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CONTINENTAL NICKEL LIMITED

TECHNICAL REPORT ON THENTAKA HILL NICKEL PROJECT,LINDI AND MTWARA REGIONS,TANZANIA

NI 43-101 Report

Qualified Persons:Jason Cox, P.Eng.Peter Munro, FAusIMMChester Moore, P.Eng.Marc Lavigne, Eng., M.Sc.Christopher Waller, MAusIMM(CP)

October 28, 2011

ROSCOE POSTLE ASSOCIATES INC.

Report Control Form Document Title Technical Report on the Ntaka Hill Nickel Project, Lindi and

Mtwara Regions,Tanzania

Client Name & Address

Continental Nickel Limited 114 Lakeshore Road East, Suite 202 Oakville, Ontario L6J 6N2

Document Reference

Project #1773

Status & Issue No.

Version

0

Issue Date October 28, 2011 Lead Author Jason Cox, P.Eng.

Peter Munro, FAusIMM Chester Moore, P.Eng. Marc Lavigne, Eng., M.Sc. Christopher Waller, MAusIMM(CP)

Signed “Jason Cox” Signed “Peter Munro” Signed “Chester Moore” Signed “Marc Lavigne” Signed “Christopher Waller”

Peer Reviewer Deborah McCombe, P.Geo. Signed “Deborah McCombe”

Project Manager Approval Marc Lavigne, Eng., M.Sc.

Signed “Marc Lavigne”

Project Director Approval Jason Cox, P.Eng.

Signed “Jason Cox”

Report Distribution Name No. of Copies Client RPA Filing 1 (project box)

Roscoe Postle Associates Inc.

55 University Avenue, Suite 501 Toronto, Ontario M5J 2H7

Canada Tel: +1 416 947 0907

Fax: +1 416 947 0395 [email protected]

mailto:[email protected]

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Continental Nickel Limited – Ntaka Hill Nickel Project Technical Report NI 43-101 – October 28, 2011

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TABLE OF CONTENTS PAGE

1 SUMMARY ................................................................................................................ 1-1 Executive Summary ................................................................................................ 1-1 Technical Summary .............................................................................................. 1-13

2 INTRODUCTION ....................................................................................................... 2-1

3 RELIANCE ON OTHER EXPERTS ........................................................................... 3-1

4 PROPERTY DESCRIPTION AND LOCATION .......................................................... 4-1

5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ........................................................................................................ 5-1

6 HISTORY .................................................................................................................. 6-1

7 GEOLOGICAL SETTING AND MINERALIZATION ................................................... 7-1 Regional Geology ................................................................................................... 7-1 Local and Property Geology ................................................................................... 7-3 Ntaka Hill Area Geology ......................................................................................... 7-5 Structural Geology .................................................................................................. 7-8 Mineralization ......................................................................................................... 7-9

8 DEPOSIT TYPES ...................................................................................................... 8-1

9 EXPLORATION ......................................................................................................... 9-1 Ntaka Hill Area ....................................................................................................... 9-2 Regional Exploration .............................................................................................. 9-5

10 DRILLING .............................................................................................................. 10-1 Drilling and Logging Procedures ........................................................................... 10-2 Summary of Results ............................................................................................. 10-4 Current Drilling Program and Results ................................................................. 10-23

11 SAMPLE PREPARATION, ANALYSES AND SECURITY ..................................... 11-1 Sampling Method and Approach ........................................................................... 11-1 Specific Gravity Measurements ............................................................................ 11-1 Sampling Procedures ........................................................................................... 11-2

12 DATA VERIFICATION ........................................................................................... 12-1 Independent Sampling by RPA ............................................................................. 12-2

13 MINERAL PROCESSING AND METALLURGICAL TESTING ............................... 13-1 Sample Selection.................................................................................................. 13-1 Mineralogy ............................................................................................................ 13-1 Comminution Testing ............................................................................................ 13-5 Flotation Testing ................................................................................................... 13-5 Flowsheet Design ................................................................................................. 13-8 Recovery and Concentrate Grade Estimates ........................................................ 13-8

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14 MINERAL RESOURCE ESTIMATE ....................................................................... 14-1

15 MINERAL RESERVE ESTIMATE ........................................................................ 15-31

16 MINING METHODS .............................................................................................. 16-1 Mining Studies ...................................................................................................... 16-1 Mine Design ......................................................................................................... 16-5 Production Quantities ......................................................................................... 16-12 Geotechnical Assessment .................................................................................. 16-16 Hydrogeology And Hydrology Assessment ......................................................... 16-16 Seismicity ........................................................................................................... 16-16

17 RECOVERY METHODS ....................................................................................... 17-1 Process Plant Design ........................................................................................... 17-1 Process Plant Description ..................................................................................... 17-5 Flotation ............................................................................................................. 17-10 Sampling ............................................................................................................ 17-12 Concentrate Thickening ...................................................................................... 17-13 Concentrate Filtration ......................................................................................... 17-13 Services and Utilities .......................................................................................... 17-15 Tailings Disposal ................................................................................................ 17-18

18 PROJECT INFRASTRUCTURE ............................................................................ 18-1 Utilities and Services ............................................................................................ 18-1 Project Infrastructure ............................................................................................ 18-2

19 MARKET STUDIES AND CONTRACTS................................................................ 19-1 Markets ................................................................................................................ 19-1 Metal Pricing ......................................................................................................... 19-5 Indicative Concentrate Terms ............................................................................... 19-6 Concentrate Transport and Logistics .................................................................... 19-7

20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT ..................................................................................................................... 20-1

21 CAPITAL AND OPERATING COSTS .................................................................... 21-1 Capital Cost Estimates ......................................................................................... 21-1 Operating Cost Estimates ..................................................................................... 21-7

22 ECONOMIC ANALYSIS ........................................................................................ 22-1 Alternate Scenarios .............................................................................................. 22-7

23 ADJACENT PROPERTIES ................................................................................... 23-1

24 OTHER RELEVANT DATA AND INFORMATION ................................................. 24-1 Project Execution.................................................................................................. 24-1 Risks and Opportunities........................................................................................ 24-5

25 INTERPRETATION AND CONCLUSIONS ............................................................ 25-1

26 RECOMMENDATIONS ......................................................................................... 26-1

27 REFERENCES ...................................................................................................... 27-1

28 DATE AND SIGNATURE PAGE ............................................................................ 28-1

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29 CERTIFICATE OF QUALIFIED PERSON ............................................................. 29-1

LIST OF TABLES PAGE

Table 1-1 Cash Flow Summary – Base Case Open Pit Scenario ............................... 1-4 Table 1-2 Sensitivity Analyses .................................................................................... 1-6 Table 1-3 Mineral Resources – April 2011 ................................................................ 1-10 Table 1-4 Proposed Development Plan and Budget ................................................. 1-13 Table 1-5 Mineral Resources – April 2011 ................................................................ 1-19 Table 1-6 Production Schedules ............................................................................... 1-27 Table 1-7 Summary Flotation Test Results ............................................................... 1-29 Table 1-8 Predicted Metallurgical Performance ........................................................ 1-31 Table 1-9 Indicative Smelter Terms .......................................................................... 1-41 Table 1-10 Base Case Open Pit Scenario - Capital Cost Summary .......................... 1-42 Table 1-11 Unit Operating Costs .............................................................................. 1-42 Table 1-12 Key Risks Identified and Mitigating Strategies ........................................ 1-46 Table 1-13 Opportunities and Development Strategies ............................................ 1-48 Table 4-1 Prospecting Licences Summary (October, 2011) ........................................ 4-5 Table 4-2 Annual Rents and Expenditures ................................................................. 4-7 Table 6-1 Summary of 2006 Drill Results - IMX Resources ........................................ 6-5 Table 8-1 Geological Attributes of the Thompson Nickel Belt and the Nachingwea Area ..................................................................................................................................... 8-3 Table 9-1 2007–2010 Exploration Summary ............................................................... 9-2 Table 9-2 Results from Other Targets in the Ntaka Hill Area ...................................... 9-3 Table 9-3 Drill Results from the Lionja Target Area ................................................... 9-9 Table 10-1 Drilling Summary .................................................................................... 10-1 Table 10-2 Selected Assays – G Zone ..................................................................... 10-5 Table 10-3 Selected Assays – H Zone ..................................................................... 10-8 Table 10-4 Selected Assays – J Zone .................................................................... 10-11 Table 10-5 Selected Assays – L Zone .................................................................... 10-15 Table 10-6 Selected Assays – M Zone ................................................................... 10-17 Table 10-7 Selected Assays – NAD013 Zone ......................................................... 10-18 Table 10-8 Selected Assays – Sleeping Giant Zone ............................................... 10-21 Table 10-9 Results from 2011 Sleeping Giant Drilling ............................................ 10-24 Table 11-1 QA/QC Statistics .................................................................................... 11-4 Table 12-1 2010 Independent Surface Samples ....................................................... 12-3 Table 13-1 Mineral Composition of Samples for Metallurgical Testing ...................... 13-4 Table 13-2 Summary Flotation Test Results ............................................................. 13-6 Table 13-3 Predicted Metallurgical Performance ...................................................... 13-9 Table 14-1 Mineral Resources – April 2011 .............................................................. 14-1 Table 14-2 Uncut Assay Statistics by Deposit .......................................................... 14-3 Table 14-3 Capping Levels by Deposit ..................................................................... 14-6 Table 14-4 Capped Assay Statistics by Deposit ....................................................... 14-8 Table 14-5 Composite Statistics by Deposit ............................................................. 14-9 Table 14-6 Variogram Parameters ......................................................................... 14-11 Table 14-7 Search Parameters ............................................................................... 14-12 Table 14-8 NSR Parameters .................................................................................. 14-13

