Mineral Resource Ore Statement Frieda - Highlands …€¦ · Locate and report areas of additional...

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14 March 2014

2014 Mineral Resource and Ore Reserve Statements

Following are the statements of Mineral Resources and Ore Reserves for the Frieda River project as at 31 December 2013, reported under The JORC Code, 2012 Edition.

1. Horse-Ivaal-Trukai -Page 1 2. Koki -Page 23 3. Ekwai -Page 47 4. Nena -Page 70

For further information, please contact: John Gooding or Craig Lennon Highlands Pacific - 07 3239 7800

Media Enquiries to: Simon Jemison Collins St Media - 03 9224 5319

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ASX Code: HIG PoMSox Code: HIG Shares on Issue: 854 millionOptions on Issue: 7.2 million Performance Rights: 11.6 million Directors Ken MacDonald, Chairman John Gooding, Managing Director Mike Carroll Dan Wood Bart Philemon Management Craig Lennon, CFO &Co.Sec Larry Queen, Chief Geologist Peter Jolly, GM Projects Ron Gawi, GM Port Moresby For further information, please contact: John Gooding or Craig Lennon Highlands Pacific - 07 3239 7800 Media Enquiries to: Simon Jemison Collins St Media - 03 9224 5319 Website: www.highlandspacific.com

About Highlands Pacific Limited Highlands Pacific is a PNG incorporated and registered mining and exploration company listed on the ASX and PoMSoX exchanges. Its major assets are the US$2.1bn Ramu nickel cobalt project and the Frieda copper gold project; with exploration in progress on the Star Mountains (Nong River, Mt Scorpion, Munbil and Tifalmin) licenses approximately 20km north of the Ok Tedi mine. Highlands also has exploration tenements at Muller Range on the border of the Western and Southern Highlands Provinces and on Normanby Island (Sewa Bay).

Star Mountains Prospects* The Star Mountains exploration tenements, which include Nong River EL1312, Mt Scorpion EL1781, Munbil EL2001 and Tifalmin EL1392, are located approximately 20km north of the Ok Tedi mine, in the West Sepik Province, PNG. They lie within the highly prospective New Guinean Orogenic Belt, which hosts the Grasberg, Ok Tedi, Porgera and Hidden Valley mines, as well as the Frieda deposit.

Ramu Nickel Cobalt Mine The Ramu nickel mine is located 75km west of the provincial capital of Madang, PNG. Highlands 8.56% interest in Ramu will increase to 11.3% at no cost to Highlands after repayment of its share of the project debt (estimated to paid by 2018). From commissioning, Highlands has access to its pro-rata 8.56% share of Ramus post-debt servicing, net cash flow. Highlands also has an option to acquire an additional 9.25% interest in Ramu at fair market value, which could increase the companys interest in the mine to 20.55%, if the option is exercised.

Frieda Copper/Gold Project* The Frieda copper gold project is located 175kms north-west of the Porgera gold mine and 75km north-east of the Ok Tedi mine. Highlands has a 20% interest in the project, subject to the completion of the PanAust Glencore Agreement which was announced on 1 November 2013. PanAust, subject to the completion of the PanAust Glencore Agreement, will be responsible for 100% of the costs incurred by the Frieda River Joint Venture to finalise the definitive feasibility study for PanAusts development concept and will appoint and fund the cost of an independent expert to provide a peer review. PanAust will also be responsible for 100% of the costs to maintain the Frieda River project site, assets and community relations programmes up to the point in time of lodgement of the Mining Lease or Special Mining Lease application. * Subject to the right of the Independent State of Papua New Guinea to acquire up to a 30% equity interest in any mining development in the country.

http://www.highlandspacific.com/

28th February 2014 Resource Estimates for the Cu/Au Horse-Ivaal-Trukai Deposit, Frieda River, PNG

In 2012 H&S Consultants Pty Ltd., (H&SC) was requested by Highlands Pacific Limited (HIG) to update its assessment of the Resource Estimates for the Horse-Ivaal-Trukai (HIT) deposit, part of the Frieda River Copper/Gold Project in Papua New Guinea. The target commodities are copper and gold associated with a large porphyry system. Additional smaller deposits occur nearby at Koki and Ekwai. The 2012 resource estimates incorporated all the available drillhole data from the recent Xstrata (XS) 2011 drilling programme. The purpose of the exercise was to:

1. Provide an update on its assessment of the resource estimates for HIT and confirm the outcomes of the recent resource modelling work completed by XS (August 2011),

2. Locate and report areas of additional resource at HIT outside the current proposed pit shell

A separate updated resource estimation report was completed by H&SC for the Ekwai and Koki deposits (Tear, Oct 2011) and H&SC also completed in May-June 2011, an interim report for HIG on the resource estimates for HIT, Ekwai and Koki (Tear, June 2011). Work completed by H&SC for the 2012 resource estimate check included:

Updating the H&SC Access drillhole database (renamed to fr_comb_101111.mdb) from data supplied by HIG as CSV files. Drillhole collars were converted to an orthogonal local grid to facilitate resource estimation work. A substantial amount of collar coordinate checking was required. This new database just contains drillholes for HIT, Ekwai and Koki only.

Importation of a range of surfaces and 3DMs into a Surpac mine software workspace for the H&SC

local grid (from Vulcan software files created by XS).

Importation of the XS Vulcan block model into the H&S local grid block model in Surpac

Creation of a new local grid block model using H&SCs GS3M modelling software; reporting of resources from the block model.

In 2014 HIG has requested that H&SC be prepared to sign off on the resource estimates for the HIT deposit. H&SC has completed an extensive review of the feasibility study report completed by XS. A location map of the three deposits is included as Figure 1. The figure shows the topography with the XS-designed pit shell inserted and the raw copper data from the drilling.

Horse-Ivaal-Truki Resource Estimate, Highlands Pacific

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Figure 1 Location Map

View : looking down to NW The HIT drilling database is suitable for resource estimation with a predominance of diamond drilling; logging has paid considerable attention to alteration, lithology, oxidation and mineral species. Core recovery has been documented with an average recovery of >90.8% for the mineralisation with no bias towards higher grades. Only minor typographic errors were noted in the data. Core handling, sampling and assaying procedures are to industry standard. A detailed QAQC programme has indicated some minor issues with the data, primarily with some of the locations of the earlier drillholes. Some of these holes have been excluded from the resource estimation whilst a few have been retained and have limited impact. Geological interpretation has identified a substantial number of units reflecting host lithologies and typical porphyry-style alteration. In addition, structural analysis has identified 5 fault bounded structural domains with hard boundaries. Oxidation related to surface weathering has been interpreted with total and partial oxidation zones along with a gypsum/anhydrite leach zone surface. Interaction of these domains resulted in the interpretation of 14 estimation domains with hard boundaries. Controls to mineralisation are uncertain as alteration boundaries are diffuse and not strongly coincident with grade, particularly the phyllic and potassic alteration zones. Controls to higher grade mineralisation may be related to overprinting of alteration phases. Density data has been collected by appropriate methods with reasonable values. Modelling of the density data was by inverse distance cubed method. Check measurements has indicated that 0.13t/m3 should be subtracted from density block grades above the gypsum/anhydrite surface. Compositing of the drillhole data has been to 4m intervals with no top cutting which is considered reasonable for the deposit type and the low coefficient of variation for the drilling data. The block size, 25m by 25m by 15m, used in the block model is considered appropriate for the type of deposit and the proposed mining method. Lithology, alteration and oxidation block coding has been completed using the wireframe interpretations.

