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Formation Capital Corp. Technical Report

Idaho Cobalt Property Feasibility Study (Ram Deposit)

September 14, 2007


Formation Capital Corp. Technical Report Idaho Cobalt Property Page 1

1.0 TITLE PAGE

1.1 Technical Report: Idaho Cobalt Property, Feasibility Study (Ram Deposit) Submitted to: Formation Capital Corp.

1.2 Mineral Project Location: The Idaho Cobalt property is located in east-central Idaho, approximately 25.8 miles west of the town of Salmon.

1.3 Qualified Persons:

Samuel Engineering, Inc. (Richard Kunter, QP, FAus, BS, MS, IMM (CP), Metallurgical Engineer) Mine Development Associates, Inc. (Neil Prenn, PE, Mining Engineer)

1.4 Effective Date of Report: September 14, 2007 Samuel Engineering, Inc. 8450 East Crescent Parkway, Suite 200 Greenwood Village, Colorado 80111-2816 Telephone: 303.714.4840 Fax: 303.714.4800



2.0 Table of Contents

1.0 TITLE PAGE ......................................................................................................... 1

2.0 TABLE OF CONTENTS........................................................................................ 2

3.0 SUMMARY............................................................................................................ 9

4.0 INTRODUCTION................................................................................................. 13

5.0 RELIANCE ON OTHER EXPERTS .................................................................... 17

5.1 DISCLAIMER .......................................................................................................17

5.2 RELIANCE ON OTHER EXPERTS .....................................................................17

5.3 LAND....................................................................................................................17

5.4 PERMITTING .......................................................................................................17

5.5 GEOTECHNICAL REPORT.................................................................................18

5.6 PREVIOUS TECHNICAL REPORT .....................................................................18

5.7 COBALT PRODUCTION FACILITY ....................................................................18

6.0 PROPERTY DESCRIPTION AND LOCATION .................................................. 19

6.1 LOCATION...........................................................................................................19

6.2 DOCUMENTATION AND STATUS OF THE MINERAL CLAIMS.......................19

6.3 EXCEPTIONS TO THE TITLE OPINION.............................................................22

6.4 REQUIREMENT TO MAINTAIN THE CLAIM IN GOOD STANDING.................24

6.5 ENVIRONMENTAL AND PERMITTING REQUIREMENTS................................24

7.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ........................................................................................................... 28

7.1 ACCESSIBILITY ..................................................................................................28

7.2 CLIMATE..............................................................................................................28

7.3 LOCAL RESOURCES AND INFRASTRUCTURE PHYSIOGRAPHY................29



7.4 PHYSIOGRAPHY.................................................................................................29

8.0 HISTORY ............................................................................................................ 30

9.0 GEOLOGICAL SETTING.................................................................................... 31

9.1 REGIONAL GEOLOGY .......................................................................................31

9.2 LOCAL GEOLOGY..............................................................................................33

9.3 GEOCHEMISTRY ................................................................................................38

10.0 DEPOSIT TYPES................................................................................................ 41

11.0 MINERALIZATION.............................................................................................. 43

12.0 EXPLORATION .................................................................................................. 45

13.0 DRILLING ........................................................................................................... 47

14.0 SAMPLING METHOD AND APPROACH .......................................................... 49

14.1 CORE RECOVERY..............................................................................................49

15.0 SAMPLE PREPARATION, ANAYSES AND SECURITY................................... 50

15.1 SAMPLE PREPARATION ...................................................................................50

15.2 QUALITY CONTROL...........................................................................................50

15.3 SECURITY ...........................................................................................................53

16.0 DATA VERIFICATION........................................................................................ 54

17.0 ADJACENT PROPERTIES................................................................................. 60

17.1 SUNSHINE DEPOSIT ..........................................................................................60

17.2 OTHER DEPOSITS..............................................................................................63

18.0 MINERL PROCESSING AND METALLURGICAL TESTING ............................ 64

18.1 REVIEW OF METALLURGICAL TEST WORK...................................................64

18.2 PROCESS DESCRIPTION ..................................................................................66

18.3 PLANT SITE LOCATION.....................................................................................69



18.4 CONCENTRATE TRANSPORTATION ...............................................................70

18.5 TAILINGS AND WASTE ROCK DISPOSAL.......................................................70

19.0 MINERAL RESOURCES AND MINERAL RESERVES ESTIMATES................ 71

19.1 INTRODUCTION ..................................................................................................71

19.2 DATA ACQUISITION...........................................................................................71

19.3 RAM DEPOSIT.....................................................................................................72

19.4 GEOCHEMISTRY OF THE RAM DEPOSIT ........................................................73

19.5 SPECIFIC GRAVITY............................................................................................74

19.6 RAM RESOURCE METHOD ...............................................................................74

19.7 RAM RESOURCE ESTIMATE - 2006 .................................................................75

20.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES.............................................................................. 83

20.1 MINING OPERATIONS........................................................................................83

20.2 RECOVERABILITY..............................................................................................91

20.3 MARKETS............................................................................................................91

20.4 CONTRACTS .......................................................................................................95

20.5 ENVIRONMENTAL CONSIDERATIONS ............................................................95

20.6 TAXES................................................................................................................102

20.7 CAPITAL AND OPERATING COST ESTIMATES............................................102

20.8 ECONOMIC ANALYSIS.....................................................................................103

20.9 CAPITAL PAYBACK .........................................................................................107

20.10 MINE LIFE..........................................................................................................107

21.0 INTERPRETATION AND CONCLUSIONS ...................................................... 108

21.1 RISKS.................................................................................................................108

21.2 OPPORTUNITIES ..............................................................................................109

22.0 RECOMMENDATIONS..................................................................................... 115



23.0 REFERENCES.................................................................................................. 116

24.0 DATE AND SIGNATURE.................................................................................. 123

25.0 OTHER RELEVANT DATA AND INFORMATION ........................................... 124

25.1 INFRASTRUCTURE ..........................................................................................124

26.0 ILLUSTRATIONS.............................................................................................. 129

LIST OF TABLES

Table 3.1 ICP Deposit Resources @ 0.20% Co Cutoff............................................................12

Table 4.1 Consultant Companies Commissioned for the ICP..................................................14

Table 6.1 ICP Mining Claims ...................................................................................................20

Table 6.2 Permits and Licenses Required for the ICP.............................................................26

Table 9.1 Stratigraphy of the Ram Deposit..............................................................................37

Table 9.2 2004 Ram Drilling – Anomalous Geochemistry .......................................................39

Table 9.3 2004 Ram Drilling – Correlation Coefficients ...........................................................40

Table 13.1 ICP Drilling Summary...............................................................................................47

Table 15.1 Check Samples, Blanks, and Standards Pre-1999..................................................51

Table 15.2 Check Samples, Blanks, and Standards – 1999 Ram Drilling Program ..................51

Table 15.3 Metallurgical Composites Grades – 2004 ...............................................................52

Table 15.4 2005-2006 Check Assays ........................................................................................52

Table 16.1 Ram Summary Statistics of Mineralized Horizon Assay Data..................................55

Table 16.2 Ram Summary Statistics of Hanging Wall Mineralized Horizon Assay Data ...........56

Table 16.3 Ram Summary Statistics of Main Mineralized Horizon Assay Data.........................57

Table 16.4 Ram Summary Statistics of Footwall Mineralized Horizon Assay Data ...................58

Table 16.5 Ram Rare-Earth Analysis ........................................................................................59

Table 17.1 Stratigraphy of the Sunshine Deposit…………………………………........................62

Table 18.1 Locked Cycle Test Results…………………………………........................................65

Table 18.2 Gravity Concentration Test Results…………………………………. .........................66

Table 18.3 Hydrometallurgical Test Conditions…………………………………...........................67

Table 18.4 Hydrometallurgical Test Conditions………. .............................................................68

Table 19.1 ICP Drilling Summary...............................................................................................72

Table 19.2 Ram Main and Footwall Horizon Orientations .........................................................73



Table 19.3 Tonnage Factor Summary for Ram Deposit ............................................................74

Table 19.4 Ram 3010 Horizon Resources.................................................................................76




LIST OF TABLES, CONT.





Table 19.10 Project Measured and Indicated Resources ............................................................82

Table 20.1 Ram Rock Mass Rating………………………………………………………… ..... …………83

Table 20.2 Ram Deposit Development Workings………………………….…… ..…………………….85

Table 20.3 Proven and Probable ICP Reserves………………………………………………… ……. 86

Table 20.4 ICP Mine Production Schedule………………….……………………………………… ... ...87

Table 20.5 Mine Equipment Summary……………………………………………………………… ....... 88

Table 20.6 Cobalt Market Share Based on End Use for 2005...................................................92

Table 20.7 Cobalt Supply-Demand Balance..............................................................................93

Table 20.8 Required Environmental Permits ...........................................................................100

Table 20.9 Summary of Capital Costs for ICP Mine and Concentrator ...................................101

Table 20.10 Summary of Capital Costs for ICP Cobalt Facility .................................................102

Table 20.11 Average Life of Mine Operating Costs for ICP Mine and Concentrator .................102

Table 20.12 Average Life of Mine Operating Costs for ICP Cobalt Facility ...............................102

Table 20.13 Base Case with Discount Rate ..............................................................................103

Table 20.14 Cost and Price Sensitivities ...................................................................................103

Table 20.15 Sensitivities on Recovery.......................................................................................104



LIST OF FIGURES

Figure 6-1 Location Map ........................................................................................Section 26

Figure 6-2 ICP Mining Claims ..................................................................................Section 26

Figure 7-1 Site Access Roads .................................................................................Section 26

Figure 9-1 Regional Geology ...................................................................................Section 26

Figure 9-2 Local Geology Map ................................................................................Section 26

Figure 9-3 Ram Cross Section ................................................................................Section 26

Figure 9-4 Plan Map Showing Ram Cross Sections ...............................................Section 26

Figure 13-1 Ram Deposit Drill Hole Locations ..........................................................Section 26

Figure 16-1 Cobalt Grade Distribution in Horizon 3023 ............................................Section 26

Figure 19-1 Ram Cobalt QQ Plot ..............................................................................Section 26

Figure 19-2 Ram Copper QQ Plot ............................................................................Section 26

Figure 19-3 Ram Gold QQ Plot .................................................................................Section 26

Figure 19-4 Ram 3023 Horizon .................................................................................Section 26

Figure 20-1 Base Case Financial Model ...................................................................Section 26



3.0 SUMMARY

Formation Capital Corp. U.S. (FCC) commissioned Samuel Engineering, Inc. (SE) to complete a bankable feasibility study of its Idaho Cobalt Project (ICP or “the project”) and an independent Qualified Person’s Review and Technical Report. This report is based on the results of a recently completed feasibility study. The resource estimate for the feasibility study has been updated since the prefeasibility-level Technical Report completed by Mine Development Associates and filed on SEDAR on October 31, 2006. Most notably, this report includes only the Ram deposit in calculating the resource estimate and project economics.

Richard Kunter, QP, FAus, IMM (CP), Metallurgical Engineering, served as the Qualified Person responsible for the preparation of this Technical Report, as defined in National Instrument 43-101, Standards of Disclosure for Mineral Projects (NI 43-101), and in compliance with Form 43-101F1 (the Technical Report).

Formation Capital Corporation, U.S. (FCC) is a wholly owned subsidiary of Formation Capital Corporation an established Canadian company that was incorporated in 1988. The ICP is the company’s flagship property. FCC owns 100 percent of the ICP, which is a high-grade, primary cobalt deposit that is capable of producing super-alloy-grade cobalt metal and cobalt chemicals.

Another of Formation Capital Corporation's wholly owned subsidiaries is Essential Metals Corporation (Essential Metals). The Big Creek Hydrometallurgical Complex was purchased by Essential Metals in 2002. The Sunshine Precious Metals Refinery is part of the Big Creek Hydrometallurgical Complex. It began operations in 2004.

The Idaho Cobalt Property consists of 144 unpatented lode mining claims located in east-central Idaho, approximately 25.8 miles west of the town of Salmon. The property covers 2,520 acres centered on 45°07’50” north latitude and 114°21’42” west longitude. It is within the Gant Mountain 7.5 minute quadrangle of the USGS Topographic Map Series. (Pegg, 1997) More specifically the Idaho Cobalt Project unpatented mining claims are located in Sections 8, 9, 15, 16, 17, 20, 21, and 22, Township 21 North, Range 18 East. The claim block is within the Salmon-Cobalt Ranger District of the Salmon-Challis National Forest (Formation Capital, 2005), lands under surface use administration by the United States Forest Service (USFS).

The ICP is a unique, primary cobalt deposit with few impurities and is capable of producing super-alloy-grade, high-purity cobalt metal. The project's output is expected to be equivalent to approximately 3.3 percent of the entire global cobalt supply and to supply roughly 15 percent of the North American demand for cobalt. This would make FCC the leading primary producer of cobalt in North America, offering a reliable and stable source of cobalt to a growing industry with ever-increasing demands. Other saleable metals include copper and certain by-products.



The ICP is an underground mine. At full production, the mine will supply 280,000 tons per year, which is an average of 800 tons per day for 350 days per year. Processing will be carried out at the mine site and will include crushing, grinding, and flotation to produce a concentrate. Concentrate will be transported by truck through the town of Salmon to the hydrometallurgical facility in Kellogg.

The Big Creek Hydrometallurgical Complex is located a few miles east of Kellogg, Idaho, and about one mile south of Interstate 90, near the Sunshine Mine. The processing facilities include pressure hydrometallurgical leaching capabilities and separate silver and gold refining capabilities. Essential Metals Corporation obtained the permitted facility due to its ideal location and to obtain its hydrometallurgical equipment which can be readily modified to process cobalt concentrate from the ICP. The cobalt extraction and recovery process uses the pressure leaching process which is established at the plant, leaving the precious metals refining section open for the production of high-purity silver bullion and gold from separate feedstocks.

Copper mineralization in the Blackbird Creek area was discovered in 1892, and the area was soon explored as both a copper and gold prospect. The area was first mined by Union Carbide at the Haynes-Stellite Mine located south of the present FCC claim block, during World War I. Union Carbide mined approximately 4,000 tons of cobalt-bearing ore before ceasing operations, reportedly due to excessive mining costs. From 1938 to 1941, the Uncle Sam Mining and Milling Company operated a mine at the south end of the present Blackbird mine and reportedly mined about 3,600 tons of ore. Calera Mining Company, a division of Howe Sound Company, developed and mined the Blackbird deposit between 1943 and 1959 under a contract to supply cobalt to the U.S. government. Calera mined approximately 1.74 million tons of ore grading 0.63% Co, 1.65% Cu, and 0.03 oz Au/ton during this period, accounting for the majority of production from the district. Calera stopped mining when the government contract was terminated in 1960. According to FCC, poor payment for cobalt from smelters hindered continued development of the district, with minor exceptions. Machinery Center Inc. mined 343,000 tons grading 0.36% Co and 0.64% Cu from the district between 1963 and 1966, when Idaho Mining Company (owned by Hanna Mining Company) purchased the property. Noranda optioned the property from Hanna in 1977 and carried out extensive exploration, mine rehabilitation and metallurgical testing. In 1979 Noranda and Hanna formed the Blackbird Mining Company (BMC) to develop the property. BMC completed an internal feasibility study of their property at the time, including material from the Sunshine deposit in 1982. BMC allowed perimeter claims to lapse in 1994, and FCC re-staked much of that ground. From 1995 to the present, FCC has completed surface geochemical sampling and drilled 113 diamond drill holes on their ground.

The most recent drilling was conducted in 2006. Mine Development Associates (MDA) completed an updated resource estimate, which expanded the resources for the ICP using the data from this drilling program. The results of the 2005 and 2006 drilling added thick, high-grade mineralization in the southern portion of the 3023 horizon of the Ram deposit. Resources have been estimated for multiple, mineralized horizons in the Ram deposit. Table 3.1 lists the current combined measured and indicated resources for using a 0.20%



Co cutoff grade. The measured and indicated resource includes the deposit reserves. The Ram deposit contains a number of poorly defined horizons that were not included in the resource estimate.



Table 3.1 The ICP Deposit Resources @ 0.20% Co Cutoff

Measured and Indicated Undiluted Resources (2006)

Horizon Classification Tons 000s % Co % Cu oz Au/ton Thickness True

Thickness3010 Meas + Ind 79.8 0.419 0.045 0.005 7.0 5.7 3011 Meas + Ind 51.8 0.374 0.145 0.007 7.4 6.1 3012 Meas + Ind 101.5 0.596 0.680 0.010 6.4 5.2 3013 Meas + Ind 54.1 1.052 0.281 0.018 5.7 4.7 Subtotal Meas + Ind 287.2 0.593 0.332 0.010 6.6 5.4 3021 Meas + Ind 184.2 0.412 0.578 0.016 8.2 6.7 3022 Meas + Ind 449.3 0.593 0.519 0.014 8.6 7.0 3023 Meas + Ind 1,370.0 0.686 0.776 0.018 11.6 9.6 3032 Meas + Ind 78.6 0.529 0.716 0.008 6.5 5.3 3035 Meas + Ind 24.3 0.607 0.120 0.011 7.9 6.4 Total Ram Meas + Ind 2,393.7 0.631 0.651 0.016 10.0 8.2

The ICP has an estimated mine life of 10 years. The total estimated costs to construct and commission the facilities described in this report is $138.7 million. The average annual LOM operating cost for the mine and concentrator is estimated at $18,605,379, or $70.39 per ton of ore. The average annual LOM operating cost for the hydrometallurgical facility is estimated at $8,606,829, or $3.27 per pound of cobalt. The base-case NPV over the assumed mine life, at a discount rate of 7.50 percent, is $87,291,107. The IRR is 22.30 percent, and the payback is estimated at approximately 44 months.

Based on the results of this NI 43-101 compliant Technical Report, SE through Richard Kunter, the Qualified Person with respect to the feasibility study, recommends that FCC proceed with detailed engineering, procurement, and construction of the Idaho Cobalt Project.



4.0 INTRODUCTION

Formation Capital Corp. U.S. (FCC) commissioned Samuel Engineering Inc. (SE) to provide a feasibility study of the Idaho Cobalt Project (ICP or “the project”) and an independent Qualified Person’s review and technical report. Richard Kunter, QP, FAus, IMM (CP), an SE metallurgical engineer, served as the Qualified Person responsible for the preparation of this technical report as defined in National Instrument 43-101, Standards of Disclosure for Mineral Projects, and in compliance with Form 43-101F1 (the Technical Report). Mr. Kunter is a licensed professional metallurgical engineer with degrees in metallurgical engineering and mineral dressing engineering and more than 41 years of experience in the mining industry, primarily in process engineering, including plant design and plant audits.

Richard Kunter traveled to the site on October 30th and 31st 2006. During this visit, he observed access roads and the transportation routes to the site, the general site location, district historical workings, location of the Ram deposit and drill hole locations, proposed portal location, surface geology, and proposed location of the process facilities.

Upon returning to Salmon, Mr. Kunter observed the FCC office geological maps, prior study documents, and technical information. He also visited the drill core storage warehouse in Salmon, where he observed the stored drill core and examined the split core samples from which the metallurgical samples were taken.

On the same trip, Mr. Kunter visited the Big Creek Hydrometallurgical complex on November 1st and observed the existing facility, equipment to be modified or refurbished, and the site designated for new facilities.

Mr. Kunter is not an associate or affiliate of FCC, or of any associated company. Fees paid for this technical report are not dependent in whole or in part on any prior or future engagement or understanding resulting from the conclusions of this report. These fees are in accordance with standard industry fees for work of this nature.

Persons taking responsibility for certain sections of this report including related figures and tables for the purposes of NI 43-101 are set out in Table 4.1 below.



Table 4.1 Consultant Companies Commissioned for the Idaho Cobalt Project Report

Contributor(s) Independent

QP Consultant Section Title Paul Farley No (RK) SE 3.0 Summary Paul Farley No (RK) SE 4.0 Introduction Gordon Shepherd No (RK) SE 5.0 Reliance on Other Experts 6.0 Property Description Joe Scheuering No (RK) FCC 6.1 Location

Joe Scheuering No (RK) FCC 6.2 Documentation and Status of the Mineral Claims

Joe Scheuering No (RK) FCC 6.3 Exceptions to the Title Opinion

Joe Scheuering No (RK) FCC 6.4 Requirement to Maintain the Claim in Good Standing

Conrad Parrish No (RK) Telesto 6.5 Environmental and Permitting Requirements

Conrad Parrish No (RK) Telesto 7.0

Accessibility, Climate, Local Resources, Infrastructure and Physiography

Conrad Parrish No (RK) Telesto 8.0 History Neil Pren Yes MDA 9.0 Geological Setting Neil Prenn Yes MDA 10.0 Deposit Types Neil Prenn Yes MDA 11.0 Mineralization Neil Prenn Yes MDA 12.0 Exploration Neil Prenn Yes MDA 13.0 Drilling

Neil Prenn Yes MDA 14.0 Sampling Method and Approach

Neil Prenn Yes MDA 15.0 Sample Preparation



Table 4.1 Consultant Companies Commissioned for the Idaho Cobalt Project Report

Contributor(s) Independent

QP Consultant Section Title Neil Prenn Yes MDA 16.0 Data Verification Neil Prenn Yes MDA 17.0 Adjacent Properties 18.0 Mineral Processing

Richard Kunter Yes SE 18.1 Review of Metallurgical Test Work

Richard Kunter Yes SE 18.2 Process Description Richard Kunter Yes SE 18.3 Plant Site Location Dale Buob No(RK) MTB 18.4 Concentrate Transportation

Conrad Parrish No(RK) Telesto 18.5 Tailings and Waste Rock Disposal

Neil Prenn Yes MDA 19.0 Mineral Resources 20.0 Additional Requirements Neil Prenn Yes MDA 20.1 Mining Operations Richard Kunter Yes SE 20.2 Recoverability Dale Buob No (RK) MTB 20.3 Markets Gordon Shepherd No (RK) SE 20.4 Contracts

Conrad Parrish No (RK) Telesto 20.5 Environmental Considerations

Gordon Shepherd No (RK) SE 20.6 Taxes David Weber No (RK) SE 20.7 Capital Costs John Bell No (RK) MTB 20.7 Operating Costs John Bell No (RK) MTB 20.8 Economic Analysis John Bell No (RK) MTB 20.9 Capital Payback Neil Prenn Yes MDA 20.10 Mine Life

Gordon Shepherd No (RK) SE 21.0 Interpretation and Conclusions

Gordon Shepherd No (RK) SE 22.0 Recommendations All QPs 23.0 References All QPs 24.0 Date and signature pages Richard Kunter Yes SE 25.0 Other Relevant Data



For contributors who are not Qualified Persons the Qualified Person who has ensured that the information relied upon is sound is indicated in parenthesis: Richard Kunter (RK), Neil Prenn (NP). All qualified persons authoring this report visited the site.

• Richard Kunter of SE is the overall Qualified Person for this report. • Neil B. Prenn P.E., of MDA, is the Qualified Person with regard to the reserve and

resource estimate and all information presented relative to geology and mining. Mr. Prenn visited the site February 18th & 19th, 2005, April 25th & 28th, 2005, June 1st to 3rd, 2005, and numerous other visits prior to 2005.

This report is based on information known to SE as of September 14, 2007. In preparing this report, SE relied on geological reports and maps, miscellaneous technical papers listed in the References section at the conclusion of this report, as well as the extensive experience of FCC personnel. The feasibility study, and this Technical Report, has built upon previous information on the Idaho Cobalt property, including the most recent Technical Report, completed by MDA and filed on SEDAR on October 31, 2006.



5.0 RELIANCE ON OTHER EXPERTS

5.1 Disclaimer

This report is directed solely for the development and presentation of data with recommendations to allow FCC to reach informed decisions.

This report is intended to be read as a whole, and sections should not be read or relied upon out of context. This report contains the expression of the professional opinions of the contributors to this report and other consultants, based on information available at the time of preparation. The quality of the information, conclusions and estimates contained herein are consistent with the intended level of accuracy as set out in this report, as well as the circumstances and constraints under which the report was prepared, which are also set out herein.

5.2 Reliance on Other Experts

In preparing its sections of this report, Samuel Engineering, Inc. has relied upon certain reports, opinions and statements of other experts. The extent of reliance is described below. Samuel Engineering Inc. hereby disclaims liability for such reports, opinions and statements to the extent that they have been relied upon in preparation of this report as described below.

5.3 Land

FCC has provided copies of legal documentation regarding the land position and unpatented mining claims covering the Idaho Cobalt Project. Although SE is not a “Qualified Person” for assessing the validity of unpatented claims, FCC has completed a due diligence review of the claims and has stamped copies of the payment of claim holding fees for 2005-2006 from the BLM and Lemhi County. Land title opinion was provided by Michael Christian, lawyer, of Marcus, Christian & Hardee, LLP.

5.4 Permitting

The permitting requirements description contained in Section 6.5 of this report was provided by Telesto Solutions Inc. Conrad H. Parrish, P.E., Senior Engineer. Mr. Parrish is a mining professional with over 30 years of experience in mine operations and environmental affairs. He has worked with agencies at the local, state, and federal level. SE did not investigate the environmental or social-economic issues associated with the Idaho Cobalt Project, and the authors are not “Qualified Persons” for these issues. These issues are being addressed by the current permitting program of FCC.



5.5 Geotechnical Report

Several geotechnical reports have been prepared for the project. All of the surface and underground geotechnical work was completed by Dr. David Stone for the surface mine infrastructure and underground design parameters.

Dr. David Stone is a mining/geotechnical engineer with a career that spans 25 years of consulting to metal mines. Dr. Stone’s primary expertise is in mining rock mechanics, where he has advice to several operating mines. His rock slope experience includes geotechnical designs for pits up to 400 m deep, as well as monitoring and remediation of several large pit wall failures.

Dr. Stone currently serves as the US representative on the International Minefill Council, and is the past Chairman of the 7th International symposia on Mining with Backfill. Dave has authored a number of technical papers on cemented back filling and technical presentations made to mining companies.

5.6 Previous Technical Report

A prefeasibility-level Technical Report on the ICP property was prepared by MDA and filed with Sedar on October 31, 2006. Certain information from that report remains valid and is cited herein as indicated.

5.7 Cobalt Production Facility

Process design for the Cobalt Production Facility was provided by FCC. The process has not been commercially operated on a continuous basis but has been tested in batch scale. FCC has relied on Grenville Dunn of Hyromet (Pty) Ltd. for the continuous process design.



6.0 PROPERTY DESCRIPTION AND LOCATION

6.1 Location

The Idaho Cobalt Property consists of 144 unpatented lode mining claims located in east-central Idaho, approximately 25.8 miles west of the town of Salmon, as shown on the location map provided in Figure 6.1. The property covers 2,520 acres centered on 45°07’50” north latitude and 114°21’42” west longitude. It is within the Gant Mountain 7.5 minute quadrangle of the USGS Topographic Map Series. (Pegg, 1997) More specifically the Idaho Cobalt Project unpatented mining claims are located in Sections 8, 9, 15, 16, 17, 20, 21, and 22, Township 21 North, Range 18 East. The claim block is within the Salmon-Cobalt Ranger District of the Salmon-Challis National Forest (Formation Capital, 2005), lands under surface use administration by the United States Forest Service (USFS). The mine portal is located at an elevation of approximately 7,060 feet above sea level, and the processing plant and most of the site infrastructure is located on Big Flat, which is about 1,000 feet above the mine.

6.2 Documentation and Status of the Mineral Claims

Table 6.1 lists the claims that comprise the Idaho Cobalt Project, and Figure 6.2 is a map showing location of the claims. Ownership of unpatented mining claims in the U.S. is in the name of the holder (locator), with ownership of the minerals belonging to the United States of America, under the administration of the U.S. Bureau of Land Management (BLM). Under the Mining Law of 1872, which governs the location of unpatented mining claims on federal lands, the locator has the right to explore, develop and mine minerals on unpatented mining claims without payments of production royalties to the federal government. It should also be noted that in recent years there have been U.S. Congressional efforts to change the 1872 mining law to include the provision of federal production royalties. Currently, however, annual claim maintenance and filing fees are the only federal encumbrances to unpatented mining claims. Idaho BLM records of mining claims can be searched online at www.blm.gov/lr2000.

The mining claims covering the northwest end of the property which includes the Ram deposit, mill site and the tailings and waste rock storage facility were surveyed by Taylor Mountain Survey; fractional claims were located to cover all fractions.



Table 6.1 ICP Mining Claims

Owner Claim Name

BLM/ IMC # County # Owner Claim Name

BLM/ IMC # County #

FCC SUN 1 174156 222991 FCC LDC-1 174579 224140 FCC SUN 2 174157 222992 FCC LDC-2 174580 224141 FCC SUN 3 A 174158 245690 FCC LDC-3 174581 224142 FCC SUN 4 174159 222994 FCC FCC SUN 5 174160 222995 FCC LDC-5 174583 224144 FCC SUN 6 174161 222996 FCC LDC-6 174584 224145 FCC SUN 7 174628 224162 FCC LDC-7 174585 224146 FCC SUN 8 174629 224163 FCC LDC-8 174586 224147 FCC SUN 9 174630 224164 FCC LDC-9 174587 224148 FCC SUN 16 A 177247 245691 FCC LDC-10 174588 224149 FCC SUN 18 A 177249 245692 FCC LDC-11 174589 224150 FCC LDC-12 174590 224151 FCC SUN FRAC 1 176755 228059 FCC LDC-13 A 174591 248718 FCC SUN FRAC 2 176756 228060 FCC LDC-14 A 174592 248719 FCC LDC-16 174594 224155 FCC TOGO 1 176769 228049 FCC LDC-18 174596 224157 FCC TOGO 2 176770 228050 FCC LDC-20 174598 224159 FCC TOGO 3 176771 228051 FCC LDC-22 174600 224161 FCC LDC FRAC 1 A 175880 248720 FCC LDC FRAC 2 A 175881 248721 FCC LDC FRAC 3 A 175882 248722 FCC LDC FRAC 4 A 175883 248723 FCC LDC FRAC 5 A 175884 248724 FCC RAM 1 176757 228501 FCC HZ 6 174644 224414 FCC RAM 2 176758 228502 FCC HZ 7 174645 224415 FCC RAM 3 176759 228503 FCC HZ 8 174646 224416 FCC RAM 4 176760 228504 FCC HZ 9 174647 224417 FCC RAM 5 176761 228505 FCC HZ 10 174648 224418 FCC RAM 6 176762 228506 FCC HZ 11 174649 224419 FCC RAM 7 176763 228507 FCC HZ 12 174650 224420 FCC RAM 8 176764 228508 FCC HZ 13 174651 224421 FCC RAM 9 176765 228509 FCC HZ 14 174652 224422 FCC RAM 10 176766 228510 FCC HZ 15 178085 231338 FCC RAM 11 176767 228511 FCC HZ 16 178086 231339 FCC RAM 12 176768 228512 FCC HZ 18 178087 231340 FCC HZ 19 174657 224427 FCC RAM 13 A 181276 245700 FCC HZ 20 174658 224428

A Amended claim name



Copies of individual unpatented mining claim notices and the detailed map showing their locations are on file with the BLM office in Salmon and with the Lemhi County Recorder’s office in Salmon. The claim notices and maps on file with the BLM and Lemhi County constitute the legal descriptions of the unpatented mining claims. The claim locations in the field take precedence should there be a discrepancy between descriptions and maps. The BLM serial numbers (IMC numbers) for each claim or claim group are listed in Table 6.11. These numbers provide sufficient information to identify specific claims and their detailed description and map which are on file.