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Table 14-9 G Zone Mineral Resources – April 2011 ............................................... 14-22 Table 14-10 H Zone Mineral Resources – April 2011 ............................................. 14-23 Table 14-11 J Zone Mineral Resources - April 2011 ............................................... 14-24 Table 14-12 L Zone Mineral Resources – April 2011 .............................................. 14-25 Table 14-13 M Zone Mineral Resources – April 2011 ............................................. 14-26 Table 14-14 NAD013 Zone Mineral Resources – April 2011 .................................. 14-27 Table 14-15 Sleeping Giant Mineral Resources – April 2011 .................................. 14-28 Table 14-16 Block Model Comparison .................................................................... 14-29 Table 16-1 Lateral Development .............................................................................. 16-8 Table 16-2 Vertical development .............................................................................. 16-8 Table 16-3 Open Pit Mining Fleet at 2.5 MTPA ore ................................................ 16-12 Table 16-4 Production Schedules ........................................................................... 16-15 Table 17-1 Summary of the Process Plant Design Criteria ....................................... 17-4 Table 21-1 Base Case Open Pit Scenario - Capital Cost Summary .......................... 21-1 Table 21-2 Open Pit / Underground Scenario – Capital Cost Summary .................... 21-1 Table 21-3 Open Pit Scenario - Mine Capital Cost Summary ................................... 21-2 Table 21-4 Open Pit / Underground Scenario - Mine Capital Cost Summary ............ 21-3 Table 21-5 Base Case 1 Mtpa Capital Cost Estimate Summary ............................... 21-4 Table 21-6 Factored Plant expansion Capital Costs ................................................. 21-4 Table 21-7 Base Case TSF Capital Cost Summary .................................................. 21-5 Table 21-8 Owners Project OverHead Costs ............................................................ 21-6 Table 21-9 Unit Operating Costs .............................................................................. 21-8 Table 21-10 Summary of Process Operating Costs .................................................. 21-9 Table 21-11 Summary of General and Administration Costs .................................. 21-10 Table 22-1 Taxation and Royalty Summary .............................................................. 22-2 Table 22-2 Estimated Accumulated Tax Losses ....................................................... 22-3 Table 22-3 Cash Flow Summary – Base Case Open Pit Scenario ........................... 22-4 Table 22-4 Sensitivity Analyses ................................................................................ 22-6 Table 22-5 Cash Flow – Open Pit / Underground Scenario ...................................... 22-9 Table 24-1 Risk Assessment Matrix ......................................................................... 24-6 Table 24-2 Key Risks Identified and Mitigating Strategies ........................................ 24-6 Table 24-3 Residual Risk Assessment ..................................................................... 24-8 Table 24-4 Opportunities and Development Strategies .......................................... 24-10 Table 24-5 Recommended Further Work ............................................................... 24-11 Table 25-1 Mineral Resources – April 2011 .............................................................. 25-2 Table 26-1 Proposed Development Plan and Budget ............................................... 26-3

LIST OF FIGURES PAGE

Figure 1-1 Sensitivity Graph ....................................................................................... 1-5 Figure 1-2 Surface General Arrangement ................................................................. 1-21 Figure 1-3 Preliminary Project Development Schedule ............................................. 1-45 Figure 4-1 Location Map............................................................................................. 4-2 Figure 4-2 Property Map............................................................................................. 4-4 Figure 6-1 Compilation at Ntaka Hill Area ................................................................... 6-3 Figure 7-1 Regional Geology ...................................................................................... 7-2 Figure 7-2 Property Geology ...................................................................................... 7-4

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Figure 7-3 Geology of the Ntaka Hill Area .................................................................. 7-6 Figure 9-1 TDEM Targets – Ntaka Hill Area ............................................................... 9-4 Figure 9-2 Radiometric Targets .................................................................................. 9-7 Figure 9-3 Lionja Area .............................................................................................. 9-10 Figure 10-1 Drill Plan – G Zone ................................................................................ 10-6 Figure 10-2 Drill Plan – H Zone ................................................................................ 10-9 Figure 10-3 Drill Plan – J Zone ............................................................................... 10-12 Figure 10-4 Drill Plan – L Zone ............................................................................... 10-14 Figure 10-5 Drill Plan – M Zone .............................................................................. 10-16 Figure 10-6 Drill Plan - NAD013 Zone .................................................................... 10-19 Figure 10-7 Drill Plan – Sleeping Giant Zone .......................................................... 10-22 Figure 14-1 Isometric View of the Ntaka Hill Deposits .............................................. 14-4 Figure 14-2 Specific Gravity Versus Sulphur .......................................................... 14-10 Figure 14-3 G Zone Grade Distribution / Resource Classification ........................... 14-14 Figure 14-4 H Zone Grade Distribution / Resource Classification ........................... 14-15 Figure 14-5 J Zone Grade Distribution / Resource Classification ............................ 14-16 Figure 14-6 L Zone Grade Distribution / Resource Classification ............................ 14-17 Figure 14-7 M Zone Grade Distribution / Resource Classification ........................... 14-18 Figure 14-8 NAD013 Zone Grade Distribution / Resource Classification ................ 14-19 Figure 14-9 Sleeping Giant Zone Grade Distribution / Resource Classification ...... 14-20 Figure 14-10 Drift Analysis ..................................................................................... 14-30 Figure 16-1 Site Plan ................................................................................................ 16-2 Figure 16-2 Isometric View of Ntaka Hill Pit Shells ................................................... 16-6 Figure 16-3 Underground Typical Section ................................................................ 16-9 Figure 16-4 Underground Typical Level .................................................................. 16-10 Figure 16-5 Underground Typical Level - Details .................................................... 16-11 Figure 17-1 Metallurgical Flowsheet ......................................................................... 17-8 Figure 17-2 Process Plant Layout ............................................................................ 17-9 Figure 22-1 Sensitivity Graph ................................................................................... 22-6 Figure 24-1 Preliminary Project Development Schedule ........................................... 24-4 Figure 24-2 AS/NZS 4360: 2004 Risk Assessment Framework ................................ 24-5

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1 SUMMARY EXECUTIVE SUMMARY Roscoe Postle Associates Inc. (RPA), Mineralurgy Pty Ltd (Mineralurgy), and

Lycopodium Minerals Pty Ltd. (Lycopodium) were retained by Continental Nickel Limited

(Continental), to complete a Preliminary Economic Assessment (PEA) and prepare an

independent Technical Report on the Ntaka Hill Nickel Project (the Project) in southeast

Tanzania. The purpose of this report is to provide technical support information for

Continental’s public disclosure on the Project. This Technical Report conforms to

National Instrument 43-101 (NI 43-101) Standards of Disclosure for Mineral Projects.

Continental is a Toronto Stock Exchange (TSX) Venture exchange issuer involved in the

acquisition and exploration of nickel-copper sulphide mineral properties. Continental is a

junior exploration company with a corporate head office in Oakville, Ontario, Canada,

and a regional office in Dar es Salaam, Tanzania. The company currently holds a 75%

interest in a large exploration property containing zones of nickel-copper mineralization

near Nachingwea, Tanzania.