Horse-Ivaal-Trukai

Ekwai

Koki


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Classification of resources is based on an independent kriging strategy unconnected with the metal grade interpolation. H&SC check models appear to confirm the XS global resource estimates. Check Modelling As part of its 2012 review H&SC completed a series of check models. This involved creating a new set of 4m composites from the drillhole database, undertaking variography and interpolating the copper and gold grades to produce a new block model. Figure 2 shows the distribution of the 4m copper composites (in an H&SC local grid). There appears to be a slight grid ESE trend in higher copper grades.

Figure 2 HIT 4m Copper Composite Distribution (H&SC extraction)

52000 53000 54000

9000

10000

11000

Plan Plot of Copper

RLs: -369.0 to 1296.0

East

Nor

th

H&SCs preferred search strategy is a three pass flat search for a single unconstrained estimation domain, which is more suitable to the data point distribution and the mineralisation model type. This is very different to the XS search strategy which had a much steeper set of orientations for 14 estimation domains. As a check measure H&SC

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.700

0.700 - 1.00

1.00 - 7.00

Copper Range

Point Data

UNIVARIATE STATISTICS

Mean: 0.40642

Variance: 0.12372

CV: 0.86544

Minimum: 0.00

Q1: 0.13500

Median: 0.33950

Q3: 0.58600

Maximum: 6.88500

No. of Data: 33718


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completed a second model involving a three pass steep search strategy. The minimum data points for the steep search is less than the flat search and more in keeping with a typical porphyry-style set of search parameters. Several models were tried, experimenting with the number of data used and the search distances. H&SC used Ordinary Kriging (GS3M software) with its newly generated composite file with no domaining. Density data was also modelled using Ordinary Kriging, as opposed to XSs inverse distance cubed method, but with a more flatter search reflecting the gradual increase of density with depth particularly for the oxidation and gypsum/anhydrite zones. The XS published figure for the HIT resource model is given in Table 1. The estimates are reported inside a supplied pit shell at a 0.2% copper cut off with a volume adjustment for topography.

Table 1 XS Reported Resource Estimate

Xstrata Model Published Figure 0.2% Cu cut off Category MTonnes Cu % Au g/t Cu KTonnes Au KOzs Measured 780 0.51 0.28 3,978 7,023 Indicated 410 0.44 0.20 1,804 2,637 Inferred 900 0.39 0.17 3,510 4,920 Total 2,090 0.44 0.22 9,292 14,785

XS used a resource classification method independent of the search parameters for the metal grade interpolation. The method was based on kriging performance indicators ie kriging pass, number of samples, and average distance to samples, used to spatially constrain Measured, Indicated and Inferred Mineral Resources. The classification kriging used a 3 pass search strategy for Measured, Indicated and Inferred categories based on a pure nugget variogram. This means that there is equal averaging of selected samples regardless of sample to block distance. A more generous search was used for the Primary-Ivaal domain, based on a perceived level of greater confidence of grade continuity. Once an indicative index was generated a complex process of smoothing was applied with the view of producing very coherent zones of Measured, Indicated and Inferred blocks. The aim was to remove any suggestions of the spotted dog effect ie isolated blocks of Measured or Indicated resource within a sea of Indicated or Inferred resource respectively. The resource estimates for the H&SC models are included in Table 2. H&SC used a much simpler classification method basing it on the 3 Passes in its search parameter strategy.


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Table 2 In-Pit Resources for HIT : H&SC Models November 2011 (2012)

Flat Search Category Mtonnes Cu % Au g/t Cu Tonnes Au ounces Measured 1,147 0.47 0.25 5,368,922 9,111,246 Indicated 378 0.39 0.17 1,476,239 2,063,804 Inferred 480 0.40 0.20 1,895,194 3,023,795 Total 2,005 0.44 0.22 8,739,865 14,180,140 Steep Search Category Mtonnes Cu % Au g/t Cu Tonnes Au ounces Measured 1,263 0.47 0.25 5,909,574 9,947,548 Indicated 269 0.40 0.18 1,062,301 1,539,254 Inferred 446 0.40 0.20 1,762,399 2,797,572 Total 1,978 0.44 0.23 8,742,068 14,309,157

(rounding errors occur)(use of significant figures does not imply precision) The visual comparison of block grade with composite grade indicates a good match up for both the XS model and the H&SC models. Comparison of the XS and H&SC block grades indicates a reasonable match which demonstrates the robust nature to the simpler H&SC model. Visual differences between the two models are:

a minor amount of grade smearing with the H&SC model, the tighter control and hence introduced selectivity to the XS model the larger amount of extrapolated grade with XS.

Examples of H&SC and XS block grade-composite value comparison are included as Figures 2 to 5. Modelling of the new set of 4m composites by H&SC indicated a very similar overall resource reporting outcome to the XS published figure. This would seem to validate the simpler H&SC methodology. However H&SCs outcome suggests a greater proportion of Measured Resource compared to Indicated Resource, although the combined Measured and Indicated figures are relatively comparable with XS. The conclusion for the XS resource and the H&SC resource is that the XS model is globally larger because of the larger Inferred search pass; this is partly offset by H&SC having a slightly higher global density probably due to not applying the gypsum/anhydrite density factor.


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Figure 2 HIT Block Grade & Composite Comparison Trukai

H&SC Model Section 52880mE

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

model extents

Copper range

blocks this lay er only

9400 9500 9600 9700 9800 9900 10000 10100

100

200

300

400

500

600

700

800

Section Plot of Copper

Easting slice: 52880.0 +/- 40.0

North

Ele

v

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data


Mean: 0.39563

Variance: 0.13830

CV: 0.93998

Minimum: 0.00

Q1: 0.1200

Median: 0.32500

Q3: 0.57500

Maximum: 22.800

No. of Data:

35431 / 39871

XS Model Section 52880mE

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

model extents

Copper range


9400 9600 9800 10000 10200

200

400

600

800


Easting slice: 52880.0 +/- 40.0

North

Ele

v

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data


Mean: 0.39563

Variance: 0.13830

CV: 0.93998

Minimum: 0.00

Q1: 0.1200

Median: 0.32500

Q3: 0.57500

Maximum: 22.800

No. of Data:

35431 / 39871


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Figure 3 HIT Block Grade & Composite Comparison Western Horse-Ivaal


0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

model extents

Copper range


9400 9500 9600 9700 9800 9900 10000 10100

100

200

300

400

500

600

700

800


Easting slice: 53040.0 +/- 40.0

North

Elev

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data


Mean: 0.39563

Variance: 0.13830

CV: 0.93998

Minimum: 0.00

Q1: 0.1200

Median: 0.32500

Q3: 0.57500

Maximum: 22.800

No. of Data:

35431 / 39871

XS Model Section 53040mE

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

model extents

Copper range


9400 9600 9800 10000 10200

200

400

600

800


Easting slice: 53040.0 +/- 40.0

North

Elev

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data


Mean: 0.39563

Variance: 0.13830

CV: 0.93998

Minimum: 0.00

Q1: 0.1200

Median: 0.32500

Q3: 0.57500

Maximum: 22.800

No. of Data:

35431 / 39871


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Figure 4 HIT Block Grade & Composite Comparison Central Horse-Ivaal


0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

model extents

Copper range


9800 10000 10200 10400

0

200

400

600

800


Easting slice: 53280.0 +/- 40.0

North

Elev

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data


Mean: 0.39563

Variance: 0.13830

CV: 0.93998

Minimum: 0.00

Q1: 0.1200

Median: 0.32500

Q3: 0.57500

Maximum: 22.800

No. of Data:

35431 / 39871

XS Model Section 53280mE (note smaller scale for figure)

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

model extents

Copper range


9600 9800 10000 10200 10400

0

200

400

600

800


Easting slice: 53280.0 +/- 40.0

North

Ele

v

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data


Mean: 0.39563

Variance: 0.13830

CV: 0.93998

Minimum: 0.00

Q1: 0.1200

Median: 0.32500

Q3: 0.57500

Maximum: 22.800

No. of Data:

35431 / 39871


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Figure 5 HIT Block Grade & Composite Comparison Eastern Horse-Ivaal


0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

model extents

Copper range


9800 10000 10200 10400

0

200

400

600

800


Easting slice: 53760.0 +/- 40.0

North

Elev

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data


Mean: 0.39563

Variance: 0.13830

CV: 0.93998

Minimum: 0.00

Q1: 0.1200

Median: 0.32500

Q3: 0.57500

Maximum: 22.800

No. of Data:

35431 / 39871

XS Model Section 53760mE (note smaller scale for figure)

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

model extents

Copper range


9600 9800 10000 10200 10400

0

200

400

600

800


Easting slice: 53760.0 +/- 40.0

North

Elev

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data


Mean: 0.39563

Variance: 0.13830

CV: 0.93998

Minimum: 0.00

Q1: 0.1200

Median: 0.32500

Q3: 0.57500

Maximum: 22.800

No. of Data:

35431 / 39871


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Discussion The following represents areas for further review:

The large number of estimation domains has allowed for a complicated estimation model which may not be justified. H&SC believes a simpler model could be developed.

Interpolation of grade appears to have a too few minimum data requirement coupled with a limited number

of informing holes. This has led to some assay grades within the block not being used to inform on the average grade of the block. This could lead to a slight over-statement of grade and is considered not good practice. A data value limit has been applied to the interpolation which in effect is a top cut. This may act to counteract the effect of using of hard boundaries.

A complex strategy of smoothing has been applied to remove any spotted dog effects. H&SC consider the

smoothing strategy to be unnecessary.

The higher Measured Resource for the H&SC model is the result of two very different classification strategies.

Further H&SC modelling is not likely to significantly change its figures. However new models may lead to a

realignment of the Measured, Indicated and Inferred categories of mineralisation.

A review of block grades in conjunction with drilling data highlighted one or two issues where drilling had stopped in high grade material. These areas should be looked at to see if additional drilling could expand the higher grade areas.

Conclusion Work completed by H&SC on the HIT deposit allows it to be in a position to sign off on the XS resource estimate. Simon Tear Consulting Geologist H&S Consultants Pty Ltd


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JORC Code, 2012 Edition Table 1 Horse-Ivaal-Trukai Deposit

Section 1 Sampling Techniques and Data

(Criteria in this section apply to all succeeding sections.)

Criteria JORC Code explanation Commentary Sampling techniques

Nature and quality of sampling (e.g. cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc.). These examples should not be taken as limiting the broad meaning of sampling.

Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used.

Aspects of the determination of mineralisation that are Material to the Public Report.

In cases where industry standard work has been done this would be relatively simple (e.g. reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules) may warrant disclosure of detailed information.

Diamond drilling HQ Core Holes generally drilled steep to S and SW with a few moderately

angled holes to the WSW. Sampling consisted of sawn half core Consistency of sampling method maintained Sampling technique is considered appropriate for deposit type Well documented core handling and sampling procedures for Phase 4

Drilling techniques

Drill type (e.g. core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc.) and details (e.g. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc.).

Phase 1a 1969 to 1971 CEC 19 diamond drillholes for 5,695m (assays excluded from resource due to uncertain collar locations and assay results)

Phase 1b 1976 to 1982 FEPL 25 diamond drillholes for 7,829m Phase 2 1993 to 1997 HPL 36 diamond drillholes for 9,844m Phase 3 1998 to 1999 Cyprus 19 diamond drillholes for 5,447m Phase 4 2002 to 2012 Noranda-Xstrata 371 diamond drillholes for

115,923m Total diamond drilling 457 holes for 144,738m Drilling technique is considered most appropriate for deposit type A suite of percussion holes, the SPH series, was excluded from the

resource estimates due to suspect data. No oriented core as no major structural control to mineralisation

Drill sample Method of recording and assessing core and chip sample recoveries Recorded on a drill run and sample length basis


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Criteria JORC Code explanation Commentary recovery and results assessed.

Measures taken to maximise sample recovery and ensure representative nature of the samples.

Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material.

Some zones of bad recoveries, particularly the barren totally oxidised and leached zones

Recovery is reported as good with an average 90.8% for the mineral zone; no evidence of grade bias with recovery

Drill recoveries are considered adequate

Logging Whether core and chip samples have been geologically and geotechnically logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies.

Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc.) photography.

The total length and percentage of the relevant intersections logged.

Detailed hard-copy lithological logging of all holes transcribed by operators at the time into Excel spreadsheets and then loaded into an Access Database with a full set of quantitative logging codes and validation checks.

Since 2010 data loaded into an SQL server database with numerous validation checks

Core photographs available for 2002-2012 work. All relevant intersections were logged Core from Phase 2 onwards retained on site

Sub-sampling techniques and sample preparation

If core, whether cut or sawn and whether quarter, half or all core taken.

If non-core, whether riffled, tube sampled, rotary split, etc. and whether sampled wet or dry.

For all sample types, the nature, quality and appropriateness of the sample preparation technique.

Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples.

Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field

duplicate/second-half sampling. Whether sample sizes are appropriate to the grain size of the material being

sampled.

Company procedure for Phase 4 core handling documented in a flow sheet Sawn half core under geological control for 2m samples (90% of

samples) Sample crushed and sub-sampled on site; pre 2007 200g sample; post 2007 250g sub-sample. Sampling procedures were in line with industry standards of the day (as documented in historic reports); Sub-samples sent from site to commercial laboratory for assay, with

appropriate sample prep All sampling methods and samples sizes are deemed appropriate

Quality of assay data and laboratory tests

The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total.

For geophysical tools, spectrometers, handheld XRF instruments, etc., the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc.

Nature of quality control procedures adopted (e.g. standards, blanks, duplicat external laboratory checks) and whether acceptable levels of accuracy (i.e. lac bias) and precision have been established.

Company has the analytical procedures for Phase 4 documented as flow sheets;

Appropriate analytical method using an aqua regia partial digest Fire assay (50g) for gold from all phases of drilling

AAS for copper for Phases 2-3 whilst Phase 4 used ICP-OES with high copper grades having an AA finish

Assaying was carried out by ALS, an accredited laboratory. No QAQC data for Phase 1a work


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Criteria JORC Code explanation Commentary Extensive QAQC programme with standards, blanks, laboratory

duplicates & secondary lab checks. Outcomes for Phases 2 to 4 indicate acceptable precision and no obvious biases QAQC report is supplied by XS and reviewed by Golder Associates; it indicates

no issues with the data for Horse-Ivaal-Trukai (HIT) All sampling and assay methods and samples sizes are deemed

appropriate.

