15 Mineral Reserve Estimates

This item is not applicable for this PEA.

115
16 Mining Methods
The Taca Taca deposit is amenable to conventional, large-scale, open pit mining methods. FC
evaluations were conducted to determine potentially economic pit limits and the pushback
development sequence. This work was based on the deposit block model described in Item 14.0.
Six mining phases were designed and a mine production schedule was developed using a declining
cut-off grade policy to maximize project present values.

This PEA is preliminary in nature and includes inferred mineral resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is no certainty that the results of this PEA will
be realized. Mineral resources that are not mineral reserves have not demonstrated economic
viability.

16.1 Economic Pit Limit Evaluations

Table 16-1 summarizes the recovery and economic parameters used in the FC analyses. Areas
shaded in gray are not applicable to the referenced zones.

Table 16-1: Floating Cone Recovery and Economic Parameters

Zone
Primary Secondary Oxide / Leach Cap
Sulfide Sulfide High Cu Low Cu / Hi Au

Cu recovery, % 92% 87% 70.0%

Mo recovery, % (thru Mo con) 60% 55%

Au recovery, % 65% 60% 45% 70%

Ag recovery, % 50%

Cu payable, % 96.5% 96.5% 96.5%

Mo payable, % 85.0% 85.0%

Au payable, % 70.0% 70.0% 70.0% 99.5%

Ag payable, % 98.0%

Cu refining, $/lb payable 0.06 0.06 0.06

Mo refining, $/lb payable 0.00 0.00

Au refining, $/oz payable 7.50 7.50 7.50 2.00

Cu con freight & treatment, $/dmt 155.00 155.00 155.00

Mo con freight & treatment, $/dmt 90.00 90.00

Cu con grade, % Cu 28% 33% 40%

Mo con grade, % Mo 48% 48%

116
 Zone
Primary Secondary Oxide / Leach Cap
Sulfide Sulfide High Cu Low Cu / Hi Au

Cu FSR cost, $/lb payable 0.32 0.28 0.242

Mo FSR cost, $/lb payable 0.10 0.10

Royalties (NSR basis): 10.0% 10.0% 10.0% 5.5%

Base mineralized material mining, $/t 1.40 1.40 1.40 1.40

Base waste mining, $/t 1.60 1.60 1.60 1.60

Incremental haulage, $/t/bench below 3605 el 0.035 0.035 0.035 0.035

Sustaining mine capital, $/t mined 0.38 0.38 0.38 0.38

Mineralized material processing, $/t 4.50 4.50 4.50 9.00

General/admin, $/t 0.80 0.80

Internal cut-off, NSR $/t 5.10 5.10 4.30 8.80

Breakeven cut-off, NSR $/t 7.08 7.08 6.28 10.78

Internal cut-off, % CuEq 0.17 0.18 0.18

Breakeven cut-off, % CuEq 0.24 0.25 0.27

Internal cut-off, Au gpt 0.38

Breakeven cut-off, Au gpt 0.46

Low grade sulfide stockpile:

LG stockpile rehandling cost, $/t 1.10 1.10

Model Cu recovery at LG stockpile cut-off 87% 82%

Recovery losses 7% 7%

LG stockpile cut-off, % CuEq 0.24 0.25

LG stockpile cut-off, block model NSR $/t 6.74 6.78

Leach cap (oxide) material above the cut-offs indicated in Table 16-1 was investigated for possible
batch processing after sulfide materials are exhausted. This material, along with dyke zones (which
have low Cu grades and are mostly from the leach cap horizons of the deposit), would be stockpiled
for potential processing at the end of the mine’s life. Low grade sulfide mineralized material
stockpile cut-off grades account for rehandling and incremental haulage costs for the stockpiled
material.

117
 W&N, with sub consultants FSR performed geotechnical analyses in support of scoping-level pit
slope recommendations for the Project. These analyses were based primarily upon geotechnical
data collected by W&N and Lumina Copper personnel during the course of exploration core drilling
and dedicated geotechnical drilling in the years 2010 to 2012.

Six slope sectors were defined to control the FC projections and subsequent pushback designs.
Overall slope angles for FCs ranged from about 38° in the north walls, 42° in the east and southeast
walls, to 44-46° in the southern walls, and about 42° in the northwestern quadrant of the pit.

Recovery and valuation subroutines were developed to compute NSRs, net values, and
recoverable metal grades for each block. For this PEA, mineral resources classified as indicated
and inferred were allowed to contribute revenues to the economic pit limit evaluations. None of the
mineral resources have been classified as measured.
3 3
In situ bulk densities range between 1.90 kg/m for overburden to 2.65 kg/m for primary sulfides.
Densities vary by rock type in the deposit model.

The base case is defined by prices of $2.00/lb Cu, $12.00/lb Mo, $1,100/oz Au, and $14.00/oz Ag.
Price sensitivities were conducted in increments of $0.25/lb Cu, ranging from $1.25/lb to $3.00/lb
Cu; other metal prices were proportioned from the base copper price. An internal NSR cut-off of
$5.10/t was applied when estimating contained mineral resources for each pit shell (note that NSR
values vary with the metals prices and are recomputed prior to each FC run). A 1.5% per bench
discount rate was applied to the net block values in the FC analyses, which is roughly equivalent to
9% per year at a sinking rate of six benches per year. This discounting approximates the effects of
time value of money; penalizing zones of marginal mineralized material blocks and/or high
incremental stripping ratios in order to maximize present values for the Project.

The $2.00/lb Cu shell with indicated and inferred resources was selected as the basis for
subsequent pit designs. A shell at higher Cu prices through $2.75/lb could have been selected
given recent market history, more than doubling the contained mineral resource tonnages – but at
lower incremental head grades. This would require additional tailing storage capacity and would
extend the Project life well beyond 30 years. It was felt that the $2.00/lb Cu shell would capture the
bulk of the Project’s potential present value and would be more reasonable to use at this stage of
evaluation.

16.2 Mining Phase/Pit Designs

The Taca Taca ultimate pit and internal mining phases were designed to accommodate large-scale
mining equipment operating on 15 m benches. This equipment includes rotary blasthole drills
capable of drilling holes up to 270-311 mm in diameter, 60 m3 electric shovels, a 42 m3 hydraulic
shovel, a 40 m3 FEL, and off-highway haulage trucks with payload capacities of 290-363 t.

Pit walls were smoothed from the basis FC shell to minimize or eliminate, where possible, noses
and notches that could affect slope stability. Internal haulage ramps were included to allow for truck
access to working faces on each level. The basic parameters used in the design of six mining
phases, or pushbacks, are summarized in Table 16-2 below.

118
Table 16-2: Basic Pit Design Parameters

Parameters Unit Value

Bench height m 15
Haul road width (including ditch & safety berm) m 44
Internal ramp gradient % 10
Minimum pushback width m 90
Typical pushback width m 120+

Inter-ramp and bench face angles vary according to the W&N recommendations summarized in
Table 16-3 for six slope design sectors. The sector boundaries were adjusted as necessary to
honor the pit wall orientations suggested by the geotechnical analysis.

Table 16-3: Pit Design Recommendations

Slope Sectors
Design Parameter 1 2 3 4 5 6
N NE E-Central SE SW NW

Inter-ramp angle (degrees) 43.5 48.5 48.0 50.0 48.5 48.5

Bench face angle (degrees) 55 62 61 64 62 62

Catch bench vertical interval, m 30 30 30 30 30 30

Catch bench width, m 10.6 10.6 10.4 10.5 10.6 10.6

The main ultimate pit is approximately 3,100 m wide E-W and over 2,700 m N-S at the crest.
Elevations range from 2,915 m at the bottom to 3,680 m at the highest crest in the concave portion
of the southeast wall. The maximum overall wall height is 765 m. The smaller pit to the north,
mined in Phase 5 and targeting some lower grade sulfides near surface, is about 720 m E-W and
870 m N-S, with elevations ranging between 3,425 and 3,620 m and a maximum depth of 195 m.
The surface areas of the main and north pits are 776 and 67 ha, respectively.

