the check assay being both higher and lower than the primary assay which indicates that there is no systematic bias occurring in the check analyses routine.


Table 11: Variance of Original and Internal Laboratory Duplicate Analyses

Ni Co Fe Al Mg Si

McPhar

Variance from 1st Assay 0.05% -0.26% -0.15% -0.08% 0.28% 0.03%

Duplicates = 1st Assay 98 204 4 98 23 16

Duplicates < 1st Assay 84 38 146 94 137 120

Duplicates > 1st Assay 90 30 122 80 112 136

Intertek

Variance from 1st Assay -0.06% 0.36% 0.09% -0.04% 0.33% 0.01%




11.9 External check assays (MRL)

MRL has also set up its own QA/QC protocols vis-à-vis the laboratories’ sample preparation and analytical procedures, which the author has observed in the field and analysed the results for this report. The external laboratory checks determine the assaying laboratories to replicate a known standard, the repeatability of the assay from the field splitting and the pulp repeats (i.e. external and internal repeats of the primary assays), the consistency of grade between laboratories, and the determination of any bias within the sample preparation process through the analyses of the coarse rejects. It is a comprehensive series of analyses compiled to ensure grade estimates are of the highest calibre.

11.10 Nickel standards

As a double check on the precision of the analytical procedures of both McPhar and Intertek laboratories, nickel standards were inserted by MRL into the sample runs at approximately 1 to 45 samples on average. A total of 303 nickel standards, representing 2.73% of the 11,100 core samples were sent. These standards were purchased from Geostats Pty. Ltd of Australia. Twelve types of standards were used for the whole drilling course to date, with grade ranging from 0.11 to 2.00% nickel. Table 12 presents the data standards for nickel for two of the Ni standards used by MRL which were lateritic nickel standards and most closely related to the ANDP samples submitted. From the statistical analyses it is confirmed that the external standards submitted by MRL fell within a small range from the accepted mean, and that comparative statistics were well within acceptable standards. A point to note is that both McPhar and Intertek consistently underestimated Fe for both standards, and although the


variation is <3.2% of the Ni standards for Fe grade, it was the only example of a systematic variation encountered within the dataset.

Table 12: Variance of Ni Standard and Laboratory Assays

Ni Standard GBM901-1 Ni Standard GBM905-13

Ni Co Fe Ni Co Fe

Variance from Standard

-1.7% -8.6% 3.15%

Variance from Standard

-0.3% -4.25%

1.92%

# Assays = Std 0 0 0 # Assays = Std 0 2 0

# Assays > Std 46 45 0 # Assays > Std 25 20 0

# Assays < Std 9 10 55 # Assays < Std 16 19 41

The graphical representation of the standards data shows that the Ni grade is extremely consistent within the standard, and within both standards the check assays vary above and below the standard’s value (Figure 15). However, when a new batch of the same standard was put into the sample runs the minor elements within the standard varied (especially Co), and this indicates the difficulty of ensuring an even spread of the minor elements within a product like a Ni standard. The variation for the minor elements can therefore be explained by batch variation rather than a systematic error within the assaying process.

11.11 Field duplicates

The analytical reproducibility of field duplicate samples is a measure of the representativity of the original split of the sample, a check on the reliability of the sample reduction procedure (splitting) undertaken by MRL at the field area.

The field duplicates were sent together with the regular core samples for assaying. A total of 325 core field duplicates (2.93% of the 11,100 core samples) were analysed. Of these, 134 were analysed by McPhar (1 in 20 cores) while 191 duplicates were analysed by Intertek (1 in every 40 samples).


Table 13: Variance of Field Duplicate and Original Assays

Ni Co Fe Al Mg Si

Variance from Assay -0.16% -2.1% 0.1% 0.3% -0.6% -0.9%

(Abs Variance from Assay) 3.30% 7.2% 3.1% 6.1% 9.5% 6.2%




The results presented in Table range from 0.3% to -2.1% for all elements, which indicates that there is an extremely high repeatability for all field samples. When reviewing the Absolute Variance, i.e. the maximum variance from the sample average, all values for all elements are still under 10% of the average grade which supports the consistency of the splitting method and the reliability of the assays. Reviewing the split of duplicate samples being higher or lower in grade on average, the total count indicates that there is an equal chance of any duplicate being higher or lower than the original assay.

The author confirms that the field splitting and sampling protocol was excellent and supports the validity of the samples to be assayed for use in estimation purposes for all elements.

11.12 Coarse rejects

The re-analysis of the coarse reject samples was undertaken as an internal check on the crushing and sub-sampling procedures of McPhar and Intertek to ensure that the samples taken for analysis were representative of the bulk sample. The Variance results for the coarse fraction post crushing in comparison to the primary assay are shown in Table 14.

Table 14: Variance of Coarse Reject and Original Assays

Ni Co Fe Al Mg Si

Variance from Assay -0.04% 4.0% -0.4% -0.6% 1.9% -0.9%


Coarse Rejects = Assay 5 19 0 3 1 0

Coarse Rejects < Assay 42 38 45 46 45 39

Coarse Rejects > Assay 34 24 36 32 35 42


The results presented in Table 14 range from 4.0% to -0.9% for all elements, which indicates that there is an extremely good correlation of the coarse rejects with the passing material that formed the pulp for assaying. When reviewing the Absolute Variance, i.e. the maximum variance from the sample average, there are 3 elements (Co, Fe and Mg), that are more variable and this may be due to specific minerals that may crush less evenly due to hardness or platiness (Corundum for Al as an example) – but even with these minor variances for some minor elements the coarse sample rejects are very similar to the fines material. Reviewing the split of coarse rejects being higher or lower in grade on average, the total count indicates that there is an equal chance of any duplicate being higher or lower than the original assay.

The author confirms that the protocol for crushing of the primary sample was excellent and supports the validity of the resultant pulps to be assayed for use in estimation purposes for all elements.


Figure 15: Graphs of Nickel Standards Assays.

11.13 Pulp rejects analysed by primary laboratory

A total of 30 of the McPhar pulp rejects during the first and second drilling phases were re-sampled and analysed, representing 1.07% of the 2,793 core samples. These were selected from previously submitted batches covering a range of sample grades, a range of horizons and a range of holes from the core drilling programs, so as to be representative of all the samples.

The method of pulp reject sampling for Intertek Laboratory was modified in June 2008. Starting with batch 2008 AGL-18, pulp rejects were randomly selected one in every set of 40 and were pre-numbered. These pulps were inserted to their assigned numbers right after sample preparation and were analysed in the same batch as their sources. A further 220 pulp rejects were submitted to the completion of the 2010 drill program.

The duplicate pulp analyses were conducted to test for homogeneity of the pulps generated by the two laboratories. Insufficiently milled samples will lead to multiple assaying of pulps with poor precision (i.e. poor repeatability). Inversely, agreement between assays of duplicates of the pulp would indicate that the milling procedure in the laboratory was efficient and generated a suitably homogeneous pulp.

Table 15: Variance of Pulp Duplicate and Original Assays

Ni Co Fe Al Mg Si

Variance from Assay 0.59% -2.6% 0.0% -0.6% -0.3% 0.4%


Pulp Duplicates = Assay 13 58 0 8 1 1

Pulp Duplicates < Assay 102 108 117 147 119 117

Pulp Duplicates > Assay 135 84 133 95 130 132


The results presented in Table 15 range from 0.59% to -2.6% for all elements, which indicates that there is an extremely high correlation of the repeat pulp assay with the primary assay. When reviewing the Absolute Variance, i.e. the maximum variance from the sample average, the range is extremely small at 1.3-6.0% which indicates an extremely good repeatability for the pulps presented to the laboratories prior to assaying. Reviewing the split of pulp repeats being higher or lower in grade on average, the total count indicates that there is an equal chance of any pulp duplicate being higher or lower than the original assay.

The author confirms that the pulp repeatability was excellent and supports the validity of the primary pulps to be assayed for use in estimation purposes for all elements.

11.14 Pulp rejects analysed by umpire laboratory

Two laboratories have been used since the inception of the laterite Ni exploration at ANDP, and during the drilling programs check pulps have been forwarded to the alternate laboratory to confirm assay reliability. There are minor issues for some element analyses due to the varying assay methodologies (McPhar use an AAS method and Intertek use an XRF method), but this is predominantly within the minor elements and not the Ni assay.

The results presented in Table 16 range from -0.9% to 2.7% for all elements, which indicates that there is an extremely high correlation of the interlab repeat pulp assay with the primary assay, and in fact are very similar to the range of variance encountered within the single lab pulp repeats. When reviewing the Absolute Variance, i.e. the maximum variance from the sample average, the range is larger at 1.0-20.5% which indicates that although there is good repeatability for the pulps, the differing methodologies do provide some contrast in the minor elements (Al and Mg especially). Reviewing the split of pulp interlab repeats being higher or lower in grade on average, the total count indicates that there is an equal chance of any pulp duplicate being higher or lower than the original assay.

Table 16: Variance of Pulp Duplicate and Interlab Assays

Ni Co Fe Al Mg Si

Variance from Assay 1.97% -0.9% 1.2% 2.7% 2.4% 0.0%


McPhar = Intertek 9 60 0 7 1 1

McPhar < Intertek 117 127 135 140 129 74

McPhar > Intertek 193 132 184 172 189 81

The author confirms that the pulp interlab repeatability was excellent and further supports the validity of the primary pulps to be assayed for use in estimation purposes for all elements.

11.15 Summary

In the author’s opinion the sampling protocols, procedures and methods performed by MRL, and their implementation, are of acceptable standards. Assays performed by McPhar and Intertek in Metro Manila are also of acceptable standards. Variations encountered in the McPhar and Intertek QA/QC program on the Agata samples were all within acceptable limits.


12 Data Verification

12.1 Data Verification

The author has visited site numerous times in the past 18 months and on each occasion has reviewed protocols and processes set in place at the Mindoro base camp in Agata. The datasets provided by Mindoro were checked and verified by comparing a random portion against original field sheets and official Certificates of Analytical Results. Selected core trays were visually inspected against the logs. In addition, the core photos were viewed and compared with the cross sections showing laterite horizons generated by MRL. The lithology was checked in the field and in the drill cores. The digital file was checked for logical errors or data entry errors. There were a few but very minor errors found.

Previously Dallas Cox, who has compiled the four previous resource reports, also completed a series of random checks made in the field, to corroborate the acceptable quality of the data. As a further test, he collected twelve field duplicate samples and sent them to the same laboratory at which they were originally assayed. Five samples came from the limonite horizon, six from the saprolite and one from the saprolitic rock horizon. Table 17 and Figure 16 show the results and the correlation vis-à-vis the original MRL assay values.

Table 17: Results of Independent Check on Drill Core Assays

HOLE ID

FR

OM

TO

RU

N

MR

L N

i %

DM

C N

i %

MR

L C

o %

DM

C C

o %

MR

L F

e %

DM

C F

e %

MR

L A

l %

DM

C A

l %

MR

L M

g %

DM

C M

g %

AGL 2008-281

1.00 2.00 1.00 1.46 1.43 0.09 0.09 38.94 39.75 2.45 2.64 1.07 1.13

AGL 2008-355

2.00 3.00 1.00 1.02 0.91 0.07 0.07 30.47 31.55 2.57 2.61 2.28 1.44

AGL 2008-175

2.60 3.45 0.85 1.59 1.58 0.05 0.05 23.32 23.60 0.74 0.66 10.51 10.32

AGL 2008-194

6.00 7.25 1.25 0.92 0.95 0.03 0.03 15.22 15.89 0.71 0.69 12.93 12.64

AGL 2008-174

3.40 4.20 0.80 1.31 1.35 0.03 0.03 14.45 15.25 0.46 0.45 15.57 15.63

AGL 2008-297

8.00 9.00 1.00 1.27 1.25 0.14 0.13 52.05 50.62 3.88 3.36 0.36 0.42

AGL 2008-299

1.00 2.00 1.00 1.20 1.32 0.14 0.13 47.57 44.50 1.82 1.69 2.75 3.89

AGL 2008-355

2.00 3.00 1.00 0.87 0.92 0.03 0.03 14.24 14.64 0.52 0.55 15.89 15.65

AGL 2007-17

27.00 28.00 1.00 1.33 1.31 0.02 0.02 6.38 8.14 0.11 0.21 15.02 17.24

AGL 2008-135

5.55 6.45 0.90 1.03 1.12 0.12 0.11 50.10 50.73 2.46 2.12 0.71 0.77

AGL 2008-74A

17.40 18.40 1.00 0.46 0.51 0.01 0.01 5.40 6.07 0.15 0.16 14.66 15.43


AGL 2008-14A

13.55 14.85 1.30 0.80 0.97 0.02 0.02 8.48 10.20 0.16 0.19 14.53 15.15

* DMC - Dallas M. Cox

Figure 16: Comparison of Independent Checks and MRL Assays

The graphs show good correlation between the MRL assays and those of Dallas Cox’s samples. This is attested by the values of the coefficient of determination R2, which range from 0.947 for nickel to 0.996 for iron.

12.2 Bulk density determinations

MRL have completed a significant number of bulk density tests so as to provide data for estimating the tonnages of each specific mineralised zone within the ore body. Samples were predominantly taken from test pits prepared for the taking of density samples. A total of 30 samples from 15 test pits were used for the ferruginous laterite horizon; 37 samples from 19 pits for limonite; and 17 pit samples from 6 pits for saprolite. In addition 19 core samples were tested from the saprolite zone.

For BD measurements done on site, large samples ranging in volume from 0.005 m3 to 0.08 m3 were collected from twenty test pits. The locations of these test pits are distributed around the drilling area. The bulk samples were measured for volume, wet weight, and dry weight.

The BD and moisture content were computed using the following formulae.

Weight (kg) Bulk Density = ÷ 1000 (kg/ton) Volume (m

3)

Weight wet – Weight dry % Moisture Content = x 100 Weight wet

For the drill cores, relatively solid, less compressed portions of 10 cm - 20 cm lengths were selected from drill holes that are spatially distributed and coated in paraffin wax to preserve the


moisture. These were then dispatched to McPhar Laboratories where the samples were tested using the water displacement method. It is standard practice for McPhar to check the wax coating and perform re-waxing if needed.

Table 18: Summary of Bulk Density Measurements

Horizon Wet Density Dry Density Moisture

Content % No. of

Samples

FERRUGINOUS LATERITE 1.72 1.20 30.49 30

LIMONITE 1.81 1.24 31.74 37

SAPROLITE (Pit Samples) 1.98 1.46 26.11 17

SAPROLITE (Core Samples) 1.82 1.45 20.60 19

Table 18 shows the summary results of these measurements, and the dry density values used in the resultant block model were 1.24 dmt/m

3 for limonite and 1.45 dmt/m

3 for saprolite. A dry

density of 1.8 dmt/m3 for bedrock has been applied in the model, but there is no mineralised ore

within this defined region and as such is simply a differential figure to aid in planning and de

With the separation of the upper and lower limonite and the upper and lower saprolite within the resource modelling a further refinement of the dry bulk density values was required. In regards to the limonite values, the bulk density test work as shown in Table 18 successfully allocated the upper limonite (ferruginous laterite), and lower limonite values (limonite). However for saprolite there was no distinction and a review of all the saprolite data confirmed that there was a significant difference between these two layers and a gross average could not be applied.

Based on the spread of the data and the presence of smectite mineralogy it can be assumed that the moisture content will be approximately 24% in situ. This provides a bulk density of 1.32 t/m3 for the upper saprolite. One other factor needs to be considered and this is the presence of boulders within the upper saprolite and used in the estimation, this lithology has a greater density and forms ~19% of the upper saprolite material. As it is impossible to accurately predict the tonnes of this rock, or the actual density due to its varying level of hardness and weathered status, thus we can only predict a small impact on overall density.

Considering all of these factors the following density values for the newly formed upper and lower saprolite layers in the ANDP 2013 resource have been interpreted as below.

Upper Saprolite Dry Density = 1.34 tonnes/m3

Lower Saprolite Dry Density = 1.45 tonne/m3


Figure 17: Agata North Bulk Density Test Pit Location Map


13 Mineral Processing and Metallurgical Testing

There will be no mineral processing of limonite ore carried out onsite.

The key parameters that affect the saleability of high iron limonite ore are iron, nickel and phosphorus grades, and moisture content.

The testwork that has been done on ore with respect to iron and nickel grades has been outlined in Sections 11 and 12 of this report.

The results of analysis of field duplicates indicates that there is an extremely high repeatability for all field samples. When reviewing the absolute variance, all values for all elements are still under 10% of the average grade which supports the consistency of the splitting method and the reliability of the assays. Reviewing the split of duplicate samples being higher or lower in grade on average, the total count indicates that there is an equal chance of any duplicate being higher or lower than the original assay.

The results of the analysis of pulp assay variance indicates that there is an extremely high correlation of the repeat pulp assay with the primary assay. When reviewing the absolute variance, the range is extremely small at 1.3% - 6.0% which indicates an extremely good repeatability for the pulps presented to the laboratories prior to assaying. Reviewing the split of pulp repeats being higher or lower in grade on average, the total count indicates that there is an equal chance of any pulp duplicate being higher or lower than the original assay.

The testwork that has been done on ore with respect to moisture content has been outlined in Section 11 and 12 of this report. Whilst the average insitu moisture measured at 30% is below the target limit of 35%, it is the impact of precipitation that will largely determine how much drying time will be required. Shipping of ore has been substantially reduced in the period of the year subject to higher than normal precipitation.

The testwork that has been done on ore with respect to phosphorus was done conjunction the other elements. A review of the raw assays of samples having iron grades greater than 44 Fe%, showed that approximately 25% of samples fall in the range above 0.01 P%. As with iron, nickel and moisture content, this is will be dealt with by blending off multiple stockpiles to ensure shipment specification criteria are met for all parameters.


14 Mineral Resource Estimate

The resource Estimate calculations were completed by Mike Job, Principal Consultant for Quantitative Group based out of Fremantle, West Australia. All data was checked and forwarded by the author, and all modelling methodologies were discussed prior to commencement of developing the resource.

14.1 Geometric Interpretation

There is a total of 633 drillholes in the dataset. All of the holes are vertical and relatively shallow, with the deepest hole ending at 46.6m depth. The UTM coordinates (rather than the local grid) have been used. Basic validation of the dataset was previously conducted by QG in 2010.

As reported in Gifford (2010) the limonite/saprolite contact point was based on an abrupt change in the level of Mg in limonite (usually less than 1% Mg) to saprolite (generally well over 10% Mg, although sometimes down to about 5% Mg). There is also an abrupt drop of Fe in limonite (~40% to 50%) to saprolite (less than 10%). The saprolite/bedrock contact was identified by using the Ni assay data (bedrock generally less than 0.4%) and the geological logging. The geological logging provided in the dataset matched these grade-determined boundaries extremely closely (Gifford, 2010).

As discussed in the introduction, the division of the limonite domain into sub-domains was based on a 44% Fe grade boundary. The higher Fe grade occupies the greatest proportion of the limonite domain and is positioned above the lower Fe grade sub-domain. Likewise for the saprolite sub-domains, based on a 0.7% Ni boundary, the higher Ni grade occupies the upper portion of the domain and represents the greatest proportion of the total domain. The sub-domains are shown graphically in Figure 19.

The topography surface was used to cut the base of limonite and base of saprolite wireframes, which were in turn subdivided by the respective sub-domain wireframes (Figure 18). These 5 surfaces were used to select and flag the drill samples. The sample selection and flagging processes were conducted using Datamine software.

Figure 18: Wireframe surfaces and drilling, Agata North (Ni on left, Fe on right side of drill trace).


Sample selection and flagging was checked on screen and demonstrated robust adherence to the interpretation parameters, with accurate selection and flagging of the samples.

The domain and sub-domain codes (DOMAIN and SUBDOM fields respectively) are shown in Table 19.

Table 19: Domain and Sub-Domain codes for Agata North Laterite.

Domain & Sub-Domain Domain Code Sub-Domain Code

Limonite >44% Fe (Upper Limonite) 1 11

Limonite <44% Fe (Lower Limonite) 1 12

Saprolite >0.7% Ni (Upper Saprolite) 2 21

Saprolite <0.7% Ni (Lower Saprolite) 2 22

The same wireframe surfaces used for sample selection were also used for the construction of a 3D block model. The parent cell size used by Gifford (2010) of 20m x 20m x 1m with 10m x 10m x 1m sub-blocking was used here. The model origin was chosen so that the drillholes would mostly be located in the centre of a parent block (Gifford, 2010).

Table 20: Block Model Properties

Easting (m) Northing (m) RL (m)

Origin 775,625 1,025,225 0

Parent block size 50 50 1

Sub-block size 10 10 1

Extent 778,225 1,029,025 400


Figure 19: Block model sub-domains.

14.2 Exploratory Data Analysis

The flagged samples were composited to 1m to allow EDA on comparative, additive samples. The majority of raw samples were at or less than 1m in length.

A number of drillholes had exactly the same collar coordinates; AGL 2008-196 and -196, and holes AGL 2008-247and 248. Therefore, holes -196 and -248 were removed. Compositing was conducted in Datamine using ‘Mode = 1’, which divides the down-hole intercept in each (sub) domain equally to be as close to 1m as possible. A minimum composite length of 0.5m was used.

More sample length is lost compositing in the sub-domains compared to compositing in just the main domains, but the amounts lost are relatively small. Table 21 shows the raw and composite lengths for both domains and sub-domains, and the percentage of the length lost.


Table 21: Comparison by of raw sample lengths to composite sample lengths.

Domain / Sub-Domain

Raw Sample Length Composite Sample Length

% Length Lost

1 3058 3016 1.4

11 2563 2526 1.4

12 496 480 3.2

2 5701 5653 0.8

21 4336 4296 0.9

22 1373 1337 2.6

Preparation of the three additional variables, Cr2O3, CaO and MnO, included dealing with a number of grade values given as <0.01%. This indicates the variable was below detection limit for that sample. These values were converted to a grade of 0.01% to allow their consideration in the analysis and prevent their loss in the case of subsequent estimation, which could allow higher grades to possibly over inform the estimate in those areas.

Assessment of the validity of the sub-domains for each of the variables was conducted by comparison of the basic statistics of the composited samples for each domain and sub-domain, consideration of their distribution in the form of histograms and by contact analysis. The results of each of these processes are given in Appendix 5.

Note that the variables of interest are not informed to the same levels; Ni, Co and Fe are best informed and CaO, Cr2O3 and MnO are the least informed (Appendix 5).

Assessment of the main limonite and saprolite domains, including the additional 3 variables, CaO, Cr2O3 and MnO, supports the use of a hard boundary between these domains as concluded by Gifford (2010).

Basic summary statistics for each of the sub-domain composites within each domain are given in Table 22.


Table 22: Composite statistics for sub-domains

There is a clear change in the mean and variance for some variables, most obviously the variables providing the basis of the sub-domaining (Fe in limonite and Ni in saprolite) but also for some of the other variables e.g. Fe in saprolite and Mg in limonite. These distribution changes are reflected in the histograms (Appendix 5).

Care does need to be taken in some cases where isolated extreme values can affect the statistics in one sub-domain or the other without necessarily indicating the validity of a sub-domain boundary. An example of this is Cr2O3 in the saprolite sub-domains where a single high grade sample in the upper saprolite has a significant effect on the variance of the distribution. This is shown in Figure 20.

Figure 20: Histograms for composited Cr2O3 for saprolite sub-domains (upper saprolite uncut on left; upper saprolite top-cut in middle and lower saprolite on right).


CaO in the limonite domain appears to be problematic, particularly in the upper sub-domain, with what appears to be two populations rather than a single population. This indicates there may be a separate control on CaO distribution in the upper sub-domain. The histogram for CaO in the upper limonite sub-domain is given in Figure 21.

Figure 21. Histogram for composited CaO in the upper limonite sub-domain (histogram for higher grade population inset).

Contact analysis considers two ‘domains’ at a time (one contact) - samples are ‘binned’ according to their distance either side of the contact and the average grade of each bin is calculated for each variable of interest. The mean grades across the contact are plotted, providing a visual guide as to whether the transition is gradational or sharp.

Contact analysis plots are contained in the figures below and in Appendix 1 (Contact Analysis worksheet). In the plots the mean grade by distance from the contact is represented by the red line series; the interpreted contact itself is represented by the vertical black line (at zero distance).

For the limonite domain, the contact analysis plots for the upper and lower sub-domain contact shows two clear groupings of variables; those that demonstrate a trend of grade through the sub-domain boundary, and those that show a distinct statistical shift either side of the boundary.

Those that show a gradational trend in grade across the limonite sub-domain boundary are Ni, Co, Al and (to a lesser degree) Mn. The contact analysis plots for these are shown in Figure 22.

Variables demonstrating a distinct statistical shift either side of the boundary are Fe (as would be expected), Mg and SiO2, and Cr2O3. The contact analysis plots for these are shown in Figure 23.


Figure 22: Contact analysis for the upper and lower limonite sub-domains for Ni, Co, Al and Mn respectively.

