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Mina de Cobre Panama    BASIC ENGINEERING    SUMMARY REPORT         May 2012
PROJECT DESCRIPTIONProject                                         Cobre Panama                    Status    Shovel-ready,...
PROJECT DETAILSCHEDULE                                                          UNIT COSTS ($US/t ORE MILLED) - LT CONSENS...
Minera Panama, S.A.                                                                           Mina de Cobre Panama Project...
Minera Panama, S.A.                                                                          Mina de Cobre Panama Project ...
Minera Panama, S.A.                                                                        Mina de Cobre Panama Project   ...
Minera Panama, S.A.                                                                          Mina de Cobre Panama Project ...
Minera Panama, S.A.                                                                                                Mina de...
Minera Panama, S.A.                                                                                             Mina de Co...
Minera Panama, S.A.                                                                                              Mina de C...
Minera Panama, S.A.                                                                                Mina de Cobre Panama Pr...
Minera Panama, S.A.                                                                                     Mina de Cobre Pana...
Minera Panama, S.A.                                                                                     Mina de Cobre Pana...
Minera Panama, S.A.                                                                             Mina de Cobre Panama Proje...
Minera Panama, S.A.                                                                  Mina de Cobre Panama Project         ...
Minera Panama, S.A.                                                                  Mina de Cobre Panama Project         ...
Minera Panama, S.A.                                                                                 Mina de Cobre Panama P...
Minera Panama, S.A.                                                                                      Mina de Cobre Pan...
Minera Panama, S.A.                                                               Mina de Cobre Panama Project            ...
Minera Panama, S.A.                                                                                   Mina de Cobre Panama...
Minera Panama, S.A.                                                                Mina de Cobre Panama Project           ...
Minera Panama, S.A.                                                                 Mina de Cobre Panama Project          ...
Minera Panama, S.A.                                                                 Mina de Cobre Panama Project          ...
Minera Panama, S.A.                                                                  Mina de Cobre Panama Project         ...
Minera Panama, S.A.                                                                Mina de Cobre Panama Project           ...
Minera Panama, S.A.                                                               Mina de Cobre Panama Project            ...
Minera Panama, S.A.                                                                          Mina de Cobre Panama Project ...
Minera Panama, S.A.                                                    Mina de Cobre Panama Project                       ...
Minera Panama, S.A.                                                                     Mina de Cobre Panama Project      ...
Minera Panama, S.A.                                                              Mina de Cobre Panama Project             ...
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
Cobre Panama Basic Engineering Summary Report
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Transcript of "Cobre Panama Basic Engineering Summary Report"

  1. 1. Mina de Cobre Panama BASIC ENGINEERING SUMMARY REPORT May 2012
  2. 2. PROJECT DESCRIPTIONProject Cobre Panama Status Shovel-ready, ESIA approved December 2011Project location Panama, Colón province Products Cu-Au and Mo concentratesSovereign rating Investment grade Features Botija, Colina, Valle Grande open pitsConcession area 13,000 ha Gyratory crushing, grinding, flotationLife of mine 31 years Owner port site, Panamax capableStart of Production 1Q16 Owner 300 MW coal-fired powerCapital Cost $US6.18b Concentrate pipelineTIER I CHARACTERISTICS AVG ANNUAL PROD. Y2-16 LOM TOTAL LOMAverage annual production (Y2-16) 298 ktonnes Cu Cu ktonnes 298 266 8,237Average annual production (LOM) 266 ktonnes Cu Au koz 106 87 2,705C1 cash costs (Y2-16) $US0.72/lb Cu Ag koz 1,572 1,545 47,899C1 cash costs (LOM) $US0.82/lb Cu Mo ktonnes 3.1 2.9 90.2Strip ratio 0.58Design mill throughput (Y1-9) 160 ktpdDesign mill throughput (Y10-31) 240 ktpdRESERVE & RESOURCE ktonnes Cu (%) Au (g/t) Ag (g/t) Moly (%) Cu ktonnes Au koz Ag koz Mo ktonnesProven 258,000 0.57 0.14 1.6 0.010 1,478 1,126 13,020 25Probable 2,061,000 0.38 0.06 1.4 0.007 7,781 4,041 91,008 145Total 2,319,000 0.40 0.07 1.4 0.007 9,258 5,167 104,028 169Measured 262,000 0.56 0.13 1.5 0.009 1,476 1,118 12,979 24Indicated 3,905,000 0.34 0.06 1.2 0.005 13,237 7,845 155,392 214Total 4,167,000 0.35 0.07 1.3 0.006 14,715 8,963 168,454 238Inferred 3,749,000 0.23 0.04 1.0 0.004 8,660 4,805 120,534 156(resources inclusive of reserves) PROJECT ECONOMICSCAPITAL COSTS $USm % AFTER TAX VALUATIONMining 760 12 LT Consensus FW Curve 3Y Trl. Avg.Process plant 1,184 19 Financed Case 1 14.3% 18.5% 19.2% IRRSite and services 550 9 Financed Case 2 16.7% 21.9% 22.5%Port site 543 9 Financed Case 1 $3.2b $4.8b $6.0b NPV8%Power plant 646 10 Financed Case 2 $3.5b $5.0b $6.3bTotal Direct 3,682 59 Financed Case 1 $2.4b $3.9b $4.9b NPV9%Construction indirects 844 14 Financed Case 2 $2.8b $4.2b $5.2bTotal field costs 4,526 73 Financed Case 1 $1.8b $3.2b $4.0b NPV10%EPCM 355 6 Financed Case 2 $2.2b $3.6b $4.4bOwner Costs 885 14Contingency 415 7Total project cost 6,181 100Sustaining capex 2,916POTENTIAL FOR UPSIDEExpand throughput beyond max planned 240ktpd Financed Case 1: $US1.6b in debt drawn over 3.5 yearsAccelerate increase to 240ktpdConversion of substantial resources beyond reserves Financed Case 2: $US1.6b in debt drawn over 3.5 years $US1.2b upfront payment for 86% of MPSA precious metals and on-going paid $400/oz Au and $6/oz Ag for PM streamPROJECT ADVANTAGESLow strip-ratio (one fifth of industry O/P Cu mine avg 2011 )Ammenable to large scale, efficient mining LT Consensus: Flat $2.75/lb Cu, $15/lb Mo, $1,250/oz Au, $20/oz AgPowered by owner-built, 300mW coal-fired plant FW Curve: Forward curve dropping to LT ConsensusProximity to tidewater, permitting inexpensive con transport (2016 start at $3.66/lb Cu, $1,785/oz gold and $31/oz Ag)Clean concentrate 3Y Trail. Avg: Flat $3.42/lb Cu, $14.68/lb Mo, $1,316/oz Au, $24.90/oz AgExtensively reviewed by 3rd parties (capex and opex) COBRE PANAMA FACT SHEET - PG 1
  3. 3. PROJECT DETAILSCHEDULE UNIT COSTS ($US/t ORE MILLED) - LT CONSENSUSNotice to proceed 2Q12 Labour Material Power Other Total LOM Total Y2-16Mine/process construction start 2Q12 Mining 0.27 1.87 0.05 0.24 2.44 2.68Process earthworks complete 4Q13 Processing 0.24 2.13 0.91 0.01 3.29 3.28Plant to port road complete 4Q13 G&A 0.15 0.01 0.04 0.69 0.88 0.97Port complete 2Q14 Site Services 0.11 0.07 0.01 0.09 0.28 0.3Power line complete 3Q14 Total 0.77 4.08 1.01 1.03 6.88 7.23Tailings dam complete 3Q15Ore hits grinding lines 4Q15 UNIT COSTS ($US/t ORE MILLED) Total LOMPower plant complete 4Q15 LT Consensus FW Curve 3YR Trl. Avg.Start of production 4Q15 Mining 2.44 2.46 2.55Concentrate shipment 1Q16 Processing 3.29 3.36 3.60Commercial production 2Q16 G&A 0.88 0.88 0.89RESOURCE ADDITIONS SINCE 2010 Site Services 0.28 0.28 0.28(contained metal) Total 6.88 6.98 7.32M&I FEED Increase CurrentCu (m lb) 25,800 6,641 32,441 Power($US/kWh) Y1-9 1,2 0.027 0.033 0.034Au (k oz) 6,533 2,430 8,963 Power($US/kWh) Y10-31 2 0.05 0.05 0.055Ag (k oz) 133,300 35,154 168,454 C1 cash cost ($US/lb) Y2-16 - Fin Case 1 0.72 0.74 0.77Mo (m lb) 474 51 525 C1 cash cost ($US/lb) LOM - Fin Case 1 0.82 0.83 0.87 1-Power costs adjusted to reflect sales into grid 2-Power costs are quoted before D&A expense covering the $646m capitalINF FEED Increase Current NSR BY METALCu (m lb) 16,600 2,492 19,092 Avg. Annual Avg. AnnualAu (k oz) 4,003 802 4,805 Y2-16 ($USm) LOM ($USm)Ag (k oz) 103,100 17,434 120,534 Cu 1,557 1,389Mo (m lb) 236 18 344 Au 121 100(resources inclusive of reserves) Ag 28 27RESOURCE NOT IN MINE PLAN Cu ktonnes Cu mlbs Mo 93 86Measured and Indicated 5,457 12,031 Total 1,798 1,602Inferred 8,660 19,092 OTHER USEFUL INFORMATIONTAXATION VARIANCE FROM FEED CAPEXCorporate tax rate 25% Capital costs $USmAlternative minimum tax rate 1.17% FEED study estimate 4,320Base metal royalty 5% Power plant 646Precious metal royalty 4% Increased process plant estimate 403 Increased mining estimate 312AVG LOM RECOVERIES Increased port site estimate 285Copper 89.0% Other 215Molybdnemum 53.3% Basic Engineering Estimate 6,181Gold 52.4% Drivers:Silver 46.1% Process Changed scope to achieve higher productivity 2 year tailings starter dam (vs. 1 prev)CONCENTRATE ASSUMPTIONS Higher certainty of estimatesCopper TC $70/dmt Mining Fuel costs of $1.06/litre in capex (vs. $0.56 prev)Copper RC $0.07/lb Higher certainty of earthwork estimatesGold RC $5/oz Pre-strip costs moved from indirect to directSilver RC $0.50/oz BENEFITS TO PANAMAMolybdenum roast and freight $1.49/lb $110m regional development plan to maximize sustainable socio-economic benefitsFreight $41/t wet con Increased local access to healthcare, education, sanitation and clean drinking waterCopper Con Moisture 8% Generates $US20b purchases in national economy and $US3.6b in royalties and taxesLosses and Insurance charges 0.25% Prioritizes local hiring and job-training, total salaries $US2.2b (locals and expats): Peak total manpower during construction of 10,000 Average total manpower during operations of 2,100 COBRE PANAMA COBRE PANAMA FACT SHEET - PG 2