The ultimate pit design is shown in Figure 16-1. Dual ramp access is provided to the 3,080 m
elevation. Grid lines are on 1,000 m intervals.

The salar sediments are expected to reach a maximum depth of roughly 50 m along the eastern
crest of the ultimate pit. The sediments would be dewatered and excavated to the hard rock
contact prior to pit expansions into the salar. Additionally, an impervious barrier would be
constructed immediately east of the pit to prevent brine inflows.

119
 Figure 16-1: Ultimate Pit Design (WLRC, 2013)

The starter pit (Phase 1) lies mostly in the northeast portion of the main ultimate pit area,
downslope of the hill covering much of the deposit, and is located where the supergene zone rises
closest to the topographic surface. Approximately 230 Mt of preproduction stripping will be required
to reach the top of mineralized material in Phase 1. The Phase 1 pit is about 1,070 m wide E-W
and roughly 1,000 m N-S, with elevations ranging between 3,290 and 3,740 m for a total depth of
450 m. The surface area of Phase 1 is 126 ha.

16.3 Mine Production Schedule

The proposed development plan for the Project envisions starting with two grinding lines rated at a
nominal capacity of 60,000 t/d each, for a total initial milling rate of 120,000 t/d. A third grinding

120
circuit is contemplated to be brought on line at the beginning of Year 8, increasing the total milling
rate to a maximum of 180,000 t/d.

The basic parameters used to develop the mine production schedule are summarized in Table 16-4
below.

Table 16-4: Production Scheduling Parameters

Parameters Unit Value

Annual target concentrator feed

production rates:
Y1 Mt 34.92
Y2-Y7 Mt 43.20
Y8 Mt 62.75
Y9+ Mt 64.80
Daily milling rates:
Y1-Y7 t 120,000
Y8+ t 180,000
Operating hours per shift h 12
Operating shifts per day shifts/d 2
Operating days per week d/wk 7
Scheduled operating days per year d/y 360

A nine-month concentrator ramp-up schedule is incorporated into the Year 1 concentrator feed
production target. Similarly, the Year 8 production target includes a 4 to 5 month ramp-up period
for the third grinding line.

Estimates of the mineral resources contained within the mining phases were based on the
November 2012 deposit model, include material classified as indicated and inferred, and were
based on the metallurgical recoveries and costs presented in Table 16-1. NSRs were computed at
base case metals prices of $2.00/lb Cu, $12.00/lb Mo, $1,100/oz Au, and $14.00/oz Ag.

The Taca Taca deposit is a well-disseminated Cu-Mo-Au mineralized system that has large
mineralized zones above the anticipated cut-off grades. The sample compositing and block grade
interpolation process used to construct the deposit model are believed to incorporate sufficient
dilution and, hence, no additional dilution factors were applied. Mining recovery of mineralized
material within the open pit is expected to be virtually 100%. Low grade sulfide stockpile recovery
is estimated at 97%.

Bulk densities were stored in the deposit model for each block and vary by geologic zone. Table
16-5 summarizes the zones and the corresponding in situ dry densities. Any undefined blocks were
3
assigned a default density of 2.60 t/m .

121
Table 16-5: Geologic Zones and Bulk Densities

Geologic Zone Model Code Density (t/m3)

Overburden 1 1.90
Leach Cap (oxide) 2 2.50
Secondary Sulfide (supergene) 3 2.62
Primary Sulfide (hypogene) 4 2.65
Dyke 5 2.60

A production scheduling analysis indicated that a variable cut-off strategy employing initial sulfide
NSR cut-offs of $8.60-12.60/t during the first nine years and declining to internal cut-offs ($5.10/t)
by Year 22 would improve the potential present value of profits by about 5%. An internal NSR cut-
off of $5.10/t was applied to all stockpiled dyke material. Low copper ( 0.02% TCu) oxide blocks
were considered for stockpiling and potential precious metal extraction if the computed NSR was
above an $8.80/t internal cut-off. High copper oxide blocks were considered for stockpiling and
potential batch processing if the NSR value was above a $4.30/t internal cut-off.

The mine production schedule was developed for the Project using estimates of indicated and
inferred mineral resources contained within each of six mining phases. Only secondary and
primary sulfides above a declining NSR cut-off were considered as potential concentrator feed; all
mineralized dyke and oxide material would be stockpiled only. Stockpiled low grade sulfide
mineralized material would be reclaimed and fed to the mill immediately after the open pits are
exhausted.

Table 16-6 summarizes the mine production schedule based on the declining cut-off grade policy
described above. This schedule includes mineralized material processing through a third grinding
line in the concentrator beginning at the start of Year 8. Peak material handling rates in the mine,
including waste, would be about 508,000 t/d, or 183 Mt per year. The stripping ratio, based on
declining cut-offs, is projected at 1.57 (tonnes of waste and stockpiled material per tonne of sulfide
material milled).

Mine preproduction stripping will require 2.5-3 years, including site preparation and a gradual build-
up of equipment and trained personnel. Mine stripping targets for preproduction Years -3, -2, and -
1 are 15, 86, and 150 Mt, respectively. Total preproduction stripping is estimated at 251 Mt, which
includes some advanced stripping in mining Phase 2.

Nearly 21 Mt of dyke material would be stockpiled for potential batch processing after exhausting
the sulfide resource. Similarly, about 5 Mt each of oxide copper and oxide gold resources would
also be stockpiled. Almost 56 Mt of low grade sulfide material would be stockpiled during Years 1-
15, of which about 54 Mt (97%) would be reclaimed in Year 28. Over 78 Mt of low grade sulfides
(above an internal cut-off) would not meet the stockpiling cut-off and are treated as waste in the
production schedule.

122
 A breakdown of the total concentrator feed by indicated and inferred mineral resource
classifications is listed in Table 16-7 below.

Table 16-7: Resource Classification of Concentrator Feed – PEA Schedule

Concentrator Feed
Classification Ktonnes Cu % Mo % Au g/t Ag g/t

Measured 0 - - - -

Indicated 1,545,000 0.46 0.013 0.09 0.6

Inferred 106,000 0.43 0.005 0.09 1.1

The concentrator is expected to operate for approximately 28 years based on the mine production
schedule presented in Table 16-6. The mine production schedule presented in Table 16-6 is
comprised of 1,545 Mt of indicated mineral resources grading 0.46% Cu, 0.013% Mo, 0.09 Au g/t,
and 0.6 Ag g/t and 106 Mt of inferred mineral resources grading 0.43% Cu, 0.005% Mo, 0.09 Au g/t,
and 1.1 Ag g/t which would be processed by the concentrator over the life of the Project. The
production schedule excludes milling of the dyke and oxide resources.

This PEA is preliminary in nature and includes inferred mineral resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable
them to be categorized as mineral reserves. Inferred mineral resources have a great amount of
uncertainty as to their existence and as to whether they can be mined legally or economically.
There is no certainty that the PEA will be realized.

16.4 Waste Rock Storage and Stockpiling

Approximately 31 Mt of mineralized dyke and oxide material will be stockpiled to the west of the
main open pit. Over 56 Mt of low grade sulfides will be stockpiled just west of the oxide stockpile.
Two waste rock storage facilities (WRSFs) will be required to store an estimated 2,520 Mt of sub-
grade material. Of this total, only 414 Mt of waste rock will be extracted from the secondary and
primary sulfide geologic zones; the vast majority of waste will be oxide. Figure 16-2 shows the
anticipated locations of the low-grade stockpiles and WRSFs.

Portions of the North WRSF and nearly all of the South WRSF are contemplated to be constructed
atop the Salar de Arizaro near the open pit. The North WRSF design has a storage capacity of
nearly 350 Mt, while the South WRSF, as shown, could store a little over 2,200 Mt of waste rock.
The crest elevation of both WRSFs is approximately 165 m above the present salar surface.

