Proyecto Minero Magistral ffs 43-101

Samuel Engineering, Inc.SEWe Provide Solutions

Inca Pacific Resources Inc. Technical Report Magistral Property Feasibility Study

January 17, 2008


Inca Pacific Resources Inc. Technical Report Magistral Property Page 1

1.0 TITLE PAGE

1.1 Technical Report: Magistral Property Feasibility Study Submitted to: Inca Pacific Resources, Inc.

1.2 Mineral Project Location: The Magistral property is located in the Ancash

Department of Northern Peru.

1.3 Qualified Persons: Samuel Engineering, Inc. (Richard Kunter, QP, FAus IMM (CP), BS, MS, Metallurgical Engineer) Mine Development Associates, Inc. (Neil Prenn, PE, Mining Engineer, Steven Ristorcelli, P.Geo) Vector Peru (Scott Elfin, PE)

1.4 Effective Date of Report: January 17, 2008 Samuel Engineering, Inc. 8450 East Crescent Parkway, Suite 200 Greenwood Village, Colorado 80111-2816 Telephone: 303.714.4840 Fax: 303.714.4800



2.0 Table of Contents

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

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

4.0 INTRODUCTION AND TERMS OF REFERENCE ............................................. 13

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

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

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

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

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

5.5 GEOTECHNICAL REPORTS ..............................................................................17

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

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

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

6.2 MINERAL RIGHTS...............................................................................................19

6.3 SURFACE RIGHTS..............................................................................................24

6.4 ENVIRONMENTAL AND PERMITTING..............................................................25

7.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY... 33

7.1 ACCESSIBILITY ..................................................................................................33

7.2 CLIMATE..............................................................................................................34

7.3 LOCAL RESOURCES AND INFRASTRUCTURE ..............................................35

7.4 PHYSIOGRAPHY.................................................................................................34

8.0 HISTORY ............................................................................................................ 35

9.0 GEOLOGICAL SETTING.................................................................................... 36

9.1 REGIONAL GEOLOGY .......................................................................................36



9.2 LOCAL GEOLOGY..............................................................................................39

9.3 PROPERTY GEOLOGY.......................................................................................39

9.4 DEPOSIT GEOGRAPHY .....................................................................................44

10.0 DEPOSIT TYPES................................................................................................ 55

11.0 MINERALIZATION.............................................................................................. 56

11.1 MINERALIZATION EXPOSED AT SURFACE AND IN UNDERGROUND WORKINGS.56

11.2 MINERALIZATION IN MIXED ZONE AND INTRUSIVE ROCKS .......................59

11.3 MINERALIZATION IN PROGRADE AND DISTAL SKARN ...............................61

11.4 LATE STAGE QUARTZ-CALCITE-SULFIDE VEINS .........................................63

11.5 IMPLICATIONS TO MODELING .........................................................................64

12.0 EXPLORATION .................................................................................................. 66

12.1 TOPOGRAPHIC SURVEYS.................................................................................66

12.2 GEOLOGICAL MAPPING....................................................................................68

12.3 SURFACE SAMPLING ........................................................................................69

12.4 UNDERGROUND MAPPING AND SAMPLING..................................................71

12.5 GEOPHYSICAL STUDIES...................................................................................73

12.6 PETROGRAPHIC STUDIES................................................................................75

12.7 MINERALOGICAL STUDIES...............................................................................76

13.0 DRILLING ........................................................................................................... 77

14.0 SAMPLING METHOD AND APPROACH .......................................................... 81

15.0 SAMPLE PREPARATION, ANAYSES AND SECURITY................................... 82

15.1 SAMPLE PREPARATION ...................................................................................82

15.2 QUALITY CONTROL...........................................................................................82

15.3 SECURITY ...........................................................................................................87

16.0 DATA VERIFICATION........................................................................................ 88



17.0 ADJACENT PROPERTIES................................................................................. 89

18.0 MINERAL PROCESSING AND METALLURGICAL TESTING.......................... 90

18.1 REVIEW OF METALLURGICAL TEST WORK...................................................90

19.0 MINERAL RESOURCES AND MINERAL RESERVES ESTIMATES................ 92

19.1 MINERAL RESOURCE ESTIMATE ....................................................................92

19.2 MINERAL RESERVES.........................................................................................93

20.0 OTHER RELEVANT DATA AND INFORMATION ............................................. 95

20.1 PROJECT INFRASTRUCTURE AND SUPPORT FACILITIES ..........................95

20.2 TAILINGS STORAGE FACILITY.......................................................................101

20.3 WATER MANAGEMENT ...................................................................................103

20.4 SOCIOECONOMIC CONDITIONS ....................................................................104

20.5 PROJECT DEVELOPMENT ..............................................................................105

21.0 INTERPRETATION AND CONCLUSIONS ...................................................... 107

21.1 OPPORTUNITIES ..............................................................................................107

21.2 RISKS.................................................................................................................108

22.0 RECOMMENDATIONS..................................................................................... 109

22.1 MINING...............................................................................................................109

22.2 METALLURGICAL OPTIMIZATION..................................................................109

22.3 WATER TREATMENT .......................................................................................110

22.4 TAILINGS DAM CONSTRUCTION ...................................................................110

23.0 REFERENCES.................................................................................................. 111

24.0 DATE AND SIGNATURE.................................................................................. 118

25.0 ADDITIONAL REQUIREMENTS FOR ADVANCED PROJECTS.................... 119

25.1 MINING OPERATIONS......................................................................................119



25.2 RECOVERABILITY............................................................................................126

25.3 PROCESS DESCRIPTION ................................................................................127

25.4 MARKETS..........................................................................................................130

25.5 CONTRACTS .....................................................................................................131

25.6 ENVIRONMENTAL CONSIDERATIONS ..........................................................131

25.7 TAXES................................................................................................................132

25.8 CAPITAL AND OPERATING COST ESTIMATES............................................132

25.9 ECONOMIC ANALYSIS.....................................................................................133

25.10 CAPITAL PAYBACK .........................................................................................139

25.11 MINE LIFE..........................................................................................................139

26.0 ILLUSTRATIONS.............................................................................................. 140



List of Tables

Table 3.1 Magistral Mineral Resource Estimate ...............................................................11

Table 3.2 Magistral Proven and Probable Reserves ........................................................12

Table 4.1 Consultant Companies Commissioned for the Magistral Property Report ...................14

Table 6.1 Effects Related to the Project............................................................................29

Table 7.1 Average Monthly Meteorlogical Measurements ..............................................35

Table 12.1 Magistral Exploration History..........................................................................66

Table 12.2 Reference Survey Cordinates on the Magistral Property (after Acuña, 2001) .............68

Table 12.3 Geochronology of Magistral Rocks (after Kerr, 2004)...................................69

Table 13.1 Magistral Project Drilling Summary ................................................................79

Table 15.1 Types and Frequencies of QA/QC Samples Inserted in the 2005 Drill Campaign ........84

Table 15.2 2005 Standard Sample Data: WCM Cu113.....................................................86

Table 15.3 2005 Standard Sample Data: WCM Cu117.....................................................86

Table 15.4 2005 Standard Sample Data: GBM396-6C .....................................................86

Table 19.1 Magistral Mineral Resource Estimate .............................................................93

Table 19.2 Magistral Proven and Probable Reserves ......................................................94

Table 19.3 Magistral Mineralized Material Included in the Final Pit and Treated as Waste ...........94

Table 20.1 Tailings Dam Design Criteria.........................................................................101

Table 25.1 Magistral Ore Production Schedule..............................................................122

Table 25.2 Magistral Contractor Mining Fleet (Number of Units) .................................123

Table 25.3 Magistral Owner Mining Fleet........................................................................124

Table 25.4 Magistral Contractor Manpower....................................................................125

Table 25.5 Magistral Owner Mine Manpower..................................................................126

Table 25.6 Metals Prices Outlook 2011-2020 ..................................................................130



Table 25.7 Summary of Capital Costs .............................................................................132

Table 25.8 Average Life of Mine Operating Costs for the Magistral Mine and Concentrator.......133

Table 25.9 Base Case Sensitivities..................................................................................133

Table 25.10 Cost and Price Sensitivities.........................................................................134

Table 25.11 Capital Cost and Operating Cost Sensitivities ..........................................134

Table 25.12 Sensitivities on Recovery ............................................................................135

Table 25.13 Sensitivities on Grade ..................................................................................136

Table 25.14 Sensitivity of Molybdenum and Copper for Various Cases......................137

Table 25.15 LoM Base Case Cash Flow Financial Model ..............................................138



List of Figures

Figure 6.1 Map of Peru........................................................................................................19

Figure 6.2 Magistral Concessions .....................................................................................20

Figure 7.1 Mine Access Routes .........................................................................................33

Figure 9.1 Regional Geology and Structures ...................................................................38

Figure 9.2 Stratigraphic Column of the Magistral Property ............................................40

Figure 9.3 Geology of the Magistral Property ..................................................................41

Figure 9.4 Geologic Section Through the Magistral Property ........................................43

Figure 9.5 Geology and Drill Hole Locations (pre-2005 drilling) ....................................45

Figure 9.6 Locations and Ages of Intrusive Stocks in the Magistral Area ....................46

Figure 9.7 Section 1450NE Geology..................................................................................46

Figure 9.8 Example of Orpiment/Realgar Mineralization in Limestone..........................54

Figure 11.1 Quartz-Sulfide Vein Stockwork in Retrograde-Altered Skarn.....................59

Figure 11.2 Quartz-Chalcopyrite-Molybdenite Vein Stockwork in San Ernesto Intrusion.......61

Figure 11.3 Late-Stage Quartz Vein with Gray Sulfide Selvages....................................63

Figure 12.1 Polygonal Survey Line at Magistral...............................................................67

Figure 12.2 Rock Geochemistry in the Magistral Deposit Area......................................70

Figure 12.3 Sampling and Mapping of the San Ernesto and Arizona Drifts ..................72

Figure 12.4 Total Field Magnetic Map ...............................................................................74

Figure 13.1 Magistral Drill Plan Map..................................................................................78

Figure 20.1 Mine Access Routes .......................................................................................96

Figure 20.2 – Tailings Impoundment Storage Capacity ................................................102

Figure 25.1 Magistral Ultimate Pit....................................................................................121



3.0 SUMMARY

Inca Pacific Resources Inc. (IPR) commissioned Samuel Engineering, Inc. (SE) to complete a final feasibility study of its Magistral Project (Magistral or “the project”) and an independent Qualified Person’s Review and Technical Report. The purpose of this report is to support IPR’s news release of December 3, 2007. This report is based on the results of a recently completed feasibility study. The resource estimate for the feasibility study has been updated since the prefeasibility-level Technical Report completed by SRK Consulting and filed on SEDAR on November 2, 2006.

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

IPR is an established Canadian company that was incorporated in 1983. IPR owns 100 percent of the property through its Peruvian subsidiary company, Minera Ancash Cobre S.A. Magistral is a copper-molybdenum deposit with an anticipated mine life of approximately 15 years.

The Magistral property is located in the Peruvian Andes approximately 260 kilometers east of the seaports of Trujillo and Chimbote, and 450 kilometers north-northwest of Lima. The property is located at latitude 8°13'S and longitude 77°46'W in the District of Conchucos, Province of Pallasca, Department of Ancash. Elevations on the property range from 3,900 to 4,700 meters above sea level (masl).

In total, the Magistral property consists of 24 registered mining concessions, plus two that are currently in application. The total area of the registered concessions is 11,901.72 hectares, while the total of all concessions is 13,150 hectares.

Magistral will be mined as an open pit. At full production, the mine will supply 7 million tonnes of ore per year, an average of 20,000 tonnes per day for 365 days per year. Processing will be by crushing, grinding, and flotation to produce copper and molybdenum concentrates. Concentrate will be transported by truck to the seaport of Salaverry, near the city of Trujillo, where a facility will be constructed to store the concentrate and load it into ships for transport to overseas smelters.

The Magistral copper-molybdenum deposit is located near the northeastern end of the Cordillera Blanca, a region underlain mainly by Cretaceous carbonate and clastic rocks. Magistral stratigraphy is dominated by limestone of the north-striking, west-dipping Cretaceous Jumasha formation. In the late Tertiary, the Jumasha limestone was intruded by a quartz-monzonite stock. The intrusion has an irregular elliptical shape in plan with dimensions of about 600 meters east-west by 400 meters north-south, at about 100 meters below the surface.



The Magistral intrusion has been subdivided into three facies, named the San Ernesto, Sara, and H. The facies are distinguished by important differences in the style and intensity of alteration, quartz-sulfide veining, and copper-molybdenum mineralization.

The skarn surrounding the Magistral intrusion has been subdivided into three categories: distal skarn, which occurs outside the main skarn-limestone contact; skarn, a proximal phase that contains no dykes or sills; and mixed zone, a skarn phase that is intruded by numerous dikes or sills and lies adjacent to the main intrusive contact.

The most important and abundant copper-molybdenum mineralization occurs in stockwork and sheeted zones of quartz-sulfide veins that are most common in the border zone of the Magistral stock and near the intrusion/skarn contact, especially in the mixed zone. The dominant sulfides are pyrite, chalcopyrite, and molybdenite. These minerals are also disseminated in the wall rocks; however, where quartz-sulfide veins are absent, the copper and molybdenum grades are low. In the porphyry-style mineralization in the Magistral stock and the mixed zone, chalcopyrite and molybdenite occur together in quartz-sulfide veins and disseminated in wall rocks. Grades in two-meter core samples from the best-mineralized sections of the stock and the mixed zone can exceed 1.5% Cu and 0.15% Mo. The highest-grade copper mineralization in the deposit (ranging to over 5% Cu in individual two-meter core samples) forms mantos and lenses of semimassive chalcopyrite and pyrite in skarn. Less commonly, molybdenite also occurs in high-grade mantos in skarn, where Mo grades can exceed one percent in individual samples. As a rule, the copper mantos contain very little molybdenite, and the molybdenite mantos have low copper grades.

Copper-molybdenum mineralization has been adequately explored to approximately 300 meters below the surface in most parts of the Magistral stock and the adjacent skarn zones. Nevertheless, the section of the San Ernesto skarn zone above the valley level has not been adequately drilled. This is due to steep and rocky surface topography and the blocky landslide debris in this area, which have prevented construction of surface drilling platforms.

The deeper sections of the Magistral deposit are only partially explored by drilling. Since the first Anaconda drill program in 1999, the exploration approach by all operators has consistently confined the drilling to a pattern based on expected open-pit geometries. As a consequence, many holes were stopped short in copper-molybdenum mineralization, and in some cases this was in very good grade. The geological evidence provided by some drill holes in the western and northwestern sections of the deposit indicates that the Magistral mineralization, which at shallow depths is concentrated in the mixed zone and the outer shell of the Magistral stock, continues to depth to the west and northwest.

Between 1969 and 1973, Minera Magistral drilled 14 shallow underground drill holes totaling 1,287.8 meters. In 1999, 2000, and 2001, Anaconda drilled 76 diamond drill holes totaling 24,639.58 meters. In 2004, Ancash Cobre completed 34 drill holes, totaling 7,984.85 meters. In 2005, Ancash Cobre drilled 14,349.35 meters in 60 holes. In 2006 and 2007, Ancash Cobre drilled 25,295.85 meters in 165 drill holes. All the drilling has been surface core drilling with the exception of the work between 1969 and 1973.



Updated NI 43-101-compliant resource models were completed. The work was prompted by the 2006/2007 drilling. Resource models were completed for rock density, copper, molybdenum, arsenic, and silver; an antimony model was partially completed.

The new NI 43-101 mineral resource estimate is based on assay results from 65,214 meters of core drilling in 286 holes and at a 0.4% Cu equivalent cut-off is as shown in Table 3.1. Copper equivalent calculation of five to one reflects metal prices used in the prefeasibility study (Cu - US $1.20/lb, Mo - US $6.00/lb) with no adjustment for metallurgical recoveries and relative processing and smelting costs.

Table 3.1 Magistral Mineral Resource Estimate

Cutoff %CuEq

(1)

Tonnes Grade %CuEq

(1)

Grade % Cu

Tonnes Copper

Pounds Copper

Grade %Mo

Tonnes Molybdenum

Pounds Molybdenum

Grade g Ag/t

Ounces Silver

Measured 0.40 108,839,000 0.79 0.52 561,100 1,236,900,000 0.06 60,400 133,170,000 2.5 8,907,000

Indicated 0.40 86,716,000 0.74 0.51 441,800 974,000,000 0.05 40,700 89,660,000 2.6 7,349,000

Measured and Indicated

0.40 195,555,000 0.77 0.51 1,002,900 2,210,900,000 0.05 101,100 222,830,000 2.6 16,256,000 Inferred

0.40 55,399,000 0.67 0.55 305,400 673,300,000 0.02 12,900 28,335,000 1.5 2,624,000 1) Copper equivalent grade based on 5:1 molybdenum to copper ratio, Note this ratio was used for the cutoff grade 2) Copper equivalent grade based on 6.5:1 molybdenum to copper ratio, Note this ratio is based on the approximate long term price

ratio and differences in recoveries.

Based on the calculated block values after processing, smelting, refining, and royalty, an internal cutoff of $5.25 per tonne was used to calculate the project reserves. Measured and indicated blocks inside the final pit design become proven and probable reserves if they meet the cutoff grade criteria. Table 3.2 summarizes the proven and probable pit reserves.



Table 3.2 Magistral Proven and Probable Reserves

Class Material Tonnes % Cu % Mo g Ag/t % As g Sb/t % Cueq Value 000s $/tonne

Measured Porphyry 45,668.1 0.39 0.049 2.04 0.021 25.6 0.64 $15.53 Indicated Porphyry 6,672.1 0.37 0.041 2.33 0.019 21.0 0.57 $13.96 M + I Porphyry 52,340.2 0.39 0.048 2.07 0.021 25.0 0.627 $15.33 Measured Mixed 18,973.2 0.56 0.056 2.32 0.052 72.3 0.84 $18.62 Indicated Mixed 12,538.9 0.58 0.050 2.50 0.050 55.7 0.83 $18.35 M +I Mixed 31,512.1 0.56 0.054 2.39 0.051 65.7 0.84 $18.51 Measured Skarn 12,958.4 0.68 0.050 3.84 0.064 37.9 0.93 $20.20 Indicated Skarn 19,956.4 0.50 0.046 3.26 0.059 30.3 0.73 $16.11 M + I Skarn 32,914.8 0.57 0.048 3.49 0.061 33.3 0.81 $17.72 Measured All 77,599.6 0.48 0.051 2.41 0.036 39.1 0.73 $17.06 Indicated All 39,167.5 0.50 0.047 2.86 0.049 36.9 0.74 $16.46 M + I All 116,767.1 0.49 0.049 2.56 0.040 38.3 0.73 $16.86 Hi As Porphyry 251.6 0.29 0.028 1.99 0.139 62.2 0.43 Mixed 1,307.2 0.35 0.030 1.74 0.176 96.7 0.50 Skarn 1,627.1 0.30 0.036 2.60 0.308 78.6 0.48 Hi As All 3,185.9 0.32 0.033 2.19 0.241 84.7 0.49 M + I Total less Hi As 113,581.2 0.49 0.050 2.57 0.035 37.0 0.74 Magistral Reserves M + I Production Schedule 102,912.8 0.52 0.053 2.70 0.034 37.5 0.79 Material M + I Stockpiled Material 10,668.3 0.18 0.019 1.27 0.037 32.3 0.28

The Magistral Project has an estimated mine life of 15 years. The total estimated cost to design, procure, and construct the facilities described in this report is $401,333,526. The average annual LOM operating cost for the mine and concentrator is estimated at $56,979,979, or $8.305 per ton of ore. The net present value (NPV) at a discount rate of eight percent over the assumed mine life is $151,989,802. The IRR is 15.2 percent, and the payback is estimated at approximately 40 months.



The project development schedule is based on a duration of 36 months from the completion of the feasibility study to plant startup. The schedule has been developed through analysis of vendor quotations, contractor quotations, and historical data for similar high-altitude mining projects in South America. Certain key events must take place during a 13-month “at risk” period, prior to receipt of full project financing, in order to meet the planned date for project completion.

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

4.0 INTRODUCTION AND TERMS OF REFERENCE

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

Richard Kunter traveled to the Magistral site on August 18th and 19th, 2007. During this visit, he observed access roads and the transportation routes to the site, the general site location, location of the deposit and drill-hole locations, surface geology, and proposed location of the process and waste storage facilities. He also examined drill core at the site core storage warehouse.

In Lima, Peru, Mr. Kunter visited the offices of Inca Pacific Resources and Minera Ancash Cobre, where he viewed geological maps, prior study documents, and technical information.

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

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



Table 4.1 Consultant Companies Commissioned for the Magistral Property Report

Contributor(s) Independent

QP Consultant Section Title Paul Farley No (RK) SE 3.0 Summary Paul Farley No (RK) SE 4.0 Introduction Gordon Shepherd No (RK) SE 5.0 Reliance on Other Experts 6.0 Property Description Anthony Floyd No (RK) IPR 6.1 Location Anthony Floyd No (RK) IPR 6.2 Mineral Rights Anthony Floyd No (RK) IPR 6.3 Surface Rights

Thomas Furst No (SE) Vector 6.4 Environmental and Permitting Requirements

Thomas Furst No (SE) Vector 7.0

Accessibility, Climate, Local Resources, Infrastructure and Physiography

Anthony Floyd No (RK) IPR 8.0 History Steven Ristorcelli Yes MDA 9.0 Geological Setting Steven Ristorcelli Yes MDA 10.0 Deposit Types Steven Ristorcelli Yes MDA 11.0 Mineralization Steven Ristorcelli Yes MDA 12.0 Exploration Steven Ristorcelli Yes MDA 13.0 Drilling

Steven Ristorcelli Yes MDA 14.0 Sampling Method and Approach

Steven Ristorcelli Yes MDA 15.0 Sample Preparation Steven Ristorcelli Yes MDA 16.0 Data Verification Neil Prenn Yes MDA 17.0 Adjacent Properties 18.0 Mineral Processing

Richard Kunter Yes SE 18.1 Review of Metallurgical Test Work





QP Consultant Section Title

19.0 Mineral Resources and Mineral Reserves

Steven Ristorcelli Yes MDA 19.1 Mineral Resources Neil Prenn Yes MDA 19.2 Mineral Reserves Various 20.0 Other Relevant Data Scott Elfen Yes Vector 20.1.1 Haul Roads Scott Elfen Yes Vector 20.1.2 Site Roads Scott Elfen Yes Vector 20.1.3 Access Roads

Gordon Shepherd No (RK) SE 20.1.4 Power Supply and Electrical Distribution

Scott Elfen Yes Vector 20.1.5 Water Supply

Gordon Shepherd No (RK) SE 20.1.6 Sewage and Water Treatment

John Bell No (RK) MTB 20.1.7 Communications Gordon Shepherd No (RK) SE 20.1.8 Fire Protection Gordon Shepherd No (RK) SE 20.1.9 Security and Fencing Gordon Shepherd No (RK) SE 20.1.10 Site Ancillary Facilities

John Bell No (RK) MTB 20.1.11 Employee Housing and

Transportation Gordon Shepherd No (RK) SE 20.1.12 Port Facility John Bell No (RK) MTB 20.1.13 Offsite Offices Scott Elfen Yes Vector 20.2 Tailings Storage Facility Scott Elfen Yes Vector 20.3 Water Management

Thomas Furst No (SE) Vector 20.4 Socioeconomic

Conditions Gordon Shepherd No (RK) SE 20.5 Project Development

Gordon Shepherd No (RK) SE 21.0 Interpretation and Conclusions

Gordon Shepherd No (RK) SE 22.0 Recommendations All QPs 23.0 References All QPs 24.0 Date and signature pages 25.0 Additional Requirements Neil Prenn Yes MDA 25.1 Mining Operations Richard Kunter Yes SE 25.2 Recoverability Gordon Shepherd No (RK) SE 25.3 Process Description John Bell No (RK) MTB 25.4 Markets Gordon Shepherd No (RK) SE 25.5 Contracts





QP Consultant Section Title

Thomas Furst No (SE) Vector 25.6 Environmental Considerations

Gordon Shepherd No (RK) SE 25.7 Taxes David Weber No (RK) SE 25.8 Capital Costs John Bell No (RK) MTB 25.8 Operating Costs John Bell No (RK) MTB 25.9 Economic Analysis John Bell No (RK) MTB 25.10 Capital Payback Neil Prenn Yes MDA 25.11 Mine Life No (RK) SE 26.0 Illustrations

For contributors who are not Qualified Persons, the Qualified Person who has ensured that the information relied upon is sound is indicated in parenthesis: Richard Kunter (RK), Neil Prenn (NP), Scott Elfen (SE).

All qualified persons authoring this report visited the site.

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

resource estimate and all information presented relative to geology and mining. Mr. Prenn visited the site October 10th and 11th, 2006

• Scott Elfen, P.E., of Vector Engineering, is the Qualified Person with regard to geotechnical investigation and analysis, design of tailings and waste rock storage facilities, environmental and permitting, and socioeconomic conditions. Mr. Elfen visited the site October 10th and 11th, 2006

This report is based on information known to SE as of January 17, 2008. In preparing this report, SE relied on geological reports and maps, miscellaneous technical papers listed in the References section at the conclusion of this report, as well as the extensive experience of IPR personnel. The feasibility study and this Technical Report have built upon previous information on the Magistral property, including the most recent Technical Report, completed by SRK and filed on SEDAR on November 2, 2006.

All costs are stated in 4th Quarter 2007 US dollars unless noted otherwise.



5.0 RELIANCE ON OTHER EXPERTS

5.1 Disclaimer

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

This report is intended to be read as a whole, and sections should not be read or relied upon out of context.

This report contains the expression of the professional opinions of the contributors to this report and other consultants, based on information available at the time of preparation. The quality of the information, conclusions and estimates contained herein are consistent with the intended level of accuracy as set out in this report, as well as the circumstances and constraints under which the report was prepared, which are also set out herein.

5.2 Reliance on Other Experts

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

5.3 Land

IPR has provided copies of legal documentation regarding the mineral rights and surface use rights covering the Magistral Project.

Although SE is not a Qualified Person for assessing the validity of unpatented claims, IPR has completed a due diligence review of the claims and legal opinion regarding the land tenure provided by the law firm of Rodriguez-Mariategui & Vidal in Lima, Peru.

5.4 Permitting

The permitting requirements description contained in Section 6.4 of this report was provided by Vector Peru S.A. Vector has considerable experience providing environmental, permitting, and socioeconomic studies for mining projects in Peru.

5.5 Geotechnical Reports

Several geotechnical reports have been prepared for the project. Vector Peru S.A. completed geotechnical investigations and analyses for all areas outside of the open pit. Pit geotechnical investigation and analysis was conducted, and pit-slope design parameters provided, by Piteau Associates Engineering Inc.



5.6 Previous Technical Report

A prefeasibility-level Technical Report on the IPR property was prepared by SRK Consulting and filed with Sedar on November 2, 2006. Certain information from that report remains valid and is cited herein as indicated.



6.0 PROPERTY DESCRIPTION AND LOCATION

6.1 Location

The Magistral Project is located in the Peruvian Andes approximately 260 kilometers east of the seaports of Trujillo and Chimbote and 450 kilometers north-northwest of Lima. The property is located at latitude 8°13'S and longitude 77°46'W in the District of Conchucos, Province of Pallasca, Department of Ancash (See Figure 6.1). Elevations on the property range from 3,900 to 4,700 meters above sea level (masl).

Figure 6.1 Map of Peru

6.2 Mineral Rights

In total, the Magistral property consists of 24 registered mining concessions, plus two that are currently in application. The total area of the registered concessions is 11,901.72 hectares, while the total of all concessions is 13,150 hectares. Figure 6.2 is a map showing the coordinate points and boundaries of the Magistral concessions.



