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Appendix 4

Report of AMC Consultants Pty Ltd

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AMC Consultants Pty Ltd ABN 58 008 129 164

SPECIALIST'S TECHNICAL REPORT

OXIANA LIMITED AND ZINIFEX LIMITED

AMC PROJECT 207098 May 2008

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6 May 2008 The Directors Grant Samuel & Associates Pty Ltd Level 6, 1 Collins Street MELBOURNE Vic 3000 Dear Sirs

OXIANA LIMITED & ZINIFEX LIMITED SPECIALIST’S TECHNICAL REPORT

Oxiana Limited ("Oxiana") and Zinifex Limited ("Zinifex") announced on 3 March 2008 that they had entered into an agreement to merge their businesses and that the merged company will be renamed and will be headquartered in Melbourne, Australia. The announcement included statements that the merged entity will be the world's second-largest producer of zinc in concentrates, that copper will also be a core commodity and that gold production has been significant.

Zinifex has commissioned Grant Samuel & Associates Pty Ltd ("Grant Samuel") to provide a report as to whether the proposed merger is in the best interests of Zinifex shareholders.

Grant Samuel has engaged AMC Consultants Pty Ltd ("AMC") to provide technical advice to Grant Samuel for the purposes of its assessment. In particular, Grant Samuel engaged AMC to provide a specialist's technical report including a description of the mineral assets of Oxiana and Zinifex and their planned development, AMC's conclusions as to reasonableness or otherwise of the technical assumptions regarding Ore Reserves, production profiles, capital costs, operating costs and an assessment of the exploration interests.

In December 2007 Zinifex announced its takeover bid for Allegiance Mining NL ("Allegiance") and subsequently, in March 2008, announced that it had gained a controlling interest in Allegiance. Pending completion of the transaction, AMC has not been requested to review the mineral assets of Allegiance.

For each of the operations and projects reviewed, AMC has provided production and capital and operating cost projections ("modelling scenarios") to Grant Samuel. AMC believes the modelling scenarios are based on reasonable grounds.

ZINIFEX LIMITED Oxiana Limited & Zinifex Limited - Specialist's Technical Report

AMC207098: 6 May 2008 ii

In general terms AMC, has modelled scenarios for each operation and project. Case 1 is typically being based on Ore Reserve (JORC1 defined) estimates and that part of other Mineral Resources (JORC defined) and exploration potential for which AMC judges there is a high confidence of future conversion to Ore Reserves.

Case 2 typically adds to Case 1 mining and processing inventories, those tonnages which AMC judges to represent further additions to Ore Reserves from existing Mineral Resources and from readily demonstrable exploration potential but to a lesser confidence level than in Case 1. In some cases, Case 2 provides for a significant expansion of production and/or other technical upgrades and improvements. Nevertheless, AMC believes that the Case 2 modelling scenarios are based on reasonable grounds. AMC has not provided a valuation of those operations and projects under development.

AMC has provided Grant Samuel with valuations of the exploration assets of Oxiana and Zinifex that are located remote from their operations and projects under development. AMC has not visited these exploration assets.

AMC has completed its engagement as a Specialist in accordance with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports, 2005 (the "Valmin Code"2).

AMC's use, in this report, of the terms Mineral Resources and Ore Reserves are in accordance with the JORC Code except in relation to the Canadian assets where the same terms are as defined by the CIM Definition Standards3.

For the purposes of preparing this report, AMC has visited the operating sites and projects under development, reviewed material technical reports and management information and held discussions with management staff both on site and in the Melbourne offices of Oxiana and Zinifex. AMC has not visited the exploration projects located away from the operations and projects under development as they are not considered to be material to the overall value of Oxiana and Zinifex.

AMC has not audited the information provided to it, but has aimed to satisfy itself that all of the information has been prepared in accordance with proper industry standards and are based on data that AMC considers to be of acceptable quality and reliability. Where AMC has not been so satisfied, AMC has included comment in this report and made modifications to the estimates and forecasts provided by AMC to Grant Samuel.

For exploration assets, it is not possible to project cash flows and/or production estimates with sufficient confidence to rely on discounted cash flow methodology. AMC therefore has considered other methods to value the exploration assets. These methods are commonly used in Australia to value exploration projects and are discussed in this report.

The Valmin Code defines a Technical Value as an assessment of future net economic benefit and a Fair Market Value as one which adds to or subtracts from a Technical Value a premium or discount relating to market, strategic or other considerations. AMC's values of exploration assets are Fair Market Values. Some of the exploration valuation methods result in a Technical Value, but AMC does not believe it appropriate at this time to apply a premium or discount to assets such as these to obtain Fair Market Value.

1 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, The JORC Code 2004 Edition, Effective December 2004, Prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC).

2 Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports, The VALMIN Code 2005 Edition, Prepared by The VALMIN Committee, a joint committee of the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Mineral industry Consultants Association with the participation of the Australian Securities and Investment Commission, the Australian Stock Exchange Limited, the Minerals Council of Australia, the Petroleum Exploration Society of Australia, the Securities Association of Australia and representatives from the Australian finance sector.

3 CIM DEFINITION STANDARDS - For Mineral Resources and Mineral Reserves, Prepared by the CIM Standing Committee on Reserve Definitions Adopted by CIM Council on 11 December 2005


AMC207098: 6 May 2008 iii

Oxiana and Zinifex have separately advised AMC that independent reviews of each other's material tenements have been undertaken as part of their legal due diligence processes. AMC has not reviewed the status of tenements.

AMC's review of operating costs has been restricted to site based costs. State or third party royalties, taxes, concentrate transport charges, smelting and refining charges have not been reviewed and are not included in costs detailed in this report.

AMC presents the Technical Specialist's Report which follows in the form of:

• Executive Summary

• 1. Mineral Assets - Summary

• 2. Description of Oxiana Assets

• 3. Description of Zinifex Assets

• 4. Sources of Information

• 5. Qualifications.

All monetary figures in this report are expressed in 2008 Australian Dollars ("$") or United States Dollars ("US$") unless otherwise noted. Costs are presented on a cash cost basis unless otherwise specified.

Reporting of production and costs in this report is presented on a calendar (January to December) basis except where otherwise specified.

For definitions of abbreviations used in this report, refer to Appendix A.

Yours faithfully

A M Chuk L Gillett M AusIMM M AusIMM (CP), MMICA Principal Consultant Director


AMC207098: 6 May 2008 iv

EXECUTIVE SUMMARY

This Executive Summary is presented by AMC as a fair summary of AMC's Specialist's Technical Report.

AMC has prepared this technical specialist’s report for Grant Samuel on the principal mineral assets of Oxiana and Zinifex, namely:

• Oxiana:

- Sepon open pit copper and gold mine, Laos

- Golden Grove underground copper, zinc, lead, silver and gold mine, Western Australia

- Prominent Hill open pit copper, silver and gold mine, South Australia

- Martabe open pit gold and silver development project, Indonesia

- Other exploration projects.

• Zinifex

- Century open pit zinc, lead and silver mine, Queensland

- Rosebery underground zinc, lead, silver and gold mine, Tasmania

- Dugald River underground zinc, lead and silver development project, Queensland

- Canadian development projects

- Other exploration projects.

This report by AMC to Grant Samuel includes projections of production and costs for these Oxiana and Zinifex operations and projects under development. The report also provides AMC’s valuations of the regional exploration properties of Oxiana and Zinifex.

OXIANA

SEPON

Sepon commenced production of gold bullion in 2002 and copper metal in cathode form in 2005.

AMC's key observations for the Sepon copper and gold operation are:

• gold mining and processing operations are currently planned to continue for two to three years at a rate of around 2 Mtpa, producing gold at a rate of around 100 koz per full year

• the Oxiana Board has approved capital expenditure of US$178M for expansion of copper cathode production from the current nameplate capacity of 63 ktpa to around 80 ktpa. Ore feed to the copper process plant will be increased from the current 1.3 Mtpa to approximately 2 Mtpa

• preliminary mining schedules call for a total material movement rate of around 20 Mtpa for 2009 versus the 2007 actual rate of around 10 Mtpa. AMC expects that this higher rate will be achievable based on Oxiana's reports that Sepon has achieved total material movement rates of this order in 2005/2006

• the main technical risk for the operation would be a one in 50 to 100 year monsoon rainfall event that would inundate the pit operations and general infrastructure, but not the copper and gold plants which are located above the 50 and 100 year rainfall event water lines

• Sepon has a very active exploration programme aimed at extending leachable gold and copper Mineral Resources and increasing Mineral Resources of primary gold and copper.

Operating and Capital Costs - Sepon

Planned operating costs for Sepon copper and gold operations for 2008 are:

• Sepon Copper

- Cu Recovered 64 kt


AMC207098: 6 May 2008 v

Operating costs:

- Mining US$1.94/t ore mined

- Processing US$32.73/t processed

- Concentrate Transport/Port US$6.79/t processed

- Maintenance US$11.72/t processed

- Administration US$20.22/t processed

- Total Site Unit Costs US$84.01/t processed

• Sepon Gold

- Au Recovered 80.7 koz

Operating costs:

- Mining US$2.37/t ore mined

- Processing US$8.67/t processed

- Concentrate Transport/Port US$0.09/t processed

- Maintenance US$2.12/t processed

- Administration US$5.35/t processed

- Total Site Unit Costs US$23.40/t processed.

The gold operation tonnes mined and milled reflects the limited mining inventory currently identified. The increase in waste mining for the copper operation from 2009 is based on 7 Mtpa to 8 Mtpa of waste being mined from Thengkham North for those years, in addition to ongoing waste mining for the Khanong pit.

The substantial capital expenditure planned copper operation for the next three years is US$297M including $US$178M in 2008/2009 for expansion of copper cathode production capacity from the current nameplate capacity of 63 ktpa to around 80 ktpa, plus a second oxidation autoclave and further construction of the tailings storage facility ("TSF").

AMC Modelling Scenarios - Sepon

Sepon Copper

AMC has developed two modelling scenarios, based principally on a life of mine plan ("LOMP") prepared by Oxiana which targeted copper production of around 80 kt per annum.

Key aspects of the modelling scenarios adopted by AMC include:

Case 1 – Copper

Case 1 can be described as:

• annual ore milled at the rate of 2 Mtpa, producing 78 ktpa of copper cathode

• total ore milled 22 Mt grading 4.2% copper

• copper recovery post commissioning 92%

• final production year 2017

• total copper produced 846 kt

• unit operating costs principally adopted from Oxiana’s 78 ktpa LOMP.

Case 2 – Copper

The main differences in Case 2 relative to Case 1 are:

• annual copper production at full capacity 81 ktpa


AMC207098: 6 May 2008 vi

• annual milling rate increased to 2.1 Mtpa

• total ore milled 27 Mt grading 4.2% copper

• mine life extended by two years

• total copper produced 1,029 kt.

Sepon Gold

Case 1 – Gold

Case 1 can be described as:

• annual ore milling capacity, approximately 2 Mtpa producing slightly over 80 koz of gold per year of both gold and silver

• total ore milled 5.3 Mt grading 1.6 g/t gold and 6 g/t silver

• metallurgical recovery: gold 77%, silver 21%


• total production: gold 215 koz, silver 214 koz

• unit operating costs and capital expenditure established from Oxiana 2008 budget information.

Case 2 Gold

The main differences in Case 2 relative to Case 1 are:


• ore grades and metallurgical recovery as per Case 1



• unit operating costs as per Case 1

• additional US$2M sustaining capital expenditure in 2011 over Case 1.

GOLDEN GROVE

Geology

The Golden Grove operation commenced production at Scuddles in 1990 and Gossan Hill in 1998.

The current Ore Reserve supports approximately five years of production at current planned rates.

Subject to completion of evaluation studies, open pit mining operations at Gossan Hill is likely to extend the mine life at Golden Grove by approximately five years.

Recent modifications have been made to the concentrator to allow the throughput rate to be increased to approximately 1.8 Mtpa.

Operating and Capital Costs – Golden Grove

Planned operating costs for Golden Grove for 2008 are:

• Production parameters:

- Zn 142.9 kt recovered

- Pb 14.7 kt recovered

- Cu 26.3 kt recovered

- Au 57.1 koz recovered

- Ag 3,210 koz recovered


AMC207098: 6 May 2008 vii

Operating costs:

- Mining $76.30/t ore mined

- Processing/Maintenance $32.90/t processed

- Concentrate Transport/Port $6.60/t processed

- Administration $13.20/t processed

- Total Site Unit Costs $129.20/t processed

Capital expenditure planned for the next three years is $225M, with $169M of that planned for 2008.

• Capital expenditure planned for 2008 is abnormally high. This is driven by a combination of upgrades, capacity expansion, drilling programmes and studies.

AMC Modelling Scenarios – Golden Grove

AMC was provided with the 2008 Golden Grove operating and capital budgets, which are based primarily on mining of the current underground Ore Reserves. These budgets were used to prepare the modelling scenario presented in Case 1.

Based on the work completed to date on evaluation of the open pits at Gossan Hill, Oxiana has provided AMC with a Strategic Plan Production Schedule detailing physical and cost schedules for mining of the open pits. These schedules, in combination with the budget schedules used in Case 1 have been used to prepare the modelling scenario presented in Case 2.


Case 1

Case 1 is primarily based on reported Ore Reserves for Scuddles and Gossan Hill, with some non-reserve (Inferred) material included. This case generates a mine life to 2015.

This case does not include any production from the Gossan Hill open pits that are currently being evaluated.

Case 2

Case 2 is Case 1 plus additional underground production from Xantho Extended at Gossan Hill and Cervantes at Scuddles and also includes mining of the gold and copper oxide open pits at Gossan Hill. This case generates an operations life to 2019.

PROMINENT HILL

The open pit mine development is currently progressing from overburden removal to ore mining in Stage 1.

The current mining inventory (Ore Reserve plus some Inferred Mineral Resource) provides for mining operations to continue until 2017.

Given the deposit characteristics, combined with the likely conversion of Inferred Mineral Resources within the currently planned pit limit and the near mine exploration potential, AMC expects that the mining inventories will result in extensions to operations beyond 2017.

The mining operation is well equipped with new equipment purchased at the commencement of mining and the mining contractor has demonstrated an ability to achieve planned targets to date.

The 8 Mtpa processing plant is still under construction and is therefore untested.

Nonetheless, AMC considers that a conservative approach to major equipment selection provides capacity to treat 9 Mtpa.


AMC207098: 6 May 2008 viii

The copper and gold concentrate produced at Prominent Hill will be a high grade copper concentrate. With the levels of uranium and fluorine present in the concentrate, larger smelters will be those best able to blend the concentrate in as a smaller proportion of total feed.

Operating and Capital Costs - Prominent Hill

Planned unit operating costs for 2009, which is the first year of full production, are:

• Mining $2.57/t mined (ore and waste)

• Processing $6.90/t processed

• Concentrate Handling/Port $3.68/t processed

• Administration and Other $6.45/t processed.

A revised capital cost estimate in October 2007 increased the capital cost budget by just under 30% with an additional $567M planned to be expensed in 2008.

AMC Modelling Scenarios

AMC prepared two modelling scenarios as follows:

• Case 1:

- Mill throughput of 8 Mtpa.

- Annual waste tonnages and ore tonnages and grade were adopted from the 2008 LOMP.

- Metallurgical recoveries, operating and capital costs generally adopted from Prominent Hill 2008 LOMP with some minor adjustments.

- Unit operating and capital costs adopted from Prominent Hill 2008 LOMP.

• Case 2, which is similar to Case 1 with the following amendments:


- Additional open pit mine life of three years based on average annual life of mine ("LOM") ore tonnages and grade and strip ratios.

- Additional underground ore tonnages.

- Underground mining capital and unit operating costs consistent with Oxiana’s scoping study assessment.

- Additional capital for exploration and minor processing plant de-bottlenecking included.

- Metallurgical recoveries for copper and gold reduced by 0.5% to allow for the reduced rougher flotation retention time.

MARTABE

A Definitive Feasibility Study ("DFS") has been recently completed for the development of the Martabe Project and an Ore Reserve estimate for the Purnama deposit is reported as 38 Mt grading at 1.8 g/t gold and 24.9 g/t silver.

The DFS has identified an initial mine life of 9½ years with an annual production of approximately 200 koz of gold and 2,000 koz of silver from the Purnama deposit. There is also significant potential for additional ore sources at depth and in the adjacent Baskara and Pelangi deposits.

The processing plant will treat 4.5 Mt of ore per annum using proven semi-autogenous and ball milling and carbon-in-leach technology. Recoveries are estimated to be 76% for gold and 55% for silver.

The initial capital cost of the project is estimated at US$310M (including contingency and escalation allowances of US$48M). This initial capital cost estimate does not include sunk costs prior to 2008 or sustaining capital expenditure.


AMC207098: 6 May 2008 ix

The Oxiana Board approved the development of the Martabe Project in December 2007.

Construction is estimated to take approximately two years from award of the Engineering Procurement Construction Management ("EPCM") contract to first gold production, based on the indicated deliveries of critical long lead items such as the power station and grinding mills. First gold production is targeted for the end of 2009.

In addition to the Ore Reserve estimates for Martabe, there is a substantial gold Mineral Resource base and the COW is generally prospective. Combined with Oxiana's active exploration programme at Martabe, extensions of mining and processing inventories beyond Ore Reserves can be anticipated.

Operating and Capital Costs – Martabe

Per the DFS, the site operating costs are estimated for 2010, being the first year of operations, as:

• Mining US$2.99/t mined (ore and waste)

• Processing US$9.83/t processed

• Administration and Other US$2.24/t processed

• Total Site Unit Costs US$17.24/t processed


AMC was provided with Oxiana's business model with production and cost forecasts for the DFS mining schedule and, separately, an accelerated mining schedule whereby higher grade ore would be processed first, while lower grade ore is stockpiled for subsequent processing.

Accordingly, AMC has prepared two modelling scenarios based on Ore Reserve estimates plus those parts of other Mineral Resources for which AMC considers there is a sufficient degree of confidence of future conversion to Ore Reserves.

The two modelling scenarios developed by AMC were established on the following basis:

Case 1 - Martabe

• Tonnages were extended beyond the DFS Purnama scenario by an additional two years. This case extends the project life to 2020.

• Annual average ore tonnages, waste tonnages, grades and recoveries for the additional years have been adopted as a base.

• Processing tonnage was set at approximately 4.5 Mtpa decreasing in the final year.

• LOM average annual unit operating costs have been adopted as a base.

• A sustaining capital provision of 4% of total project capital, less owner’s capital and land capital costs, has been applied across the life of the project.

• A closure/rehabilitation provision totalling US$4.25M included in the project capital.

Case 2 - Martabe

• Case 2 tonnages were extended beyond Case 1 by a further two years and then an acceleration simulation applied whereby all higher grade ore (gold grade greater than 1.5 g/t) would be processed first and lower grade ore stockpiled and processed at the completion of all higher grade processing. This case extends the project life to 2022.

• The other elements for Case 2 are as described above for Case 1.

AMC has not specifically included the Baskara and Pelangi Mineral Resources in the modelling scenarios. Additional value has been provided for these Mineral Resources in valuations of exploration assets. AMC considers that any additional value attributable to exploration is incorporated in the extended cases in the modelling scenarios.


AMC207098: 6 May 2008 x

OTHER EXPLORATION PROJECTS

AMC has valued other exploration projects of Oxiana.

The exploration projects valued by AMC are largely at a pre Mineral Resource stage and methods for valuing such projects are subjective. AMC’s approach is to use as many methods as are relevant to a particular project and to choose from the indicated values a range which it considers appropriate. Limited if any use is made of share market indicators given the volatility of markets for speculative exploration. The values herein accordingly are closest to Technical Values as defined by the Valmin Code.

The methods used include:

• Past Expenditure method

• Actual Transactions for the project being reviewed or, more frequently, recent Comparable Transactions applicable to projects considered to have similarities with that under review

• Yardstick Values, derived from Comparable Transactions, where there are Mineral Resources or potential Mineral Resources that can be reasonably quantified

• Values per unit area of tenement, again derived from Comparable Transactions. Values per unit area usually decrease with increase in the size of the tenement package

• Expected Values where a target Ore Reserve can be approximately quantified and its potential value approximately measured, the present value being derived by discounting the potential value with a market risk factor or by applying to the potential values a probability factor for successful delineation of the target and subtracting estimated exploration costs to prove it.

Exploration Values - Oxiana

Oxiana has interests in a number of regional exploration projects in Australia and Asia. AMC has valued those regional exploration properties, as well as those associated with or close to existing mining projects. The major part of the latter is reviewed and valued per the Case 1 and Case 2 modelling scenarios provided by AMC to Grant Samuel.

Oxiana’s ongoing annual budget for exploration is in the order of $80M to $90M, slightly more than half of which is scheduled to be spent on regional exploration as opposed to “in mine”.

By using a combination of the exploration valuation methods referred to above, AMC values Oxiana’s regional exploration projects at $150M. The values are the means of the ranges.

Table I Oxiana Breakdown by Project Area Project Area Value

($M) Mt Woods 20 to 50 Mt Gibson 0.4 to 1 Golden Grove 4 to 8 Wiluna 10 to 16 Sepon 39 to 60 Martabe 15 to 28 Thailand 7.6 to 14.4 Cambodia 5 to 7.5 China 5 to 7.5 Total (Rounded) 110 to 190


AMC207098: 6 May 2008 xi

ZINIFEX

CENTURY MINE

Geology and Mineral Resources

The geology of the Century deposit is well understood through information gained from over 1,000 drillholes and mining experience from having mined a significant portion of the orebody.

The QA/QC programme used at Century Mine is complete and appropriate. The geological interpretation and stratigraphic column are appropriate for use in Mineral Resource modelling.

The seam accumulation method is appropriate for preparing the volume model.

The estimation of the zinc, lead and silver grades by direct estimation of the grade and not accumulation may result in slightly different grades but AMC does not consider the difference to be material.

AMC considers the classification of the Mineral Resource as appropriate.

The Mineral Resource statement, 31 March 2007, is suitable for publication and contains no material flaws.

Reconciliations show differences between the Mineral Resource estimate and the milled and stockpiled grade and tonnes. AMC notes that these differences are accounted for by using an MCF.

Zinifex holds interests in and manages exploration over 4,603 km2 stretching some 150 km to the north-west and south-east from the Century Mine.

It is likely that low tonnages of additional mining inventories will be established on reef style deposits adjacent to the Century deposit.

Mining

The mining operation is mature with operating processes well developed through eight years of mining experience on the deposit.

Due to the physical characteristic of the deposit and completeness in Mineral Resource definition, it is unlikely that additional Ore Reserves will be delineated on the Century deposit.

The Ore Reserve will allow operations to continue to 2015.

The operation is well equipped with modern equipment after a significant replacement and expansion programme implemented over the past two years.

A significant programme of waste removal is underway which will see over 80% of the remaining waste stripped from the mine before June 2010.

A number of geotechnical issues are being managed as the west wall of the pit is exposed in the Stage 7 area of the pit.

It is possible that the complexity of the orebody in the Stage 7 area, along with related geotechnical issues could lead to some short-term production delays.

A high degree of confidence can be placed on the extraction of the Ore Reserve.

Mineral Processing and Concentrate Handling

The process plant is modern, and has been well maintained since its commissioning in 1999.

Processing methods are proven and common to like deposits in the region.


AMC207098: 6 May 2008 xii

Actual mineral recoveries (FY07) are; zinc – 77.8%, lead – 63.3%.

Zinc recoveries have reduced from approximately 80% to 78% over recent years, largely as a consequence of increased mill throughput.

Zinifex is implementing an improvement programme “Programme Percent” to improve zinc recovery through the addition of a second ball mill and additional surge capacity in the flotation circuit.

Environment

Protection of surface and groundwater quality, particularly in relation to acid drainage from some waste rock types, presents the largest environmental challenge at Century. Zinifex is demonstrating effective management of this issue on a project life basis.

The modelling of groundwater and waste stockpile water relationships is expected to provide a robust basis for sustainable closure designs within statutory requirements.

Closure planning has commenced, as evidenced in the 2007/2010 Plan of Operations. The closure estimate of $74 million is based on realistic unit rates.

Costs

Planned unit operating costs for FY08 are:




• Asset Management $10.33/t processed

• Site Administration $15.18/t processed.

Cost over-runs, in the order of 15% have been experienced across the operation in the past two years. There is some evidence that this issue has been addressed through recent planning processes. Operating costs for the six months to December 2007 are consistent to budget estimates.

Zinifex manages a Business Improvement Programme at Century that includes targets on cost containment.

A significant programme to upgrade and expand the mining fleet has been implemented over the past two years.



• Production has been constrained to current Ore Reserves.

• Mill throughput of 5.6 Mtpa.

• Metallurgical recovery of zinc 81%.

• Mining unit operating costs have been adopted from the Century 2007 LOMP.

• In all other areas, unit costs have been projected from the Century Three Year Plan.

ROSEBERY MINE

Geology

The Rosebery deposit has a long history of production since its discovery over a century ago.

The exposed geology and mineralisation has been well documented and understood. However high-grade mineralisation is not well defined in advance of the deepest mining areas.


AMC207098: 6 May 2008 xiii

As the depth of the mineralisation increases northward along strike, surface drilling will become impractical. A systematic underground exploration drilling is planned to delineate Mineral Resources in this area.

Zinifex has implemented an exploration and development programme called “Project Horizon” to expand and improve the definition of Mineral Resources. This programme, which to date has increased Mineral Resources by 65%, is likely to define sufficient Mineral Resources to support a ten-year mine life under current market conditions.

AMC has not re-estimated the Mineral Resources or Ore Reserves, or undertaken a detailed technical audit. However, AMC did review the Mineral Resource and Ore Reserve digital model, processes and procedures and considers that they conform with industry standards.

The reconciliation comparing mined tonnes and grades with Mineral Resource depletion shows a positive tonnage and grade reconciliation.

Overall AMC considers the Mineral Resource and Ore Reserve estimation are appropriate and that the Mineral Resource and Ore Reserve statement provide a reasonable guide to the mining operations and life of mine.

Mining

The Ore Reserve is sufficient for 4½ years of production at planned rates.

The majority of mine production comes from depths of approximately 1,000m with some mining of remnant pillars in the upper levels. Production from the lower levels involves long truck haulage distances which impact on mining costs.

Geotechnical aspects of the project appear to be well analysed, understood and managed.

Ventilation constraints have impacted on the operation over recent years due to the depth of mining and high virgin rock temperatures. Initiatives are currently in implementation to increase both primary airflows and air conditioning systems and have achieved improved working conditions.

Geotechnical analysis undertaken and mining practices in general suggest that the Ore Reserve estimate is sound and achievable.

It is expected that Rosebery will be supplemented by ore purchased from Bass Metals Ltd, from both Que River and Hellyer Mines, and from South Hercules (100% Zinifex).

Processing

Mineral processing involves conventional flotation as the primary separation technique.

The plant has a nominal throughput rate of 850 ktpa. This rate has not been achieved in recent years on an annualised basis potentially due to high zinc feed grades.

Mineral recoveries achieved in FY07 are, zinc - 91%, lead - 81% and copper - 55%.

Opportunity exists to improve the plant’s performance through upgrading or refurbishing the fixed plant and reviewing operating procedures.

Environment

Water management issues are the predominant ongoing environmental risk at Rosebery requiring the diversion and treatment of potentially contaminated water prior to discharge into the Pieman River.

Zinifex has demonstrated its commitment to this challenge through the 2005 upgrade of the water management system and subsequent reduction in EPN exceedances.


AMC207098: 6 May 2008 xiv

Acid mine drainage, including that from “legacy” sites, similarly presents ongoing challenges. Again, Zinifex has developed monitoring programmes which accurately characterise risks to freshwater ecosystems, as part of the development of risk-based closure plans.

Recent closure plan have not been reviewed by AMC, however the existing plans have rigorously identified the risks and challenges, and the costings are considered to be of an appropriate order.

Capital and Operating Costs


• Mining $52.76/t ore mined

• Mine Development $4,626/m


• Administration $50.26/t processed

Zinifex manages an improvement programme at Rosebery, the Mission Direct Work Team programme to assist with cost containment.

Capital expenditure of $149M is scheduled for the coming three years.

A prefeasibility study is underway which may suggest a significant increase in capital expenditure with a view to improving operation efficiencies and extending the mine life.



• Production has been extended beyond to current Ore Reserves that would have otherwise restricted the mine life to December 2011.

• AMC’s Case 1 runs to 2017 and Case 2 to 2022.

• Mine production and mill throughput have been increased to 850 ktpa.

• Zinc, lead and copper recoveries set at 91%, 81% and 56% respectively.

• Unit costs are the FY07 actuals. Mining unit costs have been increased at 2% per annum.

DUGALD RIVER

AMC’s key observations in regard to the Dugald River Project are:

Zinifex has reported an Indicated and Inferred Mineral Resource of 47.9 Mt grading 12.1% zinc, 2.1% lead and 44 g/t silver.

The public Mineral Resource report is based on a Pasminco 2000 estimate. Although there is a later 2006 estimate based on the same data by AMC, AMC agree it is appropriate to continue to quote the previous Mineral Resource until the results of the feasibility study drilling, currently underway, are available and a revised estimate completed.

An Ore Reserve has not been estimated for the deposit, although a mining inventory was estimated during the prefeasibility study.

There is potential for the mineralisation to continue with depth.

Copper mineralisation has been identified in the hangingwall and throughout the tenements. The potential for the copper mineralisation to constitute a Mineral Resource is being investigated.

Production and cost estimates have been prepared to industry standards consistent with a prefeasibility study.


AMC207098: 6 May 2008 xv

Past evaluations of the deposit have not proved positive as a result of weak financial outcomes and metallurgical testwork suggesting high levels of manganese in concentrate.

Zinifex is confident of the projects potential and is currently completing a feasibility study on the project at a cost of $24 M.

CANADIAN DEVELOPMENT PROJECTS

In regard to the Canadian Development Projects, AMC is of the opinion that:

• the Nunavut projects, with substantial further exploration and completion of feasibility studies, offer the potential to provide substantial future production opportunities, particularly from Izok Lake and High Lake

• gold production from the Lupin and Ulu deposits utilising existing infrastructure in the case of Lupin mine are real possibilities

• the Zinifex exploration tenements are prospective for base metals and gold.

OTHER EXPLORATION PROJECTS

AMC has not undertaken a technical review of the Zinifex’s other exploration projects, but has reviewed general information made available by Zinifex.

AMC believes the other exploration projects have significant exploration potential but are generally in the early stages of exploration.

By using a combination of exploration valuation methods, AMC values Zinifex's regional exploration projects at $18M. The values are the means of the ranges.

Table II Zinifex Breakdown by Project Area

Project Area Value ($M)

Menninnie Dam SA 7 to 15 Wilcherry Hill SA 0 Asia Now alliance in PRC 1.0 to 1.5 Corazonada Mexico 0.5 to 0.8 Drake Resources alliance Sweden 1.3 to 1.6 Albidon alliance Tunisia 2.5 to 5.0

Total (Rounded) 12.5 to 24

Zinifex's Ore Reserves and Mineral Resources as at 31 March 2007 are summarised below:


AMC207098: 6 May 2008 xvi

Table III Zinifex Mineral Resources3 and Ore Reserves as at 31 March 2007

Tonnes (M)

Zinc (% Zn)

Lead (% Pb)

Silver (g/t)

Gold (g/t)

Copper (% Cu)

Australian Mineral Resources2 Rosebery 11.7 13.0 3.8 138 1.9 0.4 South Hercules 1.1 2.7 1.4 99 1.6 0.1 Century 53.7 12.5 1.4 33 - - Century Eastern Block 0.9 9.7 0.7 61 - - Dugald River 47.9 12.1 2.1 44 - -

Total Australian Mineral Resources 115.3 12.3 1.9 49 - - Canadian Mineral Resources1

Izok Lake 14.8 12.8 1.3 71 - 2.6 High Lake 17.3 3.3 0.3 70 1.0 2.2

Total Canadian Mineral Resources 32.0 7.7 0.8 70 - 2.4 Ore Reserves2

Rosebery 3.8 11.9 3.2 115 1.7 0.4 Century 46.2 11.2 1.1 25 - -

Total Ore Reserves 50.0 11.2 1.3 32 - - 1. Conforms to CIM standards, the Canadian equivalent of JORC Code. 2. Figures are rounded and in accordance with the JORC Code guidelines. 3. Includes 100% of all Mineral Resources and Mineral Resources include Ore Reserves.

Oxiana's Ore Reserves and Mineral Resources as at 30 June 2007, as published in February 2008, are summarised below:

Table IV Oxiana Mineral Resources2 and Ore Reserves as at 30 June 2007 (Contained Metal)3

Gold (Moz)

Silver (Moz)

Copper (Mt)

Zinc (Mt)

Lead (Mt)

Nickel (Mt)

Cobalt (Mt)

Mineral Resources1 Sepon Gold 3.4 12.5 - - - - - Sepon Copper 0.4 26.1 1.6 - - - - Golden Grove 0.8 38.9 0.6 1.2 0.1 - Prominent Hill 3.7 15.8 1.9 - - - - Martabe 5.9 60.0 - - - - - Wiluna Nickel Laterite - - - - - 0.6 0.05

Total Mineral Resources 14.3 153.2 4.0 1.2 0.1 0.6 0.05 Ore Reserves1 Sepon Gold 0.20 0.35 - - - - - Sepon Copper - - 0.79 - - - - Golden Grove 0.30 14.62 0.19 0.61 0.07 - - Prominent Hill 1.29 7.06 0.88 - - - - Martabe 2.26 30.14 - - - - -

Total Ore Reserves 4.05 52.17 1.86 0.61 0.07 - - Notes: 1. Figures are rounded and in accordance with the JORC Code guidelines. 2. Includes 100% of all Mineral Resources and Mineral Resources include Ore Reserves. 3. Oxiana Group Mineral Resources and Ore Reserves are presented in Table IV on a contained metal basis as reported by

Oxiana 30 June 2007. Oxiana Group Mineral Resources and Ore Reserves 30 June 2007 do not report Mineral Resource and Ore Reserve estimates on a tonnage and grade basis.


AMC207098: 6 May 2008 xvii

CONTENTS EXECUTIVE SUMMARY

1 MINERAL ASSETS - SUMMARY...........................................................................................................1 1.1 Oxiana's Principal Mineral Assets................................................................................................1 1.2 Zinifex's Principal Mineral Assets ................................................................................................2

2 DESCRIPTION OF OXIANA ASSETS...................................................................................................4 2.1 Sepon...........................................................................................................................................4

2.1.1 Introduction ...................................................................................................................4 2.1.2 Geology and Exploration ..............................................................................................8

2.1.2.1 Copper Mineral Resources ...........................................................................9 2.1.2.2 Gold Mineral Resources..............................................................................12 2.1.2.3 Exploration ..................................................................................................14

2.1.3 Mining Operations.......................................................................................................15 2.1.3.1 Overview .....................................................................................................15 2.1.3.2 Ore Reserve Estimates ...............................................................................15

2.1.4 Processing and Concentrate Handling.......................................................................17 2.1.4.1 Process Description ....................................................................................17 2.1.4.2 Plant Performance.......................................................................................18 2.1.4.3 Future Ore Treatment and Plant Capacity ..................................................19 2.1.4.4 Gold Processing..........................................................................................19 2.1.4.5 Plant Performance.......................................................................................20 2.1.4.6 Primary Gold Project Metallurgical Development .......................................20

2.1.5 Environment................................................................................................................21 2.1.6 Operating and Capital Costs ......................................................................................21 2.1.7 AMC Modelling Scenarios ..........................................................................................22

2.1.7.1 Sepon Copper .............................................................................................22 2.1.7.2 Sepon Gold .................................................................................................24 2.1.7.3 Exclusions ...................................................................................................26

2.1.8 Key Observations .......................................................................................................26 2.2 Golden Grove.............................................................................................................................26

2.2.1 Introduction .................................................................................................................26 2.2.2 Geology and Exploration ............................................................................................27

2.2.2.1 Mineralisation ..............................................................................................27 2.2.2.2 Exploration ..................................................................................................29

2.2.3 Mineral Resources and Ore Reserves .......................................................................30 2.2.4 Mineral Resource/Ore Reserve Estimation ................................................................30

2.2.4.1 Reconciliation ..............................................................................................31 2.2.5 Site Infrastructure .......................................................................................................32 2.2.6 Processing ..................................................................................................................32

2.2.6.1 Grinding Circuit............................................................................................32 2.2.6.2 Flotation.......................................................................................................33 2.2.6.3 Metallurgical Operating Plan .......................................................................34 2.2.6.4 Operating Costs ..........................................................................................35 2.2.6.5 Capital .........................................................................................................35

2.2.7 Environment................................................................................................................35 2.2.7.1 Potential Environmental Threats .................................................................35

2.2.8 Operating and Capital Costs ......................................................................................36 2.2.9 AMC Modelling Scenarios ..........................................................................................37

2.2.9.1 Case 1 .........................................................................................................38 2.2.9.2 Case 2 .........................................................................................................39

2.2.10 Key Observations .......................................................................................................39 2.3 Prominent Hill .............................................................................................................................40

2.3.1 Introduction .................................................................................................................40 2.3.2 Geology and Exploration ............................................................................................41

2.3.2.1 Mineralisation ..............................................................................................41 2.3.2.2 Exploration ..................................................................................................43

2.3.3 Mineral Resources......................................................................................................44 2.3.3.1 Mineral Resource Estimate .........................................................................44


AMC207098: 6 May 2008 xviii

2.3.3.2 Reconciliation ..............................................................................................45 2.3.4 Ore Reserves..............................................................................................................45 2.3.5 Mining Operations.......................................................................................................45

2.3.5.1 Overview .....................................................................................................45 2.3.5.2 Grade Control..............................................................................................46 2.3.5.3 Geotechnical ...............................................................................................46 2.3.5.4 Mine Operations and Planning....................................................................47 2.3.5.5 LOM Fleet Schedule....................................................................................47 2.3.5.6 Mining Sequence.........................................................................................48

2.3.6 Processing and Concentrate Handling.......................................................................48 2.3.6.1 Ore Characteristics .....................................................................................49 2.3.6.2 Process Flowsheet......................................................................................49 2.3.6.3 Process Development and Equipment Selection........................................49 2.3.6.4 Metallurgical Performance ..........................................................................50 2.3.6.5 Concentrate Quality.....................................................................................50

2.3.7 Infrastructure...............................................................................................................50 2.3.7.1 General........................................................................................................50 2.3.7.2 Transport and Logistics...............................................................................51 2.3.7.3 Accommodation...........................................................................................51 2.3.7.4 Airstrip .........................................................................................................51 2.3.7.5 Power Supply ..............................................................................................51 2.3.7.6 Processing Water Supply............................................................................51 2.3.7.7 Potable Water Supply..................................................................................51 2.3.7.8 Tailings Storage Facility ..............................................................................51

2.3.8 Environment................................................................................................................51 2.3.8.1 Overview .....................................................................................................51 2.3.8.2 Potential Environmental Threats .................................................................52

2.3.9 Operating and Capital Costs ......................................................................................52 2.3.10 AMC Modelling Scenarios ..........................................................................................53 2.3.11 Key Observations .......................................................................................................55

2.4 Martabe ......................................................................................................................................58 2.4.1 Introduction .................................................................................................................58 2.4.2 Contract of Work.........................................................................................................59 2.4.3 Geology and Exploration ............................................................................................59 2.4.4 Mineral Resources......................................................................................................61 2.4.5 Ore Reserves..............................................................................................................62 2.4.6 Geotechnical...............................................................................................................62 2.4.7 Hydrogeology and Hydrology .....................................................................................62 2.4.8 Mining Operations.......................................................................................................62

2.4.8.1 Contract Mining Request for Quotation Process ........................................63 2.4.8.2 Owner Mining Study....................................................................................63 2.4.8.3 Mine Production Schedule ..........................................................................64 2.4.8.4 Waste Storage.............................................................................................64

2.4.9 Processing ..................................................................................................................64 2.4.10 Infrastructure...............................................................................................................65 2.4.11 Environment................................................................................................................66 2.4.12 Operating and Capital Costs ......................................................................................66

2.4.12.1 Operating Costs ..........................................................................................66 2.4.12.2 Capital Costs ...............................................................................................67

2.4.13 AMC Modelling Scenarios ..........................................................................................67 2.4.14 Key Observations .......................................................................................................68

2.5 Other Exploration - Oxiana ........................................................................................................68 2.5.1 Regional Exploration Valuation ..................................................................................68 2.5.2 Mount Woods Inlier.....................................................................................................71

2.5.2.1 Valuation .....................................................................................................71 2.5.3 Mount Gibson .............................................................................................................72

2.5.3.1 Valuation .....................................................................................................72 2.5.4 Golden Grove Regional ..............................................................................................73

2.5.4.1 Valuation .....................................................................................................73 2.5.5 Wiluna Project.............................................................................................................73


AMC207098: 6 May 2008 xix

2.5.5.1 Valuation .....................................................................................................74 2.5.5.2 Summary .....................................................................................................75

2.5.6 Sepon..........................................................................................................................75 2.5.6.1 Primary Mineral Resources.........................................................................75 2.5.6.2 Regional Exploration ...................................................................................76 2.5.6.3 Valuation of Regional Exploration ...............................................................76 2.5.6.4 Summary .....................................................................................................77

2.5.7 Martabe.......................................................................................................................77 2.5.7.1 Martabe District Mineral Resource Value ...................................................77 2.5.7.2 Regional Exploration ...................................................................................77 2.5.7.3 Valuation of Regional Exploration ...............................................................78 2.5.7.4 Summary .....................................................................................................78

2.5.8 Other Asian Exploration..............................................................................................78 2.5.8.1 Comparable Transactions ...........................................................................79

2.5.9 Thailand Exploration...................................................................................................79 2.5.9.1 Thai Iron ......................................................................................................79 2.5.9.2 Palitpan .......................................................................................................79 2.5.9.3 Chatree/Wang Yi .........................................................................................79 2.5.9.4 Lampang .....................................................................................................80 2.5.9.5 Summary .....................................................................................................80

2.5.10 Cambodia ...................................................................................................................80 2.5.10.1 Phnom Chi...................................................................................................80 2.5.10.2 Ou Anlong ...................................................................................................80 2.5.10.3 Ok Vau - Ochung.........................................................................................80 2.5.10.4 Summary .....................................................................................................80

2.5.11 Other Laos Interests ...................................................................................................81 2.5.12 China...........................................................................................................................81

2.5.12.1 Inner Mongolia, Xizosongshan (“XSS”) and Zarogi ....................................81 2.5.12.2 Yunnan-Laoxuzhai (“LXZ”) (Previously Referred to as Rexing Minerals JV)

81 2.5.12.3 Yunnan - Jinlong .........................................................................................81 2.5.12.4 Sichuan Joint Venture .................................................................................82 2.5.12.5 Summary .....................................................................................................82

2.5.13 Summary of Other Exploration - Oxiana.....................................................................82

3 DESCRIPTION OF ZINIFEX ASSETS.................................................................................................82 3.1 Century.......................................................................................................................................82

3.1.1 Introduction .................................................................................................................82 3.1.2 Geology, Mineral Resources and Exploration ............................................................84

3.1.2.1 Sampling .....................................................................................................86 3.1.2.2 Quality Assurance/Quality Control Programme ..........................................88 3.1.2.3 Mineral Resource Model .............................................................................88 3.1.2.4 Mineral Resource Classification..................................................................88 3.1.2.5 Statement of Mineral Resources.................................................................89 3.1.2.6 Reconciliation ..............................................................................................90 3.1.2.7 Exploration ..................................................................................................90

3.1.3 Mining Operations.......................................................................................................91 3.1.3.1 Overview .....................................................................................................91 3.1.3.2 Ore Reserve Estimates ...............................................................................92 3.1.3.3 Grade Control..............................................................................................93 3.1.3.4 Geotechnical ...............................................................................................95 3.1.3.5 Mine Operations and Planning....................................................................95 3.1.3.6 LOM Fleet Schedule....................................................................................96 3.1.3.7 Mining Sequence.........................................................................................96

3.1.4 Processing and Concentrate Handling.......................................................................97 3.1.4.1 Ore Mineralogy............................................................................................97 3.1.4.2 Process Description ....................................................................................98 3.1.4.3 Metallurgical Performance Analysis............................................................99 3.1.4.4 Process Constraints ..................................................................................100 3.1.4.5 Concentrate Handling ...............................................................................100 3.1.4.6 Processing Production Plan ......................................................................101


AMC207098: 6 May 2008 xx

3.1.5 Environment..............................................................................................................101 3.1.5.1 Statutory Authorities ..................................................................................101 3.1.5.2 Surface and Groundwater Management...................................................101 3.1.5.3 Rehabilitation.............................................................................................102 3.1.5.4 Closure and Rehabilitation ........................................................................102 3.1.5.5 Community Relations ................................................................................102

3.1.6 Operating and Capital Costs ....................................................................................102 3.1.7 AMC Modelling Scenarios ........................................................................................103 3.1.8 Key Observations .....................................................................................................104

3.1.8.1 Geology and Mineral Resources...............................................................104 3.1.8.2 Mining........................................................................................................104 3.1.8.3 Mineral Processing and Concentrate Handling ........................................105 3.1.8.4 Environment ..............................................................................................105 3.1.8.5 Costs .........................................................................................................105 3.1.8.6 AMC Modelling Scenarios.........................................................................106

3.2 Rosebery..................................................................................................................................106 3.2.1 Introduction ...............................................................................................................106 3.2.2 Geology and Exploration ..........................................................................................107

3.2.2.1 Mineralisation ............................................................................................107 3.2.2.2 Host Rocks ................................................................................................107 3.2.2.3 Exploration ................................................................................................107

3.2.3 Mineral Resources and Ore Reserves .....................................................................108 3.2.3.1 Mineral Resource/Ore Reserve Estimation...............................................108 3.2.3.2 Reconciliation ............................................................................................108

3.2.4 Mining Operations.....................................................................................................109 3.2.5 Geotechnical.............................................................................................................110 3.2.6 Ventilation .................................................................................................................110 3.2.7 Ore Reserve Estimates – Modifying Factors............................................................110 3.2.8 Ore Reserve Estimates - Ore Reserves as at 31 March, 2007................................111 3.2.9 Future Cut-Off Grade Strategy .................................................................................112 3.2.10 Life of Mine Mining Inventory....................................................................................112

3.2.10.1 Alternative Long Term Production Sources and Scenarios ......................113 3.2.10.2 Mining Operations .....................................................................................113

3.2.11 Processing and Concentrate Handling.....................................................................114 3.2.11.1 Introduction................................................................................................114 3.2.11.2 Ore Mineralogy..........................................................................................114 3.2.11.3 Process Description ..................................................................................114 3.2.11.4 Metallurgical Performance ........................................................................117

3.2.12 Environment..............................................................................................................118 3.2.12.1 Statutory Authorities ..................................................................................118 3.2.12.2 Surface and Groundwater Management – Acid Mine Drainage ...............119 3.2.12.3 Tailings Management................................................................................119 3.2.12.4 Closure and Rehabilitation ........................................................................119 3.2.12.5 Community Relations ................................................................................120

3.2.13 Operating and Capital Costs ....................................................................................120 3.2.14 AMC Modelling Scenarios ........................................................................................121 3.2.15 Key Observations .....................................................................................................122

3.3 Dugald River Development Project..........................................................................................124 3.3.1 Introduction ...............................................................................................................124 3.3.2 Geology and Exploration ..........................................................................................125 3.3.3 Mineral Resources and Ore Reserves .....................................................................127 3.3.4 Mining .......................................................................................................................129 3.3.5 Processing and Concentrate Handling.....................................................................130 3.3.6 Infrastructure.............................................................................................................131 3.3.7 Environment..............................................................................................................132 3.3.8 Costs and Production Outlook..................................................................................132 3.3.9 Key Observations .....................................................................................................133

3.4 Canadian Development Projects .............................................................................................134 3.4.1 Izok Lake ..................................................................................................................135 3.4.2 High Lake..................................................................................................................135


AMC207098: 6 May 2008 xxi

3.4.3 Nunavut Gold Project................................................................................................135 3.4.4 Nunavut Regional Exploration ..................................................................................136 3.4.5 Summary ..................................................................................................................136

3.5 Other Exploration Projects .......................................................................................................136 3.5.1 Australia....................................................................................................................136

3.5.1.1 Menninnie Dam, SA ..................................................................................136 3.5.1.2 Wilcherry Hill Project .................................................................................137

3.5.2 Overseas ..................................................................................................................137 3.5.2.1 Peoples Republic of China........................................................................137 3.5.2.2 Mexico .......................................................................................................137 3.5.2.3 Sweden .....................................................................................................138 3.5.2.4 Tunisia.......................................................................................................138

3.5.3 Summary ..................................................................................................................138

4 SOURCES OF INFORMATION .........................................................................................................139

5 QUALIFICATIONS .............................................................................................................................139

TABLES

Table I Oxiana Breakdown by Project Area............................................................................................. x

Table II Zinifex Breakdown by Project Area............................................................................................ xv

Table III Zinifex Mineral Resources3 and Ore Reserves as at 31 March 2007........................................xvi

Table IV Oxiana Mineral Resources2 and Ore Reserves as at 30 June 2007 (Contained Metal)3..........xvi

Table 1.1 Mineral Resources (1) (Contained Metal) .....................................................................................1

Table 1.2 Ore Reserves (1) (Contained Metal) .............................................................................................1

Table 1.3 Mineral Resources (2) (Contained Metal) .....................................................................................2

Table 1.4 Ore Reserves (2) (Contained Metal) .............................................................................................3

Table 2.1 Sepon Mineral District Stratigraphy ............................................................................................. 8

Table 2.2 Sepon Copper Mineral Resources Reported to 30 June 2007..................................................10

Table 2.3 Sepon Gold Mineral Resources Reported to 30 June 2007......................................................13

Table 2.4 Sepon Ore Reserve Estimates as at 30 June 2007 ..................................................................16

Table 2.5 Copper Processing Performance...............................................................................................18

Table 2.6 Gold Processing Performance...................................................................................................20

Table 2.7 Sepon Copper ............................................................................................................................ 22

Table 2.8 Sepon Gold ................................................................................................................................ 22

Table 2.9 AMC Modelling Scenario - Sepon Copper Case 1 ....................................................................23

Table 2.10 AMC Modelling Scenario - Sepon Copper Case 2 ....................................................................24

Table 2.11 AMC Modelling Scenario - Sepon Gold Case 1.........................................................................25

Table 2.12 AMC Modelling Scenario - Sepon Gold Case 2.........................................................................25

Table 2.13 Mineral Resources as at 30 June 2007 .....................................................................................30

Table 2.14 Ore Reserves as at 30 June 2007 .............................................................................................30

Table 2.15 Xantho and Cervantes Mineral Resource..................................................................................30

Table 2.16 Mine - Mill Reconciliation ........................................................................................................... 31

Table 2.17 Five Year Metallurgical Plan ...................................................................................................... 34

Table 2.18 Actual and Budgeted Operating and Capital Costs ...................................................................37

Table 2.19 AMC Modelling Scenario - Case 1.............................................................................................38


AMC207098: 6 May 2008 xxii


Table 2.21 Mineral Resource Estimate as at 30 June 2007........................................................................44

Table 2.22 Ore Reserve Estimate as at 30 June 2007................................................................................45

Table 2.23 LOM Material Movement Schedule (Mbcm) ..............................................................................47

Table 2.24 LOM Primary Mining Fleet Levels..............................................................................................47

Table 2.25 LOMP Mining Stages 2008 to 2017...........................................................................................48

Table 2.26 Prominent Hill Ore Types as at August 2006.............................................................................49

Table 2.27 Prominent Hill Metallurgical Performance Predictions...............................................................50

Table 2.28 Operating and Capital Costs...................................................................................................... 52

Table 2.29 Reconciliation of Actual and Plan Mining Operating Costs .......................................................53

Table 2.30 Capital Cost Estimate................................................................................................................. 53



Table 2.33 Martabe Mineral Resources as at 30 June 2007.......................................................................61

Table 2.34 Purnama Ore Reserves as at 30 June 2007 .............................................................................62

Table 2.35 Martabe Mining Request for Quotation Pricing..........................................................................63

Table 2.36 Martabe Scheduled Ore Production ..........................................................................................64

Table 2.37 Martabe Operating Costs from the DFS ....................................................................................67

Table 2.38 Martabe Capital Costs from the DFS.........................................................................................67

Table 2.39 AMC Modelling Scenario - Martabe Case 1 ..............................................................................70

Table 2.40 AMC Modelling Scenario - Martabe Case 2 ..............................................................................70

Table 2.41 Summary of Oxiana's Regional Exploration Values ..................................................................82

Table 3.1 Drilling Summary of the Valid Drillholes used in Mineral Resource Estimation.........................86

Table 3.2 Mineral Resource as at 31 March 2007 at a 3.5% Zinc Cut-off Grade......................................89

Table 3.3 Eastern Fault Block Mineral Resource at 0% Zinc Cut-off Grade .............................................89

Table 3.4 Mineral Resource Depletion for the 12 months to 31 March 2007 at 3.5% Zinc Cut-off Grade 89

Table 3.5 Comparison of Mining Adjusted Model Depletion with ROM Stockpile Adjusted Mill for the 12 Months to 31 March 2007 .......................................................................................................... 90

Table 3.6 Mineral Resource and Ore Reserve Estimates as at 31 March 2007 .......................................93

Table 3.7 LOM Material Movement Schedule (Mbcm) ..............................................................................95

Table 3.8 LOM Primary Fleet Levels ......................................................................................................... 96

Table 3.9 LOMP Mining Stages FY08 to FY15..........................................................................................96

Table 3.10 Lawn Hill Concentrator Performance Summary ........................................................................99

Table 3.11 Three Year Production Plan for Century Process Operations.................................................101

Table 3.12 Operating and Capital Costs....................................................................................................103

Table 3.13 Examples of Actual and Plan Costs.........................................................................................103

Table 3.14 AMC Modelling Scenario .........................................................................................................104

Table 3.15 Mineral Resources ...................................................................................................................108

Table 3.16 Ore Reserve – Mine Reconciliation .........................................................................................108

Table 3.17 Mine - Mill Reconciliation .........................................................................................................108


AMC207098: 6 May 2008 xxiii

Table 3.18 Typical Upper Levels Recovery and Dilution Factors (Mineral Resource to Ore Reserve) .... 111

Table 3.19 Ore Reserves as at 31 March 2007.........................................................................................111

Table 3.20 Rosebery Mine Reconciliation: 1 April 2006 to 31 March 2007...............................................112

Table 3.21 Rosebery Mine Estimated Economic Reserves at 31 March 2007 .........................................113

Table 3.22 Ore Production Statistics .........................................................................................................117

Table 3.23 Dore and Copper Concentrate Production Statistics...............................................................117

Table 3.24 Lead and Zinc Concentrate Production Statistics....................................................................118

Table 3.25 Actual Operation and Capital Costs.........................................................................................120

Table 3.26 AMC Modelling Scenario - Case 1...........................................................................................121

Table 3.27 AMC Modelling Scenario - Case 2...........................................................................................122

Table 3.28 Dugald River Mineral Resources (31 March 2007) .................................................................128

Table 3.29 Dugald River Prefeasibility Projections....................................................................................133

Table 3.30 AMC Modelling Scenario .........................................................................................................133

Table 3.31 Menninnie Dam Inferred Mineral Resource by Lode ...............................................................136

Table 3.32 Summary of Zinifex's Regional Exploration Values .................................................................139

FIGURES

Figure 1.1 Oxiana Development Pipeline......................................................................................................2

Figure 1.2 Zinifex's Development Strategy ...................................................................................................3

Figure 2.1 Sepon Location Map ....................................................................................................................4

Figure 2.2 Plants and Nearby Pits.................................................................................................................6

Figure 2.3 Project Area Layout......................................................................................................................7

Figure 2.4 Copper Processing Block Flow Diagram ...................................................................................18

Figure 2.5 Gold Processing Block Flow Diagram .......................................................................................20

Figure 2.6 Location of Golden Grove Operations .......................................................................................26

Figure 2.7 Longitudinal Projection Gossan Hill Orebodies .........................................................................28

Figure 2.8 Longitudinal Projection Scuddles Orebodies .............................................................................29

Figure 2.9 Geographic Location..................................................................................................................40

Figure 2.10 Prominent Hill Cross Section - 555,700 mE ..............................................................................42

Figure 2.11 Near Mine Mineral Resource Extension Potential .....................................................................43

Figure 2.12 Mine Operations Layout Looking to the South-East (November 2007).....................................46

Figure 2.13 LOMP Mining Sequence with Lithology at 1050 mRL ...............................................................48

Figure 2.14 Prominent Hill Process Flowsheet .............................................................................................49

Figure 2.15 Martabe Location Plan ...............................................................................................................58

Figure 2.16 Cross Section of the Purnama Deposit Indicating the Proposed Final Pit Outline ....................60

Figure 2.17 Proposed Martabe Processing Circuit .......................................................................................65

Figure 3.1 Geographic Location..................................................................................................................83

Figure 3.2 Mining Leases ............................................................................................................................83

Figure 3.3 Plan of Century Deposit Showing the Main Structural Features ...............................................85


AMC207098: 6 May 2008 xxiv

Figure 3.4 Area of CBX Dykes Compared to Total Area of Ore Sequence Mined as at 31 March 2005 ...86

Figure 3.5 Plan Showing the Deposit Outline and 426 Drillholes used in the Mineral Resource Estimate 87

Figure 3.6 Century Regional Exploration Area............................................................................................91

Figure 3.7 Mine Operations Layout.............................................................................................................92

Figure 3.8 Century Orebody - North-South Section....................................................................................93

Figure 3.9 Century Orebody - Plan View ....................................................................................................94

Figure 3.10 Ore Stratigraphy.........................................................................................................................94

Figure 3.11 LOMP Mining Sequence ............................................................................................................97

Figure 3.12 Century Process Plant Schematic Flowsheet............................................................................98

Figure 3.13 Rosebery Mine Site..................................................................................................................106

Figure 3.14 Total Mineral Resource, Ore Reserve and Production Levels – 1981 to 2007 .......................109

Figure 3.15 Rosebery Concentrator FY08Plan...........................................................................................115

Figure 3.16 Dugald River Location (Plan) ...................................................................................................125

Figure 3.17 Eastern Fold Belt Region .........................................................................................................126

Figure 3.18 Geology of the Dugald River Area ...........................................................................................127

Figure 3.19 Deposit Cross Section .............................................................................................................130

Figure 3.20 Prefeasibility Process Flowsheet .............................................................................................131

Figure 3.21 Canadian Development Projects .............................................................................................134

APPENDICES

APPENDIX A ABBREVIATIONS

APPENDIX B REFERENCES

Distribution list: 1 (elec) copy to Mr Stephen Cooper, Grant Samuel & Associates Pty Ltd 1 (elec) copy to Mr Cameron Stewart, Grant Samuel & Associates Pty Ltd 1 (elec) copy to Mr Andrew Coles, Zinifex Limited 1 copy to AMC Perth Office


AMC207098: 6 May 2008 1

1 MINERAL ASSETS - SUMMARY

1.1 Oxiana's Principal Mineral Assets

Oxiana’s principal mineral assets are comprised of the:

1. Sepon Mine

2. Golden Grove Mine

3. Prominent Hill Mine

4. Martabe Project

5. Other Exploration Properties.

Mineral Resources and Ore Reserves estimates for each of the assets are outlined in Tables 1.1 and 1.2 below.

