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  1. 1. Resource AuditMMX Mineração e Metálicos S.A. Serra Azul Mines Brazil Prepared for: MMX Mineração e Metálicos S.A. Avenida Prudente de Morais1250 Belo Horizonte, Minas Gerais Brazil SRK Project Number: 162700.10 Prepared by: 7175 W. Jefferson Avenue, Suite 3000 Lakewood, CO 80235 Effective Date: November 16, 2010 Report Date: January 5, 2011 Author: Leah Mach, CPG, MSc
  2. 2. MMX Mineração e Metálicos S.A. ISerra Azul Mines Resource AuditTable of Contents1 INTRODUCTION ........................................................................................................... 1-1 1.2.1 Sources of Information ......................................................................... 1-1 1.3.1 Site Visit................................................................................................ 1-22 PROPERTY DESCRIPTION AND LOCATION ........................................................... 2-13 GEOLOGICAL SETTING .............................................................................................. 3-1 3.1.1 Regional Structure ................................................................................ 3-1 3.2.1 Local Lithology..................................................................................... 3-4 3.2.2 Alteration .............................................................................................. 3-4 3.2.3 Structure ................................................................................................ 3-4 3.2.4 Metamorphism ...................................................................................... 3-54 MINERALIZATION ....................................................................................................... 4-15 DRILLING....................................................................................................................... 5-16 SAMPLING METHOD AND ANALYSIS..................................................................... 6-1 6.1.1 Logging and Sampling .......................................................................... 6-1 6.2.1 Logging and Sampling .......................................................................... 6-2 6.4.1 Sample Preparation ............................................................................... 6-3 6.4.2 Sample Analysis.................................................................................... 6-3 6.5.1 Comparison of Assayed and Calculated Global Grades ....................... 6-4 6.5.2 Stoichiometric Closure.......................................................................... 6-4 6.5.3 Certified Reference Material................................................................. 6-57 DATA VERIFICATION ................................................................................................. 7-18 MINERAL RESOURCES ESTIMATE .......................................................................... 8-19 RECOMMENDATIONS ................................................................................................. 9-110 REFERENCES .............................................................................................................. 10-111 GLOSSARY .................................................................................................................. 11-1 11.1.1 Mineral Resources .............................................................................. 11-1 11.1.2 Mineral Reserves ................................................................................ 11-1List of TablesTable 1: Drilling at the Serra Azul Mine ..................................................................................... IVTable 2: Serra Azul Mineral Resource Statement, as of November 16, 2010* ........................... VITable 1.3.1: Key SRK Project Personnel .................................................................................... 1-2Table 2.2.1: Serra Azul Land Tenure.......................................................................................... 2-1Table 5.1.1: Comparison of Twin RC and Core Drillholes ........................................................ 5-1Table 5.1.2: Drilling at Serra Azul.............................................................................................. 5-2Table 6.4.1: Laboratories used for Sample Preparation and Analysis ........................................ 6-2Table 6.4.1: Bureau Veritas Detection Limits ............................................................................ 6-4SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  3. 3. MMX Mineração e Metálicos S.A. IISerra Azul Mines Resource AuditTable 8.1.2: Basic Statistics for Assays ...................................................................................... 8-1Table 8.2.1: Basic Statistics of Metal Variables by Lithotypes used in Grade Estimation ........ 8-3Table 8.3.1: Composite Statistics................................................................................................ 8-4Table 8.4.1: Density of Lithotypes ............................................................................................. 8-5Table 8.5.1: Variogram Parameters ............................................................................................ 8-6Table 8.6.1: Block Model Dimensions and Origin ..................................................................... 8-7Table 8.6.2: Estimation Parameters ............................................................................................ 8-7Table 8.7.1: Basic Statistics of the Blocks.................................................................................. 8-8Table 8.8.1: Serra Azul Classification Criteria ........................................................................... 8-9Table 8.9.1: Serra Azul Mineral Resource Statement, as November 16, 2010* ...................... 8-10Table 8.10.1: Measured and Indicated Grade and Tonnage by Fe Cutoff. ............................... 8-11Table 8.10.2: Inferred Grade and Tonnage by Fe Cutoff ......................................................... 8-11Table 11.2.1: Glossary .............................................................................................................. 11-2Table 11.2.2: Abbreviations...................................................................................................... 11-3List of FiguresFigure 2-1: General Location Map of the Serra Azul Mine........................................................ 2-2Figure 3-1: Project Location within the São Francisco Craton................................................... 3-6Figure 5-1: Drill Collar Location Map........................................................................................ 5-3Figure 8-1: Drillhole Location Map with Topography and Mining Concessions .................... 8-13Figure 8-2: Cross-sections with Geology and Drilling Looking East....................................... 8-14Figure 8-3: Oblique View of Cross-sections Showing Change in Bedding Dip ...................... 8-15Figure 8-4: Omni-Directional and Downhole Variograms for Iron, Friable and Compact Itabirite8-16Figure 8-5: Cross-sections with Geology, Block Model and Drilling Looking East................ 8-17Figure 8-6: Swath Plot Index Map and Iron Swath Plot ........................................................... 8-18Figure 8-7: Cross-sections with Geology, Block Model Classification and Drilling ............... 8-19Figure 8-8: Grade Tonnage Curves, Iron .................................................................................. 8-20SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  4. 4. MMX Mineração e Metálicos S.A. IIISerra Azul Mines Resource AuditSummaryProperty Description and LocationThe Serra Azul Mine (the Project) is located in the Serra Azul area in the state of Minas Gerais,Brazil near the town of Igarapé, approximately 60km southwest of Belo Horizonte, the capital ofMinas Gerais. The Project consists of an operating mine and two beneficiation plants for theproduction of lump and sinter feed.OwnershipThe Project is controlled by AVG Mineraçao S/A, a subsidiary of MMX Sudeste MineraçãoLtda. (MMX Sudeste), a 100% owned subsidiary of MMX Mineração e Metálicos S.A. (MMX).Geology and MineralizationThe Project lies within the Quadrilátero Ferrífero (Iron Quadrangle). The geology of the IronQuadrangle has been studied since the 18th century and is one of the most important metallogenicprovinces in the world. The lithologies in this area include the Rio das Velhas and MinasSupergroups, which are part of the crystalline basement. This area is known for its banded ironformation (BIF) deposits.In the Project area, the Serra das Farofas is composed of rocks from the Minas Supergroup thatare underlain by the Rio das Velhas Supergroup in a clear discordant contact. The MinasSupergroup is subdivided, from youngest to oldest, into three groups: Piracicaba Group; Itabira Group; and Caraça Group.Locally, the stratigraphic sequence is inverted, with the most recent quartzitic formations of thePiracicaba Group overlain by the itabirites of the Cauê Formation, Itabira Group, which, in turn,is capped by the oldest phyllites and quartzites of the Caraça Group.Within the pit area, the geology is dominated by four formations. From oldest to youngest, theseare the Batatal, Cauê, Gandarela and Cercadinho Formations. The Batatal Formation has beenthrust over the younger Cauê Formation, which has been thrust over the youngest CercadinhoFormation. The deposit is crosscut by a northwest-trending, high-angle brittle fault that appearsto be offset by younger northeast trending faults.The mineralization at the Project consists of metamorphosed BIF subsequently with strongevidence of hydrothermal syngenetic formation with areas of supergene enrichment throughlateritic weathering. This results in a variety of different mineralization types. There are sevendistinct lithological ore types observed in this area of the Serra do Curral: Canga; Friable siliceous itabirite; Friable rich itabirite; Compact itabirite; Friable hematite;SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  5. 