Figure 23: Contact analysis for the upper and lower limonite sub-domains for Fe, Mg, SiO2 and Cr2O3 respectively.

The contact analysis for CaO is less clear, possibly affected by some other control on distribution.

The contact analysis for CaO in the limonite sub-domains is shown in Figure 24.

Figure 24: Contact analysis for the upper and lower limonite sub-domains for CaO.

For the saprolite domain, only three variables show evidence of an abrupt statistical change across the 0.7% Ni sub-domain contact. The most distinct, was Ni, but Co and Fe also displayed a marked change at the sub-domain boundary, as shown in Figure 25. Less distinct or lower magnitude statistical shifts are shown by Al, Mg, Cr2O3 and MnO, given in Figure 26.


Gradational distributions across the contact are demonstrated by SiO2 and CaO, shown in Figure 27.

Figure 25: Contact analysis for the upper and lower saprolite sub-domains for Ni, Co and Fe respectively.

Figure 26: Contact analysis for the upper and lower saprolite sub-domains for Al, Mg, Cr2O3 and MnO respectively.

Figure 27: Contact analysis for the upper and lower saprolite sub-domains for SiO2 and CaO respectively.

From the statistical analysis and assessment of the validity of the Fe based sub-domains in the limonite domain and the Ni based sub-domains in the saprolite domain, it is seems evident that the sub-domains are valid for a number of variables. These variables would benefit from separate estimation using the sub-domain contact as a hard boundary while others would not


benefit, and may in fact be adversely affected, by the imposition of a hard sub-domain boundary. It also needs to be noted that for some variables in the lower limonite sub-domain there is a significant reduction in the number of assays available for estimation, for example CaO, Cr2O3 and MnO are reduced to 295 samples.

In the limonite domain, Fe, Mg and SiO2 would benefit from separate estimation into the sub-domains while Ni, Co and Al would be more robust with estimation into the parent domain.

The cases for CaO, Cr2O3 and MnO are less clear cut, so these variables were estimated into the domains and sub-domains in parallel for assessment (see the Final Model section).

For the saprolite domain, Ni, Co and Fe are likely to benefit from separate estimation into the sub-domains, but CaO estimation will likely be more robust into the parent domain.

The cases for SiO2, Al, Mg, Cr2O3 and MnO are less clear cut and these variables were estimated into the domains and sub-domains in parallel for assessment.

14.3 Variography and Estimation

Experimental variograms were generated for the nine variables in the two main domains and the four sub-domains. Given the orientation and geometry of the domains and sub-domains variography was generated in the horizontal plane with an additional downhole direction to help model short range structure and calculate the nugget. Little anisotropy is evident in the horizontal plane so all but three of the variogram models are omni-direction in the horizontal plane.

A lag value of 30m to 60m in the horizontal plane was used with 1m in the vertical direction. Using a slicing height of 2m to 5m in the horizontal plane provided an improvement in variogram structure. The models are tabulated in Table 23 and Table 24.

For the variables estimated into both the main domains and sub-domains in parallel the domain variogram models were used for both estimates.

The grade variables showed relatively low nuggets being less than 10% for the limonite domain rising to about 20% for the saprolite domain. The nuggets rose for the sub-domain up to 40% in the case of Mg in the lower limonite and Co in the lower saprolite but were generally around or below 20% otherwise.

The majority of the variance was taken up in the nugget and first structure with the range of the first structure rarely exceeding 40m. The second structure ranges were generally below 150m with a very few exceeding that range.


Table 23: Limonite Variogram Models

Estimation was performed using ordinary kriging (OK) and followed the general methodology and parameters used in Gifford (2010). OK was run for each of the variables into either the domains or sub-domains as determined by the Phase 1 assessment. The domains or sub-domains estimated for each variable is given in Table 25.


Table 24: Saprolite Variogram Models

Variable (C0) % Major Semi Minor Sill % Structure

SiO2 5 17.4% 22 20 3 18 62.6% 1

175 50 4 5.77 20.1% 2

CaO 0.032 33.7% 13 13 2 0.016 16.8% 1

140 140 9 0.047 49.5% 2

Al 0.025 10.0% 12 12 2 0.072 28.8% 1

125 125 8 0.153 61.2% 2

Mg 3.43 19.8% 20 20 2.5 11.46 66.1% 1

170 170 6 2.456 14.2% 2

Cr2O3 0.052 23.9% 25 25 2 0.111 50.9% 1

130 130 3 0.055 25.2% 2

MnO 0.003 19.2% 16 16 3 0.008 51.3% 1

85 85 5 0.0046 29.5% 2


Ni 0.025 14.5% 8 8 2 0.102 59.0% 1

60 60 3 0.046 26.6% 2

Co 0.0001 22.5% 10 10 2 0.00023 51.7% 1

18 18 3 0.000115 25.8% 2

Fe 6.7 22.2% 12 12 2 15.4 51.0% 1

85 85 4 8.1 26.8% 2


Ni 0.006 16.0% 8 8 1 0.0241 64.1% 1

60 60 1.5 0.0075 19.9% 2

Co 1.7E-05 40.0% 20 20 2 1.36E-05 32.1% 1

330 330 4 1.19E-05 28.0% 2

Fe 0.95 22.2% 15 15 4 1.55 36.3% 1

440 440 5 1.772 41.5% 2

Saprolite

Upper Saprolite

Lower Saprolite

Nugget Range Sill

Nugget Range Sill

Nugget Range Sill


Table 25: Domains and sub-domains estimated for each variable

(Sub)Domains Ni Co Fe Al Mg SiO2 CaO Cr2O3 MnO

Limonite Yes Yes Yes Yes Yes Yes

Upper Limonite Yes Yes Yes Yes Yes Yes

Lower Limonite Yes Yes Yes Yes Yes Yes

Saprolite Yes Yes Yes Yes Yes Yes

Upper Saprolite Yes Yes Yes Yes Yes Yes Yes Yes

Lower Saprolite Yes Yes Yes Yes Yes Yes Yes Yes

The search ellipses were oriented according to the local dip and dip direction using the Datamine dynamic search feature, which allows the search neighbourhood ellipse dip and dip direction to be defined separately for each block (in this instance, the variogram was also rotated to align with the search, but this does not always need to occur). This has the advantage of having a locally-varying orientation over a domain, where an ‘average’ dip and dip direction would not necessarily honour the local grade geometry.

The local dips and dip directions were calculated from the orientation of the limonite/saprolite boundary wireframe triangles, approximating the dip of each of the mineralised domains. Note that tolerances can be set during this process, so that ‘erroneous’ points will not be generated, such as vertical dips at the edges of the wireframe.

These points were then used to produce the dip and dip direction for each parent block - essentially the dip and dip direction are treated as variables and estimated into the block model using special parameters (to account for dip between 90° and -90°, and dip direction between 0° and 360°).

Then, during estimation of the grade variables, the search ellipse and variogram orientation is rotated appropriately for each parent block.

To limit the effect of downhole drift evident for many of the variables a restricted search was used for the vertical direction. Three estimation runs were conducted with less restrictive parameters for each successive run to inform the maximum number of blocks as possible. The main neighbourhood search parameters are given in Table 26 and a block discretisation of 5x5x1was used.


Table 26: Estimation neighbourhood parameters.

Estimation run number

X direction (m)

Y direction (m)

Z direction (m)

Minimum number of samples

Maximum number of samples

Run 1

150 150 5 10 40

Run 2

300 300 10 4 40

Run 3

600 600 20 4 20

The results of the estimates into each domain or sub-domain are provided in Appendix 5 (Model Stats worksheet). This includes the number and percentage of uninformed cells and negative kriging values.

The percentage of uninformed cells for each estimate was extremely low, being less than 0.3% for the poorly informed variables and less than 0.05% for the well informed variables. The exception to this was for lower limonite, which has the fewest sample numbers, and has up to 3% uninformed cells.

Five variables reported negative kriging results for all estimates. These negative results are an artifact of grades receiving a negative weight at the periphery of the search ellipse. These were very minor in number with a maximum of 0.37% cells for CaO in the upper limonite (Appendix 5).

For the final model these uninformed cells and those with negative kriging results were assigned positive values. The assigned values were determined by visual inspection of the areas affected in the model for each domain or sub-domain with a general value of the surrounding grades used. These minor numbers of affected cells will not have affected the overall quality of the estimation.

As an indication of the level of sample support, Table 27 shows the percentage of cells informed in each estimation run and the mean number of samples used for Ni in the limonite and upper and lower saprolite and Fe in the upper and lower limonite.

Table 27: Percent cells informed in estimation runs and mean number of samples used

Dry bulk density was assigned to the model (limonite 1.24, saprolite 1.45).

Validation of the estimates was conducted by comparison of the estimate statistics to the informing composite sample statistics, swath plots and on-screen visual validation.


Statistical comparison of the model to samples shows a very close match between means, and a sensible reduction in variance. The comparison of sample to model means is given in Table 28 with a more comprehensive comparison provided in Appendix I (Model Stats worksheet).

Swath plots were generated for each variable on E-W and N-S slices at 50m spacings and compared the mean grade of the block model and composites in each slice. The swath plots are contained in Appendix II. An example is illustrated in Figure 28 which compares Ni in the limonite domain. In all cases the block model follows the trends of the composites with the expected reduction in variability.

To assist in assessment of the variables estimated using both the main domains and sub-domains, the sub-domain swath plots for these variables also had the domain model (restricted to the sub-domain) plotted as well. An example is given in Figure 29, with all sub-domain plots given in Appendix II.

Table 28: Composite vs. block estimate comparison

Domain Variable Sample Mean Model mean

Ni 0.97 0.95

CO 0.11 0.11

AL 3.34 3.34

CaO 0.22 0.21

Cr2O3 3.12 3.01

MnO 0.91 0.90

FE 47.80 47.93

MG 0.54 0.61

SIO2 3.31 3.51

CaO 0.22 0.19

Cr2O3 3.21 3.14

MnO 0.93 0.92

FE 35.98 36.20

MG 3.75 3.83

SIO2 16.86 16.76

CaO 0.26 0.23

Cr2O3 2.56 2.59

MnO 0.80 0.83

SIO2 40.77 40.49

CaO 0.34 0.35

AL 0.43 0.49

MG 17.45 17.52

Cr2O3 0.83 0.83

MnO 0.22 0.22

NI 1.17 1.12

CO 0.03 0.03

FE 11.57 11.89

AL 0.47 0.56

MG 16.73 16.64

Cr2O3 0.89 0.91

MnO 0.24 0.24

NI 0.52 0.52

CO 0.02 0.02

FE 7.63 7.61

AL 0.31 0.33

MG 19.82 20.06

Cr2O3 0.61 0.59

MnO 0.16 0.16

Limonite

Upper Limonite

Lower Limonite

Saprolite

Upper Saprolite

Lower Saprolite


Figure 28: Comparison of composites against the block model for Ni in limonite.

Figure 29: Comparison of composites against the sub-domain and domain block models for Cr2O3 in upper saprolite.

On the basis of the validation process it was evident that for variables estimated into both domains and sub-domains both produced valid estimates with little difference between them.

14.4 Resource Classification

As only 40 holes had been added to the previous estimation data set, and those were in 5 tightly spaces ‘grade control’ grids, the classification applied to the previous estimate (Gifford, 2010) was applied in this study.


The resource classification reflects confidence in both geometric interpretation and confidence in geostatistical grade estimates, and also classifies the resource in a spatially coherent manner, avoiding small areas of different categories. The vast majority of the deposit is drilled on 50m x 50m or 100m x 100m grids, which is sufficient to support an Indicated Resource category. The only areas of Inferred Resource are around the steep-sided creek systems, where the drilling is on a broader pattern and the laterite horizons thin out. Measured Resource is restricted to that part of the resource where the drilling has been on 25m x 25m centres (Figure 30).

Figure 30: Resource classification, Agata North Deposit

Decisions on whether the variables were better estimated into domains or further divided into sub-domains was made on the basis of the EDA, contact analysis and the validation of the estimation results.

Ni, Co and Al for limonite and CaO for saprolite demonstrated clear continuous trends across the sub-domain boundaries and were estimated into the main domains only. Fe, Mg and SiO2 in the limonite and Ni, Co and Fe in the saprolite showed a distinct statistical shift across the sub-domain boundaries and were estimated into the sub-domains only.


For the other variables, CaO, Cr2O3 and MnO in the limonite and SiO2, Al, Mg, Cr2O3 and MnO in the saprolite, the statistical shift across the sub-domain boundaries were less distinct or of lower magnitude but did not exhibit a clear continuous trend. These variables were estimated into both domains and sub-domains with validation indicating both approaches resulted in acceptable results. However, the sub-domain validation appeared marginally superior and with no evidence of an adverse effect from the hard sub-domain boundaries, the sub-domain estimates for these variables were used in the final model.

The Mineral Resource Estimate figures above a 0.5% Ni cut-off for limonite and above a 0.8% Ni cut-off for saprolite are presented in Table 29. (variable grades are in %).

Table 29: Agata North Mineral Resource Estimate as at 18th March 2013.

In comparison to the August 2010 resource there is an increase of 4.1Mt in the Measured and Indicated. Including a Ni grade increase in comparison to the previous estimate (from 1.03% to 1.10%), thus contained Ni metal for the Measured and Indicated has increases by 21% (from 307kt Ni to 373kt Ni).

Nickel grade-tonnage curves for the Measured plus Indicated resource at 0.05% incremental cut-offs shown for the domains and sub-domains are shown in Figure 31 to Figure 36.


Figure 31: Grade-tonnage curve, Measured + Indicated, Limonite.


Figure 32: Grade-tonnage curve, Measured + Indicated, Saprolite.

Figure 33: Grade-tonnage curve, Measured + Indicated, Upper Limonite.


Figure 34: Grade-tonnage curve, Measured + Indicated, Lower Limonite.

Figure 35: Grade-tonnage curve, Measured + Indicated, Upper Saprolite.


Figure 36: Grade-tonnage curve, Measured + Indicated, Lower Saprolite.

14.5 Interpretation and Conclusions

The presence of large areas of an exposed Ultramafic along the Western Range, an upthrust ridge east of the Philippine Fault, has provided a location for lateritic weathering of the ultramafic. The area known as Agata North has been enriched within the laterite profile in Ni and Co.

The ANDP has two distinct geomorphic features that have influenced laterite formation and consequent nickel enrichment. The Eastern part of the delineated body has a moderate relief whose bedrocks are exposed in ridge tops and in the nearby creeks. The Western laterite occurs on a low relief terrain and with no exposures of bedrock on its hillcrests. In the Western area, the laterite is well developed and contains thick and highly mineralized limonite/saprolite. The Eastern Laterite Zones contain some boulders within the laterite profile. Its limonite zone is usually thinner.

The laterite profile in the ANDP consists of the ferruginous laterite, limonite and saprolite zones or horizons, and the saprolitic rock, from surface to increasing depth. The limonite zone is characteristically iron oxide-rich, where the predominant minerals are hematite, goethite and clays, and with moderate nickel content (over 1%), which overlies the saprolite zone that has much less oxidised, is magnesium -rich, and has a slightly higher nickel content than the limonite horizon, with grades in both zones generally at their highest near or adjacent to the contact zone.

This report is based on the data that were produced and compiled by MRL. Data verification performed by the author found no discrepancies in the sampling and analyses that biased the data set. Hence the database is considered adequate to meet industry standards to estimate mineral resources.


The resource was calculated by Quantitative Group using Ordinary Kriging as the estimation method. Both the limonite zone and the saprolite zones were estimated independently as the form of mineralisation in both zones were unique and could not be used for comparative statistics. Each of the limonite and saprolite zones were further subdivided and specific elements re-estimated to account for both geochemical and mineralogical variation seen within the major lithologies. The measured and indicated resource estimated from this report is as below:

33,938,000t ore @ 1.10%Ni, 0.05%Co, 22%Fe

The cut-offs applied to the resource were 0.5%Ni for Limonite and 0.8%Ni for Saprolite (as per the previous estimates completed upon the ANDP, (Cox, 2008 2009a 2009b, Gifford 2010). The last resource calculated on the ANDP (Gifford, 2010), had the following tonnage and grade:

29,790,000t ore @ 1.03%Ni, 0.05%Co, 23%Fe

Variations in grade can be explained by the application of a grade restrictive delineation between the upper and lower saprolite and variation in tonnes are explained by the restriction on the influence of lower grades within the lower saprolite thus giving a greater tonnage >0.8%Ni estimated (Appendix 6). With the increase in tonnage there is also a tonnage increase in total Ni tonnes (from 307kt to 373kt contained Ni).


15 Mineral Reserve Estimate

15.1 Introduction

This section outlines the pit optimisation parameters and pit design methodology used to determine the Proven and Probable Mineral Reserve estimate for that part of the ANDP resource amenable to a direct shipping of high iron limonite. The source block model was a 10m x 10m x 1m regularised version of the block model developed by Quantitative Group (QG) in March 2013.

15.2 Pit Optimisation

This section discusses the pit optimisation parameters that were used to define the economic pit limits.

The pit optimisation process was run using Mintec's MineSight Economic Planner software.

The selling price estimate used for pit optimisation was USD 19/wmt FOB. This is a conservative estimate as the average selling price advised by off takers over the last 18 months has been USD 24/wmt FOB, and the base case sale price used in this study is USD 22/wmt FOB.

The overall slope used in the pit optimisation process was 34o. This is conservative given that

the outer walls generally daylight to the natural topography, and the average wall height to base of limonite is typically less than 8 metres.

Ore Mining Cost - The mining cost of ore used in the analysis was USD 10/wmt, inclusive of ore drying, blending, rehandling, road maintenance, environmental, administration, VAT, fees and other services associated with the mining and rehandling ore.

Ore Mining Cost - The mining cost of waste used in the analysis was USD 7.50/wmt, inclusive of road maintenance, environmental, administration, VAT, fees and other services associated with the mining waste.

Barging Cost - The barging cost used in the analysis was USD 2.00/wmt inclusive all services associated with barging operations.

The pit optimisation process was rerun using MineSight Economic Planner software to generate an optimised pit surface that was used as a basis for pit design. The pit optimisation process was rerun using a net value technique based on a pre-tax margin of USD 7.00/wmt for material grading higher than 44 Fe%.

15.3 Pit Design Parameters

The pit surface generated was trimmed of non-contiguous or spotty mining areas, zones less than 1.5m thickness, and areas on slopes considered too steep to mine. This formed the basis for the pit design using overall batter slope assumption of 36

o.

Whilst the depth from natural surface to the base of limonite varies up to 10 metres at Agata North, the height of the outer pit walls is generally below 5 metres.

Most of the roads and ramps are of a temporary nature, and have been predominantly confined within the pit extents. All roads within the pit were designed at a width of 15 metres (including safety berm and drain) at a maximum gradient of 10%.

A perspective view of the pit design for Agata North is shown in Figure 37.


Figure 37: Agata North Pit Design (3m benches) and main road network

15.4 Mineral Reserves

The DSO Mineral Reserve is based on the designed pits at Agata North. The Proven and Probable DSO Reserves are shown in Table 30.

The Proven and Probable DSO reserves are based on a cut-off grade of 44 Fe%. A 44 Fe% cutoff was chosen as at this cutoff grade the average grade of Limonite equates to the marketable shipping grade of 48 Fe% in current and historical high iron DSO markets.

Table 30: Mineral Reserves

Classification Horizon M dmt M wmt Ni% Co% Fe% Al% Mg% SiO2% Proven

Limonite 0.18 0.26 1.00 0.11 47.1 3.0 1.6 5.6

Saprolite

Subtotal 0.18 0.26 1.00 0.11 47.1 3.0 1.6 5.6

Probable Limonite 6.61 9.44 0.93 0.11 48.3 3.4 0.5 3.0

Saprolite

Subtotal 6.61 9.44 0.93 0.11 48.0 3.4 0.5 3.0

Proven + Probable

Limonite 6.79 9.70 0.93 0.11 48.0 3.4 0.5 3.1

Saprolite

TOTAL 6.79 9.70 0.93 0.11 48.0 3.4 0.5 3.1


16 Mining Methods

TVI will employ a contour mining system that involves several phases including the following:

Pre-mining drainage works and land clearing

• Overburden Removal and Storage

• Ore Mining, Ore Stockpiling and Ore Rehandling

• Progressive Rehabilitation

16.1 Introduction

Mining operations will be maximised in the dry season, and no areas will be disturbed until drainage control measures and erosion control facilities such as settling ponds, fascines and/or mini rock dams have been installed to minimise erosion and siltation.

16.2 Site preparation

Land clearing will commence ahead of mining and includes clearing of shrubs, and removal of humus just ahead of overburden removal. Dozers, excavators and trucks will undertake this work. This material will be stockpiled at designated areas for use in future rehabilitation works.

Prior to any earthworks being carried out, excavators and dozers will be used to construct drainage and diversion channels to direct runoff into settling and sedimentation ponds.

16.3 Grade control

To ensure that optimal material classification will be implemented during the pre-development and mining stages, considerable attention will be committed to grade control prior to and during mining operations.

Face/slope sampling at 3 meter intervals between sample channel/cut and/or XRF grade control monitoring will be carried out during mining. One sample/reading shall be collected for every one meter at the channel. Samples will be dried, split and assayed at an onsite laboratory.

Colour coded ribbons will be installed at the face and on benches signifying the grade and classification of the ore thus aiding the excavator operators and grade control personnel on the type of material being excavated.

Grade control personnel will be assigned to active mining areas as required.

16.4 Excavation and Haulage

Mining is planned initially, as simple benching operations using hydraulic excavators. Generally an area to be mined will be developed with an on-contour terrace, bench or road. The maximum bench height will be 3 metres.

Ore will be loaded into either 30 tonne capacity articulated mining trucks or 25 tonne on-highway trucks, depending on bench or weather conditions. The trucks will operate on unsheeted bench roads or sheeted permanent mine haul roads with gradients up to 12% (articulated trucks), but generally between 5-10% gradients. It is has been estimated that bench and weather conditions will be suitable for haulage from the pit using on-highway trucks only 50% of the available time, with the remainder of time allocated to utilisation of articulated trucks in wet or soft bench conditions.


The trucks will haul ore to the main stockpile are on the plateau where it will be dumped on the appropriate stockpiles according to its material type categorisation.

A lower bench will be developed once the bench above has advanced sufficiently to allow for a 15m working bench width. The excavator will retreat to the position where initial bench development commenced to develop the new bench.

The mining schedule is based on 2-3 areas being mined at any given time; however one or more fleets could work on separate benches within one area, depending upon operational and blending requirements.

16.5 Ore Stockpiling and Drying

Stockpiling will be done at the main stockpile area on the plateau. Grade controllers will control dumping onto various stockpiles in accordance with material categorisation based on iron, nickel and phosphorus grades.

Ore will be dried using a combination of excavators and front end loaders and diligently sampled to ensure that the ore meets moisture criteria for shipping prior to rehandling. This is targeted at or below 35% moisture content.

16.6 Topsoil and Overburden Disposal

Topsoil and overburden material removal will be carried out by hydraulic excavators, loading 30 tonne capacity articulated mining trucks for transport to overburden dumps, stockpiles, or mined out areas.

Throughout the DSO mine life, the location of topsoil and overburden dumps will be optimised to minimise erosion, runoff, and rehandle haulage distances.

16.7 Road Sheeting

Road sheeting will be sourced from suitable sub-grade material from the limestone quarry which is approximately 3.5 km from the pit. The road sheeting material will be loaded into either 30 tonne capacity articulated trucks or 25 tonne capacity on-highway trucks, and hauled/placed/compacted in 300 mm thick layers using dozers, graders, water trucks and a rollers.

Table 31 shows the allowance for road sheeting materials over the life of the project.

Table 31: Road Sheeting

Year 1 1-3 4-11

Sheeting Km 10.4 5.0 3.5

16.8 Fleet selection

Fleet selection was based on a combination of criteria with consideration to production requirements, operational flexibility, minimum mining widths and ability to operate continuously in light to moderate wet weather conditions.


The primary fleet will consist of a 36 tonne hydraulic excavators loading unit and 30 tonne articulated dump trucks. The secondary fleet will consist of a 22 tonne Front End Loaders and 25 tonne on-highway trucks. Additional 36 tonne hydraulic excavators will provide backup support for the primary and secondary loading units as well as providing loading capacity at the limestone quarry and functioning as an ancillary unit for drainage, environmental and rehabilitation works.

Trucking requirements, cycle times and average truck speeds were determined using Caterpillar Fleet Production Cost (FPC) software. The trucking requirements fluctuate throughout the mine life due to fluctuation in haulage distances.

Tracked dozers (150 kW) will be utilised for pit development and floor maintenance, and stockpile and dump maintenance, and rehabilitation works.

Motor graders (145 kW) and Water Trucks will be utilised to maintain pit haul roads, the port haulage road and all access roads on the project site.

16.9 Ore Haulage

The secondary fleet (22 tonne Front End Loader and 25 tonne on-highway trucks) will be primarily used for haulage from the Pit stockpile to the Port Loading facility.