Table 1.1 Mineral Resources (1) (Contained Metal)

Mineral Asset Gold (Moz)

Silver (Moz)

Copper(Mt)

Zinc (Mt)

Lead (Mt)

Nickel (Mt)

Cobalt (Mt)

Sepon Gold 3.4 12.5 - - - - - Sepon Copper 0.4 26.1 1.6 - - - - Golden Grove 0.8 38.9 0.6 1.2 0.1 - - Prominent Hill 3.7 15.8 1.9 - - - - Martabe 5.9 60.0 - - - - - Other Exploration Properties - - - - - 0.6 0.05

Total 14.3 153.2 4.0 1.2 0.1 0.6 0.05 (1) Reported by Oxiana as at 30 June 2007 as JORC Code compliant

Table 1.2 Ore Reserves (1) (Contained Metal)

Mineral Asset Gold (Moz)

Silver (Moz)

Copper (Mt)

Zinc (Mt)

Lead (Mt)

Sepon Gold 0.20 0.35 - - - Sepon Copper - - 0.79 - - Golden Grove 0.30 14.62 0.19 0.61 0.07 Prominent Hill 1.29 7.06 0.88 - - Martabe 2.26 30.14 - - - Other Exploration Properties - - - - -

Total 4.05 52.17 1.86 0.61 0.07 (1) Reported by Oxiana as at 30 June 2007 as JORC Code compliant

Oxiana has established a development "pipeline" as indicated in Figure 1.1. Key features of this pipeline post 2007 include the commissioning of:

• the Prominent Hill Copper Gold project in 2008

• the Golden Grove Copper Oxide pit in 2009

• the Martabe project in 2010

• and Sepon copper expansion in 2010.


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Figure 1.1 Oxiana Development Pipeline

1.2 Zinifex's Principal Mineral Assets

Zinifex’s principal mineral assets are comprised of the:

1. Century Operation

2. Rosebery Mine

3. Dugald River Development Project

4. Canadian Development Projects

5. Other Exploration Projects.

Mineral Resources and Ore Reserves estimates for each of the assets are outlined in Tables 1.3 and 1.4 below.

Table 1.3 Mineral Resources (2) (Contained Metal) Mineral Asset Zinc

(Mt) Lead (Mt)

Copper (Mt)

Silver (Moz)

Gold (Moz)

Century Mine 6.8 0.8 - 58.7 - Rosebery Mine 1.6 0.5 0.05 55.4 0.8 Dugald River Development Project 5.8 1.0 - 67.8 - Canadian Development Projects 2.5 0.2 0.77 72.7 1.0 Other Exploration Properties - - - - -

Total 16.6 2.5 0.81 254.6 1.7

(2) Contained metal estimates have been calculated by AMC from Mineral Resource and Ore Reserves reported by Zinifex as at 31 March 2007. Mineral Resource and Ore Reserves for the Canadian Development projects have been reported consistent with CIM requirements. All other estimates are reported by Zinifex as JORC Code compliant.


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Table 1.4 Ore Reserves (2) (Contained Metal) Mineral Asset Zinc

(Mt) Lead (Mt)

Copper (Mt)

Silver (Moz)

Gold (Moz)

Century Mine 5.2 0.5 - 37.1 - Rosebery Mine 0.5 0.1 0.02 14.1 0.2 Dugald River Development Project - - - - - Canadian Development Projects - - - - - Other Exploration Properties - - - - -

Total 5.6 0.6 0.02 51.3 0.2

(2) Contained metal estimates have been calculated by AMC from Mineral Resource and Ore Reserves reported by Zinifex as at 31 March 2007. Mineral Resource and Ore Reserves for the Canadian Development projects have been reported consistent with CIM requirements. All other estimates are reported by Zinifex as JORC Code compliant.

Zinifex has outlined its strategy for the development and utilisation of its current Mineral Resources as indicated in Figure 1.2. Key aspects of the strategy are:

• Century Operation to remain the primary production source over the coming seven years

• final production from Century in 2015

• commissioning of the Dugald River Development Project in 2011

• commissioning of the Izok Lake and High Lake projects after 2015

• extension of the Rosebery Mine life.

Figure 1.2 Zinifex's Development Strategy


AMC207098: 6 May 2008 4

2 DESCRIPTION OF OXIANA ASSETS

2.1 Sepon

2.1.1 Introduction

The Sepon copper-gold operation is located in the Lao People's Democratic Republic ("Lao PDR"), as shown in Figure 2.1. Oxiana acquired 80% of the project from Rio Tinto in 2000 and the remaining 20% in early 2004. Exploration by CRA/Rio Tinto between 1993 and 1999 resulted in the discovery of separate gold and copper deposits.

Oxiana now holds its interest in the Sepon project through Lane Xang Minerals Ltd ("LXML") which is the manager of, and 90% equity holder in, the Sepon project.

Oxiana has reported that in 2007, the Government of Laos exercised its long-standing option to acquire a 10% interest in the Sepon project and is currently financing its purchase through foregoing dividends.

LOM tenure for Sepon is held under a Mineral Exploration and Production Agreement ("MEPA") that was signed with the Lao PDR Government in June 1993. The original MEPA area was 5,000 km2 and, through relinquishment, has progressively been reduced in size. The current MEPA area hosts near-surface gold and high grade copper Mineral Resources.

The project area is in moderately steep, dissected terrain surrounded by gently undulating hills. Some deposits, for example Khanong copper, Discovery East gold and the Thengkham North copper are located in relatively elevated areas with typical slopes of between 25o and 35o. Site elevations range from 200m to 700m above sea level. The Namkok River essentially runs in a north-south direction through the central portion of the site and drains to the south of the town of Sepon. It is the main waterway in the project area.

Vegetation is predominantly secondary tropical forest with relatively open undergrowth and a low canopy.

The project area has a tropical monsoonal climate, typically with a dry season between November and March, and a wet season between June and September. Average rainfall is around 2,200 mm per annum.

The main access to the Sepon project is from Savannakhet, some 200 km along Route 9 and then Route 28A to site.

Figure 2.1 Sepon Location Map

The Sepon contract area occupies 1,250 km2, located approximately 40 km north of the town of Sepon in Savannakhet Province, south-central Laos. Layout of the project area is shown in Figure 2.3.


AMC207098: 6 May 2008 5

SPDA in Figure 2.3 refers to the Sepon Project Development Area and GDPA refers to the Greater Project Development Area.

Oxiana has been producing gold bullion at Sepon since December 2002 and LME grade copper cathode since early 2005. High grade chalcocite and carbonate copper ores fed to the processing plant currently at a rate of around 1.3 Mtpa, are mined from the Khanong open pit.

The copper ores at Sepon are leachable and separate and discrete orebodies from the gold deposits. Mining is undertaken by a contractor using a primary material movement fleet currently comprising 32 articulated haul trucks of 25t to 40t capacity and 12 excavators, ranging up to the 80t class.

The gold processing plant is currently fed with oxide gold ore at a rate of around 2.2 Mtpa from a series of separate gold open pits. The separate plants can be seen in Figure 2.2. In 2007, Sepon produced 62.5 kt of copper that is supplied to end users, primarily in Vietnam, Thailand, Malaysia and China. In 2007, Sepon produced some 102 koz of gold.

Electric power for the Sepon operation is generated from hydro-electric plants in Laos and supplied via a main grid connection through Thailand.

At the end of 2007, LXML's total employee and contractor workforce was approximately 4,700 people with around 85% of those utilised in operations and the balance in exploration.

The workforce includes personnel involved in the clearance of unexploded ordinance ("UXO") ahead of exploration, development and operations. Typically, there are 300 people working on the UXO programme at any time, with 600 involved in clearing bush and related activities.

Padan, the main camp for the Sepon operation, can be seen in the lower left of Figure 2.2. It accommodates 1,500 to 1,700 people. A second camp, Namkok, not shown in Figure 2.2, accommodates around 800 people.

As announced in December 2007, the Oxiana Board approved an expansion of the Sepon copper operation to 80 ktpa. The estimated capital cost is US$178M and unit cash operating costs are expected to reduce by approximately 10%. The expansion will take around two years to complete. It includes expenditure of approximately US$50M for improvements to plant recoveries, reliability and performance generally.

Not included in the expansion cost estimate is an estimated US$32M for a second oxidation autoclave ("POX II") to improve plant utilisation, flexibility and reliability.

AMC's copper modelling scenarios provided to Grant Samuel consist of an operation with a projected remaining life of 11 to 14 years, producing copper cathode at the rate of 63 ktpa in 2008, increasing to 81 ktpa by 2012 and then tailing off in the last few years. The gold modelling scenarios provided to Grant Samuel consist of an operation with a limited life of 2½ to 3 years, producing gold at around 80 koz to 87 koz in each full year.

A major new western tailings storage facility ("WTSF") located some 13 km to the west of the processing plants has recently been constructed at a capital cost of approximately US$45M. The original tailings dam, TSF1, has been decommissioned and surface water is being pumped out in preparation for rehabilitation. The WTSF wall will be raised using waste from the nearby Houay Yeng gold pit that has not yet commenced. When completed, the WTSF will have sufficient capacity for tailings for the life-of-mine ("LOM") as currently defined.

Sepon also features primary copper and primary gold Mineral Resources that are not amenable to processing through the existing plants. These primary Mineral Resources are typically situated beneath the Mineral Resources from which ore is sourced for feeding the existing copper and gold processing plants.

There is currently insufficient primary gold Mineral Resource to justify the capital cost of a primary gold processing plant. Preliminary assessment of treatment processes suitable for the primary copper ore is being undertaken. Exploration for additional copper and gold, including primary copper and gold Mineral Resources, is continuing.

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2.1.2 Geology and Exploration

The Sepon mineral district is located in the informally defined Sepon basin within the Truongson fold belt which is oriented north-west cutting across central Vietnam to northern Laos. The Sepon basin comprises Middle Ordovician to Late Devonian age continental fluvial and shallow to deep marine sediments deposited during the development of an east-west oriented basin. Overlying the Palaeozoic basins is the Mesozoic Khorat basin of Thailand and Laos.

The Sepon mineral district is delineated by soil, stream sediment and rock geochemistry and extends for about 35 km east-west and 6.5 km north-south. In the centre of the Sepon mineral district two supergene copper systems and several separate gold deposits have been identified.

Rock types within the Sepon mineral district are mainly shallow-dipping, dark gray to black bedded calcareous shale, limestone and dolomite with overlying laminated black to dark gray chert, pale coloured pyritic siltstone and shale and lesser black shale. The sediments are intruded by sub-horizontal to sub-vertical felsic porphyry dykes and sills referred to as the rhyodacite porphyry. Regional scale open folds and faults strike east-west with second order faults striking north-west. Major dykes have been controlled by the regional fault sets that dominate the structural fabric of the basin. Most of the contacts between the rhyodacite porphyry and sedimentary rocks are marked by shears.

The mine area is underlain by a sequence of calcareous and clastic sedimentary rocks divided into nine formations which are detailed in Table 2.1.

Table 2.1 Sepon Mineral District Stratigraphy

Devonian Nam Kian Formation Laminated, black (carbonaceous) mudstone, intercalated chert and claystone.

Abundant pyrite and pyrrhotite. Discovery Formation Carbonaceous and calcareous mudstone; argillaceous limestone. Common

pyrite at top and base. Nalou Formation Thick bedded or massive micritic dolomitised limestone locally interbedded with

carbonaceous mudstone. Silurian Kengkeuk Formation Laminated black (carbonaceous) mudstone, siltstone and sandstone. Namphuc Volcanics Andesitic pyroclastics, flows, agglomerates and conglomerates. Lateral

equivalent of middle of Kengkeuk formation. Ordovician Vang Ngang Formation Laminated claystone, siltstone, chert and limestone. Nampa Formation Claystone to laminated siltstone. Houay Bang Formation Dark grey, laminated, fine grained limestone interbedded with calcareous

sandstone and mine claystone. Payee Formation Interbedded red sandstone with clay and siltstone interbeds grading into light

grey, laminated sandstone.

Copper mineralisation occurs in a number of geological settings with the main Mineral Resources being secondary mineralisation formed from the weathering and mobilisation of copper from primary mineralisation in massive sulphide bodies and skarns associated with the rhyodacite porphyry. Supergene enrichment of primary sulphide mineralisation resulted in the development of a clay hosted chalcocite blanket overlying a copper oxide zone.

Primary copper skarn and skarn-related mineralisation is hosted by the Kengkeuk, Nalou and Discovery formations and most of it occurs within the Kengkeuk formation. Secondary copper mineralisation is mostly located near the contact between the Kengkeuk and the overlying Nalou formations. Mineral Resources are also reported for primary chalcopyrite mineralisation.

Gold mineralisation is mainly hosted by jasperoid and decalcified calcareous shale with minor gold mineralisation in the rhyodacite porphyry. Gold replacement-style mineralisation is strongly stratigraphically and structurally controlled with most of the known gold mineralisation occurring at the contact between the Discovery and the Nalou formations. Gold mineralisation also occurs in limestone and dolomite lenses at the base of the Vang Ngang formation.


AMC207098: 6 May 2008 9

A basin-wide structurally and sedimentary-controlled late diagenetic process occurred which dolomitised carbonate rocks. This process modified the chemical framework of the basin and influenced the location of mineralisation.

Low grade porphyry-style copper molybdenum mineralisation is associated with the rhyodacite porphyry centres.

2.1.2.1 Copper Mineral Resources

Two supergene copper systems have been identified, centred on the Padan and Thengkham intrusive centres.

The Khanong copper deposit is associated with the Padan intrusive centre and is interpreted to be derived from the chalcocite replacement of low-grade pyrite-chalcopyrite massive sulphide skarn mineralisation. The chalcocite appears to have precipitated at the water table. Parts of the chalcocite mineralisation were later oxidised by fluids flowing along porous sands at the base of the chalcocite zone and along steep north-west striking faults.

Three further supergene copper deposits drilled to at least Inferred Mineral Resource have been identified at Thengkham North, Thengkham South and Phabing.

At Thengkham North the chalcocite mineralisation appears to have replaced lenses of skarn-related pyrite-chalcopyrite massive sulphide bodies that are thinner and less continuous than the main massive sulphide body at Khanong. Chalcocite mineralisation also appears to replace semi-massive quartz sulphide stockworks formed at the margins of rhyodacite porphyry intrusives. Malachite mineralisation has formed at Thengkham North by further oxidation of chalcocite along fault-controlled permeable zones and reaction of copper-bearing solutions with dolomite.

Thengkham South is similar to Thengkham North but with less dolomite and so less malachite mineralisation. There also appears to have been more lenses of primary skarn-related pyrite-chalcopyrite massive sulphide mineralisation than at Thengkham North.

Phabing is an exotic deposit formed down-slope of the Thengkham North deposit where the oxidised copper-bearing solutions reacted with dolomite forming a malachite-dominant deposit.

Primary copper mineralisation consisting of pyrite and chalcopyrite in porphyry and unweathered siltstone and limestone has been identified beneath supergene mineralisation at Khanong, Thengkham North and Thengkham South. Initial exploration at Thengkham East has identified significant porphyry-style copper mineralisation. The current plant at Sepon cannot treat this material but exploration for further primary copper Mineral Resources is continuing with a view to an extended project with a different treatment process.

Table 2.2 lists the Sepon copper Mineral Resources reported to 30 June 2007.


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Table 2.2 Sepon Copper Mineral Resources Reported to 30 June 2007

Tonnes Au Ag Cu Tonnes Au Ag Cu Tonnes Au Ag Cu(Mt) g/t g/t % (Mt) g/t g/t % (Mt) g/t g/t %

SupergeneKhanong 16.6 0.2 20.5 3.31 4.5 0.22 21.2 4.98 4.4 0.25 10 2.84Thengkham North - - - - 3.5 0.34 21.2 4.2 6.9 0.3 8.1 1.14Thengkham South - - - - - - - - 10.7 0.19 4.4 1.39Phabing - - - - - - - - 2 0.16 2 3.37Stockpiles 2.9 0.2 20.5 2.15 - - - - - - - -Total Supergene 19.4 0.2 20.5 3.13 7.9 0.27 21.2 4.64 24 0.23 7.8 1.75

PrimaryKhanong 2 0.19 6.7 1.73 1.2 0.24 6.9 1.67 7.2 0.06 5.6 1.18Thengkham North - - - - - - - - 1.2 0.23 8.7 1.06Thengkham South - - - - - - - - 4.5 0.16 4.4 0.81Total Primary 2 0.19 6.7 1.73 1.2 0.24 6.9 1.67 12.9 0.11 6.1 1.04

* reported at 0.5% Cu cutoff and rounding as per Oxiana statement

Measured Resource* Indicated Resource* Inferred Resource*

The Mineral Resource estimate for Khanong was carried out in 2002 for the project feasibility study and has subsequently been updated several times, most recently in 2007. Thengkham South was estimated in 2004 and Thengkham North in 2006 and were updated in 2007 using additional drillhole and assay data available as at 30 June 2007. Mineral Resource estimates are depleted for mining. Phabing Mineral Resource was first estimated in 2007. There is a large degree of uniformity in the approach used for estimation of copper Mineral Resources, although each estimate has individual characteristics reflecting differences in geology. The information below is an outline of the common Mineral Resource estimation practice.

The Mineral Resource estimates are based on the interpretation of domains that reflect copper grade, oxidation state and geological-metallurgical characteristics (metcodes). Grades and other model characteristics are estimated separately within each domain. The metcode domains are:

• Saprolitic Rock

• Limonite Clay

• Colluvium

• Manganiferous Clay

• Copper Carbonate Domains

• Chalcocite Domains

• Copper Oxide

• Fresh Rock below Supergene Mineralisation

• Strataform Skarnoid Chalcopyrite Mineralisation.

The delineation between primary and oxidised mineralisation is defined by the base of supergene mineralisation which has been interpreted from drillhole logging of oxidation, metcode and sulphur assays. The base of supergene surface represents the lowest occurrence of supergene mineralisation.

Generally copper mineralisation is interpreted on 25m spaced sections at a nominal cut-off of 0.2% copper but taking into account continuity and continuous geometry. Interpretation also follows geological controls, especially in relation to the boundary of the rhyodacite porphyry, the assumed sub-horizontal orientation of the water table and the interpreted location of faults.

Early generations of drilling in the Sepon mineral district used mainly reverse circulation ("RC") drilling method. As mining has progressed, however, it has become apparent that RC drillholes in wet ground has resulted in smearing of grade in a number of drillholes. All the Mineral Resource definition drilling carried out in recent years has been diamond drilling. Historic RC drillhole data is still used for Mineral Resource estimation but each hole is evaluated to determine whether the mineralised interval appears to be smeared, based on comparisons with adjacent diamond drillholes. Drilling for Mineral Resource definition is now limited to diamond drilling in mineralised zones. RC drilling is still used for grade control.


AMC207098: 6 May 2008 11

Diamond drilling is predominantly triple-tube HQ3 core size with reverse circulation drilling used for pre-collars of deeper holes. Drilling guidelines are described in procedural documents. Most drillholes are downhole-surveyed using Eastman single-shot cameras and, more recently, some downhole surveys have been carried out using Reflex electronic magnetic surveys. Drillhole collars are sited with hand-held global positioning system ("GPS") and subsequently surveyed and historically they have been surveyed into one of three grids. Diamond drillholes are oriented using an electronic Ace reflex core orientation tool, although prior to 2007 core orientation used a wire line spear.

Drillcore is logged for lithology, alteration, oxidation, mineralisation, veining, structure and geotechnical parameters. Logging procedures are carried out in accordance with a site geologist's manual. Earlier generations of drilling were logged using older logging codes that have been updated.

RC drillholes samples are weighed and the recovery is calculated. Recovery of drillcore is also recorded. Sample recovery is used as part of the Mineral Resource classification process. Drilling at Sepon can intercept cavities from the dissolution of carbonate rocks by acidic ground water during supergene processes. Large cavities are recorded by drillers, but with RC drilling smaller cavities may not be detected.

Sample moisture is recorded in a qualitative fashion for all RC sample intervals. For some historical RC samples, the moisture content is not known. Wet and moist samples have a potential to bias copper grades upwards, especially in supergene copper and copper carbonate mineralisation where the copper is hosted by dense competent minerals in an unconsolidated clay matrix. Current procedures have RC drilling stopped at the first wet sample and drillholes completed by diamond drilling. There have been some twinned holes.

Diamond drillcore samples are normally collected over 1m intervals, but sample intervals are broken at mineralisation and rock type contacts. RC drillholes used for exploration, Mineral Resource definition and grade control are samples at 1m downhole intervals. All drillcore and RC cuttings are logged on site.

Bulk density determinations are carried out on drill core using the wax immersion method. This method may bias determinations towards more competent drillcore.

Topographic surveys have been carried out along roads, tracks, gullies and ridges to establish an accurate topographic surface not influenced by the height of vegetation.

Drillhole data used for Mineral Resource estimation is derived from numerous drilling campaigns and three laboratories have been used for assaying. Different assay quality control protocols applied at different times and assay quality control data on earlier campaigns is incomplete. More recent drilling has been subject to a common industry protocol, which indicates acceptable assay precision and accuracy.

Current assay protocols have samples initially assayed using multi-element mixed acid digest inductively coupled plasma ("ICP") analysis with samples returning grades above 0.5% copper being re-analysed using ICP with aqua-regia digestion. Gold is assayed using fire assay with atomic absorption spectroscopy ("AAS") finish on 30g charges. Mineral Resource definition drilling has sample preparation carried out by a commercial laboratory in Vientiane and assays carried out by a related laboratory in Australia. Grade control samples assayed at the Sepon site laboratory are assayed using mixed acid digest and AAS determination.

Grade estimation is carried out using ordinary kriging on two-metre composites, using parameters determined from a variographic study. Parent cell size for the model is 25m x 25m x 5m with the cell splitting allowed to 5m x 2.5m x 1m. Orientation domains are used to reflect changes in strike and dip of mineralised domains. Grades are estimated for sulphur, molybdenum, iron, manganese, silver, arsenic, calcium, aluminium, magnesium, gold and copper. Topcuts were applied to copper, sulphur and gold grades at levels indicating a top cut at between 96% and 99% of the data.

For metallurgical purposes a value reflecting pyrite content is estimated based on a theoretical weight percent of pyrite calculated from assays and based on assumed mineralogy. Separate formulae were used to calculate pyrite content in supergene and fresh rock domains.

The grade estimation is controlled by a combination of lithology, oxidation state and metcode domain with grades estimated only using data that fall within those domains. Bulk densities applied to the model are based average values of core determinations. A value for acid producing or non-acid forming capacity is based on combinations of rock type and sulphur content.


AMC207098: 6 May 2008 12

A value for sample moisture, sample type and calculated recovery is also estimated in the model and this is used as part of the Mineral Resource classification process.

Copper Mineral Resources are reported at 0.5% copper cut-off. Mineral Resource classification of copper Mineral Resources is based on confidence in the estimation of copper grade only. No Mineral Resources are reported from the saprolite, limonite, colluvium, or fresh rock domains. Any parts of the estimate where copper is greater than 0.5% copper in the pyrite or manganese domain are classified as Inferred Mineral Resource.

Mineral Resource classification was influenced by: • an assessment of confidence in geological interpretation • distance to the nearest composite used for grade estimation • kriging slope of regression • sample moisture • the proportion of sample recovery • sample type.

Mineral Resource estimates are classified as Measured, Indicated and Inferred Mineral Resources. Indicated Mineral Resources are generally tested by 25m to 50m drillhole spacing, taking into account other factors listed above. Measured Mineral Resources are only reported where closer-spaced grade control drilling has been completed (Khanong deposit).

The Thengkham North and South oxide and partial oxide gold Mineral Resources are reported from the same models as copper Mineral Resources classified as Inferred Mineral Resource.

Reconciliation of Mineral Resource models to the grade control model at Khanong can indicate discrepancies especially for carbonate mineralisation. This is largely attributed to differences in data density between the Mineral Resource estimate and grade control affecting geological interpretation and grade estimation. Problems with wet RC samples were also identified and rectified in current Mineral Resource estimation practice.

In AMC’s opinion, the copper Mineral Resource estimates have been developed using acceptable industry practices and classification into Measured, Indicated and Inferred Mineral Resource categories is in accordance with the JORC Code.

2.1.2.2 Gold Mineral Resources

The June 2001 Mineral Resource statement identifies gold Mineral Resource estimates for 14 locations in the Sepon district. Khanong, Thengkham North and Thengkham South gold Mineral Resources are integral with the equivalent copper supergene Mineral Resources. Other gold Mineral Resource estimates are stand-alone occurrences of oxide and primary gold mineralisation.

Table 2.3 lists the Sepon gold Mineral Resources reported to 30 June 2007. Oxide, partial oxide and primary gold Mineral Resources are reported at a 0.5 g/t gold cut-off. Metallurgical testwork indicates that recovery of gold from primary mineralisation is less than that for oxide and partial oxide mineralisation. Reporting the primary gold Mineral Resource at a higher cut-off to reflect poorer recovery would be appropriate.


AMC207098: 6 May 2008 13

Table 2.3 Sepon Gold Mineral Resources Reported to 30 June 2007

Tonnes Au Ag Tonnes Au Ag Tonnes Au Ag(Mt) g/t g/t (Mt) g/t g/t (Mt) g/t g/t

Oxide and Partial OxideSepon Gold Deposits1 3.6 1.58 7 7.7 1.91 6.8 6 1.4 4.8Khanong2 2.7 1.01 3.2 0.7 0.72 3.5 0.4 0.67 1.4Thengkham North2 - - - - - - 0.7 0.8 7Thengkham South2 - - - - - - 0.7 0.74 4.1Stockpiles 2.7 1.16 5.4 - - - - - -Total Oxide and Partial Oxide 9 1.28 5.4 8.4 1.81 6.5 7.7 1.25 4.8

PrimarySepon Gold Deposits 1 5.7 2.7 6.8 16.9 2.24 7.8 12.5 1.27 6.1

1 eleven separate estimates2 associated with copper resources

Measured Resource* Indicated Resource Inferred Resource

* rounding as per Oxiana statement

The gold Mineral Resource estimates have been developed over a number of years and have been developed using a number of different estimation processes. Some of the estimates have been updated during 2007 due to the availability of additional drillhole data.

Revised gold Mineral Resource estimates have taken into account the realisation that some early generation RC drilling in wet ground provided unreliable results with regard to the downhole thickness of gold intersections.

These intersections has been evaluated as to whether they indicate genuine mineralised thicknesses and dealt with accordingly. In some cases this has led to a decrease in the estimated resource.

Broadly speaking, Mineral Resource estimates drilled at 50m x 50m centres are classified as Inferred Mineral Resource and estimates drilled to about 25m x 25m are classified as at least Indicated Mineral Resource. Prior to mining, grade control drilling infills this pattern in a stepped programme that can result in the closest spaced RC drilling before mining to be 10m x 5m. The close-spaced data is used to develop a grade control model.

All recent drilling carried out in mineralisation is HQ triple-tube diamond drilling although RC drilling is used to the top of the water table for drillhole pre-collars.

Assay data available for Mineral Resource estimation consists of fire assay for gold using a 30g charge. Samples with a fire assay grade greater than 0.4 g/t gold are analysed by rapid cyanide leach to identify the cyanide recoverable gold.

Resource estimation domains are based on a grade threshold of about 0.25 g/t gold taking into account the lithological contacts.

Volume models are developed using blocks of 25m x 6m x 2.5m and grade estimated using 2m composite data. Grade estimation parameters are based on variographic and statistical studies which indicate moderate nugget effect and short to moderate ranges of continuity. Grades were estimated into blocks using ordinary kriging and using single pass estimation. An estimate of recoverable gold is made by comparing the cyanide leach assay to fire assay for each observation state. Base of oxide and partial oxidation is based on logging assay and mapping data where available. This boundary can be difficult to delineate locally.

Organic carbon has been identified in drillhole logging and interpretation of zones of organic carbon within the partial oxide and primary zones can be difficult to estimate.

Reported Mineral Resource estimates are based on Mineral Resource drilling data only although Ore Reserve estimates are based on combined Mineral Resource estimate and grade control models. The Mineral Resource and Ore Reserve models agree within 5% on contained gold ounces.


AMC207098: 6 May 2008 14

Mineral Resource classification is based on data density, modelled spatial continuity, estimation statistics and data quality. Parts of Mineral Resource estimates that have been estimated using 10m x 5m grade control drilling are classified as Measured Mineral Resource.

In AMC’s opinion, the gold Mineral Resource estimates have been developed using acceptable industry practices and classification into Measured, Indicated and Inferred Mineral Resource categories is in accordance with the JORC Code.

Of the 3.4 Moz of contained gold in gold Mineral Resource estimates, 2.2 Moz are primary Mineral Resources (reported at a 0.5 g/t gold cut-off). The current treatment plant at Sepon returns poor recovery for this material. Part of the exploration effort in the Sepon region is to increase the primary gold Mineral Resource which may improve the economics of a primary gold mining and treatment operation.

2.1.2.3 Exploration

Copper exploration to 2006 concentrated on delineation of Mineral Resources at Thengkham North and Thengkham South resulting in the estimation of Mineral Resources. Mineral Resource definition drilling to upgrade the Mineral Resource status is continuing on both of these prospects. Exploration over 2007 focussed on increasing supergene and carbonate copper Mineral Resources and the targeting of gold mineralisation with a view to increasing the oxide gold Mineral Resources and also to define significant primary gold Mineral Resources. In 2007, the Mineral Resource at Phabing was delineated and an Inferred Mineral Resource estimated.

Copper exploration aimed at identifying additional feed for the existing plant and targeted all known copper soil anomalies. Exploration focussed on the margins of intrusive centres, particularly in the Thengkham area.

Exploration drilling has been carried out on five other prospects including Nampa and Thengkham East where primary copper and copper oxide mineralisation has been identified in drillholes which will be further tested during 2008.

Copper exploration in the eastern part of the Sepon mineral district has identified primary copper targets surrounding the Padan and Padan porphyry systems. This exploration work is at a preliminary stage involving geological and geochemical drillhole targeting.

Gold exploration in 2007 was targeted at numerous gold-in-soil anomalies, initially aimed at providing oxide source material for the existing plant, but also to delineate primary gold Mineral Resources as part of initial studies. Two new Mineral Resource oxide gold estimates were carried out for Dankoy and Houay Yeng deposits.

The focus of exploration was on the carbonate stratigraphy in the western sector of the Sepon area where deeper oxidation levels are apparent. The Houay Yeng deposit presents a potentially new style of mineralisation in Karst fill.

The exploration budget for 2008 totals US$8.5M with notionally US$4M each being spent on copper and gold exploration and a small commitment to other mineralisation styles. The exploration programme is targeted at grass roots exploration as further Mineral Resource definition drilling will be budgeted separately.

The gold exploration programme will shift to a predominantly primary gold focus as part of the programme to justify implementation of a primary gold milling circuit. Copper exploration will be focused on delineating new supergene Mineral Resource and assessing targets for primary copper mineralisation.

The understanding of the district geology has recently been enhanced by the completion of a Sepon district three-dimensional model to allow targeting and prioritisation of exploration effort.

Some exploration activity will be carried out on zinc-lead, soil anomalies and the potential for molybdenum mineralisation, especially around the Thengkham and Padan porphyries.

Since the establishment of the copper and gold Mineral Resources at Sepon, most exploration has been focussed on the Sepon mineral district. Exploration during 2008 and will also take into account regional


AMC207098: 6 May 2008 15

assessment of the tenement area outside the Sepon mineral district, targeting potential for copper, gold, zinc, lead and molybdenum.

2.1.3 Mining Operations

2.1.3.1 Overview

The current gold and copper ore production rates are approximately 2.2 Mtpa and 1.3 Mtpa respectively. Total open pit primary material movement for the gold and copper operations combined is currently around 10 Mtpa with a strip ratio of 1.9t of waste to 1.0t of ore. The vast majority of material mined is weathered, but blasting is common in the interests of overall mining efficiency.

Budgets and longer term plans are typically for a 30% to 40% increase in total material movement rates associated mainly with expansion of copper production to around 80 ktpa of cathode. However, according to preliminary mine plans, total material movement, including the gold operation, is to peak at around 20 Mtpa in 2009.

AMC expects, however, that this peak rate will be achievable based on Oxiana's reports that Sepon has achieved material movement rates of this order during 2005 (16 Mt) and 2006 (19 Mt), including 11 Mt for the first half of 2006.

It should be noted, however, that mine planning and scheduling for the copper pits in the Thengkham area is preliminary. The sequence of mining the pits may also be changed with, for example, Phabing being mined before Thengkham North, with Thengkham North waste possibly being backfilled into an exhausted Phabing pit. Therefore, the material movement requirements per year may change from those adopted for the AMC modelling scenarios.

The current primary mining fleet comprises 35t to 40t articulated haul trucks and backhoes ranging in size up to 80t class. The fleet has been found to be well suited to the moderate material movement requirements, mined concurrently from multiple locations. This activity is in an environment characterised by periods of high rainfall, some steep topography and much of the material mined being of high clay content. Mining is undertaken by a contractor under a three year contract that commenced in November 2006 with an option for an extension for an unspecified term.

The Khanong copper and the gold pits grade control is typically based on 1m sample intervals of 20m vertical RC grade control holes drilled on a 5m x 5m pattern. Ore and waste are dug on a flitch height of 2.5m.

The Khanong and Thengkham copper final pits will have significant slopes (in excess of 200m vertically) in weak materials. Khanong pit slope design and ongoing assessment receives appropriately close attention from LXML, assisted by reputable specialist consultants. Thengkham North will require similar attention, however, geotechnical investigations are at an early stage. Accordingly, slope design constraints that are considered by Oxiana to be conservative, have been applied to pit optimisations and preliminary pit designs for Thengkham, based on LXML's experience in similar materials at Khanong. AMC considers these slope design constraints to be appropriate at this preliminary stage.

Although operations have not, to date, been significantly disrupted due to high rainfall events, the biggest technical risk to mining and overall operations at Sepon has been assessed to be a one in 50 to 100 year monsoon rainfall event. Such an event would have the potential to inundate the pits and water management systems, however, the processing plants are considered to be above the 100 year rainfall event water line.

2.1.3.2 Ore Reserve Estimates

The Ore Reserve estimates for Sepon, as reported by Oxiana, are summarised in Table 2.4. The Ore Reserve estimates do not contain any primary copper or primary gold. AMC considers that Ore Reserves have been estimated using good industry practice.


AMC207098: 6 May 2008 16

Table 2.4 Sepon Ore Reserve Estimates as at 30 June 2007 Category Tonnes

(Mt) Grade Contained Metal

Copper Proved - In Pit 10.26 4.48 % Cu 460 kt Cu Proved - Stockpiles 2.34 2.47 % Cu 58 kt Cu Probable - In Pit 4.54 5.89 % Cu 268 kt Cu Total 17.15 4.58 % Cu 786 kt Cu Gold Proved - In Pit 1.00 1.25 g/t Au 40 koz Au Proved - Stockpiles 0.87 1.46 g/t Au 41 koz Au Probable - In Pit 2.04 1.76 g/t Au 116 koz Au Total 3.91 1.50 g/t Au 197 koz Au

Copper Ore Reserves

The copper Ore Reserve estimates as at 30 June 2007 are based on closing stockpiles and open pit mining of the Khanong pit and the Thengkham North deposits. Further definitional drilling and evaluation studies are being undertaken to assess the Thengkham South and Phabing deposits with a view to converting parts of their current Mineral Resources into Ore Reserves in 2008.

The Khanong Ore Reserves comprise some 80% of the total copper Ore Reserve estimate. Mining in the Thengkham is yet to commence. Further evaluation of Thengkham North and Phabing may result in scheduling of the mining of Phabing before Thengkham North. AMC does not expect, however, that the sequence will have a significant effect on the value of the Sepon operation.

A copper price of US$2.00/lb is used for the Ore Reserve estimates, per Oxiana's forecast. The Khanong Ore Reserve cut-off is 1.1% copper and the Thengkham North cut-off is 1.2% copper, reflecting the longer haul of some 7km to the process plant.

For the Ore Reserve estimates, mining dilution of 10% is allowed for Khanong and 15% is allowed for Thengkham North, both at zero grade, with mining recoveries of 95%.

The copper pit optimisations are run using Mineral Resource models that include Inferred as well as Measured and Indicated Mineral Resources. The Khanong pit design contains 340 kt of Inferred Mineral Resource, while the Thengkham North pit design contains 520 kt of Inferred Mineral Resource, both representing upside to the Ore Reserves.

Pit optimisations and preliminary pit designs have also been prepared for Phabing and Thengkham South copper pits. The modelling scenarios provided by AMC to Grant Samuel include ore mining inventories totalling 2.9 Mt for Phabing and Thengkham South based on those preliminary designs.

Gold Ore Reserves

The gold Ore Reserve estimates as at 30 June 2007 are based on closing stockpiles and open pit mining of oxide Mineral Resources at:

• Discovery East pits

• Discovery West pits

• Namkok East pit

• Luang Muang pil

• Vang Ngang East pit

• Nalou pit

• Phavat North pit

• Knanong gold cap within the copper pit.


AMC207098: 6 May 2008 17

The gold Ore Reserve estimates for the various pits are based on gold prices of either US$600, US$700 or US$745 per ounce, depending on when estimates were prepared during the 2006-2007 period.

The cut-off grades used in the Ore Reserve estimates vary between 0.70 g/t gold and 0.85 g/t gold depending on the gold price and metallurgical recovery estimates used and the haulage distance to the processing plant.

Current ore cut-off grade determinations are, however, based on a gold price of US$900/oz in reflection of recent spot prices.

Mining dilution of 5% at zero grade and mining recoveries of 97.5% have been applied within the Ore Reserve estimates, commensurate with reconciliations against actual mill production and general industry practice.

2.1.4 Processing and Concentrate Handling

2.1.4.1 Process Description

The copper processing plant at Sepon produces copper cathodes in an integrated hydro-metallurgical processing facility. The process consists of atmospheric acid leaching, followed by conventional solvent extraction and electrowinning. The facility is novel in that it produces all of the ferric sulphate and most of the sulphuric acid to satisfy the internal needs of the leaching circuit. This is achieved by recovery of sulphides from the leached residue by acid flotation and subsequent oxidation leaching of the sulphide concentrate in a pressure oxidation autoclave.

The plant was designed and constructed as a joint venture between engineers Ausenco Ltd and Bateman Engineering. Construction commenced in 2003 and the plant was successfully commissioned by March 2005. The nameplate capacity for the plant is 60 ktpa of copper cathodes.

The processing circuit is presented in a block flow diagram in Figure 2.4.

Run of Mine ("ROM") ore is crushed in a toothed roll crusher and conveyed to a primary ball mill where it is ground in sulphuric acid process solution. Acidic ferric sulphate solution is added to the slurry and leaching occurs in a series of agitated tanks at atmospheric pressure and a target temperature of around 80oC. Approximately 80% to 90% of the copper is leached from the ore in this leaching step.

The leached slurry is pumped to a leach thickener and the product copper solution is removed and clarified, and then pumped to a solvent extraction plant for copper recovery. The residue slurry from the leach thickener is washed free of copper in a series of counter current wash thickeners. Make-up water and barren solution from the solvent extraction plant is utilised for washing.

In the solvent extraction plant the copper containing product solution is contacted with an organic solvent and copper is extracted from solution to the solvent. The loaded organic solvent is then stripped of copper by contact with highly acidic spent electrolyte returning from the electrowinning plant. The loaded electrolyte produced from stripping is pumped back to the electrowinning area. The electrowinning plant is a state of the art facility with automatic stripping equipment for the removal of the copper cathodes from the stainless steel cathode blanks.


AMC207098: 6 May 2008 18

Figure 2.4 Copper Processing Block Flow Diagram

ROM OreOre Blending and

Crushing Oxygen Plant

Crushed Ore Oxygen

Acid Ore Grinding Ground Slurry Atmospheric Leaching

Acidic Ferric Solution Pyrite Autoclave

Leaching

Process Acid

SolutionLeached

Slurry Pyrite Concentrate

Solvent Extraction

Copper Solution Counter Current

Washing

Residue Slurry

Pyrite Flotation

Loaded Organic Barren Solution

Water

Flotation Tails

Copper Elecrowinning Gold Plant Tails Tailings

Neutralisation

Copper Cathodes

Final Tailings to Dam

Final Tailings to Western

TSF

Residue slurry from the counter current washing circuit is subjected to rougher and scavenger flotation to recover pyrite and other unleached copper sulphides. The pyrite flotation concentrate is cleaned and pumped to the pressure oxidation autoclave section. The tailings from the flotation is neutralised with limestone, lime and gold plant tailings before disposal in the tailings residue facility.

The oxidation autoclave operates at a temperature of approximately 220oC and a total pressure of 3400 kPa. Oxygen required for the process is produced in a dedicated oxygen plant located at the site. The oxidised slurry is subjected to heat recovery step and then pumped to the concentrate atmospheric leach circuit, where the remaining copper is leached and ferric sulphate is solubilised for use in the main atmospheric ore leaching circuit.

2.1.4.2 Plant Performance

Copper production ramped up to the design nameplate capacity of 60,000 tpa of copper cathode in the first year of operation. The plant design was based on milling a nominal 1.4 Mtpa of copper ore at a grade of 5.1% copper.

Reported plant performance over a three year period is summarised in Table 2.5:

Table 2.5 Copper Processing Performance

Year Ore Processed

(t)

Ore Grade (% Cu)

Stripped Copper Cathode

(t)

Plated Copper Recovery

(%) 2005 643,771 5.80 30,480 85.9 2006 1,230,619 5.56 60,803 89.5 2007 1,225,020 5.65 62,541 91.2


AMC207098: 6 May 2008 19

Copper recovery and production have shown continuous improvement for operations to date. A number of improvement projects which are currently under implementation should facilitate a further increase in plant capacity to as high as 65 ktpa of copper with the existing installed plant. AMC considers that planned process circuit improvements for the copper plant will result in further small increases in recovery to approximately 92% for current Khanong ore.

2.1.4.3 Future Ore Treatment and Plant Capacity

A significant plant expansion for the copper processing facility has recently been approved. Engineering work has commenced to increase the capacity of the facility to 78 ktpa copper cathode. The design ore capacity for the upgraded plant is approximately 2 Mtpa.

The expansion includes the following plant changes:

• Increased capacity of the ROM crusher.

• Increased atmospheric ore leaching capacity.

• Additional oxygen production facilities.

• Additional heat exchangers and cooling tower.

• Installation of a new eight thickener counter current washing train and clarifier.

• Installation of additional pyrite flotation capacity and a concentrate thickener.

• Installation of a second pressure oxidation autoclave.

• Installation of 24 new electrowinning cells with a dedicated rectiformer.

Long lead items have been ordered and the expanded facilities are expected to be installed and operational in 2010.

Ore for the upgraded plant will come from the existing Khanong mine as well as new copper ore deposits to be developed at Thengkham North, Thengkham South and Phabing. Metallurgical testwork on these new deposits has, to date, been restricted to a preliminary programme of work on Thengkham North samples only. AMC understands that for the purposes of the expansion the metallurgical properties of untested ore types have been assumed based on mineralogical similarities to that of equivalent ore types from Khanong. It should be noted, however, that further testwork and ore characterisation studies will be required to confirm reagent and recovery predictions proposed with the expansion.

2.1.4.4 Gold Processing

Process Description

The Sepon gold process plant utilises conventional carbon in leach ("CIL") technology for recovery of gold.

The initial processing facilities were installed by Ausenco Ltd in 2002. A major plant expansion consisting of an additional crushing and grinding circuit, and expanded leaching facilities, was commenced in 2003 by a joint venture of Ausenco Ltd and Bateman Engineering. The upgraded plant was successfully commissioned earl in 2005. The nameplate capacity for the upgraded plant is for the treatment of 2.5 Mtpa of open pit ore.

The upgraded processing circuit is presented in block flow form in Figure 2.5.

ROM ore is fed to two parallel crushing and grinding circuits. The smaller of the two circuits consists of primary crushing and a single stage SAG mill, while the larger circuit consists of primary crushing followed by a SAG mill and ball mill in series.

Ground slurry from the milling circuits is combined and fed to the carbon in leach tanks where the slurry is agitated in cyanide solution in the presence of granulated carbon. Gold is leached from the ore and adsorbed to the carbon. The gold is recovered from the carbon by elution, electrowinning and smelting techniques. The barren leached slurry is subjected to cyanide detoxification prior to being added to the copper plant tailings for neutralisation and disposal.


AMC207098: 6 May 2008 20

Figure 2.5 Gold Processing Block Flow Diagram

ROM Ore ROM Ore

Crushing & Stockpile

Circuit 1

Crushing & Stockpile

Circuit 2

Process Water SAG Mill Circuit 1

SAG Mill Circuit 2 Ground Ore Ball Mill

Circuit 2

Ground Ore Ground Ore

Cyanide Loaded Carbon

Gold Recovery

Dore gold-silver bars

Copper Plant Tails

Cyanide Destruction Tails Slurry Final

Neutralisation

To TSF

Crushed Ore

Barren Slurry

Carbon in Leach (CIL) Circuit

To Western TSF

2.1.4.5 Plant Performance

Reported plant performance over a three year period is summarised in Table 2.6.

Table 2.6 Gold Processing Performance

Year Ore Processed(t)

Ore Grade (% Cu)

Gold (oz)

Gold (%)

2005 2,659,948 2.77 200,270 84.5 2006 2,909,247 2.25 173,524 83.7 2007 2,160,551 1.79 101,325 81.5

Ore throughput for years 2005 and 2006 was well in excess of the name-plate capacity but has dropped in 2007 due to ore reduced availability from the mine as mining pits are exhausted.

Plant recovery has decreased over the three year period due to decreasing ore grade and increasing amounts of transitional and carbonaceous ore in plant feed. Metallurgical testwork on future gold ore types indicate that recovery will continue to be variable and dependent on the amount of transitional ore included in feed.

2.1.4.6 Primary Gold Project Metallurgical Development

Metallurgical testwork and preliminary engineering studies have been undertaken to establish the feasibility of installing a processing facility for treating ore from the Sepon primary gold resource. The carbonaceous primary ores have been found to be refractory and pre-robbing. Mineralogical analyses indicate that both sulphides and organic carbon are finely disseminated throughout the ore and they are not fully liberated even at fine grind size (down to 9 micron).

Metallurgical testwork undertaken has involved flotation of ore to recover a gold-rich concentrate followed by pressure oxidation of concentrate to break down refractory sulphides and carbonaceous material. Whole of ore pressure oxidation, roasting of concentrate and whole of ore roasting were also tested.


AMC207098: 6 May 2008 21

An engineering study was undertaken for simultaneous treatment of both oxide and primary ores. The design for the primary plant involved treatment by flotation and pressure oxidation for 1.73 Mtpa of primary ore at 3.6 g/t contained gold to produce 150,000 troy oz of gold per annum. The draft engineering study indicated a preliminary capital cost estimate for the primary gold treatment facilities of approximately US$180M. Economic studies have suggested that a larger gold Mineral Resource than currently exists is required to make the project viable.

2.1.5 Environment

Statutory environmental approval for the Sepon operation is based on an Environmental and Social Impact Assessment ("ESIA") submitted to the Government of Lao PDR in 2001. An addendum was submitted in 2002 to include the impacts associated with the copper project. In 2006 a new ESIA was submitted to accommodate project expansion beyond the originally-approved project. LXML prepared eleven Environmental Management Plans ("EMPs") in 2002, prior to the start of operations. In 2004 these EMPs were integrated into a single EMP, and LXML committed to updating the EMP every two years - the first revision was in 2006, and included information derived from the first year of copper operations. The EMP is now being successfully incorporated into Oxiana's integrated management system ("OXims").

Typical of mining operations in tropical areas, the Sepon project faces challenges associated with water quality, both physical and chemical, and especially downstream of the project area. These challenges are being met, albeit with predictable but generally minor non-compliances with Lao, World Bank or self-imposed guidelines and thresholds. Detailed bio-monitoring at downstream sites is and will continue to be crucial to demonstrating the environmental integrity of the operation.

Closure planning is in progress, but not fully developed; detailed costs, which would allow progressive provisioning for closure, have yet to be estimated. Importantly, community consultation and involvement is a key element of the environmental programme at Sepon.

A detailed environmental and social audit in 2007, while finding many procedural and technical deficiencies in environmental programmes and systems, did not reveal major or “fatal flaw” issues. The audit identifies areas for improvement in environmental programmes and their implementation, but none are considered by AMC to constitute risks of catastrophic or even severe environmental impacts, based on information made available for review.

There appears to be no major environmental challenge or risk which would involve large unforeseen expenditure or constraint on operations.

2.1.6 Operating and Capital Costs

Recent actual operating costs and the plan for the next three years as provided by Oxiana for Sepon copper and gold operations are presented in Tables 2.7 and 2.8.

The gold operation tonnes mined and milled reflects the limited mining inventory currently identified.

The increase in waste mining for the copper operation from 2009 is based on 7 Mtpa to 8 Mtpa of waste being mined from Thengkham North for those years, in addition to ongoing waste mining for the Khanong pit.

The substantial capital expenditure for the copper operation for 2008/2009 is for expansion of copper cathode production capacity from 63 ktpa to around 80 ktpa, plus POX II and further work on the WTSF.


