Zafranal-43-101-Technical-Report.pdf

AQM Copper Inc.

Zafranal Copper Project Peru

Technical Report December 2010 Resource Estimate Document No. 60246-00000-23-002-001 AMEC Minproc 25/02/2011


Technical Report December 2010 Resource Estimate

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Revision Date Description Prepared Reviewed Approved

Study Manager

Sign-off Client

0 25.02.11 Issued for Client use A Manfrino B Peters N Ricketts

Item Page Section Comments

* Use after Rev. 0



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Important Notice

This notice is an integral component of this Technical Report and should be read in its entirety and must accompany every copy made of the Technical Report.

This Technical Report has been prepared for AQM Copper Inc (“AQM”) by AMEC Minproc Limited

(“AMEC Minproc”). The Technical Report is based on information and data supplied to AMEC Minproc

by AQM and other parties and where necessary AMEC Minproc has assumed that the supplied data and information is accurate and complete.

The conclusions and estimates stated in the Technical Report are to the accuracy stated in the

Technical Report only and rely on assumptions stated in the Technical Report. The results of further work may indicate that the conclusions, estimates and assumptions in this Technical Report need to

be revised or reviewed. AMEC Minproc has used its experience and industry expertise to produce the estimates and

approximations in the Technical Report. Where AMEC Minproc has made those estimates and approximations, it does not warrant the accuracy of those amounts and it should also be noted that all estimates and figures contained in the Technical Report will be prone to fluctuations with time and

changing industry circumstances.

The Technical Report should be construed in light of the methodology, procedures and techniques

used to prepare the Technical Report. Sections or parts of the Technical Report should not be read or removed from their original context.

This Technical Report is intended to be used by AQM, subject to the terms and conditions of its

contract with AMEC Minproc. Recognising that AQM has legal and regulatory obligations, AMEC Minproc has consented to the filing of the Technical Report with Canadian Securities Regulatory

Authorities and its publishing on the SEDAR filing System. Except for the purposes legislated under provincial securities laws, any other use of this report by any third party is at that party’s sole risk.



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Title Page

Project Name: Zafranal Copper Project Title: Technical Report Location: Peru Effective Date of Technical Report: 25th February 2011 Effective Date of Mineral Resources: 25th February 2011 Qualified Persons

Annick Manfrino (Engineer ENSG, MAIG), Consultant Resource Analyst to AMEC Minproc Limited is the Qualified Person (QP) responsible for the preparation of the December resource estimate of the Zafranal Main Zone detailed in Section 17. Annick Manfrino is also responsible for the overall compilation of the Technical Report and prepared Sections 1,2,3,12,13,14,15,18, 19 and 20 in addition to Section17.

Greg Harbort (Ph.D. MAusIMM), Manager Process at AMEC Minproc Limited is the QP responsible for the process and metallurgical data presented in the Technical Report and summarised in Section 16.

James McCrea (P. Geo.) is the QP responsible for compiling a summary of the geology and exploration activities for the Zafranal Project.



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Table of Contents Important Notice ........................................................................................................... ii

1 SUMMARY ............................................................................................................... 12 1.1 SCOPE, BACKGROUND & LAND OWNERSHIP ........................................................................... 12

1.2 GEOLOGY, MINERALISATION & EXPLORATION ........................................................................ 13

1.3 METALLURGICAL & PROCESS STUDIES .................................................................................... 13 1.4 DATABASE & MINERAL RESOURCE ........................................................................................... 14 1.5 CONCLUSIONS ............................................................................................................................. 15

1.6 RECOMMENDATIONS .................................................................................................................. 16

2 INTRODUCTION ...................................................................................................... 17 2.1 SCOPE OF THE REPORT ............................................................................................................. 17 2.2 QUALIFICATIONS & PERSONNAL SITE INSPECTIONS .............................................................. 17

2.3 PRINCIPAL SOURCES OF INFORMATION .................................................................................. 18 2.4 INDEPENDENCE ........................................................................................................................... 19

2.5 DEFINITIONS & ABBREVIATIONS ................................................................................................ 19

3 RELIANCE ON OTHER EXPERTS ........................................................................... 20

4 PROPERTY DESCRIPTION & LOCATION ............................................................... 20 4.1 BACKGROUND INFORMATION ON PERU ................................................................................... 20 4.2 PROJECT LOCATION .................................................................................................................... 20

4.2.1 Mineral Rights, Agreements & Royalties.......................................................................... 22

4.3 MINERAL TENURE, AGREEMENTS & ENVIRONMENTAL REGULATION .................................. 24 4.3.1 Mineral Tenure ................................................................................................................ 24 4.3.2 Environmental Regulations & Exploration Permits ........................................................... 25

5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE & PHYSIOGRAPHY ..................................................................................................... 26

5.1 ACCESSIBILITY ............................................................................................................................. 26 5.2 CLIMATE ........................................................................................................................................ 26 5.3 LOCAL RESOURCES .................................................................................................................... 26

5.4 INFRASTRUCTURE ....................................................................................................................... 27

5.5 PHYSIOGRAPHY ........................................................................................................................... 27

6 HISTORY ................................................................................................................. 28 6.1 BACKGROUND INFORMATION .................................................................................................... 28

6.2 EXPLORATION HISTORY – ZAFRANAL PROJECT ..................................................................... 29 6.2.1 Introduction ...................................................................................................................... 29

6.2.2 Geology ........................................................................................................................... 30

6.2.3 Geochemistry .................................................................................................................. 31 6.2.4 Geophysics ...................................................................................................................... 34 6.2.5 Drilling ............................................................................................................................. 34

6.3 EXPLORATION HISTORY - SICERA SOUTH PROSPECT ........................................................... 37



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6.3.1 Geochemistry .................................................................................................................. 39

6.3.2 Drilling ............................................................................................................................. 40

6.4 EXPLORATION HISTORY - SICERA NORTH PROSPECT ........................................................... 40 6.4.1 Geochemistry .................................................................................................................. 41

6.5 EXPLORATION HISTORY - CAMPANERO PROSPECT ............................................................... 43

6.5.1 Geology, Mineralisation & Alteration ................................................................................ 43

6.5.2 Drilling ............................................................................................................................. 44 6.6 EXPLORATION HISTORY - ROSARIO PROSPECT ..................................................................... 45

6.7 EXPLORATION HISTORY - GANCHOS ........................................................................................ 46 6.8 EXPLORATION HISTORY - PAMPAS (CHICHARRON) ................................................................ 47

7 GEOLOGICAL SETTING .......................................................................................... 47 7.1 REGIONAL GEOLOGY .................................................................................................................. 47

7.2 PROPERTY GEOLOGY ................................................................................................................. 49 7.2.1 Lithology .......................................................................................................................... 50 7.2.2 Structure .......................................................................................................................... 53

8 DEPOSIT TYPES ..................................................................................................... 58

9 MINERALISATION .................................................................................................. 58 9.1 LEACHED CAP & SECONDARY ENRICHMENT ........................................................................... 58 9.2 PRIMARY SULFIDE MINERALISATION & HYDROTHERMAL ALTERATION ............................... 61

9.2.1 Early veinlets – EDM, A-type & B-type ............................................................................ 62

9.2.2 Intermediate veinlets – C-type ......................................................................................... 62

9.2.3 Late veinlets – D, E & F-types ......................................................................................... 62

10 EXPLORATION ........................................................................................................ 64 10.1 EARLY EXPLORATION ................................................................................................................. 64

10.2 GEOPHYSICS ................................................................................................................................ 67

11 DRILLING ................................................................................................................ 67 11.1 INTRODUCTION ............................................................................................................................ 67 11.2 DIAMOND CORE DRILLING .......................................................................................................... 68

11.3 REVERSE CIRCULATION DRILLING ............................................................................................ 84 11.3.1 Zafranal ........................................................................................................................... 84

11.3.2 Sicera South & Sicera North ............................................................................................ 87

11.4 DRILLING ORIENTATION .............................................................................................................. 90 11.5 DRILLING QUALITY ....................................................................................................................... 90

11.5.1 Core recovery considerations .......................................................................................... 90

11.5.2 Diamond-RC Drillhole Twins ............................................................................................ 91

11.6 SURVEYING .................................................................................................................................. 91 11.7 GRID CONTROL ............................................................................................................................ 92

11.8 DRILLHOLE COLLARS .................................................................................................................. 92 11.9 DOWNHOLE SURVEYING ............................................................................................................. 92 11.10 SURFACE TOPOGRAPHY ............................................................................................................ 93

12 SAMPLING METHOD & APPROACH ....................................................................... 93



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12.1 DIAMOND CORE SAMPLING & LOGGING ................................................................................... 93

12.2 RC SAMPLING & LOGGING .......................................................................................................... 94

12.3 GEOLOGICAL LOGGING .............................................................................................................. 94 12.4 STRUCTURAL DATA ..................................................................................................................... 95 12.5 GEOTECHNICAL DATA ................................................................................................................. 95

12.6 ROCK DENSITY MEASUREMENT ................................................................................................ 95

12.7 SAMPLE QUALITY ......................................................................................................................... 96

13 SAMPLE PREPARATION, ANALYSES & SECURITY ............................................... 96 13.1 SAMPLE SECURITY ...................................................................................................................... 96

13.2 ANALYTICAL LABORATORY, SAMPLE PREPARATION & ANALYTICAL PROCEDURES .......... 96 13.3 ADEQUACY OF PROCEDURES ................................................................................................... 96

14 DATA VERIFICATION ............................................................................................. 97 14.1 DRILLING & SAMPLING INTERNAL QUALITY CONTROL PROCEDURES ................................. 97

14.1.1 Collar location .................................................................................................................. 97 14.1.2 Downhole Survey ............................................................................................................ 97 14.1.3 QAQC Data Verification ................................................................................................... 97

14.1.4 Database Generation & Validation ................................................................................. 100 14.2 INDEPENDENT GEOLOGIST DRILLING & SAMPLING DATA VERIFICATION .......................... 100 14.3 AMEC MINPROC DRILLING & SAMPLING DATA VERIFICATION ............................................. 101

14.3.1 Drilling ........................................................................................................................... 101 14.3.2 Sampling ....................................................................................................................... 101

14.3.3 Collar location ................................................................................................................ 101

14.3.4 Downhole survey ........................................................................................................... 101 14.3.5 Sample database integrity ............................................................................................. 101 14.3.6 Independent samples .................................................................................................... 102

14.4 ANALYTICAL QUALITY CONTROL PROCEDURES & ASSESSMENT ....................................... 102

14.4.1 Introduction .................................................................................................................... 102 14.4.2 Blanks ............................................................................................................................ 102

14.4.3 Standard Samples ......................................................................................................... 103 14.4.4 Duplicate samples ......................................................................................................... 111 14.4.5 Data Quality Summary ................................................................................................... 112

14.5 COMPARISON OF DATA TYPES – TWIN DRILLHOLES ............................................................ 112

15 ADJACENT PROPERTIES ..................................................................................... 114

16 MINERAL PROCESSING & METALLURGICAL TESTING ...................................... 114 16.1 HISTORICAL TECK TESTING ..................................................................................................... 114 16.2 2010 AMEC MINPROC TESTING – PRELIMINARY RESULTS ................................................... 114

16.3 SAMPLE SELECTION .................................................................................................................. 115 16.4 SAMPLE INSPECTION ................................................................................................................ 115 16.5 OXIDE SAMPLES......................................................................................................................... 115

16.6 SUPERGENE SAMPLES ............................................................................................................. 116 16.7 HYPOGENE SAMPLES ............................................................................................................... 117

16.8 COMMINUTION TESTWORK ...................................................................................................... 117



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16.9 FLOTATION TESTWORK ............................................................................................................ 118

17 MINERAL RESOURCE & MINERAL RESERVE ESTIMATES ................................. 118 17.1 INTRODUCTION .......................................................................................................................... 118

17.2 STUDY DATA ............................................................................................................................... 119 17.2.1 Drillhole Database & Solids ........................................................................................... 119 17.2.2 Data Preparation ........................................................................................................... 120

17.3 GEOLOGICAL MODEL ................................................................................................................ 121 17.3.1 Lithological Model .......................................................................................................... 121 17.3.2 Structural model ............................................................................................................ 123

17.3.3 Mineralogical Model ....................................................................................................... 123 17.3.4 Alteration Model ............................................................................................................. 125

17.4 GRADE ENVELOPE MODELS ..................................................................................................... 126

17.5 TOPOGRAPHY ............................................................................................................................ 130 17.6 STATISTICAL ANALYSIS & VARIOGRAPHY .............................................................................. 131

17.6.1 Sample Coding .............................................................................................................. 131

17.6.2 Data Compositing .......................................................................................................... 133

17.6.3 Statistical Analysis ......................................................................................................... 133 17.6.4 Outlier Analysis - Capping ............................................................................................. 140

17.6.5 Variography ................................................................................................................... 142 17.7 BLOCK MODEL DEVELOPMENT ................................................................................................ 147

17.7.1 Model Characteristics .................................................................................................... 147

17.7.2 Model Coding ................................................................................................................ 147 17.7.3 Model Transformation .................................................................................................... 147

17.8 GRADE ESTIMATION .................................................................................................................. 147

17.8.1 Estimation Technique .................................................................................................... 147 17.8.2 Domain Constraints ....................................................................................................... 148

17.8.3 Search Strategy & Kriging Neighbourhood .................................................................... 148

17.9 DENSITY ASSIGNMENT ............................................................................................................. 149 17.10 MODEL VALIDATION ................................................................................................................... 151 17.11 RESOURCE CLASSIFICATION ................................................................................................... 154

17.12 RESOURCE REPORTING ........................................................................................................... 156 17.13 MINERAL RESERVES ................................................................................................................. 158

18 OTHER RELEVANT DATA AND INFORMATION ................................................... 158

19 INTERPRETATION & CONCLUSIONS .................................................................. 159

20 RECOMMENDATIONS ........................................................................................... 161

21 REFERENCES ........................................................................................................ 163

22 DATE AND SIGNATURE PAGES ........................................................................... 164

23 ILLUSTRATIONS ................................................................................................... 172



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List of Tables Table 1-1 December 2010 Model Resource Report within the Cu Envelope at a 0.2% CuTotal

Cut-off Grade by Resource Category ................................................................................... 14 Table 1-2 December 2010 Model Resource Report within the Cu Envelope –

Measured+Indicated ............................................................................................................. 15

Table 1-3 Geology & Exploration Proposed 2011 Budget ..................................................................... 16 Table 2-1 Qualified Persons & Responsibilities .................................................................................... 18 Table 4-1 Zafranal Concession List ...................................................................................................... 21

Table 6-1 Teck Drilling Phases at Zafranal ........................................................................................... 34 Table 6-2 Zafranal Teck Drillhole Location ........................................................................................... 36

Table 6-3 Teck Sicera South 2007 Drilling Programme ........................................................................ 40

Table 6-4 Teck 2006-2007 Drilling Programme – Campanero/Sicera West .......................................... 44 Table 6-5 Teck 2006 Las Pampas Drilling Programme ......................................................................... 47 Table 11-1 Significant Results from AQM Diamond Drilling Programme in the Zafranal Main Zone ....... 68

Table 11-2 AQM Drillhole Collar Location as at November 2010 ............................................................ 77

Table 11-3 Significant Results from AQM RC Drilling Programme in the Zafranal Main Zone ................ 85 Table 11-4 RC Collar Location for Sicera South & Sicera North ............................................................. 87

Table 11-5 RC Collar Location for Sicera South & Sicera North ............................................................. 88 Table 11-6 Distribution of Downhole Surveying Methods in the Zafranal 2009-2001 Drilling

Programme ........................................................................................................................... 93

Table 12-1 Number of Samples Collected for Bulk Density Measurements by Lithology ........................ 96 Table 14-1 Standards used for the 2009-2010 Zafranal Drilling Programme .......................................... 98 Table 14-2 Summary of Zafranal Analytical QAQC Programme ........................................................... 102

Table 14-3 Blanks Statistics ................................................................................................................. 103 Table 14-4 AQM Standards Characteristics .......................................................................................... 104

Table 14-5 Standard Results ................................................................................................................ 104

Table 14-6 Field Duplicate Results ....................................................................................................... 111 Table 14-7 Twin Drillhole List ............................................................................................................... 113 Table 16-1 Zone Samples .................................................................................................................... 115

Table 16-2 Selection of Oxide Samples ................................................................................................ 116

Table 16-3 Selection of Supergene Samples ........................................................................................ 116 Table 16-4 Selection of Hypogene Samples ......................................................................................... 117

Table 17-1 Drillhole Data & Block Model Codes ................................................................................... 132 Table 17-2 Summary Statistics of 2 m Composites inside the 0.2% CuTotal Grade Envelope ............. 136 Table 17-3 CuTotal Average Grade for 2 m Composites inside the 0.2% CuTotal Grade Envelope ..... 137

Table 17-4 Variogram Parameters ........................................................................................................ 144

Table 17-5 Block Model Characteristics ............................................................................................... 147 Table 17-6 Kriging Neighbourhood Parametres .................................................................................... 148

Table 17-7 Average Bulk Density ......................................................................................................... 151 Table 17-8 December 2010 Model Resource Report within the Cu Envelope at a 0.2% CuTotal

Cut-off Grade by Resource Category ................................................................................. 156

Table 17-9 December 2010 Model Resource Report within the Cu Envelope at a 0.2% CuTotal Cut-off Grade by Resource Category & Mineralogical Domain ........................................... 156

Table 17-10 December 2010 Model Resource Report within the Cu Envelope –

Measured+Indicated ........................................................................................................... 157



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Table 17-11 December 2010 Model Resource Report within the Cu Envelope – Inferred ...................... 157

Table 19-1 December 2010 Model Resource Report within the Cu Envelope at a 0.2% CuTotal

Cut-off Grade by Resource Category ................................................................................. 161 Table 20-1 Geology & Exploration Proposed 2011 Budget ................................................................... 161

List of Figures Figure 4-1 Zafranal Location Map .......................................................................................................... 21 Figure 4-2 Zafranal Concession Map ..................................................................................................... 23

Figure 4-3 Zafranal Property with Mineralised Zones ............................................................................. 24 Figure 6-1 Teck Geology, Alteration & Drillhole Map ............................................................................. 31

Figure 6-2 Zafranal Gridded Copper Geochemistry ............................................................................... 32

Figure 6-3 Zafranal Gridded Gold Geochemistry ................................................................................... 33 Figure 6-4 Sicera South Prospect –Geology & Alteration ...................................................................... 38 Figure 6-5 Sicera South Prospect – Geological Model ........................................................................... 39

Figure 6-6 Sicera South Prospect – Geochemistry & Drillhole Location ................................................. 39

Figure 6-7 Sicera North Prospect – Geology & Geochemistry ............................................................... 42 Figure 6-8 Sicera North Prospect – Geology & Geochemistry (detail) ................................................... 43

Figure 6-9 Campanero Prospect – Geology, Alteration & Drillhole Location Map .................................. 45 Figure 6-10 Ganchos Prospect – Geology & Drillhole Location Map ....................................................... 46 Figure 7-1 Zafranal Regional Geological Map ........................................................................................ 48

Figure 7-2 Zafranal Regional Geological Map Legend ........................................................................... 49 Figure 7-3 Zafranal Main Zone Geological Map ..................................................................................... 50 Figure 7-4 Zafranal Main Zone Alteration Map ....................................................................................... 50

Figure 7-5 Zafranal Structural Controls .................................................................................................. 55 Figure 7-6 Zafranal Porphyry Relative to the Incapuquio Fault System ................................................. 56

Figure 7-7 Section 793 700N – Mineralisation Zoning & Faults ............................................................. 56

Figure 7-8 Evidence of Structural Control at Zafranal ............................................................................ 57 Figure 9-1 Photo - Casts Filled with Hematite ........................................................................................ 61 Figure 9-2 Photo – Parallel D Veins ....................................................................................................... 61

Figure 10-1 Zafranal Main Zone – Surface Geochemical Results for Gold .............................................. 66

Figure 10-2 Zafranal Sicera South Zone – Surface Geochemical Results for Copper ............................. 66 Figure 10-3 Magneto-tellurics Depth Slice 200m below Surface .............................................................. 67

Figure 11-1 Diamond Drilling completed by AQM during 2010 ................................................................ 84 Figure 11-2 RC Drilling completed by AQM during 2010 ......................................................................... 87 Figure 11-3 RC Drilling completed on the Sicera South Target ................................................................ 89

Figure 11-4 RC Drilling completed on the Sicera North Target ................................................................ 89

Figure 11-5 Average Core Recovery % vs. CuTotal Grade Bins .............................................................. 91 Figure 12-1 Lithological Codes used at Zafranal ...................................................................................... 95

Figure 14-1 Chronological Sequence of Blank Results for CuTotal & Au ............................................... 103 Figure 14-2 CuTotal & Au Standards – Global Chronological Graphs.................................................... 106 Figure 14-3 CuTotal & Au Standards - Chronological Graphs ................................................................ 106

Figure 14-4 CuTotal & Ag Standards - Chronological Graphs ................................................................ 110 Figure 14-5 Field Duplicates Scatter Graphs ......................................................................................... 112 Figure 17-1 3D View – Zafranal Lithological Units – Zafranal Diorite ..................................................... 121

Figure 17-2 3D View – Zafranal Lithological Units – Microdiorite ........................................................... 122



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Figure 17-3 3D Views – Zafranal Lithological Units – Dykes .................................................................. 122

Figure 17-4 3D View – Zafranal Topography & Structural Features ....................................................... 123

Figure 17-5 Threshold Ratios & Mineralogical Domain Boundaries ....................................................... 124 Figure 17-6 Long Section at 8224350N – looking North ........................................................................ 124 Figure 17-7 Section 793300E – looking East ......................................................................................... 124

Figure 17-8 Section 793800E – looking East ......................................................................................... 125

Figure 17-9 3D View – Zafranal Alteration Units – Potassic Alteration ................................................... 125 Figure 17-10 3D View – Zafranal Alteration Units – Hornfels Alteration ................................................... 126

Figure 17-11 Long Section at 8224350N – Copper Grade Envelope, Supergene Zone & Drillhole Traces ................................................................................................................................ 126

Figure 17-12 Section 793300N – Copper Grade Envelope, Supergene Zone & Drillhole Traces ............ 127

Figure 17-13 Section 793800N - Copper Grade Envelope, Supergene Zone & Drillhole Traces ............. 128

Figure 17-14 Long Section at 8224350N – Gold Grade Envelope, Supergene Zone & Drillhole Traces ................................................................................................................................ 129

Figure 17-15 Section 793300N Gold Grade Envelope, Supergene Zone & Drillhole Traces .................... 129 Figure 17-16 Section 793800N Gold Grade Envelope, Supergene Zone & Drillhole Traces .................... 130

Figure 17-17 3D Views of Zafranal Topography & Drillhole Traces ......................................................... 131

Figure 17-18 Histogram of Sample Lengths inside the Cu Envelope ....................................................... 133 Figure 17-19 Average Grade for CuTotal and Au per Mineralogical & Geological Domains .................... 134 Figure 17-20 Average Grade for CuTotal, Au and Sulphur per Mineralogical & Geological Domains

–only data included in the copper envelope ........................................................................ 135 Figure 17-21 CuTotal Average Grade Variation with Easting & Relative Elevation inside 0.2%

CuTotal Grade Envelope .................................................................................................... 137

Figure 17-22 Au Average Grade Variation with Easting & Relative Elevation inside 0.1 g/t Au Grade Envelope ............................................................................................................................ 137

Figure 17-23 Au Average Grade Variation with Relative Elevation inside 0.2% CuTotal Grade

Envelope ............................................................................................................................ 138

Figure 17-24 Log Probability Plots of CuTotal Grades Composites inside the 0.2% CuTotal Envelope per Mineralogy .................................................................................................... 138

Figure 17-25 Log Probability Plots of Supergene CuTotal & CuCN Grades Composites inside the 0.2% CuTotal Envelope per Lithology ................................................................................. 139

Figure 17-26 Log Probability Plots of Supergene CuTotal & CuCN Grades Composites inside the

0.2% CuTotal Envelope per Alteration Domain ................................................................... 139 Figure 17-27 Log Probability Plot of Gold Composites inside the 0.2% CuTotal Envelope per

Mineralogy .......................................................................................................................... 140

Figure 17-28 Spatial Distribution on Plan View of +2.5% CuTotal Assay Values with Associated Gold & Arsenic .................................................................................................................... 141

Figure 17-29 Spatial Distribution on Plan View of +0.8 g/t Au Assay Values with Associated Arsenic ..... 142

Figure 17-30 Modelled Variograms .......................................................................................................... 144 Figure 17-31 Variation of Density Measurements with Relative Depth per Mineralogical Zone &

Lithology ............................................................................................................................. 150

Figure 17-32 Variation in Average Bulk Density Measurements with Elevation in Hypogene .................. 151

Figure 17-33 December 2010 CuTotal Resource Model – Long Sections with Drillhole Data & Block Model .................................................................................................................................. 152

Figure 17-34 December 2010 CuTotal Resource Model – Sections with Drillhole Data & Block Model .................................................................................................................................. 153



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Figure 17-35 Grade Trends – Input Drilling Data & Output Grade CuTotal Model – Average Grade

per Easting ......................................................................................................................... 154

Figure 17-36 Resource Classification – Long Sections ............................................................................ 155 Figure 17-37 Grade Tonnage Diagrams – December 2010 Resource Model – Measured+Indicated

Resource ............................................................................................................................ 157



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1 SUMMARY

1.1 SCOPE, BACKGROUND & LAND OWNERSHIP

AMEC Minproc Limited (AMEC Minproc) and AQM Copper Inc. (AQM) have prepared an Independent Technical Report on the Zafranal Copper Project (the Project, the Zafranal Project). This report complies with disclosure and reporting requirements set forth in the National Instrument 43-101, Companion Policy 43-101CP, and Form 43-101F1. This report presents the December 2010 Mineral Resource estimate for the AQM Zafranal Project in Peru. The trigger for the preparation of the Technical Report was the press release disclosure of the Zafranal Main Zone Mineral Resource made by AQM on 13th January 2011. The Zafranal Project is located in south western Peru, in the Huancarqui and Lluta Districts in the Provinces of Castilla and Caylloma, in the Department of Arequipa. The property is on two Peruvian National Topographic system map sheets, namely Huambo (32-r) and Aplao (33-r). The property is located northwest of the city of Arequipa, approximately 150 road kilometres from the town. The Project is comprised of the Zafranal Main Zone porphyry and five other porphyry prospects, namely; Campanero, Ganchos, Sicera South, Sicera Norte and Rosario, all of which are located within the Zafranal mining concessions covering 26 899.63 hectares. On May 14, 2009, AQM Copper Inc. through its wholly owned subsidiary AQM Copper Perú SAC and Teck Perú SA (Teck) jointly announced the signature of an option/joint venture agreement (the “Teck Option”) whereby Teck granted AQM Copper Perú SAC an option to acquire an initial 51% interest in the Zafranal copper-gold porphyry project from Teck, subject to Teck's right to earn-back to a 60% interest. The agreement also provided options for AQM Copper Perú SAC to increase its interest to 60%, and to 100% if Teck did not exercise its earn-back right. On July 8th 2010, AQM Copper Perú SAC and Teck announced the signing of an amendment of the original option agreement, whereby AQM immediately vested a 50% interest in the Project and the formation of a 50/50 Joint Venture between Teck and AQM Copper Perú SAC with respect to the project. All cash payments, NSR royalty payments and back-in rights to Teck were eliminated in exchange for the issuing of 5 million AQM Copper Perú SAC shares, the full funding of an additional $10.7 million in exploration expenditures on top of the $7.5 million originally stipulated by the option agreement, and the right for Teck to choose to become Project operator once a production decision has been made. At the time of writing of this report, all of the above conditions have been met and the 50/50 Joint Venture is officially operational, with both parties contributing equally to the Project expenditures. AQM Copper Perú SAC remains the Project operator.



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1.2 GEOLOGY, MINERALISATION & EXPLORATION

The Late Cretaceous to early Paleocene, 81 million year old Zafranal porphyry copper-gold deposit lies near the northern end of the Porphyry Copper Belt in southern Peru and is the oldest of all the known porphyry deposits occurring within the belt. The porphyry belt is controlled by the Incapuquio Fault System, a series of parallel to semi-parallel NW trending faults traversing much of the rigid continental margin of southern Peru. The Zafranal Main Zone lies within a fault-bounded block with north and south bounding faults trending generally east-west. The host rocks within this block are Jurassic volcanoclastics, quartzite and fine grained sedimentary interbedded within the volcanoclastics, and intrusive feldspar porphyry, which have been intruded by diorites. Locally strongly deformed Cretaceous granodiorite batholithic rocks are located north of the block and Jurassic sediments of the Yura Formation to the south of the block. The deposit is supergene enriched with a leached cap ranging from 40 metres to 110 metres thick and a supergene enriched blanket underlying it ranging up to 180 metres thick. The hypogene protore below the enriched blanket has not been fully tested so is still of unknown depth. The deposit at the surface is phyllically altered within the volcanics and sediments and biotite, phlogopite, chlorite and sericite altered within the later diorites that intrude them. Pre-oxidation and leaching of the hypogene mineralisation at surface occurred primarily as stockworks of sulphide vein-veinlets in quartz-sericite or phyllically altered rocks within the volcano-sedimentary rocks and very minor to no mineralisation occurring within the diorites at surface. The enriched copper sulphide blanket below the leached cap transcends both the diorites and volcano-sedimentary rocks. AQM has completed surface geochemical sampling in the Main Zone and the Sicera South targets. It has also commissioned a magneto-tellurics study on the Zafranal Main Zone. As of the date of this report, AQM has completed 67 283.50 metres of diamond and reverse circulation (RC) drilling in 193 holes within the Main Zone. 1.3 METALLURGICAL & PROCESS STUDIES

The metallurgical testwork completed to date is as follows:

A metallurgical test programme on individual and composite samples was conducted at bench scale evaluating comminution, flotation, regrinding, thickening, leaching and tailing characterisation

Bond abrasion indices varied from 0.09 to 0.22, increasing with depth, indicating a moderately abrasive material

Morell crusher work indices varied from 4.56 kWh/t to 10.9 kWh/t. The wide distribution indicates the coarse material varies from moderately soft to very hard at depth

Bond ball mill work indices fell in a narrow range between 9.86 kWh/t and 12.29 kWh/t indicating a moderately hard material for ball milling

From a SAG mill grinding perspective, the material varied from soft (3.81 kWh/m3) to moderately hard ( 9.37 kWh/m3) at depth



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Locked cycle copper recovery varied from 87.6% for supergene material to 91.4% for hypogene material

Locked cycle gold recovery varied from 60.6% for supergene material to 74.5% for hypogene material

Locked cycle concentrate grade varied from 41.0% Cu for supergene material to 33.0% Cu for hypogene material, with no penalty elements above smelter limits

1.4 DATABASE & MINERAL RESOURCE

AMEC Minproc considers that AQM’s assay, drillhole survey, drillhole collar and geological data provides a reasonable representation of the geology and mineralisation of the Zafranal Project at the current drillhole spacing and study level. AMEC Minproc considers that the data is also of sufficient quality to support an Indicated Resource classification in the most densely drilled portions of the deposit with limited in-filled areas of Measured Resource. Resource estimation of the Zafranal Main Zone has been completed using a domain-controlled ordinary kriging. Three-dimensional solid modelling of mineralogical and lithological domains have been combined with a 0.2% total copper grade envelope to define, from the statistical analysis of the data, a domain model to control the variography and the estimation process. Density has been assigned to the model from a large number of measurements which were analysed within the domains defined for the estimation process. The resource model has been validated statistically and visually on sections and plans; it provides a good representation of the Zafranal mineralisation, both in terms of grade averages and grade spatial distribution within the grade envelopes.

The December 2010 resource estimate of the Zafranal Main zone at a 0.2% total copper cut-off grade is presented in Table 1-1 with detailed report at different cut-off grades for Measured+Indicated material in Table 1-2. Mine planning work by AMEC Minproc indicates that using a copper price of $2.00/lb and gold price of $800/oz, the resource would define a pit shell suitable for open pit mining. This work resource demonstrates reasonable prospects for economic extraction. The work suggests that the 0.2% total copper cut-off grade is reasonable.


Cut-off Grade by Resource Category

Resource Category Tonnage

Mt

% Total Tonnage

CuTotal %

CuCN %

CuS %

Au g/t

Measured 17 5% 0.93 0.71 0.12 0.09

Indicated 284 81% 0.44 0.19 0.05 0.08

Measured+Indicated 301 86% 0.47 0.22 0.05 0.08

Inferred 51 14% 0.32 0.06 0.02 0.06



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Note: CuCN corresponds to ALS Cu-AA16S cyanide soluble copper grade, CuS corresponds to ALS Cu-AA06S weak sulphuric acid soluble copper grade Table 1-2 December 2010 Model Resource Report within the Cu Envelope – Measured+Indicated

CuTotal Cut-off Grade %

Tonnage Mt

CuTotal %

CuCN %

CuS

%

Au

g/t

1.0 19 1.30 0.99 0.19 0.12

0.9 27 1.20 0.91 0.17 0.11

0.8 37 1.11 0.84 0.15 0.11

0.7 49 1.02 0.76 0.14 0.11

0.6 67 0.92 0.67 0.13 0.10

0.5 89 0.82 0.58 0.11 0.10

0.4 122 0.72 0.47 0.10 0.10

0.3 200 0.57 0.32 0.07 0.09

0.2 301 0.47 0.22 0.05 0.08

0.1 313 0.46 0.21 0.05 0.09

1.5 CONCLUSIONS

The Zafranal property currently holds a Measured plus Indicated resource of 301 Mt @ 0.47% total copper at a 0.2% total copper cut-off grade in the Zafranal Main Zone. It was optioned by AQM Copper Perú SAC in May of 2009 from Teck. The option agreement was modified in July 2010 whereby AQM Copper Perú SAC vested a 50% interest by making additional expenditures totalling US$10.7 million and issuing Teck an additional 5 million shares. These commitments have now been fulfilled and the Project is run as a 50/50 corporate Joint Venture between TRL and AQM Copper Perú SAC.

The Zafranal Property is made up of six copper-gold prospects: Zafranal Main Zone, Sicera South, Sicera North, Campanero, Ganchos and Rosario. AQM Copper Perú SAC has focused its exploration on the Zafranal Main Zone.The geology of the Main Zone is dominated by a sequence of Jurassic age volcanic and sedimentary rocks intruded by porphyritic diorite and microdiorite stocks and plugs. Later dioritic and aphanitic intermediate composition dykes and sills cross-cut the area. A complex set of EW and NW-SE reactivated faults appear to control hypogene mineralisation. Supergene copper mineralisation is only affected by late normal movements along these same faults.

Copper mineralisation occurs as oxides, a laterally continuous 50 m to 180 m thick blanket of secondary enrichment and a large zone of primary mineralisation that remains open in all directions. Porphyry-style copper-gold mineralisation has been identified over a 3.3 km strike length, up to 600 metres in width and up to 400 metres in thickness.