The Pit stockpile is located 3.5 km from the Port Loading facility. Samples will be taken from trucks enroute to the Port Loading facility, composited and assayed to ensure shipments comply with iron, nickel and phosphorus grade, and moisture content specifications.

16.10 Drainage and sediment control

During construction, diligent effort will be made to minimize the duration of soil exposure by scheduling earthworks during the dry season and completing remedial works as soon as possible after grubbing, retaining existing vegetation where possible, and grading disturbed areas to a stable slopes.

Drains will be developed to divert water from entering disturbed areas. The general channelling of the water from benches and mine roads will be toward areas with space and elevation adequate for settling ponds or sumps. These ponds and sumps will be positioned as close as possible to the disturbed area.

Reduced runoff velocities will be achieved by using gentle drainage grades, lining erodible soils with suitable material (rip-rap or brush), construction of check dams in ditches, and sizing the ditches to handle the expected runoff from precipitation.

A critical element of the storm water and runoff management is the maintenance of the drains and sediment retention structures. This entails periodic removal of sediment load, proper disposal and encapsulation of the sediment.

16.11 Environment and rehabilitation

Rehabilitation will commence after mined-out excavations are backfilled and in-pit dumps are established. The details of the work programme within a given area will depend on the local bench configurations and ultimate landform design. Some small steep benches will be left exposed, while mined areas will be backfilled and graded to long-term stable slopes.

Buffer zones will be set up along the slopes of haul roads and at the margins of the pit extents. The buffer zones will perform filter, barrier, and sink functions for the projects emissions and effluents.


The progressive rehabilitation methodology will minimise the extent of disturbance and the time of exposure of disturbed areas.

Mitigating measures such as sumps, fascines, mini rock dams, and settling ponds will be constructed to minimize the impact of erosion. The fascines and mini rock dams will prevent sediments from moving downhill and impacting areas adjacent to the construction or mining sites. The settling ponds will slow down water and provide some time for the sediment to drop out of suspension leaving a cleaner water effluent.


17 Recovery Methods

17.1 Introduction

There will be no ore processed at the project site. Blending and ore drying activities will occur at the Pit stockpile on the top of the plateau approximately 3.5km from Payong Payong.

Following blending and drying, all ore will be trucked to a Port Loading Facility at Payong Payong bay and directly unloaded onto barges that will be moored at two berth causeway.

An Assay Laboratory and a Shipping Office will be located adjacent to the Port Loading facility.

17.2 Port Loading Facility

This section describes the Port Loading Facility proposed for the ANDP. The design basis is outlined together with a detailed process description of each plant area, an outline of the major equipment within each area and ancillary facilities such as utilities and reagents.

17.3 Design basis

The Port Loading Facility presented in the FS was developed from the concept of establishing a causeway and barging facility at Payong Payong bay which is on the coast adjacent to the Agata North deposit.

The criteria was to design a facility capable of handing up to 2.5M wmt of High Iron limonite ore per annum. Vessel characteristics that are expected to utilize the facility were given in the requirements provided by TVI. The vessel is about 5,000 DWT barge and its properties were used to evaluate the mooring forces to be applied in the structural design of the mooring dolphin structures.

17.4 Design concepts

17.5 Location

The selection criteria for the location of the Port Loading facility was based on the following:

• vessel characteristics

• hydrography

• geotechnical characterization

• environmental conditions

Figure 38 shows the preferred causeway position near the proposed access road development. This site is preferable because it does not interfere with the flow of nearby creeks, and is accessible to a possible site for a jetty for a potential on-site processing facility.


Figure 38: Location of Causeway

The barging and shipping operations are scheduled to occur for 10 months of the year on a continuous basis of 24 hours per day, 7 days per week.

17.6 Design criteria

17.7 Introduction

The design concept of the proposed causeway allowed for two barges to be moored and loaded at the same time with sufficient space for truck manoeuvrability. The causeway will also serve as a temporary ramp for the delivery of equipment, construction and heavy lift materials.

Hydrographic survey mapping, conducted by EGB and Associates on the topography of the area surrounding the proposed loading facility, was indicated in the Geophysical Investigation and Geophysical Survey Report and was used as reference to define the water depth. The survey data was initially traced and became the source of the seabed profile elevation. Hydrographic survey points and the cad file of the bathymetric survey were later issued for design work.

The Geotechnical Investigation and Geophysical Survey Report, November 2010 showed the four drill holes at the onshore side of the proposed project location conducted by a local soil investigation subcontractor.

Hydrodynamic and meteorological data adopted were based on the GHD Port Facilities Report for Agata Nickel Project done in December 2010.

A site inspection on the proposed location and its surrounding area was carried out by two PTCC engineers from March 4 to March 6, 2013. Photos, notes and other relevant data were collected.


Based on the GHD report, the prevailing wind pattern in the area are the North East and South West winds. South West wind occurs during July to October. North East monsoon winds occur from October to March, but the ANDP is relatively sheltered from these. During the course of the inspection at the proposed site, it was observed that there are four (4) waterways along the shore that shows signs of scouring as evident by exposed roots of small trees. Corals are approximately within 10m off the shore.

Figure 39: Locations of creeks on shoreline

The particular criteria adopted in the Port Loading Facility site selection include:

• Caters two (2) - 5,000DWT barges at causeway

• Caters one (1) 50,000 DWT bulk carrier at the jetty (in the future)

• Least distance to possible stockpile/s area

• Least distance of ore source and access road to the shoreline

• Minimal interference of creeks flow/discharge

• Nearest distance to rock material sources

• Nearest location to uniformly aligned seabed at El. -15.0 m for jetty (in the future)


Applicable Codes and Standards

• Design Manual for Ports and Harbor Facilities in the Philippine Port Authority (PPA) - 1995

• National Structural Code of the Philippines NSCP, Vol. I Buildings, Towers and vertical Structures 5th Edition - 2001

• American Institute of Steel Construction (AISC), Manual of Steel Construction, 9th Edition

• American Concrete Institute (ACI Publications), ACI 318-08 for Reinforced Concrete and ACI 315 for Detailing of Concrete Reinforcement, 2005

• American Welding Society (AWS)

Basic Design Loads

Dead Loads

Concrete 24.00 kN/m3

Steel 77.00 kN/m3

Soil 18.00 kN/m3

Salt Water 10.00 kN/m3

Live Load

Truck load 10 wheeler truck

Environmental Loads

Wave Wave height = 2.0m

Wind loads Zone 2 - 200kph

Seismic Loads

Zone 4; z = 0.40

Vessel Parameters

Carrying 5,000 DWT

Overall Length 80 m

Beam 22 m


Laden Draft 4 m

Vessel Type Barge

Berthing Type Front Berthing

Tractive Force 50 Tonnes

Materials

Concrete

All materials and workmanship shall conform to the latest building code of American Concrete Institute (ACI-318-08). The minimum compressive strength at 28 days (f’c) for each class of concrete shall be as follows:

Steel

All reinforcing steel shall be deformed bars conforming to ASTM 615 (AASHTO M31) with the following minimum yield strengths:

Rocks

All rocks shall conform to the specification:

Earthworks

Earthworks shall conform to DPWH 2004 Specification:


Design

The rock fill causeway design is shown in Figure 40.

Figure 40: Rock FIll Causeway Design

The rock filled causeway consists of fill core materials with run-off quarry rocks weighing 20 kilograms to 1.5 tons. This fill material is protected by armour rocks weighing 1.5 to 3 tonnes. In this scheme, the causeway needs a large supply of rock and preferably the source of material should be nearer to the site to avoid the high cost of hauling.

No permanent surface of the causeway, such as concrete slab, is recommended to avoid unnecessary replacement due to cracks since allowance for settlement/consideration of the fill materials is taken into consideration. The surface will instead be a 300mm thick base course and a 500 mm thick sub-base course. A geotextile lining shall be laid between the core fill materials and the armour rocks to prevent the fines from coming out.


Figure 41: Causeway Cross Section

The approach causeway is about 10m wide to cater two ten wheeler trucks with a capacity of 20 cubic meters during the mining operation. The length of the causeway is measured from the shoreline to the point where El -5 is located to accommodate a 5000 DWT barge.

Based on the bathymetric survey the resulting length is approximately 120m, however a 160m length is recommended. The length is broken down into a 100m long approach while the jetty head is a 60m long rock-fill structure and 70m wide to allow manoeuvrability of at least eight trucks transporting the nickel ore. Armour rock weight ranges from 1.50t to 3t while core rocks weight is from 20 kg to 1.50t. The two materials are separated by a geotextile lining.

Four mooring dolphins having a dimension of 3.5m x 3.5m x 1.2/1.5m thick are provided to secure the ship while in berth. The mooring dolphins are supported by steel piles. Additional mooring dolphins with a dimension of 1.50m x 2.50m x 1.20m thick were also provided. 50t mooring bollards are also provided to secure the ship during berthing.


Figure 42: Port Loading Facility Layout and Bathymetry

Construction Materials

The selected scheme will require a large amount of fill materials and armour rock as well as materials for sub-base and base course,

The preferred source of materials is Payong Payong limestone deposit which is within 2km of the proposed site. Results from 4 diamond drill holes indicated that there is a contiguous limestone unit averaging 55 metres in thickness over an area exceeding 3.6ha, and in excess of 5 million tonnes of limestone.

Transportation will be by 30t articulated trucks via an access road from the material source to the Port Loading Facility site.

Construction Timeline

Figure 43 shows a construction timeline encapsulating the key elements of the construction activities, the relationship among the activities and the respective time frame for each activity. The construction schedule is based on the 2-3 km distance of the material source to the site.


Figure 43: Causeway Construction Timeline

17.8 Assay Laboratory

This section describes the Assay Laboratory for proposed for the ANDP.

17.9 Design Basis

Based on grade control, blending and QC for shipping requirements, the ANDP assay laboratory will require to carry out sample preparation and assaying on up to 300 sample per day for elements including but not limited to Nickel, Iron, Cobalt and Phosphorus.

Assay Laboratory equipment requirements and cost estimates were provided by Intertek McPhar (Manila). Table 32 lists Assay Laboratory equipment requirements.


Table 32: Assay Laboratory requirements

Sample Preparation Equipment

Hot air circulating Oven 1 ea

500L Drying Oven 1 ea

Analytical Balance - 30Kg/ 0.1g 1 ea

Analytical Balance - 1.2Kg/ 0.01g 1 ea

Compressor 15HP screw, With Air Drier, & Filters 1 ea

Dust Extraction System 1000cfm & Ducting 1 ea

LM2-P pulveriser 380v 60hz 3ø 2.2 kW 2 ea

Work station 1200*750*900h, bottom exhaust ( LM2) 1 ea Terminator crusher 380v 60hz 7.5hp+Safety hopper & enclosure 1 ea

Sample Splitting Hood 1500*800, 1 ea

Riffle Splitter 11mm chutes 1 ea

Sample Storage Shelving 1 ea

Sieves- 200mm 4 ea

Sample prep Benches 2 ea

Balance Room Equipment XRF Press

Balance Analytical 310g/ 0.001g 1 ea

XRF Pellet Press ( 25T)- Manual 1 ea

XRF - 40mm Die Set 1 ea

XRF- Dessiccator 1 ea

Calibration Mass weights (certified)- Kit Class F1/F2 1 ea

Calibration Mass weight 1Kg 1 ea

Calibration Mass weight 2Kg 2 ea

Calibration Mass weights 20Kg? 1 ea

Instrument Room –XRF

XRF- EDS Bench top, including Vacuum pump. 1 ea

XRF- UPS 6KVA 1 ea

Computer

Computers, HP Compaq 8200 Elite MT 1 ea

Microsoft Office Software 1 ea

UPS for PC, APC ES 500VA 1 ea

Laser Printer HP 2055DN 1 ea


17.10 Buildings

The Assay Laboratory and Shipping Office will be located in the same complex adjacent to the Port Loading Facility. Figure 44 and 45 show perspective views and the general layout of the Assay Laboratory and Shipping Office.

Figure 44: Perspective view of Assay Laboratory and Shipping Office

Figure 45: General Layout of Assay Laboratory and Shipping Office


17.11 Power, Water and Utilities

Power to Assay Laboratory and Shipping Office will be supplied by a 50kVA generator.

The Payong-Payong creek will supply the water requirements of the complex. This water will only be used for bathing and daily requirements of the camp for cleaning, whilst potable or drinking water will be supplied by a water refilling station in nearby municipality.


18 Project Infrastructure

18.1 Introduction

This section presents infrastructure requirements for the proposed ANDP.

The existing infrastructure in the vicinity of Agata North consists of MRL's exploration camp and compound adjacent to the deposit, and the Colorado road; a gravel road of about 5 m width which provides access to Jabonga in the north.

Key factors that have influenced the current proposed location and layout of the infrastructure for the project include:

• the site topography and current land usage

• accessibility to the Pan-Philippine highway national road

• proximity to the Colorado road

• proximity to the laterite deposit and the Payong-Payong bay

The infrastructure has been developed on the following basis:

• General Infrastructure requirements assessment; such as a base camp, ore transport road and communications.

• Temporary Construction Facilities assessment; such as the construction camp, warehousing, lay down areas, temporary power supply and waste disposal which will be required during construction of the Port Loading facility.


18.2 Infrastructure Study

Table 33: Infrastructure Study

Task Comment

Delivery of ore to Stockpile Design developed for ore haulage route including access road to Pit Stockpile and Port Loading facility

Fresh water storage, supply and distribution

Raw water requirement has been determined and supply sources identified.

Power Supply Diesel gensets will used for the duration of the DSO operations

Fuel storage, supply and distribution

Fuel storage requirements have been determined based on potential disruption of supply to the gensets, mining fleet and general site support vehicles for one month.

Civil works including accommodation, site offices, stores and maintenance workshops and miscellaneous infrastructure identified during the study

Preliminary sizing of service buildings, construction camp and miscellaneous infrastructure has been undertaken

Communication & IT facilities

Design for communication and IT facilities for buildings, offices, base camp and other facilities including the mine support facility, have been completed.

The overall plan layout was developed during the feasibility study as follows:


Figure 46: Overall Layout Plan

18.3 Transport Infrastructure

18.4 Road summary

An existing gravel road of approximately 5 m width provides access to the area from the main sealed road at Tubay. This road passes through La Fraternidad and Binuangan villages and continues on to Jabonga at an elevation varying from 20 to 60 m above sea level.

This existing road will be upgraded to be 6 m for two lanes of light vehicle traffic. This road will be the public road as before since the mining and process plant activity will have an exclusive operational road as the JV owned private road.

18.5 Access roads

The project’s mine site is accessible by any land vehicle from Butuan City or Surigao City via the Pan-Philippine Highway and the connecting municipal roads.


The access road to the ANDP is from Lawigan/Jabonga to the mine site by municipal road.

The access road was upgraded to a farm to market road by MRL in 2006. The road requires resurfacing and widening in several locations to handle the increase in light traffic, and a back-up to sea transportation.

18.6 Site roads

Site roads are described as the roads connecting facilities and areas for the ANDP on-site. These roads include the haul roads which are used for transporting the ore from the mine site to stockpile area on the plateau, ore from the stockpile to Payong Payong Port Loading Facility, sheeting material from the quarry.

Figure 47: Road Sections

Haul roads

The purpose of the haul roads is for the transport of ore and road sheeting materials using either 30t articulated trucks or on-highway trucks, as well as general access for light vehicles, ancillary fleet and service vehicles.

Public use will be prohibited in this area with the concern for HSEC and incidents with large haulage trucks and mine support vehicles.

Haul trucks

The major vehicles using the Stockpile to Port haul road will be Isuzu Giga, Volvo Truck FMX type or similar type with a 25.2 tonne pay-load capacity, gross vehicle weight (GVW) of


approximately 48 metric tonnes. The haul road will periodically be used by 30 tonne capacity articulated trucks hauling ore from the mine to the ore stockpile area.

Typical haul trucks, and specifications for articulated and on-highway trucks are shown in Figure 48.

Figure 48: Typical Haul Trucks


Table 34: Road Development Summary

Section Description

Category

Existing

Design

Width Lengt

h Width Pavement

Section 1

Colorado Road - Main Gate

Upgraded access road

4 m

3.2km

road = 6 m base course = 15 cm

shoulder = 2x1 m

Section 2

Main Gate - Mine

New road

- 2.0km

road = 9 m subbase course = 30 cm

Section 3

Mine Area - Port

New road

- 4.0km


Section 4

Quarry Access Road

New road

- 1.2km


Haul Road parameters

• Batter slope : Cut Horizontal : Vertical 1:1

• Rill slope : Horizontal : Vertical 2:1

• Maximum road gradient : 10%

• Maximum design speed : 40 km/hr

• Road design life : 10 years with regular maintenance

18.7 Water Supply

The Mantiawas Creek supplies the water requirements of the camp. This water is only used for bathing and daily requirements of the camp for cleaning, garage and the nursery, whilst the potable or drinking water is supplied by a water refilling station in nearby municipality.

Raw water infrastructure was developed for mining, as well as domestic requirements such as administration facilities, base and construction camps.

Preliminary raw fresh water requirements are:

• 10 m3/h for construction camp

• 50 m3/h for the Base Camp


The Tubay River is the fresh raw water source for dust suppression on site roads. It flows from Lake Mainit at the north to Tubay bay at the south. The Kalinawan River meets the Tubay River near Santiago Municipality.

The GHD road and river survey mentioned the Tubay River advantages were:

• Fresh water

• Adequate flow rates

• Water available in all seasons

Figure 49: Tubay River with Lake Mainit in background

For the anticipated routine floods in the area, as stated in GHD’s Hydrological Study report for the Tubay (Kalinawan) River, the intake pump will be mounted on a pontoon and will pump the water to a pond at higher ground level nearby. From this point water will be pumped to the base camp and other facilities.

The pump system has redundancy built in with duty and standby pumps allocated for all areas with remote monitoring and start capacity provided and priced accordingly in the capital estimate.

A Reverse Osmosis plant will be installed at the base camp for potable water supply.

18.8 Power

The MRL Agata Camp is connected to the existing cooperative power supply with a single phase, secondary line, approximately 500 meters away from a single 50KVA transformer. This transformer is supplying the barangay of E. Morgado, Santiago, Agusan Del Norte. The lines supply the whole village including the activity/equipments like pumps, motors, and ball mill of the Small Scale Miners (SSM) within the barangay.


The primary line will be extended and 100 KVA transformers installed to supply the required peak consumptions of about 80 KVA to the base camp.

Power requirements during construction will be supplied by 150KVA diesel generators.

18.9 General Service Buildings and Ancillary Facilities

General service buildings and ancillary facilities have been assessed for supporting the DSO operation, maintenance, administration and amenities.

These buildings are categorized as:

• Service Buildings

These buildings are related to service functions for diesel generator buildings.

• General Buildings

These general buildings include offices and mine workshop.

18.10 Buildings

All buildings and facilities will be located within the MPSA area.

Table 35: Building Facility

Location Building Requirement General Description

General

Administration • Offices • Designed for 45 persons

Gate house / Barracks • Building • Security Office area for 20 persons

HSEC and HRD • Building • Designed for 100 personnel

Other facility: ablutions, conference room, meeting room.

Area allocated 100 m x 50 m.

Mining Compound • Workshop

• Mine Office

• The Workshop will house the mining contractors office, heavy and light vehicle maintenance equipment , welding bays, tools stores, and toilet facilities.


All buildings will be fabricated on-site and based on the following:

• 100 mm reinforced concrete slab using concrete that shall have a minimum UCS of 3000 psi at 28 days

• Walls constructed from Concrete Hollow Blocks with minimum UCS 45psi at 28 days, with PVC window and timber door frames.

• Light metal truss roof structure with Duracoor sheets

18.11 Base Camp accommodation

Base Camp means the permanent accommodation facilities for the company employees who are working for mining and shipping operations, or supporting departments.

The base camp will cater all staff. It is expected that some of the more senior locally recruited staff will stay in the existing nearby towns.

The following formed the basis for the feasibility study:

• Current indications are that there will be up to 250 people in mining and associated operations.

• The Base Camp was designed to accommodate up to 300 staff and employees.

The base camp will be located on the north eastern extent of the Agata North area, adjacent to the access road.

Figure 50: Base Camp layout


18.12 Buildings

The buildings for the site are proposed as follows:

Table 36 - Village Buildings

Building Quantity Description

VIP/Guest House 1 building 180 m2

Staff Housing 3 buildings 9 m2

Ladies Dormitory 1 building 280 m2

Rank and File 2 buildings 260 m2

Laundry & Bath Areas 3 buildings 160 m2

Mess Hall 1 building 420 m2

Club House 1 buildings 330 m2

Sports facility 2 complex 270 m

2 basket ball & 81 m

2 badminton

court

Power House 1 building 40 m2

Administration 1 building 200 m2

Mine Office 1 building 150m2

Mine Workshop – Warehouse 1 building 670 m2

The building type will be fabricated on-site and was based on the following:

• Floor system – reinforced concrete with ceramic tile

• Structure – concrete hollow block and light steel truss with PVC window and timber door frames

• Wall - typical prefabricated gypsum

• PVC piping and plumbing

• Insulation – insulation and buiding foil wrapping to roofs.


Figure 51: Plan Layout for Accommodation buildings and Hall

Figure 52: Perspective View of Mine Workshop


Figure 53: Plan Layout for Mine Workshop


18.13 Base Camp services

Base Camp services are provided to support the Base Camp daily activities and summarised as follows:

Building/Plant Quantity/Capacity Description

Raw water supply

• Raw water storage 5 m x 5 m x 3 m

• submersible pump 50 m3/day capacity

Domestic water system

• Transfer pump from storage to WTP

50 m3/day capacity Including piping – valve

• RO Treatment Plant 50 m3/day capacity Clean water product into 2x

10,000 L PE tank

• Water reticulation By gravity feed to buildings HDPE piping– throughout the village building

Sewage system

• Septic Tanks

Power supply 2 buildings Gensets

Communication system Mobile Mobile service / sat dish

Security 1 gate post

Fenced perimeter

18.14 Construction camp

The small construction camp will provide the temporary construction accomodation facilities for TVI and contractor personnel who would be engaged on-site during the construction of the Port Loading Facility and the haul and access roads from Payong Payong to connect to the Colorado road.

The camp has been designed to accommodate initially 50 personnel.

The camp would be located adjacent to the Payong Payong Port Loading Facility site.

The accommodation camp consists of:

• Staff accommodation and non-staff accommodation

• Kitchen and Mess Hall

• Camp office, HSE and Security

• Diesel Genset


• Firefighting equipment

• Septic Tanks

Construction Camp Buildings

The buildings will be fabricated on-site and were based on the following:

• Floor system – reinforced concrete.

• Structure; concrete hollow block and light steel truss with PVC window and timber door frames

• Wall’s - typical prefabricated gypsum

• PVC piping and plumbing

• Insulation - insulation and building foil wrapping to roofs.

18.15 Water

The Payong-Payong creek will supply the water requirements of the construction camp. This water will only be used for bathing and daily requirements of the camp for cleaning, whilst potable or drinking water will be supplied by a water refilling station in nearby municipality.

18.16 Sewerage

The camp will be equipped with eight septic tanks.

18.17 Communications & IT Summary

Communication and IT systems were provided for the following areas:

• Administration area and Base Camp

• Mining area including buildings, offices and facilities

• Port area

18.18 Radio communications

A conventional UHF/VHF radio communication and repeater system is provided for communications within the mine, administration and port areas.

18.19 Conventional multi service network

All offices and amenities buildings will be internally connected with TCP/IP Ethernet Local Area Network system.

The data centre will be located in the Administration building.


19 Market Studies

19.1 Recent History of DSO

The unparalleled demand for low nickel DSO began when Chinese steel manufacturers developed a different technology processing low grade nickel ores to produce nickel pig iron (NPI). Nickel laterite DSO with nickel grades of 0.9 - 1.1 Ni% from South East Asian suppliers in the Philippines and Indonesia were consumed by the Chinese to feed blast furnaces, which became a backyard industry.

Nickel laterite DSO exports from the Philippines saw a 1,288% increase in 2006. The price of this low grade DSO reached as high as USD 80 per wmt. At this time the Tubay nickel laterite project (operated by San Roque Metals Incorporated since 2006) approximately 5km south of Agata North was able to complete four DSO shipments. A record of its production schedule showed its DSO was then averaging 1.04 Ni% and 45.7 Fe%. The Zamora group of nickel laterite mining companies in Surigao took advantage of the high demand of low grade DSO with all its 3 mines (Cagdianao, Hinatuan, and Taganito) producing that category of ore in addition to the production of high nickel DSO products which these operations shipped to Japan and Queensland.

In 2007 the pricing of DSO was professionalised and based on a transfer pricing system that was a function of nickel grade tied to LME nickel prices. By August of that year, 1.1 Ni% DSO was being sold in the range from USD 26 - 28 per wmt. There were some Chinese buyers who bought DSO at USD 20 - 24 with a grade of 0.9 Ni%. Also by 2007, the 1.4 Ni% DSO sold at USD 54 - 60 per wmt. By late 2007 several DSO mines in eastern Surigao del Norte were put into operation including projects operated by Carrascal Nickel Corporation (CNC), CTP Construction and Mining Corporation, Platinum Group Metals Corporation and Shuley Mine Incorporated.