Verification of sampling and assaying

The verification of significant intersections by either independent or alternative company personnel.

The use of twinned holes. Documentation of primary data, data entry procedures, data

verification, data storage (physical and electronic) protocols. Discuss any adjustment to assay data.

Twinned holes for Phase 1b indicated holes could be included for resource estimation but were only suitable for Indicated or Inferred resources.

XS have core handling procedures as flowsheets. Density data was adjusted for the gypsum zone with a subtraction of

0.13t/m3 applied to all measurements in this zone; based on check density measurements using whole core trays.

Location of data points

Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations

used in Mineral Resource estimation. Specification of the grid system used. Quality and adequacy of topographic control.

DGPS on all XS holes in PNG94 Zone 54 grid projection by surveyors AAM Hatch. Accuracy to


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Orientation of data in relation to geological structure

Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the

Deposit type. If the relationship between the drilling orientation and the orientation of

key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.

Drilling at moderate to steep dip to SSW, at approximate right angles to broad zone of mineralisation

Some additional holes drilled to west/WSW Drilling orientations are appropriate with no bias

Sample security

The measures taken to ensure sample security. No documentation supplied; industry standard assumed Intensity of copper mineralisation is visual

Audits or reviews

The results of any audits or reviews of sampling techniques and data. The XS HIT Feasibility Study was supplied and covered the drilling phases relevant to HIT. XS expressed concern about the

documentation for the Phase 1a drilling at HIT and excluded the drillholes Golder Associates : External Review of Feasibility Level Mineral

Resources identified no significant risks to the HIT estimates


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Section 2 Reporting of Exploration Results

(Criteria listed in the preceding section also apply to this section.)

Criteria JORC Code explanation Commentary Mineral tenement and land tenure status

Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.

The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.

Located in the foothills of the main divide in the Sandaun Province, PNG; 80km NE of OK Tedi Mine

Exploration Licence EL58 held by XFRL a wholly owned subsidiary of Xstrata Copper on behalf of the Frieda River Joint Venture between Highlands Pacific and Xstrata

The area is remote with poor land access

Exploration done by other parties

Acknowledgment and appraisal of exploration by other parties. 5 phases of work have historically been identified for the Frieda River area Phase 1a CEC: diamond and short hole percussion drilling Phase 1b FEPL: diamond and short hole percussion drilling

Discovery of Ekwai Phase 2 HPL : diamond drilling Phase 3 Cyprus: diamond drilling Phase 4 Noranda-Falconbridge-Xstrata: bulk of diamond drilling by

Noranda Variety of surface geochemistry techniques and ground/airborne

geophysical surveys; surface mapping; geological studies Previous exploration has been completed to industry standard

Geology Deposit type, geological setting and style of mineralisation. The Frieda River Igneous Complex (FRIC) represents the remains of a solitary strato-volcano associated with an island arc subduction setting. It intrudes meta-sedimentary basement of Cretaceous age. The FRIC is a sub-vertical intrusion and covers an area of 17 by 7km with a NW elongate axis.

The FRIC comprises diorites and andesite cross cut by later flimtem (trachyandesite) dykes. The intrusive is multi-phased ranging in ages between 13.1 and 17.3ma.

Deformation is confined to late stage brittle structures. Four fault bounded terrains have been defined based on surface mapping although there is no obvious relationship between domain and mineralisation

The Horse Microdiorite (HMD) is the main intrusive phase related to mineralisation in the general area and represents a hornblende- biotite phyric microdiorite porphyry.


16

Criteria JORC Code explanation Commentary Overprinting alteration is of a typical porphyry system with the

majority of the mineralisation associated with the potassic and phyllic alteration phases Mineralisation comprises chalcopyrite disseminations and thin quartz veins

with chalcopyrite veinlets and blebs. Lithology is the main control on mineralisation with alteration providing

control within the dominant mineral-hosting lithologies namely the HMD. Weathering has produced a completely oxidised zone near zone with

mineral depletion. A narrow enriched supergene zone has been delineated with chalcocite copper mineralisation. Quartz - anhydrite veins are prevalent with the anhydrite zone

becoming gypsum above the water table surface. This has produced a distinct difference in geotechnical behaviour and density value for rocks above and below this surface

Drill hole Information

A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes:

o easting and northing of the drill hole collar o elevation or RL (Reduced Level elevation above sea level in metres) of

the drill hole collar o dip and azimuth of the hole o down hole length and interception depth o hole length.

If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case.

Exploration results not being reported

Data aggregation methods

In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (e.g. cutting of high grades) and cut-off grades are usually Material and should be stated.

Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail.

The assumptions used for any reporting of metal equivalent values should be clearly stated.


Relationship These relationships are particularly important in the reporting of Exploration results not being reported


17

Criteria JORC Code explanation Commentary

between mineralisation

Exploration Results. If the geometry of the mineralisation with respect to the drill hole

widths and angle is known, its nature should be reported. intercept lengths

If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (e.g. down hole length, true

width not known). Diagrams Appropriate maps and sections (with scales) and tabulations of Exploration results not being reported

intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.

Balanced Where comprehensive reporting of all Exploration Results is not Exploration results not being reported reporting practicable, representative reporting of both low and high grades

and/or widths should be practiced to avoid misleading reporting of Exploration Results.

Other Other exploration data, if meaningful and material, should be reported Exploration results not being reported substantive including (but not limited to): geological observations; geophysical exploration survey results; geochemical survey results; bulk samples size and data method of treatment; metallurgical test results; bulk density,

groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.

Further work The nature and scale of planned further work (e.g. tests for lateral Exploration results not being reported extensions or depth extensions or large-scale step-out drilling). Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive.


18

Section 3 Estimation and Reporting of Mineral Resources

(Criteria listed in section 1, and where relevant in section 2, also apply to this section.)

Criteria JORC Code explanation Commentary Database integrity

Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes.

Data validation procedures used.

Data collated by Xstrata in an SQL server Hardcopies of all drilling , logging etc. scanned & stored in Brisbane by XS Golder completed a detailed check in 2009-11; no

major discrepancies encountered Checks completed by H&SC include:

Data exported from supplied Xstrata database and imported into an HS&C Access database with indexed fields, including duplicate entries, sample overlap, unusual assay values and missing data.

Additional error checking using the Surpac database audit option for incorrect hole depth, sample/logging overlaps and missing downhole surveys.

Manual checking of logging codes for consistency, plausibility of drill hole trajectories and assay grades.

Data converted to a local orthogonal E-W grid for ease of working; viewed using the Surpac software

Assessment of the data confirms that it is suitable for resource estimation.

Site visits Comment on any site visits undertaken by the Competent Person and the outcome of those visits.

If no site visits have been undertaken indicate why this is the case.

Larry Queen, Exploration Manager for Highlands Pacific in numerous site visits has reviewed all drill core and RC chips, and all geological mapping and interpretation.

A site visit to the Frieda River area was completed by Simon Tear in 2001. The site visit helped to result in the joint venture of the project by Noranda Pacific (now XS)

Geological interpretation

Confidence in (or conversely, the uncertainty of) the geological interpretation of the mineral deposit.