The present ICP property position consists of 144 unpatented claims. Evidence of the current status of the claims has been obtained from the following documents:

• A receipt for $20,250 issued by the United States Bureau of Land Management (BLM), acknowledging payment of the annual filing fees for 162 claims, with an attached list of claims. The receipt is dated August 25, 2006. The list of claims prepared by FCC is date-stamped as having been received August 25, 2006, by the BLM. Of the claims, 144 comprise the ICP as listed in Table 6.1. The other 18 claims are in another area and are not part of the ICP. The total BLM fee for the ICP claims is $18,000.

• “Affidavit of Payment of Claim Maintenance Fees and Notice of intention to Hold Unpatented Mining Claims,” prepared by FCC and bearing a date-stamp by Lemhi County indicating that it was received August 25, 2006, with filing fees payment of $84.50. A total of $75.50 is for the Idaho Cobalt Claims.

• An electronic copy of a letter dated February 18, 2005, from the law firm of Marcus, Merrick, Christian & Hardee LLP captioned “Re: Title opinion update for Lemhi County mining claims.” Item II of the title opinion states: “Based upon our examination of these sources, it is our opinion that the claims have been recorded with the BLM and in Lemhi County, Idaho, and that record title to the claims is vested as shown on Exhibit A hereto, subject to the exceptions stated herein.”

• An electronic copy of a table prepared by FCC labeled “Exhibit A.” The table contains a listing of 162 claims, 144 of which are part of the ICP. This electronic copy of “Exhibit A” is presumed to correspond to Exhibit A of the title opinion described above.

• An electronic copy of a Quitclaim Deed dated February 27, 2004, between Northwest Minerals Inc. (a Nevada Corporation), and Formation Capital Corporation U.S. (a Nevada Corporation), in consideration of the sum of $19,880.00, deeding 136 claims from Northwest Minerals Inc. to Formation Capital Corporation U.S. The deed is date-stamped as received by the Lehmi County Recorder on March 9, 2004, with filing fees paid of $15.00, and date-stamped as received by the BLM on March 11, 2004, with filing fees paid of $680.00. In its October 31, 2006, Technical Report, MDA noted that 118 of the claims in “Exhibit A” to the Quitclaim Deed are with the same names and BLM serial numbers (IMC#) as the group of 145 claims that are part of the ICP. The 136 claims are denoted by MDA in Table 4.1 as “FCC” in the ownership column. Note that claim LDC-4 has been dropped since the transaction.



6.3 Exceptions to the Title Opinion In their February 18, 2005, title opinion, Marcus, Merrick, Christian & Hardee noted what they referred to as Exceptions to Title Opinion, which they listed as follows:

Our opinion regarding title to the Claims is subject to the following exceptions:

a. Paramount title of the United States.

b. The right of the United States Department of Agriculture (National Forest Service) to manage the surface resources and protect the National Forest from depredation. This right is coextensive with the claimants’ rights to use their claims for mining purposes.

c. The effect of state and federal regulations pertaining to mining, including the requirement of an approved operating plan and reclamation bond, water quality requirements, and other requirements for mitigation of environmental impact from mining and related activities. We do not believe that these regulations impose an unusual risk to claim owners, although specific reclamation, mitigation or protective measures which may be requested or required may add to the cost of operation.

d. Any conflicting unpatented mining claims (including extralateral rights associated with other mining claims). We found no active mining claims in conflict with the area of Claims reflected in the geographic index maintained by the BLM.

e. Defects in the descriptions of the Claims contained in original location notices and any amendments thereto and BLM records.

f. Documents affecting title recorded in Lemhi County or with the BLM but not indexed or improperly indexed.

g. Restrictions relating to water rights and ingress and egress to and from the claims. Use of water from established streams requires filing with the Idaho Department of Water Resources.

h. Encumbrances or conveyances of title recorded after November 19, 2003.

i. Rights, claims of persons in possession, or other unrecorded interests, not shown in public records.

j. Easements or rights of way not shown by public records.

k. Any lien, or right to a lien for services, labor or materials heretofore or hereafter furnished ,imposed by law and not shown by public records.

l. Taxes or special assessments not shown as existing liens by public records.

m. Discrepancies, conflicts in boundary lines, shortage in area, encroachments and any facts which a correct survey and inspection of the Claims would disclose.

n. The validity of the Claims as to the discovery of valuable minerals thereon.



o. The correct and timely posting of the discovery pit and corners and the maintenance thereof, as required by state and federal law.

p. The location of any of the Claims on property not open to mineral location.

q. As we noted in our 1997 title opinion, no affidavits of assessment work were filed or recorded with respect to the Claims, and no proof of payment of claim maintenance fees for certain of the Claims was recorded in Lemhi County, in 1994. Idaho law requires the recording of an affidavit of assessment work within sixty days of the time set for the performance of such work unless “the performance of annual labor . . . is suspended, extended or waived by act of Congress of the United States, and the provision is therein made for filing or recording a notice, affidavit or statement by the claimant . . . accepting the provisions of said act,” in which event such substitute notice is to be recorded as an affidavit of assessment work would otherwise be recorded. Idaho Code § 47-606. The General Mining Law was amended in 1993 to provide for payment of a claim maintenance fee for unpatented mining claims “in lieu of” performance of assessment work and filing of an affidavit attesting to such work. 30 U.S.C. § 28f(a). This amendment likely constituted a “waiver” of the requirement for annual assessment work. The required maintenance fee was paid for all of the claims for each year since 1994. However, the federal law as amended made no specific provision “for filing or recording a notice, affidavit or statement by the claimant . . . accepting the provisions of said act.” A strict reading would result in the conclusion, therefore, that the recording of affidavits of assessment work in the county is still required under Idaho law, even though annual assessment work is not required under federal law upon payment of the claim maintenance fee. However, Idaho law provides that failure to make the required recording constitutes only “prima facie evidence” (i.e., a rebuttable presumption) that annual labor has not been performed. Since the federal law expressly waives the requirement of performing annual assessment work if a claim maintenance fee is paid, and proof of actual payment of the claim maintenance fee is still possible, no adverse result is likely from the failure to file affidavits of assessment work or proof of payment of claim maintenance fees. A related federal law, the Federal Land Policy and Management Act (“FLPMA”), requires a claimant to file and record a notice of intent to hold a claim each calendar year following the year in which the claim was located, where the requirement of annual assessment work has been “deferred or suspended.” 43 U.S.C. § 1744. This requirement was satisfied for each of the Claims.”

Note: Item “q” was not listed in the Title Opinion. In its October 31, 2006, Technical Report, MDA noted that Item “q” was in previous title opinions and stated . . .”The effect, if any, of that Agreement between Formation Capital Corporation and Northwest Minerals, dated July 1, 1994, regarding some or all of the Claims.” Section 4.4 of this report notes the agreement between Northwest Minerals Inc. and Formation Capital Corporation U.S. for 71 of the original claims at the ICP and that Section 4.1, item 5, describes a transfer of 118 ICP claims from Northwest Mineral Inc. to Formation Capital Corporation U.S. In addition, the list of claims shown in Table 6.1 indicates that all claims for the ICP are now owned by FCC.



6.4 Requirement to Maintain the Claim in Good Standing

In order to maintain the claims in good standing, FCC must pay annual claim maintenance and filing fees to the U.S. Bureau of Land Management (BLM) before September 1 of each calendar year. In 2006 those fees were approximately $125.00 per claim, for a total of $18,000.00. The company must also file a notice of its intention to hold unpatented mining claims with the Lemhi County recorder before October 1 of each year. In 2006 the cost to file this notice was $75.50.

6.5 Environmental and Permitting Requirements

The ICP will require a number of reviews, approvals and permits by federal and state regulatory agencies. The permitting effort involves a sizable team of technical groups applying specific expertise to the process. FCC guides the overall process with input from Telesto as a technical resource and Baird Hanson and Williams as their legal advisors. Other organizations participate in special areas: Wildhorse Environmental for air quality matters, Karen Kuzis for aquatic biology, and Intermountain Resources for soils, plant biology and wetlands. Several other organizations have also assisted with data collection and other permitting matters: Jim Gelhaus for meteorological data collection, Shaw Environmental and Water Right Solutions for hydrologic data collection, Peri Mehling for geochemical data collection, Turkey Tracks Enterprises for traffic and roads reports, and Cascade Earth Sciences for soils information.

FCC has applied for all discretionary permits, and held preliminary discussions with other agencies. An overall schedule of permit needs and application dates has been prepared to guide timing of applications for the nondiscretionary permits. The critical path for project approval goes through the EIS and associated discretionary permits. Following is a discussion of each of the discretionary permits.

6.5.1 Plan of Operations and Environmental Impact Statement

The ICP is located on lands managed by the Salmon-Challis National Forest. The Forest Service regulations at 36CFR part 228 require that the ICP apply for a Plan of Operations approval. The application for a Plan of Operations triggered a Forest Service requirement to comply with the National Environmental Policy Act (NEPA). Under NEPA, the Forest Service must decide the appropriate level of environmental review for the project. The Plan of Operations cannot be approved until NEPA compliance is complete.

Upon reviewing the proposed Plan of Operations, the Forest Service determined that the project is a major federal action that could significantly affect the quality of the human environment, thus, NEPA requires that an Environmental Impact Statement (EIS) be prepared prior to project approval. In order to expedite the EIS process, FCC contracted with Hydrometrics to act as third-party contractor to prepare the EIS under direction of the Forest Service. The Forest Service is serving as lead agency for preparation of the EIS,



with the Environmental Protection Agency (EPA) and Idaho Department of Environmental Quality (DEQ) as cooperating agencies.

As of this writing the Forest Service has completed and circulated a Draft EIS and received public comment on the Draft EIS. While the Forest Service has not yet made all of the public comments available, comments submitted by the Blackbird Mine Site Group (BMSG) and a coalition of environmental groups lead by the Idaho Conservation League (ICL) have been reviewed. These two groups constitute the majority of the serious opposition to the project. Responding to the comments will require additional time, but there do not appear to be any issues that cannot be addressed in a Final EIS. The project cannot proceed until the EIS is finalized and permits are issued, and there is no guarantee that permits will be timely issued or that conditions will not be so onerous as to render the project uneconomic. However, this risk is a normal risk for mining projects in the current political environment, and the issuance of a Draft EIS in February 2007 is important progress, especially since the Draft EIS did not identify any significant impacts from the project. An analysis of the Draft EIS indicates that the conditions the agencies are considering will not materially impair project economics.

Upon completion of the Final EIS, the Forest Service will prepare a Record of Decision (ROD). It is currently anticipated that the ROD will approve the project, with some stipulations for project changes to further reduce environmental effects.

6.5.2 National Pollutant Discharge Elimination System Permit

In addition to the Plan of Operations, FCC has applied to the EPA for a permit to discharge treated waste water to Big Deer Creek. The discharge permit process is known as the National Pollutant Discharge Elimination System (NPDES) and is governed by the Clean Water Act. Before EPA can issue an NPDES permit, the EPA must complete NEPA compliance, and the state of Idaho must certify that the permit complies with Idaho’s surface water quality criteria (Section 401 Certification).

EPA is participating as a cooperating agency in the preparation of the ICP EIS and issued a Draft NPDES permit concurrent with the issuance of the Draft EIS. Once the Final EIS is complete and Idaho DEQ has issued a Section 401 certification, EPA will issue a ROD and an NPDES permit.

6.5.3 Section 401 Certification

Under the federal Clean Water Act, states in which EPA issues NPDES permits must certify that the proposed federal permit is in compliance with their water quality standards before the EPA can issue the permit. This process is known as the Section 401 certification process, after the section of the Clean Water Act that provides for the certification. While Idaho has no obligations under NEPA, it can participate in the NEPA process. Idaho DEQ is serving as a cooperating agency in preparing the EIS. Concurrent with the Draft EIS, Idaho issued a draft 401 Certification.



6.5.4 Other Permits

The other permits shown on Table 6.2 involve much less discretion by the issuing agencies than the permits discussed above. While some permits, such as the Nationwide 404 permit required from the Army Corps of Engineers (COE), fall within the area where the agency could use its discretion to require an individual permit, there have been no indications to date that the agencies involved would do so.

Table 6.2

Permits and Licenses Required for the ICP Permit, License, or Approval Agency (Regulation)

Plan of Operations

(Including Reclamation Plan and Preparation of Environmental Impact Statement)

United States Forest Service

(1872 General Mining Law, Organic Administration Act, [36 CFR 228 Subpart A], National Environmental Policy Act)

Biological Opinion United States Fish and Wildlife Service and National Marine Fisheries Service

(Endangered Species Act [50 CFR 402])

National Pollutant Discharge Elimination System Permit

United States Environmental Protection Agency

(Clean Water Act)

Storm Water Permit Environmental Protection Agency

(Clean Water Act)

Air Quality Permit Idaho Department of Environmental Quality

(Idaho Clean Air Act)

Section 401 Certification Idaho Department of Environmental Quality

(Clean Water Act)

Septic Permit Idaho Department of Health and Welfare

Section 106 Review and Concurrence United States Forest Service and State Historic Preservation Officer

(National Historic Preservation Act)

Spill Prevention, Control, and Countermeasure Plan

United States Environmental Protection Agency

(40 CFR 112)

Water Rights Idaho Department of Water Resources



Table 6.2 Permits and Licenses Required for the ICP

Permit, License, or Approval Agency (Regulation)

Nationwide Wetlands Permit United States Army Corps of Engineers

(Clean Water Act)



7.0 Accessibility, Climate, Local Resources, Infrastructure and Physiography

7.1 Accessibility

Vehicle access to the ICP is via a series of well-maintained, public-access gravel roads that lead west from a point on paved Highway 93 approximately six miles south of Salmon, Idaho, as shown in Figure 7.1. This gravel road leads to the Blackbird Mine, which is currently not operating; however, the road is kept open year round and a potential mining operation can operate year round. The total driving distance from Salmon to the ICP proposed mill site is approximately 48 miles.

7.2 Climate

The ICP is located in the Salmon River Mountains of central Idaho, within the Northern Rocky Mountain physiographic province. Major waterways in the area include the Salmon River and Panther Creek. These waterways are located in the upper reaches of the Snake River Basin, which drains to the Columbia River.

The ICP is within the Panther Creek subbasin of the Salmon River. The project area contains flat-topped mountains and moderate to steep V-shaped canyons, and covers an area ranging in elevation from 6,100 to 8,100-feet. The area that may potentially be affected by mining and mill operations is bounded by the divides of the streams that generally drain the project area which are Bucktail Creek and Big Flat Creek. Bucktail Creek drains into the South Fork of Big Deer Creek, which drains to Big Deer Creek, which then drains to Panther Creek. Big Flat Creek drains directly into Panther Creek, which reports to the Salmon River.

The Natural Resources Conservation Service (NRCS) Morgan Creek SnoTel station is located approximately 20 air miles south-southeast of the ICP at an elevation of 7,600-feet (NRCS, 2004). Based on 12 years of data (1991-2003), the average annual temperature at the station is 34.8 degrees Fahrenheit (ºF), with a low of –34.6ºF and a high of 89.4ºF. Based on 23 years of data (1981-2004), annual precipitation is 24.4 inches. About 60 percent of the precipitation occurs as snow during the winter months (14.7 inches).

During the summer of 2000 the Clear Creek Fire burned over 200,000 acres, including the area of the ICP. The severity of the fire was high over most of the area, with all of the canopy cover and most of the litter and duff burned off. A preliminary assessment indicates that the degree of change that occurred was influenced by the various fuel loads, species, ladder fuels, canopy closures, slope and aspect components interacting with fire weather conditions at the site. As a consequence, typical mosaic patterns now prevail that are consistent with large fire behaviour in this type of ecosystem. Post-fire vegetation establishment in the project area in 2004 was variable, with vegetation cover ranging from 30 to 80 percent depending on slope, aspect, fire intensity and severity, soil type and post-fire seeding.



7.3 Local Resources and Infrastructure Physiography

Salmon, Idaho, is the nearest town and is located about 26 miles east of the property. The 2000 Census reported a population of about 3,120 people (www.city-data.com, 2005). Salmon is a local supply and transportation center, with a small airport. In 1997 there were daily scheduled flights to Idaho Falls and semiweekly flights to Boise (Pegg, 1997). The nearest railroad is at Dubois, a smaller town 100 miles southeast of Salmon. A 4 MW power line extends from Salmon to BMC’s Blackbird Mine site.

Although Salmon currently does not provide services for mining activities, it has functioned in this manner for past mining activities at Noranda’s former Blackbird mine, and at Meridian Gold’s former Beartrack gold mine. Salmon has, and can again, serve as a location for personnel housing and a staging point for mine support services.

7.4 Physiography

According to Noranda’s 1982 feasibility report, the terrain in the mine area is made up of slopes approaching 35 percent and cut by narrow valleys. The ore body outcrops between elevations of 7,400 and 7,800 feet, with most facilities located at 6850 feet. Soils in the area are generally comprised of sandy loam averaging five feet in depth, with frequent rock outcroppings. Bedrock exposure amounts to only about one to three percent of the property area. Large boulder fields are found in many areas along the higher mountain ridges.



8.0 HISTORY

Copper mineralization in the Blackbird Creek area was discovered in 1892, and the area was soon explored as both a copper and gold prospect. The area was first mined by Union Carbide at the Haynes-Stellite Mine located south of the present FCC claim block, during World War I. Union Carbide mined approximately 4,000 tons of cobalt-bearing ore before ceasing operations, reportedly due to excessive mining costs. From 1938 to 1941, the Uncle Sam Mining and Milling Company operated a mine at the south end of the present Blackbird mine and reportedly mined about 3,600 tons of ore.

Calera Mining Company, a division of Howe Sound Company, developed and mined the Blackbird deposit between 1943 and 1959 under a contract to supply cobalt to the U.S. government. Calera mined approximately 1.74 million tons of ore grading 0.63% Co, 1.65% Cu, and 0.03 oz Au/ton during this period, accounting for the majority of production from the district. Calera stopped mining when the government contract was terminated in 1960. According to FCC, poor payment for cobalt from smelters hindered continued development of the district, with minor exceptions.

Machinery Center Inc. mined 343,000 tons grading 0.36% Co and 0.64% Cu from the district between 1963 and 1966, when Idaho Mining Company (owned by Hanna Mining Company) purchased the property. Noranda optioned the property from Hanna in 1977 and carried out extensive exploration, mine rehabilitation and metallurgical testing. In 1979 Noranda and Hanna formed the Blackbird Mining Company (BMC) to develop the property. BMC completed an internal feasibility study of their property at the time, including material from the Sunshine deposit in 1982. BMC allowed perimeter claims to lapse in 1994, and FCC re-staked much of that ground. From 1995 to the present, FCC has completed surface geochemical sampling and drilled 113 diamond drill holes on their ground.



9.0 GEOLOGICAL SETTING

The Idaho Cobalt Project (ICP) is located on the east side of the central Idaho Batholith granitic-to-granodioritic rocks (Tertiary-Cretaceous in age), hosted in Proterozoic-age sedimentary rock. The host sedimentary rocks are on the southern flank of, and perhaps were part of, a large Proterozoic-age marine sedimentary basin in which dominantly clastic sediments were deposited; now the belt is a supergroup of dominantly quartzite and argillite metasedimentary rock.

Unique to the Proterozoic rocks in this region, are cobalt-copper (Co-Cu) occurrences in the Proterozoic-age Apple Creek formation of east-central Idaho. The Co-Cu mineralization at the Blackbird Mine has been described as a type locality for this occurrence of stratiform Co-Cu mineralization. The ICP is located adjacent to the former Co-Cu producing Blackbird Mine.

Recent work by the USGS (PP 1601) correlating the rocks of the Lemhi Range with the rocks of the Salmon River Range led to the recommended nomenclature of Apple Creek Formation for the middle Apple Creek which includes the cobalt-bearing strata.

9.1 Regional Geology

The regional geology is shown in Figure 9.1. The description of the regional geology that follows is derived from Staargaard (1996):

The Idaho Cobalt Project is situated in the Idaho Cobalt Belt, a 30- to 35-mile-long metallogenic district characterized by stratiform copper-cobalt deposits (Staargaard, 1996). The deposits are hosted by a thick, dominantly clastic sequence of Middle Proterozoic age sandwiched between late Proterozoic quartz monzonitic intrusions. The clastic sediments were deposited in a large fault-bounded basin, probably as large submarine fan complexes and/or deltaic aprons that were frequently “drowned” by continuing subsidence within the basin. All significant copper-cobalt deposits and occurrences are found in the Proterozoic Apple Creek Formation, which constitutes the base of this sequence. This formation was originally correlated with Pritchard Formation metasediments of the Belt supergroup to the north, its age being constrained by dates of 1.37 Ga for adamellites intruding the sequence and 1.7 Ga1 from mafic dykes and sills emplaced along the basin margin faults (Hughes, 1983).

The structure of the Apple Creek Formation is dominated by the regional rift structure. Cobalt-copper-gold mineralization lies along a northwest-southeast trending structure parallel to and west of the central axis of the rift. There is a series of northerly trending faults that are considered to represent initial growth faults, reactivated by Laramide and

1 Ga = 1,000,000,000 years



younger events. The district has also been affected by northeasterly structures of the Trans-Challis Fault Zone (Gow, 1995).

Staargaard described the regional mineralization as follows:

A number of significant stratiform cobalt-copper-gold deposits and prospects define the Idaho Cobalt belts. As far as can be determined at this point, they are associated with two or more distinctive, regional stratigraphic horizons within the Apple Creek Formation that are distinguished by diagnostic Fe minerals. In the Blackbird area, the mineralized sequence is characterized by the presence of biotite-rich beds often referred to as “biotitite” within a sequence of up to 3,000 feet of interbedded quartzite, siltite and argillite. … Approximately ten miles to the southeast, probably within the same stratigraphic sequence, FCC has been exploring stratiform copper-cobalt mineralization at their Blackpine project.

Three types of cobalt-copper-gold occurrences have been reported in the Idaho Cobalt Belt (Nash, 1989, reported in Pegg, 1997). Significant ore deposits have been mined and/or delineated in two of the styles of mineralization described below (descriptions copied from Pegg, 1997, with minor editing2):

Type 1: Cobalt-copper-arsenic rich deposits of the Blackbird Mine type. Generally, these contain approximately equal amounts of cobalt and copper, with variable amounts of gold and pyrite. The dominant ore minerals include cobaltite (CoAsS) and chalcopyrite (CuFeS2). The cobaltite accounts for nearly all of the arsenic content in these occurrences. This syngenetic and stratabound mineralization is closely associated with mafic sequences of the middle unit of the Apple Creek Formation. The deposits are found in tabular form. Examples of these types of deposits include the Blackbird Mine and the mineralized zones found within FCC’s Sunshine and Ram deposits.

Type 2: Cobaltiferous-pyrite-magnetite deposits with a variable chalcopyrite and low arsenic content. These occurrences are hosted by fine-grained metasediments from the lower unit of the Apple Creek Formation. Mineralization is stratabound, locally stratiform and is found within synsedimentary soft-sediment structures. The deposits are found in the area of Iron Creek, approximately 17 miles southeast of the Blackbird Mine. An example of this is the Siskon Gold Corporation’s3 Iron Creek property, which is under option to Cominco American Resources. This deposit contains some higher grade cobalt values within the 1,000-foot stratigraphic section.

Type 3: Cobaltiferous, tourmaline-cemented breccias. These are relatively common in the lower unit of the Apple Creek Formation, especially south and east of the Blackbird Mine. Only a few of these, apparently, contain in excess of 0.1% cobalt.

2 Editing consisted of deleting certain quoted quantities of mineralized material, which may not be in compliance with NI 43-101. 3 Owned by Siskon at the time of the 1997 report; SE is unaware of the current status of Siskon Gold or the current ownership of the Iron Creek property.



9.2 Local Geology

The local geology is shown in Figure 9.2. The majority of the following geologic discussion (except where otherwise indicated) is summarized from Report on the Reserve/Resource Estimates for Sunshine Lode, East Sunshine, and Ram Prospects, Sunshine Property, Idaho, USA by Formation Capital Corporation U.S. field staff, April 1998.

9.2.1 Lithology and Stratigraphy

The Idaho Cobalt Belt represents a distinct district dominated by stratabound cobalt + copper ± gold mineralization, with a remobilized constituent. The district is underlain by strata of the middle Proterozoic-age Apple Creek Formation, which is an upward-thickening, upward-coarsening clastic sequence at least 49,000 feet thick (Nash, 1989) that represents a major basin-filling episode (Connor, 1990).

Detailed work by Noranda geologists and the USGS showed that Apple Creek can be divided into three units (Staargaard, 1996). The lower unit of the Apple Creek Formation is over 15,000 feet thick and consists mainly of argillite and siltite, with lesser occurrences of fine-grained quartzite and carbonates. Graded bedding and planar-to-wavy laminae are common in the lower unit, which is locally metamorphosed to phyllite. The middle unit of the Apple Creek Formation is up to 3,600 feet thick and comprises several upward-coarsening sequences of argillite, siltite, and quartzite, with distinctive biotite-rich interbeds (Nash, 1989) that generally have a direct correlation to mineralization. The middle unit hosts the majority of the known cobalt, copper and gold occurrences in the Idaho Cobalt Belt. The upper unit exceeds 9,800 feet in thickness and is predominantly composed of thin- to thick-bedded, very fine- to fine-grained quartzite (Connor, 1990).

Mafic tuffs within the middle unit of the Apple Creek Formation are the oldest igneous rocks exposed in the Sunshine-Blackpine district. They are accompanied by felsic tuffs and carbonatitic tuffs. Some mafic dikes and sills intrude the middle unit of the Apple Creek Formation and may be comagmatic with the mafic tuff beds. Several small lamproitic diatremes may also be coeval with mafic volcanism (Gow, 1995).

The Apple Creek Formation has undergone varying degrees of regional metamorphism, ranging from greenschist facies in the southern part of the district to amphibolite grade facies in the northern part of the district. Several types of mafic dikes and sills, ranging from three to 100 feet thick, intrude the Apple Creek Formation and are interpreted as feeders to the exhalative mafic tuffs, which are most abundant in areas of intrusive activity (Staargaard, 1996).

9.2.2 Structural Geology of the Deposits

The dominant structures in the area are steep, north- to northwest-trending normal faults and shear zones. The prominent White Ledge Shear, which displays substantial apparent



strike-slip movement, marks the western extent of the mafic strata and associated stratiform mineralization in the project area (Nash, 1989).

Noranda Exploration Inc. interpreted the Sunshine stratigraphy as having been folded into a tight syncline about a northerly-plunging axis (Dagget and Baer, 1981). Small-scale fold hinges and transposed bedding visible in the Sunshine Trench indicate parasitic folding and locally severe deformation. Large-scale transposition faults roughly parallel the axial plane of the Sunshine syncline.

9.2.3 Alteration

Much of this discussion is adapted from Hughes (1993). Hughes described the Blackbird mineralized system, and the Idaho Cobalt Project mineralization is part of this system.

Some of the broadest mineralogical indicators of the mineralizing system are tourmaline and ankerite, which can be found up to several thousands of feet from the nearest known sulfide occurrences. Although they probably do not provide any reliable indications of proximity to ore targets, their presence does appear to be confined only to that portion of the Middle Apple Creek that hosts the mineralized zones.

Ankerite changes to disseminated siderite and occasional siderite veinlets in rocks that are several hundreds of feet from ore zones. The relative amounts and coarseness of the siderite appear to increase toward individual bodies of mineralization.

Outside the high-grade metamorphic aureole at Blackbird, chlorite and siderite are found within the same stratigraphic intervals that contain mineralization. Chlorite-rich rocks may be found as much as several hundreds of feet from known mineralization, but are more typically found within tens of feet of high-grade, semimassive sulfides.4

Silicification is commonly associated with chloritization at Blackbird. It is especially common near chlorite accumulations that are interpreted to be near feeder zones. Barite is found in some quartz-siderite veins in feeder zones.

The following brief description of alteration at Blackbird-like deposits is copied from Evans, et. al. (1986). The alteration at the Idaho Cobalt Project is substantially similar:

“Alteration is stratabound and coextensive with ore (Nash and Hahn, 1989). The transition from altered to unaltered rock is abrupt (less than 1 meter) in many places. Altered rock in the Merle ore zone ... at Blackbird is coincident with biotite and intercalated rocks and contains elevated abundances of cobalt and arsenic. Alteration zoning consists of pyrite-siderite-quartz-muscovite in the core zone and grades outward into quartz-muscovite-(with

4 The high-grade, semimassive mineralization described by Hughes is more characteristic of the Blackbird Mine mineralization than of the Idaho Cobalt Project.



lesser) pyrite. Potassic alteration has enhanced biotite crystallization across the entire ore zone.”

9.2.4 Mineralization

Mineralization at the ICP is characterized as syngenetic, stratiform, exhalative deposits within, or closely associated with, the mafic sequences of the middle unit of the Apple Creek Formation. The deposits range from nearly massive to disseminated. Some crosscutting mineralization is present that may be in feeder zones to the stratiform mineralization. Dominant ore minerals include cobaltite (CoAsS) and chalcopyrite (CuFeS2), with lesser, variable occurrences of gold. Other minerals present in small quantities are pyrite (FeS2), pyrrhotite (Fe1S), arsenopyrite (FeAsS), linnaeite ((Co Ni)3S4), loellingite (FeAs2), safflorite (CoFeAs2), enargite (Cu3AsS4) and marcasite (FeS2).