124
 Figure 16-2: Waste Rock Storage and Oxide Stockpile Facilities (WLRC, 2013)

16.5 Mine Equipment

Large-scale open pit mining equipment operating on 15 m benches could be used to extract
mineralized material and waste rock for the Project. Electric drills and shovels were chosen
because of their lower operating costs and better reliability. The rest of the mining fleet is
envisioned to consist of diesel-powered machinery to provide maximum flexibility in pit operations.

The production schedule presented in Table 16-6 was used as the basis for determining equipment
requirements. It was assumed that the Owner would be performing all mining services, including
preproduction stripping, blasting, and maintenance and repair activities. Mine operations would be
scheduled for two 12-hour shifts per day, 7 d/wk, for a total of 360 d/y. A provision was made for
five lost days per year due to adverse weather and holidays. Four crews, rotating between day and
night shifts, is contemplated to provide continuous operator and maintenance labor coverage for the
mine.

125
The selected primary mining fleet includes the following:

Rotary blasthole drills capable of 270- to 311-mm-diameter holes

3
60 m rope shovels
3
42 m hydraulic shovel
3
40 m FEL
363 t off-highway haul trucks
635-kW and 435-kW crawler dozers
600-kW rubber-tired dozer
370-kW rubber-tired dozers
400-kW and 220-kW motor graders
120,000 l (134 t) water trucks

A portable crushing and screening plant with a rated capacity of about 500 t/h is envisioned to
produce crushed rock for blasthole stemming and road surfacing throughout the project area. A 30
t vibratory compactor is contemplated to be needed for haul road maintenance/construction and
engineered earthworks.

Other auxiliary equipment could be used for miscellaneous earthworks and construction around the
mine and WRSF sites, cleaning out minor ditches and sumps, equipment assembly and
maintenance, fueling and lubrication services, transporting mine equipment and electric power
cables, loading/unloading mining supplies and repair parts, transporting mine personnel, and other
mine support duties.

The mine equipment fleet is presented for selected years (1, 7, 13, and 20) in Table 16-8. The
peak haul truck requirement of 58 units occurs in Year 7.

126
Table 16-8: Mine Equipment Fleet for Selected Years

Equipment Y1 Y7 Y13 Y20

Primary:
Crawler Rotary Drills, 270-mm 3 4 6 6
Crawler Rotary Drills, 311-mm 8 8 6 5
Secondary Percussion Drills, 89-mm 2 2 2 2
Electric Shovels, 60-cu-m 5 5 5 4
Hydraulic Shovel, 42-cu-m 1 1 1 1
Loader, 40-cu-m 1 1 1 1
Loader, 12-cu-m (R&D) 1 1 1 1
Haul Trucks, 363-tonne 38 58 58 51
Lt. Haul Trucks, 91-tonne (R&D) 3 3 3 3
Dozers, 635-kW 3 3 3 3
Dozers, 435-kW 7 7 7 7
R.T. Dozer, 600-kW 1 1 1 1
R.T. Dozers, 370-kW 5 5 5 5
Graders, 400-kW 2 3 3 3
Graders, 220-kW 6 8 8 8
Water Trucks, 120,000-liter 5 5 5 5
Auxiliary:
ANFO/Slurry Truck, 25 t 3 3 3 3
Blasthole Dewatering Truck 2 2 2 2
Powder Truck, 1 t 2 2 2 2
Powder Magazine, 14 t 5 5 5 5
AN Storage Bin, 60 t 10 10 10 10
Emulsion Storage Bin, 65 t 2 2 2 2
Integrated Tool Carrier, 105 kW 3 3 3 3
Hydraulic Hammer 1 1 1 1
Crawler Excavator, 6 cu m 1 1 1 1
Crawler Excavator, 3 cu m 2 2 2 2
Backhoe/Loader, 1.1 cu m 1 1 1 1
Vibratory Compactor, 30 t 1 1 1 1
Portable Aggregate Plant, 500 tph 1 1 1 1
Mobile Generator (2 MW) 1 1 1 1
Cable Reel Truck 1 1 1 1
Aerial Boom Truck 2 2 2 2
All Terrain Crane, 80 t 1 1 1 1
Crawler Crane, 200 t 2 2 2 2
Equipment Transporter, 200 t 1 1 1 1
Fuel/Lube Truck Large 2 2 2 2
Fuel/Lube Truck Small 1 1 1 1
Mechanic Field Service Truck 2 2 2 2
Medium Duty Field Truck w Crane 2 2 2 2
Off Road Tire Handling Truck 1 1 1 1
Tire Handling Forklift 1 1 1 1
Shop Forklift, 16 t 1 1 1 1
Shop Forklift, 5 t 2 2 2 2
Light Plant 16 16 16 16
Pickup Truck, 0.5 t, 4 WD 32 32 32 32
Crew Bus 5 5 5 5
Ambulance 1 1 1 1
Truck Dispatch System 1 1 1 1

127
16.6 Mine Workforce

Mine workforce requirements were estimated on the basis of working two 12-hour shifts per day, 7
d/wk, 52 wk/y. A standard, four-crew rotating work schedule for craft labor and front-line
supervision will be used for around-the-clock coverage.

It is anticipated that expatriate personnel will be hired to help establish safe and efficient mine
operations and maintenance systems, and to train Argentine nationals in proper work procedures.
As the skill levels of national workers increase, expatriates would be phased out with the eventual
goal of minimal expatriate staffing.

Mine personnel requirements are based on the Owner performing all mining functions. The use of
contractors for such activities as supplemental preproduction stripping, down-hole explosives
supply and shot services, and contract maintenance and repair have not been incorporated into the
workforce and mining cost estimates.

The projected mine workforce is presented for selected years (1, 7, 13, and 20) in Table 16-9. A
peak mine workforce of 874 is projected in Year 7.

Table 16-9: Projected Mine Workforce for Selected Years

Position Y1 Y7 Y13 Y20

Operations, Craft Labor 373 450 441 411
Maintenance, Craft Labor 229 274 270 250
Supervision & Technical 150 150 150 150
Total Mine Department 752 874 861 811

128
17 Recovery Methods

17.1 Introduction

The PEA production schedule assumes the Taca Taca concentrator will initially process 120,000 t/d
of ROM mineralized material, producing copper concentrate, molybdenum concentrate, and tailings.
Prior to Year 8, an expansion is contemplated to be undertaken to increase the capacity of the
concentrator to 180,000 t/d.

The process includes crushing and grinding of the ROM mineralized material, bulk copper –
molybdenum rougher and cleaner flotation, regrinding, copper and molybdenum separation and
molybdenum cleaner flotation, and dewatering of copper and molybdenum sulphides. The copper
and molybdenum concentrates are envisioned to be transported by truck from the concentrator to
the rail load-out facility from where it will be transported by rail to the Port of Mejillones in Chile for
shipment to customers. The flotation tailings are planned to be thickened before placement in the
TSF.

17.2 Process Design Basis and Design Criteria Summary

The key process criteria for the plant design and operating costs are provided in Table 17-1.

