Western Copper Feasibility Study

Nevada Star Resource Corp.

Design Criteria OK Mine

Western States Engineering Project No. 98010 2700 E. Executive Drive, Suite 100 Telephone: 520-889-2040

Tucson, Arizona 85706 Fax: 520-889-2733

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY Transmittal Letter Executive Summary

1.0 Introduction .............................................................................................1–1 1.1 1.2 1.3 1.4

1.5 1.6

General ................................................................................................... Project Location ...................................................................................... Project History......................................................................................... Land Tenure ............................................................................................ Figure 1.1 - Map Showing Project Location ........................................... Figure 1.2 - OK Mine Project Location ................................................. Project Concept ....................................................................................... Data Sources............................................................................................

2.0 Geology and Mineral Resources ............................................................... 2.1 2.2 2.3 2.4

2.5

Introduction ............................................................................................. Regional Geology.................................................................................... Figure 2.1 - Site Map............................................................................... Mineral Deposit Description ................................................................... Database .................................................................................................. 2.4.1 General...................................................................................... 2.4.2 Data Source............................................................................... 2.4.3 Survey, Location and Elevation Control................................... 2.4.4 MDA Independent Sampling .................................................... 2.4.5 Twinned Holes .......................................................................... 2.4.6 Specific Gravity ........................................................................ 2.4.7 Data Used in Modeling ............................................................. Mineral Resources................................................................................... 2.5.1 Methodology ............................................................................. 2.5.2 Hidden Treasure........................................................................ Figure 2.2 - HT Collar Map ...................................................... Figure 2.3 - HT Cross Section .................................................. Figure 2.4 - HT Bench Map...................................................... Figure 2.5 - HT Model Differences .......................................... 2.5.3 Maria ......................................................................................... Figure 2.6 - Maria Drill Hole Map ...........................................

i

1–1 1–1 1–1 1–1 1–2 1–3 1–4 1–4 2–1 2–1 2–1 2–2 2–3 2–3 2–3 2–4 2–7 2–8 2–11 2–13 2–14 2–16 2–16 2–20 2–21 2–22 2–23 2–25 2–26 2–27

Western States Engineering Tucson, Arizona

2.6

Figure 2.7 - Maria Cross Section .............................................. Figure 2.8 - Maria Level Map................................................... 2.5.4 Copper Ranch............................................................................ Figure 2.9 - Copper Ranch Drill Hole Map .............................. Figure 2.10 - Copper Ranch Section......................................... Figure 2.11 - Copper Ranch Level Map ................................... 2.5.5 OK Mine ................................................................................... Figure 2.12 - OK Mine Drill Hole Collars................................ Figure 2.13 - OK Section .......................................................... Figure 2.14 - OK Level Map .................................................... 2.5.6 Stockpiles.................................................................................. 2.5.7 Past Production and Previous Resource Estimates ................... Qualifications, Risks and Opportunities..................................................

3.0 Geotechnical and Hydrology ..................................................................... 3.1 3.2 3.3 3.4 3.5

General ................................................................................................... Investigation ............................................................................................ Site Conditions ........................................................................................ Analysis and Recommendations.............................................................. Water Resources......................................................................................

4.0 Mineable Reserves and Mine Plan ........................................................... 4.1 4.2

4.3

4.4 4.5 4.6

Methodology ........................................................................................... Ultimate Pits ........................................................................................... Figure 4.1 - OK Mine Ultimate Pit Grade - Tonnage Curve................... Figure 4.2 - Hidden Treasure Ultimate Pit Grade - Tonnage Curve ....... Figure 4.3 - Copper Ranch Ultimate Pit Grade - Tonnage Curve........... Figure 4.4 - Maria Ultimate Pit Grade - Tonnage Curve ........................ Pit Designs............................................................................................... Figure 4.5 - Hidden Treasure and Maria Pit and Dump Design.............. Figure 4.6 - Copper Ranch Pit and Dump Design................................... Figure 4.7 - OK Pit and Dump Design .................................................... Dump Designs ......................................................................................... Production Schedule................................................................................ Mine Equipment and Costs .....................................................................

5.0 Plant Design Criteria ................................................................................... 5.1 5.2

Metallurgical Testing .............................................................................. Design Criteria ........................................................................................ 5.2.1 Site Conditions.......................................................................... 5.2.2 Ore Characteristics....................................................................

ii

2–28 2–29 2–30 2–31 2–32 2–33 2–34 2–36 2–37 2–38 2–41 2–42 2–43 3–1 3–1 3–1 3–1 3–1 3–1 4–1 4–2 4–2 4–4 4–4 4–5 4–5 4–6 4–7 4–8 4–9 4–10 4–11 4–14 5–1 5–1 5–3 5–3 5–3

Western States Engineering Tucson, Arizona

5.2.3 5.2.4 5.2.5 5.2.6 5.2.7 5.2.8 5.2.9 5.2.10 5.2.11 5.2.12 5.2.13 5.2.14 5.2.15

Crushing.................................................................................... Heap Construction .................................................................... Solution Handling and Leaching .............................................. Solution Pond & Tank Data...................................................... Solvent Extraction..................................................................... Piping and Materials - SX Plant ............................................... SX Instrumentation and Controls ............................................. SX Area Lighting...................................................................... Painting ..................................................................................... Organic Removal - Electrolyte Filters ...................................... Electrolyte Heat Exchangers..................................................... Tank Capacity Data .................................................................. Electrowinning.......................................................................... Operational Aspects .................................................................. Cell and Electrode Data ............................................................ Electrolyte ................................................................................. Electrical System ...................................................................... Building .................................................................................... Piping ........................................................................................ Tank Data.................................................................................. EW Additives............................................................................ Miscellaneous Facilities............................................................

6.0 Process Plant ................................................................................................. 6.1 6.2 6.3 6.4 6.5

Crushing and Agglomeration .................................................................. Leach Heaps ............................................................................................ Heap Irrigation ........................................................................................ Solvent Extraction ................................................................................... Electrowinning ........................................................................................

7.0 Infrastructure and Utilities ........................................................................ 7.1 7.2 7.3 7.4 7.5

Site Development .................................................................................... Maintenance ............................................................................................ Administration......................................................................................... Site Access .............................................................................................. Power and Other Utilities/Services .........................................................

8.0 Environmental .............................................................................................. 8.1 8.2

Required Authorizations.......................................................................... List of Permits Required for the OK Mine Project ................................. Specific Permit Requirements .................................................................

iii

5–3 5–4 5–4 5–5 5–5 5–7 5–7 5–8 5–8 5–8 5–9 5–9 5–9 5–9 5–10 5–11 5–11 5–12 5–12 5–12 5–13 5–13 6–1 6–1 6–2 6–2 6–3 6–5 7–1 7–1 7–1 7–1 7–2 7–2 8–1 8–1 8–2 8–3

Western States Engineering Tucson, Arizona

8.2.1 Deposits on Private Land .......................................................... 8.2.2 Deposits on Federal Land ......................................................... 8.2.3 Processing Facilities ................................................................. 8.2.4 Support Facilities ...................................................................... 8.3 Other Environmental Considerations ...................................................... 8.4 Conclusions ............................................................................................. List of Permits Acquired for the OK Mine Project ..........................................

9.0 Schedule 9.1

9.2

9.3 9.4

9.5

................................................................................................... Introduction ............................................................................................. 9.1.1 Engineering ............................................................................... 9.1.2 Pre-Operation Stage .................................................................. 9.1.3 Pre-Production Stage ................................................................ Basis and Logistics.................................................................................. 9.2.1 Selection Criteria ...................................................................... 9.2.2 Design Criteria .......................................................................... 9.2.3 Supervision ............................................................................... 9.2.4 Legal Criteria ............................................................................ 9.2.5 Safety ........................................................................................ 9.2.6 Environmental........................................................................... Project Schedule ...................................................................................... Construction ............................................................................................ 9.4.1 Conventional Construction ....................................................... 9.4.2 Specialized Construction .......................................................... Commissioning and Start-up ...................................................................

10.0 Capital Cost Estimate .................................................................................. 10.1 Introduction ............................................................................................. Table 10.1 - Capital Cost Estimate Summary ......................................... Table 10.2 - Sustaining Capital Requirements........................................ 10.2 Description of the Estimate ..................................................................... 10.2.1 Equipment Cost......................................................................... 10.2.2 Construction Labor Cost ........................................................... 10.2.3 Site and Earthwork.................................................................... 10.2.4 Concrete & Foundations ........................................................... 10.2.5 Structural Support ..................................................................... 10.2.6 Mechanical................................................................................ 10.2.7 Piping ........................................................................................ 10.2.8 Electrical and Instrumentation .................................................. 10.2.9 Utilities...................................................................................... 10.2.10 Contractor’s Fee........................................................................

iv

8–3 8–4 8–5 8–7 8–7 8–8 8–9 9–1 9–1 9–1 9–1 9–1 9–1 9–1 9–2 9–2 9–2 9–2 9–2 9–2 9–2 9–3 9–3 9–3 10–1 10–1 10–2 10–3 10–3 10–3 10–3 10–4 10–4 10–4 10–4 10–4 10–5 10–5 10–5

Western States Engineering Tucson, Arizona

10.2.11 Engineering ............................................................................... 10.2.12 Contingency .............................................................................. 10.3 Equipment List ........................................................................................ 10.4 Pre/owned/Operated Equipment.............................................................. 10.4.1 Search and Evaluation .............................................................. 10.4.2 Cost Savings ............................................................................. 10.5 Salvage Value.......................................................................................... Salvage Value by Type............................................................................

11.0 Operating Cost .............................................................................................. Table 11.0 - Operating Cost Summary.................................................... Operating Labor ...................................................................................... Maintenance Labor.................................................................................. Administration......................................................................................... Power Cost .............................................................................................. Maintenance Parts & Supplies ................................................................ Operating Supplies .................................................................................. Mining Costs ........................................................................................... Miscellaneous Costs ................................................................................ Operating Costs At Various Sales Prices ................................................ Table 11.13 - $0.80 Copper..................................................................... Table 11.14 - $1.00 Copper .............................................................................. Table 11.15 - $1.05 Copper..................................................................... Table 11.16 - $1.20 Copper..................................................................... 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9

12.0 Marketing ................................................................................................... 12.1 12.2 12.3 12.4 12.5 12.6 12.7

Introduction ............................................................................................. World Copper Production & Consumption............................................. OK Mine Project - General ..................................................................... Cathode Quality....................................................................................... Copper Price ............................................................................................ Distribution Costs.................................................................................... Industry Cost Curves ...............................................................................

13.0 Financial Evaluation .................................................................................... 13.1........................................................................Introduction 13.2 Basic Assumptions .................................................................................. 13.2.1 Project Schedule and Start-up of Production............................ 13.2.2 Production Forecast .................................................................. 13.2.3 Metal Price ................................................................................ 13.2.4 Sales Terms...............................................................................

v

10–5 10–5 10–6 10–7 10–6 10–6 10–7 10–8 11–1 11–2 11–3 11–5 11–7 11–8 11–10 11–11 11–12 11–13 11–15 11–15 11–16 11–17 11–18 12–1 12–1 12–1 12–3 12–3 12–4 12–6 12–6 13–1 13–1 13–1 13–1 13–1 13–1 13–2

Western States Engineering Tucson, Arizona

13.2.5 Royalties ................................................................................... 13.2.5 Markets ..................................................................................... 13.2.6 Distribution Costs ..................................................................... 13.2.7 Escalation Factors ..................................................................... 13.2.8 Operating Costs......................................................................... 13.2.9 Taxes ......................................................................................... 13.2.10 Depreciation/Amortization ....................................................... 13.2.11 Fixed Capital............................................................................. 13.2.12 Additional and Sustaining Capital ............................................ 13.2.13 Working Capital........................................................................ 13.2.14 Salvage Values.......................................................................... 13.2.15 Reclamation .............................................................................. 13.3 Project Economics ................................................................................... 13.3.1 Cash Flow Summary................................................................. 13.3.2 Return On Investment ............................................................... 13.3.3 Net Present Value ..................................................................... 13.3.4 Pay Back ................................................................................... 13.3.5 Cash Cost .................................................................................. 13.4 Sensitivity Analysis................................................................................. Variation In Cash Flow Due To Sales Price............................................ Variation In Cash Flow Due To Operating Cost..................................... Variation In Cash Flow Due To Capital Cost ......................................... Cash Flow Analysis Sheets .....................................................................

13–2 13–2 13–2 13–2 13–2 13–3 13–3 13–3 13–3 13–3 13–3 13–3 13–4 13–4 13–4 13–4 13–4 13–4 13–4 13–5 13–6 13–7 13–8

14.0 Units of Measure...........................................................................................

14–1

Appendices

Volume I

Section 1 Section 2 Section 3

Drawings Equipment List Capital Cost Estimate Details

Appendices

Volume II

Section 4 Section 5 Section 6 Section 7 Section 8

METCON Research, Inc.: OK Mine Project Column Leach Tests Pruitt, Gushee & Bachtell: Due Diligence Review Letter From Rick Havenstrite: Subject: Water Wells Mine Development Associates: Sections 2 & 4 References Miscellaneous Quotations

vi

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 1.0 – Introduction Table of Contents 1.0

Introduction 1.1 1.2 1.3 1.4

1.5 1.6

......................................................... 1–1 General ............................................................... 1–1 Project Location ........................................................... 1–1 Project History .............................................................. 1–1 Land Tenure ............................................................... 1–1 Figure 1.1 - Map Showing Project Location................. 1–2 Figure 1.2 - OK Mine Project Location ........................ 1–3 Project Concept ............................................................. 1–4 Data Sources ............................................................... 1–4

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY Section 2.0 – Geology and Mineral Resources Table of Contents 2.0

Geology and Mineral Resources ........................................ 2–1 2.1 2.2 2.3 2.4

2.5

2.6

Introduction ............................................................... 2–1 Regional Geology ......................................................... 2–1 Figure 2.1 - Site Map .................................................... 2–2 Mineral Deposit Description......................................... 2–3 Database ............................................................... 2–3 2.4.1 General .............................................................. 2–3 2.4.2 Data Source ....................................................... 2–4 2.4.3 Survey, Location and Elevation Control........... 2–7 2.4.4 MDA Independent Sampling ............................ 2–8 2.4.5 Twinned Holes .................................................. 2–11 2.4.6 Specific Gravity ................................................ 2–13 2.4.7 Data Used in Modeling ..................................... 2–14 Mineral Resources......................................................... 2–16 2.5.1 Methodology ..................................................... 2–16 2.5.2 Hidden Treasure ................................................ 2–20 Figure 2.2 - HT Collar Map .............................. 2–21 Figure 2.3 - HT Cross Section........................... 2–22 Figure 2.4 - HT Bench Map .............................. 2–23 Figure 2.5 - HT Model Differences................... 2–25 2.5.3 Maria ............................................................... 2–26 Figure 2.6 - Maria Drill Hole Map.................... 2–27 Figure 2.7 - Maria Cross Section ...................... 2–28 Figure 2.8 - Maria Level Map ........................... 2–29 2.5.4 Copper Ranch.................................................... 2–30 Figure 2.9 - Copper Ranch Drill Hole Map ...... 2–31 Figure 2.10 - Copper Ranch Section ................. 2–32 Figure 2.11 - Copper Ranch Level Map............ 2–33 2.5.5 OK Mine............................................................ 2–34 Figure 2.12 - OK Mine Drill Hole Collars........ 2–36 Figure 2.13 - OK Section .................................. 2–37 Figure 2.14 - OK Level Map............................. 2–38 2.5.6 Stockpiles .......................................................... 2–41 2.5.7 Past Production and Previous Resource Estimates ........................................... 2–42 Qualifications, Risks and Opportunities ....................... 2–43

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 3.0 – Geotechnical and Hydrology Table of Contents 3.0

Geotechnical and Hydrology .............................................. 3–1 3.1 3.2 3.3 3.4 3.5

General ............................................................... Investigation ............................................................... Site Conditions.............................................................. Analysis and Recommendations ................................... Water Resources ...........................................................

3–1 3–1 3–1 3–1 3–1

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 4.0 – Mineable Reserves and Mine Plan Table of Contents 4.0

Mineable Reserves and Mine Plan .................................... 4–1 4.1 4.2

4.3

4.4 4.5 4.6

Methodology ............................................................... 4–2 Ultimate Pits ............................................................... 4–2 Figure 4.1 - OK Mine Ultimate Pit Grade Tonnage Curve .......................................... 4–4 Figure 4.2 - Hidden Treasure Ultimate Pit Grade Tonnage Curve ............................... 4–4 Figure 4.3 - Copper Ranch Ultimate Pit Grade Tonnage Curve .............................. 4–5 Figure 4.4 - Maria Ultimate Pit Grade Tonnage Curve ......................................... 4–5 Pit Designs ............................................................... 4–6 Figure 4.5 - Hidden Treasure and Maria Pit and Dump Design...................................... 4–7 Figure 4.6 - Copper Ranch Pit and Dump Design ........ 4–8 Figure 4.7 - OK Pit and Dump Design.......................... 4–9 Dump Designs............................................................... 4–10 Production Schedule ..................................................... 4–11 Mine Equipment and Costs ........................................... 4–14

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 5.0 – Plant Design Criteria Table of Contents 5.0

Plant Design Criteria ............................................................ 5–1 5.1 5.2

`

Metallurgical Testing ...................................................... 5–1 Design Criteria ............................................................... 5–3 5.2.1 Site Conditions .................................................. 5–3 5.2.2 Ore Characteristics ............................................ 5–3 5.2.3 Crushing ............................................................ 5–3 5.2.4 Heap Construction............................................. 5–4 5.2.5 Solution Handling and Leaching....................... 5–4 5.2.6 Solution Pond & Tank Data .............................. 5–5 5.2.7 Solvent Extraction............................................. 5–5 5.2.8 Piping and Materials - SX Plant........................ 5–7 5.2.9 SX Instrumentation and Controls...................... 5–7 5.2.10 SX Area Lighting .............................................. 5–8 5.2.11 Painting ............................................................. 5–8 5.2.12 Organic Removal - Electrolyte Filters .............. 5–8 5.2.13 Electrolyte Heat Exchangers ............................. 5–9 5.2.14 Tank Capacity Data........................................... 5–9 5.2.15 Electrowinning .................................................. 5–9 Operational Aspects .......................................... 5–9 Cell and Electrode Data .................................... 5–10 Electrolyte ......................................................... 5–11 Electrical System............................................... 5–11 Building............................................................. 5–12 Piping ............................................................... 5–12 Tank Data .......................................................... 5–12 EW Additives .................................................... 5–13 Miscellaneous Facilities .................................... 5–13

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 6.0 – Process Plant Table of Contents 6.0

Process Plant 6.1 6.2 6.3 6.4 6.5

............................................................... Crushing and Agglomeration ........................................ Leach Heaps ............................................................... Heap Irrigation .............................................................. Solvent Extraction......................................................... Electrowinning ..............................................................

6–1 6–1 6–2 6–2 6–3 6–5

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 7.0 – Infrastructure and Utilities Table of Contents 7.0

Infrastructure and Utilities ................................................ 7–1 7.1 7.2 7.3 7.4 7.5

Site Development .......................................................... Maintenance ............................................................... Administration .............................................................. Site Access ............................................................... Power and Other Utilities/Services ...............................

7–1 7–1 7–1 7–2 7–2

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 8.0 – Environmental Table of Contents 8.0

Environmental

............................................................... Required Authorizations ............................................... List of Permits Required for the OK Mine Project ....... Permit Requirements 8–3 8.2.1 Deposits on Private Land .................................. 8.2.2 Deposits on Federal Land.................................. 8.2.3 Processing Facilities.......................................... 8.2.4 Support Facilities .............................................. 8.3 Other Environmental Considerations............................ 8.4 Conclusions ............................................................... List of Permits Acquired for the OK Mine Project....... 8.1

8–1 8–1 8–2 8.2

Specific

8–3 8–4 8–5 8–7 8–7 8–8 8–9

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 9.0 – Schedule Table of Contents 9.0

Schedule 9.1

9.2

9.3 9.4

9.5

............................................................... Introduction ............................................................... 9.1.1 Engineering ....................................................... 9.1.2 Pre-Operation Stage .......................................... 9.1.3 Pre-Production Stage......................................... Basis and Logistics........................................................ 9.2.1 Selection Criteria............................................... 9.2.2 Design Criteria .................................................. 9.2.3 Supervision........................................................ 9.2.4 Legal Criteria .................................................... 9.2.5 Safety ............................................................... 9.2.6 Environmental ................................................... Project Schedule............................................................ Construction ............................................................... 9.4.1 Conventional Construction................................ 9.4.2 Specialized Construction................................... Commissioning and Start-up.........................................

9–1 9–1 9–1 9–1 9–1 9–1 9–1 9–2 9–2 9–2 9–2 9–2 9–2 9–2 9–3 9–3 9–3

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY Section 10.0 – Capital Cost Table of Contents 10.0

Capital Cost Estimate .......................................................... 10–1 10.1

10.2

10.3 10.4

10.5

Introduction................................................................... 10–1 Table 10.1 - Capital Cost Estimate Summary............... 10–2 Table 10.2 - Sustaining Capital Requirements.............. 10–3 Description of the Estimate........................................... 10–3 10.2.1 Equipment Cost ........................................... 10–3 10.2.2 Construction Labor Cost ............................. 10–3 10.2.3 Site and Earthwork ...................................... 10–4 10.2.4 Concrete & Foundations.............................. 10–4 10.2.5 Structural Support........................................ 10–4 10.2.6 Mechanical .................................................. 10–4 10.2.7 Piping........................................................... 10–4 10.2.8 Electrical and Instrumentation .................... 10–5 10.2.9 Utilities ........................................................ 10–5 10.2.10 Contractor’s Fee .......................................... 10–5 10.2.11 Engineering ................................................. 10–5 10.2.12 Contingency................................................. 10–5 Equipment List .............................................................. 10–6 Pre/owned/Operated Equipment ................................... 10–6 10.4.1 Search and Evaluation ................................. 10–6 10.4.2 Cost Savings ................................................ 10–6 Salvage Value ............................................................... 10–7 Salvage Value by Type ................................................. 10–8

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 11.0 – Operating Cost Table of Contents 11.0

Operating Cost ..................................................................... 11–1

Table 11.0 - Operating Cost Summary ......................... 11–2 Operating Labor ............................................................ 11–3 Maintenance Labor ....................................................... 11–5 Administration .............................................................. 11–7 Power Cost .................................................................... 11–8 Maintenance Parts & Supplies ...................................... 11–10 Operating Supplies........................................................ 11–11 Mining Costs ................................................................. 11–12 Miscellaneous Costs...................................................... 11–13 Operating Costs At Various Sales Prices...................... 11–15 Table 11.13 - $0.80 Copper .......................................... 11–15 11.14 - $1.00 Copper ........................................................... 11–16 Table 11.15 - $1.05 Copper .......................................... 11–17 Table 11.16 - $1.20 Copper .......................................... 11–18 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9

Table

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 12.0 – Marketing Table of Contents 12.0

Marketing 12.1 12.2 12.3 12.4 12.5 12.6 12.7

................................................................... 12–1 Introduction................................................................... 12–1 World Copper Production & Consumption .................. 12–1 OK Mine Project - General ........................................... 12–3 Cathode Quality ............................................................ 12–3 Copper Price.................................................................. 12–4 Distribution Costs ......................................................... 12–6 Industry Cost Curves..................................................... 12–6

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY Section 13.0 – Financial Evaluation Table of Contents 13.0

Financial Evaluation ............................................................ 13–1 13.1 13.2

13.3

13.4

Introduction................................................................... 13–1 Basic Assumptions ........................................................ 13–1 13.2.1 Project Schedule and Start-up of Production................................ 13–1 13.2.2 Production Forecast ................................... 13–1 13.2.3 Metal Price................................................. 13–1 13.2.4 Sales Terms................................................ 13–2 13.2.5 Royalties .................................................... 13–2 13.2.6 Markets ...................................................... 13–2 13.2.7 Distribution Costs ...................................... 13–2 13.2.8 Escalation Factors...................................... 13–2 13.2.9 Operating Costs ......................................... 13–2 13.2.10 Taxes.......................................................... 13–3 13.2.11 Depreciation/Amortization ........................ 13–3 13.2.12 Fixed Capital.............................................. 13–3 13.2.13 Additional and Sustaining Capital ............. 13–3 13.2.14 Working Capital......................................... 13–3 13.2.15 Salvage Values........................................... 13–3 13.2.16 Reclamation ............................................... 13–3 Project Economics......................................................... 13–4 13.3.1 Cash Flow Summary.................................. 13–4 13.3.2 Return On Investment................................ 13–4 13.3.3 Net Present Value ...................................... 13–4 13.3.4 Pay Back .................................................... 13–4 13.3.5 Cash Cost ................................................... 13–4 Sensitivity Analysis....................................................... 13–4 Variation In Cash Flow Due To Sales Price ................. 13–5 Variation In Cash Flow Due To Operating Cost........... 13–6 Variation In Cash Flow Due To Capital Cost ............... 13–7 Cash Flow Analysis Sheets ........................................... 13–8 Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Section 14.0 – Units of Measure Table of Contents 14.0

Units of Measure

....................................................... 14–1

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Appendix - Section 1

Drawings

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Appendix - Section 2

Equipment List

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Appendix - Section 3

Capital Cost Estimate Details

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Appendix - Section 4

Metallurgical Study Locked Cycle Column Leach By METCON Research Inc.

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Appendix - Section 5

Due Diligence Review By Brad Hays Pruitt, Gushee & Bachtell

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Appendix - Section 6

Letter From Rick Havenstrite Subject: Water Wells

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Appendix - Section 7

Sections 2 & 4 References Mine Development Associates

Western States Engineering Tucson, Arizona

NEVADA STAR – OK MINE PROJECT FEASIBILITY STUDY

Appendix - Section 8 Miscellaneous Quotations

Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Appendix I Drawing List

OVERALL SITE/GENERAL DRAWING NO. 00-GA-00 00-C-O0 00-GA-0l 00-GA-02 00-GA-03 00-GA-04 00-GA-05 00-CN-01 00-CN-02 00-S-0l 00-S-02 00-S-03 00-S-04 00-E-0l

DESCRIPTION

COVER SHEET OVERALL SITE PLAN PROCESS PLANT SITE PLAN CRUSHING & SCREENING SITE PLAN PROCESS PLANT SITE, SECTIONS OVERALL SITE PLAN, UTILITIES PROCESS PLANT SITE PLAN, UTILITIES CONCRETE, GENERAL CRITERIA NOTES, SYMBOLS CONCRETE, STANDARD STEEL SECTIONS, DETAILS STRUCTURAL, STANDARD STAIR DETAILS STRUCTURAL, STANDARD HANDRAIL DETAILS STRUCTURAL STANDARD LADDER DETAILS STRUCTURAL, STANDARD STEEL DETAILS OVERALL SITE, ONE-LINE DIAGRAM

AREA 10 CRUSHING/SCREENING/AGGLOMERATION 10-FS-01 l0-GA-0l 10-GA-02 10-CN-01 10-E-0l 10-PI-0l

FLOWSHEET GENERAL ARRANGEMENT, PLAN GENERAL ARRANGEMENT, SECTIONS CONCRETE, FOUNDATION PLAN ELECTRICAL, ONE-LINE DIAGRAM P & ID

AREA 20 LEACH PAD 20-FS-0l 20-GA-01 20-GA-02 20-GA-03 20-GA-04 20-GA-05 20-GA-06 20-E-0l 20-PI-0l

FLOWSHEET LEACH, PLAN & SECTIONS, END OF MINING TOPOGRAPHY HEAP LEACH PAD, PLAN, SECTIONS AND DETAILS SOLUTION PONDS, PLAN, SECTIONS AND DETAILS SOLUTION COLLECTION/LEAK DETECTION, PLANS MISCELLANEOUS DETAILS HW LEACH, IRRIGATION PLAN ELECTRICAL, ONE-LINE DIAGRAM P & ID

ΑΠΠ−Ι − 1

Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Appendix I Drawing List

AREA 30 SOLVENT EXTRACTION DRAWING NO. 30-FS-0l 30-GA-01 30-GA-02 30-CN-01 30-S-01 30-E-01 30-PI-01 30-PI-02

DESCRIPTION

FLOWSHEET GENERAL ARRANGEMENT, PLAN GENERAL ARRANGEMENT, SECTIONS CONCRETE, FOUNDATION PLAN STRUCTURAL, PLAN ELECTRICAL, ONE-LINE DIAGRAM SOLVENT EXTRACTION P & ID TANK FARM & ACID STORAGE P & ID

AREA 40 ELECTROWINNING 40-FS-01 40-GA-01 40-GA-02 40-GA-03 40-M-01 40-M-02 40-CN-01 40-CN-02 40-S-01 40-E-01 40-PI-01

FLOWSHEET GENERAL ARRANGEMENT, PLAN GENERAL ARRANGEMENT, SECTIONS GENERAL ARRANGEMENT, SECTIONS MECHANICAL, WASH TANK DETAILS MECHANICAL, CATHODE & ANODE DETAIL CONCRETE, PLAN CONCRETE, CELL DETAILS STRUCTURAL, PLAN ELECTRICAL, ONE-LINE DIAGRAM P & ID

AREA 50 TANK FARM 50-GA-01 50-GA-02 50-GA-03 50-GA-04 50-E-01

GENERAL ARRANGEMENT, PLAN GENERAL ARRANGEMENT, SECTIONS GA, CRUSHING/ACID UNLOADING, PLAN & SECTIONS GA, ACID/KEROSENE UNLOADING, PLAN & SECTIONS ELECTRICAL, ONE-LINE DIAGRAM

AREA 60 UTILITIES 60-FS-01 60-GA-01 60-GA-02 60-E-01 60-PI-0l

FLOWSHEET GA, WELL PUMP STATION, PLAN & SECTIONS WAREHOUSE/MAINTENANCE PLAN & SECTIONS ELECTRICAL, ONE-LINE DIAGRAM P & ID

ΑΠΠ−Ι − 2

Western States Engineering Tucson, Arizona

Domestic Production and Use: Domestic mine production in 1997 was essentially unchanged at 1.9 million metric tons valued at about $4.6 billion. The five principal mining States, in descending order, Arizona, Utah, New Mexico, Nevada, and Montana, accounted for 98% of domestic production; copper was also recovered at mines in six other States. While copper was recovered at about 35 mines operating in the United States, 15 mines accounted for about 97% of production. Seven primary and 4 secondary smelters, 7 electrolytic and 6 fire refineries, and 15 solvent extraction-electrowinning facilities were operating at yearend. Refined copper and direct melt scrap were consumed at about 35 brass mills; 15 rod mills; and 600 foundries, chemical plants, and miscellaneous consumers. Copper and copper alloy products were consumed ' in building construction, 43%; electric and electronic products, 24%; industrial machinery and equipment, 12%; transportation equipment,12%; and consurner and general products, 9%

Recycling: Old scrap, converted to refined metal and alloys, provided 420,000 tons of copper, equivalent to 15% of apparent consumption. Purchased new scrap, derived from copper fabricating operations, yielded 930,000 tons of contained copper; 80% of the copper contained in new scrap was consumed at brass mills. Of the total copper recovered from scrap, copper smelters and refiners recovered 28%; ingot makers, 9%; brass mills, 58%; and miscellaneous manufacturers, foundries, and chemical plants, 5%. Copper in all old and new, refined or remelted scrap comprised 36% of U.S. copper supply.