Figure 6.2 Magistral Concessions



The law firm of Rodriguez-Mariategui & Vidal in Lima, Peru, an independent law firm, provided legal opinions on land tenure in November 2005. At that time, the Magistral property consisted of 15 registered mining concessions registered to Ancash Cobre. The following summary of the legal description is based on that 2005 legal opinion:

According to the mineral title registry files, the property covers 5,776.03 hectares (Rodriguez-Mariategui, 2006). The Magistral 12, 13 and 14 concessions were staked over several much smaller and older concessions owned by other parties. These small concessions were staked and registered before the Catastro UTM coordinate-based system was introduced in Peru and so are irregular in shape.

The areas covered by each of these old concessions were originally determined by conventional surveying methods (at best), so their areas as recorded in the mineral titles registry are approximate.

AMEC (2004) made area measurements of the Magistral concessions and the older concessions using Arcview GIS calculations from UTM coordinates, and noted small discrepancies between its data and the areas recorded in the mining registry. Based on the AMEC Arcview GIS calculations, the Magistral property covers 5,807 hectares, excluding the concessions owned by other parties (AMEC, 2004). Notwithstanding AMEC’s findings, the area of coverage of each concession set forth in the mineral registry files determines the annual fees and/or penalties to be paid for each concession.

The Magistral 14 concession was staked over two previously existing concessions owned by Compañia Minera Aurifera del Sur S.A. These older concessions have an area of 35.99 hectares. The Magistral 13 concession surrounds a group of six older concessions owned by Compañia Minera Potosi S.A. that cover 257.01 hectares.

A 100-hectare property between the Magistral 12, Magistral 13 and Magistral 14 concessions is also held by Compañia Minera Potosi S.A. (AMEC 2004). All the concessions owned by Compañia Minera Aurifera del Sur and Compañia Minera Potosi S.A. were registered before the Inca Pacific concessions. None of these third-party properties impinges upon the Ancash Cobre Magistral resource.

The Magistral Concessions are subject to a Transfer of Ownership Contract (“transfer deed”) dated January 18, 2001, and an addendum between Ancash Cobre and Centromin dated August 27, 2004. The terms of the Transfer of Ownership Contract of those five Magistral Concessions are summarized below.

The five Magistral Concessions have a total contiguous surface area of 250 hectares. The Magistral copper-molybdenum deposit is located within these concessions.

According to the original transfer deed, Ancash Cobre was committed to put a mining-metallurgical project into production within five years of exercising the option (the deadline was January 8, 2006).

However, this transfer deed allowed Ancash Cobre the option to extend the January 8, 2006, deadline by up to two years, provided that the deadline date was changed to



December 31 of each extension year, and that penalties of $200,000 for the first year (until December 31, 2006) and $400,000 for the second year (until December 31, 2007) are paid. For each additional year requested, notice has to be given and payments made on or before December 31 of the previous Year.

Consequently, the first extension to December 31, 2006, was requested on December 16, 2005, and the first payment of $200,000 also was made on December 16, 2005 (Rodriguez-Mariategui, 2006). Under the terms of the original deed, by requesting these extensions and making the required payments, Ancash Cobre would be required to prepare and file a feasibility study for a 15,000-tonnes-per-day (tpd) mining operation by December 31, 2006, and a bankable feasibility study by December 31, 2007.

Pursuant to an addendum to the transfer deed, approved on August 27, 2004, an extension for a further four years was granted, subject to the payment of $400,000 for each year of the extension.

In each case, these payments are to be made by the end of the year preceding the year of extension (e.g., the payment for the extension year 2008 must be made on or before December 31 2007). The Addendum will lapse on December 31, 2011.

As a further consequence of the rescheduling provided for in the addendum, Ancash Cobre proved, before December 31, 2005, that it has expended over $1 million in exploration at Magistral in the years 2004 and 2005. In the opinion of the law firm Rodriguez - Mariategui & Vidal, Ancash Cobre spent at least $1 million in that period. Ancash Cobre has also made annual concession fee and penalty payments as required (Rodriguez-Mariategui, 2006).

The terms of the Transfer of Ownership Contract entered into by Banco Minero del Peru (now in liquidation), Centromin, and Ancash Cobre on January 18, 2001, and an addendum to the Transfer Deed entered into by the same parties on September 2, 2004, include the following provisions:

• Payment of $400,000 to Centromin at the date of execution of the Transfer Deed. • Submission of a technical-economic study to reveal the optimum production that

could be forecast for Magistral. This was a condition for obtaining the Transfer Deed from Centromin. The original study stated that a production rate of 25,000 tpd could be obtained. An amended study, based on the results of exploration work, was later filed stating that a mining rate of 15,000 tpd was preferred.

• Extension of the investment term by four years from December 31, 2007, until December 31, 2011, provided that payments of $400,000 are made before the start of each additional year.

• Payment of an Annual Retribution (RA), which must be made each year as of the beginning of commercial production. For the first five years the RA will be a minimum of 0.5 percent of the net value of sales. Commencing with the sixth year of production, the minimum RA will increase to 0.75 percent of net value of sales. The operator of the mine has to deliver the previous year’s audited financial statements or income tax return to Centromin on April 1st of each year after commercial production is achieved.



• Ancash Cobre shall spend a total of $1 million in exploration during 2004-2005 (until December 31, 2005).

• Not later than December 31, 2006, Ancash Cobre shall submit a feasibility study that shall establish the basic characteristics of the mining-metallurgical project, with a minimum capacity of 15,000 tpd.

• Ancash Cobre shall prepare and file a bankable feasibility study, and seek and obtain financial approval for the project not later than December 31, 2007. Centromin shall have 60 days to study and approve the bankable feasibility study, or to request more information. The bankable study will establish the total investment required for project development, and a schedule for construction of the mine. Ancash Cobre will be required to commit to an investment of at least 80 percent of the total capital expenditure required to build the mine.

• At the time of approval of the bankable feasibility study, Ancash Cobre shall submit a performance bond to Centromin. This collateral will cover expenditures up to 30 percent of the scheduled investment commitment for the first year, and it will be renewed up to an amount of 30 percent for the second year, minus the actual investment made in the previous year. This same procedure will apply every year until the completion of the scheduled investment commitment, on or before December 31, 2011.

The 15 Ancash Cobre mining concessions are part of UEA Magistral 2000, a grouping of mining concessions within a five-km radius as allowed by Peruvian mining law. The title date of the oldest concession in any UEA determines the date of commencement of obligations regarding production and investment, or the payment of penalties for nonperformance of these obligations. The five privatized Magistral concessions are the oldest concessions in the UEA Magistral 2000 (they were titled in 1934 to 1945).

However, they were privatized in January 2001, and according to Peruvian law they are not required to show evidence of minimum capital investments and mining production until 2007.

Ancash Cobre has taken the legal position that the other ten mining concessions in the Magistral UEA 2000 have exactly the same status as the privatized Magistral concessions and should not be required to show evidence of production, or become liable for penalty payments in lieu until 2007. The Ancash Cobre argument is based on the premise that since the Magistral concessions are the oldest in the Magistral UEA, all the other concessions are subject to the same conditions. Further, because the Magistral concessions, by law, are not required to meet obligations regarding production and investment, or the payment of penalties in lieu, until 2007, then all of the concessions in the Magistral UEA should be subject to the same requirements (Rodriguez-Mariategui, 2005).

This interpretation was in dispute at the highest mining administrative level, the Consejo de Mineria.

Pending the decision of the Consejo de Mineria, Ancash Cobre had made the required penalty payments for the Magistral 11 to 18, Marita Uno and Marita Dos concessions on an annual basis since commencing its obligation in 2001.



In 2006, the Consejo de Mineria ruled in favor of Ancash Cobre, and the company was reimbursed for the penalty payments made to date (Rodriguez-Mariategui, 2006).

Because the privatized Magistral concessions are already subject to an Annual Retribution (RA) based on net concentrate sales from the first year of production forward, Ancash Cobre has received an exemption from the new mining royalties that came into effect during 2004 (pers. comm., Luis Rodriguez-Mariategui, 2005.

Concession fees for mining concessions become due on January 1st of each year, and must be paid before June 30th of that year. If the titleholder fails to pay the concession fee for one year, it is permitted to pay it until June of the following year. If the titleholder accumulates two years without paying the concession fee, the mining concession will lapse (Rodriguez-Mariategui, 2005). Six-year-old mining concessions are required to pay an annual fine (Penalidad) of $6.00 per hectare. The payment is due at the end of the first semester of the seventh year after the mining concession was titled (i.e., June 30th). Titleholders are not required to pay the fine if they can prove that they have achieved a minimum production equal to $100 per hectare in the previous calendar year. No allowance has been made in the project cost estimate for these payments.

The fine can be avoided if the titleholder can prove that a minimum investment of ten times the applicable fine was made in the mining concession in the previous calendar year.

Samuel Engineering has not completed an independent review of the mineral titles or agreements to assess the validity of the stated ownership of the mining concessions, and has relied on the legal opinion of the law firm of Rodriguez-Mariategui & Vidal, Lima, Peru, as put forth in its documents dated September 2006.

6.3 Surface Rights

The surface overlying the Magistral Project is owned by different peasant communities (Comunidades Campesinas), mainly by the community of Conchucos. The Conchucos community held an assembly in which they unanimously approved granting a usufruct, or permission to use the land, to Minera Ancash Cobre S.A. A legal opinion from the law firm Hernandes & Cia. of Lima provides greater detail of this usufruct, as well as a translation of the minutes of the assembly.

The legal opinion states “…any community has the right to decide on its own on how to administrate and dispose of their community land. The communities may decide what kind of agreement they shall enter in connection with their own land. Other than the formality of having the resolution approved in assembly by two thirds of all the members of the community, there are no other obligations or limitations for selling or granting rights upon community land to third parties.”

The legal opinion concludes that; the community can sell its property or grant a usufruct to a third party, provided that it is approved by an assembly resolution by two thirds of its members. Difference between ownership and usufruct is mainly that the usufruct-holder cannot dispose or claim the good. The usufruct in favor of a legal entity, as a company, is possible for a maximum tern of 30 years. Term can be extended upon its expiration.



Usufruct agreement shall prevail over the non-imperative Civil Code regulations. This allows the parties to structure the usufruct agreement according to their needs. Usufruct for mining purposes is admissible, provided special provisions as to the activities to be performed are detailed in the usufruct agreement. Usufruct can be assigned/transferred and encumbered by the usufruct-holder, unless otherwise contemplated in the usufruct agreement. Content of the usufruct agreement shall be drafted in such a way that it shall reduce the risk of incurring in termination causes.

6.4 Environmental and Permitting

The Environmental and Social Impact Assessment (ESIA) for the Magistral Project forms the principal input for identifying baseline conditions and evaluating the impact of the project. Mitigation and closure plans, community relations policies and planning, as well as socioeconomic analysis have also been implemented in the ESIA to assist in promotion of the project. The ESIA is the basic document provided to the Ministry of Energy and Mines (MINEM) for evaluation and permitting.

The ESIA has been designed to satisfy requirements of Peruvian legislation and to comply with internationally accepted guidelines of social and environmental protection, such as the Equator Principles, followed by such organizations as the World Bank, International Finance Corporation.

The ESIA, at the time of writing this report, is in preparation with a scheduled submission date of March 1, 2008.

6.4.1 Legal Framework

The legal and institutional framework in Peru is represented by a number of authorities that have the jurisdiction to permit and regulate implementation of mining projects. The following authorities have such authority and are relevant to the Magistral Project:

• Ministry of Energy and Mines • Ministry of Agriculture • Ministry of Transportation and Communication • Ministry of Health • Ministry of the Interior • Ministry of Education • National Council of Environment • Regional and local governments

The legal framework applicable to the Magistral Project is outlined by the following laws and documents of environmental protection:

• General Environmental Law (Law 28611) • Law of the National System of Environmental Impact Assessment (Law 27446) • Regulation for the Environmental Protection for Mining and Metallurgic Activities

(Supreme Decree 016-93-EM)



• Guidelines for ESIA elaboration regarding Port Infrastructure (Directorate Resolution 012-2007-MTC-16)

• Guidelines for ESIA elaboration regarding wharfs, peers, and similar (Directorate Resolution 0283-96-DCG)

• Environmental Regulations for Electrical Activities ( Supreme Decree 029-94-EM) • Regulations for Public Consultation and Participation in the ESIA approval process

(Ministry Resolution 596-2002-EM/DM) • General Law of the National Environmental Management System (Law 28245) and

its correspondent regulation (Supreme Decree 08-2005-PCM) • National System of Evaluation of Environmental Impacts (Law 27466) • Regulation of Territorial Zoning and Urban Development (Supreme Decree 027-

2003-VIVIENDA) • Forestry and Wildlife Law (Law 27308) and its correspondent regulation (Supreme

Decree 014-2001-AG) • General Law of Campesinas Communities (Law 24656) and its correspondent

regulation (Supreme Decree 008-91-TR) • General Law of National Cultural Heritage (Law 28296); • Regulation of Archaeological Assessments (Supreme Resolution 004-2000-ED) • General Water Law (Law Decree 17752) and its correspondent regulations • National Ambient Air Quality Standards (Supreme Decree 074-2001-PCM) • National Ambient Noise Quality Standards (Supreme Decree 085-2003-MTC) • Maximum Allowed Levels for Liquid Effluents for Mining-Metallurgical (Ministry

Resolution 011-96-EM/VMM) • Maximum Allowed Levels for Gas Emissions (Ministry Resolution 315- 96-EM/VVM) • General Health Law (Law 26842) • Unified and Ordered Text of the General Mining Law (Supreme Decree 014-92-EM) • Jurisdiction and Opinion of INRENA (Supreme Decree 056-97-PCM, Supreme

Decree 061-97-PCM and Supreme Decree 038-2001-AG) • General Solid Wastes Law (Law 27314) and its regulations (Supreme Decree 057-

2004-PCM) • Closure Plan Law (Law 28090) and its correspondent regulation (Supreme Decree

033-2005-EM)

6.4.2 Permitting

The ESIA is submitted to regional and central offices of the MINEM. The central office in Lima is in charge of conducting the evaluation process. The General Directorate of Environmental Affairs is responsible for studying the document and coordinating its conclusions with other cooperating agencies. Depending on the location of the project and its characteristics, at least three other agencies will be involved in the evaluation of the ESIA (commonly, these are the Institute of Natural Resources, the National Culture Institute, and the Department of Agriculture).

The ESIA is publicized by placing an announcement in the leading newspaper of the region. A copy of the entire document is made available to all affected communities. The executive summary of the ESIA is made available via Internet on the MINEM website (see www.minem.gob.pe). Then, after 40 or more working days from the date of official



presentation of the document to the MINEM, the general public has a 30-day window of opportunity to communicate concerns, observations, and/or comments to the MINEM in written form.

The regulatory framework allows 60 days for the ministry to issue its observations or request additional information, which is then followed by a 30-day period for the company to respond. Two or more observation cycles are allowed. According to recent experience, the overall approval cycle lasts for approximately six months.

Once the document is approved, the concession to operate is issued. This step is followed by a site inspection by the MINEM. When construction is completed, permission to operate is issued.

6.4.3 ESIA Scope

The ESIA was developed to complete the following tasks:

• Identify environmental and socioeconomic resources that could potentially be affected by the project;

• Predict positive and negative effects and determine to what degree the negative effects can be mitigated;

• Quantify and evaluate the significance of the effects wherever possible; • Outline requirements for monitoring of the resources that could be affected by the

project; and • Provide a conceptual closure plan for the mine site and associated facilities.

In accordance with Peruvian legal requirements, and in keeping with the best international practices, the ESIA used the following tools and procedures to analyze and identify potential impacts:

• Quantitative and qualitative information regarding existing environmental conditions; • Tools and predictive methods to describe quantity and quality characteristics of

future environmental conditions; • Quantitative and qualitative evaluation of probability and significance of potential

effects, taking into account the factors of baseline conditions, management objectives, and the difference in opinions of the project developer and various groups of stakeholders;

• Evaluation of the influence of proposed design characteristics and management plans on potential adverse effects; and

• Assessment of potential residual effects and evaluation of their consequences for the environment.

Environmental and social design of the project was regarded as the key to develop mitigation strategy. To provide adequate evaluations of potential social and environmental impacts, the engineering design team worked closely with the environmental team during the project’s planning and development stages. The mitigation measures were developed in the beginning of the design process, which helped to maximize their effectiveness.



The spatial extent of the ESIA was defined by the key geography of the study areas, while the spatial extent of the effects has been determined by the project definition.

The environmental and social areas were selected for the ESIA in terms of the anticipated areas of influence. For the majority of the environmental disciplines, the studies were developed on regional bases (indirect effects) as well as on local bases (direct effects).

6.4.4 Baseline Studies

A detailed description of environmental and social aspects of the project area was developed; the studies began in 2002 and were completed in 2005. Most of the baseline studies were developed by local professionals. The studies included:

• Physical Components

○ Air quality ○ Climate ○ Geology, geomorphology, and geotechnical study ○ Soils and land use ○ Hydrology (surface and hydrogeology) ○ Landscape

• Biological Components

○ Flora and terrestrial fauna ○ Aquatic ecology

• Socioeconomic Components

○ Demography ○ Infrastructure analysis ○ Qualification of work force and commercial resources ○ Identification of stakeholders' groups ○ Transport ○ Local and regional development programs ○ Archaeology ○ Paleontology

6.4.5 Identification and Evaluation of Effects and Mitigation Measures

The environmental and socioeconomic impacts were identified by monitoring the area characteristics and comparing them with anticipated results caused by implementation of the project. In some cases (particularly in air and water study), models were developed to evaluate magnitude and extent of potential effects. The main effects and corresponding mitigation measures have been identified and are provided in Table 6.1.



Table 6.1 Effects Related to the Project

Component Type Of Effect Impact Agent Duration Of Effect Mitigation Measures

Mine

Ambient air quality Dust emissions Road transit; Exposed surfaces; Mineral grinding; Stockpiling of soils

Throughout construction and operation Irrigation with tankers

Ambient air quality Combustion by-products Vehicle operation; Operation of machinery

Throughout construction and operation

Continuous maintenance of vehicles and machinery

Physiography Terrain Alteration Land movement and ground level-off for component construction

Permanent Topsoil stockpiling

Soils and ground water quality Accidental spills of hydrocarbons and concentrate tailings Material management practices, particularly hydrocarbons; Concentrate tailings

Localized contamination Special storage areas for dangerous materials

Surface water quality Alteration of surface water quality; Surface water consumption.

General operation of the mine Throughout construction and operation Surface water control program

Groundwater quality Potential ARD development

Surface waste rock management facilities Long-term Drainage control and monitoring

Land and resource use Alteration to the landscape

Construction of different mining components Permanent

Topsoil stockpiling

Fauna Migration away from project site Increase in human presence, noise and light, traffic

Transitory Replacement of species upon closure

Flora Removal of vegetation Land movement for components construction. Transitory Rescue and removal of sensitive species Revegetation upon closure

Transport Additional road traffic Movement of trucks and other vehicles Throughout construction and operation Clear demarcation of road hazards, continue general upkeep and maintenance

Social and cultural context Immigration General operation of the mine Construction Community relations plan Social and cultural context

Social effects General operation of the mine Long-term Community relations plan

Worker health Air pollution; Dust; Noise All Throughout construction and operation Regulated use of personal safety equipment and continued monitoring of work environment

Highway Ambient air quality Dust emissions Road transit Throughout construction and operation Irrigation with tankers Ambient air quality Combustion by-products Vehicle operation

Throughout construction and operation Continuous Maintenance of vehicles and machinery

Physiography Terrain alteration Land movement and ground level off for construction

Permanent Topsoil stockpiling

Economy, employment and training Increase in demand and supply of labor General operation of the mine Throughout construction

Public facilities, utilities and services

Development opportunities General operation of the mine Long-term

Transmission Line

Ambient air quality Combustion by-products; Dust emissions

Vehicle operation; Operation of machinery;

Throughout construction and operation Throughout construction and operation

Irrigation with tankers; Continuous maintenance of vehicles and machinery



Ambient air quality Generation of electromagnetic field Transmission Line Operation Control Program Land and resource use Alteration to the landscape Construction of transmission line Permanent

Topsoil stockpiling

Fauna Migration away Increase in human presence, noise and light, traffic Transitory Replacement of species upon closure Flora Removal of vegetation Land movement for construction

Transitory Rescue and removal of sensitive species

Revegetation upon closure

Transport Additional road traffic and right of way Movement of trucks and other vehicles Throughout construction and operation Clear demarcation of road hazards, continue general upkeep and maintenance

Economy, employment and training Increase in demand and supply of labor General operation of the mine Throughout construction

Port

Transport Increase in sea traffic Ship Movement Throughout operation Increase ship traffic control and monitoring

Sea sediment Sediment removal Dredging Throughout construction and operation Water quality monitoring program Ambient air quality Combustion by-products Vehicle operation

Throughout construction and operation Vehicle maintenance program

Fauna Migration away from project site Increase in human presence, noise and light, traffic Transitory Replacement of species upon closure Water quality Water quality alteration General operation Throughout construction and operation Water quality monitoring program Waste generation Tires and other industrial wastes All Throughout construction and operation Waste disposal at authorized places Economy employment and training Increase in demand and supply of labor General operation of the port Throughout construction and operation Public facilities, utilities and services

Development opportunities General operation of the port Long-term



6.4.6 Community Relations Plan

In order to optimize relations between the community and the project, an integrated community relations program has been developed with the following objectives:

• Establishment of ties with community leaders to enhance understanding of social reality of the neighboring populations, their concerns and hopes for development;

• Disclosure and consultation regarding the technical and economic aspects of the project;

• Identification and establishment of mechanisms to support local development processes throughout and after project operations period; and

• Enforcement of the institutions through development of consensual programs based on mutual respect and transparency.

To achieve these objectives, the following activities have been planned and developed:

• Participation by local inhabitants in environmental studies during elaboration of the feasibility study;

• Disclosure and consultation, starting from the first community workshop and continuing throughout the project life; and

• Establishment of a development promotion program.

6.4.7 Public Consultation

Peruvian legislation recommends a minimum of three public consultation meetings during the elaboration of the ESIA. The initial meeting is designed to introduce the communities to the ESIA process, help them understand their rights and responsibilities, and to describe the baseline studies that form a part of the permitting process.

In order to reinforce and extend the dialogue to other affected communities, the same concepts and processes are described in a series of assemblies and meetings with authorities and local opinion leaders, municipal councils, and the owners or users of surface and water resources.

Information about the general characteristics of the project (scale, lifecycle, etc.), the complexity of the mining activity, and the relations that will be established with the local community are shared in each of these meetings. The emphasis is to facilitate access to information about how environmental and social data is gathered. The meetings also give citizens information about how they may participate, based on existing legislation. The legal obligations of the mining project’s owners, which were created to promote sustainable development of the areas affected by their operations, are outlined as well.

The participation of the local population is incorporated in the baseline studies, with community members participating in the field teams specializing in fauna, flora, water, and soils.



These experiences serve to develop better understanding among the communities about what an environmental impact study involves. Ongoing participation by the communities in the water quality monitoring program is recommended.

6.4.8 Environmental Management Plan

Inca Pacific Resources has committed to instituting an ISO 14001 certification (or equivalent) for the environmental management of the project. The implementation process and certification will begin once the authorities have granted permission to proceed with the project. This will provide a global mechanism to ensure that appropriate environmental management is maintained during the life of the mine. In addition to the international certification process, IPR has also developed an environmental management plan for the project. This plan comprises a chapter of the ESIA and includes:

• Detailed monitoring program for air, water, soil, biological, and social aspects • Mitigation plan (key elements summarized above) • Contingency plans



7.0 Accessibility, Climate, Local Resources, Infrastructure and Physiography

7.1 Accessibility

The property can be reached by land from either Trujillo or Chimbote, both of which are northern Peruvian seaport cities. It takes approximately six hours (approximately 425 km) to drive from Lima to Chimbote via the Pan-American Highway and an additional two hours (approximately 125 km) to reach Trujillo from Chimbote. The project will be accessed using the northern route that starts from Trujillo and passes through the communities of Simbal, Quiruvilca, Quesquenda, and Alto de Tamboras before finally reaching Magistral. Much of the route is made up of poor dirt roads that traverse steep mountainsides. Extensive road improvements and new road construction is planned for the project. The access routes are shown in Figure 7.1.

Figure 7.1 Mine Access Routes



7.2 Climate

The Magistral Project is located on the east side of the continental divide of the Peruvian Andes at an elevation of 3,700 to 4,500 masl. The site climatology is considered high mountain dry tundra (IGN 1989). The project is strongly affected by a microclimate that typically produces measurable monthly precipitation thoughout the year. The dry season (winter) is from May to October, and the wet season (summer) is from November to April. In dry years, rains may not begin until January.

In November 2004, Magistral installed a meteorological station to determine specific climate conditions on the project site. It has been collecting hourly measurements of precipitation, temperature, relative humidity, velocity and wind direction, barometric pressure, solar radiation, and evaporation. The meteorological data is collected by various sensors that are transferred to a data logger. A summary of the average monthly meteorological measurements at site is shown in Table 7.1.

The temporate climate will permit year round mining and processing operation.



Table 7.1 Average Monthly Meteorlogical Measurements

Month Rainfall

(mm) Evap. (mm)

Temp. ( C)

Max Mean Temp. ( C)

Min. Mean Temp.

( C) Relat. Humidity (%) Wind Speed

(m/s) Wind Direction

(deg)

Sun Light (hr)

Net Rad. (kW/ml)

Jan 121.2 74.0 6.4 11.0 3.4 73.1 2.7 SW 13:00 3.2 Feb 137.3 68.8 6.6 10.7 3.9 74.8 2.9 SW 12:30 3.1 Mar 252.9 74.3 6.2 10.0 3.8 77.6 2.5 SW 12:00 2.7 Apr 117.0 73.6 6.5 10.6 3.8 72.4 2.9 NNE/SW 11:45 2.8 May 36.2 97.6 6.1 11.1 2.2 61.9 3.2 NE 11:05 2.8 Jun 29.2 81.4 5.8 10.3 2.3 62.9 3.4 NE 11:00 3.3 Jul 8.0 135.3 5.8 10.7 1.8 46.9 4.1 NE 11:15 3.6 Aug 19.0 89.8 5.7 10.5 1.9 58.1 2.8 NE/NNE 11:45 3.0 Sep 46.4 97.2 6.0 11.0 2.3 63.6 3.4 NE 12:00 3.4 Oct 146.5 99.3 5.8 11.0 2.3 68.2 2.7 SW/NE 12:30 3.1 Nov 83.1 97.9 5.8 11.1 2.2 63.9 2.8 SW 12:55 3.3 Dec 182.9 127.4 5.9 10.3 3.0 74.8 2.6 SW 13:15 3.1

Annual 1191.2 1131.2 6.0 11.2 2.2 66.5 3.0 SW/NNE 12:05 3.1

7.3 Local Resources and Infrastructure

The Magistral Project is located in a remote mountain setting with few local resources and presently limited infrastructure. The closest town is Conchucos, which is a small village of only a few hundred inhabitants. There is limited lodging and some food services available in Conchucos. The nearest major cities are Chimbote and Trujillo on the Peruvian coast; however, the drive time to these cities on the very poor roads is extreme. New road construction and old road improvement to facilitate project development and trucking of concentrates will also enable faster and safer travel between the project and Trujillo. The influence of the project will also improve road infrastructure in and around Conchucos, which will result in an improved economy and greater resources.



Electrical power is not currently available; however, project plans include construction of a power line to bring power into the site. Hydrological studies have indicated that sufficient water exists in the area of the site for all project needs. The local available workforce is small and oriented to agriculture; however, sufficient manpower should be available for labor and other low-skill jobs. Personnel for more highly skilled positions will need to be sourced elsewhere in Peru.

7.4 Physiography

The Magistral Project is located in a deep, U-shaped glacial valley at elevations between 3,900 and 4,700 masl. The mineral deposit, and thus the open-pit mine, is located at the closed end of the valley. Sufficient area exists below the pit area to construct the processing plant and ancillary facilities. A tailings dam will be constructed at the open, downstream end of the valley, and this will impound tails and surface water upstream toward the plant. Several suitable locations have been identified for proper storage of mine and other waste rock. See Figure 26.1.