Nature of the data used and of any assumptions made. The effect, if any, of alternative interpretations on Mineral Resource

estimation. The use of geology in guiding and controlling Mineral Resource

estimation. The factors affecting continuity both of grade and geology.

Simple porphyry copper model; exposed at surface Geological modelling has used Leapfrog3D software to generate

solids which have then been incorporated in a block model. Five structural domains have been delineated for distinct geological

packages, mainly on structural analysis and fault patterns; used as hard boundaries for lithology and alteration modelling; boundaries interpreted as major faults

Lithological and alteration units and zone have been interpreted. The alteration delineation is based on core logging and extensive x-


19

Criteria JORC Code explanation Commentary ray diffraction work.

Weathering has produced a total oxidised zone leached of all metals; a partially oxidised transition zone for sulphide minerals; a top of anhydrite surface important for rock behaviour characteristics; a modest supergene blanket zone is interpreted to exist in tandem with the transition zone

Gypsum/Anhydrite surface characterises geotechnical behaviour Barren alluvium has been delineated Geological understanding appears to be good and appropriate for

resource estimation Alternative interpretations are possible for the alteration definition

which has been defined using modelling software but unlikely to affect the estimates.

The style of mineralisation and the orebody type means there are very few factors controlling the grade and geological continuity. There is no obvious structural control to mineralisation. There is some post mineral alteration that has removed the original copper mineralisation. This has been designated a separate domain.

Dimensions The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource.

3400m strike by 1100m plan width to a maximum depth of 1200m below surface.

Outcropping at surface Estimation and modelling techniques

The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters and maximum distance of

extrapolation from data points. If a computer assisted estimation method was chosen include a description of computer software and parameters used.

The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data.

The assumptions made regarding recovery of by-products. Estimation of deleterious elements or other non-grade variables of economic

significance (e.g. sulphur for acid mine drainage characterisation). In the case of block model interpolation, the block size in relation to the

average sample spacing and the search employed. Any assumptions behind modelling of selective mining units. Any assumptions about correlation between variables.

Vulcan modelling software; block model checked in Surpac Initial statistical analysis indicated a strong correlation between gold and

copper; weaker copper-silver correlation 14 estimation domains for copper and gold were created based on

structural zone, lithology, alteration and weathering. Arsenic and molybdenum used different estimation domains Estimation domains used to select composites; 33,162 4m downhole

composites used. The domain hard boundaries were used to constrain the composite selection; residuals


20

Criteria JORC Code explanation Commentary

Description of how the geological interpretation was used to control the resource estimates.

Discussion of basis for using or not using grade cutting or capping. The process of validation, the checking process used, the comparison of

model data to drill hole data, and use of reconciliation data if available.

composite data for 11 of the 14 domains. 3D Variography was modest mainly due to a lack of drilling. Ordinary Kriging estimation, for copper, gold, silver and

molybdenum, used for 11 domains, ID2 used for the remaining three domains; 3 pass search strategy

The search ellipses were orientated to follow the anisotropies of the variography for each domain; distances based on the ranges of the correlograms

Search parameters of the order of 50-100m Pass 1, 60-180m Pass 2 & 200-300m Pass 3; a range of search orientations

Maximum extrapolation from the nearest drillhole is up to approximately 150m

Minimum data 6 with no octants decreasing to 3 data, maximum number of data from 6 to 12 with increasing search distance.

Other limits include number of holes used and the maximum number of samples from single hole

Parent Block size 25m (east) by 25m (north) by 15m (elevation) with no sub-blocking. Discretisation 3 by 3 by 2 for each block

The model block size is effectively the selective mining unit for these estimates

Model validation has consisted of visual comparison of block grades and composite values and indicated a reasonable match. Comparison of summary statistics for block grades and composite values has indicated the composite mean is greater than the block grade mean for both copper and gold

No deleterious elements or acid mine drainage factored in. Nearest neighbour model to check on effect of high grade outliers in the

data; no issues noted H&SC completed a series of check Ordinary Kriged models which

indicated no obvious issues with the resource model Moisture Whether the tonnages are estimated on a dry basis or with natural

moisture, and the method of determination of the moisture content. Tonnages are estimated on a dry weight basis; moisture not

determined. Cut-off parameters

The basis of the adopted cut-off grade(s) or quality parameters applied.

0.2% copper cut off used; no account for gold grades The cut-off grade at which the resource is quoted reflects the

intended bulk-mining approach Pit shape used in XS model Copper price $2.50/lb and gold price

$1000/oz Mining factors Assumptions made regarding possible mining methods, minimum H&SCs understanding based on information supplied by HIG is for


21

Criteria JORC Code explanation Commentary or assumptions mining dimensions and internal (or, if applicable, external) mining

dilution. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential mining methods, but the assumptions made regarding mining methods and parameters when estimating Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the mining assumptions made.

an open pit mining scenario. Minimum mining dimensions is the parent block size of 25x25x15m Any internal dilution has been factored in with the modelling and as such is

appropriate to the block size.

Metallurgical factors or assumptions

The basis for assumptions or predictions regarding metallurgical amenability. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential metallurgical methods, but the assumptions regarding metallurgical treatment processes and parameters made when reporting Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the metallurgical assumptions made.

Mineralisation has had a substantial amount of testwork completed Simple grinding and standard flotation operation No assumptions have been made on recoveries in estimates No penalty elements identified in work so far

Environmental factors or assumptions

Assumptions made regarding possible waste and process residue disposal options. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider the potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfields project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.

Substantial studies have been completed by XS as part of the Feasibility Study for HIT

The area lies within steep terrain with restricted watercourses The area is covered with dense vegetation typical of that part of PNG There are carbonate rocks in the vicinity that could potentially provide

material for control of any acid mine drainage 2 disposal areas have been considered as plausible in mining studies

Bulk density Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.

The bulk density for bulk material must have been measured by methods that adequately account for void spaces (vughs, porosity, etc.), moisture and differences between rock and alteration zones within the deposit.

Discuss assumptions for bulk density estimates used in the evaluation process of the different materials.

Wax coated individual 10-15cm sticks of core from each core tray with the water immersion method. All pre-phase 4 data excluded due to suspect measuring practices; QAQC consisted of whole tray measurements for broken core/weathered/vuggy zones and the use of standards

Good coverage for lithology, alteration and mineral style Average dry density value based on modelling of measured densities Minor errors in database; no indication if errors used in modelling Modelling used inverse distance squared on 7,445 sample

measurements 0.13t/m3 subtracted from block grades above the gypsum/anhydrite

oxidation related surface, derived from whole core tray


22

Criteria JORC Code explanation Commentary measurements

Default average values used where no modelled grade exists. Average default densities and modelled data appear reasonable Density measuring methods considered appropriate; although possibility of

bias with the single sample selection for the Archimedes method, not considered significant

Classification The basis for the classification of the Mineral Resources into varying confidence categories.

Whether appropriate account has been taken of all relevant factors (i.e. relative confidence in tonnage/grade estimations, reliability of input data, confidence in continuity of geology and metal values, quality, quantity and distribution of the data).

Whether the result appropriately reflects the Competent Persons view of the deposit.