AMC207098: 6 May 2008 22

Table 2.7 Sepon Copper

Item Units 2006 2007 2008 2009 2010Production ParametersOre & Waste Mined Mt 8,568,000 6,931,962 8,600,000 15,461,383 12,955,700Ore Mined Mt 2,320,000 1,941,962 2,171,056 2,009,357 1,783,655Ore Milled Mt 1,230,619 1,225,020 1,332,884 1,365,121 1,929,841Au Recovered koz - - - - -Cu Recovered koz 60.8 62.5 64.0 65.1 74.3Unit Cash Operating CostsMining US$/t mined 2.24 2.27 1.94 1.47 2.22Processing US$/t processed 29.42 33.31 32.73 32.78 27.44Conc. Transport/Port US$/t processed 5.06 5.40 6.79 6.50 4.52Maintenance US$/t processed 8.22 11.33 11.72 11.77 9.97Administration US$/t processed 12.27 16.77 20.22 21.30 14.38Total Site Unit Costs US$/t processed 70.53 79.66 84.01 88.98 71.23Cash Operating CostsMining US$M 19,155,691 15,737,097 16,710,860 22,686,153 28,794,120Processing US$M 36,200,644 40,811,153 43,629,594 44,754,860 52,949,725Conc. Transport/Port US$M 6,222,691 6,619,161 9,049,296 8,867,050 8,730,371Maintenance US$M 10,117,699 13,878,154 15,627,205 16,070,566 19,243,931Administration US$M 15,102,094 20,541,310 26,956,761 29,083,335 27,748,941Total Site Cost US$M 86,798,819 97,586,875 111,973,716 121,461,964 137,467,088Total Capital Expenditure US$M 153,102,816 118,345,936 26,000,000

Actuals Three Year Plan

Table 2.8 Sepon Gold

Item Units 2006 2007 2008 2009 2010Production ParametersOre & Waste Mined Mt 10,408,000 2,890,676 6,636,044 7,660,000 1,222,169Ore Mined Mt 2,629,000 1,509,676 2,187,000 1,935,000 133,000Ore Milled Mt 2,909,247 2,160,551 2,187,000 1,935,000 1,169,000Au Recovered koz 173.5 102.4 80.7 86.6 47.2Ag Recovered koz 203.5 144.6 88.6 78.4 47.4Unit Cash Operating CostsMining US$/t mined 2.37 3.27 2.37 2.35 5.73Processing US$/t processed 5.86 6.96 8.67 8.48 7.58Conc. Transport/Port US$/t processed 0.14 0.13 0.00 0.00 0.00Maintenance US$/t processed 1.54 2.07 2.12 2.33 3.20Administration US$/t processed 3.18 5.20 5.35 6.58 10.16Total Site Unit Costs US$/t processed 19.21 18.75 23.32 26.69 26.93Cash Operating CostsMining US$M 24,709,383 9,459,653 15,700,000 18,000,000 7,000,000Processing US$M 17,059,546 15,040,769 18,959,424 16,400,000 8,864,774Conc. Transport/Port US$M 405,506 287,566 186 182 104Maintenance US$M 4,480,723 4,480,027 4,640,576 4,500,000 3,735,226Administration US$M 9,243,888 11,243,496 11,690,132 12,739,900 11,880,000Total Site Cost US$M 55,899,047 40,511,511 50,990,318 51,640,082 31,480,104Total Capital Expenditure US$M 6,252,000 1,748,000 990,000


2.1.7 AMC Modelling Scenarios

2.1.7.1 Sepon Copper

AMC has developed two modelling scenarios (Case 1 and Case 2), based principally on a LOMP prepared by Oxiana which targeted copper production of 78 ktpa.

Key aspects of Case 1 are:

• annual ore milled at full capacity of 2 Mtpa, producing 78 ktpa of copper cathode

• total ore milled 22.2 Mt grading 4.16% copper (reserve 17.2 Mt grading 4.58% copper)

• copper recovery post commissioning 92%


AMC207098: 6 May 2008 23


• total copper produced 846 kt

• unit operating costs principally adopted from Oxiana’s 78 kt LOMP with the exception of site administration charges which have been set at US$37.3M for copper only at full production

• capital expenditure estimates adopted from Oxiana’s 78 kt LOMP inclusive of:

- an additional US$20M added to 2012 for tailing facilities expansion

- US$10.7M added to 2008 for expected out-turn for the water polishing plant

- US$4M added to 2009 to cover expected increase in POX II plant costs.


• annual copper production at full capacity 81 ktpa

• annual milling rate increased to 2.1 Mtpa

• total ore milled 26.8 Mt grading 4.17% copper

• mine life extended by two years

• total copper produced 1,029 kt

• no change of administration and “other costs” from Case 1

• total mining, and shipping costs prorated up based on production levels from Case 1

• milling costs based on a fixed and variable cost analysis

• capital expenditure as Case 1, though with the addition of US$1M in 2011 to facilitate increased copper production in the processing plant.

The Sepon Copper Case 1 and Case 2 are summarised in Tables 2.9 and 2.10.

Table 2.9 AMC Modelling Scenario - Sepon Copper Case 1

Units Total / Ave 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Production Parameters

Total Movement Mt 116.3 7.9 12.9 13.1 12.1 14.4 16.6 11.1 9.7 9.4 9.3 - - Ore Mined Mt 19.5 1.9 1.9 2.1 2.1 2.4 2.1 1.9 1.5 1.9 1.9 - - Strip Ratio 4.95 3.2 5.9 5.4 4.9 5.0 7.1 4.8 5.5 3.9 3.9 - - Ore Processed Mt 22.2 1.4 1.7 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 1.1 Cu Recovered kt 846.3 63.0 71.5 78.0 78.0 78.0 78.0 78.0 78.0 78.0 75.5 66.2 24.2

Unit Cash Operating Costs - Mining US$/t mined 2.31 2.44 2.13 2.25 2.31 2.29 2.14 2.37 2.31 2.54 2.53 - - Processing US$/t processed 35.86 43.21 38.45 35.55 35.55 35.55 35.55 35.55 35.55 35.55 35.10 32.68 34.11 Admin, Transport and Other US$/t processed 25.04 24.91 22.88 23.22 27.28 27.28 27.28 27.28 27.28 27.28 27.15 19.01 14.67 Total Site Unit Costs US$/t processed 73.02 82.40 77.48 73.46 76.75 79.31 80.52 75.98 74.01 74.72 74.03 51.69 48.77

- Cash Operating Costs -

Mining US$M 268.4 19.3 27.5 29.4 27.8 33.0 35.4 26.3 22.4 23.8 23.6 - - Processing US$M 794.6 58.3 65.4 71.1 71.1 71.1 71.1 71.1 71.1 71.1 70.2 65.4 37.7 Admin, Transport and Other US$M 554.9 33.6 38.9 46.4 54.6 54.6 54.6 54.6 54.6 54.6 54.3 38.0 16.2 Total Cash Costs US$M 1,617.8 111.2 131.7 146.9 153.5 158.6 161.0 152.0 148.0 149.4 148.1 103.4 53.9

Capital Costs - Expansion US$M 198.2 81.8 113.6 - 0.7 1.1 0.1 0.5 0.2 - 0.4 - - Sustaining US$M 113.6 23.8 11.8 6.7 6.6 26.9 7.0 6.6 6.4 6.4 6.4 - - Rehab / Closure US$M 24.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 20.7 Total Capital Costs US$M 336.0 106.0 125.6 7.0 7.6 28.3 7.4 7.3 6.8 6.8 7.1 0.3 20.7

Item


AMC207098: 6 May 2008 24

Table 2.10 AMC Modelling Scenario - Sepon Copper Case 2 Units Total / Ave 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Production ParametersTotal Movement Mt 140.5 7.9 12.9 13.1 12.4 14.9 17.2 10.8 10.8 11.5 10.4 9.4 9.3 - - Ore Mined Mt 24.2 1.9 1.9 2.1 2.1 2.5 2.1 2.1 2.1 2.0 1.6 2.0 2.0 - - Strip Ratio 4.80 3.2 5.9 5.4 4.9 5.1 7.1 4.2 4.2 4.8 5.6 - - - - Ore Processed Mt 26.8 1.4 1.7 2.0 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.0 1.1 Cu Recovered kt 1,028.9 63.0 71.5 78.0 80.0 81.0 81.0 81.0 81.0 81.0 81.0 81.0 79.0 66.2 24.2

Unit Cash Operating CostsMining US$/t mined 2.38 2.44 2.13 2.25 2.31 2.28 2.14 2.75 2.75 2.37 2.26 2.64 2.66 - - Processing US$/t processed 35.55 43.21 38.45 35.55 35.29 35.17 35.17 35.17 35.17 35.17 35.17 35.17 34.65 32.68 34.11 Admin, Transport and Other US$/t processed 24.50 24.91 22.88 20.34 25.00 26.42 26.42 26.42 26.42 26.42 26.42 26.42 26.13 19.01 14.67 Total Site Unit Costs US$/t processed 72.53 82.40 77.48 70.58 74.21 77.98 79.27 75.85 75.85 74.77 72.91 73.50 72.60 51.69 48.77

Cash Operating CostsMining US$M 335.1 19.3 27.5 29.4 28.5 34.1 36.7 29.6 29.6 27.4 23.5 24.8 24.7 - - Processing US$M 954.2 58.3 65.4 71.1 72.4 73.1 73.1 73.1 73.1 73.1 73.1 73.1 72.5 65.4 37.7 Admin, Transport and Other US$M 657.6 33.6 38.9 40.7 51.3 54.9 54.9 54.9 54.9 54.9 54.9 54.9 54.7 38.0 16.2 Total Cash Costs US$M 1,946.8 111.2 131.7 141.2 152.3 162.0 164.7 157.6 157.6 155.3 151.5 152.7 151.9 103.4 53.9

Capital Costs - Expansion US$M 199.8 81.8 113.6 - 1.7 1.1 0.1 0.5 0.2 0.5 0.2 - 0.4 - - Sustaining US$M 126.6 23.8 11.8 6.7 6.6 31.9 7.0 6.6 6.4 6.6 6.4 6.4 6.4 - - Rehab / Closure US$M 24.8 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 20.7 Total Capital Costs US$M 351.1 106.0 125.6 7.0 8.6 33.3 7.4 7.3 6.8 7.3 6.8 6.8 7.1 0.3 20.7

Item

2.1.7.2 Sepon Gold

AMC has developed two modelling Scenarios, based on recent planning information provided by Oxiana.


• annual ore milling capacity, approximately 2 Mtpa producing slightly over 80 koz per year of both gold and silver

• total ore milled 5.3 Mt grading 1.63 g/t gold and 6 g/t silver (reserve 3.9 Mt grading 1.50% g/t gold)

• metallurgical recovery: gold 77%, silver 21%



• unit operating costs and capital expenditure established from Oxiana 2008 budget information.



• ore grades and metallurgical recovery as Case 1



• unit operating costs as per Case 1

• additional US$2M sustaining capital expenditure in 2011 over Case 1.

The Sepon Gold Case 1 and Case 2 are summarised in Tables 2.11 and 2.12.


AMC207098: 6 May 2008 25

Table 2.11 AMC Modelling Scenario - Sepon Gold Case 1 Units Total / Ave 2008 2009 2010

Production ParametersTotal Movement Mt 16.5 6.6 7.7 2.2 Ore Mined Mt 5.3 2.2 1.9 1.2 Strip Ratio - - - -Ore Processed Mt 5.3 2.2 1.9 1.2 Au Recovered koz 214.5 80.7 86.6 47.2 Ag Recovered koz 214.4 88.6 78.4 47.4

Unit Cash Operating CostsMining US$/t mined 2.47 2.37 2.35 3.20 Processing US$/t processed 10.80 10.80 10.80 10.80 Admin, Transport and Other US$/t processed 8.64 8.31 8.49 9.51 Total Site Unit Costs US$/t processed 27.13 26.29 28.59 26.29

Cash Operating CostsMining US$M 40.7 15.7 18.0 7.0 Processing US$M 57.2 23.6 20.9 12.6 Admin, Transport and Other US$M 45.7 18.2 16.4 11.1 Total Cash Costs US$M 143.6 57.5 55.3 30.7

Capital CostsExpansion US$M - - - - Sustaining US$M 8.1 6.1 2.0 - Rehab / Closure US$M - - - - Total Capital Costs US$M 8.1 6.1 2.0 -

Item

Table 2.12 AMC Modelling Scenario - Sepon Gold Case 2 Units Total / Ave 2008 2009 2010 2011

Production ParametersTotal Movement Mt 20.6 6.6 7.7 4.8 1.6 Ore Mined Mt 6.6 2.2 1.9 2.0 0.5 Strip Ratio - - - - -Ore Processed Mt 6.6 2.2 1.9 2.0 0.5 Au Recovered koz 268.5 80.7 86.6 81.0 20.2 Ag Recovered koz 268.3 88.6 78.4 81.0 20.3

Unit Cash Operating CostsMining US$/t mined 2.40 2.37 2.35 2.62 2.12 Processing US$/t processed 10.80 10.80 10.80 10.80 10.80 Admin, Transport and Other US$/t processed 8.75 8.31 8.49 8.44 12.94 Total Site Unit Costs US$/t processed 27.03 26.29 28.59 25.49 30.34

Cash Operating CostsMining US$M 49.5 15.7 18.0 12.5 3.3 Processing US$M 71.5 23.6 20.9 21.6 5.4 Admin, Transport and Other US$M 58.0 18.2 16.4 16.9 6.5 Total Cash Costs US$M 179.0 57.5 55.3 51.0 15.2

Capital CostsExpansion US$M - - - - - Sustaining US$M 10.1 6.1 2.0 2.0 - Rehab / Closure US$M - - - - - Total Capital Costs US$M 10.1 6.1 2.0 2.0 -

Item

The production schedule incorporated into the Case 1 modelling scenario provided by AMC to Grant Samuel also includes a mining inventory (not Ore Reserves) of some 700 kt grading 3.5 g/t gold from Houay Yeng, a recent discovery. The waste from Houay Yeng and Phavat North gold pits is to be used for construction of further stages of the WTSF. It is estimated, however, that an additional 6 Mt of waste will be needed to complete the WTSF to a level that will cater for the LOM plan as currently defined. This additional waste could be sourced from Phabing or one of the Thengkham copper pits.


AMC207098: 6 May 2008 26

2.1.7.3 Exclusions

AMC has not included primary gold or primary copper in LOM modelling scenarios. Additional value has been provided for primary gold and primary copper Mineral Resources in valuations of exploration assets.

AMC considers that any additional value attributable to exploration is incorporated in the Case 2 scenarios.

2.1.8 Key Observations

AMC's key observations for the Sepon copper and gold operation are:

• gold mining and processing operations are currently planned to continue for two to three years at a rate of around 2 Mtpa , producing gold at a rate of around 80 koz per full year

• the Oxiana Board has approved capital expenditure of US$178M for expansion of copper cathode production from the current name-plate capacity of 63 ktpa to around 80 ktpa. Ore feed to the copper will be increased from the current 1.3 Mtpa to approximately 2 Mtpa

• preliminary mining schedules call for a total material rate of around 20 Mtpa for 2009 versus the 2007 actual rate of around 10 Mtpa. AMC expects, however, that this peak rate will be achievable based on Oxiana's reports that Sepon has achieved material movement rates of this order during 2005 (16 Mt) and 2006 (19 Mt), including 11 Mt for the first half of 2006

• the main technical risk for the operation would be a one in 50 to 100 year monsoon rainfall event that would inundate the pit operations and general infrastructure, but not the copper and gold plants which are located above the 50 and 100 year rainfall event water lines

• LXML has a very active exploration programme aimed at increasing primary gold and copper Mineral Resources in addition to extending leachable gold and copper Mineral Resources.

2.2 Golden Grove

2.2.1 Introduction

The Golden Grove base and precious metals operation, owned and operated by Oxiana, is located approximately 450 km north-east of Perth and 280 km east of Geraldton as shown in Figure 2.6.

Volcanic hosted massive sulphide (“VHMS”) mineralisation was discovered at Gossan Hill in 1971 and at Scuddles in 1979.

Figure 2.6 Location of Golden Grove Operations

The plant at Golden Grove was first built in 1990 and was acquired by Oxiana, from Newmont Mining Corporation, in July 2005. Golden Grove consists of the Scuddles and Gossan Hill zinc and copper underground mines and the Scuddles concentrator.


AMC207098: 6 May 2008 27

Scuddles, which commenced producing in 1990 was placed on care and maintenance in 2005, with all production then sourced from Gossan Hill, which started producing in 1998. The Scuddles mine was reopened in 2007.

Copper, zinc, lead, silver and gold are all recovered from the Gossan Hill and Scuddles orebodies, which are approximately 3.5 km apart along strike. The Gossan Hill deposit extends over a strike length of more than 2.2 km and to a depth of approximately 1.5 km and Scuddles has a strike length of approximately 700m and extends to a depth of more than 1.4 km below surface. The mine has produced approximately 1.4 Mtpa in recent years, and plans to expand this to 1.75 Mtpa in 2008.

Since takeover of the Golden Grove operations, Oxiana has maintained approximately six years mine life in Ore Reserves.


The Golden Grove deposits are located in the Murchison Province of the Archaean Yilgarn Block within the Yalgoo Greenstone Belt. Mineralisation occurs at the base of the Warriedar Fold Belt (“WFB”) within a sequence of felsic to intermediate volcaniclastic sediments, lavas and associated autoclastic breccias.

The WFB comprises the southern half of the Yalgoo-Singleton greenstone belt. Within the WFB, five major faults representing structural discontinuities separate unrelated tectonostratigraphic domains. The Golden Grove Domain that hosts the Gossan Hill and Scuddles deposits lies along the north-east flank of the WFB, on the eastern limb of a syncline. The domain is bound to the west by the Mougooderra Fault, to the east by a recrystallised monzogranite and post folding granites to the north and south.

The stratigraphy of the domain dips steeply west and is west facing. The Golden Grove Domain has been metamorphosed to greenschist facies, post sulphide deposition.

The Golden Grove Domain is subdivided into three groups; the Gossan Hill, Thundelarra and Minjar groups. The Gossan Hill group is of primary economic interest and consists of a sequence of felsic volcaniclastic and coherent volcanic rocks that has an average thickness of 3 km. VHMS mineralisation is located in the central part of the group. The Gossan Hill group has a north-south strike extent of 28km. The group is further subdivided into four formations:

• Gossan Valley (lower)

• Golden Grove (GG)

• Scuddles (SC)

• Cattle Well (upper).

All currently exploited mineralisation occurs within two members of the Golden Grove Formation (part of the Gossan Hill Group) and known locally as GG4 and GG6. Recent exploration has identified mineralisation in other units such as GG2 and GG3 (in the footwall) and SC2 and SC3 (in the hangingwall).

Overlying the mineralised sequence at both deposits is a thick sequence of lavas and lava breccias. Post mineralisation intrusives including dacite, dolerite and rhyolite dykes commonly cross-cut the mineralisation.

2.2.2.1 Mineralisation

Mineralisation at Gossan Hill occurs as massive sulphides hosted within a volcanically derived sedimentary package. Figure 2.7 shows a longitudinal section of the mineralisation at Gossan Hill. The mineralisation here generally dips sub-vertically and can be divided into two zones.

The lower zone within the GG4 member contains the primary copper mineralisation, comprising pyrite-magnetite-pyrrhotite-chalcopyrite. The main copper lenses are A Copper and Q (GG4) Copper, but copper is also significant in Amity, Hougoumont GG6, Ethel and C Zinc lenses.

The upper zone within the GG6 member hosts the primary zinc mineralisation as a pyrite-sphalerite assemblage, which is often underlain by a pyrite-pyrrhotite-chalcopyrite stringer zone. The main known Zinc lenses are A, B and C Zinc, and the more recently discovered Amity, Hougoumont (GG6 & HW), Catalpa,


AMC207098: 6 May 2008 28

Ethel, Cambewarra and Xantho. Some of the more recently discovered lenses are notably higher in gold and silver than those discovered earlier.

Both the primary copper and primary zinc Mineral Resources extend to depth from the base of oxidation. Oxide copper mineralisation exists above the primary copper mineralisation and oxide gold (and silver) mineralisation exists above the primary zinc mineralisation.

Figure 2.7 Longitudinal Projection Gossan Hill Orebodies

At Scuddles, the mineralised sequence occurs within GG6, a sequence of fine-grained sandstone to siltstones with poorly sorted breccias. It is composed primarily of massive zinc and copper sulphides with an underlying stringer sulphide zone.

The Scuddles orebody extends almost 1,400m down-dip, 700m along strike and up to 50m in width and dips 70 degrees to 80 degrees to the west. Figure 2.8 shows a longitudinal section of the mineralisation at Scuddles. It is divided into five lenses, Main, Central/Intermediate, Deeps, Zeewijk, Batavia and the recently defined Cervantes. All lenses have similar mineralisation characteristics.


AMC207098: 6 May 2008 29

Figure 2.8 Longitudinal Projection Scuddles Orebodies

Cervantes (to 8650m RL)

Batavia Copper

Batavia Zinc

2.2.2.2 Exploration

In the three years or so since the takeover of the Golden Grove operations by Oxiana, there has been little regional exploration undertaken. Most exploration work has focussed on near mine Mineral Resource extension and delineation drilling, particularly the deeper orebodies at Gossan Hill and Mineral Resource extensions for the reopening of the Scuddles mine.

Oxiana has budgeted $5.5M for near-mine exploration in 2008, excluding delineation and infill drilling under and around existing orebodies. The Xantho decline is expected to be complete by 2009, which will allow for deeper drilling below and exploration between the Hougoumont and Xantho orebodies. In addition, the Scuddles decline is expected to be complete by December 2008 to allow for drillout of the Batavia and the top of the Cervantes orebodies.

An RC drilling programme is planned to commence this year for verification and infill drilling of the open-pit Mineral Resources. There appears to be little potential for along-strike extensions of the current oxide resource, but a possible down-dip extension resulting in 15% to 20% volume increase is possible.

The exploration potential of the southern tenements held by Oxiana, some 3 kms to 4kms south of Gossan Hill and including the Felix, Gossan Valley, Flying Hi and Bassendean prospects, is discussed elsewhere in this report (sub-section 2.5, Other Exploration). Other Golden Grove regional exploration, including the Mount Gibson prospect is also discussed in sub-section 2.5.


AMC207098: 6 May 2008 30

2.2.3 Mineral Resources and Ore Reserves

The Mineral Resources and Ore Reserves as reviewed at Oxiana’s Golden Grove operations have been estimated following the guidelines set out in the JORC Code. Competent persons from Oxiana (and Newmont prior to Oxiana ownership) have carried out the estimation and reporting of the Mineral Resource and Ore Reserve.

2.2.4 Mineral Resource/Ore Reserve Estimation

The Mineral Resource and Ore Reserve as at 30 June 2007 are summarised in Tables 2.13 and 2.14. It is understood that the next formal revision of these estimates will be in June 2008.

Table 2.13 Mineral Resources as at 30 June 2007

Mine Classification Tonnes (Mt)

Cu (%)

Pb (%)

Zn (%)

Ag (g/t)

Au (g/t)

Measured 10.5 2.22 0.57 5.49 48.0 0.97

Indicated 8.5 1.71 0.18 1.71 23.9 0.67 Gossan Hill

Inferred 5.0 1.11 0.85 6.55 63.1 1.00

Subtotal 24.0 1.81 0.49 4.37 42.6 0.87 Measured 3.7 2.39 0.28 3.83 36.2 0.60

Indicated 1.1 2.50 0.04 0.67 12.6 0.22 Scuddles

Inferred 1.1 1.81 0.34 4.20 34.7 0.54

Subtotal 5.8 2.30 0.25 3.32 31.6 0.52

Total 29.8 1.9 0.5 4.2 41 0.8

*NB: The figures in the totals in the table above may not add precisely due to rounding

Table 2.14 Ore Reserves as at 30 June 2007

Classification Tonnes (Mt)

Cu (%)

Pb (%)

Zn (%)

Ag (g/t)

Au (g/t)

Proved 7.9 2.10 0.63 6.16 48.9 0.95 Probable 1.9 1.45 0.81 6.11 43.3 0.90

Total 9.8 1.97 0.67 6.15 46.2 0.94

Oxiana has recently prepared Mineral Resource estimates for Xantho and Cervantes. These estimates are summarised in Table 2.15.

Table 2.15 Xantho and Cervantes Mineral Resource

Mine/Lode Classification Tonnes (Mt)

Cu (%)

Zn (%)

Au (g/t)

Gossan Hill/Xantho Inferred 5.1 3.1 5.7 0.8

Scuddles/Cervantes Inferred 1.8 1.5 6.2 0.6

Total 6.9 2.7 5.8 0.7

Note: Ag and Pb grades not provided.

At Golden Grove, the 2007 Ore Reserve has increased by 0.4 Mt over the previous year while the Mineral Resource has increased by 0.45 Mt despite depletion due to mining. Drilling in 2006/2007 of over 28,000m at Gossan Hill and approximately 680m at Scuddles supported the Mineral Resource increase. The increase in Mineral Resource is predominantly primary zinc mineralisation.

The subsequent addition of 6.1 Mt of Inferred Mineral Resource from Xantho and Cervantes comprises 2.1 Mt of zinc mineralisation and 4.8 Mt of copper mineralisation.


AMC207098: 6 May 2008 31

The stated total Mineral Resource (including Inferred) at Golden Grove increased substantially from December 2005 to June 2006, from 16 Mt to 29 Mt. It has remained at about this level since then. Conversion from Mineral Resource (Measured and Indicated only) to Ore Reserve has been consistently 40% or so. Conversion of Mineral Resource to Ore Reserve is hampered by the availability of drill platforms as most new Mineral Resource is at depth and requires infill drilling from underground.

The Gossan Hill block models were reviewed by AMC on site with the assistance of the Oxiana geologists, as were the Mineral Resource and Ore Reserve processes, procedures and documentation. The Scuddles models were not reviewed, although documentation for them was part of the Mineral Resource documentation provided. Drillhole information is stored in a Microsoft Access database, with internal validation procedures and the database is soon to be upgraded to use the Micromine “GBIS” software. The interpretation wireframes are created by the Mineral Resource geologists, with input and review from the mine and project geologists responsible for the area being interpreted. Wireframe outlines are based on geology and a series on mineralisation cut-offs, depending of the orebody and mineralisation type.

AMC considers the procedures used to be technically appropriate and acceptable with industry standards and in compliance with the JORC Code guidelines.

Generally, procedures for data collection and preparation were of industry standard, however there were some concerns with the assay QA/QC programme. The procedure for the use of standards, blanks, duplicates and umpire assays was not to industry standard. Only assay standards were being used regularly and umpire assays (at a secondary laboratory) were almost never obtained. There appears to have been a general low bias in the standard results (generally less than 10%), but within Oxiana’s allowable limits.

The QA/QC procedures have had several reviews in the past and the same general conclusions were drawn. AMC understands that the procedures have had a major overhaul in the past few months and they are now to industry standard. However, in the context of this review, the adverse QA/QC results do not have a material impact.

Density measurements are routinely carried out using the Archimedes’ principle methodology and in the primary sulphide orebodies there are no issues. In the oxide open-pit data, there is some question as to the reliability of the data and in particular the percentage of porosity allowed for. The data in question are currently being reviewed as to the impact of any possible change. In the context of this review, the potential impact on the oxide Mineral Resource is not expected to be material.

The oxide Mineral Resource database is probably not as complete as it could be with minimal cyanide soluble copper assays and no cyanide soluble zinc assays. This will have an impact on how metallurgical recoveries can be predicted for various parts of the orebody and may have an impact on the conversion of oxide Mineral Resource to Ore Reserve. Work is ongoing to validate the oxide Mineral Resource data and update the block models and AMC regards that the current paucity of cyanide soluble data has no material impact for the current review.

2.2.4.1 Reconciliation

Reconciliation figures, showing tonnage mined versus tonnage milled for the six months to December 2007 are presented in Table 2.16. No figures were provided for the Ore Reserve to mine reconciliation.

Table 2.16 Mine - Mill Reconciliation

Tonnes Mined Tonnes Milled Mine – Mill Reconciliation

660,312 709,525 107%


AMC207098: 6 May 2008 32

2.2.5 Site Infrastructure

Airstrip

The airstrip has recently been sealed and is serviced by charter flights from both Perth and Geraldton.

Camp

Accommodation has be updated and overall capacity increased to cater for the current workforce.

Power

The site is connected to the state grid by a 132kV transmission line. The line has a capacity of approximately 50MW whilst the current site requirement is 12MW. The current substation and distribution system is adequate for the current load, any significant increase in load would require an upgrade of the substation.

Water

The Golden Grove site has a positive water balance and there should be no problems with ongoing supply. Potable water is sourced from an onsite bore. Raw water is sourced from water pumped from the underground operations.

Freight

Service contracts are in place for transport of concentrate from site to Geraldton Port and transporting of fuel and general freight to site from Perth.

2.2.6 Processing

Gossan Hill and Scuddles mines each produce two basic ore types:

• a copper ore with only minor amounts of lead, zinc and precious metals and

• a zinc ore containing significant amounts of copper, lead, silver and gold.

These ores are each produced from Gossan Hill and Scuddles. The two ore types are treated separately on a campaign basis through the concentrator located at Scuddles.

Ore from both operations is delivered to stockpiles adjacent to the concentrator. The live capacity of each stockpile is approximately 8,000t.

Ore is withdrawn from the Scuddles stockpile using vibrating feeders, and conveyed to the mill feed conveyor that passes beneath the Gossan Hill stockpile. Ore from the Gossan Hill stockpile is also fed on to the mill feed conveyor using vibrating feeders.

2.2.6.1 Grinding Circuit

The grinding circuit at Golden Grove consists of a semi-autogenous grind ("SAG") mill, two ball mills and a pebble crusher.

Crushed ore is conveyed to the 6.7m x 2.1m ANI SAG mill fitted with a 1500 kW drive motor, 125 mm steel grinding media is added to the mill and makes up 12% to 16% of the total mill charge. Pulp is discharged through 65 mm pebble ports on to a 10 mm x 25 mm trommel screen. Trommel screen oversize is conveyed to a Nordberg 1352 Omnicone pebble crusher. This unit crushes the pebbles to approximately 10 mm, with the crusher product being returned to the SAG mill. The minus 10 mm SAG mill trommel product is mixed with the ball mill discharge and pumped to the ball mill cyclones (6" x 20” Warman cyclones). Cyclone underflow is fed to the ball mill and cyclone overflow is fed to the flotation circuit. The ball mill is a 3.8m x 6.7m ANI mill fitted with a 1500 kW drive, 65 mm and 40 mm balls are added to the mill.

To increase the grinding circuit throughput a redundant regrind mill has been converted to a primary ball mill. A portion of the SAG/ball mill discharge is directed to a cyclone, cyclone underflow is mill feed, cyclone overflow joins the flotation feed. Discharge from this ball mill is cycloned with the underflow being returned to the mill and the overflow joining the flotation feed stream. This ball mill is a 2.6m diameter x 4.26m EGL unit fitted with a 400 kW drive.


AMC207098: 6 May 2008 33

The average grinding circuit product sizing is normally 80% passing 90 to100 microns.

Grinding throughput is dependent on the blend of ore being fed to the circuit and needs to average 220t per hour to meet the annual budget throughput of 1.75 Mt, assuming a grinding circuit utilisation of 92%.

Low sulphide stringer copper ores are hard and have a relatively low throughput - as low as 160 tph or 1.3 Mtpa. The higher sulphide massive copper ores are softer and have a higher throughput.

A blend of these two copper ores will normally result in budget throughput rates being achieved.

Similarly massive zinc ore is soft and relatively easy to mill whilst stringer zinc is harder and more difficult. No major problems are anticipated in achieving budget throughput with zinc ore blends.

2.2.6.2 Flotation

Copper and zinc are treated separately on a campaign basis.

Copper Ores

Some copper ores at Golden Grove contain talcose minerals that will float freely with the chalcopyrite diluting the concentrate and raising some marketing issues. To reduce the quantity of talc in the copper concentrate the high precious metal ("HPM") lead circuit is used as a pre-float to remove as much talc as possible, the talc product is directed to final tailing. Tailings from the talc pre-float go to copper flotation, the zinc circuit is used for this when treating low precious metal ("LPM") copper ores. Concentrate grade ranges from 22% to 25% copper and recovery from 75% to 90%. The reagents used are guar, lime, sodium isopropyl xanthate and RTD 609.

Most of the copper ores contain large amounts of pyrite that will tend to float with the copper so that operation of the circuit is a trade off between concentrate grade and recovery.

Zinc Ore

Zinc ores contain significant amounts of gold, silver and lead that must be recovered prior to zinc flotation firstly to recover as much as possible of the precious metals into a product where payment is maximised, secondly to improve zinc flotation by removing galena from the feed to the zinc section.

In the HPM section a high precious metal concentrate containing gold, silver and lead is produced. The flotation circuit is operated to maximise the recovery of silver and gold to concentrate since payment for these metals in the HPM concentrate is very good.

The HPM circuit consists of roughers with two stages of cleaning. Reagents used in the HPM section are lime, AP3418A and sodium metabisulphite. The performance with respect to both concentrate grade and recovery in the HPM section is very variable depending on the head grade and the mineralogical association of the gold and silver.

Tailing from the HPM circuit is the feed to the zinc circuit.

Column flotation cells are used as roughers followed by conventional scavenging cells. Scavenger concentrate is reground then mixed with rougher concentrate prior to two stages of cleaning. Reagents used in the zinc circuit are lime, copper sulphate and sodium isopropyl xanthate. The metallurgical performance in the zinc circuit is dependent on the iron content of the sphalerite in the ore and the amount of pyrite in the ore. Concentrate grades range from 50% to 54% zinc, with zinc recovery normally lying in the range 90% to 95%.

Both the HPM lead concentrate and zinc concentrate are thickened and currently filtered using vacuum disc filters.

A pressure filter commissioned in March 2008 to filter zinc concentrate, will remove any production constraints in the concentrate handling area. The current HPM disc filter will be removed and the zinc filters used to filter the HPM concentrate.


AMC207098: 6 May 2008 34

Concentrates are stockpiled in a storage shed then trucked to the Geraldton port for export.

Tailings from the zinc flotation section (or the LPM copper section) are classified in the sand fill preparation plant, the coarse fraction being used as mine fill and the fine fraction is deposited in the TSF.

2.2.6.3 Metallurgical Operating Plan

Based on current Ore Reserves, the current production rate at Golden Grove continues through to the end of 2012. The production budget for the next five years is set out in Table 2.17. Actual production for 2007 is included for comparison.

Table 2.17 Five Year Metallurgical Plan

2007 Actual 2008 Budget

2009 Budget

2010 Budget

2011 Budget

2012 Budget

Zinc Ore

Tonnes 1,021,065 965,980 997,768 879,604 1,055,438 717,220 Grade (% Zn) 14.3 15.84 12.61 11.08 12.15 10.84 Recovery 91.91 90.8 90.8 90.8 90.8 90.8

Zinc Concentrate

Tonnes 258,408 258,569 215,434 167,829 219,907 133,995 Grade (% Zn) 51.0 53.73 53.0 53.0 53.0 53.0

HPM Concentrate Tonnes 30,365 29,858 25,315 22,071 27,150 17,616 Grade (% Pb) 47.9 39.8 33.62 33.0 34.0 33.0 (Au g/t) 56.9 48.3 29.54 23.66 32.34 22.96 (Ag g/t) 2 982 2 467 1 691 1 574 1 652 1 539

LPM Copper Ore

Tonnes 431,954 784,318 803,059 989,936 742,673 610,828 Grade (% Cu) 4.10 3.35 2.93 3.02 3.00 3.11 Recovery (%) 88.26 90.07 90.0 90.0 90.0 90.0

Copper Concentrate

Tonnes 67,803 104,017 96,258 121,488 90,670 76,761 Grade (% Cu) 22.71 22.7 22.0 22.0 22.0 22.0

Total Ore Milled 1,453,019 1,750,298 1,800,827 1,869,540 1,798,111 1,328,048

The production budget shows the concentrator treating a total of 1.75 Mtpa to 1.85 Mtpa. The lower throughput in 2012 reflects the commencement of the production tail based on current Ore Reserves. In each year a mix of zinc and low precious metal copper ores are treated. The planned throughput is a significant increase over that achieved in recent years. To achieve this increase Oxiana has made the following modifications to the concentrator:

• Reduction of the primary jaw crusher setting to 100 mm.

• Ball sizing in the SAG mill was reduced to 125 mm and the ball load increased from 12% to 16%.

• Upgrading of the mill discharge pumps to handle the higher throughput.

• Conversion of a redundant 400 kW regrind mill to a primary ball mill.

• Upgrading of pumps in the flotation circuit to enable the increased plant throughput to be achieved.

• Commissioning of a pressure filter to handle zinc concentrate, this will remove any production bottlenecks in the concentrate handling area.

• Trial installation of a secondary crusher to reduce the SAG mill feed sizing to minus 50 mm. Modelling shows that this change should enable a throughput greater than 2 Mtpa to be achieved.


AMC207098: 6 May 2008 35

Since acquiring the Golden Grove operation, Oxiana has spent a considerable sum of money on plant maintenance and as such the concentrator is in good condition and so maintenance issues should not be a production bottleneck.

Given the above there is no reason to believe that the Golden Grove concentrator will not achieve the budgeted throughput.

Metallurgical performance with the zinc and copper ores is based on operating experience. The performance set out in the budget is considered achievable.

2.2.6.4 Operating Costs

The budget shows a significant increase in the cash and unit operating costs in 2008. This is due principally to a provision of $8M for contract secondary crushing of the ore to 50 mm. It was considered that secondary crushing of the ore would be required to achieve the required throughput increase.

In the long term if a secondary crusher is found to be necessary then a suitable unit could be purchased and installed, this would involve some capital expenditure but would eliminate the cost of contract crushing.

The operating and maintenance costs are based on experience and have taken account of increases in labour and consumables, as such, the cost budgets are considered achievable.

2.2.6.5 Capital

As noted in the operating costs section a secondary crusher may be required if it is found to be necessary to crush the feed to minus 50 mm to achieve the required throughput and/or product sizing.

No other major capital items are identified. An allowance of $1M to $1.5M per annum should be made for ongoing replacement capital.

2.2.7 Environment

The Golden Grove operation is well resourced with experienced environmental staff and there is a high level of awareness throughout the organisation of the environmental challenges to be managed.

Robust environmental programmes are well established in some areas, and being developed in others, based on solid research and clear definition of long-term goals. Good examples are the programme of ecological studies on Lake Wownaminya, into which excess mine water is discharged, and the management of dust during product transport, port storage and ship loading.

Compliance with statutory permits is adequate. The key permit is a licence issued by the Department of Environment and Conservation; there is no evidence of non-compliance with any of the licence conditions which cover general issues of air quality, water management and monitoring, and monitoring of impacts of discharges to Lake Wownaminya. Product shipping through the Port of Geraldton is controlled by a licence held by the Geraldton Port Authority, although transport to Geraldton is Oxiana's responsibility through a dangerous-goods transport licence.

Nonetheless, there are several environmental issues that require maintained or even increased inputs, to avoid threats becoming live issues with the potential to constrain operations and/or demand expensive Mineral Resource inputs. These issues are discussed below.

2.2.7.1 Potential Environmental Threats

Closure Costs

Based on Oxiana’s 2005 estimate of $25M and discussions during the site visit, AMC has developed a closure cost estimate of $29M, presuming that closure does not require the remediation of contaminated sites. There are numerous contaminated sites at Golden Grove associated with stockpiling of acid-generating material, spillage of process liquors and products, losses from conveyors and hydrocarbon spills. Remediation of contaminated sites at Golden Grove would probably cost tens of millions of dollars if complete remediation, as distinct from burial and isolation from surface activities and leaching risks, were required.


AMC207098: 6 May 2008 36

There are few if any precedents for contaminated sites associated with remote mining operations being required by the Department of Environment and Conservation ("DEC") to be remediated; rather, isolating potentially contaminating material by encapsulation with stable structures of inert material and minimising risks of leaching are considered to be more practicable. However, AMC recommends that Oxiana discusses this issue with the Contaminated Sites Branch of the DEC to more confidently determine likely closure requirements.

Outside of contaminated sites issues, closure costs could be reduced through opportunities associated with development of the Gossan Hill open pit - mine waste could provide a valuable source of cover materials for closure of TSFs and other structures.

Acid Mine Drainage

While some acid-drainage sites have been dealt with in the past, there remain a number of sites with significant potential for acid drainage to cause environmental harm. Most notable is the Gossan Hill ROM pad, which comprises large volumes of sulphidic mine waste. Oxiana is planning to install interception drains and coffer dams to control acid drainage, but prevention of the generation of acidification will be required in the long term. Development of the copper pit could provide oxide waste ideal for encapsulation of the ROM pad, giving significant savings in closure costs removing the need to develop and then rehabilitate borrow pits.

Product Transport and Shipping

Oxiana has properly recognised the risks associated with transport and shipping of concentrates, especially the HPM material. Dust pollution incidents at Esperance Port, also located in Western Australia, in the last two years have heightened awareness of the risks, especially socio-political ones, and Oxiana has programmes to ensure adequate moisture contents during transport and materials handling and to provide covered storage at Geraldton. AMC believes it would be appropriate for Oxiana to be present at every ship-loading operation, even though dust management during loading is the responsibility of the Geraldton Port Authority under its Environmental Protection Act licence. Restriction of product shipping, although considered by AMC to be a low risk, would nonetheless have substantial financial impact.

TSF2 Seepage

This is considered by AMC to be a temporary problem that will no longer be an issue once TSF2 is decommissioned (near future). Seepage will then naturally decline and the groundwater mound beneath the TSF will fall. Seepage is currently being well managed by interception and pump-back, and there is, importantly, no current sign of vegetation stress in the areas affected by seepage.

Lake Wownaminya

While excellent ecological studies have been carried out and have demonstrated little significant negative impact of mine-water discharge to the lake, curtailment of that discharge on environmental or other grounds would have serious ramifications for the Golden Grove operation. AMC does not consider that there is a significant risk of such curtailment, but flags the need for sustained Mineral Resource inputs to water treatment and to studies demonstrating the environmental acceptability of the operation. Oxiana currently has several programmes aimed at ongoing demonstration of the environmental acceptability of the Lake Wownaminya discharge, and their continuation can reasonably be expected to satisfy the requirements of environmental agencies. AMC notes that discharge requirements could be significantly reduced if an open pit is developed at Golden Grove because of increased water demands for processing.


Actual and budgeted operating and capital costs for Golden Grove are detailed in Table 2.18. The budgeted costs reflect those in the modelling scenario presented in Case 1.

Capital costs in 2008 are abnormally high. This is driven by a combination of upgrades, capacity expansion, drilling programmes and studies scheduled for 2008. The most significant one-off/abnormally high capital costs scheduled for 2008 are:

• underground delineation drilling at both Gossan Hill and Scuddles ($12.6M)

• underground infrastructure and mobile equipment at Scuddles ($8.8M)


AMC207098: 6 May 2008 37

• underground mobile equipment upgrade/replacement at Gossan Hill ($12.5M)

• lateral underground capital development at Gossan Hill ($27.8M)

• primary vent raises at Gossan Hill ($23.3M)

• port upgrades and concentrate shed expansion ($11M)

• concentrator expansion ($12.4M)

• open pit studies/drill programmes ($14M).

Table 2.18 Actual and Budgeted Operating and Capital Costs

Three Year Plan Item Units 2006 Actual

2007 Actual

2008 2009 2010

Production Parameters

Ore Mined kt 1,380 1,446 1,759 1,820 1,722 Mine Op Development m - - 8,326 4,224 4,229 Ore Processed kt 1,366 1,453 1,754 1,801 1,870 Zn Recovered kt 138.8 132.0 142.9 117.7 92.1 Pb Recovered kt 11.6 8.1 14.7 10.9 9.3 Cu Recovered kt 10.8 15.4 26.3 23.4 29.0 Au Recovered koz 50.2 48.8 57.1 31.6 24.8 Ag Recovered koz 3,064 3,165 3,210 1,997 1,652

Unit Cash Operating Costs Mining $/t ore mined 69.4 78.1 76.3 69.4 70.9 Processing/Mntce* $/t processed 23.0 27.9 32.9 26.7 25.9 Administration $/t processed 13.8 13.2 13.2 10.3 10.0 Conc. Transport/Port $/t processed 5.8 7.3 6.6 5.2 4.7

Unit Site Cash Cost $/t processed 112.7 126.2 129.2 112.3 105.9

Cash Operating Cost Mining $M 95.8 113.0 134.2 126.3 122.1 Processing/Mntce* $M 31.4 40.6 57.8 48.0 48.5 Administration $M 18.8 19.2 23.1 18.6 18.7 Conc. Transport/Port $M 8.0 10.6 11.5 9.4 8.7

Total Site Cost $M 154.0 183.4 226.6 202.3 198.0

Capital Cost Sustaining Capital $M - - 131.5 30.2 24.1 Expansion Capital $M - - 37.8 0.9 -

Total Capital $M - - 169.3 31.1 24.1

Note: Actual Capital Expenditure for 2006 and 2007 were not available. * Does not include Au oxide toll treatment charges.


AMC was provided with the 2008 Golden Grove operating and capital budgets, which are based primarily on mining of the current underground Ore Reserves. These budgets were used to prepare the modelling scenario presented in Case 1.

Based on the work completed to date on evaluation of the open pits at Gossan Hill, Oxiana provided AMC with a Strategic Plan Production Schedule detailing physical and cost schedules for mining of the open pits. These schedules, in combination with the budget schedules used in Case 1 have been used to prepare the modelling scenario presented in Case 2.

Neither case has had any value added for either the Golden Grove southern leases or the regional exploration potential, as these are valued separately in the sub-section titled Other Exploration (sub-section 2.5) at the end of Section 2 of this report.


AMC207098: 6 May 2008 38

The modelling scenarios are summarised in Tables 2.19 and 2.20 followed by a brief description:

Table 2.19 AMC Modelling Scenario - Case 1 Item Units 2008 2009 2010 2011 2012 2013 2014 2015

Production ParametersOre Mined kt 1,759 1,820 1,722 1,798 1,328 738 748 373 Ore Processed kt 1,754 1,801 1,870 1,798 1,328 738 748 373 Zn Recovered kt 142.9 117.7 92.1 119.9 73.1 27.6 9.6 4.8 Pb Recovered kt 14.7 10.9 9.3 11.6 7.3 3.0 1.6 0.8 Cu Recovered kt 26.3 23.4 29.0 22.5 18.5 17.3 21.5 10.7 Au Recovered koz 57.1 31.6 24.8 35.8 18.4 10.3 8.6 4.3 Ag Recovered koz 3,210 1,997 1,652 2,041 1,297 596 519 259

Unit Cash Operating CostsMining $/t ore mined 76.3 69.4 70.9 68.6 84.8 84.5 84.5 84.6 Processing/Maintenance* $/t processed 32.9 26.7 25.9 27.0 26.5 26.6 26.5 34.4 Administration $/t processed 13.2 10.3 10.0 10.5 14.1 8.4 8.3 16.6 Conc. Transport/Port $/t processed 6.6 5.2 4.7 5.3 4.7 5.0 4.4 4.6 Closure $/t processed - - - - - - 8.0 61.7 Unit Site Cash Cost $/t processed 129.2 112.3 105.9 111.3 130.1 124.5 131.7 201.9

Cash Operating CostMining $M 134.2 126.3 122.1 123.4 112.6 62.4 63.2 31.5 Processing/Maintenance* $M 57.8 48.0 48.5 48.5 35.2 19.6 19.8 12.8 Administration $M 23.1 18.6 18.7 18.8 18.7 6.2 6.2 6.2 Conc. Transport/Port $M 11.5 9.4 8.7 9.5 6.3 3.7 3.3 1.7 Closure $M - - - - - - 6.0 23.0 Total Site Cost $M 226.6 202.3 198.0 200.2 172.8 91.9 98.5 75.2

Capital CostSustaining Capital $M 131.5 30.2 24.1 10.1 1.4 0.3 0.4 -Expansion Capital $M 37.8 0.9 - - - - - -Total Capital $M 169.3 31.1 24.1 10.1 1.4 0.3 0.4 -

* Does not include Au Oxide toll treatment charges

Table 2.20 AMC Modelling Scenario - Case 2 Item Units 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Production ParametersOre Mined kt 1,759 1,820 2,002 1,999 1,989 2,341 2,328 1,607 1,480 1,480 1,471 540 Ore Processed kt 1,754 1,823 2,003 1,999 1,989 2,007 1,999 1,605 1,483 1,480 1,471 543 Zn Recovered kt 144.2 110.6 86.6 119.9 86.3 58.3 57.2 69.9 42.7 42.4 42.4 23.8 Pb Recovered kt 15.2 10.1 8.8 11.6 8.6 6.1 6.7 7.2 4.3 4.3 4.3 2.4 Cu Recovered kt 25.6 26.3 31.4 26.7 30.9 45.7 49.4 29.1 31.9 31.9 31.7 14.4 Au Recovered koz 58.4 30.1 23.1 35.7 22.4 24.9 29.6 27.1 20.2 20.1 20.0 10.9 Ag Recovered koz 3,289 1,895 1,555 2,041 1,532 1,360 1,695 1,920 1,071 1,062 1,060 573 Unit Cash Operating CostsMining $/t ore mined 76.3 69.4 82.1 82.8 82.2 64.5 70.8 62.8 68.0 59.6 40.2 84.4 Processing/Maintenance* $/t processed 32.9 26.3 25.8 26.7 26.2 26.3 26.3 26.5 26.5 26.5 26.5 34.5 Administration $/t processed 13.2 10.2 9.3 9.4 9.4 9.3 9.4 11.7 12.6 12.6 12.7 11.4 Conc. Transport/Port $/t processed 6.3 5.2 4.3 5.0 4.3 4.3 4.5 4.7 4.2 4.3 4.3 5.5 Closure $/t processed - - - - - - - - - - 3.4 35.0 Total Site Unit Costs $/t processed 128.9 111.0 121.5 123.8 122.1 115.2 122.6 105.7 111.3 103.0 87.1 170.5 Cash Operating CostMining $M 134.2 126.3 164.3 165.4 163.4 151.0 164.8 101.0 100.7 88.2 59.1 45.6 Processing/Maintenance* $M 57.8 48.0 51.7 53.3 52.2 52.7 52.5 42.5 39.3 39.2 39.0 18.7 Administration $M 23.1 18.6 18.7 18.8 18.7 18.7 18.7 18.7 18.7 18.7 18.7 6.2 Conc. Transport/Port $M 11.0 9.4 8.7 9.9 8.5 8.7 9.0 7.5 6.3 6.3 6.3 3.0 Closure $M - - - - - - - - - - 5.0 19.0 Total Site Cost $M 226.1 202.3 243.4 247.4 242.8 231.1 245.0 169.7 165.0 152.4 128.1 92.5 Capital CostSustaining Capital $M 129.5 84.4 76.6 69.9 44.2 17.1 11.9 10.5 2.1 0.2 0.2 -Expansion Capital $M 37.8 0.9 - - - - - - - - - -Total Capital $M 167.3 85.3 76.6 69.9 44.2 17.1 11.9 10.5 2.1 0.2 0.2 -

* Does not include Au Oxide toll treatment charges

2.2.9.1 Case 1

Case 1 is primarily based on reported Ore Reserves for Scuddles and Gossan Hill, with some non-reserve (Inferred) material included. These are approximately 0.45 Mt from Xantho, at Gossan Hill, and 0.8 Mt from Batavia at Scuddles. This case generates a mine life to 2015.

This case does not include any production from the Gossan Hill open pits that are currently being evaluated.

Operating costs and metallurgical performance in 2013 to 2015 are estimates based on the previous years in the Golden Grove budget.


AMC207098: 6 May 2008 39

2.2.9.2 Case 2

Case 2 is Case 1 plus additional underground production from Xantho Extended at Gossan Hill and Cervantes at Scuddles and also includes mining of the gold and copper oxide open pits at Gossan Hill. This case generates a mine life to 2019.

Physical and cost schedules for the open pits are based on preliminary studies completed by Oxiana. Whilst AMC has not reviewed this work in detail the schedules are considered to be reasonable.


Key observations made by AMC in regard to the Golden Grove operations are:

Geology

The Golden Grove deposit has a reasonably long history of production since commencement of the operation at Scuddles in 1990 and Gossan Hill in 1998.

High-grade zinc mineralisation is now mostly in the deeper areas of the deposit, whereas the higher grade copper is mainly above 10,000 mRL (approximately 350m below surface).

As the depth of the mineralisation increases, surface drilling will become impractical. Some of the deeper Mineral Resource is currently only supported by a few drillholes (and is classified accordingly). Two declines (Xantho and Scuddles) have commenced to allow for systematic underground exploration drilling in the deeper areas and for infill drilling for Mineral Resource classification upgrade and to aid conversion to reserve.

AMC has not re-estimated the Mineral Resources or Ore Reserves, or undertaken a detailed technical audit. However, AMC did review the Mineral Resource and Ore Reserve digital model, processes and procedures and considers that they conform to industry standards.


Mining

The current Ore Reserve supports approximately five years of production at current planned rates.

Geotechnical aspects of the project appear to be well analysed and managed and are not considered likely to impact on the Ore Reserve estimate.

Subject to completion of evaluation studies, open pit mining operations at Gossan Hill is likely to extend the mine life at Golden Grove by approximately five years.

Processing

Recent modifications have been made to the concentrator to allow the throughput rate to be increased to approximately 1.8 Mtpa.

Considerable expenditure in recent years on plant maintenance has ensured the concentrator is in good condition.

Environmental

Robust environmental programmes are well established in some areas, and being established in others.

Compliance with statutory permits is adequate.

Acid mine drainage may be an issue with the large quantity of sulphidic waste contained in the ROM pad at Gossan Hill.


AMC207098: 6 May 2008 40

2.3 Prominent Hill

2.3.1 Introduction

The Prominent Hill Copper-Gold Operation (Prominent Hill) is situated in central South Australia and consists of an open pit mine, a copper concentrator (under construction) with nominal capacity of 8 Mtpa and associated infrastructure including village, airstrip, powerline, TSF, water borefield and pipeline. Pre-strip mining commenced in September 2006 and ore mining commenced during March 2008. Production is planned to commence during the fourth quarter of 2008.

Prominent Hill is located approximately 650 km north-north-west of Adelaide, 100 km south-west of Coober Pedy, and 150 km north-west of Roxby Downs, as shown in Figure 2.9.

Figure 2.9 Geographic Location

The project area is a flat broad plateau with the natural surface level around 210m Australian Height Datum ("AHD"). The main topographical feature is Prominent Hill (standing 25m above the surrounding natural surface), from which the project has been named.

The Mount Woods Joint Venture (BHP (51%), Newmont (23.9%), Minotaur Resources Ltd (Minotaur) (19%), Sons of Gwalia (3.8%) and Sabatica (2.3%)) discovered the Prominent Hill deposit in October 2001. Oxiana became a joint venture partner in September 2003 via a farm-in arrangement and finally purchased the project outright in February 2005. By June 2005, Oxiana had drilled the known mineralisation between 555400 mE and 556200 mE on a 50m x 50m grid to a depth of 450m below cover.

The mine and mine infrastructure are located within a 78.56 km2 mining lease area. Oxiana holds further exploration leases in the region along with other miscellaneous purposes licenses for support infrastructure extending beyond the mine area and is also exploring areas adjacent to and below the current ultimate pit design.