5. MMX Mineração e Metálicos S.A. IVSerra Azul Mines Resource Audit Compact hematite; and Friable carbonate itabirite.ExplorationLike most private iron mine operators in Brazil, AVG, Minerminas and prior operators have nothad extensive and detailed exploration programs. There has been minimal exploration drillingprior to MMX’s involvement in the Project. Limited channel samples were collected in the pitarea.Since 2005, 213 holes have been drilled at the Project, totaling 18,857M. The drilling consists ofboth core and reverse circulation drilling. Table 1 lists the number of drillholes by program andcompany and the laboratory that was used to analyze the samples.Table 1: Drilling at the Serra Azul Mine Number of Length Number of Campaign Period Laboratory Drillholes Type (m) Samples FSAVG, FSAVGSB 11 HW Core 2005 440 50 AVG Total AVG 11 2005 440 50 AVGMMX 9 HWL Core 2007 694 88 SGS SEFDSF 26 HQ, HWL 2007-2008 1,459 273 SGS,MMX FSMNM 3 HWL Core 2007-2008 191 34 MMX FDSB, SEFDSB 50 HWL Core 2008 3,190 628 MMX FDSF 6 HWL Core 2008 203 49 MMX RPSF (RC) 19 4 or 5" 2009 2,836 522 SGS FDSA 32 HQ, HN 2010 3,872 448 SGS, Bureau Veritas FDSC 11 HQ 2010 590 * Bureau Veritas RPSA (RC) 46 4.75 or 5" 2010 5,382 551 Bureau Veritas Total MMX 202 2007-2010 18,417 2593 Total 213 2005-2010 18,857 2643Mineral ResourcesMMX prepared the resource estimation for Serra Azul under the direction of Ms LilianGrabellos, Manager of Resouces and Reserves. Leah Mach, Principal Resource Consultant withSRK, audited the resource.The drillhole sample database was compiled by MMX and verified by SRK and is determined tobe of high quality and suitable for resource estimation. SRK received the drillhole database asfour comma separated variable (csv) files consisting of: Collar: Drillhole ID, easting, northing, elevation, and total depth; Survey: Depth, azimuth, inclination; Geology: From, to, lithology and code from drill log, modeled lithology and code from cross-sections; and Assay: Four files with one file for each of three size fraction groups and one for global, containing from, to, Fe, SiO2, Al2O3, P, Mn and LOI.Sixty-seven geologic cross-sections were constructed at 100 or 50m intervals depending on thedrill spacing. The cross-sections were used to prepare horizontal sections at 10m spacing fromSRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  6. 6. MMX Mineração e Metálicos S.A. VSerra Azul Mines Resource Auditelevation 9550 to 1,365. The block model was coded from the horizontal sections. Thelithotypes that were used in grade estimation are Canga (CG), friable itabirite (IF), friablecarbonate itabirite (IFCA), and compact itabirite (IC).MMX composited the samples on 5m intervals starting at the top of the drillhole with breaks atthe lithotype solid boundaries. MMX conducted variography studies on the AVG andMinerminas properties separately because of the difference in the dip of the beds between thetwo properties. The study included directional and downhole variograms as well as omni-directional variograms. The omni-directional variogram was chosen as showing the best fit forthe data.A block model was created that covers the entire AVG/Minerminas mine area. The block modelcontains variables for: Fe, SiO2, Al2O3, Mn, P, and LOI – global and for each of the three size fractions; Lithotype; Percentage below topography; Estimation parameters – number of composites, number of drillholes, average distance of composites used in estimation, and distance to closest composite; and Class – 1=measured, 2=indicated, 3=inferred, 4=potential.Block grades were estimated by ordinary kriging in three passes. Blocks were classified asMeasured, Indicated or Inferred after each estimation pass. Blocks that did not meet thenecessary criteria for classification were re-estimated in the next pass. The search ranges weredetermined by the iron variogram range with the first pass at the variogram range and the secondat 150% of the range. The third pass was at 2000m to fill all the blocks in the model andestimate a mineral potential. The estimation was conducted using block and composite lithotypematching.The resources were classified according to CIM classification as Measured, Indicated, or Inferredbased on the pass in which the block was estimated and the number of drillholes used in theestimation. In order to control the depth to which the blocks could be classified, a surface wasgenerated at the base of the drillholes. This surface was lowered 20m and then uused to limit theclassification of measured, indicated, and inferred resources.The Mineral Resources for the Serra Azul Mine as of November 16, 2010, on a wet tonnes basisare presented in Table 2.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  7. 7. MMX Mineração e Metálicos S.A. VISerra Azul Mines Resource AuditTable 2: Serra Azul Mineral Resource Statement, as of November 16, 2010* Tonnes ROCK CLASS (000s) Fe% SiO2% Al2O3% Mn% P% LOI% Measured 158,368 51.14 23.36 1.8 0.047 0.049 1.261 Indicated 41,621 48.46 26.99 1.67 0.144 0.048 1.333 IF Total M&I 199,989 50.58 24.12 1.77 0.07 0.05 1.28 Inferred 17 40.84 38.02 1.11 0.029 0.033 0.774 Measured 384,164 35.82 14.1 0.62 0.031 0.025 0.372 Indicated 252,657 34.32 49.23 0.7 0.082 0.025 0.519 IC Total M&I 636,821 35.22 28.04 0.65 0.05 0.03 0.43 Inferred 3,939 30.57 53.25 0.78 0.341 0.049 1.652 Measured 37,491 32.97 44.3 3.64 0.832 0.081 2.799 Indicated 13,608 32.9 44 3.72 0.993 0.083 2.926 IFCA Total M&I 51,099 32.95 44.22 3.66 0.87 0.08 2.83 Inferred 0 Measured 4,447 59.4 5.75 4.05 0.022 0.159 4.634 Indicated 7,170 55.37 8.1 5.69 0.037 0.226 5.801 CG Total M&I 11,617 56.91 7.2 5.06 0.03 0.2 5.35 Inferred 5,535 53.01 10.98 6.16 0.045 0.218 5.998 Measured 584,440 39.97 40.37 1.16 0.087 0.036 0.801 Indicated 315,056 36.6 45.13 1.07 0.129 0.035 0.851 Total Total M&I 899,496 38.79 42.04 1.13 0.1 0.04 0.82 Inferred 9,492 43.67 28.57 3.92 0.168 0.147 4.185* Cut-off Grade 12% Fe; tonnes on a wet basis.RecommendationsAnalytical and QA/QC DataMMX has a laboratory quality assurance/quality control program (QA/QC) in place and monitorsthe laboratory results from these samples on a regular basis. The QA/QC samples includesstandard reference samples developed from Serra Azul material and pulp duplicates.Resource EstimationSRK recommends that MMX continue to drill additional holes into the compact itabirite to gainadditional samples and analysis and increase confidence in the grades at depth and to increasethe indicated resources in this rock type.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  8. 8. MMX Mineração e Metálicos S.A. 1-1Serra Azul Mines Resource Audit1 IntroductionSRK Consulting (U.S.), Inc., (SRK) was commissioned by MMX Mineração e Metálicos S.A.(MMX) to audit resources at the Serra Azul Mine. The Project is located in the Serra Azul areain the state of Minas Gerais, Brazil near the town of Igarapé, located approximately 60kmsouthwest of Belo Horizonte, the capital of Minas Gerais. The Project consists of twocontiguous open pit mines and two beneficiation plants for the production of lump and sinterfeed. The Tico-Tico Mine was acquired by MMX as part of the acquisition of AVG MineraçãoS.A. (AVG) in December 2007. The Ipê mine was acquired as part of the acquisition ofMineradora Minas Gerais Ltda (Minerminas) in March 2008. The properties are operated byMMX Sudeste Mineração Ltda. (MMX Sudeste), a 100% owned subsidiary of MMX.This report is prepared using the industry accepted Canadian Institute of Mining, Metallurgy andPetroleum (CIM) “Best Practices and Reporting Guidelines” for disclosing mineral explorationinformation and CIM Definition Standards for Mineral Resources and Mineral Reserves(December 11, 2005).Certain definitions used in this executive summary are defined in the body of this Technicalreport on resources and in the glossary in Section 10.1.1 Terms of Reference and Purpose of the ReportThis audit of Mineral Resources is intended to be used by MMX to further the development ofthe Project by providing an independent audit of the mineral resource estimates and classificationof resources. MMX may also use this Report for any lawful purpose to which it is suited.1.2 Reliance on Other ExpertsSRK’s opinion contained herein is based on information provided to SRK by MMX throughoutthe course of SRK’s investigations as described in Section 1.2.1, which in turn reflect varioustechnical and economic conditions at the time of writing.SRK reviewed certain materials pertaining to a limited amount of correspondence, pertinentmaps and agreements to assess the validity and ownership of the mining concessions. However,SRK did not conduct an in-depth review of mineral title and ownership; consequently, noopinion will be expressed by SRK on this subject.SRK is of the opinion that the information concerning the properties presented in this report(within or not produced by SRK) adequately describes the properties in all material respects.1.2.1 Sources of InformationThe underlying technical information upon which this Report is based represents a compilationof work performed by MMX. The studies and additional references for this Technical Report onResources are listed in Section 10. SRK has reviewed the Project data and incorporated theresults thereof, with appropriate comments and adjustments as needed, in the preparation of thisReport on Resources.The author reviewed data provided by MMX including hard copy and digital files located in theProject and MMX’s offices in Brazil. Discussions on the geology and mineralization wereconducted with MMX’s technical team. The drillhole assay database was prepared by MMX andverified by SRK.