8.0 HISTORY

The Pasto Bueno - Conchucos district, of which Magistral is a part, was known early in the colonial era as a gold-silver producing district. Early records report the production of 22,000 ounces of gold and 44,000 ounces of silver between 1644 and 1647 (Salazar Suero, 1997). The prominent outcrops of copper oxides at Magistral were probably known at this time, but the first modern records of exploitation date to 1915 when the Garagorri Mining Company built a small smelting furnace to exploit high-grade surface ores from shallow workings in the Arizona and El Indio outcrops. This operation continued until 1919.

In 1920, engineer D.H. McLaughlin of Cerro de Pasco Corporation conducted a thorough study of the deposit area, which included topographic and geologic mapping. A total of 854 meters of underground workings were accessible in 1920. The property was examined and explored intermittently between 1924 and 1953, mainly by representatives of Cerro de Pasco Corporation, but no records of large-scale exploration programs exist for this period. Cerro de Pasco purchased the Magistral concessions in 1950, but no significant work was done until 1969. From 1969 to 1973, Minera Magistral conducted a surface and underground exploration program that focused on copper-bearing skarn mineralization on the south side of Magistral valley, at and above the valley floor level. Buenaventura Ingenieros S.A. conducted a thorough evaluation of the Magistral deposit in 1980-1981.

In 1997, Minero Peru began the process to privatize Magistral by inviting open bidding. An option to purchase the titles to the five Magistral mining concessions was awarded to Inca Pacific on February 18, 1999. Inca Pacific agreed to a three-year, option-to-purchase agreement contract with Minero Peru S.A. In November 2000, Inca Pacific S.A. and Minera Anaconda Peru S.A. formed Ancash Cobre, as a holding company to carry out exploration and development at Magistral.

Anaconda completed 2,491.5 meters of diamond drilling in eight holes in 1999 and 6,167.7 meters in 19 holes in 2000. A further 15,980.38 meters in 49 holes were completed in 2001. In March 2004, Inca Pacific Resources Inc. acquired Anaconda Peru’s 51-percent interest in Ancash Cobre for $2.1 million, thus restoring its 100-percent interest in Magistral.

In 2004, Ancash Cobre completed a 7,984.85-meter, 34-hole, diamond drill hole program, a geotechnical review, and initiated environmental baseline studies. In 2005, IPR entered into a joint venture with Quadra Mining.

In 2005 Ancash Cobre (funded by Quadra) drilled 14,349.35 meters in 60 holes. In October 2005, Quadra withdrew from the joint venture and retained no interest.

In 2006 Ancash Cobre completed a 7,073.5-meter, 49-hole, diamond drilling program, and a positive preliminary feasibility study was issued by SRK in October 2006. In 2007, Ancash Cobre drilled 18,222.35 meters in 116 drill holes, prepared a new mineral resource estimate, and completed this final feasibility study.



9.0 GEOLOGICAL SETTING

This section of the report was taken from Sivertz, et. al. (2005).

The description of the regional geological setting in this report is compiled from descriptions by Glover (2000), Noblet (2000), Ramos (2005), Wilson, et. al. (1995) and Ancash Cobre geologists. Descriptions of the Magistral property geology, stratigraphy, structure, alteration, and mineralization by Allen (2000, 2001), Dick (2004), Glover (2000), Meinert (1999), Perello, et. al. (2000), and Ramos (2005) were incorporated into this report. David Kerr, at the request of AMEC, compiled a report on the deposit geology and prepared a proposal for the 2004 drilling program in collaboration with Pedro Ramos, Chief Geologist for Minera Ancash Cobre (Kerr, 2004).

9.1 Regional Geology

The Magistral property is near the northeastern end of the Cordillera Blanca, a region that is underlain predominantly by Cretaceous carbonate and clastic sequences. These units strike north to northwest and are folded into a series of anticlines and synclines with northwest-trending axes.

The Cretaceous sedimentary rocks are bounded to the east by an early Paleozoic metamorphic terrane composed mainly of micaceous schist, gneissic granitoid, and slate. The Cretaceous sedimentary sequence unconformably overlies these metamorphic rocks. The Cretaceous rocks are structurally overlain by black shale and sandstone of the upper Jurassic Chicama formation that were thrust eastward along a prominent regional structure. The Chicama formation was intruded by granodiorite and quartz diorite related to the extensive Cordillera Blanca batholith, which has been dated at 8.2 +/- 0.2 Ma (Dick, 2004).

The Cretaceous sedimentary sequence is divided into a lower member dominated by clastic sedimentary rocks (sandstone, quartzite, shale, and minor carbonate) and an upper, dominantly calcareous, member (limestone, marlstone, sandstone, and calcareous shale).

The clastic sedimentary rocks of the lower member include the Chimu, Santa, Carhuaz, and Farrat formations, which make up the Goyllarisquizga group. The upper calcareous units include the Pariahuanca, Chulec, Pariatambo, Jumasha, and Celendin formations.

Several major structural features are evident in the Cretaceous sedimentary rocks in the Magistral region, including anticlines, synclines, and thrust faults. The trend of the fold axes and the strike of the faults swing from northwest to north near Magistral (Dick, 2004; Figure 9.1).

The following structural description is taken from Dick (2004): “Regional-scale faults and folds constitute part of the imbricated tectonic unit of Wilson and Reyes (1967).



The leading edge of this unit is the Conchucos fault, and because the imbricate tectonics of the belt do not seem to have affected the basement, the structural setting of the region is considered to be thin-skinned, consisting of low-angle thrust faults and horizontal shortening in the order of 10 km east-west.

Numerous northeast-trending lineaments cut the low-angle features, resulting in disruption to fold axes, termination of folds, the alignment of intrusive bodies along them, and appear to have had an affect on the position of Quaternary-age glacial valleys.



Figure 9.1 Regional Geology and Structures



9.2 Local Geology

On the district scale, the structural setting is complex, characterized by low-angle inverse faults and upright to overturned north-striking folds. The Huacchara fault forms a major break in the stratigraphy to the east and west and is the predominant structural feature in the area of the property, with a vertical displacement estimated to be at least 1,000 meters. This fault strikes north and dips about 60º to the west, juxtaposing quartzites of the Chimu formation against the carbonate-dominant Jumasha formation. The Huacchara fault is one of the most important structures in the district, and can be traced for over 25 km from Magistral toward the north.

East of the Huacchara fault, the stratigraphy is predominantly in a series of tight, thrust-folded anticlines and synclines with axes striking and dipping to the northwest and limbs dipping between 10 and 50º. Between Laguna Pelagatos and Magistral, a large overturned fold, which is related to the Huacchara fault, is cored by the Pariahuanca, Chulec, and Pariatambo formations, suggesting that the stratigraphy at Magistral, and in particular the skarn-hosting Jumasha formation, may be overturned as well.

The reverse faults in the area of Magistral vary between high-angle and low-angle, the latter constituting bedding plane thrusts striking northwest and affecting primarily the Jumasha and Celendin formations.

West of the Huacchara fault, the structural setting is similar, consisting of a large synclinal fold with an arcuate axis, striking approximately northeast.

Geological work in the area (Wilson and Reyes, 1967; Noble et. al., 1990; Wilson et. al., 1995; and Benavides-Caceres, 1999) documents several stages of deformation, ranging in age from upper Cretaceous to Miocene. Red beds of the Chota formation situated south of Magistral have been dated at 50-44 Ma (Noble et. al., 1990) and discordantly overlie Cretaceous calcareous rocks, evidence of a pre-Eocene event. Since the red beds are folded and included in thrust faulting, a younger tectonic event is also indicated. The roughly east-west trending alignment of intrusive stocks in the region of Magistral indicates that preintrusive structures had an affect on the location of intrusions.”

9.3 Property Geology

Glover (2000c), Noblet (2000), Dick (2004), and Ramos (2005) provided overviews of the property geology, and these form the basis for the following section. Figure 9.2 presents a stratigraphic column for the Magistral property and Figure 9.3 illustrates the geology of the Magistral property.



Figure 9.2 Stratigraphic Column of the Magistral Property



Figure 9.3 Geology of the Magistral Property



The main lithologies can be separated into two principal domains divided by a regional north-south striking thrust fault, named the Huacchara fault. The stratigraphy on the east side of the fault is dominated by the Jumasha formation, but contains some units of the Celendin formation. The easternmost part of the property is underlain by strata of the Pariahuanca, Chulec, and Pariatambo formations, comprised of sandstones, marls, and black shales of Cretaceous age.

The Jumasha and Celendin formations are Cretaceous in age. The Jumasha is composed mainly of medium-to thick-bedded limestone (Noblet, 2000). It includes four principal stratigraphic members with a total measured thickness of approximately 900 meters and is the principal host to skarn mineralization at Magistral. The Celendin formation outcrops mainly in the walls of the hanging valleys to the northeast of the Magistral deposit. It comprises units of gray marlstone, calcareous shale and thinly bedded limestone, and has a stratigraphic thickness of at least 300 meters (Noblet, 2000).

A complete section of the regional stratigraphy is exposed on the west side of the Huacchara fault (Section A-B on Figure 9.4). The lowermost unit is a quartzite member of the Chimu formation, overlain by the Cretaceous (Aptian) clastic sequences of the Santa, Carhuaz and Farrat formations (Dick, 2004 after Noblet, 2000). These units are overlain by the Pariahuanca, Chulec and Pariatambo formations, which are, in turn, overlain by the Jumasha and Celendin formations.



Figure 9.4 Geologic Section Through the Magistral Property



Intrusive rocks are represented by small stocks and dikes of Miocene diorite to quartz monzonite composition. The intrusions, including the Magistral stock, were emplaced along a northeast-trending zone extending along the Magistral valley. (Dick, 2004).

Thick accumulations of unconsolidated gravel, lacustrine deposits, and talus are found at lower elevations, and are related to fluvioglacial and lacustrine environments associated with alpine glaciation and earthquake activity.

The massive blocky talus on the southeast side of the Magistral valley (Arizona and El Indio areas) is the result of landslides caused by the 1946 earthquake (Sassarini, 1973).

9.4 Deposit Geography

The stratigraphy is dominated by the Jumasha formation limestone, which generally strikes north and dips west. The limestone was intruded by the Magistral stock (Figure 9.5 and Figure 9.6), a diorite to quartz monzonite intrusion with dimensions of about 600 meters east-west by 400 meters north-south at the 3,950-meter level. The upper surface or hanging wall of the stock plunges westerly at about -45º to -60º. During the emplacement of the Magistral stock, zones of metasomatic alteration, or skarn, were formed around its borders. Jumasha limestone, skarn, and intrusive rocks have been affected by normal and reverse faulting that caused displacements of 5 to 60 meters in all units.



Figure 9.5 Geology and Drill Hole Locations (pre-2005 drilling)



Figure 9.6 Locations and Ages of Intrusive Stocks in the Magistral Area

To support the descriptions of deposit geology, this report includes cross sections from the same northeast lines used in previous technical reports by AMEC (2004) and Dick (2004). This allows direct comparisons between the 2005 drilling and earlier work. Figure 9.7 presents sectional illustrations.



Figure 9.7 Section 1450NE Geology



9.4.1 Lithology

Stratigraphy

Well-bedded, dark-gray recrystallized micrite limestone of the Jumasha formation is the principal sedimentary rock, but the limestone sequence also contains thin beds of calcareous shale, siliceous carbonate sediment, and recrystallized sandstone. The sedimentary rocks dip to the west at approximately 45º.

The limestone becomes progressively more bleached of its carbon content as the Magistral deposit alteration zone is approached. Toward the intrusive, a sharp contact generally separates unaltered limestone from metasomatically altered rock or skarn. Distal bodies of skarn can occur in limestone up to 150 meters outboard of the main skarn contact. Remnants of limestone or marble within the alteration aureole of the Magistral deposit are usually bleached white, and are generally coarser grained than those outside the aureole.

Intrusive Rocks

The Magistral intrusive stock has an irregular elliptical shape in plan view, and measures approximately 600 meters east-west by 400 meters wide at the 3,950-meter elevation. At this level, the intrusion occupies approximately 0.24 km2 of area.

As shown on the northeast sections, the body appears to plunge toward the west at approximately -45º to -60º and is up to 350 meters wide orthogonal to the plunge axis. Drilling has fairly well bracketed the areal extent of the intrusive body near the present surface, although its shape and attitude below the 3,900-meter level are less well understood.

It should be noted that the evidence for a westerly plunge is provided mainly by the attitude of the hanging-wall contact, as drilled above the 3,900-meter level. Deeper drilling, cutting completely through the deposit, will be needed to confirm this orientation.

Based on postalteration textures and compositions, the degree of alteration, the density of veins, and the tenor of copper and molybdenum mineralization, three different facies of intrusive rocks have been mapped. These different rock types are often readily identifiable in hand specimen, but the distinguishing characteristics are secondary. Primary intrusive textures and compositional criteria do not serve to distinguish each facies because equigranular to porphyritic textures and diorite to quartz monzonite compositions are characteristic of the entire Magistral stock (Allen, 2001). The three facies distinguished in the field are named San Ernesto, Sara, and H. The H facies was named for its weakly mineralized nature.

The present writers and others consider the stock to represent one intrusive body, and the apparent textural and compositional differences among the intrusive facies mapped by Ancash Cobre field workers actually reflect variable intensities of hydrothermal alteration, veining, and sulfide mineralization (Glover, 2000; Dick, 2004), or possibly the effects of magmatic differentiation (proposed by Allen, 2001).



Based on the available field and petrographic evidence, the San Ernesto, Sara, and H intrusive facies are considered to be distinctive alteration facies and not separate primary phases of the Magistral intrusion, an interpretation that would not change the current resource estimate. More petrographic studies and field alteration mapping are required to resolve this question.

In this report, the field terms San Ernesto porphyry, Sara porphyry, H porphyry (or porphyry H), and Magistral porphyry, which are embedded in the Magistral literature, are used interchangeably with their equivalents San Ernesto facies, Sara facies, H facies, and Magistral intrusion. Both sets of terms serve in a general sense to distinguish the three main alteration/mineralization facies and to refer to the Magistral intrusion. In strict scientific usage, the general term “porphyry” is avoided in the contexts above because of its genetic and textural connotations.

The San Ernesto facies has the best-developed porphyry-style alteration and mineralization and is characterized by moderate to locally strong potassic and sericite-quartz alteration. Copper and molybdenum grades are higher than in the Sara and H facies, due to the greater incidence of quartz-sulfide veinlets associated with the sericite-quartz alteration. The Sara facies has weak potassic and phyllic alteration, and much weaker copper and molybdenum mineralization. The H facies has highly variable sericite-pyrite alteration.

One of the definitive characteristics of the H facies, allowing easy recognition in drill core, is the presence of dense stockwork and sheeted zones of late-stage, barren quartz veins. These veins are so closely spaced in some areas that they almost completely replace the original intrusive rock and earlier mineralized veins. These late-vein swarms also cut skarn, leaving a texture of angular silicified fragments and relict segments of skarn in a dense stockwork of translucent to white quartz veins.

A complex of porphyritic dykes and/or sills was emplaced into the Jumasha sediments, forming an intrusive-and-skarn zone (the mixed zone) primarily on the western, or hanging-wall side of the intrusive stock.

The mixed zone intrusions were emplaced prior to mineralization, and were likely coincident with the emplacement of the stock. However, intermineral dikes cutting the San Ernesto intrusion appear similar in texture and composition to the dikes or sills in the hanging wall of the stock, suggesting that later intrusive pulses continued after the main intrusive event. Low-angle, roughly bedding-parallel fault zones may have acted as zones of weakness along which the sills in the mixed zone were injected. Since the intrusive stock dips steeply to the west, subparallel to the dip of the Jumasha sediments, the emplacement of the entire intrusive body may have been guided by bedding plane faults (Dick, 2004).



San Ernesto Facies

The San Ernesto facies is the most important alteration facies in the Magistral stock. It hosts the greater part of the copper and molybdenum mineralization in the deposit, mainly in stockwork and sheeted zones of quartz-sulfide veins. Disseminated copper and molybdenum mineralization also occurs in the wall rock.

The dominant composition of the San Ernesto facies is quartz monzonite, but its quartz content and the ratio of orthoclase to total feldspar vary, so compositions range from diorite to quartz monzonite as orthoclase and quartz contents increase.

Some minor porphyritic phases, interpreted to have intruded the main porphyry, have quartz phenocrysts and a distinctly different porphyritic texture.

Textures range from medium-grained equigranular to porphyritic, with grains (in equigranular rocks) and phenocrysts ranging from 0.5 to five millimeters. Porphyritic varieties have a microcrystalline to granular groundmass of fine aggregates of quartz, potassium feldspar, and minor ferromagnesian minerals. The rock typically contains between 25 and 35 percent plagioclase grains or phenocrysts and up to 10 percent amphibole and biotite. Plagioclase and hornblende phenocrysts are subhedral to euhedral; biotite is anhedral.

The San Ernesto facies is characterized by moderate to locally strong hydrothermal alteration. The earliest alteration is calcium-silicate (clinopyroxene, tremolite/actinolite). This was followed by potassic (secondary biotite-orthoclase-quartz) and late, overprinting phyllic (sericite-pyrite) phases.

The San Ernesto facies locally contains well-developed systems of multidirectional quartz-sulfide veinlets. In drill core, veinlet densities can reach 30 to 40 per meter. In the Sara facies, the veins are similar but are much less frequent.

Sara Facies

The Sara facies is weakly altered and occupies the eastern part of the Magistral deposit where it is in contact with skarn in the Asturias, La Gringa, and El Indio areas. Like the San Ernesto, the composition ranges from diorite to quartz monzonite. Alteration in the Sara is weak to moderate potassic, with secondary biotite replacing amplibole and primary biotite. Zones of endoskarn are present near the contacts with exoskarn. The Sara facies is interpreted to be the core of the Magistral intrusion.

The central zone of the Sara facies has a coarse-grained equigranular texture, but border phases near skarn contacts are sometimes porphyritic. Phenocrysts comprise plagioclase (40 percent), hornblende (eight to 10 percent) and biotite (six to eight percent) in an interstitial matrix (or groundmass, in porphyritic phases) of plagioclase, potassium feldspar, quartz, amphibole, and biotite.



Copper-molybdenum mineralization occurs in sparse quartz-pyrite-pyrrhotite veinlets, and less commonly in quartz-calcite veins. Weakly mineralized zones of disseminated pyrite-pyrrhotite-chalcopyrite are also present.

H Facies

In the 2004 and 2005 drilling campaigns, “H porphyry” was a field term used to describe a strongly sericite-altered, intensely fractured, and quartz-veined intrusive rock. Some Ancash Cobre geologists considered it to be a distinct primary phase of the Magistral intrusion, but at the present time, it is believed that the H porphyry is a late alteration facies (H facies), characterized by abundant sericite and dense stockworks of barren to weakly mineralized quartz veins. The strong overprinting sericite alteration in the core of the H facies zones gradually weakens outwards and has very irregular gradational contacts with San Ernesto facies alteration. H facies alteration zones are present in the north-central (Chavin) and southwest (San Ernesto) sectors of the deposit, where they have the forms of irregular lenses near contacts between skarn and the main body of San Ernesto porphyry (Sections 1400 NE to 1600 NE).

The H facies characteristically has much lower copper and molybdenum grades than the San Ernesto and Sara facies, but the amount of copper and molybdenum mineralization is inversely related to the intensity of the alteration and, particularly, to the volume of barren quartz veins.

The strong texture-obliterating H facies sericite alteration most commonly occurs overprinting potassic and propylitic alteration of the San Ernesto facies. Another characteristic of the H facies alteration is the presence of stockwork and sheeted zones of overprinting weakly mineralized to barren quartz and quartz-calcite veins, sometimes with more than 40 veins of five to 20 millimeters per meter in drill core. The veins have strong silicified alteration envelopes. Vuggy textures are common, with cavities on the borders and in the cores of the veins. The veins are so closely spaced in some places that they almost completely replace the original intrusive rock and earlier mineralized veins. These late vein swarms are not restricted to the stock; in some areas adjacent to the intrusive contact they also cut skarn, forming rock composed of relict angular silicified fragments and blocks of skarn in a dense stockwork of translucent to white quartz and quartz-calcite veins.

Dikes and Sills

There are weakly altered, weakly mineralized, coarse-grained dikes that are most common in the peripheral areas of the Magistral deposit, including the mixed zone. They contain disseminated pyrite with minor chalcopyrite, and scarce quartz veinlets.

Alteration consists of propylitization and silicification. These dikes were probably emplaced in the later stages of the mineralizing process.

Andesitic to basaltic andesite subvolcanic dikes are scarce. Textures are aphanitic to porphyritic; some have phenocrysts of plagioclase, hornblende, or biotite. These unmineralized late dikes intrude all lithologies including Jumasha limestone.



9.4.2 Alteration

Several distinct styles of alteration are present in the Magistral deposit. Contact-metamorphic (metasomatic) alteration affected the Jumasha carbonate rocks during the emplacement of the Magistral intrusion, forming skarn within the thermal aureole of the intrusive. Endoskarn formed in the border zones of the intrusive complex and in peripheral dikes and sills. Postemplacement hydrothermal events caused widespread porphyry-style alteration in the intrusion and retrograde alteration of skarn. Fracture-controlled silica-pyrite-arsenic alteration in the main deposit, and bands of orpiment-realgar in unaltered limestone, are interpreted to postdate retrograde skarn alteration (Dick, 2004; Ramos, 2005).

Porphyry-Style Alteration in the Magistral Stock

The Magistral stock has undergone moderate to locally strong hydrothermal alteration. The earliest alteration is calcium-silicate (clinopyroxene, tremolite/actinolite). This is followed by potassic (secondary biotite-orthoclase-quartz) and late, overprinting phyllic (sericite-pyrite) phases. In the case of the H facies, very strong sericite alteration, with wall-rock silicification in strongly quartz-veined zones, overprints and destroys the textures and alteration of the preexisting San Ernesto facies.

Both potassic and quartz-sericite alteration facies are important hosts of copper-molybdenum mineralization, with potassic facies significantly more important volumetrically than the superimposed quartz-sericite facies. The H facies phyllic alteration, where best developed, is barren.

Argillic alteration is characterized by the development of quartz, green clay or sericite, and chlorite associated with weakly developed quartz veining. The argillic facies has replaced the original rock constituents and hosts only weak copper and molybdenum mineralization. Parts of the Sara facies and significant parts of the San Ernesto facies have been affected by argillic alteration.

The distribution of potassic alteration (commonly including secondary K-feldspar and biotite) in the Magistral stock is not well understood; there may be abundant secondary K-spar flooding of the rock groundmass in areas of intense potassic alteration.

Fine-grained potassium feldspar is very difficult to distinguish from fine-grained plagioclase and quartz in hand specimen. Sodium cobaltnitrite staining, a field test for potassium feldspar and a diagnostic test for potassic alteration, was never conducted at Magistral. Such testing would greatly aid the mapping of alteration facies in the Magistral stock.

Distal Skarn and Skarn

Skarn is developed at the contact between the Magistral intrusion and the Jumasha carbonate rocks. In many areas in the footwall of the Magistral stock, the mixed zone dikes are absent.



The skarn here is similar to the skarn lying outboard of the mixed zone in other parts of the deposit. Skarn near the intrusive contact is composed of clinopyroxene and red to brown garnet in varying proportions.

Garnet composition is intermediate between andradite and grossularite; pyroxene is inferred to be intermediate between hedenbergite and diopside (Allen, 2000). Toward the skarn-limestone contact, the proportion of green garnet and clinopyroxene often increases (Ramos, 2005).

Lenticular and irregular bodies of distal skarn are present in limestone well beyond the limits of the main skarn contact. Examples of distal skarn zones are San Blas, El Indio, La Gringa, and Asturias. These are green-colored skarns that contain green garnet, lesser brown garnet, abundant clinopyroxene, and minor quartz and wollastonite. Retrograde alteration is well developed in many distal skarns, generally in haloes bordering quartz-chlorite-epidote-calcite veins.

The distal skarns lying 50 meters or more from the main skarn front often have large garnet crystals that form a coarse mosaic with quartz-calcite-chlorite-magnetite or chalcopyrite-pyrite-magnetite filling the large interstices. In some cases, the copper content in these coarse-grained skarns can reach five percent or more. Such coarse-grained skarns may have formed from limestone with high porosity, perhaps including fossiliferous (bioclastic) beds.

Mixed Zone

The name “mixed zone” is given to a transitional zone of intercalated skarn and intrusive bodies that lies between the main intrusive and exoskarn. This zone contains bodies or lenses of skarn alternating with porphyritic (San Ernesto) and coarse-grained granitic (intermineral) dikes or sills. In drill core, the intrusive and skarn intervals have widths ranging from less than a meter to tens of meters.

In the mixed zone, skarn is composed mainly of red-brown garnet and clinopyroxene, and has a fine- to medium-grained granoblastic texture. Endoskarn is common in mixed zone intrusions. Retrograde alteration (typically, calcite-quartz-smectite-chlorite-clay, with K-feldspar-biotite-calcite in intensely altered zones) is widespread and locally intense. The intrusions in the retrograde skarn zones often have propylitic alteration overprinting earlier potassic and phyllic phases.

Both retrograde-altered skarn and intrusive rocks often have well-developed quartz-pyrite-chalcopyrite-molybdenite vein stockworks.

Endoskarn

Endoskarn is developed in the border zones of the Magistral stock, and in the intrusions in the mixed zone outboard of the main intrusive contact.

Endoskarn often has relict granitic or porphyritic texture, with primary plagioclase, hornblende and biotite and lesser red to brown garnet and pyroxene.



In well-developed endoskarn, primary texture is virtually obliterated by the development of red to brown garnet, pyroxene, and green garnet. Retrograde alteration (chlorite-smectite-calcite-clay) is present in endoskarn in the mixed zone.

Hornfels and Skarnoids

Hornfels and skarnoids are developed in thin beds of calcareous shale and siltstone that are interbedded with limestone. One specimen of skarnoid examined by Allen (2000) is composed of fine-grained calcite, quartz, a green clay / chlorite mineral, and minor apatite.

Late-Stage Alteration

A late-stage event of hydrothermal alteration is characterized by a very fine-grained mixture of dark-gray to black silica and pyrite that forms selvages on late-stage fractures in altered intrusives and skarn. These fractures can contain realgar, orpiment, and other arsenic minerals where they cut garnet-rich skarn and quartz-sericite-altered intrusive rocks. Where late-stage silica veins cut garnet-rich skarn, no retrograde minerals are present, indicating that the silica-arsenic event was much later than the formation of retrograde skarn alteration.

Orpiment and realgar also occur in unaltered limestone outside the outer limit of skarn, forming distinct bands within the limestone (Figure 9.8). In some cases, these bands contain 30 to 50 percent of these arsenic sulfides. Since there is evidence that the deposition of realgar postdated the formation of garnet skarn, it is most likely that the time of deposition of arsenic-rich mineralization in general was also after formation of skarn.



Figure 9.8 Example of Orpiment/Realgar Mineralization in Limestone

One interesting point noted by MDA while working on the 2005 resource models is that arsenic, antimony, and molybdenum occur in limestone country rock that is not mineralized by copper. Geological mapping and core logging have confirmed the presence of molybdenum, without significant copper, in weakly altered distal skarns well outside the main skarn contact. Arsenic is present in the banded zones of orpiment-realgar discussed earlier in this paragraph. Antimony minerals have not been observed to occur in limestone country rock. The presence of arsenic, antimony and molybdenum in country rock will be an important factor to consider in planning waste rock mining and disposal.

9.4.3 Structure Six principal low-angle or thrust faults have been recognized in the deposit area. The two named faults are the Keith Glover thrust and the San Ernesto fault (Ramos, 2005). These faults strike northerly and dip to the west at 25º to 45º. Where the San Ernesto fault intersects the San Ernesto adit, the San Ernesto fault strikes north and dips west at 40º to 55º and has a strike-slip displacement on the order of 60 meters (Ramos, 2005). Three major normal faults are also recognized: Chavin, B normal and C normal.