9.2.5 Ram Deposit

Stratigraphy in the Ram deposit area is predominantly medium- to fine-grained quartzite metamorphosed to upper greenschist to amphibolite facies. Stratigraphically, the Ram deposit is subdivided into three zones: hanging-wall, main and footwall, with each zone containing distinct mineralized horizons. An example Ram cross section is shown in Figure 9.3 (Section -200). A plan map showing the location of the cross sections is provided as Figure 9.4.

FCC subdivided the Ram hanging-wall zone into three lithologic packages. The upper hanging wall contains medium- to coarse-grained, locally poorly bedded to well-bedded quartzite. Occurrences of biotitic tuffaceous exhalite (BTE) are generally restricted to discontinuous, irregular coarse-grained garnetiferous pods (interpreted locally as diapirs). The middle hanging wall is dominated by medium-grained, generally well-bedded quartzite that is locally conformably interbedded with chloritic/biotitic cobaltiferous tuffaceous exhalites. The lower hanging wall includes medium- to coarse-grained quartzite with poorly defined, chaotic bedding. BTE material is restricted to sporadic, irregular diapirs.

The main zone is dominated by fine- to medium-grained, thin- to medium-bedded quartzites that are interbedded with biotitic and chloritic tuffaceous exhalites and local siliceous tuffaceous exhalites (STE). Mineralization in the Ram main zone is generally found within a confined stratigraphic package containing three, closely spaced, stratiform horizons, of variable thickness and continuity, which strike between 340° and 355° and dip between 50° and 55° to the northeast. These horizons contain fine- to coarse-grained disseminations, bands, blebs, and stringers of cobaltite, chalcopyrite, and minor pyrite. This mineralization is dominantly concordant with bedding, but locally has been remobilized into thin quartz veins (i.e., ‘sweat veins’) and/or crosscutting structures. The main zone represents the bulk of the potentially economic mineralization identified in the Ram deposit to date. The 3023 horizon is the lowest member of the main zone and is the thickest and most continuous horizon. The main zone is up to 21 feet in true thickness.



The footwall zone was subdivided into two rock packages. The upper footwall is characterized by poorly to well-bedded silty quartzite, often intercalated with chloritic and biotitic tuffaceous exhalite. Frequently distorted bedding (soft sediment deformation) and a lack of tuffaceous exhalite differentiate the lower footwall from the upper.

A north-trending vertical to steeply east dipping normal fault is evident in drill core. The fault cuts the main mineralized zone in the south on section 2+00 north and diverges to the north. The mineralized horizons were found in drill holes R97-02 and R97-03 west of the fault. The down dropped side of the fault appears to be around 40 feet lower. Shearing is locally common in the footwall as well as in the upper hanging wall. Small-scale folds are evident in drill core (FCC Staff in 1998 resource report).

According to the 1998 resource report by FCC Staff:

The Ram’s main mineralization is found within a confined stratigraphic package containing three closely spaced stratabound horizons. They have been coded from upper to lower as 3021, 3022 and 3023 horizons. …text abridged … Additional mineralized horizons have been encountered in the upper unit of the footwall package and in the middle unit of the hanging wall package. The stratabound mineralization consists of fine- to coarse-grained disseminations, bands, blebs and stringers of cobaltite, chalcopyrite and minor pyrite. Minor pyrrhotite, noted only in the upper footwall horizon, and the pyrite occurrences in the Ram appear to be local concentrations. This mineralization is dominantly bedding concordant but, locally has been remobilized into fractured quartz veins and/or crosscutting structures. The mineralized zone is typically hosted by siliceous and/or biotitic tuffaceous exhalites and fine- to medium-grained quartzites. The biotitic tuffaceous exhalites commonly contain a chloritic component.

Table 9.1 summarizes the stratigraphy of the Ram Deposit.



Table 9.1 Stratigraphy of the Ram Deposit

Component Description Upper Hanging Wall

Medium- to coarse-grained quartzites, locally poorly bedded to well- bedded;

Biotite-rich tuffaceous exhalite (BTE) is restricted to irregular, coarsely garnetiferous diapirs.

Middle Hanging Wall

Medium-grained quartzites interbedded with locally conformable cobaltiferous chloritic/biotitic exhalites, generally well-bedded.

Lower Hanging Wall

Medium- to coarse-grained quartzite, poorly defined locally chaotic bedding;

Local clastics; Sporadic, irregular diapirs of biotitic exhalite, often cobaltiferous.

Mineralization Fine- to medium-grained, poorly bedded but with locally well-developed thin- to medium-bedding;

Generally three conformable cobaltiferous horizons, best developed down dip.

3021 Horizon Not always well defined; Often comprised of clastic horizon with biotitic matrix and

considerable chalcopyrite and minor pyrite, on section 0+00 comprised of fine grained cobaltite fracture fill associated with minor chloritic to biotitic BTE in siliceous tuffaceous exhalites (STE) matrix;

Biotite becomes dominant down dip; Not well developed up dip on northern sections.

3022 Horizon Not always well defined; Often comprised of disseminated cobaltite in biotitic gangue; Best developed down dip.

3023 Horizon Variably comprised of disseminated and/or banded cobaltite in chloritic BTE, or fracture filling cobaltite in STE with attendant chloritic or biotitic BTE;

In general chloritic component increases up dip and biotite increases down dip;

STE increases down dip; Chalcopyrite and pyrite appear to increase down dip; Footwall contact is best developed down dip; A distinct, black, biotitic mafic dike/sill (MDS) is encountered near

the lower horizon in all intersections. Upper Footwall Silty quartzite, intercalated with BTE, thin- to medium-bedded,

poorly to well-defined; Chloritic BTE component absent or restricted to horizons down dip.



Footwall Horizons

• Commonly characterized by biotitic matrix with chloritic overprint; • Locally contains STE; • Commonly contains chalcopyrite and locally pyrite and minor

pyrrhotite; • In general chloritic component increase up dip; • In general biotitic component and sulfides increase down dip and

to the north. Lower Footwall • Silty quartzite, thin to medium bedded, poorly to well defined, often

distorted; • Frequently soft sediment textures; • Locally abundant MDS, frequently calcareous; • Occasional biotitic garnetiferous bands.

Notes: This table was copied with minor alteration from Table 9 of the 1998 resource report by FCC staff.

9.3 Geochemistry

The following is an abridged discussion of geochemistry from Gordon Hughes (1993); A Deposit Model and Exploration Guidelines for the Blackpine Cu-Au-Co Sulfide System, Lemhi County, Idaho:

“The systematic changes through space and time with respect to sulfide formation and distribution in clastic-hosted metalliferous systems, such as those at Blackbird and Blackpine, provide some predictive qualities that can be used to identify relative positions within the systems. Thus, certain elements and element ratios have been found to be excellent guides for locating high-grade portions of a system, which are nearly always contained in lodes located closest to the original feeder structures. Both lithogeochemical and soil geochemical prospecting were successful at Blackbird to delineate ore targets.

“Lithogeochemical data were found to be more sensitive, and therefore more reliable guides for identifying high-grade, feeder-zone styles of mineralization. The most useful indicator elements for vectoring in on high-grade, proximal-type ores are rare-earth elements, bismuth, As:Cu, and Au:Cu ratios. Rare-earth elements (especially Ce, Eu, La, and Nd) and bismuth are both present in feeder-proximal sulfide ores at levels that are in the range of at least 4X than in surrounding, more distal sulfides. This relationship appears to be consistent for both tuffite-hosted and exhalite-hosted ores. Likewise, As:Cu and Au:Cu ratios increase significantly both within and immediately (tens of feet) surrounding the inferred feeder-vents at Blackbird.”

Important systematic variations are observed in the hanging-wall rocks and footwall rocks. They include higher concentrations of Co, As, Y, Ba, and possibly Na2O in the hanging wall versus the foot wall. There are also higher concentrations of Cu, Ag, Cr, and TiO2 in the footwall versus the hanging wall. Hughes continued with the following:



“Soil geochemical surveys were effectively used at Blackbird to a) locate buried target zones, b) follow known mineralized intervals, and c) identify areas of stronger mineralization within a broader anomaly. By far the most definitive and, ultimately, the most reliable ore indicator element for these types of systems is arsenic. Copper was shown to be more readily concentrated by supergene processes, while, cobalt was significantly leached. Both copper and cobalt (in soils) could be used to determine the presence (or absence) of mineralized stratigraphy in an exploration area at Blackbird. However, they could not discriminate between high-grade ore zones, low-grade zones, or simply geochemically anomalous mafic tuff horizons in the stratigraphy.”

Surface geochemistry was used by FCC to trace and extend the near-surface projections of drill intercepted mineralized horizons.

Drill hole geochemistry shows similar element associations as surface geochemistry, noting that partly oxidized rocks near the surface may have some leaching and or concentrations of some elements as a result of supergene processes. A look at elemental associations of the 2004 core drilling samples for the Ram deposit shows Co-Cu-Au-As-Bi-Ag to be anomalous (without segregation of oxidized versus nonoxidized core). The mean and high values for each are listed in Table 9.2.

Table 9.2 2004 Ram Drilling – Anomalous Geochemistry

% Co % Cu oz Au/ton ppm Ag ppm As* ppm Bi

Maximum 6.11 9.04 0.212 1,083 226,818 58,884

Mean (1) 0.18 0.23 0.004 0.35 1,494 38

Mean (2) 0.20 0.27 0.006 4.13 1,732 161

* excludes 61 samples that are overlimit @ +300,000 ppm As

(1) Including values of 0.0

(2) including only values greater than 0.0



Correlation coefficients for the above elements show the associations Co-As, Co-Au, Cu-Au and Au-As to be quite strong as indicated by the highest positive numbers, which are shaded, in Table 9.3. Although silver has strong associations as well, the level of silver anomalism is rather low as also shown in Table 9.3.

Table 9.3 2004 Ram Drilling – Correlation Coefficients

Cu Au Ag As Bi Co 0.296 0.688 0.315 0.791 0.191 Cu 0.585 0.910 .313 0.258 Au 0.607 0.593 0.437 Ag 0.360 0.353 As 0.210

Coupled with grade distribution plots for each element and for each mineralized horizon, it may be possible to define geochemical and/or grade zoning patterns in the Ram deposit. MDA recommends that geochemical associations and/or grade zoning patterns be investigated for the Ram deposit in particular to determine if any zonations can be used in deposit modeling and mine planning. Drill hole density at the Ram deposit may not be sufficient at this stage to determine such patterns; however, preliminary indications could be useful in determining, for instance, a trend to high-grade Co values that should receive in-fill drilling as part of ongoing activities by FCC.



10.0 DEPOSIT TYPES

The deposits comprising the ICP belong to a class of deposits variably described as “Blackbird Co-Cu” (Evans et. al., 1986) or “Blackbird Sediment-hosted Cu-Co” (Hõy, 1995). The Idaho Cobalt Project lies in the type locality for these deposits and includes some of the type deposits.

According to Evans et. al., “These deposits are stratabound iron-, cobalt-, copper-, and arsenic-rich sulfide mineral accumulations in nearly carbonate-free argillite/siltite couplets and quartzites ….”

The summary that follows is extracted from Hõy (1995):

“CAPSULE DESCRIPTION: Pyrite and minor pyrrhotite, cobaltite, chalcopyrite, arsenopyrite and magnetite occur as disseminations, small veins and tabular to pod-like lenses in sedimentary rocks. Chloritic alteration and tourmaline breccias are locally associated with mineralization.

“TECTONIC SETTINGS: Near continental margins or in intracratonic basins. Within the Belt-Purcell basin, which may have formed in a large inland sea, extensional tectonics are suggested by possible turbidite deposition, growth faulting, gabbroic sills and tuff deposition. Alternative setting is marine, in an incipient or failed rift along a continental margin.

“DEPOSITIONAL ENVIRONMENT / GEOLOGICAL SETTING: These deposits are not well understood. Possible turbidite deposition in marine or inland sea, associated with basaltic pyroclastic volcanics or mafic synsedimentary gabbroic sills; alternatively, tidal flat environment.

“AGE OF MINERALIZATION: Can be of any age. The Blackbird deposits at the type locality are assumed to be approximately 1460 Ma, the age of the host rocks.

“HOST/ASSOCIATED ROCK TYPES: Fine-grained metasedimentary rocks; thin-bedded siltstone, fine-grained quartzite, black argillite and calcareous siltstone; garnet schist, phyllite, quartz-mica schist. In the Blackbird district synaeresis cracks (subaqueous shrinkage cracks) occur within immediate host rocks, sedimentary structures indicative of shallow water, and locally subaerial exposure in overlying rocks, suggest shallow water environment. Numerous biotite-rich beds within the host succession may be mafic tuff units (or diorite sills). Sheep Creek5 deposits are within correlative Newland Formation dolomitized shales and conglomerates.

“DEPOSIT FORM: Irregular, tabular to pod-like deposits, from approximately 2 to 10 m thick.” 5 The Sheep Creek deposits are in Montana. Hoy mentioned them as examples of deposits that may have some geologic similarities to the Idaho Cobalt deposits.



“ASSOCIATED DEPOSIT TYPES: Possibly Besshi volcanogenic massive sulphide deposits, Fe formations, base metal veins, tourmaline breccias.”



11.0 MINERALIZATION

Mineralization at the ICP is characterized as syngenetic, stratiform, exhalative deposits within, or closely associated with, the mafic sequences of the middle unit of the Apple Creek Formation. The deposits range from nearly massive to disseminated. Some crosscutting mineralization is present that may be in feeder zones to the stratiform mineralization. Dominant ore minerals include cobaltite (CoAsS) and chalcopyrite (CuFeS2), with lesser, variable occurrences of gold. Other minerals present in small quantities are pyrite (FeS2), pyrrhotite (Fe1-xS), arsenopyrite (FeAsS), linnaeite ((CoNi)3S4), loellingite (FeAs2), safflorite (CoFeAs2), enargite (Cu3AsS4) and marcasite (FeS2).

Recently, rare-earth minerals have been identified in the samples from the deposit. Rare-earth analysis has been completed for most ore-grade core intervals of the deposit. The following is a summary from Wilson (2006) describing the mineralogy of select samples of mineralized material from the Idaho Cobalt Project:

The current work was spurred on by the recent recognition of high enrichment of rare-earth elements (REE) in the cobalt-rich ores of the venerable Blackbird mining district. Scanning electron microscopy (Slack, 2006) has identified monazite, xenotime and allanite as the principal host minerals for REE plus Y in the ores. Monazites, (La, Ce, Nd, Th) PO4 and allanites (epidote-family silicates of Ca, REE, Al and Fe) concentrate LREE such as La and Ce, while the phosphate xenotime, ideally YPO4, contains HREE and Y. The predecessor to the present report was confined to microscopic observations on the metallic ore minerals and consideration of the whole-rock geochemistry (Wilson, 2006). Seven samples were received as small sawn slices: the more siliceous rocks tend to be coherent, whereas some of the other lithologies are very friable. A total of nine polished thin sections were prepared for examination in transmitted and reflected light.

The suite is for the most part strongly foliated and metamorphosed under upper greenschist to lower amphibolite facies conditions. The variably siliceous schists are generally dominated by different proportions of quartz, chlorite, biotite and garnet. Muscovite and carbonate are sparsely present. REE and Y are deduced to occur in generally fine-grained host phases which are provisionally identified optically as epidote, allanite and xenotime (traces of REE will also occur in garnet and sphene, but this need not concern us here). Cobaltite is abundant, as are chalcopyrite and pyrite in some samples. Trace ore minerals, for the most part secondary in nature, are pyrrhotite, digenite, covellite and chrysocolla. Secondary Fe oxides and sphene (titanite) are also present. Native gold was not observed. This could be a function of polishing, but cobaltite is well-polished in this suite, relative to the softer chalcopyrite. It has been shown that Au correlates with Co and As, and not with Cu: not unexpected as native gold grains up to 20 µm in size have mostly been observed in or on cobaltite (Nash et al., 1987), and arsenides are one of the best-known mineralogical concentrators of gold.



Seven of the nine samples contain trace to 12% potential REE phases. The samples also contain 3-40% sulphides and arsenide (cobaltite). All samples contain cobaltite (trace to 30%) and eight out of nine contain Cu minerals (trace to 7%: seven samples with sulphides, and one with chrysocolla). The colour index (in practice, all minerals except quartz) varies from 16 to 97% (58-97% in seven samples). There is minimal carbonate (trace to 1% in two samples). Brown to curiously greenish biotite mica, somewhat chloritized in some samples, is ubiquitous (2-50%; 10-50% in six samples). Chlorite is abundant in all but the Northfield samples. Total biotite + chlorite contents in the suite average 34%.

The observations flesh out the findings of the previous report, which was limited to reflected-light observations. Potential host minerals of REE are fine-grained silicates and phosphates. In accord with the findings of Slack (2006), these presumed REE hosts are associated with cobaltite, both in a general sense (chlorite, cobaltite-rich layers) and to some degree in more intimate granular intergrowths and replacements, indicative of a late stage of concentration of REE, probably with mobilization and reprecipitation during metamorphism. A recent study of 11 local ore samples found that total REE + Y contents correlate well with P2O5, good evidence for the primary role of phosphate host minerals such as xenotime (Slack, 2006). Phosphates may dominate the REE budget in a range of metallic ores, as summarized below.

In the absence of detailed electron microprobe data, no mass balance can be provided for the REE in the samples examined to date from the Idaho Cobalt Project. REE are likely present at high levels in xenotime and allanite, and at lower, probably subeconomic levels in other minerals such as epidote (sensu strictu) and sphene. Slack (2006, p.278) notes that Cu-Co ores in the Blackbird district tend to have low LREE and very high HREE and Y, which in itself appears to be good evidence for the primacy of phosphate(s) as the main REE-Y repository in these frequently sulphide- and arsenide-rich ores. This deduction should be valid regardless of the precise genetic classification of the Co-rich ores of the Blackbird district (see Slack, 2006 and references therein).

The practical question here is the residence of the REE plus Y, and whether these are worthwhile to recover as byproducts of the Co-(Cu-Au). If there are significant tonnages of phosphate-rich ores, such as some of the Northfield material, then this would be a good source of HREE and Y. Lower concentrations of allanite in other ores most probably contain LREE in particular, but may be hard to separate efficiently. Common epidote and garnet, although locally very common, are probably not worth recovering, as these are not standard sources of REE, and one suspects not readily sold to specialist REE processors and marketers. REE will also be present in sphene, but this is a secondary phase associated with Fe-Ti oxides, almost certainly of variable physical properties and limited REE tenor.



12.0 EXPLORATION

Exploration drilling completed by FCC since 1995 defined two areas of Blackbird Co-Cu-type mineralization, which are referred to as the Sunshine and Ram deposits. FCC completed a total of 152 drill holes for 98,439 total feet of core drilling, and defined mineralization in multiple subparallel zones of Co-Cu mineralization that are stratiform in nature. The Ram deposit consists of five hanging-wall horizons, a main zone comprising three horizons, and three footwall horizons. The main zone horizons, which are the most extensive, were drill tested over 2,000-3,000 feet in strike extent, 500-1,200 feet in vertical extent, and have true widths that average about eight feet (true widths range from less than three feet to greater than 20 feet for horizon 3023). These subparallel horizons generally strike N15oW and dip 50o-60o to the northeast and were drill tested to depths of 1,200 feet vertically. While there are exploration opportunities to expand the two resource areas and to develop other targets within the FCC claim block, this discussion is primarily directed at the main resource area: the Ram deposit.

The FCC U.S. field staff report of 1998 described exploration work that included:

1995 and 1996

• 52,740 feet of core drilling in 93 holes on the Sunshine Lode, East Sunshine Lode, Cougar Zone and Northfield Zone;

• Surface mapping at a scale of 1 inch to 100 feet; • Mapping of old trenches and prospect pits; • The collection of 979 surface rock samples including those from trenches; • The collection of 8,427 soil samples.

In 1995, soil sampling of selected areas was conducted on lines spaced 200 and 400 feet apart, with samples collected at intervals of 100 feet along the lines. This program discovered the southern end of the previously unknown Ram target.

In 1996, the soil grid was extended north and soil samples were collected on lines spaced 200 feet apart with samples collected at 25-foot intervals along the lines. Some infill samples were collected from the 1995 soil grid. Other parts of the grid were also extended and sampled on 25 foot intervals where warranted.

1997

• FCC built 3,100 feet of benched drill road into the Ram zone; the road was laid out to cross the Ram soil geochemical anomaly, in order to facilitate trenching;

• Three trenches, 623 feet long in aggregate, were excavated within the “prism” of the road; the trenches were mapped and 83 rock samples were collected;

• One 20-hole, 12,045-foot, core drill program was completed, producing 1,712 samples of split core;



• The north and south extensions of the Ram prospect were geologically mapped; • The newly opened 6930 drift was mapped, and 163 rock samples were collected; • The Ram soil grid was extended northward, with the collection of an additional 95

soil samples.

For a topographic base, FCC had a five-foot contour map of the project area, produced photogrammetrically, using aerial photography.

FCC field staff, or contractors working under the direct supervision of FCC staff, carried out all of the field work described.

1998-2001

• 1998 prefeasibility study and resource audits by MDA; • 1999 drilling of 11 holes for 5,211 feet, primarily in the Ram target area; • 2000 drilling of eight, PQ-size, core holes for metallurgical samples; • 2001 prefeasibility study by MDA; • Permitting baseline studies initiated; • POO Submitted.

2002-2006

• 2002 acquisition of the Sunshine silver-gold refinery and hydrometallurgical plant by FCC;

• 2004 drilling of 24 holes totaling 24,869 feet; • 2005-2006 season drilling of 13 holes totaling 9,834.5 feet; • Various baseline studies completed in support of project activities and the Plan of

Operation (POO), and the USFS Environmental Impact Statement (EIS) were completed;

• Updated POO submitted in April 2006; • Resource update by MDA, 2006; • Feasibility study estimated to be completed 2nd quarter 2007.

According to Daggett (1981), “The Sunshine deposit possesses no geophysical expression, produces only a faint geochemical anomaly, and is inconspicuous in surface outcrop. Exploration for Sunshine-like deposits must, therefore, proceed by model formulation and testing, rather than by prospecting.”

The present report is focused on resource estimates using drill-hole data. MDA acknowledges that the surface geological and geochemical work were important contributors to the discovery of the Ram deposit, but the results of the surface exploration are not discussed in detail in this report. The resource estimates in this report incorporate and are the culmination of the interpretation of the exploration data. Total expenditures by FCC at the Idaho Cobalt Project from 1995 through December 2006 were $28.575 million.



13.0 Drilling

The drilling database that defines the Ram deposit consists of 80 core holes totaling 54,572 feet drilled by FCC as shown in Table 13.1.

Figure 13.1 shows locations of the drill collars and the surface projection of drill-hole traces of the angle holes drilled into the Ram deposit.

Table 13.1 ICP Drilling Summary

Year Drilled Operator Deposit Number Feet 1959 Calera Mining Company Sunshine 3 982

1979 – 1981 Blackbird Mining Company (Noranda) Sunshine 29 17,826.0 1995 – 1996 Formation Capital Sunshine 48 29,144.0 1995 – 1996 Formation Capital East Sunshine 24 14,723.5

1997 Formation Capital Ram 20 12,045.0 1999 Formation Capital Ram 11 5,211.0

2000 (1) Formation Capital Ram 8 2,613.0 2004 Formation Capital Ram 28 24,869.0 2005 Formation Capital Ram 9 5,302.5 2006 Formation Capital Ram 4 4,532.0 Totals Sunshine 104 62675.5 Totals Ram 80 54572.5 Totals Ram + Sunshine 184 116,266.0

(1) - Metallurgical Test Holes - Not used in Grade Model

With the exception of reverse circulation pre-collars for the holes completed by FCC in 2000 to obtain metallurgical samples, all drill data was obtained by core drilling. Exploration holes were drilled with either NQ- or HQ-size core; the metallurgical holes were drilled with PQ-size core. NQ, HQ and PQ core have diameters of 1.875 inches (47.6mm), 2.500 inches (63.5mm) and 3.345 inches (85.0mm), respectively.

FCC routinely logged the drill core in considerable detail, with particular emphasis placed on mineralized sections.

The collars of all drill holes were located using tight chain and compass from the nearest known point. Most of the pre-1998 drill-hole collar locations were resurveyed by Harper-Leavitt Engineering Inc. using a transit (1998 report by FCC Staff).

A single-shot, Sperry Sun instrument was used for down-hole surveys to check the drill-hole orientations. Down-hole surveys were done every 150 feet in the hole.

Drilling was conducted as angle holes oriented approximately normal to the strike of the mineralized horizons, and crosscutting mineralized horizons at appropriate angles that



allowed true thicknesses of mineralization to be determined. It is MDA’s opinion that the drilling methods used at the Idaho Cobalt Project follow industry standard procedures, and are appropriate methods to adequately interpret the mineralized zones defined by that drilling



14.0 SAMPLING METHOD AND APPROACH

Drill core was sawed to obtain the splits. Soft material that did not lend itself to sawing was split by hand.

Throughout the drill campaigns, FCC diligently sampled the core at intervals that corresponded to geologic, mineralogic and alteration features. During the 1997 Ram drilling program, sample lengths ranged from 0.50 feet to 5.00 feet. No sample longer than six feet was used in the 1998 resource estimates. Subsequent drilling campaigns have been sampled at similar 0.50 to 5.00 foot intervals. Typically, several sample intervals define the mineralization for any single intercept of the various mineralized horizons.

14.1 Core Recovery

For drilling done prior to 1999, MDA checked 20 intervals of mineralized material and found the mean core recovery to be 94.4 percent. FCC recorded core recovery for all of the 1999 Ram exploration drill holes; the mean core recovery for sample intervals containing greater than 0.1% Co was 85.3 percent. There does not appear to be a relationship between cobalt grades and core recovery, so the impact on grades from core with poorer recovery should not impart a bias.

Sampling methods used for core have been according to standard industry practices.



15.0 SAMPLE PREPARATION, ANAYSES AND SECURITY

15.1 Sample Preparation

All of the persons involved in the field aspects of sampling the drill core – including selecting intervals for sampling, doing the sampling, packaging and shipping the samples – were employees of FCC.

FCC included cobalt, copper and gold assaying as part of their routine analytical procedure. In addition, multielement geochemical analyses were completed on nearly all of FCC’s drill holes at the ICP.

FCC’s sample analyses were performed by Chemex Labs, Inc., of Sparks, Nevada, and Vancouver, British Columbia, and Bondar Clegg Laboratories, Inc. (USA), of Reno, Nevada, and Bondar Clegg Laboratories, Inc. (Canada), of Vancouver, British Columbia. EcoTech Laboratories Ltd. of Kamloops, British Columbia, completed additional check-sample analyses in 1996. Cobalt and copper analyses were done by 4-acid (HNO3-HClO4-HF-HCl) digestion and an atomic absorption (AA) finish; gold was analyzed by 30-gram fire assay followed by an AA finish. Multielement geochemical analyses were performed using induction-coupled plasma methods. These are all industry standard analytical techniques.

15.2 Quality Control

FCC completed check assays and submitted blanks and standards with each assay batch. FCC made up two standards to evaluate potential biases in the cobalt analyses. At the time of the evaluation, Bondar Clegg (Canada) reported consistently higher grades than those reported by Chemex.

MDA examined this data in 1998 and found the assays of the check samples, blanks, and standards were in good agreement with the expected values. The exception was one blank sample, which returned low cobalt, but high copper values. These checks are summarized in Table 15.1.



Table 15.1 Check Samples, Blanks and Standards Pre-1999

Original Assays Check Assays Item Number of

Samples % Co % Cu oz Au/t % Co % Cu oz Au/t Sunshine BMC core 54 0.11 0.43 0.008 0.10 0.39 0.002 FCC core 140 0.55 0.74 0.018 0.56 0.66 0.017 Blanks 56 0.00 0.00* 0.000 Standard 1 81 0.84 n/a n/a 0.81 0.08 0.061 Standard 2 23 0.26 n/a n/a 0.25 0.03 0.030 Ram FCC core 13 1.05 0.38 0.021 1.11 0.51 0.025 Blanks 30 0.01 0.00 0.000 Standard 1 81 0.84 n/a n/a 0.80 0.07 0.061 Standard 2 6 0.26 n/a n/a 0.24 0.04 0.029 *excluding one high copper assay

In the 1999 Ram drilling program, FCC submitted standards and blanks for each drill hole, except R99-09, which did not intersect significant mineralization. Blanks were inserted immediately after samples were seen or suspected to contain high-grade cobalt. Results of the 1999 Ram standard and blank sample program are summarized in Table 15.2

Table 15.2 Standard and Blank Samples, 1999 Ram Drilling Program

Standard / Blanks Mean Assayed Values Item

% Co % Cu oz Au/t Number of Submittals % Co % Cu oz Au/t

Blank Sample --- --- --- 10 0.008 0.00 0.0002 Standard 1 0.836 n/a n/a 3 0.818 0.07 0.0626 Standard 2 0.255 n/a n/a 10 0.254 0.03 0.0302

The use of standard reference material verifies and enhances the confidence in the laboratory procedures used by Chemex, since the difference between the original standard values and the average values reported for standards 1 and 2 are only 2% and 0.4%, respectively. Each of the ten sample blanks that were submitted were reported to have trace levels of cobalt concentrations.

A further check of assay data was completed in 2004 and is reported in Table 15.3. A comparison of the weighted average of the analyses from the original core samples was made with the composite grades of coarse rejects that were used to prepare three metallurgical samples. The composites were each prepared from approximately 40 individual samples which aggregate 50-60 kg for each composite sample. The original assays were done by Chemex or Bondar Clegg (now ALS Chemex), and the composite



metallurgical head grade was determined by Lakefield Research, of Ontario, Canada. Close comparison is demonstrated for Cu, Co and Au. Although not designed as an outside laboratory check of the assay procedure, the end result is an acceptable comparison of two lab procedures on replicate samples.

Table 15.3 Metallurgical Composites Grades - 2004

Composites % Cu % Co g Au/t # Core Samples Weight (kg)

#1 Core assay average 0.44 0.62 0.267 43 #1 Met. Head grade 0.44 0.59 0.350 54 #2 Core assay average 1.10 0.75 0.676 43 #2 Met. Head grade 1.10 0.72 0.690 65 #3 Core assay average 0.44 1.15 0.658 39 #3 Met. Head grade 0.45 1.20 0.670 47

Overall, FCC has demonstrated diligence in monitoring check assays and standard and blank results, which is critical to the maintenance of an accurate database.