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  9. 9. MMX Mineração e Metálicos S.A. 1-2Serra Azul Mines Resource AuditLeah Mach is a Qualified Person as defined by NI 43-101.1.3 Qualifications of Consultants (SRK)The SRK Group is comprised of over 900 staff, offering expertise in a wide range of resourceengineering disciplines. The SRK Group’s independence is ensured by the fact that it holds noequity in any project and that its ownership rests solely with its staff. This permits SRK toprovide its clients with conflict-free and objective recommendations on crucial judgment issues.SRK has a demonstrated record of accomplishment in undertaking independent assessments ofMineral Resources and Mineral Reserves, project evaluations and audits, technical reports andindependent feasibility evaluations to bankable standards on behalf of exploration and miningcompanies and financial institutions worldwide. The SRK Group has also worked with a largenumber of major international mining companies and their projects, providing mining industryconsultancy service inputs.This report has been prepared based on a technical and economic review by a team of consultantssourced principally from the SRK Group’s Denver, US office. These consultants are specialistsin the fields of geology exploration, mineral resource and mineral reserve estimation andclassification, open pit mining, mineral processing and mineral economics.Neither SRK nor any of its employees and associates employed in the preparation of this reporthas any beneficial interest in MMX or in the assets of MMX. SRK will be paid a fee for thiswork in accordance with normal professional consulting practice.The individuals who have provided input to this Report, who are listed below, have extensiveexperience in the mining industry and are members in good standing of appropriate professionalinstitutions. Ms. Leah Mach is a Qualified Person under Canadian Instrument NI 43-101guidelines.Table 1.3.1: Key SRK Project Personnel Name Responsibility Leah Mach Geology, Resources, Project Manager Neal Rigby Reviewer1.3.1 Site VisitLeah Mach, Qualified Persons for this report, made site visits to the Property on June 27 andOctober 7, 2007, February 13, 2009 and June 30, 2010. The site visits consisted of reviewing thedrill core and logging procedures, visiting the open pit and observing the operations and producttypes, visiting the beneficiation plant, and touring the property to see the tailings facility andwaste dumps.1.4 Units of MeasureMetric units are used throughout this report, except where otherwise stated.1.5 Effective DateThe effective date of this Audit of Resources is November 16, 2010. The resource estimationincludes drilling through November 10, 2010. The topography is current as of November 16,2010.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  10. 10. MMX Mineração e Metálicos S.A. 2-1Serra Azul Mines Resource Audit2 Property Description and Location2.1 Property LocationThe Project is located approximately 60km southwest of Belo Horizonte, and approximately560km northwest of Rio de Janeiro in Minas Gerais State, Brazil (Figures 2-1 and 2-2). TheProject consists of three contiguous licenses in the Serra Azul Mountain Range, located near thecity of Igarapé in the southwest part of the Quadrilátero Ferrífero (Iron Quadrangle). The Projectalso includes six exploration claims surrounding the licenses. The licenses lie between20°07’30”S and 20°06’30S and between 44°17’W and 44°19’W (Figure 2-3). The Project lieswithin the municipalities of Brumadinho, Igarapé, Itatiaiuçu, Mateus Leme and São Joaquim deBicas.2.2 Mineral TitlesMMX holds the mineral rights through leases and ownership. Table 2.2.1 presents the miningand exploration licenses and requests for exploration licenses controlled by MMX in the SerraAzul area. The holder of the three mining licenses is Companhía de Mineração Serra da Farofa(CEFAR) and MMX has lease agreements with CEFAR for each one. Brazilian Mining Lawallows holders of Exploration or Mining Licenses to totally or partially assign or transfer theseclaims to a third party, with DNPM’s approval. The three mining licenses cover 509.71ha, theexploration licenses cover 4,331ha and areas requested for exploration cover 6,393.38ha.Table 2.2.1: Serra Azul Land Tenure Area Validity Claim Holder Location* Mineral(s) (ha) Permit Term Cia. de Mineração Serra Igarapé, Brumadinho and São Not 801.908/68 Iron 351.64 Mining da Farofa - CEFAR Joaquim de Bicas Applicable Cia. de Mineração Serra Not 805.374/71 Brumadinho and Igarapé Iron 83.37 Mining da Farofa - CEFAR Applicable Cia. de Mineração Serra Not 5.182/58 Brumadinho Iron 74.70 Mining da Farofa - CEFAR Applicable Exploration September 833.379/2004 AVG Igarapé,Itatiaiuçu,Mateus Leme Iron 1,035.00 License 2012 Exploration 832.182/2006 AVG Itatiaiuçu,Mateus Leme Iron 1,400.00 May 2013 License Exploration 830.632/2006 AVG Brumadinho, Igarapé Iron 1,896.00 July 2013 License Exploration 830.633/2006 AVG Brumadinho, Igarapé, Itatiaiuçu Iron 1,881.25 Request Exploration 831.243/2006 AVG Mateus Leme Iron 960.00 Request Brumadinho, S. Joaquim Exploration 832.183/2006 AVG Iron 1,912.50 de Bicas Request Brumadinho, S. Joaquim Exploration 830.826/2010 AVG Iron 7.97 de Bicas Request Exploration 831.713/2010 AVG Brumadinho Iron 12.01 Request Exploration 832.607/2010 AVG Brumadinho Iron 261.47 Request Brumadinho, S. Joaquim Exploration 834.356/2020 AVG Iron 1,358.18 de Bicas Request*City or DistrictSRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  11. 11. SERRA AZUL MINE Serra Azul Mine, General Location Map of the Brazil Serra Azul Project MineSRK Job No.: 162700.10File Name: Figure 2-1.doc Source: MMX Mineração e Metálicos S.A Date: 12/20/10 Approved: LEM Figure: 2-1
  12. 12. Serra Azul Mine, Site Location Map of the Brazil Serra Azul MineSRK Job No.: 162700.10 Source: MMX Mineração e Metálicos S.A Date 12/20/10 Approved: LEM Figure: 2-2File Name: Figure 2-2.doc
  13. 13. 832182/2006 Exploration License Mining License Request for Exploration Municipal Limits Serra Azul Mine, Mineral Licenses Brazil Serra Azul MineSRK Job No.: 162700.10 Source: MMX Mineração e Metálicos S.A Date: 12/20/10 Approved: LEM Figure: 2-3File Name: Figure 2-3.doc
  14. 14. MMX Mineração e Metálicos S.A. 3-1Serra Azul Mines Resource Audit3 Geological Setting3.1 Regional GeologyThe Project area is situated in the western portion of the Iron Quadrangle near Belo Horizonte,Minas Gerais, in the Serra do Curral homocline. Mineralization is hosted by the MinasSupergroup which is dominated by supracrustal metasedimentary and metavolcanic rocks.Intrusive rocks are rarely found in the area but where present, are basic sills and dikes up to 1mwide. Regional metamorphism reached the greenschist facies during multiple episodes ofdeformation.3.1.1 Regional StructureThe Project area lies within the São Francisco Craton tectonic province of South America shownin Figure 3-1. The Project is located in the extreme west of the Serra do Curral homocline and inthe north/northwest limit of the Iron Quadrangle. This region has a complex tectonic-metamorphic history and is part of the basement of the southern portion of the São FranciscoCraton. The São Francisco Craton (Almeida et al 1981) tectonic province was not affected bythe Brazilian deformation but is bordered by Brazilian fold belts that developed duringorogenesis culminating in the formation of Gondwana approximately 650 Ma. The basement ofthe craton was subjected to the Jequié/Rio das Velhas and Transamazonic tectonic-metamorphicevents that preceded the Brazilian deformation. There are various evolutionary models proposedfor the Iron Quadrangle region, and this area is still extensively studied.Among the large-scale structures in the Iron Quadrangle are the: Serra do Curral homocline; Serra da Moeda syncline; and Dom Bosco Syncline.The Serra do Curral homocline is located in the north and has a NE-SW strike and dips SE.Serra Moeda is located in the west part of the Iron Quadrangle and is the west limb of a synclinewhich has an N-S axis and dips to the south. The Dom Bosco syncline is in the south and has anE-W axis and is connected to the Serra Moeda syncline on the west side. There is also the Falhado Engenho zone of trans-current shearing, the Mariana anticline to the southeast and the SantaRita syncline to the east. According to Dorr (1969), the Santa Rita syncline corresponds to themajor and most complex folding of the region. Finally, the Gandarela isoclinal syncline islocated to the northeast with SE dipping limbs and the Fundão-Cambotas fault system thatextends for almost the entire length of the east border. Figure 3-2 shows the homocline,synclines and anticlines in the region.Serra do Curral HomoclineThere have been five different interpretations for the formation of the Serra do Curral homoclineas listed below: The homocline is a section of the Serra dos Três Irmãos region (Eichler, 1964); The homocline is the south limb of the Piedade syncline (Dorr, 1969); Pires (1979) interpreted the homocline as related to an anticline;SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  15. 