This presentation given at a Baker & McKenzie Seminar in Toronto highlights the variable, multiple issues and risks impacting the global exploration and mining business today

1. Prospectors and Developers Association
of Canada PDAC Convention 2014
Geotechnical and Business Issues When Evaluating
Resources in the Current Market Environment
at
Baker & McKenzie LLP’s Seminar
How to Reduce Risk in International Resource Projects
Tim Alch
V.P & Senior Minerals Business Analyst
Behre Dolbear & Co.
+1.845.480.1434

2. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear
• Our expertise, integrity, and adherence to highest ethical and professional
standards has earned the respect of the industries we have served since
1911 creating value for clients with independent advice
• Our reputation stems from our global approach, best-in-field consultants’
experience, expertise and matchless integrity supporting reliable and truly
independent recommendations
• We have 12 offices in 8 countries and completed 210+ projects in 55+
countries in each of the last 5 years using our global network of 125+
professionals that includes work experience throughout the Americas
• Our group of experts provides a reservoir of proven expertise and
experience in all disciplines related to the mining and minerals processing
of base, precious and ferrous metals, coal, uranium, fertilizer and industrial
minerals, gemstones, cement, dimension stone, sand, and gravel
2

3. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear
• Our clients include mining, banking, investment, legal, accounting firms, and
state-owned mineral producers, government agencies, non-traditional
providers of mining finance, multi-lateral-export credit agencies, sovereign
wealth funds, private capital pools, family offices, trading companies, and
strategic mineral consumers that sponsor mineral development
 Our capabilities span managerial, technical and financial issues
 We conduct technical and financial due diligence around the world
 Behre Dolbear was engaged by the Board of Governors of the Hong
Kong Stock Exchange to review Listing Rules for Mining Companies
 We regularly write and review Independent Technical Expert reports
• Additional information about Behre Dolbear is shown at the end herein and
at our website www.dolbear.com and is available upon request.
3

4. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Success Is Driven Not Only By Geology
Study these and many project issues with discerning, trained eye:
• Property Information and Stable Regulatory Environment
• Geology and Resources
• Mining
• Mineral Processing and Metallurgy
• Infrastructure
• Products, Markets, and Sales
• Environmental and Permitting
• Financial Issues
• Development Costs and Schedule
• Political and Social Considerations
• Market
• Project Economics – Opex and Capex
4

5. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Finding and Evaluating A Resource Is
Costly and Risky, with No Guarantees
5

6. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Exploration is Very Risky and Expensive,
From Discovery to Start Up Can Be ~17 Years
6Source: Stephen Enders from Eurasian Minerals at SME
Current Trends in Mining Finance Conference April 2013

7. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Areas of Investigation for Mining Projects
Potential Areas of Investigation
for Proposed Mining Projects
PROPERTY INFORMATION
Location, topography and climate
Land ownership and royalties
Property history
Current status
GEOLOGY AND RESOURCES
Geological description
Mineralogy
Drilling, sampling and assaying
Evaluation techniques
Mineral resource estimate
MINING
Ore reserve estimate
Mining method and plans
Mining equipment
Material handing
Material handling equipment
Historical and forecast production
Consumables
Mining capital estimates
Mining operating cost estimates
PROCESSING
Ore sampling and testwork
Processing method
Other required processes
Process equipment
Historical and forecast production
Consumables
Processing capital estimates
Processing operating cost estimates
INFRASTRUCTURE
Industrial infrastructure facilities
Social infrastructure facilities
Utilities, power, water
Infrastructure capital estimates
Infrastructure operating cost estimates
MANAGEMENT AND LABOR
Management organization requirements
Labor requirements
PRODUCTS, MARKETS AND SALES
Products
Markets
Prices
Sales
ENVIRONMENTAL AND PERMITTING
Permit list
Environmental impact
Compliance costs
Compliance cost timing
Reclamation expenses
FINANCIAL ISSUES
Taxes
Royalties
Fees
Licenses
DEVELOPMENT COSTS AND SCHEDULE
Development cost estimate
Development schedule
Development methodology
POLITICAL & SOCIAL CONSIDERATIONS
Economic benefits and costs
Government considerations
Other issues