  4. 4. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT Cautionary statement regarding forward-looking statementsThis Basic Engineering Summary Report contains forward-looking statements with respect to the CobrePanama development project (―Cobre Panama‖ or the ―Project‖), including, without limitation, informationrelating to future financial or operating performance, plans, outlook, financing plans, growth in cash flowand operating margin; projections, targets and expectations as to reserves, resources, results ofexploration (including targets) and related expenses, mine development mine production costs, drillingactivity, sampling and other data; receipt of construction permits; estimated grade levels; future recoverylevels; future production levels, capital costs, costs savings, cash and total costs of operations, productionof copper and other minerals; expenditures for environmental matters; projected mine life; reclamation andother post-closure obligations and estimated future expenditures for those matters; future copper, andother mineral prices (including the long-term estimated prices used in calculating mineral reserves).All statements in this Basic Engineering Summary Report that address events or developments we expectto occur, are ―forward-looking statements.‖ Forward-looking statements are statements that are nothistorical facts and are generally, but not always, identified by the words ―expects,‖ ―plans,‖ ―anticipates,‖―believes,‖ ―intends,‖ ―estimates,‖ ―projects,‖ ―potential,‖ ―target,‖ ―plan,‖ ―scheduled,‖ ―forecast,‖ ―budget‖and similar expressions or their negative connotations, or that events or conditions ―will,‖ ―would,‖ ―may,‖―could,‖ ―should‖ or ―might‖ occur. All such forward-looking statements are based on our opinions andestimates as of the date such statements are made. Forward-looking statements are necessarily basedon estimates and assumptions that are inherently subject to known and unknown risks, uncertainties andother factors, many of which are beyond our ability to control, that may cause the Project’s actual results,level of activity, performance or achievements to be materially different from those expressed or implied bysuch forward-looking statements. Such factors include, without limitation: price levels and volatility in the spot and forward markets for metals and; access to the necessary capital to fund the development and construction of the Project; the ability to develop and construct the Project in accordance with the currently projected budget and timeline; the uncertainties inherent in current and future legal challenges we or the Project are or may become a party or subject to; changes in national and local government legislation or regulations; the lack of certainty with respect to foreign legal systems, which may not be immune from the influence of political pressure, corruption or other factors that are inconsistent with the rule of law; the speculative nature of mineral exploration and development, including the risks of obtaining and maintaining the validity and enforceability of the necessary licenses and permits and complying with permitting requirements; inherent hazards, risks and uncertainties associated with mining exploration, development and operations, including accidents; diminishing quantities or grades of reserves; discrepancies between actual and estimated production, between actual and estimated costs, between actual and estimated reserves and resources and between actual and estimated metallurgical recoveries; geotechnical issues; the possibility of temporary or permanent shutdown; the actual costs of reclamation; Page 4May 2012
  5. 5. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT increased energy prices; dependency of cash flow and earnings growth upon the development of our current reserve base and converting our resource base to reserves and production; actual capital costs, operating costs and expenditures, production schedules and economic returns from the Project; fluctuations in the international currency markets and the rates of exchange between currencies; volatility of global financial conditions; taxation, including with respect to tax laws and regulations that are unclear or subject to ongoing varying interpretations; significant capital requirements and additional funding requirements; risks associated with joint ventures; dependence on transportation, electric and water facilities and infrastructure; fluctuation in the cost of significant inputs including fuel; delays or disruptions in supplies required for exploration, development, mining or processing, activities; disruptions arising from non-performance of off-take and other counterparties; changes in environmental laws and regulations; potential losses, liabilities and damages related to the Project’s business which are uninsured or uninsurable; regulation of greenhouse gas emissions and climate change issues; labour disputes; defective title to mineral claims or property or contests over claims to mineral properties; competition; and the loss of key employees and the ability to attract and retain qualified personnel.In addition, there are risks and hazards associated with the business of mineral exploration, developmentand mining, including environmental hazards, industrial accidents, unusual or unexpected formations,pressures, (and the risk of inadequate insurance or inability to obtain insurance to cover these risks) aswell as other risks, uncertainties and other factors.Forward-looking statements are not guarantees of future performance, and actual results and futureevents could materially differ from those anticipated in such statements. All of the forward-lookingstatements contained in this Basic Engineering Summary Report are qualified by these cautionarystatements.Although we have attempted to identify important factors that could cause actual results to differ materiallyfrom those contained in the forward-looking statements, there may be other factors that cause actualresults to differ materially from those which are anticipated, estimated or intended. There can be noassurance that such statements will prove to be accurate, as actual results and future events could differmaterially from those anticipated in such statements. You should not place undue reliance onforward-looking statements. We expressly disclaim any intention or obligation to update or revise anyforward-looking statements whether as a result of new information, events or otherwise. Page 5May 2012
  6. 6. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT Market, ranking, industry data and forecastsThis Basic Engineering Summary Report includes industry data and forecasts that we obtained fromindustry publications and surveys, public filings and internal company sources. Industry publications,surveys and forecasts generally state that the information contained therein has been obtained fromsources believed to be reliable, but there can be no assurance as to the accuracy or completeness ofincluded information. We have not independently verified any of the data from third-party sources, norhave we ascertained the underlying economic assumptions relied upon therein. We cannot guarantee theaccuracy or completeness of such information contained in this Basic Engineering Summary Report.Cautionary notice regarding reserve and resource estimatesThe disclosure in this Basic Engineering Summary Report uses mineral reserve and resourceclassification terms that comply with reporting standards in Canada, and certain mineral resourceestimates are made in accordance with Canadian National Instrument 43-101—Standards of Disclosurefor Mineral Projects (―NI 43-101‖). NI 43-101 is a rule developed by the Canadian SecuritiesAdministrators (the ―CSA‖) that establishes standards for all public disclosure an issuer makes of scientificand technical information concerning mineral projects. Unless otherwise indicated, all