15. MMX Mineração e Metálicos S.A. 3-2Serra Azul Mines Resource Audit Alkmim and Marshak (1998) interpret the structure as the inverted flank of a regional anticline; and Oliveira et al. (2005) interpret the homocline as the overturned limb of a recumbent allochthonous megafold, referred to as the Curral Nappe.Figure 3-3 shows schematic sections showing each author’s interpretation, which are discussedin detail below.Dorr (1969). The first interpretation was proposed by Eichler (1964) and is shown in Figure 3-3schematic section (a). Eichler (1964) interprets the homocline as a section of the Serra dos TrêsIrmãos region that has been brought in through thrust faults that trend to the north.According to Simmons (1968), the Serra do Curral homocline is the south limb of the Piedadesyncline, as suggested by Dorr (1969). This is shown in schematic section (b) in Figure 3-3.This structure is well characterized at the NE limit of the Serra do Curral (Serra da Piedade),where the two limbs of the syncline are recognized, a fact that leads Simmons (1968) to believethat the homocline represents one of the limbs of this megastructure. The Serra do Curralhomocline, dipping to the SE, is characterized by secondary folding with axial planes oblique tothe direction of the mountain ridge. Also recognized were small reverse faults, direction parallelto the syncline with displacement to the SE and normal faults of high angle that cut themegastructure.Pires (1979) was the first author to propose that the regional folding is related to an anticline.Through work that was done at the junction of the Serra do Curral homocline with the Moedasyncline, Pires (1979) proposes schematic section (c) shown in Figure 3-3. In this section, Pires(1979) shows an anticline, whose inverse limb (the north limb) would represent the Serra doCurral homocline. This structure is limited at the base by the Falha Curral, a thrust fault and theschists to the north, which are part of the Rio das Velhas Supergroup.Romano (1989) determined the petrographic and textural characteristics of the metavolcanicrocks of the regions of Mateus Leme to Esmeraldas and of Pará de Minas to the Pitangui.According to the author, such rocks represent the continuity of the Rio das Velhas Supergroup inthe Occidental Serra do Curral. In this region, Romano (1989) identified thrust faults sectioningthe Rio das Velhas Supergroup, among various other deformational features. The structures areattributed to two phases of regional deformation (Dn and D1). The first deformation affectedonly the Rio das Velhas Supergroup and the second that extended to the Minas Supergroup in thewest portion of the Serra do Curral homocline. The second regional deformation was of aprogressive compressional character.In the contact between the Sabará Group and the Belo Horizonte Metamorphic Complex, in theregion of Ibirité, southwest of the city of Belo Horizonte, Marshak et al. (1992) and Jordt-Evangelista et al. (1992), identified a zone of normal shearing and characterized three zones ofcontact metamorphism. They are, from NW to SE the zones of cordierite-sillimanite, ofstaurolite-andalusite-cordierite and of biotite. This situation exemplifies the metamorphicaureoles that occur in the contact zones of the supercrustal rocks with the basement metamorphiccomplexes, in response to the formation of domes and synclines.Endo and Machado (1997) interpret the Serra do Curral homocline as part of a syncline,characterized by the absence of a northern rim, or limb, at the western limit of the structure.Endo and Machado (1997) observed that on the southern rim/limb the rocks of the MinasSRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  16. 16. MMX Mineração e Metálicos S.A. 3-3Serra Azul Mines Resource AuditSupergroup are in normal stratigraphic sequence with inclinations that vary from moderate tohigh while on the northern rim/limb the stratigraphic sequence is inverted. According to Endoand Machado (1997), the Zone of Normal Shearing (the Moeda-Bonfim zone) in contact betweenthe Bonfim Metamorphic Complex and the supracrustal rocks along the Serra da Moeda, extendsto the Serra do Curral homocline. Here, the zone of normal shearing it is identified by the SouzaNochese Zone of Shearing. Thus, the principal structural features are: Sub-orthogonal between the synforms Moeda and Curral; Breaking and absence of north rim/limb of the syncline; Normal ductile shearing between the metasediments and the Bonfim Complex; and Stratigraphic inversions in the south rim/limb of the synform.Based on these structures, Endo and Machado (1997) propose eight events of deformation for theregion: four in the Neo-Archean and four in the Proterozoic, all of co-axial character.Alkmim & Marshak (1998) observed parasitic asymmetric folding and mesoscopic faultstrending to the NW at the western limit of the Serra do Curral homocline. This observation ledto the interpretation that the Serra do Curral homocline may be the inverted flank of a regionalanticline with polarity to the NW. According to Alkmim & Marshak (1996), at the Curral-Moeda junction, the Curral anticline is refolded the Moeda syncline. The development of themega-anticline would be related to a compressive event, during the Transamazonic period andolder than the extension that resulted in doming and syncline formation. Alkmim and Marshak’s(1998) interpretation is shown in Figure 3-3 section (d).Finally, the relations proposed by Oliveira et al. (2005) for the region of Itatiaiuçu, is shown inFigure 3-3 section (e). According to the Oliveira et al. (2005), the schistocity observed in therocks of the Minas Supergroup and Rio das Velhas in the entire Serra do Curral region, is thesame that predominates in the sedimentary layering and schistocity in the mesoscopic folds withoverturned limbs. According to the authors, the Serra do Curral homocline is the overturnedlimb of a allochthonous recumbent megafold, trending to the north-northeast, and referred to byOliveira et al (2005) as the Curral Nappe.3.2 Local GeologyIn the Project area, the Serra das Farofas is composed of rocks from the Minas Supergroup thatare underlain by the Rio das Velhas Supergroup in an unconformity. The Minas Supergroup issubdivided, from youngest to oldest, into three groups: Piracicaba Group; Itabira Group; and Caraça Group.Locally, the stratigraphic sequence is inverted, with the most recent quartzitic formations of thePiracicaba Group overlain by the itabirites of the Cauê Formation, part of the Itabira Group,which, in turn, is capped by the oldest phyllites and quartzites of the Caraça Group. Thisstratigraphic inversion, as discussed in Section 5.1.1, characterizes the mountain ridge and ismost likely the rim of a recumbent fold.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  17. 17. MMX Mineração e Metálicos S.A. 3-4Serra Azul Mines Resource Audit3.2.1 Local LithologyThe Caraça Group is subdivided into the Moeda (lower) and Batatal (upper) Formations. TheMoeda Formation is composed, principally, of coarse quartzites, metaconglomerates, andphyllites. According to Renger et al. (1994), the Moeda Formation has a maximum age of2.65Ga, and was deposited in a fluvial environment. Over time, this depositional environmentevolved into a marine-platform identified as the Batatal Formation. The Batatal Formation iscomposed, predominantly, of phyllites and graphitic phyllites. Its maximum age of deposition is2.5Ga (Renger et. al. 1994) and the Batatal Formation has a gradational contact with the ItabiraGroup.The Itabira Group is essentially composed of chemical sediments, a characteristic that separatesit from the Caraça Group. It is of great economic importance, as it hosts world class deposits ofiron and manganese, associated with gold and bauxite. It is divided, from base to top, into theCauê and Gandarela Formations. The Cauê Formation is composed of itabirites, dolomiticitabirites, amphibolitic itabirites, carbonate itabirites and lenses of marl and phyllites. Due totheir resistance to weathering, the itabirites form the principal ridges of the region with extensiveescarpments, such as the Serra do Curral. The Cauê Formation represents the principal target ofresearch work. Since the Gandarela Formation does not occur in the area researched, is the CauêFormation is in direct contact with the Piracicaba Group.The Piracicaba Group is divided, from base to top, into the Cercadinho, Fecho do Funil, Taboõesand Barreiro Formations. The Cercadinho Formation is the only one of this group that isidentified in the Project area, being composed of quartzites and graphitic phyllites, of light greycoloring that occurs in the north part of the area. According to Renger et