NI43-101 Technical Report

Prefeasibility Study (PFS) for the Araguaia Nickel Project

Pará State, Brazil
Prepared for: Horizonte Minerals Plc
25 March 2014

Qualified Persons:
Anthony Finch, P.Eng., MAusIMM (CP Mining), B.Eng., B.Econ
Harald Muller, B. Eng., (Chem), MBL, FAusIMM, FIChemE, FSAIChE, C Eng, Pr Eng
Peter Theron, Pr Eng, SAIMM, B.Eng (Civil Eng), G.D.E
Andrew Ross, BSc (Hons), MSc, MAIG, FAusIMM, PGeo

Final
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Issued by: London Office
Doc Ref: 140520_Final_L0566_HZM Araguaia Ni43-101
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Last Edited: 26 June 2014
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 Horizonte Minerals Plc: NI43-101 Technical Report
Prefeasibility Study (PFS) for the Araguaia Nickel Project

1 Summary ........................................................................................................................... 20
1.1 Introduction ............................................................................................................ 20
1.2 Property location, accessibility and climate ............................................................ 21
1.3 Property ownership ................................................................................................ 23
1.4 Property description ............................................................................................... 23
1.5 Geology and mineralisation .................................................................................... 24
1.6 Drilling .................................................................................................................... 27
1.7 Mineral resource .................................................................................................... 28
1.8 Mining .................................................................................................................... 32
1.9 Mineral reserve estimate ........................................................................................ 33
1.10 Metallurgical testwork ............................................................................................. 34
1.10.1 Prior testwork ......................................................................................... 34
1.10.2 Agglomeration testwork – Feeco International ........................................ 35
1.10.3 Sample characterisation and smelting tests – Xstrata Process
Support (XPS) ........................................................................................ 35
1.10.4 Slag chemistry testwork and simulations – Kingston Process
Metallurgy (KPM).................................................................................... 36
1.10.5 Slag liquidus temperatures - KPM .......................................................... 37
1.10.6 Measurement of physical and chemical ore properties – FL Smidth
(FLS) ...................................................................................................... 37
1.10.7 Smelting testwork review ........................................................................ 38
1.11 Process design and recovery ................................................................................. 39
1.11.1 Process selection ................................................................................... 39
1.11.2 Process description ................................................................................ 39
1.12 Project infrastructure .............................................................................................. 41
1.13 Execution plan........................................................................................................ 42
1.14 Capital cost ............................................................................................................ 43
1.15 Operating cost ........................................................................................................ 43
1.16 Royalties (CFEM) ................................................................................................... 44
1.17 Taxation ................................................................................................................. 44
1.18 Economic evaluation .............................................................................................. 45
1.19 Summary of the project risks .................................................................................. 46
1.20 Conclusions and recommendations........................................................................ 47
1.20.1 Conclusions............................................................................................ 47
1.20.2 Recommendations ................................................................................. 47

2 Introduction........................................................................................................................ 48
2.1 Overview ................................................................................................................ 48
2.2 Sources of Information ........................................................................................... 48
2.2.1 Applicable Documents ............................................................................ 48
2.2.2 References ............................................................................................. 49

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3 Reliance on other experts .................................................................................................. 50

4 Property description and location ....................................................................................... 51

4.1 Introduction ............................................................................................................ 51
4.2 Location ................................................................................................................. 51
4.3 Licences and tenure ............................................................................................... 51
4.3.1 Mining legislation overview ..................................................................... 51
4.3.2 Licencing details ..................................................................................... 52
4.4 Agreements and encumbrances ............................................................................. 56
4.5 Environmental obligations ...................................................................................... 56

5 Accessibility, climate, local resources, infrastructure and physiography ............................. 59

5.1 Access ................................................................................................................... 59
5.2 Proximity to population centres and transport ......................................................... 59
5.3 Climate and length of operating season ................................................................. 61
5.4 Surface rights ......................................................................................................... 65
5.5 Infrastructure .......................................................................................................... 66
5.5.1 Power ..................................................................................................... 66
5.5.2 Roads..................................................................................................... 66
5.5.3 Rail ......................................................................................................... 66
5.5.4 Ports....................................................................................................... 67
5.5.5 Water ..................................................................................................... 67
5.5.6 Mining personnel .................................................................................... 67
5.5.7 Slag and waste dumps ........................................................................... 67
5.5.8 Process plant sites ................................................................................. 68
5.5.9 Communications .................................................................................... 68
5.6 Physiography ......................................................................................................... 68

6 History ............................................................................................................................... 70
6.1 Prior Ownership ..................................................................................................... 70
6.2 General description of exploration work undertaken by previous owners or
operators ................................................................................................................ 70
6.2.1 Introduction ............................................................................................ 70
6.2.2 Lontra ..................................................................................................... 72
6.2.3 Teck ....................................................................................................... 72
6.2.4 Lara ........................................................................................................ 74
6.3 Historical mineral resource, mineral reserve estimates and production .................. 74

7 Geological setting and mineralisation ................................................................................ 75

7.1 Geological setting................................................................................................... 75
7.1.1 Regional geology.................................................................................... 75
7.1.2 Project geology ...................................................................................... 75
7.2 Lithologies and mineralisation ................................................................................ 77

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7.2.1 Physical criteria ...................................................................................... 77

7.2.2 Chemical criteria .................................................................................... 80
7.2.3 Loss-on-Ignition (LOI) statistics .............................................................. 80
7.2.4 Facies distribution .................................................................................. 81
7.3 Mineralogical studies .............................................................................................. 82
7.4 Deposit geology ..................................................................................................... 85
7.4.1 Centre (JAC, VOW, VOI, VOE) .............................................................. 85
7.4.2 Pequizeiro (PQW, PQZ) ......................................................................... 89
7.4.3 South (Baião or BAI) .............................................................................. 91
7.4.4 Lontra sector .......................................................................................... 92

8 Deposit types..................................................................................................................... 94

9 Exploration ........................................................................................................................ 96
9.1 Lontra area............................................................................................................. 96

10 Drilling ............................................................................................................................... 98
10.1 Auger drilling .......................................................................................................... 98
10.1.1 Shallow auger drilling ............................................................................. 98
10.1.2 Wide diameter auger drilling ................................................................... 98
10.2 Diamond core drilling.............................................................................................. 99
10.2.1 Phase 1 .................................................................................................. 99
10.2.2 Phase 2 ................................................................................................ 100
10.2.3 Phase 3 ................................................................................................ 100
10.2.4 Geotechnical ........................................................................................ 104
10.3 Procedures........................................................................................................... 106
10.4 Qualified Person’s comment on drilling procedures .............................................. 107

11 Sample preparation, analyses, and security .................................................................... 108

11.1 Sample preparation methods and quality control measures prior to dispatch of
samples................................................................................................................ 108
11.2 Sample splitting .................................................................................................... 108
11.3 Security measures ............................................................................................... 111
11.4 Bulk density measurements ................................................................................. 111
11.5 Phase 3 sample preparation and analysis ............................................................ 114
11.5.1 Introduction .......................................................................................... 114
11.5.2 Routine sample preparation and analysis ............................................. 114
11.5.3 Check sample umpire analysis ............................................................. 115
11.5.4 Laboratory certification ......................................................................... 115
11.6 Results of Quality Assurance/Quality Control (QA/QC) ........................................ 116
11.6.1 Phase 3 results – standards, blanks, duplicates ................................... 116
11.7 Phase 3 results – umpire assay analysis .............................................................. 118
11.8 Author's opinion on the adequacy of sample preparation, security, and
analytical procedures ........................................................................................... 119

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12 Data verification ............................................................................................................... 120

12.1 Phase 3 data verification ...................................................................................... 120
12.2 Qualified person’s opinion on the adequacy of the data for the purposes used
in the technical report ........................................................................................... 120

13 Mineral processing and metallurgical testing ................................................................... 121

13.1 Introduction .......................................................................................................... 121
13.2 Sample selection and variability ........................................................................... 121
13.2.1 Introduction .......................................................................................... 121
13.2.2 Samples sent to XPS ........................................................................... 122
13.2.3 Samples sent to FLS ............................................................................ 122
13.3 Metallurgical testwork review................................................................................ 124
13.3.1 Feeco ................................................................................................... 124
13.3.2 Pyrometallurgical laboratory testing by XPS ......................................... 127
13.3.3 KPM ..................................................................................................... 129
13.3.4 KPM Report 29 July 2012..................................................................... 129
13.3.5 KPM Report 26 April 2013 .................................................................... 130
13.3.6 FLS ...................................................................................................... 131
13.3.7 Discussion on smelting testwork........................................................... 138
13.3.8 Other testwork conducted..................................................................... 140
13.4 Key recommendations from the testwork conducted ............................................ 141

14 Mineral Resource estimates ............................................................................................ 143

14.1 Summary.............................................................................................................. 143
14.2 Mineral Resource estimates for the PFS based on drilling up to Phase 3 ............. 143
14.2.1 Data provided and preparation ............................................................. 144
14.2.2 Geological interpretation and horizon modelling ................................... 144
14.2.3 Block model definitions ......................................................................... 145
14.2.4 Compositing of assay intervals ............................................................. 145
14.3 Exploratory data analysis - summary statistics ..................................................... 146
14.4 Estimation ............................................................................................................ 153
14.4.1 Variography .......................................................................................... 153
14.4.2 Estimation method and parameters ...................................................... 154
14.4.3 Search parameters ............................................................................... 154
14.4.4 Search ellipse strategy ......................................................................... 154
14.4.5 Estimation settings summary ................................................................ 154
14.4.6 Model validation ................................................................................... 155
14.5 Calculation of dry density ..................................................................................... 156
14.6 Mineral Resource classification ............................................................................ 156
14.6.1 Mineral Resource classification scheme ............................................... 159
14.6.2 PFS Mineral Resource reporting .......................................................... 159
14.7 Other deposits within the project area .................................................................. 162

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15 Mineral Reserve estimates .............................................................................................. 165

15.1 Summary.............................................................................................................. 165
15.2 Disclosure ............................................................................................................ 165
15.2.1 Known issues that materially affect mineral reserves ........................... 166
15.3 Assumptions, methods and parameters ............................................................... 166
15.3.1 Pit optimisation ..................................................................................... 166
15.3.2 Pit design ............................................................................................. 168

16 Mining methods ............................................................................................................... 170

16.1 Geotechnical investigation - summary .................................................................. 170
16.1.1 Engineering geology............................................................................. 170
16.1.2 Ground water ....................................................................................... 170
16.1.3 Geotechnical model.............................................................................. 171
16.2 Slope stability ....................................................................................................... 172
16.2.1 Waste dump slope design .................................................................... 172
16.2.2 Trafficability .......................................................................................... 173
16.2.3 Geotechnical review of proposed pit design ......................................... 173
16.2.4 Recommendations for further work ....................................................... 175
16.3 Mine planning methodology.................................................................................. 175
16.4 Mining concept ..................................................................................................... 176
16.4.1 Excavation............................................................................................ 176
16.4.2 Trafficability .......................................................................................... 179
16.4.3 Ore transport ........................................................................................ 180
16.4.4 Waste disposal ..................................................................................... 181
16.5 Modifying factors .................................................................................................. 181
16.5.1 Resource model ................................................................................... 181
16.5.2 Geotechnical parameters ..................................................................... 182
16.5.3 Mining parameters................................................................................ 182
16.5.4 Processing parameters ........................................................................ 182
16.5.5 Sales parameters ................................................................................. 182
16.5.6 Administration costs ............................................................................. 182
16.5.7 Cut-off grades ...................................................................................... 182
16.6 Mining model ........................................................................................................ 183
16.7 Pit design ............................................................................................................. 186
16.9 Mineral Reserve ................................................................................................... 194
16.10 Site layout ............................................................................................................ 194
16.10.1 Basis .................................................................................................... 195
16.10.2 Vila Oito zone ....................................................................................... 196
16.10.3 Jacutinga zone ..................................................................................... 197
16.10.4 Pequizeiro zone ................................................................................... 197
16.10.5 Baião zone ........................................................................................... 198
16.10.6 Stockpile and dump capacities ............................................................. 199

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16.11 Trunk roads .......................................................................................................... 201

16.12 Mining schedule ................................................................................................... 201
16.12.1 Basis .................................................................................................... 201
16.13 Schedule report .................................................................................................... 210
16.13.1 Mining schedule ................................................................................... 210
16.13.2 Ore mining schedule ............................................................................ 212
16.13.3 Processing schedule ............................................................................ 214
16.13.4 Product schedule.................................................................................. 216
16.14 Cost estimate ....................................................................................................... 217
16.14.1 Equipment supplier preference ............................................................. 217
16.14.2 Scope ................................................................................................... 218
16.14.3 Accuracy .............................................................................................. 218
16.14.4 Cost modelling methodology ................................................................ 218
16.15 Equipment selection ............................................................................................. 219
16.15.1 Off-highway truck selection .................................................................. 220
16.15.2 On-highway truck selection .................................................................. 220
16.15.3 Excavator selection .............................................................................. 220
16.15.4 Front end loader selection .................................................................... 220
16.16 Mining management ............................................................................................. 220
16.17 Productivity .......................................................................................................... 221
16.17.1 Loading ................................................................................................ 221
16.17.2 Hauling ................................................................................................. 222
16.17.3 Grade control drilling ............................................................................ 225
16.18 Equipment requirements ...................................................................................... 225
16.18.1 Operating hours ................................................................................... 225
16.18.2 Fleet equipment requirements (load, haul, drill) .................................... 226
16.18.3 Ancillary ............................................................................................... 227
16.19 Non-equipment requirements ............................................................................... 228
16.19.1 Manning ............................................................................................... 228
16.19.2 Fuel ...................................................................................................... 231
16.19.3 Explosives ............................................................................................ 232
16.19.4 Sampling .............................................................................................. 233

17 Recovery methods........................................................................................................... 234

17.1 Introduction .......................................................................................................... 234
17.2 Process Selection ................................................................................................ 235
17.3 Process description .............................................................................................. 236
17.3.1 ROM ore reception ............................................................................... 238
17.3.2 Ore crushing and homogenisation ........................................................ 238
17.3.3 Ore drying and tertiary crushing ........................................................... 240
17.3.4 Calcining .............................................................................................. 242
17.3.5 Smelting ............................................................................................... 244

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17.3.6 Slag characteristics .............................................................................. 245

17.3.7 Smelting process description ................................................................ 246
17.3.8 Refining ................................................................................................ 249
17.3.9 Metal granulation and product conditioning .......................................... 252
17.3.10 Auxiliary process installations ............................................................... 254
17.3.11 Coal preparation ................................................................................... 254
17.3.12 Dust handling systems ......................................................................... 256
17.3.13 Utilities ................................................................................................. 257
17.3.14 Fuel oil storage..................................................................................... 257
17.3.15 Diesel storage ...................................................................................... 257
17.3.16 LPG storage ......................................................................................... 257
17.3.17 Water systems ..................................................................................... 257
17.3.18 Söderberg paste handling .................................................................... 258
17.3.19 Refinery reagents handling................................................................... 258
17.3.20 Compressed air .................................................................................... 258
17.3.21 Oxygen and nitrogen ............................................................................ 259
17.4 Process design criteria ......................................................................................... 259
17.4.1 Ore receipt, crushing and homogenising .............................................. 260
17.4.2 Rotary dryer and tertiary screening ...................................................... 262
17.4.3 Rotary kiln ............................................................................................ 264
17.4.4 Coal treatment and fuel oil .................................................................... 266
17.4.5 Electric furnace and associated equipment .......................................... 268
17.4.6 Refining ................................................................................................ 271
17.4.7 Metal granulation .................................................................................. 273
17.5 Manpower Requirements ..................................................................................... 273
17.6 Mass and energy balances .................................................................................. 274
17.7 Ramp-up .............................................................................................................. 274

18 Project infrastructure ....................................................................................................... 278

18.1 Summary.............................................................................................................. 278
18.2 Plant site selection ............................................................................................... 280
18.3 Roads .................................................................................................................. 280
18.3.1 Main access road ................................................................................. 283
18.3.2 Trunk roads .......................................................................................... 284
18.3.3 Ancillary plant site roads....................................................................... 284
18.4 Rail....................................................................................................................... 284
18.5 Port facilities ......................................................................................................... 285
18.6 Supply chain solution (Coal and Fe-Ni) ................................................................ 286
18.6.1 Coal supply .......................................................................................... 286
18.6.2 Fe-Ni export ......................................................................................... 287
18.6.3 Supply chain synergy ........................................................................... 288
18.7 Water supply ........................................................................................................ 289

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18.8 Coal storage facility .............................................................................................. 289

18.9 Slag storage facility .............................................................................................. 290
18.10 Security and fencing ............................................................................................. 292
18.11 Water cooling facility ............................................................................................ 292
18.12 Water treatment and minesite sewage ................................................................. 294
18.12.1 Water requirements .............................................................................. 294
18.12.2 Water sources ...................................................................................... 294
18.13 Fire-fighting system .............................................................................................. 295
18.14 Employee housing and transportation .................................................................. 295
18.15 Communications .................................................................................................. 295
18.16 Power supply ....................................................................................................... 296
18.16.1 Overview of the Brazilian energy market .............................................. 296
18.16.2 Power distribution and transmission (national perspective) .................. 296
18.16.3 Pará state power capacity and distribution ........................................... 296
18.16.4 Tocantins state power capacity and distribution ................................... 297
18.16.5 Electrical energy source ....................................................................... 298
18.16.6 Estimated Project power requirements ................................................. 299
18.16.7 Connection to the 500 kV power grid .................................................... 300
18.16.8 Energy supply system configuration ..................................................... 301
18.16.9 Conclusion ........................................................................................... 303

19 Market studies ................................................................................................................. 304

19.1 Fe-Ni market study ............................................................................................... 304
19.2 Sources of nickel supply....................................................................................... 304
19.3 Outlook for nickel consumption ............................................................................ 304
19.4 Principal applications of Fe-Ni and market position of Araguaia product .............. 304
19.5 Nickel price forecasts ........................................................................................... 305
19.6 Iron credit forecast................................................................................................ 307
19.7 Economic evaluation price ................................................................................... 308

20 Environmental studies, permitting, and social or community impact ................................ 309

20.1 Introduction .......................................................................................................... 309
20.2 Project background .............................................................................................. 309
20.3 Project description................................................................................................ 311
20.4 Legal framework................................................................................................... 312
20.5 Permitting ............................................................................................................. 312
20.5.1 Permitting requirements ....................................................................... 312
20.5.2 Permitting status .................................................................................. 313
20.5.3 Permitting schedule .............................................................................. 313
20.6 Environmental and social investigations ............................................................... 314
20.7 Summary of environmental baseline conditions.................................................... 315
20.8 Summary of social baseline conditions ................................................................. 318

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20.9 Stakeholder engagement ..................................................................................... 319

20.10 Resettlement planning.......................................................................................... 319
20.11 Rehabilitation and closure .................................................................................... 319
20.11.1 Mine closure ......................................................................................... 319
20.12 Planning for feasibility .......................................................................................... 320

21 Capital and operating costs ............................................................................................. 322

21.1 Cost estimation overview ..................................................................................... 322
21.2 Exclusions ............................................................................................................ 323
21.3 Capital costs ........................................................................................................ 323
21.1 Operating costs .................................................................................................... 325
21.2 Royalties (CFEM) ................................................................................................. 326
21.3 Taxation ............................................................................................................... 327
21.4 Trade off studies .................................................................................................. 329

22 Economic analysis ........................................................................................................... 331

22.1 The basis for choosing the Base Case ................................................................. 331
22.2 Base Case economic headline results.................................................................. 331
22.3 General criteria..................................................................................................... 332
22.4 Economic model inputs ........................................................................................ 333
22.5 Economic model results ....................................................................................... 334
22.6 Production summary ............................................................................................ 335
22.7 Key performance indicators (KPI) ......................................................................... 336
22.8 Sensitivity analysis ............................................................................................... 337
22.9 Breakeven analysis .............................................................................................. 339
22.10 Trade off studies .................................................................................................. 339

23 Adjacent properties.......................................................................................................... 341

24 Other relevant data and information................................................................................. 342

25 Interpretation and conclusions ......................................................................................... 343

25.1 Interpretations and conclusions ............................................................................ 343
25.2 Risks and opportunities ........................................................................................ 344

26 Recommendations........................................................................................................... 347
26.1 Geology................................................................................................................ 347
26.2 Mining .................................................................................................................. 347
26.3 Metallurgy ............................................................................................................ 349
26.3.1 Testwork .............................................................................................. 349
26.3.2 Future work .......................................................................................... 349
26.3.3 Recommendations ............................................................................... 349
26.4 Environmental and Social ..................................................................................... 350
26.4.1 Resettlement planning .......................................................................... 350

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26.4.2 Completion of baseline specialist studies ............................................. 350

26.4.3 Social and environmental impact assessment ...................................... 351

27 Certificates ...................................................................................................................... 353

27.1 Andrew F. Ross.................................................................................................... 353
27.2 Harald Muller ........................................................................................................ 354
27.3 Anthony Finch ...................................................................................................... 355
27.4 Peter Theron ........................................................................................................ 356

28 References ...................................................................................................................... 357

28.1 Geology................................................................................................................ 357
28.2 Environmental and Social ..................................................................................... 357
28.3 Power ................................................................................................................... 358
28.4 Logistics ............................................................................................................... 358
28.5 Metallurgy ............................................................................................................ 358

Tables
Table 1.1 Summary of resource delineation drilling by HZM and Teck for PFS ...... 28
Table 1.2 Mineral Resources for Araguaia as at March 2014 by material type
(0.95% Ni cut-off grade) ......................................................................... 29
Table 1.3 JORC Code (2012) Table 1 Section 1 – Sampling techniques and
data ........................................................................................................ 31
Table 1.4 JORC Code (2012) Table 1 Section 3 – Estimation and reporting of
Mineral Resources ................................................................................. 32
Table 1.5 March 2014 Mineral Reserve estimate ................................................... 34
Table 1.6 Summarised key process design criteria ................................................ 41
Table 1.7 Proposed process plant ramp-up............................................................ 42
Table 1.8 Pre-production capital costs ................................................................... 43
Table 1.9 Production capital costs.......................................................................... 43
Table 1.10 LOM operating costs .............................................................................. 44
Table 1.11 Royalties ................................................................................................ 44
Table 1.12 Taxation ................................................................................................. 44
Table 1.13 Base Case economic model headline results before taxation ................. 45
Table 1.14 Base Case economic model headline results after taxation .................... 45
Table 1.15 Base Case KPI before taxation............................................................... 46
Table 2.1 Responsibilities of each co-author .......................................................... 48
Table 4.1 Permit summary ..................................................................................... 55
Table 7.1 Soil thickness statistics derived from Project drill logs ............................ 77
Table 7.2 Pisolithic ferricrete thickness statistics derived from Project drill logs ..... 78
Table 7.3 Cemented ferricrete thickness statistics derived from Project drill
logs ........................................................................................................ 78
Table 7.4 Average composition per facies based on Teck and HZM diamond
drilling to 2013 ........................................................................................ 80
Table 7.5 Average LOI statistics by area and horizon ............................................ 81

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Table 7.6 Maximum and average thickness of laterite horizons (including 2013
data) ....................................................................................................... 81
Table 10.1 Summary of resource delineation drilling by HZM and Teck ................. 102
Table 10.2 Phase 3 resource delineation drilling news releases ............................ 103
Table 10.3 Details of pit geotechnical drillholes ...................................................... 105
Table 10.4 Details of plant site geotechnical drillholes .......................................... 105
Table 11.1 Average dry, wet bulk densities, moisture contents and chemistry ....... 114
Table 11.2 Suite of constituents for method XRF79C and PHY01E ....................... 115
Table 11.3 Quality control failures and actions ....................................................... 117
Table 13.1 Key base case project criteria .............................................................. 121
Table 13.2 Assay data of samples sent to XPS for testing ..................................... 122
Table 13.3 Target laterite chemistry based on the resource (February 2012) at
Pequizeiro and Baião at a 1.2% Ni cut-off ............................................ 123
Table 13.4 Chemical analysis of the samples received at FLS ............................... 123
Table 13.5 Testwork reports .................................................................................. 124
Table 13.6 Chemical analysis ................................................................................ 133
Table 13.7 Estimated furnace metal and slag temperatures ................................... 140
Table 14.1 Mineral Resources for Araguaia as at March 2014 by material type
(0.95% Ni cut-off grade) ....................................................................... 144
Table 14.2 Block model definitions ......................................................................... 145
Table 14.3 Grade characteristics for VOW ............................................................. 146
Table 14.4 Grade characteristics for VOI ............................................................... 147
Table 14.5 Grade characteristics for VOE .............................................................. 148
Table 14.6 Grade characteristics for JAC ............................................................... 149
Table 14.7 Grade characteristics for PQZ .............................................................. 150
Table 14.8 Grade characteristics for PQW ............................................................. 151
Table 14.9 Grade characteristics for BAI ................................................................ 152
Table 14.10 Top-cuts applied during grade estimation ............................................. 153
Table 14.11 Estimation parameters ......................................................................... 155
Table 14.12 JORC Code (2012) Table 1 Section 1 – Sampling techniques and
data ...................................................................................................... 157
Table 14.13 JORC Code (2012) Table 1 Section 3 – Estimation and reporting of
Mineral Resources ............................................................................... 158
Table 14.14 PFS Mineral Resource estimates reported at 0.95% Ni cut-off ............. 160
Table 14.15 Non-PFS Mineral Resource estimates reported at 0.95% Ni cut-off ..... 164
Table 15.1 March 2014 Mineral Reserve estimate ................................................. 165
Table 15.2 Pit optimisation parameters .................................................................. 167
Table 15.3 Pit optimisation results ......................................................................... 168
Table 15.4 Design inventory comparison ............................................................... 168
Table 16.1 Summary of geotechnical domains ....................................................... 171
Table 16.2 Recommended batter configurations under different groundwater
conditions ............................................................................................. 172
Table 16.3 Recommended overall slope angles ..................................................... 172

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Table 16.4 Required sheeting thicknesses ............................................................. 173

Table 16.5 Mining zones ........................................................................................ 180
Table 16.6 Ore grade bins ..................................................................................... 180
Table 16.7 Reblocked Indicated Resource summary at 1% Ni cut-off (Transition
and Saprolite material only) .................................................................. 183
Table 16.8 Design inventory comparison ............................................................... 186
Table 16.9 Baião mining panel summary ............................................................... 187
Table 16.10 Pequizeiro mining panel summary ........................................................ 188
Table 16.11 Pequizeiro West mining panel summary ............................................... 189
Table 16.12 Jacutinga mining panel summary ......................................................... 190
Table 16.13 Vila Oito East mining panel summary ................................................... 191
Table 16.14 Vila Oito mining panel summary ........................................................... 192
Table 16.15 Vila Oito West mining panel summary .................................................. 193
Table 16.16 Probable Mineral Reserve .................................................................... 194
Table 16.17 Dump capacities (m3) ........................................................................... 200
Table 16.18 Base Case mining schedule by deposit (dry mass ore and waste) ....... 212
Table 16.19 Processing schedule ............................................................................ 216
Table 16.20 Product schedule.................................................................................. 217
Table 16.21 Primary mining equipment .................................................................... 219
Table 16.22 Ancillary equipment .............................................................................. 219
Table 16.23 Owner-operator versus contractor comparison ..................................... 221
Table 16.24 Loader inputs ....................................................................................... 222
Table 16.25 Material properties................................................................................ 222
Table 16.26 Loader productivity ............................................................................... 222
Table 16.27 Truck inputs.......................................................................................... 222
Table 16.28 Truck productivity by source and destination ........................................ 224
Table 16.29 Operating hours ................................................................................... 226
Table 16.30 Primary equipment requirements.......................................................... 227
Table 16.31 Ancillary equipment requirements ........................................................ 228
Table 16.32 Operator hours parameters .................................................................. 229
Table 16.33 Mining general management ................................................................ 229
Table 16.34 Mining supervisory staff ........................................................................ 229
Table 16.35 Mining technical services staff .............................................................. 230
Table 16.36 Mining safety and training staff (all mines) ............................................ 230
Table 16.37 Manning requirements .......................................................................... 231
Table 16.38 Fuel burns ............................................................................................ 232
Table 16.39 Fuel requirement schedule ................................................................... 232
Table 16.40 Samples required ................................................................................. 233
Table 17.1 Key criteria of crushing and dust recycling – Base Case ...................... 239
Table 17.2 Key drying parameters – Base Case .................................................... 241
Table 17.3 Tertiary crushing key parameters – Base Case .................................... 241
Table 17.4 Calcining key criteria – Base Case ....................................................... 243

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Table 17.5 Estimated furnace metal and slag temperatures ................................... 246
Table 17.6 Smelting key parameters – Base Case................................................. 248
Table 17.7 Metal characteristics............................................................................. 250
Table 17.8 Refining furnace key design characteristics – Base Case..................... 251
Table 17.9 Metal granulation key characteristics .................................................... 253
Table 17.10 Metal conditioning key characteristics .................................................. 253
Table 17.11 Coal preparation key characteristics ..................................................... 254
Table 17.12 Data source code ................................................................................. 259
Table 17.13 Overall plant design criteria – Base Case ............................................. 260
Table 17.14 Design criteria for ore receipt and crushing – Base Case .................... 261
Table 17.15 Design criteria for homogenising – Base Case ..................................... 262
Table 17.16 Design criteria for the rotary dryer – Base Case ................................... 263
Table 17.17 Design criteria for tertiary screening and crushing - Base Case............ 264
Table 17.18 Design criteria for rotary kiln – Base Case ............................................ 266
Table 17.19 Design criteria for coal production plant – Base Case .......................... 267
Table 17.20 Heavy fuel oil – Base Case .................................................................. 268
Table 17.21 Design criteria for electric furnace – Base Case ................................... 269
Table 17.22 Design criteria for refining – Base Case ............................................... 271
Table 17.23 Design criteria for metal granulation – Base Case ................................ 273
Table 17.24 Preliminary processs ramp-up - Base Case.......................................... 277
Table 18.1 Annual consumption of main consumables.......................................... 282
Table 18.2 Available facilities at the port of Itaqui................................................... 286
Table 18.3 Available equipment at the Port of Itaqui .............................................. 286
Table 18.4 Base Case water requirements ............................................................ 289
Table 18.5 Federal agencies for Brazilian electricity supply managment ................ 296
Table 18.6 2012/2011 Sources of electrical power in GWh .................................... 298
Table 18.7 Nominal and peak load demand ........................................................... 299
Table 19.1 Consensus Economics forecast ........................................................... 306
Table 19.2 Historical annual Ni metal price ............................................................ 307
Table 19.3 Typical Fe credits for a 17% Ni, Fe-Ni product. .................................... 307
Table 20.1 Approvals and permits required ............................................................ 313
Table 20.2 Permitting schedule .............................................................................. 314
Table 21.1 Base Case pre-production capital costs ............................................... 324
Table 21.2 Base Case production capital costs ...................................................... 325
Table 21.3 Base Case operating costs................................................................... 326
Table 21.4 Royalties (CFEM) ................................................................................. 327
Table 21.5 Taxation ............................................................................................... 329
Table 21.6 Base Case – Option 1 contractor.......................................................... 329
Table 21.7 Base Case – Option 2 owner operator.................................................. 330
Table 22.1 Base Case economic model headline results before taxation ............... 331
Table 22.2 Base Case economic model headline results after taxation .................. 332
Table 22.3 Base Case economic model inputs ...................................................... 333

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Table 22.4 Forward consensus Ni prices ............................................................... 334

Table 22.5 Historical Ni prices................................................................................ 334
Table 22.6 Base Case economic model headline results before taxation ............... 334
Table 22.7 Base Case economic model results before taxation ............................. 334
Table 22.8 Base Case economic model headline results after taxation .................. 335
Table 22.9 Production physicals by period ............................................................. 335
Table 22.10 Project financials by period................................................................... 336
Table 22.11 Base Case KPI’s before taxation .......................................................... 337
Table 22.12 Sensitivity table for NPV8 – before taxation .......................................... 338
Table 22.13 Breakeven analysis before taxation ...................................................... 339
Table 22.14 Case 1 economic model headline results before taxation ..................... 339
Table 22.15 Case 1 economic model headline results after taxation ........................ 339
Table 22.16 Case 2 economic model headline results before taxation ..................... 340
Table 22.17 Case 2 economic model headline results after taxation ........................ 340
Table 25.1 Risks and opportunities identified. ........................................................ 344

Figures
Figure 1.1 Location map and local infrastructure ..................................................... 22
Figure 1.2 Average monthly rainfall, Conceição do Araguaia .................................. 22
Figure 1.3 Monthly temperature, Conceição do Araguaia ........................................ 23
Figure 1.4 Typical topography of project area ......................................................... 24
Figure 1.5 Mineralogical distribution in the principal mineralised horizons ............... 25
Figure 1.6 Simplified geology map .......................................................................... 26
Figure 1.7 The Project process flow block diagram ................................................. 40
Figure 4.1 Project Location - infrastructure and other nickel laterite deposits .......... 53
Figure 4.2 Project Licence Map ............................................................................... 54
Figure 4.3 Map showing forested areas within the project licences ......................... 57
Figure 5.1 Araguaia Project location and regional infrastructure .............................. 60
Figure 5.2 Maximum and minimum mean temperature by month - 1961-2013 ........ 61
Figure 5.3 Maximum and minimum mean temperature for dry and wet season ....... 62
Figure 5.4 Monthly precipitation mean by month - 1961-2013 ................................. 62
Figure 5.5 Days with rainfall average - wet and dry season ..................................... 63
Figure 5.6 Total precipitation wet and dry season ................................................... 63
Figure 5.7 Average cloudiness between 1961 and 2013 ......................................... 63
Figure 5.8 Average cloudiness for wet and dry season ........................................... 64
Figure 5.9 Average relative humidity by month 1961-2013 ...................................... 64
Figure 5.10 Average relative humidity for wet and dry season................................... 65
Figure 5.11 View of general Project area looking north-northwest ............................. 68
Figure 5.12 View to the south-east over Pequizeiro (main zone) ............................... 69
Figure 5.13 View over the north part of Pequizeiro (main zone) ................................ 69
Figure 6.1 HMZ Project combined target map ......................................................... 71
Figure 7.1 Regional geolocical map ........................................................................ 76

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Figure 7.2 Mineralogical distribution in the principal mineralised facies ................... 82

Figure 7.3 Deportment of nickel in principal mineral facies (SGS 2011) .................. 83
Figure 7.4 Mineralogical distribution by size fraction in Blended Sample
(HM_51T_49S) ....................................................................................... 84
Figure 7.5 Deportment of nickel in the principal mineral species in Blended
Sample (HM_51T_49S) .......................................................................... 84
Figure 7.6 Bedrock structural geology map of Centre Sector .................................. 85
Figure 7.7 Outcrop of ultramafic rock within sinistral oblique thrust fault zone ......... 86
Figure 7.8 Updated bedrock JAC geology map after 2012-13 drill programme ........ 87
Figure 7.9 Updated bedrock VOW geology map after 2012-13 drill programme ...... 87
Figure 7.10 Updated bedrock VOI geology map after 2012-13 drill programme ........ 88
Figure 7.11 Updated bedrock VOE geology map after 2012-13 drill programme ....... 88
Figure 7.12 Bedrock structural geology map of Pequizeiro Sector ............................ 89
Figure 7.13 Silica and folded sediments along the margins of Pequizeiro ................. 90
Figure 7.14 Updated bedrock PQW geology map after 2012-13 drill programme ...... 90
Figure 7.15 Updated bedrock PQZ geology map ...................................................... 91
Figure 7.16 Updated bedrock BAI geology map ........................................................ 92
Figure 7.17 Ultramafic unit within the rupture zone and silica ridge ........................... 92
Figure 7.18 Geology map of North Lontra sector ....................................................... 93
Figure 8.1 Chemical trends in schematic nickel laterite profile................................. 95
Figure 8.2 Schematic laterite profile ........................................................................ 95
Figure 9.1 HZM Lontra licences soil geochemistry .................................................. 97
Figure 10.1 HZM Lontra drill location map ................................................................. 99
Figure 10.2 Drillsite DDH-0684................................................................................ 101
Figure 10.3 Collar location map of the HZM Project to 2012 ................................... 102
Figure 10.4 Schematic plan-view of drillhole locations for 2013 PFS resource
estimates .............................................................................................. 104
Figure 10.5 Location of geotechnical drillholes and pits at potential plant and
slag dump sites .................................................................................... 106
Figure 11.1 HZM core storage................................................................................. 109
Figure 11.2 Splitting soft core with paint scraper ..................................................... 110
Figure 11.3 Density measurement procedure.......................................................... 113
Figure 11.4 Results of umpire analyses .................................................................. 119
Figure 13.1 1 m diameter auger drill used to take the 130 tonne bulk sample at
Pequizeiro in September, 2011 ............................................................ 123
Figure 13.2 Feeco rotary agglomerator ................................................................... 125
Figure 13.3 Agglomerated product discharge .......................................................... 126
Figure 13.4 FLS pilot kiln......................................................................................... 135
Figure 13.5 FLS Tumble or breakage test unit (modified ASTM Test E279) ............ 136
Figure 14.1 Grade tonnage curve for Indicated Mineral resource ............................ 162
Figure 16.1 Stability anlysis results for a 20m high slope ........................................ 174
Figure 16.2 Slope height-overall slope angle relationship using typical sections ..... 174
Figure 16.3 Typical cross section showing rock types ............................................. 176

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Figure 16.4 Typically sheeting requirement ............................................................. 179

Figure 16.5 Grade-tonnage curve comparison for nickel grade ............................... 184
Figure 16.6 Grade-tonnage curve comparison for iron grade .................................. 185
Figure 16.7 Grade-tonnage curve comparison for Al2O3 grade .............................. 185
Figure 16.8 Grade-tonnage curve comparison for SiO2/MgO ratio........................... 186
Figure 16.9 Baião mining panels ............................................................................. 187
Figure 16.10 Pequizeiro mining panels ..................................................................... 188
Figure 16.11 Pequizeiro West mining panels ............................................................ 189
Figure 16.12 Jacutinga mining panels ....................................................................... 190
Figure 16.13 Vila Oito East mining panels ................................................................. 191
Figure 16.14 Vila Oito mining panels ......................................................................... 192
Figure 16.15 Vila Oito West mining panels ................................................................ 193
Figure 16.16 Overall mining configuration ................................................................. 195
Figure 16.17 Vila Oito zone layout ............................................................................ 196
Figure 16.18 Jacintuga zone layout ........................................................................... 197
Figure 16.19 Pequizeiro zone layout ......................................................................... 198
Figure 16.20 Baião zone layout ................................................................................. 199
Figure 16.21 Baião mining advance .......................................................................... 203
Figure 16.22 Pequizeiro mining advance .................................................................. 204
Figure 16.23 Pequizeiro West mining advance ......................................................... 205
Figure 16.24 Jacutinga Mining Advance.................................................................... 206
Figure 16.25 Vila Oito East mining advance .............................................................. 207
Figure 16.26 Vila Oito mining advance ...................................................................... 208
Figure 16.27 Vila Oito West mining advance ............................................................. 209
Figure 16.28 Mining schedule by deposit .................................................................. 210
Figure 16.29 Simultaneously active pits .................................................................... 211
Figure 16.30 Waste schedule .................................................................................... 211
Figure 16.31 Ore mining schedule ............................................................................ 213
Figure 16.32 Ore mining grades ................................................................................ 213
Figure 16.33 Stockpile schedule ............................................................................... 214
Figure 16.34 Processing schedule by rock type ........................................................ 214
Figure 16.35 Processing grade schedule .................................................................. 215
Figure 16.36 Recovered nickel schedule ................................................................... 217
Figure 17.1 Plant site location and orientation ......................................................... 235
Figure 17.2 Laterite profile and potential metallurgical processes ........................... 236
Figure 17.3 Process flow diagram ........................................................................... 237
Figure 17.4 Primary and secondary crushing and homogenisation flowsheet.......... 240
Figure 17.5 Drying and tertiary crushing flowsheet .................................................. 242
Figure 17.6 Calcining flowsheet .............................................................................. 244
Figure 17.7 Cross section of a typical electric arc furnace ....................................... 245
Figure 17.8 Smelting flowsheet ............................................................................... 249
Figure 17.9 Refining flowsheet ................................................................................ 252

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Figure 17.10 Refined metal granulation flowsheet ..................................................... 253

Figure 17.11 Refined metal conditioning flowsheet ................................................... 254
Figure 17.12 Coal preparation flowsheet ................................................................... 256
Figure 17.13 Block flowsheet of water system........................................................... 258
Figure 17.14 Rotary kiln - typical schematic .............................................................. 265
Figure 17.15 Typical electric arc furnace schematic .................................................. 268
Figure 17.16 Human Resource Requirement ............................................................ 274
Figure 17.17 McNulty curves of plant ramp ............................................................... 275
Figure 17.18 McNulty curves 1+2 and Project A........................................................ 276
Figure 18.1 Site layout ............................................................................................ 279
Figure 18.2 Location of plant location options ......................................................... 280
Figure 18.3 Regional road infrastructure ................................................................. 281
Figure 18.4 Road transport corridor to São Luís (port of Itaqui) ............................... 283
Figure 18.5 Map showing proposed access road to the Project site ........................ 284
Figure 18.6 Satellite image of the port at Itaqui ....................................................... 285
Figure 18.7 Coal supply chain ................................................................................. 286
Figure 18.8 Fe-Ni export process, container stowage at port .................................. 288
Figure 18.9 View of selected slag dump site ........................................................... 290
Figure 18.10 Location of slag dump in relation to plant ............................................. 291
Figure 18.11 Detailed plan of slag dump and water retention dam ............................ 292
Figure 18.12 Detail of water cooling facility ............................................................... 293
Figure 18.13 Load evolution, Pará state .................................................................... 297
Figure 18.14 Load evolution, Tocantins state ............................................................ 297
Figure 18.15 Brazilian supply of electrical energy (OIEE) breakdown........................ 298
Figure 18.16 Power Transmission to the Project site................................................. 300
Figure 18.17 Existing Colinas substation – Satellite view .......................................... 301
Figure 18.18 Existing Colinas substation................................................................... 302
Figure 18.19 Colinas substation to Project power transmission line connection ........ 302
Figure 20.1 Project location ..................................................................................... 310
Figure 20.2 Process flow diagram for the Project .................................................... 311
Figure 22.1 Sensitivity graph ................................................................................... 338

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1 Summary
1.1 Introduction
This report is a National Instrument 43-101 (NI 43-101) Technical Report on the Pre-
Feasibility Study (PFS) for the Araguaia Nickel Project (the Project), a mineral development
project located on the eastern margin of the State of Pará, to the north of the town of
Conceição do Araguaia in the country of Brazil. The Project is 100% owned by Horizonte
Minerals Plc (HZM). This Technical Report has been prepared for HZM by Snowden Mining
Industry Consultants Limited (Snowden). IGEO Mineração Inteligente Ltda (IGEO), KH
Morgan and Associates (KHM) and Prime Resources (Pty) Ltd (Prime) have also
contributed,the work by IGEO and KHM has been reviewed by Snowden and Prime.

This Technical Report has been prepared for HZM by or under the supervision of qualified
persons within the meaning of NI 43-101 Standards of Disclosure for Mineral Projects in
support of HZM’s disclosure of scientific and technical information for the Project.

This study was conducted with the objective of evaluating the economic viability of the Project
to produce ferronickel (Fe-Ni). This Technical Report summarises the geological,
hydrological and engineering studies performed at a PFS level (± 25% accuracy) and used in
the economic evaluation of the Project.

The engineering design solutions offered in this Technical Report are considered industry
standard practices. The mining of nickel laterites is typically via open pit configurations which
involve well-developed mining practices and earthmoving machine applications. This study
considers the open pit configuration and builds upon this knowledge for the exploitation of
nickel laterites to establish the production of ROM from seven open pits which supply a
targeted 0.9 million tonnes per annum (Mtpa) of ore to a processing and smelter facility that
uses the RKEF process with the product being sold at the mine gate. Initially, two production
scenarios were considered:

 2.7 Mtpa (contractor and owners mining and haulage)

 0.9 Mtpa (contractor and owners mining and haulage)

The Base Case of 0.9 Mtpa was selected based as a consequence of HZM’s desire to
minimize the capital expenditure and overall capital intensity, and to optimize overall cash
flow, payback, and the economics of the Project. Opportunity does exist to increase and
expand production subject to further engineering and a potential to increase in reserve base.
The Base Case for this study assumes an ore processing rate of 0.9 Mtpa after a two year
initial ramp up period. A plant construction period of two years has been assumed and the
pre-production capital construction costs for the plant have been divided 30%, in Year 1, and
70%, in Year 2. In addition, sustaining capital has been provided for over the life of the mine
and process plant. To minimise capital, the Base Case also assumes contractor mining
which includes ore haulage to the plant. Supply chain factors have also been considered for
in-bound and out-bound logistics for key consumables such as coal for smelter requirements.

The economic analysis contained in this Technical Report is based on Probable Reserve
estimates. All dollar values are in United States Dollares (USD).

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1.2 Property location, accessibility and climate

The Project is centred approximately 07° 37’S and 49° 24’E (675000E/9120000N)
(Figure 1.1) and extends marginally across the south-eastern border of Pará State with
Tocantins State. This location is approximately 40 km north of Conceição do Araguaia
(population of 46,206) and is accessed by a network of unsealed roads branching eastward
from the unsealed Conceição do Araguaia– Floresta road (PA 449) that passes through the
Project. The area has a close reticulated system of earth roads servicing numerous cattle
properties.

The Project can be reached by air from São Paulo via Palmas, the capital of Tocantins State
situated to the east of Rio Araguaia. From there it is a further 400 km drive on mainly sealed
highways to the main Araguaia field office in Conceição de Araguaia. Local flights are
supported by airports at Palmas (Tocantins State), and Redenção via Belém/Marabá.

In the Araguaia region, the rain season mostly extends from October to May with
approximately 1,754 mm of average annual fall. An average temperature of around 25° C is
maintained throughout the year. Average maximum of approximately 35° C occurs in August
and September with an average minimum of approximately 20° C from June to August.
Summer rain results at the southern edge of the equatorial Intertropical Convergence Zone
(ITCZ). The seasonal shift of the ITCZ gives rise to a wet and dry season to the Araguaia
region. Short periods of rain can occur in the winter dry season through northward extensions
of the Polar Front. Rainfall average for Conceição do Araguaia is shown on Figure 1.2 and
temperature on Figure 1.3.

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Figure 1.1 Location map and local infrastructure

Figure 1.2 Average monthly rainfall, Conceição do Araguaia

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Figure 1.3 Monthly temperature, Conceição do Araguaia

1.3 Property ownership

The Project is comprised of 14 exploration licences in two non-contiguous blocks within the
prominent Araguaia Nickel Araguaia Nickel Belt located in Pará state, Brazil. The licences
have been acquired by HZM through application and acquisition. Lontra was a discovery by
HZM and the Araguaia licences were acquired through the purchase of Teck Resources
Limited’s adjacent Araguaia project. The Floresta and Villa Oito licences were acquired via
share purchase from Lara Exploration. All licences are now held under one Brazilian
company 100% owned by HZM.

1.4 Property description

The Project covers an area of 118,557 Ha. Topography of the area, defined in the
quadrangle 9,110,000N to 9,135,000N and 670,000E to 685,000E, is considered mildly
undulating with various rounded hill features ranging in elevations of 217 m (AMSL) to 360 m
(AMSL). Figure 1.4 provides a generalised view of the topography in the Project area.

More than 60 % of the Project is cleared of vegetation for open paddock cattle grazing. The
area was never primary rainforest and is termed cerrado in Brazil.

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Figure 1.4 Typical topography of project area

Source: KHM 2013

1.5 Geology and mineralisation

The deposits of the Project are typical examples of nickel laterites formed in a seasonally wet
tropical climate on weathered and partially serpentinised peridotite. The nickel in such
deposits is derived from altered olivine, pyroxene and serpentine that constitute the bulk of
tectonically emplaced ultramafic oceanic crust and upper mantle rocks.

Laterisation of these serpentinised peridotite bodies occurred during the Tertiary period and
the residual products have been preserved as laterite profiles over plateaus/amphitheatres,
elevated terraces and ridges/spurs.

Supergene concentration of the nickel by leaching from the limonite zone and enrichment in
the underlying saprolite zones is also common. The degree of the nickel concentration and
the detailed type of regolith profile developed is determined by several factors including
climate, topography, drainage, tectonism and the mineralogy and structures in the parent
rock.

A nickel laterite deposit profile at the Project typically consists from surface to bedrock of:

A Soil Horizon – 0.6 m to 1.6 m average thickness

Ferricrete Horizon (including unconsolidated and cemented types, iron cap and pisolites) –
0.6 m to 4.3 m average thickness

Limonite Horizon (red and yellow types) – 7.5 m to 11.6 m average thickness

Transition Horizon (upper plastic, green and brown types depending on the ratio of
nontronite, goethite and manganese minerals) – 3.2 m to 6.3 m average thickness

Saprolite Horizon (earthy, rocky and silicified types) – 5.2 m to 10 m average thickness.

The mineralogy of the main mineralised horizons is provided in Figure 1.5.

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Eighteen nickel laterite targets are located in the Project, with Mineral Resources estimated
for fourteen deposits. Of these, seven are sufficiently drilled and sampled to permit the
declaration of Indicated Mineral Resources, and these are the basis for the PFS.

From North to South, the seven PFS deposits are: Vila Oito East (VOE); Vila Oito (VOI); Vila
Oito West (VOW); Jacutinga (JAC); Pequizeiro West (PQW); Pequizeiro (PQZ), and Baião
(BAI) identified in Figure 1.6.

Figure 1.5 Mineralogical distribution in the principal mineralised horizons

Source: SGS 2011

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Figure 1.6 Simplified geology map

Source: HZM, 2013

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1.6 Drilling
Diamond core drilling programmes undertaken by Teck and HZM totalling 1,120 drillholes for
a total length of 29.1 km are the basis for Mineral Resource estimates for the PFS. Auger
drilling and reverse circulation (RC) drilling has also been undertaken for exploration
purposes however data from these has not been used for Mineral Resource estimates.

First pass irregular spaced exploratory RC drilling was undertaken by Teck between
September and November 2006 to test nickel in soil geochemical, airborne geophysical
anomalies and identified target areas.

Following positive results from the RC drill programmes, 400 m x 400 m spaced diamond
drilling took place at the Baião, Pequizeiro, Jacutinga, Vila Oito West, Vila Oito, Vila Oito East
and Oito targets between April and November 2007.

Where preliminary results from drill core were positive, 200 m x 200 m spaced diamond
drilling was undertaken. In November 2008, having completed the diamond drilling over
selected targets, for a total of 489 holes and 11,404 m, Teck ceased exploration on the
project

In 2008 HZM initiated the first of three phases of a diamond drilling programme. In total 63
diamond drillholes were completed totalling 1,299.5 m to test the Northern and Raimundo
Zone target anomalies. The programme consisted of 31 holes completed on the Northern
anomaly; 31 holes completed on the Raimundo anomaly; and 1 exploratory hole on the
Southern anomaly.

Within the programme vertical holes were drilled to 15-25 m in depth, ensuring that the
saprock-fresh rock interface was intersected. Drillhole spacing was as follows: on 400 m
spaced lines with 80 m hole centres (for geological sections and interpretation); on 200 m x
200 m centres (for resource potential identification); and on 100 m x 100 m centres (in the
Raimundo high grade zone for definition of grade variation).

In October 2010 HZM commenced a Phase 2 drilling programme on the combined Teck
Araguaia and HZM Lontra Licences. This phase of work comprised diamond core drilling to
infill the previous drilling completed by Teck and HZM. From October 2010 to December
2011 HZM completed 539 drillholes for 13,261 m. To manage and support this programme
more efficiently an exploration office was established in Conceição do Araguaia in September
2010.

The drilling programme was designed to reduce the 200 m x 200 m Teck drilling grid to a 100
m x 100 m grid on the Pequizeiro and Baião targets. In addition the drill spacing was reduced
to 141m x 141m on the Pequizeiro West and Vila Oito East targets and to approximately this
same spacing on the Lontra North and Raimundo targets. Seven scout holes were completed
at Lontra South

At both Pequizeiro and Baião a set of 25 holes was drilled on a 25m x 25 m grid for
geostatistical evaluation purposes. The resource drilling completed in September 2011 was
specifically focused on converting the mineral resource estimate on the Pequizeiro and Baião
targets to an Indicated resource category in accordance with the JORC Code.

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From September 2012 to April 2013 HZM conducted a Phase 3 mineral resource drilling
programme. This programme was designed to complete infill drilling on 100 m x 100 m grids
on the Jacutinga, Vila Oito West, Vila Oito, Vila Oito East and Pequizeiro West targets in
order to convert Inferred resources to Indicated resource categories. 321 holes (9,309 m)
were completed including 35 holes (1,186 m) on Jacutinga, 84 holes (1,669 m) on Vila Oito
West, 133 holes (4,228 m) on Vila Oito, 44 holes (1,509 m) on Vila Oito East and 25 holes
(717 m) on Pequizeiro West.

Table 1.1 provides a summary of diamond core drilling for the PFS.

Table 1.1 Summary of resource delineation drilling by HZM and Teck for PFS

Target № Metres drilled

Vila Oito West (VOW) 143 3,096.5
Vila Oito (VOI) 182 5,573.4
Vila Oito East (VOE) 127 3,901.7
Jacutinga (JAC) 59 1,720.9
Pequizeiro (PQZ) 219 6,114.9
Pequizeiro West (PQW) 60 1,626.0
Baião (BAI) 330 7,098.0
Total 1,120 29,131.4

Sample methodology and approach employed for the HZM drilling data is undertaken and
verified by Snowden through several site visits.

Half split core samples, taken by HZM, are crushed and pulverised at SGS laboratory in
Goiania and the resultant pulps analysed at SGS laboratory in Belo Horizonte using
tetraborate fusion X-Ray Fluorescence. Full QA/QC procedures are implemented, including
the insertion of standards, duplicates and blanks by HZM and checked by a programme of
umpire assays on sample pulps by ACME laboratory, Vancouver.

Snowden’s Qualified Person concluded that the sampling and analytical procedures are
acceptable and that the resulting records are suitable for use in Mineral Resource estimation.

1.7 Mineral resource

Mineral Resource estimates are reported in Table 1.2. At a cut-off grade of 0.95% Ni, a total
of 72 dry Mt at a grade of 1.33% Ni is defined as Indicated Mineral Resource and a further 25
dry Mt at a grade of 1.21% Ni is defined as Inferred Mineral Resource.

Mineral Resources reported for the PFS deposits were prepared under the supervision of Mr.
Andrew F. Ross.

Mineral Resources for other deposits in the Project area were prepared by Dr. Marc-
Antoine Audet and were reported in Audet, M A, et al (2012). The other deposits are
Pequizeiro NW, Oito Main, Lontra North and Raimundo for which Inferred Mineral Resources
are reported. These other deposits were not considered in the PFS.

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Table 1.2 Mineral Resources for Araguaia as at March 2014 by material type (0.95% Ni cut-off grade)

Material Tonnage Density Contained Ni metal Ni Co Fe MgO SiO2 Al2O3 Cr2O3

Araguaia Category
type (kT) (t/m3) (t) (%) (%) (%) (%) (%) (%) (%)
Sub-total Indicated Limonite 11,560 1.35 137,790 1.19 0.127 36.50 2.76 19.45 9.48 2.61
Sub-total Indicated Transition 24,110 1.19 346,920 1.44 0.060 19.87 11.36 41.19 5.05 1.38
Sub-total Indicated Saprolite 36,310 1.32 473,960 1.31 0.034 11.82 23.67 42.27 3.62 0.85
Sub-total Inferred Limonite 8,830 1.34 100,310 1.14 0.097 35.85 3.94 19.77 9.48 1.78
Sub-total Inferred Transition 9,340 1.28 122,040 1.31 0.053 20.34 13.94 37.80 5.31 1.20
Sub-total Inferred Saprolite 7,190 1.41 84,370 1.18 0.033 12.07 23.92 41.46 4.16 0.80
TOTAL Indicated All 71,980 1.28 958,660 1.33 0.058 18.48 16.19 38.25 5.04 1.31
TOTAL Inferred All 25,350 1.34 306,730 1.21 0.063 23.40 13.29 32.56 6.43 1.29
Note: Totals may not add due to rounding. Mineral Resources are inclusive of Mineral Reserves

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The PFS estimates were prepared in the following steps:

 data preparation
 geological interpretation and horizon modelling
 establishment of block models and definitions, with a block size of 25 m x 25 m x 2 m
 compositing of assay intervals
 exploratory data analysis and variography
 Ordinary Kriging estimation method.
 model validation
 calculation of dry density
 classification of estimates with respect to JORC (2012) guidelines
 resource tabulation and resource reporting.

Table 1.3 and Table 1.4 list Snowden’s assessment of the criteria that were considered when
classifying the 2013 Araguaia PFS resource estimates in accordance with the JORC Code
(2012 edition) guidelines.

The resource classification scheme adopted by Snowden was based on the following:

 Mineralisation was classified as Indicated where the drilling density was 100 mE by 100
mN (or less).
 Mineralisation delineated using a drilling density larger than 100 mE by 100 mN and up
to about 150 m spacing was classified as Inferred.
 Mineralisation delineated using sparse spacings was not classified.

For the other deposits, not included in the PFS Mineral Resources were estimated by Dr.
Marc-Antoine Audet using block estimation by Inverse Distance at the power of 2 (ID2)
interpolation methodologies on 25 m × 25 m × 2 m blocks.

Three-dimensional models for these deposits were created using surveyed holes. The
models integrate the concept of geological horizons (limonite, transition and saprolite) to
create a 3D block model. For each deposit, a surface geological constraining envelope was
generated using drillhole data as well as information from geological mapping.

There are no Mineral Resource estimates for other prospects (Morro, Southern, Oito West
and Pequizeiro East) due to insufficient drill sample information.

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Table 1.3 JORC Code (2012) Table 1 Section 1 – Sampling techniques and data

Item Comments
Sampling The data used for resource estimation is based on the logging and sampling of diamond core drilling
techniques (100% of the sample data).
The drilling was completed using vertical core holes. Vertical drillholes are appropriate given the
Drilling techniques
strike and dip of the mineralisation.
Drill sample HZM has required the drilling contractor to redrill where recoveries were less than 85 %, thus
recovery ensuring the recoveries in the provided database are adequate.
Almost all of the geological information has been obtained by the logging of drill samples, and
supplemented by surface geological mapping and interpretation of geophysical surveys. Logging of
Logging
drillhole samples was done with sufficient detail to meet the requirements of resource estimation and
mining studies, and in accordance with HZM Standard Operating Procedures.
Cores were sampled at 1 m intervals. Half split core samples are crushed and pulverised at SGS
laboratory in Goiania and the resultant pulps analysed at SGS laboratory in Belo Horizonte using
Sub-sampling
tetraborate fusion X-Ray Fluorescence. Full QA/QC procedures are implemented, including the
insertion of standards, duplicates and blanks.
Quality of assay
Snowden’s analysis of the QAQC data (standards, blanks, duplicates) and assessment made by
data and laboratory
HZM did not identify any significant issues which could be material to the resource estimate.
tests
Drilling from earlier phases was verified by independent Qualified Persons.
Verification of In 2013, HZM dispatched 457 duplicate pulp samples to the ACME Laboratory in Canada for umpire
sampling and check analyses. Original assay was completed by SGS in Brazil and the same analysis method
assaying (tetraborate fusion XRF) was applied at both laboratories. A reasonable level of accuracy has been
demonstrated.
The project area is centred about the following co-ordinates: WGS 84 Latitude 07° 54' 9.0" South;
UTM SAD 69 22S 9126200mN; and WGS 84 Longitude 49° 26' 1.8" West; UTM SAD 69 22S
Location of data 672700mE.
points Collar locations were surveyed using a DGPS (precision +/- 10 cm) by Independent Licenced
Surveyor. Elevation differences between drillhole collars and the supplied topography DTM were
checked and eliminated by pressing the collars to the DTM.
No downhole surveys were collected for the drilling. Mitigating this issue to a large extent is the fact
that most of the drilling consists of shallow vertical core holes and the drill rig alignment is checked
by HZM staff prior to drilling.
Drilling was completed along a set of oriented sections. The drillhole spacing is essentially 100 m
Data spacing and apart with two small areas on areas PQZ and BAI drilled to 25 m spacing for variogram analysis.
distribution These drillhole spacings are sufficient to establish the degree of geological and grade continuity
necessary to support the resource classifications that were applied.
The drilling was composited downhole using a 1.0 m interval which corresponds to the dominant
assay interval.
Orientation of data
The location and orientation of the Araguaia drilling (vertical) is appropriate given the geometry and
in relation to
orientation (horizontal) of the laterite mineralisation.
geological structure
All sampling and data collection is handled by HZM personnel and the drill core is subsequently
transferred into core boxes. Drill core is stored in a secure facility in Conceição do Araguaia.
Sample security Sample security procedures are provided in section 11.3. Pulp and crush rejects are returned after a
90 day period at SGS, pulp rejects are stored in cardboard boxes and crush rejects in large plastic
boxes sequentially batch by batch also onsite.
The drilling database was reviewed by Snowden and sufficient cross-checks with assay certificates,
Audits and reviews drill core and logging, collar surveys were undertaken to confirm that the data is suitable for use in
mineral resource estimation.

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Table 1.4 JORC Code (2012) Table 1 Section 3 – Estimation and reporting of
Mineral Resources

Item Comments
The new Phase 3 drilling data was supplied to Snowden in Microsoft Excel spread sheets and then
Database integrity imported into an existing GEMS Project database by Snowden. Internal validation checks were made
by Snowden and any discrepancies were corrected in consultation with HZM.
Snowden believes that the local geology is well understood as a result of work undertaken by HZM
and Dr Marc-Antoine Audet in respect of chemical classification of rock types. The contacts between
Geological laterite horizons have been interpreted based on a combination of logging and geochemistry as
interpretation described in Section 6.
Alternative interpretations of the mineralisation are unlikely to significantly change the overall volume
of the Horizons.
The Araguaia mineralisation estimated by Snowden consists of seven areas. Descriptions of the
Dimensions deposits are provided in Section 4.3. Maximum and average thickness of the laterite horizons are
provided in Section 7.0.
Unfolded ordinary block kriging using hard boundary domains, with sub-celling to accurately reflect
Estimation and horizon contacts, was undertaken in Datamine software.
modelling
techniques The deposits have been estimated previously by Dr Marc-Antoine Audet in GEMS software using an
unwrinkling approach.
Moisture All tonnages have been estimated as dry tonnages.
Cut-off parameters The nickel mineralisation was reported above a 0.95% nickel cut-off grade.
Mining factors and
It is assumed the deposits will be mined using open cut methods.
assumptions
Metallurgical factors None. Metallurgical test work reported in Section 13 indicates there is a reasonable prospect for metal
and assumptions recovery using current technologies.
Environmental
These are discussed in Section 20 “Environmental Studies, permitting, and social or community
factors or
impact”.
assumptions
There are sufficient bulk density measurements (water displacement method) to relate major
Density chemistry to density by linear regression. Block estimates of dry density were calculated from block
grade estimates.
The resources have been classified based on continuity of both the geology and the nickel grade
Classification along with the drillhole spacing. Additionally the information summarised in this table has been used
to support the resource classification categories of Indicated and Inferred.
The Snowden models compiled in 2013 have not been independently reviewed in detail but have been
Audits and reviews
discussed with HZM’s Technical Advisor, Mr F R Billington.
Accuracy and The resource was classified by taking into consideration the confidence in the continuity of nickel
confidence grades and the confidence in the geological interpretation.

1.8 Mining
Seven mining pits were identified through a process of pit optimisation using costs, and
process recoveries. All seven pits were designed through a standard process of pit
optimisation, waste dump design and pit design.

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The pit design used smoothed pit shells from the pit optimisation and altered for the removal
of small satellite pits. This was deemed by Snowden to be appropriate for pits with no ramp
requirements. It is likely that the actual pit floor will be dictated by operating conditions as
they are mined, although the quantities mined from each will be similar to those calculated by
Snowden in this study.

Feedback from all relevant stakeholders was used to determine a waste disposal concept for
each pit, including both ex-pit and in-pit options. After calculating the volumes of each waste
type waste dumps were designed to contain this material and minimise required haulage
distances as much as possible

The Project was scheduled on the basis of panels. A total of 43 panels for the project were
designed and scheduled. Within each panel, a number of “bins” are generated on the basis of
rock type and nickel grade. The production schedule was completed in quarterly increments
over the life of the project.

A number of processing constraints were applied to the schedule which included a 13 month
processing feed quantity ramp up period, and specific process feed grade constraints
throughout the life of the project:

 Fe grade between 15.0% and 16.5%

 Al2O3 grade between 4.0% and 5.5%
 SiO2/MgO ratio between 2.2 and 2.6.

Each of the deposits is proposed to be mined with typical truck and excavator mining.
Although the primary fleet requirement changes throughout the life of the project a typical
configuration is 6 x 48 t operating weight (OW) excavators, 3 x 50 t OW front end loaders, 17
x 40 t rated payload (RP) articulated off-highway trucks and 2 x 30 t RP on-highway trucks for
longer inter-pit haulage. This fleet is supported by the usual array of support and ancillary
equipment.

Grade and mineralogy will be closely monitored in the mining process using close spaced
grade control drilling ahead of mining.

1.9 Mineral reserve estimate

The estimation of Mineral Reserves used estimates of Indicated Mineral Resources for the
Project as reported in Table 1.2.

A Mineral Reserve estimate of 21.2 kt (dry) at an average grade of 1.66% Ni was estimated.
The detailed breakdown of the Mineral Reserve by deposit is presented in Table 1.5.