The world economic slowdown in 2008 took its toll on metal prices affecting the price of Nickel Pig iron. Also affecting the DSO price was the oversupply of low nickel DSO. Millions of tonnes of this material sat idle in Chinese ports. The price of 0.9 - 1.1 Ni% with minimum 45 Fe% dropped to USD12 per wmt and the market for this product became restricted. Companies such as CNC, who have direct links with Chinese steel producers, were still able to market the 0.9 - 1.1 Ni%. Overall, the market for DSO became selective in that only the +1.4% Ni% sustained its relatively higher price (USD 24 - 30 per wmt for 1.4 Ni%, USD 56 for 1.7 - 1.9 Ni%). The +1.4 Ni% DSO was exported mostly to China, Japan and Australia.

By 2009 iron content for DSO became an important requirement. Where before minimum 45 Fe% was required for 0.9 – 1.1 Ni% DSO, it increased to 48 Fe%. DSO, of grade specification 0.9 - 1.1 Ni% and minimum 48 Fe%, sold at USD 12.50 per wmt. The continuous increase in the price of iron ore in the world market positively affected the price of what now has become a new DSO category; high iron DSO.

Table 37 below shows nickel laterite DSO production in Caraga Region of the Philippines for CY 2011 to 2012.


Company 2011 2012

wmt wmt

Cagdianao Mining Corp.-Dinagat Island 273,139 182,378

Hinatuan Mng. Corp.- Hinatuan Island 1,789,433 1,601,892

Taganito Mining Corp.- Claver, SDN 728,703 1,266,026

Platinum Group Metals Corp.- Claver, SDN 2,805,646 3,614,058

CTP Const. and Mining Corp.-Adlay Project 2,452,425 3,192,644

CTP Const. and Mining Corp.- Dahican Project 564,640 27,563

Carrascal Nickel Corporation – SDN 4,814,622 3,177,783

Marcventures Min. & Dev. Corp-Cantilan, SDS 383,467 578,194

SR Metals, Inc.-Tubay, AND 967,781 2,080,033

Oriental Synergy Mining Corp. - Dinagat Is. 98,258 353,009

Claver Mineral Dev. Corp. / Shenzhou-SDN 1,341,501 566,981

Pacific Nickel Phil. Inc. / Shuley Mine Inc.-Nonoc Is 670,744 -

AAM-PHIL Natural Resources Exploration-Dinagat Is. - 154,325

Adnama Mining Resources Inc.-Urbiztondo, SDN 438,931 2,361,793

Sinosteel Philippines H.Y. Mining Corp. - 48,612

Total 17,329,290 19,205,291

Table 37: Production in Caraga Region of the Philippines for CY 2011 to 2012

19.2 Recent high iron DSO Market Situation

Figure 54 show actual DSO pricing for the Philippine market, expressed as USD/wmt FOB for 2013.

Figure 54: USD/wmt FOB for 2013 (source: www.ferroalloynet.com)


Figure 55: High DSO pricing since January 2012

TVI has been in discussion with several potential off takers since early 2013. Historical pricing provided by China Nickel Resources Holdings since 2012 is shown in Figure 55

The spot prices attracted by high iron DSO commodities are readily available from several sources including:

• www.ferroalloy.net

• www.mysteel.com


19.3 Forecast Iron Market Situation

Whilst high iron DSO shipping prices are not directly related to iron ore prices, the medium term outlook for iron ore is steady; although declining by up to 10%.

Table 38: Global Iron Ore price $/t forecasts (Source: Metal Expert LLC, January 2013)

19.4 High Iron DSO off takers

Over recent years, both TVI or MRL have been in discussion with numerous off takers who have expressed an interest in their Agata North high iron DSO product. Potential off takers include but are not limited to:

• China Nickel Holdings Limited

• Weil Group Resources

• MRI Trading AG

• Transamine Trading

• Trafigura Group

• Cliveden Trading AG


A list of DSO buyers provided by the Mines and Geosciences Bureau in Region XII of the Philippines in 2013 included:

• Burwill Resources Limited.

• Shandong Huaxin Industry Co. Ltd.

• Minecore Resources Inc.

• Tewoo Hoperay (Singapore) Pte. Ltd.

• D.H. Kingstone Holding Co. Ltd.

• Tianjin Materials and Equipments Group Corporation

• Honour Metal Trading Co. Ltd

• Hua Yi Copper Holding Ltd

19.5 DSO Sales Agreement

TVI entered into a MOU with China Nickel Holdings Limited (CNHL) in April 2013 in respect to the purchase of high iron DSO with the following specifications:

• 0.9 - 1.1 Ni%

• 48 - 50 Fe%

• 2.5 - 3.0 SiO2

• 33 - 35 Moisture%

• 0.0 - 0.01 P%

The essence of the agreement in April 2013 was for CNHL was to buy up to 0.3M wmt of the high iron DSO for the year of 2013 and 1.5M wmt per year from 2014.

Delivery of the first shipment would start within a reasonable period from the time of full completion and development of the port construction and availability of all regulatory licenses and permits by TVI, and actual quantity and date of delivery of each shipment shall be stated in the Sales Contract to be executed by the parties.

The base price, shall have Free on Board terms, and shall be reviewed and adjusted proportionally according to the market situation every two (2) months or every three (3) consecutive shipments; whichever one comes first.

The mechanism for the price adjustment will be based on the published data for low nickel high iron laterite ore from the website www.mysteel.com.

The Sale Price will be varied +/- in respect to variance to base nickel grade, iron grade, and/or moisture content.


Based on the contract price as stated in the Sales Contract, the CNHL shall open a Documentary Irrevocable Letter of Credit payable at sight to cover 100% of the contract value of each shipment within ten (10) days from the signing of the Sales Contract.

CNHL has the right to reject shipments based on non compliance in respect to specifications related to nickel, iron and phosphorus grades, and/or moisture content, or higher than the Transportable Moisture Limit.


20 Environmental Studies, Permitting, and Social or Community Impact

20.1 Overview

The Project as outlined in previous sections will entail the removal of lateritic soils containing high concentrations of iron and nickel for direct shipment to other markets for processing. The depth of materials removal is estimated to be in the range of 10 to 12 meters and will not entail underground mining methods. Also, the planned operations will not include any plant processing or concentrate production. Seven primary and distinct activities will be carried out on a continuous basis over the planned mining period.

• Planning - Quarterly mine planning to identify the areas to be mined, materials handled and economic/cost evaluations.

• Surface Clearing and Topsoil Removal – Tree cutting, clearing and grubbing of surface materials, removal of topsoil and storage of topsoil in a secured area for future use.

• Overburden Removal – Stripping of the overburden materials to expose the higher grade ore and storage of the overburden materials in a secured location for future use.

• Ore Grade Control – Ore exposed by the stripping operations is sampled and tested for quality, grade and other elements affected by the offtake agreements.

• Excavation, Hauling and Stockpiling – Ore meeting the grade and quality requirements is removed by heavy equipment, loaded in trucks and hauled to designated and secured stockpile storage areas.

• Stockpile Management – Stockpiles will be managed by different means to reduce the moisture content within the ore, if required, to enhance the handling characteristics of the ore. Blending or different grade and quality of ores may also be done to better conform to the offtake agreements. Samples from the stockpiles will also be assayed to better define the quality and characteristics of the ore.

• Materials Handling and Ship Loading – Ore that meets to requirements of the offtake agreements will be loaded into trucks and transported to an onsite port for loading into barges. Loading will be direct from the trucks to the barges. The barges will then transport the ore to a larger oceangoing ship for loading and further transport to the market.

Although the approved Mineral Production Sharing Agreement covers an area of 4,995 hectares, the direct ore shipping mining operations will be limited to an area of 195 hectares. Three political jurisdictions will be affected by the Project and include the Municipalities of Jabonga, Santiago and Tubay. All three are located within the Province of Agusan del Norte. All three have expressed their acceptance of the Project during previous consultations and Focus Group Discussions. From the standpoint of the Philippine regulatory environmental permitting and approval process, the Project has secured the key Environmental Compliance Certificate (ECC) and other permits required within the regulatory guidelines. Three other key documents, the Environmental Protection and Enhancement Plan (EPEP), the Final Mine Rehabilitation and Decommissioning Plan (FMRDP) and the Social Development Management Plan (SDMP) have been prepared and are in the review process. Exploration activities within and around the Project area have been ongoing for the past 7 years and resulted in long term interaction with the communities. This has been a positive experience and has allowed for a good understanding of the project by the community. Several environmental and social baseline studies have been completed during this time and provide a good basis for understanding and managing the impacts and issues of the Project. The most current baseline study was produced by Gaia


South Inc. in Year 2012. The majority of information and data provided in this Section is based on that study. Identification of Project Impacts and Control Strategies as they pertain to environmental and social issues are based on the topics identified by the Philippine Environmental Impact Assessment process. These consist of Land Resources, Water Resources, Air Quality and Noise, Conservation Values and Social and Community Values. Mining and support activities will result in changes to the local topography through the removal of soil and rock material. Mining will generally follow the natural contours resulting in a terraced topography made up of benches and uniform slopes. Topsoil and overburden waste materials will be segregated and placed in separate stockpiles within the natural valleys. Impacts and management control measures will primarily focus on landform stability, soil erosion and transport and sedimentation of the streams and rivers. The increased soil erosion potential and exposure of the soils will impact both the groundwater and surface water regimes within and outside the Project area. This includes both the hydrologic regime and water quality. Water management programs will be one of the singular most important impact management control activities to be implemented throughout the Project activities. These activities will include a large number of interception and diversion canals for surface water control and a significant number of sedimentation/water treatments ponds for flood control and water quality treatment purposes. Air quality and noise impacts will be less critical primarily due to the more rural nature of the Project area and limited mining area. Fugitive dust will be the primary air quality impact. Control strategies will rely to some extent on the high rainfall within the area to minimize the dust. Noise impacts will not likely be significant due to the distances to the local municipalities and residential areas. Conservation values include terrestrial flora and fauna conditions, freshwater and coastal marine aquatic resources and oceanographic conditions along the Project area coastline. The terrestrial flora and fauna conditions can be expected to be significantly impacted through the removal of forests and vegetation and the attendant decrease in the area biodiversity. Changes in the topography and landforms and the increased soil erosion will result in physical impacts to the freshwater aquatic resources. Impact control measures will focus on a rapid progressive rehabilitation program to restore the vegetation and soil cover and stream and creek restoration programs to replace the lost aquatic habitat conditions. As with the water management programs within the mining area, similar programs along the Project area coastline will also be one of the singular most important impact mitigation strategies. The coastal marine resources are generally rich in diversity and importance to the local economy. The potential for water quality degradation is high which also translates into a significant potential for negative biodiversity impacts. Impact control strategies include similar water control management facilities, restrictions in the operations areas and strict operations controls during ore handling and shipping activities. Community consultations over the past 7 years have indicated support for the Project with an understanding of the need for strict environmental management controls throughout all phases of the Project. In addition to this, the local communities and local government units are expecting economic benefits from the Project which will allow for the improvement in basic services, increase the economic conditions of the area and increase the quality of life. The presence of other similar mining projects within the region have provided examples of the good and the bad of these operations and provide a basis for expectations of appropriate environmental management programs. Based on previous consultations with the regulatory agencies, there does not appear to be any issues associated with Indigenous People’s claims or cultural/heritage values associated with the Indigenous Peoples. Mine rehabilitation and closure activities will be initiated immediately after the mining operations begin. The mining plan as currently developed will allow for Progressive Rehabilitation to be initiated within the first year of operation and provide for continuous rehabilitation activities throughout the mine life. The


focus of the activities will be revegetation and reforestation, stream restoration and inclusion of agri-forestry programs to enhance post mine life livelihood/community programs.

20.2 Regulatory Requirements

20.2.1 Philippine Environmental Regulatory Framework

Mining in the Philippines is governed by several environment legislations of which Republic Act (RA) 7942 or the Philippine Mining Act of 1995 is the primary legislation. The framework for environmental management and protection is outlined in this Act and the details are identified in the Implementing Rules and Regulations. Implementation of the Act is under the mandate of the Mines and Geosciences Bureau (MGB) which is a line agency of the Department of Environment and Natural Resources. Companies are assigned mining rights over government and mineral reservation areas through the approval of mineral permits or mineral agreements. Mineral exploration shall be undertaken only with an Exploration Permit valid for a period of two years renewable for like periods, but not to exceed a total term of four years for non-metallic mineral exploration of six years for metallic mineral exploration. If exploration activities reveal the presence of mineral deposits sufficient to support a mining operation, a Declaration of Mining Project Feasibility (DMPF) will need to be submitted and approved by the DENR. Once approved, the company will be granted the exclusive rights to explore and operate in the area through a mineral agreement. In addition to mineral permits or mineral agreements, no Project shall operate without an Environment Compliance Certificate (ECC) as provided in Presidential Decree (PD) 1586: Establishing An Environmental Impact Statement System including other Environmental Management Related Measures and for other Purposes. This Decree identifies and sets forth the requirements for initiating and completing an Environmental Impact Assessment (EIA) pertinent to the specific project and project location. A mining project is considered an Environmentally Critical Project (ECP) and requires preparation of an Environmental Impact Statement (EIS) Report to document the EIA Project planning process. The EIS is submitted to the DENR- Environmental Management Bureau (EMB) where it is reviewed by an EIA Technical Review Committee. Upon approval of the EIS, a draft ECC is prepared in concert with the project proponent and the Technical Review Committee. In most cases, a series of conditions are attached to the ECC to further define the roles and responsibilities of the project proponent and the environmental management actions required. These conditions are based on the environmental baseline data, project impacts and management and monitoring programs identified during the EIA process and preparation of the EIS. The draft ECC is then endorsed to the EMB Director for approval and issuance of the ECC with the authority of the DENR Secretary. The project proponent then has five years to begin the project under the ECC. Should the five year period lapse without project implementation, the ECC is considered expired. Two key environmental documents are required as part of the ECC conditions associated with mining projects. These are the Environmental Protection and Enhancement Plan (EPEP) and the Final Mine Rehabilitation and Decommissioning Plan (FMRDP). Both documents are submitted to the MGB for review and approval and are required as part of the DMPF package. Prior to project operation, several environmental permits need to be secured at the regional level. Key permits include a Wastewater Discharge Permit in compliance with DENR Administrative Order No. 1990-35: Revised Effluent Regulation of 1990, a Permit to Operate Air Pollution Source/ Control Installations in compliance to DENR Administrative Order 2000-81: Implementing Rules and Regulations of RA 8749: The Philippine Clean Air Act of 1999, Hazardous Waste Generator’s ID and Chemical Control Order Registration for Substances under the Priority Chemical List in compliance to DENR Administrative Order No. 1992-29: Implementing Rules and Regulations of RA 6969: Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990 and water rights for use during project operations under PD 1067:


Water Code of the Philippines. These permits are generic for all industries and not for the mining industry alone. Tree Cutting permits, if necessary, will also need to be secured at the regional and possibly the National level depending on the agency jurisdiction of the mining area. Similarly, a number of environmental management based permits will need to be secured at the local level through the Local Government Units (LGU) having jurisdiction over the project. These include building permits, special land use permits, solid waste management and port facility construction and operation. The 1995 Mining Act also identifies a regulatory framework for social and community issues related to mining projects as well as Indigenous Peoples within a mining area. This framework is discussed in Section 20.1.31.

20.2.2 Mining Project Specific Environmental Regulatory Requirements

In addition to the environmental regulatory framework identified in the 1995 Mining Act, the Implementing Rules and Regulations also identify the mechanism for establishing environmental management and guarantee funds. This is detailed in Department Administrative Order (DAO) 2010-21, Chapter 18: Contingent Liability and Rehabilitation Fund. Multiple funds are identified and are collective know as the Contingent Liability and Rehabilitation Fund. Five separate funds are required to be established by the project proponent. The funds, their relationship with the other funds and their respective deposit amounts are shown in Figure 56. Overall management of the funds is done by the Contingent Liability and rehabilitation Fund Steering Committee (CLRF).

Figure 56: Diagram of Environmental Management and Rehabilitation Funds

Multi-sectoral environmental monitoring is also included as a requirement of the 1995 Mining Act and provides for the participation of different stakeholders including the government regulatory agencies and civil sector societies. The framework for the monitoring programs is described in Section 182 of DAO 2010-21 and provides for the creation of the Mine Rehabilitation Fund Committee (MRFC). A diagram of the compliance monitoring organization is shown on Figure 57.

Contingent Liability and Rehabilitation Fund

Mine Rehabilitation Fund

Environmental Deposit for EPEP Activities Costs

Mine Waste and Tailings Reserve Fund

Payment for Mine Waste and Tailings Generated

Final Mine Rehabilitation and Decommissioning Fund

Amount to be Determined as Part of the Closure Plan

Rehabilitation Cash Fund

10% of the EPEP Cost or Php 50 million (whichever is less)

Monitoring Trust Fund Php 150,000 For Monitoring

Team Expenses


20.2.3 Current Status of Environmental Regulatory Requirements

The majority of environmental permits and approvals for the Project have been granted by the respective Philippine government agencies. Key to this is the Environmental Compliance Certificate (ECC 0710-025-2140) which was issued by the DENR-EMB on May 20, 2008. The 5-year expiration period was subsequently extended by the DENR-EMB on May 10, 2013. The conditions attached to the original ECC which remain in effect. The project parameters/description within the ECC limit the operations to a Direct Ore Shipping Operation (DSO) within a designated 600 ha area. The maximum production capacity during the first year of operations is limited to 1,500,000 dry metric tonnes. All years subsequent to the first year are limited to a maximum production capacity of 2,000,000 dry metric tonnes. The Declaration of Mining Project Feasibility (DMPF) package has been prepared and submitted to the DENR-MGB for review and approval. This process is ongoing. Included in the DMPF package are the two key environmental documents; the EPEP and the FMRDP. Separate ECC’s have been issued for construction of a port facility (ECC-R13-1306-0084) and construction of a relocation village for those residents affected by the port construction (ECC-R13-1306-0086). Formation of the Project MRFC has been initiated and members identified. The Cahir of the MRFC will be the MGB Region 13 Director.

Figure 57: Diagram of the Philippine Environmental Compliance Monitoring Organization

Mine Rehabilitation Fund Committee MGB Regional Office – Chair

Department of Environment and Natural Resources Regional Office Environmental Management Bureau Regional Office

Local Government Project Area Civil Society (NGO, Church, Civic Organization)

Proponent (Company)

� Separate MRFC convened by the MGB for each Project

Contingent Liability and Rehabilitation Fund Steering Committee

MGB Director – Chair Environmental Management Bureau

Land Management Bureau Forest Management Bureau

Bureau of Soils and Water Management Bureau of Plant and Industry

Bureau of Fisheries and Aquatic Resources National Irrigation Administration

� Provides the policies and direction for the MRFC and the Regional Investigation and Assessment Team � Reviews and approves the EPEP and FMRDP. � Approves the payment of claims for damage compensation. � When necessary, on its own or through a third party, conducts specific technical studies for decisions.

Multi-Partite Monitoring Team

MGB Regional Office – Chair MGB, EMB, DENR, LGU, Proponent, IP, NGO

� Monitoring arm of the MRFC

Regional Investigation and Assessment Team MGB Regional Office

Other Agencies as Needed

� Validation of claims for damage compensation related to project activities


20.2.4 International Finance Corporation Environmental and Social Framework

In addition to adhering to the Philippine regulatory standards and laws, implementation of the Project will also incorporate environmental and social Performance Standards and protocols recommended by the International Finance Corporation (IFC). The January 1, 2012 document entitled IFC Performance Standards on Environmental and Social Sustainability will provide the basis for developing environmental management and mitigation programs as well as social management programs. The Performance standards are identified in Table 39.

Table 39: International Finance Corporation Performance Standards

Performance Standards 1 through 8 Year 2012

1 - Assessment and Management of Environmental and Social Risks and Impacts

5 - Land Acquisition and Involuntary Settlement

2 - Labor and Working Conditions 6 - Biodiversity, Conservation and Sustainable Management of Living Natural Resources

3 - Resource Efficiency and Pollution Prevention 7 - Indigenous Peoples

4 - Community Health, Safety and Security 8 - Cultural Heritage

Source: IFC, January 1, 2012

20.3 Environmental and Social Baseline Studies

20.3.1 Previous Studies

Several environmental baseline studies have been completed within and around the Project Area beginning in Year 2007. The most recent study was conducted by Gaia South, Inc. in Years 2011 and 2012. These data are included in the Project Pre-Feasibility Study Report completed by Ausenco Venture and dated January 3, 2012. Previous studies were completed by Coffey Philippines Inc. in Year 2008 and Technotrix Consultancy Services, Inc. and Mediatrix Business Consultancy in Year 2007. The discussions within the Gaia South Inc. Report focus on the land, water and air aspects of the environment and community issues within and around the Project Area. Primary data were collected on site during the period June to August, Year 2011. Secondary data and documents were collected from different government agencies including National, Local Government Units and Barangay offices. Laboratory testing for soil, water and air were performed by local laboratories accredited by the Department of Environment and Natural Resources (DENR). Social and community baseline studies were included as part of the Gaia South, Inc. environmental baseline studies. Secondary data was collected from various agencies and local government offices. The perception of the local stakeholders regarding the mining operations was accomplished through Focus Group discussions and Key Informant interviews. The community and social studies data collection was done during the period June to August, Year 2011. The social and community investigations focused on socio-economics, public health, infrastructure and demographics. Baseline data, impacts and control strategies discussed in the sections below are primarily based on the work performed by Gaia South, Inc. These data and information represent the most complete and most recent baseline descriptions of the Project Area and surrounding areas.


20.3.2 Known Environmental and Social Issues

There are no known environmental or social/community issues that will provide a significant impediment to development and operation of the Project. Other similar mining operations within the region have provided examples of key environmental issues that will need to be addressed and for which impact control strategies will need to be implemented. Two key environmental management issues focus on the inland freshwater resources and the coastal marine resources. Soil erosion, transport and sedimentation within the streams and creeks of the Project area and the downstream rivers are unavoidable impacts. The exposure of large areas of bare soil and the resulting steeper slopes from mining operations combined with the high rainfall will result in higher erosion rates. Water management programs will need to be well designed, well constructed and well managed to control and mitigate these impacts. The eastern one-half of the Project area drains to the Tubay River which is noted for its high quality water. Lower quality water and increased sediment from the Project area tributaries will affect the Tubay River and downstream water users. The western one-half of the Project area drains to Butuan Bay which will also be the location of the port and the offshore loading/shipping facilities. The coastal area has a diverse marine environment which is sensitive to changes in water quality and especially surface water runoff and sediment transported from the mining and other disturbed areas. Water management programs implemented in the eastern one-half will need to be equally well managed in the western one-half of the Project area. Also, the transport, handling and loading of the ore at the port will provide further opportunities for coastal marine water quality impacts. These are very visual impacts and have been well documented at other mining operations within the region. Social issues are focused on the need for continuous community interaction and the continuous implementation of responsible mining practices. The communities and local government units are also anticipating visible economic benefits as well as improvements to the basic services of the area. Meeting and discussions with the National Commission on Indigenous Peoples to date have indicated there are no cultural or heritage issues.

20.4 Land Resources

20.4.1 Land Use

The topography of the project area ranges from gently rolling to steep. The eastern portion is generally more rolling with flat areas adjacent to the Tubay River floodplain. The steeper areas are located within the central and western portion of the Project area and most especially the stream valleys. Land use within the Project area is based primarily on vegetation cover. Five land use vegetative units were mapped and consist of Forest Areas, Coconut and Forest Areas, Coconut Areas, Ferns and Grasslands. A map of the different land use units is shown on Figure 58. Forest areas can be found in all barangays covering the Project area and consist primarily of secondary forest growth. They are located within both the eastern and western areas of the project area. They can be found on some of the steeper slopes and adjacent to the streams and creeks. Coconut land use units are generally coconut plantations and are found on the gentler slopes. The majority are located within the western portion of the Project area. The combination of Forest and Coconut is the largest land use within the Project area and is located within the western portion. Fern areas are also located on the gentler slopes and ridge tops and are the second largest land use unit. They are primarily located within the eastern portion of the Project area.


Grasslands exist in patches within the Project area and are generally dominated with cogon and carabao grasses with some pioneering tree species. There are also some small patches of cultivation within the grasslands. Grasslands can be found in both the western and eastern portions of the Project area.