AQM has completed a first phase, 67 283.50 metre drill programme at the Zafranal Main Zone and a 5 529 metre RC exploratory drilling programme at its Sicera South and Sicera North targets.

Scout drilling at the Sicera South and Sicera North targets has identified potentially significant hypogene copper mineralisation that could significantly increase the overall mineral inventory at Zafranal.

The resource at the Zafranal Main Zone, as of January 13th 2011 is shown in Table 1-1.



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1.6 RECOMMENDATIONS

AQM has commissioned AMEC Minproc to complete a Scoping Study for the Zafranal Copper Project the first quarter of 2012; it is planned that the study will include the following: Geology & Exploration

An additional 28 500 metres of diamond drilling for the Zafranal Main Zone in order to better define the limits of the mineralization and increase the Measured and Indicated component of the Zafranal Main Zone resource

An additional 30 000 metres of diamond drilling in the Sicera North area, where exploratory drilling during 2010 identified a potentially significant hypogene copper target with a large alteration area

An additional 22 000 metres of of reverse circulation drilling on various satellite porphyry targets and gravel covered areas

A complementary geophysical campaign on the satellite targets

Further detailed mapping of the Zafranal Main Zone and all of the satellite targets

Additional analytical QAQC independent laboratory checks assays The proposed budget for the geology and exploration activities is planned as follows: Table 1-3 Geology & Exploration Proposed 2011 Budget

Item Estimated Cost (US$)

Main Zone Drilling (28 500 m – all cost) $6 000 000

Sicera North Diamond Drilling (30 000m – all in cost) $6 300 000

RC Drilling on Satellites and Gravel Covered Areas (22 000m – all in cost)

$2 900 000

Geophysics on Satellite targets $200 000

Mapping & other Geological Studies $200 000

Total $15 600 000

Metallurgical & Process It is recommended that the 2011 test programme be designed to more fully determine leach, flotation and comminution variability throughout the mineralisation - dependent on ore type and oxidation levels, quantify the extent of recovery variability- in order to generate a better understanding of the impact of mineralogy on recovery and evaluate the impact of copper mineralogy and ore variability with respect to hardness, competency and throughput, in alignment with the preliminary mine plan. It is planned that locked cycle flotation test work will be conducted, with both site bore water and sea water. It is recommended that the test programme be conducted on a mine plan weighted basis. It is anticipated that ore will be grouped into early mine life, mid-mine life and late mine life for detailed evaluation. The test work programme will be weighted towards the earlier mine life samples.



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Base conditions as developed in the 2010 test programme will be used for the flotation programme. A leach plan will be developed to evaluate sulphuric acid, and bacteria assisted leach options for oxide, leached cap and supergene ore types. Resource Modelling Following the completion of the additional drilling, the resource estimate of the Zafranal Main Zone will be updated for the 2011 Scoping Study. Additional resource analysis and estimation will include the following:

Update of the copper and gold estimates with the added 2011 drilling information

Estimation of the accessory elements S, Fe, As and Zn

Analysis and estimation of the CRU-31 test data to develop a relative hardness model for mine planning purposes

The Sicera North target will also be interpreted and modelled to arrive at a comprehensive total project resource encompassing the Zafranal Main Zone and the satellite deposits. Mining, Geotechnical, Hydrological/Hydrogeological, Environmental & Engineering Project work for these disciplines will continue over the course of 2011 to produce reliable information to scoping study level for the Zafranal Main Zone and the satellite deposits. 2 INTRODUCTION

2.1 SCOPE OF THE REPORT

This Technical Report on the Zafranal Copper Project has been prepared to comply with the disclosure and reporting requirements set forth in the National Instrument 43-101, Companion Policy 43-101CP, and Form 43-101F1. The report is intended as a summary of current activities on the property, to provide support for written disclosures regarding the December 2010 resource estimate for the Main Zone of the Zafranal deposit completed by AMEC Minproc and to provide recommendations for further project work. It complies with Canadian National Instrument 43-101 for the ‘Standards of Disclosure for Mineral Projects’ of December 2005 (the Instrument) and the resource and reserve classifications adopted by CIM Council in November 2004. The trigger for the preparation of the Technical Report was the press release disclosure of the Zafranal Main Zone Mineral Resource made by AQM on 13th January 2011. 2.2 QUALIFICATIONS & PERSONNAL SITE INSPECTIONS

AMEC Minproc was appointed by AQM to complete a resource estimation of the Zafranal deposit, undertake metallurgical testing and compile the Technical Report. AMEC Minproc is currently undertaking a scoping study for the Project which will include a resource update, metallurgical testwork, mine design, plant and infrastructure design and development of capital and operating costs. The current report documents the first AMEC Minproc resource estimate and provides information on the preliminary metallurgical testwork results.



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The following professionals were instrumental in the completion of the Technical Report:

Annick Manfrino (Engineer ENSG, MAIG), Consultant Resource Analyst to AMEC Minproc Limited, is the Qualified Person (QP) responsible for the preparation of the current estimate detailed in Section 17. Annick Manfrino visited the AQM Zafranal properties and ALS Chemex Arequipa and Lima laboratories between the 16 and 19 February 2010 and was at the Zafranal site for a duration of 2 days. Annick Manfrino is also responsible for the overall compilation of the Technical Report and the preparation of Sections 1, 2, 3, 12, 13, 14, 15, 17, 18, 19 and 20.

Greg Harbort (Ph.D. MAusIMM), Manager Process at AMEC Minproc Limited is the QP responsible for the process and metallurgical data presented in the Technical Report summarised in Section 16. Greg Harbort has visited the Zafranal properties and ALS Chemex Arequipa and Lima laboratories on several occasions in 2010.

James McCrea (P. Geo.) is the QP responsible for compiling a summary of the geology and exploration activities for the Zafranal Project and providing recommendations for further work in these disciplines. James McCrea is responsible for the preparation of Sections 4, 5, 6, 7, 8, 9, 10 and 11. James McCrea is an independent geologist and has been involved in the exploration activities at Zafranal for several years

Responsibilities for the preparation of certain sections of the Technical Report are listed in Table 2-1. Table 2-1 Qualified Persons & Responsibilities

Qualified Person Company Relevant Technical Report

Sections

Annick Manfrino AMEC Minproc 1,2,3,12,13,14,15,17,18,19,20

Greg Harbort AMEC Minproc 16

James McCrea Independent geologist 4,5,6,7,8,9,10,11

2.3 PRINCIPAL SOURCES OF INFORMATION

In addition to site visits undertaken to the Zafranal Project in 2009 and 2010, the authors of this report have relied extensively on information provided by AQM. Information and data used in this report consists of field observations made by the authors, data collected by AQM in the field and reports from the previous operators of the Zafranal Project. Information concerning mining concessions comes from Peru’s mining claim registry: Instituto Geológico Minero y Metalúrgico (INGEMMET). A detailed list of references and sources of information is provided in the References section (Section 21) of this report. The authors have made all reasonable enquiries to establish the completeness and authenticity of the information provided and identified, and a final draft of this report was provided to AQM along with a written request to identify any material errors or omissions prior to lodgement.



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2.4 INDEPENDENCE

AMEC Minproc is not an associate or affiliate of AQM, or of any associated company. AMEC Minproc’s fee for this Technical Report is not dependent in whole or part on any prior or future engagement or understanding resulting from the conclusions of this report. The fee is in accordance with standard industry fees for work of this nature. James McCrea who authored the geological sections and the historic and current exploration activities sections on the Zafranal Project is an independent Qualified Person under NI 43-101, 2.5 DEFINITIONS & ABBREVIATIONS

Currency used in this report is in United States dollars. Copper grades are Total Copper grades unless otherwise specified. Definitions of terms and acronyms used in this report are listed below: AA atomic absorption spectroscopy Ag silver amsl above mean sea level AusIMM JORC Australasian Institute of Mining and Metallurgy, Joint Ore Reserve Committee Au gold Avg average bn bornite CIM Canadian Institute of Mining, Metallurgy and Petroleum cp chalcopyrite Cu copper CV coefficient of variation (CV) DDH Diamond Drill Hole dg digenite Fe iron g gram g/t grams per tonne ha hectares kg kilogram km kilometre L litre m metre Mg magnesium Mo molydenum NI 43-101 Canadian National Instrument 43-101 Pb lead ppm parts per million py pyrite RC reverse circulation Si silicon µm micron Zn zinc



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3 RELIANCE ON OTHER EXPERTS

The authors have relied, and believe to have a reasonable basis to rely upon the employees and contractors of AQM and its Peruvian subsidiary, AQM Copper Perú SAC. Tom Henricksen, P.Geo, Chief Geologist for AQM and Alvaro Fernández-Baca, P.Geo, General Manager of AQM who compiled the history, drilling and other geological sections for this report. The exploration and drilling reports of Teck were used as a source to write the exploration history and other geological sections of this report. AMEC Minproc relied on the drillhole database information and wireframe models provided by AQM and Atticus Associates (Atticus) to calculate the Zafranal resource estimate. 4 PROPERTY DESCRIPTION & LOCATION

4.1 BACKGROUND INFORMATION ON PERU

Peru has a long history of mining, dating back to pre-colonial times. Since 1994, Peru has liberalised its mining laws allowing foreign and domestic investment into its mining sector, which has led to significant growth in the sector and in the economy in general. Over 50% of Peruvian exports are mineral ores or metal, and a significant portion of the country´s tax revenue originates from the mining sector. Peru´s economy has diversified significantly in the last 10 years, thanks to free trade agreements with most of its major trading partners. Although mining remains the dominant sector in the economy, textiles, agribusiness and industrial goods are slowly gaining importance. Liberal economic policies implemented in the early 1990s mean that Peru has seen a long period of low inflation and a stable economy. Excepting 2009, Peru has seen annual economic growth of over 5% since the early 2000s. Economic stability has also allowed very large mining investments to go ahead in the last few years, including the Bayovar phosphate deposit, the Las Bambas copper deposit and the expansion of the Cerro Verde copper mine. Additionally, the country has a significant labour pool experienced in the mining sector. 4.2 PROJECT LOCATION

The Zafranal property is located along the Incapuquio Fault System which hosts the Southern Peru Copper Belt, approximately 153 road kilometres northwest of the city of Arequipa (Figure 4-1). The geographic centre of the property is located at approximately 16o 02’28.8” degrees south latitude and 72o 14’18.8” west longitude. The UTM (Zone 18S) coordinates using datum PSAD56 are 794 200 m east and 8 224 400 m north. The Zafranal property covers 26 899.63 hectares in the district of Huancarqui in the province of Castilla and the district of Lluta in the province of Caylloma, Departmento of Arequipa, Peru. The property is on two Peruvian National Topographic system map sheets: Huambo (32-r) and Aplao (33-r). Concession details are listed in Table 4-1 and shown in Figure 4-2, as verified by the author.



Figure 4-1 Zafranal Location Map

Table 4-1 Zafranal Concession List

Concession

Name

Ministry

Code Status*

Expiry

Date

Concession

Granted

Concession

Holder Hectares

Campanero 1 01-02782-08 Trámite 06/30/10 05.05.2008 TECK 1,000

Campanero 2 01-02781-08 Trámite 06/30/10 05.05.2008 TECK 400

Charo 1 01-05540-07 Trámite 06/30/10 25.10.2007 TECK 1,000

Sicera 1 01-02489-03 Titulado 06/30/10 22.07.2003 TECK 1,000

Sicera 2 01-02950-03 Titulado 06/30/10 05.09.2003 TECK 500

Sicera 3 01-03137-03 Titulado 06/30/10 25.09.2003 TECK 900

Sicera 4 01-03303-03 Titulado 06/30/10 13.10.2003 TECK 1,000

Zafranal 1 01-01354-03 Titulado 06/30/10 16.04.2003 TECK 730.2475


Zafranal 3 01-01753-03 Titulado 06/30/10 20.05.2003 TECK 525








Zafranal 13 01-02608-04 Titulado 06/30/10 03.08.2004 TECK 1,000





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Concession

Name

Ministry

Code Status*

Expiry

Date

Concession

Granted

Concession

Holder Hectares








Chcharron_N_5 01-02090-03 Titulado 06/30/10 23.06.2003 TECK 1,000

Chicharron_N_6 01-02091-03 Titulado 06/30/10 23.06.2003 TECK 700

Chicharron_N_7 01-02092-03 Titulado 06/30/10 23.06.2003 TECK 1,000

Chicharron_N_8 01-02093-03 Titulado 06/30/10 23.06.2003 TECK 1,000

Chicharron_11 01-02104-03 Titulado 06/30/10 23.06.2003 TECK 1,000

Amalia Guillermina 01-01725-03 Titulado 06/30/10 15.05.2003 AQM 200

AQP I 01-02098-09 Trámite 06/30/10 17.08.2009 AQM 800

AQP II 01-02099-09 Trámite 06/30/10 17.08.2009 AQM 500

AQP III 01-02100-09 Trámite 06/30/10 17.08.2009 AQM 900

*Concession status: Titulado, titled or Trámite, awaiting final publication

4.2.1 Mineral Rights, Agreements & Royalties

On May 14, 2009, AQM through its wholly owned subsidiary, AQM Copper Perú SAC, and Teck Perú SA (previously defined) jointly announced the signature of an option/joint venture agreement (the “Teck Option”) whereby Teck granted AQM Copper Perú SAC an option to acquire an initial 51% interest in the Zafranal copper-gold porphyry project from Teck, subject to Teck's right to earn-back to a 60% interest. The agreement also provided options for AQM Copper Perú SAC to increase its interest to 60%, and to 100% if Teck did not exercise its earn-back right. On July 8th 2010, AQM Copper Perú SAC and Teck announced the signing of an amendment of the original option agreement, whereby AQM Copper Perú SAC immediately vested a 50% interest in the Project and the formation of a 50/50 corporate Joint Venture between TRL and AQM Copper Perú SAC. All cash payments, NSR royalty payments and back-in rights to Teck were eliminated in exchange for the issuing of 5 million AQM shares, the full funding of an additional $10.7 million in exploration expenditures on top of the $7.5 million originally stipulated by the option agreement, and the right for TRL to choose to become Project operator once a production decision has been made. At the time of writing of this report, all of the above conditions have been met and the 50/50 Joint Venture is officially operational, with both parties contributing equally to the Project expenditures. AQM Copper Perú SAC remains the Project operator. The Project covers an area of 26 899.6 has, including 19 799.6 ha 100% owned by Teck and the 4 700 ha Chicharron option from BHPB Minerals (BHPB Option), which is subject to a 1.5% capped NSR royalty.



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Teck has already properly exercised the BHPB Option, and title transfer has been formalised in favour of Teck. AQM has also acquired the Amalia Guillermina claim which hosts the Sicera North prospect. The purchase was executed on June 26, 2009, and AQM now owns 100% of the property after making a onetime payment of US$50 000 to the owner. Under the terms of the Teck option, any additional property staked or acquired by AQM, such as Amalia Guillermina, automatically becomes part of the Zafranal Project and are subject to the terms of the Teck Option. All the concessions are in good standing as of the effective date of this Report. AQM has paid the annual license fee for the concessions for the year 2011. The Property has not been legally surveyed. Known porphyry-type Cu-Au mineralisation on the Zafranal property is located in six separate and distinct areas (Figure 4-3Error! Reference source not found.). These prospect areas are called the Zafranal Main Zone, Campanero, Ganchos, Rosario, Sicera South, and Sicera North. Figure 4-2 Zafranal Concession Map



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Figure 4-3 Zafranal Property with Mineralised Zones

4.3 MINERAL TENURE, AGREEMENTS & ENVIRONMENTAL REGULATION

4.3.1 Mineral Tenure

Peru is a country with a stable mining industry and mature mining laws. The General Mining Law of Peru was changed in the mid 1990s to foster the development of the country’s mineral resources. The law defines and regulates different categories of mining activities according to stage of development (prospecting, exploitation, processing, and marketing). Titles over mineral claims are controlled by INGEMMET (Geological, Mineral and Metallurgical Survey of Peru). Mining titles (mining concessions) are granted using UTM coordinates (PSAD56) to define areas in hectares. New mining concessions shall be at least of 100 ha in size (1 km2), and must be oriented in a north-south or east-west direction. Pre-existing concessions, based on the old system (“punto de partida” or starting point system), can be at any orientation. The old framework which has been in force since 1992 establishes that mining concessions are irrevocable if its titleholder complies with the annual payment of US$ 3.00 of validity fee per hectare and reaches a minimum production of US$ 100.00 per hectare within six years following the year in which a mining concession was granted, or otherwise pays a US$ 6.00 penalty per hectare per year as of the first semester of the seventh year until such production is reached (penalties increase to US$ 20 from the 12th year). Currently a new regulation establishes that the holder of mining concessions shall achieve a minimum production of at least one Peruvian Tax Unit (approximately US$ 1 900) per hectare per year, within a 10 year term following the year in which the mining concession title is granted. If the minimum



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production is not reached in the referred term, the mining concession holder shall pay penalties equivalent to 10% of the Peruvian Tax Unit per hectare. If minimum production within a 15 year term from the day in which the mining concession was granted is not achieved, the mining concession will be cancelled unless a qualified major force event occurs and is approved by the Mining Authority, or by paying the applicable penalties and providing evidence of a minimum investment of at least ten times the amount of the applicable penalties. In this last case the mining concession will not be cancelled up to a maximum term of five additional years (total term 20 years). If minimum production is not reached in the 20 year term the concession title will be inevitably cancelled. According to these rules, the Project must reach production no later than 2018 or, should the minimum required investment be spent, 2023 before the claims are cancelled. While the holder of a mining concession is protected under the Peruvian Constitution and the Civil Code, it does not confer ownership of land and the owner of a mining concession must deal with the registered land owner to obtain the right of access to fulfil the production obligations inherent in the concession grant. It is important to recognise that all transactions and contracts pertaining to a mining concession must be duly registered with the Public Registry in the event of subsequent disputes at law. Peru levies a gross concentrate sales royalty on commercial mineral production. The sliding-scale royalty is levied based on gross annual sales of concentrate. Gross annual sales of up to US$ 60 million are subject to a 1% royalty, those between US$ 60 and US$ 120 million are subject to a 2% royalty and gross annual sales of over US$ 120 million are subject to a 3% royalty. 4.3.2 Environmental Regulations & Exploration Permits

The General Mining Law, administered by the Ministry of Energy and Mines (MEM), may require a mining company to prepare an Environmental Evaluation (EA), an Environmental Impact Assessment (EIA), a Programme for Environmental Management and Adjustment (PAMA), and a Closure Plan prior to mining construction and operation. The Supreme Decree Nº 020-2004-EM classifies the environmental requirements for mining and exploration programs as follows:

Category I: this category includes mining projects involving small scale drilling programmes up to and including a maximum 20 drill pads, a disturbed area of less than 10 hectares considering drilling platforms, trenches, auxiliary facilities and access means or the construction of tunnels with a total maximum length of 50 metres. These projects require the preparation of an Environmental Impact Declaration (“Declaración de Impacto Ambiental –DIA-”).

Category II: this category includes mining projects involving more than 20 drill pads, a disturbed area of more than 10 hectares considering drilling platforms, trenches, auxiliary facilities and access, or the construction of tunnels over a total length of 50 metres, require an authorisation called an Environmental Impact Study-semi detailed (“Estudio de Impacto Ambiental-semi detallado”, or EIA-sd) and is approved by the Ministry of Energy and Mines. Category II permits, which include mining projects involving more than just drilling, must include, prior to their submittal to the Ministry of Energy and Mines, water-use permits from the Ministry of Agriculture, land-use agreements with the surface rights owners and evidence of having held town-hall meetings in all



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nearby communities. Additionally, the EIA-sd must include a detailed reclamation programme once the drilling phase ends.

Permits are usually granted within 4 months of their submittal. There are no known environmental liabilities at Zafranal. 5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE &

PHYSIOGRAPHY

5.1 ACCESSIBILITY

The Zafranal Property is located 90 kilometres northwest of the city of Arequipa, (population ~1 000 000), capital of the Arequipa Department in southern Peru. The property is 153 road kilometres from Arequipa. Road access to the east side of the Zafranal property is by 42.2 kilometres of paved Highway 34A to the Pan-American Highway South (1-S) junction then 53.3 kilometres on the Pan-American to Pedregal. Pedregal is west of Arequipa. From Pedregal one takes gravel Highway 1-SJ for 42.6 kilometres north toward Huambo in the Cachimayo quebrada, then approximately 15 kilometres on an improved dirt road to the project camp. Access to the west side of the property is from Corire, along the Rio Majes. Corire is northwest of Pedregal and is accessed by continuing along the Pan-American to the west from the Pedregal turn-off for another 16.4 kilometres to the junction with paved Highway 1-SG, then north on Highway 1-SG for 46.2 kilometres to Corire (population ~2 700) then northeast up the improved dirt road in the Sicera quebrada for 30 kilometres to a central location relative to the Main Zone and satellite deposits. Corire is the closest community to the Zafranal mining concession via road access. Access roads connecting the east and west sides of the property, allowing access between the six known prospects, have been completed by AQM´s contractors. 5.2 CLIMATE

The climate at Zafranal is sub tropical desertic and is dry and moderate year-round, although some rain may fall during January and February with approximately 52 mm of precipitation per year. Temperatures approximately range from a low of 6o C to a high of 35o C with an average maximum temperature of 28.2o C and an average minimum temperature of 12.3o C. The scarce rain does not permit agriculture except where irrigated in the river valleys and the limited rainfall does not support enough vegetation to sustain grazing. These characteristics make this zone almost uninhabitable. The dry temperate climate allows exploration and mining activities to continue year round. 5.3 LOCAL RESOURCES

Bus transportation is available between Arequipa and Pedregal, and public transportation is also available along Highway 1-SJ up to Huambo from Pedregal. The final 15 kilometres is covered only by private transportation, four-wheel drive vehicle preferred, but not necessary. Internal drill roads are four-wheel drive only.



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Fuel and groceries may be purchased in the communities of Corire and Pedregal and these communities would serve as a source for unskilled labour but major purchases and hiring would be from Arequipa. Arequipa is the closest major centre to the project site and would be the source for hiring experienced mining personnel and for large purchases of supplies and equipment. Regular flights serve Arequipa from Lima and other points in Peru. Lan Perú operates up to 9 flights a day and other airlines add an extra 4 flights per day. The Arequipa airport is considered an international airport capable of receiving charter flights from neighbouring countries, with twice-weekly regular flights to Arica (Chile) available. 5.4 INFRASTRUCTURE

The Zafranal prospects are green field sites, and thus existing site infrastructure is limited to an exploration camp and drill roads. The Property is large enough to host an open pit or underground mining operation, including a large open pit, mill, tailings facilities, waste dumps, and leach pads. AQM has surface rights for exploration activities on the Zafranal property area, but the owners, the Autodema irrigation agency, have the right to establish rules and land lease rates for any mining activity. Corire is located beside the Majes River which has an average flow rate of 24 m3/s and is a potential water resource for the project although there is an elevation difference of approximately 1200 metres between the two locations. The project has the necessary permits to extract water for its exploration activities. In previous drilling, Teck encountered water saturated gravels within the property, representing a potential water source for the Project. AQM will continue to evaluate the potential of this aquifer to provide water for a future processing plant. EGASA is the power generator for the Arequipa Department, which relies primarily on hydroelectric generation. They forecast a power deficit for the next two years in the area but have two large hydroelectric projects with a combined output of 1000 MW scheduled for development as soon as financing can be re-established. These projects are located in the Arequipa Department, fairly close to Zafranal and the 220 KV electrical grid passes within 45 km of the potential mine site. In addition, gas-fired generation plants are being added to the power distribution grid that connects the Arequipa Department with the rest of Peru. This grid is being upgraded from 220 KV to 550 KV. TISUR is the owner of the private port of Matarani, which is located 170 km via road from Zafranal. The port currently handles approximately 3 million tonnes of cargo a year and has the capacity to handle 13 million tonnes with some investment. TISUR currently receives cathode and concentrate from mines at Tintaya via truck and Cerro Verde via rail and has an expansion plan ready to accommodate the Las Bambas mine if they are successful in the bidding process. Matarani is a modern facility with good environmental controls. It operates 24 hours per day, 365 days per year, and has its own backup power generation to ensure continuous operation. Only a few days are lost each year due to bad weather. 5.5 PHYSIOGRAPHY

The region around Zafranal is characterised by steep, deeply dissected topography. Elevations range from approximately 1050 metres near the Rio Majes up to a peak of 3280 metres on the Zafranal 13 concession in the north central part of the property. Outcrop is primarily limited to quebrada bottoms



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and steeper slopes, with more moderate topography covered by colluvium and dust. The natural vegetation consists of widely-spaced cacti and shrubs. Cactus species include (Cereus macrostibas, cereus candelaris) and the "chilca" (baccharis sp.) recognised by its greater size; and the "pinco pinco" (Hypericum sp.) plant capable of reaching some 50 centimetres in height. The representative wildlife species in the area correspond to wildlife typically found in the South American Desert Coastal regions of the Pacific. The fauna in this bioregion is scarce, due essentially to the adverse factors of extreme aridity and almost total lack of vegetation. Foxes, Culpeo Zorro or Andean Fox, (Lycalopex culpaeus), pumas (Puma concolor) and guanacos (Lama guanicoe) have been sighted along with their tracks on the prospect. Bird life on the prospect is limited and representative species would be house sparrows (Passer domesticus) and the hummingbird (Oreotrochilus estella). Included with fauna are ants, lizards and spiders like the argiope sp. These arachnids are normally found in the driest zones. 6 HISTORY

6.1 BACKGROUND INFORMATION

Mining and exploration in the Southern Peru Porphyry Copper Belt have been important components of the social and economic history of the region. Most of the significant exploration and mining developments in southern Peru in the twentieth century occurred between 1940 and 1960. Toquepala was first prospected in the 1800s. Cerro de Pasco recognised it as a porphyry copper deposit in 1937. The company drove several adits by hand and began drilling in 1939, after a shaft cut high grade sulphides. Cerro's drilling "defined" about 60 Mt of 1.7% Cu in approximately 30 holes. Worldwide, a period of growth in mineral exploration followed the Second World War, particularly due to a report by the U.S. President's Materials Policy Commission (Paley, 1951), which indicated that a shortage of mineral resources was likely within the next decade. This edict set off an intense search for mineral deposits. Peru was not excluded from this trend and a new Mining Code promoting the mineral industry had already been enacted in 1950. This legal framework led to the discovery of a number of new deposits and to the further development from known mining districts in Peru. Due to the renewed interest in worldwide exploration, plus the Peru government’s need for capital to develop its resources, the American company ASARCO was asked in the late 1940s and 1950s to evaluate and submit an offer for the area that eventually became the great Toquepala porphyry copper ore deposit. American geologists Harold Courtright and Kenyon Richard completed the first systematic exploration at Toquepala in the Southern Peru Copper Belt. A few years later, another American company, Cerro Corporation, began the systematic evaluation of nearby Cuajone, another porphyry copper prospect in southern Peru. ASARCO formed a Peru subsidiary, Southern Peru Copper Corporation (Southern Peru), which first operated Toquepala and later operated Cuajone. The original corporate partners in Southern Peru were ASARCO, Cerro Corporation, Newmont Mining, and Phelps Dodge. Now both Toquepala and Cuajone are operated by Grupo Mexico which acquired ASARCO. The Peru government’s expropriation wave in 1968 to 1975 slowed the exploration and development, as did the terrorist activities during the1980s. In addition, low copper prices in the late 1990s and early in the in new millennium limited exploration and mine development in Peru.



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Since the 1990s, due principally to diminishing terrorist activities and laws encouraging exploration and mining, Peru has again become a favourable locale for exploration and development. Since 2004, due to the increase in copper prices, junior and intermediate mining companies, and several majors, have enjoyed varying amounts of success in acquiring and exploring copper properties in Peru. The junior companies include Peru Copper (Toromocho), Monterrico Resources (Rio Blanco), Candente Resources (Cañariaco), Chariot Resources (Mina Justa), Milpo (Pucajaja), Antares Minerals (Haquira), and Norsemont Mining (Constancia). Other districts with significant porphyry copper deposits and/or prospects, actively being mined or explored by different majors and juniors, include Cerro Corona, Michiquillay, Galeno, Magistral, and Aguila. These properties are all in various stages of exploration and development. According to Teck reports (2004 and 2005), the Zafranal porphyry copper prospect lies along the northern extension of the Southern Peru Copper Belt in Southern Peru (Figure 4-1Figure 6-1). The current Zafranal 26 900 hectare project area includes: the Zafranal Main Zone, plus porphyry copper prospects at Campanero, Ganchos, Sicera South, Sicera North, and Rosario (Figure 6-2Figure 6-2). Limited drilling had been completed in the 1990s by Phelps Dodge at Sicera South, optioned from Milpo. Phelps Dodge had claims in the 1990s on the Main Zone of Zafranal but did not conduct drilling. Phelps Dodge had also staked the oxide copper area known as Rosario and reportedly drilled four shallow drillholes there in the 1990s. Limited drilling has been carried out at the Campanero, Sicera South, and Ganchos (Chicharron area) areas in 2006 and 2007 by Teck. Western Mining and BHP Biliton held land positions within the current concession area but did not conduct any drilling. The following are descriptions of the historical work conducted on the Zafranal Main Zone, plus the other five prospects within the current Zafranal land holdings. These descriptions have been summarised from private Teck reports. 6.2 EXPLORATION HISTORY – ZAFRANAL PROJECT

6.2.1 Introduction

Artisanal gold miners have been producing from veins in the upper Sicera drainage for many years – the exact date is not know but probably less than 20 years in the Zafranal Main Zone area. Currently there are approximately 400 artisanal miners working from several camps in the area from veins that are up to 1 metre in width with grades ranging from 15 g/t to 2 g/t Au. These gold veins are peripheral to the porphyry copper mineralisation. There has been no production of copper on the Zafranal Main Zone, although oxide copper has been mined at the Campanero prospect. In early 2003, geologists from Teck Cominco, as it was known in those days, were led by artisanal miners to outcrops of porphyry-style copper mineralisation in an area known as Cerro Zafranal. The original team of Teck geologists included geologists and prospectors and was led by Manuel Montoya. The property examination was part of a porphyry generative programme and systematic reconnaissance work in southern Peru aimed at evaluating targets in the Southern Peru Porphyry Copper Belt along or adjacent to the regional Incapuquio Fault System. The original trip into the area was on foot, approximately 15 kilometres from the nearest road. Zafranal, as well as two other properties to the northwest, were staked in 2003. AQM geologists Tom Henricksen, José Corzo and



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Jhony Medrano first visited the Property in mid 2008 prior to the start of negotiations for the acquisition of the Project from Teck. 6.2.2 Geology

The Zafranal Main Zone has historically been the most explored member of a number of porphyry systems, located within a NW-trending cluster about 15 km by 10 km in size that also includes the Campanero, Rosario, Sicera North, Sicera South and Ganchos prospects. The geological descriptions in this History section are summarised from Teck reports for the field campaigns between 2003 and 2007. AQM has carried out, and is currently completing, extensive, geologic, geochemical, and geophysical studies at Zafranal and these are discussed in later chapters of this report. Teck recognised that basement rocks in the area are represented by Precambrian gneisses which are in contact through reverse faulting with Palaeozoic and Mesozoic sedimentary rocks. Well bedded siliciclastic and carbonate marine sediments, as well as massive andesite beds of Jurassic age belonging to the Yura Group and Guaneros Formation, are locally exposed along NW-trending outcrops facing the flats located to the west of the district. These units are cut by multiphase, batholith-scale granitoid intrusions and by small stocks of Upper Cretaceous to Paleocene age. The Jurassic Guaneros Formation volcanic-sedimentary sequence is the unit that hosts the intrusive complexes responsible for the alteration and mineralisation at Zafranal. Teck mapped the Zafranal deposit at a 1:10 000 scale starting in 2003 with updates made through 2005. Property-scale geological descriptions are available in previous Teck reports by M. Smith and W. Tejada (March 2004) and W. Tejada (Sept. 2005). Figure 6-1 shows Teck´s geological map for the Zafranal Main Zone. AQM has re-mapped the area and a description of the lithological units is included in Section 7.2.1. Argon-Argon dating of three outcrop samples was performed by UBC laboratories in Vancouver. Two of the samples were specimens collected from pervasively sericite-altered outcrops near ZFRC04-001 and ZFRC04-010 and one sample came from a late mineral dyke exposed along a road cut near ZFRC04-011. Results are the following:

Sericite sample # 1: 81.3 Ma (sample taken near drillhole ZFRC04-010)

Sericite sample # 2: 82.2 Ma (sample taken near drillhole ZFRC04-001)

Hydrothermal biotite sample (late mineral dyke): 76.7 Ma (near drillhole ZFRC04-011)



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Figure 6-1 Teck Geology, Alteration & Drillhole Map

6.2.3 Geochemistry

Teck collected approximately 238 surface rock samples on the Zafranal deposit. The copper and gold results of this rock sampling are shown in Figure 6-2 and Figure 6-3. Relatively large (2-4 kg) samples were taken of representative rock types collected with the aim of blanketing the area of the phyllic zone of alteration at relatively even sample spacing. The samples themselves generally represent chip samples at least 1 m long or outcrop samples representing an area of at least two square metres. Most samples represent outcrop, although in some locations, notably the ridge tops, it was necessary to sample areas of sub crop in order to achieve a relatively even distribution of samples. Pulps were analysed at ALS Chemex Peru, including 32 element ICP and gold by fire assay with AA finish.