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Table 1.5 March 2014 Mineral Reserve estimate

Ore Dry Mass

Class Deposit Ni (%) Fe (%) Al2O3 (%) SiO2/MgO
(kt)
Probable Baião 3,500 1.67 17.41 4.58 2.56
Probable Pequizeiro 9,300 1.70 15.58 5.39 2.56
Probable Pequizeiro West 380 1.57 20.38 4.63 4.29
Probable Jacutinga 960 1.81 15.13 2.96 2.11
Probable Vila Oito East 2,450 1.55 15.97 3.73 2.22
Probable Vila Oito 3,580 1.63 14.61 3.63 2.05
Probable Vila Oito West 1,020 1.59 19.35 4.25 3.32
Total Probable 21,200 1.66 16.01 4.59 2.44
Proven NIL N/A N/A N/A N/A
Total Proven and Probable 21,200 1.66 16.01 4.59 2.44

1.10 Metallurgical testwork

From late 2011 to 2013, HZM contracted various organisations and metallurgical laboratories
to conduct metallurgical testwork on material from the Project. The testwork was aimed at
providing design data for the preferred processing option, a typical Rotary Kiln Electric
Furnace (RKEF) installation, designed to treat lateritic nickel ore containing between 1.4%
and 1.9% Ni and producing a final refined Fe-Ni product containing between 18% and 22%
Ni.

The main testwork included:

 Agglomeration testwork by Feeco International

 Laboratory based tests by Xstrata Process Support
 Slag chemistry testwork and simulations by Kingston Process Metallurgy
 Liquidus measurements of Fe-Ni slag by Kingston Process Metallurgy
 Evaluation by FL Smidth Inc.
 Screening study for ore smelting by Hatch Ltd.

The testwork was carried out with a view to establishing both the feasibility of applying the
RKEF process to Araguaia ore, and subsequently, determining the main RKEF parameters.
Based on this testwork, it was found that Araguaia ore is suited to processing by RKEF; a
target Ni grade in Fe-Ni of 20% Ni was considered (range 18 to 22% Ni).

1.10.1 Prior testwork

During earlier stages of the Project hydrometallurgical testwork was conducted, with two
approaches reviewed:

 Atmospheric tank leach

 Bottle roll tests to simulate heap leaching.

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Sulphuric acid was selected for both types of leaching tests. Acid consumption was high and
these options were not further pursued after the initial testwork was completed.

1.10.2 Agglomeration testwork – Feeco International

A number of agglomeration tests were run in the pilot rotary agglomerator at Feeco
International using a 51% transition to 49% saprolite blend. The objectives of the tests were
to observe the agglomeration behaviour of the as-received ore (nominally 38% moisture
content). The three variables that were changed in the tests were:

 feed rate
 drum rotational speed
 with and without a liner and lifters inside the drum.

During the testwork it was visually observed that agglomerates were reasonably competent
and that fines were generally contained within the agglomerates.

The drop test demonstrated good resilience of the agglomerated particles to breaking during
the test. The round particles did however deform into flat disks during the tests.

Particle size distribution ranged from approximately 3 mm to 25 mm. Agglomerated particles

did tend to break up during exposure to water in a flat tray, however, it was observed that the
feed material tended to break up faster than the agglomerated particles.

The rotary action of the drum (which resembled the action of the kiln dryer) was generally
able to produce balled or agglomerated material from as-received wet laterite ore over a
range of feed rates and drum revolving speeds and independently of whether the liner was in
place or not.

1.10.3 Sample characterisation and smelting tests – Xstrata Process

Support (XPS)

XPS first performed a series of sample characterization tests which included moisture
measurements (free and crystalline), particle size analyses and chemical assays of the ore
and calcine samples. Subsequently a series of smelting tests were conducted at elevated
temperature (1520 0C). At the end of each smelting test, the products, Fe-Ni alloy and slag,
were collected and weighed. The alloy and slag samples were submitted for chemical
analyses. As a part of the study, the potential recovery of Ni was also estimated based upon
small scale batch tests.

Preliminary heat and mass balance calculations were also performed, estimating energy
requirements of the process and were used to generate a simplified flow sheet. The flow
sheet included steps such as feed preparation, drying, calcining and smelting.

The results of the study are summarized as follows:

 Particle size analyses indicated that due to the fineness of the ore material handling
challenges are to be expected, particularly during wet weather.
 Blending of the feed will be necessary to achieve optimum Fe/Ni ratios in the ore feed.
The feed preparation step can also be tailored towards the production of Fe-Ni alloy or
matte as the final products.

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 Preliminary batch smelting tests were conducted at 1520 0C on three ore samples,
targeting an alloy grade of 30 wt% in each case. The tests were successful in producing
this grade of alloy for two of the samples. Similarly, the series of smelting tests with
specific ore blend ratios with varying Fe/Ni ratios were also successful, with the Fe-Ni
grades obtained in the tests varying from 14% Ni to 53% Ni.
 Smelting tests were performed adding sulphur in order to generate matte as the final
product. The liquidus temperature of the resulting matte phase was also predicted with
thermo-chemical calculations.
 The possibility of utilizing the sensible heat and chemical reduction potential of the off-
gas from the smelting step opens up a number of flow sheet options which could be
explored.
 Extensive thermo-chemical modelling was performed predicting the liquidus
temperatures of all possible phases. Based upon preliminary heat and mass balance
calculations, a basic flow sheet was developed to treat the deposits.
 The basic flow sheet proposed can be further optimized to reduce the fuel and reductant
consumptions. Opportunities for energy savings were also identified and could include
technologies such as flash drying, fluidized bed calcination, hot calcine charging and DC
smelting.
 The testwork demonstrated that the SiO2/MgO ratio has a significant impact on the slag
liquidus temperature.

On review of the XPS report, IGEO expressed concerns regarding some of the data quoted in
the report which could impact on process design criteria such as energy requirements and
hence the associated operating costs. These concerns were clarified with HZM prior to
completion of the process design.

1.10.4 Slag chemistry testwork and simulations – Kingston Process

Metallurgy (KPM)

Simulations conducted by KPM, using FACT, indicated that XPS results were in close
agreement with the thermodynamic calculations. The coke consumption in the electric
furnace was calculated to range between 3% and 5% of feed depending on the ore blend and
also the level of pre-reduction of the calcine.

HZM also requested optimised conditions for smelting calcine produced by a blend of 13.7%
limonite, 43.8% transition and 42.5% saprolite when producing a 25% Ni alloy in the electric
furnace. FACT simulations were conducted to test these conditions.

KPM also performed a number of FACT® calculations regarding the slag chemistry aimed at:

 simulating the results of selected laboratory smelting tests carried out at XPS
 evaluating the smelting of a different laterite blend proposed by HZM.

Results indicated that:

 XPS experimental results are in close agreement with the thermodynamic calculations
performed in this study.

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The new blend proposed for the Araguaia laterites brings a challenge and an opportunity in
the smelting of this ore by providing a low melting point slag, which will allow operating the
electric furnace at lower temperatures. However, the higher superheat required to maintain
the metal as liquid will impact on furnace design.

The alumina content of the slag (~7% wt) also favours a low slag liquidus temperature. The
soluble Ni in slag should be under 0.05% Ni and the remainder would be in the form of
entrained alloy droplets. Total losses are expected to be at nearly 0.15% when compared to
similar operations.

KPM sees no major technical constraint in smelting this type of blend in an electric furnace,
provided that a careful furnace design is taken into account.

1.10.5 Slag liquidus temperatures - KPM

KPM also measured slag liquidus temperatures for a Fe-Ni smelting process during a
separate testwork project, using differential thermal analysis combined with thermo-
gravimetry (TGA/DTA). Synthetic slag was used in a TGA/DTA unit under argon to ensure
that the composition was accurate and to prevent oxidation of FeO. In all, six different slag
compositions were studied to determine the influence of alumina (Al2O3) concentration and
silica/magnesia (SiO2/MgO) ratio on the liquidus temperatures.

The liquidus increased from 1,368 oC to 1,405 oC when the SiO2/MgO ratio was decreased
from 2.7 to 2.3. A significant decrease in liquidus (1,431 °C to 1,383 °C) was found when the
alumina concentration was increased from 4.00 % to 7.36 %. The liquidus temperatures
measured experimentally followed the same trend as the projected (FACT) values but were
consistently lower by 10 oC to 20 oC.

1.10.6 Measurement of physical and chemical ore properties – FL Smidth

(FLS)

A laboratory study was performed by FLS during 2012 to evaluate the physical and chemical
properties of two nickel laterite ore blends.

 Mix 1: 51% Transition and 49% Saprolite

 Mix 2: 14% Limonite, 44% Transition and 42% Saprolite.

The samples were analysed to determine free moisture content, bulk density, angle of
repose, particle size distribution, drying curves and particle degradation (tumble testing).
From the testwork FLS concluded the following:

 The Araguaia ore is characterized by a very fine natural particle size. The fine particles
demonstrate binding properties similar to clays when dried, thereby yielding relatively
hard agglomerates resistant to significant degradation and dusting.
 The onset of particle sintering is 50°C to 100°C lower than many lateritic ores evaluated
by FLS. This suggests a limited achievable calcine temperature of 800 to 825°C during
rotary kiln processing, which will also limit the degree of iron pre-reduction that can be
obtained. For equipment design purposes IGEO have considered target of 850oC for the
kiln discharge and 825oC for calcine feed to the furnace.
 The use of 10% Ni and 60% Fe pre-reduction targets for commercial Fe-Ni line design
were proposed. Pilot rotary kiln testing was recommended. For design purposes, IGEO
have considered pre-reduction of 20% for Ni and 70% for Fe.

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 Briquetting appears to be a viable option for producing an agglomerated feed suitable for
kiln processing to yield a granule calcine with acceptable dusting rates.
 Rotary drum agglomeration demonstrated the production of agglomerates resistant to
fines generation during tumbling.
 The results of this laboratory study suggest that the Araguaia ore is suited for rotary kiln
processing in an RKEF system provided that proper agglomeration provisions are
adapted and that lower calcine temperature and pre-reduction levels are considered in
the electric furnace design.
 Larger scale pilot testing was recommended to confirm the conclusions of this study.

1.10.7 Smelting testwork review

Slag Characteristics – Key factors

 The combined impact of the ratio SiO2/MgO, FeO and Al2O3 contents of the slag on the
liquidus temperatures and the viscosity of the slags.
 The impact of impurities, particularly carbon and silicon, on the liquidus temperatures and
viscosity of the metal.
 The impact of the issues in 1 and 2 above can be affected/controlled to varying degrees
by controlling the degree of reduction of Fe effected during the smelting process
 Slag foaming can occur with viscous slags and silica and alumina play significant roles in
this. Such foaming is likely to increase nickel losses into the slag.
 The degree of iron reduction dictates the grade of nickel to be achieved in the final metal
product as well the silicon and carbon content of the metal.
 At the SiO2/MgO ratio of 2.29 and the FeO and Al2O3 content anticipated in the Araguaia
slags, the liquidus temperatures can be significantly depressed. However, minimum
tapping temperatures of both metal and slag must be attained to ensure fluidity.

Metal Liquidus Temperature

 The XPS report considered the binary Fe-Ni system only and reported temperatures
above 1,500oC. KPM did not include the effects of residual C, Si and S on the alloy and
reported a metal liquidus temperature of 1,479oC.
 50% iron reduction (with respect to Fe/Ni ratio) is required to get substantial amounts of
C and Si into the metal. These elements have an important influence on the metal
liquidus temperature. Reduction of over 50% would result in high C, Si and Cr in the
metal and a liquidus temperature of 1,250 oC to 1,350oC. A reduction of over 50% would
result in a Fe-Ni grade of 15%.
 Introduction of sulphur into the metal could be used to reduce the metal liquidus
temperature. This will require further treatment methods of the matte and was therefore
not considered for this PFS phase of the Project.

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1.11 Process design and recovery

1.11.1 Process selection

As part of the metallurgical testwork, both pyrometallurgical and hydrometallurgical test work
was undertaken. This testwork subsequently confirmed the preferred suitability of the
conventional RKEF process for the treatment of the Araguaia ore to produce Fe-Ni and this
process was adopted for the PFS by HZM.

1.11.2 Process description

Although two throughput options were considered during the prefeasibility study, the
preferred Base Case is a single line RKEF installation for 0.9 Mtpa (dry) ore, producing
approximately 15,000 tpa nickel as Fe-Ni. The overall process flow block diagram shown in
Figure 1.7 summarises the various processing stages of the proposed project.

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Figure 1.7 The Project process flow block diagram

The initial process stages encompass ore preparation, where the ore is sized to match the
subsequent metallurgical process requirements. Kiln dust is recycled to the process before
the secondary crushing stage. The ore is then homogenized, partially dried and fed to the
kiln with the addition of a reductant material. In the kiln, the ore is completely dried and
calcined to remove chemically combined moisture, and partially pre-reduced. Calcine is
transferred into an electric furnace for the separation of the metal and slag at high
temperatures. The metal is conveyed in ladles to the refining stage. The refining oxidized
slag is granulated with water, while the reducing slag is transported molten and disposed of in
a specific site. The final Fe-Ni product is granulated with water, screened, dried and
stockpiled prior to dispatch to the market. The process design criteria (PDC) are outlined in
Table 1.6.

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Table 1.6 Summarised key process design criteria

Item Unit Value

Plant throughput Mtpa (dry) 0.9
Moisture content % 30
Coal consumption in rotary kiln dry kg/dry t ore 76.4
Coal consumption in dryer kg/wet t ore 13.6
Design Ore grade %Ni 1.8
Overall Ni recovery %Ni 93
Ni production at design grade tpa 15,067
RKEF combined availability % 90
Furnace power MW 50
Furnace energy consumption kWh/ t calcine 511
Ni grade in metal %Ni 20.0
Refinery Ladle furnace
Final product Granulated Fe-Ni

1.12 Project infrastructure

The Project will comprise the following infrastructure:

 Slag dump
 Port facilitation
 Rail
 Roads (access, trunk and ancillary)
 Process facilities
 Ancillary buildings (administration, workshops, ablutions, etc.)
 Power distribution system
 Cooling water dam
 Coal storage facility
 Water acquisition, storage and distribution systems
 Fuel storage
 Communications
 Fire systems.

The Project is supported by existing infrastructure including a network of Federal highways

and roads. In addition, the existing port city of São Luís provides the primary supply chain
facility for in-bound and out-bound logistics for bulk material handling of coal and potentially
Fe-Ni product.

Further details are found in Section 18.

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1.13 Execution plan

A two year construction period has been estimated.

A ramp up schedule is shown in Table 1.7. Based on this tonnage in the first year of
production will be approximately 50% of the design capacity and will be increased gradually
over the first 10 months of production to 100% of the nominal design tonnage of 0.9 Mtpa.

Table 1.7 Proposed process plant ramp-up

ARAGUAIA NICKEL PROJECT

Preliminary Process Plant Ramp-up for Mining Studies - Base Case
Year Month One Process Line - 0.900M dmt ore per year
Tonnage Ni Recovery Ni Produced
% of Nominal Actual % % of Ni Input
1 50 45 22.5
2 55 65 35.8
3 60 75 45.0
4 69 78 53.8
5 76 81 61.6
6 83 83 68.9
1
7 87 85 74.0
8 90 87 78.3
9 93 88 81.8
10 95 90 85.5
11 100 90 90.0
12 100 93 93.0
13 100 93 93.0
14 100 93 93.0
15 100 93 93.0
16 100 93 93.0
17 100 93 93.0
18 100 93 93.0
2
19 100 93 93.0
20 100 93 93.0
21 100 93 93.0
22 100 93 93.0
23 100 93 93.0
24 100 93 93.0

Notes: 1) Nominal plant feed 900 ktpa dry ore

2) Ni production = % of Ni input in ROM ore

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1.14 Capital cost

All $ used in this Technical Report are USD.

The capital costs are discussed in detail in Section 21.

The Base Case for this study assumes an ore processing rate of 0.9 Mtpa after an initial ramp
up period. The ore processing methodology is the pyro-metallurgical conversion of a nickel
bearing laterite ore into a Fe-Ni product using the RKEF process that will be sold at the mine
gate.

The pre-production capital costs in t have been allocated 30% in year 1 and 70% in year 2 of
the 2 years of construction. Deposits will be required on the high value long lead items in
year 1 and the balance will be required in year 2.

The pre-production capital costs are shown in Table 1.8 and the production capital costs are
shown in Table 1.9 .

Table 1.8 Pre-production capital costs

Item $ million
Plant direct 376.088
Plant indirect 38.206
Owners costs 18.313
Infrastructure 56.034
Slag storage facility 5.242
Social 6.000
Mining 5.000
Contingency at 15% 76.092
First fills and spares 1.200
Total pre-production capital costs 582.176

Table 1.9 Production capital costs

Item $ million
Mining & plant Sustaining 43.313
Closure (2 Years) 20.000
Total Production Capex 63.313
Salvage 1.400

1.15 Operating cost

The operating costs, royalties and taxation are shown in Table 1.10 below and are discussed
in detail in Section 21.

The Base Case assumes a contractor for mining and ore haulage to the plant.

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Table 1.10 LOM operating costs

Item $ million $/tonne

Mining (contractor) 552.998 26.08
Processing 2,641.667 124.57
Off-site overheads 99.000 4.67
Total operating costs 3,293.665 155.32

1.16 Royalties (CFEM)

The calculation for royalties is discussed in detail in Section 21.

The calculation of the Compensation for Exploitation of Mineral Resources (CFEM) is carried
out using the accumulated cost of production as a deduction up to the point the ore has no
physico-chemical modification.

In the case of a pyro metallurgical project such as the Araguaia project the calculation of the
CFEM encompasses the following costs: mining, stockpiling, crushing, coal preparation,
administration, maintenance and some environmental costs up to and including calcining.
The addition of all these costs gives a value that will be multiplied by 2%. The CFEM payable
is shown in Table 1.11.

Table 1.11 Royalties

Item $ million
Royalty 43.301

1.17 Taxation
The taxation regime in Brazil is discussed in detail in Section 21.

The taxation regime uses a taxation rate of 15.25% of the taxable income for the initial
10 years of production after which the rate is increased to 34% of the taxable income. The
taxable income is calculated after deducting all operating expenses and depreciation of
capital items.

Depreciation is calculated on a straight line method over 10 years. For this project, an initial
value of $15 million was allowed for previous expenditure not deducted. The taxation payable
is shown in Table 1.12 below.

Table 1.12 Taxation

Item $ million
Taxation 668.051

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1.18 Economic evaluation

Several cases were studied to identify the financial implications to the Project. From the
results of these studies the Base Case was chosen to present in detail for this report. The
basis of the studies and the reasons for choosing the Base Case are discussed in more detail
in Section 22.

Snowden prepared an economic cashflow and financial analysis model based on inputs from
mining and processing schedules as well as capital and operating cost estimates including
royalties for the Base Case. The model was prepared from mining schedules estimated on a
quarterly basis for the first 4 years of production and then annually for the remaining project
life. All inputs are consolidated annually in this report.

The following Table 1.13 and Table 1.14 provide the project headline results before and after
taxation (Table 1.15). After a review of a consensus opinion and historical prices, the Ni price
used is $19,000 per tonne and the Fe price is $150 per tonne. Both are flat for the life of the
project. Base Case KPI before taxation provides a summary of the Project KPI’s as shown in
Table 1.15.

Table 1.13 Base Case economic model headline results before taxation

Item Unit Value

Net Cashflow $M 2,433.933
NVP8 $M 730.067
IRR % 22
Production payback period years 4.1

Table 1.14 Base Case economic model headline results after taxation

Item Unit Value

Net Cashflow $M 1,765.882
NVP8 $M 519.233
IRR % 20
Production year payback years 4.4

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Table 1.15 Base Case KPI before taxation

Item Unit Value

Value of product sold $/t ore 302.58
Cash cost $/t ore 157.36
Total cost $/t ore 187.80
Production year payback year 4.1
Prorata cash cost $/lb Ni 4.48
Prorata cash cost $/t Ni 9,883
Prorata total cost $/lb Ni 5.35
Prorata total cost $/t Ni 11,795
Brooke Hunt methodology C1 cost $/lb Ni 4.16
Brooke Hunt methodology C1 cost $/t Ni 9,166

1.19 Summary of the project risks

A full risk assessment was conducted as part of the PFS.

A detailed examination of the actions associated with each of the risks and opportunities
identified suggests that there are five common themes prevailing, as are described below:

1. The management and technical competency theme relates to the technical knowledge,
ability and willingness of potential employees (management and workforce) to
commission and maintain a complex nickel plant with high tolerances in terms of
throughput, control and instrumentation and maintenance.

2. The complexity theme relates to the mineability and treatability of nickel laterites which is
inherent.

3. The data theme covers timely data acquisition that is sufficiently well scoped that it
covers all later needs. The PFS study has identified a number of data and information
requirements which need to be satisfied before commencing a feasibility study.

4. The water theme relates to the mine being in a part of the world exposed to seasonal
variations of heavy rainfall and drought which poses subsequent design requirements in
terms of controlling moisture within excavated material (ore or waste), productivity
aspects relating to excavation, together with potential inundation.

5. The tenure and licencing theme relates delays of permitting caused by delays in approval
of various permits and key documentation. There is an inherent need to ensure
advanced planning of key documentation for permits and permissions and close
engagement by HZM with the relevant authorities.

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1.20 Conclusions and recommendations

1.20.1 Conclusions

The Project has been investigated at a PFS level and this Technical Report provides a
summary of the results and findings from each major area of investigation and study. This
Technical report has drawn from a PFS engineering study in support of this Technical Report
which have been detailed as Applicable Documents. Each section of this Technical Report
describes in more detail the results of the various investigations and studies along with
principal findings and appropriate discussions of significant risks that may have been
identified during the PFS as well as conclusions and recommendations for further study.

Based on the accumulative findings from the various technical areas of the PFS, the
economic analysis performed shows the Project to have merit and be worthy of additional
detailed investigations.

The next step for the Project will be further engineering and geoscientific evaluation to
advance the Project to feasibility study level.

A more detailed discussion of conclusions, relating to the PFS, is provided in Section 25 of

this report.

1.20.2 Recommendations

Snowden recommends that HZM takes the project into a feasibility study to increase
engineering definition and therefore improve the cost and economic accuracy for the Project.

Recommendations have been made for subsequent detailed metallurgical testwork for the
feasibility study stage of the project. Such testwork is designed to provide additional
confirmatory technical data and efficiency factors for the process design.

The mining of nickel laterites is well understood and has unique requirements and
challenges. It is recommended that subsequent studies consider refining productivity and
operational flexibility in earthmoving machinery to maximise the reserve potential.

Recommendations have been made from the social and environmental perspective including
a listing of required permits and studies to enable the Project to proceed.

All recommendations are detailed in Section 26 of this report.

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2 Introduction
2.1 Overview
This Technical Report has been prepared by Snowden Mining Industry Consultants
(Snowden) for Horizonte Minerals Plc (HZM) in compliance with the disclosure requirements
of the Canadian National Instrument 43-101 (NI 43-101). The trigger for preparation of this
report is the 25 March 2014 press release by HZM disclosing an updated mineral resource
and mineral reserve for the project, and the results of a pre-feasibility study.

Unless otherwise stated, information and data contained in this report or used in its
preparation has been provided by HZM.

The Qualified Persons for preparation of the report are Andrew Ross, who conducted as site
in November 2012, Anthony Finch, and Peter Theron who visited the project site in July 2013.
Harald Muller did not conduct a site visit.

The responsibilities of each author are provided in Table 2.1.

Table 2.1 Responsibilities of each co-author

Author Responsible for section/s

Andrew Ross 6-12,14, parts (1-3)
Anthony Finch 15, 16, 19, 21-27, parts (1-3)
Harald Muller 13, 17, 18, parts (1-3)
Peter Theron 4, 5, 20, parts (1-3)
Unless otherwise stated, all currencies are expressed in US dollars ($).

2.2 Sources of Information

2.2.1 Applicable Documents

Snowden has based this prefeasibility study (PFS) on the engineering and geological detail
provided in the following studies that were undertaken in 2013.

Snowden
 Mining Engineering study for the Araguaia Nickel project, 900 Ktpa Scenario (Base
Case) and 2.7 Mtpa Scenario (Option 1) – December 2013.
 Araguaia Nickel Project – Phase 3 - Mineral resource estimate – November 2013.
 Araguaia PFS Geotechnical Report, Plant Site and Slag Dump site ground investigation
– December 2013
 Araguaia PFS Geotechnical Report - Araguaia Project Geotechnical Report – December
2013
 Araguaia Risk Analysis Report – December 2013

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IGEO
 Araguaia Nickel Project Mineral Processing and Smelter Design – December 2013

KH Morgan and Associates

 Hydrology – Hydrogeology, Araguaia Nickel Project – December 2013

Prime
 Slag dump Design for the Araguaia Nickel project – December 2013
 Environmental Study for the Araguaia Nickel project – December 2013

2.2.2 References

All references are listed in Section 28.

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3 Reliance on other experts

This Technical Report has been prepared by Snowden on behalf of HZM. The information,
conclusions, opinions, and estimates contained herein are based on:

 Information available to Snowden at the time of preparing this Technical Report including
previous Technical Reports prepared on the Project and associated licences within the
project
 Assumptions, conditions, and qualifications as set forth in this Technical Report; and
 Data, reports, and other information supplied by HZM and other third party sources.

The qualified persons have not carried out any independent exploration work, drilled any
holes or carried out any sampling and assaying on the Project, other than examining/verifying
mineralisation and rock conditions in drill cores.

For the purposes of this report, Snowden has relied on ownership information provided by
HZM. Snowden has not researched property title or mineral rights for the Araguaia Nickel
Project and expresses no opinion as to the ownership status of the property. The description
of the Property, and ownership thereof, is set out in Section 4 in this technical report, is
provided for general information purposes only.

Except for the purposes legislated under provincial securities laws, any use of this report by
any third party is at that party’s sole risk.

Information sources have included detail from the following organisations:

 CRU strategies (CRU), London, United Kingdom – Section 22.

 Ernst and Young (E&Y), Brazil – Sections 21 and Section 22.

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4 Property description and location

4.1 Introduction
The Project is comprised of 14 exploration licences in two non-contiguous blocks within the
prominent Araguaia Nickel Belt located in Pará state, Brazil. The licences have been
acquired by HZM through application and acquisition. Lontra was a discovery by HZM and
the Araguaia licences were acquired through the purchase of Teck’s (TSX: TCK) adjacent
Araguaia Project. The Floresta and Vila Oito licences were acquired via share purchase from
Lara Exploration (TSX-V: LARA). All licences are now held under one Brazilian company
100% owned by HZM.

4.2 Location
The property is centred approximately 45 km northwest of the town of Conceição de Araguaia
(population of 46,206) and approximately 25 km west of the north-south trending Araguaia
River (Figure 4.1).

Initial historic discovery of nickel laterite in the region was at the Quatipuru deposit, located
approximately 75 km southwest of the project area. Xstrata’s Serra do Tapa and Vale dos
Sonhos nickel laterite deposits, that form part of the Araguaia Nickel Belt, are located
approximately 80 km north of the Project area (Figure 4.1).

The project area is centred about the following co-ordinates, for a SAD 69 Datum:

 LAT 07° 54' 7.48" S / LON 49° 26' 0.26" W

 UTM 22S 9126200 N / 672700 E

The Carajás mineral province (Mining District), situated approximately 200 km northwest of
the Project, is host to a number of other prominent iron ore, nickel laterite and IOCG deposits.
Carajás is the main centre of mining activity in the Pará State (Figure 4.1).

4.3 Licences and tenure

4.3.1 Mining legislation overview

The main sources of mining legislation in Brazil are the Federal Constitution and the Mining
Code (Decree-law No. 227 of 28 February 1967). The Mining Code defines and classifies
deposits and mines, sets requirements and conditions for obtaining authorizations,
concessions, licences and permits, the rights and duties of holders of exploration licences
and mining concessions. There are two main legal regimes under the Mining Code regulating
exploration and mining, i.e. the “authorization” for exploration and the “concession” for
mining.

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Exploration, which is defined by the Mining Code as the work required to locate and define a
deposit and determination of the economic feasibility thereof, can be carried out through an
authorization from the Federal Government. The exploration authorization is granted through
a licence issued by the Director General of the Departmento Nacional de Produção Nacional
or DNPM as it is commonly referred to. DNPM is the federal agency in charge of
implementing the country’s exploration and mining, fostering the mining industry, granting
and managing exploration and mining titles and monitoring the activities of exploration and
mining companies.

Exploration licences may be for areas up to 10,000 hectares and be granted for a period of
up to three years depending on the substance being sought. Nickel qualifies for up to the
maximum area and 3 years. The term (3 yr) can be renewed once, at the discretion of the
DNPM, upon its review of an interim Partial Exploration Report (Relatorio Parcial de Pesquisa
- RPP) from the licence holder regarding exploration conducted to date which justifies further
exploration.

Prior to the termination of the exploration licence, be it the initial three (3) year period or in the
case of renewal its second three year period the holder must submit a Final Exploration
Report (RFP) on the results of the work to DNPM. DNPM may then decide to: (i) approve the
report, when it shows the existence of a resource which can be both technically and
financially developed; (ii) dismiss the report, when the exploration work undertaken was
insufficient or due to technical deficiencies in the report; (iii) file the report, when it has been
proved that there was no deposit which may be both technically and/or financially developed;
or (iv) postpone a decision on the report in the event the existence of a resource has been
demonstrated, but for technical and/or financial reasons development of the property is not
feasible at the time.

Item (iv) above, the decision to postpone a decision on the Final Exploration Report is
referred to as Sobrestamento. With this decision DNPM will fix a time period in which the
interested party will be required to submit a new technical - financial feasibility study of the
deposit. This is normally a three year period (decree -portaria 21/97). The penalty for not
meeting the deadline will be the archiving of the RFP and liberation of the area. If the new
study does not demonstrate technical-financial feasibility DNPM may grant the interested
party an extension to the time limits or declare the area free and available for claiming if they
believe there are third parties who could feasibly mine the deposit. If the new study
demonstrates technical-economic feasibility the Final Exploration Report (RFP) will be
approved and the holder of the licence will have one year to apply for a mining concession.

4.3.2 Licencing details

The Project is wholly owned by HZM through its Brazilian subsidiaries Araguaia Niquel
Mineração Ltda and HZM do Brasil Mineração Ltda. It comprises fourteen exploration
licences encompassing an area of approximately 1130 km2 that extends approximately 70 km
in a north-south direction, and 35 km in an east-west direction.

As part of the transaction that took place in August 2010 to acquire the Teck Araguaia
licences, HZM took 100% control of the Lontra exploration licences, previously held in
partnership with a number of Brazilian entities.

In July 2011 the licences held by Pan Brazilian Mineração Ltda and Curionópolis Mineração
Ltda. were transferred to HMZ in an agreement with Lara Exploration Limited.

Tenement details are presented in Figure 4.2 and Table 4.1 below.

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Figure 4.1 Project Location - infrastructure and other nickel laterite deposits

Source: DNPM, IBGE

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Figure 4.2 Project Licence Map

Source: HZM, 2013

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Table 4.1 Permit summary

Permit
Process Permit / Request
Area (ha) Phase Publication Deadline Project Comment
Number Holder
Date
Araguaia Níquel
850.209/2006 9371.47 1st 21-06-11 21-06-14 Araguaia
Mineração Ltda
Suspension
Araguaia Níquel
850.277/2004 10000.00 2nd 02-03-06 03-05-13 Araguaia (Sobrestamento) -
Mineração Ltda
published 09-05-13
Suspension
Araguaia Níquel
850.278/2004 10000.00 2nd 02-03-06 03-05-13 Araguaia (Sobrestamento) -
Mineração Ltda
published 09-05-13
Araguaia Níquel
850.407/2011 5567.00 1st 21-06-11 21-06-14 Araguaia
Mineração Ltda
Araguaia Níquel
850.421/2004 9593.00 2nd 23-06-06 04-08-14 Araguaia
Mineração Ltda
Negative exploration
Araguaia Níquel
850.501/2008 2560.00 2nd 16-09-09 16-09-12 Araguaia report filed- awaiting
Mineração Ltda
DNPM decision
Suspension
Araguaia Níquel
850.514/2004 9861.00 2nd 17-02-05 09-06-12 Araguaia (Sobrestamento) -
Mineração Ltda
published 26-02-13
Suspension
Araguaia Níquel
850.515/2004 9361.00 2nd 17-02-05 09-06-12 Araguaia (Sobrestamento) -
Mineração Ltda
published 26-02-13
Suspension
Araguaia Níquel
850.516/2004 10000.00 2nd 17-02-05 09-06-12 Araguaia (Sobrestamento) -
Mineração Ltda
published 26-02-13
Suspension
Araguaia Níquel
850.517/2004 9657.00 2nd 17-02-05 09-06-12 Araguaia (Sobrestamento) -
Mineração Ltda
published 26-02-13
Araguaia Níquel
850.518/2004 9985.00 2nd 12-08-05 12-04-14 Araguaia
Mineração Ltda
Araguaia Níquel
850.575/2011 8174.00 1st 21-06-11 21-06-14 Araguaia
Mineração Ltda
Araguaia Níquel
850.576/2011 2945.00 1st 21-06-11 21-06-14 Araguaia
Mineração Ltda
Araguaia Níquel
851.300/2011 5791.80 1st 11-12-13 11-12-16 Araguaia
Mineração Ltda
filed on 17-10-13
Araguaia Níquel Applica
851.757/2013 5690.00 Araguaia (replaces
Mineração Ltda -tion
850682/2007)

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In Table 4.1, it is noted that seven of the licences show 2013 deadline dates in the sixth
column. Though these dates are correct the licences are in good standing as the Final
Exploration Reports in these cases were filed prior to the deadline date and are under
evaluation by DNPM. Brazilian law protects the processes while they are being examined, a
decision is reached and the decision published in the government gazette. In the comments
column note that six of the seven licences are shown to be in suspension or sobrestamento
which was mentioned in the opening overview on the mining code. The licences with
sobrestamento in Table 4.1 will remain in good standing for the three year period granted, or
until such time as the revised technical financial study is filed with DNPM.

HZM has not acquired any surface land rights for the Project but the company has
agreements in place with the principle landowners for surface access rights covering the
main deposits. Under the Brazilian Mining Law there is a compulsory purchase mechanism
for surface land rights over mining projects in the event that suitable terms cannot be agreed
between the landowner and Company. HZM currently has good working relationships with
the principal landowners

4.4 Agreements and encumbrances

Agreements are in place with local farm landholders that allows access to land and conduct
exploration with the minimum of disturbance.

4.5 Environmental obligations

HZM has obtained the necessary permits and authorizations to conduct exploration. An
exploration operation licence or permit is required and issued by the state environmental
agency. A water permit (Outorga) is required for drilling. When drill spacing in forested areas
at less than 100 m spacing a Vegetation Removal Authorisation (ASV) permit is required.
This requires a vegetation inventory of the forested areas that will be drilled, so that future
recovery needs are quantifiable. HZM is renewing the Operation Licence (“LO”), and water
permits and is in the process of obtaining an ASV for the next stage of drilling with drillhole
spacing at 50 m or less. Figure 4.3 shows the principal forested areas within the Project.

The area is not subject to any environmental or native title reserves.

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Figure 4.3 Map showing forested areas within the project licences

Source: HZM, 2013

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In general, to develop a mining project, the Project must undergo a three-stage

environmental licencing process. The State environmental authority is in charge of licencing
a mining project, as opposed to the Federal environmental authority.

A Preliminary License (“LP”) must be obtained at the planning stage of the mining project. An
Environment Impact Assessment (“EIA-RIMA”), which is the equivalent of a Social and
Environmental Impact Assessment (“SEIA”), and a plan for the restoration of degraded areas
must be prepared at this stage. Public hearings are called to present the EIA-RIMA to the
communities and authorities. Following the public hearing the State Environmental Council
may or may not approve the issue the LP. The LP usually imposes conditions that the mining
company must comply too. By granting the LP the environmental authority acknowledges
that the project is environmentally acceptable. At this stage the environmental authority will
also set the amount of the environmental compensation, which is a minimum of 0.5% of the
projected development investment.

HZM has completed the collection and analysis of all of the baseline social and
environmental data specified by the state environmental agency. This analysis together with
the PFS and its characterization the envisioned mine project, provides the base on which the
SEIA can be prepared. The ANP SEIA has concluded the 1st part of the SEIA which is the
presentation of the socio-economic and environmental setting that the mine development will
occur as well as the characterization of the mine project from installation through closure.
Part 2, the impact assessment has been started.

The second stage of the environmental licensing process is the Installation Licence (“LI”)
stage. During this stage the mining company must produce an Environmental Control Plan
(“PCA”), among other documents and submit it to the environmental authorities. Once the
PCA is approved, the LI is granted, usually under certain conditions. The mining company
may start construction of the mine, plant and infrastructure. A mining concession can only be
granted by the Minister of Mines once the mining company has obtained the LI.

The last stage of the environmental licensing process is the one related to the LO. The LO is
granted once the environmental authorities are satisfied that the development and
construction were completed in accordance with all the conditions of the LI and that the PCA
is correctly implemented. The LO authorizes a mining company to mine, process and sell (as
well as other ancillary activities that may be described in the licence), from an environmental
viewpoint.

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5 Accessibility, climate, local resources, infrastructure

and physiography
5.1 Access
The Project is centred approximately 07° 37’S and 49° 24’E or 675000E - 9120000N
(Figure 5.1) and extends towards the south eastern border of Pará State with Tocantins
State. Access to the site is via the Conceição do Araguaia – Floresta road (PA 449) which
passes through the Project area. The Project area is supported by a system of dirt roads
which have been developed to service existing cattle properties.

The Project can be reached by local flights from airports at Palmas (Tocantins State), and
Redenção or via Belém/Marabá. There is an airport at Conceição do Araguaia, where HZM
have their main field office but currently no scheduled flights are available.

5.2 Proximity to population centres and transport

Population density within the Project area is sparse and comprises solely of isolated farms.
The Project is approximately 45 km north of the town and municipality of Conceição do
Araguaia which has a population of 46,206 (source: Instituto Brasileiro de Geografia e
Estatística - IBGE) which hosts commercial and municipal services required to support the
town population including hospitals, hotels, restaurants, food markets and other such
amenities.

The town and municipality of Redenção is 110 km west of the Project area. Redenção is
considered the nearest business centre and supports a population of 79,010 (Source: IBGE)
with additional amenities required to support a larger population and business centre.

The city of Goiania is approximately 1,200 km to the South and is the traditional centre
business centre for most activities in the region. Goiania is 170 km southwest from Brasilia
which is the federal capital of Brazil.

Transport in the region is typically vehicular traffic which includes road haulage for supply of
goods to and from the region. In addition, there is an existing rail system which was
predominately developed for bulk material handling to support the iron ore industry together
with other agricultural and commercial goods.

The Araguaia River is being developed as a water transport route with locks currently under
construction at the Tucuruí dam allowing barging between Marabá and the sea port of
Barcarena. The locks have been commissioned (late 2012) and are functional. However, the
locks are barely used since the work necessary to make the Tocantins River, above the dam,
safe for transportation has not been completed.

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Figure 5.1 Araguaia Project location and regional infrastructure

Source: Audet, M A, et al 2012

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5.3 Climate and length of operating season

According to the Köppen classification, the climate in the municipality of Conceição do
Araguaia is equatorial super-humid Am type, very near the transition boundary for Aw. The
average annual temperature is 26.3 º C (Figure 5.2), with relative high humidity fluctuations
between very rainy and very dry seasons going from 90% to 52%. The dry season from June
to October is followed by heavy rain from November to May, with an annual rainfall of around
2,000 mm.

According the National Meteorological Institute (INMET) the lowest temperature registered in
Conceição do Araguaia was 9.2º C on 3 June, 1964 and the highest temperature of 41.3ºC
was registered on 15 September, 2010. The highest accumulated rainfall in 24 hours, 164.6
mm, was registered on 11 December, 2000.

The graph presented on Figure 5.2 represents the maximum and minimum mean
temperature, by month, from 1961 through 2013, a 53 year period.

Figure 5.3 shows the maximum and minimum mean temperature, by year, for the dry and wet
season for the same period.

Figure 5.2 Maximum and minimum mean temperature by month - 1961-2013

(Source: INMET)

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Figure 5.3 Maximum and minimum mean temperature for dry and wet season

(Source: INMET)

The graph in Figure 5.4 represents the average monthly precipitation for the period of 1961
through 2013, and Figure 5.5 the average number of days with rainfall for the wet and dry
season. Figure 5.6 shows the total precipitation for the dry and wet seasons for this period.

Figure 5.4 Monthly precipitation mean by month - 1961-2013

(Source: INMET)

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Figure 5.5 Days with rainfall average - wet and dry season

(Source: INMET)

Figure 5.6 Total precipitation wet and dry season

(Source: INMET)

Figure 5.7 represents the average cloudiness, by month, for the period 1961 through 2013,
and Figure 5.8 the average cloudiness, by year, for the dry and wet seasons.

Figure 5.7 Average cloudiness between 1961 and 2013

(Source: INMET)

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Figure 5.8 Average cloudiness for wet and dry season

(Source: INMET)

Figure 5.9represents the average relative humidity, by month, for the period 1961 through
2013, and Figure 5.10 the mean relative humidity, by year, for the dry and wet seasons.

Figure 5.9 Average relative humidity by month 1961-2013

(Source: INMET)

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Figure 5.10 Average relative humidity for wet and dry season

(Source: INMET)
Consideration has been given in the PFS for the wetter periods that may affect mining and
processing productivity.

Mining productivity has been based upon 362 mine production days with six being accounted
for poor conditions due to rain.

Generally, it is accepted that the plant will be operating 24/7 for 365 days per year, but
availability is different for different parts of the plant due to expected equipment maintenance
and other scheduled and unscheduled downtime:

 Ore receipt / crushing and screen / homogenising - 75% availability

 Reclaiming from crushed ore stockpile to dryer – 85% availability
 Drying and screening – 85% availability
 Calcining (rotary kiln) – 90% availability
 Smelting – 90% availability
 Refining – 95% availability
 Metal granulation – 95% availability.
Experience from other mining operations in the vicinity has been considered.

5.4 Surface rights

As of the date of this report, HZM has not acquired any surface land rights for the Project but
the HZM has agreements in place with the principal landowners for surface access rights
covering the area with the deposits and proposed plant site considered in this PFS. Under
the Brazilian Mining Law, there is a compulsory purchase mechanism for surface land rights
for mining projects in the event that suitable terms cannot be agreed between the landowner
and Company. However, HZM has good working relationships with the principal landowners.

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5.5 Infrastructure
5.5.1 Power

The area is well-serviced with a 500 kV transmission line currently linking the Tucurui power
generation plant, which has a generation capacity of 8,300 MW, to the national grid at
Marabá, Imperatriz and Colinas. Colinas, will also be link to the Serra da Mesa power
generation plant, with 1,300 MW generation capacity, and to the national grid in
approximately 5 years. It will also link to Belo Monte with an average generation capacity of
4,500 MW and the transmission line which is currently approximately 7,000 MW capacity will
expand to 11,000 MW.

Power for the Project will be via a grid connection at the Colinas substation. Potential
opportunity exists for a connection to the Belo Monte – Paráuapebas – Miracema
transmission line and shorten the distance to the Project site to approximately 35 km.

5.5.2 Roads

The main roads that connect the Amazonian region to the various waterways, ports, and train
terminals throughout the country are the BR -153 (Belém- Brasília) and the BR-251. The BR-
153 is a highway of approximate 4,335 km, connecting Rio Grande do Sul, in the south, to
Pará in the north. Through the states of Goiás and Tocantins, the highway is paved and has
good trafficability, except for a small stretch near Xambioá (TO), where the track is uneven.
The BR-215 is a highway connecting Bahia to southern Mato Grosso state. This highway
connects to BR-153 at Rialma (GO). In Goiás, the paved sections are discontinuous, with
several areas occurring as graded natural bed.

The Project site is located some 150 km away from main BR-153 highway but is also
supported by an existing road system. The Project area is supported by an existing
infrastructure of dirt tracks used for access by local farms.

5.5.3 Rail

Rail infrastructure consists of a network which is owned by VALEC-Engineering, Construction

and Railways SA (Valec) which is a public company controlled by the Ministry of Transport.

The North – South railway (FNS) extends from Anápolis in the state of Goias to Açailandia in
the state of Maranhão (see Figure 5.1). In Açailandia it is linked to the Carajás railway, which
is used by Vale to transport iron ore to the port of Itaqui, in São Luis.

Valec has granted the concession for exploration and operation of the North-South (FNS)
railway to Vale for 30 years, adding an additional 1220 km, which passes approximately 180
km from the project site, to the original concession of approximately 570 km from Açailandia
to – São Luis / Itaqui.

Currently, the railway is used for transportation of pig iron, fertilizers, fuel and other goods as
well as passengers between the towns of Paráuapebas and São Luis. There are three
scheduled trains per week, along the distance of approximately 1,000 km, which takes
approximately 15 hours. However, delays of several hours are not uncommon.

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5.5.4 Ports

Regionally, the Project is supported by existing port facilities at the port of Itaqui, in São Luis.
This facility is well served by a railway and road infrastructure and is 1150 km from the
Project and is currently in use by Vale who use this location to support their Carajás
operation.

Other port facilities exist but Itaqui provides the key location for in-bound and out-bound
logistics for imports of bulk consumables, such as coal and potentially export of Fe-Ni
product.

5.5.5 Water

The provision of water for the project is described in Section 18.10.2. Water sources include
river water, a closed-system for the plant and recycling effort from mine dewatering, water
flows from waste and slag dumps and other catchments from facilities around the site. There
are known periods of drought during the summer months but this PFS considers a number of
engineering solutions which would be elaborated further in subsequent studies. The
hydrological characteristic of the area suggests that the provision of water does not pose a
problem for this operation with an appropriate design solution.

It should be noted that less than half of the dwellings in Conceição do Araguaia have access
to running water. The main water supply sources are wells or springs located on the
properties. Other sources include rain water stored in cisterns, water trucks, dams or
streams.

The Project does provide an opportunity for Conceição do Araguaia to improve clean water
availability as a sustainable solution.

5.5.6 Mining personnel

It is anticipated that mining personnel for the Project would be sourced from the population of
Conceição do Araguaia and the general locale. The region already supports a mining
community which provides an opportunity for the Project to attract a skilled workforce from
operators through to technical and managerial staff. It is envisaged that additional skilled
employees would be sourced throughout Brazil and internationally as the operational
tolerances for processing and smelting will require a requisite high skill-set.

5.5.7 Slag and waste dumps

The Project requires a slag dump to facilitate waste from the smelting process and a number
of locations have been considered as part of the PFS. The total volume of slag produced
over the 25 years is estimated at 9.93 Mm3. This will be accommodated in a waste dump as
part of a waste management programme. A number of locations have been assessed for
their viability. The slag dump will be lined with a clay liner which preliminary geotechnical
testing indicates as suitable after engineering and compaction. High clay content material is
readily available on site. This is described in further detail in Section 18.0.

Waste rock from mining, (defined as nickel grade less than 0.8%), is planned to be disposed
in waste dumps and back into the mined out pits. Each mining area has a planned waste
dump and sites have been identified. This is described in further detail in Section 16.4.4.

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5.5.8 Process plant sites

Four locations were considered for the process plant and smelter locations. A site has been
selected which was established in terms of required utility and the best economics. These
are described in further detail in Section 18.

5.5.9 Communications

Cellular phone coverage is available in Conceição do Araguaia and the immediate surrounds
but is intermittent to not available in the Project area. Internet connections are available at
the HZM field office and in Conceição do Araguaia supported by local internet service
providers.

5.6 Physiography
The Project area is characterised by undulating hill systems with elevated plateaus separated
by shallow valleys with relief being typically in the region of 100 m. The highest elevation of
the Project area is 360 m (AMSL) and the lowest elevation is 217 m. The topography across
the Project area is considered reasonable level with gentle gradients with a downward slope
across the project area, from West to East, towards the Araguaia River.

The original area is known as cerrado and has never been considered part of the Amazon
rainforest. Some of the plateaus are used for cash crops such as pineapple plantations with
the lower lying areas predominantly used for cattle ranching.

Views of typical relief, vegetation and land use are presented in the following photographs
Figure 5.11, Figure 5.12, and Figure 5.13 below.

Figure 5.11 View of general Project area looking north-northwest

Source: Audet, M A, et al 2012

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Figure 5.12 View to the south-east over Pequizeiro (main zone)

Source: Audet, M A, et al 2012

Showing large ferricrete plain surrounded by valleys (fault zones), contact to sediments to the
west and east of the plain, photo taken from elevated position (silicified zone), semi-dense
forest covering the centre zone of Pequizeiro (main).

Figure 5.13 View over the north part of Pequizeiro (main zone)

Source: Audet, M A, et al 2012

Showing view to the west, semi dense forest at the border of mineralised zone, showing
position of 3 drill rigs at the end of dry season (Dec 2010)

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6 History
6.1 Prior Ownership
The history of the mineral tenements that now comprise HZM’s Project are summarised as
follows:

 HZM commenced exploration by way of regional stream sediment sampling in 2006.

This resulted in the discovery of seven nickel targets and resulted in the awarding of
three exploration licences in 2007, held 100% by HZM. Two contiguous licence areas
then held by a private Brazilian company (LGA Mineração e Siderugia) were acquired in
a partnership agreement with HZM in 2007. Collectively the five mineral tenements were
known as the Lontra project covering 22,556 hectares. The Lontra project included
Northern Target, Raimundo Target, Southern and Morro Target (Figure 6.1).
 In July 2010 HZM entered into an agreement with Teck Resources Limited (Teck) to
acquire Teck Cominco Brasil S.A. which owned 100% of Teck’s Araguaia project. The
merged Lontra and Araguaia tenements comprised eleven licences and licence
applications covering 73,000 hectares and eight significant mineralised zones. Around
the same time HZM acquired the remaining 50% interest in the Lontra project not then
held by HZM.
 In July 2011, in an agreement with Lara Exploration Ltd (Lara), HZM acquired 100% of
the licences containing the Vila Oito West and Floresta discoveries.

Subsequent to the acquisition of the Teck Araguaia and Lara tenements, in excess of 15
targets are identified within HZM Project (Figure 6.1).

6.2 General description of exploration work undertaken by

previous owners or operators
The following has been summarised from Audet, M A, et al (2012).

6.2.1 Introduction

Exploration work for nickel laterite deposits historically consisted of geologic mapping, soil
geochemical sampling (both surficial grab samples and/or shallow auger drilling); with
subsequent reverse circulation drilling (RC) and diamond core (DDH).

The initial phases of exploration and discovery of nickel laterite mineralisation in the Araguaia
Project area were reported by Lara (Barry 2006). Subsequent to that report, exploration
activities was carried out by Xstrata (formerly Falconbridge) until early 2007, Lara in 2007 and
by Teck from September 2007 until November 2008.

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Figure 6.1 HMZ Project combined target map

Source: HMZ, 2013

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Xstrata, Lara and Teck all carried out regional geological mapping at various degrees of
detail based on photo‐interpretation and geophysical image interpretation complimented by
field reconnaissance. The outcrop in the region is generally poor, because of the widespread
laterite hard cap cover and generally deep tropical weathering. The magnetic images proved
to be particularly useful in this terrain as they readily outline the magnetic ultramafic bodies
and late cross‐cutting mafic dyke structures that show a strong contrast with the regional non‐
magnetic phyllite sequences.

The Xstrata Airborne Magnetics and Radiometric Survey covered the Vila Oito and Floresta
Blocks. This produced a high resolution, or high‐density survey, with flight lines flown at 100
m above the ground and with east-west orientated flight lines at 500 m spacing along the
trend. The survey was flown in several stages (June 2004, February and June 2005) by
Prospectors Ltd. In addition Xstrata flew an area of 440 km2 in the Vila Oito Block using
helicopter‐mounted Versatile Time Domain Electromagnetic (VTEM) survey system.

The data for the Vila Oito Block was made available to Lara when Xstrata pulled out of the
Joint Venture. Lara was able to purchase the data for the Floresta Block and other areas of
interest held in the region in early 2007. This data was an essential part of the database
used by Lara to carry out an in‐house evaluation and target selection for priority nickel targets
across some 300,000 ha of claims controlled by Lara in 2007. This data was made available
to Teck on entering into a Joint Venture agreement with Lara and was also an integral
component for their nickel laterite target definition programme.

6.2.2 Lontra

The Lontra area had previously been claimed for phosphate and then iron, although to HZM’s
knowledge no exploration was undertaken. While ultramafic bodies are known in the
Araguaia Belt the existing regional geologic maps had indicated that the Lontra area was
underlain by packages of fine to coarse-grained clastic sediments.

6.2.3 Teck

Nickel exploration across the Teck Araguaia licence areas dates back to the 1970’s. During
the period work conducted by CVRD (Docegeo) and VALE led to the discovery of a small
ultramafic intrusive hosted nickel laterite deposit at Serra do Quatipuru (DNPM 850514/2004)
(Figure 6.1).

In the 1990’s Rio Tinto Desenvolvimento Mineral (RTDM) conducted exploration for
magmatic nickel mineralisation associated with ultramafic rocks in the region of Couto
Magalhaes (DNPM 850514/2004). Results of this work are unknown.

From 2006 until 2008 Teck Resources completed 5 main stages of exploration, including
geological sampling, airborne geophysical surveys, and drilling.

Auger and reverse circulation drilling

Teck completed 46 shallow auger drillholes for initial exploration purposes. Bottom-of-hole
auger samples were typically less than 1 metre due to limitations with auger penetration at
depth (Bennell, 2010).

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First pass irregular spaced exploratory reverse circulation (RC) drilling was undertaken by
Teck in 2006 to test nickel-in-soil geochemical and airborne geophysical anomalies in
identified target areas.

A total of 69 RC holes were drilled for 1,996 m testing 5 target areas at Baião, Pequizeiro,
Jacutinga, Vila Oito West and Vila Oito (DNPM 850.514/2004). Positive drill results were
returned for each target tested.

One metre bulk RC samples were collected in marked plastic bags from the cyclone and
transported to a RC receiving area on site. Bulk samples were chipped, with chipped 1.0 m
intervals being stored in compartmentalised RC wood boxes similar to core boxes for logging
and future reference.

At the RC receiving area 1.0 m samples were laid out on plastic sheets to sun-dry. Once dry
samples were put through a Jones riffle splitter where 50% of the sample was spilt for
dispatch to the laboratory for preparation and analysis.

The remainder of the 1.0 m bulk sample was stored at the RC receiving facility on site or
other Teck storage facility elsewhere. At present almost 100% of the Teck rejects, pulps and
bulk samples, are stored in the HZM facility at Conceição do Araguaia.

Data from these drillholes have not been used in mineral resource estimates reported in this
Technical Report.

Diamond drilling

Following positive results from the RC drill programmes, 400 m x 400 m spaced diamond
drilling took place at the Baião, Pequizeiro, Jacutinga, Vila Oito West and Vila Oito targets in
2007.

Where preliminary results from drill core were positive, 200 m x 200 m spaced diamond
drilling was undertaken. In November 2008, having completed the diamond drilling over
selected targets, for a total of 489 holes and 11,404 m, Teck ceased exploration on the
project.

Teck diamond drillholes are included in the data subsequently provided by HZM to Snowden
for mineral resource estimation. The average thicknesses of mineralised intercepts
calculated at a 1.0% nickel cut-off-grade for the four main sectors range from 5.12 m to
7.55 m, with maximum thicknesses varying from 13.08 m to 21.30 m.

Teck drill core handling and processing involved similar steps to that described for HZM
(sections 10 and 11).

After sampling, remaining half drill core was retained and stored in the core box for future
reference with sample intervals marked on the core box with the use of metal tags (Bennell,
2010).

In total, some 18,712 individual samples were taken and sent for preparation and analysis
from the Teck drillholes comprising of 15,841 from DDH’s and 470 from RC drillholes
(numbers include quality control standards and blanks). The remaining 2,401 samples are
believed to be from surface sampling.

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Geological logging

Drill core was photographed and logged prior to sampling. Evidence suggests core was dry
photographed only.

Drill core and RC geological logging intervals were determined by lithology rather than set
intervals and recorded using hardcopy graphical logging sheets to capture pertinent
geological information for each deposit including lithology, facies and texture.

Geological information recorded as hand written sheets was then transferred to Microsoft®
Excel spreadsheets direct to an AcQuire database.

For geotechnical logging Teck recorded core recovery, RQD and expansion.

Drill cores were routinely measured for magnetic susceptibility, using a Terraplus Inc. KT-9
digital magnetic susceptibility meter. Magnetic susceptibility was measured for all core at
20 cm intervals. This information was stored in the database for use in geological logging
and further deposit analysis and interpretation.

Topographic survey

In 2006 Teck commissioned Prospectors Aerolevantamentos e Sistemas Ltda to undertake

geophysical surveys across the Araguaia project area and as part of this survey a digital 10m
topographical coverage of the project area was also acquired. Data for the surveys were
recorded using an RMS DGR 33A data acquisition system, a Magnavox/Leica MX 9212
twelve channel GPS receiver mounted on a twin engine Piper Navajo/Chieftain PA31-350.

Teck drillholes were positioned with handheld GPS and surveyed using DGPS.

No downhole surveys were conducted due to the short, vertical nature of the drillholes.

6.2.4 Lara

Between 2006 and 2008, joint venture (JV) work with Falconbridge Ltd and, later Teck,
resulted in the discovery of nickel laterite mineralisation at Vila Oito, between the Teck and
Lontra discoveries, and at Floresta to the north.

In 2009 Lara reported that exploration programs on their Araguaia Nickel project conducted
since 2006 have identified bodies of nickel laterite mineralisation in the southern part of the
Vila Oito licence block and in the southwest of the Floresta licence block, with 64 diamond
drillholes and 55 auger drillholes completed to date (Lara 2009).

Teck completed significant exploration immediately to the south and east of Vila Oito and in
January 2009 presented a conceptual grade and tonnage estimate for the combined targets
in their properties together with the Vila Oito target of Lara (now called Vila Oito West by
HZM).

6.3 Historical mineral resource, mineral reserve estimates and

production
There are no historical mineral resource, mineral reserve estimates and production to be
reported for deposits within the HZM Project.

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7 Geological setting and mineralisation

7.1 Geological setting
7.1.1 Regional geology

The project lies within the Neoproterozoic Araguaia Fold Belt. This belt is a large north to
south trending orogenic zone along the contact of the Amazon Craton to the west and the
São Francisco Craton to the east (Figure 7.1). The Belt is 1,000 km long and 150 km wide
and its evolution is believed to be contemporary with the Brazilian thermal event at the
Neoproterozoic boundary.

The belt comprises metamorphosed and deformed marine-clastic sediments of the Tocantins
Group and can be split into two halves based on the degree of metamorphism present. The
more highly metamorphosed Estrondo Formation comprises the eastern half of the belt while
the western half displaying lower levels of metamorphism is termed the Couto de Magalhães
Formation.

The Estrondo Formation is dominated by greenschist to amphibolite facies grade

metamorphosed sediments with occasional banded iron formations, carbonates and
exposures of Achaean basement. Proterozoic granites intrude the eastern belt.

The Couto de Magalhães Formation contains weakly metamorphosed, marine pelites with
local carbonate, iron-rich, and mafic to ultramafic bodies.

7.1.2 Project geology

The local geology has largely been interpreted from airborne geophysical survey data, soil
sampling data and mapping by HZM and previous owners of the tenements. Various types of
metasediments cover the vast majority of the licence area. Large plateau areas, varying in
size from a few hundred square metres to several square kilometres, and generally capped
with a hard iron rich duricrust that is occasionally silicified are frequently developed over
mafic and ultramafic bodies. These bodies and numerous northwest-southeast to north-
south trending lineaments have been identified from magnetic data and outcrop. These
bodies are often bounded by a siliceous breccia. Bodies of pillow lava and other volcanic
material also exist. The area is cut by numerous mafic dykes.

A distinctive lateritic sequence is developed over ultramafic and mafic rocks within the Project
area and the same sequence can be recognised at each of the target sites though the
thickness and extent of each facies and the complete sequence itself may vary from location
to location. The sequence can be split into 6 main facies types: soil, ferricrete, limonite,
transition, saprolite and fresh rock as well as numerous sub-facies.

The interpreted project geology is shown in Figure 7.1 and discussed further in Section 7.4.

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Figure 7.1 Regional geolocical map

Source: HZM 2013

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7.2 Lithologies and mineralisation

7.2.1 Physical criteria

The lithological facies of the laterite profile are described as follows:

Soil Horizon

A dark brown layer rich in humus material constitutes the uppermost soil layer. This layer
comprises occasional ironstones as well as organic material derived from the breakdown of
plants and the networks of fine plant roots. The chemical composition of this layer is
characterized by low Ni and MgO. The soil material forms a thin horizon that generally
averages less than 1.0 m to 1.6 m thickness and is absent in many places (Table 7.1).

Table 7.1 Soil thickness statistics derived from Project drill logs
1
Area Minimum (m) Maximum (m) Average thickness (m)
VOW 0.00 5.05 1.21
VOI 0.00 4.97 1.34
VOE 0.00 3.48 1.14
JAC 0.00 5.69 1.61
PQZ 0.00 7.00 0.59
PQW 0.00 2.50 0.63
BAI 0.00 5.61 0.74

Ferricrete Horizon

This facies comprises a hard, cohesive, red to yellow brown material, high in
hematite/goethite and often containing magnetite with occasional chromite. Ferricrete is
present as both an unconsolidated horizon with ubiquitous haematitic pisolites (code PF) and
a cemented goethite rich horizon containing distinctive worm burrows (code LF). Ferricrete is
present in virtually all locations with thickness varying from absent to approximately fifteen
metres; commonly two to three metre thick horizons are developed (Table 7.2 and Table 7.3).

1
VOW (Vila Oito West); VOI (Vila Oito); VOE (Vila Oito East); JAC (Jacutinga); PQZ (Pequizeiro); PQW
(Pequizeiro West); BAI (Baião)

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Table 7.2 Pisolithic ferricrete thickness statistics derived from Project drill logs

Area Minimum (m) Maximum (m) Average thickness (m)

VOW 0.00 5.30 1.21
VOI 0.00 10.49 2.80
VOE 0.00 7.35 1.70
JAC 0.00 3.02 0.95
PQZ 0.00 9.59 2.44
PQW 0.00 5.00 1.87
BAI 0.00 11.30 2.33

Table 7.3 Cemented ferricrete thickness statistics derived from Project drill logs

Area Minimum (m) Maximum (m) Average thickness (m)

VOW 0.00 6.87 1.10
VOI 0.00 8.21 1.81
VOE 0.00 14.44 1.83
JAC 0.00 3.70 0.64
PQZ 0.00 12.80 1.38
PQW 0.00 9.49 4.32
BAI 0.00 14.06 3.92

Limonite Horizon

The limonite layer follows immediately below the soil or the ferricrete layer, and consists of
deeply weathered material. The upper part of the limonite, sometimes called Red Limonite, is
a red-brown or more often, chocolate-brown clayey material with little internal structure
although layering has been observed. The material consists entirely of fine-grained minerals
of silt to clay fractions, predominantly hydrated iron oxides.

The lower part of the limonite, sometimes called Yellow Limonite, is yellow-brown to orange
coloured and generally has a more compact appearance than the red limonite. The yellow
limonite rarely contains coarse fragments of weathered material. Both Red and Yellow
Limonite maybe well developed; alternatively only one sub-type may be present or
occasionally neither.

Transitional Horizon

Three sub-facies are recognised:

 The Upper Transition facies (UT) is a dark red to brown red, cohesive, soft, plastic, and
fictile material, with fine granulation. It is differentiated from Red Limonite by the
presence of manganese oxide (up to 2%), whitish gibbsite pockets (up to 5%), and
incipient texture. UT can contain up to 15% of disseminated green serpentine, which
increases the nickel content in this horizon. Manganese oxide also considerably
increases the cobalt and nickel content.

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 The Green Transition facies (GT) predominately hosts nontronite/kaolinite minerals

(approx. 85-90%) and approximately 5% Mn minerals, and is characterised by the
association of green material and brown clayish material. The green material represents
from 30 to 70% of the GT facies and the clayish material occurs as laminations or
disseminations. The nickel content is associated with the relative presence of these
materials and, usually, the greener the material the higher the content. GT is usually
compact and plastic. It can also occur in a friable form, but without losing its plastic
property. The clayish material is usually brown, but it can be orange/brown or reddish
brown, depending on the amount of associated goethite and/or hematite. Chlorite,
vermiculite, manganese oxide (asbolane), and talc can also occur disseminated (> 1%).
Free silica can be present in the form of millimetre sized veins or pockets.
 The Brown Transition facies (BT) consists of approximately 40% nontronite/kaolinite,
30% Mn minerals and a portion of approximately 20% Limonite/Goethite, the latter
responsible for the brownish, clayey fraction. BT is the most common transition facies
and is formed by granules of millimetre or centimetre size of green to light green
nontronite immersed in a brown to reddish brown clayey matrix. The material is compact
and granular and presents incipient texture. The clayey matrix can represent up to 30%
of material and can also occur as laminations. The nontronite granules can form
cohesive aggregates, but the hardness is usually low. Manganese oxide and chlorite can
sometimes occur.

Saprolite Horizon

Three sub-facies are recognised:

 Earthy Saprolite (SAP) is pervasively altered rock composed of hydrated Fe-oxides,

serpentine and clays. Minor amounts of quartz, olivine and chromite are present.
Primary rock textures have been obliterated with some visible relics; trace amounts of
clay/serpentine pseudomorphs after pyroxene or olivine. The horizon is usually reddish to
brownish.
 Rocky Saprolite (SROC) is hard saprolite and is competent dark green to greyish rock
of weathered peridotite and with moderate saprolite alteration, occurring mostly along
fractures. Primary olivine and orthopyroxene exhibit patchy replacement by fine-grained
hydrated iron oxides and amorphous silica. Granular textures are well preserved and the
material consists of cores of angular fresh rock (20–50%) with successive rims of
increasingly altered material. Silica boxwork is rarely seen in the hard saprolite but a
bright green garnierite staining can often be seen on fracture planes.
 Silicified Saprolite (SIS) is a saprolitic material with high silica content. The hardness
and colour of the material vary according to the silicification intensity, but the material
usually presents moderate to high hardness and whitish brown to reddish brown colour.
Sometimes, the texture is still preserved and the presence of free silica is common.