Currently, the major assets associated with the Ntaka Hill Nickel Project are a 6,400 km2

exploration land position, held under licence and licence applications, containing

numerous geophysical anomalies and seven zones of nickel-copper mineralization for

which Mineral Resources have been estimated.

The PEA Base Case considers open pit mining and conventional flotation processing,

producing a bulk nickel-copper concentrate. Four years of mining small, high-grade

zones at a rate of one million tonnes per year (Mtpa) will be followed by eight years of

mining larger zones at a rate of 2.5 Mtpa.

The Base Case in this PEA uses the previously-disclosed Mineral Resource estimate

which was constrained by optimized pit shells and is disclosed in RPA, 2011.

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ECONOMIC ANALYSIS A Base Case cash flow projection for the Base Case Open Pit Scenario has been

generated from the Life of Mine (LOM) production schedule and capital and operating

cost estimates, and is summarized in Table 1-1. A summary of the key criteria is

provided below.

ECONOMIC CRITERIA Physicals

A resource base of o Measured & Indicated 5.0 Mt, at grades of 1.22% Ni, 0.24% Cu. o Inferred 17.3 Mt, at grades of 0.8% Ni, 0.2% Cu.

A pre-production period of 2 years.

Total production quantities of 23.8 Mt, at grades of 0.82% Ni, 0.18% Cu.

A mine life of 12 years – four years at 1 Mtpa, eight years at 2.5 Mtpa

A maximum of 158,000 t moved per day at the mine (52.5 Mtpa). A LOM stripping ratio of 17.2

Average mill recoveries of 87% Ni and 92% Cu.

REVENUE

A nickel price of US$10.20 per lb, and a copper price of US$3.40 per lb.

Smelter terms with an average of 77% payable for the Nickel contained and average revenue of US$90/DMT of concentrate for by-products contained in the concentrate, per typical smelter contracts, which account for treatment and refining.

Net Smelter Return averages US$114 per tonne, including deductions for concentrate shipment, treatment, refining and royalties.

Revenue is recognized at the time of production. COSTS

A LOM average operating cost of US$59.30 per tonne milled. A pre-production capital of US$217 million, expansion capital of $297 million,

and a sustaining capital of US$85 million over the LOM. o Sustaining capital above does not include recovery of working capital

and warehouse inventory, totalling $40 million.

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TAXES AND ROYALTIES A royalty of 4% of net revenue.

An average corporate tax rate of 30%. US$55 million accumulated tax losses at commencement of the project.

CASH FLOW ANALYSIS Considering the Base Case Open Pit Scenario of the Project on a stand-alone basis, the

undiscounted pre-tax cash flow totals $753 million over the mine life, and simple

payback occurs in approximately five years (shortly after expansion to 2.5 Mtpa). Before

tax, the NPV at an 8% discount rate is $310 million, and the IRR is 25.4%.

After accounting for taxes, the undiscounted cash flow totals $539 million and simple

payback occurs in approximately six years. The after-tax NPV at an 8% discount rate is

$207 million and the IRR is 21.5%.

The total cash cost is US$4.24/lb Ni and the mine life capital unit cost is US$1.48/lb Ni,

for a total production cost of US$5.72/lb Ni. Average annual nickel production during

operations is 31 million pounds per year and the average annual copper production is

seven million pounds per year.

All scenarios in this PEA are preliminary in nature and include both Indicated and

Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative

geologically to have the economic considerations applied to them that would enable

them to be categorized as Mineral Reserves. There is no certainty that the PEA will be

realized.

Units Total Year -2 Year -1 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12MINING

Operating Days 333 333 333 333 333 333 333 333 333 333 333 333 Tonnes milled per day tpd 2,700 3,000 3,000 3,000 7,290 7,500 7,500 7,500 7,500 7,500 7,500 7,320 Tonnes moved per day tpd 59,259 60,673 67,308 67,051 67,917 135,994 168,269 168,269 168,269 168,269 142,628 95,064 51,731

Production '000 tonnes 23,770 900 1,000 1,000 1,000 2,430 2,500 2,500 2,500 2,500 2,500 2,500 2,440 Cu Grade % 0.18 0.23 0.17 0.27 0.29 0.16 0.16 0.16 0.16 0.16 0.16 0.17 0.17 Ni Grade % 0.82 1.44 1.18 1.42 1.58 0.73 0.73 0.73 0.73 0.73 0.73 0.68 0.60

Waste '000 tonnes 409,000 8,000 18,030 20,000 19,920 20,190 40,000 50,000 50,000 50,000 50,000 42,000 27,160 13,700 Total Moved '000 tonnes 432,770 8,000 18,930 21,000 20,920 21,190 42,430 52,500 52,500 52,500 52,500 44,500 29,660 16,140 Stripping Ratio 17.21 20.03 20.00 19.92 20.19 16.46 20.00 20.00 20.00 20.00 16.80 10.86 5.61

PROCESSING

Total Ore Milled '000 tonnes 23,770 900 1,000 1,000 1,000 2,430 2,500 2,500 2,500 2,500 2,500 2,500 2,440 Cu Grade % Cu 0.18 0.23 0.17 0.27 0.29 0.16 0.16 0.16 0.16 0.16 0.16 0.17 0.17 Ni Grade % Ni 0.82 1.44 1.18 1.42 1.58 0.73 0.73 0.73 0.73 0.73 0.73 0.68 0.60

RecoveryCu Recovery % 91.72 90.93 88.59 90.63 88.76 95.00 95.00 95.00 95.00 95.00 95.00 88.86 80.00 Ni Recovery % 87.27 86.60 86.59 83.63 81.60 90.70 90.70 90.70 90.70 90.70 90.70 85.18 75.00

Concentrate GradeCu Grade % 3.42 3.06 2.56 3.48 3.16 4.18 4.18 4.18 4.18 4.18 4.18 2.91 1.92 Ni Grade % 15.21 18.00 16.99 17.27 15.85 18.00 18.00 18.00 18.00 18.00 18.00 11.48 6.35

REVENUE

Metal PricesCu US$/lb 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ Ni US$/lb 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$

Payable MetaContained Cu lbs '000 84,683 4,194 3,393 5,299 5,673 8,245 8,482 8,482 8,482 8,482 8,482 8,109 7,359 Contained N lbs '000 376,544 24,684 22,548 26,259 28,495 35,519 36,543 36,543 36,543 36,543 36,543 31,959 24,368

Total Gross Revenue US$ '000 3,025,265$ 198,970$ 176,028$ 211,683$ 227,553$ 288,945$ 297,269$ 297,269$ 297,269$ 297,269$ 297,269$ 252,805$ 182,936$

Total Smelter Charges US$ '000 182,772$ 9,456$ 9,063$ 10,437$ 12,214$ 13,622$ 14,014$ 14,014$ 14,014$ 14,014$ 14,014$ 24,726$ 33,182$

Gross Less Charges US$ '000 2,842,493$ 189,514$ 166,965$ 201,246$ 215,339$ 275,323$ 283,255$ 283,255$ 283,255$ 283,255$ 283,255$ 228,079$ 149,754$

Royalty US$ '000 121,011$ 7,959$ 7,041$ 8,467$ 9,102$ 11,558$ 11,891$ 11,891$ 11,891$ 11,891$ 11,891$ 10,112$ 7,317$

Net Smelter Return US$ '000 2,721,482$ 181,555$ 159,924$ 192,779$ 206,236$ 263,766$ 271,364$ 271,364$ 271,364$ 271,364$ 271,364$ 217,966$ 142,437$ US$/t ore 114.49$ 201.73$ 159.92$ 192.78$ 206.24$ 108.55$ 108.55$ 108.55$ 108.55$ 108.55$ 108.55$ 87.19$ 58.38$

OPERATING COSTS

Mining (Open Pit) US$/t moved 2.10$ 3.15$ 3.15$ 3.15$ 3.15$ 1.90$ 1.90$ 1.90$ 1.90$ 1.90$ 1.90$ 1.90$ 1.90$ Processing US$/t milled 14.38$ 18.65$ 17.83$ 17.83$ 17.83$ 13.75$ 13.64$ 13.64$ 13.64$ 13.64$ 13.64$ 13.64$ 13.73$ G&A US$/t milled 6.65$ 13.73$ 12.35$ 12.35$ 12.35$ 5.59$ 5.44$ 5.44$ 5.44$ 5.44$ 5.44$ 5.44$ 5.57$ Total Operating Cost US$/t 59.30$ 98.63$ 96.34$ 96.09$ 96.94$ 52.51$ 58.98$ 58.98$ 58.98$ 58.98$ 52.90$ 41.62$ 31.87$