PROJECT ECONOMICS
Economic parameters
Discount rate determination
Cash flows
Investor returns
Debt analysis
Sensitivities
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8. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Our Role as Independent Experts
Whether we are advising mining companies, investors, lenders, or
government stakeholders, all benefit from qualified expertise to:
• Evaluate the inherent risks
• Act as resident skeptic
• Hear our view about project risk(s):
 High Risk: A factor poses an immediate danger of a failure, if
uncorrected, may have a material effect (>15%) on the project
cash flow and performance and could lead to project failure
 Moderate Risk: A factor, if uncorrected, could have a significant
effect (10%) on the project cash flow and performance unless
mitigated by some corrective action
 Low Risk: A factor, if uncorrected, may have little or no effect
on project cash flow and performance
8

9. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
When To Call An Expert
• There is a reason Wall Street terms Mining a
‘deep cyclical’ – As valuations in 2013 made clear
• If mining were that simple, there would be more
successful and profit making firms, operations
• Typically experts are called on to the scene when:
A property, project, transaction is off course
Lenders and investors are out of patience
Company and owners are out of money
Despair has set in
9

10. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Three Levels of Engineering Studies
Seeing Into the Future is Hard
• Not exhaustive, rather indicative checklists
• Each require trained, qualified experts’ review:
 Conceptual/Scoping Study
 Pre-feasibility Study
 Feasibility Study
• Feasibility or Definitive Study – in very broad terms
 Is the document upon which a mine is approved by the Board of
a mining company developing the mine
 If financing is required, this is the document evaluated by
financial institutions in their decision-making process
 Is document to which a completed and commissioned mine plan
is compared to determine its commercial status
• Caveat Emptor – If it sounds too good to be true – Get a 2nd opinion
10

11. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies (1)
CATEGORY – Illustrative not exhaustive
CONCEPTUAL
STUDY/SCOPING STUDY
PRE-FEASIBILITY STUDY FEASIBILITY STUDY
INTRODUCTION
Location, Topography, and Climate
Site location map
Ownership and Royalties
Claims list
Claims map
Current Status and History
Historical chronology
Information on past production, if any
•Yes
•No
No
No
No
•Yes
•No
Yes
No
No
•Yes
•Yes
Yes
Yes
Yes
GEOLOGY AND RESOURCES
Geological Description
Geological map
Geological cross-sections
Drilling, Sampling, and Assaying
Parameters
Drill hole location map
Sampling/assaying flow diagram and assessment
Assay check assessment and graph
Mineral Resource Estimate
Resource methodology determination and approach
Geologic model limits
Lithology/tonnage factors/code
Cumulative frequency of samples verses grade
Variograms
Resource Estimate
Yes
No
Yes
Yes
No
No
Yes
Yes
No
No
No
Industry Standards (NI 43-
101, JORC, etc.)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Industry Standards (NI 43-
101, JORC, etc.)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Industry Standards (NI 43-
101, JORC, etc.)
11

12. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies (2)
CATEGORY – Illustrative not exhaustive
CONCEPTUAL
STUDY/SCOPING STUDY
PRE-FEASIBILITY
STUDY
FEASIBILITY STUDY
MINING
Ore Reserve Estimate
Reserve and resource calculation parameters
Cutoff grade equations
Reserve and resource estimate
Mining Method and Plans
Mining parameters
Hydrology/geotechnical parameters
Mining equipment list
Consumables list
Material handling systems
Material handling equipment
Personnel list
Surface mining
Final pit and dump outlines
Incremental pit and dump outlines
Underground mining
General mine development
Mining approach (stoping, cut and fill, etc.)
Production Schedule
Historical production, if any
Annual ore and waste tonnage and grade
Mining Capital and Operating Cost Estimates
Mining operating cost estimates
Mining capital cost estimates
Assumed Values
No
Industry Standards
Yes, minimal engineering basis
No
No
No
No
No
No
No
Yes, simple outline
No
Yes, general outline
Yes, general approach
Yes
Yes, division of total
Yes, factored ±45%
Yes, factored ±45%
Test-Based Values
Yes
Industry Standards
Yes, some geotechnical data
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes, ±30%
Yes, from engineering
manuals ±30%
Test-Based Values
Yes
Industry Standards
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes, ±15%
Yes, from vendor quotes and
take-offs ±15%
12

13. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies (3)
CATEGORY – Illustrative not exhaustive
CONCEPTUAL
STUDY/SCOPING STUDY
PRE-FEASIBILITY STUDY FEASIBILITY STUDY
PROCESSING
Ore Sampling and Test Work
Test work data
Processing Methods and Plans
Processing methods
Processing parameters
Equipment list
Consumables list
Personnel list
Material balance
Flow diagram
Site plan
General arrangement drawings
Production Schedule
Historical production, if any
Annual production tonnage and grade
Off-site Processing Cost Estimates
Concentration charges
Smelting and refining charges
Other charges
Material handling and transport
Insurance and sales charges
Processing Capital and Operating Cost Estimates
Processing operating cost estimates
Processing capital cost estimates
No, assumed values
Yes, general approach
Yes, minimal engineering
No
No
No
No
No
Yes, simple block diagram
No
No
Yes
Yes, division of total
No
No
No
No
Yes, factored ±45%
Yes, factored ±45%
No, preliminary data
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes, preliminary estimate
Yes, preliminary estimate
Yes, preliminary estimate
Yes, preliminary estimate
No
Yes, ±30%
Yes, from engineering
manuals ±30%
No, preliminary data
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes, quote
Yes, quote
Yes, quote
Yes, quote
Yes, quote
Yes, ±15%
Yes, from vendor quotes and
take-offs ±15%
13

14. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies (4)
CATEGORY – Illustrative not exhaustive
CONCEPTUAL
STUDY/SCOPING STUDY
PRE-FEASIBILITY STUDY FEASIBILITY STUDY
INFRASTRUCTURE
Industrial Infrastructure Facilities
Facilities list
Power and water parameters
Full site plan
Social Infrastructure Facilities
Facilities list
Housing
Schools
Hospitals
Other
Infrastructure Capital and Operating Cost Estimates
Consumables list
Personnel list
Infrastructure operating cost estimates
Infrastructure capital cost estimates
Yes, with minimum detail
Yes, preliminary
No
Yes, with minimum detail
No
No
No
No
No
No
Yes, factored ±45%
Yes, factored ±45%
Yes
Yes
Yes
Yes
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes
Yes
Yes, ±30%
Yes, from engineering
manuals ±30%
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes, ±15%
Yes, from vendor quotes &
take-offs ±15%
MANAGEMENT, LABOR & ADMINISTRATION
Personnel
Personnel lists
Training requirements
Personnel Capital & Operating Cost Estimates
Consumables list
Personnel operating cost estimates
Personnel capital cost
No
No
No
Yes, factored ±45%
Yes, factored ±45%
Yes
Yes
No
Yes, ±30%
Yes, ±30%
Yes
Yes
•Yes
Yes, ±15%
Yes, ±15%
14

15. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies (5)
CATEGORY – Illustrative not exhaustive
CONCEPTUAL
STUDY/SCOPING STUDY
PRE-FEASIBILITY STUDY FEASIBILITY STUDY
MARKETS, PRODUCTS AND SALES
Markets, Products and Sales
Products
Volume
Prices
Sales organization
Sales Related Capital and Operating Cost Estimates
Personnel list
Consumables list
Sales related operating cost estimates
Sales related capital cost estimates
Yes, preliminary
Yes, preliminary
Yes, preliminary
No
No
No
Yes, factored ±45%
Yes, factored ±45%
Yes
Yes
Yes
Yes, preliminary
Yes
No
Yes, ±30%
Yes, ±30%
Yes
Yes
Yes
Yes, preliminary
Yes
No
Yes, ±15%
•Yes, ±15%
ENVIRONMENTAL AND PERMITTING
Environmental
Permit list
Environmental Impacts
Environmental Compliance Cost Estimates
Personnel list
Environmental related operating cost estimates
Environmental related capital cost estimates
No
Yes, preliminary
No
Yes, factored ±45%
Yes, factored ±45%
Yes
Yes
Yes
Yes, ±30%
Yes, ±30%
Yes
Yes
Yes
Yes, ±15%
Yes, ±15%
15

16. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies (6)
CATEGORY – Illustrative not exhaustive
CONCEPTUAL
STUDY/SCOPING STUDY
PRE-FEASIBILITY STUDY FEASIBILITY STUDY
DEVELOPMENT SCHEDULE AND COSTS
Development Schedule
Development methodology
Development schedule
Development Costs
Personnel list
Development related operating cost estimates
Development related capital cost estimates
•Yes, preliminary
Yes, preliminary
No
No
No
•Yes
Yes
Yes
Yes, ±30%
Yes, ±30%
•Yes
Yes
Yes
Yes, ±15%
Yes, from vendor quotes &
take-offs ±15%
PROJECT ECONOMICS
Financial Issues
Taxes
Royalties
Fees
Licenses
Economic Issues
Economic parameters
Discount rate determination
Cash flows
Investor returns
Debt analysis
1.Sensitivities
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes, preliminary
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
16

17. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies (7)
CATEGORY – Illustrative not exhaustive
CONCEPTUAL
STUDY/SCOPING STUDY
PRE-FEASIBILITY STUDY FEASIBILITY STUDY
SUMMARY AND RECOMMENDATIONS
Operational Parameters
Title and ownership
Geology
Ore reserves
Mining and processing rates
Development period and mine life
Metal/mineral recoveries
Sales
Operating cost estimates
Capital cost estimates
Financial Parameters
Cash Flows
NPV, IRR, and ROI
Mostly assumed and factored
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Some engineering basis
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Some engineering basis
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
17

18. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Mining is a Long Term Proposition –
Adapting to Uncertainty is Hard
• Changing taxes, royalties, rules, regulations etc.
deters investors and delays action
• Projects and investors need to have stable rule of
law to earn competitive returns and maintain access
to capital thru cyclical and volatile market conditions
• Investment trends are competitive & reflect variable
economic trends as are expectations and risks of
project owners, shareholders, lenders & investors
• Stakeholders evaluate projects in a risk-adjusted
manner seeking to reduce risk exposure
• Planning for different, changing risks is difficult
18

19. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Mining Involves Many Risks,
Different Goals and Horizons
• Geologists optimistically look for lode
• Developers look for funds and mine
• Bankers, Investors look for returns
• Local people want jobs and stake
• Governments want participation
• There are many others involved
• Bottom line: There are many risks
19

20. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Current Environment is Challenging
Focused on Optimization and Lower Costs
• 2013 was plagued with less robust growth and weaker prices
 China’s GDP is less than 8%; transitioning, shifting priorities
 Commodity prices are off from recent highs
• Regulatory, political and resource nationalism risks are rising
• Investor focus is on returns, Growth at any, all cost, is not enough
 Mining companies have been writing down assets
 Expansion plans, new projects have been curtailed
 Many Junior miners lack sufficient capital
• Margins are under pressure, as are Boards and Executives
• Strengthening cash flow, Optimizing operations, Cutting costs,
Sales of marginal assets, Reduced capex are goals
• Selective, opportunistic M&A and investments can occur with
Private Equity, SWFs, SOEs taking greater interest in mining
20

21. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Reasons To Be Optimistic – Longer Term
• Urbanization, industrialization in China, Asia, India,
South America, Middle East, Africa, etc. continues to
drive industrial metals and energy demand
• Security and stability of supply are a concern in China,
Korea, Japan, Middle East, etc. and of some industrial
companies e.g., technology or critical metals, fertilizer
minerals, energy fuels (coal, uranium) etc.
• Constraining new supply are: Declining ore grades and
spending; Higher costs; Fewer large deposits; Larger
‘takes’ by Governments; Changing political winds; etc.
• Metals supply may struggle to meet demand in longer
term. Sporadic price spikes may/can/do occur
• Prices may stay above long term averages
21

22. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear
• We perform technical, operating, financial issues and
valuations studies advising clients in the mining, banking,
investment, financial, legal and accounting sectors and
government agencies around the world
• Behre Dolbear offers a range of highly specialized and
complementary services
 Technical Consulting
 Engineering Services
 Valuation and Financial advisory
 Management Consulting
 Environmental Services
22

23. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear
• To meet client requirements, we select, integrate and manage our
highly qualified and experienced specialists
 Each are selected for particular skill-set and ability to provide
the highest levels of insight, advice and recommendation
 They have experience in many transactions involving brown
and green field projects requiring lender due diligence and
project monitoring as well as management advisory roles
 If other skills and experience are needed, our flexibility and
depth of talent allows us to deliver them swiftly and efficiently
Tim Alch
V.P. & Senior Minerals Business Analyst
Behre Dolbear & Co.
+1.845.480.1434
Tim.Alch@Dolbear.com
23

24. BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear - A Worldwide Resource
24