Bedrock

Bedrock has a dark green to dark brown colour and consists of massive to fractured,
varyingly serpentinised peridotite, whose interface with the weathered profile can be highly
irregular and undulating. Bedrock is commonly exposed along rivers and creeks and in major
landslides.

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7.2.2 Chemical criteria

A facies distinction by chemical composition was devised by consulting geologist Dr. Marc-
Antoine Audet in 2011-12, based on factor analysis of the initial Teck data and updated
thereafter using the entire core assay database. The discrimination is made using mainly Fe,
MgO, SiO2, Al2O3 and Ni grades (Table 7.4).

Typical Limonite-facies laterite contains 0.78% Ni, 0.11% Co, 2.4% Cr2O3, less than 2%
MgO, 36.5% Fe and 19.7% SiO2. The underlying Transition material typically has 1.20% Ni,
0.05% Co, 11.7% MgO, 18.3% Fe and 44.3% SiO2. The underlying Earthy - Rocky Saprolite
typically has 1.29 – 0.92% Ni, 0.04 – 0.03% Co, 18.3 – 27.0% MgO, 14.8 – 9.7% Fe and 41.8
– 42.2 % SiO2.

Table 7.4 Average composition per facies based on Teck and HZM diamond
drilling to 2013
o
N
Ni% Co% Fe% MgO% SiO2% Al2O3% Cr2O3%
Facies assays
Weathered Peridotite
Soil 3,640 0.153 0.033 29.63 0.19 25.00 17.30 1.75
Ferricrete 384 0.367 0.098 47.70 0.22 9.69 9.36 2.15
Limonite 6,698 0.775 0.113 36.47 1.80 19.72 11.09 2.39
Transition 4,557 1.196 0.051 18.29 11.65 44.25 4.89 1.21
Earthy Saprolite 1,653 1.293 0.041 14.79 18.26 41.97 4.44 1.00
Rocky Saprolite 6,643 0.918 0.025 9.96 26.96 42.19 3.52 0.70
Silicified Saprolite 512 0.413 0.023 8.34 7.14 70.94 3.20 0.48
Bedrock 5,443 0.302 0.012 6.15 34.19 41.34 1.68 0.44
Other Protore
Sediment 4,744 0.073 0.014 9.22 2.18 58.71 14.91 0.19
Quartz vein 97 0.047 0.010 2.52 0.95 93.53 0.58 0.12
CaO Rich 65 0.107 0.010 4.44 18.85 22.56 1.26 0.26
Dike Al-rich 379 0.135 0.010 5.36 3.62 61.06 15.85 0.07
Diorite 1,136 0.175 0.015 12.31 4.97 46.75 16.15 0.20

7.2.3 Loss-on-Ignition (LOI) statistics

The assay database provides LOI results for each sample. LOI average statistics for each
Horizon in selected deposits are presented in Table 7.5.

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Table 7.5 Average LOI statistics by area and horizon

Area Horizon 100 (LOI %) Horizon 200 (LOI %) Horizon 300 (LOI %)
VOW 9.40 8.65 9.89
VOI 10.12 8.45 10.41
VOE 9.41 9.28 10.71
JAC 8.46 8.88 9.40
PQZ 10.51 10.74 19.43
PQW 10.13 9.45 10.02
BAI 10.39 9.28 10.06

7.2.4 Facies distribution

The deposits at the Araguaia project are heterogeneous as far as lateritic facies distribution is
concerned (Table 7.6). The average thickness for the limonite facies ranges from 7.5 m to
11.6 m, while maximum thicknesses vary from 23.9 m to 45 m. The saprolite horizon shows
similar average variations while the total thickness is highly variable. The transition horizon is
thinner than limonite or saprolite and generally less continuous laterally, which is shown by
the large variation in maximum thickness observed from one deposit to another.

Table 7.6 Maximum and average thickness of laterite horizons (including 2013
data)

Thickness (m)
Drillholes
Sector Area Limonite Transition Saprolite
(№)
Max. Avg. Max. Avg. Max. Avg.
Baião
South 361 23.90 7.46 17.83 4.12 28.11 6.74
Baião South
Pequizeiro
Pequizeiro East
Pequizeiro 265 44.99 8.97 33.63 5.86 36.94 9.57
Pequizeiro West
Pequizeiro NW
Vila Oito East
Vila Oito
Centre 444 32.10 8.71 48.65 5.72 54.05 10.04
Vila Oito West
Jacutinga
Oito
North 58 31.30 11.56 25.20 6.25 37.86 9.87
Oito West
North
Lontra 144 30.55 10.38 10.25 3.15 23.70 5.16
Raimundo

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7.3 Mineralogical studies

In December 2010 SGS Mineral Services, Lakefield, Ontario, Canada (SGS), was contracted
to undertake a high definition mineralogical study on four samples selected from the
remaining half core drilled in the Teck exploration programmes on the Baião and Pequizeiro
targets. One sample of each of the mineralised Yellow Limonite, Green Transition, Brown
Transition and Saprolite facies was selected.

Techniques employed included QEMSCAN technology (Quantitative Evaluation of Materials

by Scanning Electron Microscopy), X-ray diffraction (XRD), optical microscopy and electron
microprobe (EMP) analyses. The main purpose of this test programme was to identify the
mineral assemblage and modal abundance of the various nickel bearing horizons, as well as
to determine the overall nickel deportment amongst the samples.

The results of this work were reported in July 2011 (SGS Mineral Services, 2011). The
mineralogical distribution is shown in Figure 7.2 and the deportment of nickel in the principal
mineralised facies is summarised in Figure 7.3.

Figure 7.2 Mineralogical distribution in the principal mineralised facies

Source: SGS 2011

In December 2012 SGS was contracted to undertake an additional high definition

mineralogical study on a sample split of the Transition plus Saprolite blend (HM_51T_49S)
used in the metallurgical test work completed at FLSmidth. The techniques employed were
identical to those used in the earlier work and included QEMSCAN, XRD, optical microscopy
and EMP analyses (SGS 2013).

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Figure 7.3 Deportment of nickel in principal mineral facies (SGS 2011)

Limonite Saprolite

Transition – green Transition - brown

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The mineralogical distribution by size fraction is shown in Figure 7.4 and the deportment of
nickel in the principal mineral species is summarised in Figure 7.5.

Figure 7.4 Mineralogical distribution by size fraction in Blended Sample

(HM_51T_49S)

Source: SGS 2013

Figure 7.5 Deportment of nickel in the principal mineral species in Blended Sample
(HM_51T_49S)

Source: SGS 2013

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7.4 Deposit geology

The following has been excerpted from Audet, M A, et al (2012) and updated where
appropriate.

7.4.1 Centre (JAC, VOW, VOI, VOE)

The Centre Sector: Jacutinga (JAC); Vila Oito West (VOW); Vila Oito (VOI); and Vila Oito
East (VOE), covers an area of approximately 10 km2 (Figure 7.6). Since VOI and VOE
deposits are located in the flat areas with no discernible outcrop, only JAC and VOW have
been surface mapped though the connection between these ultramafic bodies is
unconfirmed.

Figure 7.6 Bedrock structural geology map of Centre Sector

Source: HZM 2013

Northwest-southeast, northeast-southwest and north-south trending silica filled fault zones

are found within the JAC area. A minor east-west trending steep fault cross-cuts the north-
south trending fault and a northwest-southeast trending silica filled fault is the contact
between ultramafic and sedimentary rocks. The conical hill is composed of both ultramafic
and sedimentary rock, while the larger triangle shaped hill is mostly composed of massive
silica and silicified sedimentary rocks.

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In VOW, silica filled fault zones represent the sedimentary and ultramafic rock boundaries
and trend northeast-southwest and east-west along the northwest and southern limits of the
target respectively. Both are dislocated by northwest-southeast trending steep cross faults.
Shear indicators indicate dextral movement.

A ridge, located north of VOW, exposes an oblique thrust fault zone filled by massive silica.
The fault zone trends northwest-southeast and dips to the northeast at 55° to 80°.
Sedimentary rocks occur on both sides of this zone, however ultramafic rocks outcrop within
the fault zone covering an area of 150 x 1,000 m. A 3 km displacement separates this
ultramafic outcrop from the closest similar body. Duricrust covers both sediment and
ultramafic rocks in the far north-eastern area (Figure 7.7). Northeast-southwest trending,
steep faults dislocate the silica ridges. Some north-south trending faults located in the
southern rim dislocate northeast-southwest trending cross structures.

An east-west trending silica filled fault zone marks the only topographic high around VOI.
This 200 m long hill is dislocated by a north-south trending cross fault in the middle and
terminates with some north-south fractures in the eastern rim.

Figure 7.7 Outcrop of ultramafic rock within sinistral oblique thrust fault zone

Note: Sd: Sedimentary rock; Sl: Silica; Um: Ultramafic rock; Dc: Duricrust (not to scale)
Source: Audet, M A, et al 2012

HZM provided Snowden with updated surface geology maps for each of the deposits,
following the completion of the 2012-13 drilling programme (Figure 7.8, Figure 7.9,
Figure 7.10, and Figure 7.11). These maps and drillhole results were used by Snowden to
guide the construction of 3D wireframe interpretations of the limonite, transition and saprolite
horizon contacts.

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Figure 7.8 Updated bedrock JAC geology map after 2012-13 drill programme

Source: HZM 2013

Figure 7.9 Updated bedrock VOW geology map after 2012-13 drill programme

Source: HZM 2013

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Figure 7.10 Updated bedrock VOI geology map after 2012-13 drill programme

Source: HZM 2013

Figure 7.11 Updated bedrock VOE geology map after 2012-13 drill programme

Source: HZM 2013

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7.4.2 Pequizeiro (PQW, PQZ)

Three northwest trending mineralised bodies cover an area of approximately 3 km2 in this
sector. The deposits are enclosed by steeply dipping fault zones along northeastern and
southwestern margins leading to their elongate outlines (Figure 7.12). The three main areas
show the same style of mineralisation and characteristics and are therefore interpreted as
one body of mineralisation that has subsequently been partitioned as a result of the major
northwest trending fault system and later stage cross-faults trending northeast.

Sedimentary rocks show intense folding and silicification at the ultramafic contact where
massive silica is absent (Figure 7.13).

A large prominent hill between Pequizeiro and Pequizeiro West demarks the intersection of
three fault zones. The hill is composed of massive silica with pervasive iron oxide within the
fault zones.

Figure 7.12 Bedrock structural geology map of Pequizeiro Sector

Source: HZM 2013

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Figure 7.13 Silica and folded sediments along the margins of Pequizeiro

Note: Sd: Sedimentary rock; Sl: Silica; Um: Ultramafic rock; Dc: Duricrust; Ni: Nickeliferous zone (not to
scale)
Source: Audet, M A, et al 2012

HZM provided Snowden with an updated surface geology map for PQW, following the
completion of the 2012-13 drilling programme (Figure 7.14). This map and drillhole results
were used by Snowden to guide the construction of 3D wireframe interpretations of the
limonite, transition and saprolite horizon contacts. Snowden elected to use the existing
horizon wireframes for PQZ, subject to review (Figure 7.15).

Figure 7.14 Updated bedrock PQW geology map after 2012-13 drill programme

Source: HZM 2013

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Figure 7.15 Updated bedrock PQZ geology map

Source: HZM 2013

7.4.3 South (Baião or BAI)

The South sector consists of three separate ultramafic bodies, the largest being Baião and
covers an area of around 8 km2 (Figure 7.16). No structures were identified from field
mapping in the sector due to the flat topography, lack of exposure in the southern part and
dense forest cover in the east.

A steeply dipping, silica filled fault zone is located along a north-northwest to south-southeast
trending ridge in the northeastern part of Baião and reaches up to a width of 250 m. The
direction of the fault zone changes to west-northwest to east-southeast further north of the
ridge. A 200 m wide fresh ultramafic outcrop is located within the rupture zone that is
constrained between two steep northeast-southwest trending cross-cutting faults
(Figure 7.17).

The western part of Baião is limited by a zone of massive silica and silicified sedimentary
rock, almost 1 km wide. Steeply dipping structures trend north-northeast to south-southwest
and northeast-southwest trending. These major trends are dislocated by cross-cutting faults.
Contrary to the other cross faults in Pequizeiro and northeast of Baião, these are northwest-
southeast trending and filled by silica instead of iron-oxide.

Snowden elected to use the existing horizon wireframes for Baião, subject to review.

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Figure 7.16 Updated bedrock BAI geology map

Source: HZM 2013

Figure 7.17 Ultramafic unit within the rupture zone and silica ridge

Note: Sl: Silica; Um: Ultramafic (not to scale)

Source: Audet, M A, et al 2012

7.4.4 Lontra sector

There is limited outcrop in this sector and geology is largely interpreted from soil and termite
mound colours (Figure 7.18). Sedimentary rocks and infrequent ultramafic / mafic rocks
cover an area of 10 km2. Hills in the eastern part consist of partly silicified sedimentary rocks,
with smaller hills interpreted to consist of ultramafic and sedimentary rocks underneath the
ferricrete cap. A few structures were found to host iron oxide enrichment and breccia instead
of the massive silicification seen at Pequizeiro and Baião.

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Figure 7.18 Geology map of North Lontra sector

Source: Audet, M A, et al 2012

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8 Deposit types
The target mineralisation at HZM’s Project are characteristic of typical nickel laterite deposits
formed in a seasonally wet tropical climate, on weathered and partially serpentinised
ultramafic rocks. Features of nickel laterites include:

 The nickel is derived from altered olivine, pyroxene and serpentine that constitute the
bulk of tectonically emplaced ultramafic oceanic crust and upper mantle rocks.
 Lateritisation of serpentinised peridotite bodies occurred during the Tertiary period and
the residual products have been preserved as laterite profiles over
plateaus/amphitheatres, elevated terraces and ridges/spurs.
 The process of formation starts with hydration, oxidation, and hydrolysis, within the zone
of oxidation, of the minerals comprising the ultramafic protore.
 The warm/hot climate and the circulation of meteoric water (the pH being neutral to acid
and the Eh being neutral to oxidant) are essential to this process. Silicates are in part
dissolved, and the soluble substances are carried out of the system.
 This process results in the concentration of nickel in the regolith in hydrated silicate
minerals and hydrated iron oxides; nickel and cobalt also concentrate in manganese
oxides. The regolith hosting nickel laterite deposits is typically 10 – 50 m thick, but can
exceed 100m.
 Concentration of the nickel by leaching from the limonite zone and enrichment in the
underlying saprolite zones is also common. Leaching of magnesium +/- silicon causes
nickel and iron to become relatively concentrated in the limonite zone. Nickel is released
by re-crystallization and dehydration of iron oxy-hydrides and is slowly leached
downwards through the profile, both vertically and laterally, re-precipitating at the base
with silicon and magnesium to form an absolute concentration within the saprolite
(Figure 8.1).
 The degree of the nickel concentration and the detailed type of regolith profile developed
is determined by several factors including climate, geomorphology, drainage, lithology
composition, and structures in the parent rock, acting over time.
 A typical laterite profile contains three distinct horizons (limonite, transition and saprolite).
A schematic laterite profile for Baião and Pequizeiro is shown in Figure 8.2.

Exploration criteria is summarised from Brand et al (1996) as follows:

 Geological massifs with olivine-rich lithologies and their metamorphic derivatives, large
enough to host nickel laterite deposits that will support low-cost, high-tonnage, open-cut
mining operations, must initially be identified.
 Airborne magnetic surveys, regional mapping and known occurrences of lateritic nickel
are useful to identify likely targets.
 Later, detailed geological and geophysical surveys may be needed to delineate olivine-
rich lithologies and faulting that may represent sites for shallow, high-grade Mn-Co-Ni
and garnierite mineralisation.
 Regolith landform mapping and reconnaissance drilling can be used to determine the
nature and distribution of the regolith (i.e. whether in-situ, concealed or stripped) and
those zones that host nickel enrichments.

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 Regional drilling and possibly soil sampling of in-situ regolith can be used to identify
nickel halos (>0.5% Ni), and target the most prospective parts of a weathered ultramafic
sequence.
 Follow-up drilling to delineate Ni-enriched zones will, in association with geochemistry
and mineralogy, provide valuable information on the geological and metallurgical
characteristics of any nickel laterite. For metallurgical purposes, it is useful to maintain a
consistent element suite when analysing drill sample (Ni, Co, Mn, Cr, Mg, Fe, Si, Al) and
ignition loss.

Figure 8.1 Chemical trends in schematic nickel laterite profile

Source: MALA Ground Penetrating Radar

Figure 8.2 Schematic laterite profile

Source: Audet, M A, et al 2012

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9 Exploration
Drilling programmes are the main form of exploration conducted on the Project by HZM, and
these are summarised in section 10. This section 9 presents relevant exploration other than
drilling conducted by HZM. Exploration and drilling conducted by prior owners and operators
is summarised in section 6 and details of their programmes can be found in Audet, M A, et al
(2012); Barry, J.P. (2006).

9.1 Lontra area

In 2006 HZM commenced exploration on the Lontra area which is in the northwest of the
current Project area. Non-drilling work included stream sediment, mapping, soil and rock
sampling. A total of 2,024 stream sediment, soil and rock samples were taken. Garmin
handheld GPS devices were used for field mapping control.

Surface exploration and mapping

Exploration was initiated by HZM in late 2006 with a regional low threshold, multi-element,
fine fraction stream sediment survey. This led to the definition of seven anomalous zones of
which three were considered priority nickel targets. Initial field reconnaissance indicated the
presence of previously unmapped ultramafic lithologies and produced a rock sample, from a
laterite gravel pit being used to obtain road base, with visible garnierite indicating the
potential for lateritic nickel. Ground magnetometry surveys assisted the geological mapping.

In 2007, after formalising the Joint Venture on the Lontra Project, the stream sediment targets
were followed up by regional (400 m x 80 m grid) multi-element soil sampling programmes.

HZM soil geochemical survey grids for the Lontra project area are shown in Figure 9.1.

Through this work three principal areas of ophiolite emplacement with associated laterite
development have been established, namely: Northern target; Raimundo target; and
Southern and Morro target.

Targets are shown in Figure 9.1 and brief descriptions of the three main targets discovered
and developed by HZM are given below:

 Northern Anomaly: The northern zone is a 3 km by 1.5 km area containing four

anomalies, of which the main target is a 1,600 m by 250 m soil geochemical anomaly.
The soil anomaly is over undulating terrain with dark red soils and termite mounds and is
truncated to the northeast by wide flat residual lateritic plateaus.
 Raimundo Anomaly: 2 km to the south of the Northern anomaly the Raimundo anomaly
has a core zone of 1,600 m by 1,000 m which became the focus of diamond drilling.
 Southern and Morro Anomaly: This zone gave some of the best results in a shallow
auger programme despite the fact that many of the holes had to be abandoned before
reaching the target depth due to the presence of silcrete or saprolite.

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Figure 9.1 HZM Lontra licences soil geochemistry

Source: Audet, M A, et al 2012

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10 Drilling
HZM has conducted several programmes of auger drilling and diamond core drilling at the
Project. Shallow auger drilling was used prior to 2009 to define some exploration targets,
while wide diameter auger drilling was used in 2011 to obtain bulk samples of mineralisation
for metallurgical testwork from one deposit. Core drilling has been used to obtain samples for
resource delineation in phased programmes and, separately, for geotechnical assessment of
a potential open pit and plant site.

10.1 Auger drilling

10.1.1 Shallow auger drilling

In late 2007, a 124 hole shallow auger drilling programme was initiated by HZM at the Lontra
area to evaluate the principal soil anomalies at Raimundo, Northern Zone and Southern
Zone. Exploration success continued in 2007 with a number of mineralised nickel intervals
being intersected in the auger drilling. However, the rising water table associated with the
on-set of the rainy season and the limited ability of the auger to penetrate to the saprock zone
meant that many holes had to be abandoned above or within the mineralised interval.

Figure 10.1 shows HZM auger drillhole coverage for the Lontra area. Holes were initially
spaced on a 400 m x 80 m grid and few holes reached maximum depths beyond 12 m.
Metres drilled totalled 921 m with an average depth of 7.4 m.

Data from these drillholes have not been used in mineral resource estimation.

10.1.2 Wide diameter auger drilling

Audet et al (2012) reported that wide diameter auger drilling was used to collect
approximately 130 dry tonnes of bulk sample from the Pequizeiro deposit for metallurgical
testwork.

Drilling was by way of a truck mounted auger drill capable of a maximum depth of 20 m with a
variety of bits including a wide diameter 1 m bit to be used for the bulk sampling, in 1 m
intervals. At each location the auger holes were drilled in close proximity (about 2 m) of an
earlier core drillhole to ensure that the target geology/geochemistry was collected.
Positioning of the auger hole was supervised by the Project Manager and Project Geologists
and organised by the Operations Manager/Technicians.

The auger drill was incapable of passing through “blocky ferricrete” containing fist sized and
greater cemented blocks. An initial reconnaissance by the geology/technical team
determined if these blocks were present, and an excavator removed the ferricrete, which is
only found to a maximum depth of about 4 m.

The author verified the remainder of the samples are stored in 200-litre sealed plastic drums
in a warehouse in Conceição do Araguaia.

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Figure 10.1 HZM Lontra drill location map

Source: Audet, M A, et al (2012)

10.2 Diamond core drilling

10.2.1 Phase 1

In 2008 HZM initiated the first of three phases of diamond drilling. In total 63 diamond
drillholes were completed totalling 1,299.5 m to test the Northern (31 holes) and Raimundo
Zone (31 holes) target anomalies. One exploratory hole was completed on the Southern
anomaly.

Within the programme vertical holes were drilled to 15-25 m in depth, ensuring that the
saprock-fresh rock interface was intersected. Drillhole spacing was as follows: on 400 m
spaced lines with 80 m hole centres (for geological sections and interpretation); on 200 m x
200 m centres (for resource potential identification); and on 100 m x 100 m centres (in the
Raimundo high grade zone for definition of grade variation).

The diamond drilling programme was carried out with the objective of demonstrating the
existence of lateritic nickel mineralisation over a significant area.

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The first phase holes were drilled by drill contractor, Pacheco e Filhos Ltda of Rio Grande do
Sul, using a “Sullivan” diamond drill rig with conventional drilling techniques. The second
phase was drilled by Mariana Drilling Inc. of Goiania, Goias, using a “BBS-10” drill rig. The
holes were drilled with HWT rods resulting in HQ core. Core recoveries were closely
monitored, with less than 90% recovery being questioned and less than 80% requiring the
hole to be re-drilled.

Holes were drilled through the lateritic profile to fresh rock where, in general, the hole was
stopped after 3-5 m of highly competent massive fresh rock in the first phase and at the
contact in the second phase. Holes were typically between 15-25 m long, but did reach over
30 m in depth.

10.2.2 Phase 2

HZM re-commenced exploration drilling on the Araguaia Nickel Project (Combined Teck
Araguaia and HZM Lontra Licences) in October 2010. The programmes were designed to
infill the previous core drilling completed by Teck. As well as establishing various field camps
near the target sites, to minimise travel for drill crews and field staff, HZM also established an
exploration office in Conceição do Araguaia from September 2010 to co-ordinate all
exploration activity.

An initial drilling programme was designed to infill the 200 m x 200 m pattern on the
Pequizeiro West, Pequizeiro and Baião targets. Geosonda Sondagens Geológicas Ltda.
drilled HQ3 core that was designed to first reduce the drill spacing to 141 m x 141 m (5-spot
drilling) and then to further reduce the drill spacing on the Pequizeiro and Baião targets to
100 m x 100 m. In addition HZM conducted drilling at Pequizeiro and Baião, at a spacing of
25 m x 25 m, to determine grade variability, geological continuity and the drill spacing
required for Inferred and Indicated resource definition.

From October 2010 to December 2011 HZM completed 539 drillholes for 13,261 m as part of
Phase 2. The extent of drilling to 2012 is shown in Figure 10.2.

10.2.3 Phase 3

From September 2012 to April 2013 HZM conducted a Phase 3 mineral resource drilling
programme. This programme was designed to complete infill drilling on 100 m x 100 m grids
on the Jacutinga, Vila Oito West, Vila Oito, Vila Oito East and Pequizeiro West targets in
order to convert Inferred resources to Indicated resource categories. 321 holes (9,309 m)
were completed including 35 holes (1,186 m) on Jacutinga, 84 holes (1,669 m) on Vila Oito
West, 133 holes (4,228 m) on Vila Oito, 44 holes (1,509 m) on Vila Oito East and 25 holes
(717 m) on Pequizeiro West. HZM engaged drilling contractor Servitec Foraco to undertake
core drilling with the provision of up to five rigs (Figure 10.2). Steven Heim PMP of Heim
Consultoria acted as site Project Manager for HZM with technical support from F. Roger
Billington P.Geo.

A summary of resource delineation drilling for seven targets that underpin pre-feasibility
studies is provided in Table 10.1 (Figure 10.3). Drillhole locations and bedrock geology maps
are provided in section 7.

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Figure 10.2 Drillsite DDH-0684

Source: HZM 2013

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Figure 10.3 Collar location map of the HZM Project to 2012

Source: Audet, M A, et al (2012)

Table 10.1 Summary of resource delineation drilling by HZM and Teck

Target № Metres drilled

Vila Oito West (VOW) 143 3,096.5
Vila Oito (VOI) 182 5,573.4
Vila Oito East (VOE) 127 3,901.7
Jacutinga (JAC) 59 1,720.9
Pequizeiro (PQZ) 219 6,114.9
Pequizeiro West (PQW) 60 1,626.0
Baião (BAI) 330 7,098.0
Total 1,120 29,131.4

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According to NI 43-101, HZM’s Project meets the definition of an “advanced property”

because Mineral Resource estimates and a Preliminary Economic Assessment have been
reported (Audet et al., 2012a and 2012b). In line with NI 43-101 F1 instructions for advanced
properties, drilling results are therefore not provided in this Technical Report. The reader is
referred to Audet et al., 2012b for Phase 2 drilling results.

HZM has provided drill results by way of four news releases for the Phase 3 infill drilling
programme (Table 10.2). In these news releases mineralised intervals are calculated by
compositing of the nickel grades in individual drillholes across geological boundaries using a
nickel cut-off of 1% with a minimum intercept length of 2.0 metres and a maximum length of
internal waste of 2 metres. All holes were vertical and as these nickel laterite deposits are
essentially flat-lying, all widths reported are essentially true widths.

Table 10.2 Phase 3 resource delineation drilling news releases

Date Title
8 January 2013 Positive results from infill drilling programme & successful metallurgical testing
14 March 2013 New high grade nickel results from infill drilling programme
30 April 2013 New high grade nickel results from infill drilling programme
10 September 2013 Final drill results from infill drilling programme

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Figure 10.4 Schematic plan-view of drillhole locations for 2013 PFS resource
estimates

VOW

VOI
VOE

JAC

PQW

PQZ

BAI

10.2.4 Geotechnical

As part of a geotechnical data collection programme, 12 diamond core drillholes designed by

Snowden were drilled in 2013 in six potential open pit mining areas, totalling 386 m of HQ
size diamond core (Table 10.3). All the holes were drilled vertically and cored from the
surface with hole depths ranging from 20 m to 40 m. No oriented holes were drilled as it was
considered that rock mass structure has no influence on preliminary slope design due to
shallow depths of proposed pits limited mostly to the laterite profile.

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Table 10.3 Details of pit geotechnical drillholes

Depth No of samples
Target Area Hole ID Easting (m) Northing (m) Elevation (m RL) Dip
(m) PSD & AL UCS
DDGT_001 674898 9115893 288 -90 45.2 6 1
DDGT_002 674748 9115487 278 -90 30.2 3 0
Pequiziero
DDGT_003 676880 9115100 285 -90 35.1 5 3
DDGT_004 672398 9117000 287 -90 25.2 4 0
DDGT_005 676200 9109600 270 -90 40.0 5 2
DDGT_006 676200 9110701 270 -90 20.0 2 1
Baião
DDGT_007 676800 9109695 265 -90 25.0 4 1
DDGT_008 677513 9110090 253 -90 30.0 5 1
Jacutinga DDGT_009 676000 9123600 268 -90 35.0 4 0
Vila Oito DDGT_010 681000 9129196 271 -90 40.0 5 1
Vila Oito East DDGT_011 685105 9129800 233 -90 30.0 5 0
Vila Oito West DDGT_012 678600 9128600 286 -90 30.0 4 1
Note: PSD (Particle size distribution); AL (Atterberg Limit); UCS (Unified Soil Classification)

Geotechnical data collected included core interval data; lithology, degree of weathering,
strength, rock quality designation, fracture frequency, core recovery and discontinuity data.
These data have been entered into a geotechnical database for analysis and domain
definition for the development of geotechnical models for the potential pit areas.

The selected samples were tested at the Engesolo Engenharia Ltda laboratory in Belo
Horizonte, Brazil in July 2013.

Eight diamond drillholes and several pits were also completed at potential plant and slag
dump sites (Table 10.4and Figure 10.5). The drill core was assessed in a similar way to the
other geotechnical drillholes at Engesolo Engenharia Ltda laboratory in August 2013.

Table 10.4 Details of plant site geotechnical drillholes

No of samples
Target Easting Northing Elevation Depth\
Hole ID Dip PSD &
Area (m) (m) (m RL) (m) UCS
AL
DDGT_013 673676 9115420 233 -90 53.5 3 0
DDGT_014 673045 9115160 218 -90 19.9 3 0
DDGT_015 673550 9115401 221 -90 22.04 5 0

Plant site DDGT_016 673649 9115180 244 -90 25.7 3 0

B DDGT_017 673868 9115038 248 -90 24.2 4 0
DDGT_018 674020 9114530 286 -90 22.63 4 1
DDGT_019 673424 9114543 232 -90 24.15 2 1
DDGT_020 673086 9114770 240 -90 18.2 3 1
Note: PSD (Particle size distribution); AL (Atterberg Limit); UCS (Unified Soil Classification)

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Figure 10.5 Location of geotechnical drillholes and pits at potential plant and slag
dump sites

10.3 Procedures
Procedures relevant to diamond core drilling for resource delineation are provided below and
are summarised from HZM’s Standard Operating Procedures (Horizonte Minerals 2012) and
verified by Snowden.

 Drillhole programmes are approved by HZM’s Project Manager in consultation with the
Technical Advisor. Qualifications and experience for both roles are consistent with the
definition of Qualified Person according to NI 43-101.
 Proposed drillhole locations are presented in an internal report accompanied by maps
and sections with a cost estimate, together with target depths and objective.
 The HZM Project Manager leads a team comprising Operations Manager. Project
Geologists, Technicians and Core Checkers.
 Proposed co-ordinates of drillholes are passed to the Operations Manager and
Technicians for sighting in the field. The survey team instructed by the Operations
Manager locates each position in the field using a total station system and identify each
position with a survey tag. The total station used is a Sokkia Stratus integrated GPS L1
system with an accuracy of 5 mm horizontal and 10 mm vertical.
 With a handheld GPS, Technicians locate the correct survey tag for the hole in question
using the “known” drillhole co-ordinates supplied by the Project Manager.
 Where required, access tracks and drill pads are cleared in line with licence conditions
and to ensure a safe working area. Earthworks and tree cutting is kept to the minimum
required for a safe working area.

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 Drill rig set-up, positioning and levelling is checked by HZM staff prior to drilling.
 The Operations Manager and Project Manager monitor health and safety at the drill site.
 Drill rig activity and progress is monitored by HZM and recorded in production reports
and compared with the drilling contractor’s production record sheets at the end of each
shift. Core Checkers record recovery / drill advance, hole completion and final depth,
core box details, drill platform assessment.
 HZM require that minimum recovery requirements are met by the drilling contractor and
holes finish in bedrock. Current requirements are a minimum recovery in mineralised
zones is 85% over a 6 m run, and 3 m of bedrock is drilled at the bottom of each hole.
HQ triple tube coring systems are mandatory.
 Technicians ensure, with Core Checkers, that the contractor correctly labels each core
box with the following information: Target Name, Hole Identifier, Box Number, From and
To, the direction of drill run and start and finish of the core in the box must also be
marked. To ensure clarity, box identification data is marked on metal plaques using
metal stamps. Core blocks showing the advance and recovery for each run are securely
placed in the box, all core is wrapped in plastic.
 After drilling the hole is sealed and marked with a concrete cap which includes hole
identifier, date, contractor and final depth. Once drilling is completed and the hole has
been capped the survey team return and re-survey the capped position using a total
station system as described above.
 HZM supervise core handling in the field and ensure that core boxes are properly
secured and carefully transported from the field to the core shed. Core boxes are
covered by a nailed lid and carefully transported to the core shed under a tarpaulin to
protect the boxes from the weather.

10.4 Qualified Person’s comment on drilling procedures

It is the author’s opinion that the procedures used by HZM for core drilling were thorough and
provided the appropriate level and quality of information required to interpret the laterite
profile and to form the basis for Mineral Resource estimates. There is no apparent drilling or
recovery factor that would materially impact the accuracy and reliability of the diamond core
drilling results.

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11 Sample preparation, analyses, and security

11.1 Sample preparation methods and quality control measures
prior to dispatch of samples
HZM’s Standard Operating procedures (Horizonte 2012) describes the handling of diamond
drill core in the following steps which were verified by Snowden at the HZM’s core shed in
Conceição do Araguaia (Figure 11.1). All procedures are undertaken by HZM technicians
and supervised by project geologists who have a minimum 2 years’ experience in drill core
and pit sampling:

 Details of new core boxes transported from the field are recorded in the core shed log
book
 Quick logging of core is undertaken to define the boundaries of the main facies
 Samples are selected for density measurement that is performed in the core shed
 Plastic covering is removed from the core
 Core is half-split or sawn according to hardness (Figure 11.2)
 Sample intervals are defined and marked by metal tags on the core box
 QAQC samples are defined
 Core is logged
 Density test samples are returned to the core box and cut
 Core is sampled and bagged
 Quality control (QC) samples (blanks, standards) are added to the batch
 Field duplicate samples are selected
 Core is photographed wet
 The sample submission sheet is prepared
 Procedures are checked prior to the packing and dispatch of samples.

11.2 Sample splitting

Sampling of core starts after a hole has been completed and all core boxes have been
transferred to the core shed where bulk density samples are identified, removed, tested and
returned and the core is logged in detail.

Half core samples are taken for analysis, the other half core remains in the box for reference.
The nominal sample length is 1.0 m and can vary from 0.25 m minimum to a maximum of
1.50 m according to adjustments by the geologist so the intervals do not cross lithological
boundaries. Relic fragments of unweathered bedrock of less than 10 cm in length within the
saprolite facies are sampled together with the facies in which it occurs. If exceeding 10 cm
the fragment is sampled separately. Soft material is split using a paint scraper and hard core
is cut with a diamond saw by HZM personnel.

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Figure 11.1 HZM core storage

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Figure 11.2 Splitting soft core with paint scraper

Samples are double bagged in plastic, and the sample number is written on both bags.
Numbered sample tickets are also added to the inner plastic bag; three tickets are placed in
the bag with each sample and sent to the laboratory. In the laboratory, two tickets stay with
the reject material produced at various stages of preparation while the third follows the pulp
through to analysis. The sample number is recorded along with the hole number and sample
interval.

The sample is then weighed and this information is also recorded. Project geologists are
responsible for ensuring that information is correctly recorded. Sample intervals are marked
in the boxes, a metal tag with the sample number and in the case of QC samples the type
and 1 ticket from the sample book all located at the start of the sample in consideration.

All primary samples have a unique number and sampling of any medium is accompanied by
application of sample numbers from the series of standard sampling books of the type that
contain 6 tear off tickets. All QC samples are also given primary sample numbers.

The numbers assigned to samples on the sampling cards are recorded on a spread sheet,
along with drillhole identifier, sample interval, weight, sample batch and volume number. For
QC samples the sample type is also recorded. Core samples are transferred from core
boxes into sacks and placed on the sampling table. The sampling table is divided so that 3
batches may be produced at any one time but kept separate by taped lines. Samples are
placed on the table in sequential order with sacks containing QC samples also placed in the
batch at the correct point.

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A batch consists of 42 samples including 5 control samples: a high nickel standard, a low
nickel standard, a quartz blank, plus a pulp duplicate and in alternate batches, a crush
duplicate or a field duplicate. Field duplicates are ¼ core samples. Instructions are sent to
SGS to prepare crush and pulp duplicates at the relevant preparation stage.

11.3 Security measures

Standards are closely monitored, each standard has a colour assigned and each individual
packet of that standard is marked with the same colour. The standards are placed in sacks
which are not immediately sealed but left open for the geologist to verify the contents in the
final checking procedure.

Once a batch is complete a final checking procedure is conducted. A HZM Project Geologist
takes the sampling spread sheet relevant for the batch to be packed; initially the number and
type of QC samples are checked and verified, the presence of standards and their colours
are checked and the standards are sealed in their sacks. The samples are packed in 6 large
sacks (volumes) each containing 7 samples. The Project Geologist counts off the 7 samples
for a volume checking that the initial and final sample numbers as well as the sequence
between correspond with the data recorded in the spread sheet for that volume.

Once the Project Geologist is satisfied that the volume is correct, the samples are double
packed into two large sacks with company name, batch number and volume number are
written on the outside. This procedure is repeated for the 6 volumes and the geologist then
signs off on the batch for dispatch to SGS Geosol Goiania via HZM personnel.

The samples are transported by daily local transport and once samples arrive, at SGS
Goiania, custody passes to SGS.

Analytical results are received from SGS in digital format via email, using a pre-defined Excel
file format and a hardcopy signed analytical certificate.

Reference core is stored in core boxes sequentially by hole and box number onsite in
Conceição do Araguaia. Pulp and crush rejects are returned after a 90 day period at SGS,
pulp rejects are stored in wooden boxes and crush rejects in large plastic boxes sequentially
batch by batch also onsite.

11.4 Bulk density measurements

The amount of density tests conducted on each facies type is continually monitored to ensure
that an even spread of samples is taken across all facies. Bulk density testing is completed
as soon after the core arrives in the core shed from the field as possible to avoid drying out of
samples and subsequent reduction in volume

One 10 – 15 cm length of core is taken every 3.0 m run for bulk density testing of
consolidated material. Where possible each density sample is taken in the first 10 to 15 cm
of the analytical sample interval to avoid bias and is not taken across facies boundaries.

Core is weighed wet straight from the box, then in water (after the core is coated with wax)
and after drying (Figure 11.3). Sample drying is by way of oven heating at 100°C for a
minimum period of 12 hours. Sample position, number and length, facies type, as well as
weight information, are recorded.

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Prior to any weighing exercise the electronic scales are calibrated using a variety of checks.
Five ‘standard samples’ with known bulk density values are also tested along with the core
samples in order to check both accuracy and precision of the equipment. Currently 2 nylon,
2 aluminium and 1 PVC samples are used with known density values ranging from 1.15 to
2.72 g/cm3.

The standard samples approximate a core sample in terms of diameter and length and are
weighed on the balance and in water in the same manner as core samples. One of the
standard samples is chosen at random and tested with core samples to be tested on that
day, the newly tested density value for the standard sample is immediately calculated in the
core shed before the other core samples are placed in the oven for drying. If the newly
tested density value is acceptably close to the known value for that standard sample the test
is accepted and the samples are sent for drying. If the result of the standard test is
unacceptable all the core samples are retested. The standard test is accepted if the newly
tested density value is calculated to within ± 10%.

The temperature of water is taken and recorded; a value significantly above or below 28°C is
avoided.

It should be noted that no external, independent bulk density analysis has been performed by
HZM as it is considered that the results compare well to those from the Teck period of
exploration and analysis.

A combination of HZM and Teck bulk density measurements, now totalling approximately
10,000 representative samples from each of the major laterite facies, has been used to derive
the dry and wet bulk densities as well as moisture content. The result of this work is
summarised in Table 11.1.

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Figure 11.3 Density measurement procedure

Source: HZM, 2012

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Table 11.1 Average dry, wet bulk densities, moisture contents and chemistry

№
Facies SG Dry SG Wet H2O% Ni% Co% Fe% MgO% MnO% SiO2% TiO2% Al2O3% Cr2O3% CaO%
Samples
Soil 726 1.73 2.1 18.61 0.14 0.04 27.78 0.15 0.54 27.85 1.53 17.95 1.39 0.01
Ferricrete 79 1.74 2.24 27.46 0.37 0.1 48.97 0.22 1.03 9.41 0.31 9.03 1.94 0.01
Limonite 1,538 1.38 1.89 30.41 0.91 0.12 35.96 2.29 0.96 21.36 0.58 10.27 2.16 0.05
Transition 1,780 1.25 1.68 29.94 1.21 0.05 17.79 11.97 0.46 45.02 0.25 4.72 1.18 0.13
Earthy Saprolite 436 1.17 1.69 36.13 1.41 0.04 14.81 17.91 0.35 42.07 0.28 4.44 1.05 0.22
Rocky Saprolite 2,026 1.43 1.82 25.67 0.99 0.03 10.44 25.74 0.25 42.64 0.2 3.78 0.72 0.15
Silicified Saprolite 124 1.57 1.95 24.32 0.51 0.03 8.94 7.8 0.27 67.06 0.2 4.07 0.56 0.38
Bedrock 959 2.26 2.4 6.86 0.28 0.01 5.91 34.55 0.12 40.9 0.06 1.5 0.42 1.27
Diorite 397 1.59 1.95 19.21 0.2 0.02 11.98 4.36 0.32 47.59 2.27 16.87 0.27 0.96
Sediment 1,762 1.63 1.98 18.35 0.05 0.01 8.7 1.82 0.35 58.68 1.29 15.96 0.15 0.29
CaO Rich 17 2.86 2.91 1.72 0.06 0.01 3.7 17.46 0.16 16.26 0.01 0.62 0.2 23.65
Dyke Al-rich 165 1.74 2.01 13.6 0.13 0.01 5.43 3.49 0.16 61.19 1.05 15.76 0.07 0.46
Quartz vein 11 2.18 2.32 6.33 0.03 0.01 1.82 0.47 0.05 94.26 0.07 1.03 0.08 0.02
Total 10,020

11.5 Phase 3 sample preparation and analysis

11.5.1 Introduction

Half split core samples are crushed and pulverised at SGS laboratory in Goiania and the
resultant pulps analysed routinely at SGS laboratory in Belo Horizonte using tetraborate
fusion X-Ray Fluorescence.

11.5.2 Routine sample preparation and analysis

The following procedures are used for sample preparation of the half core samples submitted
(SGS method reference: ‘PREP_GY’):

 Weigh on receipt
 Dry for 12 hr at 105°C
 Weigh to determine moisture content
 Crush to 95% passing 2 mm
 Weigh to evaluate loss of material during crushing stage
 Sieve at 2 mm size to evaluate performance of crushing stage
 Split to approx. 300 g size
 Weigh 300 g sample
 Pulverise 300 g sample using carbon steel bowl to 85% passing 200 mesh
 Weigh to evaluate loss of material during pulverising stage
 Sieve at 2 mm size to evaluate performance of pulverising stage
 Split to 30 g aliquot ready for analysis
 The preparation laboratory also inserts 8 QC samples.

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Once the prepared samples are received at SGS Geosol Belo Horizonte they are re-dried at
105°C (±5°C) before being riffle split and a pulp sample removed for analysis.

A glass fused disc is then prepared using lithium tetraborate to enable XRF analysis to be
conducted for Co, Ni, Cu, Pb, Zn and other major oxides, as well as Loss-on-Ignition (‘LOI’)
using thermogravimetric analysis by SGS method reference ‘PHY01E’. Additional analysis
for Co may be required for selected samples by four acid digestion ICP OES, but are only
requested after receipt of results from XRF.

Samples are analysed by method reference ‘XRF79C’ which is one of the Nickel Laterite
Packages offered by SGS. The suite of analysed elements and detection limits are given in
Table 11.2.

Table 11.2 Suite of constituents for method XRF79C and PHY01E

Detection Detection Detection

Element Element Element
Limit Limit Limit
Al2O3 0.1 % Fe 0.007 % Pb 0.01 %
Cu 0.01 % P2O5 0.01 % Cr2O3 0.01 %
Ni 0.008 % Zn 0.01 % MnO 0.01 %
TiO2 0.01 % Co 0.005 % SiO2 0.1 %
CaO 0.01 % MgO 0.1 % LOI -45 %

In the event of the cobalt value in a sample exceeding 0.24% the sample is re-analysed by
SGS method reference ‘ICP41BB’. The suite of analysed elements and detection limits for
this method has an increased upper detection limit for cobalt (8 – 10,000 ppm).

11.5.3 Check sample umpire analysis

Where primary analysis has been undertaken at the SGS Geosol in Belo Horizonte, check
assays are conducted on selected samples at ACME laboratories, Canada.

Umpire samples comprising 30 g aliquots of the remaining pulp of the selected samples for
analysis are analysed using an identical method to that used in the primary laboratory (i.e.
tetraborate fusion/XRF). Umpire samples were submitted in batches of 40 to which were
added 2 standard samples.

11.5.4 Laboratory certification

SGS is independent of HZM and the sample preparation and analytical laboratories are
located as follows:

 Preparation:
 SGS Geosol Goiana, Av Joao Leite 3209 – Q01 – L18-19.
 Setor Santa Genoveva, Goiana, GO-CEP 74672-020.
 Analysis:
 SGS Geosol Laboratorio Ltda, Av Mario Fonseca Viana, 120
 Bairro Angicos, Vespasiano, MG.

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SGS Geosol operates with the following Quality Management System certification:

 ISO 9001:2008; ISO 14001:2004 (ABS 32982 and ABS 39911.

ACME is independent of HZM and its laboratories are located at:

 Acme Analytical Laboratories (Vancouver) Ltd; 9050 Shaughnessy St., Vancouver BC

V6P 6E5.

ACME operates with the following Quality Management System certification:

 ISO 9001:2008 for provision of assays and geochemical analyses.

11.6 Results of Quality Assurance/Quality Control (QA/QC)

Quality assurance describes the confidence in validity (i.e. data reflects what it is supposed to
represent) and correct storage (i.e. data is stored accurately and may be recovered easily
and without error) that is perceived for a given data set. Quality control procedures are in
place by HZM to ensure that a high level of quality assurance is achieved.

11.6.1 Phase 3 results – standards, blanks, duplicates

Sampling of the resource drillhole core resulted in 9,178 samples to which 1,241 control
samples were added for a total of 10,417 samples. Control samples account for 12% of the
samples submitted for analysis.

Criteria for batch acceptance / rejection

Assay batches are passed or failed according to the following criteria:

 Analyses for nickel:

 Blank values must not exceed 200 ppm for Ni (2.5 x detection limit)
 Duplicate (pulp & crush) values must lie within 10% of the primary sample.
 Standard values fall within “boundary gates” as follows:
 OREAS standards – values must not exceed mean ±10%
 If a pass is not achieved then the analysis will be considered to have failed.
 A batch is accepted for entry into the database if:
 All standards, blanks, and duplicates pass, or
 Only a single Ni standard fails (exceed the boundary gates), in this case only the
standard is re-analysed. If the fail is repeated the batch is deemed to have failed.
 A batch will be rejected, not entered into the database, and submitted for re-assay if:
 Both standards fail
 A blank fails
 A pulp/crush duplicate analysis fails.

If there is a discrepancy of ±10% for field duplicate results it is reported to the HZM Project
Manager who decides on either reporting it further to the QP or depending on all other
samples in the batch whether to proceed to include the batch in the data base.

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Failure of blank/standard samples could be due to errors in the analytical machine and
should be investigated at the analytical laboratory. Failure of pulp/crush duplicates could be
due to problems at the preparation laboratory which should be investigated.

If a batch passes based on the Ni pass criteria the values for Fe, SiO2 and MgO from the
standard samples submitted in the batch are reviewed. If one or more of the values for these
oxides exceeds the mean ± 10% the results for the batch are flagged for critical examination
and the QP’s determine if the batch passes or if re-assay is required.

Results

The assay results under review were reported in 254 certificates of analysis. Out of the 254
certificates 9 were rejected. The reasons for rejection, actions taken, and current status are
summarised in Table 11.3. Three of the certificates were subsequently accepted where
sample identifier switches were identified and corrected. The re-analysis of the samples for
nine certificates returned acceptable values for the samples in question and the new
certificates accepted.

Table 11.3 Quality control failures and actions

Laboratory Final
Month/ Accepted
Target Certificate Reason not accepted – Action taken Certificate
Year /Rejected
Number Accepted
OREAS standards assay values incompatible with
recommended values. On further analysis established
Oct/2012 JAC GY1200889 Rejected Accepted
that standards were switched. Accepted on switch
reversal.

Sample mix-up requiring repeat lab work. The re-analysis Accepted

Oct/2012 JAC GY1200890 Rejected
resolved the mix-up. GY1201118
OREAS standards assay values incompatible with
recommended values. On further analysis established
Jan/2013 VOI GY1300003 Rejected Accepted
that standards were switched. Accepted on switch
reversal.

Sample mix-up requiring repeat lab work. The re-analysis Accepted

Feb/2013 VOI GY1300117 Rejected
resolved the mix-up. RE1300123

Sample mix-up requiring repeat lab work. The re-analysis Accepted

Feb/2013 VOI GY1300118 Rejected
resolved the mix-up. RE1300124

Sample mix-up requiring repeat lab work. The re-analysis Accepted

Feb/2013 VOI GY1300119 Rejected
resolved the mix-up. RE1300125
Blank assay value incompatible with recommended value.
Mar/2013 VOE GY1300139 Rejected On further analysis established that Blank was switched Accepted
with identifiable sample. Accepted on switch reversal.
OREAS standards assay values incompatible with
recommended values. On further analysis established Accepted
Apr/2013 VOW GY1300244 Rejected
that standards were switched. Accepted on switch GY1300195
reversal
Blank assay value incompatible with recommended value. Accepted
May/2013 VOW GY1300319 Rejected On further analysis established that Blank was switched
with identifiable sample. Accepted on switch reversal. GY1300056

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Duplicates

HZM used three types of duplicate samples in the Phase 3 drilling campaign:

 Field Duplicates

Field duplicate samples were designed to test the sample heterogeneity. They were taken at
the rate of one every alternate batch dispatched i.e. 1 in 74 samples. Where a sample
interval was selected for a field duplicate, the remaining ½ core from primary sample was
further split in two, leaving a ¼ core material in core boxes.

 Crush Duplicates

Crush duplicates tested the variability at the crusher stage and again were taken at the rate
of one every alternate batch i.e. 1 in 74 samples. Crush duplicates were not prepared onsite
but were produced following instruction given to the preparation laboratory. The preparation
laboratory had to split the selected sample post crushing into two equal samples viz., a
primary and duplicate sample.

 Pulp Duplicates

Pulp duplicates tested the variability at the pulverisation stage and were taken at the rate of
one every batch i.e. 1 in 37 samples. As for the Crush duplicates, the Pulp duplicates were
not prepared onsite but by the preparation laboratory following instruction by HZM. The
preparation laboratory had to split the selected sample post pulverising into two equal
samples viz., a primary and duplicate sample.

A total of 497 duplicate samples were inserted in the HZM samples submitted during the
Phase 3 drilling campaign for 4.8% of the total as follows; Field duplicates: 127, Crush
duplicates: 124, and Pulp duplicates: 246.

With few exceptions, samples show satisfactory re-assay precision statistics for the whole
range of data values with assay pairs showing less than 10% absolute difference between
first and second assays.

11.7 Phase 3 results – umpire assay analysis

After receipt of the primary assay results 5% of the samples (from mineralised zones) were
selected for umpire assay.

A minimum protocol would be for >90 % of the samples assayed at the umpire laboratory
should give <10 % difference in nickel values relative to the primary laboratory.

In 2013 HZM dispatched 457 duplicate pulp samples (55 from JAC area; 37 from PQW area;
73 from VOE area; 202 from VOI area; 90 from VOW area) to ACME.

The results of the umpire analyses are presented in Figure 11.4 below and are acceptable to
Snowden.

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Figure 11.4 Results of umpire analyses

11.8 Author's opinion on the adequacy of sample preparation,

security, and analytical procedures
The author concludes that the procedures are acceptable and that the resulting records are
suitable for use in Mineral Resource estimation.

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12 Data verification
12.1 Phase 3 data verification
The GEMS databases compiled and verified by Dr. Marc-Antoine Audet were provided to
Snowden on 12 October 2012. Snowden, under the supervision of Andrew Ross FAusIMM,
P.Geo, checked the databases and reconciled the drill data and resource block models with
the information presented in Audet, M A, et al (2012).

Several field visits and reviews have been conducted by Snowden consultants. The first visit
to the project site occurred from 22 to 24 November 2012 by Andrew Ross and Marcio
Soares when drilling was underway on the Vila Oito area. A subsequent site visit was
performed by Marcio Soares from 8 to 12 April 2013 where 27 of the Phase 3 drill collars
were checked, representing 10% of the drillholes. Five drillhole cores in the logging facility
were reviewed. The sample preparation and analytical facilities were also inspected by
Marcio Soares: on 18 April 2013 the SGS Geosol sample preparation laboratory in Goiania
was inspected; on 24 April 2013 the SGS Geosol analytical laboratory in Vespasiano was
inspected. From 26 to 30 August 2013, Asoka Herath of Snowden inspected geotechnical
drilling underway at the potential plant site.

HZM provided Snowden with drillhole related information on several occasions throughout
the duration of the Phase 3 drill program, including: standard operating procedures; drill
geological, survey and sample data files; analytical certificates; QA/QC results; and density
measurements. In order to maintain consistency with the assigned facies defined by the
chemical correlation matrix, Snowden requested HZM engage Dr. Marc-Antoine Audet to
complete that assessment.

Data verification work of Phase 3 drilling included:

 Collar locations – independent checking of 10 % of collar locations

 Geological logging – independent checking of drill core logs
 Review of QA/QC procedures and results
 Review of facies assignment from sample chemistry.
 Review of density measurement procedures
 Review of data entry procedures and cross-check with analytical certificates
 Review of sample preparation and analytical laboratory procedures.

12.2 Qualified person’s opinion on the adequacy of the data for

the purposes used in the technical report
The author concludes that the data verification results provide assurance that the data is
reliable and adequate for use in mineral resource estimation. Together with the findings of
the QP for Phase 1 and 2 data, Snowden concludes that the Project resource database
meets industry standards and is compatible with the JORC and CIM codes for public
reporting.

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13 Mineral processing and metallurgical testing

13.1 Introduction
The Project scenario under consideration is the development of a greenfield Fe-Ni smelter
with a design production capacity of up to 15,067 tonnes per annum of nickel in Fe-Ni from
laterite ore. The pyro-metallurgical plant will have one single processing line from Ore
Receipts through to Granulation of the refined Fe-Ni final product and will be capable of
processing 0.9 Mtpa (dry). For design purposes, the ore nickel grade adopted is 1.80% Ni.
The Life-of-Mine (LOM) plan reflects one year when the grade increases to up to 1.9% Ni
while the full LOM average grade is 1.66% Ni. It is important to note that over the LOM this
proposed capacity was selected due to the potential availability of equipment that is already
sized and constructed. As a result production is limited to the capacity of this equipment.
The key project criteria for the base case are given in Table 13.1. An alternative higher
capacity scenario was also evaluated.

Table 13.1 Key base case project criteria

ITEM UNIT VALUE

Ore throughput – year 1 to year 4 Mtpa (dry) 0.9
Ore grade – LOM average % Ni 1.63
Ore grade – design % Ni 1.80
Overall nickel recovery % 93
Final metal Ni production - design Mtpa Ni 15 067
Furnace power (per furnace) MW 50
Ni grade in the final product metal % 20.3
Plant configuration One RKEF line
Refinery system Ladle furnace
Final product Granulated Fe-Ni

HZM has previously investigated processing by hydro-metallurgical methods and testwork for
this approach is summarised in this section for completeness.

13.2 Sample selection and variability

13.2.1 Introduction

As part of the work by HZM, a testwork program to examine the Araguaia laterite material for
treatment by the Rotary Kiln Electric Furnace (RKEF) process was carried out. A number of
test samples were obtained which were considered by HZM to be representative for
processing of this ore and the %Ni cut-offs selected were based on the Mineral Resource
estimate available at the time of collection. Two sets of samples were used in the
metallurgical testwork program which was carried out at both Xstrata Process Support (XPS)
and FLSmidth (FLS). The material sent to XPS in 2011 was based on ¼ core samples, while
the samples sent to FLS in 2012 were prepared from a large (130 dry tonne) bulk sample
taken with a 1 m auger. The following section describes these test samples.

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13.2.2 Samples sent to XPS

For the tests at XPS carried out in late 2011, six samples, 2 x 10 kg from each of the principal
facies types (Limonite, Transition and Saprolite) were made up of selected ¼ core samples.
The samples were representative of each of the facies from the Pequizeiro and Baião
deposits, characterised at a 1.0% Ni cut-off. In total, 60 kg of sample material in partly dried
condition was received at XPS. Each of the facies samples were homogenised at XPS.

Table 13.2 presents the assay data of these samples. It is seen that the assays of the
homogenised samples match with those calculated.

Table 13.2 Assay data of samples sent to XPS for testing

% Ni Co Fe MgO SiO2 Al2O3

Composite Sample Targets & Samples Facies SiO2/MgO Fe/Ni Ni/Co
in Resource % % % % % %
Target Limonite 13.7% 1.43 0.117 34.68 4.73 20.10 9.17 4.25 24.20 12.29
HM_14L_FLS Limonite 1.89 0.140 31.17 4.38 30.23 5.96 6.90 16.49 13.50
Target Transition 43.8% 1.66 0.063 18.92 11.76 40.72 5.65 3.46 11.41 26.22
HM_44T_FLS Transition 1.57 0.067 20.08 11.69 37.83 5.44 3.24 12.82 23.50
HM_14L_44T_42S_FLS
Target Saprolite 42.5% 1.58 0.040 12.49 21.03 42.21 4.37 2.01 7.92 39.89
HM_42S_FLS Saprolite 1.27 0.052 13.83 21.60 38.23 5.23 1.77 10.87 24.61
Target TOTAL Composite 100% 1.59 0.060 18.35 14.74 38.53 5.59 2.61 11.52 26.34
Sample TOTAL Composite 1.52 0.074 19.84 13.77 36.70 5.46 2.66 13.03 20.60

Target Transition 50.7% 1.66 0.063 18.92 11.76 40.72 5.65 3.46 11.41 26.22
HM_51T_FLS Transition 1.59 0.070 20.76 10.63 37.77 5.53 3.55 13.09 22.65
Target Saprolite 49.3% 1.58 0.040 12.49 21.03 42.21 4.37 2.01 7.92 39.89
HM_51T_49S_FLS
HM_49S_FLS Saprolite 1.68 0.047 15.40 18.27 38.73 4.71 2.12 9.16 36.02
Target Composite Composite 100% 1.62 0.052 15.75 16.33 41.45 5.02 2.54 9.73 31.39
Composite Sample Composite 1.64 0.056 17.54 15.21 38.35 5.03 2.52 10.68 29.33

13.2.3 Samples sent to FLS

Samples sent to FLS for testing during the fall of 2012 (also for testing by Feeco International
and by KR Komarek) were taken from a 130 tonne bulk sample (dry weight). The material
was taken with a 1 m auger in September 2011 from selected areas of the Pequizeiro deposit
(Figure 13.1). The objective was to generate two blended samples (14% Limonite, 44%
Transition and 42% Saprolite; and 51% Transition and 49% Saprolite) of approximately 3
tonnes each (wet) representative of the total resource estimate at a 1.2% Ni cut-off. A total of
6,099 kg of material (wet basis) was received at FLS for testing.

The resource chemistry is presented in Table 13.3, while Table 13.4 presents the assays
obtained at FLS. It is seen that the chemistry of the material at FLS closely matched the
target chemistry.

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Table 13.3 Target laterite chemistry based on the resource (February 2012) at
Pequizeiro and Baião at a 1.2% Ni cut-off

% Ni Co Fe MgO SiO2 Al2O3

Composite Sample Targets & Samples Facies SiO2/MgO Fe/Ni Ni/Co
in Resource % % % % % %
Target Limonite 13.7% 1.43 0.117 34.68 4.73 20.10 9.17 4.25 24.20 12.29
HM_14L_FLS Limonite 1.89 0.140 31.17 4.38 30.23 5.96 6.90 16.49 13.50
Target Transition 43.8% 1.66 0.063 18.92 11.76 40.72 5.65 3.46 11.41 26.22
HM_44T_FLS Transition 1.57 0.067 20.08 11.69 37.83 5.44 3.24 12.82 23.50
HM_14L_44T_42S_FLS
Target Saprolite 42.5% 1.58 0.040 12.49 21.03 42.21 4.37 2.01 7.92 39.89
HM_42S_FLS Saprolite 1.27 0.052 13.83 21.60 38.23 5.23 1.77 10.87 24.61
Target TOTAL Composite 100% 1.59 0.060 18.35 14.74 38.53 5.59 2.61 11.52 26.34
Sample TOTAL Composite 1.52 0.074 19.84 13.77 36.70 5.46 2.66 13.03 20.60

Target Transition 50.7% 1.66 0.063 18.92 11.76 40.72 5.65 3.46 11.41 26.22
HM_51T_FLS Transition 1.59 0.070 20.76 10.63 37.77 5.53 3.55 13.09 22.65
Target Saprolite 49.3% 1.58 0.040 12.49 21.03 42.21 4.37 2.01 7.92 39.89
HM_51T_49S_FLS
HM_49S_FLS Saprolite 1.68 0.047 15.40 18.27 38.73 4.71 2.12 9.16 36.02
Target Composite Composite 100% 1.62 0.052 15.75 16.33 41.45 5.02 2.54 9.73 31.39
Composite Sample Composite 1.64 0.056 17.54 15.21 38.35 5.03 2.52 10.68 29.33

Figure 13.1 1 m diameter auger drill used to take the 130 tonne bulk sample at
Pequizeiro in September, 2011

Table 13.4 Chemical analysis of the samples received at FLS

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13.3 Metallurgical testwork review

During late 2011 and 2013, HZM contracted various organisations and metallurgical
laboratories to conduct testwork.

The main testwork and reports produced by various companies are shown in Table 13.5 and
are reviewed in this section.

Table 13.5 Testwork reports

Title/Description Date Company

Lab Testing of Horizonte Minerals Araguaia Nickel
03 April 2012 Xstrata Process Support (XPS)
Laterite Deposits - Final Report
Slag Chemistry for the Smelting of Horizonte Laterite 29 July 2012 Kingston Process Metallurgy (KPM)
Report on Agglomeration Tests 15 January 2013 Feeco International (Feeco)
Liquidus Measurement of Fe-Ni Slag 26 April 2013 Kingston Process Metallurgy
Evaluation of Brazilian Araguaia Nickel Laterite July 2013 FLSmidth(FLS)

The review highlighted some key issues which can impact on design and operational factors
on a commercial scale processing plant. Comments from IGEO, who conducted the
engineering design for the Project, based on their experiences on some of these issues are
also incorporated.

13.3.1 Feeco

Testwork summary

A number of agglomeration tests were run in the pilot rotary agglomerator at Feeco on the
51% transition - 49% saprolite blend. The idea of doing these tests arose out of discussions
with FLS that given the potential fine particle size of the material and the possible impact on
kiln dusting, it was considered desirable to get a better understanding of the behaviour of the
as-received laterite material during the rotary action in the dryer kiln. The tests on the unit at
Feeco were able to simulate this physical action. The objectives of the tests were to observe
the agglomeration behaviour of the as-received ore (nominally 38% moisture content) when
processed through this type of unit over a range of test conditions.

Four barrels (corresponding to about 798 kg) of the 51 % transition - 49% saprolite blend of
Araguaia material was shipped to Feeco from FLS prior to the work. A moisture
determination made by Feeco on a sample taken at about the middle of one of the drums
reported a moisture content of 38% H2O.

The three variables that were changed in the tests were:

 the feed rate

 the drum rotational speed - each of these effectively affecting the residence time
 with and without a liner and lifters inside the drum.

The first two variables each affect the residence time of the ore in the agglomerator. The
results of these preliminary tests were presented as a report and were complemented by
subsequent testwork at FLS

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The rotary agglomerator at Feeco (see Figure 13.2) essentially resembles a kiln and is a
revolving, stainless steel, cylindrical drum sized 0.762 m diameter by 2.9 m long. The unit
was equipped with a variable speed chain drive turning the supporting rollers and thus turning
the drum. The unit had provision for feeding material at a known, controlled feed rate while at
the discharge end there was a chute where the product emptied into plastic trays.
Figure 13.3 shows the agglomerated product discharging from the agglomerator.

Tests were run with the inside of the drum both with and without a plasticised rubber lining
and six small “lifters” bolted lengthwise along the inside of the unit. The rotary movement of
the ore was considered to reasonably simulate the action within a dryer or kiln.

Figure 13.2 Feeco rotary agglomerator

Source: Feeco International Inc.

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Figure 13.3 Agglomerated product discharge

Source: Feeco International Inc

Test results

It was visually observed that agglomerates were reasonably competent and that fines were
generally contained within the agglomerates.

The drop test demonstrated good resilience of the agglomerated particles to breaking during
the test. The round particles did however deform into flat disks during the tests.

Particle size distribution ranged from approximately 3 mm to 25 mm.

Agglomerated particles did tend to break up during exposure to water in a flat tray, however it
was observed that the feed material tended to break up faster than the agglomerated
particles.

Conclusions

From the observations made on the agglomerator product, it is evident that the rotary action
of the drum was generally able to produce balled or agglomerated material from as-received
wet Araguaia laterite ore over a range of feed rates and drum revolving speeds and
independently of whether the liner was in place or not.

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A review of the test results found that the agglomeration tests carried out gave important
indications of the favourable behaviour of this ore to agglomeration. Equally importantly was
the subjection of the agglomerated material to competency tests after drying.