The best-defined fault is Chavin, which strikes north and dips subvertically. There are local vertical displacements of 5 to 50 meters along the plane of this fault (Ramos, 2005). There are also numerous smaller unmapped faults, which are marked by fracture and rubble zones in drill core. The attitudes of these minor features are not known.



10.0 DEPOSIT TYPES

The Magistral deposit is a calc-alkaline, copper-molybdenum, porphyry deposit with a well-developed envelope of copper-(molybdenum) mineralized skarn.

Vein stockwork and disseminated copper-molybdenum-silver mineralization is hosted by a hydrothermally altered, diorite to quartz monzonite stock and by zones of retrograde alteration in the enveloping metasomatized carbonate rocks.

A model for the Magistral porphyry/skarn deposit was proposed by Sassarini (1973), and this model was sunsequently refined by numerous workers.

The Magistral copper-molybdenum porphyry/skarn deposit is centered on a mid-Miocene diorite to quartz monzonite stock that intruded a sequence of upper Cretaceous carbonate rocks (the Jumasha and Celendín formations) that had been folded and thrust-imbricated during the late Eocene Incan Orogeny. The stock outcrops near the valley floor and the enveloping skarn is exposed on the valley walls, so a proportion of the original deposit was eroded (Kerr, 2004).

A very large copper-zinc skarn-porphyry deposit with similarities to Magistral is Antamina, 175 km to the southeast. The two deposits have similar structural and physiographic settings. The Antamina intrusive complex is composed of quartz monzonite; it consists of a main phase, associated with skarn formation and mineralization, and middle and late phases that form dikes and sills. The early and middle intrusive phases have copper- and molybdenum-bearing quartz vein stockworks; there are zones of molybdenum mineralization grading up to 0.1% Mo (Redwood, 1999). Important differences between the two deposits include the degree of erosion or unroofing, the ore metal assemblage, the age of the main intrusions (Antamina has been dated at 9.8 Ma, whereas Magistral has dates ranging from 14.6 to 15.3 Ma), the style of mineralization (Antamina is dominated by hydrothermal breccias, not porphyry-style stockwork), the proportion of endoskarn (abundant at Antamina but minor at Magistral), and possibly the depth of formation (Kerr, 2004).

The quantity and grade of mineralization at Antamina are not necessarily indicative of the quantity and grade of mineralization that exist at Magistral. Inca Pacific Resources Inc has no beneficial interest in the Antamina deposit.



11.0 MINERALIZATION

This Section of the report was taken from Sivertz, et. Al. (2005).

The Magistral deposit comprises three distinct styles of sulfide and iron-oxide mineralization:

• Porphyry-style veins and disseminations in wall rock. • Skarn-hosted mantos with interstitial disseminated to massive sulfides • Late-calcite veins and fracture-controlled silicification containing tetrahedrite-

tennantite, orpiment, realgar, possibly other sulfosalts, and Cu-As compounds (Glover, 2000, and Allen, 2001).

Veins and disseminated mineralization are similar in both intrusive rocks and skarn, and there is no apparent dependence on host rock type (Allen, 2001). There is no important supergene copper or silver mineralization at Magistral.

11.1 Mineralization Exposed at Surface and in Underground Workings

The largest outcropping mineralized zones in the Magistral skarn are named San Ernesto, Arizona, Sara (El Indio), and Chavin. The San Ernesto, Arizona, and Sara zones are actually segments of a continuous skarn deposit, which has been imbricated by postmineral faults (Sassarini, 1973). The outcrops of these zones now form a series of resistant knobs and steep bluffs extending 900 meters easterly along the south side of the Magistral cirque, at elevations of 4,100 to 4,360 meters. The Chavin (formerly Rio Tinto) zone, which outcrops as small scarps and bluffs at elevations of 4,100 to 4,190 meters on the northwest side of the cirque, 500 meters north of the San Ernesto zone, is probably also part of a continuous zone of mineralized skarn extending to the southwest and east. Small outcrops of mineralized distal skarn, including the La Gringa and Asturias zones, lie 500 to 800 meters east of Chavin, peripheral to the inferred trace of the eastern contact of the intrusive.

11.1.1 Chavin and La Gringa Zones

There is little information available describing underground exploration of the Chavin or La Gringa zones. An adit, now completely caved, was driven 35 meters on a heading of 300o in the Chavin zone. Sassarini (1973) reports that the “made by hand” adit was entirely within skarn, which was observed to contain a larger amount of molybdenite than in the San Ernesto and Sara zones. The Chavin zone outcrops are largely composed of coarse-grained brown garnet with lesser pyroxene, quartz, minor chlorite, and calcite (Sivertz 1999). Coarse-grained aggregates of pyrite with varying amounts of pyrrhotite, magnetite, and chalcopyrite occur in lenses, pods, and discontinuous bands in massive garnet skarn. Streaks of limonite and manganese oxides with malachite and azurite coat the outcrops in places, marking narrow, north-trending fracture zones.



Banded skarn at the west end of the zone appears to strike north-northeast and dip steeply west-northwest; slabs of massive garnet skarn at the east end strike northeast and dip steeply northwest. Narrow dikes and sills of quartz-rich hornblende plagioclase porphyry cut the Chavin outcrops.

A series of four panel samples collected from the Chavin zone outcrops during the Banco Minero evaluation returned copper values of 0.51% to 3.10% (Salazar Suero, 1997). A selected sample taken by the writer Sivertz from a north-striking, vertically dipping, silicified hornblende plagioclase dike containing quartz-sericite-pyrite-chalcopyrite veinlets assayed 1.09% Cu, 525 ppm Mo, 12 ppm Ag, and 25 ppb Au. Another sample of partially oxidized skarn with abundant pyrite, chalcopyrite, and magnetite assayed 3.08% Cu, 2250 ppm Mo, 17.4 ppm Ag, and 23 ppm Au (Sivertz, 1999).

At the La Gringa zone, 700 meters east of Chavin, small outcrops of skarn lie at elevations of 4,280 to 4,320 meters. Some of the outcrops consist of northwest-striking tabular bodies of massive skarn, which have the aspect of mantos. Quartz-feldspar porphyry dikes and sills are common in skarn and adjacent limestone, where they are often stained by malachite.

Minero Peru took two large panel samples in the La Gringa area (M-26, M-29), which assayed 0.19% and 0.14% Cu. The writer took a 50-cm2 panel sample from oxidized, pyritic skarn adjacent to a narrow quartz-feldspar porphyry dike; it assayed 1.19% Cu, 43 ppm Mo, 17.5 ppm Ag, and 32 ppb Au.

11.1.2 San Ernesto and Arizona Zones

Historically, the San Ernesto and Arizona skarn deposits are by far the most explored and best known. Although they have been explored for more than a century, little information prior to 1900 is preserved. Before surface diamond drilling began in 1999, knowledge of these deposits was based mainly on information compiled by Cerro de Pasco Corporation from 1920 to 1969 and data from the Minera Magistral exploration program of 1969-1973, with limited contributions from Buenaventura, Luis Salazar Suero, and Inca Pacific.

Minera Magistral explored the San Ernesto zone from 1969 to 1973. An adit was collared in a skarn outcrop a few meters above the valley bottom (elevation 4,100 meters) and driven east-southeast for 200 meters, east for another 70 meters, and then east-northeast for 108 meters, for a total of 378 meters. Crosscuts ranging from a few meters to 50 meters were driven at irregular intervals. The adit intersected massive skarn, composed of varying percentages of red-brown garnet and pyroxene with minor relict blocks of recrystallized limestone, to a point 270 meters from the portal, where the skarn is offset to the north by a north-trending, west-dipping fault zone. The skarn contains veinlets, irregular pods, lenses, and disseminated aggregates of pyrite, chalcopyrite, pyrrhotite, marcasite, and molybdenite, with minor amounts of sphalerite, galena, arsenopyrite, and magnetite.



East of the fault, the adit was driven through weakly developed skarn, recrystallized limestone and marble hosting a few narrow, northwest-trending bands of brown to green garnet skarn mineralized with pyrite and chalcopyrite.

11.1.3 Sara / El Indio Zone

The Sara adit, now partially caved and unsafe to enter, was collared at 4,155 meters elevation, approximately 55 meters above cirque level, at a point 535 meters east-northeast of the San Ernesto portal.

It was driven 300 meters on an east-southeast heading (117o) to intersect the El Indio skarn at depths of 100 to 150 meters below surface. The adit intersected strongly fractured quartz monzonite for 40 meters, and continued through more competent monzonite to the skarn contact at 190 meters from the portal.

The adit passed through faulted blocks of mineralized skarn and intrusive to 222 meters, and then into recrystallized limestone and marble with weak skarn mineralization. Crosscuts were driven to explore the faulted skarn zone at points 195 and 220 meters from the portal.

The south wall of the adit was channel sampled from 87 to 298 meters; the north wall was sampled only in the skarn zone from 189 to 222 meters. The individual samples in all cases were 1.5 meters long. Samples were also taken from both walls of the crosscuts.

The first series of samples in the adit, from 87 to 187.5 meters, was cut from weakly fractured quartz monzonite with localized zones of propylitic alteration, chloritization, and silicification. Sulfide minerals, including pyrite, pyrrhotite, and chalcopyrite were noted in narrow calcite veinlets (85 to 105 meters) and as coatings on joints and fractures (130 to 150 meters). Copper grades in sample blocks between timbered sections averaged 0.28% (from 87 to 118.5 meters), 0.38% (128 to 153.5 meters), 0.22% (160 to 176.5 meters) and 0.10% (181 to 187.5 meters). The copper grades vary with the style and intensity of alteration, which appear to be controlled by north- to northeast-trending structures (Sassarini,1973).

In the section from the intrusive contact at 190 meters to the limestone at 222 meters, fault blocks, irregular patches, and bands of weakly to strongly mineralized skarn occur with dikes or sills of hornblendite and light-green quartz monzonite. Copper grades on the south wall of the adit increase gradually from 187.5 to 195 meters (average 0.30%) and then increase sharply, averaging 0.87% from 195 to 220.5 meters. Grades in the corresponding interval on the north wall average 1.27% Cu from 189 to 222 meters. A composite sample from the interval 189 to 211.5 meters on the south wall of the adit assayed 0.66% Cu, while its counterpart on the north wall ran 1.13% Cu. Corresponding channel sample averages are 0.66% Cu (south side) and 1.06% Cu (north side).

Lenses and irregular zones of massive to medium-grained brown garnet skarn and semimassive sulfides exposed on the walls of the western crosscut contain from 1.16% to 3.09% Cu over sample lengths of 1.5 to 4.5 meters.



Brown and green fine-grained skarn exposed on the walls of the eastern crosscut assayed 0.70% Cu along a 12-meter length south of the main adit, and 0.20% to 0.61% along 7.5 meters on the north side.

The lensy nature of copper mineralization in skarn exposed in the adit and crosscuts is demonstrated by individual sample grades ranging from 0.02% to 4.40% Cu.

From the 222-meter point to the end of the adit, recrystallized and bleached limestone hosts narrow weakly mineralized zones of skarn with copper grades ranging from 0.11% to 0.75% Cu. Unmineralized limestone returned assays in the 0.01% to 0.05% range.

11.2 Mineralization in Mixed Zone and Intrusive Rocks

Porphyry-style sulfide and iron-oxide mineralization in intrusive rocks and in retrograde altered skarn in the mixed zone occurs predominantly in stockwork or sheeted complexes of quartz-adularia/orthoclase-epidote veins (Figure 11.1).

Figure 11.1 Quartz-Sulfide Vein Stockwork in Retrograde-Altered Skarn

The most common sulfides in the veins are pyrite, chalcopyrite and molybdenite, with variable but usually minor amounts of pyrrhotite, tetrahedrite, tennantite, stibnite, sphalerite, magnetite, and hematite.



Pyrite, chalcopyrite, tetrahedrite and molybdenite also occur as disseminations in the wall rocks, although molybdenite is generally found close to quartz-sulfide veins while chalcopyrite and pyrite are more widely distributed.

In the absence of mineralized quartz veins, the copper and molybdenum grades are generally low (< 0.4% Cu, < 150 ppm Mo). Porphyry-style mineralization is well developed in a broad zone or shell that encompasses the border zone of the Magistral stock and the adjacent zone of locally endoskarned porphyry dikes and retrograde-altered garnet-pyroxene exoskarn (mixed zone).

There has not been sufficient petrographic work done to allow a rigorous classification of the veins in the Magistral deposit, but field observations and the petrographic work completed to date have provided some preliminary information.

There are several varieties of mineralized quartz veins (Figure 11.2). Based on crosscutting relationships observed in drill core, chalcopyrite-dominant quartz-pyrite veins are believed to be earlier and generally more common than molybdenite-dominant veins (Glover, 2000).



Figure 11.2 Quartz-Chalcopyrite-Molybdenite Vein Stockwork in San Ernesto Intrusion

However, petrographic evidence indicates that molybdenite is an early-vein mineral, found on vein margins and disseminated in vein-wall rocks. Pyrite is intergrown with vein quartz, and chalcopyrite forms rims on pyrite. The sequence of sulfide deposition was molybdenite, pyrite, chalcopyrite, stibnite, and tetrahedrite (Allen, 2000, 2001).

Arsenopyrite occurs within both vein types locally, but is more common within late-stage, fine-grained, gray, sulfide-bearing, quartz-calcite veins. Quartz in the early copper-rich veins is dull gray and translucent.

These veins are observed to have epidote-chlorite selvages where they crosscut prograde garnet-pyroxene skarn and endoskarn, and chlorite-only selvages where they crosscut the porphyry away from the intrusive contact. Late-stage molybdenum-bearing quartz veins are white and opaque (bull quartz) with sericitic selvages. These later veins, together with a more pervasive silica-sericite alteration, are particularly well developed close to late brittle faults (Glover, 2000).

Toward the core of the intrusion (Sara facies), mineralized quartz veins gradually become less abundant and give way to low-grade disseminated mineralization. Due to the westerly plunge of the whole system, copper-molybdenum mineralization is better developed (and better explored) on the upper or hanging-wall side than on the footwall. Southeasterly or northeasterly directed drill holes in the central and eastern sections of the deposit are often collared in well-mineralized, strongly altered intrusive rock and terminate in the low-grade core or Sara facies. Very few holes have passed through the entire intrusion into the footwall skarn, so very little is known about the alteration and quartz veining in the footwall shell of the intrusion.

11.3 Mineralization in Prograde and Distal Skarn

Skarn-style mineralization is preferentially developed close to steeply dipping contacts in most of the zones on the south and southeast sides of the Magistral valley (San Ernesto and Arizona zones). In the north and northwest, erratically mineralized prograde skarn is found outboard of the mixed zone.

Skarn mineralization is characterized by disseminated, veined, and locally semimassive to massive sulfides of chalcopyrite, pyrrhotite, and pyrite, sometimes with minor molybdenite. Near the San Ernesto zone underground workings, these sulfides are found in a body of hydrothermal breccia in association with semimassive to massive magnetite. Copper grades are generally more erratic than in the porphyry-style mineralization, but where best developed, skarn-hosted mineralization can grade in excess of 10% Cu, as in the San Ernesto underground workings, where it reaches a maximum width of 80 meters. Molybdenum values, however, are generally lower in the skarn than in the porphyry style of mineralization. There are drill intersections of localized zones of very high grade molybdenite mineralization (up to 1.0% Mo) in skarn, particularly in the San Ernesto zone, on sections 1500 and 1550 northwest. In these areas, molybdenite occurs as coarse blebs interstitial to coarse garnet crystals.



The Asturias and San Blas zones are distal skarns with respect to intrusive rocks and, presumably, the fluid source. Both of these zones are characterized by green garnet-pyroxene-wollastonite mineralogy. San Blas is southwest of the other skarn zones and is weakly mineralized where it was intersected in the upper parts of drill holes PM-9, PM-11 and PM-14.



However, the extent of bleaching in the adjacent limestone and local occurrence of massive sulfide veins suggest that a major fluid source and, therefore, potentially significant mineralization exist down-dip to the southwest of San Blas, along the axis of the valley (Dick, 2004). Road construction in the Asturias zone, near the northern perimeter of the deposit, exposed pyrite-chalcopyrite-molybdenite mineralization hosted by green garnet-pyroxene skarn.

A single drill hole (PM-109), which tested this zone in 2004, intersected four meters of pyroxene-garnet skarn containing 0.12% Mo and 0.08% Cu. The high Mo grade in this intersection adds weight to the possibility of economically significant mineralization in this area.

11.4 Late Stage Quartz-Calcite-Sulfide Veins

These veins contain locally massive, very fine-grained pyrite, tetrahedrite-tennantite, and arsenopyrite, with occasional traces of chalcopyrite and/or sphalerite. They comprise a relatively minor component of the mineralization but are widespread and crosscut both previously described styles of mineralization. Locally, they can be extremely high grade, as shown by the hydrothermal breccia located close to the adit in the San Ernesto workings. They are associated with zones of retrograde alteration, defined by pervasive silicification and sericitization. The alteration associated with this mineralization has a characteristic tan colour where it overprints garnet skarn. As with the quartz-molybdenite veins with which they are sometimes associated, gray, sulfide-quartz-calcite veins commonly occur close to late-stage brittle faults (Figure 11.3).

Figure 11.3 Late-Stage Quartz Vein with Gray Sulfide Selvages



11.5 Implications to Modeling

Mineralization at Magistral is associated with an equigranular to porphyritic intrusive complex in limestone.

The intrusive rocks in this complex are often collectively referred to in this report as porphyry, because this informal term is widely used in previous reports and in the field. The main Magistral intrusion, or stock, is of diorite to quartz monzonite composition.

There is a well-developed set of dykes and/or sills on the hanging-wall side of the stock that have similar textures and compositions. The intrusive complex forms a body that is roughly cylindrical in shape and elliptical in cross section. Dimensions vary but on average are roughly 400 by 600 meters in plan. The intrusive complex and associated mineralization plunges to the west-northwest about 55° for at least 600 meters, based on the deepest drill penetrations. The intrusive complex hosts classic porphyry-style copper and molybdenum mineralization in the form of disseminations and stockwork and is partially to wholly surrounded by skarns. These skarns include endoskarn (developed inside the intrusion at its margins), mixed zone (monzonitic dikes/sills and skarn), and exoskarn (developed within the limestone). The exoskarn is broken down into proximal skarn (close to the intrusion) and distal skarn (farther away from the intrusion). Complicating this further are late, weakly mineralized to barren intrusions. One strongly altered but very weakly mineralized intrusive rock in particular, the H facies, represents a large amount of internal waste within the mineralized intrusive complex and is captured in optimized pits.

This complex geologic and mineralized system introduced in multiple phases a variety of metals with diverse styles. Examples include:

• Chalcopyrite, the dominant copper mineral, is found as disseminations, patches or blebs, veins, impregnations, and stockwork. At least two of these styles occur in the intrusion and each of the skarn types discussed above. Multiple phases of chalcopyrite mineralization have been identified, some with molybdenum and some not. One very important feature is the occurrence of high-grade copper mineralization in horizontes or beds within the skarn.

• Molybdenite occurs in porphyry and skarn predominantly in stockwork veinlets but also as disseminations, veins, and patches or blebs, sometimes with small amounts of chalcopyrite, sometimes not.

• Arsenic occurs in veins and fractures, as either very fine-grained quartz-pyrite-arsenopyrite veins and stockworks of relatively higher grades or relatively rare orpiment/realgar within all rock types, including otherwise unmineralized limestone. There are indications from the results of metallurgical testwork of the existence of tennantite.

• Lead and probably zinc occur in rare, very late, subhorizontal veins of up to five centimeters in thickness, probably in all of the above.

• Although there is pervasive low-grade antimony mineralization, the high grades are localized in discontinuous and narrow fractures along the margins of the deposit.



In spite of the complex system that exists at Magistral, the Ancash staff has an excellent understanding of the deposit, which cannot be ignored during any resource modeling and estimation. The geology is so complex that any realistic resource model, in order to be used for detailed economic evaluations, requires multiple and unique models for copper, molybdenum, arsenic, antimony, specific gravity, and acid generation potential, for example. Silver modeling is unique in that the silver distribution is similar to copper, so the copper zones can be used to control the silver estimation.

MDA modeled the copper in seven zones, each of which was defined by both grade and geologic criteria.

These zones encompass relatively evenly distributed porphyry-style mineralization in the intrusives, or more erratic and variable styles and grades of mineralization in the skarn. Each main group of porphyry and skarn was subdivided into sheeted zones in the porphyry and into more massive sulfide horizontes in the skarns.

Detailed geology and grade changes were simplified only in the complexly intermixed portions of the deposit where numerous, apparently geometrically complex dikes intrude the skarn or, conversely, where remnant blocks of skarn lie within intrusive (presumably as partially stoped blocks of skarn). In this case, the major rock type dictated the zone to which that volume would be assigned. In most of these areas the grades are relatively evenly distributed. These mixed zones were defined for metallurgical purposes.



12.0 EXPLORATION

The exploration and mining history of the Magistral property is summarized by campaign in Table 12.1. The most recent drilling program was conducted by Quadra between April and June 2005 and was directly supervised by Ancash Cobre personnel on behalf of Quadra. The drilling project did have oversight by Sivertz, MDA, and Quadra personnel.

Table 12.1 Magistral Exploration History

Year Company Exploration Activity Spanish Colonial Era Underground tunneling, small-scale mining 1915 – 1919 Minera Garragori Surface and underground mining, smelting 1944 Cerro de Pasco Metallurgical studies 1950 – 1953 Cerro de Pasco Geological studies 1969 - 1973 Minera Magistral SA Diamond drilling (11 holes), underground tunneling (938

m), surface trenching. 1981 Buenaventura (BISA) Prefeasibility assessment of known mineralization 1999 – 2002 Inca Pacific / Anaconda Peru IP, magnetometry, geological mapping, sampling,

geochemistry, diamond drilling (76 holes) 2004 Inca Pacific Diamond drilling (34 holes), sampling, resource estimation. 2005 Quadra Mining Diamond drilling (60 holes), metallurgical sampling,

resource estimation, metallurgical and other studies

12.1 Topographic Surveys

The coordinate system in use on the property is UTM zone 18 L, datum Provisional SAD 1956. Maps at scales of 1:100,000 and 1:25,000 are available from the Instituto Geografico Nacional.

In 1999, Inca Pacific requested Eagle Mapping Peru to prepare 1:5,000-scale maps with five-meter topographic intervals for a 3,600 hectare area (6 km2). The air photographs used as the base for the topography are at a scale of 1:40,000.

A closed polygonal baseline, formed by 10 points (Julio, Polvorín, San Ernesto, Sara, Rincón, Pirita, Zapato Rojo, Heidi, Chamba and Elena) represents the basis for topographic measurements within the project area (Acuña, 2001; Figure 12.1). An additional point, Cruce 1, with coordinates N 9,090,696.44 and E 194,171.53, lies in the middle of the property. All of the polygonal points have UTM coordinates, measured with a Geodimeter 608M total station (Table 12.2). The total length of the polygonal line is 3663.245 m. The resulting errors are as follows: N: -0.0253m; E: 0.1098m; Z: 0.1832m; angular: 0.0026°. The polygonal line was referenced to two survey datum points, Cuello and Cajón, both belonging to the Peruvian national geodesic grid (AMEC, 2004).



Figure 12.1 Polygonal Survey Line at Magistral



Table 12.2 Reference Survey Cordinates on the Magistral Property (after Acuña, 2001)

Point Name Northing Easting Elevation Type Julio 9,090,196.887 193,964.179 4110.811 Polygonal Polvorin 9,090,435.867 194,210.943 4108.454 Polygonal Sn. Ernesto 9,090,632.393 194,446.556 4085.463 Polygonal Sara 9,090,852.705 194,947.675 4154.757 Polygonal Rincon 9,091,365.817 194,818.668 4159.800 Polygonal Pirita 9,091,042.997 194,526.487 4131.941 Polygonal Z. Rojo 9,090,974.144 194,427.311 4130.277 Polygonal Heidi 9,090,867.913 194,250.927 4108.289 Polygonal Chamba 9,090,651.207 194,000.377 4071.414 Polygonal Elena 9,090,481.920 193,632.006 4068.796 Polygonal Cruce 1 9,090,694.440 194,171.530 -- Point Geomecanica S.A.C. completed a detailed survey in March 2007. This survey resulted in a conversion factor from the coordinate system used at the mine (Zone 18 PSAD 56 UTM coordinates) to Zone 18 WGS-84 coordinates. The conversion is shown below:

Item CorrectionEast -218.533North -375.483Elevation 6.3374Rotation 0o3'8.514"Scale 1.00024749Centroid East 192673.883Centroid North 9089319.301

All of the resource work was completed in the mine coordinate system. Drawings shown in this section are in the mine coordinate system. New (2007) area topography was also used in this study.

12.2 Geological Mapping

The Pallasca quadrangle (sheet 17-h) by Wilson and Reyes (1967) and Wilson, et. al. (1995), at 1:100,000 scale, provides the regional geology and structural setting of the Magistral deposit.

Noblet (2000), working for Ancash Cobre, completed the extremely difficult task of mapping approximately 50 km2 of rough terrain surrounding Magistral at a 1:10,000 scale. The mapping was intended to define the district-scale stratigraphy and structure. Glover, Ramos, Ray, and Rhodes carried out surface geological mapping in the immediate deposit area in 2000 (coverage 2.5 km2, scale 1:2,000).



This work shed much light on the main characteristics of the skarn mineralization and the immediate structural setting of the deposit.

Ancash Cobre continued detailed geological mapping in the deposit area in 2005. As drill access roads and platforms were constructed, new outcrops were exposed and subsequently mapped by Ancash Cobre geologists.

Geochronological determinations were made for several intrusions in the immediate deposit area. The data, summarized by Kerr (2004) in Table 12.3, established a 14.6 to 15.3 Ma age for the Magistral intrusive complex.

Table 12.3 Geochronology of Magistral Rocks (after Kerr, 2004)

Porphyry Intrusive Mineral Age (Ma) Method Geochron Lab San Ernesto Biotite (secondary) 15.3 ± 0.7 K/Ar Sara Biotite (primary) 15.0 ± 0.5 K/Ar

Chilean Geol. Survey Chilean Geol. Survey

San Ernesto Hornblende (primary) 15.1 ± 0.2 Ar/Ar Sara Hornblende (primary) Poor spectra Ar/Ar San Ernesto Biotite (primary?) 14.6 ± 0.1 Ar/Ar Sara Biotite (primary?) 14.6 ± 0.1 Ar/Ar

Queen’s University Queen’s University Queen’s University Queen’s University

San Ernesto Molybdenite (hydrothermal) 14.73 ± 0.02 Re/Os San Ernesto Molybdenite (hydrothermal) 14.63 ± 0.02 Re/Os

Colorado State University Colorado State University

12.3 Surface Sampling

Surface rock geochemical sampling completed between 1999 and 2002 was carried out by samplers under the direct supervision of an Anaconda geologist. Channel samples (two meters long and 25 cm wide) were chipped from mineralized outcrops from the La Gringa, Chavin, San Ernesto, San Blas, Arizona, and Zona Norte Zones. A total of 131 samples, each weighing approximately 20 kg, was sent to the CIMM laboratory in Trujillo, Peru, for preparation. The sample pulps were then forwarded directly to the CIMM laboratory in Lima for ICP analyses.

Anaconda conducted rock geochemical sampling in 2000.

The survey area was approximately seven square kilometers, and the survey was apparently focused on un-mineralized outcrops. The samples were taken at 50-meter centers in outcrop areas, and on a where-found basis where outcrop was sparse. The samples were rock chips taken from one-meter-square panels. The survey yielded a total of 353 six-kilogram samples. They were sent to the CIMM preparation lab in Trujillo and then to CIMM Lima for multielement ICP analysis. The results of this survey (Figure 12.2) indicate that copper grades are erratic, but a very weak 50-ppm anomaly surrounds the deposit. Minor anomalies exist near the distal skarn showings at Asturias and San Blas. Both of these anomalies may be due simply to dust contamination from past blasting and other exploration and mining activities.



