2018 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley

This report presents the processing facilities, historical operating data, and testwork-based projections for the Caraíba Mill and associated SX/EW plant as of 1 August 2018.

Report context

This technical report, dated 01 August 2018, documents the updated mineral resources and mineral reserves for Mineração Caraíba’s Vale do Curaçá mineral assets in the Curaçá Valley. The processing section describes the Caraíba Mill, which commenced operations in 1979, and the historic SX/EW plant that operated from 2007 until 2014. The report distinguishes between the existing designed flowsheet, historical operating data from 1998 through June 2018, and testwork-based projections for future blended feed.

Processing route

Caraíba Mill Flowsheet and Process Description

The Caraíba Mill was designed and built by Mill Der Kaiser, a Canadian engineering, design and construction company. Processing operations commenced in 1979 and the plant has since had the benefit of decades of process optimization work performed by the Caraíba Mill’s process engineering team with the support of third-party consultants as needed. The concentrator is operated 24 hours per day, seven days per week with monthly scheduled downtime to perform routine maintenance. In its current configuration, the plant has capacity to treat a nominal 3.2 million tonnes of copper bearing ore per annum, assuming 91% availability.

The Caraíba Mill is of a conventional three-stage crush, milling and flotation design. Three-stage crushing is used to prepare a nominal 12.5mm crushed feed for the ball milling circuit prior to being sent to flotation for the recovery of copper-bearing minerals. Final flotation concentrate is filtered to a design target of 7.5% moisture and is transported via highway for smelting and refining either (i) locally at Paranapanema company, located in Dias D’Ávila, or (ii) sold via international export markets from Salvador’s port, both approximately 475km from the Caraíba Mill. Installed equipment of the Caraíba Mill are detailed in Table 17-3, and a process flowsheet showing major unit operations is further detailed in Appendix C.

Crushing

There are two primary crushing operations. Ore from open pit mining is delivered to the surface primary cone crusher, featuring a nominal capacity of 1,600t/h. Ore from underground mining is crushed underground by one of two primary jaw crushers with a nominal capacity of 400t/h each. Feed enters the primary crushing operations with maximum size of 48” and is discharged with maximum size of 10”.

The blended product of the primary crushing operations is transported via conveyors to an apron feeder stockpile with a capacity of 12,000 tonnes and fed to one of two secondary cone crushers (seven-foot standard Symons; 1,400t/h of capacity each) set to 28mm aperture. The secondary discharge feeds two primary double deck screens, configured with 100mm gaps on the top and 40mm gaps on the bottom decks. Screen undersize passes to the collection conveyor while oversize material passes to the secondary crushers in an open circuit configuration.

Secondary cone crusher discharge and primary screen fines are blended with tertiary crusher discharge and are conveyed to the seven secondary double screen decks, configured with 25mm gaps on the top and 16mm gaps on the bottom decks. Tertiary crushing is performed with four standard CH660 Sandvik cone crushers (capacity of 350t/h each) set to 20mm aperture. Oversize material passes to the tertiary crushers operating in a closed-circuit configuration. Final product from the combined crushing and screening operations is 88% passing 1/2”.

Ore Blending

Crushed ore is conveyed to the stacker-reclaimer system to further homogenize the ore for feeding the plant. The stacker-reclaimer system is comprised of a two-armed stacker and a 16 bucket-wheel reclaimer with capacities of 1,600t/h and 1,200t/h, respectively. Crushed ore capacity of the stacker-reclaim system is 140,000 tonnes.

Grinding

The grinding circuit consists of two identical lines operating with a primary ball mill operating in closed circuit with a dedicated battery of 26” cyclone classifiers. Each ball mill is 5.0 m by 7.6 m, charged with 90 mm in diameter high chrome cast steel balls. The nominal grinding capacity of each mill is 200 t/h each. Typical ball consumption is 340 g/t.

Blended ore from the stacker reclaimer is withdrawn through belt feeders below one of the 3,000 tonne ore surge bins on each line. Ore is delivered to the ball mill over a weightometer to monitor the mass of ore sent to each mill for metallurgical accounting purposes.

The coarse fraction from the cyclone underflow recycles to the ball mill feed chute for further grinding. Overflow from both grinding lines combines as feed to flotation, at approximately 40 to 45 percent solids and a target P65 to P70 (65% to 70% of discharge passing a screen aperture) of 105 microns.

High Frequency Screeners and Regrinding

The rougher flotation stage tails are pumped to high frequency screening operations comprised of eight screens with five decks each of 105+ micron aperture. The high frequency screening coarse fraction is gravity fed to the vertical mill (Metso VTM200) for regrinding, operating in closed circuit with a hydrocyclone battery. The screening operation fines combine with the regrind cyclone overflow and are pumped to the scavenger flotation stage.

Flotation and Dewatering

The flotation circuit at Caraíba consists of a conventional rougher-cleaner-scavenger flotation process. The rougher circuit consists of three rougher banks divided into two stages of flotation (rougher, cleaner) with four cells in each unit operation. The first four cells of each bank produce a rougher concentrate that passes to the four cleaner cells. In practice, the concentrate of second rougher stage is returned to the head of the circuit to increase total rougher mass pull and retention time. Rougher concentrate is fed to the cleaner circuit and tails are fed to the scavenger circuit.