Over the past years IGEO has done considerable work with engineering company Polysius
on incorporating this concept of agglomeration in the design of the dryer and these have
actually been transposed into commercial operating plant equipment. Focus has also been
given to design of the internals of the kiln, not only to retain the agglomeration benefits as
much as possible, but also to improve drying efficiency in the early stages of the kiln while at
the same time taking care to minimise dust losses in the kiln off-gas.

It is also important to highlight that, apart from the dryer and kiln design, agglomeration can
have an important influence on the effectiveness of the furnace operations. Mainly this is due
to the benefits arising from improved charge permeability and also to the type of charge
profile that can be attained around the electrodes. It was recommended to conduct pilot
scale agglomeration tests to confirm the behaviour of as-received ore during any future pilot
plant calcining and smelting campaign.

At this stage of the project it is planned to develop a flowsheet based on the IGEO
experience from operations and testwork and with a focus on minimising capital costs.

For treatment of kiln off-gas dust from the precipitator at this stage it is planned to introduce
the simplest flowsheet, but one which is known from experience does in fact work to a
reasonable degree. In the feasibility study stage, it needs to be considered whether
something more sophisticated such as the Barro Alto concept is adopted.

13.3.2 Pyrometallurgical laboratory testing by XPS

Testwork summary

As a part of testwork for the PFS, HZM supplied three different types of ore samples to XPS.
XPS first performed a series of sample characterisation tests which included moisture
measurements (free and crystalline), particle size analyses and chemical assays of the ore
and calcine samples. After the initial phase of sample characterisation, a series of smelting
tests were conducted at elevated temperature (1520 0C). At the end of each smelting test,
the Fe-Ni alloy and slag products were collected, weighed and submitted for chemical
analyses. As a part of the study, the potential recovery of Ni was also estimated based upon
small scale batch tests.

To estimate the required processing energy, preliminary heat and mass balance calculations
were also performed. Based upon these calculations, a simplified flow sheet was created.
The indicated flow sheet included steps such as feed preparation, drying, calcining and
smelting. Suggestions also were made for modifying the flow sheet towards the optimisation
of energy consumption.

The report contains all the results from the laboratory tests and thermo-chemical calculations.
Based upon XPS‘s experience in the production of Fe-Ni, some suggestions are also made.

Arising from the work the following items are highlighted:

 Particle size analyses indicated that the fineness of the ore suggests that material
handling challenges are to be expected, particularly during wet weather:

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 If a rotary kiln based calcination step is chosen, significant agglomeration of the feed
will be required to prevent dust issues.
 Dusting during drying will also be an issue.
 A feed blending step is necessary in order to reach an optimum level of Fe/Ni ratio in the
ore feed. The feed preparation step can also be tailored towards the production of Fe-Ni
alloy or matte as the final products.
 Preliminary batch smelting tests were conducted at 15200C on three samples. Smelting
tests were repeated to ensure reproducibility. An alloy grade of 30 wt% was targeted in
each case. The tests were successful in producing this grade of alloy for two samples.
The smelting tests with specific blend ratios were also successful in achieving targeted
alloy grade. The Fe-Ni grades obtained in the tests varied from 14% Ni to 53% Ni.
 The possibility of producing a matte phase was also investigated. It should be pointed
out that the market and margins for Fe-Ni alloy and matte are different.
 The possibility of utilising the sensible heat and chemical reduction potential of the off-
gas from the smelting step opens up a number of flow sheet options to be explored and
examples are discussed.
 Extensive thermo-chemical modelling was performed predicting the liquidus
temperatures of all possible phases. Based upon preliminary heat and mass balance
calculations, a basic flow sheet was developed to treat the Araguaia deposits. The
energy requirements for each processing step of the flow sheet were calculated and
presented. The amount of reductant to produce 30 wt% Ni alloy was also calculated. It
should be pointed out that the basic flow sheet can be optimised to reduce the fuel and
reductant consumptions. The opportunities for energy savings were also identified and
discussed.

XPS also carried out a simplified heat and mass balance.

The testwork demonstrated that the SiO2/MgO ratio has a significant impact on the slag
liquidus temperature and should be monitored with regards to the design of the furnace,
especially with regards to potential cooling system requirements. The three samples tested
had SiO2/MgO ratios of 6.7, 4.4 and 2.3 respectively.

IGEO carried out a review of the XPS test work and raised a number of concerns regarding
the moisture content of the ore, LOI results and inconsistencies associated with the
interpretation of this data. In consultation with HZM, however, the evaluation of this data for
design purposes was resolved.

A valuable aspect of the XPS report was the focus on the thermodynamic properties of Fe-Ni
slags and associated alloys. The criticality of the liquidus temperatures on operating
conditions and design issues for the furnace will pose a significant challenge for the Araguaia
project and mitigation of the associated risks will have to be a strong focus in any future more
detailed study phases. Additionally, benchmarking data on other operations were provided in
the XPS report for comparison, particularly in terms of slag liquidus characteristics. Having
had association with a number of these operations, it is recommended that for this PFS, HZM
endeavours to obtain more recent information and experiences on current kiln and furnace
operations at Cerro Matoso. In conjunction with Hatch, operating staff at Cerro Matoso
probably have had the most experience in dealing with furnace design and operations issues
associated with ratios of SiO2:MgO values above 2.0. From a previous site visit by IGEO it
was understood that Cerro Matoso is probably now operating at SiO2:MgO ratios of
below 2.0.

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13.3.3 KPM

Two reports were prepared by KPM and reviewed during the PFS.

13.3.4 KPM Report 29 July 2012

Summary

Simulations conducted by KPM indicated that XPS results were in close agreement with the
thermodynamic calculations performed in this KPM study. The coke consumption in the
electric furnace is expected to range from 3 to 5% addition (over the feed) in the electric
furnace depending on the ore blend and also the level of pre-reduction of the calcine.

According to the thermodynamic (FACT) simulations with the resultant calcine, the proposed
blend provides a challenge and an opportunity for the smelting in the electric furnace by
providing a low slag liquidus temperature (lower than the Fe-Ni alloy liquidus), which will allow
operating at a lower temperature, but at the same time will require considerations for the
furnace design.

The impact of the SiO2/MgO was mapped and the anticipated ratio in the proposed blend is
2.6 with FeO content in the range of 20% to 25% by weight in the slag. With these conditions,
KPM suggests that no major problems should be experienced during the smelting of this
laterite blend. The alumina content of the slag is in a range for having a low slag liquidus and
the Cr2O3 level does not appear to be at critical level for creating accretion problems in the
furnace. The reasonably low FeO level of the slag reduces the partial pressure of oxygen,
hence minimising the soluble nickel in the slag. Under the present oxidant conditions,
allowing the production of a 20% to 25% Ni alloy, a small portion of the nickel is expected to
be in the form of soluble nickel (0.01wt% Ni in slag). The remaining nickel should be in the
form of entrained metal. Total losses are expected to be at nearly 0.15% when looking at
losses in similar operations.

KPM was also requested to perform a number of FACT calculations regarding the slag
chemistry during the smelting of Araguaia laterite ore to ferro-nickel. The purpose of the study
was two-fold:

 to simulate the results of a selected number of laboratory smelting tests carried out at
XPS during 2011.
 to evaluate the smelting of a new laterite blend proposed by HZM, including an
approximate estimate of the reduction requirements for a commercial plant to produce
20% to 25% Ni alloy, and in particular to carry out an evaluation of the slag chemistry
and estimate the optimal operational temperatures. The latter part of the study also
covers an evaluation of the key slag components (the SiO2/MgO ratio, the %FeO and
%Al2O3 levels in slag) and provides phase diagrams showing the impact of each
parameter on the slag melting point. A discussion was also provided with respect to the
slag superheat, furnace operating temperature, and comments on design criteria for the
electric furnace.

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Conclusions
 The results indicated that XPS experiment outputs are in close agreement with the
thermodynamic calculations performed in this study. Based on the work here, the coke
consumption in the electric furnace is expected to be in the range from 3% to 5% of the
calcine feed to the electric furnace, depending on the feed blend and pre-reduction level
of the calcine (Fe2+ and Fe3+ levels).
 The new blend proposed for the Araguaia laterites brings a challenge and an opportunity
in the smelting of this ore by providing a low melting point slag, which will allow operating
the electric furnace at lower temperatures of 1,510°C to 1,530°C comparing with other
electric furnaces. The resulting high superheat required, however, to maintain the metal
as liquid has to be considered in the furnace design. Another possibility is to add sulphur
to the metal producing matte with lower liquidus temperature.
 The alumina content of the slag (~7%wt) also favours a low slag liquidus temperature.
The reasonably low FeO level of the slag reduces the partial pressure of oxygen in the
furnace, hence minimising the soluble nickel in the slag. A small portion of the nickel will
be in the form of soluble nickel and some will be in the form of entrained metal.
 KPM sees no major technical constraint in smelting this type of blend in an electric
furnace, provided that a careful furnace design is taken into account.

Other possible future activities were recommended. These include:

 Evaluation of the best drying and pre-reduction technologies for Araguaia laterite.
 Discussion with electric furnaces suppliers to evaluate the best design and have a
CAPEX evaluation for the furnace. To consider copper coolers, deep immersion,
electrodes configuration and electric heating (DC vs AC).
 Modelling of heat and mass balance for the Fe-Ni production plant with 2-3
configurations (pre-reduction, smelting and refining).
 Evaluation of sulphur and other impurities in Fe-Ni and layout of the Fe-Ni refining
(literature review, experimental test and modelling), also evaluate the alternative to form
matte as regards, lowering the liquidus temperature of the metal phase and at the
present slag composition.

13.3.5 KPM Report 26 April 2013

Summary

KPM were also contracted by HZM to measure slag liquidus temperatures for a Fe-Ni
smelting process. Differential thermal analysis (DTA) combined with thermo-gravimetry
analysis (TGA) was used to determine the liquidus temperatures. In all, six different
synthetic slag compositions were studied to determine the influence of alumina (Al 2O3)
concentration and silica/magnesia (SiO2/MgO) ratio on the liquidus temperatures.

The results confirmed that the FACT calculations for this system provide an accurate
representation of the liquidus within ~10°C (on the high side) of the measured values.

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Conclusions

Six tests were completed to determine liquidus temperature at different slag compositions
varying Al2O3 (0, 4 and 7.36%) and SiO2/MgO ratio (2.3, 2.4, 2.55 and 2.7). Slag
solidification is an exothermic process which could be detected by DTA. The liquidus was
measured at two different rates, 5oC/min and 20oC/min but values obtained at a lower cooling
rate (5oC/min) were used for higher accuracy.

The liquidus temperature measured experimentally followed the same trend as the projected
(FACT) values and consistently lower by 10-20oC. The FACT values should be taken as an
uppermost value for design purposes.

At constant SiO2/MgO ratio (2.55), the liquidus temperature was found to decrease
significantly when the Al2O3 level was increased. The liquidus temperatures were 1,383°C
and 1,431°C at 7.36% and 4% Al2O3, respectively. The liquidus was above 1,450°C at 0%
Al2O3, above the maximum allowable test furnace temperature. The liquidus temperature
decreased from 1,405°C to 1,368°C as the SiO2/MgO ratio was increased from 2.3 to 2.7.

The outcome of the KPM reports has provided valuable information on variation of slag
liquidus temperatures with variations in the slag analyses anticipated in treating the ores from
the Araguaia project. This information is absolutely critical in:

 evaluating the furnace operational conditions likely to be encountered

 designing the furnace with appropriate high intensity water cooling facilities for the walls.

The impact of slag viscosity on slag foaming and potential nickel losses to slag must also be
evaluated. These issues are the most crucial to be addressed for the potential success of the
Araguaia project.

13.3.6 FLS

Summary

A laboratory study was performed beginning in the third-quarter of 2012 to evaluate the
physical and chemical properties of two nickel laterite ore blends. As a follow-up to further
expand the results of that testing, HZM authorised additional testing of the 51/49 blend (see
below) generated in Phase 1 testing, identified as FLS Lab# 120274M. Simultaneously,
material from the first test phase was returned from Feeco agglomeration testing and
subjected to FLS tumble testing.

For the testwork the supplied materials were combined into two blends mixed in proportions
by wet weight as follows:

 Mix 1: 51% T and 49% S

 Mix 2: 14% L, 44% T and 42% S

The blended mix samples were relatively free flowing despite free moisture levels in the
range of 34% to 38 wt%.

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Ore physical analyses

The samples were analysed to determine free moisture content, bulk density, angle of
repose, particle size distribution, drying curves and particle degradation (tumble testing). The
free moisture levels were determined using a drying oven temperature of 105°C and were
37.70 wt% for Mix 1 and 34.53 wt% for Mix 2. Particle size distributions were determined by
wet and dry sieve methods:

The dry sieve results include 100% passing 31.8 mm, 69.9% to 73.9% passing 6.4 mm and a
D50 of about 4 mm to 4.5 mm. A D50 value of about 4 mm to 4.5 mm falls within the D50 range
(1.2 mm to 9.5 mm) of other laterite ore samples that have been analysed by FLS.

The shift in D50 analyses between wet and dry material is significantly greater than for other
ores tested by FLS and initially suggests an ore dusting potential exceeding that of lateritic
ores currently processed in rotary dryer or kiln systems. This test does not account for the
natural binding properties of the ore, which may limit the degree of particle size reduction that
actually occurs during rotary drying and kiln firing. The natural binding properties of the
Araguaia ore are very good when dried (similar to many clays), yielding hard agglomerates
that are expected to be resistant to dust generation during processing in rotary systems. The
end result is a dry particle size distribution and dusting potential comparable to numerous
laterite ores currently processed in commercial RKEF operations.

Modified ASTM E279 tumble tests were performed on the two mixes following drying at
105°C and screening to 50.8 mm x 9.5 mm. The tumble test product was then screened at
seven size ranges from +19 mm to below 90 µm. Overall degradation of the ore was slightly
higher than saprolitic ores and less than limonitic ores tested by FLS. This data suggests a
kiln dusting potential of 15% to 20% of dry feed input, somewhat higher than the majority of
Fe-Ni rotary kiln operations at10% to 15% of dry feed input.

Drying curves were developed and the time required to achieve complete moisture reduction
was similar for both sample mixes at approximately 30 minutes at 105°C.

A series of attrition tests (10 minute rotap) were performed to establish the agglomerated
ore’s resistance to degradation upon firing at various temperatures. The attrition behaviour of
the ore was compared upon treatment at 105°C, 500°C and 1000°C. A comparison of the
size distribution of the ore samples following the thermal treatment and rotap procedures
indicate no change between 105°C and 500°C, and only a minor increase after treatment at
1000°C. This data suggests that the agglomerated ore will not experience significant
degradation as it is heated in the rotary kiln process.

Ore chemical analyses

The chemical assays for the two mixes were determined by FLS (Table 13.6).

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Table 13.6 Chemical analysis

Lab No.: 120274M Lab No.: 120276M

Sample ID: 51/49 Mix Sample ID: 14/44/42 Mix
SiO2 42.2 % SiO2 39.4 %
Al2O3 5.54 % Al2O3 5.83 %
Fe2O3 25.2 % Fe2O3 27.6 %
CaO 0.23 % CaO 0.19 %
MgO 13.8 % MgO 13.0 %
K2O 0.014 % K2O 0.012 %
Na2O 0.109 % Na2O 0.105 %
SO3 0.018 % SO3 0.018 %
NiO 2.16 % NiO 1.96 %
TiO2 0.19 % TiO2 0.18 %
MnO 0.37 % MnO 0.40 %
o o
Loss @ 982 C 11.13 % Loss @ 982 C 10.64 %
Total 100.96 % Total 99.34 %

The XRF analysis also indicated total chrome levels as Cr2O3 of 1.36 and 1.38 wt%.

Speciation work by SGS does not support the presence of significant Ni-chromite in the ore
samples, but rather indicates that the nickel is dominantly contained within nontronite,
goethite, hydrated Magnesium silicates (serpentine and chlorite) and Manganese
oxide/hydroxides.

Ore thermal analysis

The mix samples were dried at 105°C and ground and were analysed via TGA – DSC. The
total sample weight losses measured between ambient and 1,000°C were 13.09 and 12.99
wt% for Mix 1 and Mix 2 respectively.

The DSC test was continued to a maximum temperature of 1500°C in order to establish melt
point temperatures. The following partial and primary melt temperature ranges were reported:

 Mix 1: 1,250°C to 1,340°C partial, 1,340°C to 1,420°C primary

 Mix 2: 1,270°C to 1,335°C partial, 1,335°C to 1,440°C primary

Ore sintering and reduction

Samples of the two mixes were dried, sized to minus 6.3 mm and blended with 5 wt% coal
(ground to pass through 2mm) in preparation for sintering and Fe/Ni reduction tests. The coal
used as reductant was previously used to simulate PT Inco kiln operations and includes a
volatile content of 35 to 40 wt%. The coal properties are also similar to several major
Colombian bituminous coal sources that are used by Fe-Ni producers operating in Brazil.

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The sintering and reduction tests were performed in a tube furnace using peak temperatures
of 1,100°C, 1,150°C and 1,200°C under a reducing atmosphere (85% nitrogen, 10% carbon
dioxide and 5% carbon monoxide). A small degree of particle sintering was evident in both
ore mixes following treatment at 1,150°C, followed by significant sintering/melting in select
regions following treatment at 1,200°C. The majority of ores tested by FLS do not exhibit
significant sintering until the temperature is >1,200°C. This data suggests that a lower calcine
temperature should be considered to limit sinter formation in the rotary kiln. Based on
practical operating experience a target calcine discharge temperature of 800-825°C should
be considered for commercial system design purposes versus levels of 850-900°C
considered for ores that do not exhibit significant sintering until >1,200°C.

Each sinter sample was analysed to establish Fe and Ni speciation and residual organic
carbon. The level of Fe reduction achieved is considered normal for this test method while
the Ni reduction level is lower than the normal range of 20% to 30%. The lower nickel
reduction may be attributed to a portion of the nickel being combined as Ni-chromite.
Speciation work subsequently conducted by HZM suggests that the nickel is associated with
nontronite (a clay-like mineral) and some nickel is combined as complex silicates – both of
which may also explain the lower reduction levels observed - while virtually no nickel was
identified as associated with Ni-chromite.

Low residual carbon levels are attributed to the high carbon consumption resulting from the
elevated iron content and suggest higher than typical reductant addition rates (typical 3% to
4% of dry ore input) are required in the rotary kiln to support high pre-reduction levels while
maintaining an acceptable residual carbon level to support the electric furnace operation.
HZM is considering additional laboratory reduction analysis utilising a higher reductant coal
addition of 8.5 wt%.

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Figure 13.4 FLS pilot kiln

Source: FL Smidth

Following the completion of this analysis HZM requested additional testing to further evaluate
reduction behaviour using alternate temperatures and reductant coal addition rates. The
sintering and reduction tests were performed in a tube furnace using peak temperatures of
800°C, 900°C and 1,150°C under a reducing atmosphere (85% nitrogen, 10% carbon dioxide
and 5% carbon monoxide). Testing was conducted utilising 5 wt% coal at 900°C and 8.5%
weight coal at all three temperatures.

As in the previous test burns, a small degree of particle sintering was evident in the ore mix
beginning at a temperature of 1,150°C.

Each sinter sample was analysed to establish Fe and Ni speciation and residual organic
carbon. Previously, the level of Fe reduction achieved was in what is considered a normal
range for this test method while the Ni reduction level was lower than the normal range of
20% to 30%. Notable increases in both Fe and Ni reduction were achieved when combining
processing at 1150°C with a higher reductant addition levels. Based on the sintering
behaviour of the ore and considering pre-reduction levels achieved in existing commercial
Fe-Ni kiln operations, FLS considers 10% Ni reduction and 60% Fe reduction levels to be
acceptable targets for Fe-Ni line design purposes.

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Figure 13.5 FLS Tumble or breakage test unit (modified ASTM Test E279)

Source - FLSmidth

Briquetting

Briquetting tests were carried out at KR Komarek to evaluate the briquetting properties of
Mix 1. The following conclusion was drawn:

“Based on Komarek’ s experience you can briquette the ore at around 15% moisture and we
estimate that coal maybe a good addition for the briquettes, however at other plants the ore
alone can be briquetted as long as the particle and moisture levels are kept within the
Parameters of the pocket size and roll size.”

Small samples of briquettes delivered to FLS demonstrated good green strength; they did not
crush easily in one’s hand nor break when dropped. A moisture analysis indicated a total free
moisture level of 17.4 wt%. In the event that rotary agglomeration is not effective, initial tests
suggest that briquetting is a viable option to transform rotary dryer product to a briquette
suitable for rotary kiln processing. Additional larger scale briquette testing followed by pilot
rotary kiln processing is required to confirm this.

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Rotary drum agglomeration tests

HZM made arrangements with Feeco to evaluate the potential benefit of promoting particle
agglomeration using a rotary device prior to subsequent rotary drying and kiln processing
(modified ASTM E279 tumble tests). The material was dried at 105°C and screened to 50.8
mm x 9.5 mm prior to conducting the tumble test. Tumble test feed and product sieve
analyses were carried out. While the coarser agglomerates degraded to a larger extent than
the dried ore (static drying process), virtually no fines were generated during tumbling. This
suggests a lower dusting rate in a rotary kiln operation as a result. Therefore, the design of
the ore preparation and drying circuit should include provision to maximise ore agglomerate
formation and strength development prior to the rotary kiln process.

FLS conclusions

 The Araguaia ore is characterised by a very fine natural particle size. The fine particles
demonstrate binding properties similar to clays when dried, thereby yielding relatively
hard agglomerates resistant to significant degradation and dusting. The end result is a
dry particle size distribution and dusting potential comparable to numerous laterite ores
currently processed in commercial RKEF operations.
 The onset of particle sintering is 50°C to 100°C lower than many lateritic ores evaluated
by FLS. This suggests a limited achievable calcine temperature of 800 to 825°C during
rotary kiln processing (versus 850 to 900°C), which will also limit the degree of iron pre-
reduction that can be obtained.
 FLS suggests the use of 10% Ni and 60% Fe pre-reduction targets for commercial Fe-Ni
line design and that higher degrees of pre-reduction will be difficult to achieve given the
ore sintering behaviour and high iron content. Pilot rotary kiln testing is required to
confirm final design criteria. Comments on the design data for pre-reduction are given in
the review below.
 Briquetting appears to be a viable option for producing an agglomerated feed suitable for
kiln processing to yield a granule calcine with acceptable dusting rates.
 Rotary drum agglomeration demonstrated the production of agglomerates resistant to
fines generation during tumbling.
 The commercial system feed preparation and drying circuits must consider provisions for
promoting ore agglomeration and strength development prior to the rotary kiln process.
 The results of this laboratory study suggest that the Araguaia ore is suited for rotary kiln
processing in an RKEF system provided that proper agglomeration provisions are
adapted and that lower calcine temperature and pre-reduction levels are considered in
the electric furnace design. This statement does not consider the suitability of the ore for
the electric furnace smelting process.
 Larger scale pilot testing is recommended to confirm the conclusions of this study. The
testing will confirm: ore agglomeration behaviour, preferred method of
drying/agglomeration, agglomerated ore behaviour in the rotary kiln, dusting rate, degree
of Fe/Ni reduction achieved, peak calcine temperature, sintering behaviour and reductant
consumption.

A review of the FLS test work has provided valuable information which, in turn, has provided
an understanding of the behaviour of the ore in the context of materials handling and during
calcining and smelting. Specific issues are commented on as follows:

 The as-received ore was stated to be relatively free flowing despite a free moisture
content of 34% to 38%.

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 Carrying out both wet and dry sieve analyses provides important information on the
potential behaviour of lateritic ores during handling.
 Overall degradation of the tumble test product during screening was said by FLS to be
slightly higher than other similar ores and FLS suggested a dusting potential of 15% to
20% of dry ore feed be considered. A value of 20% has been incorporated in the
preliminary Process Design Criteria (PDC).
 With respect to the ore chemical analyses, of particular note for IGEO was the combined
moisture value of approximately 11%. This is considered probably more realistic for
design purposes than the approximately 7% reported in the XPS testwork report.
 From the ore sintering and reduction testwork results, FLS have recommended that
reduction values of 10% for nickel and 60% for Fe be applied to the kiln design.
 It may be necessary to restrain the target temperature of the calcine discharge to 800-
825oC. For design purposes for the kiln, however, a target temperature of 850oC has
been defined for the kiln discharge calcine and 825oC for the calcine feed to the furnace.
 FLS considers it may only be possible to achieve pre-reduction values of 10% for Ni and
60% for Fe. IGEO have defined 20% for Ni and 70% for Fe in the PDC but concur with
FLS that this design issue must be confirmed in future pilot scale testwork.
 Testwork on briquetting showed that the addition of coal was necessary to obtain
briquettes of suitable competency. It is believed that briquetting of fresh ore will require
additional unnecessary capital expenditure and a simpler flowsheet is being proposed.
 It is noted that no carbon and silicon analyses of the alloy are provided.

13.3.7 Discussion on smelting testwork

The following section provides a discussion on the smelting testwork. In addition, as noted
earlier, Hatch (Toronto) was requested to examine available information on the smelting
characteristics of the Araguaia ore. Taking all information into account, IGEO then developed
the proposed metal and slag characteristics as summarised in Table 13.7.

Slag Characteristics

The testwork carried out at XPS and KPM on Araguaia ore blends focussed considerably on
the smelting characteristics of the slags produced from the ores because these slags differ
significantly from most other current Fe-Ni operations in the world. It is important to fully
understand the implications of these characteristics on both the furnace design and on the
operational challenges which will be presented. Fortunately, due to the extensive amount of
technical knowledge which has developed on nickel laterite smelting over the years, the
fundamentals of the slag characteristics and impact of slag chemistry can be fully evaluated
and the risks assessed.

Key factors which need to be considered are:

 The combined impact of the ratio SiO2/MgO, FeO and Al2O3 contents of the slag on the
liquidus temperatures and the viscosity of the slags. The chemical effects of high SiO2
slag on the basic furnace refractory material must also be considered.
 The impact of impurities, particularly carbon and silicon, on the liquidus temperatures and
viscosity of the metal. Also the risks must be considered of silicon reversion and
associated extensive generation of heat from the reaction if silicon content is too high in
the metal.

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 The impact of the issues in 1 and 2 above can be affected/controlled to varying degrees
by controlling the degree of reduction of Fe effected during the smelting process.
 Slag foaming is also an issue that can occur with viscous slags and silica and alumina
play significant roles in this issue. Such foaming is also likely to increase nickel losses
into the slag.
 Very importantly, the degree of iron reduction dictates the grade of nickel to be achieved
in the final metal product as well the silicon and carbon content of the metal. Higher
reduction will result in lower metal grades and in all the testwork evaluations, grades of
nickel content of between 15% Ni and 25% Ni have been evaluated. Higher degrees of
reduction also give the added benefit of higher nickel recoveries across the furnace.
 Basically, at the ratio of SiO2/MgO of 2.29 and the FeO and the Al2O3 content anticipated
in the Araguaia slags, the liquidus temperatures can be significantly depressed.
However, minimum tapping temperatures of both metal and slag must be attained to
ensure fluidity. This therefore can result in excessive superheating of the slag with
possible undesirable consequences to the operation. It also will demand intensive water
cooling systems be installed on the furnace sidewalls.

Metal liquidus temperature

 The XPS report considered the binary Fe-Ni system only and reported temperatures
above 1500oC. KPM did not include the effects of C, Si and S on the alloy and reported a
nominal metal liquidus temperature of 1479oC.
 It is noted that the studies carried out showed that a 50% degree of iron reduction (with
respect to Fe/Ni ratio) is required to get substantial amounts of C and Si into the metal.
These elements have an important influence on the metal liquidus temperature.
Reduction of over 50% would result in high C, Si and Cr in the metal and a liquidus
temperature of 1250-1350oC.
 The studies showed that there is the possibility of the introduction of sulphur into the
metal to reduce the metal liquidus temperature. The objective would be to produce a
matte product with lower liquidus temperature than the Fe-Ni metal. This concept
requires further treatment methods of the matte and therefore is not considered for the
PFS phase of the Araguaia project.

Summary of liquidus temperatures

It was from consideration of all the data available that HZM, in conjunction with IGEO, agreed
that the target metal grade from the furnace will be 20% nickel, and that this value was to be
adopted for the PDC in PFS. Given this criterion, and evaluating all the relevant data from
liquidus temperature determinations in the KPM testwork, the liquidus and tapping
temperatures of metal and slag were defined as shown in Table 13.7. The resultant
superheat contained in the metal and slag are factors which will have to managed from both
an operational perspective and in designing of robust cooling systems required for the
furnace walls. Attention is also being given to the furnace roof construction such that more
rapid repairs can be carried out if the roof is subjected to high temperatures due to operating
conditions within the furnace.

The tapping temperatures achievable due to the liquidus temperatures of metal and slag are
criteria that will need to be verified in pilot scale work with a bulk sample in the next phase of
the project.

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Table 13.7 Estimated furnace metal and slag temperatures

Araguaia Criteria
Ore Blend LOM Plan Blend
Target crude Fe-Ni grade % Ni 20
Metal liquidus °C 1,440
Slag liquidus °C 1,380
Metal tapping temperature °C 1,470
Slag tapping temperature °C 1,550
Metal - Slag delta T °C 80
Metal superheat °C 30
Slag superheat °C 170
Nickel furnace recovery % 95.0

13.3.8 Other testwork conducted

During earlier stages of the project hydrometallurgical testwork was also conducted, with two
approaches reviewed:

 Atmospheric tank leach

 Bottle roll tests to simulate heap leaching.

Sulphuric acid was selected for both types of leaching tests. Acid consumption was found to
be high and these options were not further pursued after the initial testwork was completed.

Atmospheric tank leach tests

Preliminary atmospheric tank leach tests were undertaken under different test conditions to
investigate the leachability of Araguaia blended ore with respect to the effect of particle size,
solid/liquid ratio, acid strength, leaching temperature, leach time on metal recoveries and acid
consumptions. A composite feed ore blend consisting of 15% limonite, 45% transition and
40% saprolite core drill samples was used to carry out the 21 batch tests.

The batch tests clearly established that Araguaia laterite ore was leachable in tanks with
promising results. Nickel leach rates were encouraging with up to 65% of nickel extracted
within the first hour and 89% extraction achieved in 4 hours leaching. Ranges of 70-89%
recovery for nickel and 68-93% recovery for cobalt, with acid consumptions of 500 – 750 kg/t,
were achieved in 16 of the 21 tests.

Bottle roll leach tests

Sixteen bottle roll tests were performed at WAI test laboratories using separate limonite,
transition and saprolite samples as well as a composite ore blend. The tests were carried out
under atmospheric pressure and ambient temperature. Solid/liquid ratio was 1:10 using 150
grams of feed ore for each test. Two ore sizes: -6.35mm and -3.35mm and two acid
concentrations: 75 and 100g/l were tested for each type of ore.

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At the end of 91 days leaching, the transition and saprolite samples produced nickel
recoveries in excess of 85% and the composite feed ore blend generated nickel recoveries in
the order of 85-90%. As was expected, nickel recoveries for the pure limonite samples were
lower (51%). Acid consumptions varied in the range of 400-800 kg/t ore for different ore types
and test conditions.

13.4 Key recommendations from the testwork conducted

 For a further stage of the project, pilot plant scale agglomeration, calcining and smelting
testwork should be conducted:
 Confirmation of correlations in key data such as Fe-Ni metal grade and Fe:Ni ratio in
ore against nickel recovery in smelting.
 The criticality of the liquidus temperatures on operating conditions.
 Evaluation of the best drying and pre-reduction technologies for Araguaia laterites.
 The impact of slag viscosity on slag foaming and potential nickel losses to slag must also
be evaluated.
 Modelling of heat and mass balance for the Fe-Ni production plant with 2-3
configurations (pre-reduction, smelting and refining).
 Evaluation of sulphur and other impurities in Fe-Ni and layout of the Fe-Ni refining.
 The following issues from the FLS testwork are relevant to future operational and design
criteria for Araguaia:
 The as-received ore was stated to be relatively free flowing despite a free moisture
content of 34% to 38%. It is the opinion of IGEO that this moisture content will
decrease during handling and storage on a commercial operation and thus a value of
30% has been incorporated in the PDC.
 Carrying out both wet and dry sieve analyses provides important information on the
potential behaviour of lateritic ores during handling. It has been found that the fines
in some ores tend to agglomerate and then subsequently disintegrate upon sun
drying and this has to be considered in the design of the front end crushing plant.
 Overall degradation of the tumble test product during screening was said by FLS to
be slightly higher than other similar ores and FLS suggested a dusting potential of
15% to 20% of dry ore feed be considered. From IGEO experience the value of 20%
is a practical figure to apply and this has been incorporated in the preliminary PDC.
 The attrition tests carried out on the agglomerates after firing at temperatures 105 oC,
500oC and 1 000oC provided valuable information on competence of the ores at high
temperatures. The reality, however, is that in a commercial size kiln other abrasion
factors prevail and occur over a much longer period with retention times of
approximately 3 hours. Nevertheless, the FLS results obtained of minimal increase in
degradation between 105oC and 1 000oC is an important observation.
 From the ore sintering and reduction testwork results, FLS have recommended that
reduction values of 10% for nickel and 60% for Fe be applied to the kiln design. For
the purposes of design specifications for equipment suppliers, IGEO has defined the
pre-reduction values for Ni and Fe as 20% and 70% respectively and these have
been incorporated into the preliminary PDC. It is recommended, however, that these
be confirmed in larger scale tests in the next phase of the project.

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 From sintering observations FLS have recommended that for a commercial scale kiln
the calcine temperature be constrained to 800-825oC. For design purposes,
however, IGEO has defined a calcine temperature at kiln discharge of 850oC and a
calcine temperature of 825oC feeding into the furnace. This requires verification on a
pilot scale.
 Testwork on briquetting showed that the addition of coal was necessary to obtain
briquettes of suitable competency. It is believed that briquetting of fresh ore will
require additional unnecessary capital expenditure and a simpler flowsheet is being
proposed.
 Carbon and silicon analyses of the alloy must be monitored.
 In addition, from the work carried by HZM, the following points were noted for
consideration during the feasibility stage of the project:
 Whether addition of MgO to the furnace feed is a strategy that should be considered
for this phase of the Araguaia project to modify the slag characteristics.
 Further experimental work to determine the slag liquidus temperature in the
expected compositional range.
 Further evaluation of metal liquidus temperatures at different impurity levels.
 The need to conduct slag leachability testing for environmental purposes and
establish the need or otherwise for lining the slag dump.
 Power density and operation in a shielded arc or immersed electrode mode are key
factors in the design and operation of the furnace.
 A marketing study is required to define the grade of Fe-Ni to be targeted for the
Araguaia project. This is key to defining the slag characteristics and thus furnace
design and operational conditions.

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14 Mineral Resource estimates

14.1 Summary
Mineral Resource estimates are currently reported for the nickel laterite deposits at Araguaia
in Table 14.1. At a cut-off grade of 0.95% Ni, a total of 72 Mt at a grade of 1.33% Ni is
defined as Indicated Mineral Resource and a further 25 Mt at a grade of 1.21% Ni is defined
as Inferred Mineral Resource.

Mineral Resources reported for the PFS deposits were prepared under the supervision of Mr.
Andrew F. Ross and reviewed by Mr Richard Sulway. Both are employees of Snowden.

Mineral Resources for other deposits in the project area were prepared by Dr. Marc-
Antoine Audet and were reported in Audet, M A, et al (2012). The other deposits are
Pequizeiro NW, Oito Main, Lontra North and Raimundo for which Inferred Mineral Resources
are reported. These other deposits were not considered in the PFS.

Snowden is unaware of any issues that materially affect the mineral resources in a
detrimental sense.

14.2 Mineral Resource estimates for the PFS based on drilling up

to Phase 3
The HZM Phase 3 drilling resulted in updated databases for areas PQW, VOE, JAC, VOW
and VOI. So that consistency was applied, Snowden also re-estimated mineral resources for
the BAI and PQZ areas.

The estimates were prepared in the following steps:

 data preparation
 geological interpretation and horizon modelling
 establishment of block models and definitions
 compositing of assay intervals
 exploratory data analysis and variography
 Ordinary Kriging estimation method and Parameters
 model validation
 calculation of dry density
 classification of estimates with respect to JORC guidelines
 resource tabulation and resource reporting.

Details of the resource estimation work were reported to HZM in Ross (2013). Details are
summarised below.

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Table 14.1 Mineral Resources for Araguaia as at March 2014 by material type
(0.95% Ni cut-off grade)

Material Tonnage Density Contained Ni Ni Co Fe MgO SiO2 Al2O3 Cr2O3

Araguaia Category
type (kT) (t/m3) metal (t) (%) (%) (%) (%) (%) (%) (%)

Sub-total Indicated Limonite 11,560 1.35 137,790 1.19 0.127 36.50 2.76 19.45 9.48 2.61
Sub-total Indicated Transition 24,110 1.19 346,920 1.44 0.060 19.87 11.36 41.19 5.05 1.38
Sub-total Indicated Saprolite 36,310 1.32 473,960 1.31 0.034 11.82 23.67 42.27 3.62 0.85
Sub-total Inferred Limonite 8,830 1.34 100,310 1.14 0.097 35.85 3.94 19.77 9.48 1.78
Sub-total Inferred Transition 9,340 1.28 122,040 1.31 0.053 20.34 13.94 37.80 5.31 1.20
Sub-total Inferred Saprolite 7,190 1.41 84,370 1.18 0.033 12.07 23.92 41.46 4.16 0.80
TOTAL Indicated All 71,980 1.28 958,660 1.33 0.058 18.48 16.19 38.25 5.04 1.31
TOTAL Inferred All 25,350 1.34 306,730 1.21 0.063 23.40 13.29 32.56 6.43 1.29
Note: Totals may not add due to rounding. Mineral Resources are inclusive of Mineral Reserves.

14.2.1 Data provided and preparation

HZM provided Snowden with a series of GEMS project databases that were compiled by
Dr. Marc-Antoine Audet for resource estimates completed in 2011. Following receipt of the
Phase 3 drilling data, Snowden updated the relevant tables by importing collar surveys,
sample identifiers and assays for the new infill drilling. Validation routines were run inside
GEMS to identify any discrepancies such as duplicate or missing records, and no significant
issues were identified.

14.2.2 Geological interpretation and horizon modelling

The supplied geological maps in PDF format were used to guide the 3D interpretation of
digital surfaces to constrain the distribution of drilled limonite, transition and saprolite horizons
between the surface topography and bedrock. This process was applied to the PQW, JAC,
VOW, VOI, and VOE areas.

The initial step required verification of the supplied surveyed drillhole collar elevations with
the surface topography digital terrain models (DTM) provided by HZM. Any discrepancies
were rectified by pressing the drillhole collar against the surface topography DTM.

The major constituent chemistry of each sample was used by Dr. Marc-Antoine Audet to
assign a facies code (one of limonite, transition, saprolite or fresh rock) for each sample
interval. The resultant codes were then grouped and internally adjusted by Snowden to
ensure a logical sequence of horizons existed for each drillhole. These were imported into a
GEMS table and the base elevation of each horizon (limonite, transition and saprolite) was
used to generate 3D surfaces by way of the Laplace algorithm provided by GEMS.

Horizon surface extrapolations were constrained by a distance of 25 m from the perimeter

drillholes. In the case of VOE, a 3D wireframe was interpreted for a barren dyke, based on
the supplied geological map and drillhole information.

Snowden retained the triangulated horizon surfaces for BAI and PQZ that were modelled by
Dr. Marc-Antoine Audet, since there are no additional Phase 3 drillholes for these areas.

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Horizon surfaces and coded drillhole assays were exported from GEMS and then imported to
Datamine Studio 3 software for compositing, block model construction and estimation.
Variogram analysis was undertaken in Snowden Supervisor V8 software.

A consistent set of codes was used to define limonite (100), transition (200), saprolite (300),
fresh rock (500) and dyke (450, at VOE).

14.2.3 Block model definitions

The final model extents are listed in Table 14.2. The sample density (drillhole spacing
100 mE by 100 mN) was considered when selecting the parent cell size of 25 m x 25 m x 2 m
(XYZ). In the vertical direction, the parent cell size is 2 mRL reflecting the likely mining bench
height.

Table 14.2 Block model definitions

Model definition VOW VOI VOE JAC PQZ PQW BAI

X Origin (mE) 677300 680500 684600 675500 673700 671700 675000
Y Origin (mN) 9127000 9127600 9128800 9123100 9114300 9116500 9108900
Z Origin (mRL) 200 100 150 150 200 220 180
Maximum Easting (mE) 679700 683600 686200 676300 678100 672900 677700
Maximum Northing (mN) 9129400 9129800 9130000 9123950 9116600 9117600 9113300
Maximum Elevation (mRL) 400 400 300 350 310 310 400

Sub-celling to 6.25 m x 6.25 m x 0.5 m (XYZ) was employed to honour the horizon
wireframes.

14.2.4 Compositing of assay intervals

The drillhole data was composited downhole prior to running the estimation process using a
nominal 1 m sample interval to minimise any bias due to sample length. Assigned density
values were used to weight the composites as was done previously by Dr. Marc-
Antoine Audet. The compositing was run within the coded horizon fields to ensure that no
composite intervals crossed any lithological or grade boundaries. To allow for uneven sample
lengths within each of the horizons, the Datamine composite process was run using the
variable sample length method. This adjusts the sample intervals, where necessary, to
ensure all samples are included in the composite file (i.e. no residuals) while keeping the
sample interval as close to the desired sample interval as possible.

The compositing process was checked by:

 Comparing the lists of horizon domain values in the raw and composite files, which
matched.
 Comparing the sample length statistics in the raw and composite files. The two total
length values matched and the mean composite interval was 1 m.

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14.3 Exploratory data analysis - summary statistics

Basic statistical parameters for elements and oxides (as % grade) for each area are provided
in Table 14.3 to Table 14.9. An assessment of the Coefficient of Variation (CV – ratio of the
standard deviation to the mean) parameter resulted in the decision to cap selected
constituents (CaO, MgO, Co) during grade estimation for some horizons. The top-cut values
are provided in Table 14.10.

Table 14.3 Grade characteristics for VOW

Number of Minimum Maximum

Horizon Constituent Mean (%) Variance CV
Composites (%) (%)
100 Al2O3 743 1.06 21.73 10.52 16.51 0.39
100 CaO 743 0.00 0.25 0.02 0.00 1.32
100 Co 743 0.00 0.61 0.10 0.01 0.81
100 Cr2O3 743 0.04 6.92 2.48 1.39 0.47
100 Fe 743 2.82 52.52 33.55 106.37 0.31
100 MgO 743 0.05 30.00 1.48 7.08 1.80
100 MnO 743 0.01 4.42 0.78 0.34 0.75
100 Ni 743 0.01 2.64 0.71 0.27 0.74
100 SiO2 743 3.76 93.11 25.17 275.13 0.66
200 Al2O3 429 0.05 24.49 4.64 19.16 0.94
200 CaO 429 0.00 3.88 0.14 0.19 3.17
200 Co 429 0.00 0.18 0.05 0.00 0.66
200 Cr2O3 429 0.07 6.27 1.24 0.60 0.62
200 Fe 429 1.68 46.95 17.38 50.14 0.41
200 MgO 429 0.05 36.48 10.80 53.48 0.68
200 MnO 429 0.02 7.28 0.44 0.31 1.26
200 Ni 429 0.01 3.07 1.06 0.32 0.54
200 SiO2 429 11.05 94.00 47.21 185.41 0.29
300 Al2O3 893 0.05 20.18 2.14 5.34 1.08
300 CaO 893 0.00 10.37 0.12 0.48 5.59
300 Co 893 0.00 0.15 0.03 0.00 0.57
300 Cr2O3 893 0.03 4.40 0.76 0.18 0.56
300 Fe 893 0.88 35.96 9.99 15.90 0.40
300 MgO 893 0.11 38.43 26.02 84.80 0.35
300 MnO 893 0.02 1.88 0.23 0.03 0.78
300 Ni 893 0.02 3.29 0.77 0.15 0.50
300 SiO2 893 29.89 96.20 45.61 150.69 0.27

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Table 14.4 Grade characteristics for VOI

Number of Minimum Maximum

Horizon Constituent Mean (%) Variance CV
Composites (%) (%)
100 Al2O3 1731 1.53 27.51 13.03 22.14 0.36
100 CaO 1731 0.00 1.71 0.01 0.00 3.54
100 Co 1731 0.00 1.12 0.09 0.01 1.21
100 Cr2O3 1731 0.22 5.61 2.03 0.80 0.44
100 Fe 1731 5.85 55.47 37.02 73.22 0.23
100 MgO 1731 0.05 34.60 0.73 6.60 3.51
100 MnO 1731 0.02 8.16 0.94 0.76 0.93
100 Ni 1731 0.01 3.64 0.40 0.13 0.89
100 SiO2 1731 3.08 73.68 18.55 108.97 0.56
200 Al2O3 505 0.82 25.10 5.54 15.35 0.71
200 CaO 505 0.00 0.68 0.07 0.01 1.35
200 Co 505 0.01 0.33 0.05 0.00 0.68
200 Cr2O3 505 0.23 3.89 1.03 0.26 0.49
200 Fe 505 5.59 53.08 20.35 66.12 0.40
200 MgO 505 0.05 30.90 10.88 61.76 0.72
200 MnO 505 0.04 4.55 0.55 0.21 0.83
200 Ni 505 0.07 5.24 1.00 0.36 0.60
200 SiO2 505 9.36 75.30 42.62 113.41 0.25
300 Al2O3 1507 0.17 27.30 3.17 10.02 1.00
300 CaO 1507 0.00 18.48 0.20 1.52 6.09
300 Co 1507 0.00 0.14 0.03 0.00 0.54
300 Cr2O3 1507 0.02 2.84 0.69 0.08 0.43
300 Fe 1507 2.92 40.28 11.07 19.37 0.40
300 MgO 1507 0.05 37.48 25.45 74.93 0.34
300 MnO 1507 0.03 2.82 0.26 0.03 0.69
300 Ni 1507 0.01 4.80 0.92 0.25 0.55
300 SiO2 1507 15.41 89.93 42.80 61.58 0.18

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Table 14.5 Grade characteristics for VOE

Number of Minimum Maximum

Horizon Constituent Mean (%) Variance CV
Composites (%) (%)
100 Al2O3 932 1.83 30.60 14.62 29.88 0.37
100 CaO 932 0.00 3.84 0.04 0.02 3.90
100 Co 932 0.00 0.50 0.06 0.01 1.28
100 Cr2O3 932 0.01 5.67 1.40 0.95 0.70
100 Fe 932 3.03 57.92 28.84 161.21 0.44
100 MgO 932 0.05 22.13 0.69 2.53 2.29
100 MnO 932 0.00 7.91 0.57 0.35 1.05
100 Ni 932 0.01 2.70 0.28 0.15 1.38
100 SiO2 932 3.94 82.50 30.07 289.67 0.57
200 Al2O3 464 1.19 26.38 5.15 18.33 0.83
200 CaO 464 0.00 1.04 0.17 0.03 0.98
200 Co 464 0.01 0.23 0.06 0.00 0.57
200 Cr2O3 464 0.02 10.94 1.25 0.63 0.63
200 Fe 464 4.28 53.68 19.58 51.38 0.37
200 MgO 464 0.26 30.26 8.99 44.34 0.74
200 MnO 464 0.03 3.62 0.45 0.12 0.75
200 Ni 464 0.12 2.35 1.15 0.27 0.45
200 SiO2 464 9.70 78.74 44.73 96.03 0.22
300 Al2O3 883 0.25 20.29 3.31 13.18 1.10
300 CaO 883 0.00 7.84 0.18 0.44 3.72
300 Co 883 0.00 0.24 0.03 0.00 0.67
300 Cr2O3 883 0.04 5.70 0.75 0.16 0.53
300 Fe 883 3.07 44.35 10.78 16.20 0.37
300 MgO 883 0.05 36.99 24.04 83.38 0.38
300 MnO 883 0.01 1.42 0.24 0.03 0.70
300 Ni 883 0.11 3.36 0.96 0.19 0.45
300 SiO2 883 11.28 82.50 43.98 50.58 0.16

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Table 14.6 Grade characteristics for JAC

Number of Minimum Maximum

Horizon Constituent Mean (%) Variance CV
Composites (%) (%)
100 Al2O3 280 0.47 21.88 11.38 19.97 0.39
100 CaO 280 0.00 0.40 0.04 0.00 1.36
100 Co 280 0.00 0.61 0.10 0.01 0.85
100 Cr2O3 280 0.18 5.28 2.02 0.77 0.44
100 Fe 280 3.76 56.42 30.11 122.15 0.37
100 MgO 280 0.05 18.14 1.03 3.76 1.88
100 MnO 280 0.02 7.53 0.88 0.73 0.97
100 Ni 280 0.07 4.04 0.55 0.24 0.89
100 SiO2 280 1.29 1.90 1.49 0.04 0.13
200 Al2O3 104 0.11 17.70 4.42 11.77 0.78
200 CaO 104 0.00 0.68 0.13 0.02 1.05
200 Co 104 0.00 0.28 0.06 0.00 0.73
200 Cr2O3 104 0.06 5.52 1.35 0.67 0.60
200 Fe 104 1.78 49.52 21.43 89.88 0.44
200 MgO 104 0.86 24.42 11.82 44.28 0.56
200 MnO 104 0.05 2.19 0.63 0.18 0.68
200 Ni 104 0.06 3.39 1.31 0.40 0.49
200 SiO2 104 11.70 93.50 39.67 199.39 0.36
300 Al2O3 452 0.12 19.40 2.40 6.82 1.09
300 CaO 452 0.00 0.53 0.10 0.01 0.93
300 Co 452 0.01 0.21 0.03 0.00 0.77
300 Cr2O3 452 0.07 2.92 0.68 0.11 0.48
300 Fe 452 1.48 35.74 10.60 21.45 0.44
300 MgO 452 0.10 37.10 23.32 119.35 0.47
300 MnO 452 0.03 2.31 0.28 0.05 0.79
300 Ni 452 0.03 3.55 0.89 0.35 0.66
300 SiO2 452 18.70 96.32 47.45 203.26 0.30

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Table 14.7 Grade characteristics for PQZ

Number of Minimum Maximum

Horizon Constituent Mean (%) Variance CV
Composites (%) (%)
100 Al2O3 1604 1.54 28.64 15.62 25.34 0.32
100 CaO 1604 0.01 7.45 0.04 0.11 9.12
100 Co 1604 0.01 0.42 0.09 0.00 0.71
100 Cr2O3 1604 0.01 6.04 2.27 0.92 0.42
100 Fe 1604 3.11 58.47 34.06 93.47 0.28
100 MgO 1604 0.10 34.30 0.90 4.52 2.36
100 MnO 1604 0.02 4.79 0.93 0.35 0.64
100 Ni 1604 0.01 2.67 0.47 0.14 0.80
100 SiO2 1604 2.44 83.03 18.87 164.52 0.68
200 Al2O3 675 0.82 28.40 6.01 19.27 0.73
200 CaO 675 0.01 0.47 0.08 0.01 1.11
200 Co 675 0.01 0.21 0.06 0.00 0.45
200 Cr2O3 675 0.21 3.44 1.37 0.25 0.37
200 Fe 675 6.77 45.25 18.83 38.00 0.33
200 MgO 675 0.10 29.88 10.49 38.43 0.59
200 MnO 675 0.04 1.40 0.44 0.04 0.47
200 Ni 675 0.14 4.23 1.65 0.36 0.36
200 SiO2 675 12.30 79.09 41.70 90.92 0.23
300 Al2O3 1851 0.45 24.84 4.26 14.33 0.89
300 CaO 1851 0.01 3.07 0.09 0.04 2.32
300 Co 1851 0.01 0.16 0.03 0.00 0.54
300 Cr2O3 1851 0.05 3.22 0.88 0.14 0.42
300 Fe 1851 4.68 39.90 11.51 15.94 0.35
300 MgO 1851 0.52 37.92 22.43 70.44 0.37
300 MnO 1851 0.05 1.98 0.26 0.02 0.54
300 Ni 1851 0.16 5.78 1.16 0.38 0.53
300 SiO2 1851 14.23 81.11 43.02 54.09 0.17

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Table 14.8 Grade characteristics for PQW

Number of Minimum Maximum

Horizon Constituent Mean (%) Variance CV
Composites (%) (%)
100 Al2O3 468 2.09 33.53 17.09 23.53 0.28
100 CaO 468 0.00 0.29 0.02 0.00 1.44
100 Co 468 0.00 0.57 0.04 0.00 1.19
100 Cr2O3 468 0.01 4.51 0.94 0.57 0.81
100 Fe 468 4.48 50.01 26.59 84.29 0.35
100 MgO 468 0.01 3.36 0.63 0.34 0.92
100 MnO 468 0.01 1.09 0.13 0.02 1.13
100 Ni 468 8.41 75.30 30.73 166.67 0.42
100 SiO2 369 0.18 19.10 5.40 7.43 0.50
200 Al2O3 369 0.00 4.25 0.18 0.11 1.86
200 CaO 369 0.01 0.25 0.06 0.00 0.58
200 Co 369 0.02 4.14 1.39 0.23 0.34
200 Cr2O3 369 1.97 53.78 21.97 66.98 0.37
200 Fe 369 0.05 26.64 6.32 16.39 0.64
200 MgO 369 0.03 3.41 1.13 0.25 0.45
200 MnO 369 4.63 96.20 43.27 160.94 0.29
200 Ni 300 0.10 18.63 3.76 10.69 0.87
200 SiO2 300 0.01 3.63 0.16 0.11 2.02
300 Al2O3 300 0.01 0.16 0.03 0.00 0.70
300 CaO 300 0.02 2.13 0.79 0.13 0.45
300 Co 300 2.13 28.60 10.74 12.97 0.34
300 Cr2O3 300 0.10 35.89 19.95 85.04 0.46
300 Fe 300 0.03 4.70 0.38 0.19 1.13
300 MgO 300 31.18 95.10 48.56 118.85 0.22
300 MnO 300 0.57 1.47 0.99 0.00 0.07
300 Ni 411 0.28 26.37 6.47 51.57 1.11
300 SiO2 411 0.01 10.50 0.97 3.80 2.02

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Table 14.9 Grade characteristics for BAI

Number of Minimum Maximum

Horizon Constituent Mean (%) Variance CV
Composites (%) (%)
100 Al2O3 2408 2.21 28.94 12.62 15.31 0.31
100 CaO 2408 0.01 8.87 0.04 0.05 5.86
100 Co 2408 0.00 0.55 0.10 0.00 0.68
100 Cr2O3 2408 0.07 8.87 3.11 1.69 0.42
100 Fe 2408 3.96 53.29 37.05 51.36 0.19
100 MgO 2408 0.10 35.15 1.61 9.22 1.88
100 MnO 2408 0.05 6.12 0.86 0.22 0.55
100 Ni 2408 0.02 3.64 0.72 0.23 0.66
100 SiO2 2408 2.78 77.47 16.21 96.04 0.60
200 Al2O3 857 0.71 22.20 5.30 14.69 0.72
200 CaO 857 0.01 2.76 0.08 0.03 2.22
200 Co 857 0.01 0.22 0.05 0.00 0.58
200 Cr2O3 857 0.12 6.09 1.36 0.51 0.52
200 Fe 857 4.17 52.40 18.33 41.89 0.35
200 MgO 857 0.54 37.60 14.42 46.35 0.47
200 MnO 857 0.04 1.71 0.43 0.04 0.48
200 Ni 857 0.21 5.30 1.30 0.45 0.52
200 SiO2 857 5.10 80.60 40.49 90.66 0.24
300 Al2O3 1786 0.10 20.50 3.36 9.30 0.91
300 CaO 1786 0.01 13.50 0.14 0.43 4.67
300 Co 1786 0.00 0.20 0.03 0.00 0.55
300 Cr2O3 1786 0.03 5.23 0.86 0.16 0.47
300 Fe 1786 1.08 45.36 11.38 15.43 0.35
300 MgO 1786 1.16 37.92 24.34 55.82 0.31
300 MnO 1786 0.02 1.89 0.26 0.02 0.57
300 Ni 1786 0.06 4.08 0.89 0.22 0.53
300 SiO2 1786 12.14 96.20 43.27 79.13 0.21

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Table 14.10 Top-cuts applied during grade estimation

Number Number Number

CaO MgO Top- Co Top-
Area Horizon affected affected affected
Top-cut % cut % cut %
% % %
VOW 100 0.14 0.50 10.00 1.50 - -
VOW 200 0.50 3.30 - - - -
VOW 300 0.35 2.80 - - - -
VOI 100 0.15 1.00 7.20 1.90 - -
VOI 300 0.70 1.90 - - - -
VOE 100 0.36 0.01 9.00 0.10 - -
VOE 300 0.80 2.70 - - - -
JAC 100 0.31 0.40 8.00 1.10 - -
PQZ 100 0.25 0.40 12.00 0.60 - -
PQZ 300 1.00 1.10 - - - -
PQW 100 0.14 1.50 4.00 - 0.30 0.20
PQW 200 0.50 2.20 - - - -
PQW 300 1.00 1.30 - - - -
BAI 100 0.30 0.40 15.00 0.50 - -
BAI 200 1.20 0.50 - - - -
BAI 300 4.00 0.60 - - - -

14.4 Estimation
14.4.1 Variography

Variograms were generated to assess the grade continuity of the various constituents and as
inputs to the Ordinary Kriging algorithm used to interpolate grades. Snowden SuperVisor v.8
software was used to generate and model the variograms.

Laterite deposits occur often as low-lying hills, with the laterite profile effectively following the
profile of the hill and weathering fronts. This, together with variable thicknesses of individual
horizons and vertical grade trends, results in undulating geometries which present issues for
effective grade interpolation using traditional 3D methods. Snowden therefore elected to use
the Datamine Unfold process to address the impact of the undulations on the modelling of
variograms and the estimation of grades. Unfolding improves the grade estimation process
as it transforms the sample coordinates to assist in preserving vertical grade trends. This
allows variogram analysis and grade estimation to be carried out using the pre-folding
coordinates, which are then converted back to the folded (local) coordinate system. The
unfolding process results in more samples being available for variogram modelling and grade
estimation than would have been the case if standard resource estimation methods were
used.

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Variogram models

Variograms for unfolded nickel (Ni), cobalt (Co), iron (Fe) and oxide constituents (Al2O3, CaO,
Cr2O3, MgO, MnO, SiO2) were developed for each horizon and area, provided the data
density was sufficient to support robust variograms. In the case of JAC variograms were
adopted from the adjacent VOW deposit, with the major direction of continuity adjusted to
050○. In the case of PQW, variograms were adopted from the adjacent PQZ deposit, with
similar changes to the directions of continuity.

All variograms were modelled using the following general approach:

 The drillhole composites were unfolded and modelled using the unfolded coordinate
fields.
 All variograms were standardised to a sill of one.
 Variograms were modelled using spherical variograms with a nugget effect and three
structures. Snowden found that most nuggets derived from the down-hole direction were
exceedingly low which is expected in the nickel laterite environment.
 The variograms were evaluated using normal scores variograms rather than traditional
variograms. This method produces a clearer image of the ranges of continuity in skewed
data sets. The nugget and sill values were then back transformed to traditional
variograms using the discrete Gaussian polynomials technique (Guibal et al, 1987).

14.4.2 Estimation method and parameters

Datamine software was used to unfold the composite data and estimate grades using
ordinary kriging. Grades were estimated using variogram models for each attribute grouped
by Horizon. Hard boundary conditions were used to preserve the chemistry of each Horizon.

14.4.3 Search parameters

For each area, the same search ellipse ranges and axis rotations were used with each of the
grade estimates in order to keep the ratios of the various constituents (metal balance) as
consistent as possible. The search ellipse axis lengths were derived from the variogram
modelling.

14.4.4 Search ellipse strategy

The distribution and density of the various attribute values within each of the domains is quite
variable in areas around the edges of the mineralisation and for the Transition Horizon which
is often thin and highly variable thickness. As such if a single search ellipse was applied for
the estimation process then a significant proportion of cells within the interpreted Horizons
would not get informed for all of the grade fields. To ensure that each cell within the Horizons
includes an estimated grade value, a dynamic search volume approach was used:

14.4.5 Estimation settings summary

The key search ellipse and estimation parameters are summarised in Table 14.11.

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Table 14.11 Estimation parameters

Estimation setting Description/setting

vow050713v1.dm; voi050713v1.dm; voe270613v1.dm;
Final model names jac050713v1.dm; pq060613v1.dm; pqw230513v1.dm;
ba140613v1.dm
Unfolded and coded drilling data in Datamine format with top
Drillholes
cuts applied for selected variables
Boundary conditions Hard Horizon boundaries for all estimates
Top cuts Per Ross (2013)
Search ellipsoid Per Ross (2013)
Method Ordinary kriging (parent cell estimation) with unfolding)
Variograms Per Ross (2013)
Dynamic search volumes Yes
Minimum number of samples – volume 1 5
Maximum number of samples – volume 1 30
Search volume 2 factor 1
Minimum number of samples – volume 2 2
Maximum number of samples – volume 2 30
Search volume 3 factor 2
Minimum number of samples – volume 3 1
Maximum number of samples – volume 3 30
Octant searching No
Block discretisation (XYZ) 8 by 8 by 1

14.4.6 Model validation

The estimates were validated using:

 A visual comparison of the block grade estimates and the drillhole composite data.
 Generation of vertical section and plan-view plots of the estimates, and naïve composite
grades, along with the number of composite samples available (slice plots). Due to the
regular drill spacing the naïve composite grades are effectively declustered.
 A global comparison of the average composite (naïve) and estimated grades.
 A comparison of the correlations between constituents within the input composite data
and the block model grade estimates.

The conclusions from the model validation work are:

 Inspection of the slice plots shows, for regions where there are substantive input
composite numbers, good agreement in grade trends.
 Visual comparison of the model grades and the corresponding drillhole composite grades
shows a good outcome (< 10 % difference) for almost all constituents. The exceptions
are: VOE 100 for CaO; PQZ 100 for MgO; BAI 100 for CaO, MgO, 200 for CaO, Ni. Of
these Ni is within 11 % difference which is not considered material.
 The estimated models adequately preserve the correlations observed in the input
statistics.

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14.5 Calculation of dry density

A combination of HZM and Teck density measurements, now totalling approximately 10,000
representative samples from each of the major laterite facies is summarised in Table 11.1.

Snowden investigated the relationship between measured density and major chemistry of the
density samples and derived formulae to allow block dry density to be calculated from major
chemistry block estimates. Samples were sorted by Horizon and Excel’s LINEST (multiple
linear regression) formula was then applied to create an equation for each Horizon. The
regression prediction was checked by calculating the regressed density values from actual
assays: checking that the average calculated results were equal to the average of the density
measurements; and comparing the predicted values with the actual density measurements by
scatterplots.

14.6 Mineral Resource classification

JORC guidelines

Table 14.12 and Table 14.13 list Snowden’s assessment of the criteria that were considered
when classifying the 2013 Araguaia PFS resource estimates in accordance with the JORC
Code (2012 edition) guidelines.

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Table 14.12 JORC Code (2012) Table 1 Section 1 – Sampling techniques and data

Item Comments
Sampling The data used for resource estimation is based on the logging and sampling of diamond core drilling
techniques (100% of the sample data).
Drilling The drilling was completed using vertical core holes. Vertical drillholes are appropriate given the strike
techniques and dip of the mineralisation.
Drill sample HZM has required the drilling contractor to redrill where recoveries were less than 85 %, thus ensuring the
recovery recoveries in the provided database are adequate.
Almost all of the geological information has been obtained by the logging of drill samples, and
supplemented by surface geological mapping and interpretation of geophysical surveys. Logging of
Logging
drillhole samples was done with sufficient detail to meet the requirements of resource estimation and
mining studies, and in accordance with HZM Standard Operating Procedures.
Cores were sampled at 1 m intervals. Half split core samples are crushed and pulverised at SGS
laboratory in Goiania and the resultant pulps analysed at SGS laboratory in Belo Horizonte using
Sub-sampling
tetraborate fusion X-Ray Fluorescence. Full QA/QC procedures are implemented, including the insertion
of standards, duplicates and blanks.
Quality of
assay data Snowden’s analysis of the QAQC data (standards, blanks, duplicates) and assessment made by HZM did
and laboratory not identify any significant issues which could be material to the resource estimate.
tests
Drilling from earlier phases was verified by independent Qualified Persons.
Verification of
sampling and In 2013 HZM dispatched 457 duplicate pulp samples to the ACME Laboratory in Canada for umpire check
assaying analyses. Original assay was completed by SGS in Brazil and the same analysis method (tetraborate
fusion XRF) was applied at both laboratories. A reasonable level of accuracy has been demonstrated.
The project area is centred about the following co-ordinates: WGS 84 Latitude 07° 54' 9.0" South; UTM
SAD 69 22S 9126200mN; and WGS 84 Longitude 49° 26' 1.8" West; UTM SAD 69 22S 672700mE.
Location of
data points Collar locations were surveyed using a DGPS (precision +/- 10 cm) by Independent Licenced Surveyor.
Elevation differences between drillhole collars and the supplied topography DTM were checked and
eliminated by pressing the collars to the DTM.
No downhole surveys were collected for the drilling. Mitigating this issue to a large extent is the fact that
most of the drilling consists of shallow vertical core holes and the drill rig alignment is checked by HZM
staff prior to drilling.
Drilling was completed along a set of oriented sections. The drillhole spacing is essentially 100 m apart
Data spacing
with two small areas on areas PQZ and BAI drilled to 25 m spacing for variogram analysis. These
and
drillhole spacings are sufficient to establish the degree of geological and grade continuity necessary to
distribution
support the resource classifications that were applied.
The drilling was composited downhole using a 1.0 m interval which corresponds to the dominant assay
interval.
Orientation of
data in relation The location and orientation of the Araguaia drilling (vertical) is appropriate given the geometry and
to geological orientation (horizontal) of the laterite mineralisation.
structure
All sampling and data collection is handled by HZM personnel and the drill core is subsequently
transferred into core boxes. Drill core is stored in a secure facility in Conceição do Araguaia. Sample
Sample
security procedures are provided in section 11.3. Pulp and crush rejects are returned after a 90 day
security
period at SGS, pulp rejects are stored in cardboard boxes and crush rejects in large plastic boxes
sequentially batch by batch also onsite.
The drilling database was reviewed by Snowden and sufficient cross-checks with assay certificates, drill
Audits and
core and logging, collar surveys were undertaken to confirm that the data is suitable for use in mineral
reviews
resource estimation.