The Prominent Hill deposit comprises copper-gold and gold-only mineralisation occurring within a large haematite breccia complex that lies beneath approximately 120m of overburden material (a cover sequence of flat-lying shales and clays, with minor sandy layers). The deposit dips steeply at around 80° to the north, and extends approximately 900m along strike (east-west), 200m across strike (north-south) and 700m below surface. The base of the deposit and the east and west limits have yet to be defined.


AMC207098: 6 May 2008 41

Mining is undertaken using conventional open pit mining methods utilising three Liebherr 996 backhoe excavators (650t operating weight) and 18 Caterpillar 793C dump trucks (230t nominal capacity). Overburden material is mined in 15m high benches and excavated in three flitches while fresh waste and ore is mined in 12m high benches and excavated in three flitches.

The ultimate pit design used as the basis for physical material quantities in the current LOMP contains 577 Mt of rock and 79.2 Mt of ore (Ore Reserve plus some Inferred Mineral Resource with a stripping ratio of 6.3) and extends to a depth of 470m below surface. At the planned production rate of 8 Mtpa the operation is scheduled to close in 2018.

Mineral processing utilises a copper concentrator featuring conventional SAG and ball milling, and a conventional flotation circuit. The concentrate is to be transported by road to the Wirrida rail siding then railed to Darwin and shipped to India and China. Oxiana is currently negotiating with BHP Billiton to sell some of the concentrate to its Olympic Dam operations at Roxby Downs.

The region has an average mean monthly temperature range from 28°C (January) to 13°C (July), average annual rainfall of 134 mm, average annual evaporation of 3,078 mm per annum (which exceeds average rainfall in every month of the year) and no obvious seasonality, but is subject to occasional intense rainfall events greater than 100 mm in a 24-hour period.

Oxiana is currently conducting a scoping study to assess the potential viability of mechanised underground mining operations to run concurrently with the open pit mine. This would require milling of an additional 1 Mtpa, increasing the total milling requirement to 9 Mtpa.


The Prominent Hill deposit is located in the Mount Woods Inlier in the north-eastern part of the Archaean to Mesoproterozoic Gawler Craton. The inlier forms a geophysically discrete crystal block within the Gawler Craton, near the south-east margin of the Coober Pedy Ridge. Outcrop in the area is sparse, due to deep, flat lying Permian and Mesozoic cover (approximately 120m at Prominent Hill) and most of the current understanding of the geology of the Gawler Craton is derived from exploration drilling and geophysical datasets. The cover sequence unconformably overlays the crystalline basement rocks.

The Prominent Hill deposit (as well as nearby Olympic Dam) appears to be genetically related to the Gawler Range Volcanic ("GRV") – Hiltaba magmatic event which affected the central and eastern portions of the Gawler Craton around 1600 Ma.

The central and northern parts of the inlier comprise upper amphibolite to granulite facies metamorphic rocks including iron formation, felsic gneiss and schist and calc-silicate. This area of the inlier is also intruded by a suite of deformed, syntectonic granites. Much of the inlier exhibits the effects of later metasomatism and hydrothermal alteration, which can be directly related to magmatic activity of the GRV - Hiltaba event, although this is less evident at Prominent Hill.

Drilling data from the Prominent Hill-Neptune area suggests that the Proterozoic rocks here are of much lower metamorphic grade (greenschist facies) compared to the central and northern parts of the Mount Woods Inlier. The host rocks for the mineralisation at Prominent Hill show little evidence of metamorphism except for occasional clasts of schist and/or gneiss occurring in hydrothermal breccias.

The Prominent Hill deposit is located along the line of a large regional scale WNW gravity lineament, 'G9C' (O'Driscoll, 1990). This lineament can be traced from Olympic Dam where it intersects a major regional NNW trending lineament 'G2', past Coober Pedy to the north-west of Prominent Hill.


Prominent Hill is recognised as an iron-oxide copper gold (“IOCG”) deposit, of similar style to the nearby Olympic Dam Mine, Ernest Henry Mine in Queensland and Candelaria Mine in Chile, among others.

The mineralisation at Prominent Hill is related to a large regional alteration system and drilling at Prominent Hill and surrounding prospects suggests a genesis related to the GRV - Hiltaba volcano-plutonic event.


AMC207098: 6 May 2008 42

The mineralised system believed to have been fed by large scale regional east-west, north-east and north-west-trending mineralising structural channels which carried copper and gold bearing hydrothermal fluids. Copper-gold mineralisation is hosted by haematite-matrix breccias, which have undergone extensive near-surface sericite and hydrothermal silica alteration.

The geology at Prominent Hill can be domained into the following lithological and structural zones from north to south:

• Skarn-granitoid package (deformed metasediment intruded by granitoids)

• Hangingwall fault zone (“HWFZ”), containing chloritic fault breccias, graphitic shear zones, skarn, granitoid and dolomite. It is an east-west trending 10m to 30m wide zone and represents the northern extent of the main copper and gold mineralisation.

• Volcano-sedimentary package. This package includes the Prominent Hill Shear Zone ("PHSZ"), the major host to mineralisation in the deposit. It can be further subdivided from north to south as follows:

- variably haematised and silicified dolomite and limestone

- shale

- sandstone and greywacke

- volcanics.

A typical cross section showing the major geological units is presented as Figure 2.10.

Figure 2.10 Prominent Hill Cross Section - 555,700 mE

SKARN

HWFZ

DOLOMITE

Prom. Hill Shear Zone

GWK-SST

BD1_SED

PERMIAN

CADNA-OWIE

FRESH_BULLDOG_SHALE

OXIDISED_BULLDOG_SHALE

ANDESITE

PHSZ-OS

BG2


AMC207098: 6 May 2008 43

Copper-gold mineralisation occurs in domains of haematite-matrix breccia within the volcano-sedimentary package. The currently defined deposit extends over 1.2 km along strike (east-west), 200m across strike (north-south) and almost 1 km down-dip. The deposit generally dips steeply at 80° to the north and the base of the deposit and the east and west extents have yet to be defined.

The bulk of the copper mineralisation occurs as chalcocite, bornite and chalcopyrite disseminated through the matrix and, to a lesser extent, the clasts of haematite-sediment (diorite-volcanic) breccias. In addition, brecciated dolomites host chalcocite-haematite vein stock-working.

Gold mineralisation mainly occurs in and between the copper-gold breccias and as gold only mineralisation in haematite-quartz breccias in the Eastern Gold Zone.

The domaining used in the Mineral Resource model has been defined using a combination of geology, mineralogy and to a lesser extent, grade. Mineralisation within the domains is modelled separately as either chalcocite-bornite (CCBN), pyrite-bornite (PYBN), bornite-chalcopyrite (BNCP) or chalcopyrite-pyrite (CP). The mineralogical divisions are based on visual estimates from logging, copper:sulphur ratios, sulphide mineralogy calculated from assays and cobalt assays (in pyrite).

2.3.2.2 Exploration

Most recent near-mine exploration has concentrated on the areas immediately adjacent to the planned ultimate pit shape. There is good prospectivity immediately below the planned ultimate pit on the eastern and western edges (referred to by Oxiana as BD3 eastern end and PHSZ western end) and to a lesser extent further east. The near mine Mineral Resource extension potential is shown in Figure 2.11. The Western Rise Breccia area has had some very encouraging copper intersections and gold intercepts have been recovered in the area between there and the pit, part of the Prominent Hill Gravity Zone.

Figure 2.11 Near Mine Mineral Resource Extension Potential


AMC207098: 6 May 2008 44

As discussed earlier, the Prominent Hill orebody is currently not closed off at depth and there have also been some encouraging intersections recovered in the largely untested “Lower Mine” area, at depths of more than 1km below the surface.

The regional exploration potential of the Mount Woods Inlier exploration leases held by Oxiana, covering some 4,000 km2 around Prominent Hill, is discussed elsewhere in this report (sub-section 2.6, Other Exploration). The location of these leases is shown in Figure 2.9.

2.3.3 Mineral Resources

The Mineral Resources and Ore Reserves as reviewed at the Prominent Hill mine site have been calculated following the guidelines set out in the JORC Code. Competent persons from Oxiana and subconsultant, Hackman and Associates Pty Ltd, have carried out the estimation and reporting of the Mineral Resource and Ore Reserve.

2.3.3.1 Mineral Resource Estimate

The Mineral Resource as at 30 June 2007 is summarised in Table 2.21. It is understood that the next formal revision of these estimates will be in June 2008.

Table 2.21 Mineral Resource Estimate as at 30 June 2007

Oretype Classification Tonnes (Mt)

Au (g/t)

Ag (g/t)

Cu (%)

Measured 42.9 0.52 4.06 1.69

Indicated 46.4 0.41 2.59 1.14 Copper Mineralisation

Inferred 63.5 0.5 2.4 0.94

Subtotal 152.8 0.48 2.92 1.21 Measured 0.0 0.62 2.36

Indicated 16.8 1.29 1.27 Gold only

Inferred 21.4 0.97 1.09

Subtotal 38.2 1.11 1.17

Total 191.0 0.60 2.57 0.97

*NB: The figures in the totals in the table above may not add precisely due to rounding

The first published Mineral Resource for Prominent Hill was in August 2004 and reported 97 Mt of Inferred Material at 1.5% copper and 0.5% gold. The Mineral Resource has steadily increased up to the 191 Mt reported in June 2007.

The Prominent Hill Mineral Resource block model was reviewed by AMC on site with the assistance of the Oxiana geologists, as were the Mineral Resource and Ore Reserve processes, procedures and documentation. Full documentation was not provided for the current (2007) Mineral Resource model, but the Oxiana geologists assured AMC that the procedures for data handling, QA/QC and Mineral Resource modelling were the same as used for the 2006 Mineral Resource model.

Generally, procedures for data collection and preparation were equal to or better than industry standard, however there were some slight concerns with the assay QA/QC programme. The procedure for the use of umpire assays was not to industry standard. Oxiana regularly inserts standard, blank and repeat samples in the assay despatches to the primary laboratory, but no umpire assays have been sent to a second laboratory, nor 5% of repeats back to the primary laboratory for confirmation since the 2005 drilling campaign was completed.

There also appears to have been periods of assay sample returns with continuous high (copper and gold) or low (uranium) bias for some standard results that were not always sufficiently followed up and rectified. The use of umpire assays may have helped resolve the issue and indicated whether the standard or the laboratory were at fault. A regular QA/QC reporting programme may also help to identify issues with laboratory bias as they occur, rather than in quarterly or annual campaigns. However, in the context of this review, AMC believes that the issues raised about the QA/QC programme do not have a material impact.


AMC207098: 6 May 2008 45

The penalty elements uranium and fluorine are less sampled than the primary metals, although in the case of uranium it is only slightly less. Combined with the apparent low bias for some of the uranium assays, there may be a slight risk of mining areas of higher uranium and fluorine grades than the block model is currently predicting.

Procedures are in place for stockpile blending and in the extreme case, with high uranium grades, an alternate process route has been investigated. AMC feels that the possibility of higher uranium and fluorine grades that might be encountered has no material effect in the context of this report.

Drillhole information is stored using Micromine Pty Ltd’s “GBIS” database software and is set up with internal validation procedures. The senior exploration geologist created the geological interpretation wireframes, with input from the Mineral Resource geologists. This interpretation has also been externally reviewed. The interpretations honour the geological domains defined by the different mineralisation styles. AMC has some concern about the apparently common practice at Prominent Hill, of cutting and assaying the drillcore prior to logging. This may lead to some small misplacement of accurate geological boundaries, but in the context of this review it is unlikely to have a material effect on the resource.

Apart from the order of drillcore processing, AMC considers the procedures used in the Mineral Resource estimation process, as described for the 2006 block model, to be technically appropriate, acceptable with industry standards and in compliance with the JORC Code guidelines.


At the time of this review, there had been no mining of ore at Prominent Hill, although the top of the orebody had just been exposed in the base of the pit.

AMC is confident that the procedures for successful reconciliation are in place.

2.3.4 Ore Reserves

The published Ore Reserve Estimate for Prominent Hill as at 30 June 2007 is presented in Table 2.22.

Table 2.22 Ore Reserve Estimate as at 30 June 2007

Classification Tonnes (Mt)

Au (g/t)

Ag (g/t)

Cu (%)

Proved 35.7 0.50 4.0 1.67 Probable 33.1 0.67 2.3 0.87

Total 68.8 0.58 3.18 1.29

The first Ore Reserve estimate for Prominent Hill was reported in 2006.

AMC is of the opinion that additions to the Ore Reserve are likely. Table 2.18 excludes some Inferred Mineral Resource within the ultimate pit design and included in the 2008 LOMP. This material comprises 10.5 Mt with an average grade of 0.91% copper, 0.60 g/t gold and 2.47 g/t silver.

At planned production levels, the total mining inventory (Ore Reserve plus some Inferred Mineral Resource) will support the mining operations until 2017.


2.3.5.1 Overview

The general layout of the mining operations, looking to the south-east, is shown in Figure 2.12. Mining commenced in a central eastern starter pit (Stage 1), before extending to the west and down dip (Stage 2), then extending to the ultimate eastern pit limit and down dip (Stage 3) and finally to the ultimate western pit limits and depth (Stage 4).

The ROM pad and processing facilities are located to the south-west of the pit. Most other related infrastructure such as accommodation village and the airstrip are situated to the west. Waste material is stockpiled in either of two waste dumps located to the south and north of the ultimate pit limits. The southern


AMC207098: 6 May 2008 46

waste dump will constitute the structural component of an integrated waste landform comprising the waste dump and tailings storage facility. Approximately 25% (by volume) of the waste rock is potentially acid-forming and it will be encapsulated within each of the waste dumps, isolating it from the natural ground and surface infiltration.

Figure 2.12 Mine Operations Layout Looking to the South-East (November 2007)

Based on the performance to date the mining contractor has demonstrated a good ability to achieve planned targets and appears to have suitably experienced management and operational personnel to conduct the mining operations at Prominent Hill.

The key geological features that impact on mining operations include:

• the large quantity of overburden material (approximately 120m) overlying the ore that necessitates a large pre-strip and higher than average stripping ratios early in the mine life

• the steep dip of the Mineral Resource (approximately 80° to the north) that results in a conical ultimate pit with waste evenly distributed between the footwall and hangingwall

• the base of the deposit is as yet undefined

• there is good exploration prospectivity below the ultimate pit and, to a lesser extent, further east and also to the west.

2.3.5.2 Grade Control

Grade control drilling has commenced and whilst progress is slower than expected due to very hard ground, the procedures described to AMC for modelling suggest that robust grade control models will be created. Oxiana are drilling short 60o angled holes on a 10m x 10m grid, with a 5m x 5m grid spacing used in selected areas to determine short scale variability. Conditional simulation will be used to create the grade control model.

2.3.5.3 Geotechnical

The primary geotechnical issue impacting the mining operation to date is the uncovering of extensive faulting in the cover sequence. This faulting is understood to be moderately to steeply dipping with long continuity. Faulting offsets bedding by up to approximately 10m. Bedding can be gently folded between faults. Four bench scale failures occurred from 23 May 2007 and subsequently the operation has adopted several strategies to address these issues:

• External geotechnical consultants were engaged to conduct cover sequence fault stability analysis.


AMC207098: 6 May 2008 47

• Design inter-ramp angles have been reduced in the cover sequence from 35o to approximately 31o.

• Ongoing pit slope management plans have been implemented.

AMC considers that the geotechnical issues are being managed appropriately and that the strategies adopted are consistent with good practice.

2.3.5.4 Mine Operations and Planning

Mining activities at Prominent Hill are conducted on a contract basis with Oxiana providing geology, mine planning and mine supervision. The principal mining contractor is Thiess Pty Ltd which operates under a Schedule of Rates contract with a six year duration.

Mining commenced at Prominent Hill in September 2006 and wall stability issues were encountered while mining overburden material from May 2007. Consequently the inter-ramp wall angles were reduced in the cover sequence resulting in the mining of additional overburden material. Material movement requirements peak at 35 Mbcm in 2008 before declining steadily over the remaining mine life. The LOM material movement schedule is shown in Table 2.23.

Table 2.23 LOM Material Movement Schedule (Mbcm)

Material 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Overburden 28.3 20.8 12.4 11.6 6.2 0.0 0.0 0.0 0.0 0.0 Bulk Fresh Waste 1.6 5.6 9.5 9.3 12.5 16.1 10.2 1.8 0.0 0.0 Selective Fresh Waste 2.4 2.2 2.2 2.2 2.5 2.5 2.4 2.7 1.9 0.6 Ore 2.4 2.4 2.2 2.2 2.5 2.6 2.7 2.7 2.4 1.6

Total 34.7 31.0 26.4 25.3 23.7 21.2 15.3 7.2 4.2 2.2

2.3.5.5 LOM Fleet Schedule

Table 2.24 details the planned mining fleet requirements from the Mining Contract. The actual equipment in operation in 2008 aligns closely with the planned fleet requirements.

AMC considers the current and planned mining fleet to be adequate for the operation with the exceptions noted elsewhere in this report.

Table 2.24 LOM Primary Mining Fleet Levels

Major Mobile Fleet Levels

Mining Equipment – Permanent Bulk Mining Fleet 2008 2009 2010 2011 2012

Loading Fleet Excavators

Liebherr 996 Excavator 3 3 3 3 3

Haulage Fleet

Cat 793 Dump Truck 18 19 22 23 23

Drill Fleet - Primary

PV271 Drill Rig 2 3 3 3 3

ECM720 Drill Rig 1 2 3 3 3

Ancillary Fleet

Cat D10 Dozer 4 4 4 4 4

Cat 844 Wheel Dozer 1 1 1 1 1

Cat 24H Grader 1 1 1 1 1

Cat 16H Grader 1 1 1 1 1

Cat 777 Watercart 2 2 2 2 2

Cat 992 Front End Loader 1 1 1 1 1

Cat 330 Excavator/Rockbreaker - 1 1 1 1

Lighting Plant – large 12 12 12 12 12

Lighting Plant – small 9 9 9 9 9


AMC207098: 6 May 2008 48

2.3.5.6 Mining Sequence

The mine plan for Prominent Hill is structured in four stages, with overburden removal close to complete in Stage 1 and having commenced in Stage 2 prior to calendar year 2008. Waste tonnages, ore tonnages and grades for the remaining stages are detailed in Table 2.25. A plan showing each of the pit stages with lithology is shown in Figure 2.13. Note that the pit stage designs shown are from the BFS report and do not include the flatter wall angles of the current pit and stage designs.

Table 2.25 LOMP Mining Stages 2008 to 2017

Stage Tones Mt

Ore Mt

Cu %

Au g/t

Ag g/t

Waste Mt

Strip Ratio

1 48.7 14.1 1.2 0.8 3.4 34.6 2.5 2 138.9 19.7 1.7 0.5 3.0 119.2 6.1 3 129.4 15.3 1.0 0.6 3.2 114.1 7.5 4 189.0 30.1 1.1 0.6 3.0 158.8 5.3

Total 506.0 79.2 1.24 0.58 3.09 426.7 5.4

Figure 2.13 LOMP Mining Sequence with Lithology at 1050 mRL

AMC considers the planned pit development strategy suitable from a practical mining perspective. Further the staged pit designs are scheduled to provide continuity in ore production whilst deferring waste mining and a dual ramp system has been designed to reduce haulage distances and costs. AMC notes that the pit development sequence provides for cutbacks, which are greater than 70m wide and provide acceptable working areas for the mining fleet.

Scheduled material movements later in the mine life require increased bulk fresh waste movement and bench advance rates (particularly in years 2012 and 2013). AMC is of the opinion that good operational management practices and best practice operational performance will be required to achieve these peak schedule requirements. However the significant quantity of ore likely to be stockpiled on the ROM pad prior to this period will mitigate the risk of ore production shortfalls.


Construction of the 8 Mtpa plant is proceeding. Some delays have been experienced in the delivery of major equipment items from overseas manufacturers.


AMC207098: 6 May 2008 49

2.3.6.1 Ore Characteristics

The Prominent Hill orebody is an ‘iron oxide-hosted copper-gold deposit. Treatment of similar deposits usually employs conventional grinding and flotation to produce a copper-gold sulphide concentrate.

Copper mineralisation mainly occurs within a haematite (iron oxide) breccia host-rock (85%) with lesser proportions in andesite (11%) and carbonates (4%).

All currently known copper mineralisation occurs in fine-grained sulphide form, predominantly as primary chalcocite, bornite and chalcopyrite. Copper minerals usually occur in association forming discrete chalcocite-bornite (Cc-Bn), bornite-chalcopyrite (Bn-Cp) and chalcopyrite-pyrite (Cp-P) zones. There is also a separate ‘gold-only’ zone.

In general, the Cp-P zone has a greater non-haematite gangue association than the others. Non-haematite gangue contains the fluorine-bearing minerals fluorite, sericite and apatite. Uranium is present as uraninite and coffinite, mainly associated with chalcopyrite and bornite. In August 2006, the tonnage and metal contents for each of the four zones of mineralisation within the planned pit were as presented in Table 2.26.

Table 2.26 Prominent Hill Ore Types as at August 2006

Ore Type Mt % Cu g/t Au g/t Ag

Chalcopyrite - Bornite 45.0 1.69 0.46 3.80 Chalcocite - Bornite 12.9 0.93 0.44 2.90 Chalcopyrite - Pyrite 12.4 0.80 0.46 1.75 Eastern Gold only 8.9 0.06 1.60 1.47

2.3.6.2 Process Flowsheet

The basic processing flowsheet is presented in Figure 2.14.

Figure 2.14 Prominent Hill Process Flowsheet

2.3.6.3 Process Development and Equipment Selection

Comprehensive metallurgical development programmes were carried out at internationally-recognised laboratories within Australia and overseas.


AMC207098: 6 May 2008 50

AMC believes the samples used for the comminution and flotation testwork adequately represent the various rock types and copper mineralogy regimes within the orebody.

AMC has a high degree of confidence in the selected crushing, grinding and flotation equipment achieving the design throughput rate of 8 Mtpa.

AMC also believes the 60 inch x 89 inch gyratory crusher, the 12 MW SAG Mill and the rougher and cleaner flotation cells have sufficient capacity to treat 9 Mtpa. The 12 MW ball mill should also be capable of treating 9 Mtpa at a slightly elevated grind size and the 156 m2 concentrate pressure filter design capacity may be sufficient to accommodate a 9 Mtpa treatment rate. AMC believes the 45m diameter tailings thickener and the 23m diameter concentrate thickener have little upside capacity beyond the design level of 8 Mtpa.

2.3.6.4 Metallurgical Performance

Due to significant differences between predicted gold recoveries reported in the BFS and those proposed by an Independent Expert, AMC has reviewed the testwork data and developed the performance values presented in Table 2.27. Recovery rates are for mill throughput rates of 8 Mtpa and 9 Mtpa through the 8 Mtpa grinding and flotation circuits with appropriate de-bottlenecking of auxiliary equipment.

Table 2.27 Prominent Hill Metallurgical Performance Predictions

Copper Recovery % Gold Recovery % Ore Domains Conc. Grade %Cu 8 Mtpa 9 Mtpa 8 Mtpa 9 Mtpa

Chalcocite – Bornite 54 88 87.5 74 73.5 Chalcopyrite – Bornite 34 80 79.5 66 65.5 Chalcopyrite – Pyrite 25 87 86.5 60 59.5 Eastern Gold Only 64 63.5 88 87.5

2.3.6.5 Concentrate Quality

Annual concentrate grades are predicted to decline from a maximum of 51.2% copper over the ten-year mine-life as the proportion of chalcocite falls and chalcopyrite increases. A corresponding increase in sulphur and iron contents will also occur, and the copper:sulphur ratio will progressively reduce from 3 to 1. Concentrate fluorine and uranium contents will increase in the latter years unless mitigating steps are taken. Subsequent to completing the BFS Oxiana confirmed that additional rougher concentrate regrinding to below the current design level of 20 microns can reduce concentrate fluorine and uranium levels. In AMC’s opinion this could reduce the marketing constraints associated with these impurities.

AMC believes it would be technically feasible to reduce the uranium content by hydrometallurgical techniques, but as this may necessitate purchasing acid and adding a copper hydrometallurgical circuit, the additional operating costs may be prohibitive.

While copper concentrate remains in short supply, AMC believes a number of large overseas smelters, particularly those with halide scrubbers in the gas train will take limited tonnages of Prominent Hill concentrate for blending purposes. In particular, smelters treating low-grade, highly pyritic, or high arsenic-content concentrate could take advantage of Prominent Hill concentrate’s low arsenic content and high copper content, particularly in the early production years.

Opportunities also exist for concentrate sales to a domestic copper smelter where the high copper:sulphur ratio in Prominent Hill concentrate for much of the ten-year mine-life could be attractive.

2.3.7 Infrastructure

2.3.7.1 General

Prominent Hill is currently under development. However mining operations have commenced and the required infrastructure is either in place or is under construction. It is AMC's opinion that the operation will be well provisioned with supporting infrastructure.


AMC207098: 6 May 2008 51

2.3.7.2 Transport and Logistics

Vehicle access to Prominent Hill will be via a new road extending from the Stuart Highway. A dedicated concentrate export road is also under construction from the site access road to the Wirrida rail siding.

Supplies and equipment are generally transported to the site via Adelaide.

Personnel are transported using contract air charters flying from Adelaide to the site on a regular basis.

2.3.7.3 Accommodation

The permanent village at Prominent Hill has the capacity to house approximately 400 personnel. Additional accommodation is provided by a temporary construction camp.

2.3.7.4 Airstrip

The Prominent Hill airstrip is all weather and undergoes regular maintenance. The airstrip was designed to meet the requirements of the civil aviation safety authority ("CASA").

2.3.7.5 Power Supply

Construction of a 132 kV transmission line of approximately 280km in length from Olympic Dam is currently under construction to meet the electrical power requirements.

2.3.7.6 Processing Water Supply

The Boorthana Formation aquifer of the Arckaringa Basin has been identified as the most suitable source of raw water for Prominent Hill. The proposed well field is approximately 30 km southeast of the project area. Up to 18 wells will be required to meet the raw water requirements of the project, anticipated to be 16 ML/day.

2.3.7.7 Potable Water Supply

A reverse osmosis plant will be used to meet potable water requirements with water sourced from the well field.

2.3.7.8 Tailings Storage Facility

A TSF of the Integrated Waste Landform ("IWL") design is under construction within the south mine waste dump. The initial starter perimeter embankment varies in height from 5m to 9m to suit topography. It will be progressively raised to a final height of between 21m to 25m. The facility will receive thickened tailings slurry at 65% to 70% solids. Water extracted from the tailings will be recovered via a centrally located, pumped decant system. After decommissioning the TSF will remain enclosed within the waste dump.

2.3.8 Environment

2.3.8.1 Overview

While only in its development stage, the Prominent Hill project has already evidenced solid environmental performance. This is no doubt the result of thorough, risk-based impact assessment during the statutory environmental approvals process, and the subsequent development and implementation of well-designed environmental monitoring and management programmes.

Importantly, there is no evidence of significant non-compliance with statutory requirements. Authorities and permits are issued by the following agencies: Primary Industry and Resources, the Environmental Protection Agency and the Department of Water, Land, Biodiversity and Conservation. The crucial statutory instrument is the Management and Rehabilitation Plan ("MARP"), which has formed the basis of impact assessment and management-plan development during project design and implementation.

Relatively minor environmental issues have arisen during the project development so far, and these are discussed below, as well as issues which, while not currently problematical, are considered by AMC to demand sustained scrutiny and long-term planning and Mineral Resource commitment.


AMC207098: 6 May 2008 52

2.3.8.2 Potential Environmental Threats

Closure Costs

A conceptual closure plan has been developed with a total, but not detailed, cost estimate of $40M. AMC considers it to be a first-pass, empirical cost estimate and believes it should be broken down into a progressive (normally monthly) cost estimate to enable it to be provided for during the operating life of the project. This would also enable regular review of the life-of-project closure requirements and costs, with adjustment of the provisioning rate according to progressive rehabilitation and other closure activities.

Saline Water Spills

As well as representing a loss of an increasingly scarce resource, spills of saline water can cause widespread damage to ecosystems. Clean up of spills at Prominent Hill is effective, but can become a significant and distracting drain on equipment and manpower resources. The risk of coercive action by regulators is also a factor, with financial penalties and even constraint of operations becoming increasingly used as statutory environmental management tools in Australia. Telemetering of pipelines, with appropriate alarm triggers and response plans, are normally adequate to manage most spill-control situations.

Acid Mine Drainage

With almost 100 Mt of potentially acid-forming ("PAF") mine waste to be managed over the life of the project, mine schedules must ensure effective isolation of these materials from the broader environment. There is ample inert and even acid-consuming waste to be mined at Prominent Hill to allow encapsulation of PAF material, and the relatively low rainfall of the region can be expected to provide a relatively low risk environment, provided progressive management of PAF material is efficiently planned and implemented. Conceptual plans for encapsulation of PAF material have been made, with a store-and-release strategy planned for the inert cover. It will be necessary to complete the field and laboratory studies that are required for store-and-release systems as early as possible in project life, so that small-scale trials can be conducted well before decommissioning.

Significant Environmental Benefit ("SEB") Offset

The commitment to manage more than 11,000 ha of Mt Eba pastoral lease as a SEB offset is expected to meet the requirement of providing protection and enhancement of natural habitat, especially for the two threatened species identified in the project area. Regular monitoring and reporting are identified in the management plans developed for this important environmental initiative. Environmental offsets are a relatively new development in environmental management, and vigilance is required to ensure that changing aspirations of agencies and the community do not result in unresolvable problems.


Actual and planned operating and capital costs for the next three years, in accordance with the Prominent Hill 2008 LOMP are detailed in Table 2.28.

Table 2.28 Operating and Capital Costs Item Units 2006 2007 2008 2009 2010

Production Parameters Ore & Waste Mined Mt 9.5 67.3 73.0 72.1 69.7 Ore Mined Mt - - 8.2 8.3 7.2 Ore Processed Mt - - 1.4 7.6 8.0 Cu Recovered kt - - 19.2 112.1 105.2 Au Recovered koz - - 15.1 85.1 96.9 Ag Recovered koz - - 63.6 364.4 267.7 Unit Cash Operating Cost Mining $/t mined 3.6 2.0 2.4 2.5 2.6 Processing $/t processed - - 9.6 7.4 6.9 Conc. Transport/Port $/t processed - - 3.4 3.9 3.7 Site Support Services $/t processed - - 11.4 6.6 6.5 Unit Site Cash Cost $/t processed - - 145.8 41.2 39.4


AMC207098: 6 May 2008 53

Item Units 2006 2007 2008 2009 2010 Operating Cash Cost Mining $M 34.0 132.6 176.0 176.6 179.3 Processing $M - - 13.9 56.1 55.2 Conc. Transport/Port $M - - 4.9 29.4 29.4 Site Support Services $M - - 16.5 49.9 51.6 Total Site Cash Cost $M - - 211.4 312.0 315.5 Capital Cost Prominent Hill Operations $M - - 568.6* 2.0 5.4 Rehabilitation / Closure $M - - 0.0 0.0 0.0 Total Capital $M - - 568.6 2.0 5.4 * Remaining initial capital expenditure as at 1 January 2008

A review of past actual mining operating costs compared to plan has indicated that the costs are closely aligned. Table 2.29 shows a reconciliation of operating costs since mining commenced.

Table 2.29 Reconciliation of Actual and Plan Mining Operating Costs Plan

($M) Actual ($M)

Difference ($M)

Difference (%)

2006 49.0 34.0 -15.0 -30 2007 127.2 132.6 5.4 +4

A revised capital cost estimate prepared by Oxiana in October 2007 increased the capital cost budget by just under 30%. AMC has been assured by Oxiana that the revised capital estimate adequately provides for future capital expenditure. The revised capital cost estimate is detailed in Table 2.30.

Table 2.30 Capital Cost Estimate Item Original Capital Estimate

($M) Revised Capital Estimate

($M) Process Plant 250 329 Infrastructure 178 263 Indirect Costs 141 208 Pre-strip and Owners Costs 206 192 Sub-total 775 992 Owners contingency 75 88 Total 850 1080


AMC was provided with a current LOMP in the form of:

• a mining physical schedule

• an operating and capital cost and processing physical schedule

• a current three year budget.

AMC updated the operating and capital cost and processing physical schedule with the mining physical schedule and the current three year budget to develop the 2008 LOMP.

Two modelling scenarios, Case 1 and Case 2, were developed on the following basis:

• Case 1

- LOM production constrained to current ultimate pit design contents including Ore Reserve and some Inferred Mineral Resource after modifying factors have been applied.


- Processing capacity was set at 8 Mtpa commencing at the start of the December quarter 2008.


AMC207098: 6 May 2008 54

- Metallurgical recoveries for copper and gold adopted from the 2008 LOMP with some minor adjustments as detailed in Section 2.3.6.4.

- Unit operating costs consistent with the 2008 LOMP have been adopted.

- Capital costs consistent with the 2008 LOMP have been adopted.

The included Inferred Mineral Resource tonnage of 10.5 Mt is in the 2007 block model and is within the limits of the current ultimate pit design. AMC has assumed this material will be converted to Ore Reserves in the course of mining to the pit extents.


- Processing capacity was set at 9 Mtpa.

- Additional open pit mine life of three years based on average annual LOM ore tonnages and grade and strip ratios.

- Underground mining tonnes and grade of 10.6 Mt at 2.03% copper, 0.62 g/t gold and 3.92 g/t silver.

- Additional $14M of capital expenditure for Mineral Resource extension (exploration).

- Additional $10M of capital expenditure for minor processing plant de-bottlenecking.



Case 2 plans for the mining of an additional 34.4 Mt over Case 1 and extends the mine life beyond the 2008 LOMP. The additional tonnage is based on potential exploration upside arising from the relative paucity of drilling at the edges of and below the current Mineral Resource. Mineralisation has been intersected in several drillholes to the east, west and below the current Mineral Resource and is interpreted to continue at depth and along strike. Mineralogical and metallurgical qualities are assumed to be similar to the existing resource.

Approximately two-thirds of the additional tonnage is assumed to be from open-pit cutbacks and along-strike potential and about one-third from underground potential.

A significant risk in the assumptions for Case 2 is that the interpreted mineralisation at depth or along strike, may not be as continuous nor at thicknesses comparable to the existing resource.

In AMC’s opinion, it is feasible that a combination of these exploration opportunities could extend the mine life by an additional three to four years beyond that shown in Case 1 and this is what AMC has accepted for Case 2.

The two modelling scenarios are summarised in Tables 2.31 and 2.32.

Neither case has had any value added for the regional exploration potential of the Oxiana held tenements in the Mount Woods Inlier. These tenements are discussed and given a separate estimated valued in the sub-section titled Other Exploration - Oxiana (sub-section 2.5.2.1).


AMC207098: 6 May 2008 55

Table 2.31 AMC Modelling Scenario - Case 1 Item Units 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Production ParametersOre & Waste Mined Mt 73.0 72.1 69.7 63.7 68.4 67.0 47.9 22.9 13.9 7.4 - -Ore Mined Mt 8.2 8.3 7.2 7.3 8.2 8.5 9.0 9.0 8.1 5.5 - -Ore Processed Mt 1.4 7.6 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 6.3 -Cu Recovered kt 19.2 112.1 105.2 102.2 90.1 78.2 80.4 79.4 72.6 62.3 43.5 -Au Recovered koz 15.1 85.1 96.8 110.3 106.0 114.5 104.6 113.0 113.8 125.7 135.4 -Ag Recovered koz 63.6 364.4 267.7 309.0 329.0 325.0 322.6 327.5 323.4 279.5 212.4 -Unit Cash Operating CostMining $/t mined 2.4 2.5 2.6 2.7 2.6 2.7 2.9 3.3 3.8 5.1 - -Processing $/t processed 9.6 7.4 6.9 6.9 6.9 6.9 6.9 6.9 6.9 6.9 6.9 -Conc. Transport/Port $/t processed 3.4 3.9 3.7 3.7 3.4 2.9 3.1 3.1 2.9 2.9 2.6 -Site Support Services $/t processed 11.4 6.6 6.5 6.5 6.5 6.5 6.5 6.5 6.5 5.6 4.7 -Unit Site Cash Cost $/t processed 145.8 41.2 39.4 38.2 39 38.7 33.6 26 22.9 20.1 14.2 -Operating Cash CostMining $M 176.0 176.6 179.3 169.4 178.0 180.1 137.1 76.4 53.0 37.2 - -Processing $M 13.9 56.1 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 43.2 -Conc. Transport/Port $M 4.9 29.4 29.4 29.4 26.9 23.0 24.6 24.7 23.3 23.4 16.2 -Site Support Services $M 16.5 49.9 51.6 51.6 51.6 51.6 51.6 51.6 51.6 44.6 29.4 -Total Site Cash Cost $M 211.4 312.0 315.5 305.6 311.6 309.9 268.5 207.8 183.1 160.4 88.9 -Capital CostProminent Hill Operations $M 568.6 2.0 5.4 2.0 5.4 2.0 5.4 2.0 5.4 1.6 2.5 -Rehabilitation / Closure $M - - - - - - - - - - 2.8 40.0Total Capital $M 568.6 2.0 5.4 2.0 5.4 2.0 5.4 2.0 5.4 1.6 5.3 40.0

Table 2.32 AMC Modelling Scenario - Case 2 Item Units 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Production Parameters MtOre & Waste Mined Mt 73.0 72.1 69.9 64.2 69.4 68.0 48.9 47.4 38.4 31.8 36.6 36.6 36.6 1.0 -Ore Mined Mt 8.2 8.3 7.4 7.8 9.2 9.5 10.0 10.0 9.1 6.5 8.9 8.9 8.9 1.0 -Ore Processed Mt 1.6 8.5 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 4.5 -Cu Recovered kt 21.5 125.5 117.7 115.5 99.5 88.4 104.1 102.3 99.0 65.0 106.8 101.7 101.6 33.4 -Au Recovered koz 16.9 95.1 109.4 125.4 128.6 133.9 98.6 113.8 115.4 198.1 111.4 135.0 134.8 88.6 -Ag Recovered koz 71.5 409.8 289.6 359.5 377.1 367.7 385.4 395.2 396.7 308.9 376.1 367.5 366.9 128.7 -Unit Cash Operating CostMining $/t mined 2.4 2.5 2.7 3.1 3.4 3.5 3.9 3.6 3.8 4.1 4.0 4.0 4.1 55.4 -Processing $/t processed 9.2 7.1 6.6 6.6 6.6 6.6 6.6 6.6 6.6 6.6 6.6 6.6 6.6 6.6 -Conc. Transport/Port $/t processed 3.4 3.9 3.7 3.7 3.3 2.9 3.4 3.4 3.3 2.5 3.5 3.3 3.3 3 -Site Support Services $/t processed 10.9 6.3 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 5.3 4.5 -Unit Site Cash Cost $/t processed 131.3 37.9 37.1 38.4 41.9 41.8 37.5 35.1 32.5 29.9 32.7 32.5 31.7 26.3 -Operating Cash CostMining $M 176.0 176.6 186.5 197.9 233.4 235.6 192.5 171.3 147.9 131.7 147.8 147.8 148.5 55.4 -Processing $M 15.0 60.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 29.9 -Conc. Transport/Port $M 5.5 32.9 32.9 33.2 29.5 25.8 30.7 30.4 29.8 22.6 31.9 30.1 30.0 13.7 -Site Support Services $M 17.7 53.6 55.4 55.4 55.4 55.4 55.4 55.4 55.4 55.4 55.4 55.4 47.9 20.4 -Total Site Cash Cost $M 214.2 323.3 334.0 345.7 377.5 376.0 337.8 316.3 292.3 268.9 294.4 292.5 285.6 119.4 -Capital CostProminent Hill Operations $M 605.2 53.6 56.2 50.0 43.4 23.7 27.1 8.0 11.4 8.0 11.4 8.0 9.1 4.2 -Rehabilitation / Closure $M - - - - - - - - - - - - - 2.8 40.0Total Capital $M 605.2 53.6 56.2 50.0 43.4 23.7 27.1 8.0 11.4 8.0 11.4 8.0 9.1 7.0 40.0


AMC’s key observations in respect to the Prominent Hill Operation are summarised in the following sections.

Geology and Mineral Resources

The geology and mineralisation has been well documented and has been reviewed and endorsed by a world expert on IOCG systems, Dr. Murray Hitzman.

There were some issues highlighted in the assay QA/QC processes, with slight biases recorded for assay standards and an indication that regular reviews of QA/QC data are not undertaken. These are unlikely to have a material impact for this review.

General geological data gathering, core and sample handling procedures are at or better than industry standard, although the routine practice of cutting and assaying core prior to logging could lead to some slight inaccuracies when placing interpreted boundaries. This is, however, unlikely to have a material effect in the context of this review.

Uranium and fluorine sampling and assaying protocols need to be kept in line with copper and gold to assist in stockpile and concentrate blending and to avoid misprediction of grade.


AMC207098: 6 May 2008 56

The grade control drilling programme had just commenced at the time of AMC’s review, and with drilling conditions more difficult than expected. The delay in sample collection as a result of this is unlikely to be material in the context of this review.

The sum of $26 million has been allocated for Mineral Resource definition and exploration drilling in 2008. This should allow for a generous amount of drilling in the targets to the west and below the planned ultimate pit, as well as in the lesser prospective eastern target area. It should also allow for drilling at some of the 15 to 20 prospective regional targets, although for some of these there may be some access and permitting issues to be dealt with, as they are within the Woomera Prohibited Area.

Current drilling is showing that the mineralisation at depth, below the western edge of the pit, appears to be narrower than previously interpreted. This area is not currently in Mineral Resource as it is still considered an exploration target.

AMC has not re-estimated the Mineral Resources or Ore Reserves, or undertaken a detailed technical audit. However, AMC did review the digital Mineral Resource block model, processes and procedures and considers that they conform to industry standards.


Mining

The mining operation is currently progressing from overburden removal to ore mining in Stage 1.

Due to the physical characteristic of the deposit and the near mine exploration potential additional Ore Reserves are likely.

The current mining inventory (Ore Reserve plus some Inferred Mineral Resource) will allow mining operations to continue until 2017.

The mining operation is well equipped with new equipment purchased at the commencement of mining and the mining contractor has demonstrated an ability to achieve planned targets to date.

Geotechnical issues encountered while mining the cover sequence are being managed and flatter wall angles based on independent geotechnical advice have been implemented in the current pit walls and future staged pits have been re-designed.

AMC is of the opinion that good operational management practices and best practice operational performance will be required to achieve peak schedule requirements later in the project life. However the risk of production shortfalls is significantly reduced by the large quantity of ore likely to be on the ROM pad prior to this period.

A high degree of confidence can be placed on the extraction of the Ore Reserve and the eventual conversion of some of the Inferred Mineral Resource within the ultimate pit limits to Ore Reserve.

Mineral Processing and Concentrate Handling

The 8 Mtpa processing plant is still under construction and is therefore untested.

Processing employs conventional techniques and equipment.

A conservative approach to major equipment selection provides capacity to treat 9 Mtpa.

Copper concentrate will be uranium-bearing and will have a high fluorine content.

Future changes to international controls may prohibit transport or sale of uranium-bearing copper concentrate.


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The copper and gold concentrate produced at Prominent Hill will be a high grade copper concentrate. With the levels of uranium and fluorine present in the concentrate, larger smelters will be those best able to blend the concentrate in as a smaller proportion of total feed.

Environment

To date the Prominent Hill project has evidenced solid environmental performance with no evidence of significant non-compliance with statutory requirements.

A conceptual closure plan has been developed. However AMC considers it to be a first-pass, empirical cost estimate and believes it should be broken down into a progressive cost estimate to enable regular review.

There is ample inert and even acid-consuming waste to be mined at Prominent Hill to allow encapsulation of PAF material, and the relatively low rainfall of the region can be expected to provide a relatively low risk environment, provided progressive management of PAF material is efficiently planned and implemented.

Costs

Planned unit operating costs for 2010, which is the first year of full production, are:



• Concentrate Handling / Port $3.68/t processed

• Administration & Other $6.45/t processed.

A review of past actual mining operating costs compared to plan has indicated that the costs are closely aligned.

A revised capital cost estimate in October 2007 increased the capital cost budget by just under 30% with an additional $567M planned to be expensed in 2008.


AMC prepared two modelling scenarios as follows:

• Case 1:



- Metallurgical recoveries, operating and capital costs generally adopted from the 2008 LOMP with some minor adjustments.

- Unit operating and capital costs adopted from the 2008 LOMP.



- Additional open pit mine life of three years based on average annual LOM ore tonnages and grades and strip ratios.

- Additional underground ore tonnages.


- Additional capital for exploration and minor processing plant de-bottlenecking included.



AMC207098: 6 May 2008 58

2.4 Martabe

2.4.1 Introduction

The Martabe Project is located in the western side of Sumatra in the province of Northern Sumatra, close to Sibolga as shown in Figure 2.15. Sumatra has an unbroken mountain chain running down its centre, ranging in height from 1,575m to 3,805m. On the western side, the mountains plunge steeply into the sea. On the eastern side, they slope gently down to an area of plains and swamps.

The topography is steep and rugged with very few areas of flat ground and is generally forested. The Purnama deposit comprises a north-south ridge, which rises 250m above a colluvium-filled valley to its west and 100m above rugged hills to the east. There is, currently no vehicular access to the deposit; all equipment for exploration drilling was either hand-carried or transported to location by helicopter. Walking tracks pervade the area as there is a small population in the immediately surrounding area. Due to the ruggedness of the terrain there is very little agricultural activity within the actual mine area.

The Martabe deposits are above the town of Batang Toru which is 2 km from the Trans Sumatra Highway and some 30 km from the Sibolga deepwater port.

The project site is located approximately 10 km west of the Sumatran Fault.

Figure 2.15 Martabe Location Plan


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There is no history of mining within the immediate vicinity of the project. The Martabe gold system was discovered in late 1997 through regional stream sediment sampling by Normandy Anglo Asia Ltd.

The best gold soil geochemistry was identified in talus below the Purnama Hill on the western margins of the Purnama Fault, which led to the discovery of the Purnama deposit. Exploration has also identified mineralisation within the Martabe District at Pelangi, Baskara, Kejora and Gerhana.

Gold mineralisation occurs in three deposits over a strike length of 7 km. The most significant and best defined of these is the Purnama high sulphide epithermal deposit, where a Mineral Resource of 91.3 Mt containing 4,371 koz of gold and 54,800 koz of silver has been defined by diamond drilling.

A DFS has been recently completed for the development of the Martabe Project. The study determined the optimum development strategy for the Purnama deposit using conventional open pit mining methods, and conventional ore treatment methods to produce gold and silver bullion.

The DFS has identified an initial mine life of 9½ years with an annual production of approximately 200 koz of gold and 2,000 koz of silver. The project would mine and treat approximately 4.5 Mtpa of ore to produce an estimated 1,716 koz of gold and 16,563 koz of silver over the LOM. The Purnama deposit Ore Reserves have been calculated on a gold price of US$650/oz and a silver price of US$10/oz. These prices were also used for the engineering and cost studies. Recent financial analysis has been completed using a gold price of US$700/oz and a silver price of US$11/oz.

On 19 December 2007 the Oxiana Board approved the development of the Martabe Project. The capital cost of the project is estimated at US$310M (including contingency and escalation allowances of US$48M).

The processing plant will treat 4.5 Mt of ore per annum using proven SAG and ball milling and CIL technology. Recoveries are expected to be 76% for gold and 55% for silver.

Construction is estimated to take approximately two years from award of the EPCM contract to first gold production, based on the indicated deliveries of critical long lead items such as the power station and grinding mills.

Oxiana expects to formally present its application for the necessary environmental permits to the relevant Indonesian authorities in the early part of 2008 and is anticipating receipt of all necessary permits by April 2008.

There is also significant potential for additional ore sources at depth and in the adjacent Baskara and Pelangi deposits.

2.4.2 Contract of Work

Normandy Anglo Asia Ltd made an application for a Contract of Work ("COW") in the Sibolga District of North Sumatra. The COW, covering an area of 659,600 ha, was eventually granted in April 1997. Regional exploration and obligatory land relinquishment has since reduced land tenure to the present holding.

The COW is currently in good standing. All conditions for mandatory area relinquishments, minimum expenditure commitments and tax and reporting obligations have been met. The COW terms provide for specific work programme periods and minimum expenditures for each period calculated on a dollar multiple of the area of ground held at the time. The COW is currently in a first year extension of Feasibility phase, which runs until 26 May 2008. No further extension of this Feasibility phase is provided for.

The Martabe project itself lies within an area of 167 km2 inside the COW area. Of the original COW area of 6,596 km2, 1,648 km2, or 25%, is retained.

The operating period is for 30 years or longer if approved, but must commence within eight years from the commencement of the COW plus any time extensions granted during the various work periods of the COW.


The Martabe high sulphidation gold and silver deposits are hosted by Tertiary volcanic and sedimentary rocks associated with a fault that is part of the Great Sumatran Fault complex. Intermittent movement on the


AMC207098: 6 May 2008 60

regional-scale faults has been responsible for pulses of high level magmatic activity and development of phreatomagmatic breccias, flow dome complexes, hydrothermal alteration and gold mineralisation.

Major northwest to north-northwest faults form a prominent scarp that bounds the west side of the Purnama deposit. Conjugate northeast faults provided fluid channel ways that have localised and superimposed multiple alteration and mineralisation events on the rock mass.

The main host rocks to gold mineralisation are phreatomagmatic breccias and dacite flow domes that have intruded into gently dipping mudstone, siltstone, sandstone and andesitic lava. Multi-stage acid-leaching hydrothermal alteration events have produced widespread silicification which has resulted in tabular bodies of vuggy silica cutting various lithologies and enhancing the permeability of rocks for later gold-bearing fluids.

Gold mineralisation occurs in a three deposits over a strike length of seven kilometres. The most significant and best defined of these is the Purnama deposit which is the target of early proposed mining and has been estimated as Indicated and Inferred Mineral Resources.

At Purnama, epithermal gold-silver mineralisation is primarily hosted by silicic-altered and advanced argillic-altered rocks. Host rocks are mainly silicic phreatomagmatic breccias, porphyritic andesites, brecciated fault zones, and volcanic breccias. The altered breccias tend to form a less-permeable cap to the mineralising system. Several stages of mineralisation are recognised. The main stage of mineralisation consists of enargite/luzonite, covellite, native sulphur, pyrite, barite and marcasite in fractures and vughs. The mineralisation is now mostly oxidised. Zones of high gold grades are associated with late-stage fracturing, and crackle-type brecciation of the silicic rocks marginal to the clay-altered diatreme breccia.

Figure 2.16 shows a cross sections of the Purnama deposit indicating the proposed final pit outline.

Figure 2.16 Cross Section of the Purnama Deposit Indicating the Proposed Final Pit Outline

Baskara mineralisation is similar to that at Purnama, with correlation between silicic alteration and gold mineralisation. Primary controls are steep dipping north-east striking fault zones and phreatomagmatic breccias. High gold grades occur in strongly silicified phreatomagmatic breccias immediately adjacent to the fault zones.

Mineralisation at Pelangi is slightly different to that of Purnama and Baskara. Epithermal gold mineralisation is mainly hosted by steeply dipping quartz veins, sheeted quartz veins and veinlets, hydrothermal breccias and silicic altered rocks near the veins. Host rocks are phreatomagmatic breccias and sedimentary rocks.


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2.4.4 Mineral Resources

The Purnama and Baskara Mineral Resource estimates reported at 30 June 2007 are shown in Table 2.33 and are as reported in the DFS. The Pelangi Mineral Resource estimate was revised in 2007 to take into account additional drilling. Further drilling in the Purnama area in 2007 will lead to a revised Mineral Resource estimate in early 2008.

Table 2.33 Martabe Mineral Resources as at 30 June 2007 Measured Mineral

Resource Indicated Mineral

Resource Inferred Mineral

Resource Contained

Metal Gold Resources

(0.5g/t Au cut-off grade) Tonnes

(Mt) Au

(g/t) Tonnes

(Mt) Au

(g/t) Tonnes

(Mt) Au

(g/t) Au

(‘000 oz) Baskara - - - - 36.6 1.0 1,191 Pelangi - - - - 10.4 1.1 368

Purnama - - 48.8 1.8 42.5 1.1 4,371 Total - - 48.8 1.8 89.5 1.1 5,930

Measured Mineral Resource

Indicated Mineral Resource

Inferred Mineral Resource

Contained Metal

Silver Resources (0.5g/t Au

cut-off grade) Tonnes (Mt)

Ag (g/t)

Tonnes(Mt)

Ag (g/t)

Tonnes (Mt)

Ag (g/t)

Ag (‘000 oz)

Baskara - - - - 36.6 4 5,207 Purnama - - 48.8 24 42.5 13 54,800

Total - - 48.8 24 79.1 9 60,007

All of the drilling completed at Martabe has involved diamond drilling of PQ3, HQ3 and NQ3 core diameters. Drillhole data spacing for each deposit is as follows:

• Purnama: 50m x 50m spaced fences oriented along lines bearing 090º/270º with variable hole inclinations depending on accessibility to drill sites.

• Baskara: 50m x 50m spaced fences oriented along lines bearing 135º/315º with variable hole inclinations.

• Pelangi: up to 50m x 100m spacing near the central portion of the deposit, with the remaining area are more widely spaced. Drillholes are oriented along lines bearing 090º/270º with variable inclinations and azimuths accessibility to drill sites.

Drilling has been carried out and documented to industry standard. Assaying has been carried out at recognised commercial laboratories and supported by assay quality control protocols.

A geological and mineralisation framework was interpreted using geological and assay data. Lithological, alteration, oxidation and mineralisation domains were interpreted in three dimensions defined mainly by:

• a combination of alteration and lithology zones for Purnama

• alteration zones for Baskara

• interpreted zones of quartz veining, hydrothermal breccias and silicic alteration, and a 0.3g/t gold lower cut-off for Pelangi.

Grade estimation used ordinary kriging on 2m composites. Estimation parameters were based on variographic studies of domained data. Block models were developed with 25 mE x 25 mN x 10 mRL parent cell dimensions, with sub-blocking down to a minimum 6.25 mE x 6.25 mN x 2.5 mRL to delineate geological boundaries. Top cuts were applied to composite data to limit the influence of statistical outliers. Top cuts affect less than 1% of the data in each geological zone.

Grades were estimated as follows:

• Purnama: gold, silver, copper, cyanide soluble gold, cyanide soluble copper, cyanide soluble silver, arsenic, mercury, total sulphur, sulphur after pyrolysis, sulphide sulphur, total carbon, carbon after pyrolysis, and acid insoluble carbon.


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• Baskara: gold, silver and cyanide soluble gold.

• Pelangi: gold and cyanide soluble gold.