Table 17-1: Summary of Key Process Design Criteria

Criteria Description Units Design Source

Crusher Feed t/d 120 000 Lumina Copper (Yrs 1-7)
Crusher Availability % 70 Ausenco
Crusher Throughput t/h 7 143 Calculation (Yrs 1-7)
Mill Throughput Mt/y 43.8 Lumina Copper (Yrs 1-7)
Mill/Flotation Availability % 92 Ausenco
Mill Throughput t/h 5 414 Calculation (Yrs 1-7)
Bond Ball Mill Work Index BWI kWh/t 17.8 Test work/Ausenco
SMC Test Axb 52 Test work/Ausenco
Primary Grind Size P80 µm 150 Test work
Concentrate Regrind Size P80 µm 30 Test work
% Cu 1.1
Head Grade (Design) % Mo 0.02 Mine Plan Year 1-2
g/t Au 0.12
Copper Recovery % 88-92
Ausenco/Test Work
Molybdenum Recovery % 56-57
Gold Recovery % 61-65
2
Concentrate Filtration Rate t/m /h 0.85 Ausenco/Test work
2
Concentrates Thickening Flux t/m /h 0.25 Ausenco
2
Tailings Thickening Flux t/m /h 0.73 Ausenco/Test work
Tailings Thickener Underflow Density % w/w 60 Ausenco

129
 The key criteria selected for the concentrator design are:

Treatment of 120,000 t/d in two 60,000 t/d parallel lines (except for the molybdenum circuit
which is a single circuit);
Design availability of 92% (after ramp-up), resulting in 8,059 operating hours per year, with
standby equipment in critical areas;
An expansion prior to Year 8 adding another 60,000 t/d parallel line consisting of grinding,
pebble crushing, bulk rougher flotation, and regrind (bulk cleaner flotation and molybdenum
circuit do not require increased capacity);
Sufficient plant design flexibility has been considered for treatment of all mineralized material
types at design throughput.

17.3 Flow Sheet Development and Equipment Sizing

The design for the Project was based on the process design criteria and metallurgical test results.
An overall process flow diagram for the Project is shown in Figure 17-1. The concentrator is
designed to have two parallel lines processing 60,000 t/d each from crushing to bulk copper –
molybdenum cleaning; after this stage there is one circuit for molybdenum copper separation and
molybdenum cleaner flotation.

130
The key unit process operations that are well proven in the industry are envisioned to include:

Mineralized material from the open pit is crushed using two 600 kW, 60” x 89”, primary
gyratory crushers in parallel to a crushed product size of nominally 80% passing (P80) 150
mm and fed onto the stockpile feed conveyor;
One conical stockpile of crushed material with a live capacity of 24 h, with three apron
feeders for each SAG mill train, each capable of feeding 120% of the full mill throughput;
Two 23 MW SAG mills, 12.19 m diameter x 7.01 m effective grinding length (EGL) (40’ x 23’),
in closed circuit with pebble crushing;
Pebble crushing will be comprised of two MP1000 cone crushers, crushing to a product size
of nominally 80% passing (P80) 12 mm;
Four 17 MW ball mills (two per train), 7.92 m diameter x 12.19 m EGL (26’ x 40’), in closed
circuit with hydro-cyclones, grinding to a product size of nominally 80% passing (P80) 150 µm;
3
Bulk copper-molybdenum rougher flotation consisting of ten 300 m forced air tank flotation
cells (five per line) to provide a total of 12 mins of retention time;
Bulk copper-molybdenum rougher concentrate regrinding in two 3.0 MW horizontal fine
grinding Isamills (one per line) to a P80 of 30 µm;
Bulk copper-molybdenum regrind product thickening in a 38 m diameter high rate thickener
(one per line);
Bulk copper-molybdenum first stage cleaner and cleaner scavenger flotation consisting of
3
sixteen 20 m (eight per line) forced air tank flotation cells to provide a total of 10 min of
retention time;
Bulk copper-molybdenum cleaner scavenger thickening in a 38 m diameter high rate
thickener;
3
Bulk copper-molybdenum second stage cleaner flotation consisting of eight 10 m trough
shaped flotation cells (four per line) to provide a total of 2.5 min of retention time;
3
Bulk copper-molybdenum third stage cleaner flotation consisting of six 10 m trough shaped
flotation cells (three per line) to provide a total of 2.5 min retention time;
Bulk copper-molybdenum thickening in a 32 m diameter high rate thickener (one for both
lines);
3
Copper-molybdenum separation rougher flotation consisting of five 10 m forced air tank
flotation cells to provide a total of 7.5 min of retention time;
3
Molybdenum first stage cleaner and cleaner scavenger flotation consisting of five 2.5 m
forced air tank flotation cells to provide a total of 7.5 min of retention time;
3
Molybdenum second stage cleaner flotation consisting of three 2.5 m trough shaped flotation
cells to provide a total of 5 min of retention time;
3
Molybdenum third stage cleaner flotation consisting of three 2.5 m trough shaped flotation
cells to provide a total of 2.5 min retention time;

132
17.4 Comminution Circuit Design

The test work data and evaluation of bench scale flotation results indicate that the deposit is of
relatively moderate competency as indicated by Bond Ball Mill data and the two JK drop weight
(Axb) competency tests. An SABC circuit has been selected.

There will be two parallel SABC circuits each processing 60,000 t/d. Product from the SAG mill will
gravity flow through a trommel screen and into the cyclone feed pumpbox where it will combine with
the product from the two ball mills. The combined SAG and ball mill product will be pumped to two
cyclone clusters (one dedicated cluster per ball mill) to classify the product; with the coarse in the
underflow returned to the ball mill, and the fines in the overflow flowing via gravity to rougher
flotation.

This circuit will be able to achieve the design throughput of 60,000 t/d for mineralized material with
an Axb competency of 52 or greater. An Axb of 52 represents a 15% design factor increase in rock
competency compared to the measured value of the Primary material of 60. More competent
mineralized material will only be able to be processed at lower throughput rates.

The specific energy and mill sizing determined using Ausenco’s in-house method is shown in Table
17-2.

Table 17-2: Mill Design Criteria

Criteria Description Units Design

Throughput (Total) t/h 5 435
Throughput (per line) t/h 2 717
Mill Type SAG Grate D/C
Number of Mills (Total) 2
Pinion Power required kW 18 917
Mill Speed % Nc 75
Ball Charge Volume Nominal, operating % vol 13
Maximum for design % vol 18
Total Charge Volume Nominal, operating % vol 27
Maximum for design % vol 35
Mill Diameter Inside shell m 12.19
Mill Length EGL m 7.01
Selected Motor Power kW 23,000
Mill Type Ball
Number of Mills (Total) 4
Grind Size P80 µm 150
Pinion Power required kW 15 290
Mill Speed % Nc 75
Ball Charge Volume Nominal, operating % vol 33

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 Criteria Description Units Design
Maximum for design % vol 40
Mill Diameter Inside shell m 7.92
Mill Length EGL m 12.19
Selected Motor Power KW 17,000

The selected ball mill power of 17,000 kW incorporates the allowances for drive train losses to
determine the motor power installed from the pinion power required.

The selected motor power for the SAG mill incorporates similar allowances as well as an additional
contingency to allow adjustment in the mill operating conditions to handle feed variability. These
allowances and contingencies resulted in the selection of a 23,000 kW SAG mill.

17.4.1 Pebble Crushing

The pebble crushing circuit design includes the conveyors feeding the crushers as well as the
conveyors returning the crushed pebbles to the SAG mill feed. The pebble crushing circuit is
contemplated to be comprised of a single feed bin, with two reclaim feeders feeding two 900 kW
pebble crushers for each line.

A pebble circulating load of 25% of the new feed rate has been assumed for the design of the
pebble crusher, based on typical industry experience with mineralized material of similar
competency. The conveyors are contemplated to be designed to handle peak loads of up to 45% of
new feed.

17.4.2 Mill Circuit Classification

The classification circuit has been designed for a maximum circulating load of 250%. This is a
typical industry design value for an SABC circuit. The SAG mill discharge slurry passes through a
trommel screen with 12.5 mm apertures to remove pebbles, while the screen undersize flows into
the cyclone feed pumpbox and combines with ball mill discharge. At the pumpbox, two separate
suction pipes would provide feed to the two cyclone feed pumps sending feed to the ball mills.

The ball mills are envisioned to operate in closed circuit with cyclones to reduce the particle size to
the desired P80 of 150 m. Combined SAG and ball mill discharge is pumped to two cyclone
clusters of 760 mm diameter hydro-cyclones (14 operating and three spare per cluster) to split the
flow to the two secondary mills. Underflow from the hydro-cyclone clusters is envisioned to feed
each ball mill operating in parallel for further grinding.