al. (1994), this grouprepresents a new period of tectonic movement in the Minas Basin, initiated around 2.4Ga.The rocks show a general E-W direction with dips varying between 45º and 50º to the south withsome local variations occasioned by secondary asymmetric folding and by transverse faulting ofthe structure.3.2.2 AlterationAlteration in the area is described as intense silicification of compact itabirite resulting fromhydrothermal activity.3.2.3 StructureThe dominant structure in the project area is an antiform overturned to the north. The upper limbhas been completely eroded, leaving only the inverted lower limb.As a result of the numerous deformational episodes, bedding is rarely observed and then only inthe quartzite and phyllite of the Cercadinho Formation. However, the principal foliation, Sn iswell developed in all of the local lithologies. The Sn foliation dips approximately 30º to 40°S inthe northern part of the project and increases to about 70°S in the southern part of the area. Thissuggests that the Project is located on the inverted limb of an isoclinal anticline with vergence tothe north. Small scale, asymmetric folds with amplitudes from centimeter to meter scale areobserved at the Project where cataclasite has also been observed. These folds are typically tightwith E-W axes. Intense folding is seen in the BIF, often obliterating the primary structures.The contacts between formations show tectonic textures and are interpreted to be thrust faults.Normal faults are also observed in the project area.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  18. 18. MMX Mineração e Metálicos S.A. 3-5Serra Azul Mines Resource Audit3.2.4 MetamorphismThe metamorphism identified in the Project area is related to continental collision during theTransamazonian Orogeny. Metamorphic grade in the Iron Quadrangle increases from west toeast as described by Dorr (1969). The rocks of the western and central portions reachedgreenschist facies whereas those in the east reached the almandine-amphibolite facies. In theSerra do Curral, metamorphism of greenschist facies predominates.Itabirite is a highly deformed rock with a composition derived by tectonic and metamorphicprocesses. Small preserved nuclei of magnetite in the interior of hematite crystals suggest thatthe greater part of these rocks were oxidized by hydrothermal solutions during the deformationalprocesses. The most common minerals in BIF, other than quartz, are siderite, ankerite, ferroandolomite, magnetite, martite and, locally, chlorite. Martite is a product of altered magnetite andankerite and is often a secondary mineral.3.3 Project GeologyWithin the pit area, the geology is dominated by four formations. From oldest to youngest, theseare the Batatal, Cauê, Gandarela and Cercadinho Formations. The pit geology is shown inFigure 3-4, and Figure 3-5 shows north-south cross-sections 573050 and 574250 through themine area. The Batatal Formation has been thrust over the younger Cauê Formation, which hasbeen thrust over the youngest Cercadinho Formation. The deposit is crosscut by a northwest-trending, high-angle brittle fault that appears to be offset by younger northeast trending faults.The dominant structural features consist of Sn foliation, fracture planes and minor fold axes.Foliation is the most conspicuous planar element within the pit and is preferentially developed inthe enriched itabirite. The Sn foliation strikes NW-SE and dips both NE and SW suggesting thepresence of a larger fold. Parasitic fold axes typically trend 150º to 200º.Well-defined fracture planes are found in both the friable itabirite and compact itabirite. It istypically more prominent in the compact itabirite. The fracture planes have two predominantorientations. One strikes NW and dips NE the other strikes NNE and dips SE. These fabricsoften host breccia zones with areas of significantly enriched iron.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  19. 19. Três Marias FormationSão Francisco SupergroupOther units of São FranciscoSupergroupEspinhaço SupergroupPiracicaba andSabará GroupsItabira GroupCaraça GroupRio das Velhas SupergroupBasementNormal FaultThrust FaultFoliationBeddingMetamorphic Aureole Serra Azul Mine Serra Azul Mine Project Location within the Brazil São Francisco Craton SRK Job No.: 162700.10 Source: Marshak & Alkmim 1989 and Alkmim & Marshak 1998 File Name: Figure 3-1 Date: 12/20/10 Approved: LEM Figure: 3-1
  20. 20. Serra Azul Mine Area Serra Azul Mine Location of Large Structures Brazil in the Serra Azul Mine AreaSRK Job No.: 162700.10 Source: Modified from Alkmim & Noce 2006 after Dorr (1969) and Romano (1989)File Name: Figure 3-2.doc Date: 12/20/10 Approved: DKB Figure: 3-2
  21. 21. Sources: a) Schematic section proposed by Eichler (1964) in the region of the Serra dos Três Irmãos; b) Section proposed by Dorr (1969), section NW-SE in the Quadrilátero Ferrífero; c) Section proposed by Pires (1979) for the region of junction of the Serra do Curral with the Moeda syncline; d) Section proposed by Alkmim & Marshak (1998) for the region west of the homocline of the Serra do Curral; e) Schematic section proposed by Endo et al (2005) for the region of Itatiaiuçu (Section Itatiaiuçu). (Fm. Formation, Gr. Group, Sgp. Supergroup, ST Topographic Surface). Serra Azul Mine Geological Sections Proposed Brazil for the Region of theSRK Job No.: 162700.10 Serra do CurralFile Name: Figure 3-3.doc Date: 12/20/10 Approved: LEM Figure: 3-3
  22. 22. COMPACT AMPHIPLITIC ITABIRITE Serra Azul Mine Geological Map of the Brazil Serra Azul Mine AreaSRK Job No.: 162700.10 Source: MMX Mineração e Metálicos S.A Date: 12/20/10 Approved: LEM Figure: 3-4File Name: Figure 3-4.doc
  23. 23. Cross-section 573050 North-South Cross-section 574250 North-South Serra Azul Mine North-south Cross-sections Brazil through the Serra Mine in theSRK Job No.: 162700.10 Minerminas Area Source: MMX Mineração e Metálicos S.A Date: 12/20/10 Approved: LEM Figure: 3-5File Name: Figure 3-5.doc
  24. 24. MMX Mineração e Metálicos S.A. 4-1Serra Azul Mines Resource Audit4 Mineralization4.1 Mineralized ZonesThe mineralization at the Project consists of metamorphosed BIF with strong evidence ofhydrothermal syngenetic formation with areas of supergene enrichment from subsequent lateriticweathering. This results in a variety of different mineralization types. There are seven distinctmineralization types at the Project: Canga; Friable siliceous itabirite; Friable rich itabirite; Compact itabirite; Friable hematite; Compact hematite; and Friable carbonate itabirite.Canga is the product of chemical weathering of all the types of friable ore. It generally has moreelevated grades of aluminum, phosphorous, and greater loss on ignition (LOI). It occurs in threestratigraphic locations: at the top of the BIF, in the base of the southern Serra das Farofas andover the schists of the Batatal Formation. In the Batatal Formation, canga is formed in the ironore colluvium. In some areas, it has elevated iron grades, due to the nature of the source rock.The presence of visible hematite clasts is common and goethite and limonite commonly occurwith secondary minerals, increasing the hardness.The friable itabirite is confined to the proximities of compact itabirite or of zones ofsilicification. The principal characteristics of this type of ore are the grades of silica that varyfrom 6% to 10% and in granulometry that is above 19mm. The bands are composed of friablehematite intercalated with bands of recrystallized quartz.Compact itabirites occurs at the base of the friable itabirites and as small elongated bodiespreferentially oriented WNW/ESE within the friable itabirite. These last are protoliths of proto-ore that remain after intense weathering and/or hydrothermal alteration along certain preferentialdirections such as the axis of folds.The friable carbonate itabirite is characterized by intercalations of clay bands alternating withbands of friable and compact hematite. The bands of clay are generally light rose colored butlocally may be white in color. Where these bands are white, kaolinite is often present. Thetexture is banded, with bands up to 40 to 50cm in width. Where kaolinite is common in the clay-rich bands, internal breccia texture are observed. The clay bands of clay also contain isolatedcrystals of euhedral quartz and specularite, both of which are coarse to very coarse in grain size.The euhedral quartz and the specularite are the product of secondary alteration, growing over theoriginal texture of these rocks. The hematite bands are fine and even occur as films intercalatedwith clay minerals. Friable hematite also occurs disseminated within the clay bands.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  25. 