Average bulk densities have been assigned to rock types based on drill core determinations.

Mineral Resource estimates have been classified as Indicated and Inferred Mineral Resources at Purnama and Inferred Mineral Resources at Baskara and Pelangi. Mineral Resource classification was based on the confidence in the geological interpretation, the distance from data and indications of confidence from geostatistical results. The Mineral Resources have been reported at 0.5 g/t gold cut-off.

In AMC’s opinion, the gold Mineral Resource estimates have been developed using acceptable industry practices and classification into Measured, Indicated and Inferred Mineral Resource categories is in accordance with the JORC Code.

2.4.5 Ore Reserves

The Purnama Ore Reserves have been estimated using the economic cut-off grade and optimised pit design and have been adjusted to include 10% mining dilution. Mining recovery was estimated to be 95%. The Ore Reserves use metallurgical recoveries that vary according to the four metallurgical ore types identified during the DFS. The average gold recoveries vary between 71% and 81%. The silver recovery for all ore types is approximately 55%. The Ore Reserves are summarised in Table 2.34.

Table 2.34 Purnama Ore Reserves as at 30 June 2007

Contained Metal Category Tonnes ('000)

Au (g/t)

Ag (g/t) Au (koz) Ag (koz)

Proved - - - - - Probable 37,709 1.9 24.9 2,263 30,140

Total 37,709 1.9 24.9 2,263 30,140

The Ore Reserves are based on a gold price of US$650/oz and silver price of US$10/oz

There are no Ore Reserves for the Baskara or Pelangi deposits.

2.4.6 Geotechnical

Geotechnical investigations have found that the rock types are very competent, except for the brecciated clay band dipping steeply into the east wall. This clay band is extremely weak and, as such, will require a shallower pit slope. The recommended slope angle is 600. Andesite and fresh rock will have a slope angle of 700.

2.4.7 Hydrogeology and Hydrology

The Martabe Project is located in an area of high rainfall that will require the minimisation of downstream water impacts. In-pit water management will include run-off control, slope depressurisation and dewatering and the installation of dewatering bores. The preferred pumping capacity is sufficient for the ‘1 in 10 year 3 day event’.

Depressurisation of the pit walls will be required to reduce the risk of wall failure, particularly on the east wall. Horizontal drains will be required to be drilled into all walls below the ground water level.


Conventional open cut mining methods will be used to exploit the Mineral Resource of the project. Due to the closeness to surface, size and grade of the orebody, mining by underground means was not considered.

The DFS determined that hydraulic excavators, in backhoe configuration, would provide the necessary selectivity, flexibility and cost efficiency for the project. Two to three 80t class excavators matched with 40t capacity articulated all wheel drive trucks are proposed. The trucks have the advantage of being capable of hauling up steep gradients and are able to safely operate in high rainfall and poor conditions. Bench heights have been assumed to be 5m. The smaller mining equipment does, however, increase the equipment population and with that an increase in mining costs.


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The primary crusher will operate for 75% of each day and whilst direct dumping into the crusher hopper will be maximised a front end loader will be required to maintain stockpiles and to feed the crusher when ore is not being mined. It is estimated that 50% of the crusher fed will be by front end loader.

The proposed Purnama open pit has an average waste to ore stripping ratio of 0.65:1 and a total material movement of 62.4 Mt. Annual material movement rate is planned to peak at 9.3 Mt in 2012.

2.4.8.1 Contract Mining Request for Quotation Process

The DFS proposed that the mining operation be performed by a contractor. Four mining contractors were invited to submit quotations. Equipment size and types were initially not stipulated.

Some contractors were excluded from further analysis due to the submission of a late and non-conforming quotation and the fact that one did not have a presence in Indonesia.

The difference between the two conforming tenders is 24%, with the main variance being for waste excavate, load and haul. The RFQ specifications for waste disposal were based on constructing multiple small overlapping cells with the waste. The design has since been changed to a conventional TSF.

These two contractors were requested to resubmit rates based on using only 40t all wheel drive ("AWD") trucks and matched excavators. The smaller AWD truck has improved gradeability and offers improved safe operation in high rainfall and poor conditions. The submissions are contained in Table 2.35.

Table 2.35 Martabe Mining Request for Quotation Pricing

Original Revised % inc Original Revised % inc

1 Mobilisation, Establishment and Demob. 2,947,198 2,975,015 0.94% 2,336,648 2,847,720 21.87%

2 Monthly Management Fee 25,995,624 26,282,440 1.10% 34,406,800 41,846,800 21.62%

3 Preliminary Site Work 2,262,402 2,096,429 -7.34% 2,148,915 2,148,915 0.00%

4 Drill & Blast 37,221,660 37,221,660 0.00% 37,960,185 37,960,185 0.00%

5 Load & Haul Waste 29,009,597 34,898,090 20.30% 53,340,019 48,075,677 -9.87%

6 Load & Haul Ore 18,227,600 22,158,152 21.56% 18,044,562 36,147,719 100.32%

7 Load & Haul Low Grade Ore 10,779,859 12,940,226 20.04% 10,807,879 14,933,837 38.18%

8 Ore Rehandle 6,272,899 6,272,899 0.00% 4,825,307 4,825,307 0.00%

9 Construct New Road 107,683 107,683 0.00% 603,298 603,298 0.00%

10 Profiling of Waste Dumps 28,994 28,994 0.00% 155,498 155,498 0.00%

132,853,516 144,981,588 9.13% 164,629,111 189,544,956 15.13%Total

Item TitleContractor No1 Contractor No2

For cost estimation purposes the DFS used Contractor No 1 rates increased by 20%, which would be midway between the two submissions.

Unfortunately there is no material that supports the decisions to increase Contractor No. 1 rates by 20% for the cost estimation exercise.

2.4.8.2 Owner Mining Study

An owner mining study was compiled to indicate the potential savings over contract mining. Mining equipment would be leased on a fully maintained dry hire basis. Equipment was to be similar to that specified for the contractors.

The cost of owner mining was estimated from first principles using an equipment supplier quotation and estimated consumption of tyres, fuel, wear parts and service parts. The cost for excavate, load and haul is estimated to be $85.97M.

The Contractor No. 1 submission for excavating, loading and hauling is $77.15M excluding the fixed charge. The DFS assumed that 75% of the fixed charge is attributable to these activities and hence the total cost would be approximately $90M, which is $4M higher than the owner operator estimate. Given the relatively small financial savings (4%) of owner operator mining and the benefits of using an experienced Indonesian


AMC207098: 6 May 2008 64

based contractor, the DFS could not justify the owner operator mining. AMC recommends that this decision be revisited should the economic life of the project be extended.

2.4.8.3 Mine Production Schedule

The DFS developed a mine production schedule for the Purnama deposit, comprising a pre-production period followed by nine years of production. The orebody outcrops so ore is encountered immediately mining commences. The schedule is based on providing 4.5 Mt of mill feed per annum and maintaining a stockpile for blending purposes. A summary of the annual ore production is provided in Table 2.36.

Table 2.36 Martabe Scheduled Ore Production Material Total Pre-Prod 2010 2011 2012 2013 2014 2015 2016 2017 2018

T’000’s 37,709 271 3,832 4,555 4,412 4,550 4,491 4,483 4,470 4,570 2,075

Au g/t 1.9 1.2 1.8 1.8 1.9 1.9 1.9 1.7 1.8 1.9 2.5

Ag g/t 24.9 8.1 18.6 23.2 24.7 26.1 28.4 26.6 24.4 23.8 31.7

2.4.8.4 Waste Storage

All of the mined waste will be used in the construction of the TSF. Approximately 12% of the waste material is non-acid-generating, this material will be used to cover the exposed embankment in order to minimise acid generation.

2.4.9 Processing

The DFS is based on the treatment of 4.5 Mtpa of ore through a conventional milling and cyanide leach/CIL circuit.

Metallurgical testing on the Purnama ore has been undertaken over a number of years. The most recent testing was managed by Intermet Engineering ("Intermet") as part of the DFS. This work confirmed earlier testwork findings in that that the ore is of moderate hardness and gold recovery is generally insensitive to grind size. Gravity and flotation techniques were found to offer no benefits for the selected processing route. An optimum grind size of 80% passing 150 microns and conventional cyanide processing were selected for design. Recovery of gold by CIL processing was chosen over zinc precipitation (Merrill-Crowe) technique due to the presence of cyanide soluble copper in sections of the orebody.

Cyanidation testwork for samples from the four major ore types from the Purnama deposit showed that gold extractions were in the range 67% to 90%, while silver extractions were in the range 57% to 63%. Equations were developed to predict precious metal recovery based on the ore feed analysis.

The selected processing circuit is presented as a block flow diagram in Figure 2.17.

The proposed circuit utilises the following unit operations:

• Primary crushing of ore in a jaw crusher and conveying to a coarse ore stockpile.

• Ore grinding in a SAG mill operating in closed circuit with a pebble crusher, followed by a ball mill operating in closed circuit with cyclones.

• Leaching with cyanide in three leach tanks, before further leaching and gold recovery with carbon in seven adsorption tanks.

• Cyanide detoxification of leach tailings using the sulphur dioxide/air process followed by thickening of tailings and gravity discharge to a TSF.

• Recovery of gold and silver from carbon by column elution with cyanide and subsequent electro-winning of column eluate solution.

• Smelting of cathodes and sludge from the electro-winning cells to produce doré bars for export to a refinery.

• Associated services including reagent mixing, oxygen production, compressed air supply and water supply.


AMC207098: 6 May 2008 65

Figure 2.17 Proposed Martabe Processing Circuit

ROM Ore Primary Crushing &

Stockpile

Crushed Ore

Process Water

SAG Milling & Pebble Crushing

Ore Slurry Ball Milling &

Cyclone Classification

Ground Ore

Cyanide Leaching Leached Slurry CIL and Adsorption

Leached Tailings SO2/Air

Detoxification Thickening

Leached Tailings TSF

Loaded Carbon

Barren Carbon

Cyanide

Elution Eluate

Electro-winning and Smelting

Dore' for Export

The site proposed for the TSF is located in a river valley directly to the east of and at a lower elevation than the proposed Purnama open pit. Tailings will be contained by an embankment constructed from mined waste material. Two settling ponds are located downstream of the TSF to intercept contaminated run-off and seepage from the TSF. A water treatment plant located near the settling ponds treats contaminated water prior to its discharge back into the Aekpahu valley.

Water from the TSF is collected in a decant system for return to the process plant for use as process water.


The DFS includes the construction of a heavy fuel oil ("HFO") power station configured with five generator sets with a total rated generating capacity of 32MW. Further studies are being conducted to progress alternatives that will result in reduced capital and operating cost. These alternatives include grid supply from local stated-owned electricity supplier, Perusahaan Listrik Negara, and potentially hydro-generated sources. Grid supply is preferred, however reliability of supply is a necessity.

The project includes the construction of a jetty 16 km south of Sibolga (41 km to mine site) to take 2,000 DWT, 3.5m draft vessels. The jetty facilities include the development of a jetty, HFO storage tanks and associated facilities, diesel storage facilities, open storage and warehousing facilities and security, customs and ablutions buildings.

The only source of potable water in the proposed mine area is the main water supply to the village of Batang Toru from the Aek Pahu creek, which originates in the valley east of the deposit, flows south for a short distance and then flows west on the north side of the village. A cemented aqueduct on the south side of the creek carries water closer to the more densely built housing.

Rainfall in the area varies between 2.8m and 4.5m per year with evaporation in the region of 1.8m per year.

Raw water for the plant will be pumped from a catchment dam located east and adjacent to the plant site. Raw water will be used supply elution, gland water, fire water and as a supply to the potable water facility. Process water will be provided from the tailings thickener overflow and the TSF decant. Potable water will be filtered and sterilised using a ultraviolet ("UV") sterilising facility.


AMC207098: 6 May 2008 66

The project will require the Aek Pahu creek to be dammed. As this creek is the only source of water for the Batang Toru village a replacement water source will be provided by a bore field located in the valley west of the minesite.

The operation plans to have a workforce of approximately 650, including contractors. A permanent village will be constructed to house about 200 fly-in fly-out ("FIFO") personnel. The balance of the workforce will come from the surrounding area.

2.4.11 Environment

This developing project, in a very high rainfall zone of Sumatra, faces several significant environmental challenges, of which the most significant is acid mine drainage.

The proposed mining development is expected to have an impact on the local terrestrial flora and fauna communities. Terrestrial flora and fauna surveys were conducted in 2003 and 2004 and specific components of the surveys targeted threatened species known or expected to be present in the area, including the Sumatran Orang-utan. Oxiana have advised that there is little evidence of local Orang-utan populations.

The acid drainage challenge is clearly the largest in terms of potential impact and associated costs. Some 60% of the mine waste, as well as the tailings, are PAF; and virtually no waste is acid-consuming. Most, if not all, of the mine waste will be used for TSF construction, with inert waste used to cover acid-generating material. In this high-rainfall location, and despite the inert covering of PAF material, there is a significant risk of contamination of local streams with acidic and metal-enriched drainage from the outer walls of the TSF drainage.

It is proposed for Martabe that acidic drainage, and excess decant from the TSF, be treated to precipitate metals and neutralise acidity prior to release of drainage to the local stream systems. This treatment can be sustainable during operations, but will need to be continued for many years after mining ceases, because the amount of PAF material is large and will therefore provide a long-term source of acidity. Oxiana has provided for two years of drainage treatment after operations cease, but may need to extend this commitment once actual experience is gained during operations. Based on the geochemical testwork carried out to date, AMC considers that acid drainage from PAF material, even if covered with inert waste, will continue significantly longer than two years after operations cease.

It is proposed that the acidity of tailings be managed by maintaining a depth of water on the TSF. While this may significantly reduce the oxidation of sulphides in the tailings, it will still be necessary to test and likely treat the excess water during periods of discharge, even after decommissioning. It may also be possible to add water to the TSF during the dry seasons, but this would also need to continue after decommissioning, and possibly for a long time (more than a few years). Once operations cease, Oxiana may consider undiverting the creek that will be diverted around the TSF during operations; this could provide the water cover required to prevent sulphide oxidation of tailings. Further discussion with Oxiana is required on this issue.

It is also planned that the pit void be allowed to fill and overflow after the cessation of mining. Again, there is a clear need to monitor and probably treat water before discharge to local streams, since the pit walls below the depth of weathering contain significant PAF material. It is likely that, once the pit is full, little sulphide oxidation will occur, but ongoing monitoring would be required.

AMC considers that more detailed plans are required to be developed before the acid drainage risks at Martabe can be assessed in risk-management terms and the acceptability of management plans more reliably evaluated.


2.4.12.1 Operating Costs

Operating cost estimates for the project have been made in the DFS as outlined in Table 2.37.


AMC207098: 6 May 2008 67

Table 2.37 Martabe Operating Costs from the DFS Item Units Total / Ave 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Production ParametersTotal Movement Mt 62,385 834 6,166 8,123 9,322 8,744 7,645 6,695 6,411 6,083 2,362Ore Mined Mt 37,709 271 3,832 4,555 4,412 4,550 4,491 4,483 4,470 4,570 2,075Strip Ratio 7.61 2.08 0.61 0.78 1.11 0.92 0.70 0.49 0.43 0.33 0.14Ore Processed Mt 37,709 3,565 4,494 4,508 4,494 4,494 4,494 4,508 4,494 2,659Au Recovered koz 1,713 161.3 207.3 206.6 199.4 195.0 187.0 195.8 226.2 134.7Ag Recovered koz 16,590 981.0 1,651.0 1,899.6 2,075.8 2,296.0 2,205.4 2,044.4 1,952.3 1,483.9

Unit Cash Operating CostsMining US$/t mined 2.56 2.99 2.60 2.46 2.52 2.64 2.96 3.05 3.19 4.48Processing US$/t processed 9.57 9.83 9.36 9.32 9.38 9.53 9.65 9.67 9.74 9.84Admin & Maintenance US$/t processed 1.95 2.24 1.85 1.84 1.85 1.85 1.85 1.84 1.85 2.87Total Site Unit Costs US$/t processed 17.01 17.24 15.90 16.25 16.14 15.87 15.91 15.84 15.90 16.68

Cash Operating CostsMining US$M 174 18.5 21.1 22.9 22.1 20.2 19.8 19.5 19.4 10.6Processing US$M 361 35.0 42.1 42.0 42.1 42.8 43.3 43.6 43.8 26.2Admin & Maintenance US$M 74 8.0 8.3 8.3 8.3 8.3 8.3 8.3 8.3 7.6Total Site Costs US$M 609 61.5 71.5 73.2 72.5 71.3 71.5 71.4 71.4 44.4

2.4.12.2 Capital Costs

When Agincourt acquired Martabe from Newmont Mining in September 2006 the estimated development cost of the project was US$165M based on Newmont’s prefeasibility study. Agincourt commenced a bankable feasibility study ("BFS") with the intention of bringing the project on line by the end of 2008. The BFS was planned to be completed by March 2007. By November 2006 Agincourt was reporting that the project cost could be as high as US$200M based on establishing an open cut operation capable of an annual production rate of 270 koz of gold and 2,000 koz of silver over an initial eight year mine life.

In December 2007 Oxiana’s Board approved the development of the Martabe Project and advised that the capital cost would be US$310M (including contingency and escalation allowances of US$48M) based on an annual mill throughput of 4.5 Mt and an average annual gold production of 200 koz and silver production of 2,000 koz.

The current estimated capital for the project is summarised in Table 2.38. The capital costs do not include sunk costs prior to 2008, sustaining capital or project insurance.

Table 2.38 Martabe Capital Costs from the DFS Mining Base 25,453,711

Growth

Escalation 1,570,097

Contingency 1,962,621

Infrastructure Base 14,095,168

Plant/Port Base 153,791,808

Growth 10,442,432



EPCM Base 29,915,666

Growth



Land 15,267,000

Sustaining Nil

Owners Base 20,343,435

Growth

Escalation 810,775


Total 309,868,373


AMC was provided with business plans detailing production and cost forecasts over the LOM for the original DFS Purnama scenario and an accelerated version of this scenario.


AMC207098: 6 May 2008 68

AMC has prepared two LOM projection models based on Ore Reserve estimates and that part of other Mineral Resources for which AMC considers there is a high degree of confidence of future conversion to Ore Reserves.

The two modelling scenarios developed by AMC were established on the following basis:

• Case 1 tonnages were extended beyond the DFS Purnama scenario by an additional two years. This case extends the project life to 2020.

• Case 2 tonnages were extended beyond Case 1 by a further two years and then an acceleration simulation applied whereby all high grade material (gold grade >1.5 g/t) would be processed first and low grade material stockpiled and processed at the completion of all high grade processing. This case extends the project life to 2022.

• Annual average ore tonnages, waste tonnages, grades and recoveries for the additional years have been adopted as a base.

• Processing tonnage was set at approximately 4.5 Mtpa decreasing in the final year.

• LOM average annual unit operating costs have been adopted as a base.

• A sustaining capital provision of 4% of total project capital, less owner’s capital and land capital costs, has been applied across the life of the project.

• A closure/rehabilitation provision totalling US$4.25M included in the project capital.

The two scenarios are summarised in Tables 2.38 and 2.39.

Note that the Total Site Unit Costs and Total Cash Costs in Tables 2.38 and 2.39 include all other costs such as Geology.

AMC has not specifically included the Baskara and Pelangi Mineral Resources in LOM modelling scenarios. Additional value has been provided for these Mineral Resources in valuations of exploration assets. AMC considers that any additional value attributable to exploration is incorporated in the extended cases in the modelling scenarios.


AMC’s key observations are that Oxiana has reported an Indicated Mineral Resource of 48.8 Mt grading 1.8 g/t gold and 24 g/t silver and Inferred Mineral Resource of 89.5 Mt grading 1.1 g/t gold and 9 g/t silver for the Martabe area, which includes the deposits of Purnama, Baskara and Pelangi.

The Ore Reserve for the Purnama deposit is reported as 37,709t grading at 1.8 g/t gold and 24.9 g/t silver.

A DFS has been recently completed for the development of the Martabe Project. In December 2007 the Oxiana Board approved the development of the Martabe project. The reported capital cost of the project is estimated at US$310M (including contingency and escalation allowances of US$48M).

Depth potential is indicated at the Purnama deposit, however, it is currently deemed to be uneconomic due to low metal grades and recoveries.

In addition to the Ore Reserve estimates for Martabe, there is a substantial gold Mineral Resource base and the COW is generally prospective. Combined with Oxiana's active exploration programme at Martabe, extensions of mining and processing inventories beyond Ore Reserves can be anticipated.

2.5 Other Exploration - Oxiana

2.5.1 Regional Exploration Valuation

Oxiana has interests in a number of regional exploration projects in Australia and Asia. This part of the report reviews and values that regional exploration, as well as that associated with or close to existing mining projects. The major part of the latter is reviewed and valued elsewhere.

The ongoing annual budget for exploration is in the order of $80M to $90M, slightly more than half of which is scheduled to be spent on regional exploration as opposed to “in mine” exploration. As an indicative measure of the major part of the value of “in mine” exploration, the Case 2 aggregate values for Sepon,


AMC207098: 6 May 2008 69

Prominent Hill, Golden Grove and Martabe exceed the Case 1 values, which also include some exploration value, by more than $1 Billion.

The projects reviewed herein are largely at a pre Mineral Resource stage and methods for valuing such projects are subjective. AMC’s approach is to use as many methods as are relevant to a particular project and to choose from the indicated values a range which it considers appropriate. Limited if any use is made of share market indicators given the volatility of markets for speculative exploration. The values herein accordingly are closest to Technical Values as defined by the Valmin Code.

The methods used include:

• the Past Expenditure method which applies a PEM to effective past expenditure

• use of Actual Transactions for the project being reviewed or more frequently recent Comparable Transactions applicable to projects considered to have similarities with that under review. Many of these transactions are of a joint venture nature which provide a deemed expenditure to the interest of the vendor at the time of the transaction, that interest normally being 100% of the project. That deemed expenditure is discounted for the time involved in completing the earn in requirement and for the probability of that earn in being completed to obtain a value of the project at the time of the transaction

• Yardstick Values, derived from Comparable Transactions, where there are Mineral Resources or potential Mineral Resources that can be reasonably quantified

• values per unit area of tenement, again derived from Comparable Transactions. Values per unit area usually decrease with increase in the size of the tenement package

• Expected Values where a target Ore Reserve can be approximately quantified and its potential value approximately measured, the present value being derived by discounting the potential value with a market risk factor or by applying to the potential values a probability factor for successful delineation of the target and subtracting estimated exploration costs to prove it.

ZIN

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Tabl

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39

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1920

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575

7,57

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6,69

56,

411

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0.61

0.78

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0.92

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0.70

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0.14

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4494

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2.54

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2.75

2.39

2.28

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2.56

2.56

2.42

2.71

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2.91

3.40

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9.57

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9.83

9.36

9.32

9.38

9.57

9.57

9.50

9.65

9.69

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Item


AMC207098: 6 May 2008 71

2.5.2 Mount Woods Inlier

The project covers more than 4,000 km2 of favourable geology south east of Coober Pedy some 650 km north of Adelaide and includes the Prominent Hill deposit.

The tenements overlie a north-west trending contact between Palaeoproterozoic metasediments and Mesoproterozoic Gawler Range volcanics . Two major structural lineaments called G9 and G2 are postulated to have a special relationship with major Australian Mineral Resources and pass through the region. The Olympic Dam mine occurs at the intersection of these lineaments in Gawler Craton rocks about 150 km south east of Prominent Hill. About 100 km further to the south-south-east is the Carrapateena deposit also in Gawler Craton rocks.

Generally there is a cover of younger sediments some 30m to 200m thick. This provides a potential economic advantage compared with Olympic Dam where the cover exceeds 350m and Carrapateena where it exceeds 550m.

Copper-gold (-uranium) mineralisation at Prominent Hill, Olympic Dam and Carrapateena is referred to as IOCG style and is thought to be associated with Gawler Range Volcanics and Hitalba Suite intrusives around 1600 Ma. Mineralisation is typically associated with haematitic and magnetite breccias and can occur both within intrusive rocks and metasedimentary rocks, typically in association with major structures.

Within Oxiana’s tenements, previous exploration has located copper-gold mineralisation in several areas, in particular within a 10 km margin of the White Hill Complex. Future exploration will focus on the southern margin of the inlier close to the White Hill complex in a west-north-west trending zone some 30 km long associated with one of the postulated mineralising lineaments. It will also test a number of other discrete targets.

Prominent Hill mineralisation is thought to be similar in style and origin to the Olympic Dam hematite-chalcocite-bomite-chalcopyrite style while other known IOCG style mineralisation within Oxiana’s tenements is thought to be of a higher temperature magnetite-chalcopyrite style.

Oxiana’s exploration target is more than 50 Mt of open pittable mineralisation at depths above 600m and grades greater than 1.5% copper equivalent. Exploration to date has included limited drilling of prospects tested by previous title holders as well as definition of other mainly magnetic and gravity targets so far not tested by drilling. Mineralisation has been intersected in drilling in chalcopyrite – magnetite breccia and also in Gawler Range Volcanics with typical IOCG alteration, at least in one area with stratigraphy of the Prominent Hill style. So far the mineralisation intersected has been generally in broad zones of mainly less than 0.3% copper equivalent or in narrow higher grade zones.

While drilling to date has intersected mineralisation which, apart from Prominent Hill itself, is sub-economic, there has been limited testing of this large area of clearly prospective geology.

2.5.2.1 Valuation

Expenditure by Oxiana to date approximates $3.5M. Allowing for some pre Oxiana expenditure and using a PEM of 1.5 to 1.8, the indicated value would be $6M to $7M.

The value of the existing Prominent Hill deposit is in the order of $1.5 Billion as derived from work described elsewhere in this report. Exploration to find another deposit of that order could cost several tens of millions of dollars. Allowing for around $20M to $30M expenditure and using a success probability of 0.05, a broad valuation would be in the order of $45M to $55M.

During 2006 and 2007, there have been a number of farm-in transactions over projects in the general region of Prominent Hill and Olympic Dam, most with geophysical exploration targets. AMC estimated values of the projects at the time of the transaction translate into values per square kilometre of less than $1,000 for large areas to $7,500 for smaller project areas. One transaction over a 440 km2 tenement reported to be in the G2 mineralisation corridor involved cash and shares with a value per square kilometre of around $12,000. Taking into account these comparable transactions and the strategic value of the area to Oxiana, AMC estimates a value by this approach for the Mount Woods inlier of around $15M to $25M.


AMC207098: 6 May 2008 72

Considering all of these inputs AMC’s final valuation for the Mount Woods Inlier regional exploration potential is $20M to $50M.

2.5.3 Mount Gibson

The Mount Gibson project covers an area of 225 km2 over a mineralised Archaean volcanic sequence at the south end of the Yalgoo-Singleton Greenstone Belt and is some 100 km south of Golden Grove. Within the project area there are three known mineralised trends. The most important is referred to as the Mount Gibson Mine Corridor, a seven kilometre long zone containing both gold and base metal mineralisation.

The area was explored in the 1970s and 1980s, initially for base metals and then for gold, leading to the mining of near surface gold commencing in 1986 and continuing discontinuously to 1997. Some 16.5 Mt at 1.6 g/t gold (870 koz) was mined, mainly in shallow open pits.

The project was acquired by Oroya Mining Limited (“Oroya”) in December 2000 which re-estimated the residual Mineral Resources at 8.7 Mt at 1.98 g/t gold (559 koz) but concluded that this mineralisation was uneconomic at prices less than $1,000 per ounce gold. In 2003 Oroya farmed out the project to Barrick Gold which drilled some 11,600m before withdrawing.

The project was purchased in November 2005 by Legend Mining Limited (“Legend”) which completed a further 4,000m of drilling. Both its drilling and that of Barrick returned a number of narrow zones of massive sulphide with significant zinc and, some lead, copper, gold and silver with a best intersection of 4m at 13.5% zinc.

Oxiana has joint ventured the project with Legend and has the right to earn a 75% interest for the expenditure of $10M over seven years with a minimum committed expenditure of $1.5M over an 18 month period ending December 2008. To date its expenditure totals approximately $0.38M and therefore its beneficial interest would be around 10%.

Oxiana recognises similarities in stratigraphy, age and structural geometry between the Mine Corridor and the host rocks in Golden Grove and believes that the intersections of massive zinc sulphide, while narrow, could flank larger and potentially economic bodies of the Golden Grove style. It notes that there has been limited drilling below a depth of 150m and further notes the potential strategic value of Mount Gibson given the existence of a suitable treatment facility at Golden Grove.

2.5.3.1 Valuation

A project valuation based on the terms of the recent joint venture indicates a range of $1.5M to $1.8M and a value of $1.6M to $2.3M would be obtained on a unit area basis using a unit value of $7,000 to $10,000/km2.

The presently uneconomic gold Mineral Resource of 560 koz could be valued at $1.7M to $2.8M using a yardstick value of $3 to $5 per ounce, noting that the $1,000 per ounce threshold is some years out of date.

Using an Expected Value approach and a success probability factor of 0.05 to 0.10, with a value for a Golden Grove style deposit of say $200M and allowing $5M to $10M for exploration, AMC’s value estimate would be $5M to $10M.

In 2005, Legend paid $3.25M for the project.

Recently Batavia Mining sold the nearby Gullewa copper-gold deposit for $15M after a feasibility study concluded that it would not be economic. The Mineral Resource is in the order of 3 Mt at a grade estimated by AMC at around 8 g/t gold equivalents.

In 2006, a farm-in to a Napier Range area containing a small high grade zinc Mineral Resource indicated a project value of around $0.6M or $5,000/km2.

A 2007 transaction concerning the Wilcherry Hill zinc property in SA indicated a project value of $2.5M to $3.0M.


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Considering these inputs, AMC assesses a project value for Mount Gibson in the range $3M to $10M but as Oxiana has only just commenced work and its beneficial interest is small, the value to Oxiana is assessed in the range $0.4M, being its expenditure to date, to $1M.

2.5.4 Golden Grove Regional

The Golden Grove tenements cover approximately 125 km2 and include 25 km strike length of favourable base metal greenstone stratigraphy. South of the “in mine” area, previous geological mapping and drilling identified four initial target areas which have not been thoroughly tested. At Felix, intervals of up to 6m at 34% zinc are present at around 200m down hole. Supporting intervals indicate that the sulphide position may be open to the north and possibly at depth to the north thus providing a new target which will be addressed by the 2008 exploration programme. Farther south, at Gossan Valley and Flying Hi, intervals of up to 3m at 15% zinc are present between 200m and 270m down hole. Narrow intervals of up to 6.5% zinc occur at Bassendean. Much of the previous diamond drilling in the southern area tests to depths of less than 400m below surface. Most of the zinc deposits occur at Gossan Hill occur below this level.

To the north of the “in mine” area, the favourable stratigraphy is known to extend approximately 2 km north of Scuddles mine with some minor sulphide intersections recorded. Further north, the stratigraphy appears to change but supports a 7 km long copper-zinc-lead anomaly in rotary air blast ("RAB") holes which has not yet been adequately explained. Several massive pyrite-pyrrhotite intersections of uncertain stratigraphic affiliation have been made in this area.

2.5.4.1 Valuation

Oxiana's expenditure is only around $1M but it advises that previous operators had spent around $14M over more than 30 years. AMC thinks that it is reasonable to consider, at most, 50% of this earlier expenditure.

On a unit area basis of $10,000/km2 to $15,000/km2, the indicated value is $1.2M to $1.8M.

Comparable Transactions are those noted in the previous section.

The incremental value of a further two years of production at Golden Grove is in the order of $100M after allowance for ongoing exploration and capital costs. Using a market risk factor of 0.5 to 1.0, the indicated value is $5M to $10M.

AMC estimates a value for this part of Oxiana’s exploration at $4M to $8M.

2.5.5 Wiluna Project

Oxiana acquired the Wiluna project as part of its acquisition of Agincourt Resources (“Agincourt”) in 2007. The project is located on the north eastern edge of the Archaean Yilgarn Block in the Wiluna Greenstone Belt. The greenstone belt has been divided into two metamorphic domains separated by the north-west trending major Perseverance Fault. The Wiluna domain to the east is a sequence of mafic to ultramafic lavas overlain by felsic volcanics and sediments while the western Matilda domain is a higher metamorphic grade sequence with banded iron formations (“BIF”) in the west overlain by volcanics and in turn by felsic volcanic rocks and sediments. A number of granite plutons intrude both domains.

The Wiluna Project region has been explored and mined primarily for gold. Tenements containing the long operating Wiluna gold mine were sold by Oxiana to Apex Minerals in 2006 for $29.5M in cash, shares and a deferred payment. Uranium rights for some selected tenements at the southern end of the project area have been transferred to Toro Energy.

Within the remaining 950 km2 of the Wiluna Project there are a number of generally low grade gold Mineral Resources. The ultramafic sequences are also prospective for nickel sulphide and a number of tenements had been joint ventured by Agincourt with Independence Group NL (“IGO”) which has rights to earn a 51% interest in the nickel sulphide potential only over a period of three years for an expenditure of $3M with a possibility of increasing that earning right to 70%.

Within that part of the project not joint ventured with IGO, there are ultramafic sequences which Oxiana believes may be prospective for sulphide nickel and there have been historical narrow intersections of possible economic significance. Additionally Independence has relinquished its interest in some tenements


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previously in the joint venture and Oxiana believe that some of this ground continues to be prospective for nickel sulphide.

Two exploration licences (“ELs”) in the western part of the project area are held for iron ore exploration.

2.5.5.1 Valuation

For review and valuation of Oxiana’s interests AMC has considered the following components.

1. The IGO joint venture interest.

The terms of the joint venture agreement deem Oxiana with a value of $3M for its interest subject to completion of the earning requirement over three years by IGO. IGO has spent some $0.4M to date and its work has produced two narrow good grade nickel sulphide intersections at the Bodkin prospect. With recognition of this encouragement and the terms of the joint venture, AMC values Oxiana’s present interest at $2M to $2.5M.

2. Iron Ore interests.

The two ELs covering about 20 km2 include about 4 to 6 km of strike of the BIF unit which to the south hosts the Golden West deposit which has a Mineral Resource estimate of 86.3 Mt at 60.1% iron. Early work on Oxiana’s ground has identified one small pod of high grade haematite and other indications of haematite rich lithology. Recent transactions for iron ore prospective areas in the Pilbara indicate values in the order of $6,000 and $7,000 /km2 for larger areas or in one case $0.4M per tenement while three tenements purchased recently adjacent to the Cape Lambert magnetite Mineral Resource exchanged at a value in the order of $25,000/km2 or more than $1M per tenement. Considering these transactions, AMC values Oxiana’s iron ore interests in the two exploration licenses at $0.3M to $1.0M.

3. Balance of project area, gold and nickel potential.

There are three identified gold Mineral Resources totalling a contained 303,000 ounces of gold which include the residual Mineral Resource at the Matilda mine of 1.94 Mt at 1.08 g/t gold as well as the largely primary Mineral Resource at Regent estimated at 1.0 Mt at 3.47 g/t gold. In addition there are a number of other prospects where gold of sub economic to potentially economic grades and widths has been intersected in drilling and where there is potential to identify economically mineable deposits at high gold prices. Much of the area is of poor outcrop, in particular the Lake Way area to the south where there have been a number of narrow but good gold intersections in stratigraphy which continues from the Wiluna mine area.

The area has been explored for many years by a number of companies and AMC considers that a valuation taking into account past exploration expenditure would not be meaningful. Recent transactions for Western Australian gold projects include:

• Wallbrook Gold where a transaction implies a value around $13 per contained ounce for a number of apparently marginal projects aggregating to more than 500 koz being added to an existing larger project.

• $11 per contained ounce for remnant Mineral Resources within 25,000 km2 of tenement at Fortnum.

• $20 per ounce for residual Mineral Resources at the Burnakara Project.

• $37 per ounce for the Kirkalocka project acquired by an operating gold mine in the district.

For Oxiana’s interest in this part of Wiluna, AMC considers a Yardstick Value of $8 to $12 per ounce for the delineated Mineral Resources together with a value of $5,000 to $7,000 per km2 for the remaining 750 km2 of total project area, the latter figure recognising that the nickel sulphide potential is partly excluded from this part of the project. AMC therefore concludes a value for Oxiana’s interests in this part of the Wiluna Project of $6.2M to $8.9M.


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4. Wiluna Lateritic Nickel

Oxiana has reported an Inferred Mineral Resource for the Wiluna lateritic nickel deposit of 80.5 million tonnes grading 0.77% nickel and 0.06% cobalt for 620 kt of contained nickel reported at a 0.5% nickel cut off. This is a low grade lateritic nickel occurrence but Oxiana is investigating treatment options that may make allow economic mining and treatment of this material.

AMC considers that it is appropriate to value the Wiluna laterite tenements using a Yardstick Value based on comparable transactions of $3 to $6 per tonne contained nickel indicating a range of values of $1.9 to $3.7 million. In 2006 Heron Resources Ltd bought an interest in the similar Highway Mineral Resource at a price equivalent to $3.40 per tonne contained nickel.

2.5.5.2 Summary

The aggregate exploration value estimate for Wiluna is $10M to $16M.

2.5.6 Sepon

The Sepon project covers about 1,250 km2 over a sequence of Palaeozoic sediments and volcanic rocks in the Truong Son fold belt, a mobile belt between the cratons of Indo China and South China.

Most exploration work has been on the Sepon mine area where copper and gold mineralisation is associated with rhyodacite porphyry (“RDP”) intrusives localised along a jog in a northwest trending major structural feature. Significant high grade copper occurs in skarns and carbonate replacement bodies enriched by supergene processes. In some cases mineralisation is remobilised and occurs as exotic deposits in carbonate stratigraphy. Lower grade primary copper mineralisation commonly occurs beneath the supergene deposits. Economic gold mineralisation is associated with alteration and replacement in mainly carbonate sediments.

Prior to Oxiana's acquisition of Sepon, significant regional exploration was carried out including airborne geophysics and stream sediment sampling with drilling of some targets.

Exploration value associated with deposits currently in the modelling scenarios is reviewed and valued elsewhere in this report. Outside of that AMC recognises six zones of potential.

2.5.6.1 Primary Mineral Resources

Sepon Primary Gold – Measured, Indicated and Inferred Mineral Resources for primary gold mineralisation at Sepon total 35 Mt grading 2.0 g/t gold for 2,220 koz of contained gold reported at a 0.5 g/t gold cut off. Metallurgical testwork indicates that recovery of gold from primary mineralisation is less than that for oxide and partial oxide mineralisation. Reporting the primary gold Mineral Resource at a higher cut-off to reflect poorer recovery would be appropriate. Studies by Oxiana indicate that an expanded Mineral Resource base may create an economic project for primary gold Mineral Resources. The 2008 exploration programme is partly focused on expanding the primary gold resource.

AMC considers that it is appropriate to value the Sepon primary gold Mineral Resource using a Yardstick Value based on Comparable Transactions of $8 to $12 per ounce contained gold indicating a range of values of $18M to $26M.

• Sepon Primary Copper – Measured, Indicated and Inferred Mineral Resources for primary copper mineralisation at Sepon total 16.1 Mt grading 1.17% copper for 189 kt of contained copper reported at a 0.5% copper cut-off. AMC notes that the primary copper Mineral Resource as currently delineated is fairly low tonnage and not suited to the current treatment operations. The 2008 exploration programme is partly focused on expanding the resource.

AMC considers that it is appropriate to value the Sepon primary copper Mineral Resource using a Yardstick Value based on comparable transactions of $30 to $45 per tonne contained copper indicating a range of values of $5.7 to $8.5 million.


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Comparable transactions include the 2006 Copper Range joint venture valuing a 3.7 Mt low grade Mineral Resource at $30 per tonne of contained copper and the 2005 acquisition of the Redbank deposit at $62 km per tonne contained.

2.5.6.2 Regional Exploration

• Gold mineralisation immediately west and east of the mine area along the trend of the mine mineralisation.

To the west there are numerous gold-arsenic-lead geochemical anomalies over up to 20 km of strike. Some encouraging drill intersections have been recorded at the Ban Mai and Nakachan prospects but overall results indicate lack of continuity. Exploration is focusing on carbonate-bearing stratigraphy in the search for gold deposits.

In the so called Eastern Domain to the east of the mine along some 10 km of strike, exploration has identified several fairly large areas in which gold occurs in association with jasperoid and quartz veining. Rock chip samples of up to 50 g/t gold have been recorded and trenching has identified zones 2m to 3m wide of mainly 1 g/t gold to 5 g/t gold. Wide spaced shallow drilling over some 3 km strike incorporating the Nan Pa and Houay Bang anomalies have recorded gold intersections mainly in the range 1m to 10m of 1 g/t gold to 10 g/t gold.

• Molybdenum values in the central part of the RDP stocks often range between 400 ppm and more than 1000 ppm and are associated in long intersections with copper values around 0.2%. There have been no attempts as yet to indicatively quantify tonnages or grades of potentially economic mineralisation or to examine the possible economics of this style of mineralisation. For comparison, deposits in Australia which have recently been attracting attention include Spinifex Ridge which has a Mineral Resource of more than 400 Mt at 0.058% molybdenum.

• Copper potential indicated by geochemical anomalies extending east and to the south east of the mining area. Follow up exploration is being carried out.

• Zinc (lead-silver) mineralisation in the Din Daeng valley about 8 km north of the main Sepon mine area. Geochemically anomalous zinc has been recorded over a strike length of more than 20 km and a width of up to 700m and outcropping zinc mineralisation has been noted over an 8 km strike length towards the eastern end of the zone. Mineralisation is associated with Sepon aged dolomitic rocks but the mineralising event is not thought to be related.

Limited shallow drilling over some 500m across strike has recorded generally low grades of zinc with a little lead over intervals of 1 to 3m. Limited exploration to date has yet to identify geological positions in which potentially economic mineralisation might be located.

2.5.6.3 Valuation of Regional Exploration

Oxiana’s estimated expenditure on exploration outside of the areas reviewed as part of the mining project is in the order of $20M to which a further $2M could be added for previous work. AMC thinks that a PEM of around 1.2 to 1.5 would be appropriate to apply to this expenditure.

Recent Comparable Transactions include a project in Indonesia of 250 km2 with potential for large breccia and volcanogenic hosted gold-base metal mineralisation where 1989 drilling had recorded intersections of gold, silver and copper with some lead and zinc which were generally of fairly low tenor. The share, cash and expenditure transaction implies a project value of greater than $3M or greater than $12,000 per km2 for a smaller area than Sepon.

In remoter parts of Australia recent transactions concerning large areas favourable for base metal and gold mineralisation indicate values in the range $2,000 to $5,000 per km2.

Were the Din Daeng zinc project to be joint ventured in its own right AMC would expect it to attract an earning expenditure approaching $10M to earn +60% interest suggesting a project value in the order of $3M to $5M.


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Based on the evidence for potential additions to oxide gold Ore Reserves from the areas east and west of the mine area, a reasonable target would in AMC’s opinion be in the order of 3 Mt to 10 Mt of 2 g/t gold to 3 g/t gold. At the present stage of exploration, AMC would apply a risk factor of 0.15 to the indicative NPV based on the valuation of the existing oxide gold Ore Reserve to generate an expected value in the order of $4M to $9M.

Considering the indicative Ding Daeng and oxide gold values per ounce plus a value of $4,000/km2 to $7,000/km2 for the balance of the area, the estimated value would be $12M to $23M which AMC increases to $15M to $25M in consideration of the past expenditure figure.

2.5.6.4 Summary

AMC's valuation of Sepon exploration is (rounded) $39M to $60M.

2.5.7 Martabe

This assessment includes the Baskara and Pelangi Mineral Resources. These are located in the "Martabe District" (1,500 km2) and are not considered in the AMC modelling scenarios.

2.5.7.1 Martabe District Mineral Resource Value

Indicated plus Inferred Mineral Resource estimates for the Purnama, Baskara and Pelangi deposits comprise 138 Mt containing 5,900 koz of gold.

The Probable Ore Reserve estimate is for Purnama only. It is 38 Mt containing 2,300 koz, based on an evaluation gold price of US$650/oz. Pit optimisation work for Oxiana has shown, however, that this Ore Reserve estimate is quite insensitive to gold price up to US$800/oz.

Nonetheless, AMC’s modelling scenarios contain extensions beyond Ore Reserves. AMC’s Case 1 modelling scenario contains 2,800 koz and Case 2 contains 3,300 koz in the mill feed schedules, being 24% and 46% higher than the Ore Reserves respectively.

These scenarios are effectively based on the Purnama Ore Reserves plus additions in recognition of Martabe’s substantial Mineral Resource base and, to a lesser extent, the general prospectivity in the immediate vicinity of the current mine development area.

Mining evaluations of the Baskara and Pelangi deposits have not been undertaken. In combination, they comprise Inferred Mineral Resources of 47 Mt grading around 1.0 g/t gold, containing approximately 1,500 koz of gold.

Given that they have not been evaluated, AMC considers that the value of the Baskara and Pelangi Mineral Resources is not reflected in its modelling scenarios but that this value is modest because of their low grade and the challenging topography.

AMC’s estimated value of contained gold for the Baskara and Pelangi deposits is US$4 to US$8 per ounce, giving a valuation range of US$6M to US$12M or approximately $7M to $13M.

2.5.7.2 Regional Exploration

Exploration has delineated a variety of gold mineralisation styles including high sulphidation epithermal (“HSE”) and low sulphidation epithermal (“LSE”) veins, limestone replacements and skarns, all associated with volcanic rocks and altered variants of these. Most of the exploration to date has focused on the Martabe-Kapur Corridor. So far there have been no significant discoveries of copper-gold mineralisation of a porphyry style but Oxiana’s future exploration is to focus on such targets.

From north to south, the main prospects are:

• Tango Papa which is 30 km north-west of Martabe. Oxiana is looking for a Martabe style HSE gold system and has yet to drill existing geophysical and geochemical anomalies.

• Golf Mike which is 7 km south-east of Martabe in the Martabe-Kapur corridor. Geology suggests potential both for porphyry and sediment hosted HSE gold. There has been no significant mineralisation discovery yet.


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• Kapur-Gambir District which is 30 km south-east of Martabe and includes:

– The Natas LSE vein system where high grade gold has been recorded from rock chips and where Oxiana is searching for high grade gold veins.

– Batu which is a series of veins south-west of Natas and north-east of the Kapur stockwork. The Kapur epithermal system has been tested by some 18 drillholes and a few high grade gold intercepts have been recorded together with several low grade longer intersections suggesting mineralisation is distributed in a flat lying zone some 40m to 60m from surface and of supergene origin.

Extensions of Batu to the north-east have not been well tested to date and further work will be carried out looking for a larger tonnage potential.

– Gambir is a soil anomaly west of Kapur tested in 1995 with five drillholes which recorded narrow discontinuous gold mineralisation. It is intended to test a new area where values up to 2.1 g/t gold have been recorded in rock chips.

• Southern Corridor which is 45 km south-east of Martabe on the Martabe-Kapur Corridor. In an area of sediments intruded by diorite/granodiorite a geochemical anomaly associated with strong structural trends has been tested with a best intersection at 17m at 2.4 g/t gold in granodiorite. The area is believed to have potential for intrusion related base metals and gold but is in a Protected Forest Reserve for which a permit for exploration is required.

• Rantan Danjang which is 60 km south-west of Martabe where gold-copper geochemical anomalies occur in an area of old alluvial mining in Palaeozoic-Mesozoic sediments and volcanics intruded by younger granites. There is some evidence of epithermal mineralisation but the area is thought to have possible potential for porphyry mineralisation.

2.5.7.3 Valuation of Regional Exploration

Given the distance from the Martabe project area, AMC believes that these exploration areas should be valued on a stand alone basis although with some strategic premium as part of the total project.

Expenditure by Oxiana outside of the Martabe District is only $130,000 but larger amounts have been spent by previous explorers. Oxiana’s estimate of previous regional exploration expenditure approximates $15M. This exploration work included airborne geophysics and stream, soil and rock sampling.

The most relevant comparable transaction is the recent one in Indonesia on Rombang Island where 51% of five titles aggregating 250 km2 has been acquired for 5 million shares and $150,000 in cash together with an obligation to spend $1.5M on exploration. AMC values this project at the time of the transaction at over $3M.

Another 2001 Indonesian joint venture (Section 2.5.8.1) values a 116 km2 project with low grade gold intersections at around $1.25M or more than $10,000/km2.

AMC considers an appropriate value for the much larger Martabe tenements is around $4,000 to $5,000 per km2 or $6M to $9M.

With these inputs and some allowance for the strategic value of the regional exploration areas, AMC estimates a value of $8M to $15M followed by recognising past expenditure at the upper end.

2.5.7.4 Summary

AMC’s total valuation for Martabe exploration is $15M to $28M.

2.5.8 Other Asian Exploration

Outside of Sepon and Martabe, Oxiana has several programmes of generative exploration in Thailand, Cambodia, Laos and China from which a number of new projects are being currently explored. In its expenditure reports for these areas, Oxiana includes project generation expenditure which in part relates to projects which remain live and prospective. AMC has taken this into account in its valuation approach.


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2.5.8.1 Comparable Transactions

In considering Comparable Transactions for valuation, AMC has considered the following:

• The 2008 Rombang Island (Indonesian) transaction referred to above.

• A 2004 acquisition by Argonaut of prospective geology in Laos which included a payment of US$1M in cash and shares for a 20% interest.

• A 2006 acquisition of two projects in Cambodia (520 km2) with reportedly good rock chip geochemistry and Sepon and Chatree similarities for $0.87M.

• Agincourt’s 2006 purchase of Martabe (6,200 koz gold equivalent in Mineral Resources) for $102M.

• A 2004 acquisition of 65% of a 777 km2 project in Laos, 150 km from Sepon for $0.5M and share options.

• A 2007 Indonesian farm-in over a 116 km2 project with earlier long drill intersections of low grade gold to earn 51% for US$4M over five years.

• The Palitpan farm-in (Section 2.5.9.2) valuing the project at around $0.75M at the time or $14,000/km2.

• A 2008 farm-in to three tenements in Cambodia with an up-front payment of US$0.4M and expenditure of US$4.5M to earn 51%.

2.5.9 Thailand Exploration

Four separate projects in Thailand are reviewed in this section.

2.5.9.1 Thai Iron

About 100 km to 150 km east and south-east of Bangkok in an area of good infrastructure, Oxiana has secured some 208 km2 in SPL applications which cover some 90 km of strike of poorly outcropping, magnetically anomalous stratigraphy interpreted to reflect BIFs generally in the order of up to 50m wide. Float and outcrop of enriched BIF have assayed at potentially economic iron grades up to 67% iron.

Oxiana’s interest in the project is presently 100%. Including project generation, its expenditure to date is around $0.9M. Recent transactions in Australia for areas yet to be proven as significant iron ore provinces include:

• a joint venture over an area in the Gawler Range in South Australia where there have been drill intercepts up to 56.6% iron and where the earning requirement for a 40% interest is $2.5M over three years with a minimum expenditure of $0.5M. AMC values this project at the time of the transaction at $1.5M to $2M

• a joint venture concerning an area in the Robinson Range of Western Australia where 50% can be acquired for expenditure of $0.5M over a two year period and AMC would value the project at the time of acquisition at $0.3M to $0.4M.

AMC values Oxiana’s interest in the Thai Iron project at $1M to $1.5M.

2.5.9.2 Palitpan

Oxiana owns 50% and can earn a 75% interest for expenditure of $4.75M over five years in an area of applications totalling 53 km2 where the geology is similar to that at the Chatree Mine and where high tenor gold geochemical anomalies have been outlined. AMC assigns Oxiana’s interest a value of $0.3M to $0.5M considering a granted project value of $1M and expenditure to date of some $0.26M.

2.5.9.3 Chatree/Wang Yi

Oxiana has a 75% equity and is required to sole fund exploration in five applications covering an area of 10 km2 contiguous with the Chatree gold mine. Oxiana’s expenditure to date exceeds $5M, including some of the project generation costs, and its work has identified three separate areas of gold mineralisation, the best of which contains high grade veins over an area of 250m strike with a potential gold content stated at 60 koz to 100 koz. Land access is difficult in this area and Oxiana is considering selling its interest.


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Based on reported high probability of defining 100 koz to 200 koz and a moderate probability of defining 200 koz to 1,000 koz and using a Yardstick Value of $30 to $40 per ounce (considering the proximity of an operating mine) with a risk discount of 0.7 for the high probability target and 0.4 to 0.5 for the moderate probability target, AMC values Oxiana’s interest at $6M to $12M.

2.5.9.4 Lampang

Target stratigraphy for volcanogenic massive sulphide mineralisation has been defined in six areas under tenement application totalling 305 km2 and for which Oxiana’s interest is 50% earning to 75% by spending $4.75M over five years. Existing small barite mines are in rocks from which samples have assayed gold, silver and base metal values of potentially economic tenor. The host rocks are sediments and volcanics with mainly mafic intrusions.

With a project value indicated by the joint venture terms of $0.75M, AMC values Oxiana's interest at $0.3M to $0.4M.

2.5.9.5 Summary

The aggregate value for Thai exploration is $7.6M to $14.4M.

2.5.10 Cambodia

Oxiana is negotiating a joint venture with a local company which can acquire a 10% interest in Oxiana’s interest in Cambodian projects at decision to mine, Oxiana loan carrying its partner for expenditure after that time. It currently has interests in three areas north-east of Phnom Penh.

2.5.10.1 Phnom Chi

A memorandum of intent (“MOI”) has been negotiated to cover three large areas of artisanal mining where 15 holes have been drilled with generally disappointing initial gold grades. The tenement area is 78 km2 Oxiana paid US$50,000 to enter a joint venture in which it has a 90% interest sole funding expenditure to decision to mine with an obligation at that point to pay a further US$5M. It is currently considering withdrawal or disposal.

Oxiana’s total expenditure on the project to date is in the order of $1.2M and with a PEM of 0.6 to 0.8, AMC values its interest at $0.7M to $1.0M.

2.5.10.2 Ou Anlong

Surface exploration is in progress in this area of 16 km2 where there are numerous known copper occurrences with grades up to 8.75% copper and 145 ppm silver and where the target is sediment hosted copper. A MOI is being negotiated and an exploration license being procured. Oxiana is to pay US$1,500 and a further US$30,000 followed by US$50,000 at the end of year one and US$100,000 at the end of year two. Its interest will be 88% and it will sole fund exploration to decision to mine with a further payment of US$2M.

Oxiana’s expenditure to date is in the order of $0.3M and with a PEM of 1.2 to 1.7, AMC values its interest at $0.4M to $0.5M.

2.5.10.3 Ok Vau - Ochung

Oxiana has an interest of 80% in this area of 440 km2 and is sole funding exploration to decision to mine. Its target is intrusive hosted gold. Nine holes have been drilled with very good intersections such as 33m at 9.9 g/t gold, 6m at 5.66 g/t gold and 10m at 5.4 g/t gold. New geochemical targets have been outlined.