Figure 12.2 Rock Geochemistry in the Magistral Deposit Area

Southwest of the deposit (at UTM coordinates 193500 E - 9098500 N), a weak anomaly with Cu grades up to 800 ppm is hosted by diorite exhibiting weak potassic alteration and containing weakly disseminated and fracture-filling chalcopyrite mineralization. An arsenic anomaly with grades up to 1,000 ppm As lies to the northwest of the deposit.



This north-tending anomaly is approximately 500 meters long and 100 meters wide, and is situated between UTM coordinates 193500 E to 193600 E and 9091000 N to 9091500 N. Molybdenum grades are highly erratic and occur as weak isolated anomalies of up to 20 ppm.

12.4 Underground Mapping and Sampling

In the early 1970s, Minera Magistral drove 938 meters of lateral underground workings, including raises, drifts, and crosscuts in the San Ernesto, Arizona, and Sara-El Indio skarn bodies. The San Ernesto adit was collared in a prominent skarn outcrop a few meters above the valley bottom, at an elevation of approximately 4,065 meters. Minera Magistral also drove a 30-meter ventilation/escape raise to surface and drilled eight horizontal and three inclined drill holes from crosscuts and drill stations in the main adit.

Minera Magistral collected contiguous 1.5-meter channel samples from both walls of the San Ernesto adit and crosscuts as far east as the fault zone at 270 meters. Beyond this point, only the south wall was sampled except where interrupted by crosscuts. Each channel sample was assayed for total Cu, Ag, and Mo. Composite samples, each composed of 15 contiguous channel samples, were assayed for total Cu, oxide Cu, Ag, Mo, Au, Zn, and WO3. The average copper grade for the skarn from 0 m to 270 meters, based on the composite samples, is 1.47% Cu; the section of weakly mineralized marble and banded skarn from 270 to 367.5 meters near the end of the adit averages 0.49% Cu (south side only; Sassarini, 1973). Due to the “nuggety,” coarse-grained nature of the sulfides, there is considerable variation in the copper grades of individual samples cut from opposite sides of the adit and the crosscuts, but the differences tend to even out when large numbers of samples are composited (Sivertz, 2000).

Minera Magistral also explored the Sara-El Indio zone by means of the Sara adit, collared near the valley bottom some 275 meters northwest of the main El Indio outcrop. The adit was driven 300 meters on a heading of 117o in an attempt to intersect the El Indio skarn at depths of 100 to 150 meters below surface.

Crosscuts were driven to explore the faulted skarn zones encountered at points 195 meters and 220 meters from the portal (Sassarini, 1973). Minera Magistral sampled the south wall of the Sara adit from 87 to 298 meters from the portal; the north wall was sampled only in the skarn zone from 189 to 222 meters. Three holes were drilled from the Sara adit; two were horizontal and encountered no mineralization of interest. The last hole, M-14, drilled at –30o from the south end of the western crosscut, intersected weakly mineralized porphyry and moderately mineralized skarn. The best mineralized skarn sections, at 114 to 120 meters and 136 to 142 meters, assayed 0.46% Cu and 0.56% Cu, respectively. Molybdenum grades were very low (Sassarini, 1973).

Glover (2000c) mapped the San Ernesto and Arizona adits (Figure 12.3). Anaconda personnel collected continuous channels from the right side of the adits.



Figure 12.3 Sampling and Mapping of the San Ernesto and Arizona Drifts



These samples were taken at the same sites that were sampled by Minera Magistral in 1969-1973. The samples were collected systematically over two-meter intervals, from channels 20 cm wide and five cm deep. A total of 487 samples was collected, each sample weighing approximately 20 kg. The sampling coverage extended a total linear distance of 974 meters. Samples were sent to CIMM in Trujillo for preparation and forwarded to CIMM in Lima for ICP analyses.

Kerr (2004) inspected the underground workings, and found the rock faces to be dirty and heavily oxidized in areas with high sulfide content. Nevertheless, many clean “windows” still provide excellent exposures of San Ernesto porphyry, endoskarn, proximal garnet exoskarn, hydrothermal breccia, and bleached limestone. The Chavin and San Ernesto faults are also exposed in the underground workings, as well as sets of late-stage, quartz-sulfide-calcite fissure veins hosted by shallowly southeast dipping faults (Kerr, 2004).

12.5 Geophysical Studies

Inca Pacific contracted Val D’Or Geofisica S.A. to carry out a short program of induced polarization-resistivity and magnetic surveys in the deposit area. The surveys, conducted in May 1998, included five east-northeast to northeast oriented lines (2.6 km) of IP-resistivity in the relatively accessible terrain along the Magistral valley axis, and 14 lines (14 km) of magnetics on a separate N-S grid. The IP (chargeability) and resistivity results are difficult to interpret due to the small area surveyed. A number of zones of apparent high chargeability in overburden-covered areas west of the known skarn zone were partially defined, but these zones remain open, and their causative factors are unknown. Resistivity data representing bedrock at a 120 meters depth outline an area of low resistivity (200 to 300 ohm-meters) measuring 300 to 350 meters wide by 450 to 700 meters long centered in the Magistral cirque, but covering western and central sections of the San Ernesto zone. The area of low resistivity is open in all directions except to the SW and possibly to the northeast. Like the IP data, the resistivity data are inadequate to allow the complete definition of anomalies. A total field magnetic map is shown as Figure 12.4.



Figure 12.4 Total Field Magnetic Map



The magnetic data, which are available from a much larger area, define an east-west elongated, roughly ring-shaped feature consisting of numerous ovoid to linear zones of low and high magnetic susceptibility. The ring is 75 to 150 meters wide and surrounds a 250 to 300 meters by 600 meters core zone with low magnetic susceptibility.

Individual, sharply defined, strong magnetic high and low anomalies in the southern section of the ring are directly associated with the San Ernesto, Arizona, and El Indio (Sara) skarn zones.

Less well-defined, weaker magnetic highs are associated with the Rio Tinto skarn north of the San Ernesto zone, and a broad belt of diffuse magnetic highs extends east-southeast from Rio Tinto to the La Gringa zone.

R. Morris, a geophysicist employed by Val D’Or Geofisica, interprets the ring-shaped pattern of magnetic anomalies to represent tabular magnetic bodies 50 to 200 meters wide arranged around a core of nonmagnetic rock and offset by northwest, north, and northeast striking faults (Pineault et. al., 1998).

Geoinformaciones, of Santiago de Chile, carried out a ground magnetometer survey consisting of 53 line kilometers on 17 north-south oriented lines (Geoinformaciones, 2000). The lines were spaced at 200 meters, and readings were taken at five-meter intervals on the lines. The survey was centered on the Magistral deposit, and extended to an adequate distance from the deposit. The purpose of the survey was to determine if the skarn zones had a distinct magnetic signature that would allow geophysical mapping.

The survey defined a magnetic anomaly, which was interpreted to be in response to magnetite-bearing skarn. Other anomalies were also detected, including an important response approximately 200 meters north of La Gringa, and another 500 meters to the southeast of the Arizona zone. Due to the steep, rocky topography to the southeast of the Arizona zone, only the anomaly north of La Gringa was explored by drilling. Drill hole PM-19 did not intersect important skarn mineralization, but cut marble and wollastonite bearing skarn. The source of the anomaly is interpreted to lie deeper than the limit of drilling.

A second geophysical survey included an IP (Induced Polarization) / resistivity survey consisting of 24.4 line kilometers on 11 separate profiles. The lines were oriented north-south, with dipole spacing of 100 and 200 meters. The survey data suggest high conductivity at depth beneath the valley. Unfortunately, the extreme topography made interpretation of the survey data difficult.

12.6 Petrographic Studies

Following completion of the 1999 drilling campaign, various petrographic studies were carried out (Allen, 2000 and 2001; Cornejo, 2000; and Cuitiño, 2000). Allen (2000) examined 20 thin sections of samples from drill holes PM-2, PM-3 and PM-8. Carbonate rocks were described as calcareous siltstone, mudstone, and limestone (Jumasha or Celendin formation).



Three varieties of quartz monzonite were identified, including porphyritic, nonporphyritic/equigranular and nonporphyritic/inequigranular, each variety being made up of primary phenocrysts of plagioclase, hornblende, and biotite in a groundmass of potassium feldspar and quartz.

Allen (2000) noted weak, porphyry-style hydrothermal alteration, including potassic alteration with subordinate endoskarn (potassium feldspar + biotite + clinopyroxene), propylitic alteration (epidote + chlorite), and phyllic alteration (sericite).

Low-to-intermediate iron prograde skarn development was characterized by clinopyroxene (salite) replacing garnet (grandite). Retrograde skarn development was observed in vein haloes and in areas of disseminated mineralization.

Molybdenite is associated with the assemblage quartz + potassium feldspar + epidote and is earlier than copper mineralization in quartz veins. In a simplistic paragenetic sequence, molybdenite is followed by magnetite, pyrite, chalcopyrite, and tetrahedrite-calcite (AMEC 2004).

12.7 Mineralogical Studies

Godoy and Franquesa (2001) examined 77 polished sections of samples from 31 drill holes from Anaconda’s 2000 and 2001 campaigns. Chalcopyrite was recognized as the predominant Cu species, with minor tennantite-tetrahedrite. Traces of enargite, realgar, orpiment, bornite, chalcocite, covellite, and cuprite were occasionally observed. Other sulfide minerals noted were abundant pyrite, lesser amounts of molybdenite, arsenopyrite, sphalerite and pyrrhotite, and rare galena and marcasite. The bulk of the arsenic is present in tetrahedrite and arsenopyrite, but some occurs in enargite, realgar and orpiment. Minor magnetite, hematite, rare limonite and rutile were noted.



13.0 Drilling

Through the end of the 2007 drill campaign, a total of 18,222.35 meters of surface diamond drilling has been completed in 116 drill holes. In addition, Minera Magistral drilled 14 shallow underground diamond holes, totaling 1,287.8 meters, in the San Ernesto, Arizona, and Sara zones between 1969 and 1973. In 1999, 2000, and 2001, Anaconda drilled 76 diamond drill holes totaling 24,639.58 meters. All surface drilling from 2000 onward was carried out on northeast (035˚) and northwest (305˚) oriented sections. In 2004 Ancash Cobre (Inca Pacific) completed 34 drill holes, totaling 7,984.85 meters, and in 2005 Ancash Cobre (Quadra) drilled 14,349.35 meters in 60 holes. Table 13.1 provides a summary of all Magistral Project drilling. Figure 13.1 presents a plan map of all the Magistral drilling.



Figure 13.1 Magistral Drill Plan Map



Table 13.1 Magistral Project Drilling Summary

Drilling Campaign

Commenced/ Completed

Duration DDH Holes

Total (holes)

Total (meters)

Rigs Core Diameter

Minera Magistral 1969/1973 n.a. M-1 to M-14 14 1,287.8 1 rig (BBU-L)

Anaconda Phase 1

Oct 25, 1999/ Dec 04 1999 40 days PM-1 to PM-

8 8 2,491.5 2 rigs

Anaconda Phase 2

May 11, 2000/ Aug 2000 96 days PM-9 to PM-

27 19 6,167.7 2 rigs, 90%HQ 10%NQ

Anaconda Phase 3

May 17, 2001/ Aug 2001 84 days PM-28 to

PM-76 49 15,980.38 4 rigs (LF70) 52%HQ 48%NQ

Ancash Cobre (Inca Pacific)

May 14 / Aug 26, 2004 102 days PM-77 to

PM-110 34 7,984.85 2 rigs (LF70); 85%HQ, 15%NQ

Ancash Cobre (Quadra Mining)

April 26 / June 17, 2005 53 days PM-111 to

PM-170 60 14,349.35 4 rigs (LF70); 95%HQ, 5%NQ

Ancash Cobre (Inca Pacific)

Through 2nd quarter 2007 n.a. PM-171 to

PM-286 116 18,222.35 4 rigs (LF70); 95%HQ, 5%NQ

Total 300 66483.93

The 1999 through 2007 drilling campaigns have adequately tested the copper and molybdenum mineralization in most parts of the Magistral stock and the adjacent skarn zones to around the 3,750-meter levels. Nevertheless, the section of the San Ernesto skarn zone above the level of the Minera Magistral underground workings has not been adequately drilled. This is due to steep and rocky surface topography and the blocky landslide debris in this area, which have prevented construction of surface drilling platforms.

The copper and molybdenum mineralization is open to depth to the west and northwest. To explore the geology of the Chavin zone, three drill holes (PM-2, PM-3, and PM-108) were drilled northwest, subparallel to the steeply dipping hanging-wall contact of the Magistral stock. All of these intersected Cu-Mo mineralization in the mixed zone. Holes PM-2 and PM-3 were stopped in mineralization; PM-108 was abandoned in a fault, but intersected 30 meters of retrograde-altered skarn grading 1% Cu (length-weighted) from 596 to 626 meters. This is the deepest well-mineralized intercept obtained at Magistral.

The deposit has not been completely drilled off to depth, and a number of the deeper drill holes terminate in copper and molybdenum mineralization. In order to fully understand the geology, mineralization, and structure of the deposit, additional systematic drilling will be required. Ideally geological, rather than economic, criteria should govern the final depth of the drill holes.



At some point to the west and northwest of the present limits of drilling, the system will be too deep to reach from surface with conventional wireline drilling equipment, and it will become necessary to drill from underground stations.

Earlier drilling campaigns were detailed in the SRK prefeasibility study and Technical Report filed on November 2, 2006. During 2006 and 2007 Ancash Cobre drilled 18,222.35 meters in 116 drill holes (PM-171 to PM-286). All of the drilling was core and it was 80 to 90 percent HQ.

Longyear L-50 drills, belonging to the contractor Bradley MDH S.A.C., were used during the drilling program, and portable drill rigs belonging to the Lima-based contractor Pacific Rim were also used. Drilling was normally done in two 12-hour shifts, with one driller, two helpers, and one Ancash Cobre employee present at the rig.

The LF-70 drill has a nominal depth (string length) capability of 300 to 325 meters using an HQ string. In holes planned to go longer than 300 meters, the drill string was reduced to NQ diameter at a prearranged depth, typically 250 meters. All drill holes were normally collared with HQ, and all holes shorter than 275 to 300 meters were completed with HQ. The holes were drilled by conventional wire-line methods using double tubes. The drill program extended from April 26 to June 17, 2005, with an average drilling rate of about 34 meters per shift.

All drill holes after PM-113 were surveyed down hole with the MAXIBOR system. Some holes were also measured using a glass-tube acid test at 50-and 100-meter intervals. When the holes were completed, PVC pipe was inserted into the drill collars to a depth of two to three meters and the drill-hole collars were cemented and surveyed.

Similar procedures for supervision, logging, and general operations were conducted as in previous drill programs.

As of September 2007, Ancash was drilling approximately 900 meters in three holes. The objective of this three-hole program is to evaluate geotechnical issues related to a fault in the east wall of the proposed pit. The size of this core is NT and VT.



14.0 SAMPLING METHOD AND APPROACH

The nominal core sample interval was maintained at two meters when the samples did not cross important geological boundaries. When such boundaries were encountered, the nominal two-meter interval was broken into two shorter sample intervals, one on either side of the contact. A longitudinal cutting or splitting guideline was marked on the core with a grease pencil by an Ancash Cobre geologist in order to obtain a representative sample split. After geological logging, the drill core was cut longitudinally into two equal parts. Two diamond saws were used, and the work was performed in a guarded facility at the Magistral camp.

Fractured sections of core were sampled by taking alternate pieces and by hand-splitting the bigger pieces. Disaggregated material was divided into two halves in the core box with a steel knife, and one half was sampled, including the fine material.



15.0 SAMPLE PREPARATION, ANAYSES AND SECURITY

15.1 Sample Preparation

Sample preparation, analysis, and security measures all appear to have been conducted within accepted industry standards. Each half-core analytical sample was placed in a heavy plastic bag marked with the sample number. An identically numbered, waterproof, sample-number tag was placed in each bag. The sample bags were closed with cord, and then arranged in numeric sequence to await final packing for shipment. The sample storage facility, like the core logging, core storage, and sample splitting areas, was kept closed to all but authorized Ancash Cobre personnel. The split core remaining in the core boxes is stored in well-constructed racks in an indoor area.

15.2 Quality Control

Beginning with the 2000 drilling program, a more stringent QA/QC program was put into place, designed to follow the precision and accuracy of the results as the program proceeded. The method used was as follows:

• Sample lots were sized at 40 samples. • Two blank samples, prepared from nonmineralized rock, were included in each

lot, with the objective of checking for contamination during the sample preparation and to ensure that the sample tag numbers were correctly affixed (and that sample mixups did not occur).

• Three standard samples were added (in Lima) to each lot of prepared pulps, to determine analytical accuracy. Two standards were prepared from material collected from the Magistral deposit: one with high copper and low molybdenum contents, and the other with high copper and high molybdenum contents. Details about contents and preparation procedures were not available to MDA.

• Two pulp duplicate samples were also added to each lot to verify laboratory precision. The duplicates consisted of samples that had been previously analyzed from prior lots.

Cumulative frequency plots done by Anaconda show that 90 percent of the pulp pair duplicates had relative errors of 10 percent or lower for Cu, and 14 percent or lower for Mo. Although the Cu precision was within the acceptable range, the Mo precision was slightly below the recommended value. However, AMEC notes that this behavior is typical of Mo analyses, and considers the results for these QA/QC samples to be acceptable.



Even though blanks and standard samples were reported to have been routinely inserted in sample batches, no references exist about the detailed results in reports made available to AMEC, although such reports conclude that precision and accuracy for Cu and Mo were within acceptable ranges (Anaconda, 2001b; Dick, 2004).

At the completion of the drilling, pulp-check samples were submitted to ITS-Bondar Clegg Laboratory in Lima for splitting, and then sent to ITS-Bondar Clegg’s laboratory in North Vancouver, British Columbia, for analysis. Procedures used for the selection of samples to be sent to the second laboratory were as follows:

• One in every 40 samples (i.e. 2.5 percent of samples or one from each sample lot) were selected at random, excluding blank, standard, and duplicate samples, which were included for control (see above).

• Only those samples with a grade equal to, or greater than, 0.10% Cu and 81ppm Mo were considered (AMEC notes that this may introduce selection bias).

• Sample pulps were sent to ITS-Bondar Clegg in Lima, where they were split to obtain a 10g fraction, and then were forwarded directly by air to ITS-Bondar Clegg’s laboratory in North Vancouver.

The samples were analyzed for Cu and Mo by the same AA method as was used by CIMM in Lima. Both elements were analyzed using the ITS-Bondar Clegg procedure Code GA50.

Based on the results of the program, Anaconda (2001b) and Dick (2002) concluded that the check assay procedures carried out during the course of the Magistral exploration were accomplished with a high degree of diligence and that a very high degree of confidence should be given to the geochemical data that have been used in the interpretations and resource estimations. Dick (2002) also concluded that:

• No significant differences in copper values could be observed between the two laboratories.

• When compared with the originals, the duplicates show high correlation coefficients for Cu (0.999) and for molybdenum (0.994).

• With respect to Mo, only those values greater than 1,500 ppm showed even a minor deviation from a perfect correlation.

CIMM Peru provided results with a precision well within the industry standards, and comparable to a laboratory (ITS-Bondar Clegg) that operates under the norms of ISO 9002.

A coarse duplicate sampling program was used to further check the accuracy of the Magistral sample data. This program, which involved reanalyzing the coarse rejects from the sample preparation lab, was designed by Anaconda to establish that no contamination was introduced during the sample preparation phase. However, AMEC is of the opinion that this sampling program is more suitable for assessing whether subsampling variance is suitably low.



The study was carried out as follows:

• One sample in every 40 (i.e. 2.5 percent of the total) was selected from the coarse rejects (>10 mesh) that are stored in Trujillo. A total of 148 samples were selected.

• Only samples with a grade of equal to or greater than 0.10% Cu, and greater than or equal t, 81 ppm Mo, were selected (AMEC notes that this may introduce selection bias).

• The samples were prepared in Trujillo using the same sample preparation method as was used on the original samples, were ticketed with the same numbers as the original samples, and sent to the CIMM Peru laboratory in Lima for analyses.

Samples were analyzed for Cu and Mo using the same AA procedure.

Dick (2002) reports that correlation coefficients of 0.999 for Cu and 0.994 for Mo were obtained. Only samples with Mo greater than 1,500 ppm showed significant differences.

In order to conduct an independent check of the Anaconda results, AMEC completed a limited resampling program consisting of 19 twin samples, 17 coarse duplicates, and 20 pulp duplicates from the old core, rejects, and pulps, respectively, available at the Trujillo sample storage facility. The samples were sent by bus to ACME’s preparation facility in Lima, and after preparation, they were shipped to ACME Labs in Vancouver for assaying.

The twin samples, reference standards, and coarse blanks were inserted into the sample shipments at Magistral by Ancash Cobre geologists and technical employees (Table 15.1). Coarse duplicate samples were prepared in the CIMM preparation lab in Trujillo, following procedures specified by Ancash Cobre. CIMM conducted ICP analyses and ALS Chemex conducted AA.

Table 15.1 Types and Frequencies of QA/QC Samples Inserted in the 2005 Drill Campaign

QA/QC Sample Nominal Insertion Frequency Totals Core splits 1 in 80 primary samples 84 of 7391 (1.1%) Field Blanks 1 in 40 primary samples 166 of 7391 (2.2%) Coarse Duplicates (CD) 1 in 40 primary samples 169 of 7391 (2.2%) Low-Grade Standard 1 in 120 primary samples 86 of 7391 (1.1%) Average-Grade Standard 1 in 120 primary samples 82 of 7391 (1.1%) High-Grade Standard 1 in 320 primary samples 23 of 7391 (0.3%)

The quality assurance / quality control (QA/QC) program implemented for the 2005 drilling campaign was designed by MDA in association with Ancash Cobre. For explanation, a twin sample as used at the project is a second split from the same interval of core. A duplicate can be either a split of a coarse reject or a split of a pulp.



Blanks are samples with very low grades and standards are those inserted samples with predetermined and validated grades. In this report the term “split core” will be used for twin; “duplicate coarse reject” or “duplicate pulp” will be used for duplicate samples; and “blank” and “standard” will be used for blank and standard.

In addition, this section of the report refers to internal laboratory reference samples, which are samples inserted by the laboratory for their own internal controls.

George Sivertz, P.Geo., and Manuel Zevallos, chief technician for Ancash Cobre, reviewed the analytical results as they were reported by the laboratories, to identify any sampling errors or laboratory problems at an early stage. Core split, duplicate coarse reject, standard, and blank samples were inserted into the primary core sample stream to monitor sampling and subsampling variances, laboratory precision and accuracy, and to identify errors such as sampling mistakes, sample preparation errors, sample cross-contamination, and sample number swapping. The need for a formal check analysis/assay procedure was met by the use of two independent laboratories during the entire program; CIMM doing ICP analyses and ALS doing AA. Independently determined analytical data for Mo and Cu were received from both labs. The 2005 QA/QC samples inserted into the primary stream were:

Twin samples (quarter-core samples): These are intended to assess the heterogeneity of the mineralization and the sampling variance. In 2005 the original half-core sample was cut in half, so that one quarter represented the original sample and the other quarter represented the twin.

Commercial Reference Material (Standards): Standard samples are prepared by certified laboratories under special conditions and are used to test and verify the accuracy and precision of laboratory analytical procedures. Two standards were supplied by WCM Sales Ltd, Burnaby, BC Canada (WCM Cu113 and WCM Cu117), and one was supplied by Geostats Pty. Ltd., White Gum Valley, Western Australia (GBM396-6C). These standards were alternately used during this project and they represent three copper grade levels: 0.44%, 0.86% and 1.39%.

Coarse blanks: These samples were composited at the Magistral site from nonmineralized rock (Chimu Formation quartz arenite) by Ancash Cobre geologists. Blanks were used to detect contamination during sample preparation.

Pulps: These were checked by ICP or AA by the two principal laboratories for all Mo and Cu.

Summary statistics of the standards, coarse reject duplicates, and twin samples are given in Table 15.2 to Table 15.4. The tables were prepared by George Sivertz. There are slight, low biases in the ALS Chemex AA 2005 analytical results (which are used in modeling) compared to the reference grades for molybdenum and one copper standard (GBM396-6C), and there is a very small high bias in 2005 drill results compared to the copper reference grade in Standard A. MDA believes that the biases noted are not significant although they would add a negligible conservative element to the estimate.



Table 15.2 2005 Standard Sample Data: WCM Cu113

WCM-Cu113 NOMINAL GRADE 0.44% Cu 0.045% Mo Replicate Cu % ALS Peru Cu % CIMM Peru Cu ppm CIMM Mo% ALS Mo ppm CIMM Count 86 86 86 86 86 Average 0.451 0.439 4386 0.043 441 Std Dev. 0.007 0.021 207 0.001 37 CV 0.016 0.047 0 0.023 0 Minimum 0.430 0.386 3856 0.040 346 Maximum 0.470 0.518 5179 0.045 520 Mean+2SD 0.466 0.480 4801 0.045 514 Mean-2SD 0.437 0.397 3971 0.041 368

Table 15.3

2005 Standard Sample Data: WCM Cu117 WCM-Cu117

NOMINAL GRADE 0.86% Cu 0.078% Mo Replicate Cu % ALS Peru Cu % CIMM Peru ALS Mo% CIMM Mo ppm CIMM Mo% Count 82 81 82 82 82 Average 0.864 8387 0.074 774 0.077 Std Dev. 0.013 321 0.003 58 0.006 CV 0.015 0 0.036 0 0.075 Minimum 0.830 7178 0.055 621 0.062 Maximum 0.900 9053 0.077 882 0.088 Mean+2SD 0.890 9028 0.079 890 0.089 Mean-2SD 0.838 7746 0.068 657 0.066

Table 15.4

2005 Standard Sample Data: GBM396-6C GBM396-6c

NOMINAL GRADE 1.39% Cu GBM396-6c ALS Cu% CIMM Mo ppm Count 23 23 Average 1.358 1.390 Standard Deviation 0.016 0.000 CV 0.012 0.000 Minimum 1.330 1.390 Maximum 1.380 1.390 Mean+2SD 1.390 1.390 Mean-2SD 1.325 1.390



15.3 Security

All preparation, handling, and testing of samples appears to have been carried out according to accepted industry guidelines and standards. All of the persons involved in the field aspects of sampling the drill core – including selecting intervals for sampling, doing the sampling, packaging and shipping the samples – were employees of IPR. Proper chains of custody and documentation between the site, sample preparation facilities, and laboratories were observed.



16.0 DATA VERIFICATION

MDA visited the Magistral site and IPR’s Lima facilities on several occasions. MDA reviewed all the project data generated to date, including drill logs, cross sections and long sections. MDA also examined drill core and can state that geological and mineralogical data documented and presented by IPR was, in fact, found in the core. Overall, visual identification of mineralized intervals relates well to the stated assays. MDA found that in general, the geologic documentation and interpretation fairly represents the deposit.

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

A detailed assessment of QA/QC was completed and documented in Ronning and Ristorcelli (2007). Neither Ronning nor Ristorcelli were onsite during drilling (Ronning has never been to site), and they cannot verify that all procedures and assaying were done as reported. However, Ristorcelli’s historic experience with the Magistral project in general and with Inca Pacific’s principal geologist in particular give confidence to the results.

In conjunction with an update to the resource estimate for Magistral, prompted by the generation of new drilling data, a QA/QC program was implemented to assess the accuracy and precision of sample analyses and to detect sample contamination that might have occurred during the preparation and analysis of drill core samples. MDA reviewed this QA/QC data, and the data suggest that the analyses generated during the drill program are sufficiently reliable for use in the resource estimate (Ronning and Ristorcelli, 2007). Nevertheless, there are a number of issues raised by the QA/QC data that should be addressed should the project be explored further or advanced to a production stage.