25. MMX Mineração e Metálicos S.A. 4-2Serra Azul Mines Resource Audit4.2 Relevant Geological ControlsThe mineralization at the Serra Azul Mine shows strong evidence for both structural andlithological controls. There is also evidence for hydrothermal origin for the iron formation, withlater supergene modification that probably caused major enrichment in addition to “softening” ofthe ore. The hypogene phase is associated with D1 folding during which, hydrothermal fluidsascended to the surface as a result of decompression. This would also permit meteoric fluids todescend along the normal faults causing mixing resulting in oxidizing conditions and theformation of magnetite and carbonates, as described by Rosière et al. (2008). In this model, Fe-rich hydrothermal dolomite could be formed during the tight folding. Later, oxidization of theFe-rich dolomite caused leaching of Mg, Ca and CO2, resulting in the formation of hematite.Subsequent weathering resulted in supergene enrichment and “softening” of the ore. These samenormal faults would be the preferred routes for the meteoric fluids to circulate to deeper parts ofthe system. At the Project, this faulting could be represented by the high-angle brittle faultsobserved in the pit.The genesis of the friable carbonate itabirite with hypogene characteristics, could be controlledby D1 folding, that channelized mineralizing hydrothermal fluids parallel to the layering orcompositional banding. Higher-grade ore is concentrated in these folded areas. In the locationswhere the fluid/rock ratio was higher, bands of compact hematite were generated, possibly byleaching or complete substitution of the pre-existent carbonates. Nearby, where the fluid/rockratio was less, the leaching/substitution of the carbonates was not complete, some carbonateremained that, subsequently leached during supergene alteration, generating the contaminatedfriable ore. This high-grade ore is generally porous and almost always contains remnants ofweathered carbonate, observed as the orange to ochre colored interstitial material.Another observation at the Serra Azul Mine, primarily at AVG, is the close relationship betweenbreccias and/or veined areas with the high-grade friable ore and the rich itabirite. It has beenobserved that in areas with the greatest amount of breccias with carbonate veins and veinlets, it islikely that friable ore or rich itabirite will be present. This is also characteristic of areas onlyaffected by carbonate veins and veinlets. The carbonate veins can be parallel as shown in Figure7-2 or may crosscut itabirite banding. Portions of compact itabirite are common in the middle offriable ore.The contacts between friable and compact ores may be sharp or transitional. Where there arecarbonate veins/veinlets there is a tendency for the intensity of friability to be greater than theareas without carbonate veining.Iron remobilization most likely occurred as an association with hydrothermal fluids, resulting inthe formation of concordant and discordant hematite veins. These veins are often breccia zonesfilled by hematite. Some of the remobilized material is composed of magnetite. The process ofquartz remobilization was very intense in some areas, resulting in breccia formation andsilicification of the itabirite. Quartz remobilization often results in high compactness to theitabirite (hard itabirite). In places, the orientation of these silicified zones appears, to becontrolled by the hinges of D1 folds, where it is parallel to the banding. However, in other areasthe pattern is rather complex.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  26. 26. MMX Mineração e Metálicos S.A. 5-1Serra Azul Mines Resource Audit5 Drilling5.1 Type and Extent of DrillingCore drilling in the Project area by MMX was performed by Vórtice Sondagens e Serviços deMineração, Ltda. (Vórtice) and Geológica e Sondagens Ltda. (Geosol), both based in BeloHorizonte. MMX also conducted reverse circulation (RC) drilling with contractor, GeosolGeosedna Perfurações and Especiais S.A. (Geosedna), also based in Belo Horizonte.A total of 18,858m have been drilled at the Project in 149 core holes and 64 RC holes. Holeswere drilled on a slightly irregular 100m x 100m grid.CoreAll core holes are HQ or HW sized core (77.8mm), and were drilled using a conventional drillrig. Sixty-one holes are vertical and the remaining holes were drilled at inclinations between -60° and -77° to the north. The hole depth varies from 11m to 268m with an average of 72m.RC DrillingThe RC holes were drilled with a hammer or tricone depending on the hardness of the rock. Thediameter of the hole drilled by hammer is 5in and the diameter of the hole drilled by tricone is4in. All holes were drilled at an inclination of 70° to the north. The average depth of the holes is125m, with a minimum of 35m and a maximum of 280m.The technique of RC drilling was new to the AVG/Minerminas project in 2009. In order toassess the results of RC drilling, two twin holes were drilled for comparison. Table 5.1.1presents the twin drillholes and the results for the matching intervals. RPSF15 and SEFDSF08are not true twins as one is vertical and the other angled at -70 to the north, however, the resultsfor the friable and compact itabirite are quite similar. The holes were collared on the finesstockpile, so the initial interval would not necessarily be expected to be similar. The twins,FSAVGB05 and RPSF16, show similar grades in the canga, but the RC hole has higher grades inthe friable itabirite.Table 5.1.1: Comparison of Twin RC and Core Drillholes Drilled Vertical Drillhole Orientation From To Interval Thickness Lith Fe SiO2 Al2O3 P Mn LOI 0.0 12.0 12.0 12.0 FS 49.10 24.95 2.43 0.072 0.01 2.42 RPSF15 Vertical 17.0 51.0 34.0 34.0 IF,IC 50.87 26.11 0.47 0.014 0.01 0.27 0.0 11.3 11.3 10.6 FS 44.40 31.70 1.60 0.052 0.01 1.38 SEFDSF08 North,-70 16.9 52.6 35.7 33.5 IF,IC 52.02 24.20 0.52 0.011 0.02 0.17 0.0 8.2 8.2 8.2 CG 63.79 2.42 2.57 0.057 0.03 3.51 FSAVGSB05 Vertical 12.7 39.9 27.2 27.1 IF,IC 47.91 29.67 0.56 0.014 0.02 1.06 0.0 5.0 5.0 5.0 CG 60.20 12.00 1.47 0.020 0.01 0.86 RPSF16 Vertical 12.0 37.0 25.0 25.0 IF 56.84 16.72 1.02 0.012 0.01 0.71SRK also reviewed the drillholes in cross-section and did not detect a noticeable difference ingrades between the RC and core holes.Table 5.1.2 lists the number of drillholes by program and company.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  27. 27. MMX Mineração e Metálicos S.A. 5-2Serra Azul Mines Resource AuditTable 5.1.2: Drilling at Serra Azul Number of Length Number of Campaign Period Laboratory Drillholes Type (m) Samples FSAVG, FSAVGSB 11 HW Core 2005 440 50 AVG Total AVG 11 2005 440 50 AVGMMX 9 HWL Core 2007 694 88 SGS SEFDSF 26 HQ, HWL 2007-2008 1,459 273 SGS,MMX FSMNM 3 HWL Core 2007-2008 191 34 MMX FDSB, SEFDSB 50 HWL Core 2008 3,190 628 MMX FDSF 6 HWL Core 2008 203 49 MMX RPSF (RC) 19 4 or 5" 2009 2,836 522 SGS FDSA 32 HQ, HN 2010 3,872 448 SGS, Bureau Veritas FDSC 11 HQ 2010 590 * Bureau Veritas RPSA (RC) 46 4.75 or 5" 2010 5,382 551 Bureau Veritas Total MMX 202 2007-2010 18,417 2593 Total 213 2005-2010 18,857 2643*Assays not received at time of estimation5.2 ProceduresThe drillhole locations are first determined by the supervising geologist. Drill access is providedby clearing trails and drill pads with the use of a dozer. For inclined holes, a line is drawnbetween two stakes in the azimuth direction and the drill rig is aligned with it. The inclination ofthe drill rig is set by a MMX technician using the inclinometer of a Brunton compass. Uponcompletion of the drillhole, the final collar location is then surveyed by Prisma Produtos eServiços Ltda. ME (Prisma) using a Topcon Total Station, 239W, 3003W or 3005W. Prismathen generates a Microsoft Excel spreadsheet and/or a certified report in PDF format.The drilling at the Project has focused on the pit area. In general, the drillholes are on north-south section lines spaced at 100m. The drillholes on section line are about 100m apart. Drillingis limited by pit walls and areas of active mining, so the 100m by 100m is not completely filled.The drillholes were not drilled to a uniform elevation, consequently, the drillhole spacing iswider with depth below the surface. Core recovery is typically in excess of 90%. Figure 5-1 isa plan map showing the location of drillholes.5.3 ResultsThe compact and friable itabirites have varying hardness, which may result in different drillrecoveries and possible loss of material in friable zones. Core recovery averages more than 90%for all zones and RC recovery was generally greater than 70%. SRK did not observe problemswith loss of material in friable intervals. A comparison of twin RC and core holes and visualexamination of RC holes by cross-section did not detect a bias between the two drilling methods.MMX is using industry best practices for exploration drilling programs at the Project.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  28. 28. Serra Azul Mine Drill Collar Location Map BrazilSRK Job No.: 162700.10File Name: Figure 5-1.doc Date: 12/20/10 Approved: DKB Figure: 5-1