reserve andresource estimates contained in this Basic Engineering Summary Report have been prepared inaccordance with NI 43-101. These standards differ significantly from the mineral reserve disclosurerequirements of the Securities and Exchange Commission (―SEC‖) set out in Industry Guide 7.Consequently, reserve and resource information contained in this Basic Engineering Summary Report isnot comparable to similar information that would generally be disclosed by U.S. companies in accordancewith the rules of the SEC.In particular, the SEC’s Industry Guide 7 applies different standards in order to classify mineralization as areserve. As a result, the definitions of proven and probable reserves used in NI 43-101 differ from thedefinitions in the SEC’s Industry Guide 7. Under SEC standards, mineralization may not be classified as a―reserve‖ unless the determination has been made that the mineralization could be economically andlegally produced or extracted at the time the reserve determination is made. Among other things, allnecessary permits would be required to be in hand or issuance imminent in order to classify mineralizedmaterial as reserves under the SEC standards. Accordingly, mineral reserve estimates contained in thisBasic Engineering Summary Report may not qualify as ―reserves‖ under SEC standards.In addition, this Basic Engineering Summary Report uses the terms ―mineral resources,‖ ―measuredmineral resources,‖ ―indicated mineral resources‖ and ―inferred mineral resources‖ to comply with thereporting standards in Canada. The SEC’s Industry Guide 7 does not recognize mineral resources andU.S. companies are generally not permitted to disclose resources in documents they file with the SEC.Readers are specifically cautioned not to assume that any part or all of the mineral deposits in thesecategories will ever be converted into SEC defined mineral reserves. Further, ―inferred mineral resources‖have a great amount of uncertainty as to their existence and as to whether they can be mined legally oreconomically. Therefore, readers are also cautioned not to assume that all or any part of an inferredresource exists. In accordance with Canadian rules, estimates of ―inferred mineral resources‖ cannot formthe basis of feasibility or pre-feasibility studies. It cannot be assumed that all or any part of ―mineralresources,‖ ―measured mineral resources,‖ ―indicated mineral resources‖ or ―inferred mineral resources‖will ever be upgraded to a higher category. Readers are cautioned not to assume that any part of thereported ―mineral resources,‖ ―measured mineral resources,‖ ―indicated mineral resources‖ or ―inferredmineral resources‖ in this Basic Engineering Summary Report has demonstrated economic viability or iseconomically or legally mineable. In addition, the definitions of ―proven mineral reserves‖ and ―probablemineral reserves‖ under reporting standards in Canada differ in certain respects from the standards of theSEC. For the above reasons, information contained in this Basic Engineering Summary Report thatdescribes the Project’s mineral reserve and resource estimates is not comparable to similar informationmade public by U.S. companies subject to the reporting and disclosure requirements of the SEC. Page 6May 2012
  7. 7. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTThe Project’s proven and probable reserve estimates contained throughout this Basic EngineeringSummary Report are as of March 5, 2012, and are estimated based on information compiled by or underthe supervision of a ―qualified person‖ as defined under NI 43-101.Important NoticeThis report shall not constitute an offer to sell or a solicitation of an offer to purchase any securities ofInmet Mining Corporation in the United States or any other jurisdiction. Any securities of Inmet MiningCorporation have not and will not be registered under the U.S Securities Act of 1933, as amended (the―Securities Act‖), or the securities laws of any other jurisdiction and may only be offered and sold in theUnited States pursuant to an exemption from the registration requirements of the Securities Act andapplicable state securities laws. Page 7May 2012
  8. 8. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT Contents1 INTRODUCTION .........................................................................................................15 1.1 A Tier 1 Copper Asset ........................................................................................16 1.2 Concession, Permits and Socio-Environmental Commitments ......................19 1.3 Capital Costs ......................................................................................................19 1.4 Operating Costs..................................................................................................20 1.5 Project Economics .............................................................................................21 1.6 Third Party Reviews ...........................................................................................22 1.7 Risks and Opportunities ....................................................................................23 1.8 Project Execution ...............................................................................................25 1.9 Conclusions ........................................................................................................262 TECHNICAL SUMMARY ............................................................................................27 2.1 Project Description .............................................................................................27 2.1.1 Geology and Mineral Resources ................................................................29 2.1.2 Mine Plan and Mineral Reserves ................................................................33 2.1.3 Metallurgy.....................................................................................................39 2.1.4 Mine Waste Management ............................................................................43 2.1.5 Solid and Hazardous Waste Disposal ........................................................44 2.1.6 Tailings Management Facility .....................................................................44 2.1.7 Water Management ......................................................................................46 2.1.8 Power Plant ..................................................................................................47 2.1.9 Project Infrastructure / Ancillary Facilities ................................................49 2.1.10 Port ...............................................................................................................50 2.1.11 Pipelines .......................................................................................................51 2.1.12 Balance of Plant ...........................................................................................52 2.2 INDEPENDENT THIRD-PARTY REVIEWS ..........................................................52 2.2.1 Independent Tailings Review Board (ITRB) ...............................................52 2.2.2 URS Corporation Independent Review.......................................................533 PRIVILEGE TO OPERATE .........................................................................................54 3.1 Panama ...............................................................................................................54 3.1.1 Mining in Panama: Changes to the Mineral Code in 2012........................56 3.1.2 Contract Law 9 .............................................................................................57 3.1.3 MPSA’s Panamanian Society Participation ...............................................58 3.2 Inmet’s Approach To Corporate Responsibility ...............................................58 3.3 Cobre Panama: Inmet’s Commitment in Action ..............................................59 Page 8May 2012