Mineral resources have been classified on data quality, sample spacing and modelling outcomes

Numerical assignment of Measured, Indicated and Inferred Resources was based on a kriging strategy category independent of the grade interpolation strategy. Strategy based on a nugget variogram ensuring equal sample weighting irrespective of sample to block distance; a complicated indicator smoothing method was subsequently applied

The classification appropriately reflects the Competent Persons view of the deposit

Audits or reviews

The results of any audits or reviews of Mineral Resource estimates. Extensive review by Golder Associates in 2011 who considered the resource estimates to be an appropriate reflection of the in-situ resources includes site visits

No major issues noted


23

Discussion of relative accuracy/ confidence

Where appropriate a statement of the relative accuracy and confidence level in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors that could affect the relative accuracy and confidence of the estimate.

The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used.

These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.

The relative accuracy and confidence level in the Mineral Resource estimates are considered to be in line with the generally accepted accuracy and confidence of the nominated Mineral Resource categories. This has been determined on a qualitative, rather than quantitative, basis, and is based on the Competent Persons experience with similar deposits

The geological nature of the deposit, composite/block grade comparison and the low coefficients of variation lend themselves to reasonable level of confidence in the resource estimates.

There is some small scale clustering of grade or localised domains of different grade

A complicated resource classification methodology has been used; a simpler method based on search parameters may result in different tonnages for the classification categories, mainly between Measured

and Indicated Resources. The minimum number of data parameters used in the modelling is

considered low and may possibly lead to a slight overestimation of the resource estimates

The Mineral Resource estimates are considered to be accurate globally, but there is some uncertainty int he local estimates due to the current drillhole spacing and a lack of geological definition.

The estimates are local, in the sense that they are localised to model blocks of a size considered appropriate for local grade estimation. The classified as Measured and Indicated Mineral Resources.

No mining of the deposit has taken place so no production data is available for comparison.

30th September 2013 Highlands Pacific Limited Level 4, 167 Eagle Street, Brisbane, QLD 4000

Resource Estimation for the Koki Porphyry Deposit, PNG Introduction H&S Consultants (H&SC) was requested by Highlands Pacific Limited (HIG) to complete Mineral Resource Estimates for the Koki deposit, part of the Frieda River Copper/Gold Project in Papua New Guinea. The target commodities are copper and gold associated with a large porphyry system; the much larger Horse-Ivaal-Trukai Cu/Au porphyry system lies immediately to the west of the deposit. The resource estimates incorporate all the available drillhole data. A location map of the three deposits at Frieda is included as Figure 1. The figure shows the topography with the Horse-Ivaal-Trukai planned pit shell inserted and the copper data from the drilling.

Figure 1 Koki Deposit 3D Location Map

HIG has supplied the drillhole database for the deposit, which H&S has accepted in good faith as an accurate, reliable and complete representation of the available data.

Horse-Ivaal-Trukai

Ekwai

Koki

Koki Resource Estimate, Highlands Pacific Ltd

25

No geological logging was supplied along with no drillhole recovery data, sample recovery data or density data. No geological domains or surfaces were supplied. H&SC performed only very limited validation of the data and did not detect any obvious problems likely to impact significantly on the resource estimates. The drillhole database for Frieda River is satisfactory for resource estimation purposes; however responsibility for quality control resides solely with HIG. The quality control procedures for assay and sampling used by HIG were not investigated by H&SC, so responsibility for quality control resides solely with HIG. The creation of the H&SC Access drillhole database, used for composite extraction, involved loading CSV file data into the database. This allowed for some error checking e.g. duplicate samples, missing assays etc. In addition the database audit option in Surpac was also used to check and further clean up the drillhole databases e.g. overlapping assay intervals and incorrect hole depths etc. As part of a larger study for the Frieda River Project and to facilitate the modelling work H&SC converted all data to an east-west local grid, details of the conversion are included in Table 1.

Table 1 Local Grid Conversion

Original Coords Local Grid Coords Y1 9482101.065 Y1 10000 X1 581744.729 X1 50000

Y2 9478601.065 Y2 10000 X2 587806.907 X2 57000

Rotation = 330o

Detailed topography was supplied by HIG as a DXF file produced from LIDAR survey data. Drillhole spacing is 160m between sections but hole spacing along section lines is irregular due to topography but is nominally 100m on section. Modelling Data Unconstrained 4m composites were extracted for the deposit from the drillhole database. Minor trimming of peripheral data was done visually in the GS3M software. Summary statistics for the deposit are included as Table 2.

Table 2 Koki Composite Data

Koki

Copper Gold No. Data:

3626 3626

mean:

0.245 0.194 variance:

0.066 0.048

CV:

1.049 1.125 Minimum:

0.001 0.004

Q1:

0.06 0.065 Median:

0.17 0.144

Q3:

0.354 0.26 Maximum:

2.819 5.53

IQR:

0.294 0.195


26

A plan view of the composites for the deposit is included as Figure 2.

Figure 2 Koki Composites Plan View Local Grid

52000 52400 52800 53200 53600

10800

11200

11600

12000

12400

Plan Plot of Copper

RLs: 83.0 to 730.0

East

Nor

th

No density data was supplied. HIG informed H&S that an average density value of 2.57t/m3 would be reasonable based on work completed by H&SC (for HIG) for the HIT deposit. Spatial analysis of the composite data indicated a flat trend in grade continuity combined with a modest along strike trend. H&SC considers this reasonable as the creation of a mineral grade shell for the deposit indicated both flat and steep dipping components to mineralisation. The former may be due to surface oxidation but could also be due to the drilling pattern. It should also be noted that the host Koki Diorite Porphyry is a different intrusive to the Horse Microdiorite that hosts the HIT and Ekwai deposits. The geometry of the former porphyry may be quite different to the HMD. A compromise variogram model was used.

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data


27

The variogram models for Koki are included in Table 3 with an example of the 3D variogram model for copper included as Figure 3.

Table 3 Variogram Models for Koki

Koki Copper/Gold Deposit

Metal Nugge

t c1 c2 c3

Copper type exp exp exp

variance 0.017 0.27 0.007 0.71

range - X 17.5 54 721

range - Y 27.5 136 142

range - Z 8 406 409

Z Rotation 30

Y Rotation 48 X Rotation 32

Gold type exp exp exp

variance 0.1 0.32 0.19 0.39

range - X 7 56 189

range - Y 38.5 265 267

range - Z 65 421 476

Z Rotation -13

Y Rotation -29 X Rotation 22

(local grid rotations with trigonometrical convention)

Figure 3 Koki 3D Variogram Model Copper Local Grid


28

Resource Estimation The coefficients of variation for the copper and gold composite data are relatively low (CV ~1) so as to allow for Ordinary Kriging (OK) as a valid modelling method rather than a more complicated method like Multiple Indicator Kriging. Because of the low CVs no top cut was applied to the composite data. OK modelling of the composites used a three pass search strategy, details of which are included in Table 4. H&SC used the GS3M software for the modelling with the data loaded into a Surpac block model for model validation and resource reporting. Block size is 25m by 25m by 15m with no sub-blocking.

Table 4 Search Parameters for Koki

Search Pass 1 Pass 2 Pass 3 Rotations X 125 162.5 162.5 0 Y 50 62.5 62.5 0 Z 75 97.5 97.5 135 Min Data 16 16 8

Max Data 32 32 32 Min Octants 4 4 2 (rotations use the trigonometrical convention)

All resources are reported to a 0.2% copper cut-off with a fixed density of 2.57t/m3 and with the block centroid below the topographic surface. No separation was made for oxidised or fresh material. Outcomes of the resource estimation are listed in Table 5.