20.4.2 Soil, Slopes and Erosion Susceptibility

Three soil types and 7 soil mapping units were identified and mapped within the Project area. The 3 soil types consisted of the Malalag clay loam, the Kabatohan sandy clay loam and the Umigan clay loam. The soil mapping units were defined by the slope of the land surface for each soil type. The Malalag clay loam was categorized into slope ranges of 8% to 18% and 30% to 50%. The Kanatohan sandy clay loam was categorized into sloppe ranges of 8% to 18%, 18% to 30% and >50%. The Umingan clay loam slopes were categorized as having 0% to 3% slopes. The Malalag clay loam developed from the weathering of the metamorphic igneous rocks while the Kabatohan sandy clay loam developed from the weathering of the ultramafic rocks. The Umigan clay loam developed from the weathering of river and alluvial deposits. Characteristics and properties of the soils are summarized in Table 40. Ground slopes within the Project area range from flat to greater than 50%. Both the Malalag and Kabatohan soil types can be found on slopes within this range. The Umigan soil type is found on slopes ranging from flat to 3%. Erosion susceptibility within the Project area was identified based on four criteria; rainfall, soil depth and texture, land use/vegetation and slope. The 5 different land use unit erosion susceptibility ranged from slightly susceptible to moderately susceptible. The majority of the Project area falls within the moderately susceptible category. The slightly susceptible land use units are within the western portion of the Project area and include Forest and Coconut land use units located with clay loam soils as well as the Grassland areas also within clay loam areas. River sediments were sampled at 13 locations within the Project area to characterize the quality of the soil lost by erosion and transported to the local streams. Twelve creeks were sampled and 8 heavy metals were tested. The results were compared to Dutch and Taiwanese standards for soil contamination limits. The majority of the samples tested indicated concentrations below the standards. Nickel concentrations exceeded the standards at most locations as expected. Results of the sediment sample testing are summarized in Table 41.


Figure 58: Project Area Land Use Map


Table 40: Project Area Soils Physical and Chemical Properties

Soil Properties

Malalag Clay Loam

Kabatohan Sandy Clay Loam

Umingan Clay Loam

Slope 8%-18%

Slope 8% -18%

Slope 30%-50%

Slope 8%-18%

Slope 30%-50%

Slope 0%-3%

Drainage Moderately

well drained

Moderately well

drained

Moderately well

drained

Well drained

Well drained

Moderately well

drained

Texture Clay loam Clay loam Clay Loam Sandy

clay loam Sandy

clay loam Clay loam

Soil Depth (cm) 40 >100 70 >100 >100 >100

pH 6.15 5.4 5.8 5.88 5.88 6.66

Total Nitrogen (%) 0.045 0.056 0.065 0.016 0.046 0.014

Organic Matter (%) 1.6 2.05 2.5 2.19 3.58 1.57

Phosphorous (mg/kg) 2.8 0.2 1.55 1.6 0.9 1.0

Potassium (cmol/kg) 0.16 0.06 0.1 0.045 0.14 0.07

CEC (cmol/kg) 19.24 20.26 34.75 3.17 18.36 20.17

Cadmium (mg/kg) 4.47 3.74 4.08 8.61 5.11 5.21

Cobalt (mg/kg) 43.49 35.00 65.12 298.77 343.26 280.15

Copper (mg/kg) 78.62 34.23 77.57 53.51 23.64 48.22

Iron (%) 4.08 3.23 4.33 30.47 10.04 11.6

Nickel (mg/kg) 145.62 113.37 415.26 5297.5 2234.68 4654.79

Lead (mg/kg) <0.10 <0.10 <0.10 <0.10 <0.10 <0.10

Mercury (mg/kg) 0.018 0.025 0.026 0.108 0.059 0.037

Copper as Nutrient (ppm) 3.29 0.67 2.34 1.40 1.17 1.86

Zinc as Nutrient (ppm) 0.49 0.71 0.66 1.65 1.3 0.57

Iron as Nutrient (ppm) 81.14 37.39 84.74 19.84 100.25 89.32

Manganese as Nutrient (ppm)

11.18 71.04 57.98 29.99 141.07 29.79

Source: Gaia South Inc., 2012.


Table 41: River Sediment Metals Analysis

Sampling Station

Arsenic (mg/kg)

Cadmium (mg/kg)

Cobalt (mg/kg)

Copper (mg/kg)

Iron (%)

Nickel (mg/kg)

Lead (mg/kg)

Mercury (mg/kg)

SEDQ 1 <0.017 2.56 31.64 156.86 7.09 98.44 <0.10 0.021

SEDQ 2 1.60 2.20 137.37 31.61 7.85 1237.85 <0.10 <0.004

SEDQ 3 <0.01 1.95 116.32 27.12 7.82 2621.13 154.06 <0.004

SEDQ 4 0.71 2.19 165.43 16.33 10.32 4196.00 <0.10 <0.004

SEDQ 5 14.70 1.83 51.86 136.91 4.80 903.77 23.30 <0.004

SEDQ 6 16.49 2.01 63.70 65.60 5.98 125.05 <0.10 0.055

SEDQ 7 9.79 1.75 48.94 113.49 5.84 499.20 <0.10 0.195

SEDQ 8 6.07 2.01 26.19 152.54 5.96 36.86 <0.10 <0.004

SEDQ 9 3.39 1.84 22.94 183.94 5.85 58.71 28.31 <0.004

SEDQ 10

<0.01 1.74 46.03 94.0 5.51 785.66 <0.01 <0.004

SEDQ 11

4.13 2.29 53.74 34.71 5.26 1131.64 <0.01 <0.004

SEDQ 12

2.50 3.46 36.82 49.79 3.77 347.47 41.93 <0.004

SEDQ 13

4.13 2.20 47.68 71.0 5.59 598.84 <0.10 <0.004

Table 41: River Sediment Metals Analysis (continued)

List of River Sediment Sampling Locations:

SEDQ 1 Kalinawan River at confluence with Bangonay River

SEDQ 2 Nangka Creek downstream of road culvert along Nangka Creek

SEDQ3 Paiton Creek upstream of road culvert along Paiton Creek

SEDQ 4 Mantiawas Creek upstream of Mantiawas Reforestation Area

SEDQ 5 Duyangan Creek downstream of small scale mining tailings disposal area and upstream of road culvert

SEDQ 6 Agata Creek downstream of road culvert

SEDQ 7 Dinaringan Creek downstream of Dinaringan Creek and upstream of confluence with the Kalinawan River

SEDQ 8 Kalinawan River at midstream of the river

SEDQ 9 Sua Creek No. 1 downstream of Sua Creek No. 1

SEDQ 10 Sua Creek No. 2 downstream of Sua Creek No. 2

SEDQ 11 Payong payong Creek downstream of Payong paying

SEDQ 12 Tinigbasin Creek along the confluence of two tributaries of Tinigbasin Creek

SEDQ 13 Tagpangahoy Creek

Source: Gaia South Inc., 2012.


20.4.3 Mine and Waste Generation Management Impacts and Control Strategies

Mining and waste handling activities result in changes to the local landforms and topography. This in turn will affect vegetation and habitat areas, hydrologic conditions and water quality of the streams and creeks and overall land use of the Project area. Based on the mining and operations plan, approximately 140 to 150 hectares of the Project area will be disturbed over the life of the Project. The outline of the disturbed areas is shown on Figure 59. Not all of these areas will be disturbed at one time but will be staggered over the mining life. Years 2 and 3 will have the largest areas of incremental disturbance which will then begin to decrease in subsequent years. Mining widths or benches will be restricted to 15 to 20 meter wide panels. These panels will be advanced along the contour, with the truck loaded from beside or below the excavator, depending on the surface operations design and the condition of travelling surfaces. Where bench widths are less than 10 meters, mining will be done by pushing ore down the slope to an excavator. The final pit slope angle will have an overall slope (toe to toe) of 45 degrees. The planned mining cut slopes will comprise of a batter slope angle of 80 degrees and bench width of 3 meters. Temporary slopes in the working face will have an overall slope of 40 degrees and the cut slope configuration will comprise a batter slope angle of 60 degrees and bench width of 3 meters. Extraction of the ore will require the excavation and removal of overburden waste materials as well as topsoil covering the overburden. The overburden materials will be used as backfilling materials during the progressive rehabilitation programs and upon final rehabilitation and decommissioning of the Project. Interim storage of the overburden will be within designated areas. Each stockpile area will be designed to hold a specific volume with the placement of material in a staged manner to increase the stability and prevent landslides and slope failures. Topsoil excavated as part of the overburden removal process will be placed in separate stockpiles for future use. Water management facilities consisting of interceptor channels around the mining areas and the waste stockpiles will be constructed prior to the initiation of mining operations. These will discharge into sedimentation facilities designed to operate as wet detention ponds. The ponds are designed to meet the objectives of water quality control, flood control and stream base flow management. A continuous progressive rehabilitation program is a key component to the overall environmental control and mitigation programs related to land resources as well as water resources and conservation values. Progressive rehabilitation will focus on staged treatment of disturbed areas during the construction, development and


Figure 59: Project Area Disturbed Lands Map


mining operations. This will minimize the extent of disturbance, and thereby the area of land requiring significant post mining rehabilitation. Rehabilitation will be initiated in areas that are considered inactive.

As part of the environmental work program, progressive rehabilitation and re-vegetation will be implemented on a programmed schedule depending on the quarterly mining schedule and progress. A four stage approach will be implemented which includes; ground preparation, species selection, establishment of a nursery for onsite seedling propagation and a planting scheme to maximize the survival rate and increase the species diversity. A graphic diagram of the rehabilitation program is shown on Figure 60.

Figure 60: Diagram of Progressive Rehabilitation Program


20.5 Water Resources

20.5.1 Hydrology and Hydrogeology

The MPSA and the Project area are located within two watersheds. The eastern portion is within the Tubay River (also known as the Kalinawan River) watershed and the western portion drains directly to Butuan Bay along the western coastline of the Province of Agusan del Norte. The Tubay River is the largest watershed within the immediate region and encompasses a drainage area of 99, 757 ha. The headwaters of the river are the southern outlet of Lake Mainit whereupon it flows south and then west to Butuan Bay. The watershed itself can be divided into two distinct hydrologic units (Northern and Southern) based on climate conditions and rainfall patterns. The Project area is located within the Southern hydrologic unit which is characterized by rainfall patterns indicated by the PAGASA Butuan Weather Station.

Some Tubay River streamflow data are available for a gauging station located near the east central boundary of the Project area at Brgy Colorado. The tributary watershed at the station is 49,037 ha and the streamflow data period of record is limited to 10 years (1968-1970 and 1973-1979). Mean monthly streamflow and watershed yield data at the gauging station are shown in Table 42.

Table 42: Tubay River Mean Monthly Discharge and Watershed Yield

Month Monthly Discharge

(m3/sec)

Monthly Yield (million cubic meters)

Unit Monthly Yield (cubic meters/ha)

January 109.0 291.9 5950

February 94.5 228.5 4660

March 82.1 219.8 4480

April 59.3 153.8 3140

May 51.3 137.5 2800

June 43.2 112.1 2290

July 48.4 129.8 2650

August 44.3 118.6 2420

September 40.9 106.0 2160

October 42.3 113.3 2310

November 61.3 159.0 3240

December 85.6 229.3 4680

Annual 63.4 1999.6 3400

Note: Data from DPWH stream gauging station at Brgy. Colorado

Source: Gaia South Inc., 2012 and TVIRD, 2013.

The Project area is well drained with numerous creeks and streams. Most are ephemeral and fed by springs and groundwater. The watersheds within the Project area are generally small and are generally east-west in orientation. There are 24 individual watersheds that will be directly affected by the Project activities. Fifteen of these drain directly to Butuan Bay and 9 drain directly to the Tubay River. The affected western watersheds account for a total tributary area of approximately 513 hectares while the affected eastern watersheds account for approximately 545 hectares. The individual watershed areas range in size from 2 hectares to 141 hectares and are shown on Figure 61.


Storm event rainfall analyses were done using daily rainfall data from the PAGASA Butuan Station for the period Years 1981 to 2012. Results of daily rainfall depth-frequency analyses are shown in Table 43. These results compare favorably to point rainfall-frequency analyses performed in Year 2011 as part of a Lake Mainit-Tubay River Master Plan Study. Rainfall data at the Magpayang PGASA Station located northeast of the project area were used for the Master Plan Study. Water balance studies performed for the Tubay River watershed indicate approximately 84% or rainfall results in direct runoff to the streams, 10% of the rainfall results in evapotranspiration loss and the remaining 6% is attributed to groundwater recharge.


Figure 61: Project Area Watershed Map


Table 43: Point Rainfall Frequency- Depth Analyses Butuan City

Return Period (years) 24-hour Rainfall (mm) Return Period

(years) 24-hour Rainfall (mm)

2 124 (151) 20 214 (220)

5 160 (185) 50 252 (250)

10 187 (206) 100 283 (267)

Note: Log Perason Type III Analysis. Values in ( ) from Master Plan Lake Mainit-Tubay River, 2011.

Source: PAGASA, 2013. TVIRD, 2013, DPWH, 2011.

Field studies performed by Gaia South, Inc. identified 8 stream sources that serve as community water supply for portions of the municipalities of Tubay, Jabonga and Santiago. These sources experience reduced discharge during the drier seasons and increased turbidity during the rainy seasons. There are no data relative to the discharge rates of these 8 sources. The location of these sources is shown on Figure 63. The regional hydrogeology is defined by three distinct geohydrologic units; the northwest trending mountain range west of the Tubay River floodplain, the mountains along the eastern boundary of the Tubay River floodplain and the floodplain itself. The MPSA covers all three units however the Project area is located only within the northwest trending mountains west of the Tubay River flooplain. This area is underlain by ultramafic and metamorphic rocks. They are generally dense and impermeable with little groundwater. What groundwater is found is located within the weathered portions and open fracture zones. The quantity of groundwater diminishes during the dry season resulting in reduced streamflow and spring discharge. Groundwater flow in the area follows the surface topography direction. About half of the Project area drains west to Butuan Bay and the other half drains east to the Tubay River. The wells within the Tubay River floodplain are shallow with depths of 6 meters or less. There are no wells within the mountainous region of the Project area. Field studies performed by Gaia South, Inc. identified 10 spring/groundwater sources that serve as community water supply for portions of the municipalities of Tubay, Jabonga and Santiago. These sources experience reduced discharge during the drier seasons. There are no data relative to the discharge rates of these 10 spring/groundwater sources.

20.5.2 Water Quality

Surface water quality sampling and testing was performed at 17 locations within the Project area. Ten of the locations are within the Tubay River watershed and the remaining 7 locations are within streams draining to Butuan Bay. Groundwater/spring sampling and testing was done at 5 locations. Four of the sampling locations are for springs draining to Butuan Bay. One station was located within the Tubay River floodplain. Coastal marine water samples were also collected at 6 locations along the coastline of Butuan Bay west of the Project area. The location of each sampling point (surface water, groundwater and marine waters) is shown on Figure 62. Results of the laboratory testing for surface waters and groundwater/springs are shown in Table 44 and Table 45 respectively. Comparison of these data with the Philippine National Standards for Drinking Water (PSNSDW) indicated non compliance with E-coli standards and Biological Oxygen Demand requirements at some stations. Metals and other parameters were either non-detectable or within the PNSDW standards. Results of the surface water quality testing also indicate the waters can generally be


classified as Class A under the stream water quality classification parameters set by the DENR. For reference, the Tubay River was assigned a Class A stream water quality designation by the DENR in Year 2004. Results of the coastal marine water quality sampling and testing are shown in Table 46. Results at all sampling stations were within the DENR Class A marine coastal water standards.


Figure 62: Baseline Sampling Locations Map Water Quality, Air Quality and Noise


Figure 63: Water Source Location Map


Table 44: Surface Water Quality Baseline Data

Parameter Units Surface Water Quality Sampling Stations

FW-1 FW-2 FW-3 FW-4 FW-5 FW-6 FW-7 FW-8 FW-9

pH - 7.5 8.54 8.07 8.13 8.00 8.18 8.44 7.65 7.98

BOD mg/l 1 <1 <1 <1 21 11 6 1 1

COD mg/l 10 <5 <5 <5 49 20 5 5 5

DO mg/l 8.6 8.4 8.3 9.2 8.5 7.4 8.5 7.1 8.4

TSS mg/l 94 1 1 1 2790 21 374 91 2

TDS mg/l 82 241 199 105 180 196 119 36 250

Chromium (hex)

mg/l <0.01 0.02 <0.01 0.01 0.29 <0.01 <0.01 <0.01 <0.01

Nitrate mg/l 0.14 <0.01 <0.01 0.36 0.07 <0.01 0.08 <0.01 0.04

Phosphorous

mg/l 0.04 <0.01 <0.01 <0.01 0.15 <0.01 0.11 2.16 2.16

Oil & Grease

mg/l <1.0 <1.0 <1.0 <1.0 <1.0 <1.0 <1.0 <1.0 <1.0

Turbidity NTU 235 10.5 10.5 10.9 1248 90.5 363 217.5 11.9

Hardness as

CaCO3

75.78 173.9 175.9 131.81 1750.9

3 169.18 265.2 57.57 206.98

Total Coliforms

MPN per 100 ml

330 17 x 102

22 x 102

490 92 x 103

92 x 102

45 x 104

17 x 103

92 x 103

Fecal Coliforms

MPN per 100 ml

230 13 x 102

13 x 102

330 54 x 103

92 x 102

20 x 104

13 x 103

54 x 103

E.coli - Positiv

e Positiv

e Positiv

e positiv

e positiv

e positiv

e positiv

e positiv

e positiv

e

Arsenic mg/l <0.001 <0.001 0.02 <0.001 0.144 <0.001 <0.011 <0.001 <0.001

Cadmium mg/l <0.003 <0.003 <0.003 <0.003 <0.003 <0.003 <0.003 <0.003 <0.003

Cobalt mg/l <0.02 <0.02 <0.02 <0.02 0.27 <0.02 <0.02 <0.02 <0.02

Copper mg/l <0.005 <0.005 <0.005 <0.005 1.007 <0.005 <0.005 <0.005 <0.005

Iron mg/l 8.86 0.12 0.09 0.10 382.99 2.74 25.38 7.28 0.25

Lead mg/l <0.01 <0.01 <0.01 <0.01 <0.01 <0.01 <0.01 <0.01 <0.01

Nickel mg/l <0.02 <0.02 <0.02 <0.02 3.22 <0.02 0.07 <0.02 <0.02

Mercury mg/l <0.000

1 <0.000

1 <0.000

1 <0.000

1 <0.000

1 <0.000

1 <0.000

1 <0.000

1 <0.000

1

Source: Gaia South Inc., 2012


Surface Water Quality Sampling Station Descriptions:

FW-1 Kalinawan River, Brgy. Colorado. Confluence of Kalinawan and Bangonay River.

FW-2 Nangka Creek, Brgy. Colorado. Downstream of road culvert along Nangka Creek.

FW-3 Paiton Creek, Brgy. Colorado. Upstream of road culvert along Paiton Creek.

FW-4 Mantiawas Creek, Brgy. Colorado. Upstream of Mantiawas Reforestation Area.

FW-5 Duyangan Creek, Brgy. E Morgado. Downstream of small scale tailings disposal area, upstream of road culvert.

FW-6 Agata Creek, Brgy. E. Morgado. Downstream of road culvert.

FW-7 Dinaringan Creek, Brgy. E Morgado. Downstream of Dinaringan Creek before confluence with Kalinawan River.

FW-8 Kalinawan River, Santiago. Midstream of Kalinawan River.

FW-9 Sua Creek1, Brgy Lawigan. Downstream of Sua Creek1.

Table 44: Surface Water Quality Baseline Data (continued)

Parameter Units Surface Water Quality Sampling Stations

FW-10

FW-11 FW-12 FW-13 FW-14 FW-15 FW-16 FW-17

pH - - - - - - - - -

BOD mg/l - - - - - - - -

COD mg/l - - - - - - - -

DO mg/l - - - - - - - -

TSS mg/l - - - - - - - -

TDS mg/l - - - - - - - -

Chromium (hex)

mg/l - - - - - - - -

Nitrate mg/l - - - - - - - -

Phosphorous mg/l 0.40 <0.01 <0.01 0.01 <0.01 0.02 0.09 0.01

Oil & Grease mg/l 2 <1.0 <1.0 <1.0 <1.0 <1.0 <1.0 <1.0

Turbidity NTU - 10.8 11.4 12.7 11.3 0.9 13.3 17.5

Hardness As

CaCO

3 - 209.8 225.48 205.87 129.8 126.83 225.48 79.03

Total Coliforms

MPN per 100 ml

5000 92 x 103

92 x 102

16 x 103

24 x 103

24 x 102

16 x 105

23 x 102

Fecal Coliforms

MPN per 100 ml

- 54 x 103

35 x 102

54 x 102

24 x 103

24 x 102

54 x 104

23 x 102

E.coli - - positive positive positiv

e positive positive positive positive

Arsenic mg/l 0.05 <0.001 <0.001 <0.001 <0.001 <0.001 <0.001 <0.001

Cadmium mg/l 0.01 <0.003 <0.003 <0.003 <0.003 <0.003 <0.003 <0.003

Cobalt mg/l - 0.02 <0.02 <0.02 <0.02 <0.02 <0.02 <0.02

Copper mg/l 0.05 <0.005 <0.005 <0.005 <0.005 <0.005 <0.005 <0.005


Iron mg/l - 0.05 0.18 0.17 0.25 <0.02 0.19 3.93

Lead mg/l 0.05 <0.01 <0.01 <0.01 <0.01 <0.01 <0.01 <0.02

Nickel mg/l - <0.02 <0.02 <0.02 <0.02 <0.02 <0.02 <0.02

Mercury mg/l 0.002 <0.0001 <0.0001 <0.000

1 <0.000

1 <0.000

1 <0.000

1 <0.000

1


Surface Water Quality Sampling Station Descriptions:

FW-10 Sua Creek 2, Brgy. Lawigan. Downstream of Sua Creek 2.

FW-11 Payongpayong Creek, Brgy. Tinigbasin. Downstream of Payongpayong.

FW-12 Tinigbasin Creek, Brgy. Lawigan. At the confluence of two tributaries of Lawigan Creek.

FW-13 Tagpangahoy Creek, Brgy. Tagpangahoy. Downstream of a road culvert along Tagpangahoy Creek.

FW-14 Binuangan Creek, Brgy. Binuangan. At the confluence of two tributaries of Binuangan Creek.

FW-15 Binuangan Creek, Brgy. Binuangan. Downstream of Binuangan Creek adjacent to the intertidal zone, Butuan Bay. FW-16 Kalinawan River, Tubay. Downstream of the confluence of the Kalinawan River and the Santiago River.

FW-17 Kalinawan River. Tubay. Downstream of Kalinawan River near the Tubay Bridge.