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Table 14.13 JORC Code (2012) Table 1 Section 3 – Estimation and reporting of
Mineral Resources

Item Comments
The new Phase 3 drilling data was supplied to Snowden in Microsoft Excel spread sheets and then
Database
imported into an existing GEMS Project database by Snowden. Internal validation checks were made by
integrity
Snowden and any discrepancies were corrected in consultation with HZM.
Snowden believes that the local geology is well understood as a result of work undertaken by HZM and Dr
Marc-Antoine Audet in respect of chemical classification of rock types. The contacts between laterite
Geological horizons have been interpreted based on a combination of logging and geochemistry as described in
interpretation Section 6.
Alternative interpretations of the mineralisation are unlikely to significantly change the overall volume of
the Horizons.
The Araguaia mineralisation estimated by Snowden consists of seven areas. Descriptions of the deposits
Dimensions are provided in Section 4.3. Maximum and average thickness of the laterite horizons are provided in
section 7.
Unfolded ordinary block kriging using hard boundary domains, with sub-celling to accurately reflect
Estimation and horizon contacts.
modelling
techniques The deposits have been estimated previously by Dr Marc-Antoine Audet in GEMS software using an
unwrinkling approach.
Moisture All tonnages have been estimated as dry tonnages.
Cut-off
The nickel mineralisation was reported above a 0.95% nickel cut-off grade.
parameters
Mining factors
and It is assumed the deposits will be mined using open cut methods.
assumptions
Metallurgical
None. Metallurgical test work reported in Section 13 indicates there is a reasonable prospect for metal
factors and
recovery using current technologies.
Assumptions
Environmental
factors or These are discussed in Section 20 “Environmental Studies, Permitting, and Social or Community Impact.
assumptions
There are sufficient bulk density measurements (water displacement method) to relate major chemistry to
Density
density by linear regression. Block estimates of dry density were calculated from block grade estimates..
The resources have been classified based on continuity of both the geology and the nickel grade along
Classification with the drillhole spacing. Additionally the information summarised in this table has been used to support
the resource classification categories of Indicated and Inferred..
Audits and The Snowden models compiled in 2013 have not been independently reviewed in detail but have been
reviews discussed with HZM’s Technical Advisor Mr F R Billington
Accuracy and The resource was classified by taking into consideration the confidence in the continuity of nickel grades
confidence and the confidence in the geological interpretation.

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14.6.1 Mineral Resource classification scheme

The Phase 3 Mineral Resource estimates were classified and reported in accordance with the
2012 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves (the JORC Code). The resource is reported above a 0.95% nickel cut-off grade to
enable comparison with estimates reported at the completion of Phase 2 drilling (Audet M.A.
et al., 2012). A nickel cut-off grade of 0.9% is supported by economic analysis by Snowden.

Reasonable prospects for metal recovery by current technologies were reported by HZM:

 In Q1 2013 HZM reported the completion of an 18 month comprehensive metallurgical

test programme, which included work by FLSmidth, the global leader in high temperature
kiln technology, Xstrata Process Support (‘XPS’) and Kingston Process Metallurgy
(‘KPM’). The test programme was designed to evaluate the expected ore performance in
RKEF processing, and HZM were pleased to report that Araguaia ore was found to be
suitable for treatment using this proven technology. Rotary kiln processing is a key step
in the well-established RKEF pyro-metallurgical process that HZM are aiming to utilise at
Araguaia. Smelting tests carried out by XPS on a number of ore blends showed that
smelting Araguaia laterite can produce Fe-Ni alloy and a low nickel slag. This work and
additional testing by KPM confirmed the electric furnace conditions when producing a 15
to 20% Ni grade of Fe-Ni, and further confirmed the suitability of the RKEF process for
producing a marketable grade of Fe-Ni.

The resource classification criteria were developed based on an assessment of the following
items:

 Nature and quality of the drilling and sampling.

 Drilling density.
 Confidence in the understanding of the underlying geological and nickel grade continuity.
 Analysis of the QAQC data. Confidence in the estimate of the mineralised volume.
 The results of the model validation.
 Table 1 Section 1 and 3 of the JORC code.

The resource classification scheme adopted by Snowden for the 2013 Araguaia mineral
resource estimate was based on the following:

 Mineralisation was classified as Indicated where the drilling density was 100 mE by 100
mN (or less).
 Mineralisation delineated using a drilling density larger than 100 mE by 100 mN and up
to about 150 m spacing was classified as Inferred.
 Mineralisation delineated using sparse spacings was not classified.

14.6.2 PFS Mineral Resource reporting

The classified Mineral Resources for the PFS have been reported using a 0.95% nickel cut-
off grade and are provided in Table 14.14.

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Table 14.14 PFS Mineral Resource estimates reported at 0.95% Ni cut-off

Tonnage Contained
PFS Area Category Material type Density (t/m3) Ni (%) Co (%) Fe (%) MgO (%) SiO2 (%) Al2O3 (%) Cr2O3 (%)
(kT) Ni metal (t)

VOW Indicated Limonite 2,490 1.34 31,150 1.25 0.121 35.15 2.42 23.21 8.06 2.67
VOW Indicated Transition 2,740 1.17 37,180 1.36 0.050 19.27 12.01 42.80 3.89 1.44
VOW Indicated Saprolite 1,870 1.27 21,430 1.15 0.033 12.23 23.28 42.58 2.97 0.97
VOW Inferred Limonite 590 1.36 7,160 1.21 0.128 37.64 2.14 20.50 7.98 2.89
VOW Inferred Transition 910 1.17 11,580 1.27 0.057 18.94 11.73 43.75 3.72 1.43
VOW Inferred Saprolite 800 1.33 8,760 1.09 0.030 11.52 26.88 40.77 2.64 0.92
VOI Indicated Limonite 1,230 1.33 14,710 1.20 0.191 38.28 2.50 19.61 7.87 2.08
VOI Indicated Transition 2,880 1.21 40,160 1.39 0.060 20.06 12.26 40.85 4.77 1.18
VOI Indicated Saprolite 8,050 1.34 104,930 1.30 0.032 11.88 25.50 41.13 3.09 0.74
VOI Inferred Limonite 240 1.32 2,780 1.14 0.114 33.40 2.74 28.09 7.26 1.94
VOI Inferred Transition 490 1.18 6,370 1.30 0.054 20.81 10.96 41.19 4.55 1.24
VOI Inferred Saprolite 810 1.37 10,160 1.25 0.032 11.80 24.18 42.43 3.82 0.73
VOE Indicated Limonite 510 1.31 6,130 1.20 0.156 37.21 2.01 22.99 7.70 2.14
VOE Indicated Transition 3,160 1.16 43,250 1.37 0.062 20.67 10.05 42.44 4.34 1.37
VOE Inferred Saprolite 310 1.30 3,490 1.13 0.035 12.49 17.36 45.24 5.80 0.72
JAC Indicated Limonite 480 1.30 5,850 1.23 0.134 37.03 2.40 22.59 7.80 2.22
JAC Indicated Transition 870 1.14 12,340 1.42 0.071 23.19 12.14 36.77 4.03 1.47
JAC Indicated Saprolite 1,710 1.36 23,800 1.39 0.046 11.75 23.27 45.00 2.63 0.78
JAC Inferred Limonite 40 1.37 450 1.09 0.118 36.07 2.26 23.91 7.30 2.08
JAC Inferred Transition 80 1.19 1,230 1.44 0.064 18.63 12.91 41.63 4.39 1.20
JAC Inferred Saprolite 400 1.30 5,650 1.42 0.042 11.75 21.54 45.31 2.62 0.80
PQZ Indicated Limonite 1,440 1.34 16,730 1.17 0.067 35.21 2.61 19.06 11.63 2.28
PQZ Indicated Transition 5,540 1.19 94,060 1.7 0.035 19.12 10.9 40.62 6.1 1.36
PQZ Indicated Saprolite 12,510 1.32 173,530 1.39 0.095 11.68 22.68 42.1 4.45 0.89
PQZ Inferred Limonite 250 1.37 2,630 1.06 0.069 33.94 3.71 18.7 12.1 2.35
PQZ Inferred Transition 420 1.22 6,160 1.46 0.034 21.17 13.71 34.83 6.83 1.53

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Tonnage Contained
PFS Area Category Material type Density (t/m3) Ni (%) Co (%) Fe (%) MgO (%) SiO2 (%) Al2O3 (%) Cr2O3 (%)
(kT) Ni metal (t)

PQZ Inferred Saprolite 1,110 1.43 13,540 1.22 N/A 10.99 27.06 39.8 4.68 0.82
PQW Indicated Limonite N/A N/A N/A N/A 0.058 N/A N/A N/A N/A N/A
PQW Indicated Transition 2,730 1.14 32,930 1.21 0.037 21.79 6.64 43.19 5.47 1.41
PQW Indicated Saprolite 670 1.34 7,840 1.18 N/A 11.5 19.99 46.49 3.99 0.84
PQW Inferred Limonite N/A N/A N/A N/A 0.064 N/A N/A N/A N/A N/A
PQW Inferred Transition 310 1.12 3,410 1.1 0.052 22.75 6.55 41.49 5.2 1.34
PQW Inferred Saprolite 40 1.29 440 1.05 0.113 12.73 18.6 45.14 4.67 0.79
BAI Indicated Limonite 5,420 1.37 63,210 1.17 0.057 36.94 3.12 17.17 10.25 2.86
BAI Indicated Transition 6,190 1.22 87,000 1.41 0.031 18.99 13.72 40.24 5.07 1.44
BAI Indicated Saprolite 6,340 1.31 77,990 1.23 0.083 12.33 23.37 42.55 3.46 0.93
BAI Inferred Limonite 770 1.35 8,350 1.08 0.049 32.62 4.7 23.37 8.97 2.66
BAI Inferred Transition 270 1.18 3,130 1.15 0.029 24.87 11.83 33.02 6.05 1.63
BAI Inferred Saprolite 150 1.29 1,650 1.11 0 12.67 24.14 39.2 4.85 1
Total Indicated All 72,000 1.28 958,700 1.33 0.058 18.48 16.19 38.25 5.04 1.31
Total Inferred All 8,400 1.21 102,400 1.21 0.058 19.86 15.11 37.25 5.32 1.41
Note: Mineral Resources are inclusive of Mineral Reserves. Totals may not add due to rounding

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Figure 14.1 provides a grade-tonnage curve for a range of nickel cut-offs for the Indicated
Mineral Resources.

Figure 14.1 Grade tonnage curve for Indicated Mineral resource

1.80

Grade Tonnage Curve for Indicated Mineral Resource

1.70 1.4

1.3
1.60

1.2
1.50
1.1
1.40 Ni % cut-off
1.0
Ni % 0.95
1.30 0.90

0.80
1.20

1.10

1.00

0.90

Tonnes
0.80
0 20,000,000 40,000,000 60,000,000 80,000,000 100,000,000 120,000,000

14.7 Other deposits within the project area

Mineral Resources were estimated by Dr. Marc-Antoine Audet using block estimation by
Inverse Distance at the power of 2 (ID2) interpolation methodologies on 25 × 25 × 2 m blocks
(Audet et al, 2012). The deposits are: Pequizeiro NW (PQNW), Oito Main (Oito), Lontra
North (Lontra 1 – 4 or Northern) and Raimundo. The locations of these deposits are shown
in Section 7 and Section 10.

A geochemical correlation matrix was defined in order to assign a ‘GeoFacies’ to each

individual sample in the database. Bulk density values (wet and dry) and moisture content
were assigned based on facies.

Three-dimensional models these deposits were created using surveyed holes. The models
integrate the concept of geological horizons (limonite, transition and saprolite) to create a 3D
block model. For each deposit, a surface geological constraining envelope was generated
using drillhole data as well as information from geological mapping.

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The estimates were previously reported in Audet, M A, et al (2012) and are classified as
Inferred Mineral Resources (Table 14.15). These resources are not considered in the Pre-
Feasibility Study discussed in this Technical Report.

There are no Mineral Resource estimates for other prospects (Morro, Southern, Oito West
and Pequizeiro East) due to insufficient drill sample information.

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Table 14.15 Non-PFS Mineral Resource estimates reported at 0.95% Ni cut-off

Area Tonnage Contained

Category Material type Density (t/m3) Ni (%) Co (%) Fe (%) MgO (%) SiO2 (%) Al2O3 (%) Cr2O3 (%)
(Non-PFS) (kT) Ni metal (t)

PQNW Inferred Limonite 1,000 1.35 11,060 1.11 0.083 35.72 4.88 18.27 9.74 2.47
PQNW Inferred Transition 700 1.34 9,220 1.32 0.050 21.19 14.00 33.46 7.05 1.58
PQNW Inferred Saprolite 320 1.55 3,480 1.09 0.035 14.15 23.58 38.83 3.48 1.07
Oito Inferred Limonite 2,860 1.34 31,840 1.11 0.123 37.69 2.67 18.20 10.51 2.32
Oito Inferred Transition 3,470 1.35 47,820 1.38 0.051 19.41 13.90 40.28 5.09 1.24
Oito Inferred Saprolite 2,890 1.46 33,210 1.15 0.031 12.11 22.68 42.35 4.63 0.76
Lontra 1 Inferred Limonite 510 1.32 5,680 1.11 0.055 31.10 6.85 25.54 7.69 0.47
Lontra 1 Inferred Transition 40 1.27 350 1.00 0.04 23.46 17.38 31.48 3.64 0.75
Lontra 1 Inferred Saprolite - - - - - - - - - -
Lontra 2 Inferred Limonite 360 1.33 4,310 1.21 0.074 38.52 3.18 14.22 8.83 3.18
Lontra 2 Inferred Transition 100 1.31 1,100 1.11 0.038 19.29 20.66 29.65 4.19 4.54
Lontra 2 Inferred Saprolite 20 1.47 170 1.13 0.03 14.34 25.87 35.11 3.61 1.23
Lontra 3 Inferred Limonite 930 1.33 10,910 1.18 0.082 34.93 4.65 19.69 9.34 0.15
Lontra 3 Inferred Transition 670 1.28 8,240 1.23 0.054 21.20 18.23 29.82 5.95 0.64
Lontra 3 Inferred Saprolite 20 1.44 210 1.06 0.042 13.79 26.09 34.74 3.34 0.85
Lontra 4 Inferred Limonite 240 1.32 2,920 1.23 0.082 38.15 5.27 16.56 7.60 0.12
Lontra 4 Inferred Transition 160 1.30 2,070 1.28 0.054 19.93 20.04 30.92 5.56 0.66
Lontra 4 Inferred Saprolite 230 1.47 2,680 1.19 0.045 14.96 26.24 33.63 3.32 0.66
Raimundo Inferred Limonite 1,030 1.32 12,140 1.18 0.072 35.07 5.29 20.3 9.28 0.19
Raimundo Inferred Transition 1,310 1.28 16,000 1.23 0.046 21.47 17.6 31.4 5.84 0.57
Raimundo Inferred Saprolite 90 1.35 940 1.08 0.034 15.16 26.33 34.39 3.59 0.67
Total Inferred All 16,900 1.36 204,360 1.21 0,065 25.16 12.38 30.23 6.99 1.23

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15 Mineral Reserve estimates

Mineral Reserves, which are a subset of the Mineral Resources described in Section 14 have
been prepared for the Project as part of the PFS. The Reserves use the Base Case
assumptions, designs and parameters defined predominantly in Section 16 and also other
relevant sections of this report.

In accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves
(as adopted and amended), Mineral Reserves are classified as either “probable” or “proven”
Mineral Reserves and are based on Indicated and Measured Mineral Resources only. No
Mineral Reserves have been estimated using Inferred Mineral Resources

15.1 Summary
The estimation of Mineral Reserves used the recently completed estimate of Indicated
Resources for the Project as reported in section 14 of this report.

A Mineral Reserve of 21,204 kt (dry) at an average grade of 1.66% Ni was estimated. The
detailed breakdown of the Mineral Reserve by deposit is presented in Table 15.1

Table 15.1 March 2014 Mineral Reserve estimate

Ore Dry Mass

Class Deposit Ni (%) Fe (%) Al2O3 (%) SiO2/MgO
(kt)
Probable Baião 3,520 1.67 17.41 4.58 2.56
Probable Pequizeiro 9,300 1.70 15.58 5.39 2.56
Probable Pequizeiro West 380 1.57 20.38 4.63 4.29
Probable Jacutinga 960 1.81 15.13 2.96 2.11
Probable Vila Oito East 2,450 1.55 15.97 3.73 2.22
Probable Vila Oito 3,580 1.63 14.61 3.63 2.05
Probable Vila Oito West 1,020 1.59 19.35 4.25 3.32
Total Probable 21,200 1.66 16.01 4.59 2.44
Proven NIL N/A N/A N/A N/A
Total Proven and Probable 21,204 1.66 16.01 4.59 2.44

This Mineral Reserve is calculated on the basis of currently available information. Snowden
strongly recommends a test pit(s) to assess in-situ grade reconciliation to the resource model,
incidence of barren rocks in the saprolite, mining recovery and mining dilution.

15.2 Disclosure
Mineral Reserves reported in Section 15 were based on the PFS undertaken under the direct
supervision of Mr Anthony Finch who is a Qualified Person as defined in NI 43-101, an
employee of Snowden. Snowden is independent of HZM.

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15.2.1 Known issues that materially affect mineral reserves

The Mineral Reserves could be affected by changes in metal price, capital and operating
costs, metallurgical performance, infrastructure requirements, permitting or other factors.
These factors are discussed in other sections of this report. The major risks to the Mineral
Reserves are factors that either effect the costs to exploit resource or the revenues received
for the products produced.

As discussed below a break-even grade for was calculated as 1.04% Ni given the commodity
price assumption. The actual nickel cut-off grade used was 1.4% (for operational reasons),
so this provides degree of robustness for the reserve estimation.

The metallurgical testwork has indicated that the minerals can be economically recovered
using existing technology and methodology. Metallurgical performance has a direct effect
on the revenue received and increase or decreases in performance will change the amount of
metal recovered and hence the revenue received.

Permitting is not expected to be a material risk to the project as there have been no
indications to date that there are any social, regulatory or community issues that cannot be
managed through best practice operating standards and/or risk management planning and
mitigation measures. Permitting remains a risk to the reserves until the granting of the mining
licence as part of the outcomes of the feasibility studies and the successful submission of the
permitting and licence to operate requirements that will be outcomes of the final social,
environmental and community studies.

There are no perceived infrastructure risks to the reserve estimation process. The
infrastructure is either existing or of a relatively standard type to install during construction of
the project.

15.3 Assumptions, methods and parameters

15.3.1 Pit optimisation

The pit optimisation parameters used to develop the mineral reserves are shown in
Table 15.2.

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Table 15.2 Pit optimisation parameters

Parameter Unit Value

Slope angle Degrees 35
Waste mining cost USD/dmt 3.00
Ore mining cost USD/dmt 9.00
Processing cost USD/dmt feed 127.8
Processing NI recovery % 93
Process feed grade constraints Ni Minimum grade % 1.2
Iron grade range % 15 to 16.5
Al2O3 grade range % 4.0 to 5.5
SiO2/MgO ratio 2.2 and 2.6
Commodity price USD/t of recovered Ni 15,000
Administration costs USD/dmt of feed 11.20

Using the above assumptions, the marginal cut-off grade for the Project is calculated to be
1.04% Ni. However, this grade was not applied for mine planning due to the following
reasons:

 The overall ore feed is off-specification for the plant.

In particular, the overall iron grade is too high. Therefore, the higher iron grade rock types
(limonite and transition) had elevated cut-off grades applied to reduce their impact on the
average iron grades whilst maintaining the highest possible grade bring the overall grade to
within specification.

 The mine life is long and impacts negatively on net present value.

Applying a higher cut-off grade reduces the footprint of the pit, increases the average grade
and avoids mining lower grade material that would not be processed for a number of years.

Through iteration Snowden determined that the appropriate cut-off grades to meet the grade
specifications (including minimum nickel feed grade) were:

 Limonite – 1.69% Ni
 Transition – 1.4% Ni
 Saprolite – 1.4% Ni.

These cut-off grades were applied in the pit optimisation. For scheduling lower grade
Saprolite (>1.1% Ni) was processed at the end of the mine life.

Prior to optimisation the resource model was re-blocked to account for dilution. A detailed
discussion of the process and the outcomes of this re-blocking is presented in Section 16.6.

Using the re-blocked resource models, and the parameters detailed herein, a number of pit
shells were generated, ranked by revenue, with factors between 30% and 200% of the base
case revenue assumptions. From these shells Snowden selected the revenue factor 1 pit for
the mining inventory calculation. A summary of the pit optimisation inventory is provided in
Table 15.3.

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Table 15.3 Pit optimisation results

Waste Feed
Pit Dry Strip SiO2/
Dry Dry Ni Fe Al2O3 Cash Flow
Deposit Mass Ratio 2
Mass Mass (%) (%) (%) MgO (USD M)
(kt) (w:o)
(kt) (kt)
Baião 17,816 14,383 4.19 3,433 1.69 17.69 4.74 2.59 256.3
Pequizeiro 27,648 18,835 2.14 8,813 1.72 15.72 5.40 2.61 751.1
Pequizeiro West 2,350 1,944 4.80 405 1.58 20.13 4.66 4.29 23.3
Jacutinga 2,943 2,014 2.17 930 1.83 15.26 2.98 2.11 93.8
Vila Oito East 11,040 8,888 4.13 2,152 1.59 16.48 3.64 2.28 131
Vila Oito 16,356 13,195 4.17 3,161 1.68 15.05 3.65 2.12 235.0
Vila Oito West 5,523 4,537 4.60 3,161 1.61 19.57 4.27 3.41 62.2
Total 83,676 63,795 3.21 19,881 1.69 16.29 4.63 2.50 1,553

15.3.2 Pit design

The pit design used smoothed pit shells from the optimisation, altered for the removal of small
satellite pits.

The reconciliation of volumes and value between the pit shell selected for design and the
design itself is shown in Table 15.4. This reconciliation is deemed to be appropriate.

Table 15.4 Design inventory comparison

Item Design Pit Shell Difference (%)

Total pit dry mass (kt) 81,166 83,676 (3.0%)
Waste dry mass (kt) 61,631 63,800 (3.4%)
Feed dry mass (kt) 19,583 19,881 (1.5%)
Ni (%) 1.69 1.69 (0.0%)
Strip ratio (w:o) 3.14 3.21 (2.1%)
Cash flow ($M) 1,542 2,955 (0.7%)

After the pit optimisation, additional lower grade saprolite material (1.1% Ni to 1.4% Ni) was
included in the inventory to be processed at the end of the mine life. This increased the
inventory to 21.2 Mt at 1.66% Ni and reduced the strip ratio to 2.83 (waste:ore). All
inventories reported beyond this point include this lower grade material in the inventory.

The resultant designs and schedules are detailed in Section 16.

2
Cash flow is operating only, and is calculated based upon design assumptions and does not consider
capital, interest or tax. This number should be seen as a point of comparison only and not a measure of
absolute viability.

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15.3.3 Mineral Reserve classification

The classification categories of Probable and Proved Ore Reserve under the JORC Code are
equivalent to the CIM categories of Probable and Proven Mineral Reserve (CIM, 2010).

Includes:

 nickel spot price of USD 19,000 / tonne flat for LOM

 iron spot price of USD 150 / tonne flat for LOM
 Fe-Ni ratio of 20.3% Ni and 79.7% Fe
 royalties for the combined Fe-Ni product is 2% of the costs (up to the furnace)
 selling costs - there are no selling costs as product is being sold at the mine gate.

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16 Mining methods
The mine design and accompanying schedules, detailed herein, are based upon the Base
Case of 0.9 Mtpa run of mine yielding 327.4 kt of Fe-Ni product.

An alternative mine plan and schedule was developed for a higher plant throughput case of
2.7 Mtpa yielding 50.65 Mt Fe-Ni product. This option is referred to in Section 22.

16.1 Geotechnical investigation - summary

The geotechnical data collection programme comprised:

 Geotechnical logging of diamond drill cores from the 12 drillholes from Baião, Pequizeiro
Jacutinga and Oito (three areas) deposits and sampling for geotechnical laboratory
testing.
 HMZ geologists conducted geotechnical logging of 386 m of HQ size diamond core
according to the Snowden logging procedures. All the holes were drilled vertically and
cored from ground surface with depths ranging from 20 m to 40 m.
 Soil particle size distribution and Atterberg limits and rock UCS tests were carried out at
the Engesolo soils laboratory in Brazil as part of the geotechnical investigation
programme.

16.1.1 Engineering geology

The engineering geology is complicated as a result of the varying proportions of limonite,

transition and saprolite zones in the laterite profile. The thicknesses of these materials
change rapidly both laterally and vertically across the deposit sites. The average thicknesses
of the laterite profile in the proposed mining areas lie between 18.3 m to 27.7 m.

The inferred base of weathering lies below the maximum depth of the planned pits. The
majority of the pit slopes will be developed within the laterite profile but occasionally the toe
sections of deeper pit slopes may be developed through highly weathered rock mass.

16.1.2 Ground water

The regional water table generally lies within the saprolite horizon. Clay rich zones can be
erratically developed in the saprolite (common in laterite profiles), and therefore there is
potential to develop perched water tables above the regional water table, within the
weathered profile during the rainy season.

Dewatering will significantly improve mining conditions including trafficability. Although total
depressurisation of clay dominant material zones may not be possible, it is expected that
substantial dewatering may be achievable by pumping from the highly transmissive
weathered/fractured rock mass below the laterite profile.

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16.1.3 Geotechnical model

Principal geotechnical domains have been identified and defined in terms of soil or rock mass
characteristics. These domains are summarised in Table 16.1:

 Typically, residual lateritic clays have formed beneath a hard ferricrete cap. At depth, the
weathering profile consists of rocky saprolite above the fresh ultramafic bedrock.
 The weathering profile above the fresh ultramafic rock mass is highly variable, consisting
of a mixture of weak and harder material that can be classified into three broad
geotechnical domains, namely an upper ferruginous zone, lateritic-clay zone and a basal
ultramafic saprolite zone.
 The lateritic zone can be delineated in to three separate geotechnical domains, based on
their grain size and index properties namely; a limonite domain consisting of Sandy Silty
CLAY (classified as ML and MH on plasticity characteristics), transition domain
consisting of Sandy Clayey SILT (MH) and saprolite domain consisting of Sandy Clayey
SILT (MH). The latter two domains have increased amounts of smectite clays and active
clays. They are expected to deteriorate under wet-dry cycles due to potential swelling
and shrinking.

The rapid changes in material types and the large spacing between the diamond drillholes
used to capture geotechnical information, result in increased uncertainties in the geotechnical
model. Nevertheless, the confidence level of the geotechnical model is considered to be
adequate for the current PFS.

Table 16.1 Summary of geotechnical domains

Geotechnical domain Thickness Strength Description

Top soil: Reddish brown, loose to medium dense
ferruginous gravelly sand with some silt and clay. Organic
Top soil & Ferricrete Soft to med. matter and plant roots present.
Avg. 3 m
(hardcap) strong Ferricrete: Reddish brown, loose to medium dense, mostly
cemented, vuggy ferruginous gravelly sand with some silt
and clay.
Reddish brown to yellowish brown, soft to stiff, sandy
Avg. 9.9 m Very soft to clayey silt with some gravel. PI- avg.-18 (11 to 29); LL-
Limonite
*24 to 45 m stiff avg.-56 (43 to 70); Classed ML and MH. Mostly inactive
clays.
Light green, green and brown colour depending on smectite
Avg. 5.1 m Very soft to content. Soft to stiff, sometimes friable, Sandy Silty Clay.
Transition
*18 to 59 m stiff PI- avg.-45 (19 to 69); LL- avg.-107 (44 to 159); Classed
MH. Mostly normal clays.
Brown to reddish to green, mostly altered serpentine rock.
Saprolite Soft to stiff High in smectite. Fine grained zones classified as sandy
Avg. 8.2 m
and very silty clay; classed MH by plasticity. PI- avg.-55 (23 to 70);
(Earthy saprolite) *28 to 59 m
weak LL- avg.-115 (52 to 150); mostly normal but significant
amount of active clays.
Highly fractured and weathered rock mass, consisting
Weathered and fractured Very weak to
Variable sections of extremely weathered rock. High alteration
rock mass (Rocky saprolite) weak
along fractures. Groundwater aquifer.
Fresh rock variable strong Generally massive serpentinite
*- Maximum thickness range in different deposits

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16.2 Slope stability

Potential modes of instability in the laterite and weathered ultramafic domains forming the
interim and final slopes of both pits will depend on the scale of the slope. The most likely
failure mode in the inter-ramp and/or overall slope scale is likely to be rotational sliding
through the laterite and weak rock mass.

Slope recommendations

Deterministic stability analyses have been undertaken for rotational sliding for batter scale
and overall slope scale. Sensitivity analyses were conducted for different groundwater
conditions. At the current PFS level of study the slopes were designed for a target factor of
safety of 1.2. The slope angles can be adjusted in the next phase of study when the shear
strength parameters for different geotechnical domains are better defined.

Given the weak nature of the materials it is advisable to develop the pit slopes with short
batters. Steeper batter face angles can be achieved with reduced batter heights. Depending
on the choice of batter height for the optimisation of productivity and the prevailing
groundwater conditions, following batter face angles are recommended for design. For the
PFS designs, 80° and 55° batter face angles are recommended for batter heights of 5 m and
10 m respectively as presented in Table 16.2.

Overall design slope angles depend on the slope height and achievable depressurisation. It is
expected that some depressurisation would occur adjacent to the slope hence 39° and 32°
maximum overall slope angles are recommended for slope heights 20 m and 30 m
respectively as presented in Table 16.3.

Table 16.2 Recommended batter configurations under different groundwater

conditions

Batter configuration Low PS Mid PS High PS

Batter height 5m 10m 5m 10m 5m 10m
Face angle 80° 55° 65° 40° 55° NA

Table 16.3 Recommended overall slope angles

20 m high slope 30 m high slope

Slope (°) Some drawdown Some drawdown
No drawdown No drawdown
adjacent to slope adjacent to slope
Design overall slope angle 33° 39° 29° 32°

16.2.1 Waste dump slope design

The waste dumps will consist predominantly of limonite material. The dump stability
assessment indicates that a 19° overall slope over 30 m height will be stable under worst
case conditions. However, due to the uncertainties associated with the adopted shear
strength parameters, the overall slope angle used in the current design; 3H:1V (18.4°) is
endorsed for a 30 m dump height.

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16.2.2 Trafficability

The trafficability assessment indicates that sheeting will be required in the weaker laterite
domains to improve trafficability. The recommended sheeting thicknesses depending on the
type of trucks used are presented in Table 16.4.

Table 16.4 Required sheeting thicknesses

Sheeting thickness requirements

Limonite Transition Earthy Saprolite Rocky Saprolite
Case1 Case 2 Case1 Case 2 Case1 Case 2 Case1 Case2
Truck Type Sheeting Sheeting Sheeting Sheeting Sheeting Sheeting Sheeting Sheeting
thickness thickness thickness thickness thickness thickness thickness thickness
(m) (m) (m) (m) (m) (m) (m) (m)
Cat 735B 0.38 0.41 0.61 0.67 0.72 0.78 0.3 0.32
Cat 740B 0.4 0.44 0.64 0.7 0.75 0.82 0.31 0.34
Cat 772 0.55 0.6 0.88 0.97 1.03 1.13 0.43 0.47
Note: Case1 - 6 monthly major road maintenance, Case 2 - 12 monthly major road maintenance

The unconsolidated pisolitic ferricrete (PF) is considered to provide good sheeting material. It
is recommended to stockpile this material for this purpose.

16.2.3 Geotechnical review of proposed pit design

Design checks for the slopes in each pit have been conducted using the “Factor of Safety –
Overall slope angle” design charts developed using typical sections. To develop the design
charts, sensitivity analyses have been conducted using two depressurisation scenarios:

 Scenario 1 – No water table drawdown occurs, piezometric line intersects and lies on the
slope
 Scenario 2 – Some drawdown occurs adjacent to the slope.

In Figure 16.1 the stability analyses results for a 20m high slope is presented.

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Figure 16.1 Stability anlysis results for a 20m high slope

Typical section - 20m high slope

1.5

1.4

1.3
FOS

1.2 FoS 1.2

WT-drawdown
WT on slope
1.1

0.9
28 30 32 34 36 38 40 42 44 46
Overall Slope Angle

The slope stability analyses results for different slope heights have been used to develop the
design charts as presented in Figure 16.2.

Figure 16.2 Slope height-overall slope angle relationship using typical sections
Araguaia Project
Slope height-Slope angle Relationship (FoS = 1.2)
45

40

35

30
Slope Height (m)

WT-Slope

25
WT-drawdown

20

15

10

5
20 25 30 35 40 45 50
Overall Slope Angle (°)

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Design checks

The stability of the slopes of each pit has been checked using the design charts. The
geology, groundwater conditions and the depressurisation potential have been considered in
this assessment and the applicable Factor of Safety (FoS) for each slope section was
determined.

The majority of the slopes checked have met the target FoS of 1.2 and are in fact
conservatively designed. The few slopes which do not comply with the 1.2 target FoS, also
have FoS values > 1.1, which is acceptable at the PFS level of accuracy3. It is expected that
at the next level of study (feasibility) more detailed assessments will be made on potential
groundwater depressurisation and dewatering.

16.2.4 Recommendations for further work

 The geotechnical models for the Araguaia project targets are of a preliminary nature due
to limited geotechnical drilling. It is recommended to update the geotechnical models in
the next stage of study with:
 More geotechnical drilling in data limited sections
 Detailed definition of the laterite profile including the main material zones and their
sub facies including basic engineering properties
 Detailed definition of the special variability of the laterite profile and sub zone.
 Specialised laboratory tests (e.g. tri axial and direct shear) to better define the shear
strength Parameters of the weaker material zones
 Laboratory compaction and Californian bearing ratio (CBR) tests on ferricrete material to
ascertain suitability as sheeting material
 Study the mine dewatering and depressurisation potential to confirm the design
assumptions.

16.3 Mine planning methodology

All seven pits were designed through a standard process of pit optimisation, waste dump
design and pit design.

Pit optimisations were completed in Whittle 4X software, an industry standard package. This
software determines the economic limits of each deposit after accounting for estimated
revenues and costs associated with mining each resource and waste block and the maximum
allowable slope angles. The results of the pit optimisation were pit shells which were used for
subsequent mine planning.

The pit surfaces were used to derive volumes for waste dump placement. Feedback from all
relevant stakeholders was used to determine a waste disposal concept for each pit, including
both ex-pit and in-pit options. After calculating the volumes of each waste type, waste dumps
were designed to contain this material and minimise required haulage distances as much as
possible.

3
Guidelines for Open pit Slope design, Editors: Reed, J. and Stacey, P. 2010, CSIRO Publishing,
Collingwood, Vic, Australia

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Because all of the deposits are near surface (less than 25 m), it was determined that
comprehensive ramp designs would not be required, consequently smoothed pit shells were
used as the basis for design. However, the major external road networks were explicitly
designed.

Each pit was split into a number of panels for scheduling. These are explained in more detail
in the relevant sections below.

16.4 Mining concept

16.4.1 Excavation

Each of the deposits is proposed to be mined with typical truck and excavator mining.
Snowden is of the opinion that other options (such as scraper/dozer systems or bucketwheel
excavator and similar) are unlikely to give a material improvement in project economics.

Excavation through the lateritic profile typically encounters five rock types (soil, iron cap,
limonite, transition, saprolite). A typical cross section is shown in Figure 16.3.

Figure 16.3 Typical cross section showing rock types

Soil

Soil is typically pushed by a dozer. An excavator is used to load it into trucks. Trucks then
haul the soil to the appropriate stockpiles for later use on rehabilitation, or possibly direct to
active rehabilitation areas. At the dump sites, other dozers may be used to arrange and
manage the stockpiles.

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Iron cap (ferricrete)

The iron cap, which is immediately below the soil, is brittle. Once the cap is fractured and
penetrated, it can be readily dug. It is assumed that the cap will successfully be broken by
ripping and/or by high break-out force hydraulic excavators. Beneath the cap, there is often a
more granular unconsolidated pisolitic iron rich material. This can be excavated with the iron
cap. The iron rich layer averages 2 m thick with a maximum of about 5 m. It closely follows
the geomorphology of the land surface.

The excavator and trucks can traffic directly on the iron cap which comfortably supports the
machines. Hence there is little required road works. The excavator operator can readily see
the contact between the iron material and the underlying limonitic clays.

The unconsolidated pisolitic ferricrete will be used as construction material. It will often be
hauled directly to a construction site such as platforms, road ways, and water control
embankments. If there is any surplus it will be stockpiled for later construction use. The
pisolitic ferricrete may require primary crushing prior to use as a roadway material.

Limonite

The next layer in the profile is a limonite rich clay. This material typically increases in nickel
grade and water content with depth. This material is freely dug with an excavator. The
limonite layer at Araguaia averages about 4 m in depth.

While the top of the limonite may be marginally trafficable with machinery, it is rarely possible
towards the bottom. Accordingly, sheeted ‘finger’ roads will be required (see Section 16.4.2).
Trucks will travel to the face on these finger roads. Generally the loading unit will operate
from the bench above (4 m above) and load into the trucks. In some situation dozers will be
employed to push material to the loading units.

The lower surface of the limonite is usually visually recognisable. The grade boundary and
limonite/transition boundary will require moderately selective mining methods. The limonite
grade boundary is smooth and gradational and thus diluting materials taken from above the
grade boundary will only be slightly below the cut-off grade. The lower contact boundary
against the transition material will not negatively affect the nickel grades (rather it will improve
them) but it will increase the limonite grades in MgO and SiO2. This will be monitored closely
as it may cause blending problems in the feed preparation to the plant.

Transition

Transition is practically all ore grade. It averages 3 m thickness up to a maximum of 5 m. The

transition lower contact pinches and swells into the saprolite, and thus does not appear
everywhere. Low spots are generally where ground water concentrates and are thus very
wet.

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Transition has a unique chemistry and will be carefully separated from the other ore types
prior being fed to the plant. While the contact with the overlying limonite is fairly clear, the
lower contact with saprolite is more gradational. However, due to its relatively thin nature,
transition is expected to mix with its neighbouring rock types during mining. Selective mining
of the transition will be undertaken to control the Fe, MgO, SiO2 and other chemical
concentrations of the process feed. The nickel concentration of the limonite (above) and the
saprolite (below) is often similar at the respective transition boundary. Thus, there will be
insignificant nickel dilution. However, the other elements often change over a short vertical
interval and are of greater concern from a dilution perspective. It is inevitable that some
transition will report to the other ore streams (limonite and saprolite) and vice versa. This has
been accommodated in mine planning through the re-blocking of the grades at these
boundaries.

Transition material is generally of high water content and not trafficable without sheeting.
Accordingly, in most cases transition will be mined predominantly from the bottom limonite
bench. This implies that the excavator is reaching down and removing the last of the limonite
and then the transition from more or less the same position. Where mining downwards from
the last limonite bench is not safe or practical, it will be necessary to establish finger roads
and bench access just below the transition in the top levels of the saprolite. The excavator
will then be scraping down the face and loading trucks on the same level. Dozers will often
be utilised to help feed the loading unit and clean off the limonite and transition layers
appropriately.

Saprolite

Saprolite (SAP) is nearly all ore and averages 4 m in thickness (to the economic pit floor).
However the floor (which is the pit bottom) is defined as a nickel cut-off boundary and, in
some instances, reaches the bedrock contact. The nature of saprolite is a variable mix of
particle sizes from fines to larger rocks. The presence of these rocks increases with depth
and is captured in the drill logs differentiating between “earthy saprolite”, which contains more
clays, and “rocky saprolite” which contains less clays. The saprolite has very high water
content.

Saprolite will be mined separately due to its particular chemistry. The MgO content of the
plant feed is largely controlled by the saprolite component.

Saprolite will be mined in a similar manner to the limonite with finger roads established on
4 m benches.

In some areas, the economic pit outline approaches the bedrock. The final floor will be a
combination of Ni grade cut-off limit and bedrock (where the SAP is still above cut-off at the
contact). The floor will be an uneven non-planar surface possibly with some pinnacles and
troughs. This may pose operational difficulties with access and water management. Overall,
the floors of the pits have a gradient. As a general philosophy, mining will advance uphill so
as to allow the machinery to work away from the low point where water will collect.

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At the time of this report, the exploration drilling has not encountered significant barren “core
stones” or pinnacles typical of some other nickel laterite deposits. These tend to increase
towards the bedrock interface. Similarly, high grade nickel occurrences in thin cracks and
altered faces of rocks near the bedrock contact have not been seen. Boulder sized core
stones and pinnacles, should they occur, can cause a number of operating challenges from
mining to processing. Test pits down to the bedrock surface, will need to be completed in
future studies to confirm that these features are not present, and, if they are identified,
incorporated in future mining and processing strategies and plans.

16.4.2 Trafficability

Snowden has completed a preliminary assessment of the trafficability of the materials and
suggested road construction guidelines based on the geotechnical properties of these
materials (See Section 16.2.2). Sheeting quantities have been estimated using an average
sheeting thickness of 0.4 m for a 40 t capacity articulated truck. Mining slices of
approximately 25 m wide have been assumed based on the dig envelope of an 48 t
excavator. With a finger road width of 7 m in each mining slice of 25 m, this equates to 28%
of the bench surface being sheeted. (Figure 16.4).

Figure 16.4 Typically sheeting requirement

For a bench height of 4 m, the mass of sheeting is approximately an extra 6% over and
above the mass of the bench.

Sheeting will be sourced from the unconsolidated pisolitic ferricrete “iron cap” which is
present above the limonite over much of the deposit. Analysis of drillhole logging shows an
average thickness of this material (within the economic pits) to vary between 0.9 m and 2.8 m
(Table 7.2).

Given the pits are less than 20 m deep (on average) it was determined that the amount of
pisolitic ferricrete material available is sufficient to supply the sheeting requirements of the
mine and provide some excess material for aiding in construction of main haulage roads and
improving stockpile and waste dump trafficability.

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16.4.3 Ore transport

Ore will be transferred from each deposit to a near mine stockpile. There are four near mine
stockpiles associated with each of the mining zones. These are listed in Table 16.5. Ore is
hauled from these stockpiles via highway trucks to the run of mine (ROM) facility, located
near the plant.

Table 16.5 Mining zones

Mining Zone Deposits

Vila Oito zone Vila Oito East, Vila Oito, Vila Oito West
Jacutinga zone Jacutinga
Pequizeiro zone Pequizeiro, Pequizeiro West
Baião zone Baião

Ore will be stockpiled according to rock type (limonite, transition and saprolite) and nickel
grade (mineralised waste, low grade and high grade). The classification system is shown in
Table 16.6.

Table 16.6 Ore grade bins

4
Mineralised Waste Low Grade High Grade
Rock Type
(MW) (LG) (HG)
Limonite >0.8% -
Transition 0.8% - 1.4% - >1.4%
Saprolite 0.8% - 1.1% 1.1% - 1.4% >1.4%

There is a relatively strong visual differentiation of the various rock types which will aid in
grade control. Grade control drilling (on a 12.5 m by 12.5 m pattern) will be used to provide
vertical grade differentiation between mineralised waste, low grade and high grade.
Additionally, this will assist in determining the economic depth of the pit.

Rock type is also used to control the non-nickel chemistry of the ore (Fe, MgO, SiO2, Al2O3).
Piles for each rock type will build up (and be homogenised through strategic dumping and
dozing) over the course of a month or more to reduce the variability of the chemistry
contained within each pile. A record of the average grade of the pile is maintained for later
blending. When the pile is closed off it is available for ore haulage to the ROM facility.

The high grade stockpiles will typically be retained for a period of less than a quarter. Low
grade stockpiles may remain for up to 20 years. Mineralised waste is not processed in this
mine plan although may be considered for processing after the low grade stockpiles are
depleted.

4
All Inferred Resources above 0.8% Ni are treated as mineralised waste.

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A ROM shed will be built at the process facility where ore will be dumped and dozed into
finger piles for each rock type in order to homogenise it at the appropriate ratio prior to
loading into the grizzly. The possibility of direct tipping of some material may be considered
during operations but has been excluded from this study. If prolonged rainy periods are
experienced, limiting the haulage of material to the facility, it may be necessary to draw from
the nearby Pequizeiro mine stockpiles during this time to maintain feed.

Some small stocks of specific blend materials (high iron, low iron etc.) will be stored in piles
near the ROM facility to allow the plant some flexibility to manage variations in grade that will
inevitably occur.

16.4.4 Waste disposal

Waste rock, (defined as nickel grade less than 0.8%), is disposed in waste dumps and back
into the mined out pits. Each mining area has a waste dump. Snowden has applied a pit
backfill factor of 35% of the mass. This is based on:

 Initial mining: It is required to mine out some of the pit to provide space to backfill into. In
the meantime waste needs to be stored externally.
 Scheduling logistics: In order to mine the highest grades first to improve the project
economics, mining takes place from a number of disjointed separated areas. Thus there
might not be a simple path from the waste excavation face to the nearest area to backfill
in the pit
 Sterilisation: there remains a significant amount of the pit floor that contains mineralised
material that may be mined later. Placing waste on top of these areas reduces the
potential viability of this option, thus reducing the potential life of the operation (and the
flow on to local jobs).

The 35% factor mitigates these risks by allowing for the largest footprint for the operation. It is
likely that the actual percentage backfilled is higher and the external waste footprints are
smaller.

It is not proposed to re-handle all the external waste dump material back into the pits at the
end of the mine life.

High quality access roads and drainage will be maintained for ex-pit- waste dumps
throughout the mine life. Waste will be pushed to the middle of cells (not left to accumulate by
the finger roads) to eliminate ponding during the wet season. Additional dozing time has been
allocated for these activities.

16.5 Modifying factors

The parameters used for Mineral Reserve determination are provided below. These are more
conservative than those used in the economic evaluation. In this way the reserve is relatively
robust with respect to fluctuations in costs, recoveries, and commodity prices.

16.5.1 Resource model

Snowden used the resource models shown in Table 14.11. Details on these models are
provided in Section 14.

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16.5.2 Geotechnical parameters

A 35° overall wall angle was applied for pit optimisation. The derivation of this was as a
consequence of geotechnical drilling, and analysis of typical pit wall lithologies. (Section 16.1)

16.5.3 Mining parameters

A mining cost of USD3/dmt for waste and USD9/dmt for ore (incorporating stockpile
reclamation) was applied for optimisation.

16.5.4 Processing parameters

Based on preliminary modelling, a processing cost of USD127.8/dmt for optimisation and a

nickel recovery of 93%, which incorporates processing, smelting and refining. This is applied
for all material processed. There is no screening of ore at the mine, thus all material is feed
for processing. Detail on the testwork and process designs that support these assumptions
are supplied in Section 13.

A range of process grade constraints for various ore constituents was used for the Base
Case:

 Nickel grade greater than 1.2%

 Iron grade between 15.0% and 16.5%
 Al2O3 grade between 4.0% and 5.5%
 SiO2/MgO ratio between 2.2 and 2.6.

These constraints were determined as part of the process design which is detailed in
Section 17.

16.5.5 Sales parameters

The processing option for this study is RKEF which produces a refined ferronickel alloy.
Consequently, a value of USD15,000/t of recovered nickel was used for the optimisation.
This price incorporates:

 nickel spot price of USD 19,000 / tonne flat for LOM

 iron spot price of USD 150 / tonne flat for LOM
 Fe-Ni ratio of 20.3% Ni and 79.7% Fe
 royalties for the combined Fe-Ni product is 2% of the costs (up to the furnace)
 selling costs - there are no selling costs as product is being sold at the mine gate

16.5.6 Administration costs

A cost of USD11.20/t dry feed was applied for administration. This is equivalent to
USD10.0 Mpa.

16.5.7 Cut-off grades

Using the above assumptions, the marginal cut-off grade for the project is calculated to be
1.04% Ni. This grade was not applied for mine planning due to the following reasons:

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The overall ore feed is off-specification for the plant. In particular, the overall iron grade is too
high. Therefore, the higher iron grade rock types (limonite and transition) had elevated cut-
off grades applied to reduce their impact on the average iron grades whilst maintaining the
highest possible grade bring the overall grade to within specification.

The mine life is long and impacts negatively on net present value. Applying a higher cut-off
grade reduces the footprint of the pit, increases the average grade and avoids mining lower
grade material that would not be processed for a number of years.

Through iteration Snowden determined that the appropriate cut-off grades to meet the grade
specifications (including minimum nickel feed grade) were:

 Limonite – not processed

 Transition – 1.4% Ni
 Saprolite – 1.4% Ni.

These cut-off grades were applied in the pit optimisation and scheduling, lower grade
Saprolite (>1.1% Ni) was processed at the end of the mine life.

16.6 Mining model

Each of the resource models had parent cell size of 25 mE by 25 mN by 2 mRL with a
minimum subcell of 6.25 mE by 6.25 mN by 0.5 mRL.

To apply dilution Snowden re-blocked the models to the parent cell size of 25 mE by 25 mN
by 2 mRL. This method mimics the natural mixing processes of mining and allows for local
dilution of all elements, which is important for the process feed blending. The resultant mining
mineral inventory is shown in Table 16.7.

Table 16.7 Reblocked Indicated Resource summary at 1% Ni cut-off (Transition and

Saprolite material only)

Dry Mass Ni Fe Al2O3 SiO2/

Deposit
(kt) (%) (%) (%) MgO
Baião 15,194 1.30 22.2 6.06 2.48
Pequizeiro 18,077 1.46 16.5 5.75 2.31
Pequizeiro West 2,500 1.23 19.6 5.13 4.62
Jacutinga 2,513 1.43 18.5 3.80 2.33
Vila Oito East 7,474 1.31 16.7 3.97 2.30
Vila Oito 10,528 1.34 17.2 4.09 1.99
Vila Oito West 6,252 1.28 23.3 5.14 3.14
Total 62,537 1.35 18.9 5.17 2.40
Comparison to raw model at 1% Ni cut-off (3.4%) (1.3%) 2.8% 3.6% 0.3%

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The re-blocking procedure appears to reduce the material above cut-off but this is simply
associated with decreasing block grade before applying the cut-off grade. Figure 16.5 shows
that for a common tonnage the nickel grade is reduced by about 4% as a result of re-blocking
at the cut-off grade range of interest, indicating effective dilution of approximately 4% on
grade (after considering the grade of nearby blocks). Snowden deems this to be appropriate
given that:

The low strip ratio means that there is not a high incidence of waste blocks adjacent to ore
blocks. The majority of dilution is likely to occur at the rock type boundaries.

The grade of diluting blocks is likely to be similar to the grade of the ore blocks i.e. there may
be higher than 4% dilution but it has grade that is much higher than zero which minimises the
impact on recovered grade.

Figure 16.5 Grade-tonnage curve comparison for nickel grade

Note: data labels indicate nickel grade cut-off

Figure 16.4 to Figure 16.8 show the impact of re-blocking on other important elements and
ratios. To summarise the important outcomes:

 Iron and Al2O3 grade is increased as high iron/Al2O3, high grade limonite dilution is
included at the limonite/transition boundary
 SiO2/MgO ratio is largely unaffected.

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Figure 16.6 Grade-tonnage curve comparison for iron grade

Note: data labels indicate nickel grade cut-off

Figure 16.7 Grade-tonnage curve comparison for Al2O3 grade

Note: data labels indicate nickel grade cut-off

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Figure 16.8 Grade-tonnage curve comparison for SiO2/MgO ratio

Note: data labels indicate nickel grade cut-off

No further mining recovery or grade factors were applied for mine planning.

For pit optimisation, this model was then split into 5 mE by 5 mN by 2 mRL blocks (or the
same grade) so that the selected wall angles could be achieved in the optimisation.

16.7 Pit design

The pit design used smoothed pit shells from the pit optimisation (Section 15.3), altered for
the removal of small satellite pits. This was deemed by Snowden to be appropriate for pits
with no ramp requirements. It is likely that the actual pit floor will be dictated by operating
conditions as they are mined, although the quantities mined from each will be similar to those
above.

The reconciliation of volumes and value between the pit shell selected for design and the
design itself is shown in Table 16.8. This reconciliation is deemed to be appropriate.

Table 16.8 Design inventory comparison

Item Design Pit Shell Difference (%)

Total pit dry mass (kt) 81,166 83,676 (3.0%)
Waste dry mass (kt) 61,631 63,800 (3.4%)
Feed dry mass (kt) 19,583 19,881 (1.5%)
Ni (%) 1.69 1.69 (0.0%)
Strip ratio (w:o) 3.14 3.21 (2.1%)
Cash flow ($M) 1,542 2,955 (0.7%)

For scheduling, the designs were split into mining panels. These panels are shown for each
deposit in Figure 16.9 to Figure 16.15, with key statistics reported in Table 16.8 to
Table 16.16.

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Figure 16.9 Baião mining panels

Table 16.9 Baião mining panel summary

Panel Waste
Strip Ore Dry Ni Fe Al2O3
Size Dry Dry SiO2 /
Panel Ratio Mass
Mass Mass (%) (%) (%) MgO
(w:o) (kt)
(kt) (kt)
1 2,160 1,625 3.04 534 1.60 18.0 4.66 2.37
2 354 290 4.56 64 1.49 16.7 4.62 2.64
3 4,033 3,094 3.30 939 1.67 17.2 4.42 2.23
4 2,131 1,814 5.72 317 1.56 15.1 4.84 2.97
5 655 539 4.67 115 1.48 16.7 5.75 2.93
6 1,991 1,619 4.35 372 1.76 15.0 3.56 2.53
7 1,142 941 4.67 202 1.55 20.2 4.76 3.39
8 3,091 2,402 3.48 690 1.85 17.8 4.70 2.84
9 418 351 5.24 67 1.59 24.1 7.97 1.81
10 1,234 1,008 4.47 225 1.54 19.0 4.14 2.83
Total 17,208 13,683 3.88 3,524 1.67 17.4 4.58 2.56

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Figure 16.10 Pequizeiro mining panels

Table 16.10 Pequizeiro mining panel summary

Panel Size Waste Dry Strip Ratio Ore Dry Ni Fe Al2O3 SiO2 /
Panel
Dry Mass (kt) Mass (kt) (w:o) Mass (kt) (%) (%) (%) MgO
1 5,523 4,161 3.05 1,363 1.76 17.7 6.65 3.17
2 4,524 2,671 1.44 1,853 1.73 15.1 6.05 2.14
3 513 337 1.91 177 1.53 16.9 5.96 2.46
4 6,203 4,097 1.94 2,107 1.72 14.9 5.38 3.72
5 6,329 4,114 1.86 2,215 1.70 15.0 3.88 2.04
6 212 114 1.17 98 1.44 14.7 4.71 2.09
7 4,289 2,806 1.89 1,483 1.58 16.0 5.63 2.45
Total 27,594 18,299 1.97 9,295 1.70 15.6 5.39 2.56

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Figure 16.11 Pequizeiro West mining panels

Table 16.11 Pequizeiro West mining panel summary

Panel Size Waste Dry Strip Ratio Ore Dry Ni Fe Al2O3 SiO2 /
Panel
Dry Mass (kt) Mass (kt) (w:o) Mass (kt) (%) (%) (%) MgO
1 1,447 1,129 3.55 318 1.57 20.2 4.55 4.04
3 527 465 7.55 62 1.56 21.6 5.02 6.30
Total 1,973 1,594 4.20 379 1.57 20.4 4.63 4.29

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Figure 16.12 Jacutinga mining panels

Table 16.12 Jacutinga mining panel summary

Panel Size Waste Dry Strip Ratio Ore Dry Ni Fe Al2O3 SiO2 /
Panel
Dry Mass (kt) Mass (kt) (w:o) Mass (kt) (%) (%) (%) MgO
1 1,544 938 1.55 605 1.86 14.0 2.76 2.06
2 1,395 1,043 2.96 352 1.74 17.1 3.31 2.22
Total 2,939 1,982 2.07 957 1.81 15.1 2.96 2.11

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Figure 16.13 Vila Oito East mining panels

Table 16.13 Vila Oito East mining panel summary

Panel Size Waste Dry Strip Ratio Ore Dry Ni Fe Al2O3 SiO2 /
Panel
Dry Mass (kt) Mass (kt) (w:o) Mass (kt) (%) (%) (%) MgO
1 1,786 1,380 3.40 406 1.58 19.4 4.04 2.39
2 2,525 2,109 5.08 416 1.53 18.8 3.81 2.59
3 1,716 1,467 5.89 249 1.56 17.6 3.31 3.07
4 1,991 1,508 3.12 483 1.58 13.8 2.65 1.97
5 1,524 997 1.89 527 1.49 13.4 5.40 2.27
6 1,499 1,131 3.07 368 1.55 14.5 2.58 1.70
Total 11,041 8,592 3.51 2,449 1.55 16.0 3.73 2.22

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Figure 16.14 Vila Oito mining panels

Table 16.14 Vila Oito mining panel summary

Panel Size
Waste Dry Strip Ratio Ore Dry Ni Fe Al2O3 SiO2 /
Panel Dry Mass
Mass (kt) (w:o) Mass (kt) (%) (%) (%) MgO
(kt)
2 946 792 5.15 154 1.93 19.0 4.87 2.87
6 3,460 2,662 3.34 798 1.51 12.1 3.85 1.85
7 1,278 1,022 4.00 256 1.70 16.8 4.16 2.01
8 752 616 4.53 136 1.59 20.3 3.66 1.91
9 1,454 1,151 3.80 303 1.41 13.6 3.47 1.78
10 7,065 5,133 2.66 1,933 1.68 14.8 3.40 2.17
Total 14,956 11,377 3.18 3,579 1.63 14.6 3.63 2.05

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Figure 16.15 Vila Oito West mining panels

Table 16.15 Vila Oito West mining panel summary

Panel Size Waste Dry Strip Ratio Ore Dry Ni Fe Al2O3 SiO2 /
Panel
Dry Mass (kt) Mass (kt) (w:o) Mass (kt) (%) (%) (%) MgO
1 518 470 9.97 47 1.54 20.2 4.27 3.91
2 2,154 1,828 5.61 326 1.64 20.1 5.54 4.01
3 665 544 4.49 121 1.70 20.0 3.79 3.97
4 968 684 2.40 285 1.58 18.9 3.41 3.44
5 174 148 5.64 26 1.47 17.7 3.19 3.88
6 100 90 8.93 10 1.50 22.4 3.62 3.45
7 383 308 4.13 75 1.60 16.9 3.09 1.85
8 284 215 3.08 70 1.42 18.3 4.31 2.35
9 298 236 3.82 62 1.51 19.8 4.03 2.55
Total 5,544 4,523 4.43 1,021 1.59 19.3 4.25 3.32

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16.9 Mineral Reserve

A Probable Mineral Reserve of 21,204 kt (dry) at 1.66% Ni was estimated. The detailed
breakdown of the Mineral Reserve by deposit is presented in Table 16.16.

Table 16.16 Probable Mineral Reserve

Deposit Ore Dry Mass (kt) Ni (%) Fe (%) Al2O3 (%) SiO2/MgO
BAI 3,524 1.67 17.41 4.58 2.56
PEQ 9,295 1.70 15.58 5.39 2.56
PQW 379 1.57 20.38 4.63 4.29
JAC 957 1.81 15.13 2.96 2.11
VOE 2,449 1.55 15.97 3.73 2.22
VOI 3,579 1.63 14.61 3.63 2.05
VOW 1,021 1.59 19.35 4.25 3.32
Total 21,204 1.66 16.01 4.59 2.44

This Mineral Reserve is calculated on the basis of currently available information. Snowden
strongly recommends a test pit(s) to assess in-situ grade reconciliation to the resource model,
incidence of barren rocks in the saprolite, mining recovery and mining dilution.

16.10 Site layout

The overall mining configuration layout is shown in Figure 16.16.

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Figure 16.16 Overall mining configuration

16.10.1 Basis

The goals of the layout are to:

 Minimise haulage cost through minimised haul distances.

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 Minimise the disturbance footprint and thus associated restoration and water
management catchment basin areas.
 Minimise the number of disturbed drainage basins.
 Minimise impingement on forest zones.
 Facilitate the safe and efficient movement of material between the various sources and
destinations at the appropriate time.
 In general the dump heights have been minimised creating a larger footprint. This
reduces uphill haul, and is expected to reduce restoration costs, enhances dump
stability, and in the case of shared dumps, reduces travel distance from respective pits.

The key design assumptions applied are:

 Material allocations as shown in Table 16.17.

 For the waste dumps Snowden has assumed that 65% of the mined waste will be placed
in the external ex-pit dumps with the balance (35%) back filled into the pit excavation
(See Section 16.4.4).
 Dump slopes are modelled with a single uniform slope of 3H:1V (18.4°).
 The in-situ block model densities averages have been reduced for swell in the dumps by
0% for top soil, and 18% for all other rock types in line with swell factors seen in other
laterite operations. This assumption should be confirmed at the next level of study.

Both top soil and sub-soil are removed and stockpiled from over the pits. Only topsoil is
removed from the waste dumps. The total thickness of soil (topsoil and subsoil) within each
of the pits (as measured from the drillhole database logging) ranges between 0.6 m and 1.6
m for the deposits. The split of subsoil and topsoil has not been modelled. Therefore, a 0.4
m topsoil layer was assumed but this should be confirmed in subsequent studies.

16.10.2 Vila Oito zone

The Vila Oito zone encompasses zones VOI, VOE and VOW. The proposed layout is shown
in Figure 16.17. Care has been taken to site the facility so as to largely avoid the forested
zones.

Figure 16.17 Vila Oito zone layout

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The waste and MW (mineralised waste) for VOI and VOE areas are combined in a common
dump while VOW has its own dumps. A single common LG/HG stockpile is planned for this
zone. A ROM platform is shown integrated with the ore stockpile alongside the haul road.
Active ROM materials will be homogenised/blended between pits and transferred into the on-
highway trucks for transport to the plant. Soil is stockpiled in two areas.

The deposits are located near the crests of the hills on quasi-plateaus. The creeks have
incised these plateaus and eroded away the mineral deposits. Hence, the pits tend to be
near the top of the drainage basins. The dumps and stockpiles are placed laterally or
downstream of the pits such that the entire disturbed area drains into a few catchment pond
locations. The proposed layout avoids interfering with the drainages to the north. All
drainage is to the south where water management controls will be located.

16.10.3 Jacutinga zone

This small Jacutinga zone is located between the North area and the plant site
(Figure 16.18). It has its own waste dump and a 1 Mm3 mineralised waste (MW) stockpile as
shown.

Drainage is to the SE and the entire disturbed area can be controlled with water management
structures south of the dumps.

Figure 16.18 Jacintuga zone layout

16.10.4 Pequizeiro zone

The Pequizeiro zone comprises the large mining zones of PEQ near the plant site
(Figure 16.19) as well as the smaller PQW deposit. Each pit has its own waste dump but
share common ore stockpiles. The HG stockpile area is oversized relative to the current
mine plan volumes. The extra space can be used for blending and homogenising the ores
from the various zones. MW from the central pits is accommodated in the large PEQ waste
dump. Space is limited at the PQW zone due to the slag dump occupying much of the
available area, hence MW from PQW is accommodated in the PEQ dump site. The PEQ
zone is constrained by a forest area along the north eastern flank of the pit.

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Figure 16.19 Pequizeiro zone layout

The PEQ pit and dumps are located near the headwaters of a northeast draining catchment
(towards the forest). There is a potential sediment pond site in the gully east of the waste
dump within an existing cleared area. The PQW area will be designed to drain southeast
towards the plant where there will be sediment control structures in the catchments. The
PQW waste dump drainage will be kept separate from the slag drainage.

16.10.5 Baião zone

The Baião zone comprises the BAI pit (Figure 16.20). This area is heavily impacted by the
sterilisation zone. The waste dump is located northeast of the currently planned pit.
Stockpile ore is assumed to be trucked to the central area stockpiles when required.
Although this stockpile is shown overlaying potential ore zones, it is assumed that the
stockpile can be reclaimed before the ore is recovered. MW is shown stockpiled adjacent to
the waste dump.

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Figure 16.20 Baião zone layout

Drainage out of the pit and waste dump can be controlled and collected in the creek to the
south. However, if the pit were to expand, the pit and potential dump sites would span
multiple creeks and require extra water management controls.

16.10.6 Stockpile and dump capacities

Stockpile and waste dump design capacities are shown in Table 16.17.

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Table 16.17 Dump capacities (m3)

3 3
Required volume (Mm ) Design volume (Mm )
Vila Oito zone
VOI / VOE waste 7.9 7.8
VOI / VOE MW 2.7 2.8
HG/LG stockpile 1.7 2.2
Topsoil VOE 1.7 1.7
Topsoil VOI/VOW 1.0 1.3
VOW MW 1.9 2.7
VOW waste 1.4 1.4
Jacutinga zone
JAC stockpile 0.6 0.6
JAC MW 0.7 0.8
JAC waste 0.4 0.5
JAC soil 0.6 0.6
Baiao zone
BAI stockpile 1.1 1.5
BAI soil 4.7 4.7
BAI waste 2.9 2.9
BAI MW 0.4 0.5
Pequizeiro zone
PEQ waste / MW 9.9 10.1
LG stockpile 0.5 0.4
PEQ soil 1.1 1.1
HG stockpile 1.1 2.0
PQW soil 0.1 0.3
PQW waste 0.7 0.7

PEQ stockpiles are oversized as it is possible that a certain volume of additional material may
be added from other mining areas. The stockpiles have not been modelled into separate
‘fingers’ by rock type or grade bins at this time. It is assumed that such divisions would be
achieved by dumping in distinct flagged areas within the overall dump footprint. The volumes
shown are the maximum LOM storage requirements and in operations, the actual volume on
any stockpile would be less.