MDA received the QA/QC data in spreadsheet form, with little background information to put it into context. In particular, there is no information indicating whether any of the issues evident in the QA/QC data were addressed during the drill program. For example, a number of analyses of standards were failures, which should have prompted reanalysis of the sample batches from which they were derived. The reanalysis may have been done, but there is no evidence of it in the data that MDA evaluated.

Nothing that MDA has received indicates that the QA/QC data were actively monitored and responded to during the course of the drilling.



17.0 ADJACENT PROPERTIES

Three small properties held by third parties are located within the Magistral property boundaries and are surrounded by the Magistral concessions. A small concession held by Compañia Minera Aurifera del Sur (within the Magistral 14 concession) covers old workings near Conchucos (San Juan II). The six concessions owned by Compañía Minera Potosi S.A. (within the Magistral 13 concession) surround the old Huacchara mine. The 100-hectare concession located between the Magistral 12, 13, and 14 concessions is also owned by Compañía Minera Potosi S.A. None of these third-party properties impinges upon the resource. There are no significant permanent project related structures located on these concessions.



18.0 MINERAL PROCESSING AND METALLURGICAL TESTING

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

18.1 Review of Metallurgical Test Work

Metallurgical testwork was performed on Magistral ores for Samuel Engineering Inc. by G&T Metallurgical Services Ltd, Canada (G&T). A comprehensive program of laboratory test work was authorized to assess the metallurgical response of ores from the Magistral deposit.

The metallurgical testing reported by G&T includes variability in metallurgical response for drill core samples representing various zones in the deposit. Additional flow sheet development studies and the results of the pilot plant and copper molybdenum separation studies are also presented.

The Magistral ores are mineralogically simple for copper and molybdenum but more complex for arsenic minerals. The ores are quite coarsely grained, comprising several sulfide minerals emplaced in a silica-rich host. Generally, the sulfide minerals accounted for less than 10 percent by weight of the ore. Pyrite is the dominant sulfide, while the most pervasive copper sulfide mineral is chalcopyrite. In terms of grindability the ores are homogeneous and of a relatively friable nature, displaying Bond ball work indices in the range of 12 to 16 kWhr/tonne.

A simple flow sheet and treatment strategy using a standard and commonly deployed reagent regime was successfully used to process the Magistral ore samples. This approach is used in many plants processing texturally similar copper/molybdenum bearing porphyry-skarn style mineralization worldwide.

A flotation feed sizing of the order 200μm P80 was sufficient to liberate the majority of the sulphide minerals from the silicate-rich host.

Regrinding to a nominal 50μm P80 ahead of three stages of dilution cleaning permitted the production of molybdenum-enriched copper/molybdenum bulk concentrates. These data constitute the basic process design criteria.

In general, copper and molybdenum recoveries recorded in the laboratory-scale trials compared favorably to recoveries for the majority of mineralogically similar ores that have been investigated by G&T. Differential flotation techniques, designed to investigate the potential of separating the copper from the molybdenum sulphides yielded encouraging results.

Magistral has excellent grades and recovery of molybdenum. The molybdenum contained in the porphyry type ore is coarser than typical for copper/moly ores in general and has recoveries into a bulk concentrate in excess of 90 percent.



The molybdenum contained in the skarn ores is finer-grained and has the lowest recovery into a bulk concentrate in the high 60-percent range. Overall, the recovery into the bulk concentrate is over 80 percent. Two pilot plant campaigns, one for porphyry and the other for skarn type ores, produced copper concentrates from bulk concentrates that contained 0.21% and 0.23% Mo, respectively. These represent a 93-to 94-percent recovery of Mo into the molybdenum concentrate from the bulk concentrate.

Mineralogical examination of the concentrates indicated that the molybdenum was primarily entrained in the copper concentrates and, in part, as locked particles more in the skarn copper concentrate. These losses to the copper concentrate could be reduced by extra cleaning and a regrind to liberate some of the locked particles. These extra circuits have been incorporated in the engineering design of the plant and included in the capital and operating costs. Additionally, the reverse flotation in the molybdenum circuit will be done under nitrogen to improve the efficiency of the Cu/Mo separation steps.

The inclusion of these process operations is expected to reduce the molybdenum contained in the copper concentration to about 0.07% Mo with a resultant recovery of molybdenum from bulk concentrate to molybdenum concentrate of 97 to 98 percent, about three percent better than the pilot plant results.

Average life-of-mine metallurgical recoveries have been estimated to be 95 percent for copper and 79 percent for molybdenum, producing copper concentrate grading on average 33.5% Cu and 117 g/t silver, and molybdenum concentrate grading 53% Mo. The copper concentrate will attract minor penalties for arsenic. In all years the arsenic content will average less than 0.5 percent except in year 12 when it will average 0.74 percent.



19.0 MINERAL RESOURCES AND MINERAL RESERVES ESTIMATES

19.1 Mineral Resource Estimate

Updated NI 43-101-compliant resource models were completed. The work was prompted by the 2006/2007 drilling. Resource models were completed for rock density, copper, molybdenum, arsenic, and silver; an antimony model was partially completed.

The geologic model on which the resource models were based was built by Mr. Pedro Ramos, chief geologist for Minera Ancash Cobre S.A.

In the preparation of the resource model, the interpretations of country rock, skarn, porphyry, and alluvium contacts, and their geometries and orientations, were honored in almost all cases except when the interfingering of skarn and porphyry was too complex, in which case some simplifications were made. Each resource model was created using similar procedures:

• Statistical evaluation of the sample assays; • Development of the mineral domain model on cross sections and coding of the

assays to those domains; • Statistical evaluation of the sample assays by domain; • Capping of samples, compositing of the capped samples, calculation of

geostatistics; • Transfer of the cross-sectional model to level plan, refining and digitizing on plan; • Digitizing and use of the plans to code block model; • Estimation of grades into the block model; and • Tabulation of resources, and validation.

Estimation in all cases included a nearest neighbor, Krige, and inverse-distance interpolations, but in all cases the inverse-distance model was selected as the final and reported model. MDA used mineral domains defined by grade and geology to control the estimation. Estimation parameters were chosen to be appropriate for the drill spacing, geologic complexity, sample locations, and parameters defined by point validation and correlograms. In an attempt to maintain consistency with historic estimates, MDA used similar resource-modeling methodology unless compelling reasons were found not to do so.

The new NI 43-101 mineral resource estimate is based on assay results from 65,214 meters of core drilling in 286 holes and at a 0.4% Cu equivalent cut-off is as shown in Table 19.1. Copper equivalent calculation of five to one reflects metal prices used in the prefeasibility study (Cu - US $1.20/lb, Mo - US $6.00/lb) with no adjustment for metallurgical recoveries and relative processing and smelting costs.



Table 19.1

Magistral Mineral Resource Estimate Cutoff

%CuEq (1)

Tonnes Grade %CuEq

(1)

Grade % Cu

Tonnes Copper

Pounds Copper

Grade %Mo

Tonnes Molybdenum

Pounds Molybdenum

Grade g Ag/t

Ounces Silver

Measured 0.40 108,839,000 0.79 0.52 561,100 1,236,900,000 0.06 60,400 133,170,000 2.5 8,907,000

Indicated 0.40 86,716,000 0.74 0.51 441,800 974,000,000 0.05 40,700 89,660,000 2.6 7,349,000

Measured and Indicated

0.40 195,555,000 0.77 0.51 1,002,900 2,210,900,000 0.05 101,100 222,830,000 2.6 16,256,000

Inferred 0.40 55,399,000 0.67 0.55 305,400 673,300,000 0.02 12,900 28,335,000 1.5 2,624,000

1) Copper equivalent grade based on 5:1 molybdenum to copper ratio, Note this ratio was used for the cutoff grade 2) Copper equivalent grade based on 6.5:1 molybdenum to copper ratio, Note this ratio is based on the approximate

long term price ratio and differences in recoveries.

19.2 Mineral Reserves The Magistral mineral reserves are based on first calculating a net value for each model block with a grade estimate and then checking to see if the block will pay for the plant and general and administrative costs.

Based on the calculated block values after processing, smelting, refining, and royalty, an internal cutoff of $5.25 per tonne was used to calculate the project reserves. Measured and indicated blocks inside the final pit design become proven and probable reserves if they meet the cutoff grade criteria. Table 19.2 summarizes the proven and probable pit reserves. Some low-grade material that is high in arsenic content has been removed from the reserve classification if the grade of arsenic was above 0.10% As and the value per tonne was below $15. The production schedule used a higher cutoff than the reserve cutoff of $5.25, which resulted in 10.7 million tonnes of low-grade reserve material being stockpiled over the life of the mine. In addition, the final pit contains some mineralized material that is in the inferred category and is treated as waste, as shown in Table 19.3.



Table 19.2

Magistral Proven and Probable Reserves Class Material Tonnes % Cu % Mo g Ag/t % As g Sb/t % Cueq Value

000s $/tonne Measured Porphyry 45,668.1 0.39 0.049 2.04 0.021 25.6 0.64 $15.53 Indicated Porphyry 6,672.1 0.37 0.041 2.33 0.019 21.0 0.57 $13.96 M + I Porphyry 52,340.2 0.39 0.048 2.07 0.021 25.0 0.627 $15.33 Measured Mixed 18,973.2 0.56 0.056 2.32 0.052 72.3 0.84 $18.62 Indicated Mixed 12,538.9 0.58 0.050 2.50 0.050 55.7 0.83 $18.35 M +I Mixed 31,512.1 0.56 0.054 2.39 0.051 65.7 0.84 $18.51 Measured Skarn 12,958.4 0.68 0.050 3.84 0.064 37.9 0.93 $20.20 Indicated Skarn 19,956.4 0.50 0.046 3.26 0.059 30.3 0.73 $16.11 M + I Skarn 32,914.8 0.57 0.048 3.49 0.061 33.3 0.81 $17.72 Measured All 77,599.6 0.48 0.051 2.41 0.036 39.1 0.73 $17.06 Indicated All 39,167.5 0.50 0.047 2.86 0.049 36.9 0.74 $16.46 M + I All 116,767.1 0.49 0.049 2.56 0.040 38.3 0.73 $16.86 Hi As Porphyry 251.6 0.29 0.028 1.99 0.139 62.2 0.43 Mixed 1,307.2 0.35 0.030 1.74 0.176 96.7 0.50 Skarn 1,627.1 0.30 0.036 2.60 0.308 78.6 0.48 Hi As All 3,185.9 0.32 0.033 2.19 0.241 84.7 0.49 M + I Total less Hi As 113,581.2 0.49 0.050 2.57 0.035 37.0 0.74 Magistral Reserves M + I Production Schedule 102,912.8 0.52 0.053 2.70 0.034 37.5 0.79 Material M + I Stockpiled Material 10,668.3 0.18 0.019 1.27 0.037 32.3 0.28

Table 19.3

Magistral Mineralized Material Included in the Final Pit and Treated as Waste Class Material Tonnes % Cu % Mo g Ag/t % As g Sb/t % Cueq Value

000s $/tonneInferred Porphyry 151.7 0.32 0.020 2.24 0.023 17.9 0.42 $9.99Inferred Mixed 177.6 0.94 0.056 4.49 0.054 58.4 1.22 $26.75Inferred Skarn 4,447.7 0.50 0.033 3.96 0.048 26.9 0.66 $14.50 Inferred Total 4,777.0 0.51 0.033 3.92 0.048 27.8 0.68 $14.81



20.0 OTHER RELEVANT DATA AND INFORMATION

20.1 Project Infrastructure and Support Facilities

20.1.1 Haul Roads

The haul roads in the open pit were designed by MDA as part of pit design and mining production schedule.

The development of haul roads within the pit is complicated by the fact that the pit above 4,200 meters above sea level (masl) is broken into two high walls, north and south. This requires multiple side-hill external access roads.

The in-pit haul roads were designed to accommodate up to 136-tonne haul trucks. The haul roads are 26 meters wide, except for the last several benches of each expansion, which were reduced to 15 meters to accommodate one-way traffic. The ramps were designed with maximum grade of 10 percent.

The total length of external haul roads for preproduction and the first year of operations is 18.8 kilometers. During the remaining 14 years of operation and the introduction of the owner’s mining fleet in Year 3, additional external haul roads must be constructed. Some are new roads, and some are existing roads that need widening to accommodate the owner’s fleet. A total of 19 haul road segments are developed from Year 2 through the life of the project.

20.1.2 Site Roads

Because the site is so compact, plant site roads are minimal. The main access road connects to the plant facilities at the crushed ore stockpile platform. There are no other roads in relation to the plant site facilities, as vehicular traffic in and around these facilities is on the associated earthwork platforms.

20.1.3 Access Roads

Road access to the site will be from the port of Salaverry, near Trujillo, Peru, via a northern route that tracks generally east and then south into the site. This route will require significant new road construction and old road improvement. Figure 20.1 shows the proposed alignment of the northern route selected for this study, and the southern route that had been suggested in the prefeasibility study by SRK.

The northern route is considered preferable because of the change of port facility from Chimbote to Salaverry and because the southern route included more geotechnical and design challenges. Also, the southern road construction could not be completed in time to support Magistral’s development schedule.



Figure 20.1 Mine Access Routes

In addition to the main access road for movement of concentrate, supplies and personnel, another access road must be constructed between the mine and the town of Conchucos. This is to accommodate the movement of mine and processing workers between the owner’s camp, the town and the mine.

The design criteria for access roads focus on the Quesquenda to mine site (main) and Conchucos to mine site (Conchucos), which are the main road construction components for access to the mine site.



The main access is for concentrate transport trucks, supply trucks, and other large vehicles. The Conchucos access is for small vehicles and buses to transport people.

The design criteria were developed using the Peruvian Manual for Geometric Design of Highways (DG-2001) and the Peruvian Manual for the Unpaved Low Traffic Roads Design (DGCF-2005), which are the standards for all roads in the region. In addition, the Manual on Geometric Design of Highways and Streets (AASHTO 2001) was used as a supportive reference.

20.1.4 Power Supply and Electrical Distribution

Electric power will be provided to site from the national grid via a 138 kV, 49.8-kilometer transmission line that will be constructed by the project. Inca Pacific Resources has formed a power company called Energia Ancash, which will own the power transmission system.

Design and cost of the power line were investigated and provided by Promotora S.A. of Lima. The study included an estimate of the transmission system capital and operating costs, including the cost to expand the existing substation at Sihuas (owned by Hidrandina S.A.), construct the 138 kV, 49.8-km transmission line up to the plant substation portal, and purchase and install necessary voice and data communication systems. The study also addressed costs for delivered power and for right-of-way permitting and environmental impact study requirements.

The site main substation consists of two 138kV – 12.47kv, 26/29 MVA, ONAF transformers, and a 12.47kV bus with a tie breaker and distribution switchgear. Each transformer is capable of providing the total plant load. Power will be distributed to the plant facilities at 12.47 kV. Distribution will be routed via duct banks to facilities adjacent to the main substation (i.e. crushing, grinding, and flotation) while the power supply to remote locations, such as the water treatment plant and reclaim water system, will be routed via aerial lines.

20.1.5 Water Supply

Samuel Engineering identified a fresh water demand of 10 m3/hr (2.8 L/s) for the plant processes and 0.36 m3/hr (0.1 L/s) for domestic use, for a total water demand of 10.36 m3/hr (2.9 L/s). An additional demand of 11.4 m3/hr (3.2 L/s) has also been identified for dust suppression, although good-quality (fresh) water is not required for this use, and the most likely source for this purpose will be water from the tailings impoundments.

Three sources of fresh water supply were evaluated: Lake Pelagatos, Lake Challhuacocha, and the drainage area of the north valley (location of the north waste rock storage facility). The evaluations considered both average and 20-year dry years, monthly variation in surface water flows, and conservative estimates of existing water supply demands. Lake storage was not considered in the evaluations.



The north valley above the plant, was chosen as the source of fresh water because it does not require any significant pumping and piping facilities to provide water for the project.

A geomembrane-lined pond with 17,000 cubic meters of live storage was designed on the southwest side of the valley to provide water for both fire suppression and fresh water for the mine. To the east of the pond, a small perennial stream flows down to the center of the valley.

A small concrete canal with a control gate will supply water to the pond from the stream, and a concrete overflow canal will take excess water back to the stream to prevent overtopping of the pond. The pond has approximately 40 days of storage capacity based on fresh water demands. This excludes the fire suppression requirement, which is 6,000 cubic meters of dedicated fire water storage.

20.1.6 Sewage and Water Treatment

Sewage treatment for the plant area, administration building, laboratory, and the permanent camp will be by leach-bed system. Fresh water required for sanitary purposes will be chlorinated. All drinking water will be delivered to site in bottles. Appropriate allowances have been made in the cost estimates.

Recommendations for wastewater treatment were based on information provided on site water balance, water quality monitoring data, geochemical test data, process effluent water quality test data, and rock type proportions for waste rock storage. Life-of-mine water quality predictions and Peruvian and World Health Organization standards were used to determine that the treatment approach will only need to address total suspended solids.

All sources of water report to the tailings storage facility, which will be designed to contain a large, well-mixed body of water such that the various streams reporting to the facility can be mixed according to relative flow rates. Excess water in the system is discharged via the water treatment plant to the Conchucos River downstream of Laguna Llamacocha.

20.1.7 Communications

Magistral’s communication needs will be served by three systems. These include satellite systems for site telephone and data needs, radio systems for site-wide operations, and cellular telephone systems. Internet access and landline telephone services will use a satellite backbone for data and voice communications. A radio system will provide site and other local mobile communication to vehicles and personnel. Cellular service will also be used as needed for wireless telephone communications. Each work site or office will have a computer network that will support email, internet, file access, project applications, and data backup services.

Offsite communications requirements will be served through a satellite telecommunications system that will link to a center in Conchucos.



From this center, telephone and data communications will enter the national landline system. The port facility will also have a satellite system that will link through Conchucos. These systems will provide voice, data, and internet communications both for the main site and the port facility.

20.1.8 Fire Protection

A reservoir will provide both fresh water and firewater. Firewater will be fed by gravity to a firewater distribution system in the plant site area.

The fresh water discharge connection is at an elevation above the pond bottom and ensures the remaining volume will be available for firewater purposes. Distribution will consist of a buried ring main around major facility buildings with hydrants and stand pipes connected to indoor hose stations. Allowances have been made for portable cart-type and handheld extinguishers for localized protection.

20.1.9 Security and Fencing

A total of 3,000 meters of three-strand barbed-wire fencing will be installed to protect the entry point to the project area (open end of the valley). Road entry, both at the site and at the camp, will controlled by a guardhouse manned 24 hours per day, 365 days per year. An experienced Peruvian security services company will be contracted to handle all site security.

The security team’s responsibilities will include maintaining a constant, 24/7 presence at the site access guardhouse, performing roving patrols around the site, and performing plant security and loss protection.

20.1.10 Site Ancillary Facilities

Site ancillary facilities include an administration building, a laboratory, and a water treatment plant. The administration facility is a single-story, steel-frame, prefabricated, slab-on-grade building measuring approximately 19 meters by 43 meters.

The building will provide offices, conference rooms, archiving, building mechanical services, and washrooms. The building will be located north of the process plant on the main access road.

The laboratory facility is a single-story, steel-frame, prefabricated, slab-on-grade building measuring approximately 16 meters by 37 meters. This building will house offices, a sample preparation area, sample storage, weighing room, wet lab, metallurgical lab, building mechanical services (including fume collection and dust collection), and washrooms. The building is located north of the process plant on the main access road adjacent to the administration building.

The water treatment plant is a single-story, steel-frame, prefabricated, slab-on-grade building measuring approximately 10 meters by 15 meters.



The building will contain blowers, clarifiers, polyelectrolyte mixing and dosing equipment, and associated piping and electrical components. Barge-mounted pumps located in the tailings storage facility pond area will feed the plant, while treated effluent will be piped by gravity via a flow-measuring flume to the discharge point downstream of Laguna Llamacocha. The treatment plant will be located on the north side of the tailings storage facility.

20.1.11 Employee Housing and Transportation

Magistral’s operations workforce will be housed at a camp located approximately four kilometers from the site along the road between the site and the town of Conchucos.

Magistral will build a fully equipped camp facility that will include several levels of employee quarters (manager, staff, and labor levels), kitchen and dining facilities, recreational areas, laundry facilities, and all necessary utilities and services. The camp building will be of a prefabricated modular design on a concrete slab. The camp will receive permanent electrical power from the site, and water will be sourced from a well.

The company will purchase four 30-passenger busses to transport shift workers between the camp and the work site. Management and administrative personnel will be transported to site via pickup trucks and vans. The company will purchase nine 10-passenger vans for personnel transport, not only to and from the site, but also to Conchucos or other destinations as needed. Key management personnel will be assigned pickup trucks and will provide transportation to and from the site for other personnel as needed.

20.1.12 Port Facility

Bulk copper concentrate will be handled through a concentrate storage and ship-loading facility located at the port of Salaverry. The concentrate storage capacity is 15,000 tonnes, and the marine facility will accommodate ships of up to 40,000 tonnes capacity, loading them at a rate of 1,500 tonnes per hour. Molybdenum, transported from the process plant in super sacks, will be stored in a covered building (approximately 30 meters by 25 meters) until it can be loaded as bulk cargo on to ships at the Salaverry facility.

This facility does not currently exist but is planned to be constructed as part of Northern Peru Copper Corporation’s (NPCC) El Galeno project. IPR has in place a letter from NPCC that indicates a willingness to share this proposed facility with others, including IPR.

20.1.13 Offsite Offices

Offices will be constructed in Conchucos for administrative and management personnel whose direct presence at the mine and processing site is not required. Approximately 40 persons will work in these offices.



Inca Pacific Resources will maintain an office in Lima for senior management and other personnel whose responsibilities require regular liaison with authorities and others in Lima. Approximately 11 persons will work at this office.

20.2 Tailings Storage Facility

The Magistral mine will operate for approximately 15 years at a production rate of 20,000 tonnes per day. Extraction of minerals will be by flotation processes. During processing of the ore, approximately two percent becomes concentrate and 98 percent is discharged as waste into the tailings facility. Based on current reserves, it is projected that approximately 107 million tonnes of waste (i.e. tailings), will be generated during the life of the project. Preliminary testing of the tailings in the laboratory indicates that the bulk dry density will be 1.6 tonnes per cubic meter. At this estimated dry density the total volumetric requirements for the tailings storage facility (TSF) is 70 million cubic meters, not including the reclaim pond and freeboard.

Dam safety guidelines stipulate standards and a framework for the design, construction, and evaluation of dams. The United States and Canada were at the forefront of this movement, and today the guidelines of both countries meet industry standards for the design of fluid-impounding structures. For the Magistral final feasibility study, Vector chose to use the dam safety guidelines developed by the Canadian Dam Association (CDA - 1999), which exceed Peruvian standards.

The main dam (downstream embankment) is approximately 174 meters high and is situated at the west end of a hanging valley, seven kilometers upstream of the town of Conchucos. The upstream dam (part of the valley Waste Rock Storage Facility (WRSF)) consists of approximately 60 meters of the 170-meter-high dump. Therefore, the highest standards under dam safety guidelines are being used to design this facility. Table 20.1 summarizes the key design criteria used in the design of the TSF.

Table 20.1 Tailings Dam Design Criteria Description Criteria

Seismic Design Event 50% of MCE* Static Factor of Safety 1.4 Pseudo Static Factor of Safety Storm Containment

1.0 24hr -100 yr

Spillway Design Capacity PMF** Free Board three meters * Maximum Credible Earthquake ** Probable Maximum Flood

The table above does not list all the dam safety considerations within the CDA; however, these are incorporated into the TSF design. There are additional design criteria, such storm containment criteria that are not associated with CDA guidelines.



During the mineral extraction process, the whole ore will be ground into a fine grain material. The proposed flotation process will produce two streams: a tailings stream (mineral-barren) and a concentrate stream (mineral-rich). The tailings produced by the flotation process are generally chemically more benign than the host rock because the process strips out acid-producing minerals like sulfates and sulfides, and for Magistral there is a low acid-generation potential. The tailings are thickened and pumped as slurry to the TSF.

Over the life of the project, the tailings will be contained by two tailings dams. In the first four years, tailings will be impounded by a single facility, the main dam, located at the southwest end of the valley. After Year 4, the valley WRSF’s downstream face will help contain tailings in the TSF. The ultimate storage capacity of this facility is approximately 107 million tonnes at a dry density of 1.6 tonnes per cubic meter (or 70 million cubic meters). Figure 20.2 shows the tailings impoundment storage capacity verses elevation.

Figure 20.2 – Tailings Impoundment Storage Capacity

The tailings facility has been designed to contain the precipitation and runoff from the surrounding terrain, at a minimum, for the 100-year, 24-hour storm event during a wet year. Events larger than the design storm, such as the Probable Maximum Flood (PMF), will be released through a spillway.

The tailings storage facility will be accessed by the dam haul roads: one down the center of the valley in the initial years and another along the south side of the valley in the final years. Based on the project’s storage requirements, the ultimate elevation of tailings in the Magistral Valley is approximately 4,083 masl.



The main tailings dam will be a classic rock-shell fill embankment with an upstream clay-geomembrane dam facing.

There is a gravel filter between the rock shell and clay layer to prevent fine grain soil migration, i.e. soil piping, if hydraulic head builds up on the soil liner. The main dam will consist of a starter embankment followed by multiple raises over the life of the project. The Year-1 starter dam will be 108 meters high downstream toe to crest with a crest elevation of 3,993 masl and will store approximately 6.6 million tonnes of tailings. The ultimate main dam will have a height of 214 meters with a crest elevation of 4,088 masl and will store 107 million tonnes of tailings.

The TSF is downstream of the WRSF, and both are downstream of the processing plant. As the TSF is filled, it will begin to encroach on the downstream toe of the valley WRSF. In the fourth year of operation (approximately), the tailings will be at the base of this WRSF. If tailings were allowed to build up against the porous WRSF, free water would seep into this facility. The ultimate level of tailings in the TSF is approximately at an elevation of 4,080 masl, which is 40 meters higher than the plant site. The seepage could be managed by forming a tailings beach along the downstream face of the WRSF; however, Vector has chosen to use a composite barrier system (a geomembrane and low-permeability soil liner) to provide additional protection against migration of tailings water into the plant site area and increased pumping costs.

Tailings will be discharged through spigots located along the face of the dams to create beaches against the embankment, pushing the reclaim pond away from these structures. In the first four years, tailings will be exclusively discharged off the main tailings dam. The beach created will push water to the east toward the valley WRSF. When the upstream face of the valley WRSF/tailings dam is about to become inundated with decant water, tailings will also be discharged from the face of the dam. This will create a beach that will push the reclaim pond toward the center of the TSF.

The tailings impoundment will be operated continuously as the dams and barrier layers are being constructed. Based on the waste production schedule to both embankments, sufficient materials should be available to construct these facilities and keep ahead of the TSF filling operations.

20.3 Water Management

The water management of the TSF is part of the project’s site-wide water balance. The tailings management facility will be used to store process water for mill operations. During each year, the storage within the impoundment will vary due to seasonal precipitation. The facility will accumulate water through the wet season and will lose water through the dry season. Also, the amount of storage in any one year will depend on whether it’s a dry, normal, or wet year. The TSF has been designed not to store excess water; therefore, any excess water above the annual operating requirements, will be treated and discharged. If climatic conditions result in insufficient stored water volume in the tailings impoundment, water will be sent to the impoundment via the north diversion canal. Any water deficits will be made up from fresh water resources.



A tailings delivery pipeline will be constructed along the south side of the tailings impoundment and across the tailings dam. Slurried tailings will be spigotted into the impoundment from various points along the pipeline, creating a beach.

In the initial years, the reclaim pond will be located at the back of the impoundment area, and when tailings are discharged off both tailings dams, the pond will be in the center of the facility. The water-reclaim system consists of a floating barge and pumps that will be located on the reclaim pond. The location of the pond will move from year to year.

Surface water diversion canals will be installed adjacent to the TSF to minimize the inflow of water to this facility and, in turn, to reduce the need for water treatment. The diversion structures will be sized to accommodate the 25-year, 24-hour storms. However, the TSF will be designed to contain, at a minimum, the 100-year, 24-hour flood and safely pass the PMF through the spillway.