  9. 9. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT 3.3.1 Regulatory Context for Environmental and Social Impact Assessments 61 3.4 Socio-environmental Context of the Project.....................................................63 3.4.1 Environmental Baseline Conditions ...........................................................63 3.4.2 Social Baseline Conditions .........................................................................65 3.4.3 Community Relations and Community Development Activities...............67 3.4.4 Project Socio-environmental Actions and Benefits ..................................69 3.4.5 Partnerships.................................................................................................714 CAPITAL COST ESTIMATE .......................................................................................73 4.1 Basis of Estimate................................................................................................73 4.1.1 Site Investigation .........................................................................................74 4.2 Capital Cost (CAPEX $US) .................................................................................75 4.2.1 Contract budgetary incentives ...................................................................79 4.3 Sustaining Capital (SUSEX) ...............................................................................79 4.4 Independent Third Party Review – Capital Cost Estimate ...............................805 OPERATING COST ESTIMATE .................................................................................82 5.1 Basis of Estimate................................................................................................82 5.2 Operating Cost Estimate (OPEX) .......................................................................83 5.3 Brook Hunt C1 Cash Cost ..................................................................................86 5.4 Independent Third Party Reviews .....................................................................88 5.4.1 Process Plant Operating Cost Estimate .....................................................88 5.4.2 Benchmark of Mining Cost .........................................................................89 5.4.3 Power Plant Operating Cost Estimate ........................................................89 5.4.4 Power Plant Coal Supply Analysis .............................................................906 PROJECT ECONOMICS ............................................................................................91 6.1 Modelling Assumptions .....................................................................................91 6.2 Value and Returns ..............................................................................................93 6.3 Sensitivity Results ..............................................................................................95 6.4 Cash Costs..........................................................................................................96 6.5 Net Smelter Returns ...........................................................................................99 6.6 Project Cash Flows .......................................................................................... 101 6.6.1 Debt Case ................................................................................................... 101 6.6.2 Debt plus Stream Case .............................................................................. 102 6.7 Upside of Resource Value Not Reflected in Traditional Discounted Cash Flow Valuation ........................................................................................................... 1037 PROJECT FINANCING ............................................................................................. 104 Page 9May 2012
  10. 10. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT8 RISKS AND OPPORTUNITIES ................................................................................. 107 8.1 Project Risk Management ................................................................................ 107 8.1.1 Special Considerations ............................................................................. 110 8.2 Opportunities .................................................................................................... 1139 PROJECT EXECUTION ............................................................................................ 116 9.1 Project Background.......................................................................................... 116 9.2 Project Organization......................................................................................... 116 9.3 Health and Safety ............................................................................................. 119 9.4 Environmental Management Plan.................................................................... 119 9.5 Labour Relations, Training and Hiring ............................................................ 121 9.6 Sequence of Construction ............................................................................... 122 9.6.1 EPCM Scope Under JVP ............................................................................ 122 9.6.2 EPC Scope Yet to be Awarded.................................................................. 123 9.6.3 EPC Scope Under SK E&C ........................................................................ 123 9.7 Materials Management and Logistics ............................................................. 123 9.7.1 Logistics Strategy...................................................................................... 123 9.8 Procurement ..................................................................................................... 124 9.9 Security ............................................................................................................. 124 9.10 Project Master Schedule and Key Milestones ................................................ 124 9.11 Independent Reviews ....................................................................................... 127 9.11.1 Independent Project Schedule Review .................................................... 127 9.11.2 Independent Project Readiness Assessment .......................................... 127 9.11.3 Independent Project Controls Health Check ........................................... 12710 OPERATIONAL READINESS................................................................................... 12911 MARKETING AND MARINE TRANSPORT OF CONCENTRATE ............................ 133 11.1 Scope and Summary ........................................................................................ 133 11.2 Composition of Revenue and Price Assumptions ......................................... 133 11.3 Copper Prices and Trends ............................................................................... 134 11.4 Concentrate Quality.......................................................................................... 135 11.5 Summary of Copper Concentrate and Freight Market Expectations ............ 136 11.6 Preliminary Copper Concentrate Sales Plan .................................................. 137 11.7 Summary of Molybdenum and Freight Market Expectations ........................ 138 Page 10May 2012
  11. 11. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT List of TablesTable 1-1 Tier 1 Characteristics ...................................................................................15Table 1-2 Metal Production ..........................................................................................17Table 1-3 Cobre Panama Mineral Reserves ................................................................17Table 1-4 Cobre Panama Mineral Resources ..............................................................17Table 1-5 Basic Engineering Capital Cost by Major Area .............................................20Table 1-6 C1 Cash Costs($US/lb of Cu) at Copper Price Scenario of $US2.75/lb. .......20Table 1-7 Summary of Operating Costs by Component ($US/t of ore milled) ...............21Table 1-8 After-Tax Economics: Debt Case .................................................................22Table 1-9 After-Tax Economics: Debt plus Stream Case .............................................22Table 1-10 Third Party Reviews .....................................................................................23Table 1-11 Project Milestones........................................................................................26Table 2-1 Tier 1 Characteristics ...................................................................................27Table 2-2 Cobre Panama Mineral Resources ..............................................................31Table 2-3 Mine Production Schedule ...........................................................................35Table 2-4 Mining Schedule by Pit ................................................................................36Table 2-5 Cobre Panama Mineral Reserve ..................................................................39Table 2-6 Recovery Forecast Algorithms .....................................................................40Table 2-7 Mill Production Schedule..............................................................................42Table 3-1 Cobre Panama’s Progress in Implementing the IFC Performance Standards61Table 4-1 Basic Engineering Capital Cost by Major Area .............................................78Table 4-2 FEED Study to Basic Engineering Capital Cost Estimate Variances ............78Table 4-3 FEED Study to Basic Engineering Variance Description ..............................79Table 5-1 Total Operating Cost Summary ....................................................................83Table 5-2 Summary of Operating Costs per Year ($US/t of ore milled)* .......................83Table 5-3 Summary of Operating Costs by Component ($US/t of ore milled)* .............84Table 5-4 FEED Study vs. Basic Engineering Operating Costs ....................................85Table 5-5 Operating and Input Cost Estimates at Selected Copper Price Assumptions86Table 5-6 Years 2-16 C1 Cash Cost ($US/lb) ..............................................................87 Page 11May 2012