COPPER Events, Trends. and Issues: World mine production of copper rose significantly for the third consecutive year, increasing by about 3% in 1997. Most of the increase in production came from Chile, where an estimated 300,000 tons of new capacity came on-stream. In the United States, mine production and capacity were essentially unchanged. Increased production from a major new mine in Nevada, which began production in 1996, and a new solvent-extractio electrowinning (SX-EV\~ operation in Arizona, was offset by closure of two smaller mines in Arizona during 1996, and depletion of ore at a third mine in Wisconsin in 1997. Production also declined at several SX-EWoperations where mining of leach ore was curtailed and production limited to existing heaps. Though domestic production of refined copper was projected to rise about 3% for the year, it remained well below capacity owing to a shortage of anode copper during the first half of the year. The smelter in Utah, which had been plagued by problems since commissioning in 1995, was closed for 6 weeks for replacement of anode casting equipment. Copper supply remained tight for the first 6 months of 1997 and prices trended upward, the U.S. producer price averaging almost $1.16 per pound. However, in July, commodity exchange inventories began to rise and prices declined. By the end of September, exchange inventories had more than doubled from year end 1996 levels and the U.S. producer price had fallen to below $1.00 per pound. In response to the rising copper price, recovery of copper from both old and new scrap increased during the first half of the year, but then fell in the second half as the price fell and a secondary smelter in Pennsylvania closed.

Consumption of refined copper in the United States was projected to rise about 4% in 1997 owing to strong demand for wire mill products. At least one major wire rod producer reported operating above design capacity during 1997, despite having expanded capacity during 1996. Worldwide, the current surplus of refined copper is projected to increase in 1998, as world mine capacity is expected to increase about 900,000 tons in that year. World Resources: Land-based resources are estimated at 1.6 billion tons of copper, and resources in deep-sea nodules are estimated at 0.7 billion tons. LONDON - Further indications of the pressure on copper producers have emerged with the publication of the latest figures from the International Copper Study Group. These show total global refined production grew 7,1% last year, creating a refined metal surplus of 364 000 tons compared with 9 000 tons in 1996. The price for three-month copper on the London Metal Exchange (LME) hit a high the week before last of $1 816 a ton - the average cash price on the London Metal Exchange in January was $1 688 a ton - but this masks an otherwise steady decline in prices since August. At the same time, stocks on the world's two leading base metal exchanges, Comex in New York and the LME, have risen steadily to more than 477 000 tons at the end of February, almost three times their level last year. Most analysts are abiding by their long-held view that cash copper prices need to retreat to about $1 540 a ton and hold that level for a year or so. This would induce the scale of capacity closure needed to bring about a reversal of the market's bearish fimdamentals. Analysts estimate that new projects and expansions mean world copper production capacity is set to grow by 3,1-million tons a year over the next three years, while planned closures will reduce output hy 800 000 tons a year. Broken Hill Proprietary's decision to cut 70 000 tons a year at its Pinto Valley mine in Arizona is the most notable recent example of mothballing, but some analysts argue that at least another 500 000 tons need to be cut to see sustainable price recovery SOURCE: Some of the world's largest copper producers include Chile, Peru and the United States. About 80 percent of all copper mined today is derived from low-grade ores containing 2 percent or less of the element. Half of the world's copper deposits are in the form of chalcopyrite ore. All important copper-bearing ores fall into two main classes: oxidized ores and sulfide ores. Sulfide ores are more important commercially. Ores are removed either by open-pit or by underground mining. Ores containing as little as 0.4-percent copper can be mined profitably in open-pit mining, but underground mining is profitable only if an ore contains at least 0.7-percent copperO REVIEW: Recoverable copper mine production m the United States rose more than 3 percent to 1,910,000 metric tons in 1996. Refined production rose by about 60,000 tons, or 3 percent to 2,340,000 tons, despite a decline in secondary refined production, according to the Office of Minerals Information of the U.S. Geological Survey. Primary refined production rose about 5 percent to 2,010,000 tons due to increases in electrowon production and a near doubling in production from imported material, the USGS said.

Consumption of refined copper rose about 4 percent to 2,630,000 tons, according to the USGS. With supplies of copper scrap tight throughout the year, consumption of refined copper as a percentage of total feed material at brass mills rose by about 10 percent to 586,000 tons while consumption at wire rod mills rose approximately 2 percent to 1,980,000 tons, according to the USGS. At the beginning of 1996, analysts and traders pointed to rising London Metal Exchange copper inventories as a harbinger of fundamental market weakness. A long-predicted surplus would swamp the market and cause prices to fall sharply, they said. But few could have predicted the havoc that would erupt in the red metal's market, the result of a single copper trader's alleged activities. 1996 was a topsy-turvy year for copper, in which the one thing market players could be assured of was the red metal's volatility. The market was stunned when prices plummeted on the back of the $2.6-billion Sumitomo Corp. trading debacle, but then rebounded, albeit not to levels before the Sumitomo tsunami. A 10-day strike at state-owned Codelco-Chile's Chuquicamata facility--the world's largest open-pit coppermine--a one-day walkout at Salt Lake City-based Kennecott Corp.'s Bingham Canyon copper operation and continued uncertainty at Phoenix-based Phelps Dodge Corp.'s Chino copper mine in Silver City, N.M., were among the events that kept the market on its toes. About 7,000 miners at Codelco s Chuquicamata mine went on strike in April, eventually pushing the Comex July copper contract to $ 1.25 a pound May 3--a seven-month high. But the 10-day strike turned out to be too short-lived to affect supply. It would not take long for the market's attention to refocus on the activities of Japan's most active copper trader, Yasuo Hamanaka of Sumitomo. Reports surfaced around May 22 that Hamanaka had given up day-to-day trading and would focus on large-scale projects. A copper windstorm, whipped up by rumors surrounding Hamanaka's transfer, crushed prices and caused massive market hemorrhaging June 6, known as "Red Thursday." Panic selling began in earnest in early to mid-June, triggered by news that Hamanaka was dismissed for allegedly losing $1.8 billion in unauthorized trading over 10 years, later revised to $2.6 billion in losses. The Hamanaka affair prompted regulatory investigations by Britain's Securities and Investments Board, the U.S. Commodity Futures Trading Commission, the LME and the U.K. Securities and Futures Authority. The Japanese Prosecutors Office formally indicted Hamanaka in November on four counts of forgery allegedly committed in 1993 and 1994. 1996 also was marked by the announcements of numerous new copper mine projects, expansions of existing mines, smelter upgrades and solvent-extraction/electrowinning plants. MIM Holdings Ltd., Brisbane, Australia, said it would build a new copper mine at Mount Isa and expand the copper smelter there over three years in an Australian $500-million ($400-million) program. Southern Peru Copper Corp., New York, gave the green light to a $245-million expansion for its Cuajone copper mine and to modernize and increase capacity of the Ilo smelter in Peru. Toronto-based Rio Algom Ltd.'s two new mining proJects, the Bajo de la Alumbrera Mine in Argentina and the Autamina Mine in Peru, are expected to be significant contributors to the company's anticipated increase in copper production. Rio Algom said it also would expand its Cerro Colorado copper mine in northern Chile by 65 percent. The $ 198-million expansion, expected to be completed by mid-1998, will increase the mine's annual production to 220 million pounds from 130 million pounds. On Dec. 11, Westmin Resources Ltd. and Gibraltar Mines Ltd. approved the construction start on the $249-million Lomas Bayas oxide copper project in northern Chile. PRICES: The average U.S. producer price for the year declined by about 29 cents a pound from the record-high levels of 1995, according to the USGS. The London Metal Exchange cash copper price fell to around 82 cents a pound in June on the back of the Sumitomo debacle but by late November had climbed back to hit $ 1.16 a pound. Despite industry expectations of a supply surplus, the long-anticipated tidal wave of red metal did not materialize in 1996. Still, the market remained wary of rumors ahout unreported stocks as well as the uncertainty of Sumitomo's market position. --AARON WARD AMMReporter

COPPER IN JUNE 1998 Average daily mine production in June was essentially unchanged from that of May. Smelter production plummeted to the lowest level in more than a year, as maintenance shutdowns at three primary smelters led to lower primary production. Primary refined production also declined sharply owing to the shortfall in primary anode production. Consumption of refined copper in June continued to decline from the record-high level in March, yet remained 10 % above the June 1997 level. At the end of June, Encore Wire Corporation began production at its new wire-rod mill in McKinney, TX. The mill had a design capacity of about 60,000 tons per year of wire-rod. Encore Wire produces commercial, coaxial, thermostat and telecom- munication cable at its wire mill at the same location. As a result of lower refined production in June, inventories of refined copper held at producers and wire-rod mills declined. Inventories of refined copper rose slightly at brass mills owing to a drop-off in consumption and an increased reliance on refined copper as a feed material. The shift of domestic and global inventories into London Metals Exchange Ltd. (LME) warehouses in the Unite d States continued, and by the end of June LME inventories had risen to 202,000 tons (by the end of July they had risen further to 223,000 tons and accounted for 86% of global LME stocks). Mine production for the first half of 1998 was down by more than 4%,42,000 metric tons, from that of the first half of 1997 as a result of production cutbacks at several mines. At the current rate of production, full year production for 1998 is projected to be down by more than 100,000 tons compared with that of 1997. Note that the preliminary production number for full-year 1997 was revised upward to reflect new annual data. Total smelter production for the first half of 1998 was 3% higher than the equivalent period in 1997 as increased production from the Garfield, UT, smelter overshadowed lower secondary smelter production and maintenance shutdowns during the second quarter of the year at other primary smelters. Total refined production during the first 6 months of the year was up by about 4% compared with the first 6 months of 1997 Consumption for the first 6 months of 1998 was up by more than 9% compared with the first 6 months of 1997.

2.2

Design Criteria

2.2.1

Ore Characteristics Dry ore bulk density, lbs/ft3 Average ore grade, % Cu Ore Type Tons ore per day (dry), nominal Moisture Content

95 0.54 4000 4%

Particle Size Inch % passing 16 100 12 95 6 50 4 35 2 21 1 15 2.2.2

Crushing Product Particle Size Inch % passing 3/4 98 Two stage crushing Primary Secondary Operating Schedule On-Steam Factor Feed Rate

Jaw crusher Stedman Impactorl 2 Shifts/Day 5 Days/Week 90% 370 TPH

2.2.3 Heap Construction Leach pad stacking method Haulage truck capacity - tons Heap building days per week Heap building shifts per day Heap building schedule days per year Heap placement, tons per week, nominal Ore leached, tons per year Head grade to leach pad, % Cu Soluble Copper, % Cu Heap material, bulk density, lbs/ft3 Copper recovery, %

992 Bucket Loader 50 5 2 260 28,000 1.45 million 0.54 89 95 70

Lift height, ft Ultimate heap leach pad area, ft²

2.2.4

10 Pad liner material on clay base

60 mil HDPE

Solution Handling and Leaching Evaporation, % of solution sprayed Flow to heaps, gpm PLS flow, gpm Heap moisture at zero drainage, % Operating Schedule On-Steam Factor Raffinate irrigated area, ft2 Irrigation rate, gpm/ft2 Irrigation type Acid consumption, lbs per ton of ore Acid consumption, lbs per lb Cu Acid supply concentration, % Acid specific gravity Primary leach cycle, days Ditch liner material Raffinate return and PLS piping Pump manifolds Piping joints Pumps PLS and raffinate, stainless steel Typical PLS analysis, g/L Cu H2S04 Total Fe Fe+3 Si (as Si02) Al Mg Max solids, ppm pH Typical raffinate analysis, g/L Cu H2SO4 Total Fe Fe+3 Si (as Si02) Solids, ppm

8 2000 1770 5 3 Shifts/Day 7 Days/Week 97% 500,000 0.004 Senninger wobblers @ 40' 50 7 93 1.8 90 60 mil HDPE HDPE Stainless steel HDPE - butt fused, stainless steel welded and flanged. End suction centrifugal 1 operating, 1 installed standby for

1.5 2.0 3-5 0.5 ≤ 1.0 ≤ 4.0 ≤ 4.0 20 1.5 0.09 3-7 3-5 0.5 ≤ 1.0 10 ppm

pH Raffinate temperature, °F

1.7-1.9 70

2.2.5 Solution Pond & Tank Data Ponds are earth reservoirs with primary HDPE liner (60 mil thickness) and secondary HDPE liner (60 mil) with geonet layer sandwiched between. Leak detection monitoring provided by a collection sump. Pond Capacities PLS Pond 7,400,000 gal. Raffinate Pond

1,000,000 gal.

Electrolyte solution tankage located at the solvent extraction plant is situated to allow flow by gravity to the appropriate vessel. The electrolyte and organic holding tanks to be 316 S.S. lined. The tankage area is curbed. Major spills report to the raffinate pond. 2.2.6 Solvent Extraction Operational Data Feed rate, gpm Annual overall plant availability, % Plant operating schedule, overall Personnel operating schedule

1785 97 24 hrs/day, 7 days/week 3 x 8 hr shift/day

Organic Phase Extractant Characteristics: Name Acorga M5640 or Henkel LIX 984 Generic type Specific gravity Viscosity at 15°C, cP Volume % Copper/iron transfer ratio

Salicylaldoxime 0.91 - 0.97 200 7.0 500:1

Diluent characteristics: Type Specific gravity Viscosity at 15°C, cP

Kerosene - 170 ES 0.8 1.5

Aromatics, Maximum % Volume Percent

8 92.2%

Organic entrainment in raffinate, ppm Organic entrainment in strong electrolyte, ppm Aqueous entrainment, ppm Organic entrainment recovery Allowance for diluent evaporation Crud removal system

100 50 300 50% from raffinate pond, 90% from media filter 10 % of entrainment losses Portable crud pump

Plant Configuration O/A Mix ratio Extraction Strip Overall recovery, % Number of stages Extraction Strip Organic surge system Addition point of spent electrolyte Number of mixer boxes per Extraction Strip Impellers Primary Secondary Mixer retention times Extraction Strip Settler rating, gpm/ft2 total flow Extraction Stripping Organic depth, in Aqueous depth, in

1:1 1:1 97 2 1 Loaded organic tank Mixer box 2 2 Radial blade pump mix type Radial blade axial flow turbine 45 sec pump, 90 sec aux. 45 sec pump, 90 sec aux. 1.6 1.2 10 18

2.2.8 Piping and Materials - SX Plant In plant process piping: Piping joints:

Pumps: Mixer Settlers: Settler

Main process lines to be HDPE. Pump manifolds to be stainless steel. HDPE-butt-fused. Stainless steelflanged. Gaskets nitrile (Buna N) rubber. Stainless steel wetted parts. FRP or 316 S.S. lined concrete/steel structure, weir boxes - stainless steel.

Picket fences Mixers Impellers Settler Roofs

Stainless steel or FRP. FRP or Stainless steel lined concrete. Stainless steel FRP sheeting.

2.2.9 SX Instrumentation and Controls Instrumentation is selected for safe reliable plant operation in accordance with national and international standards and codes of practice. Materials of construction of in-line process instruments are, as a minimum, in accordance with the piping material specification. Pressure is indicated locally by gauges and remotely by transmitters. Flow is measured by orifice plate, magnetic flow meters, and differential pressure transmitter. Level is monitored by ultrasonic/transmitters for alarm and indication. Electronic signals to transducer/pneumatic actuators are used for all remote instrumentation and controls. Remote instrumentation will be located in a free standing control console which will house controllers, motor start/stop and status, remote instrumentation and annunciation. A PLC based system could be designed to include data collection for trending and report generation and a screen for graphic flow sheet and motor status representation. This panel would be located in a central control room with viewing of both SX and EW operations. This control station will combine solvent extraction, electrowinning, leaching, and solution handling. A single audible alarm together with indicating lamps warns of liquid level excursions beyond preset limits and of packaged equipment malfunction. The PLC based system will be considered only if requested by NSRC. Motor control will be by push button. These will indicate motor status as isolated, "stopped" or "running". All drives will have local stop/start stations and safety disconnect switches. 2.2.10 SX Area Lighting Levels recommended by WSE are: Pump/tank areas Impeller drive areas Weir box areas Passageways & ladders General area

20 ft candles 20 ft candles 20 ft candles 15 ft candles 2 ft candles

2.2.11 Painting All carbon steel surfaces which can be wetted by organic or electrolyte solutions are to use an SP-10 blast and a polyamide epoxy paint system.

2.2.12 Organic Removal - Electrolyte Filters Type: Duty:

No. of Units: Backwash medium: Backwash initiation Materials: Shell Internals Blowers Stainless steel Backwash pump External piping Valves

Dual media garnet/anthracite pressure sand filters Removal of 85% of suspended solids larger than 10 microns and up to 90 ppm of organic entrainment. 2 Plant water Operator initiated

Stainless steel Stainless steel Stainless steel HDPE/stainless steel Stainless steel body with Buna N or PTFE seats

2.2.13 Electrolyte Interchangers Heat exchanger type Materials: Plates and bolts Gaskets Frame

Plate, frame and immersion heater Stainless steel Viton or Buna N Carbon steel

2.2.14 Tank Capacity Data Loaded Organic Tank, min Filter Feed Tank, min Holding tank philosophy Materials: Loaded organic Electrolyte tanks SX Sump/Holding Tank

20 230 Contents of one settler to be accommodated in low cost tank. 316 S.S. lined steel 316 S.S. lined steel 316 S.S. lined steel

2.2.15 Electrowinning Operational Aspects Plant deposition tons per day Annual overall plant availability, % Operating Schedule

15 97 3 Shifts/Day 7 Days/Week

Cell and Electrode Data Electrolytic process Current density at cell, A/ft2 Current efficiency, percent design: Cathode spacing, in: Final cathode weight, lbs: Cell orientation: Cell construction Cell size (inside) Cathode size:

Cathode cycle, days: No of cells: Cathodes per cell: Anode type: Anode thickness, in.: Anode suspension bar: Anode insulators: Anodes per cell: Mist suppression method: Crane type: Crane capacity, ton: Cathode washing and stripping: Shipping and metallurgical: Shipping method: Cathode sampling: Electrolyte H2SO4 range, g/L: Minimum copper in electrolyte, g/L: Maximum total iron, g/L: Cobalt dosing level, ppm: Tankhouse electrolyte piping material:

Electrowinning deposition onto stainless steel permanent blanks using insoluble lead anodes. 22 90 4.0 97 (per side) Longitudinal axis Perpendicular to crane bridge girders. Pre-cast monolithic box in FRP reinforced polymer concrete 50 inches wide, 56 inches deep, 156 inches long Nominally 39.3 inches (1 meter) by 39.3 inches wetted area with 1 inch overlap on anode, on all edges. 7 depending on current density, cathode weight. 34 36 Solid blade flat surface. Hot cross rolled manufacture. 0.25 Steerhorn, solid copper bar. Polypropylene 37 Two layers of polyethylene beads Overhead Crane with bridge on overhead rail. 5 Cathode washing tank and manual stripping Platform scale with accuracy 2 lb in 2.5 ton load Tractor trailer units Hand held electric drill

Up to 190 32 1.5 (assume all ferric) 100 CPVC, HDPE

Tankhouse piping valves: Tankhouse piping location: No. of cell circulation systems: Circulation system: Cell flow control: Pump type: Pump spares: Maximum cell temperature, °F: Operating cell temperature, °F:

Coated butterfly or diaphragm (cell feed-CPVC ball valves). Principally beneath operating floor 1 Direct to cells from fresh electrolyte sump. Equalized header pressure with individual cell valves for isolation. Horizontal centrifugal All circuits to have online backup. 125 113

Electrical System Rectifier type: Rectifier Size Rectifier Output Voltage Rectifier pulsing: Device cooling: Rectifier control: Bus circuit configuration: Bus bar current rating, amps/in2: Maximum bus bar operating temperature, F Bus bar material: Bus bar protection: Bus bar type: Bus bar location: Cell electrical bypassing: Intercell connection: Material of insulator spacers: Short detection method: Building

Thyristor or silicon diode in N-1 operating arrangement. 1900 KW 82 VDC (2.4 VDC per cell) 12 pulse with phase rotation to reduce harmonics. Air cooled with evaporative room cooler. Current and voltage to be controlled within 1%. Floating null point, non grounded system. 800 190 Copper (100% IACS minimum) Expanded plastic mesh guards Multi-leafed (trunk bus). Single dogbone bar (intercell) Trunk and back bus beneath operating floor and above piping. Jumper frame for 1 or 3 cell spanning Walker multiple with offset single dogbone bar. Injection molded fiber filled polycarbonate "Lexan". IR thermometers

Elevation of operating floor: Operating floor material: Cathode discharge location: Location of cell floor: Cell support protection: Cell shimming/stray current isolation: Floor protection system: Building roofing and siding:

Building girts and purlins: Building ventilation: Building lighting levels, ft candles

At cell top FRP From stripping point to gravity roller conveyor. At or near "basement" floor level. Reinforced PVC drip sheets. PVC plates Slope floor to drain and sump with protective coating. Vinyl coated steel (Steelite or equivalent), Corrugated glass fibre reinforced vinyl ester sheets, & Glass fiber reinforced concrete Siding supports of protective coated steel Exhausted by open sidewalls, 1.5 ft above cell tops, roof ridge vent. 50 at machine areas. 30 over cell areas.

Piping All piping with process fluids in tankhouse to be CPVC. Flow control to be by all plastic ball valves to individual cells and plastic coated butterfly or diaphragm valves on cell feed headers. Tank Data Loaded organic tank, min Lean electrolyte tank, min Electrolyte recirculation tank, min Sulfuric acid off loading tank, days

20 60 30 2-3

EW Additives Anode protection additive (cobalt sulfate) will be supplied in bags and kept in storage area suitable for one month storage, if required. Miscellaneous Facilities Shift laboratory with basic wet analysis glassware and chemicals for shift analysis of copper and acid in existing space.

Feasibility Study Nevada Star Resource Corp.

1.0

Introduction

1.1

General

Section 1.0 Introduction

Western States Engineering (WSE) provides herein a Feasibility Study of a fifteen standard ton per day heap leach/solvent extraction/electrowinning operation to exploit existing oxide copper reserves at OK Mine, Milford District, Utah. The Feasibility Study is based upon WSE Proposal Number 89004, dated January 22, 1998. 1.2

Project Location

The OK Mine property is located in Beaver County in the Milford Mining District in central Utah, approximately halfway between Las Vegas, Nevada and Salt Lake City, Utah. The mine is accessed by 4 miles of paved road west from Milford, Utah and 4 miles of Beaver County maintained graded road to the northwest. Precisely, the mine is located in Sections 5,6, and 7, T27S, R11W of the Salt Lake Baseline and Meridian. In State Plane Coordinates, the center of the project is approximately 666,900 N and 1,533,400 E. Location maps showing the general position in the State and detailed ingress and egress routes are shown in Figures 1.1 and 1.2. 1.3

Project History

The OK mining district was discovered in about 1900. Sporadic underground mining occurred from 1902 until the mid 1950's. In the 1950's and 1960's, several copper companies including Kennecott, explored for a sulfide porphyry copper deposit without success. From 1968 through 1973, several companies mined oxide ore from the OK pit and processed the ore using cementation. 1.4

Land Tenure

Nevada Star Resources Corporation has 714 acres of patented mining claims, 93.5 acres of fee properties, 404 acres of fee leases, 196 unpatented lode mining claims and 5 State of Utah Metalliferous Mineral Leases. For details see the Due Diligence Review prepared by Brad J. Hays which is certified to 8:00 AM, December 12, 1997. A copy of the review is included in the Appendix. Nevada Star has indicated that all properties covered by the due diligence review were transferred to Nevada Star. The transfer of OK Mine and Essex properties took place on June 18, 1998 while the transfer of Hidden Treasure, Maria and Copper Ranch took place on June 21, 1998.

1−1

Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 1.0 Introduction

Figure 1.1 Map Showing Project Location

1−2

Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 1.0 Introduction

Insert Figure 1.2

1−3

Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp. 1.5

Section 1.0 Introduction

Project Concept

Nevada Star's proposed project is to reopen abandoned mines and build a new 30,000 lb/day solvent extraction/electrowinning copper production facility. Concurrent with the design and construction of the new facility, a remediation program will be conducted to assure that a zero discharge operation can be maintained both during and after mining operations have ceased. Open pit mining will be conducted to produce x.x million tons per year of ore and approximately y.y million tons per year of waste rock material; waste to ore ratio .zz:1. The ore containing an average of 0.bb% Cu will be crushed to a size of -3/4" (inches) and placed on a HDPE lined leach heap. The copper bearing ore will be leached with a sulfuric acid solution which extracts the copper and removes it in the liquid aqueous phase (pregnant leach solution, PLS). Through solvent extraction technology the PLS copper concentrate is upgraded to a level required for commercial electrowinning processing. The copper is electrically plated into large sheets (cathodes) of high purity copper ready for shipment direct to market. Estimates of ore reserves allow for a mine life of approximately c.c years in which d.d million pounds of copper metal will be produced. The time required for engineering/construction of the facility from a "Go" decision is approximately 14 months. 1.6

Data Sources

As a basis for their study Western States Engineering (WSE) has utilized the following: -

Mine Development Associates: Ore Reserve Estimate for the OK Mine Project Metcon Research Inc.: OK Mine Project Column Leach Tests Brad J. Hays: Due Diligence Review - OK Mine Property, etc Rick Havenstrite: Letter, Subject - Water Wells Emmons and Associates, Environmental Report

1−4

Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

2.0

Geology and Mineral Resources

2.1

Introduction

Section 2.0 Geology and Mineral Resources

Four separate mineral deposits, Hidden Treasure, Maria, Copper Ranch, and OK Mine, were modeled for this project by Mine Development Associates (MDA). The Hidden Treasure deposit contains about half the recovered copper pounds in this project with another quarter of the total pounds found at the OK Mine deposit. Three existing stockpiles located near the deposits were included in the copper resource. The locations of the deposits and stockpiles are shown in Figure 2.1. 2.2

Regional Geology

Peter Joralemon conducted much of the geologic work and geologic interpretation done in the district in the 1970s. His work culminated in the report Copper Resources of the Rocky District, Beaver County, Utah prepared for the Toledo Mining Company in September 1980. Much of the discussion given below is from this report and is augmented by more recent data compiled by Nevada Star Resources and MDA. The Milford district lies within an east-trending belt of altered granite to diorite intrusive rocks. Mineralization is dated at Cretaceous through late Tertiary and regional controls on mineralization are thought to be deep-seated crustal structures. The area is on the eastern leading edge of the Late Mesozoic to Early Tertiary Sevier thrust system with the mountains comprising the hanging wall of the eastern Mineral Mountains complex. The Mineral Mountains complex consists of thick Paleozoic through mid-Mesozoic carbonate and clastic rocks. Geology of the Milford district is structurally complex, as it has been subjected to compression and later extension from the Mesozoic Period through the Tertiary Period. Oligocene volcanic rocks consisting of andesite flows and pyroclastic rocks were extruded over much of the area, and these rocks were then intruded by a series of Oligocene rocks related to the Mineral Mountain batholith. The southern corner of the project is underlain by a fine- to medium-grained granodiorite stock composed of plagioclase, quartz, and biotite with minor orthoclase, hornblende, and magnetite. There are also small outcrops of quartz monzonite of the Rocky Mountain stock. To the north and northeast of the OK Mine, there are several altered porphyritic dikes which contain abundant magnetite and chalcopyrite within a zone of disseminated and vein-controlled mineralization. Two small outcrops of quartz monzonite occur west of the OK deposit within the volcanic rocks.