20.4 Socioeconomic Conditions

The Magistral Project is located in the Department of Ancash in a traditional agricultural and mining zone characterized by relative poverty.

Ancash has experienced approximately 13 percent population growth between 1993 and 2005; however, a large portion of the population still lacks access to basic services. Ancash also has significantly higher poverty rates, with 19 percent of the population classified as very poor. More than half the population earn their living through agriculture and/or livestock. Mining is also a significant contributor to the economy.

The surface right to the land where the project is to be developed is owned by the Conchucos Peasant Community, which is comprised of 623 members and has control over a total of 27,052.3 hectares. Most of the Conchucos community members live in the town of Conchucos, which has a population of 4,085 and is located approximately 9.5 km from the Magistral Valley.

The Magistral Project will contribute to the local communities through jobs, local purchases of goods and services, and through taxes.

Minera Ancash Cobre S.A. has developed an effective community relations program that has achieved good results both in involving local inhabitants as workers at the project and in creating an overall positive environment for relations between the company and the community.

Local citizens have a good impression of the project and its potential contributions to the economy, and they recently voted to sell to Ancash Cobre, subject to negotiation of a mutually satisfactory price, sufficient surface rights in the Magistral valley to allow development of the project.



20.5 Project Development

A comprehensive plan of execution will be developed and implemented to design and construct the Magistral Project.

The plan will address all aspects of project development, including objectives, scope, and strategies, engineering, procurement, construction, startup, and commissioning of the plant facilities and infrastructure. An integrated team of globally sourced management professionals will manage the development and execution of the project.

Engineering work will be executed in North and South America. Some vertical design packages, such as roads, infrastructure, and tailings containment will be executed in Peru. Construction will be by Peruvian contractors.

The project summary schedule developed for the feasibility study is based on a duration of 36 months from the completion of the feasibility study to plant startup. The schedule has been developed through analysis of vendor quotations, contractor quotations, and historical data for similar high-altitude mining projects in South America. Certain key events must take place during a 13-month “at risk” period, prior to receipt of full project financing, in order to meet the planned date for project completion.

Detailed engineering will begin in earnest upon approval of interim project financing by April 2008. Engineering will be substantially complete 14 months later, in June, 2009.

Commencement of construction is constrained by the preliminary development of the access road from Salaverry to the site.

The initial access road work is scheduled for nine months and is planned to be completed for transport of equipment and materials at the end of the fourth quarter of 2008. This will allow construction to start on January 1, 2009. The tailings dam construction will require 19 months.

Construction of the processing facility is 22 months with approximately two additional months allowed for completion of preoperational testing and commissioning. The efforts for mine prestripping, installation and water-supply filling of the tailings storage facility, erection of the process facility, and commissioning of the plant would be completed in 24 months (December 2010).

The critical paths are through long-lead process equipment, access road construction, mine prestripping, installation and water-supply filling of the tailings storage facility, and plant commissioning.

Key project milestones are highlighted below:

• Issue economic evaluation December 3, 2007 • Complete and issue feasibility study December 28, 2007 • Issue Environmental Impact Analysis (EIA) March 1, 2008 • Approval of EIA for access road installation April 1, 2008



• Award purchase order for ball mill March 3, 2008 • Award purchase order for crusher March 10, 2008 • Award purchase order for SAG mill March 10, 2008 • Approval of interim project funding April 2, 2008 • Commence detailed engineering April 2, 2008 • Commence access road construction April 2, 2008 • Complete phase-1 access road construction December 31, 2008 • Mobilize site construction contractors January 1, 2009 • Complete detailed engineering June 8, 2009 • Complete installation of overhead power line May 1, 2009 • Complete phase-2 access road construction October 1, 2009 • Complete port facility development (by others) November 21, 2009 • Deliver final ball mill components to site July 30, 2010 • Deliver SAG mill to site August 17, 2010 • Deliver primary crusher to site May 12, 2010 • Commence filling tailings pond with process water October 16, 2010 • Complete preoperational testing for process facility December 22, 2010 • Complete commissioning; Start up the plant December 22, 2010



21.0 Interpretation and Conclusions

21.1 Opportunities

21.1.1 Geology and Mining

Mine Development Associates (MDA) believes there is a high probability that most of the inferred material can be upgraded to ore with further drilling, since most of this material is surrounded by proven and probable ore; however, at present, the grade of the material cannot be adequately determined.

MDA believes that there is opportunity for further cutoff grade optimization to improve project economics, but this would involve higher preproduction stripping and mining higher percentages of mixed and skarn materials in the early years than is currently in the schedule.

The deposit has not been completely drilled off to depth, and a number of the deeper drill holes terminate in copper and molybdenum mineralization. In order to fully understand the geology, mineralization and structure of the deposit, additional systematic drilling will be required.

Ideally, geological rather than economic criteria should govern the final depth of the drill holes. At some point to the west and northwest of the present limits of drilling, the system will be too deep to reach from the surface with conventional wire-line drilling equipment, and it will become necessary to drill from underground stations.

21.1.2 Equipment Salvage

At the end of the 15-year project life, the equipment and processing plant material will have a salvage value offsetting some, or all, of the closure costs. Salvage value has not been considered in the economics and the cash flow because quantification is subjective due to the extended period when it will occur.

21.1.3 Recovery of IGV Taxes

IGV incurred during the preproduction period has been conservatively calculated for recovery during the first year of production.

Once IPR has signed an investment contract with the Peruvian government, the government will refund the IGV that has been spent on:

• New capital assets imported or bought locally during the preproduction stage of the mine;

• New interim assets imported or bought locally during the preproduction stage of the mine; and,

• Services and construction contracts signed or made during the preproduction stage of the mine.



The IGV can be refunded in phases during the preproduction period once all the investment contract criteria have been met.

21.1.4 Grinding Circuit Design

Due to time constraints and a need to obtain vendor equipment quotations, the design criteria for Magistral ore grinding was based on earlier test work and assumptions. The power required was evenly split between a SAG mill (40.8’ x 17.1’) and a ball mill (20.0’ x 30.5’) in the circuit at 7,200 kW installed capacity each. A pebble crusher with a 650 kW installed motor is included in the circuit.

To confirm power requirements for SAG and ball milling of Magistral ore, several composite samples of both porphyry and skarn ores were sent to SGS Lakefield to run JK SimMet SMC tests. The NQ core size was too small to run formal JKSimMet drop-weight tests, which require larger-dimensioned, unbroken rock. Four SMC tests were conducted on each of the porphyry and skarn ore types by SGS Lakefield.

The raw data were analyzed by Mark Richardson of Contract Support Services using computer simulation programs and the JKSimMet data base. Richardson’s results indicate that a smaller SAG mill, ball mill, and pebble crusher with lower installed power will adequately mill Magistral’s life of mine (LoM) ore. This creates an opportunity to reduce capital and operating costs for the project.

A second simulation by Richardson concluded that the same projected size of SAG and ball mill would be adequate to mill Magistral ore without a pebble crusher but that the SAG mill would then require 6,727 kW (an increase of 8.4 percent over SAG/Ball/Crusher case). The SAG motor size would likely increase to 6.75 or 7.0 mW. This provides an opportunity to reduce the capital cost further by eliminating the pebble crusher at the increase of some power draw and, therefore, the operating cost.

21.2 Risks

21.2.1 Fuel Costs

The mine operating cost estimate is based on 3rd Quarter 2007 United States dollars and does not include IGV taxes. The one exception to this is diesel fuel costs, which were based on the ratio of future crude oil prices and the 3rd Quarter crude oil price (0.78) and the present cost of $3.00 per gallon ($0.79 per liter).

The ratio was used to estimate the future diesel cost of $0.60 per liter for the year the owner is expected to commence mine operations. The mining contractor used the current price of $0.79 per liter in its proposal. The ratio has risen during the 4th Quarter of 2007 to 0.84. A 10-percent increase or decrease in fuel cost results in a change of mining cost of $0.012 per tonne mined.



21.2.2 Contingency

No external risk factors, such as escalation, currency fluctuation, political, excessive or adverse weather, force majeure, etc., have been addressed in the contingency analysis.


Northern Peru Copper Corp (NPCC) intends to develop a concentrate storage and ship-loading facility at the port of Salaverry for its El Galeno Project. Inca Pacific Resources (IPR) has in place a letter from NPCC that indicates a willingness to share this proposed facility with others, including IPR. The letter from NPCC stipulates no specific commercial arrangement. Further, the author is aware that NPCC is actively pursuing the sale of the El Galeno property and/or the company, and the letter of understanding has no statement of transferability.

22.0 RECOMMENDATIONS

All of the following recommended activities would be carried out during detail design or during initial operation. Although not specifically identified, the cost of implementing these activities are included in the project capital cost allowance for detail design or in the operating cost estimate.

The results of the feasibility study are positive, and it is recommended that the project be advanced to the next phase of engineering and construction execution. As the project moves forward other recommendations include:

22.1 Mining

The last pit phase is fairly large and might be better if broken into two phases.

The Colorado State University Geologist’s office has a computer program to model rock fall, and it is suggested that this program be used with other mine planning tools to minimize rock fall hazard by using rock fall barriers and berms on catch benches.

Some care should be exercised mining the south phase-1 valley overburden material, as an unknown amount of ore-grade material may cover a portion of the valley floor. This material was sampled on a regular grid on the surface and is made up of mostly skarn materials, but the thickness of this material has not been established. The surface area of ore-grade mineralization indicates a potential of about 100,000 tonnes per meter of thickness. The production schedule has included this material as waste.

22.2 Metallurgical Optimization

During initial operation the following optimization activities should be pursued:

The ore hardness studies performed in a second test program produced work index values that were markedly lower compared to the average data generated from the original Phase-1 studies.



It is recommended that additional Bond tests be considered in an attempt to delineate areas in the deposit that exhibit high work index values order to predict mill throughput.

Additional locked-cycle tests at 200 µm for the skarn composite are recommended to verify the primary grind requirements. This is particularly important for the skarn high copper composite where the cycle tests were conducted at 140μm P80.

Additional test work is recommended to further define the effect of pulp pH on rougher circuit performance.

The observed flotation responses of the copper and molybdenum in the ore zones displayed some localized variation.

More variability test work is recommended to more accurately quantify the estimates of flotation responses of the various sulfides destined for inclusion into the mine model.

The recovery performance for molybdenum displayed significant variation. This is particularly evident with those tests performed at elevated pulp pH levels. Additional test work is recommended to further define the effect of pulp pH on rougher circuit performance.

Five of the 19 skarn samples contained significant arsenic and antimony values. Two samples in particular, SK10 and SK15, contain about 14 and 28 percent arsenic, respectively, in the final concentrate. Realgar is the identified arsenic mineral. Realgar will be floated and included in the molybdenum concentrate. Identifying locations in the mine may allow these zones to be excluded from the milled ores.

The recoveries and concentration of molybdenum in the bulk concentrate warrants additional optimization of the copper-molybdenum separation circuit.

22.3 Water Treatment

Telesto recommends continued geochemical testing to confirm current interpretations during final design.

Also, Telesto recommends water treatment bench and pilot testing be conducted to confirm the assumptions made for final design, confirm selected chemicals, and obtain additional process design information, all as part of the final design process.

22.4 Tailings Dam Construction

Final construction sequencing of tailings dams should be optimized in detailed design.



23.0 REFERENCES

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24.0 DATE AND SIGNATURE

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



25.0 Additional Requirements for Advanced Projects

25.1 Mining Operations

The Magistral deposit is located in a glacial valley with steep valley walls. It will be mined as an open pit with a 15-year mine life. The mine plan is based on providing 20,000 tpd of material to the crusher for 350 days per year, or 7 million tonnes of ore per year.

The mine plan for the Magistral project was initially developed by completing pit optimization studies at various copper and molybdenum prices.

Operating cost estimates for pit optimization were based on the costs developed for the SRK prefeasibility study, as were metal recovery estimates.

New pit-slope parameters were developed by Piteau Associates Engineering Ltd. (Piteau). Based on the results from the pit optimization studies, three pit phases were developed to mine the deposit.

The top of the final pit nearly reaches the 4,600-meter elevation above sea level (masl), while the bottom of the pit is at 3,800 masl. This results in a highwall on the north side of the pit that is nearly 800 meters high and slightly less on the south side of the pit. Most of the pit benches above the valley floor (4,050 to 4,150 masl) will require side-hill access roads. A number of temporary ramps are planned from the access elevation that extend as much as 20 meters up or down from the side-hill access elevation. Side-hill access road requirements are relatively high for the project to provide access to the high-elevation waste areas.

A contract miner will establish the side-hill access roads, mine all materials from the preproduction period and Years 1 and 2. The owner will assume mining responsibilities for the rest of the mine life, augmenting with the contractor during Years 3-5 and 9-11, which are the peak waste production years.

The preproduction period for mine development lasts two years. This preproduction period starts as the main access road is nearing completion, which is when the mining contractor will be mobilized. The initial eight months of this mine preproduction period is spent constructing the initial side-hill access roads to be used when mining commences, and dozing materials from the upper narrow benches to the valley bottom. Mining by drilling, blasting and loading materials into trucks starts in month nine of the 24-month mine preproduction period.

25.1.1 Geotechnical

The design slope parameters were developed by Piteau Associates Engineering Inc. (Piteau), based on geology supplied by IPR. Piteau issued preliminary design slopes that were used for pit optimization studies. After the pit optimization was completed, a final pit design with ramps was completed.



Piteau reviewed the final pit design and suggested revisions to the eastern and southeastern portions of the pit because of faults projected by Inca Pacific to dip into the pit. A detailed structural geology program was initiated by Inca Pacific to complete a definitive structural three dimensional map of this area.

This study is still ongoing in other areas of the pit; however, the conclusion of the study in the eastern and southeastern portions is that these structures do not project into the pit and that revision of the final pit design is not required. .

The geotechnical study was initiated with a review of all available project data and existing reports. Subsequent to this initial review, a detailed geotechnical field investigation program was planned and executed between November 2006 and March 2007.

A groundwater investigation program that included core and RC drilling; in situ hydraulic conductivity (packer) testing; and piezometer installation, testing, and monitoring, was conducted by Vector in conjunction with the geotechnical drilling program.

A supplementary, laboratory, rock-mechanics testing program consisting of unconfined compressive strength (UCS) and triaxial testing of rock cores and direct shear testing of natural discontinuities was conducted on selected core samples obtained from the 2006-2007 geotechnical drill holes.

A preliminary hydrogeological model of the deposit was developed by Vector. Five selected geotechnical sections, located on slopes considered critical in terms of overall slope stability, were provided to Vector for detailed, transient pore pressure modeling.

Slope stability analysis for Magistral first involved detailed assessment of possible failure modes involving structural discontinuities that could result in failure of individual benches and interramp slopes. Optimum bench and interramp slope geometries were evaluated for each design sector on the basis of interpreted structural fabric.

Recommended interramp slope designs were provided to MDA, and a revised ultimate pit design was prepared. Geotechnical sections were modified to reflect the modifications to the ultimate pit.

Overall slope stability analyses were conducted on representative sections to verify that the proposed interramp slope designs were viable and to evaluate the possible impact of fabric anisotropy in the various rock-mass units. Pore pressure data from Vector for passive depressurization were converted to phreatic surfaces and used in the assessments of overall slope stability.

Feasibility-level slope design criteria were developed for each slope sector in the proposed ultimate open pit based on the stability analyses and related assessments described above.



25.1.2 Mine Phase Design

The feasibility base-case pit optimization was completed using base-case metal prices of $1.25/lb Cu, $8.00/lb Mo, and $7.50/oz Ag. Complete details of pit optimization and design are provided in Section 4.3 of this report.

The base-case optimized pit was used for design of the final pit.

The inter-ramp pit slopes recommended by Piteau were used to adjust face angles to work with a nine-meter wide catch bench every 30 meters. In-pit ramps were designed with a 10-percent gradient and a 26-meter width based on use of 136-ton trucks. The ramp width in the lowest pit benches in each phase was reduced to allow only one-way traffic. The pit design was sent to Piteau to check on final pit slopes, and several adjustments were made prior to completion of the final design. Figure 25.1 illustrates the final pit.

Final Pit DesignMagistral Project

INCA PACIFIC RESOURCES

Figure 25.1 Magistral Ultimate Pit



25.1.3 Mine Production Schedule

The production schedule is based on processing a total of 7 million tonnes of ore annually, or 20,000 tonnes per day for 350 days per year. The initial year of production has been scheduled to process 6.3 million tonnes due to project startup.

The production schedule was produced by increasing the value cutoff to $10/tonne during phase 1 through the 4,020-masl bench and then using $8/tonne for the remainder of phase 1. Using a higher cutoff early in the production schedule will increase the NPV and IRR of the project. When phase 2 and phase 3 are mined, the cutoff value is lowered to $6.50/tonne.

Over the life of the mine, this results in stockpiling about 10.6 million tonnes of material that meets cutoff-grade criteria but is not included in the current production schedule. In addition, about 3 million tonnes of high-arsenic (over 0.10% As) ore-grade material is stockpiled over the life of the mine from phases 2 and 3. The production schedule for the ore is shown in Table 25.1.

Table 25.1 Magistral Ore Production Schedule

Period 000s Tonnes % Cu % Mo g Ag/t % As g Sb/t % Cueq

Preproduction 56.4 1.002 0.009 8.11 0.030 34 1.051 6,300.0 0.621 0.051 3.88 0.045 38 0.882 7,000.0 0.601 0.059 2.77 0.034 31 0.893 7,000.0 0.615 0.060 2.81 0.028 35 0.914 7,000.0 0.515 0.061 2.27 0.024 34 0.825 7,000.0 0.475 0.032 3.55 0.042 27 0.676 7,000.0 0.507 0.045 3.00 0.038 33 0.757 7,000.0 0.521 0.046 2.69 0.035 27 0.808 7,000.0 0.525 0.051 2.85 0.031 28 0.779 7,000.0 0.518 0.057 2.65 0.022 40 0.86

10 7,000.0 0.446 0.054 2.00 0.018 24 0.7111 7,000.0 0.453 0.063 2.42 0.054 49 0.7812 7,000.0 0.596 0.059 2.86 0.051 56 0.9013 7,000.0 0.548 0.053 2.87 0.032 63 0.8214 7,000.0 0.452 0.047 2.17 0.034 50 0.7715 5,612.8 0.451 0.061 1.66 0.025 27 0.75

Totals 102,912.8 0.523 0.053 2.70 0.034 38 0.81

Ore Production Schedule

Note (1) The 56,400 t of preproduction material is included in the 6,300,000 t of first year production



25.1.4 Mine Equipment

The mining contractor plans to use 37-tonne highway trucks and relatively small front-end loaders and an excavator to complete the required material movement. The contractor is currently mining similar tonnages from a mine in Peru using a similar fleet and at a similar elevation. The contractor fleet is shown in Table 25.2.

Table 25.2 Magistral Contractor Mining Fleet (Number of Units)

UNIT CLASS No of Units PP Y1 Y2 Y3 Y4 Y5

Excavator CAT365 1 2 3 2 2 2FEL Caterpillar 980G 2 3 2 1 1 1Dump Truck Mercedes Benz 4150K 18 28 32 22 22 26Dump Truck Mercedes Benz 4150K 7 7 8 8 9 9

Drill Rig Titon 600 2 2 2 2 2 2Drill Rig Pantera 1500 1 1 1 1 1 1 Wheel Dozer Caterpillar 834H 1 1 1 1 1 1Dozer Caterpillar D9T 2 2 4 2 2 2Water Truck Mercedes Benz 4150K 2 2 2 2 2 2Grader Caterpillar 14M 2 2 2 2 2 2 FEL Caterpillar 966H 1 1 1 1 1 1Excavator Caterpillar 330DL 1 1 1 1 1 1Truck Mercedes Benz 4150K 2 2 2 2 2 2Lighting Plant 4 Header/ 6 Header 10 10 10 8 8 8Service Truck 4150K Module 1 1 1 1 1 1

The owner will purchase a fleet of mine equipment during Year 2 for operation in Year 3. The owner fleet is based on using 60-tonne trucks for material movement at higher elevations and 136-ton trucks at lower elevations. An 8.6-m3 front-end loader will load the 60-tonne trucks, while a 17-m3 front-end loader will load the 136-tonne trucks. The owner equipment fleet is shown in Table 25.3.



Table 25.3 Magistral Owner Mining Fleet

Item 3 4 5 6 7 8 9 10 11 12 13 14 15 Rotary Drill - 250 mm 1 1 1 1 1 1 1 1 1 1 1 1 1 Hydraulic Drill - 165 mm 1 2 2 2 2 2 2 2 2 17 cm Front End Loader 2 2 2 2 2 2 2 2 2 2 2 1 1 Spare 17 cm Bucket 1 1 1 1 1 1 1 1 1 1 1 1 1 8.6 cm Front End Loader 1 2 1 2 1 2 2 2 2 1 Spare 8.6 cm Bucket 1 1 1 1 1 1 1 1 1 1 136 t Truck 7 7 7 8 8 8 8 8 8 8 7 6 5 60 t Truck 4 5 5 6 6 6 6 6 6 3 10,000 gal H2O Truck 1 1 1 1 1 1 1 1 1 1 1 1 1 Dozer 350-450 HP 2 2 2 2 2 2 2 2 2 1 1 1 1 Dozer 500-600 HP 2 2 2 2 2 2 2 2 2 1 1 1 1

Rubber Tire Dozer 400-500 HP 1 1 1 1 1 1 1 1 1 1 1 1 1

Grader 16H 2 2 2 2 2 2 2 2 2 1 1 1 1 4 cm Mass Excavator 1 1 1 1 1 1 1 1 1 1 1 1 1 Light Plant 8 8 8 8 8 8 8 8 6 6 4 4 4 Steming Truck 1 1 1 1 1 1 1 1 1 1 1 1 1 Low Boy 1 1 1 1 1 1 1 1 1 1 1 1 1 Lube Truck 1 1 1 1 1 1 1 1 1 1 1 1 1 Fuel Trucks 1 1 1 1 1 1 1 1 1 1 1 1 1 Mechanics Truck 1 1 1 1 1 1 1 1 1 1 1 1 1 Welding Truck/Crane 1 1 1 1 1 1 1 1 1 1 1 1 1 45 T Hydraulic Crane 1 1 1 1 1 1 1 1 1 1 1 1 1 Skid Loader 1 1 1 1 1 1 1 1 1 1 1 1 1

200 HP Integrated Tool Carrier 1 1 1 1 1 1 1 1 1 1 1 1 1

Ambulance and Fire Equipment 1 1 1 1 1 1 1 1 1 1 1 1 1

Flatbed Truck 2 2 2 2 2 2 2 2 2 2 1 1 1 Crew Vans 4 4 4 4 4 4 4 4 4 4 3 3 3

25.1.5 Mine Manpower

The mine will use a contractor for all material movement during preproduction and the first two years of operation. After this period, the contractor will be used to level off the owner’s equipment requirements during peak production periods of Years 3 through 5, and 9 through 11. Table 25.4 describes the planned contractor manpower. The contractor manpower is based on working two 12-hour shifts each day with a total of three rotating crews.



Table 25.4 Magistral Contractor Manpower

No of Personnel PP Y1 Y2 Y3 Y4 Y5 Operators 129 165 186 144 147 159General Lab/Spares 18 23 26 20 21 22Blast Crew 8 10 8 8 8 8 Maintenance 26 33 37 32 32 32 Staff 15 15 15 15 15 15 Tot Employees 196 246 272 219 223 236 Onsite 129 162 180 145 147 156 Beds Req 134 168 185 150 152 161

The owner manpower requirements are shown in Table 25.5. These requirements are based on working three eight-hour shifts per day with a total of four rotating crews.



Table 25.5 Magistral Owner Mine Manpower -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

MINE OPERATIONSEX Mine Manager 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1EX Pit SuperintendentD3 General Foreman 1 1 1 1 1 1 1 1 1B6 Mine Clerk 1 1 1 1 1 1 1 1 1 1 1 1 1D1 Mine Trainer 2 1 1 1 1 1 1 1 1D2 Load and Haul SuperintendentD2 Load and Haul ForemanC1 Load and Haul Operator 0 0 0 0 48 52 44 64 44 52 52 60 52 48 32 24 22D2 Drill and Blasting Superintendent 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1D2 Mine Foreman 8 8 8 8 8 8 8 8 8 6 4 4 4D2 Dewatering Foreman 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Dewatering Crew 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0D2 Blasting Foreman 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1C4 Blastman 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0B3 Blasting Helper 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0C2 Driller 0 0 0 0 8 12 12 8 8 12 12 12 8 4 4 3 2C2 Support Equipment Operators 0 0 0 0 21 21 17 17 17 21 21 21 17 13 13 11 11B3 Trainee 0 0 0 0 2 2 2 2 2 2 2 2 2 1 0 0 0

Subtotal Mine Operations 2 2 2 2 94 101 89 105 85 101 101 109 93 76 57 46 43MINE MAINTENANCEEX Maintenance Superintendent 1 1 1 1 1 1 1 1 1 1 1 1 1 1D2 Maintenance ForemanD1 Shop Shift Foreman 4 4 3 3 3 3 3 3 2 2 2 2 2D1 Planning Engineer 1 1 1 1 1 1 1 1 1 1 1 1 1C4 Mechanic 0 0 0 0 22 24 21 25 20 24 24 26 22 19 15 11 11C4 Electrician 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1C2 Welder 0 0 0 0 4 5 5 5 5 5 5 5 5 5 4 3 3C1 Servicemen 0 0 0 0 3 3 3 3 3 3 3 3 3 2 2 2 2C4 Light Vehicle Mechanic 1 2 1 2 4 4 4 3 3 3 3 3 3 3 3 2 2B3 Workshop Storeman 0 0 0 0 2 2 2 2 2 2 2 2 2 2 1 1 1B3 Tireman 0 0 0 0 2 2 2 2 2 2 2 2 2 2 1 1 1C1 Mechanic Trainee 0 0 0 0 2 2 2 1 1 1 1 1 1 0 0 0 0

Subtotal Mine Maintenance 1 2 1 3 46 49 45 47 42 46 46 48 43 38 31 25 25

Total Mine Operations 3 4 3 5 140 150 134 152 127 147 147 157 136 114 88 71 68MINE ENGINEERINGEX Chief Mining Engineer 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1D2 Chief Surveyor 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1C4 Sr Mining Engineer 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1B6 Surveyor 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1B1 Surveyor Assistant 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1C3 Enviromental Engineer 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1B6 Enviromental Assistant

Subtotal Engineering 7 7 6 6 6 6 6 6 6 6 6 6 6 6 6 6 5

GEOLOGY AND GRADE CONTROLD3 Chief Geologist 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1C4 Senior Geologist C3 Ore Control Geologist 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1C2 GeotechnicianB3 Geotechnician AssistantD3 Chief HydrologistC3 HydrologistC2 MaintenanceB2 Data Capture ClerkB3 Sampler 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1B2 Labor 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Subtotal Geology and Grade Control 1 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

TOTAL MINE STAFF 11 15 13 15 150 160 144 162 137 157 157 167 146 124 98 81 77

25.2 Recoverability

In general, copper and molybdenum recoveries recorded in the laboratory-scale trials compared favorably to recoveries for the majority of mineralogically similar ores that have been investigated by G&T.



Differential flotation techniques, designed to investigate the potential of separating the copper from the molybdenum sulphides yielded encouraging results.

Magistral has excellent grades and recovery of molybdenum. The molybdenum contained in the porphyry type ore is coarser than typical for copper/moly ores in general and has recoveries into a bulk concentrate in excess of 90 percent. The molybdenum contained in the skarn ores is finer-grained and has the lowest recovery into a bulk concentrate in the high 60-percent range. Overall, the recovery into the bulk concentrate is over 80 percent. Two pilot plant campaigns, one for porphyry and the other for skarn type ores, produced copper concentrates from bulk concentrates that contained 0.21% and 0.23% Mo, respectively. These represent a 93-to 94-percent recovery of Mo into the molybdenum concentrate from the bulk concentrate.