  12. 12. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTTable 5-7 Life of Mine C1 Cash Cost ($US/lb) .............................................................87Table 5-8 Power Costs at Selected Copper Price Assumptions ($US/kWh) .................89Table 6-1 Modelling Assumptions ($US) ......................................................................91Table 6-2 Pre-Financing Sponsor Funding Requirement ............................................92Table 6-3 Financing Assumptions ................................................................................93Table 6-4 Metal Price Assumptions ($US) ...................................................................94Table 6-5 After-Tax Economics: Debt Case .................................................................94Table 6-6 After-Tax Economics: Debt plus Stream Case .............................................95Table 6-7 Years 2-16 Cash Costs Based on Payable Copper ($US/lb) ........................96Table 6-8 Life of Mine Cash Costs Based on Payable Copper (US/lb) .........................96Table 6-9 Year 2-16 C3 Costs ($US/lb)........................................................................98Table 6-10 Life of Mine C3 Costs ($US/lb) .....................................................................98Table 6-11 Life of Mine Revenues and NSR (Consensus LT Prices) ........................... 100Table 6-12 Construction Period Funding Requirement – Debt Case ($US) .................. 101Table 6-13 Construction Period Funding Requirement – Debt plus Stream Case ($US) .................................................................................................................. 102Table 7-1 Independent Funding Breakdown .............................................................. 104Table 7-2 Inmet’s Funding Plan ................................................................................. 104Table 7-3 Total Project Funding ................................................................................. 105Table 8-1 Key Project Risks and Treatment Plans ..................................................... 112Table 8-2 Potential Reserves Should Indicated Resources at Balboa and Brazo be Converted to Reserves .............................................................................. 114Table 9-1 Project Milestones...................................................................................... 125Table 10-1 Elements of and Assurance of Operational Readiness .............................. 129Table 11-1 Forecast Copper Concentrate Commercial Terms ..................................... 138Table 11-2 Molybdenum Concentrate NSR Calculation* .............................................. 139 Page 12May 2012
  13. 13. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT List of FiguresFigure 2-1 Site & Infrastructure Map .............................................................................28Figure 2-2 Mineral Deposits and Defined Resources Plan Map ....................................30Figure 2-3 Increase in Resources Since FEED Study ...................................................31Figure 2-4 Contained Copper Endowment (resource proxy) for Undeveloped Copper Deposits .......................................................................................................32Figure 2-5 Contained Copper Endowment (resource proxy) for Undeveloped Copper Deposits Not Controlled by >$10b Market Cap or Sovereigns......................32Figure 2-6 Summary of Mining Schedule ......................................................................34Figure 2-7 Mining Schedule Shown by Type of Material Moved and by Pit ...................34Figure 2-8 Inferred Resource In-Pit ...............................................................................37Figure 2-9 Plan View of Site Infrastructure and Design Pits ..........................................38Figure 2-10 Plan View of TMF Including Dams ...............................................................45Figure 3-1 IHS Comparative Historical Risk Showing Panama’s Risk Trending Down ..55Figure 3-2 Estimated Cobre Panama Job Additions ......................................................56Figure 3-3 Pro-Mining Demonstration of 2,500 People March 10, 2012 ........................67Figure 5-1 Breakdown of Operating Costs by Function and Input Cost .........................84Figure 5-2 Comparison of Cobre Panama’s C1 Cost on the 2020 Projected Brook Hunt Cost Curve ...................................................................................................88Figure 6-1 NPV Sensitivities..........................................................................................95Figure 6-2 Comparison of Project C1 Costs on the Projected 2020 Brook Hunt Cost Curve ...........................................................................................................97Figure 6-3 Comparison of Project C3 Costs on the Projected 2020 Brook Hunt Cost Curve ...........................................................................................................99Figure 6-4 Payable Cu Production and C1 Cash Cost by Year (Consensus LT Prices Debt Case)................................................................................................. 100Figure 6-5 Project Life After-Tax Cash Flows (Debt Case)* ........................................ 101Figure 6-6 Project Life After-Tax Cash Flows (Debt + Stream Case)* ........................ 102Figure 8-1 Plan of Distribution of Resources 2012 ...................................................... 113Figure 8-2 Plan of Distribution of Resources 2012 ...................................................... 115Figure 9-1 Project Schedule ........................................................................................ 126 Page 13May 2012
  14. 14. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTFigure 11-1 Cobre Panama NSR by Metal Based on Long-term Consensus Prices...... 133Figure 11-2 Gap Between Base Case Mine Production and Demand that Needs to be Filled with Capacity Additions .................................................................... 134Figure 11-3 Forecast vs Actual Sources of Supply 2003-2010 ...................................... 135Figure 11-4 Historical Trends in Treatment and Refining Changes in Real 2011 Dollars137 GLOSSARY k thousand m million b billion oz troy ounces lb pounds kt thousand tonnes kTon thousand tons ktpd thousand tonnes per day mt million tonnes mt/a million tonnes per annum US$/t US dollars per tonne Cu Copper Au Gold Ag Silver Mo Molybdenum bbl barrel l litre mW megawatt kWh kilowatt hour dmt dry metric tonne wmt wet metric tonne LOM life of mine g/t grams per tonne Page 14May 2012
  15. 15. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT1 INTRODUCTIONThe Mina de Cobre Panama Project (Cobre Panama; the Project) consists of a conventionalopen pit mine and the associated infrastructure to produce copper-gold and molybdenumconcentrates. The concession for the Project covers an area of 130 square kilometres (km2) andis located in the Donoso District, Colón Province in north central Panama.Cobre Panama’s projected significant annual production at first quartile cash costs, long minelife, extensive mineral reserves and resources, and high proportion of net revenues from copperall provide exceptional exposure to copper. With the Environmental and Social ImpactAssessment (ESIA) regulatory approval for the Project already received, a strong social licenseand Basic Engineering completed, the Project is construction-ready. It is essentially the onlyTier 1 copper asset not in the hands of a senior mining company.Table 1-1 Tier 1 Characteristics Tier 1 CharacteristicLife of Mine 31 yearsCapital Cost $US6.18bAnnual production (Yr 2-16) 298 ktAnnual production (LOM) 266 ktC1 cash costs (Yr 2-16) $US0.72/lb CuC1 cash costs (LOM) $US0.82/lb CuStrip Ratio 0.58Scale 160 ktpd to 240 ktpd throughput with further expansion capacity Consensus Long-Term Forward Curve 3YR Trailing Avg. (declining to (SEC case) consensus)IRR (debt financing) 14.3% 18.5% 19.2%NPV @ 8% ($m) 3,200 4,800 6,000IRR (debt plus stream financing) 16.7% 21.9% 22.5%NPV @ 8% ($m) 3,500 5,000 6,300Annual free cash flow $US0.90b(Yr 2-16, debt financing)Annual free cash flow $US0.81b(LOM, debt financing)Copper reserves* 9.3 mtCopper resources (M&I)* 14.7 mtCopper resources (Inferred)* 8.7 mtConcentrate Clean concentrate not expected to draw penaltiesLogistics Proximity to tidewater and Panama Canal*See Table 1-3 and Table 1-4 Page 15May 2012