2−1

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 2.0 Geology and Mineral Resources

FIGURE 2.1 Site Map

2−2

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp. 2.3

Section 2.0 Geology and Mineral Resources

Mineral Deposit Descriptions

Copper deposits in the Milford district occur as four distinct types: Type 1 copper deposits occur as pipe-shaped deposits entirely contained in silicified quartz monzonite or granodiorite; the best example of this type is the OK deposit. Nearby on trend is the Mary I deposit which is similar though less silicified. Chalcopyrite and bornite occur with minor molybdenite. About 75% of the sulfide minerals have been oxidized to tenorite, chrysocolla, malachite and azurite. Gold and silver are present, but are not economically significant when acid leaching is used to recover the copper. This type 1 deposit is known to occur in the district only at the OK Mine and Mary I deposits. Of the two, only the OK Mine deposit is covered in this report. Type 2 copper deposits occur in bodies of garnet-magnetite skarn adjacent to quartz monzonite. These deposits form tabular zones of different orientations. Deposits of this type include the Hidden Treasure, Maria, and Copper Ranch deposits and are subjects of this report. These deposits are not as large or disseminated as the Type I deposits. Type 3 deposits consist of remobilized copper occurring in sediments, and associated with calcite. Currently the Sunrise deposit is the only known example of this type. The Sunrise deposit is not related to skarn mineralization and is low in magnetite. The Sunrise deposit occurs partly on property controlled by Nevada Star and partly on claims controlled by others, and is not covered in this report. Type 4 deposits, which are currently of no apparent economic importance, are iron deposits consisting of magnetite skarn with minor associated copper. 2.4

Database

2.4.1

General Several mining companies including U.S. Steel, Shasta Coal, Anaconda, Toledo Mining, American Mining, Centurion Mines (now Grand Central Silver Mines), Cortex Mining and Exploration, and Nevada Star Resources have conducted exploration work on the Hidden Treasure, Maria, Copper Ranch, and OK deposits since the 1950’s. Other than the Nevada Star data, MDA has no first-hand knowledge of the quality of the exploration data produced by the above-mentioned companies. Most of the drilling data used for the Hidden Treasure, Maria, and Copper Ranch deposits was derived from the previously mentioned Joralemon report of 1980. Drill logs were not available for the majority of the holes in this report and most of the grade intervals in the report were composited from individual sample assays, which are no longer available.

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An extensive digital database exists for the OK Mine deposit, and surrounding area, which was provided to MDA by Centurion Mines. MDA reviewed the existing data and recommended that Nevada Star initiate a drilling program to verify previous drill data and fill in gaps where necessary. The drilling, conducted during 1998, substantiated much of the pre-existing data and provided a higher level of confidence in the database. MDA’s willingness to rely on the project database is supported by both the 1998 drilling results and the fact that portions of the OK Mine, Hidden Treasure, and Maria deposits were mined in the past and reported production from the properties matches the resources predicted using the database reasonably well. This subject is covered in more detail in the specific deposit modeling sections of this report. 2.4.2

Data Sources Data used in grade estimation came from four sources; Nevada Star’s drilling program conducted in 1998, Centurion Mine’s (now Grand Central Silver Mines) historic database for the OK Mine, Cortex Mining and Exploration’s drilling from 1995 and 1996, and the 1980 Joralemon report. Nevada Star Drilling The 1998 Nevada Star drilling program consisted of five core holes and 39 reverse circulation (RC) holes divided among the deposits as shown in Table 2.1.

Table 2.1 Nevada Star Drilling

Deposit Hidden Treasure Maria Copper Ranch OK Mine Total

Core Holes RC Holes Footage 2 12 2,770 1 8 1,567 2 18 3,476 0 1 275 5 39 8,088

Holes were designed to check earlier drilling or to fill in gaps in earlier drilling programs. None of the holes had down-hole surveys, but MDA does not believe there is significant deviation in the majority of holes, since they are generally less than 200 ft deep. Only one 2−4

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hole was drilled at the OK Mine because the existing data was deemed to be adequate for modeling. Unfortunately, due to drilling conditions, it was impossible to complete this hole to its original proposed depth. Stuart Havenstrite, consultant for Nevada Star, logged all of the 1998 drill holes. Core was split at the Nevada Star office in Milford, and Chemex Labs, through their Elko, Nevada and Vancouver, B.C. offices performed the assaying. Assay results were provided electronically directly to MDA. Drill logs for each of the holes were provided to MDA by Nevada Star. The core holes were assayed for total copper, acid-soluble copper, and cyanide-soluble copper on the acid soluble residue. This assay method was recommended by KD Engineering and is referred to as “sequential copper assaying”. This method has the advantage of identifying copper minerals that are leachable that do not show up in the oxide copper analysis. RC holes were assayed for total copper only, as a cost savings measure, except for the single hole drilled at the OK Mine, which was assayed for acid-soluble and cyanide-soluble as well as total copper. Centurion Mines Data The Centurion database contains data from several drilling campaigns covering the OK Mine, the Mary I deposit (the Mary I is not considered in this report), and the surrounding area. MDA used holes only in the OK Mine area since only that area was to be modeled. The data was furnished directly from Centurion to MDA in digital format. The data used in modeling is summarized in Table 2.2.

Table 2.2 Centurion Mines Corporation Database

Company Shasta Coal Co Shasta Coal Co Centurion Mines Essex Mining Bear Creek Mining Total

Year Drilled Footage 1959-1960 9,546 1960 2,200 1994-1996 15,812 1971 5,232 1960 331 33,121

Notes Unknown type, assumed core Drilled from Underground Workings Reverse circulation holes Unknown type, assumed core Single Core Hole

Within this database, drill logs and original assay information are available only for the Centurion holes. Logs were not available for the other drilling campaigns. Only total copper

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data was provided for the majority of these other drill campaigns with the exception of some Shasta Coal data that had long intervals of single oxide copper composites. It is not known which of the earlier holes were core and which were drilled using other methods. There were several minor problems in the data received from Centurion. Two holes drilled near the edge of the deposit were listed as being vertical in the database whereas printed sections from Centurion showed them to be angled. A check with printed data confirmed that the holes were angled and the database was corrected. One other hole was either mislabeled or incorrectly located and was not used in modeling. Centurion surveyed the collar locations of their holes and consolidated the older holes into a single coordinate system (state plane). It is not known if or how the earlier holes were surveyed. No down-hole surveys were available but MDA does not believe that down-hole deviations are significant in the majority of holes. Cortex Data Cortex Mining and Exploration drilled a series of holes in the district during 1995 and 1996. These were reportedly reverse circulation holes. Logs were provided by Nevada Star for eight of the holes, of which four were located in the Copper Ranch area and used in modeling that deposit. The assay and geology data was entered directly into the database from the logs by MDA. Joralemon Data The Joralemon data consists of a report written in 1980 by geologist Peter Joralemon. There are no drill logs, individual assays or other “hard” data in the report, although Nevada Star has obtained copies of logs for some of the holes. The data is presented as hand drawn cross sections of each deposit along with surface maps showing drill hole locations and generalized existing pit outlines. No specific source for the drilling data was provided and no coordinate systems were shown. This data set contains data for Hidden Treasure, Maria, and Copper Ranch. The sections show drill hole “ore” intercepts, the approximate pit shape at the time, original topography and the contact between alluvium and “hard rock”. On some cross sections, contacts between skarn and porphyry are drawn. The “ore” intercepts consist of composited total copper assay intervals where the average grade of the assays was 1.00% copper or higher. The lengths of the intercepts vary from a low of five feet to over a hundred feet. The report has no information on grade variability within the intercepts. Copper values outside of these intercepts were generally not shown, although a few sections have some grades less than 1.00% copper. 2−6

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Copies of existing drill hole logs were made available to MDA by Nevada Star. Where the drill logs exist individual assay intervals were generally available and used in preference to data from the plotted sections (the logs include copper grades lower than the 1.00% cutoff Joralemon used in plotting his sections). The average grades and down-hole depths of the cross section “ore” intercepts matched the drill logs in all cases. The drill logs contain geologic information and some have additional trace element assay information. Additionally, the logs from Hidden Treasure had completion dates, which ranged from 1958 to 1963, and were labeled as being core holes. Collar elevations were listed on all of the logs. Unfortunately, collar coordinates on the logs were generally unreadable and provided limited information for locating the holes. The collar maps were digitized as described in the next section to obtain approximate locations and the “ore” intercepts were measured directly from the sections to get the downhole distances and grades. The amount of reliance placed on this data varied between the deposits. See the specific modeling sections for more details. 2.4.3

Survey, Location, and Elevation Control Nevada Aerial Mapping conducted an aerial survey in April 1998 in conjunction with a ground control survey performed a few days earlier. Several section corners, mining claim corners, drill hole collars, and other survey monuments were located in the field and included in the survey, as were the Nevada Star 1998 core drill holes. Nevada Aerial produced digital topography (five-foot contour intervals) that was used as the base for all work on the project. Section corners and other features were added from the ground survey. A digital copy of the property claims and ownership map was provided to MDA by Nevada Star. One of the purposes of the ground survey was to locate as many early drill hole collars as possible in an effort to more accurately locate the Joralomen data and verify the accuracy of the Centurion hole locations. Most of the older drill hole locations at Hidden Treasure, Maria, and the OK Mine have been mined out or buried under dumps and thus cannot be located. Nevertheless it was possible to find several drill locations around the pit perimeters. Additionally, some collar locations near Copper Ranch and the OK Mine had identifying labels on the drill hole caps. Comparisons were made between drill hole locations in the Centurion database and those found in the field. All of the locations found matched very closely with differences less than ten feet. As such the locations of the drill holes in the Centurion database were deemed to be 2−7

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accurate. To locate the Joralemon data, MDA digitized the surface maps using local coordinate systems to obtain relative drill hole locations and their relationships to the pit outlines. The digitized data was then aligned with the current pit outlines and any known surveyed drill hole locations. The locations were then converted to the state plane system used in the aerial survey. This resulted in approximate locations for the drilling listed in the Joralemon report. At Hidden Treasure, several drill hole collars were located (and surveyed) to the west of the pit. These collar locations matched a similar pattern of holes on the Joralomen map. Aligning these holes and the pit outlines was fairly straightforward and did not require any significant rotating or scaling of data. No holes were found in the field that were comparable to the Joralemon map at the Maria deposit. Here only the pit outlines could be used to locate the holes and unfortunately, the Joralemon pit outline and the current outline do not match very well. The holes were located from a best-fit estimation of the two pit outlines. Many drill hole collar locations were found and surveyed at Copper Ranch, largely because there has been no significant mining at the deposit. The Cortex drill holes in the area were identified in the field and accurately located. Nearby holes could then be identified from the Joralemon collar map and a Cortex collar map provided by Nevada Star. Some scaling and rotating of data was required to get most of the locations to match. Unfortunately, it was impossible to get all of the holes, as located by Joralemon, to coincide with surveyed drill hole collars at the Copper Ranch site. It was decided to use scaling and rotational adjustments that resulted in the smallest total discrepancy between known drill hole locations and the Joralemon locations. The 1998 Nevada Star drill holes were all surveyed by Nevada Star except for the one hole drilled at the OK Mine, which was located by a Brunton and tape survey. 2.4.4

MDA Independent Sampling MDA took 79 samples for independent grade verification. Ten samples were taken from core splits remaining from recent drilling, 24 samples were taken from existing stockpiles, and 45 samples were taken from the pit walls. Tables 2.3 and 2.4 give and compare the results. These samples were assayed for total copper, acid-soluble copper, and cyanide-soluble copper on the acid soluble residue. The pit and stockpile samples were taken from the same locations as were the bulk leach test samples that were sent to Metcon Research. MDA feels that Nevada Star’s sampling is valid and fairly represents the material sampled based on comparisons with the independent MDA samples. 2−8

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Table 2.3 Nevada Star 1998 Core Drilling Assay Comparison

Drill hole HT98-1

HT98-2

Interval NS* Cu% MDA Cu% Difference % Difference 26-32 1.25 1.01 0.24 19.2% 60-65 4.89 4.73 0.16 3.3% 85-90 2.07 2.11 -0.04 -1.9% 123-126 3.02 3.28 -0.26 -8.6% 143-148.5 2.63 2.15 0.48 18.3% Average** 2.69 2.53 0.16 5.9%

Length 6.0 5.0 5.0 3.0 5.5 4.9

Interval NS* Cu% MDA Cu% Difference % Difference 43-48 0.9 0.86 0.04 4.4% 83-88 1.79 1.64 0.15 8.4% 123-128 4.44 3.98 0.46 10.4% 145-149.5 3.58 2.97 0.61 17.0% 159-165 2.55 3.49 -0.94 -36.9% Average** 2.67 2.63 0.04 1.4%

Length 5.0 5.0 5.0 5.5 6.0 5.3

*NS = Nevada Star **Length weighted average.

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Table 2.4 MDA Independent Pit and Metallurgical Sampling Results Hidden Treasure Sample id

Description

HT-1

East wall perpendicular to skarn trend

Cu % tot 4.20

HT-2 HT-3 HT-4 HT-5

East wall perpendicular to skarn trend East wall perpendicular to skarn trend East wall perpendicular to skarn trend North wall parallel to skarn trend

0.05 1.62 3.12 2.12

HT-6

North wall in drop-cut, sub-parallel to skarn trend

2.64

HT-7

North wall in drop-cut, sub-parallels to skarn trend

1.29

HT-8

West wall in drop cut, perpendicular to skarn trend

4.12

HT-9 HT-10

South wall in drop-cut, parallel to skarn trend South wall in drop-cut, parallel to skarn trend

1.68 1.93

HT-11 HT-12 HT-13

South wall in drop-cut, parallel to skarn trend South wall in drop-cut, parallel to skarn trend West wall perpendicular to skarn trend

1.99 10.64 3.20

HT-14

West wall perpendicular to skarn trend

Average

2.74 2.95

Maria Sample id M-1

description East wall perpendicular to skarn trend

Cu % tot 1.09

M-2

East wall perpendicular to skarn trend

1.53

M-3 M-4 M-5

Talus pile north wall parallel to skarn trend South wall drop-cut parallel to skarn East wall small drop-cut face perpendicular to skarn trend

1.71 1.83 2.02

M-6

Talus pile north wall parallel to skarn

0.91

M-7 M-8

Talus pile/sub-crop middle skarn Talus pile/sub-crop middle skarn

0.75 0.89

M-9 M-10 M-11 M-12 M-13 M-14 M-15A M-15B Average

South facing bench cut south side, parallel to skarn trend South facing bench cut south side, parallel to skarn trend North facing bench cut south side, parallel to skarn trend North facing bench cut south side, parallel to skarn trend North facing bench cut south side, parallel to skarn trend North facing bench cut south side, parallel to skarn trend West wall perpendicular to skarn trend, north half West wall perpendicular to skarn trend, south half

1.23 0.16 2.37 9.45 1.01 0.46 1.13 1.78 1.77

OK Mine Sample id OK-1 OK-2 OK-3 OK-4 OK-5 OK-6 OK-7 OK-8 OK-9 OK-10 OK-11

description Talus pile from south wall South wall of pit South wall of pit South wall of pit South wall of pit, breccia and structure South wall of pit, breccia and structure South wall of pit, breccia and structure South wall of pit, breccia and structure Berm old in-pit south side access road Berm old in-pit south side access road North wall of pit along cross structure

Cu % tot 3.01 1.76 0.52 0.6 0.6 0.31 0.78 1.04 0.21 0.24 0.1

OK-12 OK-13 OK-14 OK-15 Average

2.4.5

North wall of pit along cross structure North wall of pit along cross structure Sub-crop? in talus, north wall North wall of pit west of old drift

0.36 0.56 6.25 0.47 1.12

Twinned Holes Eight of the 1998 Nevada Star drill holes were drilled close enough to older holes (less than 15 ft apart except at Maria) to warrant comparisons as twinned holes. Four of the pairs are at Hidden Treasure, three at Copper Ranch and one pair is at Maria. Two of the 1998 holes at Hidden Treasure are core, and one of the 1998 holes at Maria is core. Additionally, a 1998 core hole could not be completed at Copper Ranch so an RC hole was drilled in virtually the same location. This last pair provided a comparison of the two drilling methods used in the Nevada Star drilling program. See Table 2.5 for a summary of all these holes. Section view comparisons of the drill holes can be found in Appendix - Section 7. The new holes at Hidden Treasure consistently have thicker mineralized intercepts than the Joralemon data and generally have higher copper grades, when using a 1.00% copper cutoff. The total grade-thickness values were higher for the 1998 drilling. Holes HT98-7RC and EHT-2 are the most different of the Hidden Treasure holes. The new hole indicates 55 ft of mineralization that was not shown in the Joralemon data. It is possible that the old hole had lower-grade copper mineralization, which was not shown. Since the Joralemon data essentially shows only grades greater than 1.00% copper it is possible that the actual mineralized intercepts in the Joralemon holes were longer than shown but contained grades below the 1.00% copper cutoff. A drill hole log exists for Joralemon hole HT-8, which implies that the hole was a core hole (1998 holes HT98-1 and HT98-2 are core, the remainder are RC). Logged rock types were generally similar between the paired holes with skarn intervals being about the same on average (The skarn is typically host to the copper mineralization at Hidden Treasure). MDA believes that the similarity between these drill holes helps substantiate the location and grades of copper mineralization at Hidden Treasure. The twinned holes at Copper Ranch show less similarity than the pairs at Hidden Treasure. The new holes (all RC) show less mineralization than the Joralemon data but with higher copper grades. The Joralemon drilling type is unknown but is assumed to be core as there are no drill logs available for Joralemon holes at Copper Ranch. The new drilling verifies the presence of copper mineralization, but does not correspond in thickness or depth. The twinned 1998 core and RC holes at Copper Ranch are similar enough to show that the RC drilling results are not substantially different from the core drilling results. The two holes at Maria are not close enough to be considered true twin holes. They were included here because they were the closest holes from the two different data sets. The 1998 hole has two separate intercepts of about 25 ft each of copper in the 1.00% range whereas the Joralemon hole has a single intercept of 125 ft. The two holes are dissimilar in this regard,

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which could indicate grade and thickness variability over relatively short distances. The differences

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Table 2.5 Twinned Holes

Old Hole 7 21 15A TOTAL Core Hole CR98-1

Interval Feet 40 30 30 100

Cu Grade-Thickness New Hole % Cu * Ft 1.73 69.0 CR98-5RC 1.45 43.4 CR98-3RC 0.46 13.8 CR9818RC 1.26 126.2 TOTAL

Interval

Cu

Grade-Thickness

Feet 55

% 0.87

Cu * Ft 48.0

Copper Ranch Interval Cu Grade-Thickness Feet % Cu * Ft 5 1.08 5.4 20 1.61 32.3 10 2.48 24.8 35

1.78

62.5

RC Hole

Interval

Cu

Grade-Thickness

CR98-1RC

Feet 55

% 0.91

Cu * Ft 50.1

Cu Difference Cu % -0.65 -60% 0.17 10% 2.02 81%

G-T Difference *Separation G-T % Feet -63.6 -1178% 6 ft -11.1 -34% 9 ft 11.0 44% 10 ft

0.52

-63.7

29%

-102%

Cu Difference

G-T Difference

Cu 0.04

G-T 2.1

% 4%

% 4%

*Separation Feet 1 ft

Hidden Treasure Old Hole HT-8 HT-33 E-76 EHT-2 TOTAL

Interval Feet 120 60 20 0 200

Cu Grade-Thickness New Hole Interval % Cu * Ft Feet 1.52 182.3 HT98-1 155 1.28 76.8 HT98-2 86 1.39 27.8 HT98-10RC 25 0.00 0.0 HT98-7RC 55 1.43 286.9 TOTAL 321

Cu Grade-Thickness % Cu * Ft 2.59 401.3 2.62 225.5 1.10 27.6 1.31 71.8 2.26 726.2

Cu Difference Cu % 1.07 41% 1.34 51% -0.29 -26% 1.31 100% 0.83 37%

G-T Difference G-T % 219.0 55% 148.7 66% -0.2 -1% 71.8 100% 439.3 60%

*Separation Feet 14 ft 11 ft 2 ft 13 ft

Cu Grade-Thickness % Cu * Ft 1.72 84.3

Cu Difference Cu % 0.73 42%

G-T Difference G-T % -39.4 -47%

*Separation Feet 27 ft

Maria Old Hole M-22

Interval Feet 125

Cu Grade-Thickness % Cu * Ft 0.99 123.8

New Hole M98-1**

Interval Feet 49

2 − 13

* Separation is distance between the holes ** Two separate intervals of 24 and 25 ft.

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between the holes could also be related to their positions relative to the edge of the mineralization, the 1998 hole being closer to the edge than the earlier hole. Nevertheless, both holes indicate the presence of significant copper mineralization. MDA’s concern with this deposit is that is has been nearly impossible to locate any early drill hole collar locations in the field, which makes verification difficult. 2.4.6

Specific Gravity Nevada Star conducted specific gravity studies on core samples from the 1998 drilling program and grab samples at the OK Mine, and performed a density test of the alluvium material at Hidden Treasure. Metcon Research also determined density of the bulk samples it received from Nevada Star (See Appendix - Section 7 for a summary). Nevada Star tested both mineralized and unmineralized material from the drill cores, whereas the Metcon tests only apply to the mineralized material. The distinction between mineralized and un-mineralized was a subjective one based on the rock type in the core and the assay values. Nevada Star tested 28 grab samples from the OK Mine, 38 core intervals from two drill holes at Copper Ranch, 41 core intervals from one drill hole at Maria, and 64 core intervals from two core holes at Hidden Treasure. The results of the Nevada Star test work indicate that the tested skarn mineralized material, or “ore”, has an average specific gravity of 3.18 gm/cm3 (10.1 cuft/ton). This value was within the range of Metcon test results. The average specific gravity for un-mineralized skarn material, “waste”, is 2.80 gm/cm3 (tonnage factor of 11.4 cuft/ton). A specific gravity of 2.52 gm/cm3 (tonnage factor of 12.7 cuft/ton) for all material was the result of the testing of OK Mine material. The Alluvium test resulted in a specific gravity of 2.0 gm/cm3 (tonnage factor of 16.1 cuft/ton). MDA believes the test work to be adequate for deposit averages at this stage of development. There is a good possibility that the actual ore densities will vary within the skarn deposits depending on mineralogy and location. The percentage of magnetite in the ore is a significant factor. The other densities are very close to typical values for the respective material types and are therefore considered reasonable. For modeling and reserve purposes, tonnage factors of potential ore (mineralized material) at Hidden Treasure, Maria, and Copper Ranch were set at 10.4 cuft/ton to be slightly conservative. These are the skarn type deposits. Both ore and waste at the OK Mine were assigned a tonnage factor of 13.0 cuft/ton, to allow for fractures and unavoidable sample bias. A waste tonnage factor of 11.5 cuft/ton was used at Maria, because the majority of non2 − 15

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alluvium waste material is anticipated to be a mix of monzonite and skarn. A tonnage factor of 10.4 cuft/ton for waste was used at Copper Ranch, because there was no distinction between mineralized and un-mineralized material in the tests and most non-alluvium waste material is anticipated to be skarn. A tonnage factor of 12.9 cuft/ton was used for waste at Hidden Treasure since most of the non-alluvium waste is anticipated to be monzonite, which typically has a tonnage factor of around 12.9 cuft/ton. 2.4.7

Data Used in Modeling Table 2.6 is a summary of the drilling data at each of the four deposits. Table 2.7 is a summary of the basic statistics of the data used to model each deposit. Table 2.6 Drill Hole Summary Hidden Treasure Drilling Summary Source Number of holes Total Footage Joralemon report without logs 52 10,937 Joralemon report with logs 10 2,831 Nevada Star 1998 drilling 14 2,770 Total 76 16,538 Maria Drilling Summary Source Number of holes Total Footage Joralemon report without logs 55 9,422 Joralemon report with logs 21 2,299 Nevada Star 1998 drilling 9 1,567 Total 85 13,288 Copper Ranch Drilling Summary Source Number of holes Total Footage Joralemon report without logs 29 3,815 Joralemon report with logs 0 0 Cortex holes 5 975 Nevada Star 1998 drilling 20 3,476 Total 54 8,266 OK Mine Drilling Summary Source Number of holes Total Footage Centurion 99 25,834 Nevada Star 1998 drilling 1 275 Total 100 26,109

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Table 2.7 Drill Hole Statistics Hidden Treasure Total Cu Assay Statistics Data set (length weighted) All assays All Assays in mineral zone Nevada Star 1998 drilling in zone Joraleman data in zone

Mean 1.11 1.78 1.42 1.93

Std. Dev 1.21 1.14 1.51 0.89

Min 0.00 0.04 0.04 0.21

Max 8.61 8.61 8.61 5.09

CV* 1.09 0.64 1.06 0.46

Length ft 4397 2657 795 1862

Max 9.88 9.88 9.88 4.19

CV* 1.04 0.65 1.28 0.51

Length ft 3412 2255 451 1804

Max 8.66 8.66 8.66 5.34

CV* 2.05 0.84 1.07 0.72

Length ft 4309 1279 494 785

Max 7.80 7.80

CV* 1.44 1.31

Length ft 31392 26621

Maria Total Cu Assay Statistics Data set (length weighted) All assays All Assays in mineral zone Nevada Star 1998 drilling in zone Joraleman data in zone

Mean 0.88 1.31 0.91 1.41

Std. Dev 0.91 0.85 1.16 0.72

Min 0.00 0.03 0.03 0.20

Copper Ranch Total Cu Assay Statistics Data set (length weighted) All assays All Assays in mineral zone Nevada Star 1998 drilling in zone Joraleman data in zone

Mean 0.42 1.35 1.03 1.55

Std. Dev 0.86 1.13 1.10 1.11

Min 0.00 0.00 0.00 0.08

OK Mine Total Cu Assay Statistics Data set (length weighted) All assays All Assays in mineral zone

Mean 0.43 0.49

Std. Dev 0.62 0.65

2 − 18

Min 0.00 0.00

*CV coefficient of variation (std dev/mean)

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The Hidden Treasure deposit contains nearly half of the mineable copper in the project and has the highest average grade of all the deposits. MDA is reasonably confident with the locations of the Joralemon data as previously described. The pattern of drill holes to the west of the pit matching the Joralemon map significantly increases the confidence level as do the twinned drill holes. The decision was made to use all of the Joralemon Hidden Treasure data and the 1998 Nevada Star drill holes in modeling based on that confidence. The 1998 Nevada Star drilling verified the Joralemon drilling to a large extent at the Maria deposit. Nevertheless, it was impossible for MDA to precisely locate the Joralemon drill holes. MDA used all of the Joralemon data and the 1998 Nevada Star drill data for modeling this deposit, mainly because the mineralized zone held together well when both data sets were used together. MDA used the 1998 Nevada Star drill holes, and four of the 1995-1996 Cortex drill holes to model Copper Ranch. None of the Joralemon holes were used in grade estimation, although they all were used to define the limits of the mineralized volume. The reason behind this decision is that MDA believes that the mineralization at this deposit is more sporadic than the Joralemon data shows, and that using the Joralemon data would overly mask the grade fluctuations. While overall data averages and physical zone boundaries are in line between the data sets the newer drilling has more low-grade intervals in the mineralized zone than do the early drill holes. Additionally, no logs were available for the Joralemon drill holes (logs were available for the Cortex holes). The data set for the OK deposit is extensive and all of the drill holes in the vicinity of the deposit were used except for the single hole mentioned previously. 2.5

Mineral Resources

2.5.1

Methodology Calculation of mineral resources was basically similar for all of the deposits. This section covers the procedures used in estimating resources common to all of the deposits while the following sections discuss those items unique to the specific deposits. All of the estimation and modeling work was performed using Medsystem software. Separate block models were built for each deposit. Grade zones (mineralized zones) were built based on sectional drill hole views and were used to code assays and model blocks.