Figure 6-2 Zafranal Gridded Copper Geochemistry



Figure 6-3 Zafranal Gridded Gold Geochemistry



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6.2.4 Geophysics

This summary was adapted from a Teck geophysical report written by W. Tejada et. al. in March, 2005, and is based in part on a geophysical survey and report by Zonge Ingenieria y Geofisica (Chile) S.A. completed in 2004. Having already drilled several highly interesting intercepts at Zafranal, it was subsequently decided to perform some geophysical orientation-surveys. In-loop TEM (Time-domain Electro Magnetics) and AMT (Audio-frequency MagnetoTellurics) surveys were completed in late November 2004. In-loop TEM was chosen because chalcocite is an extremely conductive mineral (40 times more conductive than chalcopyrite and 3000 times more than pyrite) and it was hoped that this method could help image the quasi-horizontal enrichment blanket present at Zafranal. AMT was suggested by the contractor based on previous experience. Whereas the 3-component TEM survey yielded profiles requiring interpretation, the AMT data were inverted to provide a resistivity-depth image. Those inverted AMT data appear to have imaged both the top of the enrichment blanket and the continuation of the primary sulphides to depth. The AMT method successfully separated unaltered, barren rocks from the more altered, mineralised rocks. Production rates for AMT are similar to IP, yet although AMT does not respond to chargeable minerals per se, it does provide a much deeper-looking resistivity section, giving a view towards controlling structures at depth. Only two lines of TEM were collected at Zafranal, but there are indications that an enrichment blanket is detectable. 6.2.5 Drilling

Thirty-two RC holes and four diamond drillholes were drilled by Teck on the property for a total of 11 805 m of drilling (Figure 6-1). Drillholes were generally spaced 250 m to 400 m east-west along strike and 200 m on section. Table 6-1 displays the different drilling phases and Table 6-2 summarises all previous Teck drilling programmes at Zafranal. Table 6-1 Teck Drilling Phases at Zafranal

Phase No of Drillholes Total Meters Period Drillhole Type

1 12 3 689 May-June 2004 RC

2 10 3 312 Sept.-Oct. 2004 RC

3 4 1 556 Nov. 2004 Diamond

4 10 3 248 Sept. 2005 RC

Total 36 11 805

The 2004 Zafranal RC programme consisted of two phases totalling 22 drillholes for a total of 7 001 m. First phase RC drilling was carried out during June 2004 and consisted of 12 drillholes (3 689 m) collared at 180º/-65º in two east-west trending fences separated by approximately 250 m. Results of this first pass programme outlined a +1 kilometre-long enriched copper blanket hosted by quartz-diorite/diorite porphyritic to equigranular stocks intruded into a strongly foliated volcanoclastic sequence. Best total copper results using a 0.2% cut-off grade came from the central part of the property and included the following intercepts:



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ZFRC04-007 70 m @ 1.08% Cu (120-190m) & 104 m @ 0.27 g/t Au

ZFRC04-008 110 m @ 1.02% Cu (116-226m) & 36 m @ 0.24 g/t Au

ZFRC04-009 94 m @ 0.61% Cu (164-238)

ZFRC04-010 74 m @ 0.73% Cu (174-268m)

The second phase RC programme carried out in September 2004 (3 312 m) tested the possible southern extension of mineralisation intersected in RC drillholes 7 to 10. This programme included a total of 10 drillholes (drillholes 13 to 22) most of which were collared along an E-W fence located approximately 200 m due south of drillholes 7 to 10. Best intercepts, using a 0.2% cut-off, include the following intervals (ICP total copper):

ZFRC04-013 44 m @0.32% Cu (108-152 m)

ZFRC04-016 4 m @ 0.62% Cu (160-164 m)

ZFRC04-017 40 m @ 0.4% Cu (116-156 m)

ZFRC04-018 30 m @ 0.52% Cu (32-62 m)

ZFRC04-018 42 m @ 0.3% Cu (142-184 m)

ZFRC04-019 20 m @ 0.33% Cu (136-156 m)

ZFRC04-022 6 m @ 0.4% (122-128 m) In addition, during November 2004 a diamond drilling campaign totalling 1 556.15 m (four drillholes) was carried out in order to develop a better geological model of the Zafranal system and to gain more reliable samples for geochemical assays and petrological studies. Drillhole ZFDDH04-001 twinned previous drillhole ZFRC04-008, while diamond drillholes ZFDDH04-002, ZFDDH04-003 an ZFDDH04-004 were collared at the same locations of RC drillholes ZFRC04-008, ZFRC04-0010 and ZFRC04-007 respectively, but oriented due north in order to test the possible extension of mineralisation to the north of the main mineralised zone. All four drillholes were inclined between -55º to -70º. Drillholes with significant Cu and Au intervals identified during the diamond drill programme are listed below for total copper grades:

ZFDDH04-0001 (twin of ZFRC04-008) 166.5 m @ 1.00% Cu (113-279.5 m),

includes 110 m @ 1.22% Cu & 0.16 g/t Au (119-229 m)

ZFDDH04-002 92 m @ 0.94% Cu (136-228 m)

ZFDDH04-004 77.2 m @ 1.80% Cu (75-152.2 m) & 19m @ 0.14 g/t Au Diamond drillholes ZFDDH04-002 and ZFDDH04-004 returned impressive results and confirmed that high-grade copper mineralisation is not only centred near drillholes ZFRC04-007 & 008 but actually extends to the north for at least 100 metres. Moreover, comparison of grades between drillhole ZFRC04-008 and its diamond twin ZFDDH04-001 indicates a consistent 19% increase in copper and gold grades in the core samples. In September 2005 a reverse circulation drill programme consisting of 10 drillholes (3 248 m) tested the possible western and eastern extensions of the mineralisation encountered in previous programmes. A total of three drillholes (drillholes ZFRC04-023, ZFRC04-024 and ZFRC04-025) tested the eastern most side of the Zafranal system; one drillhole (ZFRC05-026)



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tested the area north of ZFRC04-012, while drillholes 27 to 32 tested the westernmost portion of the system. Intervals with significant Cu values identified during the 2005 drill programme are listed below for total copper grades:

ZFRC05-023 60 m @ 0.38% Cu (34-94 m)

ZFRC05-024 24 m @ 0.67% Cu (40-64 m)

ZFRC05-026 36 m @ 0.22% Cu (110-146 m)

ZFRC05-027 20 m @ 0.25% Cu (72-92 m)

ZFRC05-027 22 m @ 0.21% Cu (130-152 m)

ZFRC05-028 16 m @ 0.22% Cu (110-126 m)

ZFRC05-029 20 m @ 0.24% Cu (100-120 m) Intervals with significant total copper values identified during the 2005 drill programme are listed below. Table 6-2 Zafranal Teck Drillhole Location

Drillhole Easting Northing Elev. Azimuth Dip Length Year Datum

ZFRC04-001 794 841 8 224 508 2 773 180 -65 295 2004 SAD 56 - Zone 18

ZFRC04-002 794 497 8 224 671 2 878 180 -65 310 2004 SAD 56 - Zone 18

ZFRC04-003 794 193 8 224 555 2 826 180 -65 304 2004 SAD 56 - Zone 18

ZFRC04-004 793 825 8 224 590 2 763 180 -65 268 2004 SAD 56 - Zone 18

ZFRC04-005 793 527 8 224 598 2 690 180 -65 250 2004 SAD 56 - Zone 18

ZFRC04-006 793 201 8 224 454 2 625 180 -65 312 2004 SAD 56 - Zone 18

ZFRC04-007 793 516 8 224 259 2 640 180 -65 266 2004 SAD 56 - Zone 18

ZFRC04-008 793 822 8 224 322 2 738 180 -65 348 2004 SAD 56 - Zone 18

ZFRC04-009 794 211 8 224 350 2 787 180 -65 350 2004 SAD 56 - Zone 18

ZFRC04-010 794 501 8 224 388 2 776 180 -65 334 2004 SAD 56 - Zone 18

ZFRC04-011 794 790 8 224 299 2 742 180 -65 350 2004 SAD 56 - Zone 18

ZFRC04-012 795 251 8 224 529 2 826 180 -65 302 2004 SAD 56 - Zone 18

ZFRC04-013 792 965 8 224 364 2 613 180 -65 350 2004 SAD 56 - Zone 18

ZFRC04-014 792 899 8 223 897 2 543 180 -65 294 2004 SAD 56 - Zone 18

ZFRC04-015 793 282 8 224 108 2 634 180 -65 316 2004 SAD 56 - Zone 18

ZFRC04-016 793 493 8 224 062 2 619 180 -65 348 2004 SAD 56 - Zone 18

ZFRC04-017 793 825 8 224 160 2 663 180 -65 334 2004 SAD 56 - Zone 18

ZFRC04-018 794 215 8 224 149 2 674 180 -65 330 2004 SAD 56 - Zone 18

ZFRC04-019 794 507 8 224 191 2 693 180 -65 350 2004 SAD 56 - Zone 18

ZFRC04-020 794 795 8 224 091 2 697 0 -80 330 2004 SAD 56 - Zone 18

ZFRC04-021 793 828 8 224 595 2 768 0 -75 314 2004 SAD 56 - Zone 18

ZFRC04-022 792 963 8 224 369 2 613 0 -65 346 2004 SAD 56 - Zone 18

ZFDDH04-001 793 820 8 224 322 2 738 180 -65 379.4 2004 SAD 56 - Zone 18

ZFDDH04-002 793 824 8 224 322 2 738 0 -65 390.8 2004 SAD 56 - Zone 18



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Drillhole Easting Northing Elev. Azimuth Dip Length Year Datum

ZFDDH04-003 794 496 8 224 388 2 776 0 -70 388.35 2004 SAD 56 - Zone 18

ZFDDH04-004 793 514 8 224 259 2 639 0 -55 397.6 2004 SAD 56 - Zone 18

ZFRC05-023 795 915 8 224 098 2 695 180 -65 276 2005 SAD 56 - Zone 18

ZFRC05-024 795 699 8 224 200 2 768 180 -65 350 2005 SAD 56 - Zone 18

ZFRC05-025 795 166 8 224 293 2 782 180 -70 330 2005 SAD 56 - Zone 18

ZFRC05-026 795 090 8 224 616 2 715 180 -65 366 2005 SAD 56 - Zone 18

ZFRC05-027 793 525 8 224 606 2 691 0 -65 326 2005 SAD 56 - Zone 18

ZFRC05-028 793 197 8 224 460 2 625 0 -65 336 2005 SAD 56 - Zone 18

ZFRC05-029 792 625 8 224 731 2 519 180 -65 330 2005 SAD 56 - Zone 18

ZFRC05-030 792 762 8 225 157 2 592 180 -65 340 2005 SAD 56 - Zone 18

ZFRC05-031 792 315 8 225 064 2 528 180 -65 288 2005 SAD 56 - Zone 18

ZFRC05-032 791 919 8 224 832 2 519 180 -70 306 2005 SAD 56 - Zone 18

Total 11 805

6.3 EXPLORATION HISTORY - SICERA SOUTH PROSPECT

The Sicera South porphyry system is located 6.5 km west of the Zafranal Main Zone. The porphyry prospects within the Zafranal land package in the upper Sicera drainage, in the pampas in front of the mountains, were examined many years prior to the discovery of the Zafranal deposit. Phelps Dodge optioned the prospect from Milpo in the mid-1990s and drilled several inconclusive drillholes; subsequently Teck drilled several RC drillholes examining the western and northern extension gravel-covered areas. Teck recognised that the geologic setting at Sicera South (Figure 6-4) is similar to other prospects within the Zafranal land package with a gneissic Precambrian basement overlain by a Jurassic sedimentary sequence (Yura Group) both intruded by a granodiorite stock of the Coastal Batholith. AQM in 2010 has modified the early work of Teck and these activities are discussed in later sections. Sediments at Sicera South are calcareous in nature and range from limestone, silty limestone to silt. The Sicera South porphyry system is controlled in part by the Incapuquio Fault System. Alteration at Sicera South was originally recognised by Teck as centred on an east-west trending, 1.1 km by 1.8 km zone, exhibiting moderate to strong phyllic alteration. Rocks outside the phyllic core are altered to an epidote-chlorite-silica assemblage. A hematite-jarosite dominated leached capping is present over the prospective area. Alteration and mineralisation limits are well defined at surface and by previous drilling to the west and north but may extend to the east under a post-mineral reverse fault (Figure 6-5). Phyllic alteration is overall moderate in intensity but it can be strong locally. Rocks within the phyllic altered zone are converted to a white, earthy mass in which texture is still preserved, thus primary textures are not obliterated favouring the recognition of different rock units. Potassic alteration has only been recognised as patchy exposures in several places within the phyllic altered zone and consists of secondary biotite flakes after hornfels and/or secondary biotite narrow veinlets. The strong chlorite alteration observed in many of the dykes and in some of the intrusions does not seem to originate from the alteration of previously potassic (biotite)-altered lithologies but to be the result of the alteration of hornblende or magmatic biotite.



Copper mineralisation in Sicera South is dominated by oxide specimens especially neotocite, Cu-wad, malachite, atacamite, tenorite, chrysocolla and chalcantite. Sulphide mineralisation is restricted to quartz-chalcopyrite veinlets or to weak disseminations of chalcopyrite within the microdiorite or the andesitic dykes. The bulk of the surface copper mineralisation is located inside a 1.0 km by 0.45 km north-northwest trending area spatially coincident with the strongest development of a dense dyke swarm inside the hornblendic diorite porphyry. Mineralisation in this area consists of strong copper oxide (mainly Cu-wad) staining, fracture-controlled coatings and disseminations. This mineralisation seems to increase to the north and east where it is apparently cut off by a reverse fault. Figure 6-4 Sicera South Prospect –Geology & Alteration



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Figure 6-5 Sicera South Prospect – Geological Model

6.3.1 Geochemistry

The Sicera South porphyry was intensively sampled by Phelps Dodge and Milpo in the mid 1990s. Teck results from the 49 samples collected during the recently completed field programme confirmed the results of the 257 samples previously taken by Phelps Dodge and Milpo (Figure 6-6). Figure 6-6 Sicera South Prospect – Geochemistry & Drillhole Location



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6.3.2 Drilling

Phelps Dodge drilled two drillholes in Sicera South on lands leased from Milpo in the mid-1990s (Figure 6-6). During the 2007 drill program, a total of four RC drillholes were drilled by Teck in the Sicera South region. Drillholes in the Sicera South region were collared in order to test the potential for copper mineralisation along the northern extension of the Sicera South porphyry as well as to evaluate the pampa areas located south of it. Drillhole CH07RC-011 was collared in post-mineral gravels immediately 120 metres to the north of the outcropping Sicera South porphyry. This drillhole returned encouraging Cu results (123 m @ 0.23% Cu) associated with hypogene copper mineralisation. Table 6-3 summarises the data of drillholes drilled at Sicera South in 2007. Table 6-3 Teck Sicera South 2007 Drilling Programme

Drillhole Easting Northing Elevation Azimuth Dip Length

CH07RC-010 785 292 8 224 141 1 725 330o -80o 40m

CH07RC-010A 785 300 8 224 138 1 725 90o -70o 60m

CH07RC-011 787 060 8 225 570 2 052 270o -80o 250m

CH07RC-013 785 469 8 224 333 1 750 0o -90o 108m

During the 2007 programme a total of four drillholes were collared in the Sicera South region (drillholes CH07RC-010, 010A, 011,013). Of these, three drillholes were collared 1 km south of Sicera South and despite being collared in altered outcrops they bottomed in post-mineral gravels. This is interpreted to be caused by a low-angle thrust fault with the fault plane located at around an elevation of 1705 m that puts “slides” of the Cretaceous sequences on top of the Tertiary Moquegua Formation. This fault was previously mapped in the field but was considered to have a much steeper dip angle rather than the sub horizontal attitude shown by drillholes. Drillhole CH07RC-011 located 120 m north of Sicera South intercepted encouraging copper mineralisation (120 m @ 0.23% Cu) hosted by a diorite porphyry stock showing strong chlorite alteration, 1-2% disseminated pyrite and traces to 1% chalcopyrite. This mineralisation is thought to represent hypogene sulphide copper mineralisation at the margins of the Sicera South porphyry. 6.4 EXPLORATION HISTORY - SICERA NORTH PROSPECT

The Sicera North prospect is located approximately 5 kilometres north of the Sicera South prospect and 6 kilometres south of the Rosario prospect. Much of the property was acquired in 2009 by AQM and the core of the prospect has had no previous drilling. The geological setting first described by Teck of the Sicera North is shown on Figure 6-7. The gneissic Precambrian basement is overlain by a Jurassic siliciclastic sequence (Yura Group) made up of quartzites and shales interbedded and possibly overlain by massive andesitic flows and breccias. During the Upper Cretaceous the whole stratigraphic column was intruded by a multi-pulse, medium to coarse-grained granitoid batholith (Batolito de la Costa). The geology has been modified by AQM through surface work and drilling in 2010 and is described in a later section.



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Rapid erosion as a response to massive uplift during the early to mid Cenozoic (Incaic tectonic phase) led to the formation of a large, thick sequence of gravels (Moquegua Group) that filled topographic depressions forming a regional pediplain along the Andes foothills in southern Peru. Hydrothermal alteration (Figure 6-7) at the Sicera North porphyry system covers an overall area of 3 km by 1 km and has a NW-trending elongated shape. Mineralisation at Sicera North is associated with the strong phyllic altered core and includes a hematite leached cap, an oxide zone and primary sulphide mineralisation. A hematite leached cap is exposed over a 300 x 200 metre area in the northernmost corner of the phyllic altered zone and it is defined by moderate to strong hematite coatings, veinlets, boxworks and earthy aggregates with local secondary alunite veinlets and fracture-coatings. The leached cap is hosted by strongly phyllic-altered quartz-feldspar porphyry. Copper oxides occur within the leached capping. Sulphide mineralisation is clearly recognisable along the creek that runs along the centre of the phyllic altered zone. Primary sulphide mineralogy is dominated by traces to 3% chalcopyrite and up to 15% pyrite with local chalcocite and covellite impregnations on pyrite. Most pyrite and chalcopyrite is contained by thick (1cm) sheeted veinlets and disseminations either on the quartz-eyed intrusive or in the gneiss. Copper mineralisation, although scattered all over the phyllic zone is focused on its northern half where the transition from oxides to sulphides is clearly visible. In that sector, the oxide zone reaches its maximum exposed vertical thickness (approximately 50 m) but elsewhere mineralisation is more erratic and has lower grades. 6.4.1 Geochemistry

Geochemical results for 112 rock samples collected by Teck are shown graphically in Figure 6-7 and Figure 6-8. Much more sampling has been carried out by AQM in 2010 and is reported in a later section. Copper results ranged to a maximum of 3.06% Cu but they were generally between 150 ppm and 500 ppm in the hematite leached cap, 500 ppm to 1700 ppm in the oxide zone and 0.15% to 0.3% in the sulphide zone. Most of the copper is concentrated in the oxide zone and in the primary zone exposed at the bottom of the southwest-trending creek drainage, near the centre of the system. The higher copper grades (0.15% to 0.3%) come from chalcopyrite-chalcocite-covellite disseminated and vein-controlled mineralisation located below the leached cap and the oxide zone. A total of 47 samples (42% of the total) returned copper grade values higher than 300 ppm. A total of 18 samples returned gold values greater than 30 ppb with a maximum of 6.55 g/t Au, but almost all anomalies range between 30 ppb and 1 000 ppb. None of the gold anomalies are located within the strongly phyllic-altered copper-bearing core of the system but to the north of it in the surrounding, less-altered gneissic host rock. Gold anomalies are associated with quartz veins, veinlets and structures hosted by the gneiss and by mafic dykes.



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Figure 6-7 Sicera North Prospect – Geology & Geochemistry



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Figure 6-8 Sicera North Prospect – Geology & Geochemistry (detail)

6.5 EXPLORATION HISTORY - CAMPANERO PROSPECT

The Campanero prospect is the westernmost prospect in the Zafranal land package. At Campanero there is no evidence of previous development work except for small old workings in the Campanero copper showing. Artisanal miners have been actively working the copper showings on a small scale in recent years. From a historical exploration standpoint, BHP Billiton completed in 2000 an induced polarization survey to define chargeability and resistivity anomalies under the pampa area that could be related to covered disseminated sulphide mineralisation. This survey was conducted in two separate areas of the Chicharron region: one south of Campanero (over a 6 km by 1km area) and one south of Ganchos (over a 4 km by 7 km area). 6.5.1 Geology, Mineralisation & Alteration

Campanero is a porphyry copper prospect, similar to Sicera North and SurError! Reference source not found.. The information reported in this section shows the work of Teck. AQM has done significant work in 2010 and this information is reported in a later section. The prospect seems to be controlled by splays of the Incapuquio Fault. The host rocks are in part quartzite and siltstone of the Upper Jurassic - Lower Cretaceous Yura Group. The prospect exhibits a leached capping (hematite/goethite), with a moderate to strong phyllic stockwork. Two types of



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intrusions crop out at Campanero. One is an intermediate quartz diorite porphyry showing hematite, goethite, jarosite disseminated and in veinlets, sheeted veins, plus local chrysocolla on fractures. Also occurring is secondary biotite overprinted by sericite alteration. Post-mineral quartz diorite porphyry with chlorite alteration is also observed. 6.5.2 Drilling

A 2006 drill programme by Teck consisted of nine RC drillholes totalling 2 163 m. The programme included drilling of four drillholes in the Campanero area (Figure 6-9) and five drillholes in the pampa areas. Drilling at Campanero encountered weak secondary copper mineralisation (chalcocite) hosted by quartzite of the Yura Group. The five drillholes that targeted the geophysical anomalies in the pampa area did not reach bedrock. Table 6-4 includes the intersections from the 2006 RC drill programme and 2007 diamond drill programme at Campanero. Table 6-4 Teck 2006-2007 Drilling Programme – Campanero/Sicera West

Drillhole From

m

To

m

Interval

m

CuTotal

%

CH06RC001 160 210 50 0.11

CH06RC007 192 202 10 0.13

CH06RC008 152 174 22 0.19

CH06RC009 70 86 16 0.83

CH06RC009 110 124 14 0.45

CH06RC009 160 222 62 0.29

CH07DDH01 - - - NSV

CH07DDH02 - - - NSV

CH07DDH03 168 235 67 Tr

No significant copper mineralisation was encountered, with two of the diamond drillholes intercepting only weak secondary copper mineralisation consisting of chalcocite traces over pyrite. This weak supergene mineralisation is hosted by quartzite and siltstone of the Yura Group which show moderate to strong silicification. The leached cap at Campanero consists of hematite and goethite and can be up to 85 m thick. The weak enrichment blanket identified to date in Campanero consists only of local, thin chalcocite coatings over pyrite. Thus enrichment at Campanero is immature and weak although it can attain thickness of as much as 113 m (i.e. drillhole CH07DDH-001). The best copper values in Campanero were intercepted during the 2006 RC drill programme and came from drillholes located closer to the Campanero surface showings (e.g. drillhole CH06RC009 located 300 m east of the showing returned up to 16 m @ 0.83% Cu and 62 m @ 0.29% Cu). The areas tested in 2007 are interpreted to represent just the distal parts of the porphyry system exposed at the showings in Campanero. Stronger copper mineralisation defined to date, both surface and drilling, is located closer to the Campanero copper showing, either along or on the south side of the principal structure in the pampas.



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Figure 6-9 Campanero Prospect – Geology, Alteration & Drillhole Location Map

. 6.6 EXPLORATION HISTORY - ROSARIO PROSPECT

The Rosario prospect is the northernmost prospect in the Zafranal land package. The area was discovered in November 2002 as part of the regional exploration work carried out by Phelps Dodge on the north western extension of the porphyry copper belt in Southern Peru. Originally, Phelps Dodge accessed Rosario from Sicera North by a dirt path on foot or by mules. Now the property can be accessed by a road constructed to carry out the drilling by Phelps Dodge. Teck has not performed detailed work on the Rosario prospect. The oldest rocks (Figure 6-10) in the area are represented by metasediments of the early Paleozoic Ongoro Formation, which occur in the south western sector of the study area, being characterised by NW-oriented, sub-vertical-dipping sedimentary and volcanic hornfels, carbonaceous shale, fine-grained sandstone and impure limestone. These rocks were subsequently intruded by a series of intrusive rocks belonging to the late Cretaceous-early Tertiary coastal batholith, grading in composition from diorites to coarse-grained granodiorites. A 350 m by 250 m, copper oxide-bearing, medium-grained granodiorite-diorite body occurs in the centre of the mineralised area. This granodiorite shows weak-to moderate chloritisation, and apparently secondary biotite. Quartz-limonites-green copper oxides-(chalcopyrite) veinlets occur, mainly E-W oriented, but in some places develop zones of weak stockwork-like veining. Copper grades range from 0.02% up to 3.81% Cu. A core of 100 m by 80 m shows the best copper oxide grades, from 0.1% to



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around 4% Cu. Among the copper species brochantite, chrysocolla, minor malachite and copper wad were identified. Scarce relics of partially oxidised chalcopyrite were found within this area. Phelps Dodge completed five RC drillholes at Rosario. Significant assays were not reported from these drillholes. Phelps Dodge abandoned the claims soon after. 6.7 EXPLORATION HISTORY - GANCHOS

The Ganchos prospect is south of Zafranal Main Zone and mostly covered with gravels and the Moquegua Formation. Exploration by Teck consisted of limited geology, geophysics, and RC drilling that has not encountered any bedrock to date. AQM completed additional geologic studies in 2010, reported in a later section. A historic geologic map with drill locations, of the Ganchos area is shown in Figure 6-10. In 2006 and 2007 a total of three drillholes (CH06RC005, CH07RC012, and CH07RC014) were collared south of Ganchos in order to test the possible presence of concealed porphyry mineralisation below post-mineralisation gravels. RC 005, drilled in 2006, was collared in Quaternary alluvium and never actually reached bedrock. RC 012 and RC 014, drilled in 2007, were collared near altered bedrock but soon (after approximately 25 m) were followed by the red beds of the Lower Moquegua Formation, both drillholes ending up in post-mineralisation gravels. This is interpreted to be caused by a low-angle thrust fault similar to that at Sicera South. Figure 6-10 Ganchos Prospect – Geology & Drillhole Location Map



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6.8 EXPLORATION HISTORY - PAMPAS (CHICHARRON)

The Pampas (Chicharron) area is a term named after the former joint venture with BHP Biliton. This prospect is limited to the zone that encompasses the mostly gravel covered pampas between Campanero and GanchosError! Reference source not found.. There have been efforts by BHP Biliton and Teck to drill test this area, but bedrock has not been encountered. Four exploratory RC drillholes were drilled in 2006 by Teck in the area between the Campanero and Ganchos prospects in the pampas. Table 6-5 gives the location and drill information. Table 6-5 Teck 2006 Las Pampas Drilling Programme

Drillhole Easting Northing Elevation Azimuth Dip Length

m

CH06RC002 781 890 8 222 218 1 450 0 º -70 º 232

CH06RC003 784 719 8 223 239 1 701 45 º -70 º 250

CH06RC004 785 357 8 219 703 1 450 45 º -70 º 250

CH06RC006 788 918 8 217 026 1 351 45 º -70 º 250

None of these drillholes intersected bedrock.

7 GEOLOGICAL SETTING

7.1 REGIONAL GEOLOGY

The regional geology description was taken from an internal AQM report on the surface mapping of Zafranal authored by Russell Smith (2010). The Late Cretaceous to early Paleocene, 81 million year old Zafranal porphyry copper-gold deposit lies near the northern end of the Southern Peru Porphyry Copper Belt and is the oldest of all the known porphyry deposits occurring within the belt (Clark et al, 1990; Quang et al, 2003). The 81 million year old age is from an age date determined from Teck samples taken from a strongly phyllic altered fine-grained sediment. The porphyry belt is controlled by the Incapuquio Fault System, a series of parallel to semi-parallel NW trending faults traversing much of the rigid continental margin of southern Peru. The Incapuquio Fault System stretches from near the Chilean border at its southern terminus to an undefined point north of the Rio Majes and Colca Canyon, which lies north of Zafranal (Figure 7-1 and Figure 7-2). The Incapuquio Fault System has weakened the crust to allow no less than five major porphyry copper deposits to form of which Zafranal is one of them. The Zafranal deposit appears to lie between several of the Incapuquio faults and just west of the most north easterly fault of this fault system. The Incapuquio Fault System is considered to be mostly a dip slip fault system exhibiting progressive uplifting to the northeast, toward the uplifted Andes Mountains lying to the east. Evidence of the dip slip nature of the faulting occurs at Zafranal and the Cerro Verde deposits where basement Precambrian gneiss (Arequipa massif) has been uplifted in increasingly uplifted blocks eastward toward the Andean mountains. The presence of uplifted gneissic basement rocks shows uplift of the Andean mountains, partially due to the Incapuquio Fault System and not accretion in the upper crust. There is local evidence of left lateral faulting along the Incapuquio system



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in the form of lower order, local wrench faults, indicating that the rocks to the northeast have moved north westward relative to the rocks to the southwest. This fault movement along with dip slip movement has created dilation and an extensional environment producing crustal weakening along which imbricate E-W faults formed in a horsetail pattern and porphyry copper deposits were emplaced. However, structural evidence suggests several reactivation events leading to both extensional and compressional movements along the same faults, often showing evidence of right lateral movement along some of the Incapuquio fault splays. The rocks occurring in the Zafranal area are Precambrian gneiss, Cretaceous granodiorite and Jurassic volcanoclastic and sedimentary rocks which have been intruded by Paleocene diorite to late Cenozoic dykes. The lowlands or pampa to the west of the foothills running out to the Pacific Ocean are covered by relatively flat lying Miocene to recent sediments that were deposited from the eroding Andes. These sedimentary rocks thicken toward the Andes, their source, and are generally referred to as the Moquegua Formation. Inter-bedded within these unconsolidated gravels to fine-grained sediments are basalt and andesite flows of probable Miocene age. Figure 7-1 Zafranal Regional Geological Map



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Figure 7-2 Zafranal Regional Geological Map Legend

7.2 PROPERTY GEOLOGY

The property geology studies by AQM began in 2009 at Zafranal and were originally led by Russell Smith (2010). Fernando Rivera and others have completed major revisions to the original geology, in part based on new exposures along drill roads and the observations made from extensive core and RC drilling. The most recent compilations of Rivera for the Zafranal Main Zone are presented in Figure 7-3. The Zafranal deposit lies within an east-west trending fault-bounded block. The host rocks within this block are a sequence of Jurassic volcanic, volcanoclastic and sedimentary units which have been intruded by diorites. These rocks are in contact with a genissose unit and Cretaceous granodiorite batholithic rocks to the north and Jurassic sediments of the Yura Formation to the south.



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Figure 7-3 Zafranal Main Zone Geological Map

Figure 7-4 Zafranal Main Zone Alteration Map

7.2.1 Lithology

Zafranal’s geology is dominated by a thick volcano-sedimentary sequence belonging to the Lower-Jurassic Guaneros Formation. This unit is made of interbedded sedimentary and volcanic rocks, the sedimentary members being limolite, sandstone and sedimentary breccia (debris flows), while volcanic members include tuff, breccia and andesitic lava flows, together with sub-volcanic units of andesitic composition. This sequence is affected by a strong quartz-sericite alteration within the Zafranal porphyry alteration zone. As is the case for several other porphyry deposits in the Southern Peru Copper belt, the Zafranal area’s main intrusive events occurred during the Upper Cretaceous. The various intrusions observed in the



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east-west trending Main Zone are of intermediate composition, being mostly diorite and quartz diorite. These intrusions are believed to be responsible for the significant hydrothermal alteration (4.5 km x 1 km) associated with this porphyry-type deposit. The intrusive complex comprises several units according to the following sequence:

Zafranal Diorite: The oldest recognised intrusion, a greenish-grey porphyritic rock composed of plagioclase, hornblende and quartz crystals. It outcrops as stocks and dykes everywhere in the ore body, cutting Jurassic volcanoclastic rocks. This intrusive body shows sericite-chlorite-biotite alteration (phyllic superimposed on potassic) on surface, together with thin D-type and B-type veinlets, the latter turning into A-type at depth. This intrusion is postulated as an early hypogene-copper-mineralising phase in the deposit.

Microdiorite: This is a fine-grained greenish grey rock made of plagioclase, hornblende and small amounts of quartz. It basically outcrops as stocks and apophyses in the western and eastern ends of the orebody, with a chlorite-biotite alteration and moderate superimposed sericite. It is potassically altered at depth: quartz (silicification) + secondary biotite + chlorite +/- potash feldspar, accompanied by thin B-type and A-type veins. This microdiorite, which cuts through the Zafranal diorite, appears to represent the main mineralising phase responsible for copper in the primary-sulphide zone. It has also been observed that the Zafranal diorite tends to be more mineralised when it is in contact with microdiorite, which leads to conclude that the former is mineralised by the latter.

Quartzdiorite: This rock is dark grey, has a phaneritic texture and is made of plagioclase, hornblende and quartz eyes. It generally shows chlorite-biotite alteration, and commonly pyrite (1%) and magnetite. This unit cuts through the above-named intrusive bodies as dykes and is characterised by its lack of any economically viable hypogene mineralisation.

Post-mineral diorites, occurring as dykes and small apophyses, are the last intrusive events in the deposit. These may be propyllitcally altered or unaltered, and cut through all the above-named units without showing any type of mineralisation.

A gneissic rock consisting mainly of strongly foliated volcanic and intrusive rocks occurs north of the north bounding fault. This unit has been mapped as Precambrian gneiss in the past, but more detailed mapping shows it as lacking in evidence of high-grade metamorphism, and in being closely associated to the largest structures found in the Main Zone. Several tectonic events, including major shearing, have given it its strongly deformed (or gneissic) appearance, often with mylonitic textures, which gradually grades into foliated host rock – volcanic to the south and granodiorite to the north. Jurassic-Cretaceous volcano-sedimentary host rocks make up a large part of the east-central part of the block. The volcano-sedimentary rocks within the block contain a much more felsic volcanic component than the almost purely sedimentary sequence found to the south of the block and outside of it. The volcanoclastic rocks appear to lie below a sugary quartzite unit which has a grainy texture with grain sizes ranging from coarse to very fine grained. This sugary quartzite may be part of the Yura Formation of Jurassic age; however, they appear to be more massive than those of the Yura Formation seen nearby and lie within a sequence of rocks that has a higher volcanic component than the Yura quartzite. There are also fine grained clay-rich sediments interbedded within the volcanoclastic,



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however, they are generally not subdivided into a mappable unit unless the sediment content is greater than 50% of the rock. One of these areas can be seen along the drill access road leading to drillhole ZFRC04-001 drilled by Teck. The greater proportion of the rocks mapped as sediments in light green colour on the accompanying geologic map (Figure 7-1) are sugary fairly uniform homogenous quartzite beds and silicified volcanic beds. Intruded into the Jurassic volcanoclastic and sedimentary rocks within the block are a feldspar porphyry and diorite intrusions, and possibly younger quartz porphyry and rhyolitic dykes. A large area of andesite to andesite breccia occurs at the south western edge of the mapped area and extends for some distance to the west off the map (Figure 7-1). These rocks are interpreted as Jurassic but younger than the volcanoclastic and sedimentary sequence described above within the block and appear to also be younger than the sediments found outside of the block. Late Cretaceous to Paleocene biotite microdiorite, hornblende diorite and hornblende quartz diorite intrude all the older Jurassic rocks described above. A biotite microdiorite stock occurring at the west edge of the geologic map appears to be pre-mineralisation. Pre-mineralisation quartz diorite porphyry, originally thought to be post-mineral, intrusions dominate the central part of the block hosting the Zafranal Main Zone. Although originally emplaced as stock-like and locally dyke-like features, these quartz diorite intrusions were originally vertically emplaced and often occur as sill-like, possibly flat-faulted, bodies close to the surface and can be seen intruding along faults, bedding, foliations and intense zones of jointing trending in a general west-southwest direction. At depth these “sills” may merge downward into stock-like bodies. Microdiorite stocks intrude the porphyritic diorite and are the main host for porphyry-style alteration and mineralisation. Within the central part of the deposit several narrow dykes of quartz porphyry occur but these dykes represent a very small proportion of the rocks within the core of the deposit. Rhyolitic dykes trending Az. 070o-080o occur in the north-central part of the deposit and underlie the highest topographic point of the deposit. It is unclear whether there are only dykes in this area or rhyolite flows. Post-mineral dykes cut through the deposit in two general directions. One set of dykes trends N-S and the other trends SW-NE. The dykes vary in composition, but generally have a dioritic composition with some containing varying abundances of quartz phenocrysts which are generally described as round quartz eyes. Several andesitic dykes also cut through the deposit. The andesitic dykes are much more prevalent outside the block to the south and west where most are seen cutting Jurassic sediments. Most post-mineralisation dykes are believed to have intruded along faults, which are part of the block faulting seen segmenting the sediments and volcanoclastic rocks that lie central to the deposit. All the rocks within the Zafranal deposit are extremely altered making it difficult to identify original rock types. Further drilling and interpretation of the subsurface lithologies within the volcano-sedimentary sequence and intrusions will undoubtedly lead to a better understanding of the host rock geology within the deposit.