Table 45: Groundwater Quality Baseline Data

Parameter Units Groundwater Quality Sampling Stations

DW-1 DW-2 DW-3 DW-4 DW-5

pH - 7.66 6.84 7.43 6.67 7.45

BOD mg/l <1 <1 <1 <1 <1

COD mg/l <5 <5 <5 <5 <5

DO mg/l 7.2 9.1 9.0 9.4 9.7

TSS mg/l 1 2 <1 <1 <1

TDS mg/l 115 260 239 174 236

Chromium (hex)

mg/l <0.01 <0.01 <0.01 <0.01 <0.01

Nitrate mg/l 0.34 1.04 0.28 0.02 0.16

Phosphorous mg/l <0.01 0.04 <0.01 <0.01 0.01

Oil & Grease mg/l <1.0 <1.0 <1.0 <1.0 <1.0

Turbidity NTU 1.1 1.0 0.9 12.7 0.8

Hardness as CaCO3 143.59 233.57 269.74 130.77 253.59

Total Coliforms MPN per 100 ml

350 33 4.5 49 54 x 100

Fecal Coliforms MPN per 100 ml

240 23 2.0 23 34 x 100

E.coli - positive positive positive positive positive

Arsenic mg/l <0.001 <0.001 <0.001 <0.001 <0.001

Cadmium mg/l <0.003 <0.003 <0.003 <0.003 <0.003

Cobalt mg/l <0.02 <0.02 <0.02 <0.02 <0.02


Copper mg/l <0.005 <0.005 <0.005 <0.005 <0.005

Iron mg/l <0.02 <0.02 <0.02 <0.02 <0.02

Lead mg/l <0.01 <0.01 <0.01 <0.01 <0.01

Nickel mg/l <0.02 <0.02 <0.02 <0.02 <0.02

Mercury mg/l <0.0001 <0.0001 <0.0001 <0.0001 <0.0001


Groundwater Quality Sampling Station Descriptions:

DW-1 Brgy. E Morgado, Jabonga

DW-2 Sitio Payongpayong Brgy. Tinigbasin, Tubay

DW-3 Brgy. Tinigbasin, Tubay

DW-4 Brgy. Tagpanghoy, Tubay

DW-5 Brgy. Binuangan, Tubay

Table 46: Coastal Marine Water Quality Baseline Data

Parameter Units Coastal Marine Water Quality Sampling Stations

MW-1 MW-2 MW-3 MW-4 MW-5 MW-6

pH - 8.02 8.16 8.26 8.33 8.27 8.19

BOD mg/l <1 <1 <1 <1 <1 <1

COD mg/l 151 101 503 377 503 804

DO mg/l 6.5 8.2 8.4 9.0 8.6 8.8

TSS mg/l 4 2 <1 3 8 4

TDS mg/l 19380 18590 25914 11995 10103 19363

Chromium (hex)

mg/l <0.01 <0.01 <0.01 <0.01 <0.01 <0.01

Nitrate mg/l <1.0 <1.0 <1.0 <1.0 <1.0 <1.0

Phosphorous mg/l <1.0 <1.0 <1.0 <1.0 <1.0 <1.0

Oil & Grease mg/l <1.0 <1.0 <1.0 <1.0 <1.0 <1.0

Turbidity NTU 1.5 10.7 0.7 1.3 12.8 11.8

Hardness as

CaCO3 7797.41 4743.9 8336.46 7072.58 7204.46 7658.43

Arsenic mg/l <0.001 <0.001 <0.001 <0.001 <0.001 <0.001

Cadmium mg/l <0.003 <0.003 <0.003 <0.003 <0.003 <0.003

Cobalt mg/l <0.02 <0.02 <0.02 <0.02 <0.02 <0.02

Copper mg/l <0.005 <0.005 <0.005 <0.005 <0.005 <0.005

Iron mg/l <0.02 <0.02 <0.02 <0.02 <0.02 <0.02

Lead mg/l <0.01 <0.01 <0.01 <0.01 <0.01 <0.01

Nickel mg/l <0.02 <0.02 <0.02 <0.02 <0.02 <0.02

Mercury mg/l <0.0001 <0.0001 <0.0001 <0.0001 <0.0001 <0.0001



Coastal Marine Water Quality Sampling Station Descriptions:

MW-1 Brgy. Lawigan Coastal Area, Tubay

MW-2 Sitio Payongpayong Coastal Area. Tubay

MW-3 Brgy. Tinigbasin Coastal Area, Tubay

MW-4 Brgy. Tagpanghoy Coastal Area, Tubay

MW-5 Brgy.Binuangan Coastal Area, Tubay

MW-6 Brgy. La Fraternidad Coastal Area, Tubay

20.5.3 Water Management Impacts and Control Strategies

Clearing and stripping operations followed by overburden removal and mining will result in a significantly greater susceptibility to soil erosion, soil transport and sediment deposition within the creeks and waterways of the Project area. This will be a long term impact throughout the mining operations period and for some time after operations until such time as the post mining rehabilitation and reclamation programs are established. The impacts will be associated with water quality as well as the physical and hydrologic conditions of the water resource features. Construction of the port facilities will also result in potential erosion, soil transport and sediment deposition within the near shore coastal area. This is expected to be a short term impact however, loading operations at the port have the potential to create similar near coastal sedimentation impacts over the long term. Impact control strategies will focus on physical facilities and mining plans with the objectives of capturing surface water runoff that may be contaminated with metals and/or high suspended solids and diverting surface water runoff around the active mining areas and disturbed areas. The incremental surface mining areas will be designed and constructed such that most of the surface water will drain to the lowest bench for detention and possible treatment. Diversion and interceptor canals will be constructed to segregate surface water runoff from disturbed and undisturbed areas. Surface runoff from disturbed areas will be conveyed to water quality control facilities designed as wet detention/retention ponds. These ponds will be designed and operated for the purposes of water quality treatment, flood control and stream discharge base flow management. These ponds will be constructed in the natural soil with embankment heights ranging for 3 m to 5 m. All ponds will include reduced discharge outflow structures to allow longer term storage and settling of the sediments. Each pond will also include an emergency overflow spillway for safety. The embankments will be constructed with slopes no steeper than 3 horizontal to 1 vertical. A schematic diagram of a typical water quality treatment facility pond system is shown in Figure 64. The ponds are designed to operate as wet detention ponds with the objective of providing enough storage volume to contain the surface water runoff volume from a specified storm event for a minimum of 24 hours. The detention period will be maintained by an outlet control structure that will limit the pond discharge. Sediment transported by the surface water runoff will be allowed to settle out within the pond during the 24 hour detention period. Sufficient storage will be provided within each pond to contain the estimated sediment volume generated over a specified period. Removal of the sediments and cleaning of the ponds may occur annually or quarterly depending on the volume of sediment deposited. The lower portion of the pond will remain in a wet condition. This is to help reduce the potential for re-suspension of the stored sediments during surface runoff inflow events. A wetland planting bench is also envisioned around the upper portion of the wet pond. This is intended to provide some vegetative filtering of the sediment and will serve as a safety bench.


A forebay may also be provided as part of each pond. This will be a smaller dry pond for the collection, deposition and storage of larger sediment and debris before water enters the main settling pond area. The forebay will require more frequent cleaning. Construction of the water quality control facilities and the interception/diversion canals will be done on an incremental basis as the mining operations continue from year to year. Based on the mining plan, between 25 and 30 facilities will be constructed over the mining period. The majority of these will be constructed in the first and second years of operation. An overall facilities map and water management plan is shown on Figure 65. From the perspective of groundwater resources, the local communities exhibit poor groundwater potential. The underlying ultramafics are generally impermeable and not conducive to the development of a large aquifer system. The local springs come from fractured zones that yield minimal amounts of water and offer minimal storage. These springs may be affected by sediment transported by surface water runoff from disturbed areas. Changes in the land cover, topography and stream hydrologic conditions may affect the quantity and quality of the existing springs. Exposure of the highly fractured / sheared underlying ultramafic rocks will also increase the potential for infiltration that may result in increased runoff of poor quality water and erosion from spoil piles; recharge of poor quality water to shallow aquifers; and / or poor quality flow to the nearby streams. This process may further result in the contamination of the groundwater. Impact control strategies for groundwater are limited to specific source controls in conjunction with the water quality facilities construction and the progressive rehabilitation activities.


Figure 64: Schematic Diagram of Water Quality Treatment Facility

Control strategies at the port area will be similar and will consist primarily of structural measures to intercept, collect and transport the surface water runoff to detention. Water quality monitoring will be a continuous activity throughout the entire operations period. Sampling stations will be established for all the water quality control facilities, receiving streams and the coastal area. Stations outside the project area will also be established to identify and evaluate any downstream impacts. Control stations will also be established outside the project influence to serve as control stations.


Figure 65: Water Management Plan


20.6 Air Quality, Climate and Noise

20.6.1 Meteorology and Climate

The Project Area as well as the entire Province is located within a Type 2 climate zone as defined by the Modified Coronas Climate Classification developed by the Philippines Atmospheric, Geophysical and Astronomical Services Administration (PAGASA). This particular climate type is characterized by an absence of a dry season. Rainfall occurs throughout the year with the heaviest rainfall occurring during the months of December and January. The mean annual rainfall at the PAGASA station at Butuan is 2,026 mm with the period of October to February being the wettest months. The northeast monsoon season occurs from November to April with the remaining months being subject to the southwest monsoon. Other meteorology and climate data available for the Butuan station include temperature and evaporation. Monthly mean rainfall values for the period Years 1981 to 2012 are shown in Table 47. Temperature and evaporation data shown in the Table cover the period Year 1981 to 2000.

Table 47: Climate Data Mean Monthly Values, Butuan City, Agusan del Norte (1981-2000)

Month Rainfall (mm)

Temperature (C)

Evapotranspiration (mm)

Monsoon Season

January 331 26.1 84 Northeast

February 236 26.4 80 Northeast

March 150 27.1 93 Northeast

April 112 28.1 80 Northeast

May 116 28.8 80 Southwest

June 157 28.3 81 Southwest

July 147 27.9 88 Southwest

August 105 28.1 78 Southwest

September 126 28.1 87 Southwest

October 180 27.8 88 Southwest

November 200 27.3 79 Northeast

December 240 26.7 81 Northeast

Annual 2100 27.5 999 -

Note: Evapotranspiration values represent estimates based on actual water available and are calculated from the potential evapotranspiration.

Source: Gaia South, Inc, 2012 and PAGASA, 2013.

Based on past records of PAGASA, the area is subject to an average of 1 typhoon or tropical cyclone per year. Recent years however have shown a higher occurrence of typhoons affecting Mindanao. The average monthly wind speed for non typhoon events is a constant 2 meters per second on a year round basis.


20.6.2 Air Quality and Noise

Baseline air quality sampling was completed at eight locations within and around the Project area. The locations were established based on areas having the most probable key receptors. Ambient air quality sampling and testing was done for three parameters; sulphur dioxide, nitrogen dioxide and total suspended particulates. Concentrations of all three parameters were considered to be very low and representative of natural background concentrations. Results of the sampling and testing are shown in Table 48 and the locations of the sampling stations are shown on Figure 62. Ambient noise levels were monitored at two locations that were also subject to ambient air quality monitoring; AQ-1 (Barangay La Fraternidad) and AQ-2 (Barangay Lawigan Proper). Monitoring was done during the daytime hours (9:00 am to 6:00 pm) only. The results are shown in Table 49 and are typical of expected low values within remote rural areas. The sampling locations are shown on Figure 62.

Table 48: Results of Ambient Air Quality Baseline Sampling and Testing Year 2011 (values in ug/Ncm)

Sampling Location Parameter

AQ-1 Brgy. La

Fraternidad

AQ-2 Brgy.

Lawaigan Proper

AQ-3 Sitio Sua

Brgy. Lawiga

n

AQ-4 Sitio

Payong Payong Brgy.

Tinigbasin

AQ-5 Brgy.

Tinigbasin Proper

AQ-6 Brgy.

Tagpangahoy

AQ-7 Brgy.

Binuangan

AQ-8 Brgy. E. Morgad

o

SO2 6.76 10.66 11.39 9.81 9.41 10.61 10.21 11.06

NO2 non

detect 7.4

non detect

non detect

non detect

non detect

non detect

1.08

TSP 56.29 90.71 non

detect non

detect non

detect non

detect non

detect non

detect

Note: SO2 = Sulfur Dioxide, NO2 = Nitrogen Dioxide, TSP = Total Suspended Particulates

Source: Gaia South, Inc. 2012

Table 49: Results of Ambient Noise Level Testing Year 2011 and Philippine Standards

(values in dBA)

Sampling Location Parameter

AQ-1 Brgy. La

Fraternidad

AQ-2 Brgy.

Lawaigan Proper

Category AA

Standards

Category A

Standards

Category B

Standards

Category C

Standards

Category D

Standards

Morning (5:00 am to 9:00 am)

- - 45 50 60 65 70

Daytime (9:00 am to 6:00 pm)

38.0 – 56.5

39.8 – 56.8

50 55 65 70 75

Evening (6:00 pm to 10:00 pm)

- - 45 50 60 65 70


Nighttime (10:00 pm to 5:00 am)

- - 40 45 55 60 65

Source: Gaia South, Inc, 2012

20.6.3 Air Quality and Noise Management Impacts and Control Strategies

The primary air emission associated with the Project is fugitive dust generated from ore storage stockpiles, road dust, overburden waste and topsoil stockpiles and daily mining activities. Dust generation will be the most problematic during the normal mining operations involving clearing and stripping, ore extraction, stockpile operations, and ore loading activities at the port. Higher dust production is expected during the drier season (March to October) and lower dust production during the wetter season (November to February). Fugitive dust emissions will be controlled through the use of direct water application, by spraying, wetting agents and rapid revegetation of disturbed areas, roads, and other working areas concurrent with operations. Additionally, loaded trucks will be covered with tarpaulins to prevent dust from escaping. From an operations planning standpoint, dust generation can be controlled by minimizing the areas to be cleared and exposed. Progressive rehabilitation activities will be implemented as soon as possible to reduce the area of bare soil and minimize dust generation. Other control measures to be implemented include the following:

• During the dry months, access roads and ore stockpile areas within the project area and at the Port shall be regularly sprayed with water.

• Avoid stockpiling of ore for long periods of time to avoid windblown fugitive dust.

• Regular road maintenance such as grading and surface compaction.

• Formulate and implement rapid re-vegetation program along perimeter of operations and exposed areas.

• Conduct regular ambient air quality monitoring.

• Implement speed regulation protocols for moving vehicles; especially those involve in hauling, transporting, stockpiling and loading.

Noise generation will be the result of equipment operations and movements. There will be no blasting activities as part of the mining operations. Given the distance to the nearest residential community is approximately 1 kilometer, the noise impact will be minimal, if at all. Nonetheless, noise impact control strategies will still be implemented. These will focus on relocation of residents within the immediate Project area. Progressive rehabilitation activities will also incorporate tree planting zones around the perimeter of the mine area to provide sound barriers over time.

20.7 Conservation Values

20.7.1 Terrestrial Biology Flora and Fauna

The Project area is generally characterized by three ecosystem types; forest over ultramafic rocks, tropical lowland evergreen rain forest and plantations. The ultramafic forest is the primary vegetation type with only a few tall and large trees. The tropical lowland evergreen forest is found in patches throughout the Project area and may be remnants of the vegetation that previously existed. The forest patches are generally found along the ridges and the streams/gullies within the Project area. The plantations within


the area are primarily mangium, yemane and falcata and are a result of previous reforestation efforts of the DENR. Specific baseline data for the terrestrial flora characteristics of the Project area was gathered from 14 transects and 17 quadrats. The dominant plant form within the Project area is trees, followed by herb, shrubs and vines. A summary of the plant habitats found within the Project area are shown in Table 50. Within the plant habitats a total of 172 species were identified. A summary of the different ecosystem characteristics is also included in Table 50.

Table 50: Plant Habitats and Ecosystem Species Data

Plant Habitat Number of

Species

Ecosystem

Total Individu

als

Average Individu

als

Species

Richness

Shannon

Diversity Index Trees 123

Herbs 15 Forest over Ultramafic Rocks

223 45 57 2.93 Shrubs 13

Vines 11 Tropical Lowland Rain Forest

119 40 38 2.07 Palms, Pandans, Cycad and Bamboo

9

Fern and Fern Allies 5 Plantatio

n 108 38 36 1.98

Total 176 Total 450 - 172 -


Other vegetation systems located within the Project area include limestone forests, beach forests and some agroforestry ecosystems. There are some areas of previous beach forest that have been replaced by coconut plantations. These plantations are visible in most of the lower landscape of most barangays. Some plantations have also incorporated intercropping practices. Low Diversity Indices were indicated for the different ecosystems. The Shannon Diversity Index for each ecosystem is included in Table 50. Within the Project area there are 9 flora species recorded that are considered threatened by the DENR. Two are considered critically endangered, 3 are considered endangered and 1 is considered vulnerable. Baseline data collection for fauna was done for 8 transects. A total of 58 species of wildlife were observed and recorded within the Project area. Birds accounted for 42 species, mammals accounted for 7 species and herps accounted for 9 species. With respect to the bird species, most are resident and common. There is only 1 bird that is on the IUCN Red List and listed as Vulnerable (Philippine Duck). Most of the flying mammals observed in the area are common and include fruit bats. They are abundant and the populations are stable however their habitat is threatened due to forest degradation. The reptiles (herps) within the area are also common.


20.7.2 Freshwater Aquatic Resources

Fourteen locations within 13 creeks and rivers were sampled to characterize the baseline freshwater aquatic resources. Other than the Kalinawan River, the other creeks are short in length, are low in organic matter and do not support many organisms. As such, the sampling locations within these creeks were done near the mouth of each creek. The location of each sampling point and designation is summarized in Table 51. The creeks are shown on Figure 61.

Table 51: Sampling Points for Freshwater Aquatic Resource Assessment

Station Creek/River Area Biotic Index

Station Creek/River Area

Biotic Index

FW 1 Candiis E.

Morgado, Santiago

-

FW 8 Kalinawan Curva,

Santiago 4.34

FW 2 Nangka E.

Morgado, Santiago

9

FW 9 Kalinawan Tagmamarcay,

Santiago 6

FW 3 Paiton E.

Morgado, Santiago

5

FW 10 Binuangan Binuangan,

Tubay 6

FW 4 Mantiawas E.

Morgado, Santiago

1.35

FW 11 Tagpangahoy Tagpangahoy,

Tubay 3

FW 5 Guyangan E.

Morgado, Santiago

-

FW 12 Tinigbasin Tinigbasin,

Tubay 3.15

FW 6 Agata E.

Morgado, Santiago

4.35

FW 13 Payong payong

Payong payong, Tubay

-

FW 7 Bikangbikang E.

Morgado, Santiago

4.16

FW 14 Sua Lawigan,

Tubay 3


All creeks sampled have permanent flows with the exception of Candiis Creek (FW 1). This is an ephemeral creek. Sampling location FW5 (Guyangan Creek) is located near the small scale mining area and is subject to disturbance and murky waters. No samples were collected at this location. Sampling data collected at all other locations included benthic profiles, phytoplankton, zooplankton and heavy metals analysis for fish. The biotic/ecological index determined from the benthic profile at each sampling point is shown in Table 51. The higher values indicate greater potential of organic pollution and poorer water quality. With respect to phytoplankton, diatoms dominated most of the sampling sites. This suggests a high primary productivity within the creeks that may support secondary productivity. Some algae were observed at Stations FW7, FW8 and FW12 which is indicative of high nutrient situations. This may be the result of surface water runoff from agricultural or livestock land use areas. Zooplankton observations suggest the larval forms dominate over the adult forms. Most creeks and the Kalinawan River are dominated by arthropods (insects and copepods). The adult forms of zooplankton included rotifers which are associated with the presence of organic matter.


Heavy metals analysis was done for only one fish species known locally as Snakehead. The fish was caught from the Kalinawan River. Results of the analysis of the flesh are shown in Table 52. Lead concentrations exceeded the Australian and European Standards and suggest potential bioaccumulation by this particular fish.

Table 52: Heavy Metals Analysis for Freshwater Fish

Parameter Chromium

(hexavalent)

Arsenic Cadmium Copper Nickel Lead Mercury

Concentration (mg/kg)

<0.10 <0.01 <0.03 32.25 <0.2 1.97 0.034

Australian Standard (mg/kg)

- 1 0.2 70 - 1.5 0.5

EU Standard (mg/kg/week)

- - 0.05 - - 0.3 0.5


20.7.3 Coastal Marine Aquatic Resources

Eight coastal marine locations were established for the baseline biological assessment. Station identification and locations are shown in Table 53 and referenced on Figure 62.

Table 53: Coastal Marine Sampling Locations Station

Location Statio

n Location

MW 1 Brgy. Lawigan, Tubay

MW 5 Sitio Locbon Gamay, Brgy. Tinigbasin, Tubay

MW 2 Sitio Sua, Brgy. Lawigan, Tubay

MW 6 Brgy. Tagpangahoy Proper Coastal Area, Tubay

MW 3 Sitio Payong payong, Brgy. Tinigbasin, Tubay

MW 7 Brgy. Binuangan, Tubay

MW 4 Brgy. Tinigbasin Proper Coastal Area, Tubay

MW 8

Brgy. La Fraternidad Coastal Area, Tubay


The coastline within this area is typical of volcanic islands. The beaches and shelves are narrow with the reefs being considered as fringing or patch reefs. Sampling location MW1 is at the southern most boundary of the 10 hectare Lawigan Marine Sanctuary. The limits of the Sanctuary are shown on Figure 62. The proposed port facilities, to be constructed in support of the Project materials handling activities, are located near Station MW3. Sampling and survey data collected at each stations were used to characterize the benthic profile, phytoplankton and zooplankton of the area. Fisheries characterization was also done for the area and included fish biomass estimates and heavy metals analysis. A summary of the benthic profile at each station is shown in Table 54.


Table 54: General Benthic Profile at Each Sampling Location

Life Forms and Abiotic Factors

MW 1 MW 2 MW

3 MW 4 MW 5 MW 6 MW 7 MW 8

Corals (%) 11.5 40.06 32.18 2.58 3.94 4.76 12.84 12.43

Others (%) 24.4 13.02 16.40 5.79 19.96 6.44 1.10 1.53

Abiotic Factors (%) 64.1 46.92 51.42 91.63 76.10 88.80 86.06 86.03

Note: Abiotic Factors consist of silt, rubble, sand dead corals with algae and rock with algae. Source: Gaia South, Inc, 2012 Except for Station MW8, all stations are dominated by diatoms (microalgae). Station MW8 was dominated by several species of dinoflagellates which are also referred to as Harmful Algal Bloom Species (HABS). These species may produce toxins or may decrease oxygen in the water column and may occur as a result of sediment deposition from terrestrial sources. These particular species also dominate the water column during red tide events. The total phytoplankton density at each station, except Station MW8, was comparable at approximately 1,000 cells per litre. The density at Station MW8 was more than 7,000 cells per litre. Larval forms were the dominating members of the zooplankton at all stations. Station MW1 was dominated by gastropod larvae while the other stations were dominated by copepods. The number of species at each location ranged from 10 to 16. With respect to the fisheries, angelfishes were the dominant species in terms of density and number of species. The biomass was dominated by the wrasses, surgeonfishes and emperor fishes. The highest calculated harvestable biomass was at Station MW1 (approximately 60 kg per hectare) with the next highest at Station MW4 (slightly more than 20 kg per hectare). All other stations had significantly less biomass. Heavy metals analysis was done on the meat of 3 trophic fishes caught within the surveyed area. These consisted of pelagic fishes and two benthic species considered as a carnivore and a herbivore. Results of the flesh analysis are shown in Table 55. Comparison of the test results with Australian and European Union Standards indicated the pelagic fish species were within the standards for human consumption. The benthic species were also within the standards with the exception of lead concentrations. Both the carnivore and herbivore species exceeded both standards.

Table 55: Heavy Metals Analysis for Coastal Marine Fish

Parameter Chromium

(hexavalent)

Arsenic Cadmium Copper Nickel Lead Mercury

Pelagic Fish Concentration (mg/kg)

<0.10 <0.10 <0.03 33.46 <0.20 1.08 0.143

Benthic Fish Carnivore Concentration (mg/kg)

<0.10 <0.01 <0.03 34.62 0.2 2.12 0.116

Benthic Fish Herbivore Concentration (mg/kg)

<0.10 <0.01 <0.03 34.62 0.2 2.12 0.116


Australian Standard (mg/kg)

- 1 0.2 70 - 1.5 0.5

EU Standard (mg/kg/week)

- - 0.05 - - 0.3 0.5


20.7.4 Coastal Oceanography

Three oceanographic stations were established along the coastline to provide baseline data within areas that may be affected by future project operations and potential pollutant discharges. The first station (OC1) was located near Binuangan, the second station (OC2) was located near Tapangahoy and the third station (OC3) was located near Payong payong. Ocean current data was collected from current meters moored at the three stations (5 meters below the ocean surface) and by drogues near each of the current meters. Current velocity and seawater temperature data are summarized in Table 56.

Table 56: Ocean Current Data by Current Meter Measurements

Station Ebb Tide Current (cm/sec) Flood Tide Current (cm/sec) Seawater

Temperature (C)

Current Velocity

Direction Current Velocity Direction

OC 1 1.4 to 24.4 WSW to NNW 3.2 to 12.8 WNW to N 28.9 to 29.5

OC 2 2.8 to 16.4 To NW 0.6 to 29.0 To NW 28.9 to 29.8

OC 3 2.0 to 24.0 SSE to WSW 4.8 to 16.0 S to SE 29.25 to 30.25

Note: Measurements taken June 20-21, 2011.


Primary tide data for the Project coastal area was taken from the Tide and Current Tables for 2011 as published by the National Mapping and Resources Information Authority (NAMRIA). The Cebu tidal station is the reference station for Butuan Bay. Tidal observations at Binuangan for the period June 19 to 20, 2011 indicated a semi-diurnal type following the Cebu tidal station characteristic. The tidal elevation ranged from a low of 70 cm at 2000 hours June 19 to a high of 217 cm at 1300 hours on June 20. A secondary low of 105 cm was recorded at 0700 hours on June 20 and a secondary high of 124 cm was recorded at 0200 hours on June 20. Seawater temperatures were recorded at each of the three stations at three depth intervals. The temperature data indicate a typical pattern of higher temperature near the surface and lower temperatures at depth. The data are summarized in Table 57.


Table 57: Seawater Temperature Data

Depth Station OC 1 Station OC 2 Station OC 3

28 meters above seabed

29.5 to 31.17 C 29.45 to 31.88 C 29.85 to 30.86 C

15 meters above seabed

28.95 to 29.35 C 28.56 to 30.15 C 29.05 to 29.55 C

5 meters above seabed 28.75 to 29.25 C 27.65 to 29.45 C 28.56 to 29.85

Temperature Gradient 0.1 to 1.9 C 1.80 to 2.43 C 1.40 to 1.90 C

Note: Measurements taken June 20-21, 2011. Source: Gaia South Inc., 2012

Bathymetry data were collected at the 3 stations to establish a depth profile for construction of port facilities. The depth profile at Station OC1 (Binuangan) indicates a gradient of 5.3% within the first 140 meters from the shore with a maximum water depth of 10 meters. From 140 meters to 220 meters from the shore the gradient increases to 47.9% with a maximum water depth of 40 meters. The depth profile at Station OC2 (Tagpangahoy) indicates a gradient of 13.6% within the first 70 meters from the shore with a maximum water depth of 10 meters. From 70 meters to 200 meters from the shore the gradient increases to 39.1% with a maximum water depth of 47 meters. The depth profile at Station OC3 (Payong payong) indicates a gradient of 2.4% within the first 440 meters from the shore with a maximum water depth of 10 meters. From 440 meters to 560 meters from the shore the gradient increases to 23.8% with a maximum water depth of 38 meters.