A total of 10 samples from the 2005-2006 drilling program were checked at ACME Labs. The results of this check are shown in Table 15.4. Again, there is good agreement between the original assays and the check assays.

Table 15.4 2005-2006 Check Assays

Depth Original Assay Check Assay Hole ID

Sample ID From To Total

Feet % Co % Cu oz Au/ton

% Co % Cu oz Au/ton

R05-03 11562 690 693.3 3.3 1.09 0.14 0.010 0.93 0.14 0.011 R05-09 11680 789.4 792.4 3.0 0.68 0.10 0.012 0.72 0.08 0.016 R05-08 11703 1182.5 1185 2.5 0.32 1.49 0.010 0.32 1.59 0.011 R05-07 11729 394.2 396.8 2.6 3.20 0.16 0.092 3.28 0.16 0.103 R06-01 11811 860.6 862.6 2.0 0.62 1.56 0.095 0.58 1.54 0.100 R06-01 11818 872.7 875.8 3.1 2.00 0.18 0.037 1.83 0.18 0.041 R06-02 11832 902 903.7 1.7 0.56 0.45 0.011 0.70 0.44 0.010 R06-03 11876 1197.4 1199.6 2.2 0.40 1.15 0.008 0.43 1.35 0.016 R06-04 11888 1233 1236.6 3.6 1.81 9.64 0.144 1.95 9.21 0.158

Averages 1.19 1.65 0.046 1.19 1.63 0.052



15.3 Security

FCC’s core and sample security measures were typical for exploration projects in the United States at the time the work was done. The core was received at the drill by an employee of FCC, and taken to the company’s facility in Salmon for processing. That facility is a warehouse-like building with lockable doors. Split core was placed in a labeled sample bag closed with a wire tie. An employee of the analytical laboratory picked up the samples at FCC’s facility. Thus the core has been under FCC’s control from receipt at the drill, and the parts of core not used for the analytical samples remained under FCC’s control. The samples were under FCC’s control from the drill to the core splitting facility and under the laboratory’s control after leaving FCC’s facility.

ALS Chemex holds ISO 9002:1994 certification at its North American and Peruvian laboratories and ISO 9001:2000 certification in North America. ALS Chemex is the successor to Chemex and Bondar Clegg, the laboratories that did most of FCC’s analyses. MDA has not determined the date that ALS Chemex or its predecessors first obtained ISO 9002 certification, but it is probable that much of the work for FCC was done before that date.

The purpose of the ISO 9002:1994 standard is described in this excerpt from Praxiom Research Group’s internet site at http://www.connect.ab.ca/~praxiom/9002.htm. The excerpt applies to ISO 9002, but the intent of ISO 9001:2000 is similar:

ISO 9002 is a quality assurance model made up of quality system requirements. This model applies to organizations that produce, install, and service products. ISO expects organizations to apply this model, and to meet these requirements, by developing a quality system.

Overall, FCC’s sample security and quality control procedures, and the sample preparation and analytical procedures used by the independent laboratory of ALS Chemex, were sufficient to maintain consistency, integrity and accuracy in the drill-hole database of the ICP.



16.0 DATA VERIFICATION

MDA visited FCC’s field office in Salmon, Idaho, on several occasions, with field visits to both the ICP and the adjacent BMC (Blackbird Mine) property. MDA reviewed all the project data generated to date, including drill logs, cross sections and long sections. MDA also examined drill core and can state that geological and mineralogical data documented and presented by FCC was, in fact, found in the core. Overall, visual identification of mineralized intervals relates well to the stated assays. MDA found that in general, the geologic documentation and interpretation fairly represents the Ram deposit.

MDA reviewed and checked original assays, check assays and QA/QC procedures and results; reviewed and audited the digital database; examined geologic data and interpretations; and reviewed and resampled representative core intervals.

Prior to the 1999 Ram drilling program, MDA checked about five percent of the sample intervals in the project database for data entry errors. No errors were found for entries of cobalt, copper, or gold values; however, the footage for one interval was entered incorrectly. Approximately 10 percent of the 1999 Ram drill data was audited, and no errors were found.

For drilling done prior to 1999, MDA checked 20 intervals of mineralized material and the mean core recovery was 94.4 percent. FCC recorded core recovery for all of the 1999 Ram exploration drill holes; the mean core recovery for sample intervals containing greater than 0.10% Co was 85.3 percent. There does not appear to be a relationship between cobalt grades and core recovery, so the impact on grades from core with poorer recovery should not impart a bias.

Table 16.1 shows the summary statistics for all of the RAM horizons. Table 16.2, Table 16.3, and Table 16.4 illustrate the assay sample statistics for the hanging-wall, main and footwall horizons, respectively.



Table 16.1 Ram – Summary Statistics of Mineralized Horizon Assay Data

Horizon Number Mean Minimum Maximum Variance Std.Dev. C. V. Standard Error

Assay Interval All 910 2.835 0.500 18.000 5.1989 2.280 0.80 0.0522 % Co All 899 0.452 0.000 10.650 0.6469 0.804 1.78 0.0189 % Cu All 899 0.538 0.000 10.200 1.3122 1.145 2.13 0.0269 oz Au/t All 899 0.012 0.000 0.230 0.0006 0.023 1.91 0.0006 % Co - Capped All 899 0.437 0.000 4.000 0.4817 0.694 1.59 0.0163 % Cu - Capped All 899 0.482 0.000 4.000 0.6914 0.831 1.72 0.0195 oz Au/t - Capped All 899 0.011 0.000 0.090 0.0003 0.018 1.61 0.0004



Table 16.2 Ram – Summary Statistics of Hanging-Wall Mineralized Horizon Assay Data

Item Horizon Number Mean Minimum Maximum Variance Std. Dev.

CV** Standard Error

Assay Interval 3010 36 2.468 0.600 5.800 1.9764 1.406 0.57 0.1645% Co 3010 36 0.276 0.010 1.770 0.1550 0.394 1.43 0.0461% Cu 3010 36 0.047 0.000 0.350 0.0033 0.057 1.23 0.0067oz Au/t 3010 36 0.003 0.000 0.017 0.0000 0.004 1.29 0.0005% Co - Capped 3010 36 0.276 0.010 1.770 0.1550 0.394 1.43 0.0461% Cu - Capped 3010 36 0.047 0.000 0.350 0.0033 0.057 1.23 0.0067oz Au/t - Capped 3010 36 0.003 0.000 0.017 0.0000 0.004 1.29 0.0005Assay Interval 3011 45 2.724 0.500 8.100 3.8802 1.970 0.72 0.2088% Co 3011 44 0.237 0.005 2.180 0.1775 0.421 1.78 0.0468% Cu 3011 44 0.139 0.000 0.820 0.0438 0.209 1.51 0.0233oz Au/t 3011 44 0.006 0.000 0.054 0.0001 0.010 1.62 0.0011% Co - Capped 3011 44 0.237 0.005 2.180 0.1775 0.421 1.78 0.0468% Cu - Capped 3011 44 0.139 0.000 0.820 0.0438 0.209 1.51 0.0233oz Au/t - Capped 3011 44 0.006 0.000 0.054 0.0001 0.010 1.62 0.0011Assay Interval 3012 55 5.007 0.500 18.000 31.2225 5.588 1.12 0.4845% Co 3012 53 0.358 0.005 3.462 0.4626 0.680 1.90 0.0664% Cu 3012 53 0.381 0.000 6.320 1.0662 1.033 2.71 0.1008oz Au/t 3012 53 0.011 0.000 0.140 0.0005 0.021 1.96 0.0021% Co - Capped 3012 53 0.358 0.005 3.462 0.4626 0.680 1.90 0.0664% Cu - Capped 3012 53 0.337 0.000 4.000 0.6378 0.799 2.37 0.0779oz Au/t - Capped 3012 53 0.010 0.000 0.090 0.0003 0.017 1.72 0.0017Assay Interval 3013 56 4.580 0.500 10.500 15.0317 3.877 0.85 0.3427% Co 3013 52 0.472 0.002 4.120 0.6703 0.819 1.74 0.0878% Cu 3013 52 0.425 0.000 3.590 0.4241 0.651 1.53 0.0698oz Au/t 3013 52 0.012 0.000 0.103 0.0003 0.019 1.51 0.0020% Co - Capped 3013 52 0.469 0.002 4.000 0.6503 0.806 1.72 0.0865% Cu - Capped 3013 52 0.425 0.000 3.590 0.4241 0.651 1.53 0.0698oz Au/t - Capped 3013 52 0.012 0.000 0.090 0.0003 0.017 1.43 0.0018Assay Interval 3015* 24 2.506 0.500 5.000 1.2990 1.140 0.45 0.1596% Co 3015* 24 0.177 0.010 0.812 0.0427 0.207 1.17 0.0289% Cu 3015* 24 0.828 0.030 3.930 0.6854 0.828 1.00 0.1159oz Au/t 3015* 24 0.011 0.000 0.060 0.0002 0.013 1.13 0.0018% Co - Capped 3015* 24 0.177 0.010 0.812 0.0427 0.207 1.17 0.0289% Cu - Capped 3015* 24 0.828 0.030 3.930 0.6854 0.828 1.00 0.1159oz Au/t - Capped 3015* 24 0.011 0.000 0.060 0.0002 0.013 1.13 0.0018Assay Interval 3016* 21 2.507 1.200 4.400 0.6526 0.808 0.32 0.1191% Co 3016* 21 0.149 0.007 0.610 0.0252 0.159 1.06 0.0234% Cu 3016* 21 0.173 0.000 0.730 0.0513 0.226 1.31 0.0334oz Au/t 3016* 21 0.004 0.000 0.032 0.0000 0.007 1.73 0.0010% Co - Capped 3016* 21 0.149 0.007 0.610 0.0252 0.159 1.06 0.0234% Cu - Capped 3016* 21 0.173 0.000 0.730 0.0513 0.226 1.31 0.0334oz Au/t - Capped 3016* 21 0.004 0.000 0.032 0.0000 0.007 1.73 0.0010* Not modeled **CV = coefficient of variation = standard deviation/mean



Table 16.3 Ram – Summary Statistics of Main Mineralized Horizon Assay Data


CV* Standard Error

Assay Interval 3021 114 2.667 0.500 5.300 1.6792 1.296 0.49 0.0844 % Co 3021 114 0.261 0.000 2.551 0.1640 0.405 1.55 0.0264 % Cu 3021 114 0.518 0.000 9.040 1.7635 1.328 2.56 0.0864 oz Au/t 3021 114 0.010 0.000 0.111 0.0002 0.016 1.59 0.0010 % Co - Capped 3021 114 0.261 0.000 2.551 0.1640 0.405 1.55 0.0264 % Cu - Capped 3021 114 0.424 0.000 4.000 0.6506 0.807 1.90 0.0525 oz Au/t - Capped 3021 114 0.010 0.000 0.090 0.0002 0.015 1.54 0.0010 Assay Interval 3022 136 2.278 0.500 5.000 1.0250 1.012 0.44 0.06287 % Co 3022 136 0.610 0.009 10.650 1.3391 1.157 1.90 0.0718 % Cu 3022 136 0.472 0.000 7.820 0.7636 0.874 1.85 0.0542 oz Au/t 3022 136 0.015 0.000 0.198 0.0006 0.024 1.64 0.0015 % Co - Capped 3022 136 0.554 0.009 4.000 0.6955 0.834 1.51 0.0517 % Cu - Capped 3022 136 0.442 0.000 4.000 0.4419 0.665 1.50 0.0412 oz Au/t - Capped 3022 136 0.014 0.000 0.090 0.0004 0.020 1.42 0.0012 Assay Interval 3023 276 2.518 0.500 10.000 1.8199 1.349 0.54 0.0559 % Co 3023 274 0.684 0.005 8.270 0.8480 0.921 1.35 0.0387 % Cu 3023 274 0.871 0.000 9.640 2.2421 1.497 1.72 0.0629 oz Au/t 3023 274 0.019 0.000 0.230 0.0011 0.033 1.69 0.0014 % Co - Capped 3023 274 0.666 0.005 4.000 0.6632 0.814 1.22 0.0342 % Cu - Capped 3023 274 0.767 0.000 4.000 1.1676 1.081 1.41 0.0454 oz Au/t - Capped 3023 274 0.017 0.000 0.090 0.0006 0.023 1.37 0.0010 *CV = coefficient of variation = standard deviation/mean



Table 16.4 Ram – Summary Statistics of Footwall Mineralized Horizon Assay Data


CV** Standard Error

Assay Interval 3025* 21 2.998 0.500 5.000 1.5884 1.260 0.42 0.1782 % Co 3025* 20 0.253 0.013 2.360 0.2775 0.527 2.08 0.0785 % Cu 3025* 20 0.212 0.000 1.120 0.0758 0.275 1.30 0.0410 oz Au/t 3025* 20 0.005 0.000 0.043 0.0001 0.009 1.68 0.0014 % Co - Capped 3025* 20 0.253 0.013 2.360 0.2775 0.527 2.08 0.0785 % Cu - Capped 3025* 20 0.212 0.000 1.120 0.0758 0.275 1.30 0.0410 oz Au/t - Capped 3025* 20 0.005 0.000 0.043 0.0001 0.009 1.68 0.0014 Assay Interval 3029* 4 2.873 1.700 3.600 0.5362 0.732 0.25 0.2208 % Co 3029* 4 0.292 0.060 0.790 0.0713 0.267 0.92 0.0805 % Cu 3029* 4 0.127 0.000 0.680 0.0747 0.273 2.15 0.0824 oz Au/t 3029* 4 0.005 0.002 0.011 0.0000 0.003 0.76 0.0010 % Co - Capped 3029* 4 0.292 0.060 0.790 0.0713 0.267 0.92 0.0805 % Cu - Capped 3029* 4 0.127 0.000 0.680 0.0747 0.273 2.15 0.0824 oz Au/t - Capped 3029* 4 0.005 0.002 0.011 0.0000 0.003 0.76 0.0010 Assay Interval 3030* 36 2.567 0.500 4.500 1.2718 1.128 0.44 0.1294 % Co 3030* 36 0.149 0.012 1.075 0.0286 0.169 1.13 0.0194 % Cu 3030* 36 0.179 0.000 0.790 0.0438 0.209 1.17 0.0240 oz Au/t 3030* 36 0.004 0.000 0.016 0.0000 0.004 1.01 0.0004 % Co - Capped 3030* 36 0.149 0.012 1.075 0.0286 0.169 1.13 0.0194 % Cu - Capped 3030* 36 0.179 0.000 0.790 0.0438 0.209 1.17 0.0240 oz Au/t - Capped 3030* 36 0.004 0.000 0.016 0.0000 0.004 1.01 0.0004 Assay Interval 3031* 14 2.567 0.600 4.200 1.6515 1.285 0.50 0.2473 % Co 3031* 14 0.204 0.016 1.398 0.0907 0.301 1.48 0.0579 % Cu 3031* 14 0.300 0.000 1.750 0.1121 0.335 1.12 0.0644 oz Au/t 3031* 14 0.004 0.000 0.035 0.0001 0.007 1.79 0.0014 % Co - Capped 3031* 14 0.204 0.016 1.398 0.0907 0.301 1.48 0.0579 % Cu - Capped 3031* 14 0.300 0.000 1.750 0.1121 0.335 1.12 0.0644 oz Au/t - Capped 3031* 14 0.004 0.000 0.035 0.0001 0.007 1.79 0.0014 Assay Interval 3032 53 2.559 0.600 4.800 1.2411 1.114 0.44 0.1053 % Co 3032 52 0.278 0.006 5.060 0.5957 0.772 2.77 0.0733 % Cu 3032 52 0.450 0.000 10.200 1.4058 1.186 2.64 0.1125 oz Au/t 3032 52 0.005 0.000 0.078 0.0001 0.012 2.56 0.0011 % Co - Capped 3032 52 0.259 0.006 4.000 0.4314 0.657 2.53 0.0623 % Cu - Capped 3032 52 0.380 0.000 4.000 0.5426 0.737 1.94 0.0699 oz Au/t - Capped 3032 52 0.005 0.000 0.078 0.0001 0.012 2.56 0.0011

Assay Interval 3035 15 1.996 0.900 2.900 0.4737 0.688 0.34 0.1377 % Co 3035 15 0.439 0.035 2.700 0.5484 0.741 1.69 0.1481 % Cu 3035 15 0.137 0.010 0.840 0.0301 0.173 1.27 0.0347

oz Au/t 3035 15 0.008 0.001 0.051 0.0002 0.013 1.52 0.0025 % Co - Capped 3035 15 0.439 0.035 2.700 0.5484 0.741 1.69 0.1481 % Cu - Capped 3035 15 0.137 0.010 0.840 0.0301 0.173 1.27 0.0347

oz Au/t - Capped 3035 15 0.008 0.001 0.051 0.0002 0.013 1.52 0.0025 * Not modeled **CV = coefficient of variation = standard deviation/mean



Figure 16.1 compares the quantile-quantile (QQ) plot of all previous drilling at the Ram with 2005-2006 drilling on the 3023 horizon. The recent drilling concentrated on a higher-grade portion of the 3023 Horizon. The 2005-2006 drilling extended 3023 Horizon mineralization to the south.

The data verification procedures, which included visual correlations, spot resampling by MDA, database and data entry audits, FCC’s QA/QC analytical procedures including assays of check samples, standard samples, and blanks, and database statistical evaluation, all show that the ICP database is reliable and verifiable, and is a reasonable representation of the mineral resources.

A total of 675 Ram mineralized intervals were checked by Induction Coupled Plasma analysis to estimate the quantity of rare-earth elements in the deposit. Table 16.5 shows the statistics for the analysis.

Table 16.5

Ram Rare Earth Analysis

Element Valid N Mean Minimum Maximum Standard Deviation CV*

Ce 675 196.0 2.1 6980.0 447.3 2.3 Cs 656 13.5 0.2 51.0 10.1 0.7 Hf 656 8.9 0.0 33.4 4.6 0.5 La 675 86.6 1.0 2960.0 193.8 2.2 Nd 675 81.7 1.0 2640.0 182.4 2.2 Sm 675 18.5 0.7 558.0 38.1 2.1 Y 674 203.9 13.4 2580.0 294.0 1.4 Yb 675 21.9 1.2 273.0 31.5 1.4

*CV = coefficient of variation = standard deviation/mean



17.0 ADJACENT PROPERTIES

Aside from the Ram deposit, which is the focus of this report, there are a number of other known mineral occurrences in the Blackbird area, some of which are partly or entirely located on claims held by FCC. These include the Sunshine, East Sunshine, Merle-Northfield, Iowa, Toronto and H.W. Toronto zones. The locations of these zones are shown in Figure 6.2.

17.1 Sunshine Deposit

Mineralized zones in the Sunshine Deposit are typically multiple, stacked sulfide-bearing beds. Individual mineralized beds or horizons range in thickness from inches to several feet and are intimately associated with biotite-rich tuffaceous exhalative (BTE) horizons. An increase in silica content generally indicates an increase in cobalt, copper and gold grades. Stratigraphy, including the BTE horizons, strikes north-northwest and dips moderately to steeply to the east-northeast. Individual sulfide-bearing beds may not be continuous over a distance of a few hundred feet, but generally, the overall mineralized zones within the BTE horizons can be traced along strike for over 1,500 feet.

The description that follows is copied from the 1998 resource report that was completed by FCC staff:

The Sunshine Lode’s Main Zone is comprised of fine- to medium-grained metaquartzite interbedded with siltite and mafic sequences. The mafic sequences, comprised of green biotite and lesser chlorite, have been interpreted to be metamorphosed tuffs or exhalites (BTE) (Clark, L.A., 1995). Portions of the mafic sequence contain significant amounts of chert of exhalative origin (STE) (Clark, L.A., 1995).

The hanging-wall stratigraphy is dominated by upward-coarsening and thickening quartzite. In the lower hanging wall quartzite is intercalated with local siltite and minor mafic sequences (BTE), while in the upper hanging wall quartzite contains little siltite and no mafic sequences.

The footwall stratigraphy is dominated by a thick sequence of monotonous siltite or pelite with minor interbedded sandy units. Mafic sequences are rare and can not be correlated except locally. Shearing is prevalent within this package. The boundary between the footwall and the main zone is defined by a sedimentary interface based on grain size, indicating a change between shallow and deeper water.

Concordant to subconcordant discontinuous quartz veins are found throughout the Sunshine Lode’s stratigraphy. These are diagenetic in origin and while they occasionally carry grade they are not traceable for any appreciable distance along strike or down dip.



Folding, at least locally and on the bedding scale, has been noted within the (drill) core from changes in bedding attitudes and fold noses. This may lend support to the idea that the horizons are folded repetitions. However, no definitive evidence of over turning could be documented in the core.

The Sunshine Lode mineralization appears to be cut by a number of discontinuous, shallow to moderate, west-dipping, dip-slip faults/shears. In addition, drilling has revealed a number of discontinuous, crosscutting tectonic breccias, which may affect the continuity of the Sunshine Lode, at least locally.

The north-trending, steeply west-dipping, Green Dyke fault, which parallels the Sunshine Lode for much of its strike length, may truncate the mineralization down dip and to the south. Drilling below the fault has been limited, and some of the holes may not have reached the mineralized horizons. Two Noranda drill holes, 80-03A and 80-13A, which do penetrate below the fault, intersected a core length of 2.30 feet of 0.320% cobalt, 0.08% copper and 0.003 oz gold/ton and 4.00 feet of 0.217% cobalt, 0.21% copper 0.003 oz gold/ton respectively. These holes suggest that higher-grade pods of mineralization may remain undiscovered below the fault. Neither a sense of movement nor a displacement has been determined for this fault.

… text abridged …

The Sunshine Lode’s mineralized zone is found within a confined stratigraphic section that contains a main mineralized horizon (1003), a lower footwall horizon (1001) and an upper hanging-wall horizon (1007). Although the mineralized zone is continuous along strike, the individual horizons do not always display good continuity along strike or down dip. The footwall and hanging-wall horizons attenuate rapidly both along strike and down dip. However, within the main horizon and hanging-wall horizon, tabular deposits of mineralization with sufficient grade and size exist, which should be mineable. These ore deposits appear to have their long axis down plunge towards north.

The stratabound mineralization revealed by the drilling consists of fine- to medium-grained disseminations, blebs and stringers of cobaltite and minor chalcopyrite and pyrite. Two types of (mineralization) occur within the Sunshine Lode, fine- to coarse-grained cobaltite within siliceous gangue and fine-grained cobaltite within micaceous gangue. The micas are black biotite, green biotite and chlorite. The horizons are typically composed of both ore types and are hosted by medium grained biotite rich quartzites. This mineralization is dominantly bedding concordant but has been remobilized locally into fracture quartz veins and/or crosscutting structures.

Table 17.1 summarizes the stratigraphy of the Sunshine Deposit.



Table 17.1 Stratigraphy of the Sunshine Deposit

Component Description

Upper Hanging Wall

• Medium-to coarse-grained, thin- to thick-bedded quartzite; • Contacts are gradational and conformable.

Lower Hanging Wall

• Fine-to medium-grained, thin- to medium-bedded quartzite; • Local intercalated siltites and minor BTE; • Mineralization is commonly associated with remobilized quartz

stringers. Mineralized Zone • Fine- to medium-grained quartzite intercalated with siltite and BTE,

bedding is poorly defined. 1007 Horizon • Occurs 30 to 50 feet above main horizon;

• Attenuates rapidly along strike and especially up and down dip; • Frequently remobilized; • Shows poorly developed alteration assemblage; • Cobaltite may occur in chloritic BTE, BTE, or more rarely STE.

1003 Horizon • Occurs 5 to 30 feet above footwall sediments; • Generally shows distinctive alteration assemblage, abundant coarse

grained cordierite and garnet; • Cobaltite may occur in STE, BTE or more rarely chloritic BTE; • Infrequent, local remobilization has been noted.

1001 Horizon • Occurs 5 to 10 feet below main horizon; • Attenuates rapidly along strike and up and down dip; • Frequently remobilized; • Shows poorly developed alteration assemblage; • Cobaltite may occur in chloritic BTE, BTE or more rarely STE.

Footwall • Monotonous assemblage, grey, fine grained siltite with minor sandy component;

• Tuffaceous component restricted to locally correlative BTE horizon; • Very thick unit, often sheared.

Quartz Segregations and Veins

• Found throughout the Sunshine Deposit stratigraphy; • Concordant to subconcordant and rarely traceable along strike or

down dip; • Frequently contain inclusions of chalcopyrite, pyrite and pyrrhotite.

Notes: This table was copied with minor alteration from Table 2 of the 1998 resource report by FCC staff.

BTE is biotite-rich tuffaceous exhalative. STE is siliceous tuffaceous exhalative.



17.2 Other Deposits

The brief descriptions that follow are from Gow (1995):

There are four zones with variations of the name Merle, all located near the southeast corner of the Noranda Blackbird patented claim block and the LDC claims of FCC. These are Merle, Upper Merle, H.W. Merle and the Merle-5 Zones. These zones extend outside the Noranda property and, as a result, form targets on the FCC Sunshine property (now the ICP).

The Merle Zone was extensively explored by Noranda, as discussed by Loos (1982). Some 26 diamond drill holes (aggregating 14,888 feet) were completed by Noranda and a further 3 holes were drilled by Northfield in the period 1954 to 1956. Noranda estimated in-situ reserves for the Merle Zone6 … This zone straddles the Noranda-FCC boundary.

The Upper Merle was tested by three diamond drill holes. A number of low values of cobalt and copper have been intersected but no continuity of potentially economic mineralization has been demonstrated to date.

Little data are available for the H.W. Merle Zone.

The Merle-5 Zone was not tested by Noranda. An underground program of work completed by Northfield tested parts of this zone by drifting and underground drilling. An old report shows mineralization was intersected on one level over a length of about 27 feet, with exposures in two drifts and four underground diamond drill holes. This testing was part of a larger program which included underground drifting, 8 surface diamond drill holes and 8 underground diamond drill holes.

A number of other zones have been identified during a soil geochemical survey completed by Noranda and discussed by Toth and Hahn (1982). Of interest to FCC are the Iowa Zone, the up-dip part of the Toronto Zone and the down-dip projection of the H.W. Toronto Zone.

6 Gow quoted Noranda’s in-situ reserve. However, since the amount of that reserve, if any, that may be on FCC’s ground is indeterminate, MDA has elected not to quote the Merle reserve in this report.



18.0 MINERL PROCESSING AND METALLURGICAL TESTING

Samuel Engineering, Inc., (SE) of Greenwood Village, Colorado, was retained by FCC to manage the final stages of metallurgical testwork, provide feasibility-level engineering and design for the process facilities, and calculate feasibility-level capital and operating cost estimates for the process operation.

18.1 Review of Metallurgical Test Work

Initial information about the milling characteristics of the ores from the ICP came primarily from test work on bulk samples and drill composites performed by Blackbird Mining Company (BMC). BMC successfully produced a copper concentrate and a cobalt concentrate using a differential flotation flowsheet. However, the milling and flotation of the mineralized material is not overly complex, and a bulk concentrate could readily be produced. With the purchase of the Big Creek Hydrometallurgical Complex, the need to produce separate concentrates that were marketable to copper and cobalt smelters was eliminated. Production of a bulk concentrate is based on mineral processing work conducted by The Center for Advanced Mineral and Metallurgical Processing (CAMP) on a composite from the Ram deposit, and confirmed by metallurgical testwork completed by SGS Lakefield Research (Lakefield) during a 2005 testing program that was conducted in support of the feasibility study.

The metallurgical test samples were obtained by drilling six (6) PQ diameter core holes into known mineralized horizons in the RAM deposit. About one (1) ton of mineralized intercepts were obtained with this drilling spatially representative of the mineralized horizons.

18.1.1 Mineralization

Three types of ore (mineralized material) have been recognized in the district. They are:

• High-sulfide complex ores such as those mined and processed at the Blackbird Mine • Siliceous ores • Chloritic ores

No high sulfide mineralization has been encountered in the Ram deposit. Most of the mineralization is either siliceous or chloritic with low total sulfide concentrations. In general, the low-sulfide mineralization produces better recoveries and higher-grade concentrates than the high-sulfide material. The low-sulfide ore also has significantly reduced environmental and processing concerns.



18.1.2 Process Philosophy

Past test work focused on producing cobalt and copper concentrates. The philosophy was that copper concentrate would go directly to a copper smelter and the cobalt concentrate, due to its high arsenic content, would go to a hydrometallurgical or bio-oxidation treatment facility for further processing. Current plans call for the production of one bulk sulfide concentrate that contains cobalt, copper and gold. Further processing for recovery of the individual metals is via a hydrometallurgical treatment plant. The hydrometallurgical process includes pressure leaching of the concentrate which allows control of the arsenic-bearing wastes using the iron in the concentrate to make scorodite in the leach step.

There is a large body of information about the metallurgy of the Blackbird ores based on past operations and laboratory test work that was completed until about 1981. Mineral processing work in support of the prefeasibility study was conducted by CAMP on samples that were obtained from large-diameter core drill holes in the Ram deposit. SGS Lakefield completed additional test work in support of the feasibility study. Additional test work to define the hydrometallurgical process and some further optimization tests were performed, and continue to be performed, at Mintek in South Africa.

18.1.3 Test Results and Flowsheet Development

BMC’s test work indicated that high recoveries and high-grade concentrates could be achieved from the low-sulfide material. Almost all of the ICP resources can be classed as low-sulfide material. Testing has not been completed for oxidized material, but, BMC indicated problems with oxidized material containing high concentrations of iron and clay. Metallurgical test work was also completed to optimize metal recoveries, reagent consumptions and operational conditions for the hydrometallurgical plant.

CAMP completed flotation and pressure leaching test work on core samples that were collected during the 1999 to 2000 drilling of the Ram deposit. About one ton of large diameter PQ (3.345-inch diameter) core was collected. The test work included comprehensive milling and flotation optimization testing using the bulk material from the Ram samples. The test results were statistically modeled and optimized using Stat-Ease software.

Locked-cycle flotation testing produced good recoveries and grades. The results are shown in Table 18.1.

Table 18.1 Locked Cycle Test Results

Cobalt Copper Gold Concentrate Grade 14.40% 7.41% 0.396 oz Au/ton Recovery 92.70% 92.80% 72.90%



Gravity concentration of the flotation tailings was successful in recovering additional cobalt and gold. The final concentrate grade and overall projected recoveries are shown in Table 18.2.