Overflow from the cyclone clusters flows via gravity to the flotation circuit.

17.5 Bulk Copper-Molybdenum Flotation Circuit Design

Mineralogical examination has highlighted that the copper mineralogy is fine grained. The flow
sheet selected consists of rougher flotation, rougher concentrate regrind, and three stages of
cleaner flotation. The mineralized material will require a fine regrind of the bulk rougher concentrate
to a P80 of 30 µm to achieve adequate recovery. After regrinding, conventional flotation would be
used to enable the production of saleable grade concentrates.

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17.5.1 Bulk Flotation Circuit Configuration

A rougher flotation circuit consisting of five 300 m3 tank flotation cells per train has been selected.
The flotation circuit consists of a stepwise cell installation with one cell per step.

The first cleaner flotation circuit, including cleaner scavengers consists of seven 20 m3 tank flotation
cells. The second cleaner circuit consists of four 10 m3 trough flotation cells. The third cleaner
3
circuit consists of three 10 m trough flotation cells.
nd rd
In the 2 and 3 cleaner applications smaller cells have been selected to avoid short circuiting with
fewer cells, while the trough cell design provides a higher lip length and cell surface area to volume
ratio making this style of cell more suited for this application than tank cells.

Subsequent optimization work may identify better alternate configurations including the potential
use of column cells and/or Jameson cells.

17.5.2 Regrind Circuit Configuration

Rougher concentrate will report to the regrind cyclone feed pumpbox. The regrind cyclones will
target a cut size P80 of 30 µm which will be achieved with a cluster of 250 mm cyclones, including
18 operating, 2 spares, and 3 blank nozzles for future additions. The cyclones will report to an
M1000 Isamill. The Isamill discharge is combined with the cyclone cluster overflow and reports to
the first cleaner pumpbox.

17.6 Copper-Molybdenum Separation and Molybdenum Cleaning

The flow sheet selected to separate the bulk concentrate consists of rougher flotation and four
stages of cleaner flotation. The tailings from the rougher flotation is expected to be the final copper
concentrate. Concentrate from the fourth cleaner flotation cells would be the final molybdenum
concentrate.

17.6.1 Molybdenum Rougher Flotation

3
Molybdenum rougher flotation cells are planned to consist of a series of five 10 m forced air trough
flotation cells. The cells would be arranged in a step configuration between each pair of cells. The
tailings from the molybdenum roughers would be the final copper concentrate. Molybdenum
flotation is planned to be done with nitrogen gas (N2) to minimize oxidation and consumption of
NaHS.

Concentrate from the molybdenum rougher cells is planned to flow via gravity to the molybdenum
rougher concentrate pumpbox and would then be pumped (one duty and one standby) to the
molybdenum first cleaner flotation cell.

17.6.2 Molybdenum Cleaner Flotation

The molybdenum first cleaner is planned to consist of three 2.5 m3 forced air tank flotation cells,
followed by molybdenum first cleaner scavengers consisting of two 2.5 m3 cells.
3
The molybdenum second cleaner is planned to consist of three 2.5 m forced air tank flotation cells,
3
while the molybdenum third cleaner and fourth cleaner would each consist of three 2.5 m forced air
tank flotation cells.

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 Concentrate from the molybdenum fourth cleaner cells is planned to be pumped to the molybdenum
concentrate thickener feed box. Tailings from the molybdenum fourth cleaner cells would be
pumped to the molybdenum third cleaner cells.

17.7 Copper Concentrate Thickening and Filtration

Copper concentrate from the molybdenum rougher tailings pumpbox would then be pumped to a 32
m diameter high-rate thickener and would be thickened to approximately 60% w/w solids. Thickener
underflow would be pumped to the copper concentrate filter feed tank.

Thickened copper concentrate slurry would be delivered to one of two copper concentrate filters.
The filter presses are designed to reduce the moisture content of the concentrate prior to transport.
Filter cake would be discharged through the floor of the filter building into a concrete bunker area
underneath the press. Filter cake could then be removed from the bunker by an FEL and stored in
the covered concentrate storage shed. Concentrate would then be reclaimed by an FEL from the
stockpile and loaded into 20 t tipper trucks for transport to the rail load-out facility.

17.8 Molybdenum Concentrate Thickening and Filtration

Molybdenum flotation concentrate from the fourth cleaner cells would then be thickened to
approximately 60% w/w solids in a 4 m diameter high-rate thickener. Molybdenum concentrate
storage is envisioned to provide surge capacity ahead of the molybdenum concentrate filter.

The molybdenum concentrate filter has been sized based on a head grade of 0.02% Mo and a final
concentrate grade of 53% Mo. As with the copper filters, the molybdenum filter size is based on
filtration rates determined from previous experience.

17.9 Concentrate Rail Load-Out Facility

Copper concentrate would then be trucked from the concentrator to the rail load-out facility
approximately 2.5 km to the northeast, adjacent to the new rail spur.

An FEL would be used to manage concentrate in the storage facility and dump concentrate into a
feed bin from which a feed conveyor would then take the concentrate to a 500 t concentrate storage
bin located over the rail spur. The storage bin would be equipped with vibrators and three
hydraulically actuated clamshell type gates from which rail cars could be loaded as they are
positioned under the concentrate storage bin.

17.10 Tailings Processing

The design basis chosen for this level of study includes a tailings thickener, with storage of
thickened tailings in a nearby TSF and recovery of water from the TSF surface. Due to the low
levels of pyrite in the feed, it is assumed that overall the tailings will be non-acid-generating (NAG)
and separation of pyrite from the tailings stream for storage in a separate TSF is not required.

Ausenco sized the tailings thickener for the full expanded tonnage rather than build a new smaller
thickener later, which resulted in the requirement for a 120 m diameter tailings thickener. Thickener
underflow would be pumped to the TSF, while thickener overflow would gravity flow to the process
water tank.

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17.11 Brine, Desalinated, and Process Water

Under the current design plan, the water systems will consist of three water types as follows:

A brine water system for the grinding and rougher flotation areas
A desalinated water system for the bulk cleaner and molybdenum flotation circuits
A filtered brine water system for gland seal water and rougher launder water

The majority of the plant water requirements are envisioned to be met from the plant process water
systems, which will be composed of recycled water streams i.e., thickener overflows and TSF return
water, supplemented with brine and desalinated water as required. Process make-up water
requirements and systems are discussed under Item 18.8.2

17.12 Reagents

Estimated reagent consumptions are shown in Table 17-3.

Table 17-3: Summary of Reagent Consumption

Criteria Description Units Design Source

Collector Consumption (PAX) g/t 30 Test work
Collector Consumption (Z6) g/t 5.2 Test work
Collector Consumption (Z14) g/t 0.6 Test work
Molybdenum Emulsion g/t 8 Test work
Frother Consumption (MIBC) g/t 12 Test work
Sodium hydrosulphide Consumption (NaHS) g/t 8-10 Test work
Lime Consumption kg/t 2.28 Test work
Flocculant Consumption (concentrate and tailings) g/t 37 Ausenco

17.13 Plant Layout & Description

A layout has been prepared, placing the concentrator as reasonably close to the pit as possible.
The layout is shown below in Figure 17-2. The concentrator layout has taken site topography and
concession boundaries into account and works within the bounds imposed by preliminary locations
of the pit, stockpiles, and WRSFs.

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18 Project Infrastructure
18.1 Overview

The Project is located in a remote area of northwestern Argentina, however there is reasonably
good access to regional infrastructure. A network of paved and gravel roads from Salta to the
towns of San Antonio de los Cobres and Tolar Grande provide road access to the Project. The road
continues west beyond the Project to the Socompa Pass on the Chilean border and eventually to
the port city of Antofagasta, Chile. The road conditions are generally good, but some upgrades to
portions of the road closer to the Project will be required.