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7.2.2 Structure

Copper-gold porphyry deposits such as Zafranal are open systems formed by the introduction of magmas and hydrothermal solutions into the rock along geological structures caused by the strain applied by regional and localized magmatic forces. The importance of regional-scale strain in the Zafranal deposit is clear, as the observed faults associated to it control the location and form of the intrusive bodies. Magmatic forces are evidenced by the location of concentric and radial veins in the various outcrops. The relative importance of either force within the deposit has evolved over time and space as evidenced by the pattern of the different intrusions. Furthermore, structural controls have been very significant during the supergene enrichment process, as faults, joints, foliation and bedding planes have provided permeability for surface waters to percolate to relatively deep levels. Fault zones are frequently more permeable than surrounding rock thus enabling thick supergene enrichment areas to develop. The main structural controls defined are chronologically sequenced from oldest to youngest as follows (Rivera et al., 2010):

Northern and Southern Transgressive Faults (Iquipi-Clavelinas System): Zafranal is enclosed to the North and South by two tectonic features running E-W in a straight line. They clearly respond to a strong structural control caused by Andean tectonics. These large structures would be the original structural controls for the deposit location and may be part of the Iquipi-Clavelinas fault system. Such structural morphology shows Zafranal occurring within a transgressive fault system bounded to the North and South by these major structures. The location of the deposit’s intrusive bodies, alteration and mineralisation zones fits within the limits of these large structures.

Foliation, E-W Faults, Folds, Lineation: Structural observations made at the outcrop level show the existence of a foliation event affecting the entire deposit. This event may be directly linked to the movement of strike-slip faults, in turn caused by shearing efforts within this structural event, simultaneously forming E-W trending structures. This deformation has affected Zafranal both before and after the intrusive events and hypogene copper alteration-mineralisation processes. In volcanic rocks with strong quartz-sericite alteration and presence of D-type veins, foliation cuts through these veins and foliates the vein’s sericitic halo . Both on surface and at depth, porphyry intrusions also show crystal lineation, particularly in hornblendes, thus proving that the shearing event also affected them during their emplacement . The Zafranal deposit’s major transgressive deformation has caused a series of folds (synforms-antiforms) within the structural corridors bounded by the NW-SE faults (Az. 130°-140º). Fold axes run E-W between the aforesaid normal strike-slip structures.

N-E Fault System (Az. 050°-060°): This fault system is seen on surface as a series of continuous structures mainly along the Eastern and Western edges of the system. The relative absence of this type of faults in the central part is a result of the prevalence of subsequent dextral strike-slip structures (Az. 130°-140°) that have sliced the system progressively to the northeast. This NE-structure system, together with the E-W structures, favoured the ascent of magma, and the large stocks associated with the main copper mineralisation are found at the intersection of both systems.



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Normal Strike-Slip Fault System (Az. 130°-140°): These structures are found in the central part of the deposit and appear as very long continuous structures with well-developed fault breccias up to 2 m wide. These structures run parallel to the Cincha-Lluta (Incapuquio) fault system and are the result of strong regional shearing deformation. Subsequent to the various intrusions, these dextral strike-slip structures show displacements of up to 400 m. During the Tertiary and following the secondary enrichment formation, these important structures were tectonically reactivated (associated with the Andean orogeny) as normal faults, progressively downdropping the enrichment blanket to the south (Figure 7-6). The latest signs of motion (normal faults) can be identified in outcrops, as well as diamond-drill cores, and is much better preserved than earlier strike-slip indicators.

The Zafranal Main Zone is partially bounded by WNW to E-W faults, which lie between major regional NW trending faults of the Incapuquio Fault System. These faults are part of the broadly transgressional environment created by right lateral strike slip and dip slip movement along some of the NW trending Incapuquio faults, subsequently reactivated as extensional faults. This environment has allowed for the juxtaposition of a block of Jurassic volcanoclastic rocks and sedimentary rocks and later diorite intrusions with older rock terrains. The block is bounded both north and south by faults. The block is in contact to the north with deformed gneissose rocks and Cretaceous granodiorite, and steeply dipping Jurassic sedimentary rocks to the south. Within the central part of the deposit, block faulting of the sedimentary and volcanoclastic rocks is prolific. The sugary quartzite coloured light green on the accompanying geologic map (Figure 7-3) do not have a continuous outcrop pattern and are displaced along generally east-west faults, which are believed to have upwards movement to the north. The volcanoclastic and sugary quartzite beds in this area are believed to be folded into a broad gently southwest plunging syncline. Bedding is obscured by alteration within the central part of the deposit; however the overall form of the syncline is interpreted by the outcrop pattern of the quartzite and volcanoclastic. Faulting within the deposit is prolific and both Paleocene diorite and younger dykes were intruded along some of these faults. Many of the intrusions, including diorite, quartz diorite or microdiorite bodies, have fault-bounded contacts as well as clearly intrusive contacts with chilled margins. The intrusions also intruded along weakened steeply dipping highly jointed zones and along possible bedding and foliation within the volcanoclastic and quartzite rocks. In cross-section many of the upper portions of the diorite bodies are sill-like, possibly flat-faulted bodies that probably mimic the original bedding within the volcanoclastic rock sequence. Other diorite intrusions are clearly cross-cutting. Late post-mineralisation dykes trend in two general directions; N-S and 070o. These dykes probably follow pre-existing faults and offset by these faults is likely. The dips of these 070º dykes vary from sub-vertical to approximately 45º to the south. Faulting is prevalent within the Zafranal Main Zone. This fault strikes E-W and dips to the south showing drag with upward movement on the north side. Faults like these are sympathetic to the Incapuquio Fault System which has the same movement with north side up but greater displacement. Foliation within the volcanoclastic sequence is ubiquitous. It also cuts across the interbedded fine grained sedimentary rocks within the volcanoclastic unit but is less apparent in the more massive and



silicified quartzite that lies above the foliated volcanoclastic unit. Most of the foliation strikes to the southwest and generally dips to the south along the north side of the deposit and dips to the north on the south side of the deposit. Foliation is notably absent in the fine-grained feldspar porphyry that intrudes the volcanoclastic unit and interbedded finer grained sedimentary rocks to the west. Figure 7-5 Zafranal Structural Controls



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Figure 7-6 Zafranal Porphyry Relative to the Incapuquio Fault System

Figure 7-7 Section 793 700N – Mineralisation Zoning & Faults



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Note: Section 793 700N seen from the East, showing the main dextral faults reactivated with normal motion, the blanket

(supergene enrichment) downdropping southwards, and the deposit’s primary-sulphide potential, mainly consisting of

chalcopyrite.

Figure 7-8 Evidence of Structural Control at Zafranal

The North Fault forms the Zafranal deposit’s

transpressive jog and northern boundary of the alteration-

mineralisation zone (looking eastward)

Strongly foliated volcanic units (Az. 110°/65°)

D-type thin vein cut by the foliation - foliation affects the

sericitic halo

Hornblende Lineation in Zafranal Diorite

Fault system Az. 130º-140º NE fault system that affects the deposit on the West



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8 DEPOSIT TYPES

Mineralisation at Zafranal is an Andean example of a porphyry copper, gold, and molybdenum deposit (Modified after Nicolson, 2003). A generic description from Pantaleyev (1995) summarises the common features of porphyries as large zones of hydrothermally altered rock containing quartz veins and stockworks, sulphide-bearing veinlets; fractures and lesser disseminations in areas up to or greater than 10 square kilometres in size, commonly coincident wholly or in part with hydrothermal or intrusion breccias and dyke swarms. Deposit boundaries are determined by economic factors that outline ore zones within larger areas of low-grade, often concentrically zoned mineralisation. Important geologic controls on porphyry mineralisation include large structural zones and intersections, igneous contacts, cupolas and the uppermost bifurcating parts of stocks and dyke swarms. Intrusive and hydrothermal breccias and zones of intense fracturing due to coincident or intersecting multiple mineralised fracture sets commonly coincide with the highest metal concentration. Quartz porphyry intrusions often are genetically related to the best primary grade sulphide mineralisation. The effects of surface oxidation commonly modify porphyry deposits in weathered environments. Low pH meteoric waters generated by the oxidation of iron sulphides leach copper from copper-bearing sulphides, re-depositing the copper as secondary chalcocite, digenite, and covellite in relatively flat tabular zones below the water table. This process results in a copper-poor leached cap above a supergene-enriched copper blanket, which in turn lies above a deposit of hypogene or primary grade copper, generally chalcopyrite and lesser bornite. The secondary copper sulphides sometimes are oxidised to copper oxides, such as malachite, chrysocolla, and brochantite. Occasionally, these copper oxides are deposited at some distance away from the main deposits to form large “exotic” copper deposits. Other deposit styles associated with porphyry copper deposits (spatially and genetically) include epithermal quartz veins and other quartz vein systems, lead-zinc-silver veins and replacements, and skarns. 9 MINERALISATION

The mineralisation descriptions are modified from internal AQM reports on the surface mapping of the Zafranal Main Zone authored by Russell Smith and Fernando Rivera (2010) and rock descriptions authored by Gene Tobey. Porphyry copper-gold mineralisation occurs within a large roughly east-west trending hydrothermally altered zone that is more than 7 kilometres in length and as much as 1.7 kilometres in width in a north-south direction. 9.1 LEACHED CAP & SECONDARY ENRICHMENT

The large altered and mineralised area at Zafranal has a subdued colour anomaly. The subdued colour of the leached cap is partly due to the presence of recent volcanic ash covering the prospect and also to the presence of less altered and less mineralised early porphyritic diorite or quartz diorite intrusions that are often close to the surface and directly above much of the better mineralisation, both primary



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and secondary, hosted mostly in younger microdiorite and older volcanoclastic rocks. The deposit has been intensely leached and has a well developed leached cap over the top of the supergene enriched deposit at depth. Very little primary sulphide, hypogene mineralisation is present in outcrop, so little can be said about it except by interpretation of leached outcrops. At surface all forms of sulphides are absent except for occasional pyrite along with chalcopyrite in some more silicified rocks where acid ground waters could not invade the rock and oxidise and leach it. Most of the rocks where silicification is so abundant that oxidising fluids did not invade the rock are in general the sugary quartzites through the central part of the deposit and local rhyolite and quartz porphyry rocks. The best supergene enrichment zone is generally associated with phyllic alteration consisting of a sericite + quartz + chlorite/biotite + clays + pyrite assemblage. The thickness of this zone can reach up to 150 m, averaging 75 m throughout the deposit, with grades up to 7% Cu. Although no dating information exists on Zafranal’s supergene enrichment, the agreed age of this mineralisation corresponds to the Upper Eocene to Lower Miocene, similar to other enrichments zones within porphyries in the Paleocene Belt (Quang et al., 2005). Extensional reactivation of the main strike-slip faults (azimuth 130°-140º) is responsible for downdropping the secondary enrichment layer towards the south. Some of the thickest leached cap occurs under ridges where it has been better preserved. The more pyrite-rich (now as limonite casts) volcanoclastic rocks and late microdiorite intrusion within the leached cap probably provided much of the acid sulphate solutions to oxidise, leach and transport the copper from the upper portions of the deposit to the enriched blanket. Some of the sulphides within the volcanoclastic unit may have been indigenous to them and not supplied by later porphyry-style mineralisation. The early porphyritic diorite (Zafranal diorite) intrusions, at least at the surface, do not appear to have contained enough sulphides to generate the acid necessary to form the leached cap and move copper lower to form an enriched copper sulphide chalcocite blanket. Drilling has indicated that some of the strongest leached capping at the Zafranal Main Zone lies beneath the weakly oxidised and mineralised porphyritic diorite at the contact with the underlying younger microdiorite. This contact is often a low-angle fault zone that probably provided a local “conduit” for acid-bearing waters and subsequent secondary enrichment. The supergene enriched blanket is comprised of some hypogene chalcopyrite and is enriched with secondary chalcocite, which is found either replacing the chalcopyrite or occurring as coatings on it.

Copper oxides of chrysocolla, neotocite, malachite and azurite generally occur above the main supergene enriched blanket and below the leached cap. This type of oxide copper mineralisation occurs within the leached cap associated with an intense phyllic alteration (sericite + quartz + clays). Oxide mineralisation can be up to 50 m thick, containing average grades up to 0.4% Cu. The leached cap itself is 30 m to 200 m thick. The copper-oxide zone defines former supergene enrichment zones (paleoblanket) preserved within the oxidised leach zone. Chalcocite is replaced by copper oxides, particularly the following species: brochantite, chrysocolla, chalcantite, neotocite, tenorite and psilomelanes. Occasionally, copper oxides occur above and below “perched” chalcocite blankets that are within the leached capping. Locally, copper oxides and suspect disseminated sooty chalcocite of the supergene enriched blanket is at least partially exposed at surface along the walls of the more deeply incised valleys and gullies around the property. The copper oxides occurring as fracture fillings and suspect sooty chalcocite observed at surface are generally visible as disseminations where the enriched blanket



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comes close to being exposed. Wherever the enriched blanket is nearest the surface, usually near creek bottoms, it has been extensively weakened by surface oxidation and leaching so in those areas copper oxides are more prevalent and chalcocite is very minor. Copper oxides occur there both within volcanoclastic rocks and in diorites that are chlorite, phlogopite, sericite altered. Copper oxides also occur in the deeply incised valley to the west of Teck´s ZFDDH04-001 drillhole. Some of the most spectacular amounts of copper oxides of chrysocolla, malachite and azurite seen on the property occur within post mineralisation dykes that contain enough carbonate or calcite to have precipitated copper in the form of the previously described minerals. The volcanoclastic rocks may have had both primary pyrite and chalcopyrite occurring selectively along bedding. These same volcanoclastic rocks may have then been subjected to an overprint of phyllic alteration from the porphyry system. Conversely, the so-called “bedded” sulphides may just be related to the Zafranal porphyry system, similar to contact-type skarn or hornfels mineral deposits. Similarly, differing concentrations of hematite along possible bedding may be mimicking the layered concentrations of chalcocite that occurred previously within the volcanoclastics. Successive leaching of the chalcocite blanket has left hematite in the casts once filled with chalcocite that partially or wholly replaced chalcopyrite during the enrichment process. Hematite is found locally in higher concentrations within the central zone of more intense phyllic alteration in the volcanoclastic rocks. This area is underlain by some of the best supergene enriched zones. Hypogene mineralisation occurs both as veins, stockworks, and disseminations. As previously mentioned most hypogene mineralisation observed on surface is hosted within the volcanoclastic sequence and the microdiorite. The younger dioritic intrusives at surface contain consistent background copper amounts (typically between 1000 ppm and 1500 ppm Cu) and typically represent the best surface geochemical anomalies on the property. However, at deeper levels within the deposit higher grade hypogene mineralisation, closely associated to the intrusive contact with the younger microdiorite, is more evident within these rocks and may occur as shells of mineralisation within the diorites typical of most porphyry models. The overlying enriched blanket is much smaller than the underlying hypogene mineralisation which is extensive at depth albeit at much lower grade. The enriched copper sulphide blanket occurring below the leached cap ranges up to 180 m thick. The supergene enriched blanket is lens-shaped in N-S cross-section and appears to dip to the south and somewhat to the west where it thins out in those directions. Within the enriched blanket, chalcocite has mainly replaced chalcopyrite, with local coatings on pyrite. As erosion has taken place, the supergene enriched blanket has progressively been remobilised to deeper levels, as well as laterally. Locally abundant “live limonite”, principally hematite, at the surface in the leached cap is evidence that the blanket has undergone successive leaching and re-deposition at depth.



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Figure 9-1 Photo - Casts Filled with Hematite Figure 9-2 Photo – Parallel D Veins

Casts filled with hematite are left over from the successive

downward migration of the supergene enriched blanket of

chalcocite occur within the leached cap

Parallel D veins, vein-veinlet type, with sulphide vein cores

and altered phyllic, sericite fringing selvages. These veins

occur within the central core of the feldspar porphyry. The

intermittent rock to the veinlets is weakly phyllically altered.

9.2 PRIMARY SULFIDE MINERALISATION & HYDROTHERMAL ALTERATION

The principal unit hosting the primary copper mineralisation at Zafranal is the microdiorite. This rock hosts the greater percentage of hypogene sulphides (chalcopyrite). However, new drillhole results from the eastern area show similarly mineralised Zafranal diorite, mainly in contact with large microdiorite bodies. This primary mineralisation is related to a potassic alteration zone with a quartz (silicification) + secondary biotite + chlorite +/- potassic feldspar assemblage. Chalcopyrite can be found in this area, both disseminated and in veinlets, together with A-type and B-type thin veins (quartz-chalcopyrite-pyrite, quartz-chalcopyrite-molybdenite). In this type of mineralisation, average copper grades range from 0.35% to 0.4% Cu, locally increasing up to 1% Cu. As an example of primary mineralisation hosted by microdiorite, drillhole ZFDDH10-018 yields 0.38% Cu between 219 m and 503 metres (284 m intercept). The Zafranal diorite also hosts hypogene mineralisation, mainly as chalcopyrite-pyrite veinlets and lesser disseminated amounts. Its copper grade is typically 0.15% to 0.23% Cu. However, it shows primary mineralisation exceeding 0.3% Cu when intruded by microdiorite stocks, thus indicating its mineralisation by the microdiorite. The same occurs locally within the Jurassic volcanics. Primary copper mineralisation with grades ranging from 0.35% to 0.45% Cu has been observed at Zafranal at depths of up to 400 m. The hypogene copper mineralisation potential thus remains open at depth. The Zafranal Main Zone is characterised by the presence of a large area of phyllic alteration lying between E-W bounding faults, with a weak propylitic zone surrounding the Main Zone to the north and south of these bounding faults. Zafranal hydrothermal alteration is in part lithologically controlled; phyllic alteration occurs both as stockwork and locally pervasive within felsic volcanoclastic rocks, sediments and the microdiorite that intrudes them. The early diorite porphyries generally exhibit biotite, phlogopite, and chlorite type alteration, with local quartz-sericite-sulphide veinlets and local pervasive phyllic alteration.



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All hydrothermal alteration studies, including core logging and core mapping, are utilising the following scheme: 9.2.1 Early veinlets – EDM, A-type & B-type

These veinlets are those without alteration halo, or with halos composed of rock stable minerals, i.e. quartz, feldspars, biotite and anhydrite. They are formed in the late magmatic or early hydrothermal (magmatic fluids) stage at relatively high temperatures (+400o C) in the transition from the realm of ductile deformation and fracturing, and often carry chalcopyrite, bornite and molybdenite (± pyrite, digenite). The ‘EDM’ (early dark micaceous) types are composed of biotite or greenish sericite (phengitic mica contains higher Fe, and has a higher ratio of Si/Al than the sericites formed in later stages) ± quartz, andalucite; and are usually the earliest veinlets that carry visible copper sulphides. Some members of this family may be composed only of biotite, of magnetite-quartz, or of amphibole-magnetite-biotite without sulphides. The A-type are composed of granular quartz, without centreline, with or without K-feldspar halo, with irregular non-matching walls (possibly indicating replacement formation), and are usually of little extent laterally, although in drill core this is difficult to determine. These veinlets often carry major amounts of chalcopyrite and bornite and are most common in the core of the system. A-type quartz veinlets may amount to 20% or more of the rock volume. The B-type are usually the major carriers of molybdenum values, and are the first of the brittle fracture era, have appreciable lateral extent, centreline sutures or banded character and bilateral symmetry, and have either no halo, K-feldspar, or weak sericite halos (halo to veinlet ratio < 1 or 2). 9.2.2 Intermediate veinlets – C-type

These veinlets often have halos composed of chlorite/sericite or sericite/clay. They are formed at an early hydrothermal stage and usually carry chalcopyrite, bornite (± pyrite, molybdenite); they contribute major amounts of copper to the grade in some deposits (Chuquicamata). In these early hydrothermal stage veinlets, the sericite in the alteration halo usually has a greenish cast (phengitic) with higher Si, Fe and Mg content. The halo to veinlet width ratio is not high in this stage (2 to 5), but the total content of copper sulphides is often greater in the halo, forming a cloudlike disseminated zone around the central fracture. 9.2.3 Late veinlets – D, E & F-types

These veinlets have texturally destructive halos composed of minerals not stable in fresh rock, white sericite or of sericite, carbonate, and clay with gypsum and/or anhydrite. The late veinlets are continuous and through going, usually with halo to veinlet width ratios greater than 5. These veinlets often result from hydrothermal fluids (150-250o C) with a large component of meteoric origin. The earlier D-type carries dominant pyrite (± chalcopyrite, molybdenite), with wide halos of greyish to white sericite sometimes coarse enough to be termed muscovite. When these veinlets have



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chalcopyrite in the fracture it is usually subordinate to pyrite, and the halos rarely contain appreciable disseminated chalcopyrite. The late structurally controlled mineralisation (E-type), typical of the Central Andean porphyry copper deposits is characterised by carbonate (ankerite-dolomite, or rhodochrosite), gypsum-anhydrite-barite, with pyrite, chalcopyrite, tennantite-tetrahedrite, and sphalerite-galena. These veins are often encountered with thicknesses from 5 cm to as much as 1 m. The alteration halos consist of sericite/clay and are typically 5 to 10 times vein width. This veining stage is often responsible for almost all arsenic/antimony present as contaminants in porphyry copper deposits. There are also very late (dying thermal stage) veinlets (F-type), with gypsum, carbonate, chlorite or epidote, some of which have alteration halos of clays (sericite), the clays include both non swelling types (mapped as kaolinite), and swelling clays (smectite). This stage also includes zeolite/calcite veinlets, and the zeolites may range from sodic to calcic types. These veinlets usually do not carry any metal values; however, they may contain pyrite as a sulphidation product of in situ iron. “ The phyllic alteration within the Jurassic volcanoclastic and sedimentary rocks takes on the form of both stockworks of quartz-sericite veinlets and pervasive sericite alteration and silicification. Pervasive silicification is most evident in the sugary quartzites that make up most of the mappable sedimentary rocks on the property. These rocks are made up almost entirely of intergrown quartz grains that were probably metamorphosed to a major extent during the Cretaceous coinciding with the intrusion of the Cretaceous Caldera batholiths of granodiorite. These rocks were later phyllically altered during the alteration process due to the Zafranal mineralising event and silica further invaded these rocks both by veining and redistributing the silica that was already present in the rocks. Sericite within the quartzite is associated with quartz veining, stockworks and locally occurs as a pervasive low grade sericitisation throughout the rocks. The pervasive sericite would be derived from the minor clay component of the quartzite. Alunite occurs within the more intense phyllic altered portion of the leached cap, however it has been observed with more frequency around the peripheries of the more intense phyllic altered zone of the deposit rather than central to it. The early diorite porphyries at surface are typically altered as in many diorite hosted porphyry copper deposits worldwide in that they exhibit early biotisation then later altered to chlorite and/or phlogopite. The phyllic alteration is later and “collapsed” on the early biotisation. This early biotisation is not considered “potassic” by many geologists studying porphyry coppers, but rather a form of contact metasomatism and recrystallisation of minerals. The hornblende and original “book” biotite in these rocks are locally replaced by successive alteration effects, first to biotite, then the other minerals listed above and only the outlines of the remnant hornblende remain. The strongest phyllic alteration, both pervasive and stockwork, is associated with the late microdiorite as has been noted in the early drilling by AQM. D veins are common within the central portion of the microdiorite intrusion and intruded volcanic rocks near the west end of the area mapped (Figure 7-3). The D veins are parallel veins and veinlets with sulphide cores having quartz sericite selvages bordering the central veins and veinlets. A west-southwest trending zone of parallel D veins trends through the central part of this area which may continue to the west of the known deposit under fresh young andesite exposed in the structural hanging-wall.



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Phyllic alteration is generally moderate to weak in the quartz porphyry dykes at the eastern end of the property and the gneissose rocks that they intrude are only weakly sericitised. Banding within these deformed rocks has not been destroyed by alteration and can easily be seen as biotite and or chlorite. Potassic alteration is most commonly seen in the microdiorite intrusive unit and, to a lesser extent, in the Zafranal diorite. No pink feldspars have been noted during mapping, but significant hydrothermal biotite has been found in these intrusive rocks. Some of the biotite may be metasomatic in nature, but most of the secondary biotite found to date shows clearly its hydrothermal origin. A pervasive acid leaching type alteration associated with the leached cap is prevalent over the entire deposit and takes the form of weak argillic alteration. All the rocks that occur within the central part of the deposit are bleached with all the plagioclase feldspars bleached to a white creamy colour. The plagioclase phenocrysts within the volcanoclastics and diorites exhibit varying degrees of acid sulphate alteration. Along the south side of the deposit and against the south bounding fault is an area of intense argillic alteration. The argillic zone may occur within the microdiorite, some possible sedimentary rocks and some early dykes. The argillically altered zone is more strongly bleached, being whitish in colour with yellowish jarosite and common copper oxides. The diorite porphyry to the north, lying adjacent to this zone, is not very altered but has the typical chlorite, phlogopite, sericite alteration that it exhibits throughout much of the property. The less altered diorite also outcrops over the top of the NW portion of the argillic zone covering a part of it. The argillic zone is deeply incised with several deep erosion gullies as it is soft and easily eroded. The general lack of propylitic alteration seen outside of the mineralised block between the north and south faults suggests that the faulting occurred post alteration and mineralisation. Phyllic alteration within the block appears to be terminated abruptly at the fault boundaries across which only weak propylitic alteration occurs. The gneissose rocks to the north of the north bounding fault are only slightly propylitically altered with epidote and/or chlorite. Similarly the thinner bedded sediments exposed south of the south-bounding fault contain only minor amounts of epidote and chlorite. Peripheral gold and gold-copper veins surround the copper-gold deposit. They occur outside of the fault block, up to ten kilometres away and have been worked by artisanal miners who target narrow quartz-chlorite-epidote altered zones and veins for their gold content. 10 EXPLORATION

10.1 EARLY EXPLORATION

Teck discovered the Zafranal copper-gold porphyry in 2003. Details of the Teck 2003 to 2007 exploration programmes on the Zafranal Main Zone Porphyry and surrounding prospects are included in the exploration history section of this report. AQM’s exploration programme at Zafranal started in June of 2009 on the Zafranal Main Zone with surface rock geochemical sampling and mapping. AQM´s field crews remapped the Zafranal Main Zone and completed a systematic surface rock geochemical sampling programme on a 100 m grid. Assay results obtained from rock sampling show a distinct copper anomaly in the leached cap overlying the enriched zone identified by Teck in its 2004 and 2005 drilling campaigns. The 2009 results show



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that the geochemical anomaly extends beyond the zone of strong phyllic alteration in the Main Zone. Geological mapping of the main deposit has outlined an east-west trending, funnel-shaped zone of strong phyllic-alteration over a 4500 m by 500 m to 1500 m area. This altered zone is hosted by a strongly foliated, fine-grained volcano-sedimentary unit of Jurassic age cut by several generations of porphyritic diorite stocks and dykes of dacitic composition with weak to moderate phyllic alteration and moderate to strong biotite alteration. Geological interpretation of drillhole data indicates that the copper-gold rich porphyry system is associated with a multiphase biotite-altered quartz diorite to diorite stock located at the centre of the Zafranal alteration system (Tejada, 2005). Results of the surface rock geochemical sampling programme are shown in Figure 10-1 and Figure 10-2. Field work on the satellite prospects within the project commenced in September of 2009, including work at the Sicera South, Sicera North and Ganchos prospects, where extensive areas phyllic alteration and leached capping crop out and are similar to that observed at the Zafranal Main Zone. AQM completed a surface rock geochemical sampling programme on the Sicera South zone, and announced the results on November 5th, 2009. This zone is located 6.5 km west of the Zafranal Main Zone. The Sicera South zone is marked by a 3 km by 1.8 km zone of phyllic alteration exhibiting a well-developed leached cap, typical of porphyry copper prospects in the area. The leached capping occurs within a sequence of Mesozoic limestone, shale and sandstone units intruded by diorite and minor quartz-diorite dykes and plugs. Sicera South lies along an east-west structural trend, which includes the Zafranal Main Zone. This structural trend is a splay of the Incapuquio Fault System, controlling the location of both the supergene-enriched Zafranal Main Zone and Sicera South targets. Field crews sampled the Sicera South zone, focusing along access roads built by previous operators. A total of 223 samples were collected, of which 14% (31 samples) yielded copper values over 0.1% Cu; 50% of these samples (i.e. 112 samples) were higher than 300 ppm. The significant portion of samples with plus 300 ppm copper suggests that a significant supergene enriched blanket, such as the one in the Zafranal Main Zone, may exist at Sicera South. Geochemical results for Sicera South are shown in Figure 10-2.



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Figure 10-1 Zafranal Main Zone – Surface Geochemical Results for Gold

Figure 10-2 Zafranal Sicera South Zone – Surface Geochemical Results for Copper



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10.2 GEOPHYSICS

At the request of AQM, Zonge Ingeniería y Geofisíca (Chile) S.A. in partnership with José Arce Geophysical SRL of Lima, performed a magneto-tellurics (MT) study on the Zafranal Main Zone. The study was preformed from November 9 to 12, 2009. The data collected from this study was compiled with previous MT data acquired in 2004 for Teck. In these studies, MT data was acquired with an array of pseudo tensorial dipoles (100 m). This study provides for the purchase of 5.7 line kilometres of MT data, which was integrated with the results from five line kilometres of MT data acquired in 2004. The MT data taken and processed is of good quality, with errors in the apparent resistivity typically less than 1.5%. The inverse modelling of observed data in 1 and 2 dimensions generated reasonable models and a good fit between calculated and observed data. Results of inverse modelling of resistivity data defined a coherent zone of low resistivity that is interpolated over an area of approximately 1000 m by 500 m coincident with a zone of porphyry-type alteration and mineralisation. New data acquired in this study may indicate an area of low resistivity responses to the east. (Scarbrough, 2009). Figure 10-3 shows a 2D depth slice 200 m below surface. Figure 10-3 Magneto-tellurics Depth Slice 200m below Surface

Note: Magneto-tellurics depth slice 200 metres below surface, incorporating both 2004 and 2009 data. The results show

the central part of the Main Zone as a low resistivity anomaly, extending both to the east and northwest

11 DRILLING

11.1 INTRODUCTION

The first phase 2009-2010 drilling programme started on December 24, 2009, the day the permit to drill was received. The completed drilling programme consisted of 67 283.50 metres of diamond and RC drilling. The initial part of the drilling programme concentrated on the Zafranal Main Zone to confirm several of Teck’s RC drillholes from the 2004 and 2005 drilling programmes. This has been followed by step out drilling on 100 metre centres in the main zone using diamond drillholes, some of which were



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pre-collared with RC drilling through the leached zone (40 m -100 m) in order to expedite and minimise spending throughout the programme. One RC and up to five diamond drill rigs were mobilised to the project. Teck's previous exploration efforts at Zafranal included a total of 11 805 m of drilling in 36 drillholes (32 RC, 4 diamond). In addition to the Zafranal prospect, the drilling programme included exploratory drilling on surrounding satellite targets within the Zafranal Property boundary. These additional targets include the Sicera South and Sicera North copper-gold porphyry prospects. The drilling programme was completed by AK Drilling International S.A. (AK Drilling) under the supervision of AQM's exploration team. 11.2 DIAMOND CORE DRILLING

Diamond drilling in the Zafranal Main Zone was conducted by up to 4 UDR200 LS, all-hydraulic, track-mounted rigs, supplied and operated by AK Drilling. A 5th rig was briefly added in late September 2010. This machine was a larger, track-mounted, UDR650 rig operated by Consorcio J & M of Arequipa, Peru. No diamond drilling was done on any of the satellite prospects. The first diamond rig was mobilised on December 24th, 2009, with subsequent equipment added throughout 2010. All drilling equipment at Zafranal was capable of drilling with HQ-sized core (63.5 mm diameter) down to depths of up to 700 m, after which NQ-sized lines (47.6 mm diameter) were used. Water for drilling was trucked in from the Majes River, approximately 60 km southwest of the main drilling area, to a storage area located at an elevation of approximately 2 000 m.a.s.l. From there, water was pumped to a second storage area approximately 200 m higher, and thence trucked to a main water tank from where it was gravity fed to the various drill rigs. Drillholes in the Main Zone were spotted based on the interpretation of results from the earlier Teck campaigns, and were aimed at defining a compliant resource and extending the known limits of the porphyry mineralisation. A total of 150 diamond drill holes were completed on the Main Zone at the time of writing of this report (Figure 11-1). Significant results, using a 0.2% Cu cut-off and a maximum 6 metre internal dilution, are summarised in Table 11-1. Table 11-1 Significant Results from AQM Diamond Drilling Programme in the Zafranal Main Zone

