Development of guidelines for conversion from Russian to CRIRSCO mineral resource/reserve classification

2. Reporting Russian Reserves and Resources for International Markets Stephen Henley (Resources Computing International) June 2010

3. The Russian System Reporting of mineral reserves estimates is closely integrated with Russian Federation licensing and exploration/mining permit laws Standard exploration procedures and methods are assumed, though no longer mandatory Differences in reserve/resource estimate categories and competent person signoff requirements make it difficult to report on international stock exchanges

4. Russian resource/reserves categories “Prognostic resources” P3: no explicit supporting evidence P2: evidence from geophysics/geochemistry/mapping P1: limited drill hole, trench sampling, and outcrop data “Reserves” C2: systematic sampling, ancillary studies C1: closer-spaced sampling, more detailed ancillary studies B: close-spaced exploration or partly blocked-out in mine * A: generally blocked-out ore in a producing mine * (* A and B usually only for detailed areas within a C1 reserve)

5. CRIRSCO standards JORC, SAMREC, CIM, PERC, SME, Chilean code…

6. CRIRSCO-GKZ mapping exercise Working Group convened by PERC on behalf of CRIRSCO, started in 2006 2008: Agreement in principle: Protocol of Intentions signed Conversion Guidelines: draft completed end-2009 Consultation process to mid-2010 Publication: imminent Ultimate intention: a Russian code which is CRIRSCO-aligned, to operate alongside the existing system for governmental reporting requirements

7. Conversion guidelines Purpose: to allow mapping without the need for a parallel deposit modelling exercise Starting point: detailed comparison of Russian and CRIRSCOdefinitions, not subjective views from particular cases Differences between the systems mainly in levels of prescription or discretion - BUT Competent Person definitions very similar Classification categories mappable

8. Conversion guidelines Guidelines document is about HOW to translate. It does NOT address legal questions. Conversion requires understanding, not mechanical Russian rules are codified, CRIRSCO codes are principle-based, but underlying similarities In all cases, Competent Person signoff required

11. The State Balance The Russian system includes an economic / uneconomic classification Material which can be mined profitably is added to the State Balance and known as “Balance”Reserves. If all modifying factors allow, then dilution and loss estimates may be applied, and can map to CRIRSCO reserves categories Material which at present cannot be mined profitably for any reason is known as “Off-Balance”. It may be low-grade, or outside designed pit limits, or inaccessible for technical or administrative reasons. If reasonable prospects for eventual economic extraction then can map to CRIRSCO resources categories

12. Geological Complexity Classes The Russian system classifies mineral deposits into 4 geological complexity classes (from simplest=1 to most complex=4) to help define the required exploration grid densities The allocated complexity class also determines the levels of resource and reserve category which are allowed to be reported

13. Russian Mineral Resources Based on level of geological knowledge. Includes Russian “off-balance” material provided there are reasonable prospects for eventual economic extraction

14. Russian Mineral Resources Based on level of geological knowledge. Includes Russian “off-balance” material provided there are reasonable prospects for eventual economic extraction

15. Russian “Exploitation Reserves” Russian “Balance Reserves”, with consideration of all MODIFYING FACTORS

16. Russian “Exploitation Reserves” Russian “Balance Reserves”, with consideration of all MODIFYING FACTORS, and after any adjustments for MINING LOSSES and DILUTION

17. Mutual agreement Accepted that many will disagree – a wide range from “strict” to “lenient” (or “pessimistic” to “optimistic”) conversions have been published Therefore the mapping presented in the conversion handbook is based only upon the publisheddefinitions in the Russian system and the CRIRSCO Template, and NOT on any previously published conversion mapping.

18. The Competent Person decides Every deposit is different. As always, the conversion in any particular case must be decided by the Competent Person - supported by objective assessment and professional judgement The Competent Person is defined by the CRIRSCO standard used. GKZ “Competent Experts” are allowed provided they meet relevant CRIRSCO CP requirements

19. Publication Consultation draft published early 2010. Consultation process almost completed Publication of final version imminent

20. BENEFITS Short-circuit the full CPR by taking advantage of detailed Russian work already completed Assurance of quality by insistence on Competent Person signoff. All relevant factors must be checked. Simplifies the process of bringing Russian mineral projects to market

21. Next steps Intended development of a new Russian reporting standard aligned with the CRIRSCO Template Russian direct membership of CRIRSCO (currently represented through PERC) When ready, this new standard can be used on Russian stock exchanges and internationally for company reporting - in parallel with the existing Russian system for governmental purposes (exploration / exploitation licensing etc.)