The Project is located within 10 km of the railway line that connects Salta with Antofagasta. It is
expected that this railway will be used for concentrate transport to the Port of Mejillones, located
approximately 65 km north of Antofagasta, and that consumables may also be transported by rail by
adding tank or flatbed rail cars to the empty concentrate trains returning to the Project.
Construction of a new rail spur, a new maintenance and repair facility for locomotives and railcars
adjacent to the concentrate load-out facility, and rehabilitation of approximately 40 km of track
between the Project and Socompa are envisioned to be required.

18.2 Roads

18.2.1 Mine Access Road

A preliminary assessment was performed of the existing conditions of the road from Salta to the
Project that will be used as the primary access during construction and operations (Figure 18-1).
Access from Salta to the Project is along existing public roads that include Highway 51 from Salta to
the Cauchira Salt Flat, approximately 223 km, and Road 27 from Cauchira to the Project,
approximately 158 km, for a total distance of 381 km.

Access along Highway 51 consists of both paved and gravel road sections that are in good
condition and are maintained by the government. The typical road width is approximately six to
seven meters. Based on the general visual conditions of this section, no upgrades are required.
From Highway 51 at Cauchira Salt Flat, the Project is accessed by Road 27, which is a gravel and
dirt road. This road is approximately six to eight meters wide. The government also maintains this
road; however, the section from the Pocitos Salt Flat to the Project is not as well maintained and
may require some light maintenance by Lumina Copper during construction and operation. Also,
along this section, there is a segment that contains several switchbacks, which is considered a local
landmark. Prior to construction, Lumina Copper may need to develop a by-pass to preserve the
switchback and increase the road width and turning radii.

The other section of Road 27 that will need to be upgraded lies between Tolar Grande and the
Project, which is approximately 34 km long (Figure 18-2).

139
 Design criteria for the roads is based on the proposed traffic volume, vehicle types, and desired
road surface.

The mine access road connects the mine infrastructure roads at the rail load-out, just north of the
open pit, to the town of Tolar Grande. The mine access road will need to be built to Argentinian
standards for gravel roads with an approximate width of six meters and one meter wide shoulders.
The majority of the road in this section crosses the Salar de Arizaro. To reduce differential
settlement from vehicle traffic crossing the salar, a half-meter of structural fill will need to be placed
on the prepared salt crust of the salar and topped with 200 mm of road base.

18.2.2 Site Roads

Three types of site roads were envisioned for the Project: out-of-pit haul roads, high traffic roads,
and a light vehicle maintenance road.

The out-of pit haul roads would include roads from the pit to the WRSFs, the crusher, the truck
shop, and the concentrator feed stockpile (Figure 18-3). There are approximately eight km of out-
of–pit haul roads and these need to be designed for two-way mixed haul truck traffic.

Similarly, the high traffic infrastructure-connecting roads will need to join the truck shop to the
concentrator and the concentrator to the rail load-out facility. It has been assumed there will be a
high volume of light to heavy vehicle traffic, typically less than 40 t, traveling these roads. There are
approximately 4 km of infrastructure-connecting roads that have been designed for two-way mixed
traffic, excluding haul trucks.

It is planned to have one low traffic maintenance road for light vehicles around the TSF, a distance
of 18 km. This road will access the cyclone and water reclaim facilities and allow one-way traffic
access to any point around the TSF.

The concentrator facilities are assumed to have a number of internal roads to transport materials
and personnel between facilities.

142
18.3 Power Supply

Hugo Gil Figueroa & Asociados (Hugo Gil) of Buenos Aires completed a preliminary power supply
study in July 2011 and an update to this study was prepared in January 2013 using revised
estimated electrical loads and schedule dates. The updated study addresses the below-listed
items, which are discussed further in the following sections:

Confirm the power supply source;

Confirm the tap point on the existing transmission line;
Confirm the voltage of the new transmission line that will supply power to the Project;
Confirm the routing and length of the new transmission line;
Update the estimated capital cost to complete the new transmission line, including the
switching station at Olacapato and the main substation at the Project; and,
Update the estimated energy supply and transmission cost per-kilowatt-hour (kWh), and the
transmission line operation and maintenance cost; both to be used in developing Project
capital and operation costs for use in evaluating potential Project economics

18.3.1 Power Supply Source, Tap Point, Routing, and Length

The 345 kV transmission line from the Guemes generating station in Salta to Chile will be tapped at
Olacapato where a switching station will be installed. The prospective routing of the transmission
line from Olacapato to the Project is shown below in Figure 18-4. The overall transmission line
length is 144 km.

144
18.3.2 Transmission Line Voltage

The existing Guemes-Chile transmission line is 345 kV. The transmission voltage from Olacapato
to the Project is anticipated to be 345 kV.

18.3.3 Estimated Costs

The estimated capital cost of the power supply system is $146,806,000, which includes all site civil,
earthworks, and other miscellaneous items for a complete, functioning switch station and main
substation. This cost is included in the Project capital costs described in Item 21.0 of this Technical
Report.

The estimated average cost to supply power to the Project is $0.085 kWh (rate includes estimated
line losses). This unit cost has been used in estimating mining, processing, and General and
Administrative (G&A) operating costs by applying this unit rate to estimated power consumption by
each area.

Annual switching station, main substation, and transmission line operating and maintenance costs
are estimated to be $1,468,000. This cost has been included as a component of G&A operating
costs.

18.4 Site Electrical Power Distribution

The Taca Taca main substation is located directly adjacent to the main concentrator building. From
the Taca Taca main substation, medium voltage electrical power will be distributed to the
concentrator and the rest of the site at either 33 kV or 13.8 kV depending on the length of cable
runs or the end user demand.

Electrical distribution to the Project areas such as the mine ring main, permanent camp, and water
supply stations is envisioned to be on 33 kV overhead transmission lines run along poles. The
longest transmission line is expected to be 50 km to the furthest wellfield. The rest of the
distribution, mainly to the concentrator electrical rooms as well as ancillary areas such as the
administration building, truck shop, tailings water return, rail car loading, and desalination plant will
be on 13.8 kV transmission lines.

An allowance for three 1.25 MVA diesel emergency generators on skids complete with fuel tank
switchgear, voltage monitors, and switchroom has been provided.

18.5 Tailings Storage Facility

18.5.1 Introduction

The mineral extraction processes for the Project are planned to be grinding and flotation that
produce copper and molybdenum concentrates and tailings. The flotation tailings should be
chemically benign and are anticipated to be non-acid generating based on preliminary acid based
accounting (ABA) testing by Plenge.

The ultimate tonnes of tailings anticipated to be stored in a containment facility are approximately
1.792 Bt. Various disposal options and configurations were considered for the siting of the TSF.
Based on field reconnaissance, Ausenco recommended an area northwest of the pit, which has a

146
 small impounding area as shown in Figure 18.10. This site is composed of sandy alluvium of
variable thickness overlaying sedimentary bedrock, with some weathered outcropping.

18.5.2 Tailings Storage Facility Design

Tailings are anticipated to be discharged into the TSF as a thick slurry, a mixture of finely ground
rock and water. Preliminary physical characterization of tailings has been performed in Ausenco’s
laboratory in Peru. The laboratory test work showed the whole tailings to have a settled density of
3 3
approximately 1.3 t/m and a maximum consolidated density of 1.6 t/m . For the PEA design,
3
conservative values of 1.2 and 1.4 t/m , respectively, were used. For more efficient water recycling,
high capacity thickeners are anticipated to be utilized to increase the solids content to
approximately 55% solids in the waste stream going to the TSF.

A siting study was performed that included considerations of centerline and downstream
embankment construction along with construction materials that included waste rock and coarse
tailings from the cyclone underflow. Due to the low storage efficiency of the dam (tailings
storage/embankment volume), a centerline cyclone tailings dam was selected as the best option.