  16. 16. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTCobre Panama would be developed as a conventional truck and shovel open pit mine with aconcentrator that uses the direct application of proven technology (crushing, grinding, flotation)to produce copper-gold and molybdenum concentrates. A 300 mW coal-fired power plant andship loading port facilities are also part of the Project.Basic Engineering was conducted by Joint Venture Panama Inc. (JVP), a joint venture led bySNC-Lavalin Group Inc. (70%) with partners GyM S.A. (a member of Graña y Montero Group)(15%) and Techint International Construction Corp. (15%) between November 2010 and March2012. The purpose of Basic Engineering was to further develop the scope and execution planfor the Project, and to serve as the basis for detailed engineering, procurement and construction.This work builds on the March 2010 Front End Engineering Design Study (FEED) Study. BasicEngineering provides: • A capital cost estimate with an accuracy of +10%/-10% • A Project Execution Plan in readiness for the full Notice to Proceed • A detailed Level 3 Project Master Schedule • Detailed engineering for site capture and civil works and • Initial Work Packages and contracting strategy to support procurement activities.The total estimated capital cost to bring the Project into operation is $US6.2b (expressed in Q32011 dollars), over half of which is based on firm quotes. Sustaining capital is estimated to be$US2.9b required over the mine life. This includes an expansion in the form of adding a thirdcrushing and grinding line to the process plant to increase capacity from 160ktpd to 240ktpd,which would to be ready for production in Year 10. Operating costs are estimated to be$US6.88/t of ore milled, with mining costs benefitting from a life of mine strip ratio of 0.58 tonneswaste per tonne of ore. The power cost of $US1.01/t of ore milled is an endorsement of thedecision in 2011 to undertake the capital cost to build a coal-fired power plant. Assuming a fullNotice to Proceed in May 2012, first concentrate would be scheduled for early 2016.Reconciliations to the 2010 FEED Study can be found in Sections 4 (Capital Costs) and 5(Operating Costs).1.1 A Tier 1 Copper AssetThe Project has the key attributes of a Tier 1 copper asset with substantial exposure to copper,projected long life, low operating costs and significant expansion potential in a geopoliticallyfavourable jurisdiction.Cobre Panama’s projected average annual copper production of 298kt for Years 2-16 and 266ktover the life of operations are indicative of a world class asset. The expected 31 year life withthese levels of output would provide exceptional exposure to copper. Page 16May 2012
  17. 17. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTTable 1-2 Metal Production Annual Average Annual Average Total Years 2-16 Life of Operations Life of OperationsCopper (kt) 298 266 8,237Molybdenum (kt) 3.1 2.9 90.2Gold (koz) 106 87 2,705Silver (koz) 1,572 1,545 47,899Estimated C1 cash costs (see Section 5 for definition) of $US0.72/lb for Year 2-16 and$US0.82/lb for the life of the operation would put the Project in the very favourable position ofbeing in the first quartile of the projected industry cost curve.Table 1-3 Cobre Panama Mineral ReservesCategory Tonnes Cu Au Ag Mo Cu Au Ag Mo (x1000) (x1000) (x1000) (x1000) (x 1000) % g/t g/t % Tonnes ounces ounces tonnesProven 258,000 0.57 0.14 1.6 0.010 1,478 1,126 13,020 25Probable 2,061,000 0.38 0.06 1.4 0.007 7,781 4,041 91,008 145Total 2,319,000 0.40 0.07 1.4 0.007 9,258 5,167 104,028 169Table 1-4 Cobre Panama Mineral ResourcesCategory Tonnes Cu Au Ag Mo Cu Au Ag Mo (x1000) (x1000) (x1000) (x1000) (x 1000) % g/t g/t % Tonnes ounces ounces tonnesMeasured 262,000 0.56 0.13 1.5 0.009 1,476 1,118 12,979 24Indicated 3,905,000 0.34 0.06 1.2 0.005 13,237 7,845 155,392 214Total 4,167,000 0.35 0.07 1.3 0.006 14,715 8,963 168,454 238Inferred 3,749,000 0.23 0.04 1.0 0.004 8,660 4,805 120,534 156Notes to mineral reserves and resources tableMineral reserves and resources are shown on a 100 percent basis for each property. Except as stated, mineral resources areexclusive of mineral reserves.The mineral reserve and resource estimates are prepared in accordance with the CIM Definition Standards On Mineral Resourcesand Mineral Reserves, adopted by CIM Council on November 14, 2004, and the CIM Estimation of Mineral Resources and Mineral Page 17May 2012
  18. 18. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTReserves Best Practice Guidelines, adopted by CIM Council on November 23, 2003, using geostatistical and/or classical methods,plus economic and mining parameters appropriate to each project. You will find the definitions and guidelines at www.cim.org.Estimates for all operations are prepared by or under the supervision of a qualified person as defined in National Instrument 43-101(usually an engineer or geologist).There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect theestimates of the mineral reserves.Mineral resources which do not form part of the mineral reserves do not have demonstrated economic viability.Mineral resources as at March 5, 2012, were estimated by Robert Sim, P. Geo., of SIM Geological Inc. Mineral reserves as atDecember 31, 2011 were estimated by William Rose, P.E., of WLR Consulting, Inc., a qualified person under National Instrument 43-101.Reserve estimates are based on the following assumptions:- copper price: $US2.25 per pound- gold price: $US1,000 per ounce- silver price: $US16 per ounce- molybdenum price: $US13.50 per pound- Mining costs : $US1.66 per tonne of ore mined, $US 1.96 per tonne of waste mined and- Milling and general and administration cost: $US 5.27 per tonne of ore milled, average life of mine metallurgical recoveries: 89percent for copper, 52 percent for gold, 46 percent for silver and 53 percent for molybdenum.Mineral resources include mineral reserves.Resource grades are estimated using ordinary kriging with a nominal block size of 25 metres by 25 metres by 15 metres. Resourcesare limited inside a pit shell defined by a copper price of $US2.60 per pound, $1.75 per tonne mining cost and $7.02 per tonne totalsite operating cost, and are tabulated at a cut-off grade of 0.15 percent copperMeasured and Indicated (M&I) resources have grown to approximately 32.4b lb of copper and9.0m oz of gold. This represents a 26% increase of 6.6b lb of copper and a 37% increase of2.4m oz of gold over the FEED Study. In addition, inferred mineral resources have grown to19.1billion lbs of copper and 4.8m oz of gold – an increase of 2.5b lb of copper (15 percent) andan increase of 0.8m oz gold (20 percent) over the FEED Study.Currently there are 12b lb of contained copper in M&I mineral resources and some 19b lb ofcopper in inferred mineral resources not exploited in the mine plan. While mineral resources donot have demonstrated economic viability, based on commonly used market precedent, theseadditional units of copper could potentially be valued at between $US0.03 and $US0.06/lb in theground, suggesting an option value on those copper units of between $US0.9b and $US1.8b.This is especially true once the infrastructure is in place and the mine is operating.If work progresses to allow us to move these resources into reserves, it would provideopportunities to: • extend mine life beyond the current 31 years; and/or • accelerate the addition of a third line to the process plant that would increase production in Years 3 to 9; and/or • justify expanding the planned operation beyond 240ktpd throughput.Cobre Panama would enjoy a number of other positive attributes. In an industry with a trend ofincreasing presence of deleterious elements in concentrates, the Project would have a cleanconcentrate. The port, located on tide water, would be only 30 km from the mine site, allowingfor ease of exporting concentrates as well as importing supplies. This would provide a unique Page 18May 2012
  19. 19. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTopportunity to potentially enhance profitability through swaps to reduce transportation costs andto share the benefit of reduced penalties with swap counterparties.1.2 Concession, Permits and Socio-Environmental CommitmentsThe Project exploration and mining concession was granted under Law 9 of February 26, 1997,promulgated by the Legislative Assembly of Panama. This, in addition to an amended MineralResources Code in Panama, provides clarity on the fiscal framework for Cobre Panama. TheESIA approval was received in December 2011 and gives the Project the right to obtain thebalance of the permits required to commence operations. Several such construction permitshave already been obtained.MPSA has created an existing privilege to operate locally by building relationships with localcommunities, an intention to comply with the International Finance Corporation’s PerformanceStandards on Environmental and Social Sustainability and by meeting its responsibility to ensurethat the benefits of the Project are shared with the people of Panama.1.3 Capital CostsThe estimated capital cost of $US6.18b is based on a comprehensive estimate comprised ofover 9,000 lines and 800 pages as well as third party reviews of the process and outcome.Adding further to the confidence in the figures is the inclusion of lump sum turnkey contracts,firm price estimates and vendor quotes for well over ninety per cent of the capital cost. Page 19May 2012