Drillhole From

m To m

Interval m

Cu

Au g/t

Comments

ZFDDH09-005 99.7 192.2 92.5 0.62% 0.08

Incl. 101 119.5 18.5 1.78% 0.10

ZFDDH09-006 166.95 348 181.05 0.59% 0.11 Twin of ZFRC04-009

Incl. 169 210 41 0.98% 0.09 Ended in Mineralisation

ZFDDH10-007 41 159 118 1.00% 0.09

Incl. 42 89 47 2.01% 0.13

ZFDDH10-008 74 251 177 0.74% 0.19 Twin of ZFRC04-007



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Drillhole From

m To m

Interval m

Cu

Au g/t

Comments

Incl. 114.5 181 66.5 1.31% 0.25

ZFDDH10-009 174 230 56 0.90% 0.08 Twin of ZFRC04-010

Incl. 176.45 206.5 30.05 1.34% 0.09

And 264 425.1 161.1 0.32% 0.10 Ended in Mineralisation

ZFDDH10-010 76 147.55 71.55 0.44% 0.24

And 164.3 186.95 22.65 0.52% 0.29

And 210 364 154 0.39% 0.09

ZFDDH10-011 114 171.9 57.9 0.43% 0.09

And 190 346.5 156.5 0.49% 0.11 Ended in Mineralisation

ZFDDH10-012 86 230 144 0.68% 0.13

Incl. 100.6 130 29.4 1.62% 0.19

ZFDDH10-013 133 204 71 1.78% 0.35

Incl. 138 195.5 57.5 2.09% 0.41

And 253 292 39 0.31% 0.06

And 302 328.05 26.05 0.40% 0.05

ZFDDH10-014 40 145 105 1.16% 0.12

Incl. 64 128 64 1.55% 0.11

And 152 194 42 0.47% 0.06

And 216 256 40 0.33% 0.05

ZFDDH10-015 66.6 129.6 63 0.57% 0.17

And 187 275.15 88.15 0.44% 0.15

ZFDDH10-016 148.3 203 54.7 0.61% 0.13

And 275.75 351 75.25 0.82% 0.07

ZFDDH10-017 31.8 159 127.2 0.61% 0.08

Incl. 34 60 26 0.91% 0.11

ZFDDH10-018 88.65 469 380.35 0.62% 0.11

Incl. 88.65 193 104.35 1.17% 0.11

ZFDDH10-019* 26 171 145 1.21% 0.10

Incl. 70.6 161 90.4 1.68% 0.09

ZFDDH10-020 63.5 149 85.5 1.23% 0.07

Incl. 63.5 106 42.5 1.38% 0.08

Incl. 114.5 135 20.5 1.51% 0.09

ZFDDH10-021 192 220 28 0.45% 0.05

And 230.85 322 91.15 0.55% 0.04

ZFDDH10-022* 47 154 107 1.09% 0.07

Incl. 87 146 59 1.53% 0.10

And 176 333 157 0.39% 0.11

ZFDDH10-023* 98.7 268 169.3 0.86% 0.19

Incl. 157 187 30 1.78% 0.16

ZFDDH10-024 166.85 190.6 23.75 0.54% 0.05

And 196.5 221.8 25.3 0.62% 0.05

And 292 320.75 28.75 0.22% 0.09



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Drillhole From

m To m

Interval m

Cu

Au g/t

Comments

ZFDDH10-025 142 274 132 0.42% 0.11

ZFDDH10-026 65 93 28 0.40% n/a

ZFDDH10-027 96.5 190.45 93.95 0.24% 0.07

ZFDDH10-028 178 306 128 0.80% 0.14

Incl. 202 259.75 57.75 1.29% 0.20

ZFDDH10-029 164 420 256 0.44% 0.11

Incl. 168 202 34 1.05% 0.09

ZFDDH10-030 64 88 24 0.36% 0.25

And 124 224 100 0.60% 0.10

Incl. 168 188 20 1.36% 0.12

ZFDDH10-031 83 210 127 0.56% 0.04

Incl. 83 97 14 1.22% 0.08

ZFDDH10-033 146 220 74 0.38% 0.09

And 241 286.7 45.7 0.29% 0.07

And 386 484 98 0.29% 0.11

ZFDDH10-034 177 232 55 0.42% 0.09

And 292 354 62 0.32% 0.13 Ended in Mineralisation

ZFDDH10-035 52.85 142 89.15 0.58% 0.04

ZFDDH10-036 92 292 200 0.63% 0.15

Incl. 166 199 33 0.98% 0.15

And 349.8 384 34.2 0.27% 0.08

ZFDDH10-037 139.15 168 28.85 0.32% 0.03

ZFDDH10-038 128 340.65 212.65 0.52% 0.11

Incl. 184 209.15 25.15 1.47% 0.16

ZFDDH10-039 104 292 188 0.73% 0.13

Incl. 124 144 20 1.37% 0.09

Incl. 190 240 50 1.19% 0.19

And 318 410 92 0.29% 0.06

ZFDDH10-040 14 160.2 146.2 0.52% 0.06

Incl. 29 53 24 1.01% 0.05

And 291 307 16 0.53% 0.28

ZFDDH10-041 156.75 182 25.25 0.37% 0.06

And 196 256 60 0.76% 0.07

And 276 316 40 0.35% 0.08

And 373.45 434 60.55 0.36% 0.07

ZFDDH10-042 51 117 66 1.03% 0.09

Incl. 71.5 115.2 43.7 1.34% 0.09

ZFDDH10-043 220 402 182 0.39% 0.07

ZFDDH10-044 28 57 29 0.31% n/a

And. 87.3 151 63.7 0.41% 0.04

ZFDDH10-045 63 117 54 1.02% 0.05

Incl. 79 103 24 1.37% 0.05



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Drillhole From

m To m

Interval m

Cu

Au g/t

Comments

ZFDDH10-046 128 486.8 358.8 0.70% 0.11 Ended in Mineralisation

Incl. 149.5 241 91.5 1.10% 0.10

Incl. 433 443 10 1.25% 0.28

ZFDDH10-047 No Significant Results

ZFDDH10-048 71 155 84 0.80% 0.03

Incl. 89.3 126.5 37.2 1.15% 0.03

ZFDDH10-050 103 192 89 0.60% 0.07

And 202 236 34 0.24% 0.05

And 286 328 42 0.28% 0.04

And 353 389.85 36.85 0.27% 0.05

And 418 450 32 0.24% 0.03

ZFDDH10-051 152 377 225 0.53% 0.11

Incl. 159 209 50 1.20% 0.16

And 401 436 35 0.32% 0.06

ZFDDH10-052 36.7 59 22.3 0.49% 0.01

ZFDDH10-053 85.75 119 33.25 0.78% 0.04

Incl. 151.85 196 44.15 0.43% 0.09

ZFDDH10-054 46 181.4 135.4 0.63% 0.05

ZFDDH10-055 64.9 110 45.1 0.81% 0.03

ZFDDH10-056 284 443.6 159.6 0.28% 0.06

ZFDDH10-057 104 169 65 0.72% 0.03

ZFDDH10-058 22.55 59 36.45 0.24% <0.01

ZFDDH10-059 95.5 144 48.5 0.42% 0.01

And 160 184 24 0.54% 0.01

And 190 204 14 0.31% 0.02

ZFDDH10-060 114 165 51 0.32% 0.01

ZFDDH10-061 112 190 78 0.58% 0.08

Incl. 156 180 24 1.02% 0.07

ZFDDH10-062 68 84 16 0.36% 0.02

And 111 141 30 0.28% 0.02

ZFDDH10-63 88 260 172 0.66 0.16 Ended in Mineralisation

Incl. 89.5 102 12.5 1.22 0.13

And 270 340 70 0.32 0.07

And 345 369 24 0.28 0.06

ZFDDH10-64 82.5 98 15.5 0.42 0.03

And 114 144 30 0.38 0.05


ZFDDH10-66* 58.8 137 78.2 0.42 0.05 Ended in Mineralisation

And 154 286 132 0.36 0.1

And 296 426 130 0.38 0.12

ZFDDH10-67 90 98 8 0.33 0.01

ZFDDH10-68 38.6 73.3 34.7 0.3 0.02



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Drillhole From

m To m

Interval m

Cu

Au g/t

Comments

ZFDDH10-69 154 185 31 0.27 0.02

ZFDDH10-70 145.5 302 156.5 0.28 0.07

And 380 452 72 0.32 0.1

ZFDDH10-71 50 98 48 0.23 0.01

ZFDDH10-72 108 130 22 0.4 0.03

ZFDDH10-73 46 61.8 15.8 0.42 0.04

And 70.5 234 163.5 0.36 0.1

And 240 362 122 0.4 0.15

And* 410 428.85 18.85 0.28 0.05 Ended in Mineralisation


ZFDDH10-75 78 120 42 0.47 0.21

And 163.2 224.3 61.1 0.7 0.07

Incl. 163.2 184 20.8 1.12 0.07

And 229.5 267 37.5 0.25 0.05

ZFDDH10-76 111 312.4 201.4 0.68 0.08

Incl. 115 172 57 1.13 0.11

ZFDDH10-77 12 142 130 0.43 0.08

And 152 180 28 0.28 0.1

And 190 202 12 0.49 0.13

And 232 267 34 0.39 0.06

ZFDDH10-78 87 99 12 0.24 <0.01

ZFDDH10-79 24 40.15 16.15 0.28 <0.01

And 172 190 18 0.32 0.05

And 238 324 86 0.29 0.07

ZFDDH10-80 106 302 196 0.58 0.12

Incl. 138 180 42 1.11 0.12


ZFDDH10-82 71 108 37 0.52 0.14

And 116 166 50 0.46 0.08

And 180 278 98 0.43 0.09

ZFDDH10-83 11 60.9 49.9 0.29 0.13


ZFDDH10-85 80 164.7 84.7 0.42 0.08

ZFDDH10-86 140 160 20 0.28 0.03

And 268 316 48 0.32 0.05

And 336 358 22 0.28 0.04

And 366 382 16 0.26 0.05

And 390 404 14 0.27 0.07

ZFDDH10-87 37 143 106 0.31 0.13

And 181 205 24 0.23 0.08

And 253 269.1 16.1 0.44 0.18

And 278.6 344 65.4 0.28 0.07



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Drillhole From

m To m

Interval m

Cu

Au g/t

Comments

ZFDDH10-88 76 266 190 0.35 0.07

And 280 364 84 0.25 0.08

And 378 408 30 0.24 0.1

ZFDDH10-89 148 264 116 0.8 0.14

Incl. 154 214 60 1.06 0.15

ZFDDH10-90 170 208 38 0.41 0.09

ZFDDH10-91 265.5 293.3 27.8 0.27 0.03

And 300 338.35 38.35 0.35 0.05

And 367.4 396.85 29.45 0.3 0.03

ZFDDH10-92 24.4 48.7 24.3 0.5 0.03

And 80 100 20 0.28 0.06

ZFDDH10-93 92 110 18 0.31 0.02

ZFDDH10-94 34.4 58 23.6 0.5 0.03

ZFDDH10-95 63 143 80 0.46 0.07

And 205 241 36 0.27 0.07

And 279.2 300 20.8 0.32 0.1

And 312 334 22 0.3 0.09

ZFDDH10-96 196 210 14 0.25 0.02

And 274 290 16 0.24 0.06

And 314 410 96 0.29 0.06

And 429.45 462 32.55 0.25 0.06


ZFDDH10-98 54 102 48 0.47 0.07

And 112 128 16 0.32 0.07

ZFDDH10-99 14.65 38 23.35 0.3 0.06

And 48 76 28 0.69 0.04

And 88 111.55 23.55 0.31 0.08

And 127 198 71 0.3 0.08

And 208 255 47 0.23 0.04

ZFDDH10-100 140 162 22 0.24 0.02

And 173 217.9 44.9 0.31 0.04

And 230 346 116 0.36 0.08

And 360 394 34 0.22 0.05


ZFDDH10-102 100 148 48 0.28 0.03


ZFDDH10-104 88 128 40 0.38 0.04

ZFDDH10-105 78.9 244 165.1 0.47 0.12

Incl. 84 100 16 1.02 0.13

And 274 294.7 20.7 0.25 0.05

ZFDDH10-106 69.8 106 36.2 0.55 0.07

ZFDDH10-107 12 116 104 0.38 0.05



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Drillhole From

m To m

Interval m

Cu

Au g/t

Comments

ZFDDH10-108 61.7 92 30.3 0.51 0.04

ZFDDH10-109 96 108 12 0.26 0.02

ZFDDH10-110 138 158 20 0.4 0.52

ZFDDH10-111* 36.3 378 341.7 0.37 0.1

And 420 446.45 26.45 0.27 0.15

ZFDDH10-112 53 161 108 0.28 0.03

ZFDDH10-113 80 98 18 0.29 0.04

And 128 154 26 0.26 0.09

And 168 273 105 0.27 0.07

And 384 438 54 0.29 0.06

ZFDDH10-114 144 368 224 0.39 0.08

Incl 146 172.8 26.8 1 0.11

ZFDDH10-115 92 174 82 1.35 0.15

Incl. 107.9 162 54.1 1.8 0.2

And 231 251 20 0.65 0.22

And 304 327 23 0.32 0.07

ZFDDH10-116 0 112 112 1 0.13

Incl. 44 101.1 57.1 1.57 0.12

And 119.1 153.1 34 0.63 0.11

And 182 240.8 58.8 0.36 0.06

ZFDDH10-117* 90 180 90 0.28 0.05

And 194 207 13 0.4 0.06

ZFDDH10-118 118 302 184 0.53 0.07

Incl. 128 182 54 1.08 0.07

ZFDDH10-119 82 120 38 0.47 0.02



ZFDDH10-122 97.7 130 32.3 0.29 0.02

And 148 166 18 0.39 0.09

And 202 218 16 0.24 0.07

And 276 332 56 0.22 0.05

ZFDDH10-123 98 142 44 0.35 0.1

ZFDDH10-124 376 414 38 0.26 0.03

And 443 514 71 0.28 0.04

ZFDDH10-125 119.4 186 66.6 0.45 0.05

And 364.6 524.1 159.5 0.27 0.07

And 562 594 32 0.42 0.77

And 656 664 8 0.87 1.87

ZFDDH10-126 136 146 10 0.31 0.02

ZFDDH10-127 44 211 167 0.61 0.1

Incl. 54 94 40 1.3 0.11

And 244.5 271.5 27 0.3 0.06



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Drillhole From

m To m

Interval m

Cu

Au g/t

Comments

ZFDDH10-128 82 104 22 0.83 0.04

ZFDDH10-129 74.7 104 29.3 0.39 0.03

ZFDDH10-130 118 166 48 0.39 0.04

ZFDDH10-131 310 336 26 0.22 0.04

And 358 382 24 0.27 0.09

And 416 444 28 0.25 0.06

And 460 482 22 0.24 0.05

ZFDDH10-132 78.4 107.9 29.5 0.37 0.03

ZFDDH10-133 44.55 72 27.45 0.4 0.03

And 80 96 16 0.33 0.04

And 116 144 28 0.6 0.05

And 152 178.3 26.3 0.25 0.05

And 200 220 20 0.3 0.04

And 352 426 74 0.36 0.08

ZFDDH10-134 138 150 12 0.33 0.03

ZFDDH10-135 115.8 198 82.2 0.7 0.47

And 218 436 218 0.32 0.17


ZFDDH10-137 116 126.5 10.5 0.59 0.05

And 166 274 108 0.69 0.07

ZFDDH10-138 38 76 38 0.39 0.17

And 138 189 51 0.57 0.08


ZFDDH10-140 84 178 94 0.41 0.07

And 278 386 108 0.26 0.06

ZFDDH10-141 90 114 24 0.56 0.05

ZFDDH10-142 80 92 12 0.32 0.02

And 213.25 234 20.75 0.37 0.03

And 272 280 8 0.85 0.23

And 296 318 22 0.32 0.1

ZFDDH10-143 10 44 34 0.28 0.15

And 120 188 68 0.6 0.07

Incl. 150 172 22 1.12 0.12

ZFDDH10-144 95 108 13 0.31 0.02

ZFDDH10-145 2 16 14 0.31 0.11

And 52.5 100 47.5 0.38 0.03

ZFDDH10-146 83.5 137.3 53.8 0.7 0.06

Incl. 106 137.3 31.3 0.88 0.07

And 154 175.22 21.2 0.81 0.07

ZFDDH10-147 46 388 342 0.55 0.06

Incl. 68 117.95 49.95 1.79 0.07

ZFDDH10-148 138 164 26 0.44 0.1



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Drillhole From

m To m

Interval m

Cu

Au g/t

Comments

ZFDDH10-149 74.8 95 20.2 0.54 0.08

And 104.1 214.25 110.15 0.33 0.05

And 248 307 59 0.28 0.05

And 317 361 44 0.27 0.07

ZFDDH10-150 135 260 125 0.86 0.07

Incl. 135 160 25 1.01 0.11

Incl. 233 258 25 1.44 0.09

And 314 390 76 0.35 0.12


ZFDDH10-152 29.5 54 24.5 0.68 0.01

ZFDDH10-153 48 64 16 0.33 0.02

ZFDDH10-154 149 240 91 0.78 0.15

Incl. 197.8 216 18.2 1.21 0.27

And 298 340 42 0.39 0.08

And 369.7 397.4 27.7 0.3 0.07

* drillhole ends in mineralisation



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Table 11-2 AQM Drillhole Collar Location as at November 2010

Drillhole Easting Northing Elevation Total Depth Drillhole Type Azimuth Dip Date Started Date Finished

ZFDDH09-005 793512.4 8224178.2 2622.0 248.4 diamond 180.0 -65.0 31-Dec-09 11-Jan-10

ZFDDH09-006 794197.8 8224362.4 2764.9 348.0 diamond 185.6 -66.7 30-Dec-09 1-Jan-10

ZFDDH09-007 793506.7 8224369.5 2596.4 249.1 diamond 3.9 -58.6 20-Feb-10 20-Feb-10

ZFDDH10-008 793498.9 8224270.5 2607.2 350.2 diamond 180.0 -63.2 11-Jan-10 20-Jan-10

ZFDDH10-009 794487.7 8224398.8 2760.6 425.1 diamond 182.3 -60.0 14-Jan-10 25-Jan-10









ZFDDH10-018 793591.1 8224461.8 2672.3 503.0 diamond 179.9 -64.1 17-Feb-10 4-Mar-10




ZFDDH10-022 793385.2 8224085.5 2606.5 355.9 diamond 359.5 -65.0 3-Mar-10 10-Mar-10








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ZFDDH10-030 794588.1 8224285.0 2706.9 334.5 diamond 0.0 0.0 3-Apr-10 9-Apr-10







ZFDDH10-037 793590.8 8224535.9 2657.1 244.0 diamond 2.7 -77.6 22-Mar-10 14-Apr-10



ZFDDH10-040 793398.0 8224474.6 2583.2 500.8 diamond 358.0 -72.3 25-Mar-10 1-Apr-10

ZFDDH10-041 793885.3 8224498.2 2777.2 445.9 diamond 179.4 -65.2 1-Apr-10 13-Apr-10

ZFDDH10-042 793485.3 8224449.3 2625.1 331.0 diamond 0.7 -65.3 4-Apr-10 7-May-10


ZFDDH10-044 793187.5 8224283.2 2533.4 231.8 diamond 180.6 -75.5 26-May-10 26-May-10












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ZFDDH10-056 794682.2 8224503.1 2837.5 524.5 diamond 179.8 -74.5 18-May-10 21-Jun-10










ZFDDH10-066 794787.9 8224452.0 2748.0 428.1 diamond 179.9 -74.7 2-Jun-10 12-Jun-10













ZFDDH10-079 794993.4 8224544.5 2667.0 338.4 diamond 179.0 -75.9 22-Jun-10 1-Jul-10



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ZFDDH10-086 794092.9 8224521.6 2796.3 463.4 diamond 180.0 -64.5 1-Jul-10 11-Jul-10


ZFDDH10-088 795090.9 8224511.9 2744.9 501.2 diamond 178.9 -76.0 3-Jul-10 18-Aug-10











ZFDDH10-099 795190.0 8224389.3 2749.9 383.0 diamond 177.0 -76.0 28-Jul-10 9-Sep-10



ZFDDH10-102 794877.4 8224602.3 2733.1 179.3 diamond 0.0 0.0 2-Aug-10 5-Oct-10


ZFDDH10-104 794781.9 8224223.0 2703.1 290.4 diamond 175.4 -74.7 23-Sep-10 23-Sep-10

ZFDDH10-105 795190.1 8224467.3 2776.0 398.1 diamond 178.0 -77.1 8-Aug-10 16-Aug-10



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ZFDDH10-108 795284.1 8224436.5 2780.9 306.4 diamond 174.4 -74.9 15-Aug-10 23-Sep-10


ZFDDH10-110 794696.1 8224183.1 2663.2 304.3 diamond 172.3 -75.3 20-Jan-10 8-Feb-10





ZFDDH10-115 793510.1 8224179.4 2622.0 357.8 diamond 359.5 -85.4 3-Mar-10 10-Feb-10










ZFDDH10-125 794683.2 8224419.4 2812.6 732.8 diamond 353.8 -86.1 14-Sep-10 18-Oct-10


ZFDDH10-127 793392.5 8224390.4 2558.2 403.7 diamond 179.1 -84.0 18-Oct-10 18-Oct-10


ZFDDH10-129 793377.4 8224552.4 2629.9 259.0 diamond 180.0 -85.9 18-Oct-10 25-Sep-10





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ZFRC09-033 793811.7 8224337.8 2708.6 280.0 RC 0.0 -65.0 19-Dec-09 20-Dec-09

ZFRC09-034 793499.2 8224271.7 2607.2 252.0 RC 359.8 -55.1 28-Dec-09 31-Dec-09

ZFRC09-035 793512.6 8224176.7 2622.3 104.0 RC 179.8 -64.9 20-Dec-09 21-Dec-09

ZFRC10-036 794488.1 8224400.3 2760.6 300.0 RC 179.3 -84.9 1-Jan-10 2-Jan-10

ZFRC10-037 793688.4 8224422.7 2681.5 295.0 RC 179.5 -63.3 2-Jan-10 3-Jan-10

ZFRC10-038 793690.9 8224334.6 2666.1 280.0 RC 180.0 -63.6 3-Jan-10 7-Jan-10

ZFRC10-039 793690.7 8224262.7 2657.2 350.0 RC 179.3 -59.8 7-Jan-10 10-Jan-10

ZFRC10-040 794472.0 8224481.2 2812.9 301.0 RC 0.0 -70.0 10-Jan-10 12-Jan-10

ZFRC10-041 794491.9 8224279.5 2701.2 300.0 RC 178.0 -69.0 12-Jan-10 14-Jan-10

ZFRC10-042 793988.7 8224420.6 2763.8 300.0 RC 179.1 -63.6 14-Jan-10 16-Jan-10

ZFRC10-043 793990.6 8224260.8 2726.7 360.0 RC 180.0 -62.7 16-Jan-10 18-Jan-10

ZFRC10-044 794287.8 8224414.4 2794.4 350.0 RC 180.0 -62.3 18-Jan-10 21-Jan-10

ZFRC10-045 793806.5 8224263.5 2688.7 350.0 RC 180.0 -61.8 21-Jan-10 23-Jan-10

ZFRC10-046 793805.9 8224413.3 2720.4 321.0 RC 0.0 -63.5 23-Jan-10 25-Jan-10

ZFRC10-047 793683.6 8224424.9 2681.1 313.0 RC 359.8 -81.8 25-Jan-10 29-Jan-10

ZFRC10-048 793690.9 8224172.0 2619.8 314.0 RC 179.8 -64.9 29-Jan-10 1-Feb-10

ZFRC10-049 793988.9 8224428.0 2763.8 350.0 RC 0.0 -84.6 1-Feb-10 2-Feb-10

ZFRC10-050 794289.9 8224417.0 2794.6 350.0 RC 180.0 -83.3 3-Feb-10 5-Feb-10

ZFRC10-051 794395.5 8224205.3 2659.8 350.0 RC 180.0 -68.3 5-Feb-10 7-Feb-10

ZFRC10-052 794388.1 8224413.7 2749.8 350.0 RC 0.0 -68.3 8-Feb-10 10-Feb-10



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ZFRC10-053 794286.4 8224343.1 2763.7 350.0 RC 180.0 -63.4 10-Feb-10 14-Feb-10

ZFRC10-054 794277.6 8224232.4 2699.9 314.0 RC 180.0 -63.9 15-Feb-10 19-Feb-10

ZFRC10-055 795786.2 8224076.4 2708.4 300.0 RC 180.0 -72.9 19-Feb-10 21-Feb-10

ZFRC10-056 795592.4 8224007.4 2722.2 296.0 RC 0.0 -62.4 22-Feb-10 4-Mar-10

ZFRC10-057 796012.4 8224066.0 2594.6 171.0 RC 179.3 -64.6 26-Feb-10 27-Feb-10

ZFRC10-058 796274.4 8223946.3 2633.5 286.0 RC 180.0 -65.0 28-Feb-10 2-Mar-10

ZFRC10-059 796693.0 8223793.9 2588.7 286.0 RC 0.0 -75.6 2-Mar-10 4-Mar-10

ZFRC10-060 793510.5 8224176.1 2622.0 250.0 RC 180.0 -65.5 4-Mar-10 5-Mar-10

ZFRC10-061 793983.7 8224159.9 2667.8 292.0 RC 180.0 -74.6 5-Mar-10 7-Mar-10

ZFRC10-062 793696.9 8224025.4 2568.7 273.0 RC 0.0 -66.6 31-Mar-10 31-Mar-10

ZFRC10-063 793489.5 8223989.6 2536.1 300.0 RC 0.0 -64.3 31-Mar-10 31-Mar-10

ZFRC10-064 793699.4 8224493.6 2721.2 350.0 RC 180.0 -78.5 11-Mar-10 12-Mar-10

ZFRC10-065 793992.3 8224029.3 2616.1 286.0 RC 359.6 -64.2 25-Mar-10 31-Mar-10

ZFRC10-066 794279.8 8224016.4 2601.3 328.0 RC 359.9 -65.3 3-Apr-10 6-Apr-10

ZFRC10-067 793291.3 8223971.8 2574.7 286.0 RC 358.8 -65.4 6-Apr-10 9-Apr-10

ZFRC10-068 793807.6 8224330.0 2709.0 350.0 RC 180.0 -63.6 10-Apr-10 12-Apr-10

ZFRC10-069 793281.7 8224517.8 2611.8 350.0 RC 0.0 0.0 12-Apr-10 25-May-10

ZFRC10-070 793381.5 8224549.1 2629.7 337.0 RC 359.2 -79.0 14-Apr-10 16-Apr-10

ZFRC10-071 793274.7 8224122.8 2604.6 309.0 RC 8.3 -89.6 16-Apr-10 23-Apr-10

ZFRC10-072 794590.0 8224585.8 2855.6 400.0 RC 178.6 -67.7 23-Apr-10 25-Apr-10

ZFRC10-073 793985.2 8224588.8 2789.2 368.0 RC 179.7 -85.0 25-Apr-10 26-Apr-10

ZFRC10-074 793888.9 8224575.1 2776.3 372.0 RC 179.8 -64.3 27-Apr-10 28-Apr-10

ZFRC10-075 793686.8 8224598.6 2706.1 366.0 RC 179.6 -73.3 28-Apr-10 25-May-10



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The results obtained have confirmed the existence of a large porphyry system at Zafranal, which is typically zoned with a leached cap near surface, a higher grade enriched blanket of secondary sulphides and a large zone of primary mineralisation. Mineralised intercepts in the Main Zone have confirmed the elongated E-W nature of the orebody, extending its limit to approximately 2.4 km in strike length, up to 600 m width and thicknesses of up to 500 m. The mineralisation remains open, along certain sections, to the north, the south and locally at depth. Figure 11-1 Diamond Drilling completed by AQM during 2010

11.3 REVERSE CIRCULATION DRILLING

11.3.1 Zafranal

A total of 17 951 metres in 43 RC drill holes were completed on the Zafranal Main Zone between December 26th 2009 and April 30th 2010, using a Foremost W750 rig operated by AK Drilling (Figure 11-2). AK Drilling supplied an auxiliary booster in case of drilling difficulties. This drilling method utilises a dry percussion method, whereby a rotary bit, or hammer, crushes rock as it advances downhole. The crushed rock is pushed upwards within the drilling rod and is ultimately recovered from a cyclone. RC drilling does not use water and is therefore recommended in dry climates such as Zafranal in order to minimise overall water use, and is cheaper and faster than diamond drilling. However, the geological information obtained is less detailed than that obtained from the diamond drilling method. A total of 9 diamond drill holes were pre-collared using the RC rig. This method involves drilling the upper, unmineralised portion of a drill hole using the RC method. The target depth was determined by interpreting the bottom of the barren leach cap as interpreted from the geological sections and the



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results from previous drill holes. Once the target depth was reached, the RC rig was moved to a new location, and the pre-collared hole was completed using a diamond drilling method. The RC portion of pre-collared diamond holes used an RC suffix and the samples were sent for analysis. Significant results from the RC drilling programme on the Main Zone, using a 0.2% Cu cut-off and a maximum 6 metre internal dilution, are summarised in Table 11-6.

Table 11-3 Significant Results from AQM RC Drilling Programme in the Zafranal Main Zone

Drillhole From

m To m

Interval m

Cu Au g/t

Comments

ZFRC09-033 126 238 112 0.79% 0.08 Twin of ZFDDH04-002

Incl. 139 184 45 1.21% 0.09

ZFRC09-034 71 238 167 0.89% 0.18 Twin of ZFDDH04-004

Incl. 76 154 78 1.38% 0.18

Incl. 98 116 18 2.54% 0.13

ZFRC10-036 146 206 60 0.70% 0.12 Ended in Mineralisation

Incl. 152 172 20 1.12% 0.10

And 221 297 76 0.34% 0.09


Incl. 135 173 38 0.97% 0.11


Incl. 96 141 45 0.55% 0.69

And 153 196 43 0.60% 0.09

ZFRC10-039 171 295 124 0.96% 0.14

Incl. 171 244 73 1.19% 0.19

ZFRC10-040 No significant Results


Incl. 120 167 47 1.30% 0.12

ZFRC10-042 124 223 99 0.58% 0.06

Incl. 154 171 17 1.25% 0.08

ZFRC10-043 213 354 141 0.69% 0.06

Incl. 220 278 58 1.02% 0.09

ZFRC10-044 219 316 97 0.78% 0.10

Incl. 249 293 44 1.13% 0.12

ZFRC10-045 132 157 25 1.09% 0.10

And 188 314 126 0.41% 0.04

ZFRC10-046 151 221 70 0.36% 0.04

ZFRC10-047 70 241 171 0.53% 0.04

Incl. 96 141 45 1.04% 0.07

ZFRC10-048 56 101 45 0.45% 0.10

And 119 158 39 0.77% 0.07

ZFRC10-049 85 130 45 0.51% 0.06

ZFRC10-050 143 213 70 0.56% 0.08



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Drillhole From

m Tom

Interval m

Cu Aug/t

Comments

And 251 318 67 0.31% 0.08

ZFRC10-051 156 174 18 0.40% 0.06

ZFRC10-052 No Significant Results

ZFRC10-053 190 304 114 0.58% 0.11


ZFRC10-054 181 254 73 0.46% 0.09



ZFRC10-057 20 44 24 0.29% 0.10



ZFRC10-060 84 168 84 0.58% 0.09

ZFRC10-061 148 163 15 0.26% 0.02

ZFRC10-062 99 139 40 0.47% 0.02


ZFRC10-064 108 280 172 0.61% 0.06

Incl. 149 170 21 1.01% 0.07


ZFRC10-065 120 129 9 0.45% 0.16

And 166 178 12 0.33% n/a

And 223 243 20 0.28% n/a



ZFRC10-068 130 262 132 0.92% 0.11

Incl. 138 171 33 1.36% 0.11

And 307 349 42 0.67% 0.05


ZFRC10-070 299 327 28 0.53% 0.24

ZFRC10-071 92 127 35 0.94% 0.05



ZFRC10-074 172 226 54 0.31% 0.02

ZFRC10-075 84 94 10 0.30% 0.01

And 302 322 20 0.26% 0.04



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Figure 11-2 RC Drilling completed by AQM during 2010

11.3.2 Sicera South & Sicera North

AQM also completed a total of 3105 metres of RC drilling in the Sicera South target and an additional 2425 metres in the Sicera North target. Table 11-5 shows collar information for the drilling programme in these two targets. Figure 11-2 and Figure 11-3 respectively show the drill location in Sicera South and Sicera North. Results from this programme show potentially significant copper mineralisation in drillhole SSRC10-008 in Sicera South and drillholes SNRC10-005 and SNRC10-006 in Sicera North. Significant results, using a 0.2% Cu cut-off and a maximum 6 metre internal dilution, are shown in Table 11-3. Table 11-4 RC Collar Location for Sicera South & Sicera North

Drillhole From

m To m

Interval m

Cu %

Au g/t

SNRC10-02 34 83 49 0.3 0.01

SNRC10-03 38 65 27 0.5 0.01

And 71 85 14 0.24 0.01

SNRC10-04 No Significant Results

SNRC10-05 30 57 27 0.27 0.02

And 63 80 17 0.2 0.03

And 85 96 11 0.34 0.03

And 100 125 25 0.29 0.03



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Drillhole From

m Tom

Intervalm

Cu%

Aug/t

And 140 181* 41 0.3 0.03

SNRC10-06 14 78 64 0.36 0.03

And 94 115 21 0.4 0.02

And 123 151 28 0.32 0.02

And 177 245 68 0.36 0.02

SSRC10-03 No Significant Results



SSRC10-06 140 151 11 0.4 0.02

SSRC10-07 70 86 16 0.2 <0.01

And 106 118 12 0.53 0.02

And 188 204 16 0.27 <0.01

SSRC10-08 266 302 36 0.29 0.02

And 308 343 35 0.34 0.02

SSRC10-09 10 58 48 0.64 0.05

And 78 96 18 0.3 0.03

And* 277 319 42 0.33 0.04



SSRC10-12 214 226 12 0.27 0.01

Table 11-5 RC Collar Location for Sicera South & Sicera North

Drillhole Target Easting Northing Elev. Az. Dip Length

SSRC10-003 SICERA SOUTH 787391.64 8224886.96 2160 85 -65 256








SSRC10-011 SICERA SOUTH 786,804.97 8,225,412.42 2030 250 -70 340

SSRC10-012 SICERA SOUTH 786,977.86 8,225,372.99 2070 360 -70 350

SNRC10-002 SICERA NORTH 785386.91 8228363.87 2025 60 -80 328











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Figure 11-3 RC Drilling completed on the Sicera South Target

Figure 11-4 RC Drilling completed on the Sicera North Target



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11.4 DRILLING ORIENTATION

The mineralisation shows a flat-lying to gently south dipping enrichment blanket generally between 40 m and 80 m thick (and up to 180 m thick) underlain by hypogene chalcopyrite-dominated mineralisation hosted in diorite and microdiorite intrusive rocks. The enrichment blanket appears to be younger than most faulting on the property and is hosted in intrusive rocks, volcanic host rocks and even late diorite and andesitic rocks. In relation to true thickness and orientation, the enrichment blanket is flat-lying to gently south dipping (-20 degrees) and appears to be relatively undisturbed by faulting or deformation. However, late normal faulting appears to have locally displaced the blanket by no more than 10 m. Therefore steeper inclined drillholes cut the blanket more perpendicularly then flatter inclined drillholes. As an example, the true thickness of the blanket cut by a -65o drillhole would be 90% of the reported interval. Hypogene mineralisation is controlled by lithology and by structural breaks. The higher grade primary mineralisation appears to be closely associated to microdiorite intrusive rocks, occurring both within it and in other rocks in contact with the microdiorite. Two large microdiorite bodies have been recognised on the Main Zone, both occurring as near vertical plugs, that are displaced by up to 200 m by NW-trending dextral strike-slip faults. These microdiorite plugs are interpreted to have been emplaced in a roughly northeastern orientation. Their current apparent E-W orientation is a result of subsequent tectonic displacement. North-South oriented drillholes should cut these higher grade hypogene zones perpendicularly, with shallower holes giving a better true thickness estimate than steeper ones. 11.5 DRILLING QUALITY

11.5.1 Core recovery considerations

Average core recovery for AQM diamond drillholes is 96% with 91% of the samples having a recovery greater than 90%. Within the 0.2% Cu Total grade envelope used as a constraint for the resource estimation, the average core recovery is 97%. There is no evidence of variation of recovery percentage with copper grade or lithology in the mineralised zone. A graph of average core recovery versus CuTotal grade bins using 0.2% grade increments is presented in Figure 11-5.