Oxiana’s expenditure to date totals approximately $2.7M. Considering the tenor of the intersections to date and the indicated value of the area near Chatree in Thailand, AMC values Oxiana’s interest at $4M to $6M.

2.5.10.4 Summary

The total estimate for Cambodian exploration is (rounded) $5M to $7.5M.


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2.5.11 Other Laos Interests

Oxiana has interests in applications for exploration licenses at Savannakhet south-east of Vientiane where there is evidence of copper mineralisation and the target is sedimentary copper and at Champassak, near Pakse in southern Laos, where again the target is sedimentary copper. The title areas are respectively 1,948 km2 and 3,296 km2 and Oxiana’s interest would be 100% divesting to 90% in the event of a development.

2.5.12 China

Oxiana has a Heads of Agreement to pursue joint ventures for base metal projects in China with China Minmetals, a large commodities tracking house. Four areas of interest are covered by reports provided to AMC.

2.5.12.1 Inner Mongolia, Xizosongshan (“XSS”) and Zarogi

The title is a joint venture agreement to establish a joint venture over an area of 13.3 km2 some 2½ hours by road from the regional centre of Yinchuan. The area is in the Jinchuan mineral belt. Oxiana’s interest is 80% and its initial expenditure commitment is US$1.5M. Mafic and ultramafic intrusives of lower Palaeozoic age occur over a 3.5 km long strike length with potential extensions to the north-west and typical widths of less than 50m to greater than 100m. Disseminated sulphides occur along the basal contact of the body and the area is prospective for nickel-copper and also for chromium. As well there are small targets for copper-gold in altered mafic and ultramafic rocks. Significant potentially economic mineralisation is considered to be poddy in nature. Previous work has included trenching where sections from 1.7m to 8m average 0.5% to 0.9% nickel with some platinoid values and where drillholes recorded intersections in the order of nearly 3m with nickel values of 0.3% to 1.0% and some copper and cobalt values. In the 1990s an estimate of chromite mineralisation of nearly 2 Mt grading around 3% to 5% chromium oxide with platinoid values was noted.

Oxiana’s expenditure to date on the project is limited. With reference to comparable transactions such as Jinlong (Section 2.5.12.3), AMC values the project at $0.7M to $0.9M and Oxiana’s interest at $0.6M to $0.7M.

2.5.12.2 Yunnan-Laoxuzhai (“LXZ”) (Previously Referred to as Rexing Minerals JV)

Seven exploration licenses totalling nearly 110 km2 cover prospective geology around the Dapingzhang (“DPZ”) volcanogenic massive sulphide deposit for which there is a reported Indicated and Inferred Mineral Resource of 26.5 Mt at 0.82% copper. DPZ is immediately adjacent to the area of Oxiana’s present interest which is currently 25% with an obligation to spend RMB 5M in Stage 1, RMB 10M and cash payment of RMB 10M in Stage 2 (complete), RMB 30M and 20M in Stage 3 to reach a 60% interest and RMB 10M and 20M respectively in Stage 4 to acquire an 80% interest. Drilling in Oxiana’s areas have outlined a small sulphide breccia deposit with gold values of 2 g/t to 3 g/t, silver 300 g/t to 600 g/t, copper 0.3% to 0.6%, lead 2% to 5% and zinc 1% to 6%. Other drillholes along strike of the DPZ deposit include intersections of 12.7m at 11.1% zinc and 7.4m at 1.7% copper.

Oxiana’s expenditure to date on this project exceeds $4.5M to which AMC would apply a PEM of 0.7 to 1.0.

Considering this expenditure and the value of a Mineral Resource of the nature of DPZ ($7M to $11M using a Yardstick Value of $30 to $45 per tonne contained copper), AMC values Oxiana’s interest at $2M to $4M.

2.5.12.3 Yunnan - Jinlong

Oxiana has completed stage 1 and 2 expenditure of US$0.5M and US$1.0M respectively to earn 51% in the joint venture with Yunnan Geology and Mineral Resources Company. Oxiana can earn to 75% in stage 3 by expending an additional US$2.5M and then to 85% buy sole funding to decision to mine.

The area of interest covers 250 km2 of tenements over the Tangshang Dome, a known area of gold mineralisation. The target is sediment hosted gold. Work has been continuing since 2005 when initial geochemistry and reconnaissance delineated several gold anomalies and subsequent work identified some 16 small gold mineralisation targets over a 6 km long basalt/limestone contact of Devonian age. Subsequent drilling produced poor results with only one intersection grading greater than 1g/t gold.


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AMC values its interest on the basis of its expenditure to date of more than $1.4M and a PEM of 0.8 to 1.0 at $1.1M to $1.4M.

2.5.12.4 Sichuan Joint Venture

Oxiana has completed Stage 1 expenditure of $US1.5M and $US0.435M on Stage 2 expenditure without earning any interest. The joint venture agreement provides that it can reach an interest of 51% for further expenditure of US0.9M an 75% for a further US$2.8M.

The joint venture with the China Geochemical Institute covers generative exploration and subsequent project exploration and evaluation throughout Sichuan province. To date thirteen tenement applications have been lodged and work is suspended pending a lifting of a moratorium on the grant of new tenements in Sichuan.

Oxiana’s total expenditure to date is in the order of $1.4M. With a PEM of 0.9 to 1.1 AMC values its interest at $1.3M to $1.4M.

2.5.12.5 Summary

AMC’s valuation of Chinese exploration is $5M to $7.5M.

2.5.13 Summary of Other Exploration - Oxiana

AMC values Oxiana’s regional exploration at $150M. This is summarised (in Australian dollars) in Table 2.41. Values are the means of the ranges.

Table 2.41 Summary of Oxiana's Regional Exploration Values


Mt Woods 20 to 50 Mt Gibson 0.4 to 1 Golden Grove 4 to 8 Wiluna 10 to 16 Sepon 39 to 60 Martabe 15 to 28 Thailand 7.6 to 14.4 Cambodia 5 to 7.5 China 5 to 7.5

Total (Rounded) 110 to 190

3 DESCRIPTION OF ZINIFEX ASSETS

3.1 Century

3.1.1 Introduction

The Century Operation is situated in the north-west Queensland mineral province and includes the Century Mine, concentrate transport and handling processes and a ship loading facility. The operation is Zinifex’s principal mining operation, at present generating 70% of the company’s concentrate production. In the year ending June 2008, the operation is targeting the production of concentrates containing 507 kt of zinc and 35 kt of lead production. In world rankings, the operation is reported to be the second largest producer of zinc concentrates.

The Century Operation is located approximately 250 km north-west of Mount Isa and the port facility at Karumba lies a further 250 km east-north-east. A 304 km slurry pipeline links the two operational facilities. Refer to Figure 3.1.

The area is characterised by flat low-lying plains and low limestone, sandstone and siltstone hills. The Lawn Hill National Park is located approximately 10 km to the west of the mine. The area is semi arid terrain, receiving 530 mm of rainfall annually.


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The mine is at an elevation of 120m above sea level, within two mining leases covering an area of approximately 232 km2 as shown in Figure 3.2. Zinifex holds further exploration leases along strike to the north-west and south-east along with leases associated with the concentrate transport and handling, the port facilities and other related infrastructure.

Figure 3.1 Geographic Location

Figure 3.2 Mining Leases


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The orebody was discovered in 1990 in an area adjacent to small scale reef style lead and zinc mining operations dating from the late 1800s. Development of the project commenced in 1998 with the first concentrate shipment in December 1999.

The orebody is hosted in sedimentary sequences which are generally flat lying and cover an area of 1.4 km by 1.2 km, with a final pit depth of 344m. The mineralisation is largely zinc and lead sulphides. The orebody is generally bounded by fault structures with the ore residing in two zones both approximately 15m in thickness and separated by 4m to 6m of waste rock. A number of major and minor fault structures exist within the orebody.

The orebody is well defined, though as an outcropping sedimentary sequence bounded by faults there is limited possibility of expansions to the current Mineral Resource. At current production levels of 5.6 Mt of ore being treated per year, the operation is scheduled to close in 2015.

The principal mining fleet comprises six large hydraulic shovels, six 170t and forty-three 240t haul trucks and associated heavy equipment. Total material moved in FY08 will exceed 100 Mt, making it one of Australia’s larger mining operations.

Mineral processing utilises conventional crushing, grinding and flotation techniques. Zinifex is currently in the final stages of a $50M programme to increase mineral recovery including the installation of a second ball mill and surge capacity in the flotation circuit.

Facilities at the port involve concentrate dewatering and storage, transfer vessel and loading facilities. Concentrates are transported by the transfer vessel some 45 km offshore where they are reloaded onto export ships.

Zinifex has exploration tenements in the region and is additionally exploring reef related structures adjacent to the mining area. The most notable at this stage is the Silver King deposit.

3.1.2 Geology, Mineral Resources and Exploration

The zinc-lead-silver mineralisation at Century Mine is hosted by mid-Proterozoic rocks of the Mount Isa Inlier, a major mineral province. The province also contains significant copper and copper-gold mineralisation at Mt Isa, Ernest Henry, Selwyn, Osborne and Mt Gordon.

The mineralisation is stratiform, and lies within a thick sequence of mid-Proterozoic, Lawn Hill formation siltstones, shales and sandstones. Mineralisation occurs within laminated carbonaceous shales, which are interbedded with waste or lower grade sideritic siltstones or mudstones. The mineralisation shows good lateral continuity with well-defined stratigraphic marker horizons. The Proterozoic sequence is folded into a broad syncline, dislocated by faulting, and unconformably overlain by up to 100m of Cambrian limestones. Where the mineralisation approaches the Cambrian unconformity, there is a zone of haematite alteration where ore grade mineralisation has generally been leached and altered.

The Century deposit lies in the core of the gently folded syncline, generally dipping at between 5° to 25°. The dip steepens to 70°at the western margin of the basin. The deposit extends 1,400m north-south and 1,200m east-west, generally deepening to the north reaching a maximum depth of approximately 350m.

A deposit scale structural review was commissioned by Zinifex in 2002. The study refined the main bounding structures and identified numerous medium scale structures in the overlying Cambrian limestone and within the Proterozoic sequence. Detailed structural modelling of the areas mined to March 2005 has further developed the understanding of the type of faulting within the deposit. The main bounding structures and the most significant internal structures are illustrated in Figure 3.3.


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Figure 3.3 Plan of Century Deposit Showing the Main Structural Features

In addition to the eleven key bounding and internal faults shown in Figure 3.3, two important structures impacting the mineralisation are:

• Cambrian Limestone and associated Paleo-weathering (haematite) surface - the overlying Cambrian limestone forms the boundary to the deposit along the eastern margin of the south and North Blocks. It also forms the boundary to the western margin of the North Block. The overlying limestone appears more structurally complex than the Proterozoic units, containing numerous faults, folding and overturned folds. This structural complexity is generally confined to the overlying limestone and is possibly due to the unconformity itself acting as a structural boundary, taking up much of the displacement parallel to the contact. Evidence for this is the absence of paleo-weathering or haematite alteration below the unconformity in some areas.

• Carbonate Breccia ("CBX") – occurs as irregularly shaped dykes and sills within the Proterozoic and Cambrian rocks. Due to the irregular nature of CBX it is unable to be modelled from drill hole intersections alone. Detailed mapping during mining so far has increased the understanding of the characteristics and controls on CBX distribution and its effect on the predicted resource. To date the CBX has displaced approximately 2% of predicted ore tonnes. This has been calculated by comparing the area of CBX within the mineralised sequence defined by pit mapping to the total area of mineralised sequence mined to date. This comparison is shown in Figure 3.4.

The total mineralised package is up to 45m thick and is subdivided into Upper and Lower ore zones, separated by approximately 4m to 6m of interburden siltstone waste. Sulphide mineralisation comprises principally sphalerite and galena with lesser pyrite. The Lower ore zone is typically 12m to 15m thick and comprises three principal ore shales with thin siltstone/mudstone interbeds. In this zone the zinc grade averages around 15% zinc, but lead and silver are relatively low grade (1% lead, 20 g/t silver). The Upper ore zone is typically 8m to 10m thick with a 4m thick basal ore shale followed by three relatively thin shale and interbedded siltstone units. In this zone the zinc grade averages around 10% zinc but lead and silver grades are relatively high (4% lead, 150 g/t siler). The top and bottom contacts of most of the mineralised units are relatively sharp, coinciding with a shale/siltstone interface, but the base of the Lower ore zone (Unit 450) is an assay cut off. Mineralised units extend into the hangingwall and can be selectively mined, provided the grade is high enough to allow for the associated dilution.


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Figure 3.4 Area of CBX Dykes Compared to Total Area of Ore Sequence Mined as at 31 March 2005

3.1.2.1 Sampling

The geological interpretation is based on over 1,000 drillholes, of which 426 contained valid intersections and were used in grade estimation. These are summarised in Table 3.1 and shown in Figure 3.5. The drilling types used in the Mineral Resource estimate include NQ and HQ size diamond drill core.

A total of 80 RC and Percussion Drillholes ("PD") intersected the orebody and were used for their geological information only. Geophysical logging of RC and PD drillholes produced accurate geological information on the mineralised unit boundaries and these intervals were considered valid for unit thickness estimation.

Table 3.1 Drilling Summary of the Valid Drillholes used in Mineral Resource Estimation

Drillhole Group* Date Type Number** Intersected Mineralised Sequence

Holes Used in Unit Grade Estimation

LH (Drilled by CZL) 1990-1995 DD 496 319 311 PCM (Drilled by PCML) 1998-2004 DD 108 90 69 RC,PD 243 65 0 CAL (Drilled by PCML) 2000 PD 15 15 0 ZCL (Drilled by ZCL) 2004-2005 DD 51 47 46 RC 1 0 0

Total 1,007 538 426 * CZL = Century Zinc Limited, PCML = Pasminco Century Mine Limited, ZCL = Zinifex Century Limited, DD = Diamond Drillhole, RC = Reverse circulation drillhole, PD = Percussion drillhole. **Drillholes that have “CENTURY” as AREA code in table DH_Collar in the geology database.


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Figure 3.5 Plan Showing the Deposit Outline and 426 Drillholes used in the Mineral Resource Estimate

Detailed geological logging was completed on all drillholes.

Channel samples were excluded from the Mineral Resource estimate due to concerns about their accuracy and repeatability. The concern about using channel samples was derived from the low repeatability displayed by channel sample field duplicate data.

Although AMC did not review the drilling in detail it considers the procedures used for drilling, logging and sampling as described in a number of reports to be of a suitable standard.

Pit mapping data used in the Mineral Resource model update was collected by two methods:

• Laser mapping of Unit contacts in face exposures using the Mapstar Laser survey system.

• Floor mapping of Unit contacts, which are surveyed by Zinifex survey personnel using GPS.

Mapping data is compiled and used in the generation of the reference surface, bounding structures and internal structures.

The detailed mapping of the pit surface has added greatly to the understanding of the geological structure.

AMC considers the use of pit mapping to upgrade the understanding of the deposit is appropriate.

A geophysical logging system is used to log production blast holes and has also been used to log deeper RC holes. The geophysical system measures natural gamma radiation and magnetic susceptibility rock properties of the mineralisation to differentiate intervals of siderite altered siltstone and mineralised carbonaceous shale. The blast holes provided reference surface data and the deeper RC holes provided reference surface data and Unit thickness information.

The blast hole data is used to locate the mineralised zones and adjust the model and mine plan accordingly.

The results of blast hole geophysical logs are used to locate the mineralised zones and adjust the model and mine plan. Analysis of the blast hole provides additional data that could be used to update the model and


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assist in the prediction of ore grades. However selection of the appropriate intervals for analysis from the blast hole cuttings would be difficult.

AMC considers the use of blast hole geophysical logs to adjust the location of the mineralised zones within the model and mine plan is appropriate.

3.1.2.2 Quality Assurance/Quality Control Programme

A full QA/QC programme of sample checks has been carried out throughout the series of drilling programmes, although the main focus was generally on the zinc grades.

Throughout all the drilling programmes and for all check analyses, good precision and no bias have been detected, after the re-assaying of the earlier samples. However a number of outliers have been detected for all check assays. The cause of these outliers has been stated to be due to sample misallocation.

The QA/QC programme used at Century Mine is complete and appropriate. However, the programme may benefit from full checks on lead and silver grades and not only zinc. A detailed check is recommended to identify the cause of the few outliers.

3.1.2.3 Mineral Resource Model

The Mineral Resource model was updated in April 2005 to include the drilling results and geological information collected since the previous estimate in October 2000. The model incorporates the revised geological and structural interpretation based on the review in 2002.

AMC has reviewed the following aspects of the Mineral Resource model:

• structural interpretation

• geological interpretation

• use of stratigraphic column

• grade composites

• thickness estimates

• volume model using seam accumulation techniques

• block size

• geostatistical analysis

• sample moisture

• organic carbon influences.

AMC considers that the Mineral Resource model is appropriate for Mineral Resource classification and estimation purposes.

3.1.2.4 Mineral Resource Classification

The area where the Mineral Resource has been estimated within the boundary of the drillholes has been classified as Measured. Outside this area to the edge of the defined ore zone the Mineral Resource has been classified as Indicated. The Mineral Resource classified as Inferred is located in the Eastern Fault Block based on the results of the October 2000 model, as it was not remodelled in 2005.

The results of previous mining have demonstrated that the structural and stratigraphic interpretation used at Century Mine is appropriate. Internal faulting may cause local errors but has not caused any material effect on the Mineral Resource and therefore caused concerns on its classification.

There is limited expectation that the Eastern Fault Block will be mined and the mineralisation in this area could be considered uneconomical and therefore not a part of the resource. This is currently under review by Zinifex. Outcomes from this review are unlikely to materially effect the overall Mineral Resource estimate at Century.


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3.1.2.5 Statement of Mineral Resources

The Century Mine Mineral Resource estimate as at 31 March, 2007 is based on the April 2005 Mineral Resource model.

The remaining Mineral Resource was estimated by removing the mined mineralisation from the block model. Material within the as-built survey pickup (provided by ATS Survey) for the Century pit at the end of March 2007 and also any material that was within the as-built survey pickup of the Bulk Sample Pit was depleted from the block model. The material below the floor survey of the final pit was also depleted from the model. This material consists of both ore left behind in the pit floor (as was done in Stage 3 to maintain pit stability) or represents spatial errors in the Mineral Resource model.

The Mineral Resource remaining at 31 March 2007 at a 3.5% zinc COG is shown in Table 3.2 and for the Eastern Block in Table 3.3 (note that AMC considers this Mineral Resource may never be mined and therefore should not be included in any Mineral Resource statement).

Table 3.2 Mineral Resource as at 31 March 2007 at a 3.5% Zinc Cut-off Grade

Category Tonnes (M)

Zinc (%)

Lead (%)

Silver (%)

Measured 45.7 12.8 1.4 32

Indicated 8.0 10.9 1.5 43

Inferred - - - -

Total 53.7 12.5 1.4 33

Table 3.3 Eastern Fault Block Mineral Resource at 0% Zinc Cut-off Grade

Category Tonnes (M)

Zinc (%)

Lead (%)

Silver (g/t)

Indicated 0.6 8.3 0.9 31 Inferred 0.3 12.8 0.3 125

Total 0.9 9.7 0.7 61

The Mineral Resource depletion for the 12 months to 31 March 2007 at 3.5% zinc cut-off is summarised in Table 3.4. Model errors included in this depletion are 295 kt at 14.5% zinc and 1.4% lead in areas of complex geology in Stage 5, 115 kt at 13.9% zinc and 2.1% lead of Mineral Resource error due to an offset in Pandora’s Fault and 95 kt at 8.9% zinc and 1.3% lead due to displacement of Mineral Resource from haematite alteration. A further 1,250 kt at 12.2% zinc and 0.5% lead of Mineral Resource lying below the mined out areas of the pit was depleted as ore for the 0% zinc cut-off Mineral Resource estimate.

Table 3.4 Mineral Resource Depletion for the 12 months to 31 March 2007 at 3.5% Zinc Cut-off Grade

Tonnes (t)

Zinc (%)

Lead (%)

Silver (g/t)

Measured 4,558,530 13.85 1.23 36 Indicated 2,032,674 13.71 1.36 49 Inferred - - - -

Total 6,591,204 13.81 1.27 40

The removal of Mineral Resources due to mining based on the survey pickup is considered suitable. Adjustments for changes in geological interpretation are also considered appropriate.

AMC considers the Mineral Resource statement, contained in the report by Zinifex (2007), is suitable for publication and contains no material flaws. The model appears to have some structural geology errors that


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will continue to give incorrect Mineral Resource estimates suggesting a new model should be prepared during the preparation of subsequent estimates.


The reconciliation between milled ore and the Mineral Resource estimates for up to 31 March 2007 is shown in Table 3.5.

Table 3.5 Comparison of Mining Adjusted Model Depletion with ROM Stockpile Adjusted Mill Production for the 12 Months to 31 March 2007

Tonnage (t)

Zn %

Pb %

Ag g/t

Zinc Tonnes

Lead Tonnes

Silver Tonnes

Model Depletion 5,731,851 13.16 1.38 43 754,271 79,374 245

South Marginal 0 0 0 0 0 0 0

Modelled Feed 5,731,851 13.16 1.38 43 754,271 79,374 245

Stockpile Difference 84,424 4.88 -10.07 -461 4119 -8501 -39

Milled 5,444,094 11.66 1.36 47 634,663 74,297 254

Corrected Milled 5,528,517 11.55 1.19 39 638,782 65,796 215

Resource vs Milled -3.7% -13.9 -16.4 -10.1 -18.1 -20.6 -14.1

Mine Call Factor 0.965 0.878 0.859 0.909 0.847 0.829 0.876

Based on data from Table 3.5 a Mine Call Factor ("MCF") is calculated and used for the next 12 months. This MCF assumes the same problems with the geological interpretations and hence depletions will occur for the next 12 months.

A difficulty with the calculation of the MCF is the estimation of the stockpile difference.

Reconciliation does show differences between the Mineral Resource estimate and the milled and stockpiled grade and tonnes. These differences are accounted for by using a MCF but they should be investigated to ensure the Mineral Resource estimate is not overestimating the grade.

3.1.2.7 Exploration

The nature of the Century deposit and the significant drilling and mining undertaken on the deposit significantly restricts additional exploration opportunities on the deposit itself. Further drilling at Century is largely being focused on Mineral Resource definition and geotechnical assessment in boundary areas.

Notwithstanding the constraint to exploration on the Century deposit, Zinifex manages a significant exploration programme from a base at Century. The programme is focused on the discovery of Century style (ie large strata bound sediment hosted) mineralisation. In the immediate vicinity of the mine, exploration has concentrated on known reef related mineralisation and targets broadly associated with the Termite Range Fault, a significant feature in the area.

The most significant of the potential reef style targets identified to date is the Silver King Deposit. This area has previously been mined at low production levels from 1890 to 1960. Zinifex has drilled both immediately adjacent to the historical workings and an established extension to the mineralisation to the north-east.

A series of other reef related targets have been identified including Page Creek, Tunnel Hill and Watson’s Lode.

The reef related opportunities are at target status; though AMC is aware that Zinifex has undertaken limited conceptual mine design work on the Silver King target. It appears that the reef opportunities are most likely to be lead biased as opposed to Century’s zinc biased mineralisation.

AMC recognises that there is a real possibility that additional mining inventories may be established on one or more of the reef related targets, and that mining operations may be developed concurrent with the Century Operations.


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On the basis that possible ore tonnages available from such targets are likely to be low relative to Century’s remaining Ore Reserves (therefore unlikely to extend operations life materially), the status of Mineral Resource information, and possible uncertainties in environmental approval processes, AMC has not brought tonnages from these sources into its modelling scenario for the Century Operation.

Zinifex holds interests in and manages exploration over 4,603 km2 stretching some 150 km to the north-west and south-east from Century as indicated in Figure 3.6

AMC recognises that this programme is targeting an identified mineralisation trend associated with significant regional structures on which historical mining operations have been undertaken. In this regard the programme should be considered as prospective.

Figure 3.6 Century Regional Exploration Area


3.1.3.1 Overview

The general layout of the mining operations, looking to the north-west, are shown in Figure 3.7. Mining commenced in the southern areas of the pit and is generally progressing to the north as suggested by the cut back on the far wall of the pit.


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Figure 3.7 Mine Operations Layout

Ore stockpiles and processing facilities are located to the south-east of the pit as are other related infrastructure. The main waste dumps are located to the south, east and north of the pit. A creek system runs to the west of the pit, curving from the east in front of the north dump in the far distance of Figure 3.7. A significant tailings dam and evaporation pond is located further to the southeast outside the foreground of Figure 3.7.

As a general observation, in AMC’s opinion the operation was well equipped, mine facilities and infrastructure well maintained, and safety practices well developed and adhered to.

As discussed in full in the prior section of this report, key geological features of the deposit that impact the mining operations include:

• sedimentary ore and waste sequences

• limestone capping to the north of Pandora’s Fault

• two zones

• significant faulting

• general flat dipping ore stratigraphy.

3.1.3.2 Ore Reserve Estimates

The Mineral Resource and Ore Reserve estimates as at 31 March 2007 for Century Mine are summarised in Table 3.6.


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Table 3.6 Mineral Resource and Ore Reserve Estimates as at 31 March 2007

Category Tonnage(Mt)

Zinc(%)

Lead(%)

Silver(g/t)

ResourceMeasured 45.7 12.8 1.4 32Indicated 8.0 10.9 1.5 43Total Resource 53.7 12.5 1.4 33ReserveProved 40.0 11.3 1.1 24Probable 6.2 10.2 1.1 32Total Reserve 46.2 11.2 1.1 25

AMC is of the opinion that the physical characteristics of the orebody along with the relative complete understanding of the deposit gained through extensive drilling and mining experience, will significantly limit possible additions to the Ore Reserve. At planned production levels, the Ore Reserve will support operations until 2015 at which time, it is highly likely that the operation will close.

The data presented in Table 3.6 excludes Mineral Resources currently estimated in the Eastern Fault Block.

3.1.3.3 Grade Control

Figures 3.8 and 3.9 indicate the principle faults in relation the pit deign and Figure 3.10, the ore stratigraphy. The principal ore zones are in the order of 15m in thickness.

Figure 3.8 Century Orebody - North-South Section


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Figure 3.9 Century Orebody - Plan View

Figure 3.10 Ore Stratigraphy


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Associated with the principal faulting indicated in Figures 3.8 and 3.9, the deposit experiences a significant degree of localised faults and shears. This situation has presented the operation with some significant challenges in grade control processes to maximise ore recovery and minimise ore dilution. Strategies adopted in the operation in this regard include:

• gamma detector use in blast holes to establish Unit contacts

• blast procedures to limit blast disturbance of the ore

• excavator dig depth indicators linked to bench ore model

• grade control technicians assisting ore loading.

MCFs are estimated through an ongoing reconciliation process and have been used in Ore Reserve estimation processes. This matter is more fully discussed in Section 3.1.2 of this report.

In AMC’s opinion, the grade control strategies used in the operation are effective and will remain effective in the flat dipping section of the orebody. It is AMC’s opinion that in the steeper sections of the orebody (as discussed later in this report in regard to Stage 7) where the sedimentary sequence is most disturbed, grade control practices will be more challenging and may result in ore losses and/or increased dilution.

3.1.3.4 Geotechnical

The principal geotechnical issue impacting the mining operation is the folding and faulting of the ore and related host rocks on the western side of the pit. In this area the ore is inclined steeply to the west at approximately 70O. Beyond the grade control issues discussed above, modelling has indicated an increased risk of wall failure in this area. The operation has adopted several strategies to address this issue. These include:

• staging the mining sequence to reduce the load on the western wall

• leaving the final stage in the main pit (Stage 8) as a buttress against the west wall for as long as practicable.

Other geotechnical issues relate to the behaviour of the limestone capping to the north and west of the pit. Varied weathering profiles have resulted in considerable unconformity in this material, which has resulted in an unpredictable behaviour of interim pit walls. This matter has caused some localised operational difficulties. Operating plans have been adapted to manage the impact of these issues.

AMC is of the view that the geotechnical issues are being given due regard in the operation and that the strategies adopted are consistent with good practice.

3.1.3.5 Mine Operations and Planning

Mining activities at Century are undertaken through an alliance arrangement, the Century Mining Alliance “(CMA”), principally involving Downer EDI (“Downer”) who has had a presence at the operation (through previous company structures) for a number of years. The alliance is responsible for mine planning, production and related activities. Operators and professional staff are principally employees of Downer though some professional staff are secondees from Zinifex.

In recent years, AMC has been engaged by Zinifex to prepare and review the LOMP for the Century mining operations. The most recent review was completed in June 2007.

Consideration of a range of physical parameters has lead to a significant advance on overburden removal over the past two years. Waste removal will peak in FY08 at 40 Mbcm with an in-year stripping ratio of 34:1. Waste removal requirements will reduce significantly over the following three years as indicated in Table 3.7.

Table 3.7 LOM Material Movement Schedule (Mbcm) Material FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Bulk Waste 39.588 33.383 19.451 5.389 3.268 3.420 2.386 1.122 Selective Waste 0.529 4.089 4.029 0.728 0.916 0.869 0.749 0.300 Ore 1.146 2.428 2.420 1.832 2.832 1.211 1.165 0.671 Total 41.263 39.900 25.900 7.950 7.016 5.500 4.300 2.093


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3.1.3.6 LOM Fleet Schedule

Zinifex owns the mining fleet, with the exception of some leased equipment. Given the scale of the current operation, the fleet at present is large in comparison with other Australian “truck/shovel” operations. Table 3.8 outlines the planned fleet requirements from the LOMP. Actual equipment in operation in FY08 differs to a small degree as a result of equipment availability and actual replacement timings.

AMC considers the operation to be well equipped with a relatively new fleet of equipment. It is a large fleet working within a confined mining operation. The use of a pit control system to monitor and prioritise activity in real time appears to work effectively.

Table 3.8 LOM Primary Fleet Levels MAJOR MOBILE FLEET LEVELS

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Loading Fleet – Shovels Liebherr R996 Shovel 6 6 4 2 1 1 1 1 Liebherr R994 Excavator 1 1 - - - - - - Loading Fleet – Excavators 180T Excavator 1 - - - - - - - 180T Excavator 2 2 2 1 1 1 1 1 200T Excavator - 1 1 - - - - - 250T Excavator 1 1 1 - - - - - 110T Excavator 1 - - - - - - - 110T Excavator 1 1 1 1 1 1 1 1 30T Excavator 1 1 1 - - - - - Haulage Fleet Komatsu 830E Truck (240t) 43 43 29 12 10 9 7 5 Cat 785C Truck (170t) 6 6 2 - - - - - Hitachi EH1700 Truck 3 3 3 3 3 3 3 2 Drill Fleet – Primary Ingersoll Rand DMH Drill 2 2 - - - - - - DML Drill 3 3 3 2 2 2 1 1 Reich C-700 Drill 2 - - - - - - - Reich C-700 Drill 2 2 1 - - - - - Reich C-550 Drill - - - - - - - - DM25SP Drill 1 1 - - - - - - Cubex QXR920 Drill 2 2 1 1 1 1 1 1 Ingersoll Rand DM45E Drill - - - - - - - - Gardner Denver GD5000 Drill 1 - - - - - - - ECM690 1 1 1 1 1 1 1 1

3.1.3.7 Mining Sequence

The mine plan for Century has been structured in 9 stages, with Stages 1 to 4 having been completed prior to FY08. Waste tonnages, ore tonnages and grades for the remaining stages are detailed in Table 3.9. A plan of the mine showing the ore exposed in each stage and the related cutback crests are show in Figure 3.11.

Table 3.9 LOMP Mining Stages FY08 to FY15

Stage Total (Mt)

Ore (Mt)

Zn (%)

Pb (%)

Ag (g/t)

Fe (%)

Waste (Mt)

Strip Ratio

4 - - - - - - - - 5 3.924 3.046 13.64 1.03 14.29 6.91 0.878 0.3 6 39.026 2.506 12.70 1.69 49.00 6.44 36.519 15.7 7 191.865 12.419 12.12 1.01 18.00 7.43 183.956 15.4 8 85.701 17.367 12.27 1.16 18.30 7.38 68.334 4.2 9 26.791 2.830 8.52 1.43 54.28 8.30 23.961 8.9

Total 347.307 38.168 12.08 1.16 22.57 7.37 309.138 8.6


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Figure 3.11 LOMP Mining Sequence

As indicated in Figure 3.11, the ore across Stages 3 to 8 first dips gently to a base of the pit in the area of Stage 8, and then rises up against the north and west walls at Stage 7. The bedding and related structures on the west wall have influenced the staging sequence in that significant pre-stripping has been scheduled across all of Stages 5 to 8. Waste removal peaks in the current year and drops significantly by FY11. The total waste removal in the final five years of the operation is less than one half of that scheduled for the current year as indicated in Table 3.7.

In this sequence, the waste against the west wall is completely stripped back to provide access to the Stage 7 ore in a “canyon cut” with significant waste being left as a buttress on top of Stage 8 ore. The aim being to reduce the weight on the west wall, where geotechnical modelling has indicated possible difficulties, whilst stabilising the wall to the south-west as long as possible.

Stage 6, a key focus of the current year, regularises the mining face to the final pit shape, and provides continuity of ore production prior to access to Stage 7 ore.

AMC considers the sequence logical in light of geotechnical and Ore Reserve constraints. However AMC is of the opinion that ore continuity during Stage 7 may become an issue should geotechnical factors relating to the west wall prove more complex than expected. Furthermore, an increased level of folding and faulting may impact ore recovery in that area. Stage 8, which is the largest of the remaining stages and exhibits both a low level of faulting and flat lying ore, should prove a productive area.


The processing plant was designed to produce over 500 ktpa of zinc in concentrate utilising flotation as the principal means of beneficiation. The unique characteristic of the process is that an ultra-fine grind is required to achieve a satisfactory liberation of the sphalerite from certain gangue minerals.

3.1.4.1 Ore Mineralogy

Century ore contains lead, zinc and silver as the value metals, with the zinc representing the major component. Lead is present as the galena mineral and zinc as the sphalerite mineral, both of which are recovered into flotation concentrates. The silver reports as a by-product in both the lead and zinc concentrates.


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The low iron content of the sphalerite allows high grade concentrates to be produced. However Century ore also contains silica and carbon (present as a kerogen) as impurities at very fine particle sizes. Although a high grade zinc concentrate with a low iron content can be produced from Century ore, it is also necessary to control the levels of silica and carbon. The concentration process is consequently complex by conventional standards, with ultra-fine grinding being required to liberate the silica impurity. Because of the liberation requirements of the silica, the ore has to be progressively reduced in size to 80% passing 7 microns for the final flotation stage in the beneficiation process.


A flowsheet for the Century processing plant is detailed in Figure 3.12. ROM ore is crushed to finer than 95 mm and is fed through a coarse ore stockpile to the grinding circuit which comprises a 12 MW SAG mill followed by a 6.7 MW ball mill. Although the original process design was based upon a flotation feed sized at 80% finer than 56 microns, increases in the ore throughput rate over recent years have resulted in a coarsening of the primary grind and a resultant decrease in zinc recovery levels. Hence a second ball mill has recently been installed in order to re-establish the design grind size.

In the first stage of the flotation process, part of the naturally floating carbon is removed and discharged with the final plant tailings A pre-flotation roughing-cleaning sequence is employed for this purpose.

In the second stage of the flotation circuit, lead concentrate is produced through roughing and cleaning flotation with the lead concentrate being produced from the cleaning stage. The lead flotation circuit tailings gravitate to the primary zinc circuit which incorporates a rougher-scavenger sequence, with the scavenger concentrate being reground in sand mills prior to the first zinc cleaning stage.

Figure 3.12 Century Process Plant Schematic Flowsheet

Coarse Ore Stockpile

SAG Mill Ball Mills

Cyclone Clusters

Lead Concentrate

Carbon Prefloat

Lead Rougher

Lead Cleaner

Zinc RougherZinc Scavenger

Zinc Regrind

Zinc Cleaner 1

Ultra-fine Grinding

Zinc Concentrate

Tailings Dam

Final Plant

Tailings

Carbon Reject

Product

Ultrafine Flotation Zinc Cleaners 2 to 5


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The concentrates from the rougher and the first cleaner stages become the feed to the ultra-fine zinc cleaning circuit. The combined product is reground to a nominal sizing of 80% finer than 7 microns to release silica before being processed through four ultra-fine cleaning stages to produce the final zinc concentrate. The ultra-fine circuit tailings are combined with the zinc scavenger tailings and initial carbon concentrate and sent to the tailings thickener from which the thickened product is pumped to the tailings dam.

The lead and zinc concentrates are also separately thickened before being sequentially pumped as discrete product batches through a single pipeline over a distance of 304 km to the Port site at Karumba.

The concentrates are dewatered at Karumba using separate thickeners, pressure filters and in the case of the zinc concentrate, an oil fired rotary dryer. Final zinc concentrates are pelletised during the drying process, an operation which, together with appropriate stockpiling and product handling techniques, serves to avoid spontaneous combustion of the zinc concentrate during storage and shipping. A spray system has also been installed which allows the zinc concentrate pellets to be coated if required with a surface sealant that further inhibits self-heating.

Dried concentrates are stored in an 80 kt capacity covered shed prior to reclaim and loading into a specially designed transfer vessel for transportation of both lead and zinc concentrates to ships anchored in the Gulf of Carpentaria. The transfer vessel is designed to carry loads of approximately 5 kt of concentrate.

3.1.4.3 Metallurgical Performance Analysis

The original process design considered the changing lead:zinc ratio of the ore over the LOM. The average design mass balance criteria were as follows.

• An annual feed rate of 5.04 Mtpa ore.

• An average feed grade of 12.5% zinc, which at an average recovery of 82.2% yields an annual zinc output of approximately 520 kt.

• A zinc concentrate grade of 57.5% zinc with 2.2% lead and 3.5% silica.

• A lead concentrate grade of 60% lead at 52% recovery from an average 1.7% lead feed.

Recent plant metallurgical performance statistics are summarised in Table 3.10.

Table 3.10 Lawn Hill Concentrator Performance Summary

Feed Lead Concentrate Zinc Concentrate Assay Assay Pb Rec Assay Zn Rec

FY Annual Tonnes % Pb % Zn % Pb g/t Ag % % Zn g/t Ag %

FY03 5,168,316 1.7 12.6 70.0 331 74.0 58.7 198 79.9 FY04 5,390,678 2.4 11.7 67.2 447 68.6 57.9 255 79.9 FY05 5,313,039 1.5 11.8 66.7 347 62.6 57.3 183 80.0 FY06 5,330,133 2.2 12.3 66.9 401 71.3 57.5 224 78.7 FY07 5,593,510 1.3 11.6 64.6 297 63.3 56.6 158 77.8

It will be noted from the results in Table 3.10 that:

• the annual ore treatment rate exceeds the design capacity and has been generally increasing over the past five years

• the lead circuit performance has consistently exceeded the design output

• the zinc circuit performance has been below the design output

• as the annual ore treatment rate has increased there has been a tendency for the zinc concentrate grade and the zinc recovery to decrease.

Although the process design was for a nominal 77.5 tph of zinc metal units in the feed, operating experience indicated that the plant has been able to accommodate closer to 80 tph of zinc before materials handling constraints were experienced at the design plant throughput rate, but subsequent to the installation of additional zinc scavenging capacity in 2001 and 2003. It is considered that this input rate of zinc in the feed


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ore represents a likely effective throughput limit in the flotation circuit in terms of maximising the zinc recovery with the current plant configuration. The recent production data illustrate this consideration.

During 2003, the plant operated at 98.4% utilisation that equated to a plant feed rate of 75.8 tph of zinc from which a 79.9% zinc recovery was attained. In 2006 for which a plant utilisation of 93.8% was reported, the production data indicate that the feed rate had increased to 79.8 tph of zinc with the average recovery decreasing slightly to 78.7%. However in 2007, the feed rate further increased to 80.8 tph of zinc for a plant utilisation of 91.7% while zinc recovery in turn decreased to 77.8%. The inverse trend between the input rate of zinc in the plant feed and the ensuing zinc recovery level will be noted. A capacity constraint may exist in the flotation circuit whereby the zinc recovery decreases as the input rate exceeds circa 80 tph of zinc in the feed. It is considered that the significant decrease in recovery may in part be attributed to poorer metallurgical performance as a result of available issues arising from SAG mill motor refurbishment and tailing thickener drive failure and treatment of more complex ore during the transition from Stage 4 to Stage 5 of the orebody.

3.1.4.4 Process Constraints

While it is acknowledged that the higher throughput rates in recent years have resulted in an increased zinc output rate, the metallurgical performance in terms of the zinc recovery has decreased. These higher throughput rates have reportedly caused a coarsening of the primary grind size generated in the flotation feed which has no doubt contributed in part to the reduction in the zinc recovery levels. The grind size problem had been addressed by the installation of a second ball mill which is currently being commissioned. However it is also likely that there is an inherent constraint in the flotation capacity that allows the zinc recovery to be maximised when the flotation cells are required to process circa 80 tph of zinc in the feed. As such, the reinstatement of the design grind size which has been addressed by the installation of the second ball mill may not fully reclaim the drop in the zinc recovery levels that has been noted in recent years. There may still a limit in the quantity of zinc that can be extracted with the currently installed flotation capacity.

3.1.4.5 Concentrate Handling

Concentrate pumping has generally been satisfactory, with the main operational problem experienced to date being “trail-out” of the coarser lead particles which mix backwards into the next batch of zinc concentrate following in the pipeline. This problem has been largely addressed by controlling the pumping density of the lead concentrate at a slightly higher level at which settling out of the coarser (>25 micron) fraction is inhibited. Each batch of concentrate is first pumped around a test loop to assess the performance characteristics before it is allowed to enter the pipeline transportation system.

The pipeline has operated continuously since late 1999 apart from minor interruptions. The pipeline was designed to accommodate a maximum pumping rate of 155 tph of zinc concentrate whereas the recent plant output has averaged 110 tph of zinc concentrate. Thus even with the recent increased ore treatment rates, sufficient design capacity exists in the pipeline to accommodate the annual zinc concentrate output.

The operation of the dewatering facility at Karumba is managed to appropriately control the output of lead and zinc concentrates for shipment. Spontaneous combustion of zinc concentrate which had been a problem in the early years of operation is now managed by use of appropriate materials handling procedures. The use of surface sealants can also be applied to inhibit spontaneous combustion and although a spray application system has been installed at Karumba, sealants are not normally required provided that the correct materials handling procedures are employed.

A current refurbishment programme for the pressure filters at Karumba will ensure that the plant will be able to readily process the output from the concentrator into the foreseeable future.

Lead and zinc concentrates are separately reclaimed from the storage shed and loaded onto a concentrate transfer vessel which transports approximate 5 kt lots to ships anchored in the Gulf of Carpentaria. The concentrate transfer vessel is owned by Zinifex but it is operated and maintained under charter by a specialist maritime contractor. From the environmental perspective, the transfer vessel operates with a zero spillage factor such that all dust collection and wash-down water including rainfall is stored on the vessel for subsequent discharge into the Karumba water treatment facility. The water treatment facility at Karumba has recently been upgraded to allow improved control of the quality of the discharged effluent water.


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3.1.4.6 Processing Production Plan

The Three Year Production Plan for the Century process operation is summarised in Table 3.11.

Table 3.11 Three Year Production Plan for Century Process Operations

Feed Lead Concentrate Zinc Concentrate

Assay Assay Pb Rec Assay Zn Rec

Year

Annual Tonnes % Pb % Zn % Pb g/t Ag % % Zn g/t Ag %

2008 5,602,933 1.1 11.6 68.0 192 62.5 57.3 102 78.7 2009 5,714,345 1.2 11.4 68.0 204 62.7 57.3 107 81.7 2010 5,714,354 1.0 11.4 68.0 168 61.6 57.3 73 82.5

As has been mentioned, the current process plant has an apparent capacity limit at circa 80 tph of zinc in the flotation feed at the design ore treatment rate. However as the plant throughput rate increases above this design level, the flotation circuit residence time will decrease proportionally such that the nominal zinc capacity of the circuit will reduce. Thus although the installation of the second ball mill may well allow the re-establishment of the design primary grind size, above-design ore treatment rates may mitigate against attaining the full potential improvement in the flotation response.

The flotation plant was designed to accommodate the processing of 5.04 Mtpa ore. It will be noted from the data in Table 3.10 that 5.6 Mtpa ore were processed in 2007 and that the Plan data in Table 3.11 indicate that this rate will increase to 5.7 Mtpa in 2009 and 2010 which is in excess of 13% above the design rate. Although the input rate of zinc remains at circa 80 tph zinc units, AMC considers that without an increase in the flotation capacity to re-establish the appropriate circuit residence time, it is possible that the targeted zinc recovery levels will not be attained.

3.1.5 Environment

3.1.5.1 Statutory Authorities

The Century Operation operates under an Environmental Authority ("EA") issued by the Queensland Environmental Protection Agency ("EPA"), and an associated Environmental Management Overview Strategy ("EMOS") and a three-yearly Plan of Operations ("PoOps"). These instruments were developed from statutory assessment of the 1994 Century Project Impact Assessment Study.

Other than the 2007/2010 PoOps, these documents have not been reviewed by AMC. However, the professional and rigorous nature of the 2001/2010 PoOps indicates a high level of awareness of environmental management commitments and obligations, and a proactive approach to compliance with them. Moreover, and although AMC’s site visit involved no environmental specialist, no evidence of significant environmental problems was observed during that visit.

Predictably, there have been occasional (and generally relatively minor) exceedances of permit conditions, but Zinifex appears to have responded diligently to these incidents and successfully reduced their frequency in the last three years.

Importantly, the 2007/-2010 PoOps contains an estimate of rehabilitation costs which has been verified by an independent consultant. Costs of $74M have been estimated using realistic unit rates based on area of disturbance.

3.1.5.2 Surface and Groundwater Management

Acid rock drainage from waste stockpiles is and will continue to be a significant environmental risk. Although the annual rainfall at Lawn Hill is only 530 mm, it generally involves relatively low-frequency but high-volume events; this entails risks of deep infiltration of rainfall into acid-forming material and subsequent drainage into the broader environment – especially Page Creek, which in the past has been polluted by salts from waste stockpile drainage.

Zinifex is installing down-gradient seepage collection sumps to manage acid drainage in the short term, while undertaking modelling to provide better understanding of the water relations of waste stockpiles and the underlying groundwater.


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Additionally, limestone material is incorporated into waste stockpile design and construction to neutralise acid drainage and isolate acid-forming materials. AMC assumes, but has not verified, that Zinifex is, through its modelling initiatives, seeking to evaluate “store-and-release” designs for waste stockpiles. This concept involves applying the principles of soil/water relations to design systems that enable infiltrating rainfall to be stored wholly within the inert material overlying acid-forming waste and its subsequent release to the atmosphere through evaporation and transpiration from vegetation established on the stockpiles – ie isolation of acid-forming materials from infiltrating water.

3.1.5.3 Rehabilitation

Rehabilitation Trials

Rehabilitation trials are continuing at Century, with the aim of developing robust designs, especially for waste stockpiles, when the bulk of the rehabilitation is carried out towards the end of mine life. While progressive rehabilitation during mine life is desirable from a broad environmental viewpoint, especially where encapsulation of acid-forming waste is involved, it is often impracticable. Nonetheless, the presence of significant quantities of acid-forming waste at Century demands prompt isolation of this material through progressive covering with inert material and maintenance of the smallest practicable amount open to rainfall infiltration.

Tailings Management

The TSF at Century is designed to store tailings generated over the 20-year life of the project, and to manage a 1 in 100-year rainfall event without uncontrolled discharge to the broader environment. The TSF system includes an evaporation dam to manage decant from the main TSF. AMC has not reviewed data from surface and groundwater monitoring which it is assumed is collected in compliance with permit requirements. External reviews of the TSF performance and operation are conducted on an annual basis. The last external review of TSF performance and operation of which AMC is aware was conducted in late 2007 - no significant engineering or environmental issues were reported in that review.

3.1.5.4 Closure and Rehabilitation

The EA for Century requires disturbed areas to be made safe, stable and non-polluting, and with self-sustaining vegetative cover. As noted in Section 2.5. above, the 2007/2010 PoOps contains an estimate of $74M for closure and rehabilitation. The estimate is based on unit rates (area basis) for different types of disturbance, and is thus a conceptual plan with an accuracy of some ±30%. AMC considers this to be an appropriate accuracy at the present stage of project development, and assumes that accounting provision for closure costs is being made on a regular basis. This estimate will continue to be reviewed over the project life, taking into account final landform designs – especially for waste stockpiles where acid-forming waste is encapsulated – and more precise costings based on actual experience.

3.1.5.5 Community Relations

The Gulf Communities Agreement ("GCA"), involving Zinifex, Native Title groups and the Queensland Government, was pivotal to the original development of the Century project, and addresses education, employment and training; business development; and cultural and environmental protection.

Zinifex operates a GCA department, which stewards several committees that include indigenous members. It also has in place a business conduct and community affairs plan which ensures indigenous employment (20% of the workforce in 2006) and respect for traditional rights and cultural heritage.

Mine closure and concomitant termination of benefits under the GCA are two key issues in a 10-year review of the GCA which was to be conducted in 2007. AMC is not aware of the outcome of that review, but the reportedly successful operation of the GCA in the past provides reasonable expectation for effective community relations in the future.


Actual operating and capital costs along with targets for the coming three years are detailed in Table 3.12.


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Table 3.12 Operating and Capital Costs

Item Units FY05 FY06 FY7 FY8 FY9 FY10Production ParametersOre & Waste Mined Mt 73.2 69.0 109.1 113.5 107.0 71.2Ore Mined Mt 5.3 5.3 5.4 3.5 6.1 5.6Ore Milled Mt 5.3 5.3 5.6 5.6 5.7 5.7Zn Recovered kt 501.0 516.0 502.0 510.6 528.6 537.6Pb Recovered kt 50.0 84.0 38.8 39.8 43.0 35.3Unit Cash Operating CostsMining $/t mined 2.38 2.91 2.62 2.96 3.11 3.41Processing $/t processed 18.8 19.1 21.3 21.75 22.66 23.70Conc. Transport/Port $/t processed 3.9 5.1 5.8 5.58 5.80 6.46Asset Management $/t processed 6.9 7.8 10.1 10.33 10.31 11.15Site Support Services $/t processed 7.4 8.3 10.8 15.18 15.54 16.77Total Site Cost $/t processed 69.99 78.25 98.96 110.46 110.09 95.37Cash Operating CostsMining $M 174.3 200.6 285.3 335.7 332.5 243.2Processing $M 99.7 101.4 119.5 121.9 129.8 129.2Conc. Transport/Port $M 20.7 27.2 32.2 31.3 33.2 35.2Asset Management $M 36.8 41.3 56.7 57.9 59.1 60.8Site Support Services $M 39.4 44.2 60.5 71.8 72.9 75.2Total Site Cost $M 370.9 414.7 554.2 618.6 627.5 543.6

Total Capital Expedature $M 58.2 42.5 151.8 96.3 46.4 28.0


A review of the past actual operating costs, compared to prior plans has indicated that that costs have regularly exceeded plan. Examples, comparing actual operating costs (non cash) to plan operating costs are shown in Table 3.13:

Table 3.13 Examples of Actual and Plan Costs

Plan ($M)

Actual ($M)

Difference ($M)

Difference (%)

FY06 383 417 55 +15 FY07 458 525 67 +15 FY08 (to October) 187 183 5 +2

Notwithstanding performance in FY06 and FY07, year to date costs in FY08 compare well to the plan.

The significant capital expenditure across recent years reflects the expansion of the mining fleet in response to increasing waste removal requirements and the recent upgrade of the process plant as a result of the Percent Programme.


AMC was not provided with a business plan detailing production and cost forecasts over the remainder of LOM. The LOM modelling scenario developed by AMC was established on the following basis:

• LOM production constrained to current Ore Reserve quantities.

• Annual waste tonnages and ore tonnages and grade were adopted from the 2007 LOMP.

• Processing tonnages were set at 5.6 Mtpa decreasing in the final two years.

• Zinc, Lead and Silver recoveries set at 81%, 62.7% and 50% respectively.

• Unit operating costs consistent with FY08 budget levels have been adopted.

• Capital from the Zinifex three-year plan adopted, along with disposal estimates from the LOMP. An allowance for sustaining capital being applied across FY11 to FY14.

Only one scenario based on current Ore Reserve quantities was developed given the constraints on the orebody and both the limited information available and likely tonnages involved, on alternate ore sources. The modelling scenario is summarised in Table 3.14.


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Table 3.14 AMC Modelling Scenario

Production ParametersOre & Waste Mined Mt 113.5 104.2 67.8 21.0 18.8 14.5 11.3 5.5 - Ore Mined Mt 3.5 6.8 6.8 5.1 7.9 4.4 4.2 3.4 - Ore Processed Mt 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 - Zn Recovered kt 511 589 549 557 543 535 552 561 - Pb Recovered kt 40 41 36 39 41 40 43 44 - Ag Recovered Moz 3 2 2 3 2 2 2 2 -

Unit Cash Operating CostMining $/t mined 2.97 2.90 3.22 4.05 3.78 3.68 3.92 4.65 - Processing $/t processed 21.75 21.75 21.75 21.75 21.75 21.75 21.75 21.75 - Conc. Transport/Port $/t processed 5.58 5.58 5.58 5.58 5.58 5.58 5.58 5.58 - Asset Management $/t processed 10.33 10.33 10.33 10.33 10.33 10.33 10.33 10.33 - Site Support Services $/t processed 12.82 12.97 12.79 9.11 8.89 8.69 8.49 8.04 -

Unit Site Cash Cost $/t processed 112.95 106.71 91.81 68.05 65.54 62.37 61.55 64.54 -

Operating Cash CostMining $M 336.6 301.7 218.2 85.2 71.2 53.4 44.4 25.7 - Processing $M 121.8 121.8 121.8 121.8 121.8 121.8 121.8 121.8 - Conc. Transport/Port $M 31.3 31.3 31.3 31.3 31.3 31.3 31.3 31.3 - Asset Management $M 57.9 57.9 57.9 57.9 57.9 57.9 57.9 57.9 - Site Support Services $M 71.8 72.6 71.6 51.0 49.8 48.6 47.5 45.0 -

Total Site Cash Cost $M 619.3 585.2 500.8 347.1 331.9 312.9 302.9 281.6 - Capital Cost

Century Operations $M 96.3 46.4 28.0 15.4 20.3 14.2 13.0 - - Mobile Equipment Disposals $M - - - 33.2 - 6.7 - 1.5 - 3.2 - 1.9 - 13.0 - Rehabilitation $M - - - - - - 5.0 20.0 49.0

Total Capital $M 96.3 46.4 - 5.2 8.7 18.8 11.0 16.1 7.0 49.0

FY15 FY16-18Item Units FY08 FY09 FY10 FY11 FY12 FY13 FY14


AMC’s key observations in respect to the Century Operation are outlined as follows.