  29. 29. MMX Mineração e Metálicos S.A. 6-1Serra Azul Mines Resource Audit6 Sampling Method and Analysis6.1 Core DrillingAt the drill rig, the drill core is placed in wooden boxes, and washed of all foreign material. Atechnician delivers the boxes to the logging area where they are placed either in the sun or undera roof until they are completely air-dried. The drill core is photographed before and aftersampling to record geological descriptions and sampling intervals. Geologic logging andidentification of sample intervals are carried out by the project geologist. This process identifiesthe different litho types, geological contacts, zones of fault or fracture, ferruginous zones andinternal waste.MMX personnel supervise all sample security. The drill core is collected from drill sites, loggedand sampled under the direction and control of MMX. SRK is of the opinion that there has beenno tampering with the samples.6.1.1 Logging and SamplingThe HW-sized drill core is first photographed, and then logged by a geologist onto astandardized paper form. Data from the geological log is entered into an acQuire database, thegeological database management system developed by acQuire Technology Solutions Pty Ltd.During core logging, the geologist marks the beginning and end of each sample interval on thebox. Sample breaks are at changes in lithology and friability with some consideration placed onvisual estimations of Fe percentage. Sampling is conducted only within the ferruginous zones.Sample intervals have a minimum length of 1m and a maximum length of 5m. The preferredsample interval ranges between 3m and 5m (80% of samples). Zones of internal waste withinmineralized intervals are sampled and material outside the ferruginous zone is not sampled.Samples are collected by a trained sampler under the supervision of a technician or a geologistfollowing a sampling plan produced by acQuire. The sampling plan contains the identificationof primary and check samples according to MMXs QA/QC policy (see Section 11.4). The coreis split lengthwise using a diamond core saw in the competent zones and a specially designedscoop in the highly weathered zones. The sample is placed in a plastic bag with a sample tag.The plastic sample bag is further marked in two places on the outside with the sampleidentification. The sample bags are then sealed and sent to the laboratory for physical andchemical analysis. The remaining core is archived for future reference.6.2 RC DrillingThe RC drilling is conducted dry, without injecting water. The sample was discharged from thecenter tube return through a hose to a cyclone. The entire sample was collected over 1mintervals in plastic bags. The bags were marked with the drillhole number and from and tometerage. The bags were weighed by Geosedna personnel and the weights recorded on a formfor MMX. A small sample was collected for logging and stored in wooden boxes with 30compartments and a hinged cover.MMX personnel supervise all sample security. The samples were collected from drill sites,logged and sampled under the direction and control of MMX. SRK is of the opinion that therehas been no tampering with the samples.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  30. 30. MMX Mineração e Metálicos S.A. 6-2Serra Azul Mines Resource Audit6.2.1 Logging and SamplingThe RC chips are logged by the geologist at the core facility and data from the geological log isentered into an acQuire database. The 1m samples are grouped into 5m intervals with breaks atlithological changes and the sample intervals are entered on a sampling form.Samples are sent to a commercial laboratory in Belo Horizonte where they are composited intothe sample intervals indicated by the geologist. The compositing procedure is described inSection 11.6.3 Factors Impacting Accuracy of ResultsThe compact and friable itabirites have varying hardness and will have varying drill recoveries.The varying hardness of the mineralized material forces the sampler to use two techniques forcore sample collection, which can make it difficult to collect a representative sample. MMXuses a saw for compact material and a trowel for friable material, which is industry standard.Because MMX uses lithological controls for sample intervals that are based on friability versuscompactness, the different material hardness does not present a problem. In addition, the corerecovery is good to excellent, averaging over 90%. RC drilling may also encounter problems atchanges in rock hardness or void spaces. SRK saw no evidence that there is a sampling problemor sample bias introduced at the Project due to varying hardness.MMX is conducting the sampling according to industry best practices for iron deposits.6.4 Sample Preparation and AnalysisBefore MMX acquired the property, sample preparation and analysis were performed at theAVG laboratory on the AVG property. During the initial exploration phase and in 2009, MMXused SGS Geosol Laboratórios, Ltda. (SGS) located in Belo Horizonte. For part of 2008, MMXused the laboratory at Mine 63 operated by its subsidiary, MMX-Corumbá Mineração Ltda.(MMX-Corumbá). In 2010, MMX used SGS and the Bureau Veritas laboratory in BeloHorizonte. The following sections describe the sample preparation, analysis and LaboratoryQA/QC for the samples sent to the Bureau Veritas laboratory. Previous reports by SRK havedocumented the same information for previous drill campaigns. Table 6.4.1 presents the numberof samples sent to each laboratory for the various drill campaigns.Table 6.4.1: Laboratories used for Sample Preparation and Analysis Company Year Laboratory Number Samples AVG 2005 AVG 50 2007 SGS 88 2007-2008 SGS,MMX 307 2008 MMX 677 MMX 2009 SGS 522 2010 SGS 181 2010 BV 850 Total 1825SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  31. 31. MMX Mineração e Metálicos S.A. 6-3Serra Azul Mines Resource Audit6.4.1 Sample PreparationSamples arriving at Bureau Veritas from MMX vary in size and material. The sample is initiallychecked for sample identification and preservation conditions upon receipt. The core samplepreparation process consists of: Drying in a kiln at 105ºC until the sample is completely dry; Crushing the whole sample until 95% of the sample passes through a 2mm sieve; Reducing the volume by homogenization and quartering in a rotary splitter to reduce sample to 300 to 600 g. Pulverizing the split until 95% passes a 150 mesh sieve; Quartering in a rotary splitter to a sampling weighing between 25 and 50g for analysis; Archiving the remaining coarse reject and pulp; and Record screening tests performed during sample crushing and grinding.The RC samples are received at the laboratory as the 1m samples originally collected at the drill.The sampling intervals, as noted by the geologist, are sent to the lab with the sample batch. Thesample preparation consists of the following steps: Drying in a kiln at 105ºC until the sample is completely dry; Jaw crushing until 100% of the sample passes through a 6.3mm sieve; Compositing samples according to the sample interval plan; and Splitting in a riffle splitter and dividing the sample into two halves, one for analysis and one retained for additional metallurgical or other testwork.6.4.2 Sample AnalysisAt the Bureau Veritas laboratory, all samples are analyzed using the XRF technique. The typicalsample size is 2g and is analyzed for percentage of Fe, Al2O3, SiO2, P, Mn, TiO2, CaO, MgO,K2O, Na2O and LOI.The steps in the analytic procedure for LOI consist of: Drying the sample in an oven at around 110ºC for at least one hour; Weighing the empty container (CV); Placing 1.5 to 2g of the dried sample in the container and weighing again (C+A); Placing the container with the sample in a previously heated oven and waiting until the temperature reaches 1000±50ºC and letting it calcine for more than 1 hour; and Removing the container from the oven, resting it on the refractory plate until it loses incandescence, and then put it in a closed dryer until the container and sample cool.Weighing and record the final weight. LOI is calculated using the following formula: (C A) (Final Weight) %FW x100 (C A) (CV)SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  32. 32. MMX Mineração e Metálicos S.A. 6-4Serra Azul Mines Resource AuditThe detection limits are shown in Table 6.4.1.Table 6.4.1: Bureau Veritas Detection Limits Analysis Lower Detection Limit Fe2O3 0.01% SiO2 0.10% Al2O3 0.10% P2O5 0.01% MnO 0.01% TiO2 0.01% CaO 0.01% MgO 0.10% Na2O 0.10% K2O 0.01%6.5 MMX Quality Controls and Quality AssuranceMMX has the following QA/QC program in place for its drilling programs: The insertion of Certified Reference material samples (CRM’s); Blind duplicates; Assayed versus calculated global grade comparisons; and Stoichiometric (chemical) closure calculations.MMX has used acQuire at its properties as a database management tool since December 2007.AcQuire includes QA/QC protocols within the sample numbering procedure. In the samplingplan, the system inserts two different standards and one pulp duplicate for each 20 samples atrandom positions. The standard batch size is 40 samples, with 34 primary samples, 2 pulpduplicates and 4 company standards. For each 50 samples, one coarse duplicate is also insertedinto the batch at a random position, reducing the primary samples to 33. If the batch is less than20, the system assures that at least two different standards and one pulp duplicate sample will beinserted in each batch.6.5.1 Comparison of Assayed and Calculated Global GradesMMX calculates a global grade of iron and other elements by determining a weighted averagebased on analysis of different sample of different grain size.6.5.2 Stoichiometric ClosureMMX calculates stoichiometric closure for analysis at Bureau Veritas from Fe2O3, SiO2, Al2O3,P2O5, MnO, TiO2, CaO, MgO, K2O, Na2O and LOI. This is basically a mass balancecalculations and stoichiometric closure is calculated by MMX using the following equation:S.C.=1.4298*(Fe-0.7773*FeO)+SiO2+Al2O3+2.2915*P+1.2912*Mn+TiO2+CaO+MgO+Na2O+K2O+(LOI+0.1114*FeO)+FeOStoichiometric closure is considered acceptable if it falls between 98% and 102%.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  33. 