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Figure 11-5 Average Core Recovery % vs. CuTotal Grade Bins

Drilling recoveries and core quality were commented on by Ambrus (2010). Core recoveries in several drillholes were reviewed by Ambrus and reported as averaging about 95% and rarely dropping below 90% locally despite very high fracturing (RQD rarely exceed 30%). RC recoveries were reviewed in 5 drillholes and these drillholes displayed irregular and below standard recoveries with averages of 68 to 83% per drillhole. Normal acceptable recoveries would be 90% and ideally 95% with 5% lost as dust and due to sample handling. The unrecovered materials remain in the drillhole and are possibly injected into the open spaces of the highly fractured rock mass and later incorporated in the forthcoming samples producing a random downhole contamination. 11.5.2 Diamond-RC Drillhole Twins

The conclusions of a diamond-RC twin drillhole comparison completed by AMEC Minproc in May 2010 are provided in Section 14.5. 11.6 SURVEYING

Surveyors established two control points within the Zafranal Main Zone during 2009, both of which were tied to primary geodesic points using a differential GPS. The PSAD56 datum (Zone 18S) is used for all survey work at Zafranal. Air photos obtained during 2009 were georeferenced using the same control points, thus generating detailed 1:2 000 scale topographic maps of the area as well as orthophotos. Once a cement collar and a PVC pipe or drill rod were in place, every drill collar was surveyed by Geotopomin, a surveying company based in Arequipa, using a Leica TC-405 total station and the previously established control points. Geotopomin crews periodically visited Zafranal to survey drill collars and access roads.

90

91

92

93

94

95

96

97

98

99

100

0.0 0.5 1.0 1.5 2.0

Co

re R

ec

ov

ery

%

CuTotal Grade Bin % - 0.2% increments



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11.7 GRID CONTROL

No grid was established on Zafranal. 1:2000 scale orthophotos were used to plan the drilling program, using North-South sections spaced 100 m apart. Individual drill holes were spaced between 40 m and 100 m apart within each section. 11.8 DRILLHOLE COLLARS

Drillholes were oriented by AQM geologists using Brunton compasses. Drillhole angles were established using inclinometers. Once a drillhole was completed, a 3 metre long piece of PVC pipe or HQ drill rod was left behind and cemented in for surveying with a total station. The drillhole number, azimuth, inclination and total depth were marked on aluminium tags cemented-in and/or directly on the cement collar. 11.9 DOWNHOLE SURVEYING

Three downhole surveying tools have been used during AQM drilling campaign at Zafranal. The Deviflex and Gyroscope are non-magnetic tools, while the Flexit is magnetic. All diamond and RC drllholes completed on the Zafranal Main Zone have been surveyed using one of these methods. However, due to collapsing walls, a small minority of drillholes could not be surveyed or re-entered. Table 11-6 summarises the distribution of the various downhole surveying methods during the programme. All RC drillholes were initially surveyed using the Deviflex tool. However, due to some inconsistencies and operation difficulties, some drillholes were re-entered and re-surveyed using a gyroscope. The Deviflex and gyroscope tools are wireline supported and collect data inside the rods from the end of a drillhole to surface every 2 seconds. A complete reconstruction of the drillhole is then downloaded to the Zafranal database. The magnetic Flexit tool must be sent to the bottom of a drillhole once the rods are pulled back at least 6 m. As a result, readings are collected only where the tool is sent down. In most drillholes surveyed using this method, this was done every 50 m.



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Table 11-6 Distribution of Downhole Surveying Methods in the Zafranal 2009-2001 Drilling

Programme

Method Number of Diamond Drillholes Number of RC Drillholes

Flexit 25 0

Deviflex 12 17

Gyroscope 103 33

11.10 SURFACE TOPOGRAPHY

Topographic maps were prepared by Horizons, a Lima-based airborne photography and mapping company. Flights were completed in late 2009, and 1:2000 and 1:5000 scale maps were generated. Two control points tied in to the Peruvian geodesic network were used to georeference the aerial photos and generate the topographic maps and the orthophotos. All surface mapping and drill planning was done using 1:2000 maps for the Main Zone. 1:5000 maps were used for outlying areas and satellite targets. 12 SAMPLING METHOD & APPROACH

Sampling at Zafranal has been from two parts of the exploration/drilling program. Surface sampling is described in the exploration history sections of this report and contains the number of samples, results and relative areas of the surface sampling (geochemical) programs. Sampling protocols for the drilling programme are described below. Sampling protocols used at Zafranal are standard industry practice for copper porphyry type deposits with sample intervals of 1 to 2 metres for RC and diamond drillholes. Sample quality is to industry standard for the diamond drillholes. 12.1 DIAMOND CORE SAMPLING & LOGGING

Diamond core sampling and logging procedures are described herein:

The core is loaded from the core tube into 3 m corrugated plastic core boxes labelled with box numbers and interval runs in metres

Samples are picked up from drill site with a pick-up truck and brought to core logging facility at camp. The core is logged by geologists for alteration, mineralisation, lithologies, and structures and assessed by geotechnicians for RQD

The core is then cut in half using gas-powered core saws. The half core of 2 m intervals or lesser, if it contains structural, lithological, mineralogical, or alteration differences, is placed in plastic lab sample bags weighing 5 to 7 kg per 2 m sample

Standards, blanks and duplicates are inserted after the core is cut at the logging facility. Duplicates are cut into ¼’s; (¼ duplicate sample, ¼ original sample, ½ core sample kept in core shack) 2 m interval lab sample bags are placed in rice bags totalling 35 kg and samples for entire drillholes are sent to ALS Chemex in Arequipa for preparation

The pulps are sent to ALS Chemex in Lima for analysis.



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12.2 RC SAMPLING & LOGGING

RC sampling and logging procedures are described herein:

1 metre RC chip samples are collected into buckets (directly from the rig tubing, then each 1 metre sample is weighed before being distributed into the sampling sieve

Sample weight ranges from 12 to 33 kg with an average of 20 kg

Approximately 1/3 of the recovered sample or (5.5 to 10 kg, on average 7 kg) is placed into laboratory mesh sacks and the remainder is placed in rice bags

5 field blanks (granodiorite batholith), 5 duplicates and 6 (2 of each coded standards) standards for a total of 16% are inserted at random every 100 samples using excel =randbetween formula

Standards, duplicates and blanks are inserted during the sample procedure at the Zafranal camp

Samples are placed into rice sacs that equate to 25 kg each and are picked up at the drill sites once the drillhole is finished and brought to camp with a 5 tonne truck

Once entire drillholes are organised for shipment to the laboratory with proper documents at camp, they are taken to the ALS Chemex Laboratory in Arequipa by an AQM representative in a 5 tonne truck. RC chips samples are prepared in Arequipa

The pulps are sent to ALS Chemex in Lima for analysis 12.3 GEOLOGICAL LOGGING

Geological logging was completed out by AQM geologists in the Main Zone camp. Core was transported from the drill site to camp twice a day, using AQM vehicles, under the supervision of a AQM geologist. Once in the core shack, the core was logged manually, using the codes established for each lithology. Additional codes were created during the programme, as new lithologies were encountered. The creation of new codes was approved by one of the AQM´s Qualified Persons before being entered into the database. Sulphide contents were estimated visually and subsequently verified with assay data. Approved lithologies used throughout the programme are listed in Figure 12-1. Drill logs included lithological, alteration, mineralisation and structural codes, as well as a detailed description of the observations made by the logger. Once a log was completed, it was digitally entered into the database by Company personnel. Hard copies are kept in the Zafranal camp; digital copies are stored in the Company´s server in Lima, as well as in a securely stored back-up.



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Figure 12-1 Lithological Codes used at Zafranal

12.4 STRUCTURAL DATA

Structural data was measured by project geologists and recorded manually once drill core arrived in camp. Data was subsequently entered into the digital database on a daily basis. The information recorded included fractures and joints, orientation with respect to core axis, faulting (gouge, tectonic breccias, etc.), veining and preferred vein orientation. 12.5 GEOTECHNICAL DATA

Geotechnical data was collected by Company personnel immediately upon arrival of the core to the core shack. Recovery, hardness, fracture intensity and RQD information is measured and recorded manually, and subsequently entered into the Project database. Unusual readings (e.g. recoveries exceeding 100%) were double-checked by Company geologists and corrected accordingly. 12.6 ROCK DENSITY MEASUREMENT

A total of 753 samples were collected for bulk density measurements by ALS Chemex laboratory in Lima. Samples were chosen and collected every 40 m by project geologists thus ensuring that all lithologies and alterations present at Zafranal were well represented, whether they contained mineralisation or not. Individual pieces of core measuring over 10 cm in length were collected and put into sealed and padded plastic bags to preserve sample integrity. Table 12-1 shows a summary of the samples collected for bulk density measurements. Bulk density samples were coated in paraffin and analysed by ALS Chemex using the OA-GRA09 method, described as follows: “The rock or core section is weighed and then slowly placed into a bulk density apparatus which is filled with water. The displaced water is collected into a graduated cylinder and measured. From the data, the bulk density is calculated: Density = Weight of sample (g)/Volume of water displaced (cm3)”



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Details on the bulk density data is provided in Section 17.9. Table 12-1 Number of Samples Collected for Bulk Density Measurements by Lithology

Lithology Number of Samples

Late quartz diorite 20

Microdiorite 185

Volcanoclastics 204

Dry diorite 6

Monzodiorite 3

Post Mine. dyke 3

Zafranal Diorite 332

TOTAL 753

12.7 SAMPLE QUALITY

All soil, rock, and core sampling was carried out by trained individuals under the supervision of AQM geologists. The soil and samples were located by standard GPS, often slightly modified when located on surveyed roads. The soil and rock samples were collected in double-marked bags and shipped to the laboratory approximately every two weeks or with shipments of core. Core sample intervals were marked in the boxes and shipped when the drillhole was completed.

13 SAMPLE PREPARATION, ANALYSES & SECURITY

13.1 SAMPLE SECURITY

All sampling was done at the drill site and in the core shack and was performed by AQM personnel. RC samples were quartered and sealed in cloth bags at the drill site. Samples were then put into large rice bags, which were subsequently sealed and sent to Arequipa in a sealed truck. Half core samples are collected in the core shack and individual sample bags are put into sealed rice bags which are transported to ALS Chemex sample preparation facility in Arequipa in a sealed truck. Numbered zap-straps supplied by ALS Chemex are used to seal each individual rice bag. The truck used to transport samples to Arequipa was sealed with a large padlock. The keys to the padlock are kept by the Zafranal Project Chief Geologist and the manager of the ALS Chemex facility in Arequipa. 13.2 ANALYTICAL LABORATORY, SAMPLE PREPARATION & ANALYTICAL PROCEDURES

Samples are prepared in ALS Chemex facility in Arequipa and subsequently sent to ALS Chemex in Lima, an ISO 17025 certified laboratory, for analysis. 13.3 ADEQUACY OF PROCEDURES

AQM has reviewed and audited the preparation procedures used at ALS Chemex facility in Arequipa. The methods used conform to international standards and are considered adequate by the authors.



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14 DATA VERIFICATION

14.1 DRILLING & SAMPLING INTERNAL QUALITY CONTROL PROCEDURES

The quality control measures used at Zafranal, as taken from AQM QAQC protocol, are as follows:

Core is photographed on site upon arrival at the core shack and subsequently sawed in half once it is logged by AQM geologists, with one half sent for analysis and the other is stored for future reference and assay verification. Duplicates of ¼ core are generated from the laboratory of the half core

Sample intervals are generally 2 metres, though field geologists may vary the intervals according to geological contacts and features; however no samples under 0.50 m are collected

One metre samples are collected from the reverse circulation drilling. RC chips are split twice on site using a riffle splitter, with 25% of the sample being sent to the laboratory for assay and the rest stored for future verification purposes

AQM has established a rigorous QAQC programme at Zafranal which includes the insertion of blanks, duplicates and certified standards into the sample stream. Three standards were generated by SGS Laboratories in Lima from coarse rejects from previous drill programs. One blank, one standard and a field duplicate are inserted randomly in every twenty samples

All Zafranal samples are shipped to ALS Chemex sample preparation facility in the city of Arequipa, where they are crushed and pulverised

Prepared samples are shipped to ALS Chemex certified laboratory in Lima where they are analysed for gold, copper and multi-element ICP.

14.1.1 Collar location

All drill collars were surveyed using a total station GPS device. A 3-metre long piece of PVC or HQ drill rod was left in the collar and drillhole numbers are clearly marked on cement markers. 14.1.2 Downhole Survey

Downhole survey information has not been independently verified. However, CoreTech of Lima, has resurveyed several diamond drillholes and RC drillholes using the gyroscope tool. Some RC drillholes originally not surveyed by the Deviflex tool were re-entered and surveyed using the non-magnetic gyroscope. A small number of RC drillholes show significant deviations (over 15º in azimuth); these represent an insignificant amount within the overall Project database. 14.1.3 QAQC Data Verification

AQM´s quality control program, as summarised in the sampling protocol (Section 13), utilises 3 Standard Reference Materials (SRM), or standards at any given time. A total of 15 standards have been used during the 2010 drilling program, Nine of the standards were prepared from coarse rejects from the Zafranal Project by SGS Laboratories, Lima, an ISO certified laboratory, Three standards were prepared at Inspectorate Laboratories, Lima. Three certified standards were supplied by Ore Research



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and Exploration Pty Ltd of Australia. The reported values for these Standard Reference Materials, as reported by SGS and Ore Research and Exploration Pty Ltd are presented in Table 14-1. AQM has conducted a check analysis programme at Zafranal. 33 pulp samples were re-numbered and sent in for analysis at ALS Chemex in Lima. 16 coarse reject samples were sent to CIMM Lab in Lima for preparation and analysis. These samples were designed to control the assay and preparation procedures respectively. The results are satisfactory and are summarised in Table 14-2. Sample preparation, security and analytical procedures at Zafranal are all to industry standard practice. Table 14-1 Standards used for the 2009-2010 Zafranal Drilling Programme

Standard Gold Grade

ppb

Confidence Limits Copper Grade

ppm

Confidence Limits

101 203 ± 34 10471 ± 638

201 110 ± 31 6196 ± 305

301 66 ± 17 3055 ± 182

111 -- -- 15000 ±1100

222 -- -- 22600 ±1200

333 -- -- 68700 ±1600

444 128 ±20 12900 ±800

555 95 ±20 6387 ±532

666 83 ±22 3133 ±221

700 89 ±20 3467 ±190

800 98 ±20 6661 ±116

900 99 ±10 11663 ±231

777 346 ±8 3440 ±500

888 836 ±12 7420 ±700

999 2900 ±70 15500 ±2000



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Table 14.2 Comparison of coarse reject assays between ALS Chemex and CIMM laboratories

Drillhole From m To m

Interval ALS

Cu_ICP ppm

CIMM Cu_ICP

ppm

ALS CuSolH+

%

CIMM CuSolH+

%

ALS Cu-AA16s

%

CIMM CuCN

%

ALS Cu-AA62s

%

CIMM CuRes

%

ZFDDH10-019 120.00 122.00 2.00 >10000 >10000 0.24 0.27 1.51 1.621 0.18 0.194

ZFDDH10-019 122.00 124.00 2.00 >10000 >10000 0.2 0.214 0.87 0.896 0.11 0.124

ZFDDH10-019 124.00 126.40 2.40 >10000 >10000 0.19 0.22 0.93 0.977 0.13 0.134

ZFDDH10-019 126.40 127.00 0.60 >10000 >10000 1.39 1.396 3.68 6.158 2.17 0.272

ZFDDH10-019 127.00 129.00 2.00 >10000 >10000 0.25 0.277 1.25 1.359 0.08 0.095

ZFDDH10-019 129.00 131.00 2.00 9590 9763 0.17 0.188 0.73 0.761 0.06 0.072

ZFDDH10-019 131.00 133.00 2.00 >10000 >10000 0.33 0.418 1.86 2.005 0.06 0.076

ZFDDH10-019 133.00 135.00 2.00 >10000 >10000 0.21 0.291 1.47 1.552 0.18 0.187

ZFDDH10-019 135.00 137.50 2.50 >10000 >10000 0.28 0.304 0.84 0.856 0.11 0.111

ZFDDH10-019 137.50 139.40 1.90 >10000 >10000 0.30 0.34 1.48 1.704 0.12 0.117

ZFDDH10-019 139.40 140.70 1.30 >10000 >10000 0.22 0.252 0.78 0.767 0.04 0.040

ZFDDH10-019 140.70 141.60 0.90 >10000 >10000 0.60 0.742 4.26 4.082 0.11 0.137

ZFDDH10-019 141.60 143.00 1.40 >10000 >10000 0.20 0.251 1.00 1.011 0.05 0.05

ZFDDH10-019 143.00 145.00 2.00 >10000 >10000 0.17 0.194 0.93 0.961 0.10 0.101

ZFDDH10-019 145.00 147.00 2.00 >10000 >10000 0.15 0.191 0.83 0.792 0.13 0.120

ZFDDH10-019 147.00 149.00 2.00 4900 4794 0.11 0.12 0.35 0.351 0.02 0.024



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14.1.4 Database Generation & Validation

All lithological, alteration, geotechnical and mineralisation data are recorded on paper log sheets, which are later typed into the predesigned excel spreadsheets of the same format. The Excel log sheets all have data validation measures that compel the user to enter only valid information. Text entries are limited to look-up codes that have been extracted from the database and numeric or date stamp data are controlled logically. The digital data sheets are uploaded into the database using specifically designed software that checks the data for consistency, ensuring that all information entered into the database is fully validated. As a final check an independent database administrator periodically loads the data files exported from the database into 3D viewer software and reports any anomalous data to the AQM geologists. If errors are acknowledged in the field data the Excel log sheets are updated and sent to the database administrator for reload into the database. Assay information is reported by the laboratory in digital format. The data from each batch returned from the laboratory is checked through AQM QAQC procedures before being accepted into the database. The data is imported into the database direct from the laboratory delivered report using specifically designed software so that there is no need for manipulation of the data sheets, thus ensuring integrity of the assay data. The database consists of 2 back-end data stores, one for logged field data and the other for assay, plus a front-end application all built using Microsoft Access and Visual Basic. The database is designed so that there is never any need to modify the original data tables as all data interaction is done using queries in the front end application. The data required for geological evaluation are extracted from the database through a series of queries and scripts generating export tables in CSV format. The database and the import software are all password-protected so only the database administrator is able to interact with the data. 14.2 INDEPENDENT GEOLOGIST DRILLING & SAMPLING DATA VERIFICATION

Data verification by the author included a 2 day site visit to the Zafranal Project. During the site visit the author examined surface outcrops in the Zafranal Main Zone including the extensive phyllic alteration zone present over the main zone. The author collected 4 verification samples from the Zafranal Main zone. Three of the samples were from the phyllically altered volcanics overlying the Zafranal main zone and one sample was from a copper stained dyke also in the Zafranal main zone. Copper grades from the 3 phyllically altered samples ranged from 44 ppm to 147 ppm copper and the dyke returned values of 1.18% copper. Gold values for the phyllic samples were from trace values to 0.53 ppm gold with one sample reporting 1.95 ppm gold. The high grade gold sample also reported 2 ppm silver and 88 ppm molybdenum. The sample from the dyke returned trace gold values. Verification by the author also included examination of the drill core from the 4 Teck diamond drillholes from the Zafranal main zone. The drill core clearly shows the chalcocite enrichment blanket as reported in the current drilling at Zafranal. Visual estimates of the percentages of chalcocite were consistent with the assay results reported for the drilled intervals by Teck.



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14.3 AMEC MINPROC DRILLING & SAMPLING DATA VERIFICATION

14.3.1 Drilling

AMEC Minproc reviewed drill and core handling procedures and witnessed most of these procedures on site and visited the core preparation facilities and the core shed. AMEC Minproc is of the opinion that AQM and its contractors are carrying out drilling according to industry standards. 14.3.2 Sampling

AMEC Minproc viewed the complete sampling process on site, from the drill rig, both diamond and RC, through to the final packaging and labelling of samples for dispatch to the Arequipa preparation laboratory. AMEC Minproc witnessed the specific security precautions taken by AQM during packaging and dispatch of samples until they are loaded onto specially freighted trucks and leave site. AMEC Minproc considers that the sampling and dispatching processes are carried out according to industry standards and follow strict security procedures. 14.3.3 Collar location

AMEC Minproc visited several drillhole platforms during the site visit and observed AQM practices at various stages of drilling. After drilling, the drillhole collar is marked and pegged using PVC tubing. The setup of a permanent concrete monument follows shortly afterwards. Final collar surveys are measured by Trimble DGPS survey tool and recorded in the database, overprinting the original planned position. 14.3.4 Downhole survey

AMEC Minproc did not witness the downhole surveying activity whilst on site. Downhole survey is completed using a Devi-flex tool and a gyroscope tool. The data is input in the database and checked by AQM geologists and independent database contractors. AMEC Minproc has checked that survey database is coherent and does not contain obvious errors such as missing information or sharp changes in orientation. 14.3.5 Sample database integrity

AMEC Minproc made database setup and maintenance recommendations to AQM at the onset of the site visit and in a memorandum dated 21st of April 2010. AQM implemented the recommendations and the database used for the December 2010 resource estimate was thoroughly validated by AQM and its database contractors prior to being transmitted to AMEC Minproc. AMEC Minproc completed standard checks for logical errors, duplicate data and missing information, and verified grade ranges and maximum values for grades and grade ratios. A limited number of anomalies were detected and corrected by AQM prior to obtaining a final validated database for resource estimation. AMEC Minproc considers that the database provided has been thoroughly checked and is as error-free as is practicable to verify.



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14.3.6 Independent samples

No independent samples were collected and submitted by AMEC Minproc. 14.4 ANALYTICAL QUALITY CONTROL PROCEDURES & ASSESSMENT

14.4.1 Introduction

AQM follows standard QAQC procedures with the regular insertion of blanks and certified standards, and collection of field duplicate samples. The quality control data of drilling used in the resource estimation has been assessed statistically to determine relative precision and accuracy levels between various sets of assay pairs and the variation of relative error over time during the exploration campaigns. The QAQC data reviewed cover the entire AQM exploration period. A summary of the QAQC programme is presented in Table 14-2. Table 14-2 Summary of Zafranal Analytical QAQC Programme

Type of Sample Number of Samples Percentage Frequency

AQM assayed samples 34261

Control Samples 6106 18%

- Blanks AQM 1950 6% approx. 1 in 20

- Standards AQM 2231 7% approx. 1 in 15

- Field duplicate AQM 1925 6% approx. 1 in 20

14.4.2 Blanks

A total of 1950 blank results were reviewed with analysis results for both total copper (CuTotal) and gold (Au). The blank dataset analysed only covers AQM drillholes. Blanks are used to monitor contamination during sub-sampling and at the assaying stage and are used by AQM with a frequency of blank insertion in sample batches of approximately 1 blank to 20 samples. The blanks statistics are given in Table 14-3 with the chronological graphs of the results illustrated in Figure 14-1. The graphs include as reference the warning lines at 10 times (in pink) and 20 times (in red) the detection limit. For copper, 23 results exceed 10 times the detection limit, i.e. approximately 1% of the results, and 2 results exceed 20 times the detection limit. For gold, no result exceeds 10 times the detection limit. A clear decrease in variability is noticeable for the copper blank results for the last part of the campaign, approximately after drillhole ZFDDH10-031 drilled in March 2010.



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Table 14-3 Blanks Statistics

CuTotal

% Au g/t

Number of Blanks 1950 1950

Minimum 0.001 0.002

Maximum 0.036 0.021

Average 0.002 0.004

Median 0.002 0.003

Figure 14-1 Chronological Sequence of Blank Results for CuTotal & Au

14.4.3 Standard Samples

The standards dataset covers the entire AQM exploration campaign. A total of 15 certified standards have been used over the exploration campaigns. They were chosen to cover the grade span likely to occur at Zafranal for CuTotal and Au. The frequency of standards insertion in sample batches is approximately of 1 standard to 15 samples. The standards characteristics – mean reference value & mean+-2 standard deviations for the acceptable interval values- are presented in Table 14-4. The statistical characteristics of the standards results including the calculated bias and precision are presented in Table 14-5. Global control charts showing all copper and gold standard results in chronological order are given in The individual control charts with reported values plotted in chronological order are given in Figure 14-3 and Figure 14-4. The graphs show in red the standard reference value and in blue the limits for acceptable values. Calculated precision and bias are within adequate ranges for copper and gold and only a limited number of isolated standard results fall outside of the acceptable intervals with the exception of Standard333 (the highest copper grade standard at 6.87%) which displays a high proportion of erratic results. Within the range of the copper mineralisation encountered at Zafranal, there is no evidence of bias or trend indicating the deterioration of assaying quality over time.

0.00

0.01

0.02

0.03

0.04

150000 160000 170000 180000 190000 200000

Cu

To

tal

%

Sample ID

BLANKS

0.000

0.005

0.010

0.015

0.020

0.025

0.030

0.035

0.040

150000 160000 170000 180000 190000 200000

Au

g/t

Sample ID

BLANKS



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Table 14-4 AQM Standards Characteristics

Standard

Code CuTotal Au Ag

Ref.

Value

%

Acceptable

Interval

%

Ref.

Value

g/t

Acceptable

Interval

g/t

Ref.

Value

g/t

Acceptable Interval

g/t

from to from to from to

101 1.047 0.983 1.111 0.203 0.169 0.237 - - -

201 0.620 0.589 0.650 0.110 0.079 0.141 - - -

301 0.306 0.287 0.324 0.066 0.049 0.083 - - -

111 1.500 1.390 1.610 - - - 5.6 5.2 6.0

222 2.260 2.140 2.380 - - - 6.1 5.6 6.6

333 6.870 6.710 7.030 - - - 1.9 1.6 2.2

444 1.290 1.210 1.370 0.128 0.108 0.148 - - -

555 0.639 0.586 0.692 0.095 0.075 0.115 - - -

666 0.313 0.291 0.335 0.083 0.061 0.105 - - -

700 0.347 0.366 0.328 0.089 0.109 0.069 - - -

777 0.344 0.394 0.294 0.346 0.354 0.338 - - -

800 0.666 0.678 0.655 0.098 0.118 0.078 - - -

888 0.742 0.812 0.672 0.836 0.848 0.824 - - -

900 1.166 1.189 1.143 0.099 0.109 0.089 - - -

999 1.550 1.750 1.350 2.900 2.970 2.830 - - -

Table 14-5 Standard Results

CuTotal & Au Standards

Standard 301 666 777

CuTotal % Au g/t CuTotal % Au g/t CuTotal % Au g/t

Standard Reference 0.306 0.066 0.313 0.083 0.344 0.346

Number 280 280 216 216 47 47

Minimum 0.274 0.058 0.288 0.071 0.331 0.326

Maximum 0.342 0.082 0.344 0.099 0.360 0.367

average 0.312 0.070 0.317 0.080 0.349 0.346

Median 0.312 0.070 0.317 0.080 0.349 0.346

Bias 2% 5% 1% -4% 1% 0%

Precision 2% 4% 2% 3% 1% 1%




Number 170 170 291 291 240 240

Minimum 0.306 0.077 0.562 0.092 0.589 0.072

Maximum 0.369 0.108 0.661 0.190 0.663 0.111

Average 0.347 0.090 0.613 0.112 0.624 0.091

Median 0.347 0.090 0.612 0.111 0.624 0.091



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CuTotal & Au Standards


Bias 0% 1% -1% 2% -2% -4%

Precision 2% 4% 2% 5% 2% 4%




Number 149 149 44 44 250 250

Minimum 0.599 0.077 0.70 0.81 0.94 0.18

Maximum 0.672 0.125 0.77 0.89 1.10 0.25

Average 0.632 0.099 0.74 0.85 1.03 0.20

Median 0.631 0.098 0.74 0.84 1.04 0.20

Bias -5% 1% -1% 1% -2% 0%

Precision 2% 5% 1% 2% 3% 3%




Number 131 131 239 239 37 37

Minimum 1.000 0.083 1.180 0.113 1.460 2.840

Maximum 1.215 0.131 1.345 0.145 1.580 3.030

Average 1.158 0.102 1.289 0.127 1.502 2.920

Median 1.155 0.102 1.290 0.126 1.505 2.900

Bias -1% 3% 0% -1% -3% 1%

Precision 2% 5% 1% 2% 1% 1%

CuTotal & Ag Standards


CuTotal % Ag g/t CuTotal % Ag g/t CuTotal % Ag g/t


Number 45 45 48 48 44 44

Minimum 1.480 5.2 2.250 5.8 6.650 1.9

Maximum 1.595 6.2 2.420 7.0 7.430 2.4

Average 1.523 5.8 2.345 6.3 6.991 2.2

Median 1.520 5.9 2.345 6.3 6.975 2.2

Bias 1% 4% 4% 3% 2% 13%

Precision 1% 3% 1% 3% 2% 6%



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Figure 14-2 CuTotal & Au Standards – Global Chronological Graphs

Cu

To

tal

Au

Figure 14-3 CuTotal & Au Standards - Chronological Graphs

Cu

To

tal

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

149000 159000 169000 179000 189000 199000

Cu%

Sample ID

Std101 Std111 Std201 Std301 Std444 Std555 Std666

Std700 Std777 Std800 Std888 Std900 Std999

2.00

3.00

4.00

5.00

6.00

7.00

8.00

149000 159000 169000 179000 189000 199000

Cu%

Sample IDStd222 Std333

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

149000 159000 169000 179000 189000 199000

Au ppm

Sample ID

Std101 Std111 Std201 Std222 Std301 Std333 Std444

Std555 Std666 Std700 Std777 Std800 Sdt900

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

149000 159000 169000 179000 189000 199000

Au ppm

Sample ID

Std888 Sdt999

0.90

0.95

1.00

1.05

1.10

1.15

1.20

149000 154000 159000 164000 169000

Cu

%

Sample ID

STANDARD 101

0.54

0.56

0.58

0.60

0.62

0.64

0.66

0.68

149000 154000 159000 164000 169000 174000

Cu

%

Sample ID

STANDARD 201



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Au

C

uT

ota

l A

u

Cu

To

tal

0.16

0.17

0.18

0.19

0.20

0.21

0.22

0.23

0.24

0.25

0.26

149000 154000 159000 164000 169000

Au

g/t

Sample ID

STANDARD 101

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

149000 154000 159000 164000 169000 174000

Au

g/t

Sample ID

STANDARD 201

0.24

0.26

0.28

0.30

0.32

0.34

0.36

149000 154000 159000 164000 169000 174000

Cu

%

Sample ID

STANDARD 301

1.15

1.20

1.25

1.30

1.35

1.40

155000 160000 165000 170000 175000 180000 185000

Cu

%

Sample ID

STANDARD 444

0.03

0.04

0.05

0.06

0.07

0.08

0.09

149000 154000 159000 164000 169000 174000

Au

g/t

Sample ID

STANDARD 301

0.09

0.10

0.11

0.12

0.13

0.14

0.15

0.16

155000 160000 165000 170000 175000 180000 185000

Au

g/t

Sample ID

STANDARD 444

0.50

0.55

0.60

0.65

0.70

0.75

155000 160000 165000 170000 175000 180000 185000 190000

Cu

%

Sample ID

STANDARD 555

0.26

0.28

0.30

0.32

0.34

0.36

155000 160000 165000 170000 175000 180000 185000 190000

Cu

%

Sample ID

STANDARD 666



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Au

C

uT

ota

l A

u

Cu

To

tal

0.06

0.07

0.08

0.09

0.10

0.11

0.12

155000 160000 165000 170000 175000 180000 185000 190000

Au

g/t

Sample ID

STANDARD 555

0.04

0.05

0.06

0.07

0.08

0.09

0.10

0.11

155000 160000 165000 170000 175000 180000 185000 190000

Au

g/t

Sample ID

STANDARD 666

0.30

0.32

0.34

0.36

0.38

180000 185000 190000 195000 200000 205000 210000

Cu

%

Sample ID

STANDARD 700

0.25

0.27

0.29

0.31

0.33

0.35

0.37

0.39

0.41

175000 180000 185000 190000 195000

Cu

%

Sample ID

STANDARD 777

0.06

0.07

0.08

0.09

0.10

0.11

0.12

180000 185000 190000 195000 200000 205000 210000

Au

g/t

Sample ID

STANDARD 700

0.32

0.33

0.33

0.34

0.34

0.35

0.35

0.36

0.36

0.37

0.37

175000 180000 185000 190000 195000

Au

g/t

Sample ID

STANDARD 777

0.58

0.60

0.62

0.64

0.66

0.68

0.70

175000 180000 185000 190000 195000 200000 205000 210000

Cu

%

Sample ID

STANDARD 800

0.55

0.60

0.65

0.70

0.75

0.80

0.85

175000 180000 185000 190000 195000

Cu

%

Sample ID

STANDARD 888



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Au

C

uT

ota

l A

u

0.06

0.07

0.08

0.09

0.10

0.11

0.12

0.13

175000 180000 185000 190000 195000 200000 205000 210000

Au

g/t

Sample ID

STANDARD 800

0.80

0.82

0.84

0.86

0.88

0.90

175000 180000 185000 190000 195000

Au

g/t

Sample ID

STANDARD 888

0.95

1.00

1.05

1.10

1.15

1.20

1.25

175000 180000 185000 190000 195000 200000

Cu

%

Sample ID

STANDARD 900

1.00

1.20

1.40

1.60

1.80

175000 180000 185000 190000 195000

Cu

%

Sample ID

STANDARD 999

0.06

0.08

0.10

0.12

0.14

175000 180000 185000 190000 195000 200000

Au

g/t

Sample ID

STANDARD 900

2.80

2.85

2.90

2.95

3.00

3.05

175000 180000 185000 190000 195000

Au

g/t

Sample ID

STANDARD 999



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Figure 14-4 CuTotal & Ag Standards - Chronological Graphs

Cu

To

tal

Ag

Cu

To

tal

1.30

1.35

1.40

1.45

1.50

1.55

1.60

1.65

155000 160000 165000 170000

Cu

%

Sample ID

STANDARD 111

2.00

2.10

2.20

2.30

2.40

2.50

155000 160000 165000 170000 175000 180000

Cu

%

Sample ID

STANDARD 222

4.50

5.00

5.50

6.00

6.50

155000 160000 165000 170000

Ag

g/t

Sample ID

STANDARD 111

5.00

5.50

6.00

6.50

7.00

7.50

155000 160000 165000 170000 175000 180000

Ag

g/t

Sample ID

STANDARD 222

6.50

6.60

6.70

6.80

6.90

7.00

7.10

7.20

7.30

7.40

7.50

155000 160000 165000 170000 175000 180000

Cu

%

Sample ID

STANDARD 333



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Ag

14.4.4 Duplicate samples

A total of 1925 field duplicates results for AQM drillholes were available for analysis. The frequency of field duplicate insertion in sample batches is approximately of 1 duplicate to 20 samples. The statistical characteristics of the field duplicate datasets are presented in Table 14-6. The corresponding scatter graphs for CuTotal and Au are presented in Figure 14-5. When using the hyperbolic method* to analyse the adequacy of the results, only 5% and 4% of duplicates are out of the acceptable range respectively for CuTotal and Au which is well within the 10% acceptable range for field duplicate and demonstrates the adequacy of AQM sampling practices. This is corroborated by coefficient of correlation close to 1 at 0.97 and 0.88 for CuTotal and Au between the original and duplicate datasets. No coarse nor pulp duplicates were available for analysis. Table 14-6 Field Duplicate Results

CuTotal % Au g/t

Original Duplicate Original Duplicate

Number 1925 1925

Minimum 0.0001 0.0001 0.003 0.003

Maximum 7.47 6.98 4.19 2.68

average 0.23 0.23 0.06 0.06

Median 0.13 0.12 0.03 0.03

Bias 0% -1%

Precision @95% confidence limit 16% 23% Correlation Coefficient –all duplicates 0.97 0.88 Correlation Coefficient –Diamond drilling only 0.97 0.87 Correlation Coefficient –RC drilling only 0.99 0.95

Percentage out of acceptable range 101 out of 1925, i.e. 5% 85 out of 1925, i.e. 4%

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

155000 160000 165000 170000 175000 180000

Ag

pp

m

Sample ID

STANDARD 333



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Figure 14-5 Field Duplicates Scatter Graphs

*the hyperbolic method is an evaluation method devised by Dr Armando Simon, AMEC Americas (Chile) to assess

duplicate sample results. This method complements the calculation of bias and precision.