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Composites were created using the zone boundaries as breaks and then the composites were used to estimate grades inside the appropriate coded blocks. Modeling was based on original surface topography to allow the use of drill hole data that has been mined-out and to provide a method to compare model estimates with past reported production. The 1998 surface topography was used for resource and reserve calculation. Cross sections showing all available drill hole assays and geology were plotted on azimuths roughly perpendicular to the strikes of the deposits. These cross sections were generated at the same locations and orientations as the sections presented in the Joralemon report, or on N-S orientations for the OK deposit corresponding to the Centurion cross sections. Using rock type contacts as guides, copper grade zone boundaries were drawn on each section. As a general rule, these grade zones were coincident with the skarn rock boundaries at the skarn type deposits. For the Joralemon holes the boundaries almost always fell at the top or bottom of the “ore” intervals. For the Nevada Star drill data the boundaries were drawn at the skarn contact, which consistently showed a significant change in copper grades. The OK deposit sections did not show obvious boundaries so population breaks in the assay data were used as guides for the zone boundaries. Once the cross sections were completed the mineralized boundaries were digitized into the Medsystem digital database and used to code the assay data. Three codes were used to identify assays as mineralized rock inside the zone boundaries, alluvium or unmineralized rock outside the boundaries. The assays were then weight-length averaged into composites honoring the zone boundaries. Composite lengths were 10 ft except at the OK deposit where 20 ft composites were made. These lengths were chosen because of the sizes and geometry of the different mineralized zones, the OK deposit being more gradational and disseminated, whereas the other deposits have sharper contacts. Composites were checked for clustering and variography with differing results (described in the specific modeling sections). Solids models were constructed from the cross section mineralized zone lines. The models were then “sliced” into plans on 10 ft benches (20 ft at OK) after which they were plotted along with the composites for validation and verification. Manual editing was required to “clean-up” the sliced lines and make them conform to reasonable interpretations. These final level plan lines were then used to code the model blocks with a zone code and block percentage inside the mineralized zones. Block sizes for the skarn deposits are 10ft x 10ft x 10ft and are 20ft x 20ft x 20ft at the OK deposit. Lastly, grades were estimated for blocks inside the mineralized zones using inverse distance or ordinary kriging methods. Only composites within the mineralized zones were used to

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estimate grades. No grades were estimated in blocks outside the mineralized zones. The amount of Joralemon data used for grade estimation varied by deposit, which is covered in the following sections. Table 2.8 contains the modeling parameters used for each deposit and Table 2.9 is a summary of the resources. See Appendix - Section 7 for model and data histograms. Table 2.8 Modeling Parameters

Composite length ft Block size ft Estimation method Primary search East ft Primary search North ft Primary search Elev ft Minimum samples Maximum samples Max samples from 1 hole

Hidden Treasure Maria Copper Ranch OK Mine 10 10 10 20 10x10x10 10x10x10 10x10x10 20x20x20 id2 id2 id2 Ordinary kriging 70 100 120 250 70 100 120 250 50 50 60 250 2 2 2 2 14 12 14 12 2 2 3 2

Nugget Sill Range ft semi-major distance ft Minor distance ft major direction ft dip plunge

0.0208 0.2049 250 120 120 90 0 0

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Section 2.0 Geology and Mineral Resources Table 2.9 Model Resources

Deposit Hidden Treasure

Measured and Indicated Cutoff Tons (000) Total Cu Cu% in zones Cu% Pounds (000) 0.00% 865 1.78% 30,738 0.40% 856 1.79% 30,662 0.60% 828 1.84% 30,398 1.00% 775 1.90% 29,500

Maria

0.00% 0.40% 0.60% 1.00%

618 614 569 417

1.25% 1.25% 1.31% 1.49%

15,422 15,397 14,937 12,404

Copper Ranch

0.00% 0.40% 0.60% 1.00%

326 322 293 195

1.13% 1.13% 1.20% 1.40%

7,336 7,313 7,010 5,461

OK

0.00% 0.40% 0.60% 1.00%

10,195 1,318 724 268

0.24% 0.75% 0.97% 1.32%

48,936 19,770 14,046 7,075

TOTAL

0.00% 0.40% 0.60% 1.00%

12,004 3,110 2,413 1,655 Inferred Tons (000) in zones 9 25 14 0 48

0.43% 1.18% 1.38% 1.64%

102,432 73,141 66,390 54,440

Cu% 1.78% 1.25% 1.13% 0.24% 1.31%

Total Cu Pounds (000) 312 631 315 0 1,259

Deposit Hidden Treasure Maria Copper Ranch OK TOTAL

Cutoff Cu% 0.00% 0.00% 0.00% 0.00% 0.00%

Measure and Indicated resources consist of those blocks within the mineralized boundaries that are close enough to drill data to receive estimated grades. Blocks within the mineralized

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boundaries that are too far from data to be estimated are classified Inferred. The amount of Inferred material varies by deposit and could presumably be classed as Measured and Indicated with additional drilling. 2.5.2

Hidden Treasure Hidden Treasure drill hole collars, section lines, and down hole deviations are shown in Figure 2.2, along with the surface expression of the mineralized zone. A typical cross section is shown in Figure 2.3. Sections were drawn every 100 ft at azimuths of 20°, which is roughly perpendicular to the strike of the deposit and correspond to the Joralemon sections. The zone boundaries were drawn using a 0.20% copper cutoff or at the skarn rock contact whichever was more appropriate for the specific situation. In some of the western-most RC drill holes, higher-grade copper values were found in the porphyry below the bottom of the skarn. The possibility of down-hole contamination was considered, and to account for this, the zone boundary was drawn at the skarn-porphyry contact rather than lower in the porphyry at the 0.20% grade break. This situation was considered to be minor since it was found only in a few holes in a limited area. The assays were composited into 10-ft intervals honoring breaks at the grade zone boundaries. The composites were checked for the impact of clustering, which was found to be minimal, although the average copper grade decreased slightly. An attempt was made to model variography with limited success. The global variogram yielded a range of around 140 ft, with a low nugget to sill ratio. Obtaining more detailed information met with less success. It was decided therefore to use an inverse distance method (to the second power) to estimate the grades. Search distances were chosen at about half of the variogram range with a vertical search slightly over half of the horizontal distance. This resulted in about 98% of the grade zone being filled with estimated grades. The model compared well with a nearest neighbor (polygonal) model as a check. MDA also checked the model tons and grade that would have been previously mined with reported production from the deposit. The model showed 113,000 tons at a grade of 1.58% copper being mined as opposed to reported production of 110,000 tons at 1.70% copper. Model, composite, and assay statistics are given in Table 2.10. The average number of composites used to estimate a block was five, and the average distance to the nearest composite was 31 ft. MDA believes the model to be a reasonable representation of the drilling data. A level

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plot with model blocks and composites is shown in Figure 2.4. FIGURE 2.2 HT collar map

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FIGURE 2.3 HT cross section

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FIGURE 2.4 HT Bench Map

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Table 2.10 Hidden Treasure Model, Composites, and Assay Statistics

Data set ID2 Model Polygonal Model Composites used in model estimation Assays inside mineralized zone

Mean 1.75 1.74 1.78 1.78

Std. Dev 0.70 0.97 1.05 1.14

Min 0.35 0.05 0.05 0.04

Max 4.60 6.55 6.55 8.61

CV* 0.40 0.56 0.59 0.64

Tons/feet** 979600 979600 2657 2657

*CV coef. of variation (std dev/mean) ** Model tons include material previously mined

The difference in average grades within the mineralized zone for the two drill data sets is a point of concern and needs to be addressed. The size of the mineralized zone is not as much in question as is the grade. The 1998 drilling confirmed both location and volume of the mineralization but the 1998 holes have a lower average grade than the Joralemon data (part of this difference is that the Joralemon data consists of longer composited intervals which have no “internal” low-grade). This is tempered by the comparison of twinned holes in which the 1998 holes have consistently higher grades than the Joralemon holes. In order to check the magnitude of the situation, MDA estimated model grades using only the 1998 drilling (using the same modeling parameters) and compared it with the base model. The estimated tons were about 15% less using only the 1998 data and the grade was lower as well at 1.56% copper (representing a difference of around eight million pounds of copper). A plot was made showing where the two models differ significantly, and is included as Figure 2.5. MDA recommends that the areas shown on the map be drilled to verify tons and grade prior to committing to plant construction and other major investment. A few well-placed drill holes in this case may reduce the risk considerably.

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FIGURE 2.5 HT model differences

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Maria Modeling of the Maria deposit was straightforward and the procedures outlined in section 2.5.1 were closely followed. The drill hole collars, section lines, and surface expression of the mineralized zone is shown in Figure 2.6. Sections were drawn every 70 ft at azimuths of 45°, which correspond to the Joralemon sections and are roughly perpendicular to the strike of the deposit. The zone boundaries were drawn using a 0.20% copper cutoff or at the skarn rock contact whichever was more appropriate for the specific situation. A typical cross section is shown in Figure 2.7. Assays were composited into 10-ft intervals honoring the mineral zone breaks. Declustering the composites did not lower the average copper grade. No patterns or trends were discernable in the variography analysis and inverse distance was chosen as the estimation method. All composites within the zone were used in the estimation. The average number of composites per block in the model is eight with the average distance to the nearest composite being 32 ft. MDA believes the model to be a reasonable estimate of the exploration drilling. A reported 430,000 tons of ore averaging 1.40% copper was mining from this deposit. The model estimation of mined material is 167,000 tons at an average grade of 1.37%. MDA believes that the most likely explanation for this difference is that the Joralemon data underestimated the size of the economic mineralized zone near the surface and that mining operations actually encountered more ore than exploration drilling indicated. This explanation is supported further by the fact that there are not a great deal of Joralemon "ore zone" intercepts in the mined-out area of the deposit, the majority of the drilling encountering the mineralized zone below the existing pit bottom. Model, composite, and assay statistics are in Table 2.11, with a level map in Figure 2.8.

Table 2.11 Maria Model, Composites, and Assay Statistics Data set ID2 Model Polygonal Model Composites used in model estimation Assays inside mineralized zone

Mean 1.27 1.24 1.31 1.31

Std. Dev 0.48 0.72 0.74 0.85

Min 0.22 0.05 0.05 0.03

Max 4.01 4.19 4.19 9.88

CV* 0.38 0.58 0.57 0.65

Tons/feet** 774448 774448 2255 2255

*CV coef. of variation (std dev/mean) ** Model tons include material previously mined

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Maria drill hole map

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Maria cross section

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Maria level map

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Copper Ranch The Copper Ranch deposit was modeled as described above and without much complication. A drill hole collar map showing section lines is given in Figure 2.9, a section is in Figure 2.10, and level map in Figure 2.11. Sections were drawn every 100 feet oriented N-S. While the Joralemon data was not used in grade estimation it was used in the identification of mineralized zone boundaries. Composites were created in the same manner as Hidden Treasure and Maria and again no distinct variography was found. Declustering the composite data actually increased the average copper grade about 10% when using a cell size of 70ft x 70ft x 20ft. The average number of composites per block in the model is four with the average distance to the nearest composite being 41 ft. The model, composite, and assay statistics are given in Table 2.12. Table 2.12 Copper Ranch Model, Composites, and Assay Statistics

Data set ID2 Model Polygonal Model Composites used in model estimation Assays inside mineralized zone

Mean 1.13 1.20 1.01 1.05

Std. Dev 0.38 0.88 0.83 1.14

Min 0.20 0.00 0.00 0.00

Max 2.39 5.34 5.34 8.66

CV* 0.34 0.74 0.82 1.09

Tons/feet** 325676 325676 654 624

*CV coef. of variation (std dev/mean)

Since there has been no production at Copper Ranch the only checks on the model are the polygonal model, assays and composites. It appears to MDA that lower-grade copper samples are actually clustered in the deposit which results in the model copper mean (and declustered composite copper grade mean) being higher than the mean of the copper composites. This is supported by the high average copper grade from the polygonal estimate. Nevertheless, MDA believes that the model represents the exploration data fairly although model smoothing may be masking a more-variable deposit.

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Copper Ranch drill hole map

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FIGURE 2.10

Section 2.0 Geology and Mineral Resources

Copper Ranch Section

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FIGURE 2.11

Section 2.0 Geology and Mineral Resources

Copper Ranch level map

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2.5.5

Section 2.0 Geology and Mineral Resources

OK Mine Grade Model The OK deposit was modeled differently than the other three deposits in that it is geologically different. Three grade zone boundaries were drawn on the sections, low-grade, mid-grade, and high-grade, based on total copper cutoffs of 0.10%, 0.50%, and 1.00%. These were determined from breaks in the copper grade distribution plot. Cross sections were drawn every 50 feet on N-S orientations. The mineralized shape was very continuous and after some analysis it was decided to estimate the deposit using all three zones combined (the drilling density had a major role in this decision). The boundaries between grade zones were more gradational so averaging grades across the boundaries was preferred to a sharp contact (the two higher grade zone boundaries were not used). Assays were averaged into 20-ft composites. Variograms were constructed for each zone and for all the zones combined (see Appendix - Section 7). Spherical models were fit to the variograms and kriging was selected as the preferred modeling method. Table 2.8 summarizes the modeling parameters. Assay, composite, and model statistics are summarized in Table 2.13. Figure 2.12 is a map of the current topography showing drill hole collars, with typical section shown in Figure 2.13. A level map is shown in Figure 2.14.

Table 2.13 OK Mine Model, Composites, and Assay Statistics

Data set Kriged Model Polygonal Model Composites used in model estimation Assays inside mineralized zone

Mean 0.37 0.36 0.49 0.49

Std. Dev 0.43 0.53 0.60 0.65

Min 0.00 0.00 0.00 0.00

Max 3.67 5.23 5.23 7.80

CV* 1.15 1.46 1.22 1.31

Tons/feet** 13467000 13467000 26621 26621

*CV coef. of variation (std dev/mean) ** Model tons include material previously mined

Declustering the composite data resulted in a reduction in the copper mean, which is noticeable in the polygonal model as well. The average number of composites used to estimate a block was 12 and the average distance to the nearest composite was 25 ft. MDA believes the model represents the exploration drilling fairly. A comparison between the model and reported production was made with the model showing 1.6 million tons at an

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average copper grade of 1.25% to have been mined whereas a reported production figure shows 900,000 tons at an average copper grade of 1.25%. MDA believes that the difference is primarily due to differences in the original surface topography resulting in an overestimation of mined tons from the model. (This has no impact on either the resource or reserve since these numbers are based on current topography from the 1998 aerial survey.) Considering this MDA believes the model to be a reasonable representation of the exploration data.

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FIGURE 2.12 OK Mine Drill Hole Collars

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FIGURE 2.13 OK Section

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FIGURE 2.14 OK Level Map

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Recovery Model MDA believes that the oxide/sulfide copper ratio of the OK deposit has a significant impact on copper recovery and therefore project economics. A comparison was made between the bulk sample recovery obtained by Metcon in its leach tests, drill hole oxide assays and check assays taken by MDA. The check assays were taken from the same locations as the bulk test material in the pit while the drill hole oxide assays were limited to those that were within 40 ft of the bulk sampling areas. The Metcon test recovery was 84.9% (including the secondary copper minerals) of the total copper head assay, which was discounted to 80.7% for estimated production plant recovery. The oxide-to-total copper ratio in the drill hole assays in the area was 76.3%, and 84.0% in the MDA pit samples. Plots were made of elevation and oxide-to-total copper ratios in the assay database. See Figure 2.15. A definite pattern emerged with oxide-to-total copper ratios decreasing with depth and with distance horizontally from the high-grade oxide core of the deposit. (The

majority of this high-grade oxide core has already been mined.)

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An oxide/total copper ratio model was built to better understand and visualize the changes in this ratio. Enough oxide copper assays exist in the database to build a reasonable model of the oxide-total copper ratio. There are not enough cyanide soluble copper assays to model a cyanide soluble ratio. MDA built a simple polygonal or nearest neighbor model of the oxide-to-total copper ratio. The model values were then multiplied by a factor (1.06) to produce numbers representing anticipated plant recovery. Multiplication of this number and the total copper value in each block produced a “recoverable grade” value that was used to derive the recovered pounds for the reserve calculations and also used in the floating cones. The model predicts a recovery of 80.9% plant recovery in the locations where the bulk samples were taken. Higher recoveries are predicted in areas with higher oxide copper contents and lower recoveries in areas of lower oxide copper values. MDA believes that this is a reasonable estimate of plant recovery given the data available at this time. MDA recommends that one deep core hole be drilled to obtain metallurgical test samples from areas in the deposit where the oxide-to-total copper ratios are different from those of the bulk test. The samples should be tested for leach recovery and compared to the model to test the validity of the model. Underground Workings Limited underground mining took place at the OK Mine prior to the 1920’s, with some sporadic efforts lasting until the 1950’s. Reportedly, a total of slightly over 1,200 tons of 2 − 40

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high-grade copper ore was mined. Several underground levels were developed but the total extent of the workings is not known. In 1960 Shasta Coal drilled 21 holes, totaling 2,200 ft, from the 200 level of the underground workings (about the 5800 elevation). These holes are included in the database. A map showing this drilling and the underground workings on this level was provided to MDA by Nevada Star. The total amount of material mined is unknown but judged to be minor based on review of the map and the reported production. Some of the workings are exposed in the current pit bottom at about the 5880 elevation. MDA did not account for the presence of the underground workings in the grade model. There are two concerns with the workings. The first is that open pit mining will encounter the workings at around the 5800 elevation and possibly elsewhere, which will cause difficulty in mining. Secondly, the workings may be more extensive than reported, in which case an unknown, potentially larger amount of the resource may have been previously mined. MDA does not believe that either of these concerns is significant based on the information available at this time. All drilling data used in modeling was drilled after underground mining had ceased. 2.5.6

Stockpiles There are three stockpiles of ore-grade material on the property that have been included in this resource. All stockpiles have been carefully measured and sampled in pits and backhoe trenches by Centurion and Nevada Star personnel. Tonnage factors of 16 cuft/ton were used for all the stockpiles. The tons and grade of each is summarized in Table 2.14. Table 2.14 Stockpiles Location Tons (000) Essex-Crushed Stockpile 265.2 Essex-High Grade Mill Ore 99.6 Cortex-Bawana Stockpile 200.0 TOTAL 564.8

Cu % Cu lbs (000) 0.55% 2,917 1.45% 2,888 0.60% 2,400 0.73% 8,206

The Essex crushed stockpile consists of material that has been crushed and processed in a vat-leach plant during the time period that the Essex mill was operating. The material is located at the Essex mill site. Samples have been taken by Nevada Star, Centurion, and MDA (See Appendix - Section 7 for the MDA data). Grades vary between 0.31% total copper to 1.28% total copper. The bulk sample collected by Nevada Star and sent to Metcon Research had an average grade of 0.44% total copper. MDA samples average 0.59% copper excluding an anomalous high-grade sample, and Nevada Star and Centurion samples average 0.58% total copper. Despite the lower-grade bulk sample the majority of samples are above 2 − 41

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0.50% total copper. MDA felt that some of this material has been mixed with other nonmineralized materials at the site, through time, and discounted the grade 5%, to 0.55% total copper to account for this possibility. The Essex high-grade stockpile is material at the Essex mill site that had not been processed. It is located in two basic areas, one of which consists of piles of uncrushed rock placed on the surface, the second has been graded into a flat area adjacent to the old mill building. Samples for this stockpile were taken by Centurion in 1996 and Nevada Star in 1998 and are a combination of trench and grab samples. The Nevada Star sample assays were used and weight-averaged by MDA to get the above-reported resources. The assay results are summarized in Appendix - Section 7. The Cortex-Bawana stockpile is a run-of-mine dump located near the Bawana pit, east of the Maria deposit. Sampling of the stockpile was undertaken by Nevada Star and MDA. Sampling accuracy is very poor due to the unpredictable contents and size distribution of the stockpile. MDA sample assay values ranged from a low of 0.21% total copper to a high of 1.85% total copper. MDA believes that it is unlikely that the previous operators would place significant volumes of high-grade material on a dump and therefore considers the highergrade assays not typical. MDA excluded samples above 1.00% total copper from the averaging calculations because 1.00% was the reported cutoff for the mining operations. MDA believes the stockpile volumes to be accurate, based on the Centurion surveys, but considers the estimated tons to be potentially conservative based on the tonnage factor used (see Appendix - Section 7 for Metcon's specific gravity test results). Estimated grades are as reasonable as the current sampling will allow, considering that accurate sampling of dumps is difficult. 2.5.7

Past Production And Previous Resource Estimates Past production data was provided by Nevada Star. Reported production from Hidden Treasure was 110,000 tons grading 1.70% copper. Reported production from Maria deposit was 430,000 tons grading 1.40% copper. Total production from the two properties was 540,000 tons grading 1.46% copper. Reported production from the OK deposit totals 7,560 tons of copper, recovered from 900,000 tons of ore grading 1.25% Cu. MDA did not verify these numbers, although two other sets of production numbers were found for the OK Mine (7,000 tons of recovered copper from 635,000 tons of ore, and 871,000 tons of ore with no reported copper grade). Production from the entire district, including property controlled by others, is reported as 22,300 tons of copper contained in 2,010,000 tons of ore grading 1.59% Cu.

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At least two resource estimates have been made on the deposits (Table 2.15). Joralemon made estimates on most of the mines in the district in 1980 including the Maria and Hidden Treasure. More recently, Havenstrite, consulting geologist for Nevada Star, made estimates with the benefit of the additional drilling added since Joralemon's report was written. The estimates on Hidden Treasure and Maria are similar while the estimate on the Maria deposit is significantly different. The difference is explained by the fact that Joralemon included all "ore grade" mineralization while Havenstrite included only that material which exists within the limits of a manually-calculated open pit. Havenstrite's estimates on Hidden Treasure, Copper Ranch, and OK also are limited to potentially surface-mineable material. MDA did not audit nor verify the estimates, but the methodology used should produce a rough estimate of the resource.

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Table 2.15 Previous Copper Resource Estimates Both geologists calculated these preliminary copper resources using the drilling data generated by several drilling campaigns beginning in the late 1950s. Both estimates were done using cross sectional methods.

Tons (000) 618 767 767

Grade Cu% 2.28% 2.14% 1.78%

Maria* Maria*

942 358

1.74% 1.39%

32,782 Joralemon "Probable and Possible" 9,952 Havenstrite Indicated Resource

Copper Ranch Copper Ranch

212 278

1.72% 1.58%

7,293 Joralemon "Probable and Possible" 8,785 Havenstrite Indicated Resource

1,055 1,900 1,100

1.21% 0.62% 0.35%

Deposit Hidden Treasure Hidden Treasure Hidden Treasure

OK Mine OK Mine Mary I

Lbs Cu (000) 28,181 32,828 27,305

Estimator Comments Joralemon "Probable" Joralemon "Probable and Possible" Havenstrite Indicated Resource

25,531 Joralemon 23,560 Havenstrite 7,700 Havenstrite

* See text for explanation

2.6

Qualifications, Risks, and Opportunities

MDA believes that the models presented herein represent the exploration data fairly. The only data with which MDA has first-hand knowledge is the 1998 Nevada Star drilling data, which generally substantiates the validity of the earlier databases. There are several points that MDA would make concerning the opportunities and potential risks at the current stage of project development. The models for the Hidden Treasure and Maria deposits rely heavily on data from a single source, the Joralemon report. Much of this information, which consists of drill hole collar location maps and sections showing composites of assay intervals, cannot currently be verified. If significant portions of this data are not correct, that is if the maps and sections have errors, the grade models will reflect this. Most significantly, there are several areas in the Hidden Treasure deposit, which is the source of a significant portion of copper in the project, that are based almost entirely on the Joralemon data alone. MDA recommends drilling these areas to confirm mineralization volume and grade.

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Final pit designs at the Maria deposit should include allowances for possible fluctuations in the mineralized zone boundary. Normally a final pit design would follow the edge of economic mineralization closely, however it may be more prudent to allow some extra width (at the cost of additional stripping) to ensure that the majority of the economic material is mined. Recovery at the OK deposit has a significant impact on economics. The recovery model built by MDA represents recovery based on current data. It would be prudent to confirm the validity of the model with at least one additional drill hole to get samples of material at depth that could potentially have a lower recovery. MDA does not have any evidence at this time to indicate that recovery may change significantly with depth at the other three deposits. All of the deposits are open to some extent along strike, although they all currently appear to get significantly narrower. There is some potential to increase the overall copper resource by exploring in these directions. The district contains several deposits, not currently controlled by Nevada Star, that have been mined in the past. There are also several deposits that are in the exploration stage. The potential exists to add more copper resource to the project if some of these deposits could be acquired. There are several low-grade stockpiles controlled by Nevada Star and some under other ownership that could be added to the project if economic conditions permit.

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Geotechnical and Hydrology

3.1

General

Section 3.0 Geotechnical and Hydrology

The laboratory soil testing consisted of one Falling Head Permeability Test, eight Constant Head Permeability Tests, and two Standard Proctor Tests (ASTM D-698). The results are reported by Kleinfelder Engineering in Utah (File: 35-810100, dated September 4, 1996). 3.2

Investigation

No investigation was performed to directly identify the allowable bearing pressure of the soil. The allowable soil loads were estimated for feasibility purposes. A geotechnical investigation should be performed before designing any building or crusher. 3.3

Site Conditions

The existing area is located on granodiorite bedrock with a minor amount of overlaying soils. Typically, the soils range in depth from one to ten feet and contain Silty Sand (SM) with clay or Gravel (GW) with silt. These soils were identified by the geotechnical report by Kleinfelder Engineering. 3.4

Analysis and Recommendations

According to the 1994 UBC, the allowable foundation and lateral pressures shall not exceed the recommended values of 1,500 psf for the two identified soil conditions at the proposed site. Higher values may be used only with the data to substantiate the bearing capacity. Therefore, a full geotechnical investigation should be performed in order to properly design the footings for the Electrowinning building and the crushing plant. 3.5

Water Resources

Nevada Star has developed four wells to date which are all located south of the ponds along the southern border of the property. The wells have been drilled to a depth of 390-440 feet and encountered water at a depth of 220 feet. Three of the wells have been pump tested individually at 41, 23 and 33 gpm respectively. Nevada Star estimated they could produce 149 gpm from the existing wells. A copy of their estimate and methodology is included in the Appendix. The water consumption requirements vary with ore type and are shown in Table 3.1. Since the low grade ores require fairly substantial water usage, additional water wells will likely need to be developed. One additional well with a capacity up to 150 gpm was included in the capital estimate.

3−1

Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 3.0 Geotechnical and Hydrology

Table 3.1 Water Requirements by Ore Type ($1.05 Cu)

Expected Tons Per Day

Water To Saturate Ore (gpm)

Evap. Loss (gpm)

Sub Total (gpm)

General Usage (gpm)

Total Water Needs (gpm)

Essex Crushed

3763

56

177

233

25

258

Cortex

3207

48

173

221

25

246

Hidden Treasure

1058

14

81

95

25

120

Copper Ranch

1570

24

84

108

25

133

Maria

1570

24

84

108

25

133

OK Mine

2344

35

111

146

25

171

Essex Hi Grade

1347

20

64

84

25

109

Ore Type

3−2

Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

4.0

Section 4.0 Mineable Reserves and Mine Plan

Mineable Reserves and Mine Plan

Mineable reserves, from the designed pits and including stockpiles are summarized in Table 4.1. These reserves have been classified as Proven and Probable. Table 4.1 Mineable Reserves Deposit Hidden Treasure $1.20 Cu Price $1.05 Cu Price $1.00 Cu Price $0.80 Cu Price

Cutoff Cu% >= 0.00 >= 0.53 >= 0.62 >= 0.65 >= 0.85

Ore Av. Grade Tons (000) Cu% 2,606.2 0.54% 777.8 1.77% 758.7 1.80% 752.3 1.81% 714.7 1.86%

Total Waste Lbs (000) Tons (000) 28,147.0 0.0 27,534.1 1,828.4 27,313.2 1,847.5 27,233.3 1,853.9 26,586.8 1,891.5

OK Mine $1.20 Cu Price $1.05 Cu Price $1.00 Cu Price $0.80 Cu Price

>= 0.00 >= 0.29 >= 0.35 >= 0.37

3,207.3 1,156.1 1,019.6 979.2

0.32% 0.72% 0.77% 0.79%

20,526.7 16,647.8 15,701.8 15,471.4

0.0 2,051.2 2,187.7 2,228.1

>= 0.50

777.6

0.89%

13,841.3

2,429.7

Maria $1.20 Cu Price $1.05 Cu Price $1.00 Cu Price $0.80 Cu Price

>= 0.00 >= 0.39 >= 0.45 >= 0.47

1,884.6 442.4 429.6 421.6

0.27% 1.11% 1.13% 1.14%

10,176.8 9,821.3 9,709.0 9,612.5

0.0 1,442.2 1,455.0 1,463.0

>= 0.62

379.2

1.21%

9,176.6

Copper Ranch $1.20 Cu Price $1.05 Cu Price $1.00 Cu Price $0.80 Cu Price

>= 0.00 >= 0.38 >= 0.44 >= 0.46 >= 0.61

695.3 228.6 225.5 223.1 207.5

0.37% 1.12% 1.13% 1.13% 1.18%

TOTAL $1.20 Cu Price $1.05 Cu Price $1.00 Cu Price $0.80 Cu Price Stockpiles

>= 0.00 Varies

8,393.4 2,604.9

Varies Varies Varies

Essex-Crushed Essex-High Grade Cortex-Bawana Total Stockpiles TOTAL w/stockpiles $1.20 Cu Price $1.05 Cu Price $1.00 Cu Price $0.80 Cu Price

>= 0.00 Varies Varies Varies Varies

Alluvium Total Tons (000) Tons (000) 734.7 3,340.9 734.7 734.7 734.7 734.7

Strip Ratio 0.28 3.30 3.40 3.44 3.67

0.0 0.0 0.0 0.0 0.0

3,207.3

2,251.8

1,505.4

367.2 367.2 367.2 367.2 367.2

5,145.2 5,120.6 5,096.3 5,042.1 4,897.0

0.0 466.7 469.8 472.2 487.8

304.9 304.9 304.9 304.9 304.9

1,000.2

0.44 3.38 3.44 3.48 3.82

0.38% 1.13%

63,995.7 59,123.9

0.0 5,788.5

1,406.8 1,406.8

9,800.2

0.17 2.76

2,433.4 2,376.2 2,079.0

1.19% 1.21% 1.31%

57,820.3 57,359.2 54,501.8

5,960.0 6,017.2 6,314.4

1,406.8 1,406.8 1,406.8

265.2 99.6 200.0 564.8

0.55% 1.45% 0.60% 0.73%

2,917 2,888 2,400 8,205.6

8,958.2 3,169.7 2,998.2 2,941.0 2,643.8

0.40% 1.06% 1.10% 1.11% 1.19%

72,201.3 67,329.5 66,025.9 65,564.8 62,707.4

4−1

0.00 1.77 2.15 2.28 3.12 0.19 4.09 4.24 4.34 4.94

3.03 3.12 3.71 265.2 99.6 200.0 564.8

0.0 5,788.5 5,960.0 6,017.2 6,314.4

1,406.8 1,406.8 1,406.8 1,406.8 1,406.8

10,365.0

0.16 2.27 2.46 2.52 2.92

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

Reserves were calculated at different economic cutoffs, corresponding to the specified copper prices, so that economic sensitivity analyses could be reasonably performed at these different copper prices. Stockpiles were assumed to be mined in their entirety and therefore did not have cutoffs applied. The reported reserves include the effect of mining dilution, which is essentially limited to the perimeters of the deposits. The smallest practical mining size is estimated to be about the same size as the model blocks. Locations where the mineralized zone was partially in a block are the areas where dilution has an impact. In these blocks the copper grade and mineralized tons were weightaveraged with the remaining non-mineralized tons in the block at a zero copper grade to produce the diluted grade. The block is then considered either ore or waste based on the diluted grade. 4.1

Methodology

A series of Lerchs-Grossman ultimate pits were developed for a range of copper prices and estimated operating costs for each deposit using Medsystem software (Dipper programs). Only Measured and Indicated material could be used as ore. Detailed pit designs were then created for each deposit using the ultimate pit shells as guides. It was decided to build one detailed pit design for each deposit rather than construct several designs for different copper prices. The base case $1.05 per pound copper price was used and pits were designed using this ultimate pit shell (except for Maria where the $1.00 pit shell was used). Once the designed pits were completed mineable reserves were calculated for each deposit. 4.2

Ultimate Pits

Parameters and costs used in the ultimate pit runs are summarized in Table 4.2. Table 4.2 Ultimate Pit Economic And Design Parameters Mining Cost $/ton Deposit Hidden Treasure Copper Ranch Maria OK**

Recoveries 85.5% 82.0% 82.0% 79.0%

Ore $1.25 $1.10 $1.20 $1.05

Waste $0.90 $0.90 $0.90 $0.90

Processing Cost $/ton

Alluvium Cu $0.80 $0.50 $10.82 $0.50 $7.58 $0.50 $7.33 $0.50 $5.54

Cu $1.00 $10.41 $7.15 $7.02 $4.89

Cu $1.05 $10.38 $7.15 $6.96 $4.72

Tonnage Factors (cu ft/ton) Slope Angles Deposit Ore Waste Alluvium 0-90 90-140 140-180 180-250 Hidden Treasure 10.4 12.9 16.0 45 45 45 45 Copper Ranch 10.4 10.4 16.0 45 45 45 45 Maria 10.4 11.5 16.0 55 55 45 45 OK 13.0 13.0 16.0 50 47 47 47 * Mining costs include hauls to leach site. **Recovered grades were used, average recovery 79%, see section on recovery model.