Table 5 Resource Estimates for Koki

Deposit Pass Tonnes Cu % Au g/t Cu Tonnes Au Ounces Koki 1 40,140,188 0.44 0.29 176,617 378,170

2 130,178,531 0.38 0.26 498,584 1,096,681

3 281,655,938 0.35 0.24 982,979 2,182,607

Total Inferred 451,974,656 0.37 0.25 1,658,747 3,662,303 (Use of significant figures does not imply precision)

HIG have informed H&SC that the deposit is likely to be mined in a bulk mining, open pit scenario and the resources have been classified according to this assumption. Visual inspection in Surpac and GS3M indicated that block grades reasonably honoured the drillhole data. Figure 4 shows an oblique section in the plane of the drilling with both drillhole grades and block grades.


29

Figure 4 Block Grade vs Drillhole Grade Comparison

Table 6 shows comparison of the summary statistics for the composites and block grades for copper and gold and indicates no issues with the modelling.

Table 6 Summary Statistics for Composites and Block Grades

Copper

Gold

Comps Blocks

Comps Blocks No. Data: 3626 29145

3626 29145

mean: 0.245 0.248

0.194 0.2 variance: 0.066 0.036

0.048 0.018

CV: 1.049 0.767

1.125 0.665 Minimum: 0.001 0

0.004 0.01

Q1: 0.06 0.1

0.065 0.11 Median: 0.17 0.21

0.144 0.18

Q3: 0.354 0.35

0.26 0.26 Maximum: 2.819 1.63

5.53 1.34

IQR: 0.294 0.25

0.195 0.15 Figure 5 shows a plot of the global composite grades versus the global block grades and indicates no modelling issues for copper. Gold produces a similar plot.

100m


30

Figure 5 Cumulative Frequency Comparison of Block Grade and Composites - Copper

0.001 0.010 0.100 1.000 10.0000

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

Copper grade

Cum

ulat

ive

Pro

porti

on o

f Sam

ples

Domain 2

Domain 1

Cumulative Histogram of Copper

(Domain1 = Block grades; Domain 2 = Composite grades; log scale for copper grade axis)

HIG has published a resource estimate for Koki based on a sectional polygonal model based on 30 drillholes using a nominal 0.2% Cu cut off. A conservative figure of 274Mt at 0.4% Cu and 0.3g/t Au was estimated. The smaller tonnage but at higher metal grades are consistent with the new model. The resources are classified as Inferred. Reasons for the classification are included in Table 7.

Table 7 Factors affecting Resource Classification

Positive factors Negative factors Sufficient drillholes for Inferred drilled in a reasonably regular pattern

Overall lack of drilling

Low coefficient of variation for gold and copper composite data; Cu & Au correlate reasonably well

No density data

Simple porphyry geological model No geological model controlling the margins Proximity to the major HIT porphyry deposit No oxidation surfaces Good quality topographic data No QAQC No recovery data


31

Risks The risks to the resource estimates are detailed below:

The lateral margins to the deposit are geologically undefined, more detailed drilling may cause either an increase or decrease in the resource estimate. Modelling of the unconstrained composite data does seem to have limited any smearing of grade beyond a reasonable geological limit (see Figure 4).

The impact of oxidation is unknown on the likely metallurgical recovery of copper and gold. A metallurgical testwork programme may resolve this issue. Small impacts by weathering on the near surface material have been noted in the HIT deposit.

There may be some small scale clustering of grade or localised domains of different grade that is not detectable on the current 200m by 100m spaced drilling.

The possibility of thick unconsolidated overburden is considered unlikely as the deposit generally lies on the crest of a hill away from any valley floor.

Exploration Potential The deposit is open at both ends. There is the possibility of higher grade resources existing at the south end of Koki (black circle in Figure 6).

Figure 6 Koki Copper Block Grades & Exploration Potential (Local Grid)

52000 52400 52800 53200 53600

10800

11200

11600

12000

12400

Plan Plot of Copper

RL slice: 530.0 +/- 7.5

East

Nor

th

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

Copper Range

Point Data

0.00 - 0.100

0.100 - 0.200

0.200 - 0.400

0.400 - 0.600

0.600 - 1.00

1.00 - 100.00

model extents

Copper range



32

Summary H&SC has completed new resource estimates for the Koki Porphyry deposit. The resource estimates are reported to a 0.2% copper cut off with a fixed density of 2.57t/m3. The resources are classified as Inferred.

Category MTonnes Cu % Au g/t Cu KTonnes Au Kozs Inferred 452 0.37 0.25 1,659 3,662

A substantial amount of drilling is required to upgrade the resource estimate. Simon Tear Consulting Geologist H&S Consultants Pty Ltd The data in this report that relates to Mineral Resource Estimates for the Koki Deposit is based on information evaluated by Mr Simon Tear who is a Member of The Australasian Institute of Mining and Metallurgy (MAusIMM) and who has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Persons as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Mr Tear is a Director of H&S Consultants Pty Ltd and he consents to the inclusion in the report of the Mineral Resources in the form and context in which they appear.


33

JORC Code, 2012 Edition Table 1 report template

1.1 Section 1 Sampling Techniques and Data (Criteria in this section apply to all succeeding sections.) Sampling techniques

Nature and quality of sampling (eg cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc). These examples should not be taken as limiting the broad meaning of sampling.

Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used.

Aspects of the determination of mineralisation that are Material to the Public Report.

In cases where industry standard work has been done this would be relatively simple (eg reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (eg submarine nodules) may warrant disclosure of detailed information.

Diamond drilling HQ Core Holes generally drilled steep to moderately angled to the WSW. Some

angled holes oriented to ENE Sampling consisted of cut half core Consistency of sampling method maintained. Sampling technique is considered appropriate for deposit type Well documented core handling and sampling procedures for Phase 4

Drilling techniques

Drill type (eg core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc) and details (eg core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc).

Diamond drilling mainly HQ core size totalling 49 holes for 12,924m Phase 1a 1969 to 1971 CEC 37 diamond drillholes for 9,121m Phase 1b 1976 to 1982 FEPL no drilling Phase 2 1993 to 1997 HIG 4 diamond drillholes for 1,574m Phase 3 1998 to 1999 Cyprus 2 diamond drillholes for 555m Phase 4 2002 to 2012 Noranda-Xstrata (XS) 6 diamond drillholes for

1,674m Drilling technique is considered most appropriate for deposit type A suite of percussion holes, the SPH series, was excluded from the resource

estimates due to suspect data on advice from HIG and XS documentation.


34

No oriented core

Drill sample recovery

Method of recording and assessing core and chip sample recoveries and results assessed.

Measures taken to maximise sample recovery and ensure representative nature of the samples.

Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material.

No recoveries available

Logging Whether core and chip samples have been geologically and geotechnically logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies.

Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc) photography.

The total length and percentage of the relevant intersections logged.

No geological logging is available

Sub-sampling techniques and sample preparation

If core, whether cut or sawn and whether quarter, half or all core taken.

If non-core, whether riffled, tube sampled, rotary split, etc and whether sampled wet or dry.

For all sample types, the nature, quality and appropriateness of the sample preparation technique.

Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples.

Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/second-half sampling.

Whether sample sizes are appropriate to the grain size of the material being sampled.