  20. 20. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTTable 1-5 Basic Engineering Capital Cost by Major Area CAPEX Total Area % of Project ($US)Mining 760 12Process Plant 1,184 19Site & Services 550 9Port Site Facilities 543 9Power Plant 646 10Total Direct Costs 3,682 59Construction Indirects 844 14Total Field Costs 4,526 73EPCM Services 355 6Owner Costs 885 14Contingency* 415 7Project Total Costs 6,181 100Note: Totals may not add due to rounding*Contingency: The contingency table provided to the estimate reviewers had an overall Project contingency of 9.63% (as apercentage of Total Installed Cost (TIC)). When owner’s costs (mine preproduction, mine equipment and Owner’s ProjectManagement (PM)) and contingency on owner’s costs are removed, the remaining value is 11.18%. The percentage is in line withwhat might be expected of an Authority for Total Cost Management (AACE) Class 2 engineering estimate which is described inSection 4.4.1.4 Operating CostsC1 cash costs during Years 2-16 of operation are expected to average $US0.72/lb of copper andfor the life of operations average $US0.82/lb (see Section 5 for further details). These costsshould put Cobre Panama in the first quartile of the projected industry curve and support theeconomic robustness of the operation under most foreseeable market conditions.Table 1-6 C1 Cash Costs($US/lb of Cu) at Copper Price Scenario of $US2.75/lb.Cost Item Average Yr 2-16 Life of OperationsMine 0.30 0.32Plant 0.37 0.44G&A 0.11 0.12Site services 0.03 0.04Offsite costs 0.30 0.30By-product credits (0.40) (0.40)C1* 0.72 0.82Note: Totals may not add due to rounding Page 20May 2012
  21. 21. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTTable 1-7 Summary of Operating Costs by Component ($US/t of ore milled)Cost Centre Total Labour Material Power OtherMine 2.44 0.27 1.87 0.05 0.24Process Plant 3.29 0.24 2.13 0.91 0.01G&A 0.88 0.15 0.01 0.04 0.69Site Services 0.28 0.11 0.07 0.01 0.09Total 6.88 0.77 4.08 1.01 1.03A third party review of process plant operating costs concluded that the estimate of operatingcosts was realistic and consistent with other operating concentrators. A separate reviewerconcluded that the Project’s mining productivity ratios were at the average or slightlyconservative as compared to other similar open-pit mining operations.Analysis of costs for input commodities such as oil (diesel), freight, steel (grinding media),ammonia (explosives) and coal (power) has demonstrated a strong correlation to the historicalprice of copper. When prices of oil and other raw materials are relatively high, statisticallysignificant correlations demonstrate that it is reasonable to expect that the economicenvironment is robust and, likewise, so presumably would be the price of copper. The costassumptions for these commodities can therefore linked to price assumptions for copper overthe long term. The life of mine operating costs estimate of $US6.88/t of ore milled is based on along-term copper price assumption of $US2.75/lb. Table 5-5 shows the various input costs usedfor each metal price scenario – in the $US2.75/lb copper case oil is $US68.68/bbl, diesel is$US0.62/l, coal is $US82.54/t, steel grinding media is $US935.25/t, explosives are $US936.21/tand concentrate freight cost was $US41.21/t. In the $US3.42/lb copper case oil is$US80.53/bbl, diesel is $US0.72/l, coal is $US96.93/t, steel grinding media is $US1,143.62/t,explosives are $US1,011.18/t and concentrate freight cost was $US48.32/t.1.5 Project EconomicsThree metal price scenarios were used to evaluate the Project economics: Consensus Long-Term ($US2.75/lb), Forward Curve, and Three Year Trailing Average ($US3.42/lb). It is ourbelief that the Consensus Long-Term price is conservative and does not reflect anticipatedsupply-demand dynamics (see Section 11 ―Marketing‖ for additional discussion). Two financingstructures were considered in the Project economic analysis: 1. a levered case with third party and subordinate shareholder debt, and 2. a levered case with third party and subordinate shareholder debt, plus a gold and silver stream sale. Page 21May 2012
  22. 22. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTThese structures represent Inmet Mining Corporation’s (Inmet’s) financing assumptions appliedto 100% of the Project. All scenarios and cases appear to provide solid returns that range from14.3% to 22.5% after-tax IRR.Table 1-8 After-Tax Economics: Debt Case Metal Price Scenario Forward Curve 3-Year Trailing Average (SEC($USm) Consensus Long-Term (declining to case) consensus)IRR 14.3% 18.5% 19.2%NPV @ 8% 3,200 4,800 6,000NPV @ 9% 2,400 3,900 4,900NPV @ 10% 1,800 3,200 4,000Table 1-9 After-Tax Economics: Debt plus Stream Case Metal Price Scenario Forward Curve 3-Year Trailing Average (SEC($USm) Consensus Long-Term (dropping to case) consensus)IRR 16.7% 21.9% 22.5%NPV @ 8% 3,500 5,000 6,300NPV @ 9% 2,800 4,200 5,200NPV @ 10% 2,200 3,600 4,400However, readers should be aware that the static Discounted Cash Flow valuation methodologyemployed in the analysis does not capture the value of the optionality embedded in a long-lifeasset and additional mineral resources that may be incorporated into the mine plan.1.6 Third Party ReviewsMany recent projects in the mining industry have been impacted by unreliable capital estimates.To ensure the reliability of Cobre Panama’s capital estimate, third party reviews of key aspectsof the Project overall were undertaken to mitigate risks and improve the confidence of estimates. Page 22May 2012
  23. 23. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTTable 1-10 Third Party ReviewsScope Reviewer OutcomeOverall Project Chlumsky, Ambrust & Meyer Confirmative (CAM) – Independent EngineerCapex Legico-CHP ConfirmativeOpex AMEC ConfirmativePower Sunrise Americas & Wood Confirmative MackenzieTailings URS Corporation ConfirmativeTailings ITRB ConfirmativeProject Controls KPMG ConfirmativeProject Readiness IPA Confirmative1.7 Risks and OpportunitiesCobre Panama stakeholder risks and opportunities were identified and risk mitigants put in placeas part of Basic Engineering.Cost Escalation  Quotes to build the power plant and the process plant (together a significant component of Project capital expenditures) were and are being written on a ―Lump Sum‖ and ―Not to Exceed‖ basis in order to reduce the likelihood that these components will bring the Project over budget. These quotes will be received from audited vendors with the sophistication and balance sheet to manage costs and deliver on budget.  The advanced stage of engineering for the Project (currently 38% completed) in combination with the large portion of firm bids received to-date (58%) should further reduce the potential for unforeseen costs.  Panama’s use of the US currency is another positive characteristic of the Project that should reduce the potential for material cost escalation due to foreign exchange fluctuation.  The manner in which the ―Request for Quotation‖ process was conducted should reduce the potential for cost overruns. The Project’s Engineering, Procurement and Construction (EPC) and Engineering, Procurement, Construction and Management (EPCM) contracts are designed to incent contractors to stay on budget and on schedule.  We believe the quotes obtained are materially conservative – in some cases the labour multiplier (unit of work over unit of time) used for work on the Project is as high as three times what would normally be employed and some of the quotes for individual work packages have small overlaps in scope (which could potentially reduce costs).  By the end of 2012, 50% of the Project expenditures are expected to be committed against firm quotes currently in hand.  Overall Project contingency is 9.6% (as a percentage of TIC). When owner’s costs (mine preproduction, mine equipment and owner’s project management (PM)) and contingency Page 23May 2012