4−2

Royalty Cu $1.20 $10.18 $7.01 $6.94 $4.36

% NSR 2.0% 5.0% 2.0% 0.0%

250-340 55 45 45 50

340-360 45 45 55 50

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

The plant operating costs used to create the ultimate pits are not exactly the same as the final plant operating costs. This is because the plant operating costs vary with ore tons and grade, which are not the same in the ultimate pits and the designed pits. The difference is generally small and not a significant source of concern. The results of the ultimate pit runs are summarized in Table 4.3 with grade-tonnage curves plotted in Figures 4.1 through 4.4 for each of the deposits.

Table 4.3 Medsystem Lerchs-Grossman Ultimate Pit Summaries Cu Price $/pound Deposit $0.80 Hidden Treasure Maria Copper Ranch OK TOTAL

Cutoff Ore Av. Grade Total Cu% Tons (000) Cu% Lbs (000) 0.90% 666 1.90% 25,307 0.69% 325 1.24% 8,078 0.68% 175 1.23% 4,309 0.47% 529 0.96% 10,139 1,694 1.41% 47,832

Waste Alluvium Tons (000) Tons (000) 1,422 504 832 204 396 253 817 0 3,466 961

Strip Total Ratio Tons (000) 2.89 2,591 3.19 1,360 3.71 824 1.54 1,345 2.61 6,121

$1.00 Hidden Treasure Maria Copper Ranch OK TOTAL

0.69% 0.52% 0.52% 0.33%

755 421 218 919 2,314

1.81% 1.15% 1.15% 0.81% 1.23%

27,345 9,673 4,990 14,931 56,938

1,691 1,141 485 1,676 4,993

728 270 306 0 1,304

3.20 3.35 3.63 1.82 2.72

3,175 1,832 1,009 2,595 8,611

$1.05 Hidden Treasure Maria Copper Ranch OK TOTAL

0.66% 0.49% 0.49% 0.31%

767 494 224 1,032 2,517

1.79% 1.13% 1.13% 0.77% 1.19%

27,442 11,169 5,078 15,975 59,664

1,719 1,743 497 1,857 5,815

747 405 318 0 1,470

3.22 4.35 3.63 1.80 2.89

3,232 2,642 1,040 2,889 9,802

$1.20 Hidden Treasure Maria Copper Ranch OK TOTAL

0.57% 0.42% 0.43% 0.26%

802 559 280 1,223 2,865

1.75% 1.13% 1.13% 0.73% 1.13%

28,081 12,594 6,327 17,804 64,805

1,819 2,482 890 2,062 7,253

811 538 821 0 2,170

3.28 5.40 6.10 1.69 3.29

3,433 3,579 1,991 3,284 12,288

4−3

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

4−4

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

4−5

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

4−6

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

4−7

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

4−8

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

The OK Mine deposit is most sensitive to economic changes, followed by Maria, Copper Ranch, and Hidden Treasure in that order. The tons of ore at OK essentially double between copper prices of $0.80 and $1.05 per pound. Hidden Treasure experiences a change in ore tons of about 15% between the same two copper prices. The reasons for the differences are fairly straightforward. The majority of the Hidden Treasure deposit is mined at the lower copper price, essentially because of high grades. The bottom of the $0.80 ultimate pit shell is at the same elevation as the bottom of the $1.05 pit shell. The added ore tons between the two prices are found around the fringes of the deposit and along strike to the west. In essence there is not much to add as the copper price increases. The OK deposit is lower in grade and has incrementally more stripping included as the pit size gets larger (the lower grades can only support a limited amount of additional stripping). Additionally, recovery generally decreases with depth providing less recoverable copper to support the pit. Only about half of the resource is economic to mine at a copper price of $1.05 per pound. Copper Ranch behaves similarly to Hidden Treasure, in that most of the deposit is mined in the $0.80 pit (the deposit is very flat lying). However, between copper prices of $1.10 and $1.15 per pound the size of the pit size increases substantially to include more mineralized material at lower elevations. This increase consists mainly of added stripping that can be accommodated at the higher copper price, the tons of ore do not increase at the same rate as the waste. The Maria ultimate pits behave similarly to Copper Ranch but for a different reason. The Maria deposit is narrow and deep and it is not economic to mine the added waste required to reach deeper mineralization at lower copper prices. The deposit also narrows with depth providing fewer oregrade tons at depth to pay for the added stripping. A brief analysis of the material gained between the $1.00 and $1.05 Maria pit shells revealed that the incremental stripping ratio was high and that the expansion was economically marginal. Because of this and the difficulty in adding haul roads the $1.00 pit shell was chosen as the base for this deposit. 4.3

Pit Designs

The pit designs presented here are the results of several iterations. Only two or three ramp configurations were compared for each pit and there may be others that could be more efficient. A two to three percent reduction in stripping was obtained with each design improvement although attempts to increase ore tonnage generally resulted in a much larger increase in waste mining. Further efforts to improve the designs may result in stripping reductions of a few percent. MDA believes that the pit designs are reasonable and represent the mineable reserves to about plus or minus five percent. The pit and dump designs as they would appear at the end of mining are shown in Figures 4.5 through 4.7. FIGURES 4.5-4.7 Pit designs 4−9

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

Figure 4-6

4 − 10

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

Figure 4-7

4 − 11

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

The same parameters were used to design all the pits. Ramps were designed 25 ft wide with 10% grades except for the bottom two or three benches where the grade was increased to 12%. The ramp width requires one-way traffic with pullouts. Mining on the upper benches of the deposits is to be handled using wider temporary ramps that will be mined out as the pits deepen. These temporary ramps are currently conceptual and have not yet been designed. Bench heights were set to 20 ft with slope angles of 55°, between ramps, utilizing double benching. Bench face angles were set to 70° resulting in a catch bench width of about 13.5-ft. The choice of slope angle was made based on measured slope angles in the existing pits. Overall angles in the current pits range from around 45° to nearly 65°. These angles appear to be the same regardless of rock type as some of the steepest angles were measured in alluvium at Hidden Treasure. In the existing pits at Hidden Treasure and to a lesser extent at OK there are catch benches, but the majority of the pits have a single face from pit bottom to rim. There are no major failures visible in the three pits although there are significant amounts of loose rock in some areas that have obviously fallen from the pit walls. Considering the fact that the existing slopes have been standing for over 25 years without experiencing a significant failure, MDA believes that 55° is a reasonable slope angle to use under the following circumstances. The pits will not be in active use for more than the planned three or four years and the rock in the final pit walls is found to be substantially the same as that currently exposed. If the rock quality appears poorer than anticipated or structural features are encountered that may degrade slope integrity a geotechnical study may be necessary to determine more appropriate slope angles prior to mining. It was necessary to increase the designed pit widths beyond the ultimate pit shells to maintain mining room in some locations at Hidden Treasure, Maria, and OK. The ultimate pit software does not consider minimum mining widths and therefore can create pit shells that may not be mineable. This occurred to some degree at all three of the previously mined deposits. The result of the increased widths was increased stripping, which MDA deemed necessary to maintain adequate mining access. Waste in the areas where the width was not increased can be mined with bulldozers. 4.4

Dump Designs

Waste dump locations for each deposit were specified by Nevada Star based on proximity to the pits and property ownership. Locations at Hidden Treasure and Maria are well suited to minimize haulage distances and adverse grades. The location at Copper Ranch is slightly awkward in that it requires ramping up more than desired around a hill to fit all the material in the specified area. However, this situation is apparently unavoidable given the property status in the area. The dump locations at OK deposit should be briefly evaluated to see if a longer-flat haul would improve haul economics as opposed to hauling the material to the existing locations at higher elevations.

4 − 12

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

The dumps were designed with the assumption that all waste materials would experience 20% swell when mined. The sizes of the designed dumps should be adequate, with a small cushion, to handle all the waste and alluvium produced from the designed pits using any of the economic cutoffs. The dump designs in Figures 4.5 through 4.7 represent the waste dumps, as they would appear at the end of mining and prior to any reclamation work. Dump face slopes of 1:1 were used for simplicity. The toes of the dumps would be extended as the slopes were reduced for reclamation purposes. 4.5

Production Schedule

The pits were not divided into phases because of their small size, although it may be possible to do so with Hidden Treasure. The production schedule was based on simple top-down mining taking entire benches in order starting with the uppermost bench. If Hidden Treasure could be broken into phases it may be possible to improve the grades during the early stages of mining. A base production schedule was developed based on required copper production of 30,000 recovered copper pounds per plant operating day (33,000 pounds from Hidden Treasure). The plant was assumed to operate 97% of the time resulting in 354 operating days per year. No other restrictions were placed on mining other than stripping at the first pit should start concurrently with mining and processing of the stockpiles. The economic impact of mining the deposits in different order was not considered here but should be evaluated in order to establish the best economic mining schedule for the project. The deposits were mined in order of the amount of recovered copper contributed to the project. The stockpiles were mined first at the request of Nevada Star. The schedule is shown in Table 4.4.

4 − 13

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan Table 4.4 Production Schedule

Period Total days in period

Year 1 365

Year 2 365 Stockpiles Year 2

Essex High-Grade Tons (000) Total Cu grade Total lbs (000) Recoverable lbs (000) to pad Plan Production Days Cortex Tons (000) Total Cu grade Total lbs (000) Recoverable lbs (000) to pad Plan Production Days Essex Crushed Tons (000) Total Cu grade Total lbs (000) Recoverable lbs (000) to pad Plan Production Days

Year 1 99.6 1.45% 2,888.4 2,310.7 79

Hidden Treasure Ore Tons (000) Total Cu grade In-situ lbs (000) Recoverable lbs (000) to pad Plan Production Days Alluvium Tons (000) Waste Tons (000) Strip ratio Total Tons (000) mined Lowest bench mined

Year 1 182.3 1.49% 5,432.2 4,644.5 146 734.7 951.1 9.2 1,868.2 5290

Deposits Year 2 365.5 1.87% 13,665.1 11,683.7 365 0.0 826.2 2.3 1,191.7 5170

OK Ore Tons (000) Total Cu grade In-situ lbs (000) Recoverable lbs (000) to pad Plan Production Days Alluvium Tons (000) Waste Tons (000) Strip ratio

Year 1

Year 2

Year 3 365

Year 4 365

Year 5 365

Total 1,825

Year 3

Year 4

Year 5

Total 99.6 1.45% 2,888.4 2,310.7 79

200.0 0.60% 2,400.0 1,975.2 68

200.0 0.60% 2,400.0 1,975.2 68

265.2 0.55% 2,917.2 2,087.5 72

265.2 0.55% 2,917.2 2,087.5 72

4 − 14

Year 3 210.9 1.95% 8,215.9 7,024.6 219 0.0 70.2 0.3 281.1 5090

Year 4

Year 5

Total 758.7 1.80% 27,313.2 23,352.8 730 734.7 1,847.5 3.4 3,340.9

Year 3 364.5 0.74% 5,361.4 4,235.5 146 0.0 2,066.2 5.7

Year 4 655.1 0.79% 10,340.5 8,169.0 281 0.0 121.5 0

Year 5

Total 1,019.6 0.77% 15,701.8 12,404.5 426 0.0 2,187.7 2.1

Mine Development Associates Reno, Nevada

Feasibility Study Nevada Star Resource Corp.

Section 4.0 Mineable Reserves and Mine Plan

Total Tons (000) mined Lowest bench mined

2,430.7 5880

776.6 5740

3,207.3

Table 4.4 Production Schedule - Continued Year 1

Year 2

Year 3

Year 4

Year 5

Total

365

365

365

365

365

1,825

Maria Ore Tons (000) Total Cu grade In-situ lbs (000) Recoverable lbs (000) to pad Plan Production Days Alluvium Tons (000) Waste Tons (000) Strip ratio Total Tons (000) mined Lowest bench mined

Year 1

Year 2

Year 3

Year 4 128.5 1.17% 2,994.5 2,452.5 84 367.2 1,373.7 14 1,869.4 5220

Year 5 301.1 1.11% 6,714.4 5,499.1 189 0.0 81.3 0 382.4 5080

Total 429.6 1.13% 9,709.0 7,951.6 273 367.2 1,455.0 4.2 2,251.8

Copper Ranch Ore Tons (000) Total Cu grade In-situ lbs (000) Recoverable lbs (000) to pad Plan Production Days Alluvium Tons (000) Waste Tons (000) Strip ratio Total Tons (000) mined Lowest bench mined

Year 1

Year 2

Year 3

Year 4

Year 5 225.5 1.13% 5,096.3 4,173.9 143 304.9 469.8 3 1,000.2 5080

Total 225.5 1.13% 5,096.3 4,173.9 143 304.9 469.8 3.4 1,000.2

Total Project Ore Tons (000) Total Cu grade In-situ lbs (000) Recoverable lbs (000) to pad Plan Production Days Alluvium Tons (000) Waste Tons (000) Strip ratio Total Tons (000) mined

Year 1 747.1 0.91% 13,637.8 11,018.0 365 734.7 951.1 2.3 2,433.0

Year 2 365.5 1.87% 13,665.1 11,683.7 365 0.0 826.2 2.3 1,191.7

Year 3 575.4 1.18% 13,577.3 11,260.1 365 0.0 2,136.4 3.7 2,711.8

Year 4 783.6 0.85% 13,335.0 10,621.5 365 367.2 1,495.2 2.4 2,646.0

Year 5 526.6 1.12% 11,810.7 9,673.0 332 304.9 551.1 1.6 1,382.6

Total 2,998.2 1.10% 66,025.9 54,256.2 1,792 1,406.8 5,960.0 2.5 10,365.0

Period Total days in period

4 − 15

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Feasibility Study Nevada Star Resources Corp. 4.6

Section 4.0 Mineable Reserves and Mine Plan

Mining Equipment and Costs

MDA calculated a preliminary estimate of mining capital and operating costs assuming the use of leased equipment. Haulage profiles were built and haul simulations were run to obtain mining equipment requirements. Concurrently costs were estimated for contract mining. Due to the relatively short mine life and the current abundance of mining contractors it was decided to use contract mining and use estimates provided by a contractor. Leasing costs were estimated to add about $0.41 per total ton to operating costs, or about $780,000 per year, see Appendix - Section 7. The flexibility of using a contractor is also an advantage in that the contractor may be able to substitute different equipment as required by changing operating conditions at a lower cost than would be possible with a leased fleet. West Hills Excavating in Milford Utah provided an estimate of contract costs. A copy of their letter is in Appendix - Section 7. The estimate includes road and dump maintenance as well as all equipment maintenance. This contractor is familiar with the property, having moved material at the site. These costs were reasonably close to estimates made by MDA when equipment ownership costs are included. Table 4.5 is a summary of both the estimated contract and leased equipment operating costs. Reclamation costs are not included in these estimates.

Table 4.5 Estimated Direct Mine Operating Costs

Deposit Hidden Treasure Copper Ranch Maria OK Essex Crushed Essex High Grade Cortex-Bawana

West Hills Mining Cost $/ton Ore Waste Alluvium* $1.25 $0.90 $0.50 $1.10 $0.90 $0.50 $1.20 $0.90 $0.50 $1.05 $0.90 $0.50 $1.00 n/a n/a $1.00 n/a n/a $1.00 n/a n/a

MDA Mining Cost $/ton** Ore Waste Alluvium $1.00 $0.90 $0.65 $0.90 $0.90 $0.65 $1.00 $0.90 $0.65 $0.90 $0.90 $0.65 $0.70 n/a n/a $0.70 n/a n/a $0.70 n/a n/a

Notes: Costs including drilling, blasting, mining, hauling ore to the crusher, hauling waste to waste dumps, road maintenance, and equipment maintenance. * Estimate was based on $0.85 per cubic yard. ** Does not include lease costs of $3,900,000 over life of project, or cost of shop.

West Hill Excavating proposes to use CAT 637 scrapers to mine the alluvium at Hidden Treasure, Maria, and Copper Ranch. CAT 980 loaders, or CAT excavators will be used to load ore and waste into 50-ton haul trucks. MDA estimates that a fleet of four 50-ton trucks will be required to meet 4 − 16

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Feasibility Study Nevada Star Resources Corp.

Section 4.0 Mineable Reserves and Mine Plan

production goals (an additional truck may need to be added during periods of increased stripping). The Essex and Cortex stockpiles would be hauled in 22-yard highway type trucks since the haul roads to be used are easily traveled by this type of equipment. MDA believes that the proposed equipment fleet is appropriate for the project, although there may be some areas in the alluvium where the size of cobbles forces the limited use of trucks and loaders. No buildings or special facilities need to be constructed for the contractor option whereas if equipment were to be leased an estimated $375,000 would be needed for construction of a maintenance shop. Enough supervisory and technical personnel (geologists, engineer, leach supervisor) are included in administration to cover contractor supervision and grade control.

4 − 17

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Feasibility Study Nevada Star Resource Corp. 5.0

Plant Design Criteria

5.1

Metallurgical Testing

Section 5.0 Plant Design Criteria

A series of bottle roll and column leach tests were conducted at METCON Research Inc. laboratories in Tucson, Arizona. The tests were performed on five ore types (samples) from the Nevada Star deposits. These samples included OK Mine ore, Hidden Treasure, Maria, Bawana Dump and Essex Crushed. The objectives of the tests were to evaluate the effect of crush size, to determine the amount of acid required for curing each ore type, to determine the total acid consumption and to establish what maximum copper recovery could be expected. The bottle roll tests were performed on minus 100 mesh samples using sulfuric acid solution maintained at a pH below 2.0 for 24 hours. The columns for the locked cycle leach were 8 inches in diameter and approximately 10 feet in height with a bed depth of 5 feet. Samples were crushed to 80% minus 2" and 80% minus 3/4" to compare crush size versus extraction. The samples were agglomerated and cured with water and sulfuric acid prior to loading into the columns. A mature raffinate from a mine leach operation was initially used for leaching. The pregnant solution was batch processed through a laboratory solvent extraction system to regenerate raffinate. The complete report from METCON is included in the Appendix. A summary of the design parameters based upon test results are included in Table 5.1 along with the quantity of projected reserves. The recoveries shown in the table are 95% of the actual test results for all ores except Hidden Treasure. This adjustment was made for design purposes to project expected recoveries under plant conditions with 10 foot lifts. For Hidden Treasure, test results were used to predict leach time to achieve 90% recovery in a column. That leach time was then used for Hidden Treasure along with a recovery of 95% of 90% or 85.5%. This was considered acceptable based on the tests since leaching of the Hidden Treasure ore had not started to slow when the column tests were terminated. Basically if the ores are crushed to -3/4 inch, agglomerated and cured with strong sulfuric acid, placed on heaps in 10 foot lifts and then leached with acidified raffinate at an irrigation rate of 0.004 gpm/ft2 it will be possible to achieve an average 82.2 percent copper recovery in an average 174 days of leaching. A mass balance on these conditions including evaporation and saturation losses with an ore averaging 1.1 percent copper indicated that the PLS grade can be maintained at 1.5 gpl copper by using a small amount of recycle. The flows will vary slightly with ore type. When processing Hidden Treasure ore, a PLS grade of 1.4 gpl copper is achieved without recycle. The net acid consumption at this recovery should average about 9.1 pounds per pound of copper recovered.

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Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 5.0 Plant Design Criteria

Table 5.1 Leach Results & Ore Reserves

Ore Type

Tons (000) Total

Expected Acid Tons Per Added Day Lbs/Lb Cu

Per Cent Recovery (Design)

Ore Grade % Cu

Leach Cycle Days

Essex Crushed

265.2

3695

14.1

71.6

0.55

140

Cortex

200.0

2947

17.7

82.3

0.60

160

Hidden Treasure

758.7

1040

9.0

85.5

1.80

250

Copper Ranch

225.5

1572

9.0

81.9

1.13

160

Maria

429.6

1577

9.3

81.9

1.13

160

OK Mine

1019.6

2392

7.4

79.0

0.77

140

99.6

1254

6.5

80.0

1.45

140

1674

9.1

82.2

1.10

174

Essex High Grade Total Weighted Av.

2998.2

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Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp. 5.2

Design Criteria

5.2.1

Site Conditions

Section 5.0 Plant Design Criteria

Temperature, degrees F Maximum Minimum Seismic Zone 5.2.2

100 -25 2B

Ore Characteristics Dry ore bulk density, lbs/ft3 Average ore grade, % Cu Tons ore per day (dry), average Moisture Content

95 1.10 1674 4%

Particle Size Inch % passing 16 100 12 95 6 50 4 35 2 21 1 15 5.2.3

Crushing Haulage truck capacity - tons Product Particle Size Inch % passing 3/4 98

50

Two stage crushing Primary Secondary Operating Schedule On-Steam Factor Feed Rate, average Feed Rate, design

Jaw crusher Stedman Impactor 2 Shifts/Day 5 Days/Week 90% 163 TPH 200 TPH

5.2.4 Heap Construction

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Section 5.0 Plant Design Criteria

Leach pad stacking method Heap building days per week Heap building shifts per day Heap building schedule days per year Heap placement, tons per week, average Ore leached, tons per year, average Head grade to leach pad, % Cu, average Soluble Copper, % Cu Heap material, bulk density, lbs/ft3 Average copper recovery, % Lift height, ft Ultimate heap leach pad area, ft² Pad liner material 5.2.5

Cat. 992 Loader 5 2 260 11,700 611,000 1.1 89 95 82.2 10 1,080,000 60 mil HDPE on compacted clay base

Solution Handling and Leaching Evaporation, % of solution sprayed Flow to heaps, gpm average PLS flow, gpm average Intermediate Weak Solution flow, gpm Heap moisture at zero drainage, % Operating Schedule On-Steam Factor Raffinate average irrigated area, ft2 Irrigation rate, gpm/ft2 Irrigation type Average acid consumption, lbs per ton of ore Average acid consumption, lbs per lb Cu Acid supply concentration, % Acid specific gravity Primary leach cycle, days Ditch liner material Raffinate return and PLS piping Pump manifolds Piping joints Pumps Typical PLS analysis, g/L Cu

4 % with drip, 8% with wobblers 2350 1770 460 12 3 Shifts/Day 7 Days/Week 97% 590,000 0.004 Drip Emitters 163 9.1 93 1.8 140 to 250 (174 Av.) 60 mil HDPE HDPE Stainless steel HDPE - butt fused, stainless steel welded and flanged. End suction centrifugal 1 operating, 1 installed standby 1.5

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Feasibility Study Nevada Star Resource Corp.

Section 5.0 Plant Design Criteria

H2S04 Total Fe Fe+3 Si (as Si02) Al, Mg Max solids, ppm pH Typical raffinate analysis, g/L Cu H2SO4 Total Fe Fe+3 Si (as Si02) Solids, ppm pH Raffinate temperature, °F

2.1 3-5 0.5 ≤ 1.0 ≤ 4.0 20 1.5 0.18 3-7 3-5 0.5 ≤ 1.0 10 ppm 1.7-1.9 70

5.2.6 Solution Pond & Tank Data Ponds are earth reservoirs with primary HDPE liner (60 mil thickness) and secondary HDPE liner (60 mil) with geonet layer sandwiched between. Leak detection monitoring provided by a collection sump. PLS Pond Capacity Raffinate Pond Capacity

7,400,000 gal. 1,000,000 gal.

Electrolyte solution tankage located at the solvent extraction plant is situated to allow flow by gravity to the appropriate vessel. The electrolyte and organic holding tanks to be FRP. The tankage area is curbed and provided with a spill collection sump so any overflow may be contained and returned to the process. Excess spillage flows to the Raffinate Pond. 5.2.7 Solvent Extraction Operational Data Feed rate, gpm Operating Schedule On-Steam Factor

2139 3 Shifts/Day 7 Days/Week 97%

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Section 5.0 Plant Design Criteria

Organic Phase Extractant Characteristics: Name Acorga M5640 or Henkel LIX 984 Generic type Specific gravity Viscosity at 15°C, cP Volume % Copper/iron transfer ratio Diluent characteristics: Type Specific gravity Viscosity at 15°C, cP Aromatics, Maximum % Volume Percent Organic entrainment in raffinate, ppm Organic entrainment in strong electrolyte, ppm Aqueous entrainment, ppm Organic entrainment recovery Allowance for diluent evaporation Crud removal system

Salicylaldoxime 0.91 - 0.97 200 6.0 500:1 Kerosene - 170 ES 0.8 1.5 8 92.2% 100 50 300 50% raff. pond, 90% media filter 10 % of entrainment losses Portable crud pump

Strip Solutions Design copper delta, g/L Spent electrolyte composition g/L Cu H2SO4 (maximum) Total Fe (maximum) Co, ppm Strong electrolyte composition, g/L: Cu H2SO4 Fe (maximum)

2 33 160 1.5 100 35 149 1.5

Plant Configuration O/A Mix ratio Extraction Strip Overall recovery, %

1:1 1:1 97 5−6

Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 5.0 Plant Design Criteria

Number of stages Extraction Strip Organic surge system Addition point of spent electrolyte Number of mixer boxes per Extraction Strip Impellers Primary Secondary Mixer retention times Extraction Strip Settler rating, gpm/ft2 total flow Extraction Stripping Organic depth, in Aqueous depth, in

2 1 Loaded organic tank Mixer box 2 2 Radial blade pump mix type Radial blade axial flow turbine 45 sec pump, 90 sec aux. 45 sec pump, 90 sec aux. 1.6 1.2 10 18

5.2.8 Piping and Materials - SX Plant In plant process piping:

Main process lines to be HDPE. Pump manifolds to be stainless steel. HDPE-butt-fused. Flanged Stainless steel with Buna N Gaskets. Stainless steel wetted parts.

Piping joints: Pumps: Mixer Settlers: Settler

FRP or 316 S.S. lined concrete/steel structure, weir boxes - stainless steel. Stainless steel or FRP. FRP or Stainless steel lined concrete. Stainless steel FRP sheeting.

Picket fences Mixers Impellers Settler Roofs 5.2.9 SX Instrumentation and Controls

Instrumentation is selected for safe reliable plant operation in accordance with national and international standards and codes of practice. Materials of construction of in-line process instruments are, as a minimum, in accordance with the piping material specification.