Table 18.2 Gravity Concentration Test Results

Cobalt Copper Gold Concentrate Grade 14.40% 7.18% 0.417oz Au/ton Recovery 94.10% 92.90% 78.20%

SGS Lakefield research completed two test projects in 2005 to confirm the project flowsheet and determine engineering details for the three specific rock types: siliceous, micaceous and quartzitic rocks. Locked-cycle tests were also performed on three samples that had varying cobalt to copper ratios.

The objective of the second project was to produce concentrate required to conduct the hydrometallurgical testing. This project used all available core and reject samples to produce a sufficient quantity of bulk concentrate to conduct further hydrometallurgical testing.

The SGS Lakefield work was conducted in order to determine optimum leaching conditions for the autoclave leach. The Mintek testing was a pilot plant test to confirm the proposed flow sheet. This testing was done to derive the design data required for engineering. Optimization of the hydrometallurgical processes continues. Not enough concentrate was available to perform another mini-pilot, so the optimization was completed in batch tests.

18.2 Process Description

18.2.1 ICP Concentrator

Based on the latest metallurgical test work data, the concentrator is a typical froth flotation recovery plant. It uses two stages of crushing and one stage of grinding for size reduction prior to flotation in a simple rougher/cleaner flotation circuit.

An overhead tramway delivers ore and waste rock from the mine to the processing area. The tram discharges ore into a coarse ore stockpile or a waste stockpile. The coarse ore stockpile has a live storage capacity of 800 tons, which is sufficiently large to store ore for one full operating day. Primary crushing is done by a jaw crusher and secondary crushing is done by a standard cone crusher. The crushing circuit is designed to produce sufficient ore for feed to the concentrator in one 12-hour shift per day.

Grinding is by a nine-foot (2.8-meter) diameter by 16-foot (5.0-meter) long ball mill that is driven by a 750-horsepower (559 kilowatt) motor. Two hydrocyclones (one operating and one standby) are used for classification of the slurry.



The flotation circuit consists of a conditioning tank, rougher flotation and cleaner flotation. Two parallel banks of flotation cells are incorporated. Each bank has four rougher flotation cells; the volume of each rougher cell is 100 cubic feet which provides a total residence time of approximately 11 minutes. The rougher flotation tailings are the final tailings from the concentrator. Each bank has three cleaner cells; the cleaner cleaner cells each have a volume of 24 cubic feet, which provides a total residence time of 21 minutes.

A final concentrate thickener provides the initial dewatering of the flotation concentrate. The thickened concentrate is pumped to the concentrate stock tank for storage prior to final dewatering in the concentrate filter press. The concentrate is trucked to the Kellogg facility for further processing.

The tailings from the flotation circuit are pumped to the tailings thickener. The water recovered in the thickener overflow is stored in the process water tank. The thickener underflow slurry is pumped to the mine backfill system. The backfill system consists of a tailings filter and paste preparation equipment. Approximately 50 percent of the tailings are used for mine backfill while the other 50 percent is hauled to the tailings and waste storage facility.

An important part of the processing operations at the mine site is the water treatment plant. Water that originates from mine dewatering, processing and drainage from the tailings and waste rock storage facility is collected, contained and treated using the best technology for producing clean water for discharge and the smallest quantity of waste for disposal.

18.2.2 Hydrometallurgical Facility

CAMP performed leach and flowsheet development for the prefeasibility study. The work demonstrated that the nitrogen species-catalyzed leach is effective. In addition a preliminary batch test program was carried out at SGS Lakefield to evaluate the response of the ICP copper-cobalt-arsenic concentrate to the nitrogen species catalyzed (NSC) process. Under the proper conditions, cobalt and copper extractions during NSC were in excess of 99 percent for cobalt and 93.4 percent for copper. The recommended leach conditions are shown in Table 18.3

Table 18.3 Hydrometallurgical Test Conditions

Parameter Value Pre-leach temperature 90ºC Pre-leach retention time 60 minutes NSC leach retention time 120 minutes Acid addition 50 grams per liter Nitrogen species addition 4 grams NaNO2 per liter Sulfur dispersant addition 5 kilograms per tonne Slurry density 7.4 percent solids Oxygen overpressure 15 pounds per square inch at 160 degrees Celsius



FCC commissioned Mintek to do a mini-plant campaign to test the recovery of copper and cobalt from a flotation concentrate for the ICP. Limited material was available for test work and most of the material was only available as relatively small samples of flotation concentrate that was produced at SGS Lakefield.

The samples were blended into classes of material prior to blending all of the available material for feed to the autoclave as part of the mini-plant campaign.

Based on the initial Idaho mini-plant results, additional testing was conducted. These tests are ongoing and include simulation of continuous autoclave operation with flash cooling, optimization of acid use, better understanding of gold disposition and gold recovery methods, improved arsenic removal, and reduction of the number of unit operations by combining steps. To achieve an acceptable leaching performance, the leach conditions shown in Table 18.4 were used in the mini-plant run.

Table 18.4 Hydrometallurgical Test Conditions

Parameter Value Autoclave size 45 liters Leach volume 21.3 liters Freeboard 53 percent Pre-leach temperature 90ºC Pre-leach retention time 60 minutes Leach temperature 155ºC Leach retention time 120 minutes Sulfuric acid addition 40 grams per liter NaNO3 concentration 6 grams per liter Oxygen overpressure 8.5 bars

Regrinding the bulk concentrate is a critical step in improving recoveries and the results discussed are for concentrate ground to 80 percent passing 10 micron. This batch process limited the capacity of the hydrometallurgical complex to roughly 40 tpd of sulfide concentrate. Based on the mine plan the Big Creek Metallurgical Complex needed to be able to process up to 60 tons per day of concentrate. Grenvil Dunn, principal of Hydromet Pty. Ltd, (Hydromet), was engaged to analyze and resolve on this problem as well as the remainder of the cobalt metal recovery operations. Based on Mr. Dunn’s experience, additional batch testwork was conducted and confirmed that continuous autoclave operation with flash heat recovery was a viable processing option.

Continuous autoclave operation incorporating nitrogen species as a catalyst and continuous flash cooling has significant advantages. The leach retention time is extended while throughput is increased, operations are simplified and a continuous source of steam is produced for use in other unit operations. Details of the process are not presented in this document as the process is proprietary and is currently in the patent process.



Difficulties encountered in the batch leach process included:

• heat generation and temperature control; • acid production; • high arsenic levels in the leachate; • nitrogen species containment, recovery and recycle; and • low filter rates of the leach residues.

Continuous autoclave leach operation with flash heat recovery addressed the above issues by:

• Controlling heat by controlling the volume of material withdrawn from the leach vessels and cooling via the flash heat recovery operation prior to reintroducing material to the leach circuit. This also allows a higher slurry density to be used in the autoclaves, which increases throughput;

• Neutralizing flash slurry in the flash circuit prior to reintroducing it to the leach circuit, thereby controlling acid concentration in the autoclaves;

• Precipitating the majority of the arsenic within the autoclaves; • Recovering nitrogen species contained in the off gas and recycling these back to the

leach; and • Neutralizating the flash slurry with lime creates gypsum within the autoclaves, which

has improved filter rates.

Mintek performed batch tests to simulate the subsequent solution purification steps incorporated in the cobalt recovery scheme including:

• copper scavenging using metathesis; • lead precipitation; • iron precipitation; • arsenic removal; • zinc solvent extraction; and • nickel ion exchange.

All of these steps are incorporated in the metallurgical process to produced high-purity cobalt metal. Copper cathodes are produced from the existing SX/EW circuit at the facility. By-product streams from the process are nickel hydroxide, and magnesium sulfate.

18.3 Plant Site Location

The ICP concentrator will be located near the portal facilities for the Ram deposit. The distance from the portal to the concentrator is approximately 3,000 feet, and the concentrator is approximately 1,000 feet higher in elevation. An aerial tramway will transport course ore from the portal to the concentrator. Ancillary facilities, such as workshops and warehouses will be located on the portal pad or at the concentrator.



18.4 Concentrate Transportation

Concentrate from the ICP concentrator will be trucked to the Kellogg facility for further processing. Concentrate will be moved in closed, truck-mounted containers. FCC will maintain a container transfer station in Salmon. Trucks will transport containers of concentrate from the processing facility to Salmon. At Salmon, these containers will be transferred to highway trucks for transport to the hydrometallurgical facility near Kellogg.

18.5 Tailings and Waste Rock Disposal

A single surface disposal facility will be used to store both the tailings from the concentrator and the waste rock material. It is called the tailings and waste rock storage facility (TWSF). This facility serves to minimize the area of disturbance by sharing containment and drainage collection facilities while providing storage for these materials.

The TWSF can store 800,000 tons of waste rock and 960,000 tons of tailings, which is consistent with production estimates. Tailings and waste rock are separated to the extent possible. The facility covers an area of approximately 36 acres and includes a geomembrane liner system with drainage collection.

The TWSF is located east of and down slope from the concentrator. This location was chosen as the best site because of its relatively flat topography, avoidance of jurisdictional wetlands, soil characteristics and distance from active drainages and streams. Surface runoff is diverted around the operating areas of the facility. Collection, conveyance and storage systems are included to manage runoff and seepage.



19.0 MINERAL RESOURCES AND MINERAL RESERVES ESTIMATES

19.1 Introduction

Previous Technical Reports on the ICP calculated mineral resources and reserve estimates based on combining the Ram and Sunshine deposits. The October 31, 2006, Technical Report completed by MDA was the latest to combine both of these deposits. However, in completing the feasibility study on which this Technical Report is based, FCC determined that the most prudent and efficient course of action is to base the project entirely on mining the Ram deposit. This report is, therefore, based solely on the resources and reserves estimated in the Ram deposit, with Sunshine reported only as an adjacent property in Section 17.

FCC performed all of the historic resource estimates cited in this report, other than the 2001 update of the Ram main, and Ram footwall and hanging-wall zones, and the 2005 resource estimate, which was done by MDA. MDA reviewed or audited all of FCC’s resource estimates. The most recent resource estimates/updates were completed in 2006, based on additional Ram deposit drilling that was completed during 2005 and 2006. The basis for the earlier MDA audited resources is essentially the same as for the updated 2005 resource estimates, with only new drilling data added.

19.2 Data Acquisition Analytical data for the ICP were obtained from core drilling and trench sampling. Due to the inherent problems that can occur when trench samples are used in grade estimation, trench sample assays have been omitted from the grade estimations but were used to help define the location and geometry of the mineralized horizons.

FCC’s project database contains a total of 80 holes for the Ram deposit that were drilled by FCC as shown in Table 19.1. With the exception of reverse circulation pre-collars for core holes completed by FCC in 2000 in order to obtain metallurgical samples, all data was obtained by core drilling. Exploration holes were drilled with either NQ- or HQ-size core; the metallurgical holes were drilled with PQ-size core. NQ, HQ and PQ core have diameters of 1.875 inches (47.6mm), 2.500 inches (63.5mm) and 3.345 inches (85.0mm), respectively.



Table 19.1 ICP Drilling Summary

Year Drilled Operator Deposit Number Feet 1959 Calera Mining Company Sunshine 3 982

1979 – 1981 Blackbird Mining Company (Noranda) Sunshine 29 17,826.0 1995 – 1996 Formation Capital Sunshine 48 29,144.0 1995 – 1996 Formation Capital East Sunshine 24 14,723.5

1997 Formation Capital Ram 20 12,045.0 1999 Formation Capital Ram 11 5,211.0

2000 (1) Formation Capital Ram 8 2,613.0 2004 Formation Capital Ram 28 24,869.0 2005 Formation Capital Ram 9 5,302.5 2006 Formation Capital Ram 4 4,532.0 Totals Sunshine 104 62675.5 Totals Ram 80 54572.5 Totals Ram + Sunshine 184 116,266.0

(1) - Metallurgical Test Holes - Not used in Grade Model

The majority of sample analyses prior to 1995 were for cobalt and copper, with occasional assaying for gold. Beginning in 1995, FCC included gold assaying as part of their routine analytical procedures. In addition, multielement geochemical analyses were completed for nearly all of FCC’s drill-hole samples at the ICP. Recently, rare-earth minerals have been identified in the mineralized horizons and assay data was obtained for the rare-earth minerals during 2006.

19.3 Ram Deposit The resource estimate for the Ram deposit is based on the same methods that were used in the 2005 update. Interpretations for the Ram deposit have not changed; rather, the latest drilling has allowed for increased confidence of interpretations, while adding to the resource base in the southern portion of the 3023 horizon.

The Ram main zone consists of three mineralized horizons, all occurring within the BTE units. From hanging wall to footwall, these horizons have been labeled as 3021, 3022 and 3023. Zone 3023 appears to be the most persistently mineralized of the three zones. The vertical distance between the three horizons within the main zone ranges from a few feet to, locally, tens of feet.

The Ram footwall zone is also divided into two horizons, although they appear less distinct than the main zone horizons. These horizons have been labeled as 3032 and 3035, and are separated by a few feet to tens of feet (locally nearly 100 feet separates 3032 and 3035). Four other horizons were noted in the footwall zone but were not modeled.



There are six Ram hanging-wall zones and resources have been estimated for four, which are labeled as 3010, 3011, 3012 and 3013. Table 19.2 shows the average strike and dip of the main horizons taken on plan and cross sections that were prepared to support the 2001 prefeasibility study.

Table 19.2 Ram Main & Footwall Horizon Orientations

Horizon Number of

Observations

Average Strike

Average Dip

3021 8 344° 52° 3022 8 341° 51° 3023 10 342° 51° 3031 10 339° 51° 3032 8 339° 50° 3035 4 333° 46°

Correlation of horizons between drill holes and between cross sections was made based on a combination of lithology, structure, style of mineralization, and grade. MDA relied mainly on FCC’s interpretations of the geologic and mineral continuity, with recognition that in some locations it is difficult to identify individual horizons, particularly when one or two of the horizons either coalesce or pinch out. The potential to correlate discontinuous mineralized zones within BTE units and treat them as a continuous mineralized horizon is also acknowledged.

19.4 Geochemistry of the Ram Deposit

During the first half of 2000, MDA statistically analyzed approximately 1,700 multielement geochemical sample data that were obtained from 18 holes drilled in the Ram deposit in 1997. Of these, 610 samples contained greater than 0.05% Co, and 253 samples contained greater than 0.20% Co. MDA focused the analysis on silver, arsenic, gold, bismuth, cobalt, iron, copper, mercury, and nickel because of either significant levels of concentration or good correlation with cobalt and/or copper. Some of the elements were included in the review, despite their low grades or poor association with cobalt, because of their potential economic or metallurgical impact.

Most of the elements considered tend to have higher values in the same parts of the deposit as cobalt, though rarely was there a good sample-for-sample correlation with cobalt. The only correlations of significance were Co and As, Co and Au, Cu and Ag, and Au and As. Spatial grade changes of these metals are not significant, though some subtle trends do exist, as summarized below:



• Statistically, cobalt does not vary significantly by elevation, depth or location along strike; there are indications of a north-raking (~50°) higher-grade shoot, but this is not conclusive due to the current drill spacing.

• Copper appears to decrease in grade to the north, while the lower horizons appear to contain elevated copper grades relative to the upper horizons.

• Gold and arsenic seem to decrease in grade to the north in a manner similar to copper.

• Bismuth is erratically distributed; there are only a few samples with significant occurrences of bismuth that occur near the center of the deposit and near the surface.

• Silver occurs in very low concentrations, and grades decrease to the north and at depth; the metallurgical sample composite averaged 0.13 oz Ag/ton.

• Iron levels decrease with depth and increase to the north. • Mercury distribution is erratic along strike, but seems to occur in higher

concentrations in the higher elevations of the deposit; overall mercury concentrations are very low.

• Nickel seems to be evenly distributed vertically, but a slight decrease in grade is observed along strike to the north.

19.5 Specific Gravity

FCC took samples for density measurements from uncrushed core. Specific gravity was measured by standard Jolly balance methods. The results of specific gravity determinations, and tonnage factors used in the resource models, are presented in Table 19.3

Table 19.3 Tonnage Factor Summary for Ram Deposit

Area Number of Samples Specific Gravity Tonnage Factor

(cubic feet/ton) Sunshine 321 2.95 10.86 Ram 199 2.85 11.24 East Sunshine 147 2.85 11.24

19.6 Ram Resource Method

Cross sections were developed on 200-foot intervals over a 2,600-foot strike length for the Ram deposit. A total of 13 core holes totaling 9,834.5 feet were drilled in the deposit during 2005-2006. The database shows a total of 80 core holes drilled in the deposit totaling 54,572 feet. Eight of these holes (2,613 feet) were drilled for metallurgical testing and were not used in the resource estimate since only one interval in each hole was assayed. Mineralized horizons were developed on the sections. These horizons were developed by utilizing both the favorable geologic unit (BTE) and mineralization above 0.03% Co. Where higher grade mineralization was present, the zone was drawn to a minimum three-foot true



thickness with a grade in excess of 0.20% Co. Mineralized horizons were developed for horizons 3010, 3011, 3012, 3013, 3015, 3021, 3022, 3023, 3025, 3029, 3030, 3032 and 3035; however, resources were not calculated for 3015, 3025, 3029 and 3030 due to continuity and grade issues.

These mineralized horizons were sliced on 25-foot intervals and plotted on plan-view maps. The horizons were drawn on the plan views on 50-foot intervals. The intervening 25-foot plans were developed on computer screens by interpolation.

Assays were coded in the database from the cross sections and corrected to the plans. Several holes intersected the mineralized horizons but were not assayed. For the resource calculation, these holes were assumed to intersect unmineralized material (i.e. 0.00% Co and Cu, and 0.0 oz Au/t). A statistical study was completed on the drill-hole data from these horizons. This study indicated that several populations were evident in the horizons as shown in Figure 19.1 from about 0.03% Co to 0.20% Co, from 0.20% Co to a little over 1.0% Co, and from a little over 1.0% Co to 4.0% Co, when the cobalt assays were capped. Figures 19.1 through 19.3 show the QQ plots for cobalt, copper, and gold, respectively. The QQ plot for copper shows a population break at about 1.0% copper, while the gold QQ plot shows one at about 0.03 oz Au/t. Figure 19.4 shows a long-section view of the 3023 horizon showing the high-grade zones (red: +1.0% Co), medium-grade (green; 0.30%-1.0% Co), and low-grade (blue; 0.03%-.30% Co) zones and color coded block grades within the horizon.

19.7 Ram Resource Estimate - 2006

The resource estimates calculated for the Ram deposit are shown in Table 19.4, Table 19.5, Table 19.6, Table 19.7, Table 19.8, and Table 19.9 for horizons 3010, 3012, 3013, 3021, 3022 and 3023, respectively. These are the larger horizons in the Ram deposit. The 3022 and 3023 are the most significant horizons in the Ram deposit.

Measured material was defined by the distance to the closest drill hole and the number of drill holes influencing block grades. A block was defined as measured if the closest hole was within 50 feet, or if the closest hole was within 100 feet and at least two drill holes were used to compute the block grade. Indicated materials were defined as grade estimates with one hole within 100 feet of the block estimate, except for the 3022 and 3023 horizons, which show good continuity, where indicated material was also defined by at least two drill holes within 200 feet of the block. Material defined by drill holes with distances in excess of 100 feet was classed as inferred, except for horizons 3022 and 3023, where inferred material was defined by one hole in excess of 100 feet or more than one hole in excess of 200 feet. Inferred materials were extended by about 300 feet to the south where drilling has indicated thick horizons with good continuity, or to depth where drilling has not found the bottom of the deposit, as is the case for the Blackbird group of deposits. Inferred materials were also extended down dip by 300-350 feet in horizons 3010, 3022 and 3023. The bottom of the deposit has not been found to date.



Table 19.4 Ram 3010 Horizon Resources

3010 Measured Indicated Inferred

Cutoff 000s Tons % Co % Cu oz

Au/tonAverage

True Thickness

000sTons

% Co

% Cu

oz Au/ton

Average True

Thickness

000s Tons % Co % Cu oz

Au/tonAverage

True Thickness

0.00 108.4 0.320 0.05 0.004 5.7 29.8 0.21 0.03 0 5.4 62.6 0.436 0.03 0.005 5.7 0.05 102.2 0.337 0.04 0.004 5.6 29.8 0.21 0.03 0 5.4 62.6 0.436 0.03 0.005 5.7 0.10 94.0 0.360 0.04 0.004 5.5 29.8 0.21 0.03 0 5.4 62.6 0.436 0.03 0.005 5.7 0.15 86.1 0.382 0.04 0.004 5.5 18.5 0.25 0.04 0 5.3 56.2 0.471 0.03 0.005 5.8 0.20 69.2 0.434 0.04 0.005 5.7 10.7 0.32 0.07 0 6.0 52.3 0.494 0.03 0.006 5.9 0.25 49.4 0.520 0.01 0.005 6.0 5.4 0.42 0.01 0 6.2 47.0 0.523 0.02 0.006 5.9 0.30 40.2 0.576 0.01 0.006 6.4 5.4 0.42 0.01 0 6.2 36.3 0.597 0.01 0.006 6.1 0.35 37.3 0.597 0.01 0.006 6.5 5.4 0.42 0.01 0 6.2 30.8 0.646 0.01 0.007 6.2 0.40 33.9 0.619 0.01 0.006 6.7 5.4 0.42 0.01 0 6.2 24.9 0.709 0.00 0.007 6.2 0.45 24.6 0.697 0.00 0.008 6.6 0.5 0.53 0.01 0 4.0 21.1 0.762 0.00 0.008 6.3 0.50 18.1 0.776 0.00 0.009 6.5 0.5 0.53 0.01 0 4.0 18.5 0.800 0.00 0.009 6.2 0.75 10.8 0.914 0.00 0.011 6.4 0.0 0.00 0.00 0 0.0 10.9 0.985 0.00 0.012 6.4 1.00 0.8 1.030 0.00 0.013 5.8 0.0 0.00 0.00 0 0.0 6.2 1.050 0.00 0.013 6.4 1.25 0.0 0.000 0.00 0.000 0.0 0.0 0.00 0.00 0 0.0 0.0 0.000 0.00 0.000 0.0 1.50 0.0 0.000 0.00 0.000 0.0 0.0 0.00 0.00 0 0.0 0.0 0.000 0.00 0.000 0.0 2.00 0.0 0.000 0.00 0.000 0.0 0.0 0.00 0.00 0 0.0 0.0 0.000 0.00 0.000 0.0






Au/tonAverage

True Thickness

000sTons % Co %

Cu oz

Au/tonAverage

True Thickness


Au/tonAverage

True Thickness

0.00 171.8 0.395 0.36 0.008 5.2 32.9 0.160 1.25 0.020 6.2 82.2 0.169 0.38 0.008 5.5 0.05 164.7 0.410 0.37 0.008 5.3 30.3 0.170 1.35 0.020 6.2 82.0 0.170 0.39 0.008 5.5 0.10 151.9 0.440 0.40 0.009 5.3 24.9 0.195 1.63 0.023 6.6 73.8 0.181 0.42 0.009 5.6 0.15 118.9 0.526 0.41 0.008 5.4 9.8 0.276 2.30 0.012 5.1 23.8 0.287 0.58 0.007 5.4 0.20 91.7 0.630 0.51 0.010 5.2 9.8 0.276 2.30 0.012 5.1 13.9 0.366 0.86 0.008 5.3 0.25 68.7 0.766 0.66 0.011 5.1 9.4 0.278 2.39 0.012 5.1 8.3 0.461 1.41 0.011 5.3 0.30 64.1 0.801 0.58 0.011 5.2 0.0 0.000 0.00 0.000 0.0 4.2 0.640 0.45 0.009 5.2 0.35 63.2 0.808 0.59 0.011 5.2 0.0 0.000 0.00 0.000 0.0 4.0 0.656 0.47 0.009 5.1 0.40 62.3 0.815 0.59 0.011 5.2 0.0 0.000 0.00 0.000 0.0 4.0 0.656 0.47 0.009 5.1 0.45 61.7 0.818 0.59 0.011 5.2 0.0 0.000 0.00 0.000 0.0 3.4 0.696 0.53 0.009 5.0 0.50 60.9 0.823 0.60 0.011 5.2 0.0 0.000 0.00 0.000 0.0 3.3 0.704 0.54 0.008 5.1 0.75 26.3 1.062 0.58 0.010 5.5 0.0 0.000 0.00 0.000 0.0 0.6 1.143 0.03 0.009 5.1 1.00 14.0 1.246 0.42 0.011 5.7 0.0 0.000 0.00 0.000 0.0 0.6 1.143 0.03 0.009 5.1 1.25 7.0 1.386 0.20 0.011 6.0 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 1.50 0.4 1.555 0.02 0.010 6.2 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 2.00 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0






Au/tonAverage

True Thickness

000sTons % Co %

Cu oz

Au/tonAverage

True Thickness


Au/tonAverage

True Thickness

0.00 106.6 0.392 0.43 0.011 5.1 39.5 0.654 0.26 0.012 5.2 25.3 0.204 0.51 0.010 4.9 0.05 98.9 0.420 0.46 0.012 5.1 37.4 0.689 0.27 0.013 5.1 25.3 0.204 0.51 0.010 4.9 0.10 83.6 0.484 0.49 0.013 5.1 26.7 0.932 0.27 0.016 5.0 21.6 0.226 0.55 0.011 4.8 0.15 57.2 0.650 0.41 0.014 4.8 24.5 1.006 0.25 0.016 4.9 18.0 0.245 0.51 0.011 4.9 0.20 36.8 0.915 0.35 0.017 4.5 17.3 1.345 0.15 0.019 5.0 4.6 0.435 0.50 0.013 4.8 0.25 34.8 0.954 0.33 0.018 4.5 17.3 1.345 0.15 0.019 5.0 2.7 0.580 0.41 0.015 4.6 0.30 29.6 1.073 0.31 0.019 4.6 13.0 1.693 0.02 0.022 5.0 2.1 0.658 0.38 0.016 4.6 0.35 29.2 1.083 0.31 0.019 4.6 13.0 1.693 0.02 0.022 5.0 1.4 0.811 0.44 0.018 4.3 0.40 27.7 1.121 0.32 0.020 4.5 13.0 1.693 0.02 0.022 5.0 1.1 0.951 0.45 0.020 4.1 0.45 23.7 1.241 0.36 0.022 4.6 9.0 2.265 0.01 0.029 5.3 0.8 1.166 0.58 0.024 4.1 0.50 21.7 1.310 0.38 0.023 4.6 9.0 2.265 0.01 0.029 5.3 0.8 1.166 0.58 0.024 4.1 0.75 17.7 1.481 0.45 0.026 4.5 9.0 2.265 0.01 0.029 5.3 0.8 1.166 0.58 0.024 4.1 1.00 16.9 1.509 0.44 0.026 4.5 9.0 2.265 0.01 0.029 5.3 0.7 1.183 0.57 0.024 3.9 1.25 12.1 1.652 0.42 0.027 4.4 9.0 2.265 0.01 0.029 5.3 0.0 2.265 0.01 0.029 2.2 1.50 5.5 1.977 0.21 0.028 4.4 9.0 2.265 0.01 0.029 5.3 0.0 2.265 0.01 0.029 2.2 2.00 3.2 2.265 0.01 0.029 4.6 9.0 2.265 0.01 0.029 5.3 0.0 2.265 0.01 0.029 2.2






Au/tonAverage

True Thickness

000sTons % Co %

Cu oz

Au/tonAverage

True Thickness


Au/tonAverage

True Thickness

0.00 353.7 0.252 0.44 0.010 6.2 49.0 0.149 0.61 0.006 6.7 134.3 0.205 0.45 0.008 6.4 0.05 340.8 0.260 0.45 0.010 6.2 43.5 0.163 0.66 0.006 6.6 134.3 0.205 0.45 0.008 6.4 0.10 238.1 0.339 0.57 0.013 6.5 29.1 0.202 0.84 0.007 6.1 87.3 0.273 0.57 0.011 6.6 0.15 187.7 0.398 0.56 0.015 6.7 11.9 0.317 0.52 0.008 6.0 50.7 0.383 0.52 0.015 6.9 0.20 175.9 0.413 0.58 0.016 6.8 8.3 0.388 0.63 0.010 4.9 50.3 0.385 0.52 0.015 7.0 0.25 150.1 0.445 0.61 0.017 7.1 4.0 0.542 0.77 0.018 5.9 48.9 0.389 0.52 0.015 7.1 0.30 135.0 0.464 0.63 0.018 7.1 4.0 0.542 0.77 0.018 5.9 43.1 0.404 0.53 0.016 7.1 0.35 119.0 0.483 0.65 0.018 7.1 4.0 0.542 0.77 0.018 5.9 30.9 0.435 0.59 0.018 6.9 0.40 87.8 0.521 0.72 0.020 7.0 1.5 0.795 1.48 0.030 5.7 21.0 0.462 0.68 0.019 6.7 0.45 56.1 0.577 0.86 0.021 6.7 1.5 0.795 1.48 0.030 5.7 8.6 0.524 0.90 0.018 5.6 0.50 34.4 0.641 1.05 0.022 6.2 1.5 0.795 1.48 0.030 5.7 4.9 0.564 1.02 0.020 5.4 0.75 8.5 0.831 2.11 0.018 5.7 0.9 0.925 2.37 0.020 6.6 0.0 0.934 2.39 0.020 3.4 1.00 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 1.25 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 1.50 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 2.00 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0






Au/tonAverage

True Thickness

000sTons % Co %

Cu oz

Au/tonAverage

True Thickness


Au/tonAverage

True Thickness

0.00 391.1 0.471 0.46 0.012 6.5 190.80.488 0.38 0.011 6.5 281.5 0.330 0.26 0.007 7.6 0.05 380.8 0.483 0.47 0.012 6.6 183.80.505 0.39 0.011 6.7 256.5 0.360 0.28 0.008 7.9 0.10 352.7 0.516 0.49 0.012 6.8 173.00.532 0.40 0.011 6.9 228.0 0.396 0.30 0.008 8.3 0.15 308.8 0.571 0.54 0.014 6.9 146.10.608 0.46 0.013 7.0 124.3 0.623 0.49 0.013 8.1 0.20 299.5 0.584 0.55 0.014 7.0 137.80.635 0.46 0.013 7.0 97.7 0.752 0.47 0.015 8.1 0.25 283.1 0.605 0.56 0.015 7.1 131.10.656 0.47 0.014 7.1 88.9 0.805 0.50 0.017 8.2 0.30 258.7 0.636 0.57 0.015 7.3 111.90.721 0.48 0.014 7.2 87.5 0.813 0.50 0.017 8.3 0.35 213.6 0.701 0.52 0.016 7.5 92.3 0.806 0.47 0.015 7.3 79.6 0.862 0.52 0.018 8.5 0.40 187.4 0.747 0.52 0.017 7.6 87.9 0.828 0.48 0.015 7.3 79.6 0.862 0.52 0.018 8.5 0.45 146.9 0.836 0.53 0.017 7.7 80.2 0.866 0.47 0.015 7.4 73.7 0.897 0.51 0.016 8.5 0.50 123.7 0.904 0.54 0.018 7.7 69.3 0.929 0.49 0.015 7.3 72.3 0.906 0.52 0.017 8.6 0.75 95.9 0.984 0.63 0.018 8.0 55.1 1.010 0.55 0.016 7.4 50.1 1.053 0.60 0.018 7.9 1.00 41.9 1.096 0.81 0.019 7.3 37.1 1.086 0.60 0.015 7.0 40.0 1.104 0.65 0.018 8.3 1.25 3.1 1.433 0.27 0.039 7.6 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 1.50 1.1 1.581 0.17 0.041 7.9 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 2.00 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0 0.0 0.000 0.00 0.000 0.0






Au/tonAverage

True Thickness

000sTons % Co %

Cu oz

Au/tonAverage

True Thickness


Au/tonAverage

True Thickness

0.000 829.8 0.686 0.765 0.018 8.8 650.10.590 0.727 0.017 9.2 859.5 0.588 0.920 0.018 10.6 0.050 810.9 0.701 0.777 0.018 9.0 636.20.602 0.738 0.017 9.4 852.5 0.593 0.925 0.018 10.7 0.100 797.9 0.711 0.788 0.019 9.1 631.50.605 0.742 0.017 9.4 852.1 0.593 0.926 0.018 10.7 0.150 789.3 0.718 0.795 0.019 9.2 618.70.615 0.752 0.017 9.6 851.5 0.593 0.926 0.018 10.7 0.200 771.4 0.730 0.798 0.019 9.4 598.70.630 0.748 0.018 9.8 838.9 0.600 0.919 0.019 10.9 0.250 739.3 0.752 0.812 0.020 9.5 499.80.711 0.770 0.019 9.7 557.8 0.794 0.950 0.021 10.0 0.300 705.1 0.776 0.835 0.020 9.6 478.00.731 0.785 0.020 9.9 539.9 0.811 0.971 0.021 10.3 0.350 668.1 0.800 0.863 0.021 9.7 451.60.754 0.817 0.020 10.0 519.5 0.830 0.993 0.021 10.4 0.400 638.7 0.820 0.885 0.021 9.8 427.50.776 0.843 0.020 10.2 491.6 0.856 1.021 0.021 10.4 0.450 613.3 0.836 0.908 0.022 9.9 395.90.804 0.878 0.021 10.3 475.7 0.870 1.034 0.022 10.5 0.500 580.5 0.856 0.938 0.022 10.0 360.70.836 0.932 0.022 10.6 457.9 0.885 1.057 0.022 10.6 0.750 310.6 1.046 1.005 0.028 10.4 174.61.052 0.981 0.028 11.0 202.9 1.162 1.319 0.030 10.4 1.000 131.7 1.274 0.752 0.033 9.6 81.8 1.245 0.678 0.030 10.5 148.7 1.289 1.224 0.031 10.4 0.000 829.8 0.686 0.765 0.018 8.8 650.10.590 0.727 0.017 9.2 859.5 0.588 0.920 0.018 10.6 0.050 810.9 0.701 0.777 0.018 9.0 636.20.602 0.738 0.017 9.4 852.5 0.593 0.925 0.018 10.7 0.100 797.9 0.711 0.788 0.019 9.1 631.50.605 0.742 0.017 9.4 852.1 0.593 0.926 0.018 10.7



Table 19.10 summarizes the project resources using a 0.20% Co cutoff grade. MDA believes that a cutoff grade of 0.20% Co is appropriate for reporting resources for the project. Note that reserves are a subset of the resource tabulation.