25.3 Process Description

The Magistral mineral processing facility will be located in the center of the U-shaped Magistral valley, between the open-pit mine at the closed end of the valley and the tailings storage facility at the open end of the valley. The facility will be located quite close to the mining operation and is designed to operate 24 hours per day, 350 days per year.

25.3.1 Crushing and Grinding

Run-of-mine ore will be delivered to the primary crusher in 136-tonne-capacity, rear-dump trucks. Ore will be dumped into a primary gyratory crusher.

The crushing facility will have a design throughput of 1,750 tonnes per hour (tph). One crushed-ore, stacking-belt conveyor system will transport the material to the 212,000-ton capacity (14,500-ton, live capacity), crushed-ore stockpile.

One concrete reclaim tunnel located below the crushed-ore stockpile will have two reclaim hoppers, each of which will be fitted with a variable-speed reclaim belt feeder. A third emergency dump hopper is provided and can be fed by a front-end loader or dozer. Reclaimed material will be fed to the SAG mill.

The SABC grinding circuit will consist of a SAG mill, a ball mill, and a pebble cone crusher. Design throughput will be 877 tph based on 95 percent plant availability.

SAG mill trommel undersize and ball mill discharge will flow to a common concrete cyclone feed sump and will be pumped by variable-speed, metal-lined pumps to cyclone clusters in closed circuit.

Milk-of-lime will be added to the grinding mills for pH control. Diesel fuel oil will be added for subsequent moly flotation. Cyclone overflow from the grinding circuit will be combined in a collection box for gravity feed to rougher forced-air tank cells. Flotation reagents including collector, promoter, frother, diesel fuel, and lime will be added at several addition points.



25.3.2 Flotation

Rougher flotation concentrate will flow to a regrind cyclone feed sump. The concentrate will be classified. Reground rougher concentrate will be cleaned in first cleaner column flotation cells. First cleaner concentrate will advance to a second cleaner column flotation cell. Concentrate from the second cleaner will advance to the third cleaner.

The first cleaner column tailings will be scavenged in a row of cleaner/scavenger conventional forced-air flotation cells.

Concentrate from the cleaner/scavenger cells will flow to the regrind cyclone feed pump box along with tailings from the second cleaner flotation column. Concentrate from the second cleaner flotation column will gravity-flow to the bulk concentrate thickener. Thickened concentrate will be pumped to the moly plant rougher flotation cells for Cu/Mo separation. Cleaner/scavenger tailings will flow to the tailing disposal launder.

25.3.3 Molybdenum Plant

The molybdenum plant will be designed to treat approximately 16.5 tonnes per hour (tph) of Cu/Mo concentrate.

The bulk concentrate thickener will provide surge capacity between bulk flotation and the Cu/Mo separation circuit. Copper will be depressed with sodium hydrosulfide, and kerosene will be used as the collector to float molybdenum.

The conditioned bulk concentrate will be fed to conventional rougher cells to separate the copper and molybdenum sulfides.

The rougher tailings fraction, containing copper and iron sulfide minerals, will be the final copper concentrate, which will be pumped to the copper concentrate thickener.

The molybdenum rougher concentrate will flow to the cleaner flotation cyclone feed pump sump. The molybdenum flotation cyclone feed pump will feed the molybdenum regrind cyclones cluster. The cyclone underflow will be reground in the molybdenum regrind tower mill in closed circuit.

Cyclone overflow will be cleaned in a first cleaner cell. First cleaner concentrate will be cleaned and recleaned in three additional cleaning stages.

Tailings from the first cleaner will be recycled back to rougher flotation. Tailings from the second cleaner will be recycled back to the first cleaner cell. Tailings from the third cleaner will be recycled back to the second cleaner cell, and tailings from the fourth cleaner will be recycled back to the third cleaner.



25.3.4 Thickening and Filtration

Fourth cleaner concentrate will advance to a thickener for dewatering and then to a continuous filter. Discharged filter cake will be conveyed by a screw feeder to the molybdenum concentrate repulp tank to be repulped with recirculated Nash process water for feed to the ferric chloride leach circuit.

Repulp molybdenum concentrate slurry will be pumped from the molybdenum concentrate repulp tank into the ferric chloride leach tank, where ferric chloride solution is added. Leached slurry is then sent to the molybdenum filter press via the dewatering filter feed tank for dewatering.

Cake from the filter press is sent via the molybdenum concentrate transfer screw conveyor to an indirect, oil-heated screw dryer.

Thickened copper concentrate from the concentrate thickener tank will be filtered in pressure belt filters, sized for one operating and one standby. Copper concentrate filter cake will be conveyed to the covered stockpile for storage. Concentrate will be reclaimed by front-end loader into trucks for highway transport to the port facility and subsequent shipment by ocean vessel to smelting facilities.

25.3.5 Reagents

Several reagents will be used in the copper and molybdenum flotation circuits.

The reagent facilities will provide for unloading, mixing, storing, and feeding, as required, for each particular reagent. The reagents that will be used are milk-of-lime, collectors, promoters, MIBC (frother), kerosene, sodium hydrosulfide, antiscalents, and flocculants.

Reagent dispensing facilities, including head tanks, metering pumps, and feeders, will be located inside the concentrator and molybdenum plant.

25.3.6 Tailings

Tailings from the bulk rougher flotation cells will be combined with the tailings from the cleaner scavenger cells into one tailing disposal launder and will flow by gravity to the tailings thickener. The thickened underflow will be pumped to the tailings storage facility. Thickener overflow will be pumped to the process water tank for recycle to the process circuit.

Reclaimed water from barge-mounted pumps will be delivered to the process water tank located at the concentrator.

25.3.7 Concentrate Transportation

Copper concentrate will be transported to a storage and loading facility at the port of Salaverry by 45-tonne (gvwt) haul trucks. Molybdenum concentrate will be placed at site in super sacks within sea containers for shipment to a container port at Callao.




Bulk copper concentrate will be handled through a concentrate storage and ship-loading facility located at the port of Salaverry. The concentrate storage capacity is 15,000 tonnes, and the marine facility will accommodate ships of up to 40,000 tonnes capacity, loading them at a rate of 1,500 tonnes per hour. Molybdenum, transported from the process plant in super sacks, will be stored in a covered building (approximately 30 meters by 25 meters) until it can be loaded as bulk cargo on to ships at the Salaverry facility.

This facility does not currently exist but is planned to be constructed as part of Northern Peru Copper Corporation’s (NPCC) El Galeno project. IPR has in place a letter from NPCC that indicates a willingness to share this proposed facility with others, including IPR.

25.4 Markets

Inca Pacific Resources (IPR) engaged H&H Metals Corp. (H&H) of White Plains, New York, to conduct a comprehensive study of potential markets for the Magistral Project concentrate products. H&H is a metals trading company with extensive experience working with metals producers and refiners worldwide. Based on its analysis, H&H projects metals prices for the decade 2011-2020 as shown in Table 25.6.

Table 25.6 Metals Prices Outlook 2011-2020

Bottom 2011 - 2012 2013 - 2020 Range Estimate Range Estimate Cu $/lb 1.35 2.66 – 2.86 2.76 1.35 – 1.85 1.50 Ag $/oz 9.00 9.00 – 14.00 12.00 9.00 – 14.00 12.00 Au $/oz 600 600 - 800 700 600 - 800 700 Mo $/lb 10.00 21.75 – 23.00 22.38 10.00 – 15.50 12.00

H&H estimates that the appropriate cost of petroleum for this study is $60 per barrel. Ocean shipping rates during 2010-15 would be approximately $45-$50 per wet metric ton.

Punitive penalty elements in copper concentrate include Pb+Zn, Sb, Hg, As and Bi. Of these, only As exists in sufficient quantities in the Magistral copper concentrate to incur penalties. The analysis suggests a penalty of $3.60 per tonne.

Combined treatment charges (TCs) and refining charges (RCs) are conservatively estimated to be $80/8.0 per tonne, and total freight is evaluated at $55 per tonne. Thus, considering these deductions, the net smelter return between 2011-2012 is estimated to be $1,565.93 per tonne, and between 2012-2020, the net smelter return is estimated to be $776.77 per tonne.



The standard discount for molybdenum is estimated at 10 percent for 2011 through 2012 and 16% for 2013 through 2020. The value per pound of Mo concentrate is estimated at $10.42 between 2011-2012, and $5.19 between 2013-2020.

Based on the analysis, H&H recommends marketing concentrates to smelters in China, India, and Western Europe.

25.5 Contracts

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

25.6 Environmental Considerations

The environmental conditions of the area, baseline studies, permitting, and mitigation plans are detailed in Section 6.4 of this report. The remainder of this subsection deals with closure and bonding.

Closure legislation (Law 28090, above) requires that each operating company must have an approved closure plan and financial guarantees of ability to cover the estimated closure costs. The closure plan may be elaborated within a year following the approval of the ESIA, but it must be approved by the MINEM prior to receipt of permission to operate. A conceptual closure plan must be developed during the elaboration of the ESIA.

The conceptual mine closure plan for the ESIA includes the following activities:

• Remediation of waste dumps; • Closure of site infrastructure (camp, plant, and ancillary facilities); • Closure of the open pit; • Closure of the tailings storage facility; • Establishment of water diversion channels to control water runon to the waste

dumps and tailings facility; • Decommissioning of access roads; and • Decommissioning of the power line.

The conceptual closure plan identifies and separates closure tasks and activities into two groups. One group of activities occurs progressively during the construction and operation of the mine. The second group outlines the tasks that become significant after the mine operations cease.

Evaluation of the second group of activities represents the tasks that must be financially guaranteed (according to Peruvian law) before the mine can commence operations.



Therefore, the logic developed and implemented in the conceptual closure plan will be consistent with facilities and project design criteria, as developed and presented in the bankable feasibility study.

25.7 Taxes

The economic model was prepared and analyzed on a pre-taxed basis. Recoverable value-added (VAT) taxes, such as Peruvian IGV have not been included.

25.8 Capital and Operating Cost Estimates

25.8.1 Capital Costs

The total estimated cost to design, procure, and construct the facilities described in this report is $401,333,526. The estimate accuracy is deemed to be in the range of -4 to +14 percent. Table 25.7 summarizes the capital costs by major area.

Table 25.7 Summary of Capital Costs

Area Cost (US$)

Mining 19,471,800 Process Facilities 117,722,637 Roads, Waste Dumps, and Tailings 80,240,500 Port Facilities 6,893,317 Power Transmission Line 8,571,110 Subtotal 232,899,364 Contractor Indirects 31,065,940 EPCM & Startup 32,055,446 Freight, Duties & Tax 24,081,836 Owner's Cost 31,183,445 Contingency 50,047,495

Total Capital 401,333,526

A contingency of approximately 14.2 percent, or $50 million, has been included in the capital cost. Contingency is an allowance to cover unforeseeable costs that may arise during the project execution, but which cannot be explicitly defined or described at the time of the estimate due to lack of information. It is assumed that contingency will be spent; however, it is does not cover scope changes or project exclusions.

Sustaining capital represents capital expenses for additional construction cost and equipment purchases that will be necessary during the operational years of the project, and are not included in the regular annual operating costs.



Examples include replacement of mining equipment and vehicles, additional raises of the tailings dam after the initial construction, and additional mine haul roads. LOM sustaining capital is estimated to be $153,432,661.

25.8.2 Operating Costs

Operating costs were determined for the mine and concentrator separately; however, all estimates were built up using organizational charts, estimated consumption rates for consumables, and unit prices for the commodities that are delivered to the site. Operating costs were estimated using information that was developed by the integrated feasibility study project team including Inca Pacific Resources, Samuel Engineering, MTB Project Management Professionals Inc., Mine Development Associates, Vector Engineering, and Telesto Solutions. The operating costs for the Magistral mine and concentrator are summarized in Table 25.8

Table 25.8 Average Life of Mine Operating Costs for the Magistral Mine and Concentrator

Area Average Life of Mine Cost per Year Average Life of Mine Cost per Tonne of Ore Mining $27,724,604 $4.041 Processing $21,871,772 $3.188 General and Administrative $7,383,604 $1.076 Total $56,979,979 $ 8.305

A contingency allowance of 10 percent was included in the economic evaluation and cash flow, in addition to the above costs.

25.9 Economic Analysis

25.9.1 Base Case Analysis

The net present value (NPV) at a discount rate of eight percent over the assumed mine life is $151,989,802. The internal rate of return (IRR) is 15.2 percent. Payback is estimated to be approximately 40 months after start of production. The base-case sensitivities according to discount rate are presented in Table 25.9.

Table 25.9 Base Case Sensitivities

NPV for varying discount rates: Discount Rate 0% 5% 8% 10% 12% NPV ($/millions) $596,514.5 $267,084.0 $151,989.8 $95,969.2 $51,897.6



25.9.2 Sensitivity Analysis to Base Case

Analyses to the base case were made for cost and price sensitivities (Table 25.10), initial capital cost and operating cost sensitivities (Table 25.11), recovery (Table 25.12), and grade (Table 25.13). Copper/molybdenum IRR and NPV for various scenarios are shown in Table 25.14.

Table 25.10 Cost and Price Sensitivities

Copper Metal Price -20% -10% 0% 10% 20%

Copper Metal Price ($/pound) $1.20 $1.35 $1.50 $1.65 1.80

NPV ($ millions) $44,728.2 $98,407.0 $151,989.8 $205,588.9 $258,985.7

IRR (%) 10.23% 12.8% 15.2% 17.48% 19.69%

Molybdenum Metal Price -20% -10% 0% 10% 20%

Molybdenum Metal Price ($/pound) $9.60 $10.80 $12.00 $13.20 $14.40

NPV ($ millions) $89,479.2 $120,738.6 $151,989.8 $183,145.5 $214,222.6

IRR (%) 12.35% 13.78% 15.2% 16.5% 17.84%

Silver Price -20% -10% 0% 10% 20%

Silver Price ($/Oz) $9.60 $10.80 $12.00 $13.20 $14.40

NPV ($ millions) $149,167.5 $150,578.8 $151,989.8 $153,400.7 $154,811.3

IRR (%) 15.05% 15.11% 15.17% 15.23% 15.29%

Table 25.11 Capital Cost and Operating Cost Sensitivities

Initial Capital Cost -20% -10% 0 10% 20%

NPV ($ millions) $221,253.2 $186,621.5 $151,989.8 $117,358.1 $82,726.4

IRR (%) 20.63% 17.63% 15.17% 13.10% 11.34%

Operating Cost -20% -10% 0 10% 20%

NPV ($ millions) $200,009.3 $176,243.1 $151,989.8 $127,350.4 $102,490.9

IRR (%) 17.10% 16.16% 15.17% 14.13% 13.05%



Table 25.12 Sensitivities on Recovery

Copper Recovery-Bulk Concentrate %

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

NPV ($ millions) $126,335.5 $131,444.8 $136,584.4 $141,721.7 $146,856.8 $151,989.8 $157,120.6 $162,249.4 $167,376.0

IRR (%) 14.03% 14.25% 14.48% 14.71% 14.94% 15.17% 15.39% 15.62% 15.84%

Moly Recovery- Bulk Concentrate %

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

NPV ($ millions) $135,981.5 $139,185.0 $142,387.6 $145,589.3 $148,790.0 $151,989.8 $155,188.7 $158,386.7 $161,583.8

IRR (%) 14.46% 14.60% 14.74% 14.89% 15.03% 15.17% 15.31% 15.45% 15.59%

Silver Recovery - Bulk Concentrate %

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

NPV ($ millions) $151,310.4 $151,446.3 $151,582.2 $151,718.1 $151,853.9 $151,989.8 $152,125.7 $152,261.5 $152,397.4

IRR (%) 15.14% 15.14% 15.15% 15.16% 15.16% 15.17% 15.17% 15.18% 15.19%



Table 25.13 Sensitivities on Grade

RoM Copper Grade

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

NPV ($ millions) $144,694.2 $146,152.7 $147,611.5 $149,070.6 $150,530.0 $151,989.8 $153,449.9 $154,910.3 $156,371.0

IRR (%) 14.76% 14.84% 14.92% 15.00% 15.08% 15.17% 15.25% 15.33% 15.42%

RoM Molybdenum Grade

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

NPV ($ millions) $135,981.5 $139,185.0 $142,387.6 $145,589.3 $148,790.0 $151,989.8 $155,188.7 $158,386.7 $161,583.8

IRR (%) 14.46% 14.60% 14.74% 14.89% 15.03% 15.17% 15.31% 15.45% 15.59%

RoM Silver Grade

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

NPV ($ millions) $151,310.4 $151,446.3 $151,582.2 $151,718.1 $151,853.9 $151,989.8 $152,125.7 $152,261.5 $152,397.4

IRR (%) 15.14% 15.14% 15.15% 15.16% 15.16% 15.17% 15.17% 15.18% 15.19%



Table 25.14

Sensitivity of Molybdenum and Copper for Various Cases Net Present Value at 8% discount rate

Metal Price/lb Cu $1.00 Cu $1.25 Cu1.50 Cu $1.75 Cu $2.00 Mo $16.00 $77,522.9 $166,528.2 $255,549.0 $344,179.7 $432,258.2 Mo $14.00 $25,664.8 $114,738.6 $203,871.8 $292,773.7 $381,118.8 Mo $12.00 -$26,149.3 $62,654.6 $151,989.8 $241,207.3 $329,849.0 Mo $10.00 -$73,943.1 $10,408.9 $99,896.0 $189,453.8 $278,428.3 Mo $8.00 -$99,626.6 -$41,766.6 $47,697.6 $137,480.6 $226,809.8

Internal Rate of Return at 8% discount Metal Price/lb Cu $1.00 Cu $1.25 Cu1.50 Cu $1.75 Cu $2.00 Mo $16.00 11.8% 15.8% 19.6% 23.1% 26.5% Mo $14.00 9.3% 13.5% 17.4% 21.1% 24.5% Mo $12.00 6.6% 11.1% 15.2% 19.0% 22.5% Mo $10.00 3.8% 8.5% 12.8% 16.8% 20.5% Mo $8.00 2.3% 5.8% 10.4% 14.5% 18.4%

25.9.3 Economic Model and Cash Flow

The base-case financial model presentation for cash flow is presented as Table 25.15.



Table 25.15 LoM Base Case Cash Flow Financial Model



25.10 Capital Payback

Capital payback is estimated at approximately 40 months.

25.11 Mine Life

The operating life of the mine has been estimated at 15 years.



26.0 Illustrations

Figure 26.1 Facilities Identification Plan

MINE DEVELOPMENT ASSOCIATES MINE ENGINEERING SERVICES

775-856-5700 210 South Rock Blvd. Reno, Nevada 89502 FAX: 775-856-6053

CONSENT of AUTHOR

TO: Alberta Securities Commission British Columbia Securities Commission Commission des Valeurs Mobilieres du Quebec Manitoba Securities Commission Ontario Securities Commission Saskatchewan financial Services Commission – Securities Division

I, Steven Ristorcelli, P.Geo., Principal Geologist, do hereby consent to the filing, with the regulatory authorities referred to above, of the technical report titled “Technical Report Magistral Property Feasibility Study”, dated effective January 17, 2008. This consent dated the 17th day of January, 2008 has been provided in connection with the filing of the Technical Report. “Steven Ristorcelli” Signature of Qualified Person Steven Ristorcelli Print name of Qualified Person



I, Steven Ristorcelli, P.Geo., employed by Mine Development Associates, Inc., 210 South Rock Blvd. Reno, Nevada 89502, do hereby certify:

• I graduated with a Bachelor of Science degree in Geology from Colorado State University in 1977 and a Master of Science degree in Geology from the University of New Mexico in 1980.

• I am a Professional Geologist in the states of California (#3964) and Wyoming (#153) and a certified professional Geologist (#10257) with the American Institute of Professional Geologists.

• I have worked as a geologist for a total of 29 years since my graduation from undergraduate university.

• I have read the definition of “qualified person” set out in National Instrument 43-101 and certify that by reason of education, experience, independence, and affiliation with a professional association, I meet the requirements of an Independent Qualified Person as defined in National Instrument 43-101.

• I am responsible for coordinating the study and the author of the following Sections 9.0, 10.0, 11.0, 12.0, 13.0, 14.0, 15.0, 16.0 and 19.1 of the Technical Report; Dated January 17, 2008 titled Magistral Property, Feasibility Study.

• I visited the site on February 1 to February 4, 2005. • I have had no prior involvement with the property that is the subject of the Technical Report. • I am independent of the issuer applying all of the tests in Section 1.4 of National Instrument 43-

101. • I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been

prepared in compliance with that instrument and form. • As of the date of this certificate, to best of my knowledge, information and belief, the Technical

Report contains all scientific and technical information that is required to be disclosed to make the Technical report not misleading.

___” Steven Ristorcelli”__ Signature of Qualified Person Steven Ristorcelli Print Name of Qualified Person

CONSENT of AUTHOR


I, Scott C. Elfen, P.E., General Manager, do hereby consent to the filing, with the regulatory authorities referred to above, of the technical report titled “Technical Report Magistral Property Feasibility Study”, dated effective January 17, 2008 (the “Technical Report”) and to the written disclosure of the Technical Report and of extracts from or a summary of the Technical Report by Inca Pacific Resources Inc. The undersigned does hereby confirm that I have read the press release of Inca Pacific Resources Inc. dated December 3, 2007 (the “Press Releases”) and the Press Releases fairly and accurately represents the information in the Technical Report that supports the disclosure in the Press Releases. This consent dated the 17th day of January, 2008 has been provided in connection with the filing of the Technical Report. (signed and sealed) Scott C. Elfen Signature and Seal of Qualified Person

Print name of Qualified Person

INCA PACIFIC RESOURCES INC. TECHNICAL REPORT MAGISTRAL PROPERTY FEASIBILITY STUDY

PAGE 1

I Scott Elfen, PE, employed by Vector Peru S.A.C., Jorge Vanderghen 234, Miraflores Lima, Lima 18, Peru, do hereby certify:

• I hold a Bachelor of Science degree in Civil Engineering from the University of California, Davis in 1991.

• I am a Registered Civil Engineer in the State of California by exam since 1996 (No. C56527). I am also a member of the American Society of Civil Engineers (ASCE).

• I have worked as an engineer for a total of twelve years since my graduation from university.

• I have read the definition of “qualified person” set out in National Instrument 43-101 and certify that by reason of education, experience, independence, and affiliation with a professional association, I meet the requirements of an Independent Qualified Person as defined in National Instrument 43-101.

• I am responsible for coordinating the study and the author of the following Sections 6.4, 7.0, 18.5, 20.1.1, 20.1.2, 20.1.3, 20.1.5, 20.2, 20.3, 20.4 and 25.6 of the Technical Report; Dated January 17, 2008 titled Magistral Property, Feasibility Study.

• I visited the site on August 18th and 19th, 2007. • I have had no prior involvement with the property that is the subject of the Technical

Report. • I am independent of the issuer applying all of the tests in Section 1.4 of National

Instrument 43-101. • I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report

has been prepared in compliance with that instrument and form. • As of the date of this certificate, to best of my knowledge, information and belief, the

Technical Report contains all scientific and technical information that is required to be disclosed to make the Technical report not misleading.

_(signed and sealed) Scott C. Elfen___________________________________ Signature of Qualified Person Scott Elfen Print Name of Qualified Person

CONSENT of AUTHOR


I, Richard Kunter, FAusIMM (CP), QP (metallurgy and environmental), Senior Metallurgist, do hereby consent to the filing, with the regulatory authorities referred to above, of the technical report titled “Technical Report Magistral Property Feasibility Study”, dated effective January 17, 2008 (the “Technical Report”) and to the written disclosure of the Technical Report and of extracts from or a summary of the Technical Report by Inca Pacific Resources Inc. The undersigned does hereby confirm that I have read the press release of Inca Pacific Resources Inc. dated December 3, 2007 (the “Press Releases”) and the Press Releases fairly and accurately represents the information in the Technical Report that supports the disclosure in the Press Releases. This consent dated the 17th day of January, 2008 has been provided in connection with the filing of the Technical Report. (signed and sealed) Richard Kunter Signature and Seal of Qualified Person

Print name of Qualified Person


INCA PACIFIC RESOURCES INC. TECHNICAL REPORT MAGISTRAL PROPERTY FEASIBILITY STUDY

PAGE 1

I Richard Kunter, FAusIMM(CP), QP (metallurgy and environmental), Senior Metallurgist, employed by Samuel Engineering Inc., 8450 East Crescent Pkwy. Ste. 200, Denver, CO. 80111-2816, do hereby certify:

• I am a Chartered Professional Engineer employee of Samuel Engineering, Inc • I am a graduate of the University of Idaho • I am a member in good standing of; Fellow, Australasian Institute of Mining and

Metallurgy; Mining and Metallurgical Society of America; Society of Mining, Metallurgy and Exploration (SME); Minerals, Metals and Materials Society (TMS); American Society for Metals; Society of the Sigma Xi.

• I have practiced my profession since 1967. • I have read the definition of “qualified person” set out in National Instrument 43-101 and

certify that by reason of education, experience, independence, and affiliation with a professional association, I meet the requirements of an Independent Qualified Person as defined in National Instrument 43-101.

• I am responsible for coordinating the study and the author of the following Sections 3.0, 4.0, 5.0, 6.1, 6.2, 6.3, 8.0, 18.1, 20.1.4, 20.1.6, 20.1.7, 20.1.8, 20.1.9, 20.1.10, 20.1.11, 20.1.12, 20.1.13, 20.5, 21.0, 22.0, 25.2, 25.3, 25.4, 25.5, 25.7, 25.8, 25.9, 25.10 and 26.0 of the Technical Report; Dated January 17, 2008 titled Magistral Property, Feasibility Study.

• I visited the site on August 18th and 19th, 2007. • I have had no prior involvement with the property that is the subject of the Technical

Report. • I am independent of the issuer applying all of the tests in Section 1.4 of National

Instrument 43-101. • I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report

has been prepared in compliance with that instrument and form. • As of the date of this certificate, to best of my knowledge, information and belief, the

Technical Report contains all scientific and technical information that is required to be disclosed to make the Technical report not misleading.

_(signed and sealed) Richard Kunter___________________________________ Signature of Qualified Person Richard Kunter Print Name of Qualified Person



CONSENT of AUTHOR


I, Neil B. Prenn, P.E., Principal Engineer, do hereby consent to the filing, with the regulatory authorities referred to above, of the technical report titled “Technical Report Magistral Property Feasibility Study”, dated effective January 17, 2008. This consent dated the 17th day of January, 2008 has been provided in connection with the filing of the Technical Report. “ Neil B. Prenn” Signature of Qualified Person Neil B. Prenn Print name of Qualified Person



I, Neil B. Prenn, of Reno, Nevada, employed by Mine Development Associates, Inc. 210 South Rock Blvd. Reno, Nevada 89502, do hereby certify:

• I am a Registered Professional Mining Engineer in the state of Nevada (#7844) and a member of the Society of Mining Engineers and councilor-at-large for the Mining and Metallurgical Society of America.

• I graduated with an Engineer of Mines degree from the Colorado School of Mines in 1967. • I have worked as an engineer for a total of 40 years. • I have read the definition of “qualified person” set out in National Instrument 43-101 and certify

that by reason of education, experience, independence, and affiliation with a professional association, I meet the requirements of an Independent Qualified Person as defined in National Instrument 43-101.

• I am responsible for coordinating the study and am author of the following; Sections 17.0, 19.2, 25.1 and 25.11 of the Technical Report; Dated January 17, 2008 titled Magistral Property, Feasibility Study.

• I visited the site on August 18th and 19th, 2007. • I have had no prior involvement with the property that is the subject of the Technical Report. • I am independent of the issuer applying all of the tests in Section 1.4 of National Instrument 43-

101. • I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been

prepared in compliance with that instrument and form. • As of the date of this certificate, to best of my knowledge, information and belief, the Technical

Report contains all scientific and technical information that is required to be disclosed to make the Technical report not misleading.

___”Neil B. Prenn”____ Signature of Qualified Person Neil Prenn Print Name of Qualified Person

Proyecto Minero Magistral ffs 43-101

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