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Section 5.0 Plant Design Criteria

Pressure is indicated locally by gauges and remotely by transmitters. Flow is measured by orifice plate, magnetic flow meters, and differential pressure transmitter. Level is monitored by ultrasonic/transmitters for alarm and indication. Electronic signals to transducer/pneumatic actuators are used for all remote instrumentation and controls. Remote instrumentation will be located in a free standing control console which will house controllers, motor start/stop and status, remote instrumentation and annunciation. A PLC based system could be designed to include data collection for trending and report generation and a screen for graphic flow sheet and motor status representation. This panel would be located in a central control room with viewing of both SX and EW operations. This control station will combine solvent extraction, electrowinning, leaching, and solution handling. A single audible alarm together with indicating lamps warns of liquid level excursions beyond preset limits and of packaged equipment malfunction. The PLC based system will be considered only if requested by NSRC. Motor control will be by push button. These will indicate motor status as isolated, "stopped" or "running". All drives will have local stop/start stations and safety disconnect switches. 5.2.10 SX Area Lighting Levels recommended by WSE are: Pump/tank areas Impeller drive areas Weir box areas Passageways & ladders General area

20 ft candles 20 ft candles 20 ft candles 15 ft candles 2 ft candles

5.2.11 Painting All carbon steel surfaces which can be wetted by organic or electrolyte solutions are to use an SP-10 blast and a polyamide epoxy paint system. 5.2.12 Organic Removal - Electrolyte Filters Type:

Dual media garnet/anthracite pressure sand filters Removal of 85% of suspended solids larger than 10 microns and up to 90 ppm of organic entrainment. 2

Duty:

No. of Units:

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Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 5.0 Plant Design Criteria

Backwash medium: Backwash initiation Materials: Shell Internals Blowers Stainless steel Backwash pump External piping Valves

Plant water Operator initiated Stainless steel Stainless steel Stainless steel HDPE/stainless steel Stainless steel body with Buna N or PTFE seats

5.2.13 Electrolyte Heat Exchangers Heat exchanger type Materials: Plates and bolts Gaskets Frame

Plate, frame and immersion heater Stainless steel Viton or Buna N Carbon steel

5.2.14 Tank Capacity Data Loaded Organic Tank, min Filter Feed Tank, min Holding tank philosophy

15 75 Contents of one settler to be accommodated in low cost tank.

Materials: Loaded organic Electrolyte tanks SX Sump/Holding Tank

FRP or 316 S.S. lined concrete FRP or 316 S.S. lined concrete FRP or 316 S.S. lined concrete

5.2.15 Electrowinning Operational Aspects Plant deposition tons per day Operating Schedule On-Stream Factor

15 3 Shifts/Day 7 Days/Week 97

Cell and Electrode Data Electrolytic process

Electrowinning deposition onto stainless steel permanent blanks

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Section 5.0 Plant Design Criteria using insoluble lead anodes. 22 90 4.0 97 (per side) Longitudinal axis Perpendicular to crane bridge girders. Pre-cast monolithic box in FRP reinforced polymer concrete 50 inches wide, 56 inches deep, 156 inches long Nominally 39.3 inches (1 meter) by 39.3 inches wetted area with 1 inch overlap on anode, on all edges. 7 depending on current density, cathode weight. 34 36 Solid blade flat surface 0.25 Steerhorn, solid copper bar. Polypropylene 37 Two layers of polyethylene beads Overhead Crane with bridge on overhead rail. 3 Cathode washing tank and manual stripping Platform scale with accuracy of 2 lb in 2.5 ton load Tractor trailer units Hand held electric drill

Current density at cell, A/ft2 Current efficiency, percent design: Cathode spacing, in: Final cathode weight, lbs: Cell orientation: Cell construction Cell size (inside) Cathode size:

Cathode cycle, days: No of cells: Cathodes per cell: Anode type: Anode thickness, in.: Anode suspension bar: Anode insulators: Anodes per cell: Mist suppression method: Crane type: Crane capacity, ton: Cathode washing and stripping: Shipping and metallurgical: Shipping method: Cathode sampling:

Electrolyte H2SO4 range, g/L: Minimum copper in electrolyte, g/L: Maximum total iron, g/L:

5 − 10

Up to 180 32 1.5 (assume all ferric) Western States Engineering Tucson, Arizona

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Section 5.0 Plant Design Criteria

Cobalt dosing level, ppm: Tank house electrolyte piping material: Tank house piping valves: Tank house piping location: No. of cell circulation systems: Circulation system: Cell flow control: Pump type: Pump spares: Maximum cell temperature, °F: Operating cell temperature, °F:

100 CPVC, HDPE Coated butterfly or diaphragm (cell feed-CPVC ball valves). Principally beneath operating floor 1 Direct to cells from fresh electrolyte sump. Equalized header pressure with individual cell valves for isolation. Horizontal centrifugal All circuits to have online backup. 125 113

Electrical System Rectifier type: Rectifier Size Rectifier Output Voltage Rectifier pulsing: Device cooling: Rectifier control: Bus circuit configuration: Bus bar current rating, amps/in2: Maximum bus bar operating temperature, F Bus bar material: Bus bar protection: Bus bar type: Bus bar location: Cell electrical bypassing: Intercell connection: Material of insulator spacers: 5 − 11

Thyristor or silicon diode in N-1 operating arrangement. 1900 KW 82 VDC (2.4 VDC per cell) 12 pulse with phase rotation to reduce harmonics. Air cooled with evaporative room cooler. Current and voltage to be controlled within 1%. Floating null point, non grounded system. 800 190 Copper (100% IACS minimum) Expanded plastic mesh guards Multi-leafed (trunk bus). Single dogbone bar (intercell) Trunk and back bus beneath operating floor and above piping. Jumper frame for 1 or 3 cell spanning Walker multiple with offset single dogbone bar. Injection molded fiber filled Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 5.0 Plant Design Criteria polycarbonate "Lexan". IR thermometers

Short detection method: Building Elevation of operating floor: Operating floor material: Cathode discharge location: Location of cell floor: Cell support protection: Cell shimming/stray current isolation: Floor protection system: Building roofing and siding: Building girts and purlins: Building ventilation: Building lighting levels, ft candles

At cell top FRP From stripping point to gravity roller conveyor. At or near "basement" floor level. Reinforced PVC drip sheets. PVC plates Slope floor to drain and sump with protective coating. Vinyl coated steel, Corrugated glass fibre reinforced vinyl ester sheets Siding supports of coated steel Exhausted by open sidewalls, 1.5 ft above cell tops, roof ridge vent. 50 at machine areas. 30 over cell areas.

Piping All piping with process fluids in tank house to be CPVC. Flow control to be by all plastic ball valves to individual cells and plastic coated butterfly or diaphragm valves on cell feed headers. Tank Data Lean electrolyte tank, min Electrolyte recirculation tank, min Sulfuric acid off loading tank, days

60 20 1.3

EW Additives Anode protection additive (cobalt sulfate) will be supplied in bags and kept in storage area suitable for one month storage, if required. Miscellaneous Facilities

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Feasibility Study Nevada Star Resource Corp.

Section 5.0 Plant Design Criteria

Shift laboratory with basic wet analysis glassware and chemicals for shift analysis of copper and acid in existing space.

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Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp. 6.0

Section 6.0 Process Plant

Process Plant

Section 6 offers a narrative description of the process and plant facilities necessary to carry out the objectives of the project. The overall plant is designed to process an average 611,000 TPY of ore and produce 10.6 million pounds of copper. The plant consists of Crushing, Agglomeration, Leaching, Solvent Extraction and Electrowinning with the final product being LME Grade A copper cathode. There are several different sources of ore for the plant with varying grade and conditions. Individual sections of the plant required some over-design in order to achieve the design capacity under all circumstances. Therefore, it is reasonable to expect slightly higher production rates under average conditions. 6.1

Crushing and Agglomeration

The ore will require size reduction to achieve good recovery of the copper by leaching. METCON Research test results indicates crushing to minus 3/4" will be necessary for reasonable recovery. The run-of-mine copper ore will be delivered to the feed bin by 50 ton trucks. In case of outages, a 10,000 ton feed emergency stockpile will be maintained. Stockpile recovery will be by front end loader. Ore from the feed bin enters a vibrating grizzly which feeds the primary jaw crusher. The vibrating grizzly removes -4 inch material which bypasses direct to the crusher product conveyor. The +4 inch material is crushed in the primary jaw crusher which is a 32" by 36" jaw with a 125 Hp motor. The primary crusher is capable of crushing 170 TPH. This capacity will allow for a 90 percent availability of the crusher which will operate on average two shifts per day, five days per week. After passing through the primary crusher the ore is screened using a single deck vibrating screen containing 3/4" openings. The -3/4 inch material is removed as crushed product and is conveyed to the agglomerator. The flowsheet for the crushing plant is shown in Drawing 10-FS-01. The +3/4 inch ore feeds the secondary crusher which is a Stedman Impactor, Model 4230-HC. The secondary crusher is capable of processing a maximum of 170 TPH and is driven by a 150 Hp motor. Crushed material from the impactor is recycled to the screening operation. The moisture content of the -3/4" ore is increased typically to about 8% using water sprays on the conveyor feeding the agglomerator. In the agglomerator, 93% sulfuric acid is added to aid the agglomeration process and start the ore curing process. The tumbling action of the agglomerator mixes the acid solution thoroughly with the ore and also causes the fine material and clay to adhere to larger material sizes thus creating synthetic "agglomerated" particles. The quantity of acid and water differs for each ore type. Initial treatment quantities were determined by bottle roll tests at METCON Research and will be adjusted as necessary in the plant. The acid cure applied in the agglomeration step aids in speeding up the initial reaction of the ore with the free acid. Once this

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Feasibility Study Nevada Star Resource Corp.

Section 6.0 Process Plant

solution has been applied the ore will be stockpiled and allowed to “cure” for approximately one week. 6.2

Leach Heaps

Crushed and agglomerated ore will be placed on a newly constructed leach pad using a Caterpillar 992 loader. The new pad will have an impermeable plastic liner (60 mil HDPE) underlain by a graded and compacted clay base. Engineered fill will be necessary to level the site to provide proper drainage from the heap. Ore will be stacked five days a week two shifts per day at an average rate of 11,700 tons per week. Ore will be stacked to a depth of 10 feet and will be leveled by the bucket loader. See Drawings 20-GA-01 and 20-GA-02. 6.3

Heap Irrigation

The ore from the mines containing an average of approximately 1.1 % copper will be leached with a weak sulfuric acid solution (raffinate) to remove the copper for recovery. The copper in the ore is present mostly as copper oxides with some copper sulfides. A typical reaction with the acid would be as follows: CuO + H2SO4

→ CuSO4 + H2O

The leach heap configuration was designed by JBR Engineering and modified somewhat by Western States. The irrigation network was designed by Dr. Ron Roman of Leach Inc. The leach heap starts with a lined pad approximately 1200' by 900'. The ore will slowly be built up on the pad by adding the ore in layers and sections. The heap will reach a height of approximately 80' toward the end of the project life. The raffinate which will come from the raffinate pond is distributed over the leach heap by pumping it through an irrigation network. The network is typically composed of four (4) to six (6) operating modules. A typical module is shown in drawing 20-GA-06. The Leach Pad will initially have room for 12 modules on the first level. Leach solution will be pumped through main headers along the perimeter of the leach pad to laterals which distribute the solution to a series of drip emitters. Initially the design used sprinkler heads called “wobblers” which spray the raffinate in a circular pattern on each individual leach cell. This was changed to reduce evaporation loss. Evaporation using emitters equals 4 to 6 % of the leach solution while “wobblers” lose 7 to 10 % to evaporation. The main headers will be installed as permanent lines designed to handle the maximum anticipated pressure and flow. The remainder of the application piping and emitters will be installed as a temporary system to be relocated when another module or an additional lift of crushed ore is required. High density polyethylene (HDPE) pipe will be utilized for irrigation piping. Emitters will be staggered along the laterals to deliver leach solution to the heap In this manner, the heap is

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Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 6.0 Process Plant

drenched with raffinate. The raffinate then trickles through the heap leaching out the copper. Each module or cell is irrigated for an average 174 days. Leach times vary with ore type. After the leach cycle is complete the cell irrigation will cease and the irrigation piping will be moved to a new cell for leach solution application. Leach solution consisting of raffinate, sulfuric acid and make-up water for evaporation will be dripped onto the cell surface. Evaporation is assumed to be equal to 4% of the raffinate flow. An average of Approximately 120 gpm is lost to evaporation and to saturation of the ore. Leach solution application will be at the rate of 0.004 gpm/ft2. Leach solution flow rate per cell will be 300 to 500 gpm with a total leach solution flow rate of 2000 to 3000 gpm depending upon ore type. The leach solution plus the cure solution applied in the agglomerator will deliver an average of 9.1 pounds of acid per pound of copper recovered. Free acid levels in the leach solution will be 3 to 5 gpl (grams per liter). There are two ditches for collecting the leach solution that has passed through the heap. The solutions are directed to one of the two ditches based on their copper concentration level. One ditch collects solution too low in copper concentration for immediate recovery. This solution is returned to the raffinate pond and subsequently recycled to leach more copper. The other ditch collects copper solutions for recovery that contain approximately 1.5 gpl of copper. This solution is now called the pregnant leach solution (PLS) and is directed to the PLS pond. PLS flow rate will be approximately 2000 gpm. The leached copper is further purified and refined in the solvent extraction portion of the plant. Makeup sulfuric acid comes from Kennecott and is delivered by rail car to a railroad spur approximately five miles from the plant site. From there, the acid is trucked to the plant and placed in the two 10,000 gallon storage tanks. One tank is located at the Crushing plant and feeds the agglomerator. The other tank is located near the SX/EW facilities and feeds both the leach heap and the SX area. The raffinate pond is also fed by gravity from the second extraction settler and water is added from the plant water tank to replace evaporated water. Some organic solution containing unwanted impurities will accumulate on the surface of the pond over a period of time. This “crud” will be suctioned off periodically and sent to the crud tank for organic recovery. The solutions from the raffinate and PLS ponds are pumped by horizontal centrifugal pumps mounted on the shore near the ponds. 6.4

Solvent Extraction

The solvent extraction unit operation concentrates copper values from the pregnant leach solution

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Section 6.0 Process Plant

into a high grade copper solution. In the solvent extraction plant, the copper sulfate is first absorbed in an organic solvent via ion exchange. The organic solvent is typically a kerosene containing a liquid ion exchange (LIX) extractant. The CuSO4 in the aqueous phase reacts with the organic per the following reversible reaction: CuSO4 (aq) + Org:H2

_

Cu:Org + H2SO4 (aq)

The low free acid concentration in the aqueous raffinate phase allows the reaction to move to the right and puts the bulk of the copper into the organic phase. The acid produced goes into the aqueous phase. The reaction takes place in special equipment called mixer/settlers. In the mixer, the organic and aqueous phases are intimately mixed so the extraction can occur. The phases are mixed in a 1:1 ratio. The settler is used to separate the organic and aqueous phases. To obtain good yields and increase the copper concentration in the organic phase, two countercurrent stages of extraction are used. Later in the stripping section, the organic is recovered and the copper is transferred to another aqueous phase by reversing the above reaction. This is accomplished by using a high acid concentration (150 gpl) aqueous phase which forces the equilibrium toward the CuSO4 side as follows: Cu:Org + H2SO4 (aq)

_

CuSO4 (aq) + Org:H2

The PLS is pumped into a head tank where it flows by gravity into the primary mixer of the first extraction settler at a rate of approximately 2000 gpm. The solution contains 1.5 gpl of copper and 2.1 gpl acid. Organic recycle from the second extraction settler is gravity fed into the same mixer as the PLS. From the primary mixer the solution overflows into an auxiliary mixer which ensures that the PLS and organic recycle are thoroughly mixed before going into the settler. The auxiliary mixer overflows into the extraction settler. The organic stream contains the absorbed copper and is now called “loaded organic.” It is sent to a surge tank before being pumped to the stripper mixer/settler for recovery. The aqueous solution is fed by gravity to the second extraction mixer/settler. In the second extraction step the aqueous solution from the first extraction settler is mixed with recycled organic from the stripper. Both solutions are fed to the primary mixer by gravity. The solution overflows into an auxiliary mixer and then into the settler. The organic stream is sent to the first extraction settler and the aqueous stream goes back to the raffinate pond. The LIX solvent is delivered in drums and pumped into the loaded organic surge tank as required. Kerosene arrives by tanker truck and is stored in a separate tank. Both LIX solvent and kerosene are pumped into the loaded organic surge tank as required for make-up. The loaded organic solution is pumped from the surge tank to the primary mixer of the stripper. The strong acid solution (called strong electrolyte) is also pumped into the primary mixer from an

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Section 6.0 Process Plant

electrolyte storage tank. The primary mixer overflows into an auxiliary mixer and then overflows into the settler. In the stripper, the copper transfers to the strong electrolyte as copper sulfate. This solution is now called the rich electrolyte. This rich electrolyte is further refined by electrolysis commonly called electrowinning. The organic solution from the stripper will be gravity fed back into the second extraction mixer/settler. The rich electrolyte is fed by gravity to the same electrolyte storage tank that the strong electrolyte comes from. The electrolyte tank is divided into two compartments. One compartment is rich electrolyte and the other compartment is strong electrolyte. As rich electrolyte is fed into the tank from the stripper it overflows into the strong electrolyte compartment. In this compartment, the rich electrolyte is diluted with water pumped from the water storage tank and strengthened with fresh acid pumped from the acid storage tank. The rich electrolyte will feed the electrowinning plant after being pumped through a column cell and an anthracite/garnet sand filter to reduce organics and solids. A plant holding tank was included for the purpose of holding the contents of one mixer/settler unit in case of an emergency or periodic maintenance. A single line would serve both functions of draining and refilling a mixer/settler. The draining would be accomplished by gravity and a single pump would be used for refilling. Provision has been made for recycling the aqueous solution from each settler back into their respective mixers as needed. Organic “crud” forms in the settler solutions and must be suctioned off periodically. This “crud” is a mixture of dirt, unwanted by-products, organic, etc. A portable pump with a suction hose will be used to suction off the crud and deliver it through a 2" pipe to a crud tank. Crud may also need to be removed from the strong electrolyte tank and the raffinate pond. The collected crud is pumped to an organic recovery tank along with fresh organic (kerosene). In the recovery tank the solution is agitated then allowed to settle into separate layers. The aqueous layer is pumped out to the raffinate pond and the organic phase is sent to an organic clay pressure filter. The filter plates are precoated with clay to allow the filtration of the fine waste particles that have accumulated. As the organic solution is passed through the filter, the crud particles are removed and collected as a cake. Periodically the filter plates are separated and the cake is removed and sent to waste disposal. 6.5

Electrowinning

The rich electrolyte from solvent extraction is pumped through an anthracite/garnet sand filter to further reduce organic and solids. The "polished" rich electrolyte from filtration will feed an electrolyte surge tank. The rich electrolyte is combined with lean electrolyte return from the tankhouse to form the recirculating electrolyte or strong electrolyte feed to electrolysis. Recirculating (strong) electrolyte will feed each of 34 polymer concrete electrowinning cells. Each

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Section 6.0 Process Plant

cell will contain 37 rolled lead-calcium-tin anodes and 36 316-L stainless steel cathodes. Each cell is connected in series and the cathodes connected in parallel to a rectifier capable of maintaining 22 to 25 A/ft2 at a voltage drop of 2.1 to 2.3 V. Cobalt sulfate levels of about 100 ppm will be maintained in the electrolyte to prevent excessive spalling from the lead anode. The copper electro-deposition will continue for a 7 day cycle after which the cathodes will be pulled, washed and cathode copper stripped off of the cathode blank. The daily harvest of cathode will be by manual stripping on one shift per day. The tankhouse is designed to produce approximately 15 TPD of LME Grade A cathode. Each cathode pull will carry 1/4 of the cell cathodes or 9 cathodes per pull. The cathodes are transported by the overhead crane to the washing/stripping area. The cathodes are washed to remove electrolyte and any other physical impurities and then placed in the stripping rack. The plated cathodes are physically removed (stripped) from the permanent cathode blanks which are returned to the EW cells. The stripped cathode falls to a transfer conveyor that delivers the cathode to a stacking station. Stacked cathode will be picked up by fork lift and transferred to a weigh station for weighing and banding. The banded cathode bundles will be transferred to the cathode shipping dock for shipment to market. One cathode from each pull will be selected for sampling. Sampling can be by drilling or cutting corners with a saw. The cathode samples will be used for analytical purposes and product quality control.

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Feasibility Study Nevada Star Resource Corp. 7.0

Section 7.0 Infrastructure and Utilities

Infrastructure and Utilities

The purpose of this section is to describe the required infrastructure and site preparation for the project. 7.1

Site Development

The preparation of the site, electrical power distribution, and water supply will be necessary. The access road near the mine facilities will also require relocation and some improvements. 7.2

Maintenance

Mechanical and electrical equipment maintenance facilities will be used for the repair of the following equipment: · · · · ·

Crushing plant equipment Solvent extraction and electrowinning plant equipment Pumping and leach solution handling equipment Site road maintenance equipment Building maintenance and general equipment

The facilities for maintenance of mine equipment will be constructed, equipped and operated by the contract mining company. However, the facility may be located on Nevada Star property. Routine maintenance of equipment, as much as possible, will be conducted on site. Maintenance of specialized equipment will be contracted with a company with the appropriate specialization. The access road to the property is maintained by Beaver County. 7.3

Administration

The construction of the project will be performed under the supervision of Nevada Star with a project manager, a site construction manager and administration supervisor. There should be no difficulties in obtaining qualified non-union labor to the OK Mine site. Local residents, many of whom are part-time farmers, will be attracted by the steady and relatively higher paying mine jobs. Some workers will also be interested in applying to Nevada Star for geographic reasons. Training for entry level jobs will be on-the-job, with safety and other required courses conducted on site. The quality of medical and educational services available to employees will be monitored. Property taxes are paid to Beaver County, but are assessed centrally by a Utah State Revenue Department

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which applies fairness standards for tax rates within the mining industry. 7.4

Site Access

While there is rail service to Milford near OK Mine, it is assumed all supplies except for sulfuric acid entering the site and copper cathode leaving the site will be transported by truck. Roads through Utah are mountainous, but the interstate from Beaver to Salt Lake City has minimal steep grades. From Milford to Beaver, an adequate two lane highway exists. The road from Milford into the mine site is 6 miles of graded gravel maintained by the county. 7.5

Power and Other Utilities/Services

Electric service will be provided by PacifiCorp. The existing 12KV power line will be upgraded to 69KV and extended 5 miles to the mine site. There is ample capacity in the power grid to accommodate Nevada Star's requirement. While rates have yet to be finalized, they have been quoted at an average of 0.035 cents per KWH. Water will be provided from four existing wells and a new well yet to be drilled. A new well pump, electrical switchgear and tankage will be required. The water will feed by gravity from a surge tank to the SX/EW area and will be pumped to another surge tank at the Crushing Plant. Telephone lines are not installed. Service could be extended from near Milford; however, Nevada Star plans to operate using cell phones only. Cell phone service is available at the mine site. No natural gas or propane will be required. Sulfuric acid will be supplied by Kennecott under long-term contract and trucked the five to six miles from Nevada Star’s rail spur near Milford. Reagents will come from Zeneca Specialties in Tucson, Arizona, kerosene from Phillips Petroleum in Salt Lake City, Utah and diesel fuel is provided by Petro-Source in Railroad Valley, Nevada.

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Section 8.0 Environmental

Environmental

The project is located on Federal and private lands. For private lands, state environmental regulations are controlling; the primary regulations being administered by the Utah Department of Natural Resources (DNR), Division of Oil, Gas and Mining (DOGM). Federal lands within the project area are administered by the Bureau of Land Management (BLM), and are subject to State and Federal requirements. For Federal lands, BLM implements regulations under the General Mining Law of 1872, the Federal Land Policy and Management Act, and the National Environmental Policy Act. Regulation of specific activities such as the heap leaching process is enforced by the State of Utah Department of Environmental Quality (DEQ). The project site is located in an area already disturbed by mining activity. It is not an environmentally sensitive area, i.e., there are no large wetlands, critical habitat for federally endangered or threatened species or sites of national historic significance. Part of the former Essex Copper Processing Plant was reviewed by the Environmental Protection Agency (EPA) under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to ascertain whether there was sufficient environmental hazard to warrant a site clean up under the Superfund. The resulting clean up is discussed in Section 2. 8.1

Required Authorizations

A list of permits required for the project is shown in Table I. The table shows a general description of the permit requirements, and they are discussed in greater detail in Section 1.2. Since the land status of each of the thirteen deposits is different, permit requirements and status are described separately for the deposits, the process facility and support facilities.

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Feasibility Study Nevada Star Resource Corp.

Section 8.0 Environmental

TABLE 8.1: List of Permits Required for the OK Mine Project

AGENCY

PERMIT

GENERAL REQUIREMENTS

Army Corps of Engineers

404 Permit

Design Criteria in Washes

Beaver County

Conditional Use Permit

Design Criteria

Bureau of Land Management

Approved Plan of Operation

Environmental Controls Reclamation Plan Performance Bond

Bureau of Land Management

Right of Way

Environmental Controls

Utah Department of Environmental Quality

Groundwater Discharge Permit

Design Criteria for Processing Zero Discharge Required Monitoring and Reporting Closure Requirements

Storm Water Discharge Permit

Construction Requirements Monitoring and Reporting

Air Quality Approval Order

Dust Control

Solid Waste Disposal Permit

Design and Operating Requirements

Utah Division of Oil, Gas and Mining

Approved Reclamation Plan

Operating Plan Reclamation Plan Performance Bond

Utah Office of Historic Preservation

Sec. 106 Consultation

Review project for potentially significant historic sites on Federal land

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Feasibility Study Nevada Star Resource Corp. 8.2

Specific Permit Requirements

8.2.1

Deposits on Private Land

Section 8.0 Environmental

Mining of the Southwest OK waste dump, OK South Stockpile, OK Southeast Stockpile, OK Low-grade Stockpile, and OK mine has been tentatively approved by DOGM (M/001/039). Mining of the Essex crushed ore, high grade stockpile, and Magnetite Tails is not included in the DOGM approval. These projects would need to be added to the permit. The DOGM requires an update of the August 1996 mine plan prepared by Centurion Mines Corporation prior to final approval of the project. A reclamation bond, in the amount of $550,000 must be posted before mining or construction can commence. The tentative approval authorizes mining to be conducted in three phases beginning with construction of a 69.9 acre heap leach pad and pond system and initial mining of the existing waste dumps. Phases II and III provide for additional reserves to be mined. A total of 277 acres of disturbance is allowed, with a requirement for reclamation of 200 acres of the total. Seventy-seven acres of pit disturbance will not be reclaimed. Mine operational considerations include stockpiling of topsoil, end dump construction of waste dumps, revegetation of disturbed area to a 14.7% ground cover prior to bond release, clean up and removal of structures at closure, regrading of the site and replacement of the topsoil. Mine waste dumps must be regraded to a slope of 3H:1V to allow for adequate revegetation. Stormwater and erosion control are specified in the mine plan. Design parameters for the process facilities are also specified in this permit, and are discussed in greater detail in Sec. 1.2.3. A fugitive dust control plan has been approved by the Division of Air Quality for the mining operation. It provides for mining and moving material, but does not allow for crushing, screening without an approval order. Dust abatement measures such as road watering, and wetting of mined material will be required. Stormwater quality is addressed in a permit issued by the Division of Water Quality. It specifies housekeeping, spill prevention and response, inspection, training, monitoring and reporting requirements. The stormwater control requirements are generally consistent with those specified in the DOGM permit. A Groundwater Discharge Permit (UGW010005) has been issued to Nevada Star Resource Corporation. It requires confirmation sampling of waste rock during mining to demonstrate that the material is not poially acid generating. If there are waste rock types which are potentially acid generating, the acid generating waste rock must be encapsulated with a

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Section 8.0 Environmental

minimum of 40 feet of neutralizing material above, below and to the sides of all acid generating materials. The maximum lift thickness for acid generating material is 50 feet. The permit notes that the bottom of the mine pits will be above the water table, and that the material remaining in the spent pits is oxidized and unlikely to generate acid from incidental contact with water. If any of the project affects “waters of the United States”, a 404 permit must be obtained from the Corps of Engineers. The term “waters of the U.S. has been broadly interpreted recently to include nearly all intermittent flows, including dry desert washes. A 404 permit from the Corps of Engineers is likely to be required if waste dumps or pit development affect portions of washes. If the project affects a very small area of “waters of the U.S.” (less than 3 acres), a general permit known as a Nationwide Permit can be issued, usually within 90 days. It is anticipated that obtaining a 404 permit will be straightforward, given the lack of public interest in the project to date. 8.2.2 Deposits on Federal Land There are five deposits on land administered by the BLM. They include the Cortex stockpile, Hidden Treasure, a portion of Copper Ranch, Maria and Sunrise deposits. The BLM must approve a plan of operation, including a reclamation plan, prior to commencement of mining. A draft plan of operation was filed on June 29, 1998. The BLM will review the plan and conduct an environmental analysis, consistent with requirements of the National Environmental Policy Act (NEPA). The NEPA analysis in this case will be an environmental assessment (EA), unless there is sufficient public interest to warrant an Environmental Impact Statement. The BLM must approve a plan of operations if, after the environmental analyses are complete, there is a determination that the project can be accomplished without “unnecessary or undue degradation.” The environmental assessment will include evaluation of effects to wildlife, water quality, air quality, vegetation, socioeconomics, historically significant sites and other areas of interest determined through a public scoping process. There have been no comments on other permits issued for the project, and the BLM does not anticipate significant public interest in the project (personal communication, Ed Ginouves, BLM). The EA will be completed during the summer, 1998. BLM has identified no environmental impacts from the project which could not be adequately mitigated, so there appear to be no impediments to rapid review and approval of the plan of operation by the BLM. As part of the plan of operation approval, the BLM requires a bond for reclamation. The minimum bond amount is generally $2,000 per acre. For the disturbance of

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Section 8.0 Environmental

approximately173 acres, a bond of at least $346,000 would likely be required by BLM. Mining on Federal lands in Utah must also be approved by the Division of Oil, Gas and Mining. The existing permit from DOGM M/001/039 must be amended to provide for mining the deposits on Federal land. DOGM and the BLM have a Memorandum of Understanding concerning mine operating and reclamation plans for streamlining and coordinating project reviews. One reclamation bond provided to the lead agency would satisfy bond requirements for both agencies. The draft plan of operation was submitted to DOGM on June 30, 1998 and is presently under review by the agency. The County has indicated that the Conditional Use Permit need not be amended to enable mining of the deposits on Federal land (personal communication, Craig Davis, Beaver County). The fugitive dust control plan would be amended to include the deposits on Federal land. A Storm Water permit UTR000422 has been issued for a portion of the project. An amended Notice of Intent must be submitted prior to commencement of disturbance of federal lands. A 404 permit is likely to be required for the disturbance on Federal land since waste dumps are likely to toe out into washes, and potentially affect waters of the U.S. Obtaining a 404 permit for the project is not anticipated to be a problem, particularly for the disturbance on public land since the BLM will be performing the required environmental analysis in compliance with NEPA. One 404 permit could cover the project as a whole. 8.2.3 Processing Facilities The processing facilities will be constructed on private land. The Groundwater Discharge and Construction Permit issued by the Division of Water Quality is the primary permit controlling the design and operation of the processing facility. The permit specifies the design criteria for the leach pads, process and Storm Water ponds, and the solvent extraction/electrowinning plant. Other permits affecting the facility are the reclamation plan, air operating permit, conditional use permit, and Storm Water permit. Processing facilities must be constructed using the best available technology. For the heap leach pads and process ponds, this is defined as a composite clay/ 60-mil HDPE liner with a leakage detection system (geonet or gravel). Leakage is not allowed in the leak detection system for the pads, but the process ponds are allowed a leakage rate of 200 gallons per acre per day. Leakage must be collected and returned to the process. Processing tanks and chemical storage tanks must have secondary containment. Process spills must be contained

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Feasibility Study Nevada Star Resource Corp.