Mining (Open Pit) US$ '000 909,613$ 59,630$ 66,150$ 65,898$ 66,749$ 80,617$ 99,750$ 99,750$ 99,750$ 99,750$ 84,550$ 56,354$ 30,666$ Processing US$ '000 341,843$ 16,785$ 17,833$ 17,833$ 17,833$ 33,402$ 34,109$ 34,109$ 34,109$ 34,109$ 34,109$ 34,109$ 33,503$ G&A US$ '000 158,138$ 12,355$ 12,355$ 12,355$ 12,355$ 13,590$ 13,590$ 13,590$ 13,590$ 13,590$ 13,590$ 13,590$ 13,590$ Total Operating Cost US$ '000 1,409,594$ 88,769$ 96,338$ 96,086$ 96,936$ 127,609$ 147,449$ 147,449$ 147,449$ 147,449$ 132,249$ 104,053$ 77,759$ Unit Operating Cost net of by-prod revenu US$/lb Ni 3.43$ 3.39$ 4.27$ 3.42$ 3.16$ 3.32$ 3.76$ 3.76$ 3.76$ 3.76$ 3.34$ 2.62$ 2.41$

Operating Cashflow US$ '000 1,311,889$ 92,786$ 63,586$ 96,693$ 109,300$ 136,156$ 123,915$ 123,915$ 123,915$ 123,915$ 139,115$ 113,914$ 64,678$

CAPITAL COSTS

Mining US$ '000 179,200$ 2,100$ 29,100$ -$ -$ 51,800$ 96,200$ -$ -$ -$ -$ -$ -$ -$ -$ Processing US$ '000 114,739$ 19,352$ 45,156$ -$ -$ 15,069$ 35,162$ -$ -$ -$ -$ -$ -$ -$ -$ Infrastructure US$ '000 63,656$ 19,389$ 22,699$ 1,780$ -$ 6,894$ 12,894$ -$ -$ -$ -$ -$ -$ -$ -$ Indirect Costs US$ '000 54,234$ 13,940$ 17,548$ 160$ -$ 17,620$ 20,243$ -$ -$ -$ -$ -$ -$ -$ (15,276)$ Sustaining US$ '000 69,980$ -$ -$ 1,500$ 1,500$ 1,500$ 1,500$ 5,080$ 1,200$ 10,580$ 10,580$ 14,180$ 10,580$ 10,580$ 1,200$ Closure and Reclamation US$ '000 15,000$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 15,000$ C ti US$ '000 62 176$ 7 736$ 21 284$ 390$ $ 10 610$ 22 156$ $ $ $ $ $ $ $ $

TABLE 1-1 CASH FLOW SUMMARY - BASE CASE OPEN PIT SCENARIOContinental Nickel Limited – Ntaka Hill Nickel Project

Contingency US$ '000 62,176$ 7,736$ 21,284$ 390$ -$ 10,610$ 22,156$ -$ -$ -$ -$ -$ -$ -$ -$ Working Capital US$ '000 -$ 14,795$ 1,261$ (42)$ 142$ 5,112$ 3,307$ -$ -$ -$ (2,533)$ (4,699)$ (4,382)$ (12,960)$ Total Capital Cost US$ '000 558,985$ 62,518$ 150,582$ 5,091$ 1,458$ 103,634$ 193,266$ 8,387$ 1,200$ 10,580$ 10,580$ 11,647$ 5,881$ 6,198$ (12,036)$

CASH FLOW

Net Pre-Tax Cashflow US$ '000 752,903$ (62,518)$ (150,582)$ 87,695$ 62,128$ (6,941)$ (83,966)$ 127,770$ 122,715$ 113,335$ 113,335$ 112,269$ 133,235$ 107,716$ 76,713$ Cumulative Pre-Tax Cashflow US$ '000 (62,518)$ (213,100)$ (125,406)$ (63,278)$ (70,219)$ (154,185)$ (26,415)$ 96,300$ 209,636$ 322,971$ 435,239$ 568,474$ 676,190$ 752,903$

Taxes US$ '000 213,871$ -$ -$ 494$ 3,002$ -$ 23,958$ 36,832$ 36,673$ 36,460$ 40,862$ 33,142$ 2,448$ After-Tax Cashflow US$ '000 539,032$ (62,518)$ (150,582)$ 87,695$ 62,128$ (7,435)$ (86,968)$ 127,770$ 98,757$ 76,504$ 76,662$ 75,808$ 92,373$ 74,574$ 74,265$ Cumulative After-Tax Cashflow US$ '000 (62,518)$ (213,100)$ (125,406)$ (63,278)$ (70,713)$ (157,681)$ (29,911)$ 68,846$ 145,350$ 222,012$ 297,820$ 390,194$ 464,767$ 539,032$

UNIT PRODUCTION COSTS

Operating US$ / lb Ni 4.24$ Capital US$ / lb Ni 1.48$ Total Cost US$ / lb Ni 5.72$

ECONOMICS

Pre-Tax Payback Period Years 5.22 1.00 1.00 1.00 1.00 1.00 0.22 - - - - - - Pre-Tax IRR % 25.4%Pre-Tax NPV at 5% discounting US$ '000 435,588$ Pre-Tax NPV at 8% discounting US$ '000 310,483$ Pre-Tax NPV at 12% discounting US$ '000 191,673$

After-Tax Payback Period Years 5.30 1.00 1.00 1.00 1.00 1.00 0.30 - - - - - - After-Tax IRR % 21.6%After-Tax NPV at 5% discounting US$ '000 301,206$ After-Tax NPV at 8% discounting US$ '000 207,379$ $192,017.53After-tax NPV at 12% discounting US$ '000 118,164$

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SENSITIVITY ANALYSIS Project risks and opportunities can be identified in both economic and non-economic

terms. Key economic risks and opportunities were examined by running cash flow

sensitivities on the Base Case Open Pit Scenario:

Head Grade Process Recovery Metal price Operating costs Capital costs

Sensitivity of the after-tax NPV at a discount rate of 8% to the above variables has been

calculated at -20% to +20% variations over the Base Case, with the exception of process

recovery, which was varied by ±2%. The sensitivities are shown in Figure 1-1 and Table

1-2.

FIGURE 1-1 SENSITIVITY GRAPH

$(100,000)

$‐

$100,000

$200,000

$300,000

$400,000

$500,000

‐25% ‐20% ‐15% ‐10% ‐5% 0% 5% 10% 15% 20% 25%

After‐Tax NPV

@ 8% (U

S$ '000

)

Percent Deviation From Base Case

Sensitivity to Head Grade Sensitivity to Process Recovery

Sensitivity to Metal Price Sensitivity to OPEX

Sensitivity to CAPEX

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TABLE 1-2 SENSITIVITY ANALYSES Continental Nickel Limited – Ntaka Hill Nickel Project

Parameter Variables Units -20% -10%

Base Case +10% +20%

Head Grade % Ni 0.66 0.74 0.82 0.91 0.99

Process Recovery Ni Recovery (%) 85.3 86.3 87.3 88.3 89.3

Metal Price US$/lb Ni 8.17 9.19 10.21 11.23 12.25

Operating Cost US$/t milled 47.44 53.37 59.30 65.23 71.16

Capital Cost US$ '000 447,188 503,087 558,985 614,884 670,783

After-Tax NPV @ 8% Discount Rate Units -20% -10%

Base Case +10% +20%

Head Grade US$ '000 (24,119) 93,578 207,379 317,378 427,246

Process Recovery US$ '000 142,733 173,669 207,379 232,648 257,165

Metal Price US$ '000 (42,285) 84,679 207,379 325,306 443,069

Operating Cost US$ '000 323,429 265,404 207,379 148,159 87,251

Capital Cost US$ '000 295,003 251,191 207,379 163,567 119,754 ALTERNATE SCENARIOS In addition to the Base Case discussed above, three alternate scenarios were

considered in this PEA:

An Open Pit / Underground Scenario based on the current resource estimate – high strip ratios in the open pits suggested that deeper mineralization may be more economically mined by underground methods.

An Open Pit Plus Low Grade Sensitivity Analysis (an upside case to the Base

Case) – drilling results indicate low-grade mineralization within the open pit, lying above the Sleeping Giant Zone. Previously this mineralization was not included in the geological wireframes as it was thought to be uneconomic, however, the work carried out as part of this PEA has indicated that significantly lower economic cut-off grades should be considered when developing the geological block model. This mineralization would displace waste within the open pit, allowing mining rates to stay the same, but the mill expansion in year five would be to 4 Mtpa instead of 2.5 Mtpa.