Table 19.10 Project Measured and Indicated Resources

Horizon Classification Tons 000s % Co % Cu oz Au/ton Thickness True

Thickness3010 Meas + Ind 79.8 0.419 0.045 0.005 7.0 5.7 3011 Meas + Ind 51.8 0.374 0.145 0.007 7.4 6.1 3012 Meas + Ind 101.5 0.596 0.680 0.010 6.4 5.2 3013 Meas + Ind 54.1 1.052 0.281 0.018 5.7 4.7

Subtotal HW Meas + Ind 287.2 0.593 0.332 0.010 6.6 5.4 3021 Meas + Ind 184.2 0.412 0.578 0.016 8.2 6.7 3022 Meas + Ind 449.3 0.593 0.519 0.014 8.6 7.0 3023 Meas + Ind 1,370.0 0.686 0.776 0.018 11.6 9.6 3032 Meas + Ind 78.6 0.529 0.716 0.008 6.5 5.3 3035 Meas + Ind 24.3 0.607 0.120 0.011 7.9 6.4 Total Ram Meas + Ind 2,393.7 0.631 0.651 0.016 10.0 8.2

Compared with the 2005 reserve estimate, the tonnage of measured and indicated resources for the Ram deposit has increased 16.3 percent and the contained pounds of cobalt have increased 22.5 percent using a cutoff grade of 0.20% Co. The average horizontal thickness of the horizons has increased by 10.6 percent to 10.4 feet when a 0.30% Co cutoff grade is used. Drilling in the northern portions of the deposit generally indicated narrow mineralized horizons, while drilling in section 400 and south of this section indicates wide mineralized horizons. The deposit is open down dip, to the south and to the north, but it appears to be much thinner in the north than in the south.



20.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES.

20.1 Mining Operations

The Ram deposit will be mined by underground methods, using mechanized cut-and-fill methods for narrower stopes, and longhole stoping (end slicing) for the thicker portions of the deposit. The southern one-third of the 3023 horizon can be mined by end-slicing if the portions of the footwall that dip at angles less than 55o are steepened.

Once the working level of the stope has been mined, it will be filled by paste backfill material that is fortified with two- to four-percent cement. The fill material will be in the form of a paste made from dewatered mill tailings. The paste will be piped from the paste plant located near the process plant and distributed down mine vent raises or the portal into the mine paste distribution system.

The Ram deposit is accessed by a decline that has a 13- by 15-foot cross section. It is driven from the 7,060 elevation near the top of the Ram Deposit. The decline serves as the main access and haulage way for the deposit. A total of 15 months of development work is required to develop the initial four stopes for mining, complete the first stage of the south vent raise, and complete the development drilling for these four stopes to allow final design and mining. Mining commences prior to the completion of the development work, although it will be at a reduced production rate.

Mined material is transported up the main decline to the portal pad where it is loaded into an aerial tramway for transport to the plant site.

20.1.1 Geotechnical Data

MineFill Services Inc. (MineFill) completed geotechnical investigations for the Ram deposit. Table 20.1 presents the results of average Rock Mass Ratio (RMR) values, which were calculated from the 2000 drilling database point-load tests that were available for the Ram deposit (drill holes R99-01 to R99-11). The averages range from 50 to 59, which is equivalent to “fair” rock quality.

Table 20.1 Ram Rock Mass Rating

Rock Code RMR RQD Longest

Stick (m) Count Rating

BTE 57 37 0.099 17 Fair CGQ 57 44 27 Fair MDS 59 35 0.073 16 Fair MFQ 56 36 0.051 477 Fair



QTV 52 25 0.068 11 Fair TBQ 50 21 26 Fair

The results show that rock quality is generally fair. This will have an impact on mining because it will limit stope spans, and permanent mine openings will require varying degrees of ground support. However, a spatial assessment of the rock quality at Ram suggests that mining conditions will be good in the first few years of mine development and will then deteriorate as the mining moves to the narrower mineralization to the north.

20.1.2 Mining Methods

The proposed mining method is mechanized cut-and-fill for the Ram deposit, where all of the stopes will have a diluted thickness of 7.5 feet or greater. In the southern portion of the Ram deposit, thicker high-grade mineralization has been found that allows mining by longhole stoping (end slicing). The average dilution is 19 percent in the Ram deposit. The southern one-third of the 3023 horizon can be mined by end-slicing if portions of the footwall that dip at less than 55o are steepened. Although about 4,000 feet of additional development is required, the added development cost is more than offset in the mining cost by end-slicing reductions. End-slicing provides improved project NPV and IRR.

The average thickness of the individual Ram stopes ranges from 7.5 to over 20 feet. Each cut-and-fill stope in the Ram deposit is designed to be mined from the bottom of the 100-foot stope, which is accessed from the main decline. The dimensions of each stope round will vary according to the mining width, but in general, stope rounds will be 8-12 feet deep and will be pulled to 12-14 foot heights.

A four- to seven-day cure period is required prior to resuming work on the paste backfill. As the stope mining advances upward, so does the stope access by breasting down the material as stoping access to higher elevations is required.

Both ore and waste rock from the Ram deposit will be transported from the portal area via aerial tramway to stockpiles located near the plant area.

20.1.3 Mine Development

A decline with a 13- by 15-foot cross section is driven from the 7,060 elevation, near the top of the Ram Deposit. The decline serves as the main access and haulage way for the deposit. A total of 15 months of development work is required to develop the initial four stopes for mining, completion of the first stage of the south vent raise and completion of the development drilling for these four stopes to allow final design and mining. After reaching the north ventilation raise during Year 3, the development decline and access drifts can be reduced to a cross section of 12 by 14 feet.



The development schedule calls for completion of 300 feet of development per month using one development crew when one face is available. When two faces are available, two crews will complete 500 feet of development per month, and when three or more faces are available, three crews will complete 700 feet of development per month. The Ram deposit development requirements are shown in Table 20.2

Table 20.2 Ram Deposit Development Workings (Feet)

Item Units Years Total -2 -1 1 2 3 4 5

Bays 12 x 14 feet 0 1,169 810 525 650 553 262 3,969 Bays 13 x 15 feet 0 0 0 0 0 0 0 0 Decline 12 x 14 feet 0 0 0 1,084 2,933 2,739 441 7,196 Decline 13 x 15 feet 0 3,249 2,954 2,824 0 0 0 9,026 Muck Access 12 x 14 feet 0 752 1,143 889 1,426 877 633 5,721 Muck Access 13 x 15 feet 0 0 0 0 0 0 0 0 Portal feet 0 50 0 0 0 0 0 50 Raises feet 0 0 307 319 191 1,166 0 1,983 Stope Access 12 x 14 feet 0 1,409 2,389 2,249 2,980 1,995 777 11,799 Stope Access 13 x 15 feet 0 0 0 0 0 0 0 0 Ventilation Access 13 x 15 feet 0 0 327 524 200 301 162 1,515 Totals 0 6,629 7,931 8,413 8,380 7,632 2,275 41,259

20.1.4 Mine Dilution and Losses

The estimate of dilution for the ICP feasibility study was completed in three parts. First the mineralized horizons were drawn on cross sections with a minimum thickness of three feet. In a number of cases the Ram hanging wall and footwall mineralized horizons are less than three feet thick. Second, in order to calculate diluted resources, 0.75 feet of dilution was added to the top and bottom of each mineralized horizon. For the Ram deposit, the grade of the dilutant was estimated locally from the grade of the material around each drill hole interval. If there were no assays above or below a mineralized horizon, a grade of 0.00 was assumed for use in the calculation of the grade of the dilutant.

Third, in the potential end-slicing portions of the 3023 horizon that dip at less than 55o, the footwall was steepened to 55o and the additional dilution was calculated for the end-slicing option. This added about 45,000 tons of material to the end-slice stopes, which is approximately five percent additional dilution in these stopes. The average dilution for the 3023 horizon increased from 15.75 to 18.77 percent if end-slicing is used in the south end of the horizon. An economic tradeoff study was completed in order to compare the project economics using mining by end-slicing and cut and fill. The study indicated that end-slicing improves the project economics.

The grade of the dilutant averaged 0.081% Co in the Ram deposit. Since drift-and-fill or narrow-vein mining methods are employed, mining losses are assumed to negligible.



20.1.5 Reserves

Table 20.3 summarizes the proven and probable reserves for the Idaho Cobalt Project, based on a cutoff grade of 0.20% Co.

Table 20.3 Proven and Probable Idaho Cobalt Reserves

Ram Proven Reserves Horizon 000s Tons % Co % Cu oz

Au/ton Width (feet)

True Thick (feet)

% Dilution

3010 60.6 0.463 0.020 0.005 10.5 8.6 27.4 3011 33.9 0.369 0.192 0.007 10.3 8.4 22.6 3012 92.7 0.582 0.501 0.008 8.3 6.8 29.3 3013 49.5 0.665 0.323 0.013 7.6 6.2 32.7 3021 174.9 0.374 0.538 0.015 10.9 9.0 21.5 3022 341.7 0.510 0.503 0.013 11.0 9.0 21.2 3023 904.1 0.624 0.705 0.017 16.0 13.1 19.3 3032 70.2 0.420 0.663 0.006 8.8 7.2 28.2 3035 30.3 0.503 0.116 0.009 9.9 8.1 24.1 Totals 1,757.8 0.555 0.583 0.014 13.2 10.8 21.5 Ram Probable Reserves Horizon 000s Tons % Co % Cu oz

Au/ton Width (feet)

True Thick (feet)

% Dilution

3010 6.7 0.348 0.016 0.003 10.0 8.2 22.5 3011 7.3 0.370 0.188 0.007 10.2 8.3 22.4 3012 11.8 0.229 1.836 0.009 8.1 6.6 29.7 3013 21.3 1.106 0.124 0.016 8.1 6.7 30.1 3021 3.4 0.504 0.856 0.018 8.7 7.1 26.9 3022 161.3 0.541 0.440 0.012 11.1 9.1 20.7 3023 657.6 0.560 0.673 0.016 15.8 13.0 18.2 3032 9.1 0.878 0.432 0.015 8.8 7.2 27.5 3035 Totals 878.3 0.566 0.622 0.015 14.5 11.9 19.3 Ram Proven + Probable Reserves Horizon 000s Tons % Co % Cu oz

Au/ton Width (feet)

True Thick (feet)

% Dilution

3010 41.2 0.369 0.191 0.007 10.3 8.4 22.6 3011 104.5 0.542 0.652 0.008 8.3 6.8 29.4 3012 70.8 0.798 0.263 0.014 7.8 6.4 31.9 3013 178.3 0.376 0.544 0.015 10.9 8.9 21.6 3021 503.0 0.520 0.483 0.012 11.1 9.1 21.0 3022 1,561.6 0.597 0.692 0.016 15.9 13.1 18.8 3023 79.2 0.473 0.636 0.007 8.8 7.2 28.1 3032 30.3 0.503 0.116 0.009 9.9 8.1 24.1 3035 Totals 2,636.2 0.559 0.596 0.014 13.6 11.2 20.8



20.1.6 Mine Production Schedule

A mine production schedule was completed based on processing 800 tons of ore per day from the Ram deposit. Table 20.4 summarizes the production schedule.

Table 20.4 ICP Production Schedule

Period Total Ore

Tons 000s

Total Ore

% Co

Total Ore

% Cu

Total Ore

(oz Au/t)

ProvenOre

Tons 000's

ProbableOre

Tons 000's

WasteTons000's

Stope_Volume Backfill

(000's cubic feet)

Width Stope (feet)

True_WidthStope (feet)

Month 1 6.0 0.836 1.166 0.028 4.0 2.0 70.4 22.0 18.0 Month 2 8.0 0.836 1.166 0.028 4.0 4.0 93.9 22.0 18.0 Month 3 10.0 0.836 1.166 0.028 3.2 6.8 1.1 117.3 22.0 18.0 Month 4 12.0 0.889 0.932 0.027 7.0 5.0 160.1 20.7 17.0 Month 5 16.0 0.877 0.918 0.026 7.4 8.6 4.5 205.1 20.8 17.0 Month 6 20.0 0.842 0.876 0.022 10.3 9.7 224.8 20.8 17.1 Month 7 24.0 0.734 1.049 0.020 19.6 4.4 269.8 21.8 17.9 Month 8 24.8 0.661 1.285 0.019 20.4 4.4 278.8 23.9 19.6 Month 9 23.2 0.692 1.118 0.019 15.3 7.9 260.8 22.8 18.6 Month 10 24.8 0.730 0.920 0.019 13.7 11.1 278.8 20.0 16.4 Month 11 22.2 0.731 0.759 0.020 12.5 9.7 249.9 18.2 14.9 Month 12 17.0 0.609 0.928 0.016 8.9 8.1 191.4 16.1 13.2 Year 1 208.1 0.752 1.009 0.021 126.4 81.7 5.6 2,401.0 20.9 17.1 Month 13 20.5 0.660 0.855 0.018 5.3 15.2 230.2 17.6 14.4 Month 14 21.7 0.712 0.837 0.019 10.4 11.2 0.6 249.8 18.8 15.4 Month 15 24.0 0.685 1.036 0.020 17.4 6.6 269.8 19.8 16.2 Month 16 24.0 0.725 1.047 0.021 14.1 9.9 269.8 21.2 17.4 Month 17 24.0 0.753 0.899 0.022 15.6 8.4 269.8 20.1 16.4 Month 18 24.0 0.736 0.898 0.022 15.9 8.1 0.6 277.0 19.0 15.5 Month 19 24.0 0.593 0.901 0.016 10.6 13.4 269.8 17.3 14.2 Month 20 24.8 0.537 0.896 0.015 14.6 10.2 278.8 17.8 14.6 Month 21 23.2 0.612 0.903 0.017 13.1 10.1 260.8 17.7 14.5 Month 22 24.8 0.635 1.039 0.018 12.6 12.2 278.8 17.4 14.2 Month 23 22.4 0.663 1.080 0.019 12.7 9.7 0.7 260.1 18.2 14.9 Month 24 23.2 0.774 0.746 0.022 18.3 4.9 0.6 267.2 17.7 14.5 Year 2 280.5 0.673 0.930 0.019 160.7 119.9 2.5 3,181.5 18.5 15.2 Year 3 284.8 0.671 0.930 0.019 185.5 99.3 6.4 3,273.4 17.3 14.2 Year 4 284.8 0.517 0.611 0.014 199.0 85.8 3.2 3,237.2 12.2 10.0 Year 5 285.6 0.453 0.551 0.013 207.1 78.5 5.8 3,274.8 12.2 10.0 Year 6 284.8 0.456 0.460 0.011 222.3 62.5 9.0 3,302.3 10.9 8.9



Table 20.4 ICP Production Schedule

Year 7 282.2 0.532 0.396 0.012 186.1 96.0 17.2 3,364.3 10.8 8.9 Year 8 284.8 0.513 0.435 0.012 183.0 101.8 10.5 3,319.4 12.2 10.0 Year 9 281.3 0.518 0.329 0.011 186.6 94.8 10.7 3,282.8 10.5 8.6 Year 10 166.4 0.546 0.375 0.011 102.4 64.0 2.1 1,893.8 10.9 8.9 Totals 2,643.

2 0.558 0.601 0.014 1,759.

1 884.2 73.0 30,530.6 13.5 11.1

20.1.7 Mine Equipment

A mining contractor will be used for the preproduction mine development and the first two years of mine production. Mine equipment will be required starting in Year 3 to continue development and to mine the stopes. An estimate of the mine equipment required for the development headings and production mining is summarized in Table 20.5.

Table 20.5 Mine Equipment Summary

Years Description Units -2 -1 1 2 3 4 5 6 7 8 Total

3.5 cubic yard Loader 2 0 0 0 0 2 0 0 0 0 0 2 2.0 cubic yard Loader 2 0 0 0 0 2 0 0 0 0 0 2 0.5 cubic yard Loader 1 0 0 0 0 1 0 0 0 0 0 1 20-ton Truck 2 0 0 0 0 2 0 0 0 0 0 2 Single Boom Jumbo 1 0 0 0 0 1 0 0 0 0 0 1 Longhole Drill 1 0 0 0 0 1 0 0 0 0 0 1 Narrow Vein Jumbo 1 0 0 0 0 1 0 0 0 0 0 1 Bolter 1 0 0 0 0 1 0 0 0 0 0 1 Jackleg Drills 10 0 0 0 0 10 0 0 0 0 0 10 Scissor Lift 1 0 0 0 0 1 0 0 0 0 0 1 Fuel & Lube truck 1 0 0 0 0 1 0 0 0 0 0 1 Personnel Tractor 13 0 3 0 0 5 0 0 5 0 0 13 Shotcrete Machine 1 0 0 0 0 1 0 0 0 0 0 1 ANFO Loader 1 0 0 0 0 1 0 0 0 0 0 1 UG Grader 1 0 0 0 0 1 0 0 0 0 0 1 Crane Truck 1 0 0 0 0 1 0 0 0 0 0 1 Pick ups 15 0 3 0 1 0 5 0 1 0 5 15 Vans 7 0 1 0 2 0 1 0 2 0 1 7 Total Fleet 62 0 7 0 3 32 6 0 8 0 6 62



20.1.8 Mine Infrastructure

Power

An underground power distribution system was designed by DEA Incorporated of Elko, Nevada. These design criteria were based on the required electrical loads and a power supply to the portal bench at 4,160 volts.

Explosives Storage

Blasting supplies will be trucked directly to the mine site by the powder manufacturer. Explosives storage containers will be rented from the explosives vendor and will be located above and away from the deposit and the mill area. Explosives for the underground operations will be transported to smaller magazines located underground.

Mine Communications

Onsite communications for the underground operations will be handled via telephone and leaky feeder radio coverage. The leaky feeder is composed of a two channel system that allows for audio communication, as well as the use of PLC devices to control and monitor fans, pumps and the pressure transducers for the paste backfill system. From the mine site there is a set of cross-band repeaters that will broadcast the signal (UHF) from the Ram site to repeaters at the mill and back. Each piece of mobile equipment will be equipped with a radio.

Mine Water Supply and Dewatering

Mine dewatering will supply water to the mine for drilling. During the initial period when water is not yet encountered, the mine water will be supplied by water trucks.

Mine dewatering at the Ram mine will be accomplished through a series of thirteen, eight-horsepower, submersible pumps, each capable of pumping 150 gallons per minute at a total head of 103 feet. These pumps will be staged throughout the mine to allow for pumping of water from the bottom of the mine to the main pump station, which will be located underground near the mine portal. The water not used in the mine will be pumped from the main pump station to the waste water treatment facility.

Compressed Air

Compressed air will be supplied via 250-horsepower electric air compressors, and the air will be distributed via six-inch, schedule-40 steel pipe to the active mining areas. The compressors will be located underground to minimize the possibility of freezing air lines. Compressed air will be supplied via dual 250-horsepower, rotary-screw, air-cooled, air compressors that are each sized to deliver 1,075 acfm at a maximum discharge pressure of 125 psig.



20.2 Recoverability

The latest test work conducted at SGS Lakefield yielded results similar to earlier test work and was used at the basis for the cobalt, copper, and gold extractions from ore into concentrates utilized in the BFS. Current plans are to produce one bulk sulfide concentrate that contains cobalt, copper, and gold. The recoveries from ore into the bulk concentrate are 96.53% for copper, 92.93% for cobalt, and 88.93% for gold based on ore grades of 0.601%, 0.558%, and 0.014% opt for copper, cobalt, and gold, respectively. Further processing for the recovery of the individual metals will be accomplished at the Big Creek hydrometallurgical facility.

The Big Creek hydrometallurgical facility will utilize a nitrogen species catalyzed leach (NSC leach) to affect cobalt extrations in excess of 99% and copper extractions of 93.4% based on test work conducted at CAMP, SGS lakefield, and Mintek. The overall recovery from concentrate to product in the hydrometallurgical facility is expected to be 93.1% for copper and 96.0% for cobalt based on concentrate head grades of 8.97% copper and 10.60% cobalt.

20.3 Markets

20.3.1 Cobalt Marketing

A comprehensive review of the international cobalt markets was completed by MetQuest (Pty) Limited (MetQuest) for FCC. The market review evaluated information about current, historical and anticipated cobalt markets, economics and uses. The information provided in this section is taken from the Cobalt Market Review.

Cobalt Pricing

Cobalt is a strategic and critical metal that is not traded on the London Metal Exchange (LME). Therefore, prices for cobalt are not transparent, and historical pricing is not easy to find. Historically, the price was substantially controlled by key producers. In 1994 more cobalt, particularly from Russia, came into the market, and cobalt was sold at free market prices. The price peaked at about $30 per pound in early 2004, and as increased supplies entered the market from Russia the prices dropped as low as $12 per pound in 2005. In the second quarter of 2006, there were rumors of a cobalt shortage in the market, and the price started rising.

The market changed dramatically in 2006 when Norilsk agreed to sell most of its cobalt output to OMG. OMG is a vertically integrated corporation that, according to its website, produces “value-added, metal-based specialty products and related materials” and has its corporate headquarters in Cleveland, Ohio. OMG is the largest producer of cobalt in the world because it owns the world's largest cobalt smelter and refinery. The agreement



between Norilsk and OMG significantly altered the balance of the cobalt market. Prior to the agreement, Norilsk sold cobalt on the free market at below-market prices. With the sale of the Norilsk nickel refinery to OMG, almost 5,000-tons of cobalt per year were lost from the free market. Concurrently, the aerospace industry, which consumes large quantities of cobalt, was booming, and no new metal cobalt production was scheduled to come on stream for about three years.

GFMS Metals Consulting Ltd. (GMFS), of the United Kingdom, noted in a June 7, 2007, report that conditions in the aerospace market remain favorable, there is a tightness in concentrate supply, and that “off take” is good. A recent export ban by the DRC-Congo is starting to have an impact. China relies on imports of cobalt materials, mostly from the DRC, for up to 94 percent of its requirements. GFMS also states that future investment in the DRC and the surrounding region will require investment in downstream processing. Another bullish factor on the supply side mentioned in the report is the delay in commissioning of the next generation of nickel-cobalt pressure-leach projects.

Due to this combination of events, the short- to medium-term outlook for cobalt prices is optimistic. The sales price for cobalt is forecast to be in the range of $18 to $22 per pound between 2007 and 2010. In 2007 and 2008, the London Metal Bulletin (LMB) forecasts prices of $22 per pound and $21.00 per pound, respectively. The projected price is $15.50 to $18 per pound between 2010 and 2015. However, surges in price to $30 to $40 per pound are considered possible. GFMS believes that the present prices of around $28/lb. for 99.8-percent metal are close to the bottom. They state that at a “tightening of supply that is emerging, together with a rebound in demand, should push prices back over $30/lb. in the second half of the year.” They predict the average annual price for 99.8-percent material to be $30/lb. in 2007 and $27/lb in 2008.

Certain cobalt products sell at a premium price due to a lack of available facilities to produce them. Among these are Critical Superalloy Cobalt (CSC) which has sold at an average premium of $1.20 per pound over the last four years, in comparison to the general super-alloy grade metal. CSC has a typical specification of greater than 99.86 percent cobalt and maximum specifications for trace metals. The other cobalt products that sell at a premium price are cobalt chemicals. Historically, cobalt chemicals have sold at premium prices of $5 to $12 per pound of contained cobalt.

Cobalt Uses

The major uses of cobalt are:

• High-performance alloys (such as low-creep, high-temperature alloys used in jet engine turbine blades)

• Super alloys • Cemented carbides • Nickel hydroxide-based batteries



• Lithium ion batteries • Pigments • Catalysts • Gas-to-liquid technology • Soaps • Magnets • Welding and hard-facing alloys • Other cobalt alloys • Animal feeds

The global consumption of cobalt, based on end use, for 2005 is shown in Table 20.6.

Table 20.6 Cobalt Market Share Based on End Use for 2005 Use Percent of Market Batteries 21 Superalloys 20 Catalysts 11 Pigments 11 Hard metal/carbides 10.5 Adhesives and driers 9.5 Magnets 7 Hard facing 5.5 Other uses 4.5

Cobalt Supply and Demand

The worldwide demand for cobalt was on the order of 54,000 tonnes in 2005. The rapid growth in China and emerging Asian economies is significantly changing the global demand for cobalt. The United States and European demands are decreasing as a percentage of the global market while China and other Asian markets are increasing their share of the global demand. Global demand for cobalt increased from 40,000 tonnes in 2000 to 54,000 tonnes in 2005.

Production of cobalt is highly dependent on the development of nickel projects since a large portion of the cobalt supply is produced as a by-product from nickel projects. CVRD Inco’s Goro Project in New Caldonia is currently in engineering, and the Voisey’s Bay Project in Canada came on line in 2006. Other new projects are slated for the Philippines, Madagascar, Papua New Guinea, Australia and Zambia.

Table 20.7 summarizes the supply-demand balance for 2007 through 2010.



Table 20.7 Cobalt Supply-Demand Balance (tons)

2007 2008 2009 2010

Estimated Demand 61,197 65,319 69,841 74,811

Current Refined Supply 52,783 57,133 61,333 67,983

New Supply Increases 1,800 2,200 5,650 4,500

Total Supply 57,133 61,333 67,983 73,733

20.3.2 Idaho Cobalt Project Products

Since the ICP is a primary cobalt deposit that contains few impurities, FCC is in the enviable position of having the option to produce products that will command premium prices. With a production rate of approximately 1,400 tons of cobalt per year, the ICP is capable of meeting approximately 10-15 percent of the U.S. demand for the metal.

The ICP lies within the hub of the aerospace industry, which is expected to be an industry that grows quickly over the next five years. Although the alloys used in the aerospace industry have stringent specifications, the product from the ICP easily meets the specifications. Due to this competitive advantage, this feasibility study is based upon production of CSC and the associated premium sales price.

Copper Marketing

A shortage of copper pushed prices up sharply between 2003-2005; however, supply has improved since 2005 and is expected to remain stable until about 2010. Demand is then anticipated to again exceed supply. This will be due primarily to greatly increased demand by growing industries in China and India. Significant stocks of copper concentrate are expected to exist between 2006 and 2009; however, after 2010, it is believed that inventories will be reduced, creating an increased demand for new sources.

FCC is actively investigating arrangements to sell copper cathode. For the feasibility study economic evaluation, a price of $2.30 per pound of copper is assumed.

By-products Marketing

Nickel Hydroxide: FCC is investigating opportunities to market this by-product.

Magnesium Sulfate: FCC has entered into a nonbinding agreement to provide magnesium sulfate solution to Brenntag Pacific, Inc., of Portland, Oregon, at a price of $20 per metric ton, FOB Kellogg, Idaho.