20.7.5 Conservation Value Management Impacts and Control Strategies

The majority of the Project area is devoid of forest cover. A dense homogenous community of ferns and grasses sparsely interspersed with forest tree seedlings/saplings, shrubs, herbs, and vines, predominate in almost every portion of the area. This vegetation cover comprises approximately ninety percent (90%) of the Project total land area. The remaining vegetation cover is forest communities occurring in narrow strips or small patches. They are mostly confined at the lower slopes and along the creeks, and gullies. They are characteristically remnants of second growth type of forest where dominant vegetation consists mainly of timber producing pioneer trees. Seedlings and saplings of these tree species together with other common pioneer trees, shrubs, lianas, herbs, ferns and grasses constitute the underlying vegetation. Most of this vegetation cover (approximately 141 hectares) will be removed during the mining operations. This will impact the habitat of the fauna species within the area, the biodiversity and the visual aesthetics. Given the majority of the area is primarily grassland with low biodiversity values the flora impacts will be minimized. Six species are identified as endangered or vulnerable. These will be impacted by the activities. Similarly, the fauna impacts will also be minimized given the limited habitat and common species found in the area. Only 1 species (Philippine Duck) is listed as vulnerable on the IUCN Red List. It is however mobile and will likely relocate to other areas. Impact control measures for the flora and fauna resources will primarily focus on two activities. The first will be the staged or phased approach of the mining operations wherein on limited areas will be disturbed in any given year. This will limit the loss of vegetation and habitat and allow the migration of the fauna


species to other areas. The second control measure will focus on a continuous progressive rehabilitation program. Once an area has been mined, rehabilitation activities will be initiated to replace the vegetation cover and stabilize the landforms. A large percentage of the disturbed areas will be under various stages of rehabilitation prior to the final year of operations. Fast growing species (pioneer and reforestation species) and those with substantial high tolerance to sun exposure will be selected due to the area climatologic conditions. Monoculture practices will be avoided in the program to minimize occurrences of damaging viruses, pests and other similar plant illnesses. The development of these selected species will create conditions conducive to growth of climax species. The introduction of fruit-bearing species within certain areas will also be explored during the progressive rehabilitation process. Some vines and grasses are considered to be effective to reduce soil erosion and ffor slope stabilization. These will be used throughout all stages of the progressive rehabilitation period. Collection of the endemic and endangered flora species within the area will also be done prior to mining operations. Wildlings will be collected and seedlings propagated within onsite nurseries. Various erosion control measures will be implemented to protect the newly planted seedlings and monitoring programs will be implemented on a regular basis. Thirteen of the 24 watersheds within the Project area will be affected by the operations. Impacts to the freshwater aquatic resources will occur throughout the operations period. These will include physical alterations of the stream and creeks, changes in the hydrologic regimes and water quality degradation due to surface runoff and sedimentation. Permanent physical changes will occur for approximately 1.6 kilometres of stream channels and temporary changes will occur in several additional kilometres. Stream restoration techniques will be implemented as part of the progressive rehabilitation programs to control and mitigate these impacts. Impacts to the aquatic species are not expected to be significant given the current conditions of the streams and limited freshwater species. Water quality degradation control measures will focus on the construction and operation of interceptor and diversion canals and water quality control ponds. The coastal marine aquatic resources within the coastline of the Project area have been affected by fishing and destructive practices associated with fishing. Nonetheless, portions of the coastal marine areas near the proposed port do exhibit some fair to good coral and fisheries conditions. These were recently identified and mapped in mid Year 2013. As part of this process, more than 8,000 corals were relocated from the proposed port area to the nearby Marine Sanctuary as an impact control strategies. Near shore water quality degradation is a significant potential impact and will affect the aquatic resources as well as the visual resources. The water quality management plans and programs to be used land and water resources mitigation will also be used to manage the potential for near shore coastal impacts.

20.8 Social and Community Issues and Effects

20.8.1 Philippine Social and Community Regulatory Framework

The regulatory framework for social and community issues management is identified under Chapter 14 of DENR Administrative Order No. 2010-21: Consolidated DENR Administrative Order for the Implementing Rules and Regulations of RA 7942, otherwise known as the Philippine Mining Act of 1995. This framework is applied to the host community and selected neighboring communities that may be directly or indirectly affected by the Mining Project. Additionally, the well-being of affected communities are also addressed in the Local Government Code of 1991 and the Indigenous Peoples Rights Act of 1997. Combined, these laws and the regulatory framework are applied to all phases of mining; exploration, development, operations and mine closure. Generally, the regulations are grounded on the principle that the rights of the affected communities are protected. Mechanisms are in place whereby all community and social sectors participate during each of


the mining phases with the objective that benefits from mining operations are cascaded to all affected sectors. During the exploration stage, preparation and implementation of a Community Development Program (CDP) is required. The CDP is developed in consultation and in partnership with the host communities and appropriate neighboring communities. Planned programs and activities are supported by a fund equivalent to a minimum of 10% of the budget of the Exploration Work Program (EWP). The programs are focused on a set of limited social and economic programs designed to aid the host communities in the areas of poverty alleviation, better health and better education. The framework for this program is identified in DENR Administrative Order (DAO) 13 issued in Year 2010. Should an exploration project move to an operating project, the Philippine Mining Act requires the preparation and implementation of a Social Development and Management Plan (SDMP). At a minimum, 1.5% of the annual operating costs shall be allocated to the SDMP each year. This amount shall be apportioned for implementation of the Social Development and Management Program (SDMP) a Program for the Development of Mining Technology and Geosciences and an Information and Education Campaign (IEC) Program. Other details of the SDMP are provided in Administrative Order 2000-99. Similar to the CDP, the SDMP shall be developed in consultation and in partnership with the host and neighboring communities. The SDMP shall cover a 5-year incremental periods and shall include programs, projects and activities (PPAs) focused towards enhancing the development of the immediate stakeholders. The SDMP shall also be developed such that the PPA’s are in alignment with the programs of the Local Government Unit (LGU) responsible for the Project area.

20.8.2 Community Consent Framework

Community consent is required prior to initiation of a mining project. Key to this is the determination of whether or not the potential mine and operations areas are located within an identified ancestral domain of a particular indigenous peoples (IPs) tribe. To ensure the protection of the rights of the IPs, Section 18 of the Mining Act stipulates that… “mining applications may not be granted without the prior consent of the concerned indigenous cultural communities “. The government agency tasked to implement this aspect of the mining industry is the National Commission on Indigenous Peoples (NCIP). The NCIP is responsible for addressing concerns regarding the country’s indigenous peoples. DENR Administrative Order 2010-21 defines ancestral lands as “all lands exclusively and actually possessed, occupied or utilized by Indigenous Cultural Communities by themselves or through their ancestors in accordance with their customs and traditions since time immemorial, and as may be defined and delineated by law”. Implementation of the informed consent principle of the mining regulation, the NCIP has prepared the Revised Guidelines on Free and Prior Informed Consent (FPIC) and Related Process Guidelines of 2012 also known as NCIP 2012-Administrative Order 3. This regulatory document identifies the specific processes and requirements that are needed to secure the “informed consent” of the IP community and is applicable only to declared and identified ancestral lands. In capsule, the process calls for an extensive community consultation, field validation and investigation facilitated by the NCIP that will indicate the IP consent or rejection of a mining company application. As proof of the IP consent and social acceptability of a mining project, the NCIP issues a Certificate of Precondition (CP). This is one of the major requirements for approval of exploration and mining permit applications. In the case of mine areas located within an ancestral domain, the mine operator and the IP community shall agree on a royalty payment in favor of the IP community. The minimum royalty is 1% of the gross output of the mine operation. It may be increased by negotiations between the IP group and the mining company. The royalty payment shall be used for the socio-economic development of the IP community


and shall be held and managed by the IP community themselves. The NCIP has specific Administrative Orders governing the planning, allocation and use of the royalty payments by the IP community. For areas that are not declared or identified as ancestral lands, the Local Government Code of 1991 is the applicable law. The NCIP however will conduct an area investigation and verification process that will certify that the applied mining area is not covered by any ancestral domain claims and that no IP group will be affected by mining activity. This document is issued by NCIP and is referred to as the Certificate of Non-Overlap. For mining areas considered to be non-ancestral lands, the social interests of the community are protected by the requirement that any mining application requires proof of consultation from the Local Government Units where the mining project will be located. The LGU’s are the Barangay Government, Municipal Government and the Provincial Government. Under the Local Government Code of 1991, no projects or programs shall be implemented unless the consultation is complied with and the prior approval of the LGU is obtained. Compliance with this provision requires the mining applicant to conduct consultations with the affected communities, barangay, municipal and provincial governments.

20.8.3 Project Area Demographics and Community Data

The municipalities of Tubay, Jabonga and Santiago are identified as the primary impact areas associated with the Project activities. Community and social studies of the area were conducted by Gaia South Inc. during the period June through August, 2011 to identify social issues and potential community impacts. Secondary data were also collected during this period to characterize the social and community environment prior to the beginning of the Project. Jabonga is one of the oldest towns within the area and is associated with Lake Mainit. The hierarchy of settlements classifies Santiago as a satellite municipality and is identified as a mainly agricultural area. Tubay is reportedly the second Spanish settlement within the area with a settlement date of 1751. It was a center of trade through the 1920’s which eventually declined due to road construction connecting Tubay with Santiago and Cabadbaran. The size and population of the three municipalities is summarized in Table 58.

Table 58: Municipal Population Data

Municipality Population (2010) No. Barangays Land Area (ha) Classification

Jabonga 23,833 15 29,300 4th Class

Santiago 20,955 8 28,665 4th Class

Tubay 20,426 13 13,800 5th Class

Source: Gaia South, Inc, 2012. Coffey, 2011.

Other data collected by the Gaia South Inc. studies included social and community demographics, community services and economic activity. These data are summarized in Table 59. Focused Group Discussions (FGD) and Key Informant Interviews (KII) were also conducted within the Project area during the June to August, 2011 data collection period. These two activities were focused on identifying the issues of the key stakeholders and their acceptance/non-acceptance of the Project. The results indicated general acceptance of the Project by the three communities as a mode of development. Many participants of the FGD and KII activities felt the pace of development under the current agriculture and tourism programs will be slow.


Political acceptance of the Project was also indicated to be high. The overall perception by the communities and the political landscape is that the environmental and social issues/risks the economic benefits may outweigh these issues and risks. Furthermore, community and political comments indicate the environmental and social programs implemented to date indicate a positive approach by the Company and demonstrate their adherence to responsible mining practices.

Table 59: Community and Social Data Year 2008

Data Parameter Jabonga Santiago Tubay

Education

No data Elementary Schools – 9 Primary Schools - 1 Secondary Schools – 2

Elementary Students – 3,424 Elementary Classrooms - 107 Secondary Students – 890 Secondary Classrooms – 21

Housing No data No. Households – 3,157 No. Housing Units = 3,667

Social Assistance Facilities

No data Day Care Centers - 10 Elderly Centers - 1 Women’s Centers - 1

Day Care Centers – 13

Protective Services

No data Police Personnel – 21 PNP Police Personnel – 25 PNP

Fire Protection Services

1 Fire Truck None None

Infrastructure Roads – 100 km Bridges – 6

Roads – 59 km Bridges - 4

Roads – 83 km Bridges – 9

Power Supply Households Served – 3,368 Households Served – 2,261

Households Unserved – 896 All Barangays area served by power from ANECO

Source of Water Supply by Number of Households Served

Level 2 Supply – 3,780 Community System Individual Supply – 794 Community System Shared Supply – 2,188 Wells Shared – 121 River/Springs – 40

Wells Shared (Level 1) – 1,320 Wells Shared (Levels 2 and 3) – 2,069

Solid Waste Management

No data 55 m3 per week at designated Solid Waste Facility

No Solid Waste Facility

Agricultural Crop Area and Production

Rice – 682 ha / 4,993 tonnes Corn – 232 ha / 835 tonnes Banana – 517 ha / 1,550 tonnes Vegetables – 39 ha / 238 tonnes Coconut – 6,760 ha / 8,112 tonnes Root Crops – 164 ha / 3,877 tonnes

Rice – 70 ha / 350 tonnes Corn – 176 ha / 365 tonnes Banana – 1,559 ha / 6,281 tonnes Vegetables – 73 ha / 593 tonnes Coconut – 2,032 ha / 4,064 tonnes Root Crops – 84 ha / 630 tonnes

Rice – 25 tonnes Corn – 240 tonnes Banana – 875 tonnes Coconut – 5,275 tonnes

Livestock Production

Livestock – 274,327 kg Poultry – 4,947 kg

Swine – 2,657 kg Cattle – 365 kg Carabao – 369 kg Goat – 1,441 kg Poultry – 16,260 kg Duck – 245 kg

No data


Fisheries Production

Inland Fisheries – 213,070 kg Ocean Fisheries – 113,079 tonnes

Inland Fisheries – 10,340 tonnes Fish Cages – 2.5 tonnes

Inland Ocean Fisheries – 209.7 tonnes

Source: Gaia South, Inc, 2012.

20.8.4 Public Health

Public health data for the 3 impact municipalities is limited however enough data is available to provide a health baseline condition for each municipality. Birth rates within the municipalities are slightly more than the overall Philippines birth rates but have shown a decreasing trend. The mortality rate for each is less than the national rate. Acute Respiratory Infection and Bronchitis/Bronchiolitis are the leading causes of morbidity within the municipalities. Heart disease and vascular system disease are the leading cause of deaths. Each of the municipalities has 1 Rural Health Unit (RHU). These RHU’s have adequate health professionals except for Jabonga which is lacking in doctors, dentists and midwives.

20.8.5 Cultural and Heritage Values

The majority of the local inhabitants within and surrounding the Project area are of Visayan heritage. The area is also the home of the Mamanwa-Manobo indigenous peoples. Historical account of the area suggest the earliest inhabitants came from mainland Asia and were followed by Malayans, Arabs, Chinese, Japanese, Spanish and Americans. In more recent times migrants from the Visaya and Luzon Provinces have settled in the area. Most residents speak the Cebuano dialect and reside in rural areas. On May 11, 1999 the National Commission on Indigenous People (NCIP) Office issued a certification that the MPSA application for the Project area had no recognized Indigenous Peoples (IPs) living within the applied areas nor were there any existing applications for a Certificate of Ancestral Domain Claim (CADC) or Certificate of Ancestral Domain Title (CADT). On July 14, 1999, with guidance of the NCIP, the Project proponents executed a Memorandum of Understanding (MOU) with the IPs of Sitio Coro, Brgy. Colorado, Jabonga that led to the execution of a Memorandum of Agreement (MOA) with the Mamanwa and Manobo Tribes. This then led to the eventual compliance of the Free and Prior Informed Consent (FPIC) and the issuance of a Compliance Certificate by the NCIP on February 6, 2008.

20.8.6 Social and Community Management Impacts and Control Strategies

The Project is anticipated to provide positive impacts to the community in terms of revenue, job opportunities, increased income and improvement of basic services such as infrastructure, health, education and communication services. These will be particularly focused within the host barangays. Positive impacts are also anticipated relative to Information and Education Campaigns and implementation of the SDMP. Access to communication facilities within the Project area will also be provided to the community for emergency cases. Priority for job opportunities and employment will be given to the host community. Health personnel will be hired to monitor and treat common illnesses of the workers. Medical and dental missions will be conducted on a regular basis within the nearby communities to address and manage any negative health impacts of the Project.


20.9 Closure Plans

20.9.1 Regulatory and Functional Objectives

The overall objective of the rehabilitation and closure plan is to rehabilitate the Project Area in such a manner as to promote a sustainable environment and social community using a multiple land use planning concept. From a regulatory standpoint, closure of the operations will be guided by an approved Final Mine Rehabilitation and Decommissioning Plan (FMRDP). Requirements for preparation and implementation of the FMRDP are part of the 1995 Philippine Mining Act as amended by implementing rules and regulations identified in DAO 2005-07 entitled Amendments to Chapter 18 of Administrative Order 96-40 as Amended, Providing for the Establishment of a Final Mine Rehabilitation and Decommissioning Fund. In addition to preparation and approval of the functional portion of the FMRDP, the regulations also require the establishment of the Final Mine Rehabilitation and Decommissioning Fund to be administered by the Company and the MGB. This fund is based on the estimated closure costs identified in the FMRDP and is subject to revision during every two year review period. A graduated deposit schedule is identified in the regulations and is based on the projected mine life and the overall closure cost. Funds may only be withdrawn for closure activities once the mining operations have ended and the final closure activities are ready to be implemented. Reclamation and rehabilitation activities completed prior to mine closure are considered part of Progressive Rehabilitation and are not subject to the FMRDP Fund deposit requirements. From the Company standpoint, preparation and successful implementation of the FMRDP activities focuses on two primary objectives:

• To prevent or eliminate long term environmental impacts by returning mining disturbed land to physically and chemically stable, visually acceptable, productive or self sustaining condition, taking in consideration the beneficial uses of the land and surrounding areas and as agreed with the stakeholders, and

• To ensure that sustainable alternative livelihood opportunities are established and left behind to the host and neighboring communities.

There should also be the recognition that restoration of the disturbed areas to their pre-mining condition is for the most part unachievable. A pre-requisite to development and implementation of the FMRDP is development of an overall land use concept for the overall MPSA and specifically for the disturbed areas within the MPSA. A land use concept is generally based on a multiple land use concept with the focus on retaining what natural forest areas remain, returning some disturbed areas to a natural regenerative forest area and establishing the opportunity for agricultural based livelihood programs.

20.9.2 Rehabilitation and Closure Program

An initial closure plan has been prepared in response and in conformance with the Philippine regulatory requirements. The FMRDP has been subject to Project stakeholder consultation and review and is currently under review by the regulatory agency. A Community Technical Working Group has been established to develop, evaluate and review the closure plans. Key to the identifying the program and activities is the full implementation of the progressive rehabilitation program during the mining operations. Successful implementation of this program will significantly reduce the closure rehabilitation schedule and costs. The closure program will consist of an Active Care Phase and a Passive Care Phase. Objectives of each phase are as follows.


• Active Care Stage – The stage occurs immediately after the end of mining operations. During this phase, activities are implemented to decommission any equipment, process facilities and infrastructure that will not remain. The mine and other disturbed areas will be rehabilitated and returned to an agreed land use. In this case, this will be an agri-forest concept with the possibility of plantation zones and forest management zones to assist in post project livelihood programs. Also includes in this stage is the identification and cleanup of any potential contamination.

• Passive Care Stage – This stage is a period of monitoring and evaluation of the Active Care Stage to determine the effectiveness of the Active Care Stage. The end of this stage should result in the issuance of a Certificate of Relinquishment from the DENR, certifying the objectives of the FMRDP have been met.

Implementation of the FMRDP is planned to occur over a 4 year period. The first two years will represent the Active Care Stage and the final two years will represent the Passive Care Stage. Components and associated activities for this 4 year period are shown in Figure 66.


Figure 66: Progressive Rehabilitation and Closure Activities

Mine Closure Impact Analysis

Annual Progressive Rehabilitation Area = 10 to 15 hectares Years 1 through 10.

Landform stability enhancement and revegetation

Progressive Rehabilitation Programs

Social Plan

Decommissioning Plan

Rehabilitation Plan

Maintenance and Monitoring Plan

Physical Resources Biological and Ecological Resources Land Use Plans and Alternatives Quality of Life Social and Cultural Values Sustainable Economic Development

Removal of Plant, Process Equipment and

Infrastructure

Topography/Landform Information Hydrology Information Biology Information Rehabilitation Methods Schedule of Activities Research Programs

Employee Retrenchment Packages Labor Support Programs Skills Training Transfer of Social Assets Community Livelihood Programs

Internal Monitoring Programs Third Party Monitoring Transfer of SDMP Programs

Active Mine Closure Stage Years 1 and 2

Passive Mine Closure Stage Years 3 and 4

Objectives of the FMRDP Met? Issuance of the Certificate of

Relinquishment by the CLRF Steering Committee

Implmentation of the FM

RDP

Continue Mine Closure Programs

Yes

No


21 Capital and Operating Costs

21.1 Scope of Estimate

The scope of the estimate covers mining, stockpile rehandling, barging , site preparation, road construction, Port Loading Facility, general infrastructure, equipment and materials supply, construction and installation of facilities.

21.2 Accuracy of Estimate

The capital and operating cost estimates have been developed to an intended level of accuracy of ± 10 to 15%.

21.3 Summary of Capital Cost Estimate

The capital cost estimate summarised in Table 60 was estimated by CSC based on information provided by local Philippine service providers and suppliers, and is expressed in US dollar (USD) values. The base date of the estimate is April 2013.

Description Cost USD M

Installed Start-up Capital 9.26


Contingency at 10% 0.95

VAT at 12% 1.31

TOTAL 12.45

Table 60: Summary of Capital Costs

Elements of capital cost estimates are subject to VAT at 12%. Due to the nature of the DSO export operation VAT has assumed to be non-refundable.

There is no allowance for mining fleet capital as the project is based on contract mining.

Details of the components of the Installed Start-up Capital, before VAT, are shown in Table 61.


Mobilisation – Mining 0.15

Site Preparation Infrastructure & Site 0.04

Road Construction/Rehabilitation/Widening 1.14

Port Loading Facility Construction 2.62



Mechanical/Electrical Equipment 0.07

Laboratory Equipment/Apparatus 0.24



Office Equipment 0.06

Miscellaneous Services: 0.20

Working Capital (2 months operating costs) 2.64

TOTAL 9.26

Table 61: Summary of Installed Start-up Capital Costs (before VAT)

21.4 Exclusions

The following items were excluded from the capital cost estimate:

• Pre-production land acquisition and relocation costs - in progress

• Mine closure and rehabilitation costs - included in operating costs

21.5 Summary of Operating Cost Estimate

21.6 Operating cost estimate

A quarterly operating cost estimate has been developed for the mining, stockpile rehandling, barging and all administrative, environmental, community relations and supporting departments for the ANDP.

The following costs have been included in the analysis:

• All local, provincial and federal government fees

• Royalties

• Import duties

• Export duties

• Value-added tax

The annualized operating costs for the project presented in Table 62 were estimated by CSC, based on information provided by local Philippine service providers and suppliers, and are expressed in US dollar (USD) values. The base date of the estimate is April 2013.

Contract mining costs have been estimated from mine physicals schedules and quotations from TVI's existing contractors and equipment suppliers in the Philippines. Mining costs are inclusive of labour cost, waste mining, stockpile rehandle, and haulage costs.

All other site consumables costs have been derived from current costs from the TVI's Canatuan operation and quotations from TVI's existing suppliers in the Philippines. The diesel price estimate was 38 PhP/litre, based on current supplier pricing.


Table 62: Operating Cost Summary

LOM Cost



Ore Drying 6.5 0.67


Barging 21.7 2.24


G&A 17.9 1.84



VAT Payable (@ 12%) 10.9 1.12


Figure 67 shows the cost distribution for the resulting Operating Cost (excluding contingency).

Figure 67:Cost Distribution of Operating Cost


Table 63: Mining Operating Costs by Year


Table 64: Other Operating Costs by Year


21.7 Mining operating cost estimate

Refer to Section 24 for the mining operating cost estimate detail.

21.8 Exclusions

The following costs have been excluded from these estimates but included in the economic analysis:

• Depreciation

• Corporate taxes

• Value-added tax


22 Economic Analysis

22.1 Introduction

A financial model has been prepared and the results are presented on an after tax basis in constant September 2013 US dollars. The model has been prepared on a stand-alone basis and contains no head-office or external sources of revenue or costs. Revenues and costs are estimated in US dollars converted from local currency where applicable at the rate of 41 Philippine Peso to 1 USD. The final cashflow, NPV discounted at 10% and IRR are presented in Section 22.5.

22.2 Economic Model Input Parameters

The financial model is based on the case put forward by TVI as follows:

• A pre-production and construction period of 3 months

• A mining schedule, estimated on a quarterly basis which optimises the use of current resource

• A Direct Shipping Operation (DSO) of High Iron Limonite at rate up to 2.5M wmt per annum

• Limonite is blended to meet the nickel and iron specifications required by off-takers.

The economic parameters applied to the model are based on the following:

• US dollar to Philippine Peso exchange rate of 41 PhP based on the prevailing rate

• A medium-term average ore sale price of US$22/wmt, being 10% lower than the average off-takers sale price over the last 18 months.

• A discount rate of 10% has been applied to the after-tax cashflows on the basis of the 3.8% Philippines Central Bank discount rate plus a 6.2% risk premium

The taxation and royalty assumptions incorporated into the financial model are as follows:

• The Philippines corporate tax rate of 30%.

• Value Added Tax (VAT) is payable at the rate of 12% on operating and direct capital costs

• All capital fully depreciated over the life of the project.

• No tax-holiday has been applied.