Section 8.0 Environmental

and conveyed to a concrete lined sump for return to the system. Construction and quality assurance plans must be approved by the State prior to commencement of construction. The State must inspect the facilities prior to start up. The permit provides for construction of Stage I of the leach pad, the process ponds and the plant. The Stage I leach pad is approximately 2.375 million square feet. Ore would be placed in 20 foot lifts to a maximum height of 120 feet. Ore side slopes can be no steeper than 2.5H:1V. Storm Water must be diverted around the facilities, and there are requirements for spill containment and control, electrical failures, monitoring and reporting. Groundwater monitoring must be conducted before construction and during operation, and the results reported to the State. A closure plan has been submitted. The DOGM permit furthers closure requirements by adding capping and revegetation standards, requirements for removal of structures and disposal of scrap material. A landfill permit may be required by the Division of Solid and Hazardous Waste at the time of closure to cover disposal of building materials on site. The DAQ reviewed a new source review application and fugitive dust control plan in December 1997. The submittal by Centurion Mines described the mining and processing operations. DAQ approved the dust control plan and indicated that an approval order would not be required for the project, provided that “operations are followed as outlined” in the November 29 submittal (DAQ, 12/27/97). The operation, as described, did not cover crushing and screening. The process tanks must eventually be in enclosed structures and there must be no combustion emissions. If crushing, open tanks or combustion are ultimately needed, approval must be obtained from the DAQ. It is not anticipated that there would be any problems encountered in obtaining an air permit for the process, but it could take six months to complete the permit process. Portable crushing equipment is permitted for use in Utah on a temporary basis. It may be possible to use portable equipment for crushing and screening. Use of portable equipment for crushing mine material must be authorized by the DAQ and would be limited to 180 days. It should be noted that the use of portable aggregate equipment is permitted under rules for non-metallic mineral processing facilities, so a modification or clarification of the permit for the portable equipment would be needed before this equipment could be used. To ensure that crushing and screening can take place when needed, it is recommended that application for an air permit be submitted by Nevada Star as soon as possible. The County Conditional Use Permit approves the land use for the processing facility. There may be permit requirements from the local fire marshall’s office for storage of hazardous

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Section 8.0 Environmental

materials, including explosives, combustibles and acid, depending upon the amount of material to be stored. 8.2.4

Support Facilities There are no specific provisions for equipment maintenance in the permits. If a maintenance facility is needed, some permit modifications will be required. A right-of-way has been granted by the BLM for a power line (UTU- 74942). The grant authorizes construction, operation and maintenance of a 46 kV overhead non-primary electrical transmission line. It would enable connection to the Utah Power and Light line south of the project area.

8.3

Other Environmental Considerations

In 1988, the U.S. Environmental Protection Agency (EPA) identified the Essex Copper Processing Site as a potential site requiring cleanup under the CERCLA. It conducted a preliminary investigation of the site, resulting in a 1989 report recommending site sampling and further investigation. The Utah Division of Environmental Quality (DEQ) conducted sampling in 1992. It evaluated leftover reagents in drums, leaking transformers and capacitors, soils adjacent to leaking drums and mine wastes. The sampling report identified potential environmental hazards from materials in drums, tanks and other containers including transformers. DEQ identified physical hazards and vandalism as potential problems. Results of DEQ sampling and analyses indicated that ore, tailings and mine waste rock contained elevated levels of metals, compared to background soils. Specifically highlighted in the report were copper (16,500 ppm), silver (32.9 ppm) and arsenic (363 ppm). Lead, cadmium and mercury values were within normal levels for soil. Evidence of wind blown tailings and downwind soil contamination was presented in the report. The evaporation pond solids showed a similar metal profile to tailings, but ponded water within the pond was measured at a pH 2.3-2.7. There was some speculation of potential groundwater contamination as a result of the site, but groundwater samples collected as part of the study were invalidated due to analytic error. There does not appear to be any valid samples of the groundwater, but the aquifer has been identified as the sole source of drinking water for the town of Milford. Based on these results, the EPA conducted a removal action on the Essex Copper Processing Site. EPA removed twenty (20) drums of caustic powder, fifty (50) drums of phenols, twelve (12) PCBcontaining transformers, forty (40) PCB-containing capacitors and 220 gallons of mercurycontaminated soils. There was no cleanup of mine wastes as part of the action. The removal action

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Section 8.0 Environmental

was complete on May 16, 1995. EPA invoiced Essex Group Inc. for the cleanup costs of $162,935 plus interest. There has been no official action on the site since the removal action, and it appears that the site is no longer of interest to EPA officials. There is some concern from the State (Steve Thiriot, personal communication) that the mine wastes have been used throughout the county as fill material, thus spreading contamination through the area. There is no plan at this point for the State to take any action. It would be prudent for Nevada Star Resources to accurately document the material on site prior to commencement of operation, and implement a strict policy to deny availability of the material to individuals who may want to use mine waste as fill. Further, it is recommended that, to the extent feasible, the mill and processing areas be excluded from any land acquisition or that careful consideration be given to future clean up costs, should there be any future concerns identified by the EPA or State. The DOGM routinely provides reclamation plan applications to the Division of Environmental Quality for review. It would be prudent to request that the DEQ, Division of Emergency Response and Remediation provide written comments on development plans for the Essex Millsite or stockpiles. This would provide additional documentation for Nevada Star Resources Corp. in the event of future questions as to culpability for environmental contamination. 8.4

Conclusion

A list of permits granted for the project is found in Table II. These permits provide for mining certain reserves, construction of the processing facility and loading the heap leach pad with uncrushed material from the old OK Mine areas. An air permit which includes crushing and screening will ultimately be needed for the operation. A 404 permit may be required before mining or waste rock disposal can take place in washes.

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Feasibility Study Nevada Star Resource Corp.

Section 8.0 Environmental

TABLE 8.2: List of Permits Acquired for the OK Mine Project

PERMIT/ AGENCY

PERMIT NUMBER/ EXPIRATION DATE

COMMENTS

Conditional Use Permit Beaver County

97-21 Annual review

Right-of-Way Grant Bureau of Land Management

UTU-74942 2/10/2018

Groundwater Discharge Permit DEQ- Division of Water Quality

UGW010005 5/21/2003

Submit plans prior to construction

Storm Water Discharge Permit DEQ- Division of Water Quality

UTR000422 12/31/2000

Notify of additional reserves*

Fugitive Emissions and Dust Control Plan DEQ- Division of Air Quality

none

Approval Order required prior to commencement of processing

Mine Plan Approval DNR- Division of Oil, Gas and Mining

M/001/039 tentative approval

Modify for additional reserves

* These include Cortex stockpile, Hidden Treasure, Copper Ranch, Maria, Sunrise, and the Essex Millsite.

Modification of some permits will be needed to add the unpermitted reserves. Approval from the BLM and DOGM is needed for reserves located on public lands. Neither the BLM approval or permit modifications are expected to be difficult to obtain, as there are no sensitive environmental issues which could be regarded as fatal flaws. There has been no public interest in the project to

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Section 8.0 Environmental

date.

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Section 9.0 Schedule

Schedule

This section discusses the planning for the project. 9.1

Introduction

Immediately following the authorization to proceed, the following steps of engineering, preoperation and pre-production will begin. These activities will proceed in parallel. 9.1.1

Engineering The engineering stage will include Nevada Star selection of engineering contractor, execution of contract and start of basic engineering. Basic engineering will describe the process and provide all major equipment specifications and basic engineering drawings. The Basic engineering effort will feed into site specific detailed engineering. Detailed engineering will follow and parallel basic engineering as much as possible.

9.1.2

Pre-Operation Stage The pre-operation stage will include construction of the warehouses, offices, crushing plant, solvent extraction, electrowinning, electric power line, electrical sub-station, additional water wells, water lines, diversion ditches, solution ditches, solution ponds, storage areas for materials and preparation of site for leach heaps.

9.1.3

Pre-Production Stage This will include construction and/or rehabilitation of the main roads to the heaps and pads.

9.2

Basis and Logistics

The construction stage for the project will be directed by Nevada Star based on the following methodology. 9.2.1

Selection Criteria The general policy for project purchasing and contracts is to use three criteria: highest quality, speed of execution and economics. Purchasing will be from suppliers primarily in the Salt Lake City area; however some selected items are only available out of state.

9.2.2

Design Criteria 9−1

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Section 9.0 Schedule

Each construction plan will show all required details (foundation details, walls, electrical, piping, etc.) and will be based on the technical specifications for concrete, steel and structures (ASTM). 9.2.3

Supervision All civil work will be by contractors, supervised by a technical individual within Nevada Star whose responsibility will be to ensure the completion of the work in accordance with technical specifications. The services of outside testing laboratories will be used as necessary. Alternatively a construction manager could be hired to supervise subcontractors.

9.2.4 Legal Criteria All legal issues such as permits, regulations, contracts, etc. will be in accordance with the policies of Nevada Star and will be supervised by the company environmental and legal staff. 9.2.5

Safety All personnel working on the site will be subject to the regulations and standards for safety. All staff will receive appropriate training on safe working procedures and first-aid.

9.2.6 Environmental It will be of vital importance to minimize the ecological impact of the project on the region and consequently all activities will be conducted in strict accordance with all appropriate laws and regulations. 9.3

Project Schedule

The schedule for the project can be found at the end of this section. A total duration from initiation of project to production is about 14 months. The schedule is dependant upon rapid drawing approvals and equipment requisitions. The long lead item will most likely be the rectifier. Purchase of long lead items will be critical to the schedule. 9.4

Construction

Construction activities of the project will fall into two categories: 9.4.1

Conventional Construction

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Section 9.0 Schedule

This category will include warehouse and workshop, laboratory, storage and loading areas, and diversion ditches for rainwater. 9.4.2

Specialized Construction This category will include pond and pad building including HDPE liner placement, crushing plant, solution pumping stations, solvent extraction and electrowinning. Civil work will include leach pad leveling, ponds, and pumping station pads. In the solvent extraction stage, three mixer/settlers will be built, two for extraction and one for stripping. The foundation will be built entirely of reinforced concrete with stainless steel plates (liner) supported by a welded steel support structure. Foundations will also be required for FRP solution storage tanks. The construction of the electrowinning plant will include foundations and structural support for the cell house. All decking will be of FRP members, supported by FRP.

9.5

Commissioning and Start-up

The operation of the project will be by Nevada Star staff. Mining will begin to provide ore for crushing and placement on the leach pad. Some dump material will also be placed for leaching. Approximately three weeks after leaching begins, the solvent extraction plant will be commissioned. During commissioning, sufficient electrolyte will be produced to allow the commissioning of the electrolyte tank house. The tank house will be commissioned and additional operator training will begin. The start-up team will phase out of the operation and full production will be established using the permanent staff and labor. Contractor demobilization will begin at this time.

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Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp. 10.0

Section 10.0 Capital Cost Estimate

Capital Cost Estimate

This section summarizes the capital cost estimate and the development of that estimate. The detail back-up information is contained in the Appendix, Volume I, Capital Cost Estimate Details. 10.1 Introduction The total estimated capital cost for the Nevada Star OK Mine Project is $8,029,517 (Eight Million Twenty Nine Thousand Five Hundred Seventeen Dollars). A tabular summary of the estimate is given in Table 10.1. This figure includes engineering, construction labor, materials, plant equipment, supervision, construction equipment and a 10% contingency. The estimate is based upon the following limitations:     

Copper ore will be delivered directly to the rock receiving box (dump chute) using contract mining. Materials and equipment can be delivered to the site without county road modifications. The area is continuously accessible, during regular working hours, at least 5 days a week and 10 hours a day. The construction work will be competitively bid. No additional performance specifications or limitations will be placed on the design.

The estimated cost is based upon process design and flow sheet production rates as given to us by Nevada Star or as agreed upon between WSE and Nevada Star. The estimated cost is based upon all new equipment. Equipment costs are from quotations by suppliers or manufacturers who quoted based upon flow sheet product rates or upon WSE performance specifications. Materials and labor represent true costs experienced in the market during recent months and recent trends in Western Utah, USA published cost indices. WSE took the flow sheet rates and calculated power and water requirements, crushing plant equipment requirements, agglomeration requirements, leach pad layout, SX plant requirements, tank farm needs, electrowinning requirements and infrastructure needs. During the life of the project, additional new sustaining capital for normal equipment replacement will be necessary. Table 10-2 summarizes this additional capital.

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Section 10.0 Capital Cost Estimate

Table 10.1 Capital Cost Estimate Summary

Area Description

Total (US $)

Sitework

$

229,761

Buildings

$

469,218

Crushing & Agglomeration, Area 10

$

1,207,590

Heap Leach Pad, Area 20

$

1,238,285

Solvent Extraction Plant, Area 30

$

Electrowinning Plant, Area 40

$

951,003 1,393,548

Tank Farm, Area 50

$

548,303

Utilities - Miscellaneous, Area 60

$

193,011

Main Electrical Distribution

$

632,116

Sub-Total

$

6,862,835

Engineering, 7%

$

480,398

Contingency, 10%

$

686,284

Total

$

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Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 10.0 Capital Cost Estimate

Table 10.2 Sustaining Capital Requirements ($000)

Description

Year 1

Year 2

Year 3

Year 4

Year 5

Leach Pad Additions

$617

Additional Well

$30

On Going Projects

$60

$60

$60

$60

$707

$60

$60

$60

Total 10.2

Year 6

Description of the Estimate

The direct costs for the project are those incurred directly in carrying out the construction effort and for purchase of equipment that becomes part of the fixed asset. The methodology and procedures for the development of the direct costs are discussed in the following sections. Costs were developed in U.S. Dollars for major pieces of equipment. Construction labor was estimated at local levels of pay and work crews assembled through consultation with Nevada Star personnel. 10.2.1

Equipment Cost Equipment costs for new equipment were derived from the following sources.    

Vendor quotations for major equipment items. Actual costs from previous jobs and/or Nevada Star experience. Budget level costs for a similar project were used for the remainder of the equipment costs. Small tools and supply costs were factored estimates.

10.2.2 Construction Labor Cost Labor for construction was based on recent rates obtained from operating contractors in Utah. A blended unit hourly wage for a composite crew including journeymen, helpers, and laborers was estimated at $28.00 per hour and includes direct labor, supervision, burdens, overhead and contractor profit. An exact rate for each craft and skill level would

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Section 10.0 Capital Cost Estimate

be determined at the time of construction bidding. 10.2.3 Site and Earthwork The site work consists of the earthwork necessary to prepare the site for building the plant. This includes the removal of miscellaneous vegetation and organic matter and moving and compacting earth for the crushing, leach pad, building and SX/EW areas. Costs for civil and site work will vary depending on the specific requirements. For the purpose of this estimate all site work for ponds, pads and plants is considered to be cut and fill, grading, and compaction where required. Due to the variable topography and subsurface rock, the project has been designed to take advantage of the natural features to minimize earthwork and maximize gravity flows. Cost estimates specific to each task included the required site work. 10.2.4

Concrete & Foundations Concrete & foundations represents the structural footings, grade beams and slabs on grade. This includes structural excavation, structural backfill, form work, reinforcement, and concrete. Concrete installation was based on a unit cost per cubic yard formed and poured with varying additions for the required reinforcement. Labor cost for forming, pouring and stripping is included in this cost.

10.2.5

Structural Support The structural support includes the steel columns, beams, bracing, connections, bolts, attachments, and material chute work. Structural steel costs are based on a fabricated and erected cost basis. Costs varied from light steel structures such as walkways and stairways at $1.20/lb to heavy plate work for tankage and hoppers estimated at $1.80/lb.

10.2.6

Mechanical Mechanical Systems represents the individual equipment items set in place, hooked up and ready to operate. Included in this section are freight costs, assembly costs and alignment costs.

10.2.7 Piping Piping costs were based on general arrangement drawings prepared for this project. Piping material and installation cost varied depending on material of construction, pipe schedule designation, and diameter. Valves and fittings were estimated from P&ID’s or factored from estimates of piping requirements.

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Feasibility Study Nevada Star Resource Corp. 10.2.8

Section 10.0 Capital Cost Estimate

Electrical and Instrumentation Included in this area are the labor, material and equipment necessary to run and control the equipment and process. Electrical costs were based on recent quotations for major components plus estimated costs for labor and materials required for each installation. This allowance includes all costs associated with controls, cable, cable tray, conduit and associated labor for installation and termination. EW transformer/rectifier, bus bar, distribution, lighting, controls and interlocks are accounted for. Instrumentation costs are based on estimated control requirements selected for this process. The level of controls provided is consistent with a plant where first cost is the highest concern. Also included is the cost to install the power line from the main transmission line near Milford to the mine site and the necessary substation and distribution within the plant.

10.2.9

Utilities Included in the estimate were costs for the following utility items:     

Acid day storage tanks Fresh water storage tanks Sanitary septic systems Compressed air systems Reverse Osmosis water purification unit

10.2.10 Contractor’s Fee All of the estimate line items include general overhead, labor burden, supervision and profit and home office costs for the contractor. No separate line item for contractors fee is necessary. 10.2.11 Engineering Engineering costs allow for the complete, ready to bid design package. Procurement of equipment and material and the management of the construction work will be by Nevada Star. 10.2.12 Contingency To allow for items not incorporated into the estimate, we have allotted an additional 10% of the plant cost as a contingency.

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Feasibility Study Nevada Star Resource Corp. 10.3

Section 10.0 Capital Cost Estimate

Equipment List

The estimate is based upon the equipment list presented in the Appendix, Volume I. The total estimated cost of the tagged equipment (including linings) is $3,176,000. In addition, electrical equipment costs of $93,300 and miscellaneous instrumentation costs of $18,000 were included in the estimate as untagged equipment. The electrical equipment includes the switchgear and two (2) transformers. Buildings were also separated as a major category and totaled approximately $470,000. 10.4

Pre-owned/Operated Equipment

WSE has investigated the use of pre-owned and operated equipment for use in this facility. While it would not be our first choice, due to the uncertainties, it represents a cost saving alternative to Nevada Star. Used equipment, of an appropriate size, is available for almost all of the items that will be incorporated into this project. Finding a useable match in size and HP rating for any item will be a matter of work and timing. Some used equipment that can be found to fit the job may need little in the way of repairs or modifications but most used equipment items will require maintenance and repairs to be of any use. The cost of repairs and modifications must be added to the purchase price to determine the true cost. Each item will need to be evaluated on an individual basis. 10.4.1

Search and Evaluation Searching for used equipment will require diligent effort via phone, fax, e-mail, the World Wide Web and travel. The used equipment trade journals carry advertisements for hundreds of firms specializing in used material and equipment. WSE e-mailed a list of 36 equipment items to several vendors and received faxed or e-mail responses from three. These responses included lists of equipment available, the size and HP rating (if applicable) and quotations. Other vendors responded via phone messages indicating that they would be happy to provide quotes and a written description for specific items. Before purchasing, or negotiating the price of, used equipment, an inspection visit should be made by a qualified technician to evaluate the cost of repairs or modifications. These costs must be added to the price and shipping costs to determine the true value.

10.4.2

Cost Savings The cost savings associated with the purchase and incorporation of used equipment are

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Section 10.0 Capital Cost Estimate

difficult to determine with any precision. However certain parameters can be established allowing an estimate to be made. Those parameters can be simply defined as the range of “elasticity” in the selection criteria. Finding equipment that exactly matches the specification will be unlikely. “Will it do the job at a more economic total cost than the best alternative?”, must be the deciding question. Excluding pond linings and mixer/settlers, the equipment list in the Appendix lists approximately 100 individual items with an estimated cost (new) of $2,500,000. Additionally, in the electrical estimate there are 3 pieces of 4160V equipment, estimated to cost (new) $93,300. While the range of possible savings will be different for each type of equipment and the actual savings will be independent of any calculable factors, WSE estimates that a final savings of about 21% of new equipment costs ($525,000.) may be achievable by diligent investigation and follow-up. 10.5

Salvage Value

WSE, based upon conversations with Nevada Star and reserve estimates, projects the life of this Project to be 6 years. The “salvage value” of the equipment assets to be acquired for this Project must be evaluated in terms of the life of the Project, the original condition of the item, initial installation and alignment, suitability to the purpose of its use, percentage of use outside of normal range (overloading) and the consistency of the maintenance program. This report does not address salvage value for tax or business accounting uses. The different classes of equipment will respond differently to the ravages of time and use. At the end of the Project, some items will have no value. Some will have value only as scrap and some will have a useful life, or serviceable value if used for its original purpose. In our discussions below regarding salvage value we have estimated a percentage of original cost based upon proper installation, use within its load range and consistent following of the manufacturers recommended maintenance program. This is true for both new and used equipment. In all cases the value of the electric drive motors is ignored. Shipping costs are assumed to be borne by the future purchaser. The percentages of potential salvage values discussed below are also based somewhat on the resale value as defined by price quotes for used equipment as discussed with vendors and as published in the journals. These percentages are based on the units without regularly replaced parts (conveyor belts, screens, filter media, etc.). All percentages given are believed to be accurate to within ± 10% if sold to the end user. If transferred to a consignment agent reduce all percentages by 25%. If sold to a dealer reduce all percentages by 40%. If sold in lots at auction reduce all percentages by 50% to 60%. No guarantee of actual value is given or implied.

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Feasibility Study Nevada Star Resource Corp.

Section 10.0 Capital Cost Estimate

Salvage Value by Type

.

1.

Classification equipment (used for separation of solids by size) will, in general, retain value. The grizzlies may need recapping of the bar impact surfaces but, unless severely abused, will retain roughly 80% of the purchase value (new or used). The vibrating screen bodies and drive equipment combined may be worth 70% (new) and 80% (used).

2.

Crushing equipment (used for size reduction) salvage values will depend as much upon remaining wear surfaces and bearing conditions as anything else. With more than 70% of the wear surface remaining and 3 years life left in the bearings, jaw crushers could be worth 65% (new or used), cone crushers 70% (new) and 65% (used), and impact crushers 70% (new or used).

3.

Dry Material equipment (used to lift or convey) for this project includes belt and roller conveyors. Both types of equipment are extremely versatile. Radical alterations can be made very quickly. The salvage value of a complete conveyor body (frame, head/tail pulleys, idlers and take-up) could be worth 70% (new) of original cost and 80% (used). In general the belt has little or no value but, if in excellent shape, may add as much as 5% to the selling price.

4.

The agglomerator will be difficult to market. Expect no more than 20% to 30% of original new purchase price.

5.

Electrowinning equipment (cells, cathodes, anodes, crane, weigh scale, etc) will have minimal salvage value unless purchased by another small plant. The cells were designed of a standard size so that might help resale. The salvage value of these items could be worth 20% to 50% of original cost.

6.

Instrumentation and Measuring and Detection equipment will have little or no value unless it is marketed directly to an end user.

7.

Plate work (bins, boxes, chutes, hoppers) are basically scrap. There is no general market. If someone needs what you have you might recover anywhere from 10% up to 25% of your first cost.

8.

Pumps will be difficult to sell unless rebuilt and carrying the rebuilders guarantee/warranty. A complete pump rebuild may cost 60% of the price new. If sold as is expect no more than 15% of first cost as salvage value.

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Section 10.0 Capital Cost Estimate

9.

Tanks are difficult to move, unless they conveniently fit on a truck. Small tanks might bring 50% of original cost, less the labor to cut them free. Larger tanks will need to be cut into pieces to be moved and those costs can be high. If someone wants them a value of 25% of the original cost would be appropriate.

10.

The main switchgear sections might return 50% of original cost and the 4160V to 480V transformers might return 60%.

11.

The tramp iron magnet could fetch 65% of the original cost if in good condition.

12.

The buildings could be worth from 20% to 50% of the original, un-erected, price if disassembled and packaged to ship.

13.

The balance of the structures, pipes, supports, miscellaneous equipment, etc. should be considered scrap.

In summary, WSE estimates that it might be possible to sell $1.4 million (original purchase price) of equipment at an average value of 35% producing a salvage value for the plant of $490,000. It is anticipated that some would be sold direct but most would be brokered. After exhausting the first two options, any remaining material would be auctioned.

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Feasibility Study Nevada Star Resource Corp. 11.0

Section 11.0 Operating Costs

Operating Costs

The total average operating cost for the OK Mine is estimated at $6,028,550 or 56.8 cents per pound of copper recovered. The operating cost estimate includes mining costs, operating labor, maintenance labor, general administration, power, maintenance parts and supplies, operating supplies, and miscellaneous costs. Each of the items is discussed in the following sections. The average annual operating costs are based upon a sales price of $1.05 per pound of copper and the processing of the average tonnage of ore. Average operating costs are summarized in Table 11.0. The variance in operating costs with ore type is shown in Table 11.1 as costs in dollars per month. Plant capacity was assumed to be 16.5 TPD when processing Hidden Treasure ore and 15.0 TPD for all other ores. As the sales price of copper varies, the economically recoverable reserves change as does the operating costs. The operating costs as a function of sales price for the various ore types is presented at the end of this section in Tables 13.13, 13.14, 13.15 and 13.16 for copper prices of $0.80, $1.00, $1.05 and $1.20. A complete operating cost writeup analyzed at the various copper prices is included in the Appendix and summarized in the aforementioned tables.