Addition of a free carry interest in the Project Base Case by the Government of Tanzania.

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OPEN PIT / UNDERGROUND SCENARIO A cash flow projection was generated based on a production schedule for the Open Pit /

Underground Scenario. A summary of key criteria that differ from the Base Case is

provided below.

PHYSICALS

Total production quantities of 24.5 Mt, at grades of 0.77% Ni, 0.17% Cu. o Open Pit 5.9 Mt, at grades of 0.99% Ni, 0.21% Cu. o Underground 18.6 Mt, at grades of 0.70% Ni, 0.15% Cu.

A mine life of 12 years:

o Four years at 1 Mtpa, 8 years at 2.5 Mtpa, o Five years of pit production and eight years of underground

production with overlap in Year 5

A maximum of 50,000 tpd at the pit (16.6 Mtpa). Stripping ratio is 12.7:1.

A maximum of 7,500 tpd produced from the underground operation (2.5 Mtpa)

Average mill recoveries of 85% Ni and 90% Cu. REVENUE

Net Smelter Return averages US$106 per tonne, including deductions for concentrate shipment, treatment, refining and royalties.

COSTS

A pit mining cost of US$3.30 per tonne moved and an underground cost of US$40 per tonne mined.

A LOM average operating cost of US$62 per tonne milled.

A pre-production capital of US$212 million, expansion capital of $264 million, and a sustaining capital of US$80 million over the LOM.

o Sustaining capital above does not include recovery of working capital and warehouse inventory, totalling $40 million.

CASH FLOW ANALYSIS The Open Pit / Underground Scenario offers a lower return for the Project, with the

undiscounted pre-tax cash flow totalling $567 million. Before tax, the NPV at an 8%

discount rate is $191 million, and the IRR is 19.1%. After accounting for taxes, the

undiscounted cash flow totals $398 and after-tax NPV at an 8% discount rate is $117

million and the IRR is 15.9%.

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OPEN PIT PLUS LOW GRADE SENSITIVITY ANALYSIS RPA ran a sensitivity analysis which assumed that the low-grade mineralization located

inside of the Sleeping Giant pit shell would be upgraded to a Mineral Resource. A cash

flow projection was generated based on a production schedule for this Open Pit Plus

Low Grade Sensitivity Analysis. A summary of key criteria is provided below.

The low-grade mineralization consists of 10 Mt to 15 Mt within the Sleeping Giant pit at a

grade of 0.25% Ni to 0.40% Ni. The sensitivity analysis uses a 12 year mine life - four

years at 1 Mtpa and eight years at 4 Mtpa, with a total production of 36.7 Mt, at grades of

0.65% Ni, 0.15% Cu. Because the low-grade material is displacing waste in the pit, the

mining rates remain the same as in the Base Case at a maximum of 150,000 tonnes of

material moved per day (50 Mtpa), however, the LOM stripping ratio is reduced to

10.8:1. Average mill recoveries of 86% Ni and 90% Cu are used.

NSR averages US$91 per tonne, including deductions for concentrate shipment,

treatment, refining and royalties.

Mining operating costs for the sensitivity analysis are unchanged from the Base Case,

only the proportions of ore and waste are different. Using Lycopodium’s cost estimates

in Section 21, processing and general and administration costs were factored from the 3

Mtpa estimate, accounting for fixed and variable portions of each. As a result, the

sensitivity analysis uses a LOM average operating cost of US$43 per tonne milled.

Mining capital costs are unchanged from the Base Case. The addition of the low-grade

material would require a plant upgrade to 4 Mtpa in year five, and this cost was scaled to

the power of 0.6 from Lycopodium’s estimate for a 3 Mtpa plant expansion.

Infrastructure costs were unchanged from the 3 Mtpa estimate. As a result, the

sensitivity analysis uses a pre-production capital of US$217 million, expansion capital of

$385 million, and a sustaining capital of US$85 million over the LOM. The sustaining

capital estimate does not include recovery of working capital and warehouse inventory,

which totals $46 million.

SENSITIVITY ANALYSIS RESULTS The Open Pit Plus Low Grade Sensitivity Analysis offers a better return for the Project

with the undiscounted pre-tax cash flow totalling $1,119 million. Before tax, the NPV at

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an 8% discount rate is $456 million, and the IRR is 27.5%. After accounting for taxes,

the undiscounted cash flow totals $784 and after-tax NPV at an 8% discount rate is $302

million and the IRR is 23.3%.

The Open Pit Plus Low Grade Sensitivity Analysis has total cash costs of US$3.88/lb Ni

and the mine life capital unit cost is US$1.40/lb Ni, for a total production cost of

US$5.28/lb Ni. Average annual nickel production during operation is 37 million pounds

per year and the average annual copper production is nine million pounds per year.

FREE CARRY INTEREST OF TANZANIAN GOVERNMENT The current mining act of Tanzania allows for the Tanzanian Government to acquire a

free carried interest in major mining projects developed in the country that require a

Special Mining Licence, which is the case for this Project. The mechanism for

negotiating this free carried interest is in the form of the mine development agreement.

To date in Tanzania no mining project has been required to provide a free carried

interest, however, since the possibility exists, the magnitude of the impact on Project

economics was investigated.

The impact of a 5% free carry interest would reduce the Base Case Project NPV from

$310 million to $280 million on a pre-tax basis and $207 million to $176 million on an

after-tax basis.

CONCLUSIONS In RPA’s opinion, the PEA indicates that positive economic results can be obtained for

the Ntaka Hill Nickel Project, in a scenario that includes open pit mining, and nickel-

copper-cobalt recovery by conventional flotation.

The Base Case Life of Mine Plan (LOMP) for the Project indicates that 24 Mt, at average

grades of 0.82% Ni and 0.18% Cu, will be mined over 12 years at a production rate of 1

Mtpa for the first four years, and 2.5 Mtpa thereafter. Nickel production is projected to

total 377 million pounds.

All scenarios in this PEA are preliminary in nature and include both Indicated and

Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative

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geologically to have the economic considerations applied to them that would enable

them to be categorized as Mineral Reserves. There is no certainty that the PEA will be

realized.

Base Case economic results are superior to the Open Pit / Underground Scenario, due

to higher costs and lower revenues.

The Open Pit Plus Low Grade Sensitivity Analysis provides the best economic results.

In RPA’s opinion, this scenario is likely to become the Base Case in the future, should

the low-grade mineralization be included in an updated resource estimate. The quantity

and grade of the low-grade mineralization is conceptual in nature and there has been

insufficient analysis completed to define a Mineral Resource. It is uncertain at this stage

if further exploration or analysis will result in the definition of a Mineral Resource in this

area.

Specific conclusions by area of the PEA are as follows.

GEOLOGY AND MINERAL RESOURCES

The mineralization in the Ntaka Hill area is considered typical of magmatic sulphide deposits. A range of sulphide textures from disseminated to net-textured to massive may be preserved within a host intrusion, with the massive sulphides typically forming at or near the base of the intrusion. The most common magmatic sulphide minerals are pyrrhotite, pentlandite, chalcopyrite, and pyrite, with pentlandite and pyrrhotite being the nickel-bearing phases.

The exploration strategy employed by Continental in the search for nickel-

copper sulphides has focused on the delineation of the various sulphide zones, the success of which led to an initial resource estimation for the Project in 2009.

From 2009 to 2010, the company continued to work to expand its current

Mineral Resources as well as identify and test new targets for additional zones of nickel-copper mineralization. The success of both of these objectives, including discovery of the Sleeping Giant Zone, resulted in the commissioning of an updated Mineral Resource estimate, used as the basis for the PEA.

Table 1-3 lists the Mineral Resources at Ntaka Hill by resource category, as

disclosed in a Technical Report dated April, 2011.

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TABLE 1-3 MINERAL RESOURCES – APRIL 2011 Continental Nickel Limited – Ntaka Hill Nickel Project

Resource Class

Tonnes (000) % Ni % Cu % Co g/t Pt g/t Pd

g/t Au

Measured 1,871 1.74 0.30 0.05 0.033 0.041 0.021

Indicated 3,110 0.91 0.20 0.04 0.012 0.015 0.008

Total M+I 4,981 1.22 0.24 0.04 0.020 0.025 0.013

Total Inferred 17,300 0.8 0.2 0.02 0.03 0.04 0.02

Notes: 1. CIM definitions were followed for Mineral Resources. 2. Mineral Resources were estimated at a NSR cut-off value of $17/t for open pit mining, this

corresponds to an approximate grade of 0.14% Ni. 3. Mineral Resources were estimated using an average long-term nickel, copper, and cobalt prices of

$10.00/lb, $3.50/lb, and $20.00/lb, respectively. 4. Preliminary metal recoveries were estimated at 87% for nickel, 81% for copper, and 80% for cobalt. 5. No minimum width was used.