20.4 Contracts

To the best knowledge of Samuel Engineering at this time, FCC. has not entered into any contracts for its potential concentrate products and there has been no forward sales or hedging. Mining and transportation costs are based on quotations from established companies involved in these services.

20.5 Environmental Considerations

20.5.1 Baseline Studies

Collection of certain data suitable for baseline technical reports was initiated early in 2000. This data collection was done as part of an environmental evaluation of the area as outlined in a letter to the Salmon National Forest (Bailey, 2000). The collection of additional baseline data continued during the spring and summer of 2001 and 2004. Baseline data were collected for air quality, aquatic biology, cultural resources, geochemistry, geology and mineral resources, geotechnical, noise, roads, socioeconomics, soils, vegetation, visual resources, water resources, wetlands and wildlife. The subsequent baseline reports have been distributed to the United States Forest Service (USFS).

In addition to the data Formation Capital Corporation, U.S. (FCC) and others have collected specifically for the ICP, considerable historical baseline data exist for this site and the surrounding area from previous projects. Much of the data and the accompanying Environmental Impact Statement (EIS) documents for these various projects are as relevant today as when the documents were written.

When the Blackbird Mining Company proposed to reopen the Blackbird Mine in 1980, they collected baseline data as part of their effort to prepare an EIS. Baseline data were collected for air quality, aquatic biology, cultural resources, geology, noise, socioeconomics, soil, vegetation, visual resources, water quality, water resources and wildlife.

The USFS collected baseline data on the area as part of the Sunshine Timber Sales, located in the Big Deer Creek drainage. This work resulted in the release of a draft EIS in August 1993. This set of baseline data also included air quality, aquatic biology, cultural resources, geology, noise, socioeconomics, soil, vegetation, visual resources, water quality, water resources and wildlife.

Baseline data were also collected at Meridian Minerals’ Beartrack Mine near Leesburg, approximately 15 miles east of the project. A final EIS was released in 1991.

The Blackbird Mine Study Group (BMSG) has been collecting ground and surface water data continuously from 1994 to the present under the Early Action Plan for the Blackbird Mine site as described in the U.S. Environmental Protection Agency’s (EPA’s) Administrative Order on Consent, and under the Remedial Investigation/Feasibility Study and Record of Decision as described in EPA’s Unilateral Administrative Order.



Air Quality and Climate

Baseline data for 2000 through 2003 are provided in the Comprehensive Baseline Air Quality and Meteorology Data Summary (Gelhaus, 2004).

Aquatic Biology

Information on current habitat conditions and the status of fish in and near the proposed project area can be found in the Proposed Idaho Cobalt Mine, Aquatic Baseline Condition, Draft Technical Report (Kuzis, 2004). The report summarizes temperature, sediment, habitat condition, and fish population and distribution data. Additionally, there is a survey of the cascade on Big Deer Creek and summary of macroinvertebrate data collected in support of this evaluation.

Fish species and relative abundances were sampled in 2001 in Panther Creek sites by snorkeling. Big Deer Creek, South Fork Big Deer Creek, Little Deer Creek, Deep Creek, Moccasin Creek, and Big Flat Creek were sampled by electroshocking. Fish sampling was completed at the same sites as habitat sampling. No fish were sampled in the upper portion of Big Flat Creek or South Fork Big Deer Creek. Chinook salmon were found only in lower Panther Creek, bull trout were found only in Deep and Moccasin Creeks, and rainbow trout/steelhead were found in all fish-bearing streams except Moccasin Creek (Kuzis, 2004).

A total of 1,064 adult chinook salmon were planted at four sites in Panther Creek for harvest in 2001. The fish were released at Macdonald Creek, Napias Creek, between Napias and Beaver creeks, and at the Beaver Creek Bridge.

In 2002 and 2003, the BMSG conducted spring and fall fish surveys as well as additional habitat, temperature and macroinvertebrate surveys. In general, these data reflect patterns observed in other collection efforts. However, in the September 2003 samples, chinook fry were observed in Panther Creek and at the mouth of Blackbird Creek, indicating continued successful spawning of chinook salmon in the Panther Creek drainage (Stantec, 2004).

Cultural Resources

The ICP is located on federal land administered by the Salmon-Challis National Forest and, therefore, requires compliance with Section 106 of the National Historic Preservation Act. Specifically, cultural properties within the Area of Potential Effect (APE) must be identified, documented and evaluated. The Salmon-Challis National Forest staff defined the APE as all the USFS land within the external boundaries of FCC's claim block. Site investigations and documentation for the area were performed in 1997 and documented in the Cultural Resources Baseline Report, SL-97-1211 Sunshine Exploration Project FY95 (Lahren, 1997). Additionally, Renewable Technologies, Inc. prepared a cultural resources inventory and evaluation in 2001, as documented in the Cultural Resource Report Narrative, SL-01-1349 Idaho Cobalt Project, which meets the requirements of Section 106.



A total of 22 sites were identified in the APE and nine of these (in whole or part) were determined as eligible for listing with the National Register of Historic Places. Thirteen sites were determined to be not eligible for the National Register. Only one recorded archaeological site (SL-1072, a single collapsed adit) will be impacted by the proposed project and it is not eligible for the National Register. The next closest archaeological site (SL-1558) eligible for the National Register is located approximately one-quarter mile south of the project area.

Additional investigations were performed in 2005 and 2006 and are detailed in the documents by Renewable Technologies, Inc. (2005 and 2006). These reports identified two properties that are eligible for the National Register and which are located in the vicinity of the water discharge pipeline route. SL-506 is a prehistoric campsite consisting of chipped stone tools and debitage covering a 90,000-square-foot area at the confluence of Big Deer and South Fork of Big Deer Creeks. SL-1319A is an historic mining camp ruin along Bucktail Creek, which was first documented in 1997. The historic mining camp ruin is bisected by the route of the agency’s proposed water discharge pipeline. Having suffered some damage over the last 10 years, the only feature remaining at SL-1319A that might render the property National Register eligible is a household dump. FCC proposes to find and mark that dump in the field prior to pipeline placement, as well as avoid SL-506, and thus avoid all direct impacts. Therefore, the project would have no adverse effect on that resource.

Based on the data and conclusions contained in Renewable Technologies, Inc. (2001, 2005 and 2006), the ICP will have no effect on any archaeological properties that are eligible for National Register listing.

Geochemistry

The Geochemical Baseline Report for the Idaho Cobalt Project: Waste Rock, Ore, and Tailing (Telesto, 2004) presents the geochemical characterization of the mine materials that will be produced by the ICP. The geochemical testing program used a phased approach to characterize whole-rock geochemistry, mineralogy, acid generation potential (AGP), and leachate water quality for the waste rock, ore and tailings. This information was used to evaluate the potential water quality effects related to the processing and handling of waste rock, ore and tailings at the ICP.

Noise

There have been no changes in the area that alter the baseline noise conditions since the area for the Blackbird Project was investigated in the early 1980s. The Final EIS (USDA, 1982) for the Blackbird Project states: “The affected environment can be described in terms of noise-sensitive receptors, noise sources, terrain features and existing noise levels. There are no wildlife or human land use areas sensitive to man-made noise within five miles of the proposed mine/mill complex. The terrain is very steep and isolates the proposed mine/mill



site from outside areas. Existing natural noise levels are estimated to be in the range of 15 to 45 dBA.”

Roads

A detailed analysis of the transportation routes proposed by the project was completed in 2006 and documented in Transportation Baseline Report and Transportation Plan (Turkey Tracks Enterprises, Inc. [TTE], 2006). The project will use three types of transportation routes on public and private lands, including major transportation routes (Highways 93 and 28), project access routes (Lemhi and Custer county roads and Salmon-Challis National Forest access roads), and site roads (new and existing on private and public lands.

Socioeconomics

The project is expected to impact employment, income, housing and population in Lemhi and Custer Counties; the communities of Salmon and Challis; and School Districts #291, #292 and #181. Secondary impacts will occur to other communities and taxing jurisdictions within the two counties.

Baseline Soils Inventory

Soil description and mapping at the ICP was conducted to identify the soil types present at the site and their suitability for use as future topsoil, and also to characterize the chemical and physical properties of soils in the Big Flat area for assessing the potential for land application of excess water during mining operations.

During the summer of 2001, a detailed Order 2 soil survey was completed on approximately 1,625 acres associated with the ICP. The detailed soil maps and a general description of the soil types identified are documented in the Final Soils Technical Report for the Idaho Cobalt Project (Intermountain Resources, 2002). Seven mapping units were delineated across the study area, with two units on the gently sloping Big Flat and five units on the steep mountain slopes in the remainder of the area. Approximately 11 percent of the mapped area consists of land that has been disturbed by previous mining activities.

Vegetation

Vegetation field surveys were completed at the project area in 2000, 2001 and 2004. The surveys are documented in the Threatened or Endangered and Sensitive Plant Species Survey and the Vegetation Report (Intermountain Resources, 2004a and 2004b). The Clear Creek Fire burned the majority of the project area in the summer of 2000. The severity of the fire was high over most of the area, with all of the canopy cover and most of the litter and duff burned off. Prior to the fire, the major potential climax forest habitat cover type on the Big Flat was the subalpine fir type. The fire burned approximately 90 percent of this area. The Big Flat is where most of the project’s surface disturbance will occur. The subalpine fir climax type was also dominant on cooler, wetter sites on adjacent slopes and



drainages. The Douglas-fir type was the major potential climax forest habitat cover type on drier sites and south facing slopes prior to the fire. Lands disturbed by past mining activities are also common in the project area.

Visual Resources

The overall forest management goal is to provide pleasing visual landscapes in areas viewed from major travel routes crossing the Salmon National Forest. The Visual Resource Management system is applied to all National Forest lands and Visual Quality Objectives (VQOs) have been identified for the project area in the Land and Resource Management Plan for the Salmon National Forest (USDA, undated). The area of immediate impact for this project falls into the categories of modification and maximum modification VQOs. Past mining operations have had an impact to the views of the area.

Wetlands and Other Waters of the United States

Wetlands surveys were conducted in the summer of 2000, 2001, 2004 and 2006 and are documented in the Wetlands and Other Waters of the U.S. Inventory, 2000-2004 Wetland Delineation (Intermountain Resources, 2004c) and Wetlands and Other Waters of the U.S. Inventory,2006 Wetland Delineation for Pipeline Route (Intermountain Resources, 2006). Wetlands were delineated according to the 1987 Corps of Engineers Wetlands Delineation Manual, which specifies three criteria for a site to be classified as a wetland. The inventories were completed under the appropriate conditions needed to identify the soils, vegetation and hydrologic criteria required for jurisdictional wetlands delineation. Other waters of the United States were determined according to definitions in 33 CFR 328.3.

The 2000 survey study area encompassed three sites: the proposed mill site on the Big Flat, the Ram site and the Sunshine site. The 2001 survey study area revisited the 2000 sites as a follow-up to the Clear Creek Fire and also included an inventory of other proposed activity and disturbance areas for the project. The 2004 survey study area included the original 2000 and 2001 study areas and additional areas identified for operations and facilities. The 2006 survey consisted of delineating wetlands and other waters along the proposed water pipeline from the mine site to Big Deer Creek.

The 2000-2004 study areas identified 3.58 acres of jurisdictional wetlands (as seep/wet meadow, pond, perennial stream, and/or ephemeral or intermittent stream/seep) and 1.31 acres of nonjurisdictional isolated wetlands. Other jurisdictional waters of the United States include a pond of 0.28 acre and channels estimated to cover an area of 1.33 acres. The 2006 study identified less than 0.5 acre that will be disturbed by construction of the discharge pipeline and adjacent road.

Wildlife

Baseline wildlife data for the project area are summarized from USFS documents, notably the baseline wildlife studies conducted in the Blackbird Creek and Big Deer Creek drainages



for the proposed Blackbird Mine Project and the proposed Sunshine Timber sale. Additionally, project area wildlife field studies were conducted during the summer of 2001 by Hydrometrics, Inc. as a portion of the baseline studies being conducted for the preparation of an EIS by the Salmon-Challis National Forest. These findings are detailed in Idaho Cobalt Project Terrestrial Wildlife Baseline Report (Monarch and Associates, 2005).

Three listed Threatened and Endangered Species are known to or may occur in the project area (Canada lynx, gray wolf, and bald eagle). During the wildlife studies in 2001, 2002 and 2004 no evidence of these three species were observed in the area and conditions around the ICP area were not considered suitable habitat for these three species as a result of the Clear Creek fire.



20.5.2 Required Environmental Permits

Table 20.8 lists the required environmental permits.

Table 20.8 Required Environmental Permits

Permit, License, or Approval Agency (Regulation)

Plan of Operations (Including Reclamation Plan and Preparation of Environmental Impact Statement)

United States Forest Service (1872 General Mining Law, Organic Administration Act, [36 CFR 228 Subpart A], National Environmental Policy Act)

Biological Opinion United States Fish and Wildlife Service and National Marine Fisheries Service (Endangered Species Act [50 CFR 402])

National Pollutant Discharge Elimination System Permit

United States Environmental Protection Agency (Clean Water Act)

Storm Water Permit Environmental Protection Agency (Clean Water Act)

Air Quality Permit ID Department of Environmental Quality (Idaho Clean Air Act)

Section 401 Certification ID Department of Environmental Quality (Clean Water Act)

Septic Permit ID Department of Health and Welfare Section 106 Review and Concurrence United States Forest Service and State Historic

Preservation Officer (National Historic Preservation Act)

Spill Prevention, Control, and Countermeasure Plan United States Environmental Protection Agency (40 CFR 112)

Water Rights ID Department of Water Resources Nationwide Wetlands Permit United States Army Corps of Engineers

(Clean Water Act)

20.5.3 Environmental Impact Statement

FCC submitted a Plan of Operations to the Forest Service triggering a requirement for the Forest Service to comply with the National Environmental Policy Act (NEPA). The Forest Service determined that an EIS would be required prior to approval of the Plan of Operations for the ICP. FCC executed a Memorandum of Understanding (MOU) with the Forest Service that provided for hiring of a third party contractor to complete the EIS. Under the third-party contracting system, FCC pays the contractor, which works under direction of



the Forest Service. FCC executed a contract with Hydrometrics, Inc. of Helena, Montana, to complete the EIS as third-party contractor

The Forest Service conducted scoping and began preparation of the Environmental Impact Statement. The Forest Service invited EPA and Idaho Department of Environmental Quality (DEQ) to participate as cooperating agencies in preparation of the EIS. Subsequent to initiating the EIS, FCC determined that it would be necessary to apply for a National Pollutant Discharge Elimination System (NPDES) permit under the Clean Water Act and filed an application with EPA for the permit. The NPDES application triggered an obligation for EPA to complete the NEPA process. At that time, EPA was already on board as a cooperating agency. The Forest Service and EPA executed an MOU under which both agencies will use the EIS to fulfill their NEPA obligations.

A Draft EIS was issued for public and agency review in February 2007. Comments have been received and the USFS is in the process of responding to comments and preparing a Final Environmental Impact Statement. The Forest Service indicates that a Final EIS will be ready by late summer 2007. In parallel with the Draft EIS, the EPA issued a Draft NPDES permit. Comments have been received, and the EPA is in the process of responding to comments and preparing a final Environmental Impact Statement.

20.6 Taxes

Economic model was done on pre taxed basis. The original feasibility study engineer’s cash flow model was set up to evaluate the project economics on a pre-tax basis; there was no effort to change this model, as it was considered to be a valid evaluation for the feasibility study.

20.7 Capital and Operating Cost Estimates

20.5.1 Capital Costs

The total estimated costs to construct and commission the facilities described in this report is $138.7 million. The estimate is summarized in Table 20.9 and Table 20.10

Table 20.9 Summary of Capital Costs for the ICP Mine and Concentrator

Area/Description Total ($M) Direct Costs 37.6 Indirect Costs 13.2 Owner’s Cost 16.1 Subtotal 66.9 Contingency 8.1 Total Capital Cost 75.0 Working Capital 0.0 Total 75.0



Table 20.10 Summary of Capital Costs for the Cobalt Facility

Area/Description Total ($M) Direct Costs 40.5 Indirect Costs 14.1 Owner’s Cost 3.1 Subtotal 57.7 Contingency 6.0 Total Capital Cost 63.7 Working Capital 0.0 Total 63.7

20.7.2 Operating Costs

The operating costs for the ICP mine and concentrator are summarized in Table 20.11 and the operating costs for the cobalt facility are shown in Table 20.12.

Table 20.11 Average Life of Mine Costs for the ICP Mine and Concentrator

Area Average Life of Mine Cost per Year

Average Life of Mine Cost per Ton of Ore

Mining $11,993,096 $45.37 Processing $4,643,106 $17.57 General and Administrative $1,969,177 $7.45 Total $18,605,379 $70.39

Table 20.12

Average Life of Mine Costs for the Cobalt Facility

Area Average Life of Mine Costs

Average Life of Mine Cost per Pound of Cobalt

Operations $7,837,159 $2.69 General and Administrative $769,670 $0.29 Total $8,606,829 $3.27

20.8 Economic Analysis

MTB Project Management Professionals Inc. developed a cash flow valuation model for the ICP based on the geological and engineering work completed to date. All calculations are considered on a pre-tax basis. The base-case NPV over the assumed mine life, at a discount rate of 7.50 percent, is $87,291,107. The IRR is 22.30 percent, and the payback is estimated at approximately 44 months. The economic model is provided as Figure 20.1. Base case and sensitivity analyses are presented in Table 20.13, Table 20.14, and Table 20.15. The economics were based on total measured and indicated resources, but not inferred resources.



The sensitivity analysis was performed on plus or minus 5% of base case recoveries for the metals. This is deemed to be the equivalent of varying the grade of the deposit by a like amount with that range.

Table 20.13 Base Case with Discount Rate

Discount Rate 0% 5% 7.50% 10% 12.50% 15% NPV ($/millions) 202.73 117.06 87.29 63.63 44.73 29.55

Table 20.14

Cost and Price Sensitivities Cobalt Metal Price -20% -10% 0% 10% 20% Cobalt Metal Price ($/pound) $18.02 $20.27 $22.52 $24.77 $27.02 NPV ($ millions) 14.99 51.14 87.29 123.44 159.60 IRR (%) 10.28% 16.52% 22.30% 27.78% 33.04% Copper Metal Price -20% -10% 0% 10% 20% Copper Metal Price ($/pound) $1.84 $2.07 $2.30 $2.53 $2.76 NPV ($ millions) 78.89 83.09 87.29 91.49 95.96 IRR (%) 20.90% 21.60% 22.30% 23.00% 23.69% Magnesium Sulfate Price -20% -10% 0% 10% 20% Magnesium Sulfate Price ($/pound)

$0.0073 $0.0082 $0.0091 $0.0100 $0.0109

NPV ($ millions) 86.93 87.12 87.29 87.45 87.64 IRR (%) 22.24% 22.27% 22.30% 22.32% 22.35% Initial Capital Cost -20% -10% 0 10% 20% NPV ($ millions) 129.28 109.30 87.29 63.33 37.48 IRR (%) 38.26% 29.22% 22.30% 16.82% 12.35% Operating Cost -20% -10% 0 10% 20% NPV ($ millions) 119.98 103.64 87.29 70.95 54.60 IRR (%) 27.11% 24.74% 22.30% 19.78% 17.18%



Table 20.15 Sensitivities on Recovery

Change in Recovery

-5.00% -4.00% -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00%

Cobalt Recovery in Concentrator

87.93% 88.93% 89.93% 90.93% 91.93% 92.93% 93.93% 94.93% 95.93% 96.93% 97.93%

NPV ($ millions)

67.84 71.73 75.62 79.51 83.40 87.29 91.18 95.07 98.96 102.85 106.74

IRR (%) 19.23% 19.85% 20.47% 21.08% 21.69% 22.30% 22.90% 23.50% 24.09% 24.69% 25.28% Change in Recovery

-5.00% -4.00% -3.00% -2.00% -1.00% 0% 1.00% 2.00% 3.00%

Copper Recovery in Concentrator

91.53% 92.53% 93.53% 94.53% 95.53% 96.53% 97.53% 98.53% 99.53%

NPV ($ millions)

85.11 85.55 85.99 86.42 86.86 87.29 87.73 88.16 88.60

IRR (%) 21.94% 22.01% 22.08% 22.15% 22.23% 22.30% 22.37% 22.44% 22.51% Change in Recovery

-5.00% -4.00% -3.00% -2.00% -1.00% 0% 1.00% 2.00% 3.00% 4.00%

Cobalt Recovery in Hydromet Plant

91.00% 92.00% 93.00% 94.00% 95.00% 96.00% 97.00% 98.00% 99.00% 100.00%

NPV ($ millions)

68.46 72.23 75.99 79.76 83.53 87.29 91.06 94.82 98.59 102.35

IRR (%) 19.33% 19.93% 20.53% 21.12% 21.71% 22.30% 22.88% 23.46% 24.04% 24.61%



Change in Recovery

-5.00% -4.00% -3.00% -2.00% -1.00% 0% 1.00% 2.00% 3.00% 4.00% 5.00%

Copper Recovery in Hydromet Plant

88.10% 89.10% 90.10% 91.10% 92.10% 93.10% 94.10% 95.10% 96.10% 97.10% 98.10%

NPV ($ millions)

85.03 85.49 85.94 86.39 86.84 87.29 87.74 88.19 88.64 89.10 89.55

IRR (%) 21.92% 22.00% 22.07% 22.15% 22.22% 22.30% 22.37% 22.45% 22.45% 22.60% 22.67%



20.9 Capital Payback

Capital payback is estimated at approximately 44 months.

20.10 Mine Life

The operating life of the mine has been estimated at 10 years.



21.0 Interpretation and Conclusions

21.1 Risks

Since the completion of the Idaho Cobalt Project prefeasibility study in May 2001, a number of the risks that were identified in that study have been addressed. These include environmental issues, metallurgical characteristics, geotechnical conditions, and definition of additional resources. The risk to the project from these factors has been significantly reduced.

21.1.1 Metals Prices

Fluctuation in metals prices remains the major risk to project feasibility, but the strength in today’s cobalt market, the demand for this strategic metal, and the outlook for the cobalt metal market, especially the specialty metal market, reduces the potential risk.

21.1.2 Metals Recovery

A risk exists associated with the results of metallurgical test work. In the economic evaluation the amount of cobalt and copper recovered in the concentrator is based on the results of three locked-cycle flotation tests. Samuel Engineering (SE) has not verified whether the samples are representative of the ore that will be processed or how variable the results will be over the life of the mine. As shown from the sensitivity analysis that was completed on metals recovery, these data can have a significant impact on the economics of the project.

The issue of the samples being representative of the ore was reviewed by qualified individuals from Hatch and MTB Project Management Professionals Inc. in an earlier phase of the project. This review included a field visit, inspection of the drill core from which the samples were obtained, and review of the sample locations within the ore body. The joint conclusion was that the samples were representative of the ore body.

21.1.3 Plant Performance

The metallurgical test work for the ICP has been ongoing, particularly with regard to the hydrometallurgical processes. Due to constraints on the availability of material for testing, much of the test work has been done on a batch basis, and testing of individual unit operations has not been integrated with the other unit operations. It is possible that a given unit operation may not perform as planned and tested. This possibility is mitigated because of the small size of the processing facility, which allows quick and low-cost modifications of sections, if required. The bigger, more expensive sections such as nickel-ion exchange and zinc-solvent extraction have a lower risk of nonperformance than other unit operations because they are proven technology in operations around the world. Overall, the process for cobalt recovery is proven technology currently in use in other operations around the



world. There are enhancements to the process incorporated in the design in specific areas that can be considered new technology to the cobalt industry but are in use in other hydrometallurgical operations around the world. These process enhancements are considered to be low risk.

Although a list of ideas to reduce capital cost was generated during the execution of the feasibility study, the risk of cutting additional capital costs through reduction of scope from the current design is that the plant will not perform as needed. This risk jeopardizes the ability of FCC to meet production targets. Capital cost reductions as a result of judicious equipment selection and value engineering during the detailed engineering phase represents a real opportunity to reduce capital cost with low associated risk.

21.1.4 Permitting

Permitting of the ICP is a risk, and will remain a risk, until all permits are issued and are in full force and effect. The project cannot proceed until the EIS is finalized and permits are issued, and there is no guarantee that permits will be issued timely or that conditions will not be so onerous as to render the project uneconomic. However, this risk is a normal risk for mining projects in the current political environment, and the issuance of a Draft EIS in February 2007 is important progress, especially since the Draft EIS did not identify any significant impacts from the projects. An analysis of the Draft EIS indicates that the conditions the agencies are considering will not materially impair project economics. Construction cannot proceed until permits are issued, therefore, the financial risk attendant with unnecessarily expending construction funds is avoided by regulatory controls.

21.2 Opportunities

21.2.1 Resource Expansion

There are significant opportunities to improve the economics of the ICP by expansion of the geologic resources.

• There is excellent potential to expand the Ram proven and probable ore reserve with additional drilling in inferred zones and step-out drilling:

○ Internal blocks of inferred material totaling 81,700 tons grading 0.443% Co, 0.434% Cu, and 0.009 oz./ton Au, are presently being sent to the waste disposal facility. Additional drilling is required to upgrade the classification of inferred materials.

○ Additional ore reserves of the wider, higher-grade zones encountered in the south portion of the Ram can be expected to persist at depth as well continue to the south; and

○ The Ram ore body remains open to the north as well as at depth.



• There is potential for an additional revenue stream from the recovery of rare-earth minerals:

○ Inductively coupled plasma analyses of samples taken from both Ram and Sunshine mineralized zones confirm the presence of anomalous rare-earth elements plus yttrium values;

○ Mineralogical studies have identified that phosphates, monazite and xenotime, as well as the silicate allanite, are the principle host minerals; and

○ Xenotime preferentially hosts yttrium and rare-earth elements.

• There is good potential to expand the proven and probable ore reserve through continued exploration:

○ The Sunshine deposit, which hosts a measured and indicated resource of 260,700 tons grading 0.604% Co, 0.327% Cu, and 0.013 ounces per ton gold, remains open to the north and at depth;

○ Drilling in the East Sunshine indicates a resources of 100,500 tons grading 0.422% Co, 0.94% Cu, and 0.014 ounces per ton gold, hosted in mineralized horizons, which appear to widen and strengthen to the north of the present drilling; and

○ Limited drilling and exploration reports from previous owners indicate the strong potential for significant resources in the Northfield areas.

• There is also potential to expand the ore reserve through exploration in the 15 identified greenfield areas in the Blackbird district. Theses areas, which were identified through soil geochemistry, have received little additional exploration to date.

• As underground mining proceeds in the south portion of the deposit there will be opportunity to develop an underground exploration program with the goal of adding resources and reserves to the project by drilling areas to the south and under the planned stopes. We believe that a test mining program would be wise and would limit the future risks of the project, however, Formation has tried to initiate a test mining program but it has not been possible to obtain a permit for this program.

21.2.2 Product Marketing and Metals Production

An in-depth marketing analysis of magnesium sulfate should improve the sale price and improve revenue generation. Discussions with potential purchasers of this product are ongoing. Since the production of magnesium sulfate is closely linked to reagent consumptions, the revenue generation associated with the sale of magnesium sulfate is off set by the cost associated with disposal of the residue from the process.

• There is the potential for an additional revenue stream from the recovery of gold from the flotation concentrate. The presence of gold in the ore body is clearly



documented and the majority of the gold reports to the concentrate. However, tracking of the gold species throughout the subsequent hydrometallurgical testing has been inconclusive. Part of this problem may be attributable to the small quantity of sample available. It is expected that during the initial stages of commercial operation, the deportment of gold can be determined and a suitable recovery process can be designed and installed.

• There is the potential for additional revenue streams from the production of by-products from the cobalt refinery:

• A saleable zinc by-product in the form of residue from the precipitation of metals from the process water treatment may be able to be produced. This would also eliminate the requirement for disposal of this stream in the current design.

• A saleable sodium sulfate product may be able to be produced from the zinc solvent extraction pregnant strip solution stream.

21.2.3 Metallurgy and Process

The hydrometallurgical process can be further optimized to reduce reagent consumption and generate lower quantities of waste. Conservative values are used in the design. There is opportunity to reduce operating costs. Other collectors may be used in the flotation process with the potential to reduce costs in the mill.

The most significant area where future work may yield beneficial results is in the recovery of gold from the flotation concentrates. Gold is known to be present in the ore and a significant portion reports to the concentrate. However, efforts to identify the deportment of gold in the various cobalt refinery process streams have been inconclusive. As a result, the gold recovery circuit is considered as a future option and no revenue credit has been incorporated in the economic performance model.

Another area in which there exists potential for increased revenue is in the production and marketing of by products. A market for magnesium sulfate solution has been identified but other forms of magnesium compounds may be able to be produced. It is recommended that FCC work in conjunction with potential purchasers of these materials to determine potential markets and processes to produce saleable products. Future work should also be carried out on the zinc residue. The current design removes zinc as an impurity and it is disposed of with the alkaline residue. It may be possible to make process adjustments to produce a residue which can be sold to a zinc smelter thereby converting a waste stream to a revenue stream and eliminating the cost of disposal for this stream.

Future test work (currently underway) includes investigation of high temperature fixing of the iron and arsenic contained in the copper raffinate using an autoclave and pilot plant simulation of the solution purification and cobalt production processes.

The current plan incorporates the production of cobalt “rounds,” which requires special cathodes. Variations of these types of cathodes are currently in use in at two other cobalt electrowinning operations worldwide (Inco in Ontario, Canada and Xstrada-Falconbridge in Norway). A vendor of the cobalt round cathodes is currently producing various prototype



models to be tested in existing full scale cobalt electrowinning operations in order to identify the most robust design regarding improved service life and reduction of required maintenance.



21.2.4 Mining Costs

At this point, the cost of mining is based on an estimate by a single contract mining company. The mining capital and operating costs may be improved by solicitation of competitive bids from other contract mining companies and by reevaluation of the timing of the transition from contract mining to mining by the owners.

21.2.5 Capital Costs

There are no frills in the design of the ICP mine, concentrator and hydrometallurgical facilities; therefore, little room is seen to exist to improve the economics for the project by reducing scope without increasing the risk of building a plant that performs poorly. Capital cost savings might be realized during the detailed engineering phase of the project by judicious selection of equipment, shop fabrication of skid-mounted process modules, consideration of used equipment, substitution of less costly construction materials, and the use of Victaulic piping connections in place of welded construction.