33. MMX Mineração e Metálicos S.A. 6-5Serra Azul Mines Resource Audit6.5.3 Certified Reference MaterialMMX has developed its own CRM’s from material at the Serra Azul Mine with the assistance ofAgoratek International and SGS. The three CRM’s are: SAH – Serra Azul Hematite; SACL – Serra Azul Canga Laterite; and SAIC – Serra Azul Compact Itabirite (still in preparation).MMX sent 20 of each samples to SGS in Belo Horizonte, Perth and Ontario, ALS Chemex inLima and Perth, Intertek, Genalysis, Bureau Veritas, Ultratrace, Amdel and ACTLabs foranalysis of Fe, P, SiO2, Al2O3, CaO, TiO2, MgO, K2O, Na2O, FeO and Mn. MMX thenperformed various statistical tests on the results to arrive at the accepted mean and standarddeciation for each element or oxide.6.6 InterpretationThe samples from Serra Azul are submitted with QA/QC samples, including standards andduplicate samples with standard samples appropriate to the Project. MMX has developed newstandards from Serra Azul material. These samples have been sent to several laboratories in around robin to produce analyses used to calculate an expected mean and standard deviation.QA/QC sample failures are handled appropriately and are reviewed and investigated todetermine the reason for the error. The sampling preparation and analyses follow industryguidelines and the results from the QA/QC samples indicate that the analyses are suitable for aresource database.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  34. 34. MMX Mineração e Metálicos S.A. 7-1Serra Azul Mines Resource Audit7 Data Verification7.1 Quality Control Measures and ProceduresMMX directly imports data received from the laboratories into its database. SRK has comparedassay certificates of 20% of the database and found no errors. The laboratory QA/QC measuresare described in the proceeding section.MMX is monitoring core recovery and is eliminating intervals with low recovery from theresource estimation database.MMX personnel check topographic updates to be sure that data is correct and check drillholecollars against topography.7.2 LimitationsThe limitations to the QA/QC program are described in the preceding section.SRK considers the data to be suitably verified and fit for resource estimation.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  35. 35. MMX Mineração e Metálicos S.A. 8-1Serra Azul Mines Resource Audit8 Mineral Resources EstimateThis section provides details in terms of key assumptions, parameters and methods used toestimate the mineral resources together with SRK’s opinion as to their merits and possiblelimitations. The resource estimation for the Serra Azul Mine was prepared by Mr. Elvis Vargasunder the direction of Ms Lilian Grabellos, Manager of Resources and Reserves. MMX usesMintec’s MineSight software for resource estimation and mine planning. Leah Mach, PrincipalResource Consultant with SRK, audited the resource.8.1 Drillhole DatabaseThe drillhole sample database was compiled by MMX and verified by SRK and is determined tobe of high quality and suitable for resource estimation. The database consists of assays for 214holes drilled by AVG, Minerminas, and MMX. The average depth is 88m and the total meterageis 18,858m. About a third of the holes are vertical and the remainder were drilled atapproximately -70° to the north.SRK received the drillhole database as five comma separated variable (csv) files consisting of: Collar: Drillhole ID, easting, northing, elevation, and total depth; Survey: Depth, azimuth, inclination; Recovery: Advance from, to, length, recovered length, recovery percentage; Geology: From, to, lithology and code from drill log, modeled lithology and code from cross-sections; and Assay: From, to, Fe, SiO2, Al2O3, P, Mn, LOI, TiO2, CaO, MgO, and FeO.Table 8.1.2 contains basic statistics for the assay interval and metal variables of all analyzedsamples.Table 8.1.2: Basic Statistics for Assays Coefficient 1st 3rd Standard of Variable Number Minimum Maximum Average Quartile Median Quartile Deviation Variation Interval 2669 0.85 16.20 4.40 3.55 4.80 5.00 1.65 0.31 Fe 2669 2.86 68.20 40.55 32.67 38.70 49.85 12.80 .032 SiO2 2669 0.70 94.78 38.00 24.04 42.05 50.79 18.59 0.49 Al2O3 2669 0.02 29.32 1.92 0.31 0.94 2.52 2.76 1.44 P 2669 0.003 1.420 0.050 0.016 0.032 0.063 0.065 1.296 Mn 2650 0.002 21.53 0.16 0.001 0.01 0.03 0.86 5.41 LOI 2448 -1.95 13.95 1.34 0.10 0.57 1.86 1.91 1.43SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  36. 36. MMX Mineração e Metálicos S.A. 8-2Serra Azul Mines Resource Audit8.2 GeologySixty-seven geologic cross-sections were constructed at intervals of 100 or 50m depending onthe drill spacing. Figure 8-1 is a drillhole location map with mining concessions and topographyas of September 2010. The following lithotypes were modeled in the cross-sections: Stock pile; Canga; Friable Itabirite; Friable Hematite; Friable Carbonate Itabirite; Compact Itabirite; Compact Hematite; Intrusive; Quartzite; Phyllite; Breccia; and Quartz Vein.Figure 8-2 shows typical cross-sections through AVG and Minerminas.The cross-sections were used to prepare horizontal sections at 10m spacing from elevation 955 to1,365. The geology was coded into the block model based on the horizontal sections.Grades were estimated for lithotypes Canga (CG), Friable Itabirite (IF), Friable CarbonateItabirite (IFCA), and Compact Itabirite (IC). Table 8.2.1 presents basic statistics for theselithotypes.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  37. 37. MMX Mineração e Metálicos S.A. 8-3Serra Azul Mines Resource AuditTable 8.2.1: Basic Statistics of Metal Variables by Lithotypes used in Grade Estimation Lithotype Statistic Fe SiO2 Al2O3 P Mn LOI Average 55.90 8.48 5.40 0.154 0.02 5.59 Minimum 26.32 0.70 0.64 0.020 0.00 0.18 Maximum 66.40 59.97 22.81 0.760 0.19 13.08 CG Median 59.54 5.20 3.36 0.124 0.02 4.60 St. Dev 9.92 10.40 5032 0.123 0.03 3.17 Count 119 119 119 119 117 115 Average 49.35 25.76 1.84 0.058 0.04 1.46 Minimum 13.85 0.70 0.04 0.005 0.00 0.00 Maximum 68.25 74.86 14.98 1.420 2.29 12.81 IF Median 49.50 26.23 1.34 0.040 0.01 0.97 St. Dev 10.32 15.59 1.83 0.085 0.12 1.68 Count 1513 1513 1513 1513 1497 1345 Average 34.96 48.02 0.89 0.034 0.05 0.66 Minimum 2.86 3.18 0.02 0.002 0.00 0.00 Maximum 66.00 94.78 21.33 0.318 7.10 12.66 IC Median 35.12 48.11 0.41 0.024 0.01 0.30 St. Dev 7.85 11.08 1.42 0.030 0.26 1.05 Count 2651 2651 2651 2651 2649 1755 Average 31.42 47.16 3.41 0.087 0.80 2.61 Minimum 6.53 4.40 0.07 0.005 0.00 0.04 Maximum 58.68 89.41 15.57 0.324 21.53 9.95 IFCA Median 30.13 48.03 2.87 0.075 0.24 2.20 St. Dev 10.07 14.48 2.24 0.053 1.94 1.75 Count 560 560 560 560 560 556 Average 39.56 40 1.59 0.051 0.13 138 Minimum 2.86 0.70 0.02 0.002 0.00 0.00 Maximum 68.25 94.78 22.81 1.420 21.53 13.08 All Median 37.75 43.45 0.81 0.035 0.01 0.69 St. Dev 11.70 17.29 2.11 0.063 0.73 1.82 Count 4843 4822 4822 4822 4802 37388.3 CompositingThe average length of the samples used in grade estimation is 2.23m with a range from 0.02 to15m. MMX composited the samples on 5m intervals starting at the top of the drillhole withbreaks at the lithotype solid boundaries. The variables that were composited include Fe, SiO2,Al2O3, P and Mn. Resulting composites with lengths less than 2.5m at the base of a lithotypechange were added to the previous composite, and samples greater than or equal to 2.5 weremaintained as such. Table 8.3.1 presents basic statistics of the composites used in gradeestimation.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx
  38. 38. MMX Mineração e Metálicos S.A. 8-4Serra Azul Mines Resource AuditTable 8.3.1: Composite Statistics Lithotype Statistic Fe SiO2 Al2O3 P Mn LOI Average 57.47 7.05 4.79 1.167 0.02 5.23 Minimum 26.32 0.74 0.91 0.020 0.00 0.18 Maximum 66.40 59.97 18.77 0.460 0.19 12.66 CG Median 59.20 3.58 3.50 0.125 1.02 4.88 St. Dev 7.37 9.52 3.48 0.131 0.03 2.52 Count 84 84 84 84 82 82 Average 50.87 23.60 1.85 1.052 0.04 1.32 Minimum 13.85 0.74 0.05 0.005 0.00 0.00 Maximum 68.20 74.86 14.80 1.223 1.37 12.81 IF Median 51.49 22.40 1.30 0.034 0.01 0.98 St. Dev 10.23 15.12 1.79 0.079 0.11 1.37 Count 811 811 811 811 800 749 Average 35.31 47.91 0.74 0.028 0.04 0.51 Minimum 4.34 3.18 0.02 0.002 0.00 0.00 Maximum 63.36 91.13 14.58 0.318 5.16 12.66 IC Median 35.41 48.14 0.34 0.020 0.01 0.20 St. Dev .20 10.20 1.13 0.027 0.24 0.89 Count 1068 1068 1068 1068 1066 763 Average 33.20 44.19 3.59 0.086 0.78 2.66 Minimum 8.26 7.88 0.13 0.005 0.00 0.04 Maximum 57.10 85.16 13.80 0.270 15.50 9.36 IFCA Median 33.18 45.12 2.98 0.075 0.17 2.30 St. Dev 9.25 13.71 2.45 0.051 1.83 1.87 Count 286 286 286 286 286 283 Average 41.46 37.19 1.65 1.049 0.14 1.36 Minimum 4.34 0.74 0.02 0.002 0.00 0.00 Maximum 68.20 91.13 18.77 1.223 15.50 12.81 All Median 38.83 41.96 0.84 0.030 0.01 0.69 St. Dev 11.97 17.87 2.05 0.066 0.72 1.75 Count 2249 2249 2249 2249 2234 18778.4 DensityPrior to 2010, MMX conducted three programs of density measurements at the project. Thework was performed by Prominas under contract to MMX. The first program was done atAVG, the second at Minerminas and third was done at both AVG and Minerminas. During the2010 drill campaign, MMX has taken additional density measurements on the core samples. Thesand flask method was used for the friable lithotypes and the water displacement method for thecompetent lithotypes. Average values were calculated with and without outlier values bylithotype. The average values without outliers were used in the resource estimation. Table 8.4.1presents the densities by lithotype.SRK Consulting (U.S.), Inc. January 5, 2011SerraAzulResource Audit_LMB_003.docx

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