3.1.8.1 Geology and Mineral Resources

The geology of the Century deposit is well understood through information gained from over 1,000 drillholes and mining experience from having mined a significant portion of the orebody.

The QA/QC programme used at Century Mine is complete and appropriate. The geological interpretation and stratigraphic column are appropriate for use in Mineral Resource modelling.

The seam accumulation method is appropriate for preparing the volume model but check reference surfaces could be used to identify any material differences between the modelled Units and the drillholes.

The estimation of the zinc, lead and silver grades by direct estimation of the grade and not accumulation may result in slightly different grades but AMC does not consider the difference to be material.


The Mineral Resource statement, 31 March 2007, is suitable for publication and contains no material flaws.

Reconciliations show differences between the Mineral Resource estimate and the milled and stockpiled grade and tonnes. AMC notes that these differences are accounted for by using an MCF.

Zinifex holds interests in and manages exploration over 4,603 km2 stretching some 150 km to the north-west and south-east from the Century Mine.

It is likely that low tonnages of additional mining inventories will be established on reef style deposits adjacent to the Century deposit.

3.1.8.2 Mining

The mining operation is mature with operating processes well developed through eight years of mining experience on the deposit.

Due to the physical characteristic of the deposit and completeness in Mineral Resource definition, it is unlikely that additional Ore Reserves will be delineated on the Century deposit.


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The Ore Reserve will allow operations to continue to 2015.

The operation is well equipped with modern equipment after a significant replacement and expansion programme implemented over the past two years.

A significant programme of waste removal is underway which will see over 80% of the remaining waste stripped form the mine before June 2010.

A number of geotechnical issues are being managed as the west wall of the pit is exposed in the Stage 7 area of the pit.

It is possible that the complexity of the orebody in the Stage 7 area, along with related geotechnical issues could lead to some short-term production delays.

A high degree of confidence can be placed on the extraction of the Ore Reserve.

3.1.8.3 Mineral Processing and Concentrate Handling

The process plant is modern, and has been well maintained since its commissioning in 1999.

Processing methods are proven and common to like deposits in the region.

Actual mineral recoveries (FY07) are; zinc – 77.8%, lead – 63.3%.

Zinc recoveries have reduced from approximately 80% to 78% over recent years, largely as a consequence of increased mill throughput.

Zinifex is implementing an improvement programme “Programme Percent” to improve zinc recovery through the addition of a second ball mill and additional surge capacity in the flotation circuit.

3.1.8.4 Environment

Protection of surface and groundwater quality, particularly in relation to acid drainage from some waste rock types, is considered to present the largest environmental challenge at Century. Zinifex is demonstrating effective management of this issue on a project life basis.

The modelling of groundwater and waste stockpile water relationships is expected to provide a robust basis for sustainable closure designs within the context of statutory requirements for a legacy of safe, stable and non-polluting landforms.

Closure planning has commenced, as evidenced in the 2007/2010 PoOps. The closure estimate of $74 million is based on realistic unit rates.

3.1.8.5 Costs





• Asset Management $10.33/t processed

• Administration $15.18/t processed.

Cost over-runs, in the order of 15% have been experienced across the operation in the past two years. There is some evidence that this issue has been addressed through recent planning processes. Operating costs for the six months to December 2007 are consistent to budget estimates.

Zinifex manages a Business Improvement Programme at Century that includes targets on cost containment.


AMC207098: 6 May 2008 106

A significant programme to upgrade and expand the mining fleet has been implemented over the past two years.

3.1.8.6 AMC Modelling Scenarios


• Production has been constrained to current Ore Reserves

• Mill throughput of 5.6 Mtpa.

• Metallurgical recovery of zinc 81%.

• Mining unit operating costs have been adopted from the Century 2007 LOMP.

• In all other areas, unit costs have been projected from the Century Three Year Plan.

3.2 Rosebery

3.2.1 Introduction

The Rosebery Mine is an underground operation located in the north-west of Tasmania. The general layout of the mine site is shown in Figure 3.13. The deposit was first discovered in 1893. The current operations commenced in 1936.

Zinc, lead, copper, silver and gold are all recovered from the ore that extends over a strike length of approximately 3 km and to a depth of 1.5 km. The mine produces some 700 kt of ore each year, and plans to expand this to 850 kt per year.

Access is via a decline and 40t and 55t trucks are used for ore haulage to the surface processing facility. Mining utilises mechanised methods, notably bench stoping along with sublevel open stoping and some cut and fill stoping.

Though operating continuously for over 70 years, the mine has rarely had more than six years Ore Reserves established. With a view to improving forward planning, Zinifex has recently commenced a $19M exploration programme, Project Horizon, with the intention of establishing long term Mineral Resources.

Figure 3.13 Rosebery Mine Site


AMC207098: 6 May 2008 107

Zinifex is involved in exploration over 448 km2 in the western Tasmania region.


The Rosebery Mine lies within Mining Lease ML 28M/93 which covers an area of 4,913 ha. Rosebery is considered Australia’s largest volcanic-hosted polymetallic sulphide (base and precious metals) deposit and is located within the Mount Read Volcanic Arc of Western Tasmania. The mid-Cambrian Mount Read Volcanics is host to similar deposits such as Hercules, Que River, Hellyer and Mt Lyell. The geology of Rosebery is reasonably well understood and has been published in many scientific journals.


The Rosebery deposit is stratiform comprising of zinc-lead-silver-copper and gold mineralisation hosted by the mid-to-late Cambrian volcanic and pyroclastic rocks of the Mount Read Volcanics. The predominant mineralisation comprises of sphalerite galena and pyrite. Fine-grained sphalerite and galena are the most important minerals, with some zinc as tetrahedrite and some chalcopyrite. Gold is generally present with silver electrum. Ore occurs in a north-south strike length of about 2,000m in a series of lenses up to 40m wide, dipping 45 degrees to the east. The general trend of the orebody appears to be pitching 20 degrees to 30 degrees northward along strike.

3.2.2.2 Host Rocks

Two ages of rock are represented within the mining lease: the Cambrian-age basement of the Central Volcanic Complex ("CVC"), and the much younger, superficial Quaternary-age sediments, which partly obscure it. The principal structural feature on the lease is the Rosebery Fault, which runs roughly north-south for over 20 km along its western margin, and separates the CVC (east) from the Dundas Group (west).

The CVC hosts the Rosebery orebody, and in the lease area comprises several rock units with local names: the Mt Black Volcanics, the Hangingwall Pyroclastics, the Mine Host Sequence, and the Footwall Volcanics. The Hangingwall and the Footwall Volcanics also include sedimentary horizons of black shale and related rocks which are proximal to the orebody.

• The Mount Black volcanics and intrusives comprise up to 1,000m rhyolitic lavas, breccias and dacitic intrusives.

• The Hangingwall rocks form up to 300m of rhyolitic volcaniclastics, pumice breccias with black mudstone-shale.

• The Mine Host sequence is well stratified ranging from 50m to 100m of volcaniclastic sandstone, siltstone, quartz pumice breccia, feldspar porphyry and black shale. This sequence hosts the stacked lenses of the ore.

• The Footwall is a sequence of more than 800m of rhyolitic volcanic tuffs and ignimbrites, breccias and pumice.

Low-lying areas of the lease are covered by a veneer of relatively recent Quaternary age glacial deposits and river alluvium. The main deposits are on the Stitt River, and on the Pieman at Bobadil Plain.

3.2.2.3 Exploration

Mineralisation at Rosebery was first discovered in 1893 by a prospector named Tom McDonald, and the sulphide orebody in 1894. While the Rosebery underground mine has been operating for seventy years, for much of this time it had limited Ore Reserves in front of mining operations of about three years. Zinifex has determined that it is necessary to have a mine life of at least ten years for a more predictable future. To accomplish this, a three-year programme called Project Horizons, with a budget of A$19M has been commenced. This project involves surface and underground definition and in-fill drilling, decline development and shaft/ventilation construction. This programme has facilitated the doubling of Mineral Resources from 6 Mt to approximately 12 Mt.

Current mining, development and exploration are concentrated in K, P and W lenses with some production coming from remnant pillars. Lenses K, P and W are high grade lenses below and at the northern end of the mined out area. These northern lenses have not been fully delineated. Furthermore, other lenses V, W1 and Y will also require further delineation.


AMC207098: 6 May 2008 108

Exploratory and additional in-fill drilling are required in these lenses such that Measured and Indicated Mineral Resources can be stated. It should be noted that the orebody appears to pitch at a general 20 degrees to 30 degrees northward increasing the depth of mining and making surface drilling impractical.

In the Rosebery Strategic Business Plan (July 2007), the exploration programme includes surface drilling of targets outside Rosebery. The South Hercules mine to the south of Rosebery has been providing lower grade ore to the Rosebery mill.


The Mineral Resources and Ore Reserves as reviewed at the Rosebery Mine have been calculated following the guidelines in the JORC Code. These estimations had been carried out by competent persons.

3.2.3.1 Mineral Resource/Ore Reserve Estimation

The Mineral Resource as at 31 March 2007 is summarised in Table 3.15. It is understood that the next formal revision to these estimates will be in March 2008.

Table 3.15 Mineral Resources

Area Category Tonnes ('000)

Pb (%)

Zn (%)

Cu (%)

Ag (g/t)

Au (g/y)

Fe (%)

Measured 4,687 4.1 15 0.49 149 2.2 9.6

Indicated 830 4.6 16.3 0.62 159 3.4 14.3

Rosebery

Inferred 6,195 3.5 11.1 0.34 128 1.4 7.3

Subtotal 11,712 3.8 13 0.42 138 1.9 8.7 Indicated 1,109 1.4 2.7 0.07 99 1.62 3.7 South

Hercules Inferred - - - - - - -

Subtotal 1,109 1.4 2.7 0.07 99 1.62 3.7

Total 12,810 3.6 12.1 0.38 126 1.87 8.3

At Rosebery, the 2007 Ore Reserve has increased by 1.18 Mt over the previous year while the Mineral Resource has increased by 4.6 Mt. At South Hercules, the Mineral Resource has doubled to 1.11 Mt after the completion of exploration drilling. The South Hercules Mineral Resource was estimated by AMC as a separate assignment to this report.

Rosebery’s stated Mineral Resource has varied between 8 Mt and 11 Mt since 1970, with a consistent conversion rate from Inferred Mineral Resource to Ore Reserves of approximately 60% after in-fill drilling.

The digital data of the Rosebery orebody was reviewed as were the Mineral Resource and Ore Reserve processes, procedures and documentations. AMC considers them to be technically appropriate and generally acceptable with industry standards and in compliance with the JORC Code guidelines.


Tonnage reconciliation figures for the 9 months to March 2007 are presented in Tables 3.16 and 3.17.

Table 3.16 Ore Reserve – Mine Reconciliation

Tonnes Mined Ore Reserve Inventory Tonnes

Reconciliation Depletion vs Mine Production

569,784 525,389 92%

Table 3.17 Mine - Mill Reconciliation

Tonnes Mined Tonnes Milled Mine – Mill Reconciliation 662,006 658,129 99%


AMC207098: 6 May 2008 109

The figures in Table 3.16 reflect tonnage from stopes with declared Ore Reserves and does not include development ore and other areas which are additional to Ore Reserves whereas Table 3.17 indicates total ore tonnage mined compared to the total tonnes milled.

Though some possible improvements to ore sampling procedures were identified by AMC, historical Ore Reserve to mine to mill reconciliations suggest that the estimation procedure at Rosebery is robust.


Small scale mining for lead, copper, gold and silver commenced at Rosebery in the late 1890s in the upper levels of the mine, close to surface. Full-scale mining by The Electrolytic Zinc Company of Australia ("EZ") commenced in the 1930s following the construction of a flotation plant at site. Annual production has varied since then but for the past 28 years has remained relatively constant at around 400 ktpa to 600 ktpa but peaking to over 800 ktpa in FY03. Figure 3.14 shows Mineral Resource, Ore Reserve and production tonnes since 1981.

Figure 3.14 Total Mineral Resource, Ore Reserve and Production Levels – 1981 to 2007

.000

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4.000

6.000

8.000

10.000

12.000

14.000

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

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Total Reserves

Mine Production

Mining was originally based on shaft access and rail haulage but converted to trackless (rubber tyred) methods in the 1980s. Once the decline was developed between the underground levels and surface it allowed ore and waste to be trucked to surface. The main No 2 hoisting shaft was decommissioned in 2003.

Currently the majority of production from Rosebery comes from the lower levels (approximately 1,000m below surface) with some mining of remnant pillars still occurring in the upper levels. For production from the lower levels truck haulage distances are considerable and impact on the overall mining costs.

The ore lenses at Rosebery vary in size but are typically 100m to 400m in length (along strike) and 100m to 600m in vertical height. Ore widths vary up to approximately 25m (true width). The general dip of the lodes is approximately 45o.

Production is currently based on variations of open stoping (longitudinal open stoping in narrow lodes and transverse stoping in the wider lodes), with some slashing of pillars and some cut and fill mining. Remnant stoping is planned for remnant ore in the upper levels of the mine.

Backfill, using either uncemented or cemented rockfill is an important part of the stoping cycle and helps maintain stability of the ore zone which then helps ensure successful mining of the remaining stopes and pillars.

Historically Mineral Resources have been sufficient to sustain production for four to ten years. Longer-term Mineral Resources have been difficult to prove up because of the additional capital expenditure required to access drilling locations for the deeper mineralisation.


AMC207098: 6 May 2008 110

3.2.5 Geotechnical

AMC viewed several of the underground working places and briefly discussed geotechnical aspects of the project with Rosebery’s geotechnical engineer. Ground conditions observed were considered to be good to very good with development ground support comprising splitsets, mesh and in some areas fibrecrete and/or cable bolts. Cable bolts are also used to prevent stope sidewalls from collapsing prematurely. Some stress was observed in P Lens (deterioration/cracking of shotcrete) and some stress was also reported in sill pillars. Mining recovery factors, as determined by the mine planning engineers, take into account these increased stresses.

During the past two years stress measurements have been undertaken using both the CSIRO Hollow Inclusion Cell and Acoustic Emission.

Rock conditions, displacement and deterioration have been modelled using 3D non-linear finite element modelling undertaken by Beck Arndt Engineering Pty Ltd. The modelling aids in determining a suitable extraction sequence and likely dilution and recovery factors for the remaining stopes and pillars.

Overall the geotechnical aspects of the project appear to be well analysed, understood and managed. Based on the geotechnical analysis undertaken to date the current operation and Ore Reserve estimates appear to be sound.

The major underground infrastructure at the mine consists of:

• single decline between the portal and 14L

• declines below 14L at both the north and south ends of the mine, developed to gain access to all operating levels

• intake airway shafts (No 1, No 2 and Southern Shaft)

• exhaust airway shafts (Northern Upcast ("NUC"), NUC Leg 1, NUC Leg 2)

• the North and South Exploration Declines ("NED" and "SED")

• emergency egress

• underground power supply (~ 7 MW installed capacity)

• dewatering system

• refrigeration plant

Currently there is no emergency power generation facilities, however power outages are rare.

3.2.6 Ventilation

Currently the primary intake air travels long distances before it reaches the lower level working areas and hence is subject to an increase in temperature due to the high virgin rock temperatures at depth at Rosebery. To some extent, ventilation along the deeper levels of the mine had started to constrain activities in that area prior to two bulk air coolers being commissioned.

Rosebery currently has a nominal surface exhaust capacity of 400 m3/s. In view of the planned increase in development and production activities, several options to increase the primary airflow to approximately 600 m3/s are currently being analysed.

The preferred option is to raisebore a new ventilation intake shaft between surface and approximately 2200 mRL, (approximately 1,000m below surface). If developed, the new shaft would help establish a more direct route for air from surface to the lower levels thereby delaying, possibly even removing, the requirement for additional refrigerated ventilation.

3.2.7 Ore Reserve Estimates – Modifying Factors

In order to convert Mineral Resources to Ore Reserves, preliminary stope wireframes are designed for all the Measured and Indicated Mineral Resources. These wireframes encompass what are estimated to be economic blocks based on the geological orebody block model.


AMC207098: 6 May 2008 111

Mining dilution and mining recovery factors, based on actual stope performance for each particular planned mining method, are then applied to the stope wireframe tonnages and grades. Calculation of Ore Reserves involves a varied approach depending on the lens and the location within the mine.

Lower level (P, K, W and V8 lenses) - conversion from Mineral Resource to Ore Reserve are based on recovery and dilution factors (determined by recent performance) and applied to the preliminary stope tonnes and grade estimates. All Ore Reserves have a 90% silver and gold grade factor applied, which is based on historical mine-mill reconciliation results.

Upper Levels (B, D, E, F, G, H lenses) - Mineral Resource blocks in the upper levels were reviewed and an assessment made of accessibility. Recovery and dilution factors were applied depending on proposed mining methods. Because of the large variations in local conditions, particularly in remnant mining areas, recovery and dilution factors in the upper levels are assigned on a block-by-block basis. An indication of the typical range of recovery and dilution factors for the upper levels is given in Table 3.18.

Table 3.18 Typical Upper Levels Recovery and Dilution Factors (Mineral Resource to Ore Reserve)

Stoping Method Recovery (%)

Dilution (%)

Cut and Fill 90 - 100 0 - 10 Bench Stoping 70 - 80 15 - 25 Uphole Benching 60 - 75 15 - 30 Crown Pillar Extraction 60 - 75 15 - 30 Remnant Stoping 60 - 100 10 - 40

In view of the poly-metallic nature of the Rosebery orebodies, a single cut-off grade based on one particular metal is not appropriate. Zinifex calculates two cut-offs, based on combined metal value, in order to convert the mineralisation to Mineral Resource and finally to reserve.

3.2.8 Ore Reserve Estimates - Ore Reserves as at 31 March, 2007

Ore Reserves as at March 2007 are summarised in Table 3.19:

Table 3.19 Ore Reserves as at 31 March 2007

Category Tonnes ('000)

Pb (%)

Zn (%)

Cu (%)

Ag (g/t)

Au (g/t)

Fe (%)

Proved 3,781 3.3 12.0 0.36 116 1.7 7.5 Probable 43 1.8 6.8 0.16 44 0.6 3.7

TOTAL 3,824 3.2 11.9 0.36 115 1.7 7.4

Over the 12 months to 31 March 2007, total Ore Reserves at Rosebery have increased by approximately 44%, after depletion, due to Mineral Resource upgrades in K and W Lens and revision of P lens reflect higher metal prices.

As indicated in Table 3.20 approximately 20% more lead is being obtained in milling than is estimated from the Mineral Resource and Ore Reserve modelling. Zinifex plan for this “underestimation” and believe that it stems from errors in the assay sampling procedures. Zinifex is not planning to alter the orebody block models to allow for the underestimation.


AMC207098: 6 May 2008 112

Table 3.20 Rosebery Mine Reconciliation: 1 April 2006 to 31 March 2007

Source Tonnes Pb (%)

Zn (%)

Cu (%)

Ag (g/t)

Au (g/t)

Fe (%)

Ore Hoisted (actual) 662,006 3.75 13.62 0.29 138.87 1.71 7.15Add Opening 7L Bins - 5.39 18.98 0.32 182.98 2.02 7.79Add Opening COB - Rosebery 250 4.10 15.06 0.29 165.21 1.90 8.25Add Opening FOB - Rosebery 6,800 4.10 15.06 0.29 165.21 1.90 8.25Add Opening Stockpile (7L) 25,039 3.68 15.35 0.40 127.76 1.60 8.57Add Opening Blending Stockpile (4L) - - - - - - 5.00

Less Closing COB - Rosebery 450 3.75 13.62 0.29 138.87 1.71 7.15Less Closing FOB - Rosebery 2,700 3.75 13.62 0.29 138.87 1.71 7.15Less Closing Stockpile - Rosebery 200 5.39 18.98 0.32 182.98 2.02 7.79Less Closing Blending Stockpile (4L) - - - - - - -

Ore Milled (Calculated) 690,745 3.75 13.69 0.30 138.72 1.71 7.20Ore Milled (Actual) 658,129 4.57 13.64 0.64 160.11 1.63 7.32

Variance Actual vs Calculated -32,616.2 0.83 -0.06 0.04 21.39 -0.08 0.10% Variance, Actual vs Calculated 95.28 122.08 99.59 114.32 115.42 95.21 101.65

3.2.9 Future Cut-Off Grade Strategy

Zinifex is currently analysing possible improvements to major infrastructure items, including building of a new mill and development of a new ore hoisting shaft, either of which would reduce operating costs significantly. This has the potential to increase the Ore Reserve base as a consequence of a decrease in the cut-offs used.

3.2.10 Life of Mine Mining Inventory

The LOMP is normally completed in January or February of each year, approximately two months before the Ore Reserves are estimated. To assist with planning beyond the current Ore Reserve, Zinifex has introduced production estimates termed ‘Estimated Economic Reserves' ("EER"). This reserve is defined by Zinifex as: “Proved and Probable Ore Reserves plus additional equivalent material capable of extraction from the Inferred Mineral Resource ”.

The EER contains all of the Proved and Probable Ore Reserves, together with a proportion of the Inferred Mineral Resource. To remain consistent with previous estimates, Zinifex assumes that 60% of Inferred Mineral Resource tonnes will be recovered. A dilution factor of 20% is applied to the grade of Inferred material to maintain consistency with previous estimates. Based on this definition the EER for Rosebery mine at the end of March 2007 is:

7.697 Mt @ 3.2% lead, 10.9% zinc, 0.35% copper, 113 g/t silver, 1.5 g/t gold, 7.3% iron

A breakdown of the EER is indicated in Table 3.21.


AMC207098: 6 May 2008 113

Table 3.21 Rosebery Mine Estimated Economic Reserves at 31 March 2007 Category Lens Estimated

07 Tonnes('000)

Factor

(%)

EERTonnes('000)

Pb

(%)

Zn

(%)

Cu

(%)

Ag

(g/t)

Fe

(%)

Proved Reserves All 3,781 100 3,781 3.3 12.0 0.36 1.7 7.5

Probable Reserves All 42 100 42 1.8 6.8 0.16 0.6 3.7

Total Reserves 3,823 100 3,823 3.2 11.9 0.36 1.7 7.4

Inferred Resources B 2 60 1 3.5 7.5 0.09 1.5 7.8

Inferred Resources D 6 60 4 0.8 8.7 0.83 1.3 19.0

Inferred Resources H 45 60 27 2.3 6.8 0.18 0.8 1.8

Inferred Resources K 2,347 60 1,408 3.0 13.1 0.43 1.4 9.6

Inferred Resources P 302 60 181 4.8 8.6 0.17 1.3 9.2

Inferred Resources W 1,690 60 1,014 3.3 9.7 0.40 1.3 4.9

Inferred Resources X 687 60 412 2.0 4.3 0.10 0.8 2.5

Inferred Resources Y 873 60 524 2.9 7.3 0.20 1.3 4.1

Inferred Resources S 243 60 146 1.4 8.4 0.40 0.7 15.5

Measured Not In Reserve J 157 100 157 2.2 9.0 0.80 2.1 20.2

Total 6,353 61 3,874 2.9 9.3 0.30 1.2 6.7

Estimated Economic Reserve Total 7,697 3.2 10.9 0.35 1.5 7.3

AMC notes that grades for future years in the LOMP are generally lower than currently forecast grades. Historically as Mineral Resource and Ore Reserve confidence increases, with further diamond drilling and interpretation, the grades, in general, have also increased.

The current Rosebery Strategic Business Plan – July 2008 V1.2 ("RSBP") indicates a number of target production scenarios with the preferred options based on the processing of approximately 850 ktpa in FY09 and FY10.

3.2.10.1 Alternative Long Term Production Sources and Scenarios

A prefeasibility study has commenced to examine the potential to reduce operating costs and increase both Mineral Resource and Ore Reserve levels as a result of improved mine infrastructure. Infrastructure options being examined include:

• building a new mill with SAG

• development of a new ore hoisting shaft

• upgrading the existing power supply.

There is reasonable expectation that over the longer term, Rosebery ore will be supplemented by ore purchased from Bass Metals Ltd, from both Que River and Hellyer Mines, and from South Hercules (100% Zinifex).

Bass Metals announced (on 26 October 2007) the following Mineral Resource estimate for Que River and Hellyer:

1.5 Mt at 3.5% lead, 6.3% zinc, 0.7% copper, 85 g/t silver, 1.1 g/t gold

Under the current purchase agreement, which commenced in August 2007, Bass Metals will deliver between 5 kt and 8 kt or ore per month to the Rosebery mill.

3.2.10.2 Mining Operations

Rosebery has been steadily replacing much of its own mining fleet (and operators) with a contractor fleet. Similarly contractors carry out the majority of the engineering aspects at site. The mobile fleet consists of:

• underground haulage trucks (AD55 and AD40)

• development jumbos (drills)

• production drills


AMC207098: 6 May 2008 114

• load, haul dump ("LHD") units

• ancillary vehicles such as IT and light vehicles.

As part of the infrastructure planning, alternative operating practices are being analysed including automated LHD operations.


3.2.11.1 Introduction

Rosebery is a high grade polymetallic base metal deposit containing copper, lead and zinc sulphide mineralisation including chalcopyrite, galena, sphalerite and tetrahedrite as well as free gold. Separate copper, lead and zinc flotation concentrates are produced as the principal output commodities although a proportion of the free gold in the ore is recovered into a gravity concentrate from which gold bullion is generated.

3.2.11.2 Ore Mineralogy

The principal value sulphide minerals at Rosebery include sphalerite and galena with lesser proportions of chalcopyrite and tetrahedrite together with minor arsenopyrite and pyrrhotite. Gold is generally free, being present with silver as electrum. The relative proportions of the sulphide minerals vary throughout the orebody with lead-zinc mineralisation being generally located in the hanging wall and with chalcopyrite and pyrite towards the footwall.

The texture of the sulphide mineralisation ranges from massive through to disseminated, with coarse grained mineralisation intersecting vein mineralisation in some instances. The sphalerite and pyrite tend to exhibit a slightly coarser liberation size than the chalcopyrite. Variations in both the plant feed grade and mineral presentation that would require appropriate adjustment of the process conditions to optimise the plant output might be expected in the short term. However mineralogical investigations have identified that circa 80% of the sphalerite and pyrite together with approximately 70% of the galena in the plant feed are liberated minerals such that the production of high grade contemporary zinc and lead flotation concentrates would be anticipated.

It would be anticipated that any tetrahedrite that was not recovered into a gravity concentrate would report to the copper and lead flotation concentrates.

The principal sulphide gangue mineral is pyrite although non-sulphide gangue minerals dominate.


The Rosebery process flowsheet and the concentration plan for FY08 are illustrated in Figure 3.15.

Ore from the underground mining operation is trucked to the surface where it is either direct crushed or stockpiled for blending prior to crushing. The crushing circuit feed is dumped through a grizzly where a rock breaker is used to reduce oversize material to minus 450 mm as feed to a 1200 mm x 900 mm primary jaw crusher. The crusher discharge product is conveyed to a vibrating screen ahead of a 1524 mm secondary cone crusher. The screen undersize and the cone crusher product are combined and conveyed to one of two fine ore bins for storage prior to milling, with one bin being designated for high grade ore and the other for low grade ore. The fine ore bins have been designated as the formal interface point between the mining and milling operations.

The comminution circuit in the treatment plant comprises two parallel lines with generally similar configurations. Ore is reclaimed from beneath the fine ore bins, with high grade and low grade ores being blended as required. In each line, the blended ore passes through a rolls crusher in closed circuit with a 5 mm screen. The screen oversize returns to the rolls crusher feed stream while the screen undersize is processed in a two stage ball milling circuit linked through a two stage cycloning sequence.

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ZINIFEX LIMITED Technical Report on the Mineral Assets of Zinifex

AMC207098: 6 May 2008 116

The undersize product from the rolls crusher circuit is fed to a 410 kW primary ball mill operating in closed circuit with a 610 mm cyclone. The primary cyclone underflow returns to the primary ball mill while the overflow passes to a secondary cycloning sequence. The secondary cyclones are in closed circuit with parallel 164 kW secondary ball mills, with the cyclone underflow product being split between the two secondary mills. The overflow from the secondary cyclones becomes the flotation circuit feed. The rolls crushers and the primary ball mills operate as two parallel and independent circuits. The overflow products from the primary cyclones are however combined in the secondary grinding sequence from which a single flotation feed stream is produced. The grinding circuit product is nominally sized at 80% finer than 75 microns.

A Knelson concentrator within the primary grinding circuit produces a gravity concentrate from a bleed stream cut from the primary cyclone underflow. The Knelson tailings product discharges to the ball mill discharge sump for recycling in the primary cyclone feed stream while the gravity concentrate is processed to produce a gold-silver dore bullion.

The comminution circuit product is pumped to a 30m diameter flotation feed thickener which is used to control the flotation feed pulp density to approximately 50% solids by weight. The thickener underflow gravitates to a surge tank ahead of the flotation circuit.

The flotation circuit is of a contemporary design with the sequential flotation of copper, lead and zinc concentrates. Each process stage involves roughing and cleaning sequences, with the lead circuit being perhaps the most complex.

Copper concentrate is the first of the three value flotation products to be recovered. Reagents are added to the flotation feed to enhance the flotation of the copper mineral while inhibiting the flotation of the other sulphides using sodium meta-bisulphite in conjunction with control of the flotation pH using lime.

Copper rougher flotation is carried out in a bank of fourteen 2.8m3 flotation cells although only ten cells are normally utilised on this duty. The remaining four cells had previously been used for scavenger flotation. The rougher concentrate is processed in a single cleaning stage in another bank of ten cells at a nominal temperature of 500C with the cleaner tailing product being recycled to the head of the rougher.

The copper circuit tailings are conditioned before processing in two parallel lines of twelve 2.8m3 flotation cells. Rougher concentrate generated from the first four cells in each line is processed through three stages of closed circuit cleaning, with the third stage tailings being recycled to the preceding stage while the first and second stage tailings are recycled to the rougher feed. Scavenger concentrate is recovered from the eight cells in each line following the rougher stage. The scavenger concentrate is cycloned, with the cyclone overflow joining the rougher concentrate in the cleaner circuit feed. The cyclone underflow is however milled in an open circuit 355 kW stirred mill detritor, with the detritor product also being directed to the cleaner feed stream. The three stages of cleaning utilise a total of twenty-eight 2.8m3 cells.

The lead circuit tailings are conditioned with copper sulphate before processing in a bank of twelve 8m3 rougher cells. The rougher concentrate is cleaned in a two stage cleaner circuit comprising a total of twenty 2.8m3 cells, with the second cleaner tailings recycling to the head of the first cleaner and with the first cleaner tailings recycling to the head of the rougher. No regrinding is currently employed in the zinc circuit. Refurbishments are being implemented in this circuit.

The zinc circuit tailings constitute the final reject product from the flotation circuit. These tailings are thickened, with the thickener underflow gravitating to an effluent treatment plant for pH adjustment using lime prior to being discharged into the TSF.

The final concentrates are dewatered in separate but common circuits, with the concentrates being thickened prior to being filtered on Larox pressure filters. A single thickener and filter are used for each of the copper and lead concentrates while two thickeners and filters are required to handle the larger volume of zinc concentrate. Good control of thickener overflows limits any losses from this process. Flexibility exists in the filtration process to provide backup if required.


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3.2.11.4 Metallurgical Performance

The process plant at Rosebery has a nominal capacity of circa 850 ktpa. This rate has been scheduled into forward production plans. Recent annual production statistics are summarised in Table 3.22 in conjunction with production forecasts for FY08 to FY10. An average annualised throughput rate of 709.5 kt has been obtained for the 10 year period to June 2007 as compared to an average annual production of 835.2 kt in the Three Year Production Plan. The higher throughput rates will require additional capital expenditure and/or a major change in the mill operating strategy. Zinifex has a number of initiatives in this regard.

Table 3.22 Ore Production Statistics

Head Grade Year Ending

Annual Tonnes % Pb % Zn % Cu g/t Ag g/t Au

1998-2007 Production Statistics FY98 649,857 2.76 9.92 0.40 79 1.5 FY99 706,054 3.62 12.32 0.38 101 1.7 FY00 633,222 4.15 12.17 0.34 118 1.9 FY01 734,884 4.52 11.15 0.37 156 2.2 FY02 755,629 3.88 11.55 0.29 130 1.8 FY03 805,277 3.79 11.15 0.35 110 1.9 FY04 739,416 3.79 13.79 0.45 118 2.1 FY05 689,512 4.53 14.69 0.36 155 1.6 FY06 671,666 4.76 13.66 0.36 147 1.4 FY07 707,331 4.10 12.90 0.40 157 1.7

2008-2010 Production Plan FY08 779,928 3.18 11.85 0.37 126 1.7 FY09 872,132 2.43 8.97 0.36 102 1.4 FY10 853,494 2.63 9.31 0.26 109 1.5

The metallurgical performance of the treatment plant over the ten year period from 1998 to 2007 is summarised in Tables 3.23 and 3.24 together with the projected annual output performance from the Three Year Production Plan.

Table 3.23 Dore and Copper Concentrate Production Statistics

Dore Bullion Copper Concentrate Year Ending kg %Ag %Au Au Rec (%) Tonnes %Cu %(Pb+Zn) Cu Rec (%)

1998-2007 Production Statistics FY98 88.3 30 70 8.7 5,553 23.5 13.5 47.6 FY99 89.4 31 67 10.9 5,925 22.7 18.8 49.0 FY00 90.3 32 67 25.5 5,169 23.2 17.6 51.7 FY01 88.9 29 69 22.6 6,599 22.8 18.1 57.7 FY02 90.3 31 66 18.2 5,638 22.0 20.5 56.8 FY03 88.3 29 67 23.1 7,212 20.2 18.3 52.5 FY04 367 30 64 16.3 10,463 20.4 16.3 64.3 FY05 331 31 64 16.1 8,712 20.6 18.3 65.4 FY06 449 33 63 23.2 7,936 19.7 18.1 62.6 FY07 559 30 58 32.7 7,379 21.3 19.2 55.5

2008-2010 Production Plan FY08 431 32 65 21.1 8,071 21.1 17.4 59.5 FY09 413 32 65 21.1 9,266 22.0 17.6 64.8 FY10 399 32 65 21.0 6,488 22.0 16.7 63.7


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Table 3.24 Lead and Zinc Concentrate Production Statistics

Lead Concentrate Zinc Concentrate Year Ending Tonnes %Pb %Zn Pb Rec % Tonnes %Pb %Zn Zn Rec (%)

1998-2007 Production Statistics FY98 19,546 62.3 11.3 67.8 106,719 3.0 52.6 88.5 FY99 28,056 65.3 10.1 76.9 136,487 1.9 55.1 89.4 FY00 34,310 65.7 9.3 81.8 124,864 2.0 55.4 90.3 FY01 40,611 65.3 10.2 79.9 129,026 2.5 56.3 88.9 FY02 35,644 67.2 9.4 81.7 138,716 1.7 56.3 90.3 FY03 42,171 62.5 11.7 84.0 141,888 1.3 57.1 88.3 FY04 43,237 63.9 11.3 83.1 154,464 1.4 57.1 87.4 FY05 45,690 64.3 12.7 83.9 154,365 1.7 57.3 88.1 FY06 37,122 64.8 11.5 79.4 147,877 2.3 56.5 89.4 FY07 36,783 63.9 11.0 81.0 150,619 1.8 55.1 90.9

2008-2010 Production Plan FY08 2,806 69.0 9.2 81.0 148,065 1.2 56.5 90.5 FY09 29,185 70.0 8.7 81.6 160,440 1.1 56.6 92.0 FY10 26,277 70.0 8.7 81.9 127,963 1.1 57.1 92.0

It will be noted from the results in Table 3.23 that the performance of the gravity circuit has been variable from an historical perspective, an outcome that might be expected given the variability in the deportment of free gold in the ore and the range of ore blend processed in the treatment plant.

Over the past ten years the copper recovery has averaged 56.4% into a 21.3% copper concentrate from an average 0.37% copper feed ore. Given that the feed grade is projected to decrease over the next three years while the throughput rate increases, it is difficult to accept prima facie that a higher copper recovery will ensue without a significant change to the circuit operation. It is noted that the Three Year Production Plan targets an average copper recovery of 62.7% into a 22% copper concentrate from an average 0.33 % copper ore. At present, not all of the available cells are utilised in the copper flotation circuit such that there is some scope to accommodate changes in the process conditions.

The historical metallurgical data for lead and zinc flotation are summarised in Table 3.25 together with the performance projections from the Three Year Production Plan. The average plant performance for the 10 year period to FY07 for lead flotation indicates a concentrate grade of 64.5% lead with 11% zinc at a lead recovery of 80%. For zinc flotation, an average 56% zinc concentrate has been generated with an 89% zinc recovery. Overall, the lead and zinc flotation responses have been relatively steady from an historical perspective from a feed ore averaging 4% lead and 12% zinc.

The forward plan predicts improvements in the flotation response in both the lead and zinc circuits with a lead concentrate assaying 70% lead and 9% zinc at 81.5% lead recovery together with a 56.7% zinc concentrate at 91.5% zinc recovery. In this period the average head grade is forecast to decrease and ore throughput rate increased. Although the plant performance projected in the Three Year Production Plan might be regarded as optimistic in certain areas, AMC considers that an upside exists in the potential plant performance. Not all of the installed flotation capacity is utilised with the current mode of plant operation providing the potential to utilise this unused capacity. Furthermore, the use of lower flotation densities could be conducive to generating a more selective separation of the value minerals.

3.2.12 Environment

3.2.12.1 Statutory Authorities

Zinifex holds a number of statutory permits as required by Tasmanian environmental and related laws, and administered by several government agencies. Zinifex also operates an Environmental Management System (ISO14001 certified) which integrates the site’s operational Environmental Management Plan with the requirements of the Environmental Protection Notice ("EPN") issued under the Environmental Management


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and Pollution Control Act 1994. The EPN is equivalent to a licence in other Australian jurisdictions, and is the primary tool for statutory environmental management in Tasmania.

AMC has reviewed the (undated) EPN for Rosebery, but has conducted only a cursory audit of compliance with the document – no environmental specialist participated in AMC’s site visit. However, AMC personnel who did visit the site during this review reported no new items of concern.

3.2.12.2 Surface and Groundwater Management – Acid Mine Drainage

The high rainfall and streamflows in the Rosebery area, coupled with acid mine drainage, pose significant environmental risks. Zinifex appears committed to responsible management of this risk to surface and groundwater, and has established a sophisticated water-management and treatment system to achieve this risk. The challenge is increased by historical acid drainage issues, but Zinifex appears to be managing the broad challenge effectively. The water management system involves a series of drains which collect potentially-contaminated water for management in a dedicated Effluent Treatment Plant ("ETP"), followed by discharge to the Bobadil TSF and subsequent decant into the Bobadil Polishing Pond and then discharge to the Pieman River.

Predictably, there have been periodic but comparatively minor breaches of EPN thresholds, especially at the final discharge point, but these are generally associated with high rainfall and stream-flow events which of themselves provide a significant diluting effect. AMC is not aware of any technical breach of an EPN threshold having resulted in actual or threatened coercive action by government agencies. Notably, non-compliances with the EPN have decreased since 2005, when the wastewater management system was improved and EPN conditions altered to provide realistic thresholds.

Progressive rehabilitation of the Assay Creek Waste Stockpile, and rehabilitation of historic waste stockpiles, are positive initiatives in minimising acid drainage risks.

3.2.12.3 Tailings Management

Six TSFs are operated by Zinifex at Rosebery, the main one being the Bobadil TSF. The TSF system has been subject to annual review by independent consultant engineers, with only minor issues being reported in the 2006 report. AMC has not sighted the 2007 report.

A 2005 investigation of the Bobadil TSF identified unconsolidated layers of tailings adjacent to the western embankment, which has since been strengthened to meet engineering safety standards. AMC is aware of 2006 plans to develop a new TSF to replace Bobadil, but has not determined if the four possible sites identified at the time have been fully investigated during 2007 and whether a decision has been made to proceed with development of one of them.

TSFs 2 and 5 are no longer operational, and are currently used by West Coast Council to treat sewage from the Rosebery township. A closure plan for these TSFs is being developed and implemented, with the aim of reducing the amount of water requiring treatment in the ETP by managing nutrient and bacteria concentrations to levels allowing direct discharge into the Stitt River. Acid drainage from TSFs 2 and 5 is managed with a wetland system, with plans in place to add lime-dosing facilities. TSF1 is decommissioned and used as a sports ground. Remedial works have been undertaken on the dry cover system, and the drainage system refurbished to permit control of acid drainage.

3.2.12.4 Closure and Rehabilitation

A 2006 closure plan for the Rosebery mine provides detailed information on work requirements, but a current closure cost estimate has not been sighted by AMC. However, the 2006 Behre Dolbear report noted a $32M provision for closure and rehabilitation. Without access to the documentary basis of this estimate, AMC can only comment that it appears, on the broad basis of areas disturbed and acid drainage risks, to be of the appropriate order.

A 2005 Hercules mine closure plan provided a detailed and risk-based analysis of relevant issues, and the identification of a notional $18M provision for the task. AMC has not sighted a more recent assessment and, given the complexity of the Hercules site and the lack of clearly-defined completion criteria in the 2005 report, can state only that this sum is of the appropriate order, albeit at the low end of the likely cost range.


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3.2.12.5 Community Relations

Zinifex's Community Management Plan provides a basis to manage actual and perceived community risks, and to foster relationships with the community and the local government authority. Community assistance programmes involving sporting and community club sponsorship, education assistance are operated under the Community Management Plan, as are periodic public briefings. While historically Zinifex's community engagement has been ad hoc, an agreed and definitive projects plan was agreed with the West Coast Council in 2006.

Community issues have largely resulted from noise from abnormal operations at surface, and modifications to the EPN in 2005 presaged a requirement for progressive reduction in noise emissions from the site. AMC is not aware of progress in this area, but is aware of successful similar programmes at comparable sites in Australia.


Operating and capital costs reported and projected for the Rosebery Mine are detailed in Table 3.25.

“Mission Direct” working teams have recently been established by Zinifex with the aim of reducing operating costs by allowing employees to better understand costs in their work area.

A prefeasibility study is underway at Rosebery that has the potential to impact on operating costs and mine longevity. Significant capital expenditure may result as an outcome from this study that is examining the following areas:

• mine infrastructure and operation

• concentrator capacity and renewal options

• new tailings dam.

Table 3.25 Actual Operation and Capital Costs

FY05 FY06 FY07 FY08 FY09 FY10Production Parameters

Ore Mined Mt 706 693 670 809 843 858 Mine Development m 5,631 5,406 5,373 9,169 9,562 6,518 Ore Processed Mt 690 672 707 780 872 854 Zn in Zn Con Recovered kt 88.5 83.5 82.9 83.7 90.9 73.1 Pb in Pb Con Recovered kt 29.4 24.1 23.5 20.1 20.4 18.4 Cu in Cu Con Recovered kt 1.8 1.7 1.6 1.7 2.0 1.4 Au Recovered koz 90 86 92 71 70 55 Ag Recovered koz 1,283 1,194 1,036 1,030 983 943

Unit Cash Operating CostsMining $/t mined 33.3 47.8 53.4 52.8 49.8 52.1 Mine Development $/m advanced 3,530 4,264 4,779 4,626 4,443 4,760 Processing $/t processed 29.0 32.7 34.8 31.7 29.7 30.8 Admin/Head Office $/t processed 21.6 38.5 48.2 50.3 49.8 46.1

Total Site Cost $/t processed 92.8 128.0 144.0 152.7 142.7 139.1 Cash Operating Costs

Mining (ex op dev) $M 23.5 33.1 35.8 42.7 42.0 44.7 Mine Operating Development $M 5.6 5.0 7.3 12.5 13.1 8.4 Processing $M 20.0 22.0 24.6 24.7 25.9 26.3 Admin/Head Office $M 14.9 25.9 34.1 39.2 43.4 39.4

Total Site Cost $M 64.0 86.0 101.8 119.1 124.4 118.8 Capital Costs

Mining plant/equipment $M 10.2 14.0 16.2 38.2 35.2 25.2 Mining capital development $M 11.7 11.3 11.4 21.2 15.3 13.9 Processing $MAdmin/Head Office $MExploration $M - - - - - - Rehabilitation $M - - - - - -

Total Site Cost $M 21.9 25.3 27.6 59.4 50.5 39.1

Actuals Three Year PlanItem Units


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Preliminary estimates of major capital expenditure items as indicated by Rosebery include:

• crushing and grinding upgrade $17M - $27M

• surface facilities upgrade $52M

• new TSF $12M - $14M

• mine upgrade - Ventilation (Phase 1) $4M

• mine upgrade - Ventilation (Phase 2) $25M

• mine upgrade - Mine Planning and Infrastructure $25M

The above estimates are not included in current forward plans for the operation.


AMC was not provided with a business plan detailing cost forecasts over the remainder of the life of the mine. The modelling scenarios developed by AMC were established on the following basis:

• Case 1 tonnages were extended beyond Ore Reserves and matched to the EER as defined by Zinifex. This case generated a mine life to 2017.

• Case 2 was extended a further 5 years to 2022.

• Annual waste tonnages, ore tonnages and grades were adopted from the 2007 LOMP.

• Mining and processing tonnages were set at 850 ktpa decreasing in the final two years.


• Unit operating costs consistent with FY07 actual results levels have been adopted as a base.

• Unit mining cost were increased by 2% (real) per annum to reflect likely cost increases associated with accessing more remote ore.

• Capital from the Zinifex three-year plan adopted with an allowance for sustaining capital beyond the three-year period.

The scenarios are summarised in Tables 3.26 and 3.27.

Table 3.26 AMC Modelling Scenario - Case 1

Production ParametersOre Mined kt 780 872 854 850 850 850 850 850 600 341Mine Operating Development m 1,755 3,164 1,838 2,698 2,698 2,698 2,698 2,698 1,905 1,084Ore Processed kt 780.0 872.1 853.5 850.0 850.0 850.0 850.0 850.0 600.0 341.4 Zn Recovered kt 83.8 89.7 72.2 85.1 85.1 85.1 85.1 85.1 60.1 34.2 Pb Recovered kt 20.2 20.5 18.0 17.2 17.2 17.2 17.2 17.2 12.2 6.9 Cu Recovered kt 1.6 1.5 1.2 1.2 1.2 1.2 1.2 1.2 0.8 0.5 Ag Recovered koz 1,769 1,759 1,721 1,714 1,714 1,714 1,714 1,714 1,210 688Au Recovered koz 26.2 25.7 25.1 25.0 25.0 25.0 25.0 25.0 17.7 10.0 Unit Cash Operating CostsMining $/t mined 53.4 54.5 55.6 56.7 57.8 59.0 60.2 61.4 62.6 63.9 Mine Operating Development $/m 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 Processing $/t processed 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 Administration $/t processed 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 Unit Cash Site Costs $/t processed 147.2 154.9 148.9 154.9 156.0 157.2 158.4 159.6 160.8 162.1

Cash Operating CostsMining $M 50.1 62.7 56.2 61.1 62.1 63.0 64.0 65.1 46.7 27.0 Processing $M 27.1 30.3 29.7 29.6 29.6 29.6 29.6 29.6 20.9 11.9 Administration $M 37.6 42.1 41.2 41.0 41.0 41.0 41.0 41.0 28.9 16.5 Total Site Cash Cost $M 114.8 135.1 127.1 131.7 132.6 133.6 134.6 135.6 96.5 55.3 Capital CostsCapital - PP&E $M 38.2 35.2 25.2 35.0 35.0 7.4 7.4 7.4 5.0 - Capital Mine Development $M 21.2 15.3 13.9 5.1 5.1 5.1 5.1 5.1 3.6 - Rehabilitation $M - - - - - - - - 18.0 32.0 Total Capital $M 59.4 50.5 39.1 40.1 40.1 12.5 12.5 12.5 26.6 32.0

Item Units FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY15 FY16


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Table 3.27 AMC Modelling Scenario - Case 2

Production ParametersOre Mined kt 780 872 854 850 850 850 850 850 850 850 850 850 850 600 341Mine Operating Development m 1,755 3,164 1,838 2,698 2,698 2,698 2,698 2,698 2,698 2,698 2,698 2,698 2,698 1,905 1,084Ore Processed kt 780.0 872.1 853.5 850.0 850.0 850.0 850.0 850.0 850.0 850.0 850.0 850.0 850.0 600.0 341.4 Zn Recovered kt 83.8 89.7 72.2 85.1 85.1 85.1 85.1 85.1 85.1 85.1 85.1 85.1 85.1 60.1 34.2 Pb Recovered kt 20.2 20.5 18.0 17.2 17.2 17.2 17.2 17.2 17.2 17.2 17.2 17.2 17.2 12.2 6.9 Cu Recovered kt 1.6 1.5 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 0.8 0.5 Ag Recovered koz 1,769 1,759 1,721 1,714 1,714 1,714 1,714 1,714 1,714 1,714 1,714 1,714 1,714 1,210 688Au Recovered koz 26.2 25.7 25.1 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 17.7 10.0 Unit Cash Operating CostsMining $/t mined 53.4 54.5 55.6 56.7 57.8 59.0 60.2 61.4 62.6 63.9 65.1 66.4 67.8 69.1 70.5 Mine Operating Development $/m 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 4,779 Processing $/t processed 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 34.8 Administration $/t processed 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 Unit Cash Site Costs $/t processed 147.2 154.9 148.9 154.9 156.0 157.2 158.4 159.6 160.8 162.1 163.3 164.6 166.0 167.3 168.7

Cash Operating CostsMining $M 50.1 62.7 56.2 61.1 62.1 63.0 64.0 65.1 66.1 67.2 68.3 69.4 70.5 50.6 29.2 Processing $M 27.1 30.3 29.7 29.6 29.6 29.6 29.6 29.6 29.6 29.6 29.6 29.6 29.6 20.9 11.9 Administration $M 37.6 42.1 41.2 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 28.9 16.5 Total Site Cash Cost $M 114.8 135.1 127.1 131.7 132.6 133.6 134.6 135.6 136.7 137.7 138.8 139.9 141.1 100.4 57.6 Capital CostsCapital - PP&E $M 38.2 35.2 25.2 35.0 35.0 7.4 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 - Capital Mine Development $M 21.2 15.3 13.9 8.1 8.1 8.1 8.1 8.1 8.1 8.1 8.1 8.1 8.1 6.6 - Rehabilitation $M - - - - - - - - - - - - - 18.0 32.0 Total Capital $M 59.4 50.5 39.1 43.1 43.1 15.5 13.1 13.1 13.1 13.1 13.1 13.1 13.1 29.6 32.0

Item Units FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY22FY18 FY19 FY20 FY21


Key observations made by AMC in regard to the Rosebery Mine are:

Geology

The Rosebery deposit has a long history of production since its discovery over a century ago.

The exposed geology and mineralisation has been well documented and understood. However high-grade mineralisation is not well defined in advance of the deepest mining areas.

As the depth of the mineralisation increases northward along strike, surface drilling will become impractical. A systematic underground exploration drilling is planned to delineate Mineral Resources in this area.

Zinifex has implemented an exploration and development programme called “Project Horizon” to expand and improve the definition of Mineral Resources. This programme, which to date has increased Mineral Resources by 65%, is likely to define sufficient Mineral Resources to support a ten-year mine life under current market conditions.

AMC has not re-estimated the Mineral Resources or Ore Reserves, or undertaken a detailed technical audit. However, AMC did review the Mineral Resource and Ore Reserve digital model, processes and procedures and considers that they conform with industry standards.

The reconciliation comparing mined tonnes and grades with Mineral Resource depletion shows a positive tonnage and grade reconciliation.


Mining

The Ore Reserve is sufficient for 4½ years of production at planned rates.

The majority of mine production comes from depths of approximately 1,000m with some mining of remnant pillars in the upper levels. Production from the lower levels involves long truck haulage distances which impact on mining costs.

Geotechnical aspects of the project appear to be well analysed, understood and managed.

Ventilation constraints have impacted on the operation over recent years due to the depth of mining and high virgin rock temperatures. Initiatives are currently in implementation to increase both primary airflows and air conditioning systems and have achieved improved working conditions.


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Geotechnical analysis undertaken and mining practices in general suggest that the Ore Reserve estimate is sound and achievable.

It is expected that Rosebery will be supplemented by ore purchased from Bass Metals Ltd, from both Que River and Hellyer Mines, and from South Hercules (100% Zinifex).

Processing

Mineral processing involves conventional flotation as the primary separation technique.

The plant has a nominal throughput rate of 850 ktpa. This rate has not been achieved on an annualised basis potentially due to high zinc feed grades.

Mineral recoveries achieved in FY07 are, zinc - 91%, lead - 81% and copper - 55%.

Opportunity exists to improve the plant’s performance through upgrading or refurbishing the fixed plant and reviewing operating procedures.

Environment

Water management issues are the predominant ongoing environmental risk at Rosebery requiring commitment of Mineral Resources to the diversion and treatment of potentially contaminated water prior to discharge into the Pieman River.

Zinifex has demonstrated its commitment to this challenge through the 2005 upgrade of the water management system and subsequent reduction in EPN exceedances.

Acid mine drainage, including that from “legacy” sites, similarly presents ongoing challenges. Again, Zinifex has developed monitoring programmes which accurately characterise risks to freshwater ecosystems, as part of the development of risk-based closure plans.

Recent closure plan have not been reviewed by AMC, however the existing plans have rigorously identified the risks and challenges, and the costings are considered to be of an appropriate order.

Capital and Operating Costs


• Mining $52.76/t ore mined

• Mine Development $4,626/m


• Administration $50.26/t processed

Zinifex manages an improvement programme at Rosebery, the Mission Direct Work Team programme to assist with cost containment.

Capital expenditure of $149M is scheduled for the coming three years.

A prefeasibility study is underway which may suggest a significant increase in capital expenditure with a view to improving operation efficiencies and extending the mine life.



• Production has been extended beyond to current Ore Reserves that would have otherwise restricted the mine life to December 2011.

• AMC’s Case 1 runs to 2017 and Case 2 to 2022.


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• Mine production and mill throughput have been increased to 850 ktpa.


• Unit costs are the FY07 actuals. Mining unit costs have been increased at 2% per annum.

3.3 Dugald River Development Project

3.3.1 Introduction

The Dugald River Project is currently a development project. A feasibility study and related work was commenced in 2007 and is expected to be complete in 2008. Subject to successful outcomes from a feasibility study, Zinifex envisages that the operation could commence in 2011.