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16.11 Trunk roads

The trunk roads are shown in Figure 16.16. The layout links all the zones to the plant. The
roads mostly follow the higher ridge areas and avoid the gullies and the forests. They do not
exceed 10% grade. In general, the terrain is flat and cuts/fills are minor (with the exception of
the Southern trunk road which has a 60m elevation drop in gullies). Some culverts will be
required. The trunk road has been designed at 20 m wide. This is more than adequate for
two way on–highway truck traffic. However off-highway trucks may use the route and there
may be other services (power lines) along the right of way. At this time it is assumed that
highway trucks will be used to haul ore to the plant area from the Baião, Jacutinga and north
zone stockpiles. All other haulage is to be undertaken by off-highway trucks.

16.12 Mining schedule

16.12.1 Basis

Software

The mining schedule was completed in Snowden’s Evaluator scheduling software, which is a
Mixed Integer Linear programming based tool. It is driven by the maximisation of net present
value in the presence of physical quantity and grade constraints.

Resolution

The project was scheduled on the basis of panels. These panels are shown in Section 1.4.
Within each panel, a number of “bins” are generated on the basis of rock type and nickel
grade. Each bin within a panel is assumed to be consumed at the same rate.

Time horizons

The production schedule was completed in quarterly increments over the life of the project.

Constraints

Processing

A number of processing constraints were applied to the schedule:

 A ramp up period of 13 months has been used

 Quarter 1 – 124 ktpq
 Quarter 2 – 171 ktpq
 Quarter 3 – 203 ktpq
 Quarter 4 – 216 ktpq
 Quarter 5 – 223 ktpq
 Quarter 6 onwards – 225 ktpq.
 Grade constraints
 Fe grade between 15.0% and 16.5%
 Al2O3 grade between 4.0% and 5.5%
 SiO2/MgO ratio between 2.2 and 2.6.

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Mining

As the project is driven by processing requirements, no hard mining constraints were applied.
The expansive, shallow geometry is such that there is flexibility for both mining sequence and
mining rate. Constraints were used to smooth:

 Overall mining rate.

 Mining rate in each mining zone.
 Ore haulage from the outlying deposits.

The mining of Baião was deferred until Year 3 and Jacutinga, Vila Oito East, Vila Oito, and
Vila Oito West were deferred until Year 5 to allow for roads and infrastructure to be put in
place over time and defer expenditure on this infrastructure to a period when positive cash
flows are being generated.

An additional goal was set to minimise the number of simultaneously active mining pits and
panels.

Within these rules, flexibility was provided as to how to distribute capacity amongst the pits
over time.

There were no constraints imposed to limit the size of low grade stockpiles.

Schedule progression

A visual representation of the mining advance in each pit is shown in Figure 16.21 to
Figure 16.27.

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Figure 16.21 Baião mining advance

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Figure 16.22 Pequizeiro mining advance

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Figure 16.23 Pequizeiro West mining advance

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Figure 16.24 Jacutinga Mining Advance

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Figure 16.25 Vila Oito East mining advance

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Figure 16.26 Vila Oito mining advance

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Figure 16.27 Vila Oito West mining advance

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16.13 Schedule report

16.13.1 Mining schedule

The overall Base Case open pit mining schedule is shown in Figure 16.28. Early mining
focuses on Pequizeiro and Baião. When the outlying deposits come online the mining rate is
split between each deposit and varies over time on a quarterly basis.

Figure 16.28 Mining schedule by deposit

Throughout mining the maximum number of active pits in any quarter is five (Figure 16.29).
However, during most of the life the number of active pits is usually three or four. Thus, the
schedule provides for minimal movement of excavators within quarters.

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Figure 16.29 Simultaneously active pits

The waste is broken into pure waste and mineralised waste. Mineralised waste is any
material not processed that is above 0.8% Ni. This includes Inferred Resources. A schedule
breakdown of the waste is provided in Figure 16.30.

Figure 16.30 Waste schedule

A summary of the overall mining quantities is shown in Table 16.18.

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Table 16.18 Base Case mining schedule by deposit (dry mass ore and waste)

Year BAI (kt) PEQ (kt) PQW (kt) JAC (kt) VOE (kt) VOI (kt) VOW (kt) Total (kt)
1 - 3,701 111 - - - - 3,812
2 1,572 1,408 - - - - - 2,981
3 1,529 1,452 - - - - - 2,981
4 1,238 901 - 1,228 - 191 - 3,559
5 740 1,388 - 316 - 1,124 - 3,567
6 242 1,849 - - 63 1,412 - 3,567
7 320 1,772 - - - 1,475 - 3,567
8 302 1,790 - - - 1,475 - 3,567
9 798 1,275 - 107 - 1,387 - 3,567
10 872 1,202 - 26 15 1,453 - 3,567
11 1,014 945 - 647 187 772 - 3,567
12 397 1,529 - 615 716 - 298 3,555
13 15 1,911 - - 1,034 - 260 3,220
14 15 1,692 - - 960 - 553 3,220
15 612 906 - - 730 - 971 3,220
16 745 730 43 - 645 - 1,057 3,220
17 69 1,421 28 - 839 2 860 3,220
18 749 763 99 - 415 1,021 172 3,220
19 44 958 702 - 1,110 405 - 3,220
20 1,361 - 344 - 165 1,350 - 3,220
21 1,584 - 120 - - 1,434 81 3,220
21 1,328 - 376 - 651 76 603 3,035
21 1,434 - 150 - 473 843 73 2,973
21 211 - - - 1,589 434 379 2,613
15 - - - 1,448 100 239 1,802
Total 17,208 27,594 1,973 2,939 11,041 14,956 5,544 81,256

16.13.2 Ore mining schedule

Ore is mined at rates above the specified processing capacity (Figure 16.31). This is to
provide the highest grade/best blend material possible whilst mining through less desirable
material to expose it. This is demonstrated in Figure 16.32 where, in many of the periods, the
mined grades are outside process specification. This indicates that material is being
stockpiled for later blending.

Low grade ore material is stockpiled for processing at the end of the project life. The
maximum stockpile size (dry mass) gets to 1.5 Mt (Figure 16.33). The largest stockpiles are
built in the Vila Oito zone.

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Figure 16.31 Ore mining schedule

Figure 16.32 Ore mining grades

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Figure 16.33 Stockpile schedule

16.13.3 Processing schedule

The designed processing capacity is met in all periods until the end of the project
(Figure 16.34). The feed is quite evenly split between transition and saprolite rock types.
Limonite contributes a small amount to the feed but could be considered opportunistic feed
when the iron grades of other material processed during the period is below specification.

Figure 16.34 Processing schedule by rock type

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The process feed schedule maintains grades within the specified tolerances in each quarter
(Figure 16.35). However, there are a number of quarters where the lower or upper
thresholds are met for each element or ratio, particularly iron grades which are at maximum
levels in every quarter. Tight operational controls will need to be established to ensure
compliance with targets over shorter time intervals.

Figure 16.35 Processing grade schedule

The annual processing schedule is presented in Table 16.19.

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Table 16.19 Processing schedule

Year Dry Feed (kt) Ni (%) Fe (%) Al2O3 (%) SiO2/MgO

1 714 1.60 16.06 5.50 2.29
2 898 1.82 16.50 5.50 2.35
3 900 1.79 16.08 5.50 2.39
4 900 1.86 15.40 4.40 2.36
5 900 1.82 16.24 5.03 2.49
6 900 1.76 15.61 5.33 2.50
7 900 1.76 15.17 5.09 2.60
8 900 1.75 15.00 4.70 2.60
9 900 1.75 15.00 4.44 2.60
10 900 1.74 15.32 4.55 2.60
11 900 1.73 16.36 4.50 2.60
12 900 1.72 16.50 4.25 2.60
13 900 1.70 16.50 4.16 2.55
14 900 1.69 16.50 4.00 2.43
15 900 1.66 16.50 4.15 2.38
16 900 1.61 16.50 4.73 2.46
17 900 1.60 16.50 4.75 2.55
18 900 1.59 16.50 4.48 2.40
19 900 1.58 16.50 4.28 2.27
20 900 1.51 16.50 4.43 2.31
21 900 1.46 15.72 4.30 2.20
22 900 1.41 15.65 4.04 2.30
23 769 1.41 15.10 4.02 2.20
24 486 1.47 16.50 4.00 2.44
25 339 1.47 16.50 4.00 2.60
Total 21,206 1.66 16.01 4.59 2.44

16.13.4 Product schedule

A schedule of recovered nickel in the final product is shown in Figure 16.36 and Table 16.20.
After ramp-up the production rate reaches approximately 15 ktpa. This is maintained for
about two years. After this, production drops steadily to 10 ktpa by the end of the project life.

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Figure 16.36 Recovered nickel schedule

Table 16.20 Product schedule

Year Nickel kt Year Nickel kt

1 10.6 14 14.1
2 15.2 15 13.9
3 15.0 16 13.5
4 15.6 17 13.4
5 15.2 18 13.3
6 14.8 19 13.2
7 14.7 20 12.7
8 14.7 21 12.3
9 14.8 22 11.8
10 14.6 23 10.1
11 14.5 24 0.6
12 14.4 25 0.5
13 14.2
Total 327.4

16.14 Cost estimate

16.14.1 Equipment supplier preference

Snowden does not recommend any specific equipment manufacturer. Where Snowden has
nominated particular models of equipment, these should be considered to be representative
of an equipment class only (i.e. size and productivity).

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16.14.2 Scope

The scope for the mining cost estimate includes capital and operating costs for the following
activities:

 Load and haul of ore, waste and top soil

 Grade control
 Re-handling ore from stockpiles ending at the ROM shed
 Mine services (dewatering, road construction and maintenance)

The costs are inclusive of:

 Fuel costs
 Maintenance costs (inclusive of GET, consumables, tyres, accidental damage and
contingency)
 Labour costs (operators, maintenance personnel and mining management, technical and
administration)
 Sampling costs
 Leasing costs / equipment purchase costs (including transportation)
 Excluded from this cost estimate is:
 Haulage roads (and haulage) from the plant to the slag dump
 Closure costs other than movement of material (covered in environmental cost estimate)
 Slag dump construction costs (covered in infrastructure cost estimate).

16.14.3 Accuracy

The cost model is a P50% estimate, implying a 50% probability of being too high or too low.

The mining cost estimate is supported by:

 quotations by vendors for key equipment from a large equipment dealer in Brazil
 estimation of haulage profiles for each source and destination over the life of the project
 The supporting evidence is sufficient such that Snowden is confident that this cost is
estimate is accurate to within 25% for the given inputs.

16.14.4 Cost modelling methodology

The cost model is based on assigning all mining costs to units of equipment. For each piece
of equipment, an hourly cost is derived through a number of calculations and benchmarks.
All costs are converted to hourly equipment costs (including sampling cost, and
administration costs). Where possible, hourly costs are supported by quotation from
equipment vendors. The hourly cost is multiplied by the required machine hours to derive a
total cost (which is grouped by year, source, destination and material type). The hourly costs
are adjusted on the basis of quotes received (where available). Machine requirements are
determined through the tonnage demand (and haulage profile estimation) and the relevant
equipment productivities. More detail on this methodology is provided in the following
sections.

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16.15 Equipment selection

There are two fleets included the Base Case cost model:

 A mining fleet, for load and haul activities. The final destination for this fleet is the mine
waste dump or stockpile.
 An ore haulage fleet to rehandle ore from the mine stockpiles to the ROM pad. For
Pequizeiro articulated trucks are used due to the short haul; other deposits use highway
trucks for haulage.

The primary pieces of equipment are shown in Table 16.21.

Table 16.21 Primary mining equipment

Function Mining fleet Ore haulage

5
Loader 48 t OW excavator 50 t OW front end loader (FEL)
6
Haulage 35 t CP articulated truck (ADT) 35 t CP on-highway truck
Grade control 16 t OW drill

The ancillary equipment used is shown in Table 16.22.

Table 16.22 Ancillary equipment

Equipment Model Tasks

Track dozer 39 t OW Assisting loading, road construction and maintenance
Wheel dozer 29 t OW Day works
Water truck 35 t CP Dust suppression
Grader 21 t OW Road construction, road/stockpile maintenance
Roller 16 t OW Road construction/maintenance
Refuelling truck 35 t CP Refuelling
Tyre handler 24 t OW Tyre changes
7
Diesel pump 75 HP Dewatering

One representative machine model has been selected for each machine type for costing. In
subsequent studies, the substitution of some smaller machines to provide operational
flexibility to deal with a range of conditions may be considered.

5
Operating weight.
6
Rated payload (capacity)
7
Horsepower

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16.15.1 Off-highway truck selection

Snowden considered three candidate trucks: two articulated dump trucks (35 t CP and
40 t CP) as well as a 50 t CP rigid body truck. Trafficability analysis (Section16.2.2) showed
that for the rigid body truck a step change (approximately 25%) in sheeting thickness would
be required for roads due to the increased bearing pressure associated with fewer tyres.
Given that transporting, dumping, and grading of the sheeting material is an additional
expense (for the pits as well as roads, dumps and stockpiles), rigid body trucks were
excluded from consideration.

Snowden selected the largest articulated truck available, the 40 t CP. The selection of this
truck:

 Provides a six pass loading cycle with the selected excavator

 Achieve a manageable 15 to 20 trucks at peak requirement
 Minimise sheeting requirements.

16.15.2 On-highway truck selection

Nominally, a 35 t CP on-highway truck was selected for inter-pit haulage. For the target
material movement this results in approximately 20 trucks. This number is suitable to fit in the
confined space of the ROM pad, and provides flexibility in sourcing a range of materials from
the various mine stockpiles for blending.

16.15.3 Excavator selection

The excavator was sized to match the mining trucks, the selectivity of mining, meet the
production rate, and to provide flexibility of mining multiple areas simultaneously. The 48 t
OW excavator provides a six pass cycle for the 35 t CP ADT and is capable of loading down
to a flitch height of 2 m. The 1.2 m wide bucket is capable of mining to the selectivity required
by the project. Six excavators are required to meet the production rate, providing some
flexibility to mine multiple areas.

16.15.4 Front end loader selection

A 50 t OW FEL was selected to provide sufficient clearance to load the trucks comfortably.
This class provides three pass loading into the highway trucks.

16.16 Mining management

Snowden considered both owner operator and contractor mining alternatives for each of the
fleets.

Typically, contractor mining results in higher operating cost due to the expensing of
equipment capital in the form of lease costs and the profit margin that is charged. The capital
cost is limited to the cost of infrastructure and mobilisation.

A number of important factors were considered:

 Capital cost: is a common motivator for contractor mining. The processing capital costs
of the Araguaia project are orders of magnitude higher than the potential mining capital
cost and are as not considered as a major driver for this decision.

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 Operating cost: contractors will charge a margin over their costs whereas owner-
operator will not. This is often compensated partially by productivity and manning
differences.
 Grade control: Whilst the operating cost of mining is less than 20% of the overall project
operating cost, mining is a very important aspect of mining for nickel laterite projects. The
requirement to blend a range of elements for the RKEF process circuit makes the control
of blend imperative. It is difficult to incentivise a contractor to blend and manage grade in
such a way that smooth feed to the plant is attained. An owner-operator, whilst perhaps
being less efficient, will place greater emphasis of ore quality.

An estimate of the capital cost and operating cost for each fleet is shown in Table 16.23.
Each of these estimates was built up from vendor quotes supplied for key equipment. No
contractor quotations were sourced for this study, but are recommended prior to the
Feasibility Study. Snowden have assumed a contractor margin of 20% on labour,
maintenance, and management and leasing. No margin was applied to fuel costs as it is
assumed that HM will procure this directly. A lease rate of 8% was applied for estimating
ownership costs.

Table 16.23 Owner-operator versus contractor comparison

Life Of Mine Life Of Mine

Total Cost ($M)
Capital Cost ($M) Operating Cost ($M)
Owner operator 74 407 481
Contractor 5 553 558

Either of these options is technically feasible. For this project, contractor mining was selected
to minimise capital cost.

16.17 Productivity
Productivities are calculated on a tonnes per engine hour basis. This incorporates de-rating
factors for:

 50 minute hour which accounts for the conversion from peak productivity to average
productivity
 Waiting and queuing time (stated in following sections where applied)
 20% time allowance for unproductive time on primary equipment – time spent on rework
or other activities that were not planned
 Low speed limits for trucks (stated in following sections where applied)

16.17.1 Loading

In total, four loaders are used for the various activities of the project. Table 16.24 summarises
the key inputs.

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Table 16.24 Loader inputs

Item Units Excavator FEL

Bucket capacity Loose cubic metres (lcm) 2.6 7.7
Bucket capacity Wet metric tonnes (wmt) 5.0 11.4
Pass time sec 35 60

Additionally, material properties are shown in Table 16.25.

Table 16.25 Material properties

In-situ Dry
Material 3 Swell Factor Moisture Content Carryback
Density (t/m )
Limonite 1.61 15% 31% 15%
Transition 1.22 20% 31% 15%
Saprolite 1.30 20% 37% 15%

Table 16.26 summarises the average productivity of each loading unit over the life of the
project, along with the material demand for that material and loader combination.

Table 16.26 Loader productivity

Material LIM TRN SAP

Excavator Total LOM dry mass (kt) 53,773 14,847 12,633
Productivity (dmt/hr) 174 134 143
8
FEL Total LOM dry mass (kt) 0 9,358 11,847
Productivity (dmt/hr) 181 166

16.17.2 Hauling

Two different truck types were used for the project. Their properties are shown in
Table 16.27.

Table 16.27 Truck inputs

Item Units Off-Highway Truck Highway Truck

Mass capacity wmt 32.7 35.0
Empty machine mass tonnes 32.4 16.0
Engine power kW 333 321
Dumping time sec 90 90
Spotting time sec 45 45
Queuing time sec 135 135
9
Travel time factor % 95 95

8
Considers that many of the ore tonnes are rehandled twice.
9
Travel time considers the correction of speed to account for acceleration, braking for turns or passing. This
increases the travel time and decreases the average fuel burn.

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Rolling resistances of 2% for major haul roads and 5% for finger roads in the pit were applied
in determining speeds and fuel burns.

A speed limit of 20 km/h (loaded) and 30 km/h (unloaded) was applied in and around the
operating pits. A maximum speed of 50km/h (loaded) and 60km/h (unloaded) was applied for
Interpit haulage.

Haulage distances and gradients were estimated on the basis of major haulage roads
designed by Snowden.

Speeds (and fuel burns) were calculated on the basis of the operating mass (loaded or
unloaded), engine power, road gradient and rolling resistance. The calculations are derived
from manufacturer rimpull curves for typical examples of the truck classes selected.

A summary of haulage productivity by deposit and material type (averaged over the life of the
project) is shown in Table 16.28.

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Table 16.28 Truck productivity by source and destination

One Way
Dry Mass Cycle
Productivity Haulage
Source Destination Moved Time
(dmt/hr) Distance
(kt) (min)
(m)
Mining fleet
BAI pit BAI stockpile 3,524 33 1,500 16
BAI pit BAI Mineralised waste 3,398 37 1,500 15
BAI pit BAI waste 10,285 46 1,000 13
PEQ pit PEQ stockpile 9,295 37 1,200 14
PEQ pit PEQ mineralised waste 2,846 40 1,200 14
PEQ pit PEQ waste 15,453 46 1,000 13
PQW pit PEQ stockpile 379 33 1,500 16
PQW pit PEQ mineralised waste 182 25 2,500 21
PQW pit PQW waste 1,412 58 500 10
JAC pit JAC stockpile 957 50 500 11
JAC pit JAC mineralised waste 603 56 500 10
JAC pit JAC waste 1,378 58 500 10
VOE pit VOI stockpile 2,449 18 4,000 29
VOE pit VOI mineralised waste 1,419 26 2,500 21
VOE pit VOE waste 7,173 35 1,800 17
VOI pit VOI stockpile 3,579 40 1,000 13
VOI pit VOI mineralised waste 1,581 35 1,500 16
VOI pit VOI waste 9,796 50 800 12
VOW pit VOI stockpile 1,021 22 3,000 24
VOW mineralised
VOW pit 1,596 45 1,000 13
waste
VOW pit VOW waste 2,926 53 700 11
Reclaim fleet
BAI stockpile ROM pad 3,524 26 7,000 23
JAC stockpile ROM pad 957 23 8,000 25
VOI stockpile ROM pad 7,050 15 15,000 41
PEQ
ROM pad 9,674 62 400 8
stockpile

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16.17.3 Grade control drilling

Grade control drilling is currently assumed as 12.5 m by 12.5 m. This drilling will be a
combination of reverse circulation and core drilling. Drilling will be from the surface to
bedrock through the entire lateritic profile. This averages some 15 m but can be up to 40 m.
Although the top layers are waste which do not need sampling, it is typically easier to drill off
the solid iron cap surface and also there can be ‘ore’ bands worth stockpiling high in the
profile within the ‘waste’. Two metre sample intervals (on average) have been assumed. This
is considered appropriate because in more cases ore selection can be made through the
visual differentiation of rock types.

Grade control drilling will take place well in advance of mining activities so that the results can
be included in the final mine dig plans. A productivity of 50 linear metres of drilling per shift
has been calculated. Grade control drilling will occur on a campaign basis and be completed
on day shift only.

16.18 Equipment requirements

16.18.1 Operating hours

Snowden’s estimate of annual equipment operating hours is summarised in Table 16.29,

taking account of mechanical availability, lost shifts (holidays, bad weather), shift downtime
(breaks, pre-start, refuelling) and a maximum utilisation (non-mechanical downtime). Engine
operating hours are referred to as SMU hours, as they are based on the service meter unit
reading. Equipment costs have been calculated using SMU hours. For practical purposes,
SMU hours can be equated to operating hours.

The availability of equipment has been lowered to account for a number of days per year (53)
where the mine is not trafficable due to heavy rain, This accounts for the average number of
days in the region with >10 mm daily rainfall, measured over the past 50 years.

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Table 16.29 Operating hours

Lost
Mechanical Shifts Shift Shift Maximum Operating
Shifts
Equipment Availability Per Length Downtime Utilization Hours (Hrs
(Per
(%) Day (Hours) 10 (Per Shift) (%) Per Year)
Year)
Excavator 86 3 8 186 1 60 3,283
FEL 86 3 8 186 1 30 1,641
Off-highway truck 86 3 8 186 1 90 4,925
On-highway truck 86 3 8 186 1 90 4,925
Drill 86 1 8 186 1 70 1,277
Track dozer 86 3 8 186 1 75 4,104
Wheel dozer 86 3 8 186 1 50 2,736
Grader 86 3 8 186 1 75 4,104
Roller 86 3 8 186 1 50 2,736
Tyre handler 86 3 8 186 1 50 2,736
Water truck 86 3 8 186 1 25 1,368
Fuel truck 86 3 8 186 1 50 2,736
Diesel pump 86 3 8 - - 15 938

16.18.2 Fleet equipment requirements (load, haul, drill)

Minimum equipment requirements were determined on the basis of calculated productivities

and operating hours. Requirements were then altered to smooth the fleet, with a
subsequently adjusted utilisation.

10
Includes rain delays as well as public holidays.

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Table 16.30 Primary equipment requirements

Off-highway On-highway
Year Excavator FEL Drill
truck truck
1 6 1 17 0 2
2 6 2 17 2 2
3 6 2 17 2 2
4 6 3 17 5 2
5 6 3 17 5 2
6 6 3 17 5 2
7 6 3 17 5 2
8 6 3 17 5 2
9 6 3 17 5 2
10 6 3 17 5 2
11 6 3 17 5 2
12 6 3 17 5 2
13 5 3 16 5 2
14 5 3 16 5 2
15 5 3 16 7 2
16 5 3 16 7 2
17 5 3 16 7 2
18 5 3 14 7 1
19 5 3 16 7 1
20 5 3 16 7 1
21 5 3 16 7 1
22 5 3 16 7 1
23 5 3 16 8 1
24 5 3 16 8 1
25 5 3 16 8 1

16.18.3 Ancillary

Ancillary equipment requirements were selected on the basis of a ratio to the load, haul and
drill fleet size. Consideration was made to enable mining from at least four of the deposits
simultaneously (separated by a distance).

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Table 16.31 Ancillary equipment requirements

Track Wheel Tyre Water Fuel Diesel

Year Grader Roller
Dozer Dozer Handler Truck Truck Pump
1 6 1 2 1 1 2 1 6
2 6 1 2 1 1 2 1 6
3 6 1 2 1 1 2 1 6
4 6 1 2 1 1 2 1 6
5 6 1 2 1 1 2 1 6
6 6 1 2 1 1 2 1 6
7 6 1 2 1 1 2 1 6
8 6 1 2 1 1 2 1 6
9 6 1 2 1 1 2 1 6
10 6 1 2 1 1 2 1 6
11 6 1 2 1 1 2 1 6
12 6 1 2 1 1 2 2 6
13 5 1 2 1 1 2 2 6
14 5 1 2 1 1 2 2 6
15 5 1 2 1 1 2 2 6
16 5 1 2 1 1 2 2 6
17 5 1 2 1 1 2 2 6
18 5 1 2 1 1 2 2 5
19 5 1 2 1 1 2 2 5
20 5 1 2 1 1 2 2 5
21 5 1 2 1 1 2 2 5
22 5 1 2 1 1 2 2 5
23 5 1 2 1 1 2 2 5
24 5 1 2 1 1 2 2 5
25 5 1 2 1 1 2 2 5

16.19 Non-equipment requirements

16.19.1 Manning

Manning is separated into three key categories: operators, maintenance operators, and
technical/admin staff.

Operators are allocated at the ratio of 1.3 operator hours per engine hour. The factor relates
to the need for spotters, trainees and general labourers. The available hours for each
operator (as it relates to engine hours) are determined from Table 16.32:

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Table 16.32 Operator hours parameters

Item
Shift roster 6 days on, 2 days off
Shift length 8 hours
Number of crews 4
Off days (weather/leave/holidays) 70 days
Lost time per shift 1 hour
Operator hours per year 1,433 hours

Additionally, 3.0 sampling person hours are required per drill hour.

Maintenance operators are calculated as a ratio to equipment hours. This factor is

dependent on the size and type of equipment and is derived from Snowden internal
benchmarks.

In addition, manning is allowed for management, technical and administrative staff. The
staffing needs of the mining vary with time, as pits start and stop. The peak demand for each
staff type of staff is shown in Table 16.33 to Table 16.39, below.

Table 16.33 Mining general management

Title Peak demand

General manager – mining 1
Secretary 1
Data clerk 1

Table 16.34 Mining supervisory staff

Title Peak demand

Mine Superintendent 1
Mine Foreman 3
Shift Boss 8
Mobile Maintenance Superintendent 1
Mobile Maintenance Foreman 2
Mobile Maintenance Planner 2
Secretary 1
Data clerk 1

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Table 16.35 Mining technical services staff

Title Peak demand

Technical services manager 1
Chief mine planning engineer 1
Chief geologist 1
Senior mining engineer 1
Senior Geologist 2
Mining engineer 3
Geologist 4
Senior Surveyor 1
Surveyor 3
Survey assistant 3
Dispatcher 3
Dispatch technician 1
Secretary 1
Data Clerk 1

Table 16.36 Mining safety and training staff (all mines)

Title Peak demand

Manage Mine Safety 1
Mine safety officers 2
Mine training officers 2

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Table 16.37 Manning requirements

Technical, admin
Year Operators Maintenance Total
and management
1 133 42 53 227
2 115 36 53 204
3 115 36 53 204
4 135 42 53 230
5 135 42 53 230
6 138 43 53 234
7 137 43 53 233
8 138 43 53 234
9 141 44 53 238
10 142 44 53 239
11 141 43 53 237
12 143 44 53 240
13 138 43 53 234
14 140 43 53 237
15 145 44 53 243
16 147 45 53 245
17 151 46 53 250
18 143 44 53 239
19 146 45 53 244
20 140 42 53 235
21 139 42 53 235
22 140 42 53 236
23 134 41 53 227
24 121 37 53 210
25 87 26 40 153

16.19.2 Fuel

Fuel burns were derived from quotations supplied by equipment vendors. For the haulage
functions these were adjusted to account for haulage profiles. A summary of the fuel burns is
shown in Table 16.38. A schedule of fuel requirement is shown in Table 16.39.

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Table 16.38 Fuel burns

Average Fuel Burn Equipment Hours Fuel Burn

Equipment
(L/hr) (hr x 1000) (ML)
Excavator 36.0 391.5 14.1
FEL 46.4 94.8 4.4
Off-highway truck 20.3 1,680.1 34.1
On-Highway truck 15.0 525.9 7.9
Drill 44.8 23.9 1.1
Track dozer 38.6 486.3 18.8
Wheel dozer 42.8 48.6 2.1
Grader 18.6 176.5 3.3
Roller 13.3 48.6 0.6
Tyre handler 15.3 48.6 0.7
Water truck 19.3 57.8 1.1
Fuel truck 19.3 66.2 1.3
Diesel pump 11.8 117.4 1.4
Total 90.8

Table 16.39 Fuel requirement schedule

Year Fuel Required (ML) Year Fuel Required (ML)

1 3.7 14 3.9
2 3.1 15 3.9
3 3.2 16 3.9
4 3.6 17 4.1
5 3.6 18 3.8
6 3.7 19 4.0
7 3.7 20 3.6
8 3.7 21 3.6
9 3.7 22 3.7
10 3.8 23 3.5
11 3.7 24 3.3
12 3.9 25 2.4
13 3.8 Total 90.8

16.19.3 Explosives

No explosives are planned for this project. Hard ripping will be used where necessary.

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16.19.4 Sampling

Grade control drillholes are to be sampled at 2 m intervals for all ore and mineralised waste.
A schedule of sampling requirements is shown in Table 16.40.

Table 16.40 Samples required

Samples Required Samples Required

Year Year
(x1000) (x1000)
1 5 14 4
2 3 15 4
3 4 16 4
4 4 17 5
5 3 18 4
6 4 19 3
7 4 20 3
8 4 21 3
9 4 22 3
10 4 23 3
11 4 24 2
12 4 25 1
13 4 Total 88

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17 Recovery methods
17.1 Introduction
The Base Case plant will have one single processing line from ore receipts through to
granulation of the refined Fe-Ni final product and will be capable of processing 0.9 Mtpa (dry)
at full capacity to produce 15 ktpa of Ni, utilising the RKEF process. For design purposes the
nickel grade adopted is 1.80% Ni.

The plant will have one primary and one secondary crushing station, one ore homogenisation
facility and one production line comprised of one rotary dryer, a tertiary crushing station, a
rotary kiln, a 50 MW (nominal) smelting electric furnace and a refining ladle furnace, coupled
to a metal granulation and metal conditioning area and a metal recovery from refining slag
plant.

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Figure 17.1 Plant site location and orientation

Source: IGEO

17.2 Process Selection

Two metallurgical processes for the treatment of Ni laterites were considered. These are:

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 Pyro-metallurgical processes
 Hydro-metallurgical processes

The general features of the typical laterite profile and metallurgical processing categories are
illustrated in Figure 17.2. Typically, limonite material has been treated hydro-metallurgically
(High Pressure Leach or HPAL), while the saprolite and transition materials have been
treated either hydro-metallurgically (e.g. pressure leach of the limonite followed by an
atmospheric leach of the saprolite) or pyro-metallurgically, normally by the RKEF process.

Figure 17.2 Laterite profile and potential metallurgical processes

Source: Audet, M A, et al 2012

As part of the metallurgical testwork on the Araguaia laterite ore, both pyro-metallurgical and
hydro-metallurgical test work was undertaken. This testwork subsequently confirmed the
preferred suitability of the conventional RKEF process for the treatment of the Araguaia ore to
produce Fe-Ni, and this process was adopted for the PFS by HZM.

17.3 Process description

As part of the PFS, two RKEF plant capacity scenarios were evaluated:

 Base Case: A single line 0.9 Mtpa RKEF installation, producing approximately 15 ktpa
nickel as Fe-Ni
 Option 1: Twin line RKEF installations of 1.35 Mtpa each producing a total of
approximately 40 ktpa Ni as Fe-Ni

The process description for the Base Case, together with block flow diagrams and key design
criteria of each process section is presented here to provide a clear understanding of the
project scope and main characteristics of the metallurgical process. The main sections for
the Project are depicted in Figure 17.3.

The Process Design Criteria (PDC) was developed from the throughput data for the 0.9 Mtpa
Base Case. Option 1 twin line RKEF plant was also developed for comparative purposes and
subsequent evaluation to identify the preferred option (Base Case 0.9 Mtpa).

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Figure 17.3 Process flow diagram

CRUSHER
RECEPTION SHED

DUST BIN

ELECTRO STATIC
PRECIPITATOR

O RE HOMOG ENISATIO N

CRUSHER

DRYER

ROTARY KILN
CRUSHER

FeNi GRANULATION

SLAG ELECTRIC
G RANULATION WAT ER

FURNACE

LADLE FURNACE

DEW ATERING
BEEN
SLAG DUMP

SLAG
SETTLING TANK

W ATER SPRAY
COO LING TANK

COOLING
W ATER DAM RO TARY FeNi SHOTS
SCREEN DRYER

FeNi SHOTS
STO RAGE

Source: IGEO

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The initial stages encompass ROM ore reception and blending of ore to meet metallurgical
processing requirements, ore preparation, where the ore is sized to match the subsequent
metallurgical process requirements. The ore is then homogenised, partially dried and fed to
the kiln with the addition of a reductant material. In the kiln, the ore is completely dried,
calcined to remove chemically combined moisture, and partially pre-reduced. Kiln dust is
recycled to the process before the secondary crushing stage. Calcine from the kiln is then
transferred into an electric furnace for the separation of the metal and slag at high
temperature. The metal is conveyed in ladles to the refining stage. The refining oxidised
slag is granulated with water, while the reducing slag is transported molten and disposed of in
a specific site. The rationale for adopting these treatment methods is explained later in this
document. The final Fe-Ni product is granulated with water, screened, dried and stockpiled
prior to dispatch to the market.

The process flow diagram is described in subsequent sections.

17.3.1 ROM ore reception

The ROM will be stockpiled for the purpose of initial blending of different ore types to
establish and maintain planned plant feed a pre-established metallurgical characteristic for
feeding the plant. ROM will be reclaimed by excavator and loaded onto trucks, which will
haul the material to the ore reception shed, from where it will be rehandled by front-end
loader for feeding onto a shaking grizzly. This concept has been developed in order to
maintain ROM flexibility and achieve a crushing section availability of 75% whilst ensuring
more compatible flows of ore and dust on the conveyor feeding the contact drum.

17.3.2 Ore crushing and homogenisation

The shaking grizzly will feature a 500 mm x 500 mm gap. Oversize material will be removed
with the aid of the same front-end loader used for feeding the plant, or otherwise, discharged
on the floor by the shaking effect of the grizzly. The undersize (-500 mm) stream will be
stored in a 20 m³ chute from which it will be extracted by a conveyor belt for discharge into a
mineral sizer type crusher of 250 mm gap. The crushed material will be discharged onto a
conveyor belt and then sampled by means of a shuttle conveyor before being discharged
onto the feed conveyor of the dust mixing drum. .

The rotary-type dust mixing drum will be used for providing contact between fresh ore and
recycled rotary kiln dust and thus will promote a degree of agglomeration. This concept
provides an inexpensive means of handling the kiln off-gas dust and has another major
benefit in preventing the adherence of sticky ore fines onto downstream conveyor belts. The
recycled dust may be wetted, depending on the fresh ore moisture level, prior to drum
addition. Dust generated from the contacting process will be conveyed to a baghouse and
recycled to the contacting drum.

Ore mixed with dust will be conveyed to a vibrating screen with 80 mm mesh opening,
operating in open circuit with a crusher. The oversize fraction will be conveyed to, and
crushed by, a roll crusher of 80mm gap. The screen undersize and the crushed product will
be combined and conveyed to an ore stacker for deposition onto a homogenisation stockpile.
The storage yard will feature two piles, each with a capacity of approximately 22 000 wet
tonnes of ore which is sufficient for eight days total plant feed capacity. When one pile is
being created the other is feeding the plant to allow for a continuous operation.

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The homogenisation of ore is a critical process function in order to minimise variation and
provide consistent feed to the smelting furnaces. In the case of the Araguaia ore, this feature
is particularly important due to the anticipated smelting characteristics of the slag to be
produced in terms of liquidus temperatures. Key criteria of the Ore Preparation section are
defined in Table 17.1.

Table 17.1 Key criteria of crushing and dust recycling – Base Case

Item Unit Value

Fresh Ore feed rate – design dry mt/hr 137.0
Fresh Ore feed rate – nominal wet mt/hr 195.7
Moisture content % 30
Dust recycling – storage to
dry mt/hr 27.4
contactor drum
Dust moisture content - maximum % 10
Dust recycling – storage to
wet mt/hr 30.4
contactor drum
Primary crusher type - Sizer
Secondary crusher type - Toothed double roll
Dust recycling equipment - Contacting drum
Secondary screen - Vibrating rubber lined
Ore homogenisation capacity wet mt 2 x 22 000
Ore handling for homogenisation Stacker - reclaimer

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Figure 17.4 Primary and secondary crushing and homogenisation flowsheet

Source: IGEO

17.3.3 Ore drying and tertiary crushing

Reclamation of wet ore from the homogenising piles will be by means of a single reclaimer
and conveyed to the rotary dryer feed bin. From here it will be extracted from the bin by a
weigh-belt feeder, and then transferred to the dryer feed chute. The effect of the recycled
dust mixed in the ore will ensure that the material flows readily through the chute, which is to
be designed so as to promote a smooth and adequate material flow as well. A steady feed
rate thereby improves the operational control of the drying process, which is a key
requirement for optimising energy utilisation, as well as facilitating material agglomeration.

The discharge from the dryer will feed through the tertiary screening and crushing station and
thereafter will feed into the kilns feed bin. In order to maintain availability for the kiln in the
event of maintenance, an emergency stockpile of dried and crushed ore will be incorporated.
The reclaiming system will be by means of front-end loader and hopper for recycling to the
kiln feed bin.

The dryer will feature a co-current configuration with a combustion chamber designed for
burning pulverised coal, and having fuel oil for backup and start up.

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The dryer will be designed so as to optimise the agglomeration process. Therefore it will
feature a retention dam at the discharge to attain the optimum filling degree. Heat transfer
will be controlled and the off-gas temperature will be such that it avoids condensation in the
electrostatic precipitator, which will be used for collecting dust present in the off-gas.

The target moisture of the dryer product will be 18% to 20%.

Dried ore from the dryer will then be screened on a vibrating screen with
30 mm mesh gauge. The oversize will be crushed in a roll crusher with 30 mm setting. This
top size of 30 mm has been found to be a good criterion for optimising heat transfer and
reaction kinetics in the kiln while trying to minimise dust losses in the kiln off-gas.

Key criteria of this section are defined in Table 17.2 and Table 17.3, as well as Figure 17.5.

Table 17.2 Key drying parameters – Base Case

Item Unit Value

Ore + Dust feed rate – one line wmt/hr 199.5
Feed moisture content % 27.3
Dryer throughput – ore + dust dmt/hr 145.0
Product moisture content % 18
Dryer type Co-current – rotary
Fuel type Pulverised coal
De-dusting system ESP

Table 17.3 Tertiary crushing key parameters – Base Case

Item Unit Value

Ore + dust feed rate wmt/hr 176.9
Ore + dust feed rate dmt/hr 145.0
Circuit type Direct, open
Crusher type Double roll - toothed

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Figure 17.5 Drying and tertiary crushing flowsheet

17.3.4 Calcining

The material reclaimed from the kiln feed bin will be combined with reductant coal of <
12,5 mm from the crushed coal storage bin. A weightometer on the ore feed will govern the
set feed rate of addition of coal which is controlled by a variable speed rotary valve. The kiln
feed will be conveyed to the kiln feed chute. The three main phenomena which occur in the
rotary kiln are: drying, calcining and pre-reduction. The kiln will be constructed with 3
retention dams – one at the drying section, the second at approximately the end of the
calcining process, and the last one at the discharge end. As a consequence, the material will
interact for a longer period of time, thereby enhancing the metallurgical process, as well as
avoiding the generation of excess fines. The retention time in the kiln is generally around 3
hours. The kiln will be equipped with lifters at the feed end section for the purpose of
recovering heat from the off-gas stream. The lifter arrangement will be designed, however,
such as to also minimise dust carry over by the off-gas stream. The heat required for the kiln
operation will be supplied by a burner of specialised design located at the discharge end of
the kiln, thus providing the counter current heating for attaining the required temperature
profile along the length of the kiln. The burner is designed such as to be able to use
pulverised coal and can also use fuel oil as an alternative or in case it is necessary to
stabilise the kiln environment. This dual purpose burner thus provides flexibility in future
decisions on the most economic fuel to be utilised.

The hot calcine at the kiln discharge will pass through a screening device for removing any
oversize material that may cause blockages in downstream equipment. It will be a trommel
with 80 mm mesh opening, or even larger if proved to be acceptable for the hot calcine
discharge valves in the kiln calcine bin as well as the furnace feed system. The undersize
material will be discharged into a refractory-lined bin, from where it will be extracted through a
transfer chute into a refractory-lined, 15 m³ container, which will be located on a transfer car.
All equipment associated with the calcine transfer and furnace feed systems are described
later.

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The kiln off-gas is conveyed to the electrostatic precipitator at approximately 300°C.

Collected dust will be pneumatically conveyed to the dust recycling bin at the secondary
crushing plant. Clean off-gas will be partially recycled to the coal milling facility, and the rest
will be discharged into the atmosphere. Key criteria of this section are depicted in
Table 17.4, as well as Figure 17.6.

Table 17.4 Calcining key criteria – Base Case

Item Unit Value

Ore + dust feed rate wmt/hr 167.1
Ore + dust feed rate dmt/hr 137.0
Ore + dust moisture content % 18.0
Fresh ore feed rate dmt/hr 114.2
Reductant coal feed rate dmt/hr 9.1
Reductant coal feed rate wmt/hr 9.8
Coal moisture content % 6.5
Calcine production mt/h 98.6
Degree of Ni pre-reduction % 20
Degree of Fe pre-reduction % 70

With reference to the findings of the testwork carried out at FLS, the following issues are
highlighted in terms of kiln design:

 From the testwork results at FLS, it was observed that due to the characteristics of the
ore blend material it may be necessary to restrain the target temperature of the calcine
discharge to 800°C to 825°C. For design purposes for the kiln, however, IGEO has
defined a target temperature of 850°C for the kiln discharge calcine and 825°C for the
calcine feed to the furnace. It is strongly recommended that these temperatures are
confirmed on a larger bulk sample on pilot plant scale in the next stage of the project.
 Partly due to temperature constraints mentioned above but combined with the
mineralogy of the ore, FLS considers it may only be possible to achieve pre-reduction
values of 10% for Ni and 60% for Fe. Again for design purposes for the kiln, however,
IGEO have defined 20% for Ni and 70% for Fe in the PDC.
 FLS ascertained that from agglomeration behaviour of the ore in comparison to other
ores tested, dusting rates in the kiln off-gas of 15% to 20% could be anticipated. IGEO
have applied a rate of 20% in the PDC.

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Figure 17.6 Calcining flowsheet

17.3.5 Smelting

The furnace selected for a project comparable to the Base Case proposed a circular furnace
with an 18 m internal hearth diameter for processing the 0.9 Mtpa (dry) ore per year.
Figure 17.7 shows a cross-cut of a typical electric arc furnace. Final selection of the furnace
will have to be reviewed in a trade-off study during the next phase of the project, comparing a
circular furnace with a rectangular furnace.

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Figure 17.7 Cross section of a typical electric arc furnace

17.3.6 Slag characteristics

The testwork carried out at Xstrata Process Support (XPS) and Kingston Process Metallurgy
(KPM) on Araguaia ore blends focussed considerably on the smelting characteristics of the
slags produced from the ores because the composition of Araguaia slag differs from that of
slag produced at other RKEF operations. Key factors which need to be considered are:

 The combined impact of the ratio SiO2/MgO, FeO and Al2O3 contents of the slag on the
liquidus temperatures and the viscosity of the slags. The chemical effects of high SiO2
slag on the basic furnace refractory material must also be considered.
 The impact of impurities, particularly carbon and silicon, on the liquidus temperatures and
viscosity of the metal. Also the risks must be considered of silicon reversion and
associated extensive generation of heat from the reaction if silicon content is too high in
the metal. Slag foaming is also an issue that can occur with viscous slags.
 The impact of the issues in 1 and 2 above can be affected/controlled to varying degrees
by controlling the degree of reduction of Fe effected during the smelting process.
 The degree of iron reduction dictates the grade of nickel to be achieved in the final metal
product as well the silicon and carbon content of the metal. Higher reduction will result in
lower metal grades and in all the testwork evaluations, grades of nickel content of
between 15% Ni and 25% Ni have been evaluated. Higher degrees of reduction also
give the added benefit of higher nickel recoveries across the furnace.

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 At the ratio of SiO2/MgO of 2.29 and the FeO and the Al2O3 content anticipated in the
Araguaia slags, the liquidus temperatures can be significantly depressed. However,
minimum tapping temperatures of the slag must be attained to ensure fluidity. This
therefore can result in excessive superheating of the slag and metal with possible
undesirable consequences to the operation. It also will demand intensive water cooling
systems be installed on the furnace sidewalls.

Hatch (Toronto) was requested to examine available information on the smelting

characteristics of the Araguaia ore. It was from consideration of all the data available that
HZM in conjunction with IGEO agreed that the target metal grade from the furnace to adopt
for the PDC will be 20% nickel. Given this criterion, and evaluating all the relevant data from
liquidus temperature determinations in the KPM testwork, the liquidus and tapping
temperatures of metal and slag were then defined as shown in Table 17.5. The resultant
superheat contained in the slag is a factor which will have to be managed from both an
operational perspective and in designing of the cooling system required for the furnace walls.
Attention is also being given to the furnace roof construction as explained in section 17.3.7.

The tapping temperatures achievable due to the liquidus temperatures of metal and slag are
criteria that will need to be verified in pilot scale work with a bulk sample in the next phase of
the project.

Table 17.5 Estimated furnace metal and slag temperatures

Araguaia Criteria
Ore Blend LOM Plan Blend
Target crude Fe-Ni grade % Ni 20
Metal liquidus °C 1,440
Slag liquidus °C 1,380
Metal tapping temperature °C 1,470
Slag tapping temperature °C 1,550
Metal - Slag delta T °C 80
Metal superheat °C 30
Slag superheat °C 170
Nickel furnace recovery % 95.0

17.3.7 Smelting process description

Each furnace will feature two calcine transfer cars and each car will contain two calcine
containers. The calcine transfer car will move the container to the lifting position, where a
lifting tower (one per car) will perform its hoisting function to the top of the furnace feed bins.

It has been determined from the energy balance that the specific power consumption is
approximately 511 kWh per metric tonne calcine. On this basis, the required power rating for
the furnace will be approximately 50 MW for smelting 98.6 mtph calcine. This power
consumption is based on a slag tapping temperature of 1,550oC and metal tapping
temperature of 1,470oC.

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The hot calcine, containing the required amount of residual reductant, will be stored in the
furnace feed bins, which will be strategically positioned in order to obtain a suitable
distribution and embankment of the charge inside the furnace. The calcine feed into the
furnace will be monitored in accordance with the slag temperature and, therefore, the slag
temperature inside the furnace will require monitoring as well. This has proven on other
operations to be a critical issue to be monitored.

Metal tapping will be carried out through one of two tapholes, positioned at a convenient
location along the circumference of the furnace. Slag will be tapped at a location
approximately diametrically opposite of the metal tapholes (see Figure 17.7) and will be
granulated with water. Any entrained slag fines in the water will settle in an appropriately
designed settling tank, and will be reclaimed by front-end loader and truck and transported to
the slag dumping area. Water will be ducted to a cooling system and dam, from where it will
be pumped to an elevated reservoir with a capacity of 6,000 m³.

The working hearth refractory will be designed with tapered tongue and grooved, high
magnesia bricks. Underneath the working hearth, a tapered safety hearth will be constructed
with high thermal conductivity magnesia bricks. The cooling system for the bottom floor will
be air, with dedicated fans. The upper sidewall will be fixed to the shell by means of a wall
hold down system, or other design as furnished by the particular supplier. Side wall cooling
in the region of the molten slag depth will be effected by copper cooler components.

The furnace process (primary) off-gas will be collected by a dedicated system at a

temperature of 1,000°C to 1,200°C at the furnace roof outlet. It will be cooled down and then
conveyed to a baghouse, designed for obtaining a high efficiency of particulate collection that
will comply with the Environmental Design Criteria. An emergency off-gas system will
discharge the raw off-gas to atmosphere while the furnace power is reduced to a minimum for
overcoming the upset condition.

The hot calcine discharge transfer points into the transfer containers and into the furnace
feed bins will also have a dedicated (secondary) dust extraction system. De-dusting gases
collected from the metal and slag tapping positions will be used for cooling the primary off-
gas, and then undergo the same handling process.

The roof will be constructed with high alumina bricks and the central region around the
electrodes will be manufactured with special ramming material. This is to ensure that
maintenance can be performed very readily with minimum shutdown time and minimum
exposure of the workers to the harsh environment. The design concept will be such that no
water cooling of the furnace roof will be required.

Key characteristics of this section are depicted in Table 17.6 as well as

Figure 17.8.

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Table 17.6 Smelting key parameters – Base Case

Item Unit Value

Furnace feed material
Calcine feed rate t/hr 98.6
Calcine temperature at furnace °C 825
Furnace characteristics
Geometry Circular
Internal diameter m 18.0
Electrodes configuration 3 - triangle
Electrode diameter m TBC
Number of transformers 3, one per phase
Power MW 50
Slag region cooling Copper elements
Metal characteristics
Metal production -design t/hr 9.8
Tapping Temperature °C 1,470
Liquidus temperature °C 1,440
Ni content % 20.0
Slag characteristics
Average slag production rate t/hr 88
Tapping mode h/day 15-20
Tapping Temperature °C 1,550
o
Liquidus Temperature C 1,380
Dedusting systems
Type (both systems) Baghouse

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Figure 17.8 Smelting flowsheet

17.3.8 Refining

Crude metal will be tapped at 1,470 °C from the furnace tapholes into a preheated ladle. A
last-minute preheater will be used at the final ladle position at the launder for maintaining the
ladle temperature. Furnace metal contains mainly carbon, phosphorous, a small amount of
silicon and sulphur as impurities. Ferrosilicon (FeSi) will be added into the ladle when and if
required, in order to avoid porous plug blockage, and into the metal launder, in order to
improve metal flowability through the launder. FeSi will also generate energy in the ladle due
to the reaction with oxygen to be blown into the metal through a refractory-lined or water-
cooled lance, depending on whether the metal is being tapped or blown.

Nitrogen will be blown into the metal through a porous plug at the ladle bottom for agitating
the metal, in order to ensure an even temperature distribution through the melt and improve
reaction kinetics. Nitrogen blowing is important for enhancing process reactions, and is
therefore maintained through the entire refining process. During oxygen blowing, lime and
fluorspar (if required) are added in order to remove phosphorous into the slag, thus
shortening the subsequent process cycle time. At the end of metal tapping, the ladle
containing up to 25 tonnes of hot metal, will be positioned on a transfer car by an overhead
crane and transferred to the heating station for conditioning of the oxidised slag. This will be
removed off the surface of the metal by a skimming machine and tilting of the ladle.

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Once free of the oxidising slag, the molten bath will then be deoxidised with FeSi and
aluminium, and a lime-rich slag will be developed for the desulphurisation process. Dissolved
oxygen and temperature are key parameters to be controlled and, under favourable
conditions, calcium-silicon (CaSi) cored aluminium wire will be injected deep into the bath to
speed up the desulphurisation process. At the end of the cycle, slag will be skimmed off and
a metal sample will be collected. Should the analysis match the required specification, the
ladle will be submitted to a final heating stage to a temperature of 1,630 °C before metal
granulation. Should the metal specification not be achieved, a further slag is formed and
skimmed off prior to the final heating stage followed by granulation.

During the refining process, the oxidising slags will be granulated with water, or allowed to
cool naturally, while the reducing slags will be collected in slag pots and deposited in a
specific area for hydration. This yields spontaneous breaking of the slag blocks and
facilitates recovery of any entrained metal. Metal characteristics are defined in Table 17.7.
The Ni/Co and Ni/Cu ratios are adequately above market specifications.

Table 17.7 Metal characteristics

Elements Unit Crude Metal Refined Metal

Ni % 20.0 20.3
Si % < 0.3 < 0.04
C % < 1.0 < 0.04
P % < 0.1 < 0.03
S % < 0.5 < 0.04
Cu Ni/Cu > 100 > 100
Co Ni/Co > 30 > 30

The refining station design criteria are indicated in Table 17.8. The flowsheet is depicted in
Figure 17.9.

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Table 17.8 Refining furnace key design characteristics – Base Case

Item Unit Value

Specific power input kWh/t Fe-Ni 160
Design Power – estimated - TBC MVA 5.5
Type Ladle furnace
Ladle capacity t 25
Crude metal temperature °C 1,470
Refined metal temperature °C 1,630
De S slag reagents :
Lime Kg/t Fe-Ni 87
CaF2 Kg/t Fe-Ni 3.0
Al Kg/t Fe-Ni 10
FeSi Kg/t Fe-Ni 3
CaSi Kg/t Fe-Ni 2.1
De P slag reagents:
Lime Kg/t Fe-Ni 15
Fluorite Kg/t Fe-Ni 0.5
Oxygen Nm3/tFeNi 10
Nitrogen Nm3/tFeNi 0.5

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Figure 17.9 Refining flowsheet

17.3.9 Metal granulation and product conditioning

Refined metal in the ladle at 1,630 °C will be transferred to the granulation facility and will be
positioned on a movable platform by the overhead crane. The metal will discharge through a
sliding gate installed at the bottom of the ladle at a controlled flow rate of approximately 1.0
t/min directly into one of two water tanks which are equipped with strategically positioned high
pressure water nozzles for obtaining the granulated metal.

The granulated metal will be contained in the two tanks, half in each one and will be extracted
by the overhead crane at the end of the process and transferred to a dewatering bin/screen,
and finally fed into a rotary dryer. The dried material will be screened into product sizes as
required by the market. The sized material will be bagged or transferred to a stockpile for
dispatching. Generally fines fractions of < 2 mm are not accepted by clients and will be
recycled directly into the ladle at the heating station.

Table 17.9 and Table 17.10 define the key criteria for this process section while Figure 17.10
and Figure 17.11 depict the flowsheet for metal granulation and product conditioning
respectively.

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Table 17.9 Metal granulation key characteristics

Item Unit Value

Metal granulation
Granulation rate t/min 1.5
Granulation time min 35
Metal temperature °C 1,630

Table 17.10 Metal conditioning key characteristics

Item Unit Value

Metal drying and screening
Dryer feed rate t/hr 25
Screen size mm 2, 5 and 50
Product conditioning
Configuration Big bags / bulk
Storage capacity t 10,000

Figure 17.10 Refined metal granulation flowsheet

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Figure 17.11 Refined metal conditioning flowsheet

17.3.10 Auxiliary process installations

The main auxiliary facilities that are required for the processing of laterites for Fe-Ni
production are:

 Coal preparation plant (for fuel and reductant)

 Dust handling systems.

Utilities systems are described further in this document.

17.3.11 Coal preparation

The coal preparation plant will be designed for supplying both the pulverised fuel coal and
reductant according to the key criteria indicated in Table 17.11 and the flowsheet is depicted
in Figure 17.12. The plant will be designed with capacity for supplying both the dryer and the
kiln.

Table 17.11 Coal preparation key characteristics

Item Unit Value

Fuel coal to the dryer burner dmt/year 23,623
Fuel coal to the kiln burner dmt/year 68,760
Reductant coal dmt/year 72,000
Total coal consumption dmt/year 164,383
Total coal consumption wmt/year 175,811

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Coal will be transported to site and discharged onto a receiving hopper with grizzly, located
under a shed. Coal will then be extracted from the hopper and transported to the coal
stacker or tripper conveyor which will pile it in a covered storage area with capacity for 30,000
m³ (wet). From one of the two piles a front-end loader will reclaim the coal and discharge it
into the coal crusher feed hopper.

Coal will be bulldozed from the crusher feed hopper into a roll crusher which will reduce the
as-received coal top size to 12.5 mm. The crushed coal will then be conveyed to either the
coal milling feed bin or the reductant coal bin. The handling system will operate with diverters
linked to level indicators such that when one bin is full the crushed coal will be diverted to
another bin. If all bins are full, the coal crushing and conveying system will be stopped.

Coarse coal will be conveyed to a ball mill designed such as to reduce coal top size to 170#
(or 90 µm). Clean calcining off-gas will be used to dry the ground coal to 0.5% moisture so
that it can be used as burner fuel for the kiln and dryer units. In the absence of clean off-gas,
an oil-fired hot gas generator will be available. Pulverised coal (coal mill product) will be
classified in a dynamic separator and sent to the coal milling baghouse. While coarse
particles will be returned to the mill feed, pulverised coal will be pneumatically conveyed to
the consumption points, namely the dryer and kiln. The dryer and kiln will have one bin and
dosing system. From the feed bins Coriolis/Pfister dosing pumps will feed the dryer and kiln
burners individually.

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Figure 17.12 Coal preparation flowsheet

17.3.12 Dust handling systems

Dust contains high nickel grades and therefore, in order to obtain high metallurgical
recoveries for the overall plant (i.e. above 90%), it is paramount to implement a successful,
proven and reliable dust handling and recovery system. Dust will be mainly generated and
thus collected at the following points: dryer ESP, kiln ESP, furnace baghouse (primary and
secondary), and refinery baghouse.

The refinery dust will be discharged into a bucket and combined together with the smelter
dust for recycling directly to the smelting furnace due to its very high Ni content (approx.5 –
7%).

Dryer dust will be collected independently and also conveyed to the rotary kiln dust bin for
transporting, both together, to the dust storage bin located upstream of the secondary
crushing. From this storage bin, dust will be wetted and added to the dust mixing drum in
order to be reintroduced back to the process.

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17.3.13 Utilities

The utilities areas and services incorporated for the project are:

 Fuel oil storage

 Diesel storage
 LPG storage/distribution
 Water systems
 Söderberg paste handling
 Refinery reagents handling
 Compressed air generation; and
 Oxygen and nitrogen storage/generation.

Each of them will be described as follows.

17.3.14 Fuel oil storage

Fuel oil will be used in start-up and flame stabilisation conditions in both the dryer and the
kiln. The storage location, therefore, has to be close to these consumers. The system will
feature one operating and one standby pump for each consumption point.

Oil will be also used for the emergency/start-up hot gas generator at coal milling.

17.3.15 Diesel storage

Diesel will be used by plant and mine mobile equipment. One area for each site (mine and
plant) will be envisaged. Fuel supply will be performed by tank trucks as required.

17.3.16 LPG storage

LPG will be consumed in the dryer and kiln pilot burners, last-minute pre-heaters, ladle dryer,
ladle pre-heater, refined Fe-Ni drying, the metallurgical laboratory, and the canteen.
Therefore, two storage areas are envisaged: one for the non-process areas and another for
the process areas.

It is suggested that the client pursue an “over-the-fence” agreement, so that capital costs are
minimised.

17.3.17 Water systems

The water systems comprise:

 Raw water supply and make-up

 Water treatment
 Electrodes cooling water system
 Copper plates cooling , slag and metal copper block cooling
 Slag granulation cooling
 Elevated reservoir.

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The preliminarily block diagram for the different water systems as shown in the Water
Balance document is depicted as follows:

Figure 17.13 Block flowsheet of water system

17.3.18 Söderberg paste handling

Söderberg paste for the electric furnace electrodes will be hoisted to the electrode floor for
handling and addition into the electrode casings.

17.3.19 Refinery reagents handling

Refinery reagents will be transported to site in bulk bags whenever possible.

17.3.20 Compressed air

Compressed air will be used for instruments, dust conveying, and general purpose use.
Conveying systems will be independent from instrument/plant air systems. All compressors
will feature the same size so as to minimise spares inventory.

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17.3.21 Oxygen and nitrogen

Oxygen is used in refinery lancing and for metal and slag tapping. Nitrogen is used for
porous plug stirring, emergency lancing at the refinery aisle and inertisation of the coal bins.
In order to reduce capital costs, it is suggested that the project pursue supplying alternatives
“over-the-fence”.

17.4 Process design criteria

The PDC were developed by IGEO for the Base Case with contributions from several key
team members. Table 17.12 defines the source codes for the original source of the data as
reflected in the various tables in this section.

Table 17.12 Data source code

Source Code Origin

HM Horizonte Minerals
MB Mass Balance
EB Energy Balance
TBC To be confirmed

17.1.1 Overall plant data – Base Case

The Base Case data as used for the development of the mass balance and PDC is shown in
Table 17.13.

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Table 17.13 Overall plant design criteria – Base Case

Item Source Unit Nominal value Design value

Ore Characteristics
Angle of repose of the wet ore degree 50 50
Angle of repose of the mix ore-dust degree 40 40
3
Bulk Density of ore (dry) t/m 1.37 1.37
Ni - Nominal value - LOM average Snowden % 1.41 1.41
Ni - Design value - early years LOM plan 1.80 1.80
Fe HM % 16.50 16.50
Fe : Ni ratio - nominal ratio 11.70
Fe : Ni ratio - design ratio 9.17
Co HM % 0.050 0.050
SiO2 HM % 40.22 40.22
MgO HM % 17.60 17.60
SiO2 / MgO HM % 2.29 2.29
Al2O3 HM % 4.57 4.57
CaO HM 0.08 0.08
S TBC - HM %
P TBC - HM %
K2O TBC - HM %
Na2O TBC - HM %
SO3 TBC - HM %
TiO2 TBC - HM %
MnO HM % 0.39 0.39
Cr2O3 HM % 1.16 1.16
LOI at 982°C HM % 11.89 11.89
Plant throughput
One Line Flowsheet Capacity Mtpa (dry) 0.9 0.9
Nickel in the ore - NOMINAL % Ni 1.41
Nickel in the ore - DESIGN % Ni 1.80
Nickel in ore feed to plant - NOMINAL tpa 12,690
Nickel in ore feed to plant - DESIGN tpa 16,200
Nickel recovery - overall % 93.0 93.0
Nickel production - NOMINAL - refined Fe-Ni MB - D396 t/yr 11,803
Nickel production - DESIGN - refined Fe-Ni MB - D396 t/yr 15,067

17.4.1 Ore receipt, crushing and homogenising

The design criteria for primary and secondary crushing are shown in Table 17.14 and for
homogenising the design criteria are shown in Table 17.15.

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Table 17.14 Design criteria for ore receipt and crushing – Base Case

Item Source Unit Nominal value Design Value

Primary crushing
Operating hours h/yr 6,570 6,570
Availability % 75 75
Fixed grizzly gap Mm 500 x 500 500 x 500
Ore moisture content % 30 30
Fresh ore Feed rate Mtpa 0.9 0.9
Fresh ore Feed rate Tpa (wet) 1,285,714 1,285,714
Fresh ore Feed rate dry t/hr 137.0 137.0
Fresh ore Feed rate wet t/hr 195.7 195.7
Crusher type type sizer sizer
Crusher gap Mm 200 200
Kiln dust recycling - FROM dust storage
Operating hours h/yr 6,570 6,570
Availability % 75 75
Temperature °C 150 150
Dust moisture content - dust bin % 0 0
Dust moisture content at drum inlet % 10 10
Recycling load - % of dry fresh ore feed % 20 20
Dust addition dry tpa 180,000 180,000
Dust addition wet tpa 200,000 200,000
Dust addition dry mt/hr 27.4 27.4
Dust addition wet mt/hr 30.4 30.4
Total Feed to the contacting drum – ore + dust tpa (dry) 1,080,000 1,080,000
Total Feed to the contacting drum – ore + dust tpa wet 1,485,714 1,485,714
Total Feed to the contacting drum – ore + dust dry mt/hr 164.4 164.4
Total Feed to the contacting drum – ore + dust wet mt/hr 226.1 226.1
Moisture content in the mix 27.3 27.3
Secondary crushing
Operating hours h/yr 6,570.0 6,570.0
Availability % 75.0 75.0
Feed to the screen wet mt/hr 226.1 226.1
Moisture content in the mix % 27.3 27.3
Screening size Mm 80.0 80.0
O/S fraction moisture content % 15.0 15.0
O/S fraction partition % 30.0 30.0
wet mt/hr 58.0 58.0
U/S fraction % 70.0 70.0
wet mt/hr 168.1 168.1
U/S fraction moisture content % 31.6 31.6

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Table 17.15 Design criteria for homogenising – Base Case

Item Source Unit Nominal value Design Value

System Stacker/ Reclaimer Stacker/ Reclaim Stacker/Reclaim
Number of stockpiles # 2 2
Angle of repose Degrees 34 34
Ore bulk density wet t/m3 1.25 1.25
Type of stockpile protection covered covered
Feed TO stockpile wet mt/hr 226.1 226.1
wet mt/day 5427 5427
Stockpile capacity - each Days 8 8
wet tonnes 43418 43418
Reclaiming capacity FROM stockpile to Dryer t/hr 199.5 199.5
Operating hours # 7446 7446
Availability % 85 85

17.4.2 Rotary dryer and tertiary screening

The design criteria for the rotary dryer are shown in Table 17.16and for tertiary screening
and crushing in Table 17.17. At the time of preparing this report a decision regarding the
sizing of the associated emergency ore stockpile was still pending.