  24. 24. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT on owner’s costs are removed, the remaining contingency level is 11.2%. This percentage is in line with what might be expected of an AACE Class 2 engineering estimate.  The Project is actively considering early group purchase of bulk commodities (to lock in some costs of steel, diesel, cement) for construction and passing out to suppliers.Low Cost Production from a Low Grade Mine  Cobre Panama is amenable to large scale, open pit mining methods that should result in the efficient handling of ore and waste.  Mining costs should benefit from a very low strip ratio, roughly one fifth of the average (0.58 vs 2.53 – Source: Brook Hunt) for all open pit copper mines in 2011.  The Project’s proximity to the coast and the low altitude of the Project should allow the mine and the port to be located close together, thus decreasing linear maintenance and allowing for integrated management of remote facilities.  The project would have access to low-cost, self-generated power that takes advantage of proximity to a coal source.Management Depth  Inmet has developed three mines within the tenure of the current management; the Las Cruces, Çayeli and Troilus mines.  For the Project, Inmet has recruited a strong owner’s team (detailed in Section 9) that has relevant experience in construction and operations. Further, reputable Engineering, Procurement and Construction contractors with a proven history of quality have been selected.Support for the Project  Approval of the ESIA is in our view indicative of governmental support for the Project.  Permits post-ESIA approval are being received.  Extensive engagement and cooperation at both the government and community levels.  At the community level, the current level of support in the Project area indicates that community engagement efforts are working and a recent study shows overwhelming support for the Project (Section 3.3.3).  Minera Panama, S.A. (MPSA) has received free prior and informed consent of the indigenous communities who will be physically and economically displaced by the Project.  MPSA has continuous engagement with the local communities and a broad range of stakeholders and is delivering employment to local residents.Mine Life  Current mineral resources are in excess of the Basic Engineering mine plan and point to the potential for mine life extension and expansions beyond the currently planned addition of a third crushing and grinding line to the process plant. Page 24May 2012
  25. 25. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTAcceleration of Third Line  Moving the third line addition forward could enhance the mill throughput by approximately 50% in Years 3 to 9 and would make Cobre Panama one of the ten largest copper mines in the world in terms of annual production.Further Expansion under Extended Resource  There is a significant mineral resource under the Basic Engineering plan, exclusive of mineral reserves, that is largely near surface and proximal to the planned plant. This could potentially support future expansion.Exploration Potential  In late 2010 MPSA initiated a concession-wide exploration program via airborne geophysical survey. This survey identified known shallow mineralization and generated numerous targets. One of the first targets tested in early 2011 resulted in the discovery of the Balboa deposit. An extensive exploration program for 2012 is underway with 36 holes testing additional targets on the concession.1.8 Project ExecutionA project execution plan has been developed to move Cobre Panama from completion of BasicEngineering through design, construction and commissioning phases all the way to shipment ofthe first concentrate anticipated in the first quarter of 2016. The MPSA Project team would growfrom 50 today to 107 members at its peak in 2013.Milestones from the Project master schedule are presented below. Page 25May 2012
  26. 26. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTTable 1-11 Project MilestonesMilestone Date (Estimated)Notice to Proceed 2Q12Mine/Process Plant Construction Start 2Q12Port Site Construction Camp Complete 4Q12Process Plant Bulk Earthworks Complete 4Q13Coast Road Open (Plant to Port Site) 4Q13Port Dock Facility Construction Complete 2Q14230 kV Power Transmission Line Construction Complete 3Q14Tailings Starter Dam Construction Complete 3Q15Introduction of Ore to Grinding Line No. 1 4Q15Power Plant Complete – Unit No. 1 Operational 4Q15Introduction of Ore to Grinding Line No. 2 4Q15Power Plant Complete – Unit No. 2 Operational 4Q15Start of Production 4Q15Shipment of Concentrate 1Q16Commercial Production 2Q161.9 ConclusionsWith Basic Engineering completed, detailed engineering underway, key permits in process, andcontinued efforts to maintain and enhance its privilege to operate locally, Cobre Panama is aconstruction-ready Tier 1 project. With few such assets in a construction-ready position and notalready in the hands of a senior mining company, we believe the Project has potential valuebeyond what is estimated in the NPV analysis. Page 26May 2012
  27. 27. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORT2 TECHNICAL SUMMARY2.1 Project DescriptionCobre Panama would be a world-class Tier 1 asset based on projected mine life, annualproduction, cash costs, scalability and annual cash flow.Table 2-1 Tier 1 Characteristics Tier 1 CharacteristicLife of Mine 31 yearsAnnual production (Yr 2-16) 298 ktAnnual production (LOM) 266 ktC1 cash costs (Yr 2-16) $US0.72/lb CuC1 cash costs (LOM) $US0.82/lb CuStrip Ratio 0.58Scale 160 ktpd to 240 ktpd throughput with further expansion capacityAnnual free cash flow (Yr 2-16) at $US2.75/lb Cu, debt financing $US0.90bAnnual free cash flow (LOM) at $US2.75/lb Cu, debt financing $US0.81bCopper reserves* 9.3 mtCopper resources (M&I)* 14.7 mtCopper resources (Inferred)* 8.7 mtConcentrate Clean concentrate not expected to draw penaltiesLogistics Proximity to tidewater and Panama Canal*See Table 1-3 and 1-4Cobre Panama would be developed as a conventional truck and shovel open pit mine with aconcentrator employing proven technology (crushing, grinding, flotation) to produce copper-goldand molybdenum concentrate. A 300 mW coal-fired power plant and ship loading port facilitieswould also be part of the Project.The Project would be within an exploration and mining concession covering 130 km2 located inthe Donoso District, Colón Province in north-central Panama. The development would be closeto tidewater and would be advantaged by its proximity to the Panama Canal which providesincreased flexibility in sourcing supplies from both the Gulf of Mexico (North America) and SouthAmerica as well as providing convenient shipping of mine concentrates to global markets. Page 27May 2012
  28. 28. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTFigure 2-1 Site & Infrastructure Map Page 28May 2012
  29. 29. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTThe Project infrastructure, ancillary support facilities and systems would include:  Three open pits (the Botija, Colina and Valle Grande deposits) which would be progressively developed;  Ore crushing, conveying and stockpiling facilities, consisting of two gyratory crushers, belt conveyors and a pad for crushed ore stockpiling for the initial Botija pit;  Provisions for a second crusher and associated conveying and stockpiling facilities to handle ore from the Colina and Valle Grande pits  A 160 ktpd process plant consisting of two lines;  Provisions for an addition of a third line in the concentrator expanding its capacity to 240 ktpd throughput in Year 10 with negligible infrastructure modifications;  A slurry pipeline to transport concentrate to the port facility;  A port facility including concentrate loading and coal offloading facilities;  A 300 megawatt coal-fired power plant;  A coast access road, connecting the process plant with the port facility;  Plant and truck repair shop;  Warehouse and tank farm;  Camp and administrative offices;  Facilities and systems for environmental monitoring and management of effluents in compliance with Project commitments; and  Transmission line from the power plant at the port facility to the process plant and switchyard, continuing south to connect with the Panamanian grid at the Llano Sanchez substation.2.1.1 Geology and Mineral ResourcesCopper-gold-molybdenum porphyry-style mineralization was discovered in central Panamaduring a regional survey by the United Nations in 1968. Exploration has since outlined five largedeposits and several smaller ones on the concession. Drill programs have been conducted bythe United Nations Development Program (1968-1969), Panama Mineral ResourcesDevelopment Company (PMRD), a Japanese consortium (1970-1980), Inmet-Adrian Resources-Teck as MPSA (1990-1997), Petaquilla Copper (2006-2008), and Inmet and Teck and thenInmet as MPSA (2007-2009). A total of 1,275 diamond drill holes (230,555 m) have beencompleted.The relevant deposits are all porphyry copper deposits and include Botija, Colina, Medio, ValleGrande, Brazo and Balboa. All of the porphyry-style mineralization on the property is hosted ingranodiorite, feldspar-quartz-hornblende porphyry, and adjacent andesitic volcanic rocks. Thescope of the Basic Engineering, as well as the approved ESIA, only covers the development ofthe Botija, Colina, Medio and Valle Grande deposits. Page 29May 2012
  30. 30. Minera Panama, S.A. Mina de Cobre Panama Project BASIC ENGINEERING SUMMARY REPORTFigure 2-2 Mineral Deposits and Defined Resources Plan MapCobre Panama mineral resources (inclusive of reserves) were re-estimated in early 2012 toincorporate the 171 holes completed since the 2010 FEED Study (see Table 2-2). The increasein measured and indicated resources reflected conversion of inferred resources into indicatedresources on the Brazo deposit and the addition of the Balboa resource. Most of the increase ininferred resources came from Balboa. Page 30May 2012

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