The typical construction of a sand dam requires there to be sufficient volume of coarse sand from
the cyclone underflow in order to construct the dam in parallel with impounding the balance of the
tailings. A rockfill starter dam is planned to ensure there is sufficient capacity for the fine fraction of
the cyclone tailings during normal operation and whole tailings overflow during construction of the
sand dam. The starter dam is anticipated to be approximately 55 m high with a crest elevation of
3,585 masl and an impoundment footprint of 254 ha. Both the upstream and downstream faces of
the starter embankment are envisioned to be constructed with 2:1 (H:V) slopes. The upstream face
of the starter dam is expected to be lined with a low permeability soil liner and geomembrane to
ensure initial containment of tailings and free water until the tailings beach is established and the
decant pool is pushed to the back of the impoundment. Between the rock fill and soil liner zones of
the dam, a series of granular filters will be installed to prevent piping of materials through the dam if
there is a leak in the geomembrane liner. The starter facility has a capacity of approximately 63 Mt
of tailings including 3 m of freeboard.

The tailings dam is planned to be raised using coarse cyclone tailings and centerline construction
methods using a hydraulic jacking header system and a second jacking system is envisioned to be
used to distribute the cyclone overflow (fine fraction and whole tailings) into the impoundment area.
In addition, the centerline method is able to accommodate the anticipated rapid rate of rise of the
tailings surface expected during the early years of the proposed Project production schedule. The
ultimate height of the tailings dam is expected to be approximately 175 m with a crest elevation of
3,696 masl and an impoundment footprint of 1,754 ha.

18.5.3 Cyclone Station

The sands from the tailings stream are planned to be utilized in the construction of the tailings dam.
To separate the sand, a cyclone station is envisioned to be located above the TSF at an elevation
of approximately 3,720 masl. The purpose of the station is to separate the coarser tailings from the
whole tailings. The starter cyclone facility has capacity for 120,000 t/d and in Year 8 an additional
cyclone station is planned to accommodate an additional 60,000 t/d. For the PEA, a two-stage
cyclone system with approximately 20% underflow efficiency and an average cyclone utilization
time of 85% has been assumed. The tailings from the concentrator are envisioned to be pumped to
the cyclone station. In the initial years, the underflow and overflow are planned to be transported to
the jacking header tailings distribution systems by gravity. A pumping system has been planned in
the later years.

147
18.5.4 Tailings Delivery System

The selection of a jacking header system to accommodate efficient raising of the underflow and
overflow header pipelines along the embankment crest was a critical design decision because of
the rapid raise rates in the first few years of operation. The jacking header consists of a steel frame
that is mounted on steel posts on which it can freely slide to accommodate vertical raising by a
system of jacks. One jack is located on each set of two posts (Figure 18-5). The underflow is
discharged from the underflow delivery line. Raising the jacking header is coordinated with the
embankment rate of rise and the deposition sequence. Sufficient clearance needs to be maintained
for compaction equipment to move beneath it and compact the underflow sand.

The underflow from the jacking header would be discharged on the downstream side of the
embankment crest. During initial operations the underflow will be discharged at the base of the
facility and equipment will be used to compact and build a 3:1 (H:V) slope. Once the slope reaches
the starter dam crest the underflow will be placed in compacted thin lifts down the slope to prevent
liquefaction during a seismic event.

Figure 18-5: Tailings Discharge System – Jacking Headers

148
18.5.5 Underdrain System

A drainage network underlies the sand portion of the embankment, which is a key component of the
design. The drain facilitates drainage of the cyclone tailing sands, maintaining a low phreatic
surface in the lower section of the embankment. Water that drains from the underflow sands is
collected and returned to the process plant for reuse. The embankment is raised in lifts of
compacted cycloned tailing sands while filling the impoundment. As the embankment is raised in
height, its footprint expands downstream necessitating phased expansion of the underdrain system.

18.6 Reclaim Water System

Tailings water is planned to be reclaimed from the TSF from a natural ponding location that is
expected to be on the western edge of the facility. Tailings reclaim water at a rate of approximately
960 m3/h in the initial Years 1 to 7 is planned to be pumped from the pond and sent via pipeline
approximately 9 km around the periphery of the TSF to the process water tank and the
concentrator. It is anticipated that there will be a significant quantity of water that is lost to
interstitial water retained in the settled tailings, as well as water lost to evaporation and seepage
from the TSF. This has been accounted for in the Project water balance.

18.7 Hydrogeology and Raw Water Supply Sources

During 2011 and 2012 Ausenco’s hydrogeologists conducted an extensive hydrogeological

investigation to identify and characterize potential water supply sources for the Project, and to
quantify potential pit dewatering requirements (Ausenco, 2012). The methodology and results from
the investigation are summarized below.

The climate of the western half of Salta Province is very arid with a very low average annual
precipitation of 98.4 mm/y and very high annual potential evaporation rate of 2,253 mm/y
(calculated). No perennial surface waters exist at the site. The very arid climate results in no
sources of sustained runoff and any groundwater discharge tends to evaporate quickly. However,
geomorphic evidence in the small mountains west of the site suggest runoff events do occur
occasionally for reported periods of 10 to 15 min during the months of January and February.

18.7.1 Hydrogeology

Following a review of geologic mapping and satellite and ground reconnaissance, prospective water
supply areas were identified. The areas of interest, located both north of the Project and further
west and northwest, were selected because they are outwash deposits and alluvial fans.

Ausenco supervised the installation of 18 2-inch diameter Schedule 80 PVC standpipe piezometers
using RC and mud rotary drilling methods. Slug tests were conducted at six piezometers.

Groundwater quality data indicate that there are essentially three main groups of water represented
by samples from all the piezometers.

Group I comprises fresh groundwater and may be classified as a sodium bicarbonate

NaHCO3 type.
Group II is comprised of brackish groundwater and is a sodium chloride type that is similar to
the water at the Salar de Arizaro.
Group III is represented by fresh groundwater and is a sodium chloride type but shows higher
sulfate and magnesium concentrations than water from Group II.

149
 The direction of groundwater flow in Lumina Copper’s northern concessions is towards the Salar de
Taca Taca from the Aracar Volcano. The phreatic water level surface in this area ranges from
approximately 36-120 m below ground (bg) dependent upon surface topography.

Ausenco utilized two empirical methods to estimate the available groundwater upgradient of the
Salar de Arizaro: the Darcy flow calculation and the mass balance approach. Both methods
supported the presence of a substantial mixing zone of fresh and brackish water upgradient of the
salar. This mixing zone is the planned source of raw water feed to the water treatment plant.

18.7.2 Pit Dewatering

Multiple 2-inch diameter piezometers and two 8-inch diameter test wells were installed in the Taca
Taca pit area using RC and mud rotary drilling methods. Both test wells were installed to conduct
aquifer pumping tests to determine aquifer properties of hydraulic conductivity and storativity.

A groundwater contour map of static water levels in the pit area indicates that the phreatic
groundwater surface generally follows surface topography and that the direction of groundwater
flow is towards the southeast, towards the Salar de Arizaro. This indicates the area of groundwater
discharge is most likely the salar. Groundwater samples collected from stand-pipe piezometers
within the mine pit area indicated that the groundwater is similar to the sodium chloride brine of the
Salar de Arizaro. The groundwater has a high TDS ranging from 253,000 to 310,000 mg/l and is
similar to the brine water sampled from the nearby Salar de Arizaro, which has a TDS of 255,500
mg/l.

Two predictive models were run for the mining phase of the Project, a passive dewatering scenario
(free draining pit wall surface) and an active dewatering scenario. The active dewatering scenario
included a combination of vertical interceptor wells installed around the circumference of the pit and
horizontal drains installed in the pit walls. Active dewatering simulations indicated that the predicted
average dewatering rates ranged from 26 l/s to 119 l/s, with the greatest flows entering the pit
during the first years of mining and decreasing for successive years. The predicted effects of an
aggressive pit depressurization program using wells and horizontal drains indicate that pore
pressures in and around the proposed pit slopes could potentially be significantly reduced.