The current drilling program intersected multiple zones of disseminated sulphide mineralization located above the Sleeping Giant Zone, which have not been included in the resource estimate. This “exploration target”, as defined by NI 43-101, could contain 10 Mt to 15 Mt, at grades ranging from 0.25% Ni to 0.40% Ni. The quantity and grade of the material included in the “exploration target” is conceptual in nature and there has been insufficient analysis completed to define a Mineral Resource. It is uncertain at this stage if further exploration or analysis will result in the definition of a Mineral Resource in this area.

MINING

The high-value mineralization at Ntaka Hill generates open pits with high strip ratios. The presence of low-grade mineralization above the Sleeping Giant Zone represents an opportunity to reduce these strip ratios.

PEA production schedules and cash flows are based on pit optimizations, not pit

designs. Although this level of detail is appropriate for PEA-level studies, more work is required to estimate Mineral Reserves.

PROCESSING & METALLURGY

Based on the samples tested to date the expectation is that the Project will generally produce a high grade nickel plus copper bulk concentrate with very low levels of MgO and clean of other contaminants using a conventional approach to the recovery of nickel from sulphide ore.

It is clear that the mineralogy of the samples will be a good predictor for flotation response and as such can be used to provide variability screening for the mineralized zones.

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RECOMMENDATIONS RPA recommends that Continental advance the Project to the next phase of project

development, by collecting data, conducting metallurgical test work and conducting

studies that allow for estimation of Mineral Reserves.

Specific recommendations by area are as follows.

GEOLOGY & RESOURCES

Complete the diamond drill program (approximately 30,000 m) to expand and improve the classification of the Mineral Resources at the Sleeping Giant nickel-copper zone.

Update the Mineral Resource estimate with the results of the new drilling, including the exploration target, and taking into consideration the economic results of this PEA.

MINING Carry out a geotechnical drill program and analysis to confirm appropriate pit

slope angles.

Improve the understanding of the mining cost base and carry out a preliminary mining plan and develop a detailed estimate of the mining costs.

Estimate Mineral Reserves as part of a detailed study. METALLURGY

Collect additional representative samples and carry out a definitive metallurgical test work program.

Investigate options and optimize the Project in relation to the trade-off between grade and recovery and also the production of separate nickel and copper concentrates.

OTHER

Continue the baseline environmental studies program, and progress permitting activities and community consultation.

Conduct a hydrogeological investigation (drilling, testing, and analysis) in the proposed water supply borehole location.

Carry out a program of condemnation drilling (approximately 10,000 m) in proposed locations for infrastructure (plant, camp, waste dumps, tailings storage facility).

Review access road design.

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Review marketing options and begin to develop off-take agreement(s).

The recommended work program and budget is summarized in Table 1-4.

TABLE 1-4 PROPOSED DEVELOPMENT PLAN AND BUDGET Continental Nickel Limited – Ntaka Hill Nickel Project

Activity Description Cost (C$)

Drilling Infill Drilling ~30,000 m diamond core drilling at Sleeping Giant 7,500,000Condemnation Drilling ~10,000 m drilling for plant, camp, waste dumps and

TSF 2,500,000

Pit Geotechnical Pit geotechnical drilling and investigations 1,795,000Other Geotechnical Plant and TSF geotechnical pits, drilling and

investigations 170,000

Hydrogeological Hydrogeological drilling to prove up project water supply 380,000Subtotal 12,345,000Technical Studies Mining & Geology Resource update following 2011 extension drilling,

mining optimization studies, detailed costing studies 850,000

Metallurgy Definitive metallurgical test work program and interpretation

500,000

Engineering Options studies and detailed costing studies for process plant and infrastructure

1,550,000

Water Supply Hydrogeological interpretation of drilling and design of bore field

100,000

Tailings Dam Options studies and detailed costing study 140,000Access Road Options studies, road materials identification and

preliminary design and costing 300,000

Subtotal 3,440,000Other Site Survey LIDAR site survey for detailed studies and design 150,000Concentrate Marketing Options studies and development/negotiation of off take

agreement 280,000

Environment Completion of ESIA, EMP, RAP and commencement of community engagement program

790,000

Subtotal 1,220,000Management and Administration Continental Management of work outlined above and overhead

costs associated with delivery of work plan 1,180,000

Contingency 1,820,000Subtotal 3,000,000Total 20,005,000

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TECHNICAL SUMMARY

BACKGROUND PROPERTY DESCRIPTION AND LAND TENURE The Ntaka Hill property is located in southeastern Tanzania, East Africa, 100 km north of

the border with Mozambique, approximately 180 km west of the coastal port city of

Mtwara and 400 km south of Dar es Salaam. The property is located in the Nachingwea,

Liwali, Lindi, and Kilwa districts in Lindi Region, and the Masasi District in Mtwara

Region. The Ntaka Hill area, where the nickel-copper sulphide discoveries are located,

is situated in the north central portion of the property, at approximately 10º06’S Latitude

and 38º33’E Longitude, 47 km northwest of the town of Nachingwea and 12 km

northwest of Mnero village.

The Ntaka Hill Nickel Project consists of 40 granted Prospecting Licences (PLs) totalling

4,548 km2 in area and two offered PLs totalling 150 km2. In addition Continental holds

19 applications for PLs covering 1,685 km2 in a joint venture, which are largely

comprised of applications for areas that were relinquished as part of the licence renewal

process.

Since Continental became operator of the Project, it has commissioned five separate

due diligence reports by Tanzanian legal counsel on the mineral rights held by the joint

venture in support of equity financings and for annual audit purposes. All reports

concluded that the granted licences were validly held and in good standing at the time of

the reviews (Rex Attorney’s 2007, 2008; Mkonos 2009, 2010, 2011).

EXISTING INFRASTRUCTURE The Ntaka Hill Nickel Project can be accessed via a 300 km road network west from the

port city of Mtwara located in southeast Tanzania. The road network is comprised of 200

km of sealed highway extending west from Mtwara, followed by an all-weather dirt road

from the town of Masasi, north to Nachingwea, and ultimately to the Mnero

village/mission. From Mnero, poorly maintained tracks passable with four wheel drive

extend 20 km to the Ntaka Hill area in the north central portion of the property. During

the rainy season, portions of these roads may be temporarily cut off due to rising rivers

and road washouts.

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There are several villages and towns located on and near the property and numerous

dwellings scattered between the villages. The largest towns/villages are Nachingwea

with a population of approximately 20,000, Masasi with a population of approximately

34,000, and Mnero with a population of approximately 8,000. The closest village to the

Ntaka Hill area is the Nditi village located some three kilometres to the east.

In the immediate Project area, there are some commercial farm cooperatives growing

cashew nut and a large amount of subsistence farming. There is no significant industrial

activity and there is ample and suitable room available on the property for the

establishment of mining and processing operations, waste piles, and a tailings storage

facility. There is a plentiful supply of unskilled labour in the area; however, extensive

training programs would be required to equip potential employees of a mining operation

with required skills.

Currently, there is no grid power in the immediate project area. Electricity in the larger

towns of Masasi and Nachingwea, approximately 45 km from site, is supplied by

transmission line from the port town of Mtwara where electricity is generated from a

natural gas fired, commercially run power station.

HISTORY Prior to Continental activities, exploration in the area of the current Ntaka Hill Nickel

Project was carried on intermittently between 1950 and 2006 by Inco Limited/Selection

Trust, Broken Hill Proprietary (BHP), and IMX Resources Pty Ltd (IMX).

Between 1950 and 1953, Inco Limited, in joint venture with Selection Trust, carried out a

nickel exploration program on the north central portion of the Nachingwea property. This

work included mapping, trenching, and diamond drilling (six holes, 1,306.7 m) for the

purpose of testing an outcropping nickel-copper gossan at Ntaka Hill. The most

significant result was a drill intersection of sulphide mineralization which graded 1.60%

Ni and 0.56% Cu over 3.7 m.