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Table 17.16 Design criteria for the rotary dryer – Base Case

Item Source Unit Nominal value Design Value

Rotary Dryer + Tertiary Screening
Dryer dimensions TBC diameter m
Dryer dimensions TBC length m
Fresh ore treated PER dryer line Mtpa (dry) 0.9 0.9
%moisture in ROM ore % 30 30
Fresh ore treated PER dryer line tpa (wet) 1,285,714 1,285,714
% recycled dust % of dry ore 20 20
%moisture in recycled dust to contact drum % 10 10
Total recycled dust PER line tpa (dry) 180,000 180,000
Total recycled dust PER line tpa (wet) 200,000 200,000
Total feed rate PER Dryer - ore + dust Tpa (dry) 1,080,000 1,080,000
Total feed rate PER Dryer - ore + dust Tpa (wet) 1,485,714 1,485,714
% moisture in dryer feed - total ore + dust 27.3 27.3
Operating hours h/yr 7446 7446
Availability % 85 85
Fresh ore feed to dryer dry mt/hr 120.9 120.9
Fresh ore feed to dryer wet mt/hr 172.7 172.7
Dust feed to dryer dry mt/hr 24.2 24.2
Dust feed to dryer wet mt/hr 26.9 26.9
Total feed to dryer dry mt/hr 145.0 145.0
Total feed to the dryer wet mt/hr 199.5 199.5
Moisture in the feed to the dryer % 27.3 27.3
Target moisture in the dryer product % 18 18
Dryer product wet t/hr 176.9 176.9
dry t/hr 145.0 145.0
Dryer water removal t/hr 22.6 22.6
Arising dust % 1.0 1.0
dry t/hr 1.5 1.5
Dust particle size mm < 0,2 < 0,2
Dust moisture % 3.0 3.0

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Table 17.17 Design criteria for tertiary screening and crushing - Base Case

Item Source Unit Nominal value Design Value

Operating hours h/yr 7,446 7,446
Availability % 85 85
Type of screen model vibrating vibrating
Feed to the screen wet t/hr 176.9 176.9
Feed to the screen dry t/hr 145.0 145.0
Screening size mm 30 30
O/S fraction % 30 30
O/S fraction tonnage dry t/hr 43.5 43.5
O/S fraction wet t/hr 51.2 51.2
U/S fraction tonnage wet t/hr 125.7 125.7
Moisture content in the mix % 18 18
Moisture content in the O/S % 15 15
Moisture content in the U/S % 20.1 20.1
Crusher type type roll roll
Crusher gap mm 30 30
Emergency dried ore stockpile
Storage capacity TBC h 20 20
Storage capacity t 3,341 3,341

17.4.3 Rotary kiln

The rotary kiln is one of the key installations for the treatment of nickel laterites in a
pyrometallurgical process and is, as a result, of significant importance. A schematic for a
typical rotary kiln is shown in Figure 17.14 with the design criteria for the Project rotary kiln
shown in Table 17.18.

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Figure 17.14 Rotary kiln - typical schematic

COMPRESSED AIR

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Table 17.18 Design criteria for rotary kiln – Base Case

Item Source Unit Nominal value Design Value

Kiln dimensions diameter m 5.5 5.5
Kiln dimensions length m 120.0 120.0
Operating hours h/yr 7,884 7,884
Availability % 90 90
3
Feed bulk density t/m 1.25 1.25
3
Calcine product bulk density t/m 1.20 1.20
Moisture content in the kiln feed % 18.0 18.0
Arising dust - % of fresh ore - design % 20 20
Ratio calcine / dry fresh ore MB ratio 0.86 0.86
Fresh ore feed rate to kiln dry mt/hr 114.2 114.2
Recycle dust feed rate to kiln dry mt/hr 22.8 22.8
Ore + dust feed rate wet mt/hr 167.1 167.1
Ore + dust feed rate dry mt/hr 137.0 137.0
Reductant coal feed rate dry mt/hr 7.9 7.9
Reductant coal feed rate - % of fresh ore feed % 7.0 7.0
Fixed carbon - % of fresh ore feed % 4.4 4.4
Calcine production MB - B284 t/hr 98.6 98.6
Ni content in the fresh ore % 1.41 1.80
Nickel content in the calcine % 1.64 2.09
Kiln Nickel recovery % 98 98
2+
Pre-reduction (Fe) % Fe /Fet 70 70
0
Pre-reduction (Ni) %Ni /Nit 20 20
Target Residual LOI % 0.5 0.5
Target % fixed carbon in calcine % 2.3 2.3
Calcine temperature at discharge °C 850 850
Calcine temperature at feed to furnace °C 825 825
Kiln off-gas dust recovery system Type ESP ESP
Kiln dust temperature °C 300 300
Kiln dust transportation temperature °C 150 150
Kiln off-gas flow rate Nm³/hr 195,000 195,000
Kiln off-gas temperature °C 350 350

17.4.4 Coal treatment and fuel oil

The design criteria for the coal preparation areas used both as reductant as well as fuel in the
process, are shown in Table 17.19. The design criteria for fuel oil are shown in Table 17.20.

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Table 17.19 Design criteria for coal production plant – Base Case

Nominal Design
Item Source Unit
value Value
Coal calculations
Coal calorific value kcal/kg 7,300 7,300
Granulometry - maximum mm 80 80
Coal % carbon - Ultimate analyses % 81.3 81.3
Coal % Fixed Carbon % 62.6 62.6
Reductant
Free moisture in the coal % 6.5 6.5
Fixed carbon - FC - in the coal % 81.3 81.3
Coal consumption - dry kg coal/t dry fresh MB
dry kg/dry t ore 69.5 69.5
ore E203
Coal feed rate to kiln feed dry t/hr 7.9 7.9
Coal consumption - wet t/hr wet t/hr coal 8.5 8.5
Fuel Coal - Kiln
Fuel consumption @ 100% Partition EB H68 MJ/t dry fresh ore 2005 2005
Coal calorific value MJ/t coal 30,514 30,514
Coal consumption - % of total energy % 90 90
Coal feed rate to kiln burner dry t/hr 8.7 8.7
dry kg/t dry fresh
Coal consumption - kg/t fresh ore EB C57 76.4 76.4
ore
Fuel coal - Dryer
Fuel consumption - base total wet feed MJ/t total wet feed 411 411
Coal partition % 90 90
Coal feed rate to the burner dry t/hr 2.54 2.54
Coal consumption - wet kg/t wet feed EB E27 kg/t total wet feed 13.6 13.6
Coal preparation plant
Coal consumption - overall t/hr 19.2 19.2
Coal consumption - overall t/yr 150,202 150,202
Operating hours TBC h/yr 7,446 7,446
Coal production t/hr 20.2 20.2

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Table 17.20 Heavy fuel oil – Base Case

Item Source Unit Nominal value Design Value

Fuel Oil calorific value kcal/kg 9,800 9,800
Fuel oil calorific value MJ/t 40,964 40,964
Energy required - percentage of total - KILN % 10 10
Energy required in the KILN EB G129 MJ/t dry fresh ore 201 201
Energy required - percentage of total - DRYER % 10 10
Energy required in the DRYER EB G135 MJ/t total wet feed 41.1 41.1
Fuel consumption in the KILN - fresh ore t/hr - of dry fresh ore 0.6 0.6
Fuel consumption in the KILN - fresh ore kg/t dry fresh ore 4.9 4.9
Fuel consumption in the DRYER t/hr of total wet feed 0.20 0.20
Fuel consumption in the DRYER kg/t of total wet feed 1.00 1.00

17.4.5 Electric furnace and associated equipment

The electric furnace used for smelting the calcined ore feed is the most significant equipment
item in the pyrometallurgical treatment of nickel laterite ores. A typical graphic depicting such
a furnace is shown in Figure 17.15. As a result of the importance of the furnace, the design
criteria for the furnace are of critical importance to the overall process design. Table 17.21
shows the design criteria as specified by IGEO for the electric furnace.

Figure 17.15 Typical electric arc furnace schematic

ATM

ATM ATM

ROTARY KILN PRODUCT

RECYCLING

PUMPING STATION

GRANULATED SLAG

TAPPING POSITION
METAL TO REFINING

SETTLING POND

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Table 17.21 Design criteria for electric furnace – Base Case

Item Source Unit Nominal value Design Value

Availability - RK - EF combined % 90 90
Operating hours h/yr 7,884 7,884
Ni recovery across furnace MB E289 % 95 95
Calcine feed t/hr 98.6 98.6
% Ni 1.64 2.09
Fixed carbon in the calcine feed %C 2.30 2.30
Mass ratio slag / calcine MB ratio 0.893 0.893
Slag product
Slag tapping temperature °C 1,550 1,550
Slag liquidus temperature °C 1,380 1,380
Slag superheat delta T °C 170 170
Ave rate over 24 hrs t/hr 88 88
Ni content of slag MB D303 % Ni 0.09 0.12
Tapping mode hours per day 15-20 15-20
Analyses %FeO 18.8 16.8
MB %SiO2 52.0 53.6
MB %MgO 22.7 23.5
MB %Al2O3 5.9 6.1
MB Ratio SiO2/MgO 2.29 2.28
TBC % Cr2O3
Fe reduction across furnace % 31.70 40.50
Metal product
Metal tapping temperature Tapping temp. °C 1,470 1,470
Metal liquidus temperature Liquidus temp. °C 1,440 1,440
Metal superheat delta T °C 30 30
Ni % 20.0 20.0
C max % 1.00 1.00
Si max % 0.30 0.30
P max % 0.10 0.10
S max % 0.50 0.50
Cu TBC % < 0.20 < 0.20
Co TBC % < 0.67 < 0.67
Ni/Cu ratio > 100 > 100
Ni/Co ratio > 30 > 30
Fe-Ni production MB C295 ave t/hr over 24hrs 7.7 9.8
Fe-Ni production MB C294 Fe-Ni t/yr 60,217 76,873
Ni contained in Fe-Ni MB D294 nickel t/yr 12,043 15,375

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Item Source Unit Nominal value Design Value

Energy consumption EB C132 kWh/t calcine 501 511
Energy consumption kWh/h 49,399 50,385
2
Furnace power density TBC kW/m 230 230
Furnace characteristics
2
calculated area required m 215 219
circular furnace internal diam M 18.0 18.0
rectangular furnace. length TBC M
rectangular furnace width TBC M
transformer rating TBC MVA 63.0 63.0
furnace power TBC MW 49 50
wall cooling copper elements copper elements copper elements
Slag granulation
water / slag - regular ratio t/t 15 15
water / slag - design ratio t/t 20 20
pressure - minimum Bar 7 7
design water flow rate m³/hr 1,761 1,761
Moisture content % 6 6
Size Mm <6 <6
Angle of repose dry degree 35 35
De-dusting system
Furnace gas temp at outlet TBC °C 1,000 1,000
process gas & slag / metal TBC Nm³/hr 80,000 80,000
Calcine feed bins TBC m³/hr 40,000 40,000
metal and slag launders TBC m³/hr TBC TBC
Filter type type bag filter bag filter
Solids recovery % of calcine feed 2.0 2.0
Solids recovery mt/hr 2.0 2.0

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17.4.6 Refining

Table 17.22 Design criteria for refining – Base Case

Item Source Unit Nominal value Design Value

Operating hours h/yr 8,322 8,322
Availability % 95 95
Ni production in Fe-Ni MB D396 t/yr 11,803 15,067
Refined Fe-Ni production MB C396 t/yr 58,141 74,222
Ni Recovery Refining MB D401 98.0 98.0
Crude metal temperature °C 1,470 1,470
Refined metal temperature °C 1,630 1,630
Refined metal composition
Ni % 20.3 20.3
C max % 0.04 0.04
Si max % 0.04 0.04
P max % 0.03 0.03
S max % 0.04 0.04
Cu % < 0,50 < 0,50
Co % <0,67 <0,67
Ni/Cu ratio > 40 > 40
Ni/Co ratio > 30 > 30
Ladle furnace
Capacity t 25 25
Freeboard m 1.0 1.0
Refractory lining type basic basic
Refractory consumption kt/t Fe-Ni 5.7 5.7
Number of heats heats/yr 2,409 3,075
Number of heats heats/day 6.6 8.4
Energy consumption kWh/t Fe-Ni 160 160
Furnace power TBC MW 5.6 5.6
Power Factor TBC ratio 0.85 0.85
TBC MVA - design 7.0 7.0
Gases
3
Oxygen addition Nm /t 10 10
Oxygen purity % 95 95
3
Nitrogen addition Nm /t 0.5 0.5
Reagents
Lime - Total DeS and DeP kg/t 102 102
FeSi kg/t 3.0 3.0

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Item Source Unit Nominal value Design Value

CaSi kg/t 2.1 2.1
Al kg/t 10 10
CaF2 kg/t 3 3
De-dusting system m³/hr 150,000 150,000
Refining Slagging system
Oxidising slag handling water granulated water granulated water granulated
Oxidising slag t/heat 1.6 1.6
Reducing slag handling slag pot slag pot slag pot
Total slag production t/heat 3.3 3.3
Total slag production t/yr 11,803 15,067

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17.4.7 Metal granulation

Table 17.23 Design criteria for metal granulation – Base Case

Item Source Unit Nominal value Design Value

Operating hours h/yr 8,322 8,322
Availability % 95 95
Technology supplier Uddeholm Uddeholm
Refined metal grade - %Ni MB D395 % Ni 20.3 20.3
Granulation rate t/min 1.5 1.5
Temperature °C 1,630 1,630
granulation time minutes 35 35
Granulation tank height m 4 4
Granulation tank diameter m 3 3
Water for granulation
Temperature °C 30 30
Flowrate m³/hr 700 700
Pressure bar, minimum 6 6
Granulated Metal system
Transfer system from tank compressed air compressed air compressed air
Temperature °C 50 50
Dewatering hopper hopper
Granulated metal dryer
type Rotary Rotary Rotary
Feedrate t/hr 25 25
Final moisture % 0.6 0.6
Fuel gas / diesel
Granulated metal screening
Type Rotary Rotary Rotary
Screen size mm 2,5 and 50 2,5 and 50
Fines Fraction < 2 mm % 3 3
Fines fraction t/heat 0.75 0.75
Final Product storage capacity TBC t 3,000 3,000
Final Product storage capacity TBC days 18 14
Final product Lots TBC 4 4

17.5 Manpower Requirements

The human resource requirement for (steady state) for the management and operation is
given in Figure 17.16.

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Figure 17.16 Human Resource Requirement

17.6 Mass and energy balances

The process mass balances have been developed from an IGEO model and the energy
balances from IGEO data base of information which includes data from other similar projects.
These will be subject to verification when the budget proposals have been received from the
main equipment suppliers for the Project but it is anticipated that the information in the IGEO
balances conform to the level of accuracy of this pre-feasibility study.

17.7 Ramp-up
In determining what would be a reasonable ramp up period for Araguaia, consideration was
given to ramp up curves developed by McNulty who had carried out extensive evaluations of
ramp up rates actually achieved on projects. Fundamentally McNulty had classified the curve
types depicted in Figure 17.17 as follows:

 Type 1: Process with mature technology which had been implemented in other projects.
 Type 2: Such a project was developing a prototype and with which the testing carried out
was incomplete.
 Type 3: Similar to Type 2 but with very limited pilot testing and little knowledge of
variation likely to occur in the feed material.
 Type 4: Characteristics similar to Types 2 and 3 but with a more complex flowsheet.

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Figure 17.17 McNulty curves of plant ramp

Source: McNulty

For the Project, a ramp up curve between McNulty Types 1 and 2 is considered. These
curves are depicted in the graphs in Figure 17.18 together with another but smaller Fe-Ni
plant (Project A) which has been in operation for some 12 years.

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Figure 17.18 McNulty curves 1+2 and Project A

Source: McNulty

Consequently the proposed ramp-up period for the Base Case is shown in Table 17.24. The
Base Case depicts a rapid ramp-up rate because the size of furnace envisaged (50MW) has
been well proven in many operations internationally.

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Table 17.24 Preliminary processs ramp-up - Base Case

Month
Ni Recovery Ni Produced
Year Month Tonnage
Actual % % of Ni Input
% of Nominal
1 1 50 45 22.5
2 55 65 35.8
3 60 75 45.0
4 69 78 53.8
5 76 81 61.6
6 83 83 68.9
7 87 85 74.0
8 90 87 78.3
9 93 88 81.8
10 95 90 85.5
11 100 90 90.0
12 100 93 93.0
2 13 100 93 93.0
14 100 93 93.0
15 100 93 93.0
16 100 93 93.0
17 100 93 93.0
18 100 93 93.0
19 100 93 93.0
20 100 93 93.0
21 100 93 93.0
22 100 93 93.0
23 100 93 93.0
24 100 93 93.0
Notes: 1) Nominal plant feed 900ktpa dry ore
2) Ni production = % of Ni input in ROM ore

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18 Project infrastructure
18.1 Summary
The scope of infrastructure described within this section includes the Project site
requirements at Araguaia as well as the existing road infrastructure, identified as the
preferred transport route to the Port at Itaqui in the city of São Luís for the import of coal for
Project. Considerations have been given to the potential for using the port of Itaqui for the
export of Fe-Ni product but this PFS considers the sale of Fe-Ni at the mine gate. Rail has
also been described as there may be potential to utilise this infrastructure in future years but
it does not form part of the PFS design solution.

The proposed infrastructure for the Project will include:

 Access and site roads

 Water supply
 Coal storage facility
 Slag storage facility
 Security and fencing
 Water cooling facility
 Water treatment and minesite sewage
 Fire-fighting system
 Employee housing and transportation
 Data and communications infrastructure
 Power supply

The mining area is expansive and key infrastructure is associated with the processing plant
and smelter facilities.

The Project site layout is presented in Figure 18.1

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Figure 18.1 Site layout

Source: PRIME and IGEO

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18.2 Plant site selection

The location of the plant site was selected on the basis of a trade-off which considered:

 environmental impact
 logistics and mine waste disposal
 topographical suitability
 ore transportation distances
 slag dumping facilitation
 suitability of location for provision of water cooling facility

Four locations were considered A, B, C and D as shown in Figure 18.2. Location B was
selected as the optimal location.

Figure 18.2 Location of plant location options

18.3 Roads
The Project site is located approximately 200 km from the main BR-153 highway which is a
Federal highway providing one of the key transport corridors for the area (Figure 18.3). The
Project is supported by an existing road system within the state of Pará which includes a
network of dirt tracks currently used for access by local farms.

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Figure 18.3 Regional road infrastructure

Source: IGEO-Google Maps

This PFS considers the existing road system for all in-bound and out-bound logistics from the
port of Itaqui in the city of São Luís and the Project site for the:

 supply of coal – 160,000 tpa (wet)

 supply of all consumables

plus

 potential transportation of Fe-Ni product – 74,222 tpa

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Coal will be imported from the port of Itaqui which is 1150 km from the Project. Coal could
also be imported from Vila do Conde Port in Barcarena as required. For the purposes of this
PFS, Fe-Ni product is sold at the mine gate; however there is potential synergy between the
deliveries of coal, from the port to the mine, with an opportunity to transport Fe-Ni product on
the return journey for export.

The consumables required for the Project are indicated in Table 18.1.

Table 18.1 Annual consumption of main consumables

Description Unit Value

Fuel oil t/year 6,302
LPG t/year 181
Oxygen Nm³/year 681,942
Nitrogen Nm³/year 75,771
Lime t/year 5,304
Magnesium oxide t/year 606
Ferrosilicon t/year 227
Fluorspar t/year 1,061
Aluminum t/year 758
CaSi wire t/year 152
Coal dry t/year 142,438

Other consumables include Söderberg electrode paste/bricks, various refractories (kiln,

smelter, and refinery), spare parts, employee uniforms and PPE, etc.

The existing road system was considered the most cost-effective solution following a detailed
options study that included road, rail and waterways. Figure 18.4 shows the considered road
transport corridor.

A consideration for Fe-Ni product would be the potential economic benefits of increasing the
utility of bulk haulage to include coal transport to the mine site and Fe-Ni product to port, on
the return journey to port.

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Figure 18.4 Road transport corridor to São Luís (port of Itaqui)

Source: IGEO-Google Maps

18.3.1 Main access road

Access to the Project site will be made by linking in with the existing road, the PA449 which is
the main road connecting Conceição do Araguaia and Floresta do Araguaia, via a purpose
built 44 km sealed road giving access for the town of Conceição do Araguaia where it is
anticipated that the majority of the workforce will live and be sourced from. This road will
provide access for all consumables for the Project site as well as all construction materials
and machinery. Figure 18.5 shows the proposed location for the access road.

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Figure 18.5 Map showing proposed access road to the Project site

Source: IGEO-Google Maps

18.3.2 Trunk roads

These roads provide access and haulage routes between the various open pits and will be
designed to support on–highway truck traffic (35 t trucks) and off-highway traffic (40 t trucks).
These are described in more detail in Section 16.15.

18.3.3 Ancillary plant site roads

Plant site roads will be developed to facilitate plant requirements. These will be sealed
roads.

18.4 Rail
The rail network does not form part of the proposed PFS design solution. There may be
potential utility subject to future rail developments. For the purposes of this study, rail has
been included for information purposes only.

The region is supported by an integrated rail network which is owned and operated by Valec
as described in Section 5.5.3.

Rail transport has been considered in the PFS as an option for bulk transport of coal and Fe-
Ni. This would have involved trucking to and from the railhead at Colinas (200 km east of the
Project), which is the main rail terminal for the North-South (FNS) railway. The North-South
railway connects to the Carajás railway (200 km to the North) at Açailandia town which goes
directly to Itaqui port.

The rail option has been excluded from this Base Case on economic grounds in favour of
road haulage.

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18.5 Port facilities

As stated, the existing network of federal highways establishes the transport corridor for all
Fe-Ni, coal and other consumables. The transport solution for this PFS considers utilising
bulk road haulage along these highways from the Project to the port at Itaqui (Figure 18.6).

Figure 18.6 Satellite image of the port at Itaqui

Source: Google Earth

The port administration is the responsibility of the Empresa Maranhense de Administração

Portuária (EMAP) which administers ports across the states of Maranhão, Tocantins, SE of
Pará, N of Goiás and NE of Mato Grosso).

The port at Itaqui, is reached by roads (BR-135 and BR-222) and railway (CFN –
Northeastern Railway Company and EFC Carajás Railway Company and North - South
railway). It may also be reached by river. These transport options were considered in an
option study for the PFS with road haulage being the preferred option.

The port wharf is 1,616 m in length with depth varying from 9 m to 21.5 m, distributed in 7
bays and includes the facilities which are detailed in Table 18.2 and equipment as detailed in
Table 18.3.

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Table 18.2 Available facilities at the port of Itaqui

Facility No Description Capacity

2
Warehouse 1 1 Covered facility 7500 m
Temporary covered 2
Warehouse 2 1 3000m
facility for bulk solids
3
Fuel storage tanks 50 21,000 m
3
LPG tanks 2 8,680 m

Table 18.3 Available equipment at the Port of Itaqui

Equipment No Description Capacity

Ship-loaders 2 bulk material handling
Reach stackers 2 container handling
Mobile crane 1 material handling 64t
Crane (tracked) material handling 6.3t
Fork-lift 20 material handling

The port facility has two private terminals, one of them is owned by VALE for iron ore from
Carajás and Fe-Ni from Onça e Puma. The wharf has a capacity for 450,000 DWT ships,
one opened storage yard with 125,000 m2 for iron and manganese ore. The other terminal,
which 252 m long, is owned by Alcoa, Billiton, and Novelis for bulk material shipping, such as
bauxite and aluminium ingots.

IGEO has not held discussions with the relevant port authorities. However, it is understood
that the port authorities will have capacity for the project requirements as the port facilities at
Itaqui has been underutilised.

18.6 Supply chain solution (Coal and Fe-Ni)

The supply chain solution for coal (and Fe-Ni) is described in the following sections.

18.6.1 Coal supply

The coal supply chain for the Project includes coal reception at port, port operation, storage,
shipping, transport, and receiving and unloading at Project site, as depicted in Figure 18.7.

Figure 18.7 Coal supply chain

There are two port options for coal importation. The first one is Itaqui Port, in São Luís (MA),
and the second one is Vila do Conde, in Barcarena (PA).

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Storage at the port is provided by a cargo terminal, and then the coal is transported to site,
where it is received and unloaded into the coal storage yard. Each alternative route has been
considered in this study.

Coal handling at the port will be carried out by third parties.

18.6.2 Fe-Ni export

The PFS considers selling Fe-Ni product from the mine gate. No costs have been included
for the transportation of Fe-Ni product to the port or storage and shipment thereof. However,
the PFS did consider potential solutions which would be elaborated in subsequent studies.

Two alternatives were considered for exporting Fe-Ni product from the Project site:

 container stowage at Project site and then road haulage to port

 road haulage to port and stowage performed by a logistics operator in a cargo terminal

The preferred solution was to consider road haulage of Fe-Ni to port and then to utilise a
logistical operator to load containers then onto ships – this process is described below.

The process consists of renting the containers, which will be stored in a depot by a logistical
contractor. Fe-Ni is delivered in bulk to the cargo terminal by road and stored in storage bays
ready for export. The logistics contractor will then collect the empty containers from the depot
and load them with Fe-Ni product and stow them, seal them and, after concluding
administrative procedures, ship them to the port terminal for further ship loading, as per
Figure 18.8.

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Figure 18.8 Fe-Ni export process, container stowage at port

Similarly to thermal coal supply, the battery limits considered in this study include haulage
from the Project site to the Itaqui port. An alternate port would be Vila do Conde Port in
Barcarena (PA) but only the port at São Luís is considered here. Other assumptions include
100% of production exported through the above mentioned ports, and maximum Fe-Ni
production to be exported of 74,222 tpa.

No costs were considered for container rental, as the current market practice provides 15
days free of charge. In addition, there may be opportunity to negotiate improved terms with
the transport providers due to the large volumes being considered.

Fe-Ni handling at Port would be conducted by third parties.

18.6.3 Supply chain synergy

This PFS considers the savings provided by road haulage for coal and Fe-Ni shipment. The
proposed logistical solution for this PFS considers the delivery of coal by truck and then
loading of empty trucks with Fe-Ni product for road haulage to the Port. In this manner,
economies will be made by increasing the utilisation of road haulage.

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The coal will be received and unloaded at the Port, transported to the cargo terminal, where
the coal is stored and then loaded onto trucks, and transported to the site. At the project site,
the coal is unloaded into coal storage facility and then washed to prevent contamination,
loaded with Fe-Ni and then taken by truck to the cargo terminal at the port of Itaqui. At the
cargo terminal, Fe-Ni will be stored in prepared bays and then stowed in 20 ft containers
ready for export. The containers will then be hauled by truck to the port terminal to be loaded
aboard the ship.

18.7 Water supply

Water will be supplied via a 10 km purpose built pipeline from the river Arraias do Araguaia
where a pumping station will provide adequate water requirements for the processing plant
and smelter, as required, as make up water.

The management of the water used for processing is such that all water, whether it is for
cooling or for metal and slag granulation, will be contained in a closed system, with the
cooling water dam the main reservoir where all water flows to. The cooling water dam
receives the water at 40 C, after being partially cooled in a spray cooling tank, used for
cooling of slag and metal granulation water where around 60% to 70% of the total energy
input to the electrical furnace is contained. It is cooled down to 30°C to 35°C before being
pumped back to the elevated reservoir for recycling. Water make up is performed at an
elevated reservoir which will further reduce the water temperature.

Plant and potable usage has been estimated for the Base Case as indicated in Table 18.4
(expressed as m3/hr). The estimate is for a Base Case processing rate of 0.9 Mtpa and use
of a pre-constructed plant.

Table 18.4 Base Case water requirements

Average Maximum Peak

Use 3 3 3
(m /h) (m /h) (m /h)
Raw 130.97 123.96 137.97
Softened 42.52 38.44 46.59
Demineralised 12.84 12.84 12.84
Potable 33.33 33.33 33.33
Total 219.66 208.58 230.74

Water requirements in addition to process usage will be for road works, dust suppression and
mobile plant wash-down during the wet season and is estimate at between 30 m3/hr and
40 m3 /hr.

Other potential water sources are discussed in Section 18.12.2.

18.8 Coal storage facility

A covered coal storage facility will be provided and will consist of a flat area for the
containment of 30,000 m3 of coal. This designated area will be compacted and engineered to
accommodate a drainage scheme, appropriate bunding and containment to accommodate
and mitigate against potential pollution from coal run-off into the immediate environment.

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Coal will be transported to site and directly discharged onto a receiving hopper with grizzly,
located in a shed. Coal will then be extracted from the hopper and transported to the coal
stacker or tripper conveyor which will then discharge the coal to a covered storage area with
capacity for 30,000 m³ (wet). A front-end loader will reclaim the coal from one of the two
stockpiles and discharge it into the coal crusher feed hopper.

18.9 Slag storage facility

Three sites were identified as potential slag storage areas. These sites were further
investigated with regards to the Brazilian national legislation’s Protected Areas National
System, which establishes environmentally protected zones. The selected site is described
herein. Figure 18.9 shows the area in consideration.

Figure 18.9 View of selected slag dump site

Source: HZM, 2013

The total volume of slag produced over the 25 years is estimated at 9.93 Mm 3. The proposed
slag disposal facility has a total surface area of approximately 78.7 ha of which the in-situ
material will be ripped and re-compacted to form the base layer and liner. There will be four
benches, each with a vertical height of 15m, a final maximum design elevation of 60 m from
base and an overall slope of 1V:3H. The slag disposal facility has a maximum total storage
capacity of 25.80 Mm3 at a placed density of 1.67 m3. Figure 18.10 shows the location of the
slag dump in relation to the plant site.

The slag storage area layout includes a toe drain that runs along the north western and
western perimeters of the area as well as a toe wall to form the boundary of the slag storage
area. Adjacent to the slag storage area is the drainage management area consisting of a
catchment paddock, drains and a solution trench. The catchment paddock drains are
partitioned by catchment paddock division walls every 50m.

A solution trench is positioned on the western edge of the slag storage area. The solution
trench leads to a silt trap and water retention dam, located to the south of the slag storage
area. A decant outlet, located within the water retention dam, is connected to a pump
system, which enables water to be pumped from the water retention dam back to the plant for
reuse. A storm water diversion trench is proposed to flank the water retention dam along its
north east perimeter. Figure 18.11 provides a detailed plan of the slag dump and water
retention dam.

A geotechnical evaluation for the siting and design of the slag dump was completed as part of
the PFS.

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Figure 18.10 Location of slag dump in relation to plant

Source: Prime

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Figure 18.11 Detailed plan of slag dump and water retention dam

Source: Prime

18.10 Security and fencing

The production area will be delimitated by a fence with higher security required at the
production centres including key fixed assets. The requirement is not only to minimise any
potential security risk but also to minimise any potential livestock entering the area and
posing a danger.

An entrance checkpoint and barrier will be provided at main access points.

During the construction period, it is anticipated that the main contractors will be responsible
for all security features to minimise any delays by the potential theft of key equipment. This is
a normal feature for all developing mine sites and has been considered.

18.11 Water cooling facility

The purpose of the water cooling facility is to reduce the temperature of the quenching water
used during slag granulation. Below the slag fines settling tank, water sprays are used in a
spray cooling tank to reduce the temperature of the slag granulation water to below 40 °C
degrees.

The area selected for the Base Case is immediately to the South of the Plant facility and is
shown in Figure 18.1.

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Cooling water from the spray cooling tank overflows into a large water cooling dam, built
across the valley below the spray cooling tank. This water cooling dam is large (~15 Ha) with
a substantial surface area to allow the temperature of the water to reduce from approximately
40°C to around 30°C.

The proposed water cooling dam construction is to be a homogeneous earthfill embankment

dam, with a side channel stormwater overflow (or spillway) to manage water flow from
excessive rain such that the dam itself never overflows. The level in the dam is controlled by
a pumping system from the water pumping station at the Arraias do Araguaia River. At the
embankment of the dam, a pumping station recycles the cooled water to the elevated
reservoir or directly to the slag granulation nozzles for slag granulation, metal granulation,
minor consumers and emergency cooling of high temperature components of the furnace.

The construction of the earthfill embankment will be from selected sandy-clay material
sourced from inside the dam basin itself, thereby also increasing the overall capacity of the
dam basin by using the material from inside the basin and along the flanks of the dam. The
upstream slope (1:3) of the earthfill embankment will be covered in a geo-fabric and rip-rap
from the selected ferricrete boulders sourced on site. The downstream slope (1:3) will be
grassed. Along the downstream toe of the embankment, there will be a series of drainage
systems to monitor and collect any seepage through the embankment and manage water
flow. The side channel spillway will be designed for a 1:100 year flood event. Stormwater
inflow into the dam will be limited to rainwater falling in the dam. A detailed plan of the water
cooling facility is provided in Figure 18.12.

Figure 18.12 Detail of water cooling facility

Source: Prime

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18.12 Water treatment and minesite sewage

18.12.1 Water requirements

The three main project water requirements are for:

 metallurgical processing and mine usage

 haul road maintenance and ROM dust suppression
 potable supply.

18.12.2 Water sources

Four principal water sources have been identified:

 river water
 mine dewatering of groundwater inflow
 rain catchment on plant waste dumps and the open pit
 catchment from the slag dump enclosure.

Mine dewatering

No hydraulic testing has been conducted to provide a method of modelling the rate of
increase in groundwater inflow with mine depth or lateral progress.

Estimates based on inferred values of storativity and transmissivity for the rock formation to a
depth of 40m suggest that groundwater inflows will range from 10 m 3/hr in the first year, to 40
m3/hr by year twenty.

Open pit and mine infrastructure rain catchment

Estimates on recoverable rainfall runoff suggest that wet season runoff could provide an
average of 116 m3/hr. This supply would be highly variable over short periods of time,
depending on rainfall intensity factors. A more detailed estimate on catchment probability
will be possible on availability of more detailed climate data in subsequent studies.

Slag storage impoundment

This impoundment has potential to store water and allow for an even rate of extraction when
compared with the more intermittent pumping regime that will be required to cope with
sporadic storm catchment to the pit.

It is proposed that the slag dump will have a clay-lined base which will allow for the
accumulation of rainfall. Controlled seepage, through walls and floor, will be directed to a
catchment dam and returned for plant use. Controlled seepage through the clay-lined base
will enter the groundwater system, some of which will resurface as downstream spring flow
and will be available for pumping back to the plant as required.

Recoverable water from a designed slag dump decant system has been estimated to range
between 40 m3/hr to 50 m3/hr.

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Minesite sewerage

The preliminary design for a sewerage treatment system has been sized for an estimated
peak workforce of 400 people expected for the operational phase of the project. Sewage will
be treated septic tanks, sewers and filters, duly sized for service throughout the project life
time.

For the construction phase, the use of the same sewage treatment system as in the
operational phase is being considered.

18.13 Fire-fighting system

All the main plant areas of the Project will be equipped with fire-fighting and prevention
systems, in accordance with guidelines set by the Brazilian Standards Association (ABNT).
All equipment, fixed and movable assets will be equipped with fire-fighting and prevention
systems to ensure safety of all employees and equipment.

The following components are part of the fire-fighting and prevention systems, according to
the classification of risks involved in each facility and for specific utilization.

 hydrant system with hose points

 automatic sprinkler systems
 foam-based systems
 fixed CO2 extinguishing systems
 portable fire extinguishers
 fire water storage tank
 fire truck

18.14 Employee housing and transportation

For the purposes of this PFS, ablutions, refectory and associated administration and
management facilities will be provided on site. It is anticipated that the town of Conceicao do
Araguaia, which is 35 km from the proposed site, will provide the main accommodation centre
for all employees.

Transportation will be provided by a regular bus service which could be outsourced to a local
contractor.

18.15 Communications
The mine will be designed to accommodate world-class communication facilities. The project
is provided with existing communication facilities in the immediate vicinity which will be
extended to accommodate the Project as required.

Enterprise resource planning (ERP) systems would be considered to ensure efficient

procurement, time management and overall resource planning for the facility. This would
accommodate efficient in-bound and out-bound logistics to minimise cost of inventory of
product and consumables.

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18.16 Power supply

18.16.1 Overview of the Brazilian energy market

Between 2003 and 2004, the federal government determined the basis for a new model for
the Brazilian electricity sector, which is defined by Laws nº 10,847 and 10,848 of 15 March,
2004, and Decree nº 5,163, of 30 July, 2004.

In institutional terms, the new model established the creation of the agencies as shown in
Table 18.5.

Table 18.5 Federal agencies for Brazilian electricity supply managment

Agency Mandate
Energy Research Company (EPE), Long-term planning of the electricity sector
Monitoring and assessment of the security of power
Electricity Sector Monitoring Committee (CMSE),
supply
Maintain continuity with respect to commercialization
Electric Energy Trading Chamber (CCEE) of electricity in Brazil and to monitor and control the
activities of the Wholesale Electricity Market (MAE).

With respect to the commercialization of electricity and its overall supply, two entities were
established for purchasing and selling electricity: the Regulated Contracting Environment
(ACR), where Electricity Distribution and Generation Agents participate; and the Free
Contracting Environment (ACL), where Generation Agents, Traders, Importers and Exporters
of electricity and Free Consumers participate.

18.16.2 Power distribution and transmission (national perspective)

The electricity distribution system in Brazil is regulated by ANEEL, which is governed by

directives established by laws approved by the National Congress and the decrees
established by the Federal Government.

The private sector is responsible for 80% of the power distributed in the country. By the end
of March 2013, the Brazilian electricity transmission network had established 107,400 km of
power grid.

The transmission system for the North region supplies the states of Pará and Tocantins.
These are described below:

18.16.3 Pará state power capacity and distribution

Power distribution for the state of Pará is provided from the grid at voltage levels between
500 kV and 230 kV.

The total amount of currently installed and operating power in the state of Pará, in the area
supplied by the electrical grid or Sistema Integrado Nacional (SIN), is approximately 8,866
MW, 95.4% of it being provided by hydropower. The load profile for the state of Pará forecast
for 2012-2021 considers three levels (heavy, medium and light) which are presented in
Figure 18.13. The average annual growth of power requirements is approximately 5.4%.

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For clarification, Light, Medium and Heavy refers to a period of time during a typical day. It is
expected that Heavy may be Lower than Medium due to the fact that the Heavy period
corresponds to the period of time 19:00 up to 22:00, and a corresponding higher price of the
energy. It would be cost-efficient operational practice to consider lowering the power
consumption of furnaces during this period in order to reduce cost.

Figure 18.13 Load evolution, Pará state

Source: MME, 2013

18.16.4 Tocantins state power capacity and distribution

The power distribution for the state of Tocantins is provided by a Basic Grid at voltage levels
of 500 kV and 230 kV, the main supply point being Miracema SE at 500 KV. The total
amount of currently installed and operating power in the state of Tocantins is around 1,500
MW, 100% of it being hydropower.

The load requirements for the state of Tocantins foreseen for the period 2012-2021, for three
levels (heavy, medium and light) is presented in Figure 18.14. It can be seen that the
average annual growth of the heavy load is approximately 1.3%.

Figure 18.14 Load evolution, Tocantins state

Source: MME, 2013

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18.16.5 Electrical energy source

Table 18.6 gives the total amount of electricity generated in Brazil from various sources. This
index is known as Electrical Energy Internal Offer (OIEE) which is depicted for the period of
2011 and 2012 in Figure 18.15. Most of the electricity in Brazil is produced via hydroelectric
generation.

Table 18.6 2012/2011 Sources of electrical power in GWh

GWh Structure %
Source 12/11 %
2011 2012 2011 2012
Hydraulics 428.333 415.342 -3,0 75,5 70,1
Nuclear 15.659 16.038 2,4 2,8 2,7
Natural Gas 25.095 46.760 86,3 4,4 7,9
Mineral Coal 6.485 8.422 29,9 1,1 1,4
Oil Products 12.239 16.214 32,5 2,2 2,7
Biomass 32.791 35.296 7,6 5,8 6,0
Industrial Gas 8.451 9.376 10,9 1,5 1,6
Wind 2.705 5.050 86,7 0,5 0,9
Import 35.886 40.254 12,2 6,3 6,8
TOTAL 567.644 592.752 4,4 100 100

Source: MME, 2013

Figure 18.15 Brazilian supply of electrical energy (OIEE) breakdown

Source: MME, 2013

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18.16.6 Estimated Project power requirements

Electrical power will be provided by the existing 500 kV line at Colinas, approximately 110 km
from the Project site. An alternate shorter line (35 km) was considered (Paráuapebas –
Miracema), but the timing for existing Government plans for this particular line is beyond the
present project timeline, but should be reviewed again when planned construction occurs.

The substation at Colinas is owned by Eletronorte who maintain the connection to Serra da
Mesa, which is part of the North System. Energy supply capacity is considered robust and in
the near future, another transmission line from Belo Monte will be established thereby
shortening the distance from110 km to 35 km by the year 2018.

Power requirement

The electrical demand for sizing of the substation and the transmission line was established
from the estimated electrical load which is summarized in Table 18.7.

Table 18.7 Nominal and peak load demand

Nominal Peak
Substation Areas
MW MW
Ore preparation
Primary crushing
300-SE-001 Dust recycling 1.66 1.75
Crushing
Homogenizing shed and reclaiming
Ore drying
Tertiary screening and crushing
360-SE-001 1.54 1.62
Emergency stockpile
Coal handling and crushing
Rotary kiln (calcination)
Kiln off-gas handling
410-SE-001 1.64 1.72
Dust handling
Fuel oil
Smelting
Refining
Metal granulation
Product storage, handling and dispatch
Technical office
Stores
440-SE-001 Restaurant 8.91 9.36
Refueling station / Wash and lubrication bay
Laboratory
Dressing room
Reception and gate
First aid/ Work health/ safety
Workshop
440-SE-101 Smelting 51.00 51.00
470-SE-101 Refining 1.22 1.22
610-SE-001 Water supply 1.50 1.58
620-SE-001 Cooling water facility 5.00 5.25
TOTAL 72.48 73.49

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18.16.7 Connection to the 500 kV power grid

The study has determined that a 500/230 kV substation at Colinas will be required, together
with a 110 Km transmission line at 230 kV for the supply of power to the Project site. In
addition, a 230/13.8 kV substation will also be required at the Project site.

An alternative solution for of a 500kV transmission line was also considered, but was
eliminated on the basis of environmental impact following discussions with ANEEL.

An additional power option included the planned 35km-long Paráuapebas-Miracema 500 kV

transmission line, which would be developed close to the Project site. However, the current
plans are for implementation is in 2016 and was therefore eliminated as an alternative power
solution. However, it is suggested that this is reviewed during the next stage of the Project

Figure 18.16 shows the proposed 110 km transmission line as well as the shorter 500 kV
future possibility planned for 2016.

Figure 18.16 Power Transmission to the Project site

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18.16.8 Energy supply system configuration

The implementation of the transmission line for the project will involve the following:

 Construction of a 500/230 kV substation having an approximate area of 1 ha, next to the

existing Colinas substation. This substation will be similar to the existing Colinas
substation, as depicted in Figure 18.17 and Figure 18.18.
 Construction of a 110 km long, 230 kV transmission line to be defined in greater detail
during subsequent engineering studies, together with consultation with the power
transmission concession holder.
 Construction of a 230/13.8 kV substation at the Project site.

The 500/230 kV substation

The substation configuration features two transformers and manoeuvring assemblies. This
arrangement includes a standby transformer to maintain transformer availability in support of
the maintenance requirement (typically 45 days) and risk of damage.

Figure 18.17 and Figure 18.18 shows a satellite view of the existing Colinas substation and a
ground-level view of the same substation which will be similar to the substation proposed for
the Project.

Figure 18.17 Existing Colinas substation – Satellite view

Source: Google Earth

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Figure 18.18 Existing Colinas substation

Source: IGEO

230 kV transmission line

The 110 Km transmission line between the Colinas sub-station and the Project is illustrated in
Figure 18.19.

Figure 18.19 Colinas substation to Project power transmission line connection

Source: Google Maps

Based on similar projects in the region, an average of two transmission towers per Km was
estimated. The final route will depend on subsequent studies to be conducted together with
discussions with the concession holder.

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230/34.5 – 13.8 kV substation

As noted, the substation for the Base Case would be configured with output voltage of 13.8
kV with two transformers, one as a stand-by.

18.16.9 Conclusion

The proposed 230 kV, 110 Km transmission line from Colinas and the proposed sub-station
arrangement are required for the Project. The capital costs are provided in Section 21.0.

Further, it is understood that the proposed 230kV transmission line would be readily
approved and regulated by the relevant Government agencies. Figure 18.16 shows the
shorter Paráuapebas - Miracema transmission line (35 km) remains a future possibility but
not certain for the proposed time frame of the Project.

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19 Market studies
19.1 Fe-Ni market study
A study into the ferronickel market was completed for Horizonte by CRU Strategies (‘CRU’) in
the fourth quarter of 2012.

19.2 Sources of nickel supply

According to Sherritt / CRU (January 2014), global mined nickel production in 2013 was 1.9
Mt (of contained nickel), with about 60 % originating from sulphide ores and 40% from
laterites. Sulphide ores account for about 30% of global resources and as the larger nickel
sulphide deposits are exhausted, the proportion of Fe-Ni as a source of nickel units in the
market is forecast to increase, because most new projects coming on stream are
predominantly nickel laterite, processed through either hydro-or pyrometallurgical routes, the
latter primarily producing Fe-Ni.

According to Sherritt / CRU (January 2014), the fastest growing source of supply in 2013 was
nickel pig iron (‘NPI’), which accounted for approximately 425,000 t. NPI is a lower grade
substitute for finished nickel and almost all production is located in China.

About 70% of Chinese NPI production and 50% of total Chinese nickel production utilised ore
from Indonesia in 2013. The raw materials export ban implemented by the Indonesian
government in January 2014 has the potential to remove about 300,000 tpa of nickel from the
market.

19.3 Outlook for nickel consumption

While there is no substitute for nickel units in stainless steel and other applications, a number
of primary nickel unit types are interchangeable e.g. refined nickel for Fe-Ni in stainless steel
mills. Global nickel demand is closely linked to trends in industrial production – according to
Sherritt / CRU (January 2014), primary nickel demand is expected to increase at an average
annual rate of approximately 6% to 2018. Primary demand for non-stainless applications is
expected to rise by approximately 4% per annum, driven in particular by demand in non-
ferrous alloys and batteries.

19.4 Principal applications of Fe-Ni and market position of

Araguaia product
In this study the Project plans to produce a 20% nickel in Fe-Ni product.

While the Fe-Ni market is not subdivided around Ni grade, there is however a distinction
between the ferronickel and nickel pig iron (NPI) markets. Ni grade is not the only factor and
impurities are a significant component affecting product attractiveness.

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With a proposed Fe-Ni of 20 % Ni the Project’s product is higher grade than typical NPI
material (mainly 8-12%Ni) but at the lower end of Fe-Ni product grades. Stainless steel mills
in China will usually input nickel units as NPI and Ni cathode or Fe-Ni and Ni Cathode or a
mix of all three. Depending on the exact stainless steel product that the mill is producing, the
feed mix will differ. This is also the case outside China, however NPI is only used in Chinese
mills.

It is anticipated that the 20% nickel in Fe-Ni product propsoed to be produced by the Project
will be more attractive than a 30% Ni product when iron payablility is less than 100% as the
volume of non-payable iron received is potentially greater. Furthermore a 20% Fe-Ni avoids
the stainless mill having too many iron units and needing to buy extra cathode to balance the
feed compared to purchasing a lower grade Fe-Ni.

Any stainless steel mill can in theory change its Ni feed product as long as the appropriate
balance in the feed mix is established. European and other non-Chinese mills have not had
success in dealing with the processing of NPI impurity levels and as such do not use NPI,
which means that those mills are seen as a market for the Project’s product.

While the optimal Fe-Ni product for a consumer is totally dependent on their stainless steel
mill feed mix and there being no standard, optimal grade, the 20% Fe-Ni product proposed
from the Project sits comfortably in the Fe-Ni product range available in the market.

19.5 Nickel price forecasts

The following price forecast metrics were utilised in establishing the Base Case economic
evaluation presented in Section 22 of this report.

1. Consensus Economics Inc Ni price forecast December 2013

2. Historic 10 year nickel price – Nickel Institute http://nickelinstitute.org/

Consensus forecast as published by Consensus Economics Inc. in December 2013, and

based upon analysts expectations across a range of financial institutions, as set out below in
Table 19.1.

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Table 19.1 Consensus Economics forecast11

Nickel (US$/tonne) 2017 2018 2019-2023 (nominal) 2019-2023 (real)

Consensus (Mean) 19,348 20,061 22,519 19,109
High 24,251 24,568 26,446 22,443
Low 15,135 16,467 18,188 15,432
Standard deviation 2,766 2,754 3,238 2,409
Number of forecasts 16 14 9 11
Liberium Capital
Citigroup 24,000 24,000 24,000
Macquarie Bank 22,000 23,999
Wilson HTM 19,842 21,495 23,756 19,486
Commonwealth Bank 22,908 24,568 26,446 22,046
CIMB Group 18,250 18,700 18,700 16,119
RBC Capital Markets 24,251 23,126 20,944
Investec 18,188 18,188 18,188 16,563
Econ Intelligence Unit 18,521 19,006
IHS Global Insight 20,465 22,153 25,710 22,443
BNP Paribas
Barclays Capital 18,200
Societe Generale 17,500 19,000
Credit Suisse 18,000 20,000
Oxford Economics 16,200 17,398
UBS 20,173 20,678 18,078
Numis 16,497 17,009 18,356 15,432
Morgan Stanley 17,637 18,188 24,392 20,890
Euromonitor International 15,135 16,467

Historic Average Ni Prices are were sources from Bloomberg and presented in Table 19.2
below. The Ni price, over the past 10 years, has averaged US$ 20,283 /t.

11
Survey Date, December 16, 2013 © Copyright Consensus Economics Inc.

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Table 19.2 Historical annual Ni metal price

Mean: 10 years
Year
Ni Price: actual US$/t
2004 13,854
2005 14,766
2006 24,196
2007 37,118
2008 21,004
2009 14,711
2010 21,811
2011 22,843
2012 17,526
2013 14,992
Average 20,283

19.6 Iron credit forecast

The proportion of the iron content that stainless mills typically pay for varies considerably
according to market conditions, fluctuating between 0 and 100% in recent years, with mills
unwilling to pay for some or any of content in a surplus market, with the opposite being true in
an under supplied market.

Table 19.3 illustrates typical Fe credits for a 17% Ni in Fe-Ni product in recent years:

Table 19.3 Typical Fe credits for a 17% Ni, Fe-Ni product.

FeNi Gross
LME 3 month Weight per Fe element Fe credit
price tonne Ni in Fe Ni % Ni component remaining per tonne
$ / tonne
$/lb $ / tonne Fe Ni $ / tonne Fe Ni $ / tonne Fe Ni Fe in FeNi
2008 9.66 3,964 17% 3,619 344.5912 415
2009 6.68 2,648 17% 2,503 145.1376 175
2010 9.92 3,792 17% 3,717 75.1744 91
2011 10.4 3,896 17% 3,897 -0.672 - 1
2012 8.03 3,009 17% 3,009 0.3196 0
Source: CRU Stra tegi es

As can be seen from Table 19.3, 2008 and 2009 and 2010 can be characterised as under
supplied, and 2011 and 2012 over supplied.

The iron credit applied in the financial evaluation of $ 150 /t iron in Fe-Ni is close to the
average for the past 5 years of $ 136 /t Fe in Fe-Ni and assumes a tightening in supply,
consistent with the anticipated improvement in the Ni price from recent and current levels.

The QP has reviewed the above and that the results support the assumptions in the technical
report.

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19.7 Economic evaluation price

As can be seen from the two Ni price metrics set out above, the consensus forecast Ni price
of US$19,348/t is broadly comparable to the 10-year historic average of US$20,283/t, the
average across the two sets of figures of US$19,816/t.

For the economic evaluation in this study, the Base Case uses a lower figure of US$19,000/t
($8.62/Ib Ni) and an iron credit of US$150/t ($0.06/Ib Fe). A fixed price for both Ni and Fe
has been used through the life of mine.

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20 Environmental studies, permitting, and social or

community impact
20.1 Introduction
This chapter considers the environmental and social aspects of the project, based upon work
completed to date, with a view to compliance, from an international best practice and
Brazilian perspective, for fulfilment of regulatory requirements for permitting and licencing.

20.2 Project background

Pará state had a GDP of R$ 77.8 billion in 2010, representing 2.1 % of Brazil’s total GDP.
The major industrial activities to the economy of Pará are mining (iron, bauxite, manganese,
limestone, gold and tin), timber, agriculture, industry and tourism.

Project area of influence has been defined in terms of national legislation. The area of
influence covers the intersection between the project and the terrain (direct impact resulting
from footprint), the local watercourses directly affected by the project, and the catchment /
basin affected indirectly by the project. The full extent and therefore impact of the project has
not yet been assessed because of the early project phase. The full area of influence, as
defined by Performance Standard 1, will be considered during the Environmental Impact
Assessment (EIA-RIMA).

The project area is characterised by flat-topped highlands with a downward slope across the
project area from west to east towards the Araguaia River (refer to Figure 20.1). The region’s
climate is categorized as being equatorial super-humid, with wet summers and dry winters
with periodic droughts. Historically, the area in consideration has been cleared to support the
agricultural industry. The vegetation profile in the proposed mining area is comprised of
savannah, semi-deciduous forest, riparian forest and ombrophillous forest. Local farming,
which operates at a commercial level, consists of cash crops including rice, maize / corn and
pineapples.

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Figure 20.1 Project location

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20.3 Project description

ROM ore will be mined by means of mechanical excavation and hauled by truck to
intermediate and pre-blending stockpiles. Blended ore will be reclaimed from these
stockpiles by means of a backhoe or front-end loader and hauled by 20 tonne trucks to the
processing plant. Fe-Ni production will take place using the RKEF process which involves
the preparation, drying, calcining, smelting of the ore and refining of the produced Fe-Ni and
ultimately the granulation of the smelting slag for disposal (see Figure 20.2). The granulated
slag is then transported by truck to the proposed slag disposal facility.

Figure 20.2 Process flow diagram for the Project

CRUSHER
RECEPTION SHED

DUST BIN

ELECTRO STATIC
PRECIPITATOR

O RE HOMOG ENISATIO N

CRUSHER

DRYER

ROTARY KILN
CRUSHER

FeNi GRANULATION

SLAG ELECTRIC
G RANULATION WAT ER

FURNACE

LADLE FURNACE

W ATER SPRAY SLAG DUMP

COO LING TANK

COOLING
W ATER DAM

RO TARY FeNi SHOTS

SCREEN DRYER

FeNi SHOTS
STO RAGE

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From initial geochemical testing by SGS, it has been determined that slag produced by the
smelting and granulation process will be comprised primarily of SiO2 (50 %), MgO (24 %),
Fe2O3 (14.3 %) and Al2O3 (10.6 %) with trace elements of Co (60 ppm), Cr (3 120 ppm), Cu
(62.6 ppm), Li (68 ppm), Mo (8 ppm), Ni (948 ppm), V (109 ppm), Y (409 ppm) and Zn (119
ppm).

The Base Case is for a 25 year Life of Mine (LoM) with ore processing capacity of 900 ktpa
and 674 ktpa slag production respectively.

The total volume of slag produced over the 25 years is estimated at 9.93 Mm 3. This will be
accommodated in a waste dump as part of a waste management programme. The slag
dump will be lined with a clay liner which preliminary geotechnical testing indicates as
suitable after engineering and compaction. High clay content material is readily available on
site.

20.4 Legal framework

The investigations undertaken have described the regulatory framework for Social and
Environmental Impact Assessment (SEIA) within Brazil (locally known as the Estudo de
Impacto Ambiental - EIA) together with international obligations for the Project. These
include the International Finance Corporation (IFC) Performance Standards (PS) and World
Bank Group Environmental, Health and Safety (EHS) Guidelines.

20.5 Permitting
20.5.1 Permitting requirements

According to Resolution 237/97, issued by the National Environmental Council, three

consecutive environmental permits must be requested: Preliminary Licence, Installation
Licence, and Operating Licence. Refer to Table 20.1for further details.

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Table 20.1 Approvals and permits required

Responsible
Permit Objectives
authority/Legal basis
Exploration Licence National Department of Allows investigation into the mineral potential of
(Alavara de Pesquisa) Mineral Production (DNPM) the licence area.
Granted at the conceptual stage.
Approves the location, design, and environmental
Preliminary Licence Special Secretariat for the
sustainability of the project.
(Licença Prévia) Environment (SEMA)
Establishes the basic requirements and conditions
to be met in the next stage of implementation.
Authorizes the construction of the project in
accordance with the approved EIA-RIMA and
Installation Licence supporting documentation.
(Licença de Instalação) SEMA
(LI) The proponent must implement the mitigation
measures relevant to construction and must
ensure that monitoring occurs.
Operating Licence Authorizes project operation after effective
(Licença de Operação) SEMA compliance with the other licenses and mitigation
(LO) measures has been verified.
Conceição do Araguaia Amends land use authorisation to industrial /
Land Use Authorisation
Municipality mining.

Vegetation Removal For areas that will be cleared of vegetation.

SEMA
Authorisation (ASV) Valid for 2 years.
National Traffic Council
Transport, use and (CONTRAN) and Addresses environmental and health risk.
storage of chemicals
Ministry of Labour
Water Licence
SEMA Addresses impacts on water resources.
(Outorga)
Obtained on approval of the Plan for Economic
Mining Licence DNPM
Development (PAE) and LO authorization.

20.5.2 Permitting status

Horizonte Minerals has in place

1) An Exploration Licence for the property which is valid until 26 February 2016;

2) An Operating Licence (for exploration), which is valid until 21 May 2014. A request
for renewal or extension was submitted to SEMA on 17 January 2014; and

3) A Water Licence. A request for renewal was submitted to SEMA on 17 January 2014.

20.5.3 Permitting schedule

Refer to Table 20.2.

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Table 20.2 Permitting schedule

Permit Responsible authority Schedule / Timing

Exploration Licence Apply for prior to exploration. Valid for 3 years
DNPM
(Alavara de Pesquisa) (nickel).
Must have in place an Exploration Licence to apply
for LP.
An EIA-RIMA must be prepared and registered with
Preliminary Licence SEMA.
SEMA
(Licença Prévia) EIA-RIMA is presented to communities and
authorities at a public meeting. Authorities approve
or reject LP based on EIA-RIMA.
Valid for 3 years.
LP documentation must be presented.
Installation Licence Environmental Control Plan (PCA) must be prepared.
(Licença de Instalação) SEMA If PCA is approved, then LI is granted. Construction
(LI) may begin, with certain conditions.
Valid for 3 years.
LI documentation must be presented.
Operating Licence Authorities must be satisfied that construction
(Licença de Operação) SEMA occurred as per LI and any conditions.
(LO) for Mining Allows mining, processing, and sale of minerals.
Valid for 4 years; may be renewed.
Vegetation Removal
SEMA Applied for as and when required. Valid for 2 years.
Authorisation (ASV)
O Conselho Nacional
Transport, use and de Trânsito
(CONTRAN) and Applied for as and when required.
storage of chemicals
Ministry of Labour
Applied for as and when required. Valid for 2 years;
Water Licence (Outorga) SEMA
renewable.
Report on technical and financial feasibility of project,
Final Exploration Report
DNPM based on exploration results. If approved, proponent
(RFP)
has one year to apply for Mining Licence.
Requires an approved Final Exploration Report
Plan for Economic (RFP) stating technical and financial feasibility of the
DNPM project.
Development (PAE)
Valid for 1 year. Renewable for 1 year.
Obtained on approval of the Plan for Economic
Mining Licence DNPM
Development (PAE) and LO authorization.

20.6 Environmental and social investigations

Horizonte Minerals have to date undertaken investigations into climate, air quality, noise,
soils, flora, hydrology, geohydrology, protected areas, traffic and socio-economics, The
baseline studies have not all been completed and still require additional investigation.
Additional baseline studies also need to be undertaken – these include cultural heritage,
resettlement and fauna. No information on these aspects was available at the time of
compiling this report.

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Upon completion, the baseline studies will meet the requirements of international best
practice.

20.7 Summary of environmental baseline conditions

Baseline environmental conditions are summarised:

Climate

The region’s climate is categorized as being “equatorial super-humid”, with an average

annual temperature of 26.3° C (DBO Engineering, 2013). Relative humidity in Conceição do
Araguaia is considered elevated with a defined rainy season between November and May,
and a dry season from June through October. There is almost no rainfall during the dry
season months. The annual rainfall for the region is approximately 2 000 mm (DBO
Engineering, 2013). The rate of evaporation and transpiration in the project area is
considered to be lower than, or at most equal to, precipitation (WALM, 2013).

Air quality

Dust monitoring has been undertaken at Oito, Gorgulho and Santa Maria from July 2012 to
June 2013. Results indicate very high dust emissions at Gorgulho in August 2012 and May
2013, and at Oito in October 2012, which may be partially due to clearing of land by burning
during the dry season (March to October). These values do not exceed the CONAMA
standards of 2 500 µg/m3 for ambient dust, but do exceed the IFC target values of 50 to 150
µg/m3 for prevention of air quality deterioration. The monitored dust values are higher than
the ambient limits provided by Brazil.

Noise

Noise monitoring was conducted at 10 sites within and around the project area. Based on
these results, the more rural sampling points have average daytime noise levels between
41.3 and 47.3 dB. Sample points along a major road have average values of 50.8 to 56.3 dB,
likely elevated as a result of traffic noise. The monitored noise values are higher than the
ambient limits provided by Brazil.

Topography

The project area is characterised by flat-topped highlands and sloping surfaces towards the
major river systems (KH Morgan and Associates, 2013). There is a downward slope across
the project area from west to east towards the Araguaia River. The highest elevation of the
project area is 360 mamsl and the lowest elevation is 217 mamsl.

Soils

There are four major soil types in the whole project area:

Alfissols are mineral soils, with non-hydromorphic soil horizons (light colour, characteristic of
the loss of clay, iron or organic matter), underlain by horizons which have a reddish to
yellowish colour due to an iron oxide content below 15 %. The clay content of the soil
increases with depth. These soils contain low values of Ca, Mg and K, with a base saturation
of below 50 %, and are acidic soils.

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Gleysols are formed under conditions of prolonged soaking (high water table) in the
floodplains near the Araguaia River. These soils are poorly drained, strongly acidic, and
shallow. The hydromorphic conditions cause a mottled appearance of reddish-yellow or red
within the soil profile. These soils normally have less than 2.5 % of organic matter content in
the surface or topsoil horizon. The topsoil horizon has a thickness of approximately 46 cm.
These soils are susceptible to erosion.

Entisols have their soil horizon directly on rock or rock fragments with a diameter greater than
2 mm (gravel, cobbles and boulders). Entisols are not hydromorphic soils and they have little
resistance to weathering. These soils are heterogeneous in terms of their chemical, physical
and mineralogical characteristics. The texture and colour is closely related to the source
material.

Dystrophic soils consist of mineral material (oxisols) with a horizon of >50 cm. The soil
horizon is situated 200 to 300 cm, sometimes 2m, below the surface. In general, oxisols are
non-hydromorphic and porous. The red-yellow colour of the soil is related to the removal of
silica and the exchangeable cations (Ca2+, Mg2+, K+), leading to enrichment with iron oxides
and aluminium (aggregating agents). The oxisols have a low erosion potential due to their
depth and their uniform texture.

The agricultural potential of the soils within the project area is considered moderate (WALM,
2013).

Land use

Much of the project area has been historically cleared for pastures and agriculture. The
extent of original forest remaining within the project area will be determined during ongoing
investigations.

Flora

The area of influence can be classified as transitional forest, with vegetation characteristic of
both the Dense Forest Biome and the Amazon Biome. Plant species identified included
those which could adapt to both these biomes, as well as species exclusive to either of the
biomes.

The vegetation profile in the area of influence is comprised of the Savannah (characterised
by xerophyte vegetation), Semi-Deciduous Forest (occurring in water-scarce areas), Riparian
Forest (along the Pau d’Arco and Arraias do Araguaia rivers) and Ombrophillous Forest
(transitional forest).

In total, 248 species were identified within the project area. Of the identified species, ten are
considered to be vulnerable according to SEMA. Two of these (Cedrela fissilis (cedar)
(endangered) and Cedrela odorata (white cedar) (vulnerable), are protected in terms of the
IUCN Red List of Threatened Species. It must still be determined (during ongoing
investigations) whether there are protected species in the areas that are proposed to be
cleared of vegetation.

Hydrology

The project area falls within the Araguaia-Tocantins Hydrological Basin. The major surface
water resources within the project area include the Araguaia River and tributaries thereof
including the Salobro River and the Arraias do Araguaia River (DBO Engineering, 2013).

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Regional drainage is west-to-east towards the Araguaia River. The entire region is drained
by the Araguaia River basin, with the sub-basins of the Pau D’Arco and Arraias do Araguaia
Rivers being especially relevant since the latter is a direct tributary of the Araguaia River.
Several other watercourses, including the streams of Grotão São Domingos, Grotão do Ferro,
Grotão do Ouro, and Grotão do Régis, also flow into the Araguaia River via the left bank
(DBO Engineering, 2013).

The major rivers have extensive deposition of sandy alluvium within wide sheets of shallow
water, retained by low sandbars. Part of the headwaters of tributaries of these two systems
drain from the nickel mineralised project areas to Rio Arraias.

Surface water sampling has been undertaken at 29 locations within the project area between
November 2011 and October 2012. Cyanide, chromium (total), phosphate, mercury,
selenium and vanadium all exceed the Class I CONAMA limits (drinking water, aquatic
health, crop cultivation) at almost all the sampling points. It is likely that this is related to the
geology of the area, but may impact on water management during project operation, to
ensure that these values are not increased or concentrated further.

Geohydrology

Groundwater occurs at a shallow depth of a few metres throughout the region. The saturated
oxidised rocks are clayey, have high water storage, and generally low to very low water
transmissivity. Permanent to semi-permanent springs occur at the headwaters of most small
creeks and maintain permanent to semi-permanent stream flow and/or saturated stream
beds.

This piezometric level relationship indicates that the lower groundwater system under
Pequizeiro is downward draining to the regional groundwater system and is an influent
drainage (fed by precipitation) as compared to effluent flow by the phreatic upper aquifer
(recharging surface water). It is possible that these drainage systems may alternate between
effluent and influent flow between rainfall recharge periods.