The project is owned 100% by Zinifex.

Figure 3.16 shows that the Dugald River Project is located in Queensland, approximately 65 km north-west of Cloncurry, and approximately 85 km north-east of Mt Isa. The general region is host to a number of significant base metal mining operations. Locally and historically, a number of small-scale mining operations have worked high-grade base metal lodes. It has been reported that the Dugald River Project is one of the world largest undeveloped zinc and lead deposits.

The deposit was first discovered in the 1870s. Previous owners have undertaken significant exploration and a range of technical studies on the deposit. Such studies have included Mineral Resource estimation, metallurgical test work and mining studies. Evaluations by past owners had not proved favourable to development due to poor project economic, high levels of manganese reporting to the zinc concentrate and poor market conditions.

Zinifex completed a prefeasibility study on the project in late 2006. This study identified positive improvements on previous studies, particularly in regard to impact of manganese on concentrate sales, and the general market outlook.

Zinifex commenced a feasibility study in 2007 with the view that a decision to proceed with the project would be considered in late 2008.

Key aspects to be considered in the feasibility study include:

• diamond drilling (50,000m) for Mineral Resource definition and metallurgical sampling

• civil and geotechnical surveys

• Mineral Resource estimates

• mining studies

• mineral processing test work and studies

• tailings storage

• infrastructure and services

• environmental marketing risk assessment

• financial analysis.

The budget estimate for the feasibility study is in the order of $24M.


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Figure 3.16 Dugald River Location (Plan)

At December 2007, Zinifex advised AMC that the work programmes within the feasibility study were on track for completion in November 2008.


No Ore Reserves have been estimated for the deposit although a mining ore inventory was estimated during the prefeasibility study.

For the purposes of this report, AMC has relied principally on the reports from the 2006 prefeasibility study and an independent review of Mineral Resource and Ore Reserves prepared for Zinifex in June 2007.

Orders of accuracy typically attributed to prefeasibility studies are quite broad, with cost estimates usually in the range of +/-30%. In this report, AMC has summarised outcomes from the 2006 prefeasibility study and considers that a critical appraisal of the project cannot be reasonably undertaken until additional detailed technical studies which are a part of the current feasibility study have been completed.

Accordingly, future production and cost projections outlined in this report have been taken directly from Zinifex’s prefeasibility study reports. These forecasts must be regarded at a significantly lower level of confidence than those made for the Century and Rosebery operations.

AMC has not visited the site for the purposes of this report, but has discussed the project with the Zinifex study team management at their Melbourne offices.


The Dugald River deposit is located in the Eastern Fold Belt, within a restricted black shale-carbonate sequence of the Corella Formation. The Eastern Fold Belt is a part of the Precambrian province of north-western Queensland and is mid-Proterozoic in age. A map of the region is shown in Figure 3.17.


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Figure 3.17 Eastern Fold Belt Region

In the Dugald River area west of the Mount Rosebee Fault the rocks are of greenschist metamorphic facies. In this area the Corella Formation and the overlying Mount Albert Group become younger to the west. The Corella Formation contains several informal units as well as the Dugald River Shale Member, host to the deposit. Figure 3.18 shows the geology of the Dugald River area.

The Dugald River Shale Member hosts the zinc-lead deposit and consists of black slates which are commonly carbonaceous, but may be chloritic or micaceous. The member is a relatively thin unit with a strike length of about 8 km parallel to the Knapdale Hills. The member has five distinct informal units with the lower unit being 6m to 60m thick. The mineralised Dugald Lode which overlies the lower unit is a fine grained black slate with abundant sulphides. It is commonly brecciated, especially where it is highly mineralised. The hangingwall of the lode which is marked in part by a hangingwall shear, consists of highly carbonaceous slate and spotted slate, with potassium feldspar rich beds near the contact with the lode.

Despite some local thickness variations, the Dugald River Shale Member gradually thickens from north to south in the vicinity of the lode.

The zinc-lead deposit is tabular with a strike length of 2,200m and down dip extent of 1,000m. Its thickness varies from 5m to 21m with a gradual increase from north to south and with depth. The deposit dip varies from near vertical at the northern end to 40oW at depth in the central and southern areas.

The main sulphide minerals are pyrrhotite, sphalerite, pyrite and galena. Drillholes that intersect the lode are generally spaced around 50m apart in the centre and near the top of the deposit expanding to 200m apart near the ends and at depth.

A total of 307 holes have been drilled within the area. Of these holes 245 intersected the lode and were used to define the mineralised zone. Fifteen holes that intersected the lode did not contain assay values and therefore were not included in the drillhole database used to estimate the metal grades.


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Figure 3.18 Geology of the Dugald River Area

AMC considers that there is the potential at Dugald River for the mineralisation to continue at depth.

Copper mineralisation has been identified in the hangingwall of the deposit and in numerous surface outcrops, though a Mineral Resource estimate has not been undertaken at this stage. Zinifex is of the opinion that there is the potential for a supplementary copper Mineral Resource to be identified and potentially mined and processed in conjunction with the zinc-lead resource.


Zinifex’s public reported Mineral Resources for the project are summarised in Table 3.28.


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Table 3.28 Dugald River Mineral Resources (31 March 2007)

Category Tonnage (Mt)

Zinc (%)

Lead (%)

Silver (g/t)

Measured - - - -

Indicated 31.9 12.6 2.0 44

Inferred 16.0 11.1 2.3 44

Total 47.9 12.1 2.1 44 Zinifex has not reported Ore Reserves for the Dugald River project.

The Mineral Resource estimate was re-estimated by AMC for Zinifex in 2006 as a part of the prefeasibility study programme of work. In the process of conducting the re-estimate, AMC adopted a number of changes from the previous estimation method undertaken in 2000 when Pasminco owned the project. Such changes included:

• the domaining approach adopted by Pasminco to segregate the high grade involved the creation of a number of separate high grade domains within a wireframe enveloping the mineralisation. While it is appropriate to attempt to segregate the main grade and metal distributions, the high grade zones defined by Pasminco may be overly detailed. AMC reduced the number of domains to two and these were simpler to model. The validity of this domaining approach will need to be verified following the completion of the current drilling programme. An independent review has suggested a systematic section by section interpretation of the distribution of both the logged ore types and the high grade component of the mineralisation be carried out to assess whether it is appropriate to impose an ore type model on the grade distribution, a view which AMC endorses

• the enveloping mineralisation wireframe for the Pasminco estimate included splays of mineralisation and areas close to, but not part of the main zone. These were removed in the AMC wireframing resulting in the exclusion of lenses that would not necessarily be mined with the main area

• the Pasminco wireframe included drillhole samples without any mineralisation in the Mineral Resource estimate

• the Pasminco Mineral Resource categorisation methodology has appeared to an independent review to be overly complex and less than optimum. The categorisation has resulted in an irregular distribution of Indicated and Inferred categories. AMC’s more global approach to categorisation appeared more appropriate.

Bulk densities for both estimates were based on percentage of lead, zinc and iron in each block using a stochastic formula developed by Pasminco, AMC agrees that with the available bulk density data this is an appropriate method.

Though at a 7% zinc cut-off, the AMC estimate derived similar results to the 2000 estimate, which was based on a 10% cut-off. Mineral Resource tonnages were estimated to be 21% lower and zinc, lead and silver grades 9%, 10% and 7% higher respectively. The net outcome reduced the estimated contained zinc, lead and silver by up to 15%.

The Mineral Resource estimate is under review as a part of the current feasibility study programme of work, and will be re-estimated when the current drilling programme is completed.

Zinifex continued to report the 2000 estimate in its 2007 public reports on the basis that as a part of the current feasibility study programme of work, a significant number of parameters were under review including further assessment of cut-off grades and additional geological and assay data, from the current diamond drilling programme. Zinifex is certain that the estimates will vary as a consequence of the current work.

In an independent review of Mineral Resources and Ore Reserves, 2007, it was concluded that Zinifex’s approach to the continued reporting of the 2000 Mineral Resource estimate was reasonable. For the purposes of this report, AMC concurs with this conclusion.


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Notwithstanding its approach to public reporting of the Dugald River Mineral Resource, Zinifex had used the AMC, 2006 Mineral Resource estimate as the basis of estimating a mining inventory in its 2006 prefeasibility study.

3.3.4 Mining

As a part of its 2006 prefeasibility study, Zinifex undertook a mining options study to determine mining methods, mining Mineral Resource inventory and mine production rates appropriate to the resource.

A range of options were considered across production rates varying from 1.2 Mtpa to 2.4 Mtpa for underground options, and 1.6 Mtpa to 4 Mtpa for open pit options.

The narrow steeply dipping nature of the resource, as indicated in Figure 3.19 has lead to a preferred option of underground mining only. Consideration of open pit operations transitioning to underground mining, were evaluated, but not preferred.

Of the underground mining options considered, bench stoping was considered the most appropriate option.

Evaluation of various mining production rates suggested the 2 Mtpa case as preferred.

Working from AMC’s 2006 Mineral Resource estimate and taking consideration of the preferred mining method and expected mining recovery and dilution factors, Zinifex has estimated the possible mining inventory to be 30.8 Mt grading 11.8% zinc, 2.1% lead and 44.1g/t silver.

AMC is of the view that confidence in the mining aspects of the project will be significantly improved when technical studies relating to underground mining are advanced to a feasibility study level. One such area is geotechnical considerations of reported poor ground conditions within the shear zones adjacent mineralisation, in particular possible effects of a graphitic hangingwall shear.


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Figure 3.19 Deposit Cross Section


Considerable metallurgical test work has been undertaken on the Dugald River deposit over the past 20 years, following earlier work dating back to the 1950s.

A significant focus of this work has related to the high levels of manganese in the mineralisation and projected to report to concentrates. The presence of manganese in the zinc concentrate was considered to impact severely on smelting and refining processes and is reported to be a key constraint on the development of the deposit.

The Dugald River mineralisation requires significant grinding to achieve good metallurgical recoveries as is typical of the complex fine-grained carbonaceous zinc/lead ores in the broader Mt Isa region. This aspect has additionally been a focus of past metallurgical testwork.

Using previous testwork and data, as a part of the prefeasibility study, the flowsheet shown in Figure 3.20 has been developed. The flow sheet is typical for ore in the region.


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Figure 3.20 Prefeasibility Process Flowsheet

Consistent with the planned mine production rate, the process plant will have the capacity to treat 2 Mtpa.

Metallurgical recoveries have been estimated at 85% for zinc and 60% for lead. Manganese will report to the zinc concentrate in elevated levels.

Zinifex is of the opinion that smelting and refining technologies and the development of facilities utilising these technologies have advanced in a way that will now make it feasible to market high manganese zinc concentrate.

Zinifex has stated that additional comprehensive testwork is required to bring the processing aspects of the Dugald River Project up to a standard required for a feasibility study. This work which presently forms part of the project work programme includes:

• comprehensive mineralogical data collection to characterise the mineralisation and optimise the flowsheet

• variability testing including confirmatory locked-cycle tests to understand the variability of the ore and performance of the flowsheet

• comminution testing to fine tune the grind circuit

• mineralogical testwork to better understand the nature and disposition of the manganese and carbonaceous materials

• potential benefits of magnetic separation

• pilot plant runs if potential customers require bulk concentrate samples.


Access to the site is proposed through a connecting road to the Burke Development Road from Cloncurry which runs 10 km to the east of the project area. This road has recently been upgraded to a two lane sealed road.


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The current preferred option for concentrate handling is for it to be transported approximately 100 km to Yurbi, where BHP Billiton operates a rail loop and loading facility for concentrates from the Cannington Mine. The rail connects to port facilities at Townsville some 650 km to the east.

Power is to be supplied via a 220 kV 60 km line from the Chumvale substation. An expansion of the Mica Creek power station, which provides power to Chumvale will be required.

It is proposed that water will be supplied from the Lake Julius to Ernest Henry water pipeline which passes 6 km to the north of the project.

The operation is to be a FIFO operation utilising Cloncurry Airport to Queensland’s eastern seaboard.

Zinifex’s mining leases are surrounded by Universal Resources’ (“URL”) exploration and mining leases to the north and south. On the western side, the Knapdale Ranges form a physical constraint. Combined they restrict some infrastructure placement options which may be alleviated though agreement with URL.

3.3.7 Environment

AMC has not reviewed the environmental aspects of the Dugald River project.

3.3.8 Costs and Production Outlook

Base cost estimates have been made from the prefeasibility projections as outlined in Table 3.29. An allowance of 8% escalation has been applied to bring the estimated prepared in 2006 contemporary with FY08. For the purpose of this report, AMC has adopted the projections presented as the preferred option in the December 2006 prefeasibility study report. These are presented in Table 3.30.

In considering the projections for the Dugald River Project, particularly in the context of the two operating mines at Century and Rosebery, AMC believes it is important that the development status of the Dugald River Project be recognised.


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Table 3.29 Dugald River Prefeasibility Projections Mining Inventory 30.82 Mt - Zn Grade 11.78% - Pb Grade 2.09% - Ag Grade 44.1 g/t - Mn Grade 0.79% - Fe Grade 10.4% - Production Rate (average) 2 Mtpa - Commissioning Early 2011 - Mine Life 16 Years -

Metal Average Annual LOM Zn Concentrate Production 385 kt 6.2 Mt Zn Metal 193 kt 3.1 Mt Pb Concentrate 40 kt 0.64 Mt Pb Metal 24 kt 0.39 Mt Ag Metal 1,000 koz 15,000 koz Site Operating Costs - - Mining - $30.11/t Processing - $18.65/t Administration - $7.20/t Contingency - $2.00/t Site Unit Operating Cost $57.96/t

Capital Costs Pre-Production ($M) LOM ($M) Mineral Processing 130 137 Infrastructure 78 78 EPCM 37 37 Construction Facilities 20 20 Owners Costs 45 45 Closure - 35 General & Administration 1 3 Mine Plant & Equipment 28 77 Mine Excavations 26 117 Contingency 60 65 Total Capital 427 616

Table 3.30 AMC Modelling Scenario

Production Parameters

Ore Mined Mt - - - 1.0 1.8 2.0 2.0 2.1 2.0 2.0 2.0 2.0 2.1 1.9 2.0 2.0 2.0 1.9 2.0 -

Ore Processed Mt - - - 1.0 1.8 2.0 2.0 2.1 2.0 2.0 2.0 2.0 2.1 1.9 2.0 2.0 2.0 1.9 2.0 -

Zn Recovered kt - - - 96.0 192.0 199.0 206.0 212.0 209.0 199.0 194.0 197.0 204.0 186.0 210.0 201.0 184.0 188.0 208.0 -

Pb Recovered kt - - - 10.1 19.3 21.1 24.3 26.2 24.5 27.9 28.1 26.1 25.3 25.0 27.2 25.9 24.2 25.5 25.0 -

Ag Recovered koz - - - 600 1,300 1,200 1,600 1,700 1,400 1,300 1,500 1,200 600 800 500 600 300 300 200 -

Cash Operating Cost $M - - - 61.6 115.2 122.2 122.3 129.9 127.1 125.7 125.5 126.3 129.9 122.1 124.7 127.8 123.4 122.0 125.2 -

Capital $M - 108.0 353.2 11.1 11.1 11.1 11.1 11.1 11.1 11.1 11.1 11.1 11.1 11.1 11.1 11.1 11.1 11.1 - 37.8

FY13 FY14 FY15 FY18FY17FY16Item Units FY08 FY09 FY10 FY11 FY12 FY21 FY22FY19 FY20 FY27FY25 FY26FY23 FY24


AMC’s key observations in regard to the Dugald River Project are:


The public Mineral Resource report is based on a Pasminco 2000 estimate. Although there is a later 2006 estimate based on the same data by AMC, AMC agree it is appropriate to continue to quote the previous Mineral Resource until the results of the feasibility study drilling, currently underway, are available and a revised estimate completed.

An Ore Reserve has not been estimated for the deposit, although a mining inventory was estimated during the prefeasibility study.


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There is potential for the mineralisation to continue with depth.

Copper mineralisation has been identified in the hangingwall and throughout the tenements. The potential for the copper mineralisation to constitute a Mineral Resource is being investigated.

Production and cost estimates have been prepared to industry standards consistent with a prefeasibility study.

Past evaluations of the deposit have not proved positive as a result of weak financial outcomes and metallurgical testwork suggesting high levels of manganese in concentrate.

Zinifex is confident of the projects potential and is currently completing a feasibility study on the project at a cost of $24M.

3.4 Canadian Development Projects

In March 2007, through its acquisition of Wolfden Resources Inc. ("Wolfden"), Zinifex acquired a portfolio of polymetallic exploration properties in northern Canada. The general location map of the properties is shown in Figure 3.21.

AMC has undertaken a brief review the Canadian Development Projects through documents provided and discussions held with Zinifex management at their Melbourne offices. AMC has not developed production scenarios for these projects, although AMC notes that potential production from Izok Lake and High Lake is included in Zinifex’s strategic plan from 2014 onwards and contribute 50% of conceptual concentrate production from 2016, see Figure 1.2 in the Introduction section of this report.

Beyond the exploration and Mineral Resources definition requirements of these projects, their development will require advanced consideration of transport and services infrastructure, logistics, environmental constraints and, permitting, typical to Arctic and Sub-Arctic projects.

A summary of each of the projects which are located in Nunavut Province, follows.

Figure 3.21 Canadian Development Projects


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3.4.1 Izok Lake

Izok Lake is claimed to be one of the highest grade undeveloped copper-zinc deposits in the world. It is located approximately 360 km north of Yellowknife, Northwest Territories ("NWT"), Canada. Izok Lake is a massive sulphide deposit occurring with Archaean volcanic rocks in the Salve Craton of the Canadian Shield. The deposit occurs as four separate lenses within the Central, North, North-west and Inukshuk deposits. Zinifex stated that preliminary studies indicate that the first three lenses could be mined by open pit while Inukshuk will be an underground mining proposition.

An independent Mineral Resource estimation of the mineralisation on the property has been prepared for Wolfden that conforms to the CIM Mineral Resource and Ore Reserves definitions referred to in National Instrument 43-101, Standards of Disclosure of Mineral projects. These standards are essentially equivalent to those of the JORC Code in Australasia. This has resulted in an Indicated Mineral Resource of 14.4 Mt grading 2.5% copper, 12.9% zinc, 1.3% lead and 71 g/t silver plus an Inferred Mineral Resource of 0.4 Mt grading 3.8% copper, 6.4% zinc, 0.3% lead and 54 g/t silver at a cut-off of 2.0% zinc equivalent. The zinc equivalent cut-off is based on a formula which includes a combination of economic and recovery factors and in AMC’s opinion is likely to be realistic. The independent Mineral Resource estimator has compared their estimate with other previous estimates and AMC notes there is reasonable agreement with those estimates. AMC has reviewed the report and accepts it is an acceptable estimate of the publicly reported Mineral Resource at Izok Lake.

AMC understands that environmental baseline studies and infrastructure studies have commenced which will lead to a prefeasibility study later in 2008. A preliminary economic assessment has been based on the production of 1.4 Mt of ore annually producing 140 kt of zinc concentrate and 30 kt of copper concentrate per annum.

AMC accepts that this project has the potential, subject to the outcome of further studies, to be a significant contributor to Zinifex’s production profile.

3.4.2 High Lake

The High Lake deposit is similarly a volcanogenic massive sulphide deposit located 550 km north-north-east of Yellowknife, NWT. The property is about 45 km south of the Coronation Gulf, a potential deepwater Arctic Ocean port. The deposit consists of three zones of mineralisation the West Zone and the AB and D Zones.

A Mineral Resource estimate and preliminary economic assessment was again conducted by an independent Mineral Resource estimator. The preliminary assessment envisages an open pit and underground operation with a mine life currently in excess of 12 years. The Mineral Resources are reported by Zinifex as an Indicated Mineral Resource of 17.25 Mt grading 3.4% zinc, 0.3% lead, 2.3% copper, 1g/t gold and 70 g/t silver plus an Inferred Mineral Resource of 0.04 Mt grading 2.4% zinc, 0.4% lead, 0.5% copper, 0.2 g/t gold and 122 g/t silver at a cut-off of 2.0% zinc equivalent, for a total Mineral Resource of 17.29 Mt at 3.3% zinc, 0.3% lead, 2.2% copper, 1.0 g/t gold and 70 g/t silver. Zinifex has reported additional promising exploration results from the High Lake area and the area remains prospective for the discovery of additional Mineral Resources.

AMC accepts that this project also has the potential, subject to the outcome of further studies, to be a contributor to Zinifex’s longer term production profile.

3.4.3 Nunavut Gold Project

The Nunavut gold project consists of the Lupin Gold Mine, and the Ulu Gold Project. The Lupin Mine, closed in early 2005 having produced 3,360 koz of gold at an average grade of 9.3 g/t gold. Infrastructure at the mine, including underground access remains in place. The previous owners have performed estimates of remaining Mineral Resources and despite being mentioned publicly by Zinifex, these are not able to be reported in accordance with the JORC Code, so AMC has not included them in this report. However, they serve as an indication that there is still mineralisation which might be favourable for additional Mineral Resources and Zinifex plans to test these during 2008.

At the Ulu deposit, located 50 km to the south of High Lake and about 530 km north-north-east of Yellowknife, NWT, and 125 km north of Lupin, Zinifex report an Indicated Mineral Resource of 0.7 Mt of 11.7 g/t gold and an Inferred Mineral Resource of 0.4 Mt of 10.7 g/t gold for a total Mineral Resource of


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1.1 Mt of 11.3 g/t gold. These Mineral Resources are again based on estimates by an independent reviewer, and Zinifex report the potential for additional shear hoisted high grade mineralisation in the area with the prospect of these providing potential feed to the Lupin mill.

Zinifex is considering the options for evaluating the gold exploration potential of the Nunavut properties. AMC is of the opinion that while these gold properties are prospective and have established Mineral Resources in the case of Ulu, there is still considerable evaluation work required to create value for Zinifex.

3.4.4 Nunavut Regional Exploration

Zinifex holds 2,600 km2 of exploration tenements and mining leases in the Slave Region of Nunavut, which contains the massive sulphide deposits, Gondor and Hood, with the potential to provide additional feed to a mill at Izok Lake. There is also additional prospectivity for base metals and gold as well as diamonds.

3.4.5 Summary

AMC is of the opinion that Zinifex projects in Nunavut, with substantial further exploration and completion of feasibility studies, offer the potential to deliver a substantial portion of Zinifex’s future production, particularly from Izok Lake and High Lake.

There is also the possibility of future gold production from the Lupin and Ulu deposits utilising existing infrastructure in the case of Lupin mine. The Zinifex exploration tenements are prospective for base metals and gold.

3.5 Other Exploration Projects

Direct and regional exploration being undertaken by Zinifex in relation to its Century, Rosebery, Dugald River and Canadian operations and development projects has previously been outlined in Section 3 of this report.

3.5.1 Australia

3.5.1.1 Menninnie Dam, SA

Zinifex is involved in exploration projects more remote from mining operations and development projects. The most advanced of these is the Menninnie Dam project in north-eastern South Australia. Zinifex holds a 76% beneficial interest in tenements at the Menninnie Dam project covering large silver, lead, zinc and copper targets and has completed $10M expenditure on geophysical surveys and drilling. Zinifex and its joint venture partner announced in December 2007 quarterly reports an Inferred Mineral Resource estimate of 3.8 Mt at 3.2% lead, 4.0 % zinc and 34 g/t silver. The estimate is based on 38 diamond drillholes and 19,477m of drilling. The Mineral Resource is contained within four lodes, and does not include Viper, Cassius, Tank Hill or Menninnie North prospects. This Mineral Resource is estimated within a 1% lead plus zinc mineralisation model outline and reported at a 3.5% lead and zinc cut-off. Table 3.31 lists the Inferred Mineral Resource by lode.

Table 3.31 Menninnie Dam Inferred Mineral Resource by Lode

Tonnes Grade Lode

(kt) Pb% Zn% Ag g/t Kimba 1,600 3.7 3.8 42 Caesar 400 2.3 4.6 31 Boss North 1,000 3.9 4.6 24 Boss South 800 2.0 3.5 34

Total Inferred 3,800 3.2 4.0 34

Exploration and drilling is continuing to test and develop targets in the remainder of the joint venture licence area. Zinifex acquired its interest in Menninnie Dam in June 2005, and having met its initial expenditure obligations has now assumed management of the project.

Valuation


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Exploration expenditure by Zinifex on Menninnie Dam to the end of February 2008 is reported by Zinifex to be approximately $10M. No estimate of previous expenditure, prior to Zinifex entering the current joint venture was available. Given the initial success of the exploration it seems reasonable to apply a prospectivity enhancement multiplier of between 1.0 and 1.5, giving an indicated value on the past expenditure method of $10M to $15M. This value is similar to the value of Zinifex’s interest of approximately $8M on the basis of the joint venture agreement terms for the 76% interest in the project.

The Inferred Mineral Resource at Menninnie Dam could be valued using Yardstick Values. On the basis of the classification as Inferred Mineral Resources (low level of confidence) and the likelihood of any future operation being an underground mine, AMC has applied 1% of the in situ metal value to produce a value of approximately $9M, and this results in Zinifex’s 76% interest having a value of approximately $6.8M.

In summary the considering all these approaches AMC’s valuation for Zinifex’s interest in Menninnie Dam is $7M to $15M.

3.5.1.2 Wilcherry Hill Project

Zinifex is acquiring an interest at Wilcherry Hill on the Eyre Peninsular in South Australia in an agreement dated February 2008. Zinifex is also engaged in joint ventures and exploration in its own right for lead, zinc, silver and copper targets. Zinifex can earn up to a 75% interest in all lead/zinc/silver discoveries within the project area over five years by the expenditure, in three stages, of $8.5M. The major conditions are:

• during phase 1, Zinifex must spend $0.5M within the first year of signing the farm-in agreement before equity earning can commence

• Zinifex must then spend a further $4M over the next two year period to earn 51% in all lead, zinc and silver projects

• Zinifex must then spend a further $4M over the next year to earn an additional 24%

• Zinifex may withdraw at any time after the Phase 1 expenditure has been completed.

Valuation

Zinifex’s expenditure to the end of February 2008 was approximately $30,000. Since Zinifex has not yet earned an interest in the Wilcherry Hill project, AMC consider the valuation of Zinifex’s interest in this property to be negligible.

3.5.2 Overseas

Zinifex is also exploring overseas, generally in joint venture with local junior companies in China, Mexico, Sweden and Tunisia, with the emphasis on zinc, lead and silver targets.

All expenditure listed under valuation headings in this section are expressed in Australian dollars.

3.5.2.1 Peoples Republic of China

In an alliance with Asia Now Resources, Zinifex is spending US$1.5M on exploration targets throughout the Peoples Republic of China. Asia Now Resources is conducting exploration with joint venture companies at the Dongchuan, Beiya and Habo properties in Yunnan province as well as the Great Wall property in Hebei province. Targets are being generated.

Valuation

Expenditure to date by Zinifex totals $1.1M and as the programme is still advancing through the generative phase, there are no specific properties for which AMC could ascribe value to Zinifex. However it is reasonable to apply a PEM of between 1.0 and 1.5, giving an indicated value on the past expenditure method of $1M to $1.5M.

3.5.2.2 Mexico

In Mexico Zinifex is associated with a local private company to explore the Corazonada prospect located approximately 10 miles south east of the city of Cuautla in Morelos State. Zinifex will earn a 100% interest in the project for staged payments of US$1.3M and work commitments of US$1.3M. Corazonada is in the southern extension zone of the Central Mexican base and precious metal skarn belt. The geological setting


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has potential to host skarn style mineralisation at depth. A 12 km2 hydrothermal system with a wide alteration halo is present. Surface zinc lead and silver carbonate-hosted veins and extensive alteration outcrop at surface.

Valuation

Expenditure to date by Zinifex totals $0.4M on airborne surveys and other geophysical work and has generated targets that it is intended will be further tested.

AMC has allocated a PEM range of 1.3 to 2.0 to the limited expenditure giving a value of $0.5M to $0.8M. No alternative valuation methods were available to AMC.

3.5.2.3 Sweden

In Sweden Zinifex is active through an alliance with Drake Resources. It includes 131 km2 of exploration concession in the Bergslagen and Norrbotten districts. Under the terms of the alliance, Zinifex may earn at least 70% of each project in selected provices where Zinifex and Drake jointly undertake exploration, New projects are solely funded by Zinifex. Zinifex has expended $1.26M on airborne surveys and other geophysical work and has generated targets that it is intended will be further tested.

Valuation

Expenditure to date by Zinifex totals $1.26M and as the programme is still at the target generation phase advancing to target testing, AMC has allocated a PEM range of 1.0 to 1.25 to the expenditure giving a value of $1.3M to $1.6M.

3.5.2.4 Tunisia

In Tunisia, a joint venture with Albidon Limited is active over 4,002 km2 of the Nefza and Haffouz exploration concessions in northern and central Tunisia. Zinifex may earn up to 70% of the project through staged expenditure of US$11M over five years, together with US$1M cash payments with the emphasis on zinc, lead, silver targets, Zinifex reports that expenditure to date is $2.6M.

Induced polarisation ("IP") surveys were completed at El Haouaria, Jebel Trozza and Jebel Touila. Positive responses from the known mineralisation at El Haouaria where a sizeable chargeability/resistivity anomaly is coincident with the old workings, indicates that the style of mineralisation is responsive to IP. Numerous other resistivity/chargeability anomalies, coincident with interpreted favourable structures, constitute priority drill targets.

Drilling at Bou Aouane (six holes completed for a total of 1,115m to December 2007) has returned intersections of 14.5m of 8.0% zinc (BADD003) and 21.4m of 1.7% lead and 2.4% zinc (BADD006). These holes provide an indication of a potentially significant mineralising system.

Valuation

Expenditure to date by Zinifex totals $2.6M and the programme has returned significant sulphide intersections. AMC has allocated a PEM range of 1.0 to 2.0 to the expenditure giving a value of $2.5M to $5M.

3.5.3 Summary

AMC values Zinifex's other exploration properties at $12.5M to $24M. This is summarised (in Australian dollars) in Table 3.32.


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Table 3.32 Summary of Zinifex's Regional Exploration Values


Menninnie Dam SA 7 to 15 Wilcherry Hill SA 0 Asia Now alliance in PRC 1.0 to 1.5 Corazonada Mexico 0.5 to 0.8 Drake Resources alliance Sweden 1.3 to 1.6 Albidon alliance Tunisia 2.5 to 5.0

Total (Rounded) 12.5 to 24

4 SOURCES OF INFORMATION

The assessments reported herein are based on numerous documents, reports, correspondence, plans and sections and other information provided to AMC by Oxiana and Zinifex and reviewed by AMC on the Oxiana and Zinifex sites and in their offices. Much of the information was available as electronic copies which were provided to AMC for its engagement. Information was also obtained via site inspections and communications with Oxiana and Zinifex site and head office management personnel.

A list of material references used by AMC is presented in Appendix B. This list is not exhaustive.

Diagrams included in this report have been sourced from Oxiana and Zinifex, as have Mineral Resource and Ore Reserve estimates and past performance data.

5 QUALIFICATIONS

AMC is a firm of mineral industry consultants whose activities include the preparation of due diligence reports and reviews on mining and exploration projects for equity and debt funding and for public reports.

The contributors to this report included:

Oxiana Name Qualifications Affiliation Involvement

Sepon L Gillett BEng (Mining)

DipGeosc AMC Director and Principal Mining Engineer

Project Manager, Reserves and Mine Operations

D Carville BSc (Geology) (Hons) AMC Principal Geologist Review geology and resources estimates T Showell B App Sc (Metallurgy) Subconsultant

Metallurgy Review of all metallurgical aspects

C John BSc (Agric) (Hons) PhD

Subconsultant Environmental affairs and management

Production of desktop review in respect of environmental management considerations

Golden Grove P Cunningham BEng (Mining) (Hons) AMC Regional Manager

and Principal Mining Engineer

Project Manager, Reserves and Mine Operation

J Tyrrell BA (Geology) (Hons) AMC Senior Resource Geologist

Review geology and resources estimates




A Brown BSc (Hon) Metallurgy Subconsultant Metallurgy

Review of all metallurgical aspects

Prominent Hill A Hall MSc (Min Ec), BSc

(Civ Eng) AMC Regional Manager and Principal Engineer


J Tyrrell BA (Geology) (Hons) AMC Senior Resource Geologist

Review geology and resources estimates


AMC207098: 6 May 2008 140

Name Qualifications Affiliation Involvement C John BSc (Agric) (Hons)

PhD Subconsultant. Environmental affairs and management

Production of desktop review in respect of environmental management considerations.

J Johnson BSc (Industrial Metallurgy)

Subconsultant Metallurgy


Martabe L Gillett BEng (Mining)

DipGeosc AMC Director and Principal Mining Engineer


D Carville BSc (Geology) (Hons) AMC Principal Geologist Review geology and resources estimates T Showell B App Sc (Metallurgy) Subconsultant

Metallurgy Review of all metallurgical aspects

D Peachey BEng (Electrical) AMC Principal Engineer Project analysis C John BSc (Agric) (Hons)

PhD Subconsultant Environmental affairs and management


Peer Review M Thomas Higher National

Diploma of Mining Engineering

AMC Director and Principal Mining Consultant

Peer review of entire project

Zinifex Name Qualifications Affiliation Involvement

Century Operation R Webster BSc (Applied Geology) AMC Principal Geologist Review geology and resources estimates A Chuk BEng (Mining) (Hons)

B Economics AMC Principal Consultant

Project manager, coordination of reporting and preparation of valuation inputs. Review of mining aspects

RA Cantrell BSc (Metallurgy) (Hons) MSc DIC (Minerals Engineering)






Rosebery J Llorca BSc (Geology) AMC Senior Geologist Review geology and resources estimates F Greblo BEng (Mining) AMC Principal Mining

Engineer Review of all mining aspects

RA Cantrell BSc (Metallurgy) (Hons) MSc DIC (Minerals Engineering)






Dugald River Development Project P Stoker BSc, Dip Ed AMC Principal Geologist Geology and Resources A Chuk BEng (Mining) (Hons)

B Economics AMC Principal Consultant

Mining, Operating Costs and Capital Expenditure review

Canadian and Other Exploration Properties P Stoker BSc, Dip Ed AMC Principal Geologist Review of all exploration potential outside

Australia Peer Review P Cunningham BEng (Mining) (Hons) AMC Regional Manager

and Principal Mining Engineer

Peer review of entire project

AMC has completed assignments of a similar nature for Grant Samuel. AMC and its subconsultants have also carried out technical consulting assignments for Oxiana and Zinifex and for many of its operations and projects. In all the assignments referred to above, AMC and its subconsultants have acted as independent parties.


AMC207098: 6 May 2008 141

Neither AMC nor its subconsultants have any business relationship with either Grant Samuel, Oxiana or Zinifex other than the carrying out of individual consulting assignments as engaged.

While some employees of AMC and its subconsultants may have small direct or beneficial shareholdings in Oxiana and Zinifex, neither AMC nor the contributors to this report nor members of their immediate families have any interests in Oxiana or Zinifex that could be reasonably construed to affect their independence. AMC has no pecuniary interest, association or employment relationship with Oxiana and Zinifex or with Grant Samuel.

AMC is being paid a fee according to its normal per diem rates and out-of-pocket expenses in the preparation of this report. AMC’s fee is not contingent upon the outcome of the transaction subject to this report.

In letters relating to our engagement, both Oxiana and Zinifex agreed to comply with those obligations of the commissioning entity under the Valmin Code including that to the best of their knowledge and understanding, complete, accurate and true disclosure of all relevant material information has been made.

In preparing this report, AMC has relied on information provided by both Oxiana and Zinifex and AMC has no reason to believe that information is materially misleading or incomplete or contains any material errors. Oxiana and Zinifex have been provided with drafts of those sections of our report relating to their operations to enable correction of any factual errors and notation of any material omissions. The views, statements, opinions and conclusions expressed by AMC are based on the assumption that all data provided to it by Oxiana and Zinifex are complete, factual and correct to the best of Oxiana's and Zinifex’s knowledge.

Oxiana and Zinifex have separately represented in writing that to the best of their knowledge, they have provided AMC with all material information relevant to the operations and projects described in this report.

To a limited extent, AMC’s assessments and projections have relied on commercially sensitive information which, at Oxiana's and Zinifex’s request and Grant Samuel’s agreement, AMC has not detailed in its report. Such sensitive information included metal prices and terms and conditions of sale of mineral products.

This report and the conclusions in it are effective at 11 April 2008. Those conclusions may change in the future with changes in relevant metal prices, exploration and other technical developments in regard to the projects and the market for mineral properties.

Oxiana and Zinifex have provided AMC with indemnities in regard to damages, losses and liabilities related to or arising out of our engagement other than those arising from illegal acts, bad faith or negligence on our part or our reliance on unauthorised statements from third parties.

This report has been provided to Grant Samuel for the purposes of forming its opinion as to whether the merger is in the best interests of Zinifex shareholders. AMC has given its consent for its report to be appended to Grant Samuel’s report and to be included in the scheme documents and has not withdrawn that consent before their lodgement with the Australian Securities & Investments Commission. Neither this report nor any part of it may be used for any other purpose without written consent.

The signatories to this report are corporate members of the AusIMM and bound by its Code of Ethics.

A M Chuk L Gillett M AusIMM M AusIMM (CP), MMICA Principal Consultant Director


AMC207098: 6 May 2008 Appendix A

APPENDIX A ABBREVIATIONS

OXIANA

AAS atomic absorption spectroscopy AHD Australian height datum AWD all wheel drive BFS bankable feasibility study BIF banded iron formations BNCP bornite-chalcopyrite CASA Civil Aviation Safety Authority CCBN chalcocite-bornite CIL carbon in leach CMS cavity monitoring system COW contract of work CP chalcopyrite-pyrite DEC Department of Environment and Conservation DFS definitive feasibility study DPZ Dapingzhang ELs exploration licences EMPs environment management plans EPCM engineering procurement construction management ESIA environmental and social impact assessment GPDA greater project development area GRV Gawler Range volcanic HFO heavy fuel oil HPM high precious metal HSE high sulphide epithermal HWFZ hangingwall fault zone ICP inductively coupled plasma IGO Independence Group NL Intermet Intermet Engineering IOCG iron-oxide copper gold IWL integrated waste landform Lao PDR Lao People's Democratic Republic Legend Legend Mining Limited LME London Metal Exchange LPM low precious metal LSE low sulphidation epithermal LXML Lane Xang Minerals Ltd MARP management and rehabilitation plan MEPA mineral exploration and production agreement MOI memorandum of intent OXims Oxiana's integrated management system PAF potentially acid-forming PHSZ Prominent Hill shear zone POX II second oxidation autoclave PEM prospectivity enhancement multiplier PYBN pyrite-bornite QA/QC quality assurance / quality control RDP rhyodacite porphyry RFQ request for quotation RMB Renminbi (Chinese Yuan Renminbi) SEB significant environmental benefit SLOS sub-level open stoping SPDA Sepon project development area TSF1 tailings storage facility 1 TSF2 tailings storage facility 2 UV ultraviolet UXO unexploded ordinance VHMS volcanic hosted massive sulphide WFB Warriedar fold belt WTSF western tailings storage facility

ZINIFEX Allegiance Allegiance Mining NL CBX carbonate breccia CMA Century mining alliance CVC central volcanic complex Downer Downer EDI EA Environmental Authority EER estimated economic reserves EMOS environmental management overview strategy EPA Environmental Protection Agency EPN environmental protection notice ETP effluent treatment plant FY financial year GCA Gulf Communities Agreement HO Zinifex head office LHD load, haul, dump MCF mine call factor MW megawatt NED north exploration declines NI 43-101 Canadian National Instrument 43-101

ZINIFEX (Continued) NRPT net revenue per tonne NUC northern upcast NWT Northwest Territories PoOps plan of operations RSBP Rosebery strategic business plan SED south exploration declines TMU total metal unit URL Universal Resources Limited Wolfden Wolfden Resources Inc

GENERAL $ Australian dollar % percent Ag silver AMC AMC Consultants Pty Ltd Au gold Co cobalt COG cut-off grade Cu copper FIFO fly in fly out g gram g/t grams per tonne GPS global positioning system Grant Samuel Grant Samuel & Associates Pty Ltd ha hectares JORC Code Australasian Code for Reporting of Exploration Results, Mineral

Resources and Ore Reserves, The JORC Code 2004 Edition, Effective December 2004, Prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC).

km kilometres km2 square kilometres koz thousand ounces kt thousand tonnes ktpa thousand tonnes per annum kw kilowatts LOM life of mine LOMP life of mine plan M million m metres m2 square metre m3 cubic metres m3/s cubic metres per second Ma millions of years (mega annum) Mbcm million bank cubic metres ML/day million litres per day mm millimetres modelling scenarios production and capital and operating cost projections as provided by

AMC to Grant Samuel mRL reduced level Mt million tonnes Mtpa million tonnes per annum Ni nickel oC degrees Celsius Oxiana Oxiana Limited oz ounce Pb lead PD percussion drillholes pH measure of acidity or alkalinity ppm parts per million RAB rotary air blast RC reverse circulation ROM run of mine SAG semi-autogenous grinding t tonnes tpa tonnes per annum tph tonnes per hour TSF tailings storage facility U uranium US$ United States dollar Valmin Code Code for the Technical Assessment and Valuation of Mineral and

Petroleum Assets and Securities for Independent Expert Reports, The VALMIN Code 2005 Edition, Prepared by The VALMIN Committee, a joint committee of the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Mineral industry Consultants Association with the participation of the Australian Securities and Investment Commission, the Australian Stock Exchange Limited, the Minerals Council of Australia, the Petroleum Exploration Society of Australia, the Securities Association of Australia and representatives from the Australian finance sector.

Zinifex Zinifex Limited Zn zinc


AMC207098: 6 May 2008 Appendix B-1

APPENDIX B REFERENCES

Oxiana

Document Title Date 077641002 - LO1 - Khanong Jan 2008 Geotech Review Report Jan 2008 AMC Report No. 106029 - Prominent Hill Copper-Gold Project, Mining Feasibility Study Aug. 2006 AMC Report No. 106062 - Sepon Primary Gold Mining Study, Oxiana, Draft Nov 2007 AMC Report No. 306075 - Prominent Hill Resource Estimate Review Dec. 2006

Coffee Mining - Martabe Gold Silver Project Definitive Feasibility Study Executive Summary Nov 2007 Contract of Work between the Government of the Republic of Indonesia and PT Donau Toba Mining 14 April 1997 CS-2 Pty Ltd - Review Of The Resource Models & Reconciliation, Khanong Cu-Au Deposit, Sepon, Laos PDR 2007 Golder Associates Pty Ltd Report No. 06641184-R01 - Mineral Resource Estimation Of The Prominent Hill Copper Gold Deposit, Volumes 1-3

July 2006

Hackman and Associates Pty. Ltd. Report – BFS Resource Estimate (2006), Review Of Assay Quality Assurance And Control Report

Sept 2006

Hackman and Associates Pty. Ltd. Report – Prominent Hill Prefeasibility Study, Assay Quality Assurance And Control Report

Sept 2005

Hackman and Associates Pty. Ltd. Report No. 061010 - Resource Estimate Report: Prominent Hill Copper-Gold Deposit, South Australia

Oct 2006

Historical Performance, Budget and LOMP Spreadsheets provided by Oxiana Limited to AMC Consultants Pty Ltd - Various

Feb to April 2008

IO Global - TKN Element Associations and Domain Heterogeneity Study for LXML Pty Ltd 2007

Khanong Development Group – Sepon Copper Expansion Study Feb 2006 Lang Xang Minerals Limited - 2008 Au exploration program 2007 Lang Xang Minerals Limited - Au Oxide Resources Update Phavat North Model Update Sepon Copper Gold Project Laos 2007 Lang Xang Minerals Limited - Au Oxide Resources Update Vang Nyang East 30th June 2006 Model Sepon Copper Gold Project Laos

2007

Lang Xang Minerals Limited - Primary Gold Resources Update on the Discovery West, Discovery Main and Nalou Areas at the Sepon Copper Gold Project Laos PDR

2007

Lang Xang Minerals Limited - Resource Estimate for Dankoy Gold Deposit Sepon Project, Laos 2007 Lang Xang Minerals Limited - Resource Estimate for Houay Yeng Gold Deposit Sepon Project, Laos 2007 Lang Xang Minerals Limited - Sepon Exploration Plan & Budget 2008 2007 Lang Xang Minerals Limited - Thengkham North Copper Resource Model Update at the Sepon Copper Gold Project PDR Laos

2007

Lang Xang Minerals Limited - Thengkham North Data Handover Notes 2007 LXML - Sepon Operations - Monthly Operations Reports Jan to Dec 2007 LXML Environment 2007 Annual Report 2007 Martabe - AusIMM Presentation Undated Martabe Feasibility Study - PT Newmont Horas Nauli - Section 8 Mine Engineering, Draft 2005 Martabe Project Definitive Feasibility Study - PT Agincourt Resources/Oxiana Limited Sept 2007 Oxiana Board Paper - Copper Expansion - Sepon Project Development Group. 21 Nov 2007 Oxiana Limited – Annual Report 2005, 2006, 2007 Oxiana Limited - Annual Resource/Reserve Statement June 2006, June 2007 Oxiana Limited – Australian Stock Exchange and Media Release – Oxiana’s Prominent Hill Copper - Gold Project Update Oct 2007 Oxiana Limited – Board Paper on Copper Expansion Nov 2007 Oxiana Limited – Diggers and Dealers Presentation, Kalgoorlie Aug 2007 Oxiana Limited - Martabe Project Definitive Feasibility Study Late 2007 Oxiana Limited - Media Release - Expansions planned at Oxiana’s Australian Operations Aug 2007 Oxiana Limited - Prominent Hill Bankable Feasibility Study, Volume 1 & Volume 2A, Section 5 July 2006 Oxiana Limited - Prominent Hill Underground Scoping Study, February 2008 update presentation Feb 2008 Oxiana Limited - Quarterly Report Oct 2004, Dec 2007 Oxiana Limited - resource explanatory notes - June 2007.pdf June 2007 Pells Sullivan Meynik Pty Ltd – Stability Analysis of Fault in Cover Sequence – Draft July 2007 QG Limited - Estimation of Gold Resources, Discovery Deposits, Sepon, Laos 2006 QG Limited - Estimation of Gold Resources, Nalou, Namkok East and Discovery Deposits, Sepon, Laos. 2006 Review of Geotechnical Studies - Khanong Open Pit - Sepon Gold and copper Operations, Laos PDF-077641002-LO1 30 Jan 2008 RSG Global Consulting Pty Ltd - Martabe Project Mineral Resource Estimates for the Martabe Gold-Silver Deposits 2007 RSG Global Consulting Pty Ltd - Martabe Project Preliminary Report on the Baskara/Baskara East and Pelangi Resource Estimates

2006

RSG Global Consulting Pty Ltd - Preliminary Report on the Purnama Resource Estimate 2007 Tenement Report - Oxiana Limited, letter to AMC Consultants Pty Ltd 2 April 2008 ZAB103 - Sepon Copper Feasibility Study - Oxiana Resources NL Undated


AMC207098: 6 May 2008 Appendix B-2

Zinifex Document Title Date

A Chemical Model for the Devonian Remobilisation Process in the Cambrian Volcanic-Hosted Massive Sulfide Rosebery Deposit, Western Tasmania

1999

AMC Report No. 107051 - Century Mine LOM Mining Costs June 2007 Annual Resource/Reserve Statement 2007 Annual Resource/Reserve Statement – Zinifex Rosebery 2007 Asset management Cost Review June 2007 Australian Volcanic-Hosted Massive Sulfide Deposits: Features, Styles, and Genetic Models 1992 Century - chief Operating Officer's Report Monthly various Century Mine Benchmarking and Operational Analysis Study Dec 2007 Century Mine Waste Rock Dump Schedule Nov 2007-2015 Commissioning & Process Development of Pipeline & Port Operations at Pasminco Century. Paper presented at Eighth Mill Operators' Conference.

21-23 July 2003

Distribution, Mineralogy, and Geochemistry of Gold and Silver in the North End Orebody, Roseberry, Tasmania 1988 Dugald River (by Mel Palancian, Manager - Dugald River Development Dugald River Prefeasibility Study Summary Dec 2006 FY2007-2010 Plans Geochemical Modeling of the Zoned Footwall Alteration Pipe, Hellyer Volcanic-Hosted Massive Sulfide Deposit, Western Tasmania, Australia

2001

Geochemistry of the Cambrian Volcanic-Hosted Massive Sulfide-Rich Mount Read volcanics, Tasmania and Some Tectonic Economic Implications

1992

Geology, Genesis, and Exploration Implications of the Footwall and Hanging-Wall Alteration Associated with the Hellyer Volcanic-Hosted Massive Sulfide Deposit, Tasmania, Australia

2001

Historical Performance, Budget and LOMP spreadsheets provided by Zinifex Limited to AMC Consultants Pty ltd - Various Nov 2007 to April 2008 Hydrothermal Alteration and Volatile element Halos for the Roseberry K Lens Volcanic-Hosted Massive Sulfide Deposit, Western Tasmania

2001

Letter from Behre Dolbear Australia - Independent Technical Review, Century and Rosebery Mines. 22 Nov 2006 Letter from Behre Dolbear Australia - Zinifex Resource and Reserve Review 2007 30 June 2007 Pasminco Group - Accounting and Internal Controls: Document No. PASAIC.015 Sept 1995 Plan of Operations April 2007-2010 Pre-Feasibility Study – Zinifex Rosebery Mine Strategy - Board Of Directors Meeting 31 Octr 2007 Ramp Up of the Pasminco Century Concentrator to 500,000 tpa Zinc Metal Production in Concentrate. Paper presented at Eighth Mill Operators' Conference.

21-23 July 2003

Report to Wolfden Resources - Technical Report on the Izok Lake Property from Wardrop 28 June 2006 Report to Wolfden Resources, Preliminary Economic Assessment of the Izok Property from Wardrop 26 June 2006 Rosebery Mine COO Plan FY-08 - FY10 Rosebery Strategic Business Plan July 2007 Tenement Report - Zinifex Limited, letter to AMC Consultants Pty ltd 3 April 2008 The Formation of the Volcanic-Hosted Massive Sulfide Ore Deposit at Roseberry, Tasmania 1981 The Geology and Mineral Deposits of Tasmania: A Summary 2007 The Geology and Origin of the Rosebery Ore Deposit, Tasmania 1974 The New Zinifex - Looking to the Future 2007 Zinifex Century Mine, Metallurgy Department - Process Summary Zinifex Century Mine, Variance Usage Report Oct 2007 Zinifex Century Mine: Production Unit Costs Oct 2007 YTD Zinifex Limited - Annual Report 2007 Zinifex Limited - Dugald River PFS Summary 13 Dec 2006 Zinifex Limited - Dugald River Project Scoping Study, 1652FS002 Revision Number D prepared by Ausenco Services Pty Ltd.

March 2007

Zinifex Rosebery Mine 2007 Ventilation Review Final - Report No 307012, May 2007 – AMC Consultants Pty Ltd 2007

General

Document Title Date Oxiana - Zinifex - ASX and media release, Oxiana and Zinifex to Merge to Create a Major Diversified Mining Company. 3 Mar 2008

Nature of this documeNtThis Scheme Booklet Supplement contains additional information relating to the proposed merger of Zinifex and Oxiana by way of a scheme of arrangement between Zinifex and its shareholders.

This additional information is in addition to the Scheme Booklet dated 9 May 2008. Zinifex Shareholders can obtain a copy of the Scheme Booklet by contacting the Zinifex Information Line on 1300 659 062 (within Australia, toll free) or +61 2 8986 9350 (from outside Australia), or from Zinifex’s website at www.zinifex.com.au.

Zinifex Shareholders should read the Scheme Booklet in its entirety before deciding on whether to vote in favour of the Scheme.

defiNed termsDefined terms in this Scheme Booklet Supplement have the same meaning as in section 16 of the Scheme Booklet.

Privacy aNd PersoNal iNformatioNZinifex and Oxiana and their respective share registries may collect personal information in the process of implementing the Scheme and the Merger. The personal information may include the names, addresses, other contact details and details of the shareholdings of Zinifex Shareholders, and the names of individuals appointed by Zinifex Shareholders as proxies, corporate representatives or attorneys at the Scheme Meeting.

Zinifex Shareholders who are individuals and the other individuals in respect of whom personal information is collected as outlined above have certain rights to access the personal information collected in relation to them. Such individuals should contact Computershare Investor Services Pty Limited on 1300 659 062 (within Australia, toll free) or +61 2 8986 9350 (from outside Australia) in the first instance if they wish to request access to that personal information.

The personal information is collected for the primary purpose of implementing the Scheme and the Merger. The personal information may be disclosed to Zinifex’s and Oxiana’s share registries, to securities brokers and to print and mail service providers.

The main consequence of not collecting the personal information outlined above would be that Zinifex may be hindered in, or prevented from, conducting the Scheme Meeting and implementing the Merger.

Zinifex Shareholders who appoint an individual as their proxy, corporate representative or attorney to vote at the Scheme Meeting should inform such an individual of the matters outlined above.

imPortaNt Notices

corPorate directory

ZiNifex limitedregistered office Freshwater Place Level 29 2 Southbank Boulevard Southbank Victoria 3006 Australia

information line(Australia) 1300 659 062(Overseas) +61 2 8986 9350

ZiNifex share registrycomputershare investor services Pty limited Yarra Falls452 Johnston StreetAbbotsford Victoria 3067AustraliaPhone: 1300 850 505Fax: (03) 9473 2500

fiNaNcial advisersuBs ag, australia BranchLevel 168 Exhibition StreetMelbourne Victoria 3000Australia

lazard carnegie Wylie Pty ltdLevel 33101 Collins StreetMelbourne Victoria 3000Australia

legal adviserallens arthur robinsonLevel 27530 Collins StreetMelbourne Victoria 3000Australia

iNvestigatiNg accouNtaNtKPmg transaction services (australia) Pty ltd147 Collins StreetMelbourne Victoria 3000Australia

THIS BOOKLET CONTAINS A COPY OF THE INDEPENDENT EXPERT’S REPORT BY GRANT SAMUEL & ASSOCIATES PTY LTD (INCLUDING THE TECHNICAL EXPERT’S REPORT OF AMC CONSULTANTS PTY LTD REFERRED TO IN THE INDEPENDENT EXPERT’S REPORT).

Zinifex Limited (ABn 29 101 657 309)

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scheme booklet supplementFOR THE SCHEME OF ARRANGEMENT IN RELATION TO THE PROPOSED MERGER OF ZINIFEX LIMITED AND OXIANA LIMITED

appendix 4 report of amc consultants pty ltd€¦ · market, strategic or other considerations....

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