Between 1996 and 1998, BHP conducted regional airborne magnetic and radiometric

surveys over an extensive area, which included the present Ntaka Hill property. The

surveys were part of a base metal sulphide exploration program largely targeting ‘Broken

Hill’ style lead/zinc/silver deposits.

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A regional geochemical sampling program was also completed which included 2,571

stream sediments collected at a sample density of one sample per five square kilometres

and 460 soil samples collected over interpreted magnetic targets. The geochemical

sampling program returned anomalous platinum group element (PGE) and base metal

results, which were not followed up. BHP abandoned the project in 1999 without

completing any drill testing of targets.

IMX initially carried out data compilation, processing, and interpretation of the BHP

stream sediment data and acquired Ikonos and Landsat Thematic Mapper scenes for

the Project area. In 2004, a surface sampling program was completed and anomalous

nickel and copper values were obtained from soil samples in the Ntaka Hill area and an

additional area to the south.

In 2005, more detailed soil geochemical surveys were completed and a 450 line-

kilometre VTEM helicopter-borne survey was flown by Geotech Ltd. The VTEM survey

detected numerous early- to late-channel anomalies, of which more than 30 anomalies

were identified for follow-up work. Twenty-two of these anomalies were found to be

coincident with anomalous nickel and copper soil geochemistry and most had some

aeromagnetic association.

In 2006, a basic field camp was established at Ntaka Hill and a ground TDEM

geophysical survey was completed to confirm the various VTEM anomalies identified for

follow-up. Seventeen diamond drill holes totalling 2,153 m were completed to test

various airborne and ground electromagnetic conductors often associated with nickel-in-

soil anomalies. Fourteen drill holes were drilled at Ntaka Hill and three were completed

in an area eight kilometres to the southwest. At Ntaka Hill, 12 of 14 drill holes

intersected nickel-bearing sulphide mineralization including a new nickel sulphide

discovery from drill hole NAD013 (11.23% Ni, 1.74% Cu, 0.15% Co over 3.0 m), now

referred to as the NAD013 Zone.

In 2007, the Nachingwea Project was joint-ventured to Continental as operator. Since

that time, Continental has implemented a multi-disciplinary exploration program leading

to the discovery and drill delineation of seven separate magmatic nickel-copper sulphide

deposits for which Mineral Resources have been estimated and reported.

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GEOLOGY AND MINERALIZATION The Ntaka Hill nickel discoveries lie within the late-Proterozoic Mozambique Belt (MB) in

southeastern Tanzania. In the Ntaka Hill Nickel Project area, MB lithologies consist of a

mixed assemblage of mafic to felsic granulites, gneisses, and migmatites interlayered

with amphibolites and metasedimentary rocks, including quartzites, banded magnetic

quartzites, pelites, graphitic schists, and marbles. These lithologies are cross-cut by

mafic to ultramafic intrusions of unknown age and include the Ntaka ultramafic intrusion.

All units are complexly deformed and metamorphosed to amphibolite and granulite

grades of metamorphism and occur in blocks bounded by major northwest, east-west,

and northeast fault zones.

The mineralization in the Ntaka Hill area is considered typical of magmatic sulphide

deposits. These deposits form as the result of the segregation of droplets of immiscible

sulphide liquid from an ultramafic or mafic magma and the subsequent accumulation or

concentration of the droplets generally towards the base of the magma chamber or

conduit as a result of gravity or other magma flow dynamics. The magmatic segregation

and accumulation of sulphides in an intrusion is influenced by a number of factors

including the crystallization history of the magma, the availability of an external sulphur

source(s), the open versus closed nature and longevity of the magma system, and the

flow dynamics within the intrusion. A range of sulphide textures from disseminated to

net-textured to massive may be preserved within a host intrusion with the massive

sulphides typically forming at or near the base of the intrusion. The most common

magmatic sulphide minerals are pyrrhotite, pentlandite, chalcopyrite, and pyrite, with

pentlandite and pyrrhotite being the nickel-bearing phases.

The ultramafic rocks in the Ntaka Hill area contain widespread sulphide mineralization

and host all of the significant nickel sulphide zones discovered to date on the property.

Three main styles of nickel sulphide mineralization have been identified from the drilling:

Intrusion-hosted magmatic sulphide mineralization comprised of disseminated, blebby, to net-textured with local semi-massive to massive sulphides hosted within pyroxenitic to locally peridotitic ultramafic rocks.

Remobilized mineralization occurs in vein systems that consist of single to

multiple veins and stringers of coarse-grained massive sulphide mineralization. Individual veins pinch and swell from 10 cm to up to 4 m, generally hosted within pyroxenite or along the contacts of ultramafic and intervals of amphibolite and felsic gneiss.

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Sulphide zones intermixed with graphite and rafts of metasedimentary rocks interpreted to have resulted from the contamination of the intrusion through assimilation of the graphitic metasediments. Mineralization consists of intermixed graphite and sulphides, the latter varying from disseminated to net textured to nearly massive sulphides in contact with graphite rich metasediment.

MINERAL RESOURCES Mineral Resources remain unchanged, as disclosed in a Technical Report dated April,

2011. RPA prepared Mineral Resource estimates for the G, H, J, L, M, NAD013, and the

Sleeping Giant zones using digital drill hole data provided by Continental. RPA verified

and modified a set of 3D solids of the deposits also provided by Continental. Pertinent

statistics and variograms were determined for the individual deposits and grades were

interpolated into the block models using inverse distance squared (ID2) methodologies.

Mineral Resources containing nickel, copper, cobalt, platinum, palladium, and gold were

estimated.

It was assumed that values for nickel, copper, and cobalt will contribute to the economics

of the deposit. A Net Smelter Return (NSR) was calculated for each block based on the

estimated grade of nickel, copper, and cobalt, reasonable long term metal prices,

estimated recoveries for each metal, and standard industry treatment terms.

Based on the assumption that there is potential to establish a mining operation using a

centralized mill receiving feed from multiple satellite open pit operations, reasonable

parameters were used to fit preliminary pits to the appropriate Ntaka Hill deposits.

Generally due to small tonnages, the mineralization in all zones continuing below the

potential pit bottoms was determined not to be of economic interest assuming

reasonable underground mining costs. Thus, only near-surface resources potentially

mined by open pit methods are reported (Table 1-5).

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TABLE 1-5 MINERAL RESOURCES – APRIL 2011 Continental Nickel Limited – Ntaka Hill Nickel Project

Measured Mineral Resources

Zone Tonnes (000)

Grade

% Ni % Cu % Co g/t Pt g/t Pd g/t Au G Zone - - - - - - -H Zone 338 1.394 0.208 0.026 0.034 0.037 0.016J Zone 902 1.586 0.241 0.056 0.024 0.024 0.018L Zone 137 2.427 0.449 0.046 0.046 0.064 0.030M Zone 380 1.720 0.361 0.035 0.035 0.061 0.027NAD013 114 3.166 0.726 0.043 0.082 0.094 0.034

Sleeping Giant - - - - - - -Total

Measured 1,871 1.74 0.3 0.05 0.033 0.041 0.021

Indicated Mineral Resources

Zone Tonnes (000)

Grade

% Ni % Cu % Co g/t Pt g/t Pd g/t Au G Zone 1,990 0.652 0.175 0.042 0.006 0.019 0.023H Zone 665 1.257 0.177 0.025 0.029 0.035 0.015J Zone 124 0.414 0.097 0.023 0.007 0.013 0.022L Zone 65 2.937 0.568 0.050 0.071 0.087 0.039M Zone 146 1.552 0.322 0.033 0.044 0.066 0.037NAD013 120 1.989 0.415 0.034 0.047 0.066 0.023

Sleeping Giant - - - - - - -Total Indicated 3,110 0.91 0.2 0.04 0.012 0.015 0.008

Total M+I 4,981 1.22 0.24 0.04 0.02 0.025 0.013

Inferred Mineral Resources Zone Tonnes

(000) Grade

% Ni % Cu % Co g/t Pt g/t Pd g/t Au G Zone 1,240 0.53 0.16 0.03 0.01 0.02 0.03H Zone 620 0.98 0.14 0.02 0.04 0.03 0.02J Zone - - - - - - -L Zone - - - - - - -M Zone - - - - - - -NAD013 - - - - - - -

Sleeping Giant 15,400 0.77 0.17 0.019 0.029 0.037 0.016Total Inferred 17,300 0.8 0.2 0.02 0.03 0.04 0.02

Notes: 1. CIM definitions were followed for Mineral Resources. 2. Mineral Resources are estimated using an average long-term nickel, copper, and cobalt prices of

$10.00/lb, $3.50/lb, and $20.00/lb, respectively. 3. Preliminary metal recoveries estimated at 87% for nickel, 81% for copper, and 80% for cobalt. 4. Mineral Resources are reported at an NSR cut-off value of $17 per tonne. This cut-off value

represents a pit discard, or incremental cut-off, and is only valid within an optimized pit shell.