Rougher concentrate, combined with recleaner circuit tails and scavenger concentrate, is sent to the cleaning circuit which consists of four cell banks. Each bank contains one recleaner cell, three cleaner cells and four scavenger cells. Operated in a continuous process, the recleaner cell concentrate becomes the final product grading 35% copper with minimal impurity elements. Notably, in 2016, all concentrate assays fell below detection limits of 100 ppm for Arsenic. By-product gold and silver averaged 2.3 g/t and 28.8 g/t, respectively. An assay of copper concentrate, performed on concentrate shipment from 2017 resulted in a composition as shown in Table 17-1.

The scavenger concentrate from the cleaner cells is recycled back to the cleaner circuit. Scavenger concentrate recycles to the beginning of the recleaner circuit, while the tails of the recleaner circuit are pumped to the final tails thickener.

Throughout the flotation circuit samples of new feed, final concentrate, rougher tailings and final tailing are sampled by an automatic sampling device. A fraction of the pulp is sent to an online XRF analyzer to determine the copper grade. The balance of each sample is accumulated during the duration of each operating shift for further laboratory assay and analysis performed by MCSA’s laboratory and process engineering teams.

The final copper flotation concentrate is sent to one of two thickeners for dewatering prior to the filter press. Both concentrate thickeners are 2.4m in diameter and configured such that one is operating and one is on standby or undergoing routine maintenance. Water from the concentrate thickeners is recycled for plant process water. The thickener underflow is transferred to holding tanks that feed the filter press.

The thickened concentrate is filtered by a Diemme (GHT1500) plate filter press configured with 49 plates, producing a final dry concentrate of 7% to 8% moisture. Dry concentrate is stored in the Caraíba concentrate shed until it is loaded, weighed and transported via highway to local or international markets.

Final tailings from flotation operations are pumped to one of two tailings thickeners for dewatering. Both thickeners are 90m in diameter and configured such that one is operating and the other is on standby or undergoing routine maintenance. Water from the thickeners is recycled for plant process water. The dewatered tails are pumped to the waste piles for co-disposal or to the paste fill plant for backfilling operations.

Loading and Transportation of Concentrate for Sale

The Caraíba Mill’s primary concentrate shed, located adjacent to the filter press, has storage capacity for approximately 8,000 tonnes of final concentrate. The building has a concrete floor, steel siding and dimensions of 50m in length, 36m in width and an average height of 11m (peak height of 13m). A secondary, uncovered cemented floor storage area adjacent to the primary shed has capacity for an additional 6,000 tonnes of final concentrate (covered with canvas tarps). The dimensions of the uncovered storage area are 60m by 36m.

MCSA ships final concentrate for sale to both the domestic market, via the Paranapanema Smelter located in Dias D’Ávila, Bahia State, and to international markets via Salvador’s port located in Salvador city, Bahia State. All concentrate is transported by road using standard highway trucks loaded with 32 tonnes of concentrate.

After site weight and sampling, concentrate trucks leave the MCSA Mining Complex via state highway BA314, traveling 54km on BR407 until Capim Grosso town, then follow on federal highway BR324 to Salvador City and the city’s port, the second largest in Brazil’s northeast. The total route is 472.7km from the concentrate shed for export shipments. For domestic delivery to the Paranapanema Smelter, the total route is approximately 475km from the concentrate shed, traveling via state highway BA314, BR407, and federal highways BR324 and BA512 to Dias D’Ávila town.

SX/EW Plant

The SX/EW operations at the Caraíba Mine operated from 2007 until 2014, processing a total of approximately 5.9 million tonnes of oxidized ore from open pit operations throughout the Curaçá Valley. Processing operations consisted of crushing, agglomeration / pre-treatment, leaching, solvent extraction (“SX”) and electrowinning (“EW”) producing a copper cathode. The EW unit operation has a maximum installed capacity of 430t of copper cathode per month.

In practice, crushed oxide ore was pre-treated with 98% sulphuric acid and water to agglomerate the material prior to placement on one of 22 lifts used for leaching. Each lift had approximate dimensions of 130m by 12m. Design lift height was initially 4m, but later reduced to 2m in practice. Leaching was performed over a period of 45 to 60 days, producing a pregnant leach solution (“PLS”) of 5-7 grams per liter (“g/l”) of copper in solution prior to SX/EW unit operations. Recovery of copper from PLS averaged 96%, with global metallurgical recoveries of 70.5%. Historic operating data from the SX/EW operations is shown in Table 17-7.

At the time of the Effective Date, there is no copper cathode production included in the production plan, economic projections, nor have oxide Mineral Resources been defined in sufficient quantities to incorporate economic projections.

Key reported parameters

Technical qualifications

Recent assay results provided in Table 17-1 are not intended to be representative of total concentrate production. Cu, Fe, Ni, S and Zn in the 2017 concentrate assay were determined using ICP-OES, other values by FRX without standards. Na2O, Cl, ZrO2 and Ag were detected below limit values.

The startup of the Vermelhos UG Mine will change slightly the tenors of the concentrate. The expected new composition of the Company’s concentrate, based on metallurgical characterization testwork of Pilar and Vermelhos, is provided in Table 17-2 and is not historical operating data.

At the time of the Effective Date, there is no copper cathode