Groundwater samples were collected monthly from nine sampling points (wells / boreholes)
between April 2012 and August 2013. Results indicate that groundwater is not suitable for
human consumption, because of the high values of total dissolved solids (TDS), lead, cobalt,
iron, nickel, and nitrogen exceeding the CONAMA limits for drinking water. pH is also acidic
in some areas, possibly those sample points near surface springs (due to interaction of water
with organic matter).

Protected areas

Pará has 83 protected areas, under the responsibility of SEMA. No protected areas were
identified within the project’s area of influence. There are however several local areas
considered important and protected in terms of the Protected Areas National System (Law
9985/2000). Areas relevant to the general project area include riparian zones of perennial
watercourses and springs (unless they are intermittent).

Traffic

A traffic survey was conducted on the PA449 road, which is the main road connecting
Conceição do Araguaia and Floresta do Araguaia (Horizonte Minerals, 2013). It is an
important road for the transportation of local produce. The road is approximately 110 km
long and classified as a class II vicinal (local) road, and passes 3 km to the east of the project
area.

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A 24-hour traffic count was conducted over three days, in September 2013. The morning and
afternoon peak hours were found to be between 07h00 to 08h00 and 17h00 to 18h00,
respectively. The maximum peak hour traffic recorded was 61 vehicles, 40 of which were
motorcycles.

20.8 Summary of social baseline conditions

Baseline social conditions are summarised:

According to the 2010 Census, the total population in Conceição do Araguaia is 46,206, with
a population density of 7.81 per km2. The population has grown by 5 % since
2000. Approximately 71 % (32 464) live in urban areas and 29 % (13 093) live in rural areas.

There are slightly more men (51 %) than women (49 %). The majority of the population
consists of residents aged 0 to 19 years (approximately 48 %), with only approximately 6 % of
the population being over 60 years of age. The predominant ethnic group is the brown /
mulatto ethnic group (61 %) followed by white (29 %), black (9 %) and indigenous (0.3 %).

The overall literacy rate in 2011 was 87.4 %, with women being slightly more literate (88.5 %)
than men (87.1 %). More students attend primary education than secondary education.

The majority of employment is within the commercial sector (48 %) followed by agriculture /
farming (24 %). Crops planted include pineapple, rice, beans, manioc (cassava),
watermelon, corn and soy beans; of which pineapple, corn and soy bean are the greatest
value crops. In terms of livestock husbandry, 69 % is cattle and 24 % is poultry; the rest is
made up by horses, buffalo, donkeys, mules, pigs, goats and sheep.

At the end of 2011, there were 2 816 formal jobs, most of them within the commercial sector,
with a greater number of men employed in this sector than women.

The majority of the families (71 %) living in Conceição do Araguaia live above the poverty
line, having a per capita monthly income of more than BRL 140, and 86.7 % of families are
supported by a single breadwinner. In the urban areas the average monthly income was R$
529.27, compared to R$ 261.34 in the rural areas.

The municipal road network has 52 routes and most of them are impassable due to poor
condition and disrepair. The morning and afternoon peak hours on the PA449 road,
connecting Conceição do Araguaia and Floresta do Araguaia, were found to be between
07h00 to 08h00 and 17h00 to 18h00, respectively. The maximum peak hour traffic recorded
was 61 vehicles, 40 of which were motorcycles. The dominant mode of transport is by
motorcycle (including scooters), making up 70 % of the vehicles in the municipality.

The major land use in the municipality is agriculture. Most of the agricultural establishments
are 20 to 50 hectares in size. The status of land tenure and ownership is unknown although
it is anticipated that much of this land is owned by the current farmers and/or residents.

Less than half of the dwellings in Conceição do Araguaia have access to running water. The
main water supply sources are wells or springs located on the properties. Other sources
include rain water stored in cisterns, water trucks, dams or streams. Of the 12 853 dwellings,
1.6 % have basic adequate basic sanitation facilities, 71.4 % have semi-adequate basic
sanitation facilities, and the remaining dwellings have inadequate sanitation facilities (latrines
or disposal into watercourses).

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In Conceição do Araguaia, waste is collected from 67 % of the dwellings. Where waste is not
collected, it is burned or buried on the property, or disposed of into vacant lots or rivers. The
municipality does not have a controlled landfill site or an adequate location for the disposal of
waste, so it is disposed of in a general dump.

20.9 Stakeholder engagement

The process of stakeholder engagement has to date only considered the identification of
stakeholders and the compilation of a Stakeholder Engagement Plan by Integratio.
Stakeholders include government departments (agriculture, land reform, nature conservation,
heritage, and mining), NGOs, community leaders and residents of both municipalities.
Villages within the municipalities include Vila Seringa, Vila Jonco / Lote Oito, Vila Chapéu de
Palha, Vila Canarãma, and the Fazenda Jacutinga region within Conceição do Araguaia; and
Vila Mendonça, Vila Tabuleiro and Vila Bom Jesus within Floresta do Araguaia.

20.10 Resettlement planning

It is likely that the project will require the purchase of land and relocation of certain
households. The extent of resettlement is not yet fully defined but it is currently being
investigated. Resettlement is expected to be voluntary, with land being purchased from
relevant landowners, and impacts on livelihoods being compensated. No forced relocation
will occur as a result of this project. Integratio has been appointed to undertake this
investigation.

There are no regulated compensation rates in Brazil, and actual values will be determined
upon negotiation with the various parties. A calculation has however been undertaken based
on Integratio’s experience in similar projects. This calculation considers only the land surface
that will be impacted on (within direct footprint and buffer area around the mine), and a
standard rate applied to land value. A total of 6 332 ha of land has been highlighted as the
area of influence, and an estimated value of US$ 2 166 per ha has been provided by
Integratio. A basic cost of land purchase has been calculated at US$ 13.7 M. This costing is
oversimplified and does not consider the cost of lost dwellings or livelihoods (where residents
may not be landowners), actual valuation of property, number of households or individuals
affected, and defined land required for purchase. It also does not consider the option of
leasing land in some cases.

20.11 Rehabilitation and closure

The Constitution of Brazil requires that areas disturbed by mining activities must be restored
by the mining concession holders. WALM is compiling the Environmental Impact
Assessment (EIA-RIMA) as required by Brazilian authorities and as part of that, likely within
the Environmental Control Plan, they will address rehabilitation and closure objectives in
terms of national legislation. Financial provision for ongoing environmental management, as
part of the Environmental Control Plan, will be addressed in the EIA-RIMA.

20.11.1 Mine closure

The following sections provide a philosophy of approach for closure activities for the mine pit,
processing and smelter facilities.

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Mine pit closure

The mining system will be designed for closure such that mined-out areas will be reclaimed
as a continual process as an integral requirement of mine planning and production.
However, it is not proposed to re-handle all the waste material back into the pits at the end of
the mine life.

It is anticipated that all topsoil will be stockpiled for future replacement to allow for re-
vegetation subsequent to mining activities.

With mine closure, and the cessation of all mining activities, the infrastructure within the mine
production area will be removed. A sequencing of closure events will be necessary for an
effective closure plan.

Processing and smelter facility closure

It is anticipated that decommissioning and demolition of all industrial structures will be

undertaken.

Closure costs

An estimate of closure-related costs has been calculated. The closure cost has been based
on international best practice parametric estimation rates.

The financial provision for closure is US$ 47 M.

20.12 Planning for feasibility

The feasibility study will be undertaken in terms of international best practice, i.e. Equator
Principles, International Finance Corporation (IFC) Performance Standards, and World Bank
Environmental, Health and Safety (EHS) Guidelines. In addition, the project will also comply
with the required Brazilian national legislation. WALM has been appointed to complete the
Environmental Impact Assessment (EIA-RIMA), and to address any Brazilian licensing
requirements.

Completion of baseline specialist studies

The following issues are currently being investigated but were not completed in time for
inclusion into the PFS report:

 Resettlement
 Fauna
 Cultural heritage.

These baseline studies are due to be completed before the end of 2014 and will be
incorporated into the feasibility study.

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Some of the baseline studies need to be further expanded. These include:

 Vegetation – to determine species composition of areas that will be cleared of vegetation,

and to determine whether any conservation important species will need to be relocated.
 Geohydrology – the specialist study must be expanded to address the other areas of the
mine. The current focus has been on the central Pequizeiro area. In addition, springs
have not been sampled for hydrochemistry, and this will be undertaken during the next
sampling season.

Social and environmental impact assessment

In order to comply with international best practice, the following aspects must still be
addressed within the EIA-RIMA:

 Identification and assessment of impacts - All the specialist studies undertaken to date,
including those that are still due to be completed, must identify and assess the potential
environmental and social impacts and risks of the project, including any cumulative and
third party impacts. Greenhouse gas emissions, climate change and transboundary
effects must be addressed. The impact identification process will also take account of
the outcome of the engagement process with affected communities.
 Management and mitigation of impacts - Management programmes will include mitigation
and performance improvement measures to address the identified environmental and
social risks and impacts of the project. Mitigation must ensure that the project operates
in compliance with applicable laws and regulations, and meets the requirements of
International Finance Corporation (IFC) Performance Standards 1 to 8.
 Stakeholder engagement - Stakeholder engagement is an ongoing process that should
occur early in project planning phase, and continue throughout the Life of Mine.
Stakeholders have already been identified, and a Stakeholder Engagement Plan
compiled. Integratio must ensure that this plan fully meets the requirements of
international best practice.

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21 Capital and operating costs

21.1 Cost estimation overview
The Base Case for this study assumes an ore processing rate of 0.9 Mtpa after an initial ramp
up period. The ore processing methodology is the pyro-metallurgical conversion of a nickel
bearing laterite ore into a Fe-Ni product using the RKEF process that will be sold at the mine
gate.

The pre-production capital costs in the cashflow model have been allocated 30% in year 1
and 70% in year 2 of the 2 years of construction. Deposits for equipment will be required on
the high value long lead items in year 1 and the balance of the purchase price will be required
in year 2.

The capital and operating cost estimates were prepared or advised by the following groups:

 Mining Snowden
 Process plant IGEO (Reviewed by Snowden)
 Onsite infrastructure IGEO (Reviewed by Snowden)
 Offsite infrastructure IGEO (Reviewed by Snowden)
 Environmental Prime Resources
 Social Prime Resources
 Corporate G & A Horizonte (Reviewed by Snowden)
 Royalties Earnest & Young (E&Y)
 Taxation E&Y
 Closure & Salvage Horizonte (Reviewed by Snowden)

The total estimated pre-production capital cost to engineer, procure, construct and manage
all of the works required to bring the Base Case into initial production is $582 million.

The objective of the Base Case study is to provide:

 the basis of a detailed economic evaluation of the project

 the basis of further studies to optimise the return on the investment
 a framework to increase confidence in the investment
 the basis for future studies.

Several option studies were undertaken that included an option for a higher plant throughput
of 2.7 Mtpa (Option 1) of ore in addition to a mining fleet owner operator (Case 2) at both
feed rates

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21.2 Exclusions
The following items are not included in the capital and operating estimations:

 Cost of studies and work prior to commencing equipment purchase and construction.
However an estimated cost has been included to be written off in the taxation section
 Import duties, withholding and purchase taxes based on advice from E & Y
 Foreign currency exchange rate fluctuations
 Risks due to potential government policy changes, labour disputes or permitting delays.

21.3 Capital costs

The capital costs have been estimated following a series of indicative prices received from
major equipment manufacturers and suppliers. The capital costs have been provided in
detail and for this report are summarised in Table 21.1 and Table 21.2. All of the capital costs
have been reviewed by Snowden.

Import duties on capital equipment not sourced or manufactured in Brazil are high and as
such work has been done to minimise or where possible eliminate importing items not
supplied originally or manufactured in Brazil. On advice from E & Y, no import duties have
been applied on capital equipment.

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Table 21.1 Base Case pre-production capital costs

Item $ Million
PLANT DIRECT 376.088
Site preparation 4.988
Plant ancillaries 10.950
Plant utilities 21.425
Ore preparation(included drying) 65.663
Coal preparation 26.631
Calcining 55.883
Smelting 147.187
Refining 43.360
PLANT INDIRECT 38.206
Temporary facilities and services/communication 2.119
Freight 6.528
Vendor representatives 0.448
Spare parts 4.093
EPCM services 24.000
Third party engineering 1.019
OWNER COSTS 18.313
Pre-production employment and training 2.793
Project and construction management 3.000
Construction power and catering 4.200
Insurance 4.820
Corporate travel & services 2.000
Security 1.500
INFRASTRUCTURE 56.034
Water supply 3.510
Road to site 21.739
Substation 500KV - 230KV 9.265
Power line 230 KV 12.826
Substation 230KV - 34.5KV 8.694
Slag Storage Facility 5.242
Site clearance 0.939
Earthworks & excavations 2.506
Drainage 0.612
Concrete structures 0.169
Miscellaneous 0.035
Fixed charge items 0.554
Remote location factor 0.427
Social 6.000
Mining 5.000
First fills and spares 1.200
Contingency at 15% 76.092
Total pre-production capital costs 582.176

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The social cost has been adjusted to reflect that the full project area cost will not be required
in the Base Case.

Table 21.2 Base Case production capital costs

Item $ Million
Mining & plant sustaining 43.313
Annual allocation 1.750
Total LOM sustaining 43.313
Closure (2 Years) 20.000
Total production capital cost 63.313
Salvage 1.400

The anticipated life of the major capital equipment is longer than the ore processing years for
the Base Case, the allocated sustaining capital to maintain the plant designed throughput has
been adjusted to reflect this and is considered adequate.

21.1 Operating costs

The operating costs have been estimated following a series of indicative prices received from
suppliers and also the extensive databases held by the major contributors. All of the
operating costs have been reviewed by Snowden and are presented in summary in
Table 21.3.

Import duties on supplies not sourced or manufactured in Brazil are high and as such work
has been done to minimise or where possible eliminate importing items not supplied originally
or manufactured in Brazil. On advice from E & Y, no import duties have been applied on
operating supplies.

IGEO appointed an independent consultant to provide advice on power costs. It was

determined that the power cost base for the PFS was 8.5 cents per kWhr and the rate applied
to the analysis was exclusive of taxes.

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Table 21.3 Base Case operating costs

12
Item $ Million $/Tonne - Ore
Mining (Contractor) 552.998 26.08
Mine & haul ore 137.228 6.47
Mine & haul waste 289.407 4.82
Fixed costs 126.363 5.96
Mining cost / tonne ore mined 26.08
13
Mining cost / tonne material moved 6.81
Processing 2,641.667 124.57
Ore preparation - variable 6.591 0.31
Pre furnace – fixed 545.339 25.72
Pre furnace – variable 1,060.125 49.99
Post kiln – fixed 168.014 7.92
Post kiln – variable 861.597 40.63
Off-site overheads 99.000 4.67
Total Operating Costs 3,293.665 155.32

The ore feed to the process plant comes from a number of pits, some of which are remote to
the plant. The cost of hauling the ore from these pits and the pre blending has been included
in the processing costs pre-furnace.

21.2 Royalties (CFEM)

The Compensation for Exploitation of Mineral Resources (CFEM) is a royalty payment akin to
a tax, created by the Federal Constitution as a compensation to the States and Municipalities
for the economic use of mineral resources in their territory.

CFEM is payable by legal entities in the mining industry that exploit or extract mineral
resources and are payable upon sale of the mining product. The CFEM rate applied to the
entity’s net revenues varies in accordance with the mining product, but cannot exceed 3% of
gross revenues, after deducting insurance, tax, and transportation costs. For nickel, the
applicable CFEM rate is 2%.

The CFEM revenues are divided as follows:

 10% for the Federal Government (DNPM and IBAMA);

 2% for the FNDCT (National Fund for Scientific and Technological Development);
 23% for the state (or Federal District) from which the mineral is extracted;
 65% for the municipality from which the mineral is extracted. In the case of where two or
more municipalities are involved, the CFEM must be paid to each municipality pro rata to
the volume of extraction carried out in each of them.

12
Except where noted
13
$/t of total material (ore and waste)

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The CFEM in Brazil is a tax on costs to a point in the process where the ore has not
undergone a physical change. The calculation of the CFEM is carried out using 2% of these
accumulated costs of production.

In the case of a pyro metallurgical project such as the Project the calculation of the CFEM
includes the following costs: mining, stockpiling, crushing, coal preparation, administration,
maintenance and some environmental costs up to and including calcining. The addition of all
these costs gives a value that will be multiplied by 2%. Based on this the life of mine
royalties used in the analysis are presented in Table 21.4, below.

Table 21.4 Royalties (CFEM)

Item $ million
CFEM 43.301

21.3 Taxation
The tax treatment adopted in the financial evaluation was based upon advice taken from E &
Y in Brazil. The Brazilian government is making efforts to improve the climate for foreign
investment as it seeks to develop a more market-oriented economy. Incentives are therefore
available for exporters and for which it is believed the Project would be eligible.

Most incentives apply to new investments and are offered by Federal, State or Municipal
governments. These generally include substantial reductions in taxes (mainly State VAT,
ICMS, as well as corporation tax), utility charges and other expenses. Federal incentives
(generally income tax reductions) are available for investments in less developed areas such
as where the Project is located.

Depreciation is calculated on a straight line method over 10 years.

The Project has been assessed as eligible for the various existing fiscal incentives available
and these have been assumed where applicable in quantifying the tax burden on the project

Summarised below are the principal taxes relevant to the project:

(i) Federal Corporate Income Taxes: There are 2 income taxes - the corporate income
tax and the social contribution tax on profits. They are imposed on similar taxable bases.

Brazilian corporate income tax (‘IPRJ’) is charged at a 15.25% rate, with a surtax of 10%
applicable to profits exceeding R$240,000 a year.

In addition, Brazil imposes a social contribution tax (‘CSLL’) on corporate profits. The social
contribution tax works similarly to income tax and it is charged at a 9% rate. Ordinary tax
losses may be carried forward with no time limit for offset against future operating profits.

Application of SUDAM incentive to IPRJ (25% Corporate Income Tax). A 75% reduction in
the 25%-rate IPRJ would be available to the project through application to SUDAM
(Superintendência do Desenvolvimento do Amazônia – the Development Superintendency
for the Amazonia Region), valid for 10 years from the initiation of commercial production.
Coupled with the 9% social contribution tax on corporate profits, this has the net effect of
reducing the effective rate of corporation tax from 34% to 15.25% over the first 10 years of
operations.

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The taxation regime applied in the cashflow model allows for the initial 10 years of production
at a taxation rate of 15.25% of the taxable income. Following this period taxation is payable at
the rate of 34% of the taxable income calculated after deducting all operating expenses and
depreciation of capital items.

(ii) Gross Revenues Taxes: PIS and COFINS are federal taxes charged on gross
revenues, on a monthly basis, under 2 regimes: cumulative and non-cumulative.

Current PIS and COFINS tax provisions were implemented in December 2002 (Law
10,637/02) and December 2003 (Law 10,833/03). As a result of such rules, the PIS and
COFINS rates were set at 1.65% and 7.6% respectively and a credit mechanism introduced

Imports – PIS and COFINS are generally imposed on the import of goods and services at a
combined rate of 9.25%.

(iii) Indirect Taxes: Both the Federal and State governments impose value-added tax
(VAT) type taxes in Brazil. Each manufacturing plant or branch of a Brazilian company is
generally considered an autonomous tax unit for both federal and state VAT purposes.

Federal Value Added Tax (IPI) Federal VAT (Imposto sobre Produtos Industrializados or IPI)
is charged on imports of goods, on the first sale of imported goods and on transactions
involving manufactured goods. Exports are tax exempt. The tax rate varies depending on the
product traded and ranges from 0% to 365%. IPI paid on an import transaction or on local
acquisitions generally becomes a tax credit to offset IPI charged on subsequent transactions.
Special rules apply to the import and sale of fixed assets.

State Value-Added Tax (ICMS): State VAT (Imposto sobre operações relativas à circulação
de mercadorias e sobre prestações de serviços de transporte interestadual e intermunicipal e
de comunicações or ICMS) is levied on the import of goods and on the movement out of
imported and manufactured goods, even if between branches of the sale legal entity. Exports
are tax exempt. ICMS paid on imports as well as on local acquisitions generally becomes a
tax credit to offset ICMS due on subsequent transactions. Special rules apply to the offset of
ICMS tax credits associated with the acquisition of fixed assets.

ICMS tax rates vary according to the state where the company and the acquirer of the goods
are located. Imports are generally subject to a 17% or 18% rate, while local transactions are
subject to rates varying from 7% to 18%. Transactions involving taxpayers located in the
states of the North, Northeast and Centre-West regions and Espírito Santo are subject to a
7% rate, while a 12% rate applies to transactions involving companies located in states of the
Southeast and South regions.

ICMS is also charged on the provision of transportation services, communication and

electricity.

(iv) Application of Indirect Taxes – Capital and Operating expenses: Where benefits
and special regimes exist for indirect taxes, it has been assumed that these are applicable to
the Project.

It has been assumed in this study that any credits built up on input taxes are offset against
Federal taxes on inputs. This will require confirmation through a more detailed tax evaluation,
including negotiations with the relevant authorities.

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(v) Other taxes relevant to the Araguaia Project

It is assumed that the majority of capital equipment will be sourced in Brazil.

In the eventuality of items being imported where these are not available in Brazil, it is
assumed that the ‘Ex Tarifário” benefit is granted. This reduces the rate of import duty usually
to 2%, or 0% where the Government considers that the fixed assets are of high importance
for the development of the Brazilian economy. The 0% rate has been assumed.

Furthermore, the rate can be reduced to 0% if the fixed assets are imported from a country
which has a trade agreement with Brazil (such as MERCOSUR) and provided that the goods
have certificate of origin with an also 0% taxation in the country of origin. For this project an
initial value of $15 million was allowed for previous expenditure not deducted.

The calculation of total tax paid in the financial model is presented in Table 21.5, below.

Table 21.5 Taxation

Item $ million
Taxation 668.051

21.4 Trade off studies

Case 1: 2.7 Mtpa, contractor mining and haulage

A trade off study using contractor mining and haulage was undertaken to test the economics
of the project at a plant throughput of 2.7 Mtpa (Option 1). The capital and operating costs
are shown in Table 21.6 below.

Table 21.6 Base Case – Option 1 contractor

Base Case (0.9 Mtpa) Option 1 (2.7 Mtpa)

Item
$ million $ million
Capital 645.488 1,593.131
Pre-production capital costs 582.176 1,436.134
Production capital costs 63.313 156.997
Operating 3,293.665 6,728.469
Mining 552.998 733.581
Processing 2,641.667 5,884.891
Corporate overheads 99.000 109.997
Royalties (CFEM) 43.301 84.841
Taxation 668.051 1,132.568

Case 2: owner operator

A further study was undertaken using an owner operator mining and haulage fleet to provide
a comparison with the Case 1 contractor study. The results are shown in Table 21.7 below.

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Table 21.7 Base Case – Option 2 owner operator

Base Case (0.9 Mtpa) Option 2 (2.7 Mtpa)

Item
$ million $ million
Capital 718.425 1,739.730
Pre-production capital costs 611.739 1,486.105
Production capital costs 106.686 253.625
Operating 3,106.320 6,436.750
Mining 406.985 534.134
Processing 2,600.335 5,792.619
Corporate overheads 99.000 109.997
Royalties (CFEM) 39.554 79.007
Taxation 700.321 1,166.497

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22 Economic analysis
22.1 The basis for choosing the Base Case
Several cases were studied to identify the financial implications to the Project.

The studies were:

 Plant throughput of 0.9 Mtpa using contractor mining and ore haulage
 Plant throughput of 2.7 Mtpa using contractor mining and ore haulage
 Plant throughput of 0.9 Mtpa using owner operator mining and ore haulage
 Plant throughput of 2.7 Mtpa using owner operator mining and ore haulage.

The Base Case chosen was the 0.9 Mtpa throughput using both contractor mining and ore
haulage. The reasons for choosing this model are:

 The 2.7 Mtpa throughput returned the highest NPV8 however in doing so all of the
reserves of ore at the Project were consumed leaving no room for flexibility over time
 The capital requirement for the 0.9 Mtpa model was significantly lower than the 2.7 Mtpa
model
 The models using owner operator returned a higher NPV8 than the contractor models
however the pre-production capital cost was reduced with the contractor model and this
cost was offset by higher mining costs over the life of the mine
 The IRR was similar for all models
 The unit KPI were similar for all models
 The breakeven price for Ni was slightly lower for the 0.9 Mtpa than the 2.7 Mtpa cases.

22.2 Base Case economic headline results

The following Table 22.1 and Table 22.2 provide the project headline results before and after
taxation:

Table 22.1 Base Case economic model headline results before taxation

Item Unit Value

Net Cashflow $M 2,433.933
NVP8 $M 730.067
IRR % 22
Production year payback years 4.1

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Table 22.2 Base Case economic model headline results after taxation

Item Unit Value

Net Cashflow $M 1,765.882
NVP8 $M 519.233
IRR % 20
Production year payback years 4.4

22.3 General criteria

Snowden prepared an economic cashflow and financial analysis model based on inputs
derived from mining and processing schedules as well as capital and operating cost
estimates including royalties (CFEM) for the Base Case. The model was prepared from
mining schedules estimated on a quarterly basis for the first 4 years of production and then
annually for the remaining project life. All inputs are consolidated annually in this report.

The cashflow model was based on the following:

 100% equity ownership by HZM

 Costing from 1 February 2013
 2 year pre-production period for plant construction
 No cost escalation
 All costs reported in USD and where costs were estimated in Brazilian Reais the
exchange rate used was 2.2 Reais to the USD.

The objective of preparing the cashflow model was to:

 collate all of the inputs for the following disciplines into a single model:
 Mining
 Processing
 Metallurgical
 Metal pricing
 Pre-production capital costs
 Production sustaining capital
 Operating costs
 Environmental costs
 Social costs
 Rehabilitation and closure costs
 Royalties (CFEM) and taxation.
 be flexible to enable options to be valued
 provide sufficient information to management so that they are supported in any decision
making process
 provide the basis for future studies.

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The economic cashflow model was then interrogated to determine the following values pre
and post taxation:

 Headline values:
 Net cashflow
 Net Present Value at 8% discount rate (NPV8)
 Internal Rate of Return (IRR).
 Key Performance Indicators:
 Operating costs
 Total costs
 Production payback years.
 Breakeven nickel prices based on:
 Net Cashflow
 NPV8.

22.4 Economic model inputs

Table 22.3, shows the inputs were used in the economic cashflow model:

Table 22.3 Base Case economic model inputs

Item Unit Value

Pre-Production period Years 2.0
Life of project production Years 24.75
LOM ore mined and processed kt 21,206
LOM waste mined kt 60,050
LOM Average Ni grade % 1.66
LOM Average Fe grade % 16.01
LOM Average Ni recovery % 93.0
LOM Average Fe recovery % 37.9
LOM Average product Ni grade % 20.3
LOM Average product Fe grade % 79.7
Plant throughput Mtpa 0.9
LOM Ni Price $/t 19,000
LOM Fe price $/t 150

The LOM Ni price of $19,000 was used following a review of a consensus report produced by
Consensus Economics Inc. in December 2013 and is based on forward price estimations
from 19 analyst groups. The mean forward prices are shown in Table 22.4 and are
discussed in more detail in Section 19.

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Table 22.4 Forward consensus Ni prices

Years Mean $/t Ni

2017 19,348
2018 20,061
2019 – 2023 (real) 19,109
Source: Consensus Economics Inc., December 2013

A review of was also made of historical prices, shown in Table 22.5.

Table 22.5 Historical Ni prices

Previous years Mean $/t Ni

5 19,574
6 22,505
9 20,926
10 19,796
Source: Bloomberg

22.5 Economic model results

The economic cashflow model results are presented in Table 22.6 to Table 22.8, below.

Table 22.6 Base Case economic model headline results before taxation

Item Unit Value

Net Cashflow $M 2,434
NVP8 $M 730
IRR % 22
Production year payback years 4.1

Table 22.7 Base Case economic model results before taxation

Item Unit Value

LOM Ni recovered kt 327
LOM Fe recovered kt 1,286
Avg. Ni production at 0.9 Mtpa ore ktpa 14.0
Avg. Fe production at 0.9 Mtpa
ktpa 54.5
ore
LOM Ni revenue before royalties $M 6,222.128
LOM Fe revenue before royalties $M 192.858
Estimated salvage value $M 1.400
Total revenue $M 6,416.387
Total costs $M 3,982.454
Operating cashflow $M 3,078.021

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Table 22.8 Base Case economic model headline results after taxation

Item Unit Value

Net Cashflow $M 1,766
NVP8 $M 519
IRR % 20
Production year payback years 4.4

22.6 Production summary

The physical production of the project Base Case is based on the mining, processing and
recovery of metal. The net cashflow is before taxation and the results are shown in
Table 22.9 and Table 22.10.

Table 22.9 Production physicals by period

Ore processed Ni in product Fe in product

Project year Ore mined (kt) Ni grade (%)
(kt) (kt) (kt)
3 1,457 714 1.60 11 43
4 874 898 1.82 15 56
5 918 900 1.79 15 55
6 1,042 900 1.86 16 52
7 828 900 1.82 15 55
8 933 900 1.76 15 53
9 984 900 1.76 15 52
10 1,033 900 1.75 15 51
11 1,011 900 1.75 15 51
12 984 900 1.74 15 52
13 919 900 1.73 14 56
14 994 900 1.72 14 56
15 981 900 1.70 14 56
16 986 900 1.69 14 56
17 797 900 1.66 14 56
18 773 900 1.61 14 56
19 1,017 900 1.60 13 56
20 842 900 1.59 13 56
21 856 900 1.58 13 56
22 658 900 1.51 13 56
23 630 900 1.46 12 54
24 495 900 1.41 12 53
25 518 769 1.41 10 44
26 411 486 1.47 7 30
27 263 339 1.47 5 21

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Table 22.10 Project financials by period

Net cashflow Prorata cash Prorata cash

Project year Revenue ($M) Costs ($M)
($M) cost / lb Ni cost / t Ni
1 169 -169
2 414 -414
3 208 121 86 4.96 10,943
4 297 138 158 3.97 8,749
5 293 139 154 4.02 8,872
6 304 142 162 3.97 8,746
7 297 141 156 4.05 8,929
8 288 142 147 4.19 9,229
9 288 142 146 4.20 9,249
10 287 142 145 4.21 9,282
11 285 142 143 4.24 9,340
12 284 142 142 4.25 9,374
13 283 142 141 4.26 9,394
14 282 142 139 4.30 9,485
15 278 142 137 4.33 9,543
16 276 142 135 4.36 9,623
17 273 142 131 4.42 9,956
18 265 142 124 4.55 10,224
19 263 143 120 4.62 10,025
20 262 141 121 4.59 10,181
21 260 142 118 4.65 10,115
22 249 140 109 4.78 10,541
23 241 140 101 4.93 10,877
24 233 139 93 5.10 11,247
25 198 126 72 5.39 11,889
26 131 97 33 6.27 13,812
27 93 74 18 6.66 14,685
28 10 -10
29 8 -8
Totals 6,416 4,651 1,766 4.48 9,883

The prorata cash costs include all direct operating costs plus royalties (CFEM). The costs
are allocated in proportion to the value of Ni to the total value of the product produced.

22.7 Key performance indicators (KPI)

The Base Case LOM KPI’s before taxation are presented in Table 22.11, below.

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Table 22.11 Base Case KPI’s before taxation

Item Unit Value

Value of product sold $/t ore 302.58
Cash cost $/t ore 157.36
Total cost $/t ore 187.80
Production year payback year 4.1
Prorata cash cost $/lb Ni 4.48
Prorata cash cost $/t Ni 9,883
Prorata total cost $/lb Ni 5.35
Prorata total cost $/t Ni 11,795
Brooke Hunt methodology C1 cost $/lb Ni 4.16
Brooke Hunt methodology C1 cost $/t Ni 9,166

The prorata cash costs include all direct operating costs plus royalties (CFEM), the prorata
total costs include the prorata cash costs plus capital costs. The costs are allocated in
proportion to the value of Ni to the total value of the product produced.

The Brooke Hunt methodology C1 costs include all direct operating expenses but do not
include royalties (CFEM).

22.8 Sensitivity analysis

The economic cashflow model was used to prepare a sensitivity analysis for the NPV 8 for the
Base Case before taxation. The sensitivity analysis was completed on the following variables:

 Grade of Ni
 Grade of Fe
 Recovery of Ni
 Recovery of Fe
 Price of Ni
 Price of Fe
 Pre-production capital
 Production capital
 Mining cost
 Processing cost
 Overhead cost.

The sensitivity analysis determines how the NPV8 is affected with changes to one variable at
a time while holding the other variables constant. The results of the sensitivity analysis are
presented in Table 22.12 below. In this table the B/E represents the breakeven and it
indicates the change in the variable that will bring the project NPV 8 to $0.000. Elasticity is a
measure of sensitivity that indicates for a 1% change in the variable what change in the NPV8
will occur. A value greater than 1 indicates that the change in the variable will have a higher
value change in the NPV8 than the change in the variable and indicates a higher sensitivity to
change.

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Table 22.12 Sensitivity table for NPV8 – before taxation

-20% -10% -5% 0% 5% 10% 20% B/E Elasticity

Grade Ni 231 480 605 730 855 980 1229 -29% 3.4
Grade Fe 715 723 726 730 734 738 745 - 0.1
Mining reserves 678 723 728 730 750 773 813 - 0.1
Recovery Ni 231 480 605 730 855 918 918 -29% 3.4
Recovery Fe 715 723 726 730 734 738 745 - 0.1
Price Ni 231 480 605 730 855 980 1229 -29% 3.4
Price Fe 715 723 726 730 734 738 745 - 0.1
Pre-production capital 836 783 757 730 704 677 624 - 0.7
Production capital 734 732 731 730 729 728 726 - 0.0
Mining cost 774 752 741 730 719 708 686 - 0.3
Processing cost 922 826 778 730 682 634 538 76% 1.3
Overhead cost 750 740 735 730 725 720 710 - 0.1

The sensitivity chart is shown in Figure 22.1 below and it covers a range of variable changes
from -20% to +20%. The flat line in the recovery of Ni indicates that the recovery cannot
exceed 100%.

Figure 22.1 Sensitivity graph

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22.9 Breakeven analysis

A Base Case before taxation breakeven analysis was undertaken on the Ni price for both
NPV8 and net cashflow. This analysis is conducted on the sensitivity analysis data and
provides the nickel price which will bring either the NPV8 or the net cashflow to $0. The
results of this analysis are presented in Table 22.13.

Table 22.13 Breakeven analysis before taxation

Item Unit Breakeven Price

Net cashflow $/t Ni 11,568
NPV8 $/t Ni 13,442

22.10 Trade off studies

Case 1: 2.7 Mtpa, contractor mining and haulage

A trade off study using contractor mining and haulage was undertaken to test the economics
of Option 1. Table 22.14 and Table 22.15 shows the headline values before and after
taxation.

Table 22.14 Case 1 economic model headline results before taxation

Base Case Option 1

Item Unit
0.9 Mtpa 2.7 Mtpa
Net cashflow $M 2,434 4,603
NVP8 $M 730 1,637
IRR % 22 24
Production year payback years 4.1 3.6
Breakeven Ni price on
$/t 13,442 13,633
NPV8

Table 22.15 Case 1 economic model headline results after taxation

Base Case Option 1

Item Unit
0.9 Mtpa 2.7 Mtpa
Net cashflow $M 1,766 3,470
NVP8 $M 519 1,204
IRR % 20 21
Production year payback years 4.4 3.9
Breakeven Ni price on
$/t 13,977 14,060
NPV8

Case 2: owner operator

A further study was undertaken using an owner operator mining and haulage fleet (Option 2)
to provide a comparison to the Case 1 study. The results are shown in Table 22.16 and
Table 22.17 that show the headline values before and after taxation.

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Table 22.16 Case 2 economic model headline results before taxation

Option 2 Option 2
Item Unit
0.9 Mtpa 2.7 Mtpa
Net cashflow $M 2,552 4,754
NVP8 $M 762 1,685
IRR % 22 24
Production year payback years 4.2 3.6
Breakeven Ni price on
$/t 13,200 13,474
NPV8

Table 22.17 Case 2 economic model headline results after taxation

Option 2 Option 2
Item Unit
0.9 Mtpa 2.7 Mtpa
Net cashflow $M 1,852 3,587
NVP8 $M 541 1,238
IRR % 20 21
Production year payback years 4.4 3.9
Breakeven Ni price on
$/t 13,768 13,922
NPV8

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23 Adjacent properties
There is no information from adjacent properties applicable to the Araguaia Project for
disclosure in this report.

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24 Other relevant data and information

The authors and Qualified Persons are unaware of any other data or information that would
be relevant to this Technical Report.

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25 Interpretation and conclusions

25.1 Interpretations and conclusions
 The PFS mineral resource estimate is based on diamond core drillhole data and
classified with respect to JORC Code (2012) guidelines.
 Reliability of the sample assay data is within acceptable limits for mineral resource
estimation.
 There remains an opportunity to identify measured resource estimates through additional
infill drilling and test pits to reduce the resource risk with respect to the economics of the
Project (payback period).
 Due to the relatively small amount of sub-economic material overlying the resource, it is
felt that all of the reported resources show reasonable prospects for economic extraction.
 There are no known factors related to metallurgical, environmental, permitting, legal, title,
taxation, socio-economic, marketing or political issues which could materially affect the
mineral reserve estimate.
 The metallurgical process would produce the target Fe-Ni alloy product at greater than
93% nickel recovery over a range of varying feed characteristics.
 Test samples and the comprehensive test work completed to date, for all considered
lithologies, are considered to be representative of the mineral resource within the Project
deposit areas.
 The mining system described for the exploitation of the Project is considered robust, low
cost and achievable in terms of supporting the production requirements as detailed in this
report. There is the potential for large barren “stones” to be encountered in the bottom of
the mining pits; these could present certain difficulties when mining in the pit bottoms. It
is recommended that test pitting be carried out to determine the frequency and extent of
these stones and explore methodologies to handle them.
 The Project is in an area of Brazil that is well-supported by existing infrastructure.
 The proposed 230 kV transmission line would be readily approved and regulated by the
relevant Government agencies.
 In summary, this PFS has established the Project as economically viable. A complete
risk assessment has been conducted which considers the entire value chain of the
Project as described within this report. As part of a risk management process, these
risks will be addressed as part of the subsequent set of studies, including the feasibility
study.
 Snowden concludes that the Project should be considered for further engineering
evaluation through a feasibility study to refine the economics through better engineering
definition.

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25.2 Risks and opportunities

A full risk and opportunity assessment was completed for the Project.

A risk assessment was undertaken for the PFS that focused on the key elements of the value
chain. These were:

 Resource estimation
 Mining
 Metallurgy & Process (Ore preparation, dryer, calcining, smelting, refining/granulation)
 Plant and Layout
 Infrastructure
 Geotechnical (Open Pit, Plant Area)
 Hydrology and Hydrogeology
 Social and Environmental
 Tenure and licencing
 Cashflow model (Financial model integrity).

Table 25.1 Risks and opportunities identified.

From this assessment, Snowden has established five prevailing risk themes:

 Management and technical competency in relation to the high technical skill-sets

required to manage and maintain a complex metallurgical process.
 Complexity with regard to the mineralisation and subsequent beneficiation and recovery
of nickel product.
 Data requirements, acquisition, procedures and modelling.
 The water theme has a number of key questions which need to be satisfied.
 The tenure and licencing theme.

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These are common themes are discussed below.

The management and technical competency theme

This relates to the technical knowledge, ability and willingness of potential employees
(management and workforce) to commission and maintain a complex nickel plant with high
operational tolerances in terms of throughput, control and instrumentation and maintenance.

Mitigation of this will require a human resource management response through human capital
planning to ensure that appropriately skilled and experienced employees are employed at the
required time. This is of high importance during the commissioning and ramp-up stages of
the project.

The complexity theme

This relates to the complexities of mineability and treatability of nickel laterites.

The mitigation effort required will necessitate the simplification (where possible) of design and
operational features, such as monitoring and control procedures, for both mining and
metallurgical processes. The requirement would be design for useability and maintainability
to ensure that operational readiness considers the simplification of processes both in design
and in operational execution and management.

The data theme

This theme covers timely data acquisition that is sufficiently well scoped that it covers all later
needs.

The PFS has identified a number of data and information requirements which need to be
satisfied before the FS starts. The mitigation effort requires that all required data and
information is acquired in a timely manner. This establishes the value of information and data
as a necessary condition for efficient project delivery.

The water theme

This theme relates to the mine being in a part of the world exposed to seasonal variations of
heavy rainfall and drought which poses subsequent design requirements in terms of
controlling moisture within excavated material (ore or waste), productivity aspects relating to
excavation, together with potential inundation, etc.

The mitigation effort requires the establishment of a water management capability which
would encompass the overall mine. This would include operational features of mining which
will have to consider a suitable response to maintain (or exceed) planned productivities for
earthmoving machinery. There are a number of nickel laterite mines throughout the world
and consideration of best practical solutions should be considered in subsequent studies.

The tenure and licencing theme

Delays of permitting caused by delays in approval of various permits and key documentation
will have a direct impact on the critical path leading to production and therefore revenue
generation.

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The mitigation effort required is based on the inherent need to ensure advanced planning of
key documentation for permits and permissions is achieved in a manner that is both
achievable and reflects the execution schedule of the Project. It is Snowden’s opinion that
HZM maintains close engagement with the relevant authorities to ensure timely delivery of
permits and permissions.

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26 Recommendations
26.1 Geology
Snowden makes the following recommendations with respect to geology:

 Further resource investigations: Further work should be completed to provide additional

confidence in the resource prior to commencing the Feasibility Study.
 These investigations should include:
 Infill drilling to define a Measured Resource. Drill spacing to 50 m x 50 m is
recommended, however in areas of geological complexity a drill spacing of 25 m x
25 m is recommended.
 Test mining and trenching to better understand short scale variability.

26.2 Mining
Snowden makes the following recommendations with respect to mining:

Test mining:

 Mining conditions in nickel laterites can be varied and challenging. Test mining should
be completed in selected mining areas, across the full laterite profile to better understand
these conditions, specifically within the context of large stones that may be encountered
in the pit bottom. This work will allow for a more accurate estimation of mining costs.
 This Mineral Reserve is calculated on the basis of currently available information.
Snowden strongly recommends a test pit(s) to assess in-situ grade reconciliation to the
resource model, incidence of barren rocks in the saprolite, mining recovery and mining
dilution.

Blending and materials handling study:

 An integrated study into the location and orientation of the plant in relation to the ROM
shed, the blending strategy prior to the plant along with the possibility of direct tipping
material should be completed prior to the Feasibility Study.

Estimation of pisolitic ferricrete supply:

 Future resource models should estimate the volume of pisolitic ferricrete within the
resource, such that accurate estimates of sheeting supply can be ascertained.

Sheeting demand:

 A more detailed model of sheeting demand should be developed, including sheeting

requirements for ex-pit items such as roads, stockpiles and waste dumps.

Waste dump optimisation:

 Further work should be completed to trade-off the amount of material that is backfilled
into the pit during mining, and also the location and geometry of the external waste
dumps with respect to sterilisation, scheduling logistics, permitting, water management
and stability.

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More detailed scheduling:

 In the Feasibility Study, scheduling at a greater resolution and which included the
consideration of changes in pit, dump, and road availability in certain wetter months.

Sourcing local equipment:

 Local mining equipment suppliers should be sought to gain quotations for the equipment
specified in this report.

Source contractor quotations:

 Budget contractor quotations should be sought in order to validate the current mining
cost estimate.

Government liaison:

 HZM should liaise with the Brazilian Government to ensure that the assumed taxation
exemptions will be awarded.

Review of the site layout:

 The project team should revisit site and mark out areas disturbed by the operation to
ensure that these locations are appropriate.

Mine water management plan:

 A detailed plan and design should be developed to manage water and effluent from the
mine.

Geotechnical:

 The geotechnical models for the Project are of a preliminary nature due to limited
geotechnical drilling. It is recommended to update the geotechnical models in the next
stage of study with:
 More geotechnical drilling in data limited sections:
 Detailed definition of the laterite profile including the main material zones and their
sub facies including basic engineering properties
 Detailed definition of the special variability of the laterite profile and sub zone.
 Specialised laboratory tests (e.g. tri axial and direct shear) to better define the shear
strength Parameters of the weaker material zones
 Laboratory compaction and CBR tests on ferricrete material to ascertain suitability as
sheeting material
 Study the mine dewatering and depressurisation potential to confirm the design
assumptions.

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26.3 Metallurgy
26.3.1 Testwork
 For a the next stage of the project, it is recommended that particularly pilot plant calcining
and smelting testwork should be planned to confirm some of the conclusions from this
report. Importantly, such pilot scale tests will be designed to confirm correlations in key
data such Fe-Ni metal grade and Fe-Ni ratio in ore against nickel recovery in smelting.
The XPS testwork data, however, does provide important basic information with which to
optimize the design of a pilot testwork programme.
 Having had association with a number of these operations, IGEO would recommend that
for this PFS study, HZM endeavours to obtain more recent information and experiences
on current kiln and furnace operations at Cerro Matoso. In conjunction with Hatch,
operating staff at Cerro Matoso probably have had the most experience in dealing with
furnace design and operations issues associated with ratios of SiO2:MgO values above
2.0. From a previous site visit, however, it was understood that Cerro Matoso is probably
now operating at SiO2:MgO ratios of below 2.0.

26.3.2 Future work

Future work in this project could include the following:

 Evaluation of the best drying and pre-reduction technologies for the Projects’s laterites.
 Discussion with electric furnaces suppliers to evaluate the best design and have a
CAPEX evaluation for the furnace. To consider copper coolers, deep immersion,
electrodes configuration and electric heating (DC vs AC).
 Modelling of heat and mass balance for the Fe-Ni production plant with 2-3
configurations (pre-reduction, smelting and refining).
 Evaluation of sulphur and other impurities in Fe-Ni and layout of the Fe-Ni refining
(literature, experimental test and modelling), also evaluate the alternative to form matte
to lowering the liquidus temperature of the metal phase and at the present slag
composition.

26.3.3 Recommendations

Following the proof of concept with laboratory trials at XPS and slag chemistry modelling at
KPM, the following activities should be considered to advance in the next stage of the
Project, being the feasibility study:

 Evaluation of the best drying and pre-reduction technologies for Horizonte laterite.
 Completion of a technical review including targeted plant visits and discussions with
electric furnace suppliers as required to evaluate the best design, including documenting
of current operating experience of similar plants as those proposed for the Project.
 Evaluate the best CAPEX appropriate for the design, which should consider copper
coolers, deep immersion, electrode configuration and electric heating (DC vs AC).
Discussion with electric furnaces suppliers to evaluate the best design and have a
CAPEX evaluation for the furnace.
 Modelling of heat and mass balance for the Fe-Ni production plant with 2-3
configurations (pre-reduction, smelting and refining).

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 Evaluation of sulphur and other impurities in Fe-Ni and layout of the Fe-Ni refining
(literature review, experimental test and modelling), also evaluate the alternative to form
matte as regards, lowering the liquidus temperature of the metal phase and at the
present slag composition.
 A techno-economic evaluation should be performed, after completion of the above items.
 A 100 t (dry), bulk ore sample, or as a blended ore sample, or blended ore sample
representative of the Araguaia laterite deposit, and suitable for pilot testing as
recommended in Section 26.3.1 should be taken.. Smaller samples (of the order of 100
kg each) of the different types of ore (limonite, transition and saprolite) should also be
taken for future smaller scale testwork.

Completion of a pilot scale test campaign incorporating the following features:

 Kiln drying of the representative bulk sample, including testing the in-kiln agglomeration
action and the characteristics of the ore.
 Reduction kiln testing under conditions targeted to produce calcine suitable for the
production of 20% Ni in Fe-Ni upon smelting.
 Electric furnace smelting test at 20% Ni in Fe-Ni
 A review of the quality of the Fe-Ni produced in the above electric furnace smelting test
and development of the refining practice to refine this metal product.
 The development of a suitable heat and mass balance for the above steps.

26.4 Environmental and Social

The feasibility study will be undertaken in terms of international best practice, i.e. Equator
Principles, International Finance Corporation (IFC) Performance Standards, and World Bank
Environmental, Health and Safety (EHS) Guidelines. In addition, the project will also comply
with the required Brazilian national legislation. WALM has been appointed to complete the
Environmental Impact Assessment (EIA-RIMA), and to address any Brazilian licensing
requirements.

26.4.1 Resettlement planning

It is likely that the project will require the purchase of land and relocation of certain
households. The full extent of resettlement is not yet known but it is currently being
investigated.

26.4.2 Completion of baseline specialist studies

The following issues are currently being investigated but were not completed in time for
inclusion into this report:

 Resettlement
 Fauna
 Cultural heritage.

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In addition, the following baseline studies need to be expanded upon:

 Vegetation – to determine species composition of areas that will be cleared of vegetation,

and to determine whether any conservation important species will need to be relocated.
 Geohydrology – the specialist study must be expanded to address the other areas of the
proposed mine. The current focus has been on the central Pequizeiro area. In addition,
springs have not been sampled for hydrochemistry, although it is anticipated that this will
be undertaken during the next sampling season.

Additional specialist studies may be required, and are dependent on the outcome of the
stakeholder engagement process.

26.4.3 Social and environmental impact assessment

In order to comply with international best practice, the following aspects must be addressed
within the Environmental Impact Assessment (EIA-RIMA):

Identification and assessment of risks and impacts

The project’s potential impacts and risks must be addressed in terms of the area of influence:

 Area likely to be affected by the project activities and facilities that are a component of
the project.
 Impacts from unplanned but predictable developments caused by the project that may
occur later or at a different location.
 Indirect project impacts on biodiversity or on the ecosystem.
 Associated facilities, including facilities would not have been constructed or expanded if
the project did not exist and, without which, the project would not be viable.
 Cumulative impacts that result from the incremental impact, on areas or resources used
or directly impacted by the project, from other existing, planned or reasonably defined
developments at the time the risks and impacts identification process is conducted.
 Where possible, the risks and impacts identification process will extend to those
associated with primary supply chains.
 Greenhouse gas emissions, climate change and trans-boundary effects must be
addressed. The impact identification process will also take account of the outcome of the
engagement process with affected communities.

Risk Management and mitigation of impacts

Future management programmes to include mitigation and performance improvement

measures to address identified environmental and social risks and impacts of the project.
Mitigation must ensure that the project operates in compliance with applicable laws and
regulations, and meets the requirements of International Finance Corporation’s Performance
Standards 1 to 8.

The mitigation hierarchy must favour avoidance of impacts over minimisation, and where
residual impacts remain, compensation and/or offsets will be recommended wherever
technically and financially feasible.

The management programme must indicate measureable events (as mitigation performance
targets) where possible, with elements that can be tracked over defined time periods, and
with estimates of resources and responsibilities required for implementation.

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The following aspects must be incorporated into the risk management programme:

 Organisational capacity and competency

 Emergency preparedness and response
 Monitoring and review
 Rehabilitation and closure.

Stakeholder Engagement

Stakeholder engagement should be undertaken as per the Stakeholder Engagement Plan.

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27 Certificates
27.1 Andrew F. Ross
CERTIFICATE of QUALIFIED PERSON

(a) I, Andrew F. Ross, Senior Principal Consultant of Snowden Mining Industry

Consultants Pty Ltd., 87 Colin St., West Perth, Western Australia, do hereby certify
that:

(b) I am a co-author of the technical report titled Araguaia Prefeasibility Study and dated
25 March, 2014 (the ‘Technical Report’) prepared for Horizonte Minerals.

(c) I graduated with an Honours Degree in Bachelor of Science in Geology from the
University of Adelaide in 1972. In 1985 I graduated with a Master of Science degree in
Geology from James Cook University of North Queensland. I am: a Fellow of the
Australasian Institute of Mining and Metallurgy; a member of the Australian Institute of
Geoscientists; licenced as a Professional Geoscientist with APEG (British Columbia). I
have worked as a geologist continuously for a total of 42 years since graduation. I
have been involved in resource evaluation consulting for 19 years, including resource
estimation of nickel laterite deposits for at least 5 years. I have read the definition of
“qualified person‟ set out in NI 43-101 (“the Instrument‟) and certify that by reason of
my education, affiliation with a professional association and past relevant work
experience, I fulfil the requirements of a “qualified person‟ for the purposes of the
Instrument.

(d) I visited the Araguaia Nickel Property from 22 to 24 November 2012.

(e) I am responsible for the preparation of sections 6, 7, 8, 9, 10, 11, 12, and 14 of the
Technical Report, and contributed to preparation of sections 1, 2, 25 and 26 of the
Technical Report.

(f) I am independent of the issuer as defined in section 1.5 of the Instrument.

(g) I have no prior involvement with the property that is the subject of the Technical Report.

(h) I have read the Instrument and Form 43-101F1, and the Technical Report has been
prepared in compliance with that instrument and form.

(i) As of the effective date of this Technical Report, to the best of my knowledge,
information and belief, the Technical Report contains all the scientific and technical
information that is required to be disclosed to make the Technical Report not
misleading.

Dated at Perth WA this 25 March 2014

Andrew Ross, BSc (Hons), MSc, MAIG, FAusIMM, CP (Geo), MGAA.

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27.2 Harald Muller

CERTIFICATE of QUALIFIED PERSON

(a) I, Harald Muller, Senior Principal Consultant and Divisional Manager - Metallurgy of
Snowden Mining Industry Consultants Pty Ltd., 87 Colin St., West Perth, Western
Australia, do hereby certify that:

(b) I a the co-author of the technical report titled Araguaia Prefeasibility Study and dated
25 March, 2014 (the ‘Technical Report’) prepared for Horizonte Minerals.

(c) I graduated with a Bachelors degree in Chemical Engineering from Pretoria University
and a Masters degree in Business Leadership from the University of South Africa. I am
a Fellow of AusIMM, a Fellow of IChemE, a Chartered Engineer and a registered
Professional Engineer, as well as a Fellow of SAIChE. I have worked as a metallurgist
continuously for a total of 30 years since my graduation from university. I have worked
in the process and project development of nickel laterite projects for at least 5 years.

(d) I have read the definition of ‘qualified person’ set out in National Instrument 43-101
(‘the Instrument’) and certify that by reason of my education, affiliation with a
professional association and past relevant work experience, I fulfil the requirements of
a ‘qualified person’ for the purposes of the Instrument. I have been involved in mining
and metallurgy related consulting practice for 3 years, including development and
review of nickel laterite projects such as the Mirabela operation and the Dutwa Laterite
project.

(e) I have not made a current visit to the Araguaia Nickel Property.

(f) I am responsible for the preparation of sections 13 and 17 of the Technical Report, and
contributed to preparation of sections 1 and 18 of the Technical Report..

(g) I am independent of the issuer as defined in section 1.5 of the Instrument.

(h) I have not had prior involvement with the property that is the subject of the Technical
Report.

(i) I have read the Instrument and Form 43-101F1, and the Technical Report has been
prepared in compliance with that instrument and form.

(j) As of the effective date of this Technical Report, to the best of my knowledge,
information and belief, the Technical Report contains all the scientific and technical
information that is required to be disclosed to make the Technical Report not
misleading.

Dated at Brisbane QLD this 25 March 2014

Harald Muller, B Eng (Chem), MBL, FAusIMM, FIChemE, FSAIChE, C Eng, Pr Eng.

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27.3 Anthony Finch

CERTIFICATE of QUALIFIED PERSON

I, Anthony Finch, Senior Principal Consultant of Snowden Mining Industry Consultants Pty
Ltd., 87 Colin St., West Perth, Western Australia, do hereby certify that:

(b) I am a co-author of the technical report titled Araguaia Prefeasibility Study and dated
25 March, 2014 (the ‘Technical Report’) prepared for Horizonte Minerals.

(c) I graduated with a degree in Mining Engineering from the University of Queensland in
Australia in 1986. I am a Professional Engineer in the Province of British Columbia,
number 164687, and a Member of the Australasian Institute of Mining and Metallurgy,
number 103583 and a Certified Professional (Mining) of that Institute. Since graduation
I have had 27 years continuous experience in the mining industry, in both operations
and consulting, in various roles of increasing seniority. I have worked in hard rock
underground mining, including precious metals, for over ten years, and in open pit
mining for over ten years. By reason of my education, affiliation with a professional
association, and past relevant work experience, I fulfil the requirements to be
considered a “qualified person”, as described in Section 1.1 of National Instrument 43-
101, Standards of Disclosure for Mineral Projects (NI 43-101).

(d) I visited the Araguaia Nickel Property from 23 to 27 July 2013.

(e) I am responsible for the preparation of parts of sections 1, 2, and 3, and for
sections,15,16,19 and 21-27 of the Technical Report.

(f) I am independent of the issuer as defined in section 1.5 of the Instrument.

(g) I have no prior involvement with the property that is the subject of the Technical Report.

(h) I have read the Instrument and Form 43-101F1, and the Technical Report has been
prepared in compliance with that instrument and form.

(i) As of the effective date of this Technical Report, to the best of my knowledge,
information and belief, the Technical Report contains all the scientific and technical
information that is required to be disclosed to make the Technical Report not
misleading.

Dated at Brisbane, QLD this 25 March 2014

Anthony Finch, P.Eng., MAusIMM (CP Mining), B.Eng., B.Econ.

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27.4 Peter Theron

CERTIFICATE of QUALIFIED PERSON

(a) I, Peter J Theron, Principal Environmental Consultant of Prime Resources (Pty) Ltd
Environmental Consultants; 70 – 7th Avenue, Parktown North, Johannesburg, South
Africa, do hereby certify that:

(b) I am the co-author of the technical report titled Araguaia Prefeasibility Study and dated
25 March, 2014 (the ‘Technical Report’) prepared for Horizonte Minerals.

(c) I graduated with a Bachelor Degree in Civil Engineering from the University of Pretoria
in 1985 and a Graduate Diploma in Environmental Engineering from the University of
Witwatersrand in Johannesburg in 1995. I am a Member of the South African Institute
of Mining and Metallurgy and a Professional Engineer. I have worked as an
environmental and civil engineer consultant to the mining industry, continuously for a
total of 28 years since graduation. I have been involved in international environmental
consulting for the last 17 years. I have read the definition of “qualified person‟ set out
in NI 43-101 (“the Instrument‟) and certify that by reason of my education, affiliation
with a professional association and past relevant work experience, I fulfil the
requirements of a “qualified person‟ for the purposes of the Instrument.

(d) I visited the Araguaia Nickel Property from 23 to 27 July 2013.

(e) I am responsible for the preparation of sections 20 of the Technical Report, and
contributed to preparation of parts of sections 1, 2, and 3, 25, and 26 and for sections
4, 5, 18, Technical Report.

(f) I am independent of the issuer as defined in section 1.5 of the Instrument.

(g) I have no prior involvement with the property that is the subject of the Technical Report.

(h) I have read the Instrument and Form 43-101F1, and the Technical Report has been
prepared in compliance with that instrument and form.

(i) As of the effective date of this Technical Report, to the best of my knowledge,
information and belief, the Technical Report contains all the scientific and technical
information that is required to be disclosed to make the Technical Report not
misleading.

Dated at Johannesburg, South Africa this 25 March 2014

Peter Theron, Pr Eng, SAIMM, B.Eng (Civil Eng), G.D.E

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28 References
28.1 Geology
 Audet, M A, Osmond, J. C., Pilcher, B., Mitchell, A., Allen, A., 2012a. Geology and
Mineral Resources of the Araguaia Nickel Project, Brazil, Ni 43-101 Technical Report for
Horizonte Minerals prepared by Wardell Armstrong. 23 February 2012. Ref ZT61-0947
MM640
 Audet, M A, Pilcher, B., Owen, M., Watkinson, P., Allen, A., 2012b. NI 43-101 Technical
Report – Preliminary Economic Assessment of the Araguaia Nickel Project, Brazil. Ni 43-
101 Technical Report for Horizonte Minerals prepared by Wardell Armstrong. 20 August
2012, Ref ZT61-0947 MM728
 Annels, A.E., Ingam, S, Malstrom, L., 1993. Structural reconstruction and mineral
resource evaluation at Zinkgruvan Mine, Sweden. Mineral Resource Evaluation
Conference, Leicester University
 Barry, J.P., 2006. Technical Report Araguaia Nickel Exploration Project, Pará State,
Brazil. Ni 43-101 Technical Report prepared by Irus Consulting for Lara Exploration
Limited and Pan Brazilian Mineracao Ltda. 16 February 2006
 Bennell, M., 2010. Technical Report on the Araguaia Nickel Exploration Project, Pará
State, Brazil. Ni 43-101 Technical Report for Lara Exploration Limited
 Brand, N.W., Butt, C.R.M., Elias, M., 1996. Classification and features of nickel laterites.
Paper submitted to the Jubilee Volume of the Australian Geological Survey Organisation
 Guibal D., 1987. Recoverable Reserves Estimation in an Australian Gold Project, in
Geostatistical Case Studies, Matheron G. and Armstrong M. (eds) pp149-168, (D. Reidel
Publishing)
 Horizonte Minerals, 2012. Araguaia Nickel Ni Laterite Exploration Field Procedures.
Version 15. Document ID: SOP-AN-NiLAT
 JORC, 2012. The Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves, The JORC Code 2012 Edition, the Joint Ore Reserves
Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of
Geoscientists and Mineral Council of Australia (JORC)
 Lambert, S., 2000. Geostatistical estimation and general spatial coordinate
transformations, in Geostats 2000 Cape Town, compiled by .W., J., Kliengeld and D., G.,
Krige.
 Ross, A.F., 2013. Phase 3 Mineral Resource Estimates, Araguaia, Project AU3989.
Report prepared by Snowden for Horizonte Minerals Plc.
 SGS Canada Inc., 2011. An Investigation by High Definition Mineralogy into the
Mineralogical Characteristics of Four Ni-Laterite Horizons from the Araguaia Deposit,
Brazil prepared for Horizonte Minerals Plc.
 Tavlan M., 2011. Report on the Structural Mapping Study of the Araguaia Niquel Project,
Pará, Brazil. Internal report for Horizonte Minerals Plc.

28.2 Environmental and Social

 DBO Engineering, 2013. Floristic Survey in Areas under Direct Influence of the Araguaia
Nickel Mining Ltd Mineral Research Project in Conceição Do Araguaia, Pará [English
translation]
 Horizonte Minerals, 2013. Traffic Survey on PA-449 Road, September 2013

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 IGEO Mineração Inteligente (IGEO), 2013. Araguaia Project for Snowden, Mass Balance
Design A. 27 September 2013. [Rev 2]
 Integratio, 2013. Scenario Assessment, Risk Analysis and Stakeholders Mapping, April
2013 [English translation]
 KH Morgan and Associates, 2013. Hydrogeology - Araguaia Nickel Project Pará State,
Brazil, December 2013. [Rev 2].
 WALM, 2013. Physical Baseline Report, October 2013. [English translation].
 Environmental technical investigations for baseline studies and Social and Environmental
Impact Assessment (SEIA) – WALM Engenharia e Tecnologia Ambiental (WALM)
 Biodiversity (flora and fauna) surveys – DBO Engenharia Ambiental (DBO Engineering)
 Social and community surveys and stakeholder engagement planning – Integratio
Mediação Social e Sustentabilidade (Integratio)
 Geohydrology study at Pequizeiro (rev2) – KH Morgan and Associates.

28.3 Power
 COMPASS. Brazilian Energy Sector Overview. February 2013. Technical Report.
 EPE. Ten-year Power Supply Expansion Plan (PDE 2021). Obtained from
http://www.epe.gov.br/pdee/forms/epeestudo.aspx. Accessed on October 1, 2013.
 MME. Brazilian Energy Review. May 29, 2013. Available at: www.mme.gov.br. Accessed
on October 1, 2013. Resenha Energética Brasileira – edição 2012 – 29/05/2013
 Plano Estratégico do Sistema Eletrobrás – período 2010 – 2020
 Brazilian Energy Balance 2013 – Base 2012
 ONS SIN Map: Rede Básica de Operação – Horizonte 2014 (Emissão em janeiro de
2013).

28.4 Logistics
 PLNT – Plano Nacional de Logística e Transporte – Relatório Final Setembro/2012
 Estudo de cargas na área de influência do corredor centro-norte – DNIT 09/07/207
 Tabela tarifária da Ferrovia Norte-Sul – Resolução ANTT nº 3580 de 08/09/2010,
vigência 13/06/2013
 III Seminário de Logística – IBRE – FGV 03/09/2013
 AHITAR. Activity reports. Obtained from AHITAR’s website
 Logit/Gistran. Plano Nacional de Logística e Transportes – Relatório Final (National
Logistics and Transportation Plan – Final Report). Ministério dos Transportes, Brasília,
2012.

28.5 Metallurgy
 Tripathi N, Barnes A, Milkic M; Lab Testing of Horizonte Minerals’s Araguaia Nickel
Laterite Deposits; Xstrata Process Support; 3 April 2012
 Valencia N C; Slag Chemistry for the Smelting of Horizonte Laterite Thermodynamic
Simulatin of Tests as XPS and Slag Mapping Diagrams; Kingston Process Metallurgy
Inc.; 29 July 2012
 Susilo R, Valencia N C, Mendonca A, Davis B; Liquidus Measurment of Ferronickel Slag,
Kingston Process Metallurgy Inc.; 26 April 2013.

.Final 25 March 2014 358 of 359

 Horizonte Minerals Plc: NI43-101 Technical Report
Prefeasibility Study (PFS) for the Araguaia Nickel Project

 Mackey P J; Report on Agglomeraton Test on Horizonte Laterite at Feeco; 15 January

2013
 Traupman D B, Prokesch P E; Evaluation of Brazilian Araguaia Nickel Laterite;
FLSmidth; July 2013
 Aldis M, Gibbs K; Scanning Electron Microscope Examination of XPS Slag Test 9; SGS
Canada Inc.; 30 September 2013.

.Final 25 March 2014 359 of 359