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5. No minimum mining width was used. 6. Totals may not add due to rounding.

CURRENT DRILLING Diamond drilling at Ntaka Hill in 2011 (since the resource estimate noted above)

comprises approximately 14,000 m, which is being carried out for the purpose of

expanding the Sleeping Giant Zone and to test several new targets within the Ntaka

Intrusion. A total of 8,668 m of drilling was completed in 26 holes to late September

2011.

The current drilling supports the interpretation that the Sleeping Giant Zone contains a

higher grade, more sulphidic core comprised of remobilized sulphide stringers and veins

as well as disseminated and bleb sulphides. Nickel grades within the core of the zone

average between 1% Ni and 2.5% Ni. The high grade core can be traced over a strike

extent of 500 m and a dip extent of about 100 m and open down plunge to the south.

Disseminated sulphide intersections located in the hanging wall of the zone are also

expected to expand the Sleeping Giant deposit and Continental expects to undertake a

new Mineral Resource estimate at the completion of the 2011 drilling program.

MINING METHODS The Base Case Open Pit Scenario is based on the Mineral Resource estimate

completed in April 2011 (RPA, 2011). A general arrangement of the Project is included

in Figure 1-2. This figure shows the location of main surface facilities such as open pits,

tailings pond and dams, waste dumps, process plant, and haul roads.

444,000 E 454,000 E450,000 E448,000 E446,000 E 452,000 E8,8

86,0

00 N

458,000 E456,000 E8,8

84,0

00 N

8,8

82,0

00 N

8,8

80,0

00 N

8,8

86,0

00 N

8,8

84,0

00 N

8,8

82,0

00 N

8,8

80,0

00 N

Nditi

444,000 E 454,000 E450,000 E448,000 E446,000 E 452,000 E

55 Mt

5 Mm³

7.4 Mt

28.3 Mt

Process Plant

Camp Site

H

L

G

SG

WasteDump 2

390 Mt

J Pit

M Pit

NAD013

Diversion Ditch

Overburden Pile

Waste Dump 1

Tailings Phase I

Tailings Phase II

Elev. 315

Elev. 313

Elev. 303Elev. 305

0 1000

Metres

2000 3000 4000

N

October 2011

Existing Road

Future Access and Haul RoadSurface General Arrangement

Ntaka Hill Nickel Project

Continental Nickel Limited

Tanzania, Africa

Figure 1-2

1-2

1

ww

w.rp

acan

.co

m

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Rev. 0 Page 1-22

BASE CASE OPEN PIT SCENARIO Open pit possibilities were investigated by pit optimization, using Whittle software, run on

the resource block model. Pit optimizations using updated inputs in comparison to the

resource work confirmed that a significant proportion of the resource block model would

be economic to mine using open pit methods.

Whittle pit optimizations were performed based on typical costs for comparable

operations and projects of a similar scale. Metallurgical recoveries were based on initial

mineralogy and test work. Metal prices of US$10.00/lb Ni, US$3.50/lb Cu, and

US$20.00/lb Co were based on short-term independent forecasts. Revenue factors were

calculated and used to generate a net value model which was used to float cones in the

Whittle software.

In the absence of geotechnical information, pit slope angles were selected based on

industry averages. Pit optimizations were carried out using pit slopes of 45°.

The exercise returned 22.63 Mt grading 0.86% Ni, 0.19% Cu, and 0.025% Co,

considering all resource categories (the updated inputs resulted in slightly different pit

outlines compared to those used for the resource estimate). Of the 22.63 Mt, 75% are

Inferred Resources that may be potentially mineable via open pit methods.

Dilution and mining recovery factors of 5% and 100%, respectively, were applied to the

above numbers, with dilution at zero grade. As a result, the diluted and recovered

tonnage and grades changed to 23.77 Mt at 0.82% Ni, 0.18% Cu, and 0.024% Co.

Waste within the pit shells totals 409 Mt, resulting in an average strip ratio of 17.2:1.

An upside case for the Open Pit Scenario was developed to investigate the impact of

adding the low-grade mineralization found outside the current resource model, but within

the potential Sleeping Giant open pit. This upside case is discussed in the Economic

section of this report.

OPEN PIT / UNDERGROUND SCENARIO High strip ratios in the Base Case Open Pit Scenario suggested that deeper portions of

the deposit may be more economically mined by underground methods. For the Open

Pit / Underground Scenario, the pit optimization inputs were the same as for the Base

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Rev. 0 Page 1-23

Case Open Pit Scenario, with the addition of an underground trade-off cost. This

underground mining cost is evaluated by the software in comparison with the open pit

mining cost (including all applicable waste mining). Underground costs were

differentiated by mining method – $30/t for bulk mining (Sleeping Giant Zone) and $50/t

for cut and fill mining (smaller zones).

The resulting production totals were similar to the Base Case Open Pit Scenario,

however, the bulk of the tonnage was in the underground portion.

The South Zones (comprising of Sleeping Giant, L, NAD013 and H) returned almost no

open pit mining (a total of 670,000 t of mill feed from L and H versus. 17.4 Mt for

underground). Examination of zone geometry revealed that the shallow portions of the

mineralization are very narrow and that the strip ratio climbs above the trade-off value

almost immediately, and never returns below that number. The small amount of open pit

production in the south is accompanied by 14.7 Mt of waste, giving a strip ratio of 22:1.

The split in the Northern Zones (comprising J, M, and G Zones) is more as expected,

with a majority of the mineralization captured in the pits. The quantities left for

underground mining are not considered large enough to support the capital costs to

access them, so for this scenario, the larger open pit only values for the northern zones

were used (4.8 Mt mill feed, at a strip ratio of 12:1).

Dilution and mining recovery was applied to the above numbers, using 5% and 100%

respectively for open pit mining, and 15% and 95% respectively for underground mining;

with all dilution at zero grade. As a result, the diluted and recovered tonnage and grades

changed to 24.49 Mt (5.90 Mt open pit and 18.59 Mt underground) at 0.77% Ni, 0.17%

Cu, and 0.022% Co. Waste mining of 75 Mt is required for the open pit stage of the

project, for a strip ratio of 12.7:1.

It is noteworthy that for underground mining, only the higher grade mineralization of

Sleeping Giant Zone that is currently included in the Inferred Resource would be mined. OPEN PIT MINE DESIGN Pit optimizations do not include individual benches or ramp design. For the pit size,

production requirements, and recommended equipment fleet, RPA considers mining of

12 m benches and development of 33 m wide ramps, including ditches and safety berm,

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Rev. 0 Page 1-24

to be appropriate. The ramps should be designed at 10% grade with exits appropriately

located in order to minimize distances to the mill and the waste rock dumps.

The production rate is assumed to be 1 Mtpa for the first four years of production, during

which mining would be carried out by contractors, in order to keep initial capital as low as

possible. From Year 5 onwards, the production is assumed to be expanded to 2.5 Mtpa

with owner-operated mining equipment, to reduce operating costs.

Mining will be carried out using conventional open pit methods consisting of the following

activities:

Drilling performed by conventional production drills;

Blasting using ANFO (ammonium-nitrate fuel oil) and a down-hole delay initiation

system;

Loading and hauling operations performed with hydraulic shovels, front-end loaders and rigid haulage trucks.

The production equipment will be supported by bulldozers, graders and water trucks.

Sizes of equipment will vary depending on production rate. Owner operations at 2.5

Mtpa will require the purchase of a large mining fleet.

In the scenario where the Sleeping Giant Zone is mined using open pit methods, there is

a requirement to divert a river within the footprint of the pit. A trench (maximum depth 25

m) will be excavated around the west side of the pit, before returning the flow to the

natural channel. A cost estimate for the river diversion is included in capital costs.

UNDERGROUND MINE DESIGN The underground mining methods recommended by RPA are cut & fill for narrow zones,

and longhole mining with transverse access from the deposit footwall through to the

hanging wall for larger zones. Sleeping Giant Zone (high grade mineralization only as

low grade proves to be non-economic in an underground mining cost point of view),

NAD013 Zone and H Zone (the p

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