Company procedure for Phase 4 core handling documented in a flow sheet Sawn half core under geological control for a range of samples intervals

reflecting historical practice eg 5, 10; 50% of samples as 2m samples Sample crushed and sub-sampled on site; pre 2007 200g sample; post 2007

250g sub-sample. Sampling procedures were in line with industry standards of the day (as

documented in historic reports); Sub-samples sent from site to commercial laboratory for assay, with

appropriate sample prep All sampling methods and samples sizes are deemed appropriate

Quality of assay The nature, quality and appropriateness of the assaying and Company has the analytical procedures for Phase 4 documented as flow


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data and laboratory tests

laboratory procedures used and whether the technique is considered partial or total.

For geophysical tools, spectrometers, handheld XRF instruments, etc, the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc.

Nature of quality control procedures adopted (eg standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (ie lack of bias) and precision have been established.

sheets; Appropriate analytical method using an aqua regia digest Fire assay (50g) for gold from all phases of drilling AAS for copper for Phases 2-3 whilst Phase 4 used ICP-OES with high copper

grades having an AA finish Assaying was carried out by ALS, an accredited laboratory. No QAQC data for Phase 1a work Extensive QAQC programme with standards, blanks, laboratory duplicates &

secondary lab checks. Outcomes for Phases 2 to 4 indicate acceptable precision and no obvious biases

A QAQC report is supplied by XS and reviewed by Golder Associates; it indicates no issues with the data for Horse-Ivaal-Trukai (HIT) and by extension with Koki

All sampling and assay methods and samples sizes are deemed appropriate.

Verification of sampling and assaying

The verification of significant intersections by either independent or alternative company personnel.

The use of twinned holes.

Documentation of primary data, data entry procedures, data verification, data storage (physical and electronic) protocols.

Discuss any adjustment to assay data.

No verification of intersections by non-company personnel No twinned holes XS Feasibility Study contains the use of company procedures used for

sampling

Location of data points

Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation.

Specification of the grid system used.

Quality and adequacy of topographic control.

DGPS on all XS holes in PNG94 Zone 54 grid projection by surveyors AAM Hatch.

XS also had historic drill hole collar locations validated by DGPS with good accuracy.

Down hole surveys were historically taken every 50m by single shot Eastman camera surveys. Half way through Phase 4 moved to 50m intervals with the REFLEX EZ-SHOT.

A detailed Digital Elevation Model (DEM) was generated by from LIDAR data and incorporates ground survey points.

Most collars have been resurveyed as part of the HIT deposit assessment Location methods used to determine accuracy of drillhole collars is

considered appropriate Downhole surveys are absent for Phase 1a drilling


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Data spacing and distribution

Data spacing for reporting of Exploration Results.

Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied.

Whether sample compositing has been applied.

Drillhole section spacing is 200m. On section spacing is irregular due to topography but is generally 100m. 200 by 100m spacing is appropriate for assessment of geological and grade

continuity for this type of deposit. Drilling depth is generally to 200mRL No sample compositing.

Orientation of data in relation to geological structure

Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type.

If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.

Moderately angled holes to WSW with some holes angled moderately to ENE

Drillhole angle relative to mineralisation has been a compromise to accommodate the vertical and horizontal nature and strike dimensions of a wide intrusive body

Drilling orientations are appropriate with no bias.

Sample security The measures taken to ensure sample security. No documentation supplied

Audits or reviews The results of any audits or reviews of sampling techniques and data.

The XS HIT Feasibility Study was supplied and covered the drilling phases relevant to HIT. Presumably the same comments can be applied to Koki. XS expressed concern about the documentation for the Phase 1a drilling at HIT and excluded the drillholes. The holes have been retained for Koki (75% of total) based on XSs statement there is no explicit reason to doubt the veracity of the assay data but the inclusion has impacted on classification

Golder Associates : External Review of Feasibility Level Mineral Resources identified no significant risks to the HIT estimates


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1.2 Section 2 Reporting of Exploration Results (Criteria listed in the preceding section also apply to this section.) Criteria JORC Code explanation Commentary

Mineral tenement and land tenure status

Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.

The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.

Located in the foothills of the main divide in the Sandaun Province, PNG; 80km NE of the OK Tedi Mine

Exploration Licence EL58 held by XFRL a wholly owned subsidiary of Xstrata Copper on behalf of the Frieda River Joint Venture between Highlands Pacific and Xstrata

The area is remote with poor land access

Exploration done by other parties

Acknowledgment and appraisal of exploration by other parties. 5 phases of work have historically been identified for the Frieda River area Phase 1a CEC: diamond and short hole percussion drilling. Discovery of Koki Phase 1b FEPL: diamond and short hole percussion drilling Phase 2 HPL diamond drilling Phase 3 Cyprus: diamond drilling Phase 4 Noranda-Falconbridge-Xstrata: diamond drilling Variety of surface geochemistry techniques and ground/airborne

geophysical surveys; surface mapping; geological studies

Geology Deposit type, geological setting and style of mineralisation. The Frieda River Igneous Complex (FRIC) represents the remains of a solitary strato-volcano associated with an island arc subduction setting. It intrudes meta-sedimentary basement of Cretaceous age. The FRIC is a sub-vertical intrusion and covers an area of 17 by 7km with a NW elongate axis.

The FRIC comprises diorites and andesite cross cut by later flimtem (trachyandesite) dykes. The intrusive is multi-phased ranging in ages between 13.1 and 17.3ma.

Deformation is confined to late stage brittle structures. Overprinting alteration is of a typical porphyry system with the majority of

the mineralisation associated with the potassic and phyllic alteration phases Mineralisation comprises chalcopyrite disseminations and thin quartz veins

with chalcopyrite veinlet and blebs. Lithology is the main control on mineralisation with alteration providing


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control within the dominant mineral-hosting lithologies. The Koki Diorite Porphyry (KDP) is a coarse-grained hornblende-quartz

diorite porphyry forming an elongate, partly fault-bounded, body on the eastern side of the FRIC. Coarse feldspars > 10 millimetres and finer grained hornblendes occur as phenocrysts set in a fine-grained matrix of hornblende and plagioclase.

The KDPs association with mineralisation, is interpreted to be as a host only, with the mineralising fluids related to the intrusion of the younger Horse Microdiorite (HMD).

Mineralisation within the KDP is best developed on joint surfaces and in highly fractured zones.

Drill hole Information

A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes:

easting and northing of the drill hole collar

elevation or RL (Reduced Level elevation above sea level in metres) of the drill hole collar

dip and azimuth of the hole

down hole length and interception depth

hole length.

If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case.


Data aggregation methods

In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (eg cutting of high grades) and cut-off grades are usually Material and should be stated.

Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail.



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The assumptions used for any reporting of metal equivalent values should be clearly stated.

Relationship between mineralisation widths and intercept lengths

These relationships are particularly important in the reporting of Exploration Results.

If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported.

If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (eg down hole length, true width not known).


Diagrams Appropriate maps and sections (with scales) and tabulations of intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.


Balanced reporting

Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of Exploration Results.


Other substantive exploration data

Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.


Further work The nature and scale of planned further work (eg tests for lateral extensions or depth extensions or large-scale step-out drilling).

Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive.



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1.3 Section 3 Estimation and Reporting of Mineral Resources (Criteria listed in section

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