Crushing of the ore might be done by a contractor, which would substitute higher operating costs spread out over a longer period of time for capital investment at the start of the project. It is also possible that the transition from contract mining to owner-performed mining could be delayed, which would also substitute higher operating cost for delayed capital expenditure. Both of these options have the potential to improve the overall economics of the project.

Water treatment may present another area for capital cost savings. At present, the water-treatment method is RO, which was chosen on the belief that the NPDES permit limit for sulfate and nitrate would be very low. However, the sulfate and nitrate limits in the draft NPDES permit were higher than expected and future relief from this limit is being sought. Therefore, there are numerous opportunities to use this elevated sulfate and nitrate standard to reduce capital and operating costs. The first method is to modify the existing membrane-based method to produce a product that contains elevated sulfate and nitrate, which will reduce operating cost and equipment sizing.

It appears there could be greater savings if other treatment methods are used. A laboratory test program has been initiated to evaluate other methods to remove primarily Cu, Zn and similar species. The processes that appear to have the most potential are ion exchange, followed by natural zeolites and/or a zero-valence iron process step.

A tradeoff study will be completed, and the most cost-effective method will be selected. The method selected should be lower in both capital and operating cost. The method currently planned and budgeted is recognized as one of the most expensive methods to treat water.



21.2.6 Permitting

Once permits are issued there will be opportunities to apply for amendment, modification, or deletion of onerous permit conditions. This is a potential future imporovement that could reduce the cost of ongoing environmental monitoring and compliance without risking delay in initial permit issuance.



22.0 RECOMMENDATIONS

The results of the feasibility study are positive, and it is recommended that the project be advanced to the next phase of engineering and construction execution. The estimated cost of engineering and construction execution for the mine, concentrator, and cobalt facility is $138,700,000.



23.0 REFERENCES

Anderson, Corby G.

2000a: Metallurgical Testing of RAM Ore, Consultant’s report for Formation Capital Corporation by The Center for Advanced Mineral & Metallurgical Processing.

Anderson, Corby G.

2000b: Task V Technical Assistance for Determination of Smelter Acceptance and Terms for Concentrate Processing, Consultant’s report for Formation Capital Corporation by The Center for Advanced Mineral & Metallurgical Processing.

Baer, Roger and Daggett, DeWitt

1981: An Exploration and Preliminary Engineering Evaluation of the Sunshine Prospect, Blackbird Mining District, Lemhi County, Idaho. Part 2: Geotechnical Evaluation. In-house report for Noranda Exploration Inc.

Bailey, B.C. 2000. Letter dated April 14, 2000, addressed to Mr. Ray Henderson, Salmon National Forest.

Balwin, David

2001: Correspondence with Neil Prenn regarding groundwater levels and hydraulic head in the vicinity of the proposed portal for a spiral decline into the Ram deposit.

Banning, Steven W.

1982: Metallurgical Investigations of Blackbird Cobalt-Copper Ores, Report prepared for Noranda Mining Inc.

Banning, Steven W.

1986: Flotation Testing of Blackbird “Satellite” Ores, Report prepared for Noranda Mining Inc.

Connor, J.J. 1990. Geochemical Stratigraphy of the Yellowjacket Formation (Middle Proterozoic) in the Area of the Idaho Cobalt Belt, Lemhi County, Idaho. U.S. Geological Survey Open-File Report 90-0234A.

Daggett, M. DeWitt



1981: An Exploration and Preliminary Engineering Evaluation of the Sunshine Prospect, Blackbird Mining District, Lemhi County, Idaho. Part 3: Geology, In-house report for Noranda Exploration Inc

Daggett, M. DeWitt and Baer, Roger L.

1981: An Exploration and Preliminary Engineering Evaluation of the Sunshine Prospect, Blackbird Mining District, Lemhi County, Idaho. In-house report for Noranda Exploration Inc.

Evans, Karl V., Nash, J. Thomas, Miller, William R., Kleinkopf, M. Dean, and Campbell David L.

1986: Blackbird Co-Cu Deposits in Preliminary compilation of descriptive geoenvironmental mineral deposit models, U.S. Geological Survey Open-File Report 95-0831, du Bray Edward A., ed.

Formation Capital Corporation, U.S. (Formation). 2005 (revised April and June 2006). Plan of Operations for the Idaho Cobalt Project, Lemhi County, Idaho. Version 4.0. Prepared for the United States Forest Service. February 2005.

Formation Capital Corporation, U.S.

1996: Summary and Progress Report on Formation Capital Corporation’s Cobalt Properties in the State of Idaho, U.S.A., In-house report.

Formation Capital Corporation U.S. Field Staff

1998: Report on the Reserve/Resource Estimates for Sunshine Lode, East Sunshine and Ram Prospects, In-house report for Formation Capital Corporation.

Gelhaus, J.W. 2004. Comprehensive Baseline Air Quality and Meteorology Data Summary of the Idaho Cobalt Project, June 2000 – December 2003. Prepared for Formation Capital Corporation.

Golder Associates Inc. 2000. 1999 Remedial Investigation Data Summary Report and Sampling and Analysis Plan, Blackbird Mine Site, Lemhi County, Idaho. Prepared for Blackbird Mine Site Group.

Gow, Neil N.

1995: A Report on the Blackpine and Sunshine Properties, Lemhi County, Idaho, Consultant’s report by Roscoe, Postle Associates Inc.

Hõy, Trygve

1995: Blackbird Sediment-hosted Cu-Co, in Selected British Columbia Mineral Deposit Profiles, Volume 1 - Metallics and Coal, Lefebure, D.V. and Ray, G.E., Editors, British



Columbia Ministry of Energy of Employment and Investment, Open File 1995-20, pages 41-44.

Hughes, Gordon J.

1993: A Deposit Model and Exploration Guidelines for the Blackpine Cu-Au-Co Sulfide System, Lemhi County, Idaho, Consultant’s report prepared for Formation Capital Corporation.

Hughes, Jr., G.J. 1983. Basinal Setting of the Idaho Cobalt Belt, Blackbird Mining District, Lemhi County, Idaho. In: Genesis of Rocky Mountain Ore Deposits; Changes with Time and Tectonics. Proceedings of the Denver Region Exploration Geologists Symposium, pp. 21-27.

Idaho Department of Lands (IDL). 1991. Best Management Practices for Mining in Idaho.

Intermountain Resources, Inc. 2002. Final Soils Technical Report for the Idaho Cobalt Project. Prepared for Formation Capital Corporation. January 2002.

Intermountain Resources, Inc. 2004a. Threatened or Endangered and Sensitive Plant Species Survey. Prepared for Formation Capital Corporation, Idaho Cobalt Project. September 2004.

Intermountain Resources, Inc. 2004b. Vegetation Report. Prepared for Formation Capital Corporation, Idaho Cobalt Project. September 2004.

Intermountain Resources, Inc. 2004c. Wetlands and Other Waters of the U.S. Inventory, 2000-2004 Wetland Delineation. Prepared for Formation Capital Corporation, Idaho Cobalt Project. September 2004.

Intermountain Resources, Inc. 2006. Wetlands and Other Waters of the U.S. Inventory, 2006 Wetland Delineation for Pipeline Route. Prepared for Formation Capital Corporation, Idaho Cobalt Project. November 2006.

Kuzis, K. 2004. Proposed Idaho Cobalt Mine, Aquatic Baseline Condition, Draft Technical Report. Prepared for Formation Capital. October 2004.

Lahren, Jr., S.L. 1997. Cultural Resources Baseline Report, SL-97-1211 Sunshine Exploration Project FY95. Prepared for Formation Capital Corporation.

MacFarlane, Ross

2002: Letter to Clubb Capital Ltd. summarizing a review of the Idaho Cobalt Project, by Watts, Griffis and McOuat Limited.



McLoren, Heather and Anderson, Corby G.

1999: Ram Core Sample Strength Testing, Consultant’s report for Formation Capital Corporation by The Center for Advanced Mineral & Metallurgical Processing.

Mine Development Associates, Inc. (MDA). 2001. Pre-Feasibility Study of the Idaho Cobalt Project Lemhi County, Idaho.

MineFill Services, Inc. 2001. Geotechnical Data Report. Prepared for Formation Capital Corporation, Idaho Cobalt Project, Salmon, ID. November 4, 2001. In: Telesto Solutions, Inc. 2004a. Conceptual Design of the Tailing/Waste Rock Facility and Water Management Ponds. Prepared for Formation Capital Corporation. August 2004.

Monarch and Associates. 2005. Idaho Cobalt Project Terrestrial Wildlife Baseline Report. June 2005.

Nash, J.T. 1989. Geology and Geochemisty of Synsedimentary Cobaltiferous-Pyrite Deposits, Iron Creek, Lemhi County, Idaho. USGS Bulletin 1882.

Nash, J.T. and G.A. Hahn. 1986. Volcanogenic Character of Sediment-Hosted Co-Cu Deposits in the Blackbird Mining District, Lemhi County, Idaho - An Interim Report. U.S. Geological Survey Open-File Report 86-430.

Natural Resources Conservation Service (NRCS). 2004. Website: http://www.wcc.nrcs.usda.gov/snotel/snotel.pl?sitenum=639&state=id.

Pegg Geological Consultants Ltd. 2001. Geology and Mineral Resources Technical Report for the Idaho Cobalt Project, Lemhi County, Idaho. Prepared for Formation Capital Corporation. October 25, 2001.

Pegg, Rex

1997: Report on the Reserve/Resource Calculations for the Sunshine and East Sunshine Lodes, Sunshine Property, Idaho, U.S.A., Consultant’s report for Formation Capital Corporation.

Prenn, Neil B

1998: Pre-Feasibility Study of the Cobalt, Copper, and Gold, at the Sunshine Project, Lemhi County, Idaho

Prenn, Neil B.

1999a: Sunshine Deposit cash flow studies with “optimized capital”,Memo from Mine Development Associates to Formation Capital Corp.



Prenn, Neil B.

1999b: Reserve and Economic Updates of the Cobalt, Copper, and Gold Deposit at the Sunshine Project, Lemhi County, Idaho, Consultant’s report by Mine Development Associates for Formation Capital Corporation.

Prenn, Neil B, Muerhoff, Charles and Blattman, Matt

2001: Pre-Feasibility Study of the Idaho Cobalt Project, Lemhi County, Idaho, Consultant’s report by Mine Development Associates for Formation Capital Corporation.

Prenn, Neil B.

2005: Resource Update for the Idaho Cobalt Project. Report, from Mine Development Associates to Formation Capital Corp.

Prenn, Neil B. and Moran, Allan

2005: National Instrument 43-101 Technical Report, Idaho Cobalt Project, Mine Development Associates.

Renewable Technologies, Incorporated. 2001. Idaho Cobalt Project SL-01-1349, Cultural Resource Report Narrative. Prepared for Formation Capital Corporation. August 27, 2001.

Renewable Technologies, Incorporated. 2005. Cultural Resource Report Narrative. Prepared for Formation Capital Corporation. Copy on file with Legacy Consulting Services, Butte.

Renewable Technologies, Incorporated. 2006. Idaho Cobalt Project SL-06-1546 (R-0413-2006-00071): 2006 Additional Heritage Resource Evaluation. Prepared for Formation Capital Corporation.

Shaw Environmental & Infrastructure, Inc. (Shaw). 2004a. Consolidated Baseline Hydrology Report, Idaho Cobalt Project, Lemhi County, Idaho. Version 3.0. Prepared for Formation Capital Corporation. December 2004.

Slack,J.F.

2006: High REE and Y concentrations in Co-Cu-Au ores of the Blackbird district, Idaho, Econ.Geol. 101, 275-280.

Staff of Noranda Mining Inc.

1982: Blackbird Project Feasibility Study, Detailed Calculations, Book 1 of 2. In-house report.



1982: Blackbird Project Feasibility Study, Detailed Calculations and Support Data, Book 2 of 2. In-house report.

1984: Blackbird Project, Cobalt, Idaho, Property Description, In-house report.

Stantec Consulting. 2004. Biomonitoring Study, Panther Creek Watershed, September 2003. Prepared for Blackbird Mine Site Group. March 2004.

Telesto Solutions, Inc. (Telesto). 2004. Geochemical Baseline Report for the Idaho Cobalt Project: Waste Rock, Ore, and Tailing. Revision II. Prepared for Formation Capital Corporation. September 2004.

Telesto Solutions, Inc. (Telesto). 2005a. Environmental Response to Mining at the Idaho Cobalt Project. Revision II. Prepared for Formation Capital Corporation. February 2005.

Telesto Solutions, Inc. (Telesto). 2005b. Response to Comments on the Plan of Operations Revision 3.0. Prepared for Formation Capital Corporation. February 2005.

Telesto Solutions, Inc. (Telesto). 2006a. 2005 Water Quality Data Summary Idaho Cobalt Project. Prepared for Formation Capital Corporation. May 2006.

Telesto Solutions, Inc. (Telesto). 2006b. Conceptual Design of the Tailing/Waste Rock Facility and Water Management Ponds, Draft Revision III. Prepared for Formation Capital Corporation. August 2006.

Telesto Solutions, Inc. (Telesto). 2006c. Storm Water Management Plan for the Idaho Cobalt Project. Revision VI. Prepared for Formation Capital Corporation. August 2006.

Telesto Solutions Inc. (Telesto). 2007a. 2006 Water Quality Data Summary Idaho Cobalt Project. Prepared for Formation Capital Corporation. January 2007.

Telesto Solutions Inc. (Telesto). 2007b. 2007 Water Monitoring Plan for the Idaho Cobalt Project. Prepared for Formation Capital Corporation. April 2007.

Telesto Solutions Inc. (Telesto). 2007c. Feasibility Design of the Tailings/Waste Rock Facility, and Roads for the Idaho Cobalt Project. Prepared for Formation Capital Corporation. January 2007.

Telesto Solutions Inc. (Telesto). 2007d. Feasibility Design of the Water Treatment Plant at the Idaho Cobalt Project. Prepared for Formation Capital Corporation. February 2007.

Turkey Tracks Enterprises, Inc. (TTE). 2006. Idaho Cobalt Project, Transportation Baseline Report and Transportation Plan. Revision 4. Prepared for Formation Capital Corporation. August 2006.



Tysdal, R. G.

2002: Revision of Middle Proterozoic Yellowjacket Formation, Central Idaho, USGS Professional Paper 1601A

U.S. Department of Agriculture (USDA). 1982. Final Environmental Impact Statement Blackbird Cobalt-Copper Project Lemhi County, Idaho, Salmon Nation Forest Region 4. USDA Forest Service.

U.S. Department of Agriculture (USDA). Undated. Land and Resource Management Plan for the Salmon National Forest. USDA Forest Service, Salmon National Forest.

United States Environmental Protection Agency (EPA)

1997: Blackbird Mine site Cleanup, EPA Fact Sheet, September 8, 1997.

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1998: Blackbird Mine, Idaho, Superfund Fact Sheet, June 1998.

U.S. Geological Survey (USGS). 2000. Revision of the Middle Proterozoic Yellowjacket Formation, Central Idaho, and Revision of Cretaceous Slim Sam Formation, Elkhorn Mountains Area, Montana. U.S. Geol. Surv. Prof. Paper 1601, pp. A1-A13.

Wilson, G. C.

2006: Mineralogy, textures and chemistry of crushed ore samples, Idaho Cobalt Project, Turnstone Geological Services Ltd, Report 2006-04P, for Formation Capital Corporation (U.S.), Salmon, Idaho, iv+33pp.



24.0 DATE AND SIGNATURE

Signed certificates in respect of this report have been included at the end of this report.



25.0 OTHER RELEVANT DATA AND INFORMATION

25.1 Infrastructure

25.1.1 Mine Site Plan

The Idaho Cobalt Project (ICP) is located in an area generally characterized by deep, relatively narrow valleys with steep side slopes and rugged mountains. The mine portal is located in one of these valleys. Adjacent to this valley is a flat-topped mountain which is referred to as the Big Flat. The processing facilities and the tailings and waste rock storage facilities (TWSF) are located on the Big Flat. The Big Flat is a gently sloping area at an elevation of approximately 8,000 feet, which is approximately 1,000 feet higher than the mine portal. Material is moved from the mine portal to the Big Flat using an aerial tramway system. Facilities located on the Big Flat include:

• The tram head structure; • Coarse ore and waste storage; • Crushing and screening facilities located in a crushing building; • Processing facilities located in the process building; • Backfill preparation plant located in the process building; • Wastewater treatment plant located in the process building; • Tailings and waste rock storage facility; • Mine office building and change facilities; • Fuel and lube storage and dispensing facilities; • Mine equipment maintenance facility (truck shop) is planned for construction in

Year 2; • Topsoil stockpile; • Electrical substation.

25.1.2 Hydrometallurgical Facility

The cobalt production facility is located adjacent to an existing building that houses the Sunshine Refinery near Kellogg, Idaho. The Sunshine Refinery is currently operating and producing silver bullion. In the past, antimony and copper were processed at the facility, and portions of these circuits still exist. They will be modified and used in the proposed cobalt and copper production.

A new cobalt production building will be constructed adjacent to the existing building. It will house the cobalt production equipment with the exception of some of the reagent storage silos and the residue depository. The reagent storage silos are located just outside the cobalt production building, and the residue depository is located a short distance south of the existing building.



25.1.3 Access Roads

Site access through public land is provided via a combination of newly constructed roads and upgrades of existing roads. All roads are constructed or upgraded in accordance with United States Forest Service (USFS) guidelines for road construction. The specifications for road design are covered in the Feasibility Design of the Tailings/Waste Rock Facility, and Roads for the Idaho Cobalt Project (Telesto, 2007c) and Transportation Baseline Report and Transportation Plan (TTE, 2006). Formation Capital Corporation, U.S. (FCC) proposes to upgrade the transportation route through the Blackbird Mine site and will negotiate an access agreement with the owner. The upgrade consists of regrading and adding a gravel surface to the roads.

Most of the project employees are expected to live in the Salmon area. Employees will be transported to the project site by buses or vans. This enhances transportation route safety by limiting the number of vehicles on the project roads. The transportation route for employees is via Williams Creek Road to the Williams Creek Summit, from there to Deep Creek Road, then to the Panther Creek Road, and Blackbird Creek Road as shown on Figure 7.1. Approximately 10 vans are required to transport employees to and from the site, and four pickup trucks are used by management personnel. This route is also used for transportation of concentrate, equipment, reagents, and other freight. Additional detail on the transportation corridor can be found in the Transportation Baseline Report and Transportation Plan (TTE, 2006).

25.1.4 Site Roads

All new site roads are constructed in conformance with Mine Safety and Health Administration (MSHA) regulations, as appropriate. Existing haul roads are improved as necessary. Storm water ditches and sediment control measures on all roads are constructed in accordance with Best Management Practices (BMPs) for Mining in Idaho guidelines (Idaho Department of Lands [IDL], 1991) to control storm water runoff. These are more fully described in the Storm Water Management Plan for the Idaho Cobalt Project (Telesto, 2006c).

Site roads are classified as primary, secondary and tertiary roads. Primary roads are all main access roads and roads over which there will be ore or waste rock haulage. Secondary roads are roads that will see daily, year-round use in the operations but are not ore haul routes or main access routes. Tertiary roads are roads that will see only seasonal use or intermittent use, such as roads to water monitoring locations.

25.1.5 Power Supply

The project mine site is supplied by a 69-kV power line. A power supply line to the adjacent Blackbird Mine Site, which currently feeds only the Blackbird water treatment plant, already exists. The power for the mine site is provided by Idaho Power Company. The power supply to the refinery in Kellogg is existing, operational and does not require upgrading. The power supply for the refinery is provided by Avista.



The 69-kV incoming power line originates in Salmon and travels a distance of 21 miles to the Blackbird Mine Site. Portions of the line may be upgraded to provide electric power to operate the Idaho Cobalt Project. The 69-kV overhead power line to supply the ICP will be built from a new tap on the Salmon-Blackbird line to the new substation located near the concentrator. The new section of power line is approximately 2.8 miles from the new tap point to the concentrator. This line runs parallel to the mine site access road to the concentrator.

Transformers located at the concentrator substation reduce the voltage to 4.16 kV for further power distribution. Power for the tram drive system and the concentrator ball mill are operated at 4.16 kV. All other loads operate at 480 V, with the exception of lighting, instrumentation and other small loads.

An overhead power line at 4.16 kV runs parallel to the tram from the concentrator substation to the mine portal area. Transformers located at the portal reduce the voltage to 480 V for distribution within the tram loading facility. Power distribution within the mine will be at 4.16 kV.

Power for the water management pond pumping system and the surface mounted mine vent fans are provided by 4.16 kV overhead power lines that run from the concentrator to the point of consumption. Transformers located at the consumption points reduce the voltage to 480 V to supply the equipment.

25.1.6 Fire Protection

Fire protection systems for the mine consist of hand-held fire extinguishers located throughout the mine. In addition, each piece of mobile equipment is equipped with a fire extinguisher.

Neither local building codes nor the FCC insurance carrier require a permanent fire protection system. Fire protection for the surface facilities is provided using a combination of hand-held (20-pound) fire extinguishers and wheel-mounted (120-pound) fire extinguishers. Fire extinguishers will be located in appropriate locations near equipment, particularly conveyor belts, in maintenance areas, motor control centers and other areas that may be prone to fire.

All vehicles and mobile equipment are equipped with fire extinguishers. Forest Service regulations require that fire suppression equipment be available during the fire season. A water truck equipped with pump, hoses and nozzles is sufficient to meet this requirement. Shovels and other tools for suppressing small fires will also be stocked and made readily available for employees.

In addition, FCC will coordinate with the Forest Service and local fire districts to provide any necessary fire prevention and suppression training for mine and process plant employees and also to devise and maintain a quick alert and response system in the event of any fire



that requires outside assistance. FCC will organize and conduct periodic fire drills according to applicable regulations and/or recommendations of local fire officials.

FCC will create an implement a fire prevention plan for any surface blasting events to include appropriate area closures, stationing of fire suppression equipment, and advising local fire authorities.

Fire protection is already in place at the hydrometallurgical facility in Kellogg and consists of a buried fire main and fire hydrants located around the perimeter of the facilities. This includes the area designated as the new cobalt production facility. Hand-held fire extinguishers are located throughout the facilities as additional fire protection. The existing Copper SX system has an automatic-spray fire suppression system for each mixer/settler and has an automatic foam system that will suppress fire in upper and lower decks in surrounding rooms. There is also a manual override system to start systems manually.

The zinc solvent extraction system is equipped with a high pressure fog system. Nozzles are located primarily in the solvent extraction settling tanks where the kerosene diluent is concentrated. The system is fully automatic and is triggered by sensors located in or near the solvent extraction process equipment.

25.1.7 Communications

Administrative functions for the mine and concentrator are performed primarily from the existing FCC office in Salmon. These functions include senior management, human resources, accounting, payroll, accounts payable and procurement. The Salmon office is located in the city of Salmon and is currently connected to all required data and voice communications networks. Mobile phone service is available in Salmon. Communications to the mine and concentrator site is via a satellite phone and data system.

Communications within the underground mine use radios and a leaky feeder system. This system allows radio communication from all locations within the mine. The system is extended into new working locations with the utilities systems.

Surface communication at the mine site is primarily by hand-held satellite phones. Communication to the Salmon administrative site is via the satellite phone and data system.

The existing facility near Kellogg is currently connected to all required data and voice communications networks. Mobile phone service is not available at the cobalt production facility; the nearest location is about a mile and a half away. Communication within the cobalt production facility is by handheld FM radios.



25.1.8 Security and Fencing

The mine and concentrator are located in a very sparsely populated area of Idaho 1.5 hours away from the nearest city. The requirement for site security is considered to be minimal because of the location, the very low traffic through the area, and the low value of the product produced.

Access to the site is through the existing Blackbird property and is controlled by a guard house located near the intersection of the Blackbird property boundary with the Forest Service road. The guard house will be manned on day shift five days per week. All visitors to the site must sign in, receive ICP-specific site hazard awareness training, and directions to the appropriate site facilities, which are located approximately 4.3 miles further along the road. Site personnel will receive notification of the impending visit.

Employees are bused or transported in company vehicles. No private vehicles are allowed on the mine site. This policy greatly reduces the opportunity for theft by the employees.

Warehousing of materials and supplies is primarily inside the crusher building or inside the process building. The process building is manned at all times. The crusher building is adjacent to the process building and is scheduled to be manned 12 hours per day. Only large spare parts and materials are stored in the crusher building. Smaller spare parts, tools and high-value materials are stored in the process building. Security fencing at the site is limited to specific areas, which are fenced to prevent personnel access to hazardous areas, such as the substation transformer yard. In addition, some areas such as the water management ponds are fenced to prevent wildlife access.

Fencing for the ponds protects wildlife and also protects the synthetic liner from wildlife damage.

The cobalt production facility is located adjacent to the existing building housing the silver refinery. The security system in place at the silver refinery is typical of most precious metals refineries. All employees pass through the security checkpoint between the change facility and the workplace. All visitors sign in and are escorted by a company employee once inside the secured area.



26.0 ILLUSTRATIONS

Figure 6-1 Idaho Cobalt Project Location Map

Figure 6-2 Idaho Cobalt Project Mining Claims

Figure 7-1 Site Access Roads

Figure 9-1 Regional Geology

Figure 9-2 Local Geology Map

Figure 9-3 Ram Cross Section

Figure 9-4 Plan Map Showing Ram Cross Sections

Figure 13-1 Ram Deposit Drill Collar Locations

Figure 16-1 Cobalt Grade Distribution in Horizon 3023

Figure 19-1 Ram Cobalt QQ Plot

Figure 19-2 Ram Copper QQ Plot

Figure 19-3 Ram Gold QQ Plot

Figure 19-4 Ram 3023 Horizon

Figure 20-1 Base Case Financial Model



Figure 6.1 Location Map



Figure 6.2 ICP Mining Claims



Figure 7.1 Site Access Roads



Figure 9.1 Regional Geology



Figure 9.2 Local Geology



Figure 9.3 Ram Deposit Cross Section



Figure 13.1 Ram Deposit Drill Hole Locations



Quantile-Quantile Plot of % Co in Horizon 30230.01 0.05 0.25 0.50 0.75 0.90 0.99

0.003

0.0060.009

0.030

0.0600.090

0.300

0.6000.900

3.000

6.0009.000

% C

o

2005-2006 prior drilling

Figure 16.1 Co Grade Distribution in Horizon 3023



Quantile-Quantile Plot of Cobalt 0.01 0.05 0.25 0.50 0.75 0.90 0.99

0.002

0.0040.0060.008

0.020

0.0400.0600.080

0.200

0.4000.6000.800

2.000

4.0006.0008.000

20.000

% C

o

Capped @ 4.0% Co

Figure 19.1 Ram Cobalt QQ Plot



Quantile-Quantile Plot of Copper 0.01 0.05 0.25 0.50 0.75 0.90 0.99

0.0010.001

0.003

0.0050.007

0.025

0.0500.075

0.250

0.5000.750

2.500

5.0007.500

% C

u

Capped at 5% Cu

Figure 19.2 Ram Copper QQ Plot



Quantile-Quantile Plot of Gold0.05 0.25 0.50 0.75 0.90 0.99

0.000

0.0010.001

0.003

0.0060.009

0.030

0.0600.090

0.300

0.6000.900

3.000

oz A

u/t

Capped @ 0.090 oz Au/t

Figure 19.3 Ram gold QQ Plot



Figure 19.4 Ram 3023 Horizon

142 Idaho Cobalt Feasibility Study ♦ SE Project Number 6113-01 ♦ Project Description


Figure 20.1 Economic Model

MINE DEVELOPMENT ASSOCIATES

MINE ENGINEERING SERVICES

775-856-5700

210 South Rock Blvd.

Reno, Nevada 89502

FAX: 775-856-6053

I, Neil B. Prenn, of Reno, Nevada, do hereby certify:

1. I am currently employed as Principal Engineer by:

Mine Development Associates, Inc.

210 South Rock Blvd.

Reno, Nevada 89502.

2. I graduated with an Engineer of Mines degree from the Colorado School of Mines in 1967.

3. I am a Registered Professional Mining Engineer in the state of Nevada (#7844) and a member of

the Society of Mining Engineers and councilor-at-large for the Mining and Metallurgical Society

of America.

4. I have worked as an engineer for a total of 40 years.

5. I have read the definition of “Qualified Person” set out in National Instrument 43-101 (“NI 43-

101”) and certify that by reason of my education, affiliation with a professional association (as

defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a

“Qualified Person” for the purposes of NI 43-101.

6. I am responsible for the preparation of sections 9.0, 10.0, 11.0, 12.0, 13.0, 14.0, 15.0, 16.0, 17.0,

19.0, 20.1 and 20.10 of the report titled Technical Report Idaho Cobalt Property Feasibility

Study (Ram Deposit) dated effective September 14, 2007. I visited the Idaho Cobalt property on

Feb. 18 & 19, 2005, April 25 – 28, 2005 and June 1 – 3, 2005, and on a number of occasions

prior to 2005. This Report is also prepared for inclusion in the Samuel Engineering Feasibility

Study for the Idaho Cobalt Project.

7. I have had the following involvement with the Idaho Cobalt Project: 1998: Pre-Feasibility Study

of the Cobalt, Copper, and Gold, at the Sunshine Project, Lemhi County, Idaho; 1999:Sunshine

Deposit cash flow studies with “optimized capital”. 1999: Reserve and Economic Updates of

the Cobalt, Copper, and Gold Deposit at the Sunshine Project, Lemhi County, Idaho; 2001: Pre-

Feasibility Study of the Idaho Cobalt Project, Lemhi County, Idaho; 2005: Resource Update for

the Idaho Cobalt Project; 2005: National Instrument 43-101 Technical Report, Idaho Cobalt

Project.

Page 2

Mine Development Associates September 14, 2007

8. As of the date of this certificate, to the best of my knowledge and belief, this Technical Report

contain all scientific and technical information that is required to be disclosed to ensure that the

Technical Report is not misleading.

9. I am independent of the issuer applying all of the tests in section 1.4 of National Instrument 43-

101.

10. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been

prepared in compliance with that instrument and form.

11. I consent to the filing of the Technical Report with any securities regulatory authority, stock

exchange and other regulatory authority and any publication by them, including electronic

publication of the Technical Report in the public company files on their websites accessible by

the public.

Dated this 14th

day of September 2007.

Signature of Qualified Person

Neil B. Prenn

Print Name of Qualified Person

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