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Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Table 11.0 Operating Cost Summary - Average - $1.05 Cu

Description

Annualized Cost

Monthly Cost

Cost Per Lb Copper

Operating Supervision

$190,890

$15,908

$0.018

Hourly Operating Labor

$735,821

$61,318

$0.069

Total Operating Labor

$926,711

$77,226

$0.087

Maintenance Supervision

$44,100

$3,675

$0.004

Hourly Maintenance Labor

$172,557

$14,380

$0.016

$216,657

$18,055

$0.020

Administration Labor

$263,767

$21,981

$0.025

Power

$749,446

$62,454

$0.071

Maintenance Parts & Supplies

$292,617

$24,385

$0.028

Operating Supplies

$1,635,908

$136,326

$0.154

Mining Costs

$1,919,000

$159,917

$0.181

Miscellaneous

$24,444

$2,037

$0.002

$6,028,550

$502,379

$0.568

Total Maintenance Labor

Total Operating Cost Cost Ex Mining, $/ton & $/Lb

$6.72

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Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Table 11.1 Operating Costs By Ore Type - $1.05 Cu (Without Mining Costs)

Ore Type

Expected Tons Per Day

Operating Costs ($/Mo)

Cost Per Lb Copper

Costs In $/Ton of Ore

Essex Crushed

3695

$431,609

$0.488

$3.84

Cortex

2947

$478,443

$0.541

$5.34

Hidden Treasure

1040

$328,876

$0.338

$10.40

Copper Ranch

1572

$338,370

$0.382

$7.08

Maria

1577

$342,196

$0.387

$7.14

OK Mine

2392

$337,788

$0.382

$4.64

Essex High Grade

1254

$299,929

$0.339

$7.86

Weighted Average

1674

$342,463

$0.387

$6.72

11.1

Operating Labor

Based on the average ore tonnage, the plant will require four (4) operators, two (2) helpers, four (4) laborers and a loader driver on the day shift assigned as follows: Crushing/Agglomeration Pad Building Ponds/Leaching/SX Electrowinning/Tank Farm Rover/ Fork Lift Driver

1 Operator + 1 Helper + 1 Laborer 1 Loader Driver + 2 laborers 1 Operator + 1 Helper 1 Operator + 1 Laborer 1 Operator

The evening and midnight shifts will require slightly different staffing. Crushing, agglomeration and pad building operates two shifts per day, five days per week requiring a total of 13 personnel for coverage. This number allows for vacation and illness relief. The rover operator and the laborer in

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Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Electrowinning will only be required on day shift, five days per week when the cathodes are harvested. For evening and midnight shifts, only the operator will be required. The helper in SX will also only work days. His duties will be assumed by the EW operator on evening and midnight shifts. Therefore the SX/EW area will require 9 operators and 2 helper/laborers for around the clock coverage. Also included in the operating labor is an SX/EW Superintendent, a Mining/Leach Superintendent, a crushing supervisor and a full time grade control geologist. The crushing supervisor will also assist in supervision of pad building. The EW day operator will also handle cathode shipping and raw material supplies. The Mining Superintendent will oversee the contract mining, crushing, agglomeration and leach pad building. The benefit burden on the basic payroll was assumed to be 26%. Overtime is estimated at 8% of the base pay for the hourly personnel. Average costs are summarized in Table 11.2. When considering the variations due to ore type, it was assumed that six (6) personnel were required for average ore tonnage. Those dollars were adjusted based upon the tonnage of each ore type processed. The operating labor costs per ore type are given in Table 11.3.

Table 11.2 Operating Labor Costs - Average Position

Number

Salary or Hourly Rate

Annual Cost With Benefits

Superintendent

2

$42,000 per year

$105,840

Geologist

1

$35,000 per year

$44,100

Supervisors

1

$32,500 per year

$40,950

Total Supervision

$190,890

Operators

12

$13 per hour

$408,845

Laborers & Helpers

12

$9 per hour

$283,046

Cost Per Lb Copper

$0.018

Overtime

$43,930

Total Hourly Labor

$735,821

$0.069

Total Operating Labor

$926,711

$0.087

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Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Table 11.3 Operating Labor Costs By Ore Type

Ore Type

11.2

Expected Tons Per Day

Operating Labor ($/Mo)

Essex Crushed

3695

$87,942

Cortex

2947

$87,865

Hidden Treasure

1040

$71,922

Copper Ranch

1572

$76,372

Maria

1577

$76,411

OK Mine

2392

$83,227

Essex High Grade

1254

$73,714

Weighted Average

1674

$77,226

Maintenance Labor

Maintenance on the loaders and crushing/agglomeration plant will be performed on the midnight shift. The plant will therefore have two mechanics assigned to that shift. A general repairman/welder/fabricator and a Supplies Clerk/Laborer will be assigned to the day shift. The Supplies Clerk/Laborer will handle maintenance supplies and do general cleanup. A total of five personnel will be required including vacation relief for five day per week staffing. The relief man will provide limited weekend coverage. The staffing will include a Maintenance Supervisor who will have an electrical background and provide electrical/instrument coverage on the day shift. The benefit burden on the basic payroll was assumed to be 26%. Overtime is estimated at 10% of the base pay for the hourly personnel. Costs are summarized in Table 11.4. The maintenance labor costs by ore type are presented in Table 11.5. When considering the variations due to ore type, it was assumed that two (2) personnel were required for average ore tonnage. Those dollars were adjusted based upon the tonnage of each specific ore type processed.

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Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Table 11.4 Maintenance Labor Costs - Average

Position Supervisor

Number

Salary or Hourly Rate

Annual Cost With Benefits

1

$35,000 per year

$44,100

Total Supervision

$44,100

Maintenance Personnel

4

$13 per hour

$136,282

Laborers & Clerks

1

$9 per hour

$23,587

Cost Per Lb Copper

$0.004

Overtime

$12,688

Total Hourly Labor

$172,557

$0.016

$216,657

$0.020

Total Maintenance Labor

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Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Table 11.5 Maintenance Labor Costs By Ore Type

Ore Type

Expected Tons Per Day

Maintenance Labor ($/Mo)

Essex Crushed

3695

$21,805

Cortex

2947

$21,778

Hidden Treasure

1040

$16,198

Copper Ranch

1572

$17,756

Maria

1577

$17,769

OK Mine

2392

$20,155

Essex High Grade

1254

$16,826

Weighted Average

1674

$18,055

Note:

11.3

Essex Crushed costs adjusted since ore already crushed

Administration

The plant will have a General Manager and an Environmental/Safety Engineer along with the administrative personnel listed below. The Environmental/Safety Engineer will handle supervision of the administration personnel. The Payroll Clerk will also perform general secretarial work. Receptionist/Secretary Payroll/Benefits/Purchasing Clerk Accounting Clerk

1 1 1

The benefit burden on the basic payroll was assumed to be 26%. Overtime is estimated at 5% of the base pay for the hourly personnel. Costs are summarized in Table 11.6.

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Section 11.0 Operating Costs

Table 11.6 Administrative Labor Costs

Position

Number

Salary or Hourly Rate

Annual Cost With Benefits

General Manager

1

$75,000 per year

$94,500

Enviro./Safety Engineer

1

$50,000 per year

$63,000

Total Supervision Administrative Personnel

$157,500 3

$13 per hour Avg.

Overtime

$0.015

$102,211 $4,056

Total Hourly Labor Total Admin. Labor

11.4

Cost Per Lb Copper

$106,267

$0.010

$263,767

$0.025

Power Cost

The plant will require a monthly peak demand of 215,000 KW. Power costs are based upon a monthly service charge of $98.24, a demand charge of $5.77 per maximum KW per month and $0.023813 per KWH. Total average power costs will be approximately $749,446. This is approximately $0.033 per KWH. A detailed power breakdown is included in the appendix. The average power costs are summarized in Table 11.7. The power consumption varies by ore type primarily in the crusher area. A breakdown of the average monthly power costs by ore type are given in Table 11.8.

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Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Table 11.7 Power Costs - Average

Plant

Annual KWH Required

Annual Cost

Cost Per Lb Copper

Crushing/Agglom.

1,339,407

$72,146

$0.007

Leaching

2,371,000

$77,500

$0.007

895,000

$29,400

$0.003

Tank Farm

4,763,000

$155,400

$0.015

Electrowinning

11,576,000

$368,000

$0.035

Utilities/General

1,440,000

$47,000

$0.004

22,384,407

$749,446

$0.071

Solvent Extraction

Total Plant

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Section 11.0 Operating Costs

Table 11.8 Power Costs By Ore Type

Ore Type

Expected Tons Per Day

Power Costs ($/Mo)

Essex Crushed

3695

$64,353

Cortex

2947

$64,489

Hidden Treasure

1040

$64,439

Copper Ranch

1572

$62,290

Maria

1577

$62,298

OK Mine

2392

$63,602

Essex High Grade

1254

$61,782

Weighted Average

1674

$62,454

Note:

11.5

Essex Crushed costs reduced since ore already crushed

Maintenance Parts & Supplies

Maintenance supplies include crusher wear parts, screen cloths, conveyor parts, pump parts, and miscellaneous items including electrical and instrumentation parts. The total average maintenance parts and supplies is $292,617 or $0.028 per pound of copper produced. A breakdown for the parts and supplies by ore type is shown in Table 11.9:

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Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Table 11.9 Maintenance Parts & Supplies By Ore Type ($ per month) Material

Average All Ores

Essex Crushed

Cortex

Hidden Treasure

Copper Ranch

Maria

OK Mine

Essex Hi Grade

Wear Parts Crushers

$9,167

$11,238

$16,132

$5,694

$8,608

$8,633

$13,096

$6,867

Screens & Agglom. Parts

$2,846

$6,281

$5,009

$1,768

$2,673

$2,681

$4,066

$2,132

Leach SX/EW

$5,100

$5,100

$5,100

$5,100

$5,100

$5,100

$5,100

$5,100

General Spares Supplies

$4,572

$5,986

$5,463

$4,128

$4,501

$4,504

$5,074

$4,278

Electrical Instru.

$2,700

$2,700

$2,700

$2,700

$2,700

$2,700

$2,700

$2,700

Total

$24,385

$31,306

$34,404

$19,390

$23,581

$23,617

$30,036

$21,078

11.6

Operating Supplies

Operating supplies include the cost of sulfuric acid, lubricants, LIX, diluent, fuel, tires, anode/cathode replacements, lab costs and miscellaneous items such as hoses, gloves, etc. The cost of sulfuric acid is estimated at $28 delivered to the plant site. The laboratory leach tests indicate the acid usage will probably average 9.10 pounds per pound of copper when calculated based on the reserves of the various ores. A breakdown of the operating supplies by ore type is shown in Table 11.10. A weighted average for all ores is included.

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Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Table 11.10 Operating Supplies By Ore Type ($ per month) Material

Average All Ores

Essex Crushed

Cortex

Hidden Treasure

Copper Ranch

Maria

OK Mine

Essex Hi Grade

Sulfuric Acid

112,712

174,724

219,334

111,526

111,526

115,243

91,699

80,546

Reagents

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

4,300

4,300

4,300

4,300

4,300

4,300

4,300

4,300

835

1,239

1,089

708

814

815

978

751

Tires

1,005

2,217

1,768

624

943

946

1,435

753

Assays

1,900

1,900

1,900

1,900

1,900

1,900

1,900

1,900

Fuel

3,174

5,195

4,447

2,540

3,072

3,077

3,892

2,754

General Supplies

2,100

2,100

2,100

2,100

2,100

2,100

2,100

2,100

300

300

300

300

300

300

300

300

201,974

245,238

133,998

134,956

138,681

116,604

103,404

Diluent Lubricants

Misc. Total

136,326

11.7

Mining Costs

The owners have decided to use contract mining to supply the ore to the plant. The expected reserves at a copper price of $1.05 per pound are shown in Table 11.11. The effect of sales price on reserves and profitability is covered in Section 13, Financial Evaluation. Using the reserves from Table 11.11, it is anticipated that the average mining rate will be 1674 tons/day and the mining costs will be $3.14 per ton for a total annual cost of $1,919,000. This figure includes stripping and is a delivered price to the rock box. Based upon the reserves shown, Nevada Star has a total of 4.91 years of reserves at capacity operation.

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Section 11.0 Operating Costs

Table 11.11 Ore Reserves ($1.05 Cu) & Leach Recoveries Tons (000) Total

Expected Tons Per Day

Mining Cost $/Ton

Ore Grade % Cu

Leach Cycle Days

% Cu Recovery

Acid Usage Lbs/Lb Cu

Essex Crushed

265.2

3695

1.00

0.55

140

71.6

14.1

Cortex

200.0

2947

1.00

0.60

160

82.3

17.7

Hidden Treasure

758.7

1040

3.93

1.80

250

85.5

9.0

Copper Ranch

225.5

1572

3.65

1.13

160

81.9

9.0

Maria

429.6

1577

4.68

1.13

160

81.9

9.3

OK Mine

1019.6

2392

2.98

0.77

140

79.0

7.4

99.6

1254

1.00

1.45

140

80.0

6.5

1674

3.14

1.10

174

82.2

9.1

Ore Type

Essex Hi Grade Total

2998.2

Weighted Avg.

11.8

Miscellaneous Costs

Miscellaneous costs include water supply, safety supplies and similar items. For the purpose of this estimate, these costs were estimated at $0.03 per average ton of feed or $18,333. This equates to $0.0017 per pound of copper produced. The costs per ore type are adjusted accordingly and are shown below in dollars per month in Table 11.12.

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Section 11.0 Operating Costs

Table 11.12 Miscellaneous Costs

Ore Type

Expected Tons Per Day

Misc. Costs ($/Mo)

Essex Crushed

3695

$2,248

Cortex

2947

$2,689

Hidden Treasure

1040

$949

Copper Ranch

1572

$1,435

Maria

1577

$1,439

OK Mine

2392

$2,183

Essex High Grade

1254

$1,145

Weighted Average

1674

$1,528

Note:

Essex Crushed costs adjusted since ore already crushed

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Feasibility Study Nevada Star Resource Corp. 11.9

Section 11.0 Operating Costs

Operating Costs At Various Sales Prices

Tables 11.13, 11.14, 11.15 and 11.16 present the operating costs at copper sales prices of $0.80, $1.00, $1.05 and $1.20. Insert Table 11.13

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Section 11.0 Operating Costs

Insert Table 11.14

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Section 11.0 Operating Costs

Table 11.15 Operating Costs by Ore ($1.05 Cu) Tons (000) Total

Expected Tons Per Day

Mining Cost $/Ton

Days of Ore

Total Mining Costs (000)

Total Operating Cost Ex Mining

Total Oper. Cost

Essex Crushed

265.2

3695

1.00

72

265

1019

1284

Cortex

200.0

2947

1.00

68

200

1068

1268

Hidden Treasure

758.7

1040

3.93

730

2979

7888

10867

Copper Ranch

225.5

1572

3.65

143

823

1596

2419

Maria

429.6

1577

4.68

272

2009

3065

5074

OK Mine

1019.6

2392

2.98

426

3039

4734

7773

99.6

1254

1.00

79

100

783

883

1791

9415

20152

29567

Ore Type

Essex Hi Grade Total

2998.2

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Feasibility Study Nevada Star Resource Corp.

Section 11.0 Operating Costs

Insert Table 11.16

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Western States Engineering Tucson, Arizona

Feasibility Study Nevada Star Resource Corp. 12.0

Marketing

12.1

Introduction

Section 12.0 Marketing

Section 12 summarizes the current conditions of the world market, discusses the selling terms for Nevada Star’s OK Mine cathode copper and determines the relative competitive position of the project compared to the copper industry cost profile. 12.2

World Copper Production & Consumption

Some of the world's largest copper producers include Chile, Peru and the United States. About 80 percent of all copper mined today is derived from low-grade ores containing 2 percent or less of the element. Ores containing as little as 0.4 percent copper can be mined profitably in open-pit mining. Land-based ore reserves are estimated at 1.6 billion tons of copper. Domestic mine production in1997 was essentially unchanged at 1.9 million metric tons valued at about $4.6 billion. The five principal mining States, in descending order, Arizona, Utah, New Mexico, Nevada, and Montana, accounted for 98% of domestic production. Fifteen of the thirty-five operating mines accounted for about 97% of production. Refined production rose by about 60,000 tons, or 3 percent to 2.3 million tons. Eleven smelters, thirteen refineries and fifteen solvent extraction-electrowinning facilities were operating at year end. Refined copper and direct melt scrap is consumed by brass mills, rod mills, foundries, chemical plants, and miscellaneous consumers. Copper and copper alloy products are consumed in building construction (43%), electric and electronic products (24%), industrial machinery and equipment (12%), transportation equipment (12%) and consumer and general products (9%). Old scrap, converted to refined metal and alloys, provided 420,000 tons of copper, equivalent to 15% of apparent consumption. New scrap, derived from copper fabricating operations, yielded 930,000 tons of contained copper. Copper in all scrap forms comprised 36% of the U.S. copper supply. World mine production of copper increased by about 3% in 1997. Most of the increase in production came from Chile, where an estimated 300,000 tons of new capacity came on-stream. In the United States, mine production and capacity were essentially unchanged. Consumption of refined copper in the United States increased about 4% in 1997 owing to strong demand for wire mill products. At least one major wire rod producer reported operating above design capacity during 1997, despite having expanded capacity during 1996. Worldwide, the surplus of refined copper was projected to increase in1998 due to world mine capacity increases. Mine production for the first half of 1998 was down by more than 4%, 42,000 metric tons, from that

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of the first half of 1997 as a result of production cutbacks at several mines. At the current rate of production, full year production for 1998 is projected to decrease by more than 100,000 tons compared with that of 1997. Total smelter production for the first half of 1998 was 3% higher than the equivalent period in 1997 as increased production from the Garfield, Utah smelter overshadowed lower smelter production and maintenance shutdowns at other primary smelters. Total refined production during the first 6 months of the year was up by about 4% compared with the first 6 months of 1997 Consumption for the first 6 months of 1998 was up by more than 9% compared with the first 6 months of 1997. Overall, consumption of copper in the western world is growing at an average rate of 2.7% over the past ten years. Figure 12.1 shows the growth of consumption for the past fifteen years and the projected growth through the year 2004. The projected growth rate is expected to continue to exceed the rate of population growth of 2.2% per year. Since the Nevada Star OK Mine copper project is a six (6) year project the period of time relevant to this project is 7 years assuming 1 year to engineer and construct.

Figure 12.1 World Copper Demand

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Section 12.0 Marketing

OK Mine Project - General

The production of cathode copper from the Nevada Star OK Mine Project will produce on average 15 TPD cathode copper. A production rate of this magnitude will have virtually no impact on the marketplace. Since Nevada Star is not a current producer, they will need to establish markets. However, ready markets are expected to be available for the production, and require no extraordinary costs to place the production in the existing marketplace. Western States Engineering has used $30.00/T cathode for shipping and US$20.00/T cathode for handling costs. The cash cost for cathode distribution is therefore $0.025/lb copper as cathode. 12.4

Cathode Quality

The quality of copper cathode produced is dependent upon the degree technology is used in its production. Western States has assumed the design of a plant capable of producing London Metal Exchange (LME) Grade "A" cathode copper. This grade of copper requires the use of electrolyte cleaning steps in the process. Western States has included all of the normal industry standard electrolyte cleaning steps into the design including electrolyte heating. Table 12-1 presents elemental specifications for LME Grade "A" copper. The specification requires a purity wherein the maximum concentration on all impurities does not exceed 65 ppm. Upper limits are given for nine individual elements as well as for three groups of commonly occurring elements.

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Table 12-1 Specifications for LME Grade A Copper

Element Group

Element

Maximum Concentration of Element (ppm)

selenium tellurium bismuth

2 2 2

3 (Se, Te) 3 (Se, Te, Bi)

chromium manganese antimony cadmium arsenic phosphorous

4 5 -

15

3

lead

5

5

4

sulphur

15

15

5

tin nickel iron silicon zinc cobalt

10 -

20

silver

25

25

1

2

6

12.5

Maximum Concentration of Group of Elements (ppm)

Copper Price

During the first six months of 1997, copper supplies remained tight and prices trended upward and the U.S. producer price averaged $1.16 per pound. However, in July, 1997, commodity exchange inventories began to rise and prices declined. By the end of September, 1997, exchange inventories had more than doubled and the U.S. producer price had fallen below $1.00 per pound. Since then

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prices have steadily declined in general with the average cash price in January, 1998 at $0.76 per pound. At the same time, commodity exchange stocks have risen steadily to more than 477,000 tons at the end of February, 1998. Prices have generally averaged in the seventy cent range since that time with generally high stocks on the exchanges. Most analysts are abiding by their long-held view that cash copper prices need to remain in the $0.70 to $0.75 a pound range for another one to three years. This would induce the scale of capacity closure needed to bring about a reversal of the market's bearish fundamentals. Analysts estimate that new projects and expansions mean world copper production capacity is set to grow by 3.1 million tons a year over the next three years, while planned closures will reduce output by only 800,000 tons a year. In summary, copper prices are cyclical and will vary according to demand, LME and Comex stocks and speculation. Figure 12.2 depicts historical copper prices along with projections through the year, 2004. The current price of copper, about US $0.66 appears to have been fueled by poor economic conditions in Asia resulting in a weak demand for the metal. An analysis at today’s prices in our view would distort the value of potential projects. For the period of 1988 through 1997, the constant dollar copper price averaged about $1.13 per pound in constant '97 dollars. Western States firmly believes that prices will increase in a couple years and approach the average copper prices of the past. For purposes of the economic analysis Western States will use a base case copper price of $1.05 with sensitivity analysis at $1.20, $1.00, and $0.80.

Figure 12.2 U.S. Producer Copper Prices

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Section 12.0 Marketing

Distribution Costs

The distribution cost of $0.025/lb has been included as a line item deduction of revenues in the Financial Section of this study. This cost is representative of current expenses for shipping and handling for small producer plants. 12.7

Industry Cost Curves

Total cash costs to produce and ship to market copper from oxide ore at OK Mine have been summarized in Table 12-2. The operating costs are estimated to be $0.568/lb Cu, and the cathode distribution cash cost $0.025/lb Cu. No repayment of capital, interest, depreciation or pre-production costs are included in the cash cost of production. By industry convention, competitive cash costs are calculated per pound of payable metals rather than contained metal. When considering LME Grade "A" cathode copper the purity (99.99+%) is such that the product is considered essentially pure metal. Table 12-2

Market Comparison Cash Costs $/lb of Payable Metal Cash Production Cost Cathode Distribution

0.568 0.025

Total Cost

0.593

OK Mine cash costs were compared with the cumulative copper mining industry cost curve and the SX-EW production cost curve developed by Brook Hunt & Associates Limited, for 1995. Based on $0.587/lb Cu, OK Mine will be located in the 40th percentile (40%) of the total copper mining industry, but one of the higher cost SX/EW producers.

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Financial Evaluation

13.1

Introduction

Section 13.0 Financial Evaluation

Project economics are evaluated based upon an all-equity situation; that is, a capital structure without debt. It is presented in constant monetary terms, without any consideration of escalation or inflation. Summarized below are the assumptions used with regard to production, costs, markets, and other factors used in the analysis. 13.2

Basic Assumptions

There are 4.91 years of reserves at capacity production with a planned operating life of five years of production following plant construction. The raw material, or ore, reserve of three million tons will be processed at capacity at an average rate of 610,000 short tons annually. Mining and processing of the ore by crushing, heap leaching, solvent extraction and electrowinning to produce cathode copper is expected to achieve an overall recovery rate of 82.2%. 13.2.1 Project Schedule and Start-up of Production For simplicity's sake we have included all capital expenditures and pre-production costs in what we have called Project Year 0. Project Year 0 is 14 months in duration and is the net time required from a "GO" to partial production which then ramps up to full production. 13.2.2 Production Forecast Nevada Star will initially operate producing 440 short tons of cathode copper per month using the various dumps - Essex Crushed, Cortex and Essex Hi Grade. Production will then be increased to approximately 485 tons per month for the next two years while operating on Hidden Treasure ore. Thereafter, production will be 440 short tons per month for the remaining couple of years of operation. No economic consideration has been given to the production of additional copper from existing ore dumps or other stockpiles in the area which could be added to the project. 13.2.3 Metal Price The project is very sensitive to the price of copper. WSE has elected to use a price of copper of a constant $1.05 per pound for the base case. WSE fully recognizes that the price of copper is historically low at this time (current LME prices are approximately US$ 0.66 per pound) but an analysis at today’s prices in our view distorts the potential value of the project.

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The $1.05 price of copper was selected since the average United States Producer Copper Price for years 1988-1997 is greater than US$ 1.13 per pound of copper (Source: Metals Week, electrolytic copper, f.o.b. refinery). The sensitivity to the price of copper was reflected in the study with sensitivity analyses at $0.60, $0.80, $1.00, $1.20, and $1.40 per pound. The sensitivity to the price of copper is presented in Table 13.1 and a graphical representation is shown in Figure 13.1. 13.2.4 Sales Terms It was assumed that the average cash price would be recognized upon shipment. It is expected that Nevada Star will have long-term contracts for the bulk of its product. 13.2.5 Royalties Nevada Star will need to pay royalties on copper production from three of the ore bodies. The royalty is 2% of sales revenue on Hidden Treasure and Maria ores and 4% on Copper Ranch production. 13.2.6 Markets Preliminary indications are that the entire output of Nevada Star would be sold entirely within the U.S.A. Inasmuch as total output is modest by international standards, extensive marketing efforts should not be required. No commission has been included in the estimates. 13.2.7 Distribution Costs Shipment of copper cathodes from job-site is projected to cost $30 per ton, while handling is estimated at $20 per ton. 13.2.8 Escalation Factors Results presented are in constant, uninflated, U.S. dollar terms. No changes in cost levels are considered, but were averaged for life of mine. 13.2.9 Operating Costs Operating costs are those developed and presented in Section 11.0. The project is also sensitive to operating costs (Mining and processing costs) so costs were varied above and below the projected numbers and the results are presented in Table 13.2 and graphically in figure 13.2. 13.2.10 Taxes

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Nevada Star’s tax situation was not available to Western States. Therefore the analysis focused on cumulative pretax cash flow only and did not include any state or federal taxes. Tax considerations will be addressed by others. 13.2.11 Depreciation/Amortization For the development of cash flow before taxes, depreciation is not a consideration. The project only considered the return of capital based on cash flow over the life of the project. 13.2.12 Fixed Capital Estimated fixed capital costs are $8,029,517, as shown in Section 10.0. The sensitivity to capital was analyzed and is presented in Table 13.3 and Figure 13.3. 13.2.13 Additional and Sustaining Capital Capital expenditures for replacement and major maintenance requirements are projected at an annual rate of $60,000 for project years two through five. One-half the leach pad will be constructed initially with the second half being constructed in project year two. 13.2.14 Working Capital Working capital requirements were provided at a level equal to 45 days of the total operating costs. 13.2.15 Salvage Values Plant and equipment is assumed to have a salvage value of $490,000 which is equal to 35% of a saleable equipment total of $1.4 million. This subject is covered fully in Section 10.0. 13.2.16 Reclamation Provision has been made for reclamation of the project-site and is included as a line item in the financial analysis. Nevada Star has estimated the cost at $633,000 and will be deposited in year zero.

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Section 13.0 Financial Evaluation

Project Economics

13.3.1 Cash Flow Summary Projected cumulative pretax cash flows are presented in the worksheets at the end of this section. Based upon the capital costs and operating costs presented in Sections 10.0 and 11.0 respectively, the financial analysis predicts a cumulative pretax cash flow of US$ 16.15 million for the base case. The breakeven price of copper is calculated to be $0.748 per pound. The variance in cumulative pretax cash flow with the sales price of copper is shown in Table 13.1 and a graphical representation is shown in Figure 13.1. The variance in cumulative pretax cash flow with changes in operating costs is shown in Table 13.2 and Figure 13.2. The variance in cumulative pretax cash flow with changes in capital costs is shown in Table 13.3 and Figure 13.3. 13.3.2 Return on Investment The internal rate of return of the project was not calculated since the Nevada Star tax position is unknown. Financial results are presented in cumulative pretax cash flow only. 13.3.3 Net Present Value The NPV of the project was not calculated since the Nevada Star tax position is unknown. Financial results are presented in cumulative pretax cash flow only. 13.3.4 Pay Back The pay back period based upon cumulative pretax cash flow, beginning with the start-up of operations is less than two years (Base Case). 13.3.5 Cash Cost The average cash cost of production over the life of the project is projected at $0.568 per pound. 13.4

Sensitivity Analysis Variations in cash flow due to sales price, operating costs and capital cost are shown in the following tables and figures. At the end of this section are the various computer work sheets.

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Table 13.1 Variation in Cash Flow Due to Sales Price Sales Price (US$)

Cumulative Cash Flow ($000)

$ 0.60

($6,772)

$ 0.748

$0

$ 0.80

$3,921

$ 1.00

$13,647

$ 1.05 (Base Case)

$16,154

$ 1.20

$24,902

$ 1.40

$35,797

Figure 13.1 Variation in Cash Flow Due to Sales Price

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Table 13.2 Variation in Cash Flow Due to Operating Cost Sales Price (US$)

Cumulative Cash Flow ($000)

Minus 30%

$25,024

Minus 15%

$20,589

Base Case

$16,154

Plus 15%

$11,719

Plus 30%

$7,284

Figure 13.2 Variation in Cash Flow Due to Operating Cost

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Table 13.3 Variation in Cash Flow Due to Capital Cost Sales Price (US$)

Cumulative Cash Flow ($000)

Minus 30%

$18,775

Minus 15%

$17,464

Base Case

$16,154

Plus 15%

$14,844

Plus 30%

$13,533

Figure 13.3 Variation in Cash Flow Due to Capital Cost

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Section 14.0 Units of Measure

Units of Measure

Unit amperes brake horsepower British Thermal Unit centimeter cubic foot, feet cubic meter cubic yard cu.yd. day decibel degree, celsius, fahrenheit feet, foot gallon, gallons per minute GPM gram hectare hertz horse power hour inches joules kilogram kilometer kilo newton kilopascal kilovolt ampere kilowatt hour litre meter megapascal mega volt ampere megawatt megawatt hour

Symbol A bhp Btu cm ft3, cu.ft. m³ yd3, d dB °C, F ft gal., g ha Hz hp h, hr. in. J kg km kN kPa KVA kWh L, l m MPa MVA MW MWh/ MWhr.

Unit micron mile milligram milliliter millimeter minutes ounce ounce (troy) pascal percent pound pound per square inch pound per square foot revolutions per second second square centimeter square foot square kilometer square meter square millimeter square yard ton ton per day ton per hour ton per year ton, short volt volt ampere watt yard year

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Symbol µ mi. mg ml mm min. oz oz.T. Pa % lb, # psi,lb/in2 psi,lb/ft2 RPM s, sec. cm² ft2, sq.ft. km² m² mm² yd2, sq.yd. t t/d, tpd t/h, tph t/a, tpa, tpy short ton, s.t. V VA W yd. a, yr.

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