14.4.5 Data Quality Summary

The review of the analytical QAQC database by AMEC Minproc indicates that the sample preparation and assaying conducted by AQM is of reliable and consistent quality, and provide accurate and precise information which is suitable for resource estimation and mine planning studies. 14.5 COMPARISON OF DATA TYPES – TWIN DRILLHOLES

AMEC Minproc completed in May 2010 a diamond-RC drillhole comparison study at the request of AQM. The conclusions are based on the analysis of seven twin pairs (Table 14-7). The analysis shows variation between the pairs studied; however some common traits exist, notably:

The RC drilling usually underestimates the diamond results. However, the bias is not constant over the length drilled, varying according to the material drilled, and apparently compounded by increasing depth

The bias either starts, or significantly changes magnitude, towards the base of the Supergene zone and can drastically increase in the Hypogene zone

Analysis of the relative variations of CuTotal, CuCN, CuS and CuResidual suggests that the least bias is associated with the CuCN content. This indicates that the lower copper grades associated with the RC drilling are probably a result of a loss of primary mineralisation copper species. There are indications that the drilling method deficiency could be compounded by sample preparation issues. This corroborates testwork observations that the weak acid soluble fraction (CuS) is usually

0

1

2

3

4

0 1 2 3 4

Fie

ld D

up

lica

te S

amp

le C

uT

ota

l%

Original Sample CuTotal%

CuTotal FIELD DUPLICATES

Diamond drilling

RC drilling

0.00

0.25

0.50

0.75

1.00

0.00 0.25 0.50 0.75 1.00

Fie

ld D

up

lica

te S

amp

le A

u g

/t

Original Sample Au g/t

Au FIELD DUPLICATES

Diamond drilling

RC drilling



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represented by pulverised material which would be more difficult to adequately sample by RC drilling and could cause issues during sample preparation.

It is important to note that the December 2010 resource estimate is based exclusively on AQM drilling and no Teck drilling is included in the resource database. Additionally, the AQM database comprises a majority of diamond drilling with 79% of the meterage used for the current resource estimate being diamond drilled, while RC drilling represents the remaining 21%. Table 14-7 Twin Drillhole List

Diamond Drilling RC Drilling Horizontal Shift at

Collar

Drillhole Name &

Company

Collar Coordinates

Easting, Northing,

Elevation

Drillhole Name &

Company

Collar Coordinates

Easting, Northing,

Elevation

ZFDDH04-001

Teck

793805.1,

8224336.86

2708.36

ZFRC04-008

Teck

793807.27,

8224333.95

2708.66

3.7m

ZFDDH04-002

Teck

793809.36,

8224337.91

2708.52

ZFRC09-033

AQM

793811.65,

8224337.80

2708.6

2.3m

ZFDDH04-004

Teck

793501.61,

8224269.08

2607.27

ZFRC09-034

AQM

793499.19,

8224271.71

2607.20

1.2m

ZFDDH09-005

AQM

793512.42,

8224178.15

2622.04

ZFRC10-060

AQM

793510.48,

8224176.05

2622.00

2.9m

ZFDDH09-006

AQM

794197.76,

8224362.38

2764.91

ZFRC04-009

Teck

794196.34,

8224357.9

2764.66

4.7m

ZFDDH10-008

AQM

793498.93,

8224270.5

2607.16

ZFRC04-007

Teck

793500.64,

8224269.77

2607.22

2.4m

ZFDDH10-009

AQM

794487.74,

8224398.75

2760.61

ZFRC04-010

Teck

794488.87,

8224396.75

2760.34

2.3m

Note:

- all twin drillholes are within close proximity, with six pairs of twin drillholes located within 3m of each other, and the

seventh pair within 4.7m of each other

- the assay records are complete for all drillholes for CuTotal, Au and most accessory elements, however, sequential

copper assays are only available for the AQM drillholes, with some partial records available for the Teck drillholes.



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15 ADJACENT PROPERTIES

No data from adjacent properties was used in this report. 16 MINERAL PROCESSING & METALLURGICAL TESTING

16.1 HISTORICAL TECK TESTING

An ore characterisation study was performed by Teck in 2005 on material from the Zafranal Main Zone. The summary from the Teck report is included below:

Ore characterisation was performed on a suite of RC chip samples from drillholes ZFRC04-007 through ZFRC04-0010 from the Zafranal exploration property. The objectives of the study were to determine bulk mineral assemblage and to provide details of the copper mineralogy including assemblage, grain size and surface exposure

Samples were stage-crushed to 100% passing 850 µm, prepared as polished grain mounts and analysed using MLA techniques to determine both bulk and copper mineralogy

The chip samples were dominated by quartz, plagioclase feldspar and muscovite/sericite. Biotite mica, chlorite, kaolinite, sulphides, Fe-Ti oxides and apatite occurred in minor to trace amounts

Sulphide minerals consisted of pyrite, with lesser amounts of chalcopyrite, chalcocite and covellite

Secondary copper minerals, such as chalcocite and covellite, hosted 78% of the total copper in the samples studied. A calculated 94.5% of these minerals exhibited surface exposures of 10% or greater, suggesting good heap leaching at a relatively coarse grind

Copper distribution by mineral species showed a predominance of secondary copper minerals near surface and an increase of chalcopyrite downhole for ZFRC04-008 and ZFRC04-010

Chalcocite and chalcopyrite were similar in grain size, with mean P80 of 38 µm and 39 µm. Covellite was finer-grained, with a mean P80 of 17 µm

No deleterious minerals were identified at the detection limit of the study

No carbonate minerals were identified, indicating that tailings and waste rock may be acid generating in the presence of water

The proportion of copper occurring as chalcocite and covellite compares well with cyanide soluble leachate results performed during preliminary ore testing. The 10% H2SO4 soluble copper leach results correlate more closely to the copper associated with the dissolution of one copper atom from chalcocite, leaving residual covellite. The cyanide soluble copper leach test combined with mineralogical evaluation should be used to assess the ore in future. Column leach tests may be carried out to understand its amenability to heap leaching.

16.2 2010 AMEC MINPROC TESTING – PRELIMINARY RESULTS

A metallurgical test programme has been conducted at bench scale and consisted of treatment of individual and composite samples, selected on specific mineral zones. The mineral zones, designated material type, approximate number of samples and approximate weights are detailed in Table 16-1



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Variability samples for comminution tests were sourced from diamond drill core and tested at SGS Laboratories in Santiago, Chile. Variability samples for rougher flotation were sourced from diamond drill core rejects from all zones, except the oxide composite which included RC chip samples and was conducted at AMDEL Laboratories in Adelaide, Australia. Composites were prepared from diamond drill core rejects from all material zones, except the oxide composite which included RC chip samples, due to the unavailability of core samples. These composites were used for flow sheet development tests including flotation, regrinding, thickening, leaching and tailing characterisation. Table 16-1 Zone Samples

Designated Zone Number of Samples Total Sample Weight

kg

Oxide 10 569

Supergene 20 1270

Hypogene 12 720

16.3 SAMPLE SELECTION

The Zafranal core database was analysed by AMEC Minproc to select samples suitable for a metallurgical test programme. The key criteria used in selecting samples were:

Core extracted in the 2009–2010 period

Location (Easting / Northing)

Depth

Lithology (rock type)

Zone (supergene, hypogene, etc.)

Mineralisation Continuity (continuous run of a single classification in the above categories). The test work programme was lithology-based and targeted samples that produced a broad representation of the oxide, supergene and hypogene zones. 16.4 SAMPLE INSPECTION

A site visit took place from February 15, 2010 to February 18, 2010 to inspect diamond drill core and RC chip at the Zafranal exploration camp and ALS diamond drill core reject storage in Arequipa. 16.5 OXIDE SAMPLES

The samples selected as oxide samples are detailed in Table 16-2. The selection was based both on core logging of the mineral zone by Zafranal geologists and the amount of copper reporting as CuS (WAS Cu) or copper remaining (Rem Cu). Significant variation existed with the oxide zone and samples varied from heavily oxidised to transition between oxide and supergene.



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Table 16-2 Selection of Oxide Samples

Drillhole From To Length Cu

Total CuCN CuS

Cu

Res. Au Fe S Sample Designated

m % % % % ppm % % Type Tests

ZFDDH10-008 74 90 16 0.42 0.03 0.17 0.22 0.2 4.16 0.33 Half Core Comminution


ZFDDH10-008 74 106 32 0.61 0.32 0.15 0.14 0.24 3.9 0.78 Core Reject Flotation

ZFRC09-034 86 102 16 1.42 0.86 0.49 0.07 0.11 3.3 2.4 RC Chips Flotation





ZFDDH10-011 71 90.7 19.7 0.44 0.02 0.24 0.17 0.17 2.58 0.25 Half Core Comminution

ZFDDH10-019 50 76.6 26.6 0.96 0.49 0.28 0.19 0.15 3.6 0.36 Half Core Comminution

16.6 SUPERGENE SAMPLES

The samples selected as supergene samples are detailed in Table 16-3. The selection was based both on core logging of the mineral zone by Zafranal geologists and the amount of copper reporting as cyanide soluble copper (CuCN), with greater than 70% of copper as CuCN being taken as an indicator of supergene. Table 16-3 Selection of Supergene Samples

Drillhole From To Length Cu

Total CuCN CuS

Cu Res.

Au Fe S Sample Designated


ZFDDH09-005 99.7 122 22.3 1.57 1.13 0.27 0.16 0.2 4.12 1.94 Half Core / Core Reject

Comminution / Flotation

ZFDDH09-008 106 134 28 1.22 0.88 0.23 0.11 0.31 3.32 1.39 Half Core / Core Reject






ZFDDH09-006 189 210 21 1 0.77 0.14 0.09 0.1 2.97 1.95 Half Core / Core Reject








ZFDDH09-006 270 291 20.7 0.65 0.47 0.07 0.11 0.13 0.21 1.83 Half Core / Core Reject






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16.7 HYPOGENE SAMPLES

The samples selected as hypogene samples are detailed in Table 16-4. The selection was based both on core logging of the mineral zone by Zafranal geologists and the amount of copper reporting as Rem Cu, with greater than 70% of copper as Rem Cu being taken as an indicator of hypogene material. Due to limited availability of hypogene sample two mixed supergene/hypogene samples were also selected. Table 16-4 Selection of Hypogene Samples

Drillhole From To Lengt

h Cu

Total CuCN CuS

Cu Res.

Au Fe S Sample Designated












ZFDDH10-038 121 140 19 0.35 0.04 0.01 0.30 0.35 4.35 3.96 RC Chips Flotation

ZFDDH09-034 142 154 12 1.15 0.24 0.06 0.85 0.53 4.73 4.49 RC Chips Flotation

16.8 COMMINUTION TESTWORK

Hypogene material recorded the highest average abrasion characteristics with an Ai average of 0.22. Supergene material and oxide had similar abrasion characteristics with average Ai values of 0.14 and 0.09 respectively. A substantial deviation existed in all material types. The wide distribution in abrasion results indicated the abrasive nature of the samples increased with depth. The majority of samples did not meet the requirements for Bond crusher work index determination so the Morrell Crusher Index, as derived from SMC test results was used to determine crusher specific energy. From a crushing perspective, oxide material was moderately soft (80th percentile - 4.56 kWh/t) with a relatively narrow distribution of results. Supergene material was moderately hard (80th percentile - 6.80 kWh/t), although the wide distribution of measurements resulted in amounts of soft, hard and very hard material. The hypogene material contained similar proportions of hard and very hard material, with lesser amounts of moderately hard and extremely hard material (80th percentile - 10.90 kWh/t) From a ball mill grinding perspective, oxide material was moderately soft, with an 80th percentile Bond ball mill work index of 9.86 kWh/t and a narrow distribution of results. Both supergene and hypogene material were moderately hard, with 80th percentile work index values of 11.96 kWh/t and 12.29 kWh/t. There was an increase in the Bond ball mill index with depth. From a SAG mill grinding perspective, oxide material was soft, with an 80th percentile drop weight index of 3.81 kWh/m3 and a narrow distribution of results. Supergene material (80th percentile - 5.95 kWh/m3)



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was moderately soft and hypogene material (80th percentile - 9.37 kWh/m3) was moderately hard. The wide distribution of measurements resulted in amounts of harder material in these material types. There was an increase in the drop weight index with depth. 16.9 FLOTATION TESTWORK

The flotation testwork results are as follows:

Rougher recovery for the oxide composite was 60.7% for copper and 31.8% for gold, at a flotation feed grind size p80 of 150 µm.

Rougher recovery for the supergene composite was 88.0% for copper and 70.5% for gold, at a flotation feed grind size p80 of 150 µm.

Rougher recovery for the hypogene composite was 92.4% for copper and 75.0% for gold, at a flotation feed grind size p80 of 106 µm.

The locked cycle test on the oxide composite achieved a weighted average final concentrate of 20.8% Cu, with mass recoveries of 1.5% and 5.5% to final concentrate and rougher concentrate respectively. This was achieved at a copper recovery of 38.7% and a gold recovery of 23.6%. Recovery variability between cycles was high to very high. The locked cycle test for the supergene composite achieved a weighted average final concentrate of 41.0% Cu. This was achieved at a copper recovery of 87.6% and a gold recovery of 60.6%. Recovery variability between cycles was very high for gold and low for copper. The locked cycle test for the hypogene composite achieved a weighted average final concentrate of 33.0% Cu. This was achieved at a copper recovery of 91.4% (incl. 2.7% to pyrite concentrate) and a gold recovery of 74.5% (including 22.4% to pyrite concentrate). Recovery variability between cycles was high for gold and low for copper Further test work is in progress on further samples to provide greater coverage of the resource to the east. These tests will focus on comminution and flotation variability samples, flotation locked cycle tests and leaching of supergene material. 17 MINERAL RESOURCE & MINERAL RESERVE ESTIMATES

17.1 INTRODUCTION

The December 2010 resource estimate of the Zafranal Main Zone copper deposit is based on integrated geological, mineralogical and grade interpretations of the information recorded from 172 diamond and RC drillholes solely drilled by AQM in 2009 and 2010. The total drillhole meterage is 53 308 m (79% diamond drilled, 21% RC drilled). The 172 drillholes are drilled on regular 100m spaced easting fences along the strike of the orebody with 80m or less spacing along the drill fences. Several areas of the orebody have been infill-drilled with drilling oriented east-west closing up the 100m drill fences. AQM is continuing to drill the deposit and the December 2010 resource estimate corresponds to the resource delineated by drillholes drilled up until mid-October 2010.



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Interpretation wireframe data of the deposit geology, mineralogy and the grade envelopes was supplied by AQM and was prepared by Atticus using the Leapfrog software package. The data preparation, the block model preparation, the grade interpolation and resource reporting were conducted using the GEMS mining software with exhaustive verification in GEMS and Excel. The statistical and geostatistical analysis were completed using the GeoAccess Professional package, with accessory use of the GEMS software. 17.2 STUDY DATA

17.2.1 Drillhole Database & Solids

AMEC Minproc was provided by AQM with an updated database for the project on the 6th of November 2010 during a visit to AQM’s offices in Lima. Atticus provided the final wireframe data representing the deposit geological, alteration, mineralogical and grade interpretations by the 24th of November 2010. These files were used as the basis of the resource work and were imported into the GEMS mining software. The drillhole database provided by AQM was a database dump from AQM’s master database in Access format “Zafranal DatabaseDump.accdb” containing the following tables:

DHCollar 214 records

DHSurvey 8 591 records

DHAssay 40 178 records

DHAu-ICP 40 466 records

DHCuSeq 13 884 records

DHLithologySummary 2 817 records

DHRQD 17 112 records

DHSpecificGravity 753 records

DHQAQC Blanks 2 146 records

DHQAQC Duplicates 2 188 records

DHQAQC Standards 2 231 records Note that the database contains AQM and Teck drillhole and QAQC data, although no Teck data was used for the December 2010 resource estimate, only AQM data.



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Atticus provided the following set of wireframes in DXF format:

Topography of the project area

Grade shell wireframes at 0.2% CuTotal and 0.1 g/t Au cut-off grades

Mineralogy zonation wireframes for:

Leached cap

Oxide

Supergene

Transition

Hypogene

Lithological wireframes for:

Zafranal diorite

Microdiorite

Dry diorite

Monzodiorite dykes

Late quartz diorite

Post mineralisation dykes

Volcanic

Gneiss

Structural interpretation wireframes for four fault blocks

Alteration wireframes for the following zones:

Argillic

Potassic

Propylitic

Phyllic

Hornfels 17.2.2 Data Preparation

The database files provided by AQM were imported in GEMS and checked for logical errors including:

Collar and downhole survey integrity

Agreement between collar RL and topography

Interval file from-to integrity

Duplicate sample intervals

Overlapping sample interval

Unmatched drillhole identifiers in collar, survey and interval files

Non-matching downhole distances between tables



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Anomalous maximum values in grades and ratios

Sum of sequential copper values exceeding the CuTotal values

Below detection values were set to 0.001 for copper and Au grades to avoid the presence of zero or negative values in the database used during compositing and estimation.

17.3 GEOLOGICAL MODEL

Atticus used the assay, mineralogical, lithological and structural data as provided and interpreted by AQM geological team to construct 3-dimensional solid wireframe models. These models were provided as DXF files and form the basis of the December 2010 resource estimate. They were not modified by AMEC Minproc. 17.3.1 Lithological Model

The lithological model is based on the drillhole geological logging. AQM provided Atticus with a summarised lithological logging for all drillholes available and a sectional interpretation of this data. The lithological 3D solids of the main lithological units were built using the Leapfrog software. The sectional interpretation provided by AQM was digitised and used as a guide during the creation of the solids with Leapfrog. The solids for the main 5 lithologies –Zafranal diorite, monzodiorite, late quartz diorite, post mineralisation dykes and volcanic were provided to AMEC Minproc as separate files for each geographical block. Figure 17-1 to Figure 17-3 illustrate the various lithological solids in Zafranal. Figure 17-1 3D View – Zafranal Lithological Units – Zafranal Diorite

Zafranal diorite in red, faults in purple, post mineralisation dykes in light green, late quartzite in dark green



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Figure 17-2 3D View – Zafranal Lithological Units – Microdiorite

Microdiorite in blue, faults in purple, post mineralisation dykes in light green, late quartzite in dark green

Figure 17-3 3D Views – Zafranal Lithological Units – Dykes

Dry diorite in yellow, faults in purple, post mineralisation dykes in light green, late quartzite in dark green, monzodiorite in

blue



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17.3.2 Structural model

AQM produced a coherent structural interpretation of the Zafranal deposit from structural field data including structural mapping, interpretation of aerial photographs, drill core orientation and mineralisation spatial distribution as observed on sections and plans. The deposit has been divided into four geographical blocks delineated by faults; two NS trending faults and one N115o-120o trending fault (Figure 17-4). Figure 17-4 3D View – Zafranal Topography & Structural Features

17.3.3 Mineralogical Model

The mineralogical model is based on a combination of sequential copper assay results, the ratio of S%/Fe% and drillhole logging information. All AQM samples were analysed for total copper via ICP. All samples that returned a total copper content of above 0.2% were sent for additional analysis via sequential copper leach – first, digestion by H2SO4 (CuS, acid soluble or “oxide” copper), followed by digestion by NaCN (CuCN, cyanide soluble, typically chalcocite and bornite – secondary copper minerals), then finally digestion by HCl and HNO3 (CuRes, residual copper, typically chalcopyrite). The definition of the majority of the mineralogical domains is based on the percentage of the sequential copper leach compared to total copper content and the ratio S%/Fe%. The change in S%/Fe% ratio is sharp at the leached cap-supergene boundary and occurs simultaneously to the sharp change observed for the sequential copper ratio CuCN/CuTotal at this boundary. The following grade ratios were used to define the various mineralogical domain boundaries:

Leached cap-supergene boundary: 0.2 S%/Fe% ratio threshold confirmed by the CuCN/CuTotal ratio when available

Oxide pods within the leached cap zone were modelled based on copper values

Supergene-transition boundary using the CuCN/CuTotal ratio with a 0.50 threshold

Transition-hypogene boundary using a 0.1% threshold on acid soluble copper, i.e. CuCN (Cu-AA16S cyanide soluble copper) + CuS (Cu-AA06S weak sulphuric acid soluble copper)



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The threshold ratios expressed as percentages are summarised in Figure 17-5. The assay data was coded according to the criteria chosen and used in the Leapfrog software to generate the three-dimensional solids of the mineralogical zones. The solids honours the assay coding interpretation, but given the nature of the deposit, the mineralogical zone boundaries are not always clearly defined, and the solid models have been created from ‘best fit’ surfaces that takes in data from all the evidence available. Views of the mineralogical solids are presented in Figure 17-6 to Figure 17-8. Figure 17-5 Threshold Ratios & Mineralogical Domain Boundaries

Figure 17-6 Long Section at 8224350N – looking North

Supergene zone in green, Oxide lenses in red

Figure 17-7 Section 793300E – looking East


Criteria Leached cap Oxide Leached cap Supergene Transition Hypogene

CuS/CuTotal <30% 30% 30%30% threshold

S/Fe <20% 20%

20% threshold

CuCN/CuTotal <50% 50% 50%50% threshold

CuS+CuCN ≥ 1% 1% 1% <1%

1% cut-off grade

≥1%

≥30%

<20%

<50%

<20%

<50%

<30%

<50%

≥20%

<30%<30%

≥50%



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Figure 17-8 Section 793800E – looking East


17.3.4 Alteration Model

The alteration model is based on the drillhole geological logging. The alteration 3D solids of the main alteration units were built by Atticus using the Leapfrog software. The solids define the following alteration zones:

Argillic

Potassic

Propylitic

Phyllic

Hornfels Figure 17-1 and Figure 17-2 illustrate the zones of potassic and hornfels alteration. Figure 17-9 3D View – Zafranal Alteration Units – Potassic Alteration



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faults in dark purple, potassic alteration in brown

Figure 17-10 3D View – Zafranal Alteration Units – Hornfels Alteration

faults in dark purple, hornfels alteration in green

17.4 GRADE ENVELOPE MODELS

A total copper grade envelope and a gold grade envelope were provided by Atticus. The copper grade envelope was defined using a 0.2% CuTotal cut-off grade applied on all assay data. The gold grade envelope used a 0.1 g/t Au cut-off grade. Both envelopes were created by Atticus using the Leapfrog software from the Zafranal database. A set of sections and 3D views presented in Figure 17-11 to Figure 17-16 illustrates the relationship between drillhole and grade envelopes. The December 2010 Cu envelope defines a total volume of 143 148 000 m3. Figure 17-11 Long Section at 8224350N – Copper Grade Envelope, Supergene Zone & Drillhole

Traces



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Supergene zone in green, copper grade envelope in blue, 500 m grid

Total copper Legend: 0% to 0.2% grey, 0.2% to 0.5% yellow, +0.5% red

Figure 17-12 Section 793300N – Copper Grade Envelope, Supergene Zone & Drillhole Traces





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Figure 17-13 Section 793800N - Copper Grade Envelope, Supergene Zone & Drillhole Traces





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Figure 17-14 Long Section at 8224350N – Gold Grade Envelope, Supergene Zone & Drillhole Traces

Supergene zone in green, gold grade envelope in yellow, 500 m grid

Gold Legend: 0 g/t to 0.1 g/t grey, +01 g/t pink

Figure 17-15 Section 793300N Gold Grade Envelope, Supergene Zone & Drillhole Traces





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Figure 17-16 Section 793800N Gold Grade Envelope, Supergene Zone & Drillhole Traces



17.5 TOPOGRAPHY

The topography information was imported into GEMS as a surface from a large DXF file provided by Atticus. The topographic surface covers the entire project area. A set of plan views and 3D views presented in Figure 17-17 illustrates the project topography.



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Figure 17-17 3D Views of Zafranal Topography & Drillhole Traces

17.6 STATISTICAL ANALYSIS & VARIOGRAPHY

17.6.1 Sample Coding

17.6.1.1 Coding by Lithological Domain

The assay interval data was coded into an alphanumeric field GEOLOGY and a numeric field GEOLCODE by overlaying the lithological domain solid models.



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17.6.1.2 Coding by Mineralogical & Geographical Domains

The assay interval data was coded into an alphanumeric field MINERA and a numeric field MINERACODE by overlaying the mineralogical domain solid models. The geographical domains were included into the MINERACODEG field as the unit digit 17.6.1.3 Coding by Alteration Domain

The assay interval data was coded into an alphanumeric field ALTERATION and a numeric field ALTERCODE by overlaying the mineralogical domain solid models. 17.6.1.4 Coding by Grade Envelopes

The assay interval data was coded into an alphanumeric field CUENVELOPE and a numeric field CUENVCODE from the copper grade envelope solid. Similarly for the gold grade envelope solid. 17.6.1.5 Input Data & Block Model Codes

The coding process was validated by visual inspection on section, plan and in 3-D. The drillhole input data and block model codes for the various coded domains are summarised in Table 17-1 for reference. Table 17-1 Drillhole Data & Block Model Codes

Domain Alphanumeric Field Numeric Field

Lithological Domains GEOLOGY GEOLOGYCODE

Zafranal diorite ZAFDIO 100

Microdiorite MDIO 200

Late Quartz Diorite LTQZDIO 300

Post Mineralisation Dyke PTDIO 400

Volcanics VC 500

Gneiss GNEIS 700

Dry diorite DRYDIO 800

Monzodiorite MZDIO 900

Mineralogical Domains MINERA MINERACODE

Leached cap LEACH 1000

Oxide OXIDE 2000

Supergene SUPERGENE 3000

Transition TRANSITION 4000

Hypogene HYPOGENE 5000

Alteration Domains ALERATION ALTERCODE

Potassic Potassic 10000

Phyllic Phyllic 20000

Propylitic Propylitic 30000

Argillic Argillic 40000

Hornfels Hornfels 50000



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Domain Alphanumeric Field Numeric Field

Gneiss phyllic Gneiss phyllic 60000

Gneiss propylitic Gneiss propylitic 70000

Gneiss not altered Gneiss not altered 80000

Copper Grade Envelope CUENVELOPE CUENVCODE

-inside envelope Cu%02 20

-outside envelope NOTCODED NC

Gold Grade Envelope AUENVELOPE AUENVCODE

-inside envelope Au01ppm 10

-outside envelope NOTCODED NC

Geographical Domains

Block 1 to 4 from west to east 1 to 4 added as unit digit to the MINERACODE, for example 3002 for

Supergene in Block 2

17.6.2 Data Compositing

The dominant sample length at Zafranal is 2 m, but there are a number of 1 m and smaller (and some larger) intervals (Figure 17-18). To provide valid data for statistical and geostatistical analysis, 2 m composites were generated. The compositing to 2 m was completed within the mineralogical boundaries and copper grade envelope to honour the boundaries created from assay data. Figure 17-18 Histogram of Sample Lengths inside the Cu Envelope

17.6.3 Statistical Analysis

A review of the statistical characteristics of the global deposit data indicates the following:



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The distribution of copper grades as illustrated in Figure 17-19 is dependent on lithology with the microdiorite and Zafranal diorite having significant higher averages in most mineralogical zones than the other lithologies

Volcanics and dry diorite carry significant mineralisation in the enriched zones, i.e. oxide, supergene and transition

The post-mineralisation dykes and monzonite dykes are essentially barren.

The late quartz diorite dykes are well mineralised in the supergene but have lower grade in hypogene than the Zafranal diorite, microdiorite and volcanics

Consequently, during grade interpolation, the dykes were segregated from the global dataset with the exception of the late quartz diorite in the supergene horizon

Figure 17-19 shows that the highest gold average grades are found in the oxide zone and leached cap, mainly for the Zafranal diorite and microdiorite

Figure 17-19 Average Grade for CuTotal and Au per Mineralogical & Geological Domains

The statistical characteristics of the data included in the 0.2% copper grade envelopes are discussed below:

A total of 11 546 composites (2m) with CuTotal assays are available in the 0.2% CuTotal envelopes for an average CuTotal grade of 0.46% CuTotal. This include 2062 composites with CuTotal grade lowere than to 0.2%, i.e. 18% of the data

With the exception of the microdiorite data which is significantly higher grade in the supergene zone than for the other lithologies, the total copper grade average does not vary markedly between lithologies for a given mineralogical zone and the mineralogical domaining remains the main influencing factor on the copper grade distribution

In the oxide zone, the difference of average grades between lithologies is not as pronounced for CuS than for CuTotal and CuCN

Gold grades in the copper envelopes are low with better average grades in the Zafranal diorite and the microdiorite

A statistical summary of the composited data inside the CuTotal grade envelope is presented in Table 17-2 with detailed average grade by lithology for CuTotal in Table 17-3. The Zafranal diorite is the predominant lithology inside the Cu envelope with more than half the composites pertaining to

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Dry Diorite Late Quartz Diorite Microdiorite Monzodiorite Post Mine Dykes Volcanics Zafranal Diorite

Av

era

ge

Gra

de

%

Geological Domain

Cu Total

Leached cap Oxide Supergene Transition Hypogene

0

0.05

0.1

0.15

0.2

Dry Diorite Late Quartz Diorite Microdiorite Monzodiorite Post Mine Dykes Volcanics Zafranal Diorite

Av

era

ge

Gra

de

g/t

Geological Domain

Au




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this lithology, followed by the microdiorite. The microdiorite carries the highest average CuTotal grades

Figure 17-21 to Figure 17-23 illustrate the grade variations of copper and gold with easting and relative elevation. These graphs indicate that the western part of the deposit presents higher grade averages than the rest of the orebody. The supergene zone forms a well defined enrichment zone marked by significant higher copper grades over the entire deposit with an average thickness in the order of 100 m

Log probability plots of the various copper species and gold are presented in Figure 17-24 and Figure 17-27 and illustrate their distribution according to mineralogy, geology and alteration

The Cu envelope data is mostly in potassic and phyllic alteration with little differences in terms of grade distribution between these two alteration types, hence alteration domains were not used to specifically segregate data during interpolation of the resource.

Figure 17-20 Average Grade for CuTotal, Au and Sulphur per Mineralogical & Geological Domains

–only data included in the copper envelope

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

Dry Diorite Late Quartz Diorite

Microdiorite Post Mine Dykes Volcanics Zafranal Diorite

Av

era

ge

Gra

de

%

Geological Domain

Cu Total


0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80



Av

era

ge

Gra

de

%

Geological Domain

CuCN


0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35



Av

era

ge

Gra

de

%

Geological Domain

CuS


0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16



Av

era

ge

Gra

de

g/t

Geological Domain

Au

Series1 Series2 Series3 Series5 Series4



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Table 17-2 Summary Statistics of 2 m Composites inside the 0.2% CuTotal Grade Envelope

All Composites included in the 0.2% CuTotal Envelope CuTotal

% CuCN

% CuS

% Au g/t

Number 11 546 9 484 9 484 9 484

Minimum 0.001 0.005 0.005 0.005

Maximum 21.12 10.63 2.94 8.74

Mean 0.46 0.26 0.07 0.20

Median 0.32 0.06 0.03 0.18

Leached cap Data

Number 452 181 181 181

Minimum 0.012 0.005 0.01 0.03

Maximum 1.39 1.08 0.26 0.38

Mean 0.21 0.08 0.07 0.16

Median 0.18 0.01 0.06 0.17

Oxide Data

Number 611 524 524 524

Minimum 0.059 0.005 0.03 0.015

Maximum 1.55 0.37 1.40 0.37

Mean 0.39 0.03 0.26 0.15

Median 0.33 0.01 0.18 0.15

Supergene Data

Number 4 599 4 129 4 129 4 129

Minimum 0.004 0.005 0.01 0.005

Maximum 21.12 10.63 2.94 8.74

Mean 0.69 0.55 0.10 0.10

Median 0.56 0.44 0.08 0.07

Transition Data

Number 511 439 439 439

Minimum 0.027 0.01 0.005 0.01

Maximum 1.47 0.63 0.35 1.38

Mean 0.39 0.14 0.04 0.25

Median 0.34 0.12 0.03 0.21

Hypogene Data

Number 5 373 4 211 4 211 4 211

Minimum 0.001 0.005 0.005 0.005

Maximum 2.94 1.03 0.33 2.80

Mean 0.30 0.03 0.01 0.30

Median 0.27 0.02 0.01 0.27

Note: the average grades are calculated on uncut values



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Table 17-3 CuTotal Average Grade for 2 m Composites inside the 0.2% CuTotal Grade Envelope

Lithology Leached cap Oxide Supergene Transition Hypogene Total Litho%

Zaf. Diorite 0.20 0.38 0.65 0.39 0.29 0.42 51%

MicroDiorite 0.22 0.44 0.83 0.42 0.32 0.54 36%

Volcanics 0.27 0.35 0.48 0.30 0.30 0.42 9%

LateQzDio 0.21 0.54 0.26 0.20 0.43 3%

PostDiorite 0.08 0.35 0.36 0.27 0.20 0.30%

DryDiorite 0.30 0.31 0.46 0.14 0.27 1%

Grand Total 0.21 0.39 0.69 0.39 0.30 0.46 100% % of data above 0.2% 40% 86% 89% 85% 75% 80% Average Grade of data above 0.2% 0.31 0.43 0.75 0.43 0.35 0.54

Figure 17-21 CuTotal Average Grade Variation with Easting & Relative Elevation inside 0.2%

CuTotal Grade Envelope

Figure 17-22 Au Average Grade Variation with Easting & Relative Elevation inside 0.1 g/t Au Grade

Envelope

0.00

0.20

0.40

0.60

0.80

1.00

1.20

792 900 793 100 793 300 793 500 793 700 793 900 794 100 794 300 794 500 794 700 794 900 795 100 795 300

Cu

To

tal

%

Easting

Supergene Transition Hypogene

higher grade in the western part of the deposit

-300

-250

-200

-150

-100

-50

0

50

100

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Rel

ativ

e E

leva

tio

n m

Average CuTotal%

Leached cap

Oxide

Supergene

Transition

Hypogene

top of Supergene Zone supergene zone up to 100m thick

0.1

0.12

0.14

0.16

0.18

0.2

0.22

0.24

793 300 793 500 793 700 793 900 794 100 794 300 794 500 794 700 794 900 795 100

Au

g/t

Easting

2m composites uncut 2m composites cut to 1 g/t-300

-250

-200

-150

-100

-50

0

50

100

0.0 0.1 0.2 0.3 0.4

Rel

ativ

e E

leva

tio

n m

Average uncut Au g/t

Leached cap

Oxide

Supergene

Transition

Hypogene

top of Supergene Zone



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Figure 17-23 Au Average Grade Variation with Relative Elevation inside 0.2% CuTotal Grade

Envelope

Figure 17-24 Log Probability Plots of CuTotal Grades Composites inside the 0.2% CuTotal

Envelope per Mineralogy

-300

-250

-200

-150

-100

-50

0

50

100

0.0 0.1 0.2 0.3

Rel

ativ

e E

leva

tio

n m

Average Au g/t

Leached cap

Oxide

Supergene

Transition

Hypogene




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0.2% CuTotal Envelope per Lithology


0.2% CuTotal Envelope per Alteration Domain



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Figure 17-27 Log Probability Plot of Gold Composites inside the 0.2% CuTotal Envelope per

Mineralogy

17.6.4 Outlier Analysis - Capping

Following the statistical analysis of the data by domains, a detailed review was conducted of the higher grade values for CuTotal and Au to determine the suitability and level of capping the data prior to estimation. The review of the higher grade values included the following:

A review of histograms and probability plots: this allows to identify significant breaks in populations that may be used to interpret possible outliers per combined domain –lithological-mineralogical-geographical

An examination of the spatial distribution of the higher grade values. High grade composites that exhibit clustering may be considered valid members of the population, while isolated high grade composites were considered as possible outliers, requiring cutting and/or search restriction.