• No carried forward tax losses have been applied

• A 2% Government Excise Tax on gross sales

• A 1% Indigenous persons royalty on gross sales

• Other local government and environmental and rehabilitation levies applied in accordance with the Philippines Mining regulations


22.3 Capital Costs

Installed capital cost estimates are based on the feasibility study figures provided by Philippine suppliers and documented in this report. The life-of-mine capital costs used in the economic analysis are summarised in Table 65.

Table 65: Capital Cost Estimates

Description Capital Costs USD M

Mobilisation 0.15

Road Construction/Site Preparation 1.18

Causeway Construction 2.62



Laboratory and Equipment/Apparatus 0.30

Office Equipment & Miscellaneous Services 0.26

Working Capital 2.56

Total Direct Cost 9.26

VAT 1.31

Contingency 0.92

Total Capital Cost 11.50


Total Life-of-Mine Capital 12.45

Development costs include causeway, buildings and workshop, general site, construction services, temporary construction facilities and establishment costs. A further 10% contingency is applied to all the installed capital costs. The total installed capital cost is including indirect costs is USD 11.50M.

Sustaining capital cost of USD 0.95M has been included over the life of the project.

Value Added Tax (VAT at 12%) has been assumed not to be refunded.

The sensitivity of the project to Capital Costs is discussed in Section 22.6.

22.4 Operating Costs

Key assumptions which drive the operating costs are summarised in Table 66.


Table 66: Operating Cost Assumptions

LOM Cost



Ore Drying 6.5 0.67


Barging 21.7 2.24


G&A 17.9 1.84



VAT Payable (@ 12%) 10.9 1.12


Contract mining costs have been estimated from mine physicals schedules and quotations from TVI's existing contractors and equipment suppliers in the Philippines. Mining costs are inclusive of labour cost, waste mining, stockpile rehandle, and haulage costs.

All other site consumables costs have been derived from current costs from the TVI's Canatuan operation and quotations from TVI's existing suppliers in the Philippines. The diesel price estimate was 38 PhP/litre, based on current supplier pricing.

Fixed, general and administration costs have been estimated on the basis TVI's current Canatuan operation in Mindanao.

The operating cost profile over the life of mine expressed in USD per wmt shipped is shown in Figure 68.

Figure 68: Operating Cost by Cost Centre


22.5 Life of Mine Project Financials

The summary cashflows after tax and before financing for the ANDP are summarised in Table .

Table 67: Summary Cash Flow

LOM

USD M

Revenue 213.4

Capital Expenditure ( 12.5 )

Operating Expenditure ( 127.4 )

Tax Paid ( 22.8 )

Free Cashflow 50.7

NPV (10%) 37.9

IRR 187%

Payback 1.0 years

A chart illustrating the cumulative cashflow of the project is shown in Figure .

Figure 69: Total Free Cash Flow


Figure 70: Operating Cost Pareto


Table 68: Project Production & Cash Flow

2013 2014 2015 2016 2017+ LOM

PHYSICALS

Pa Total

Laterite Mined

M wmt - 2.3 2.6 2.1 0.7-0.2 10.7

Laterite Shipped

M wmt - 2.0 2.5 1.8 0.5-0.4 9.7

CASHFLOW

Cash Receipts

M USD - 44.0 55.0 39.6 11.0-8.8 213.4

Capital Expenditure

M USD 6.9 4.7 0.2 0.2 0.2 12.5

Operating Expenditure

M USD

23.0 26.5 18.8 7.6-5.9 127.4

Tax Paid

M USD

5.7 7.7 5.6 1.6-0.6 22.8

Total Free Cash Flow

M USD

-6.9 10.6 20.6 15.0 1.7-1.1 50.7

NPV

M USD 37.9

IRR

187%


172

22.6 Sensitivity Analysis

Sensitivity analysis on the financial model shows that the project is robust to changes in modelling assumptions and requires adverse changes in excess of 20% to make the project marginal on an NPV basis. The sensitivity study has identified that the project is most sensitive to factors which impact revenue followed by operating cost. The relative sensitivity of the project to revenue, capital and operating cost estimates is illustrated in Figure 71.

Figure 71: Project Sensitivity


173

NPV (USD Million)

Change 70% 80% 90% 100% 110% 120% 130%

Revenue M USD 3.3 15.5 27.0 37.9 48.9 59.8 70.8

Operating Costs

M USD 64.6 55.7 46.8 37.9 29.0 20.1 11.2

Capital Costs M USD 40.7 39.8 38.9 37.9 37.0 36.1 35.1

NPV (USD Million)

Sale Price USD/wmt 14 16 18 20 22 24 26

NPV M USD -4.4 6.6 17.7 27.9 37.9 47.9 57.8

Table 69: Project Sensitivity


174

23 Adjacent Properties (MRL)

The Surigao peninsula in northeastern Mindanao, where the ANDP is located, is a significant mining district of the Philippines. There are four commercially significant nickel laterite resources, including Taganito, Cagdianao, Hinatuan and Nonoc Island. There are also other known but undeveloped nickel laterite resources in the area. Nickel laterite has been mapped beyond the immediate boundaries of the TVI/MRL tenements. These occurrences may be of future interest to TVI/MRL but are not contemplated or provided for in the current Feasibility Study. In addition both TVI/MRL and other companies have interests in epithermal gold and porphyry copper-gold projects in the area.


175

24 Other Relevant Data and Information

24.1 Mine Operating Costs

Mine operating costs are expressed in US dollars.

24.2 Introduction

A Mine Operating cost model was developed using information from equipment suppliers and similar sized operating mines in the Philippines.

24.3 Operating hours

The mine operation has been scheduled to operate for 365 days per annum, with allowance for stoppages during moderate-high rainfall conditions. Mine production has been scheduled for 304 days per annum.

A three panel roster system has been assumed with mine personnel working three 8 hour shifts per day.

24.4 Equipment productivity

Equipment productivity has been based on load/haul simulations, assuming equipment performance parameters from equipment suppliers and material properties of the deposit.

The weighted average dry bulk density and weight average moisture content from resource calculations are 1.20 tonnes/m

3 and 30% respectively. A material swell factor of 30% has been

assumed.

The primary load/haul fleet consists of a Caterpillar 336 excavators loading Caterpillar 730 articulated trucks which will be predominantly used in the pit. The secondary load/haul fleet consists of a Caterpillar 950 Front End Loader loading Isuzu Giga on-highway trucks and will be predominantly used for Stockpile rehandle.

An additional excavator unit has been included in the fleet to be used in the limestone quarry.

Loading Unit productivity assumptions are shown in Table .

Haul profiles were developed for the 48 mining panels. The profiles were based on the temporary in-pit road network and the distance to the centroid of each mining panel. The average gradient for the temporary road network was 5% and the rolling resistance was assumed at 3%. Load/haul simulations were carried out on 48 panels to estimate average haul and return speeds, and interpolated for the remaining mining panels.

Hauler productivity assumptions are shown in Table


176

Table 70: Loading Unit Productivity

Load Unit Excavator Loader

Make/Model CAT 336 CAT 950

Bucket Capacity Lcm 2.4 3.3

Bucket Fill Factor % 90 90

Bucket Load per Pass wmt 3.2 4.5

Swell Factor % 30% 30%

Density (In Situ) wmt/m3 1.74 1.74

Hauler Unit Articulated 6x4

Hauler Make/Model CAT 730 Isuzu Giga

Rated Hauler Capacity (by weight) wmt 28.1 20.0

Rated Hauler Capacity (by volume) lcm 16.9 8.5

Number of Passes # 4 3

Hauler Payload wmt 23.0 12.0

Spot Time sec 30.0 30.0

Load Unit First Pass sec 6.0 10.0

Load Unit Cycle sec 21.0 30.0

Total Loading Time min 2.0 2.0

Effectiveness min/hr 55 55

Loader Productivity mt/op hr 198 365

Hauler productivity options are shown in Table

Table 71: Hauler Productivity

Pit to Stockpile/Dump CAT730 (ADT) Unit Minimum Maximum Average

Haul distance m 800 3,250 1,950

Wtd Avg Speed Waste (Loaded) kph 23 26 25

Wtd Avg Speed Waste (Empty) kph 28 32 30

Total Cycle Time min 10.4 20.3 15.5


177

Effectiveness min/hr 55 55 55

Hauler Productivity wmt/op hr 65 130 95

Pit to Stockpile/Dump Isuzu Giga (OHT)

Unit Minimum Maximum Average

Haul distance m 800 3,250 1,950

Wtd Avg Speed Waste (Loaded) kph 23 26 25

Wtd Avg Speed Waste (Empty) kph 28 32 30

Total Cycle Time min 9.4 20.2 14.5

Effectiveness min/hr 55 55 55

Hauler Productivity wmt/op hr 40 60 49

24.5 Site Preparation

Allowance has been made for ancillary equipment to establish drainage controls, strip topsoil, establish temporary access roads and bench face development. Initially, topsoil will be stockpiled adjacent to the Pit Ore Stockpile.

24.6 Mining Operations

Equipment operating costs have been developed using information from several sources, including equipment suppliers and contractor estimates from TVI's Canatuan operation.

A Full Maintenance Service Contract agreement for the maintenance of plant and equipment has been assumed, with the costs inclusive of Labour, but exclusive of fuel.

Equipment hourly operating costs (including an estimate for fuel) for major equipment are shown in Table 72.

Diesel fuel cost has been estimated at USD 0.93/litre. Diesel consumption is shown in Figure Diesel consumption will peak at 14,000 litres per day in 2015.

24.7 Barging Costs

Pricing for ore barging was obtained from a local Philippine contractor currently conducting barging operations of a similar scale at several DSO sites in Mindanao. The quotation for barging costs is USD 2.00/wmt within 3.0 km from the Port Loading Facility.


178

Figure 72: Diesel Consumption

Table 72: Equipment Costs (including fuel and lube)

Make/Model Equipment USD/hr

Cat 336 Excavator 82

Cat 950 Front End Loader 55

Cat 730 Articulated Truck 105

Isuzu Giga On-highway Truck 38

Cat 938 Excavator 52

Isuzu Giga Water Truck 44

Cat D7 Dozer 102

Cat 120 Grader 51

Cat CS533E Roller 31

Workshop Crane 37

Service Truck 43


179

24.8 Environment and rehabilitation

Allowance has been made for ancillary equipment to maintain drainage controls and carry out work as described in Section 4.6.11.

The total area disturbed by mining operation excavations, infrastructure and roads at Agata North is estimated at 195 hectares, which will be progressively rehabilitated with transitional sub-grade saprolite material and topsoil prior to seeding and revegetation. Approximately 390,000 m

3 of this material has been allocated for rehabilitation purposes at Agata North.

Costs associated with these activities have been allocated to the Environmental and Rehabilitation item in the Mining Costs summary.

24.9 Manning

Staff and labour costs are based on TVI operations that are currently in operation in 2013. Staff and Labour cost estimates are inclusive of on-costs.

The mine department will be manned by 100% Philippine National personnel. All labour will be sourced from the local region. Most staff will work a rotational roster system, whilst labour personnel will work an 8 hour day for 6 days per week.

Manning levels in peak production periods are shown in Table 73. Manning levels are inclusive of labour requirements for operating the limestone quarry.


180

Table 73: Manning Levels in peak production periods

AGNDSO-TR-30 August 2013 Appendices

24.10 Equipment requirements

A summary of equipment requirements is shown in Table 74.

Table 74: Equipment requirements

24.11 Equipment hours Equipment hours

A summary of equipment hours is shown in Table 75.

Table 75: Equipment requirements

24.12 Mining Schedule

A graphical summary of the mIning schedule is shown in Figures 73 to 75.


Figure 73: Mining Schedule


25 Interpretations and Conclusions

25.1 Geological Setting and Mineralisation

The weathering of significant outcropping Ultramafic units within the Western Range of the Surigao Mineral District has led to the formation of a widespread and significant lateritic Ni/Co resources. Mineralisation occurs within both the ferruginous upper zone, which is predominantly limonite, and the underlying less altered saprolite zone, which contains predominantly serpentinites and primary clays of the smectite series (stevensite / saponite). Ni enrichment has occurred due to the loss of Si and Mg from the profile, concentrating minor elements from the primary ultramafic (Ni, Co, Fe), to economic levels for exploitation.

This lateritic Ni geological setting is common throughout the world, with the only difference being the rate of weathering, the climate during the weathering period, and the depth of weathering. The Agata North and satellite deposits have formed recently and have many similarities to deposits located within Surigao, Mindanao, Philippines, and globally (Cuba, New Caledonia etc) – and the mining and exploitation of these deposits is well documented and well known.

It can be concluded that the Agata North and satellite lateritic Ni deposits are reliably mineralised based on the global understanding of these deposits in both their formation and their residual nature. However, the rate of erosion and the fickle nature of the mineralisation in parts ensures that a systematic approach is required in defining the mineralisation and this has been carried out by TVI/MRL at every step of the exploration process.

25.2 Drilling

TVI/MRL has completed a series of significant drill programs in the definition of the Agata North Lateritic Nickel deposit. All drilling to date has been completed by the use of small mobile open hole NQ coring rigs, which are highly mobile in difficult to access terrain. Recovery from these drill rigs is high, with losses generally occurring where there are changes in the hardness of the drilled material, causing material to be disrupted at the bit face. The major ore zone is generally a softer material and losses within the ore zones have been minimal at all stages of the drilling programs. A variety of contractors have been used over time, with the drilling rate being the only variation with regards to their performance and sampling rate.

As the drilling technique has provided TVI/MRL with core from which to sample and log, the level of detail has been extremely high and this has provided the resource with very accurate boundary definitions and sampling runs specific to geology and lithology. Issues such as boulders within the saprolite, extensive nature of transition zones, and the relative hardness of various ferruginous layers have been able to documented and reviewed giving TVI/MRL a significant advantage for modelling and grade resource estimation.

The drill spacings have been tested geostatistically and shown to meet the standards of both indicated and measured for most of the Agata North deposit. A geostatistical drilled grid of 25m centres within the Agata North deposit has provided a significant amount of detail within the short range data and provided confidence in the drill spacings being applied.

25.3 Sample Preparation, Analyses and Security

A complete and fully developed series of tests have confirmed the validity and the reliability of the sample preparation, chemical analyses, and security of the process. The checking is comprehensive and includes confirmation of the sample prep via analyses of coarse sizing fractions, and repeats of primary pulps; and confirmation of the analyses through the use of standards, internal repeats and the use of an independent laboratory.


The security of process is provided through independent sample collation by the author and the previous report author, with these results matching the primary result. Also physical checks of the core on site has taken place with logging checked against core as well as referencing grades to the core to see if any inconsistencies have occurred. There has been no indication of any core manipulation or grade inconsistencies at any point of the resource reviews.


All the data has been verified by the author through physical checks and reviews, geological checks and reviews, geochemical checks and reviews, and survey checks and reviews. All data used in the process of resource estimation is appropriate for the estimate and provides adequate support for all subsequent resource estimations.

Bulk density data verification has been difficult due to ground conditions and the variable hardness of the material making many of the simple techniques effectively useless. The primary data collected from pits and test sites, as well as the knowledge gained from lateritic Ni mines in the region indicates that the values being applied are applicable and provide a close estimate to actual tonnages.


26 Recommendations

26.1 Geological Setting and Mineralisation

There are no further recommendations to be made with regards to the geological setting and mineralisation. The resource region, geology, and type of mineralisation is well understood and requires no further work within the resource area.

26.2 Drilling

The drilling technique and drill spacing is entirely appropriate for the collation of geological data and geochemical data. The use of open hole NQ coring rigs has issues associated with core preservation and recovery, but TVI/MRL has achieved extremely high recoveries (>97%) and a high level of competency when preserving and logging the core.

There is no recommendation to change or alter the drilling technique currently used by TVI/MRL within their lateritic deposits at Agata North and satellite deposits. Also there is also no recommendation to change the drill spacing until such time that resources may require upgrading to a higher status, or that mining is to commence and grade control data would be required.

26.3 Sample Preparation, Analyses and Security

The sample preparation, analyses and security are all extremely competent and there is no recommendation to alter the processes that have been put in place by TVI/MRL. Minor changes to the range of standards have been discussed with TVI/MRL staff and this change has been made and implemented.


The complete series of repeats and independent analyses of the lateritic Ni samples of TVI/MRL highlight the quality of the data provided by TVI/MRL staff. Independent verification has only ever found minor transcription errors and these were quickly sorted – there is no systematic errors encountered at any stage of the data verification process.

Bulk density test work will need to be ongoing so as to more accurately define the values for both limonite and saprolite ore zones. The difficulty of defining densities in friable and high moisture content ores is well documented, and as such every effort should be made to provide solid quantitative data as access and weather conditions permit.

26.5 Mining

The recommendations made in the Technical Report for the Agata Nickel Laterite Project, Mindanao, Philippines, Agata Nickel Laterite Project (20 December 2011) to investigate the results of the closely spaced infill drilling program at Agata North was carried out. The reconciliation between tonnage, nickel grades, cobalt grades and iron grades in limonite was +1.9%, -0.3%, -1.3% and -0.3% respectively.

The recommendations made in the Technical Report for the Agata Nickel Laterite Project, Mindanao, Philippines, Agata Nickel Laterite Project (20 December 2011) to reduce the mining panel size from 250m x 250m to 100m x 100m was done for this study. There were no issues in regard to stockpile capacity requirements and ore blending requirements.

There are no further recommendations to be made with regards to mining aspects.


26.6 Integrated Mining Study

An onsite processing study is currently in progress to develop a viable project to extract nickel from saprolite ore beneath the limonite ore at Agata North. The ramp and bench configuration of the DSO pit design has made allowance for access to the saprolite below. Should the onsite processing study prove to be viable an additional 0.8M wmt of High Iron limonite will be available for shipping; currently locked up in benches and ramp systems. This potential DSO ore has a grade of 0.93 Ni% and 48.7 Fe%.

26.7 Permitting

Should the onsite processing study prove viable and progress to development stage, with potentially an additional +15 year project life, then this leaves the way open to accelerate the High Iron Limonite DSO mining schedule and complete shipping of DSO in 4 years, after statutory approval. This has the potential to increase the NPV of the DSO component of the ANDP by at least of USD 10.2M.


27 References

Ausenco Vector, Agata Nickel Project Scoping Study, Sep 2010.

Department of Health. Department of Health District Health System in a Devolved Setting 2002.

Dorotan E. and Mogyorosy. Making your local health system work. German Agency for Technical Cooperation (GTZ) 2004.

Environmental Health Service, DOH. Philippine National Framework and Guidelines for Environmental Health Impact Assessment (EHIA) 1997.

Gaia South, Inc. Social Profiling and Environmental Impact Assessment. 2006.

Ausenco. Technical Report for the Agata Nickel Laterite Project, Mindanao, Philippines, Agata Nickel laterite Project, 20 December 2011 (SEDAR).

Gifford, M. G. Independent Report on the Nickel Laterite Resource – Agata North, Philippines, Agata Nickel laterite Project, 1 April 2013 (SEDAR).

Geotech investigations – JCP Geo-Ex Services.

LaDou J. Current Occupational and Environmental Medicine. McGraw Hill 2004.

PTTC Conceptual Design of the Causeway for Agata Mining Ventures Inc. Payong Payong Port Facilities - April 15, 2013


Appendix 1 – Certificates of Qualified Persons


CERTIFICATE OF QUALIFIED PERSON

Mark Gifford

Geological Consultant

636 Bramley River Rd

Margaret River

WA 6285, Australia

I, Mark Gifford am a qualified geologist working from a private consultancy.

The technical report to which this certificate applies is entitled “Technical Report for Agata North Nickel Laterite DSO Project (ANDP), Mindanao, Philippines” and dated 30 August 2013.

I graduated with a Master’s degree with honours in Earth Sciences at the University of Waikato in 1988.

I am a fellow of The Australasian Institute of Mining and Metallurgy.

My relevant experience with respect to the ANDP includes managing the exploration and mine geology of the Murrin Murrin lateritic Ni mine in the goldfields West Australia for 5 years, as well as consulting to numerous small Ni laterite explorers in both Australia and abroad

I have visited the Agata Northl site on numerous occasions since February 2010, with my last visit to site in July 2011.

I am responsible for the preparation of report Sections 1.2, 1.3, 7, 8, 9, 10, 11, 12, 14, 25.1 to 25.4 and 26.1 to 26.4

I am independent (as defined by Section 1.5 of NI 43-101) of TVI Pacific Inc..

I have been involved in the project since February 2010. The nature of this involvement is the development of resources based upon exploration completed by Mindoro Resources Limited.

I have read the National Instrument 43-101 and the Technical Report, to the best of my qualified person’s knowledge, information, and belief, the technical report, or part that the qualified person is responsible for, has been prepared in compliance with this Instrument.

As of the date of this Certificate, to the best of my knowledge, information and belief, the Technical Report, or part that the qualified person is responsible for, contains all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.



Dallas Cox

Principal Consultant

Crystal Sun Consulting Limited

3713 The Center

99 Queen’s Road

Central

Hong Kong

I, Dallas Cox am Principal Consultant of Crystal Sun Consulting Limited.


I graduated with a degree in Mining Engineering at the University of New South Wales, Kensington in 1986.

I am a member of The Australasian Institute of Mining and Metallurgy and Chartered Professional (CP) with membership number 201098.

My relevant experience with respect to the ANDP includes operational and technical services functions for Queensland Nickel Greenvale operations from 1987 to 1990, and mining and resource studies for Acoje Nickel Project (Zambales, Philippines), Adlay Nickel Project (Surigao del Norte, Philippines), Verdant Vale Nickel Project (Bukidnon, Philippines) and Chaldag Nickel Project (Turkey) between 2007 and 2011. In addition, I have worked as a mining engineer for 27 years, including 9 years as a mineral industry consultant.

I have visited the ANDP site and MRL’s regional nickel deposits in Agusan del Norte, Philippines in the 2007 (July), 2008 (January and November), 2010 (July, August and December) and 2011 (January, April and May).

I am responsible for the preparation of Sections 1.1, 1.4 to 1.8, 2, 3, 15 to 21, 23, 24 and 26.5 of the report.

I am independent (as defined by Section 1.5 of NI 43-101) of TVI Pacific Inc..

I have been involved with the project since August 2007. The nature of this involvement has been site visits, meetings with technical staff, preliminary resource estimation, preliminary economic evaluations and mining and mineral reserve studies.





Michael Conan-Davies

Director

MCD Geo Pty Ltd

25 Albion Street

Surrey Hills Victoria

Australia 3127

I, Michael Conan-Davies am a Director of MCD Geo Pty Ltd.


I graduated with a degree in Geology (Honours) from the Australian National University, Canberra, Australia in 1987 and a Masters of Mineral Economics from Curtin University, Perth in 1997.

I am a member of The Australasian Institute of Mining and Metallurgy and a Chartered Professional (CP) with membership number 106953.

My relevant experience with respect to the ANDP includes over 15 year of technical economic evaluations and due diligence of extractive mineral resource projects including the Nonoc, Waigeo, Cawse, Bulong, and Murrin Murrin nickel laterite projects.

I am responsible for the economic analysis aspects of Sections 1.9 and 22 of this report.

I am independent (as defined by Section 1.5 of NI 43-101) of TVI Pacific Inc.

I have been involved in the project since May 2011.




Appendix 2 – Consents of Qualified Persons


Consent of Author

Mark Gifford

Geological Consultant

636 Bramley River Rd

Margaret River

WA 6285, Australia

I, Mark Gifford, consent to the public filing of the technical report titled “Technical Report for Agata North Nickel Laterite DSO Project (ANDP), Mindanao, Philippines” and dated 30 August 2013 by TVI Pacific Inc.

I also consent to any extracts from a summary of the Technical Report in the news release issued on 11 September 2013 of TVI Pacific Inc.

I certify that I have read the news release that the report supports being filed by TVI Pacific Inc and that it fairly and accurately represents the information in the sections of the technical report for which I am responsible.

8 September 2013

Mark Gifford

ref: SCAN0304.jpg


Consent of Author

Dallas Cox

Principal Consultant

Crystal Sun Consulting Limited

3713 The Center

99 Queen’s Road

Central

Hong Kong

I, Dallas Cox, consent to the public filing of the technical report titled “Technical Report for Agata North Nickel Laterite DSO Project (ANDP), Mindanao, Philippines” and dated 30 August 2013 by TVI Pacific Inc.



8 September 2013

___________________________

Dallas Cox

Ref: NI 43 101 DSO 30August2013_v2_DallasCoxConsentPageSigned.jpg


Consent of Author


Director

MCD Geo Pty Ltd

25 Albion Street

Surrey Hills Victoria

Australia 3127

I, Michael Conan-Davies, consent to the public filing of the technical report titled “Technical Report for Agata North Nickel Laterite DSO Project (ANDP), Mindanao, Philippines” and dated 30 August 2013 by TVI Pacific Inc.



8 September 2013

___________________________


Ref: NI 43 101 DSO 30August2013_v2_MichaelConanDaviesConsent-signed.pdf

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