Examination of the drillhole data on sections indicate that both the higher grade copper and gold values usually occur in clusters within neighbouring drillholes. High copper and gold values occur over limited interval lengths.



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The bubble graphs presented below illustrate the location of all total copper values greater than 2.5%. The highest values are found in the middle part of the deposit and are clearly associated with distinctly high arsenic values. In the eastern part of the deposit, the association with high arsenic does not occur and the high grade values appear to be aligned along a NNE direction. Higher gold values (+0.8 g/t Au) are more evenly distributed over the deposit than higher copper values, and although the associated arsenic values are clearly higher in the western part of the deposit, the difference observed between the western and eastern parts of the deposit is not as marked as for copper. After examination of the distribution of the data, a topcut of 5% was adopted for total copper grades -which affects 6 composites located in the Supergene zone- and a topcut of 1 g/t or 2 g/t for Au grades (depending on the lithology) was applied to the data prior to the grade estimation. Figure 17-28 Spatial Distribution on Plan View of +2.5% CuTotal Assay Values with Associated

Gold & Arsenic

8224000

8224200

8224400

8224600

8224800

793000 793200 793400 793600 793800 794000 794200 794400 794600 794800 795000 795200 795400

COPPER >= 2.5%

8224000

8224200

8224400

8224600

8224800

793000 793200 793400 793600 793800 794000 794200 794400 794600 794800 795000 795200 795400

ASSOCIATED GOLD ASSAYS



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Note that the bubbles area is proportional to the grade values

Figure 17-29 Spatial Distribution on Plan View of +0.8 g/t Au Assay Values with Associated Arsenic

Note that the bubbles area is proportional to the grade values

17.6.5 Variography

Prior to completing the variography, the data was transformed to “unfold” the various zones using the top of the Supergene horizon as a reference surface. The “unfolded” data was used to complete the variography and the subsequent grade estimation for the Leached cap, Oxide, Supergene and Transition zones. The Hypogene zone was estimated in real space.

8224000

8224200

8224400

8224600

8224800

793000 793200 793400 793600 793800 794000 794200 794400 794600 794800 795000 795200 795400

ASSOCIATED ARSENIC ASSAYS

8224000

8224200

8224400

8224600

8224800

793000 793200 793400 793600 793800 794000 794200 794400 794600 794800 795000 795200 795400

GOLD ASSAYS >=0.8 g/t

8224000

8224200

8224400

8224600

8224800

793000 793200 793400 793600 793800 794000 794200 794400 794600 794800 795000 795200 795400

ASSOCIATED ARSENIC ASSAYS



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A preliminary variography analysis was completed for all interpolated grades – CuTotal, CuCN, CuS and Au- separating mineralogical and geographical zones. First pass variograms were calculated using data pertaining only to the grade envelopes as well as using the complete dataset unscreened. Variograms based on untransformed data, log transformed data and median indicator data were tested. This preliminary analysis indicates that:

In the Supergene zone, the CuTotal variography was completed separately for the western part of the deposit and the eastern part within the CuTotal grade envelope using “unfolded” data

In the Hypogene and Transition zones, all geographical zones were combined and all data was used conjointly within the CuTotal envelope in real space

There is insufficient data inside the grade envelopes within the Oxide or Leached cap zones to obtain meaningful variograms, hence by default, variograms obtained for the Supergene zone have been used for these domains

In the Supergene zone, the sequential copper data behaves in a similar manner to the total copper data, and for the purpose of estimation, the CuTotal parameters have been used to estimate the CuCN and CuS models

Gold exhibits a different spatial distribution to copper and appears to be controlled by steeply dipping features. All data within the Au envelope was used conjointly for the Au variography in real space, Median indicator variograms provide the best results and were used to compile kriging parametres for Au.

The variography results are summarised below:

CuTotal in Supergene Zone in the western part of the deposit: variograms calculated on unfolded data. The best direction of continuity is horizontal* NNE at N40o azimuth with a long range of 130 m along this direction and 100 m perpendicularly in the horizontal plane. The vertical range is 17 m

CuTotal in Supergene Zone in the eastern part of the deposit: variograms calculated on unfolded data. The best direction of continuity is horizontal* slightly off EW at N110o azimuth with a long range of 160 m along this direction and 135m perpendicularly in the horizontal plane. The vertical range is 17 m

CuTotal in Hypogene Zone: variograms calculated using data in real space. The best direction of continuity is along a N130o azimuth with 30o plunge and a 50o dip towards 350o with long ranges of 180 m by 145 m and 110 m

Au in the Au grade envelope: median indicator variograms calculated using data in real space. The directions define correspond to the Hypogene copper directions with long ranges of 250 m by 200 m and 130 m

The experimental variograms were modelled using spherical models with the nugget value obtained from a downhole variogram calculated on 2 m lags. The variogram parameters obtained are presented in Table 17-4. The modelled variograms are presented in Figure 17-30.



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Table 17-4 Variogram Parameters

Element CuTotal

Supergene - Western

CuTotal

Supergene - Eastern

CuTotal

Hypogene

Au

Directions N40hz, N130hz, vertical N110hz, N20hz, vertical

N130-30plunge, N350-

50dip, perpendicular

N130-30plunge, N350-

50dip, perpendicular

C0,C1,C2 0.15,0.40,0.45 0.15,0.40,0.45 0.20,0.30,0.50 0.35,0.30, 0.35

a 1 (m) 110x80x6 115x80x6 70x40x30 100x55x25

a 2 (m) 130x100x17 160x135x17 180x145x110 250x200x130

Note: for Au, median indicator variograms were modelled as the normal variograms were poor

*horizontal in an “unfolded” space

Figure 17-30 Modelled Variograms

CuTotal

Supergene zone, Western part of Zafranal

Downhole variogram azimuth 0o dip-70o Major axis variogram azimuth 40o horizontal

Semi-major axis variogram azimuth 130o horizontal Minor axis variogram vertical



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CuTotal

Supergene Zone – Eastern Part of Zafranal

Downhole variogram azimuth 0o dip-70o Major axis variogram azimuth 110o horizontal

Semi-major axis variogram azimuth 20o horizontal Minor axis variogram vertical



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CuTotal

Hypogene Zone

Downhole variogram azimuth 180o dip-70o Major axis variogram azimuth 130o dip-30o

Semi-major axis variogram azimuth 350o dip-50o Minor axis variogram azimuth 230o dip-20o

Au

Downhole variogram azimuth 180o dip-70o Major axis variogram azimuth 130o dip-30o

Semi-major axis variogram azimuth 350o dip-50o Minor axis variogram azimuth 230o dip-20o



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17.7 BLOCK MODEL DEVELOPMENT

17.7.1 Model Characteristics

The Zafranal block model was created to encompass the entire volume defined by Atticus’ solids plus spare space on the margins to allow for the development of the pit shapes. Given the drillhole spacing and the continuity characteristics of the mineralisation to estimate, a 25 m by 25 m horizontal block size is appropriate. A 5 m bench height was chosen for the vertical block size to allow for an adequate reproduction of the solid volumes and boundaries into the block model without the need to use subblocking*. Note that the first downhole variogram range of the grades estimated is also in the order of 5 m. The block model characteristics are detailed in Table 17-5. Table 17-5 Block Model Characteristics

Minimum Maximum Number Size

m

Easting 792 675 795 500 113 25

Northing 8 223 800 8 224 850 42 25

Elevation 2 110 2 880 154 5

*Note that partial blocks have been used to delineate post mineralisation diorite in the block model

17.7.2 Model Coding

As for drillhole data, the block model was coded using the wireframes representing the various lithological units, mineralogical domains and geographical zones. The copper and grade envelope solids were also used to code the block model. For reference, the model codes are identical to the ones used for the drillhole data detailed in Table 17-1. Volume checks were performed between coded blocks and the grade envelope solids to ensure the conservation of volumes from the interpreted envelopes. 17.7.3 Model Transformation

Prior to estimation, as for the drillhole data, the block model blocks corresponding to the Leached cap, Supergene zone and Transition zone were “unfolded” along the top of the Supergene horizon which was used as a reference surface. The unfolding procedure alleviates the effect of Zafranal’s rugged topography and improves the grade estimation. 17.8 GRADE ESTIMATION

17.8.1 Estimation Technique

Grade estimation for all elements was completed in “unfolded” space using ordinary kriging for the Leached cap, Oxide, Supergene and Transition zones. The Hypogene zone for all copper species was



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estimated in real space. Gold grades were estimated by ordinary kriging in real space for all mineralogical domains. 17.8.2 Domain Constraints

Given the results of the statistical analysis of the data within the various zones, hard and soft boundaries* between data during interpolation were used as follows:

Mineralogical boundaries were used as hard* boundaries for all copper species with the exception of the Transition-Hypogene boundary which was used as “soft” meaning that part of the Transition data was used to krige the Hypogene zone given the gradational nature of the grade distribution either side of this boundary.

Geological boundaries treated as hard boundaries for all dykes with the exception of the Late Quartz Diorite dykes in the Supergene zone which was combined with the other lithologies during kriging, otherwise soft boundaries were used between the other lithologies within the grade envelopes

Geographical boundaries were used as hard boundaries for copper grades between the western and eastern blocks for the main geological units but not for the dykes

*Note: a kriging boundary is “hard” when the data either side of the boundary is segregated during estimation, for

example, the boundary between the Leached cap and Supergene zone is a sharp boundary for assays as Cu grades

typically change from a background value of 0.001% in leached cap to +0.2% in Supergene. During kriging this

boundary will be “hard” indicating that only Supergene data is used to estimate supergene blocks and vice versa for

Leached cap data and Leached cap blocks

17.8.3 Search Strategy & Kriging Neighbourhood

A kriging neighbourhood analysis was completed on a range of blocks located in diverse areas of the deposit in the Supergene and Hypogene zones to test the effect of estimation parameter values on the quality of the estimate

The kriging estimation was completed in two passes. The 1st pass kriging was completed using the optimum search parameters defined by the kriging neighbourhood analysis. In order to fully estimate grades within the project area, 2nd kriging passes were completed using less restrictive parameters, i.e. a reduced minimum of composites and larger search ellipses. The parameters chosen for the estimation are detailed in Table 17-6 with the search ellipse directions corresponding to the directions of best continuity defined by the variography.

Table 17-6 Kriging Neighbourhood Parametres

Grade Element & Domain Search Ellipse

Dimensions along

Kriging Directions

Min/Max No of

Composites

Max. No of

Composites per

Drillhole

Cu all species

Supergene, Leached cap, Oxide,

Transition

inside Cu envelope

130x100x17

1st pass: 15/30

2nd pass: 2/30

5



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Grade Element & Domain Search Ellipse

Dimensions along

Kriging Directions

Min/Max No of

Composites

Max. No of

Composites per

Drillhole

Western Cu all species


Transition

inside Cu envelope

Eastern

160x135x17 1st pass: 15/30

2nd pass: 2/30

5

Cu all species

Hypogene

Inside Cu envelope

225x200x60 1st pass: 15/30

2nd pass: 2/30

9

Au

all domains

inside Au envelope

250x200x130 1st pass: 15/30

2nd pass: 2/30

9

Cu all species


Transition

outside Cu envelope

Western

130x100x17

1st pass: 15/30

2nd pass: 2/30

5

Cu all species


Transition

outside Cu envelope

Eastern

160x135x17 1st pass: 15/30

2nd pass: 2/30

5

Cu all species

Hypogene

outside Cu envelope

225x200x60 1st pass: 15/30

2nd pass: 2/30

9

Au

all domains

outside Au envelope

250x200x130 1st pass: 15/30

2nd pass: 2/30

9

Note: for the 2nd kriging pass the search ellipse dimensions are taken equal to three times the 1st pass search ellipse

dimension 17.9 DENSITY ASSIGNMENT

AQM has completed an extensive bulk density measurement campaign and the database comprises 753 measurements within the estimated area. Details on the measurement procedure are given in Section 12.6. The density data was analysed by mineralogical zone and geological coding. Figure 17-31 illustrates the variation of density measurement values according to the relative “unfolded” elevation per mineralogical domain and lithology. It is clear from the graph that the density increases with depth in the Hypogene zone.



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Average density data were applied to the model blocks based on mineralogy and geological coding of each individual block. The average density values used are presented in Table 17-7. but, in the Hypogene zone, the increase of density with depth observed was reproduced in the model for the Zafranal diorite, microdiorite and volcanics using linear equations as illustrated in Figure 17-32 rather than using average values. Figure 17-31 Variation of Density Measurements with Relative Depth per Mineralogical Zone &

Lithology

‐500

‐400

‐300

‐200

‐100

0

100

200

1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1

Relative

Z

Bulk Density t/m3

Leachedcap‐ZafDio

Leachedcap‐MDio

Leachedcap‐Volc

Oxide‐ZafDio

Oxide‐MDio

Supergene‐ZafDio

Supergene‐MDio

Supergene‐Volc

Transition‐ZafDio

Transition‐MDio

Transition‐VC

Hypogene‐MDio

Hypogene‐ZafDio

Hypogene‐Volc




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Table 17-7 Average Bulk Density

Lithology & Mineralogy Leached cap Oxide Supergene Transition Hypogene

code 1000 2000 3000 4000 5000

Zafranal Diorite 100 2.36 2.39 2.50 2.59 f(Z)

Microdiorite 200 2.36 2.41 2.53 2.63 f(Z)

Late Quartz Diorite 300 2.22 2.26 2.67 2.67 2.74

Post Mine. Diorite 400 2.47 2.58 2.58 2.58 2.58

Volcanics 500 2.30 2.35 2.53 2.60 f(Z)

Gneiss 700 2.36 2.41 2.53 2.63 2.73

Dry Diorite 800 2.70 2.70 2.70 2.73 2.73

Monzodiorite dyke 900 2.14 2.43 2.72 2.72 2.72

Figure 17-32 Variation in Average Bulk Density Measurements with Elevation in Hypogene

17.10 MODEL VALIDATION

The grade models were extensively validated visually, comparing bench composites to block data on sections and plans. Examples of sections are presented below. Coherence between the various copper species was checked. Additionally, statistical checks on the block model and comparison with the input data within the grade envelopes were completed. These verifications indicate that the copper models and the gold model provide a good representation of the Zafranal mineralisation, both in terms of grade averages and grade spatial distribution within the grade envelopes. The grade trend plots presented in Figure 17-35 for the CuTotal model in the supergene and hypogene zones confirm that grade models were interpolated correctly from the input drillholes, and that no systematic bias is present in the models.

y = ‐0.0003x + 3.4733R² = 0.803

y = ‐0.0005x + 3.8646R² = 0.7428

y = ‐0.0004x + 3.6721R² = 0.7267

2.3

2.4

2.5

2.6

2.7

2.8

2.9

2000 2100 2200 2300 2400 2500 2600 2700

Bulk Density t/m

3

Elevation m

Hypogene‐ZafDio

Hypogene‐MDio

Hypogene‐Volc

All Hypogene

Linear (Hypogene‐ZafDio)

Linear (Hypogene‐MDio)

Linear (Hypogene‐Volc)



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Figure 17-33 December 2010 CuTotal Resource Model – Long Sections with Drillhole Data & Block

Model

Section 8224200N

Section 8224300N

Section 8224350N

Section 8224400N

Legend CuTotal



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Figure 17-34 December 2010 CuTotal Resource Model – Sections with Drillhole Data & Block Model

Section 793300E Section 793400E

Section 793500E Section 793600E

Legend CuTotal



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Figure 17-35 Grade Trends – Input Drilling Data & Output Grade CuTotal Model – Average Grade

per Easting

17.11 RESOURCE CLASSIFICATION

The Zafranal resource was classified within the context of the Canadian Securities Administrators National Instrument 43-101 (NI 43-101), with consideration of the following criteria:

Quality and reliability of the drilling data (sampling, surveying & assaying)

Drillhole spacing

Confidence in the geological interpretation

Grade continuity observed within the deposit and quantified by the variography

Number of samples and drillholes used to interpolate blocks within the estimation searches

Overall quality of the grade estimate

Amenability of the material to be economically treatable under proven techniques. Extensive visual validation of the resource estimate, results of the kriging neighbourhood analysis based on the spatial characteristics of the mineralisation and a drillhole spacing study supports a classification of the resource based on drilling density and the mineralogy of the material. The current 100 m drill fences allows defining an Indicated resource where the resource is interpolated with a minimum of 3 drillholes within the search ellipse defined from the variography (1st pass kriging). Material extrapolated, i.e. on the periphery of the mineralised body and/or from less than 3 drillholes and/or estimated during the second kriging pass is coded as Inferred. Three limited areas within the Supergene zone where drilling is oriented in the east-west direction and infills the 100m spaced north-south drill fences allowing for close-spaced information has been classified in the Measured category.

0.00

0.20

0.40

0.60

0.80

1.00

1.20

792 900 793 100 793 300 793 500 793 700 793 900 794 100 794 300 794 500 794 700 794 900 795 100 795 300

Cu

To

tal

%

Easting

Supergene Data Supergene Model

Hypogene Data Hypogene Model



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Visual review of estimated blocks showed that while some isolated pockets of mineralisation occurred outside of the CuTotal envelope, they were generally isolated and at depth, and unlikely to be mineable. Accordingly, only mineralisation estimated within the CuTotal envelope has been classified and reported. The classification criteria chosen result in the following for the resource reported at a 0.2% CuTotal cut-off grade:

the Measured category is limited to 5% of the total resource and occurs in the Supergene mineralisation

81% of the Zafranal resource has been classified in the Indicated category

the Inferred material mostly corresponds to Hypogene mineralisation along the border of the Cu envelopes and within deep extensions defined by limited drilling

Three long sections presented in Figure 17-36 illustrate the classification coding for grade estimates. Figure 17-36 Resource Classification – Long Sections

Section 8224250N 50m – red=measured, green=indicated, purple=inferred

Section 8224350N 50m - red=measured, green=indicated, purple=inferred

Section 8224450N 50m - red=measured, green=indicated, purple=inferred



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17.12 RESOURCE REPORTING

The December 2010 Zafranal resource model is reported below by resource category for various CuTotal cut-off grades and mineralogical categories.

Mine planning work by AMEC Minproc indicates that using a copper price of $2.00/lb and gold price of $800/oz, the resource would define a pit shell suitable for open pit mining. This work resource demonstrates reasonable prospects for economic extraction. The work suggests that the 0.2% total copper cut-off grade is reasonable.




Mt

% Total Tonnage

CuTotal %

CuCN %

CuS %

Au g/t

Measured 17 5% 0.93 0.71 0.12 0.09

Indicated 284 81% 0.44 0.19 0.05 0.08


Inferred 51 14% 0.32 0.06 0.02 0.06

Note: CuCN corresponds to ALS Cu-AA16S cyanide soluble copper grade, CuS corresponds to ALS Cu-AA06S weak sulphuric acid soluble copper grade


Cut-off Grade by Resource Category & Mineralogical Domain


Mt CuTotal

% CuCN

% CuS

% Au g/t

Measured

Supergene 17 0.93 0.71 0.12 0.09

Indicated

Leached cap 9 0.25 0.06 0.05 0.13

Oxide 7 0.39 0.02 0.23 0.15

Supergene 95 0.68 0.50 0.10 0.08

Transition 15 0.43 0.14 0.03 0.09

Hypogene 158 0.31 0.03 0.01 0.08

Inferred

Leached cap 1 0.23 0.04 0.05 0.13

Oxide 0.7 0.35 0.02 0.20 0.12

Supergene 7 0.45 0.31 0.07 0.04

Transition 0.9 0.36 0.12 0.03 0.06

Hypogene 42 0.30 0.02 0.01 0.06

Resource reports at different cut-off grades for Measured+Indicated, and Inferred material are presented in Table 17-10 and Table 17-11 with the grade-tonnage diagrams for the Measured+Indicated material in Figure 17-37.



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Table 17-10 December 2010 Model Resource Report within the Cu Envelope – Measured+Indicated


Tonnage Mt

CuTotal %

CuCN %

CuS %

Au g/t

1.0 19 1.30 0.99 0.19 0.12

0.9 27 1.20 0.91 0.17 0.11

0.8 37 1.11 0.84 0.15 0.11

0.7 49 1.02 0.76 0.14 0.11

0.6 67 0.92 0.67 0.13 0.10

0.5 89 0.82 0.58 0.11 0.10

0.4 122 0.72 0.47 0.10 0.10

0.3 200 0.57 0.32 0.07 0.09

0.2 301 0.47 0.22 0.05 0.08

0.1 313 0.46 0.21 0.05 0.09

Table 17-11 December 2010 Model Resource Report within the Cu Envelope – Inferred


Tonnage Mt

CuTotal %

CuCN %

CuS %

Au g/t

1.0 0.1 1.08 0.69 0.10 0.06

0.9 0.2 1.02 0.60 0.09 0.05

0.8 0.4 0.92 0.49 0.08 0.05

0.7 0.7 0.83 0.48 0.09 0.05

0.6 1.5 0.73 0.44 0.09 0.05

0.5 3 0.63 0.33 0.08 0.07

0.4 8 0.52 0.21 0.06 0.07

0.3 21 0.41 0.12 0.04 0.07

0.2 51 0.32 0.06 0.02 0.06

0.1 53 0.31 0.06 0.02 0.06

Figure 17-37 Grade Tonnage Diagrams – December 2010 Resource Model – Measured+Indicated

Resource

Note that reporting is constrained within the 0.2% CuTotal envelope

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

0 50 100 150 200 250 300 350

CuTotal %

Tonnage Mt

0.7% cut‐off grade 49Mt @ 1.02%

0.4% cut‐off grade 122Mt @ 0.72% CuTotal

0.2% cut‐off grade 301Mt @ 0.47% CuTotal

0.7% cut‐off grade 49MT @ 1.02%

CuTotal0.4% cut‐off grade 122Mt @ 0.72%

CuTotal

0.2% cut‐off grade 301Mt @ 0.47%

CuTotal

‐0.2

0.1

0.4

0.7

1.0

1.3

1.6

0

50

100

150

200

250

300

350

0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

CuTotal %

Tonnage M

t

CuTotal cut‐off grade %



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17.13 MINERAL RESERVES

No mineral reserves were prepared from the December 2010 resource model. 18 OTHER RELEVANT DATA AND INFORMATION

No other information is required at this time.



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19 INTERPRETATION & CONCLUSIONS

The Zafranal property currently holds a Measured plus Indicated resource of 301 Mt @ 0.47% total copper at a 0.2% total copper cut-off grade in the Zafranal Main Zone. It was optioned by AQM Copper Perú SAC in May of 2009 from Teck. The option agreement was modified in July 2010 whereby AQM Copper Perú SAC vested a 50% interest by making additional expenditures totalling US$10.7 million and issuing Teck an additional 5 million shares. These commitments have now been fulfilled and the Project is run as a 50/50 corporate Joint Venture between TRL and AQM Copper Perú SAC.

The Zafranal Property is made up of six copper-gold prospects, namely the Zafranal Main Zone, Sicera South, Sicera North, Campanero, Ganchos and Rosario. AQM has focused its exploration on the Zafranal Main Zone

The Property was assembled by Teck between 2003 and 2007, during which time it drilled 36 drillholes on the Zafranal Main Zone and several exploratory drillholes on the other prospects. This programme identified significant supergene copper mineralisation on the Zafranal Main Zone

The geology of the Zafranal Main Zone is dominated by a sequence of Jurassic age volcanic and sedimentary rocks intruded by porphyritic diorite and microdiorite stocks and plugs. Later dioritic and aphanitic intermediate composition dykes and sills cross-cut the area. A complex set of EW and NW-SE reactivated faults appear to control hypogene mineralisation. Supergene copper mineralisation is only affected by late normal movements along these same faults

Copper mineralisation occurs as oxides, a laterally continuous 50-180m thick blanket of secondary enrichment and a large zone of primary mineralisation that remains open in all directions. Porphyry-style copper-gold mineralisation has been identified over a 3.3 km strike length, up to 600 metres in width and up to 400 metres in thickness

AQM has completed a first phase, 67,283.50 metre drill programme at the Zafranal Main Zone and a 5,529 metre RC exploratory drilling programme at its Sicera South and Sicera North targets

Scout drilling at the Sicera South and Sicera North targets has identified potentially significant hypogene copper mineralisation that could significantly increase the overall mineral inventory at Zafranal

The metallurgical testwork completed to date on individual and composite samples indicate that the Zafranal material has the following characteristics:

Bond abrasion indices varied from 0.09 to 0.22, increasing with depth, indicating a moderately abrasive material

Morell crusher work indices varied from 4.56 kWh/t to 10.9 kWh/t. The wide distribution indicates the coarse material varies from moderately soft to very hard at depth

Bond ball mill work indices fell in a narrow range between 9.86 kWh/t and 12.29 kWh/t indicating a moderately hard material for ball milling

From a SAG mill grinding perspective, the material varied from soft (3.81 kWh/m3) to moderately hard (9.37 kWh/m3) at depth

Copper recovery varied from 87.6% for supergene material to 91.4% for hypogene material

Gold recovery varied from 60.6% for supergene material to 74.5% for hypogene material



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Concentrate grade varied from 41.0% Cu for supergene material to 33.0% Cu for hypogene material, with no penalty elements above smelter limits

AMEC Minproc considers that AQM’s assay, drillhole survey, drillhole collar and geological data provide a reasonable representation of the geology and mineralisation of the Zafranal Project at the current drillhole spacing and study level

AMEC Minproc has completed a resource estimate of the Zafranal Main zone using a domain-controlled ordinary kriging. Three-dimensional solid modelling of mineralogical and lithological domains have been combined with a 0.2% total copper grade envelope to define, from the statistical analysis of the data, a domain model to control the variography and the estimation process

The resource model has been validated statistically and visually and AMEC Minproc considers that the December 2010 model provide a good representation of the Zafranal mineralisation, both in terms of grade averages and grade spatial distribution within the grade envelopes

The resource classification has been undertaken in compliance with the NI 43-101 and AMEC Minproc considers that the data is of sufficient quality to support an Indicated Resource classification in the most densely drilled portions of the deposit with limited infilled areas of Measured Resource

The resource at the Zafranal Main Zone, as of January 13th 2011 is as follows:



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Mt % Total

Tonnage CuTotal

% CuCN

% CuS

% Au g/t

Measured 17 5% 0.93 0.71 0.12 0.09

Indicated 284 81% 0.44 0.19 0.05 0.08


Inferred 51 14% 0.32 0.06 0.02 0.06

Note: CuCN corresponds to ALS Cu-AA16S cyanide soluble copper grade, CuS corresponds to ALS Cu-AA06S

weak sulphuric acid soluble copper grade 20 RECOMMENDATIONS

AQM has commissioned AMEC Minproc to complete a Scoping Study for the Zafranal Copper Project by end of 2011; it is planned that the study will include the following: Geology & Exploration

An additional 30 000 metres of diamond drilling for the Zafranal Main Zone in order to upgrade the classification status of resource and increase the Measured and Indicated component of the Zafranal Main Zone resource

An additional 30 000 metres of Reverse Circulation and Diamond drilling between the various satellite porphyry targets, in particular the Sicera North area, where exploratory drilling during 2010 identified a potentially significant hypogene copper target with a large alteration area

A complementary geophysical campaign on the satellite targets

Further detailed mapping of the Zafranal Main Zone and all of the satellite targets

Additional analytical QAQC independent laboratory checks assays The proposed budget for the geology and exploration activities is planned as follows: Table 20-1 Geology & Exploration Proposed 2011 Budget

Item Estimated Cost (US$)

Main Zone Drilling (28 500 m – all cost) $6 000 000

Sicera North Diamond Drilling (30 000m – all in cost) $6 300 000

RC Drilling on Satellites and Gravel Covered Areas (22 000m – all in cost)

$2 900 000

Geophysics on Satellite targets $200 000

Mapping & other Geological Studies $200 000

Total $15 600 000



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Metallurgical & Process It is recommended that the 2011 test programme be designed to more fully determine leach, flotation and comminution variability throughout the mineralisation - dependent on ore type and oxidation levels, quantify the extent of recovery variability- in order to generate a better understanding of the impact of mineralogy on recovery and evaluate the impact of copper mineralogy and ore variability with respect to hardness, competency and throughput, in alignment with the preliminary mine plan. It is planned that locked cycle flotation test work will be conducted, with both site bore water and sea water. It is recommended that the test programme be conducted on a mine plan weighted basis. It is anticipated that ore will be grouped into early mine life, mid-mine life and late mine life for detailed evaluation. The test work programme will be weighted towards the earlier mine life samples. Base conditions as developed in the 2010 test programme will be used for the flotation programme. A leach plan will be developed to evaluate sulphuric acid, and bacteria assisted leach options for oxide, leached cap and supergene ore types. Resource Modelling Following the completion of the additional drilling, the resource estimate of the Zafranal Main Zone will be updated for the 2011 Scoping Study. Additional resource analysis and estimation will include the following:

Update of the copper and gold estimates with the added 2011 drilling information

Estimation of the accessory elements S, Fe, As and Zn

Analysis and estimation of the CRU-31 test data to develop a relative hardness model for mine planning purposes

The satellite deposits will also be interpreted and modelled to arrive at a comprehensive total project resource encompassing the Zafranal Main Zone and the satellite deposits. Mining, Geotechnical, Hydrological/Hydrogeological, Environmental & Engineering Project work for these disciplines will continue over the course of 2011 to produce reliable information to scoping study level for the Zafranal Main Zone and the satellite deposits.



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21 REFERENCES

Clark, A.H., Farrar, E., Kontak, D.J., Langbridge, R.J., Arenas, M., France, L.J., McBride, S.L., Woodman, P.I., Wasteney, H.A., Sandeman, H.A., and Archibald, D.A., 1990, “Geologic and geochronologic constraints on the metallogenic evolution of the Andes of southeastern Peru”, Economic Geology, v. 85, p. 1520-1583 Panteleyev, A., 1995, “Porphyry Cu-Mo-Au in selected British Columbia Mineral Deposit Profiles, Volume 1 – Metallics and Coal, Lefebure, D.V., and Ray, G.E. Editors, British Columbia Ministry of Energy and Mines, Open File 1995-20, p 87-92 Quang, C.X., Clark, A.H., Lee, J.K.W. and Guillén, B.J., 2003, “40Ar/39Ar ages of hypogene and supergene mineralisation in the Cerro Verde-Santa Rosa porphyry Cu-Mo cluster, Arequipa, Perú”, Economic Geology, v. 98, p. 1683-1696 Quang, C.X., Clark, A.H., Lee, J.K.W. and Hawkes, N., 2005, “Response of supergene processes to episodic Cenozoic uplift, pediment erosion, and ignimbrite eruption in the porphyry copper province of Southern Perú”, Economic Geology v. 100 (1), p. 87-114 Rivera, F., León, J., Cano, O. and Huamán, M., 2010, “Controles de mineralizacion en el pórfido de Cu Zafranal, en el sur del Perú”, Congreso Peruano de Geología Scarbrough, J., 2009, “Informe Final Estudio de Magneto-Telúrica en el Proyecto Zafranal, Perú”, unpublished Internal Report for Minera Koritambo S.A.C. (AQM Copper), prepared by Zonge Geophysics, Antofagasta, Chile Smith, Russell, February 2010, “Zafranal Porphyry Copper-Gold Deposit Geologic Report, Southern Peru”, Internal Report prepared for AQM Copper Inc. Smith, Moira and Tejada, Walter, March 2004, “Report On Geology And Geochemistry Of The Zafranal Copper Porphyry Project, Southern Peru”, Internal Report prepared for Teck Cominco Perú S.A. Tejada, Walter, September 1st, 2005, “Final Report on the 2004 Zafranal and Sicera Drilling Programs”, Internal Report prepared for Teck Cominco Perú S.A.



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22 DATE AND SIGNATURE PAGES

This report titled “Technical Report” for the Zafranal Copper Project prepared by AMEC Minproc Limited for AQM Copper Incorporated was prepared and signed by the following contributors:



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23 ILLUSTRATIONS

A list of illustrations and tables is included in the Table of Contents at the start of the report.

Zafranal-43-101-Technical-Report.pdf

Documents

Transcript of Zafranal-43-101-Technical-Report.pdf