Based on the results of the groundwater modeling, costs were developed for the installation of
vertical dewatering wells and installation of horizontal drains in the pit walls. These costs are
included in the capital and operating cost sections, discussed in Item 21.0 of this PEA.

18.7.3 Raw Water Supply

It is envisioned that water could be provided to the concentrator from wellfields located at a
minimum of three locations in the region, likely, but not definitely, including the following:

1. 50 km to the southwest of the Project

2. 25 km to the northwest of the Project

3. 20 km to the west of the Project

Additionally, brine water from the pit dewatering and the nearby salar is anticipated to be utilized.

150
 It has been assumed that water with varying amounts of salinity and TDS will be pumped from
multiple wells at each location to a common collection tank at each site, before being pumped to the
concentrator. Power will be provided to each water supply site by overhead transmission lines.

Some of the raw water will require treatment and will be pumped directly to the water treatment
plant located adjacent to the concentrator.

18.8 Process Water Supply

18.8.1 Introduction

Schlumberger Water Services USA Inc. (Schlumberger) completed a scoping level assessment and
design of a water treatment plant to meet Project make-up water requirements (Schlumberger,
2013).

18.8.2 Make-up Water Requirements

The process water make-up requirements for the Project at 120,000 t/d throughput are estimated to
3 3
be 2,100 m /h (approximately 600 l/s) of untreated brine water and 800 m /h (approximately 200 l/s)
of fresh water. The water quality of the fresh water make-up under the PEA requires a TDS
concentration below 1,500 mg/l. This fresh water is anticipated to serve the purposes of cleaner
flotation, copper molybdenum separation flotation, gland seal water, cooling, reagent mixing, and
concentrate washing. An acceptable TDS of the brine process stream component is estimated to
be in the range of 200,000 mg/l to 300,000 mg/l, as determined by preliminary metallurgical testing,
as described previously in Item 13.4.5. The brine process water component will satisfy
requirements associated with grinding, rougher flotation, tailings losses (evaporation, seepage, and
retention), and contingency. At 180,000 t/d throughput in Year 8, the total estimated demand is
expected to increase to approximately 2,900 m3/h.

18.8.3 Quantity and Quality of Available Water Resources

3
The estimated water treatment requirements for provision of 800 m /h of fresh water make-up were
evaluated through examination of quantity and quality of available groundwater resources. The
objective of this evaluation was to minimize the flow rate and TDS of the raw water stream entering
this treatment system and to provide as much of the make-up water through blending of the
available fresh groundwater sources in the Project area, as possible. The application of
conventional desalination equipment requires a raw water feed TDS to be below 50,000 mg/l
(Guyer, 2010). Based on scoping level groundwater investigations, water sampling results and
estimates of well and aquifer yield, Ausenco identified the following potential estimated yields and
qualities of raw water, grouped by TDS ranges (Ausenco, 2013):
3
600 m /h of 250,000 – 300,000 mg/l TDS
3
150 m /h of 10,700 mg/l TDS
3
90 m /h of 440 – 830 mg/l TDS

Given the available data, the proposed water blending and treatment scenario to provide the Project
make-up water requirement is presented in Table 18-1 and Table 18-2. Hence, to meet the fresh
water make-up quality requirements, groundwater derived from the mixing zones will be the only
source requiring treatment.

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 Table 18-1: Components of 600 l/s of Untreated Brine Water Make-Up

Source Proposed Flow (l/s) TDS (mg/l)

Salar de Arizaro 460 250,000

Pit dewatering discharge 50 250,000

Concentrate from desalination 90 23,350

Total composite brine water 600 216,000

Table 18-2: Components of 200 l/s of Fresh Water Make-Up

Source Proposed Flow (l/s) TDS (mg/l)

Wellfield No. 1 (50 km southwest) 30 440

Wellfield No. 2 (25 km northwest) 30 830

Wellfield No. 3 (20 km west) 30 635

Mixing Zones (post-desalination) 110 1,815

Total composite fresh water 200 1,285

The above water treatment and blending scenario accounts for a maximum potential desalination
system efficiency of 55%, which requires 200 l/s of groundwater to be derived from the mixing
zones to produce 110 l/s of treated fresh water.

Therefore, because the estimated yield from the mixing zones has not been fully proven, it is
uncertain that the desalination system raw water feed rate can be met on a sustained basis. To help
reduce the treated water demand (i.e., mixing zone water demand) additional yield from the fresh
sources would be required. For instance, if a total of 150 l/s can be derived from the three proposed
wellfields combined (the upper estimated ranges of 10-50 l/s for each), the water treatment
requirement would be reduced to 50 l/s, thus lowering the desalination raw water feed from the
mixing zones to 90 l/s.

For the purposes of the PEA, the water treatment design and costing was kept conservative in
terms of process equipment sizing. Therefore, it was assumed that the 200 l/s mixing zone raw
water demand could be met.

18.8.4 Proposed Water Treatment System

The proposed water treatment system is anticipated to consist of the following components:

Stabilization ponds
Prechlorination dosing systems

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 Multi-media filtration systems
Dechlorination systems
Antiscalant dosing systems
Reverse osmosis systems

To facilitate the use of conventional reverse osmosis membrane technology, the treatment system
is assumed to consist of four treatment modules operating in parallel. Two additional modules are
envisioned to be required as standby units to allow cycling of modules as part of the system
maintenance program.

18.8.5 Projected Water Quality of Treated Process and Waste Streams

The estimated water quality of the desalination system permeate is provided in Table 18-3. The
water quality projections were made utilizing Hydranautics membrane Solutions Design Software, v
2012.

Table 18-3: Estimated Permeate and Concentrate Chemistry

Parameter Permeate (mg/l) Concentrate (mg/l)

Calcium 6 368
Magnesium 3 179
Sodium 689 8313
Potassium 16 152
Sulfate 18 667
Chloride 1,081 13,631
Fluoride 0.5 2.2
Boron 0.6 0.8
Silica 1.7 33
TDS 1,816 23,347
pH 8.17 8.44

18.8.6 Disposal of Waste Streams

The waste stream generated by the desalination system is anticipated to include the concentrate
stream as the primary component, with secondary waste streams consisting of backwash water
from the multi-media filtration system and backwash water from membrane system maintenance.
Because the water quality of these waste streams is anticipated to have a relatively low TDS
concentration, it is assumed they will be blended with the mine dewatering discharge and/or
groundwater derived from Salar de Arizaro to satisfy the brine make-up water supply requirement.

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18.8.7 System Operating and Maintenance Requirements

The operation of the desalination system is estimated to require 1.5 full time staff to conduct
monitoring, prepare reagents, and conduct routine maintenance.

Operation of the primary components of the desalination plant is planned to be automated,

including backwashing of the multi-media filtration system. However, system adjustments to
maintain optimal performance may be required based on monitoring of parameters including flow,
pressure, and water quality.

The total power requirement for operating the desalination system is estimated to be 777 kW.

18.8.8 Capital and Operating Costs

The total capital cost of the desalination plant is estimated to be $5,276,000, including engineering,
freight, installation, and commissioning. The annual operating cost of the system including labor is
estimated to be $1,089,000, which is equivalent to $0.31 per cubic meter of fresh-make up water
produced. The operating cost is based on a power cost of $0.085 kWh. Both capital and operating
cost estimates are +/-25% of actual costs. These costs have been utilized in the PEA cash flow
model and economic analysis.

18.9 Potable Water

An allowance has been made for a potable water system including an HDPE piping network
3
throughout the Project including the concentrator and ancillary buildings. A total demand of 20 m /h
has been assumed, based on potable demands for similar sized plants with similar staffing
requirements. It is anticipated that a pre-engineered packaged system will be utilized.

18.10 Logistics and Transportation

18.10.1 Transport Requirements

During construction, permanent plant materials and equipment will need to be transported from their
points of origin to the Project. During operation of the mine and mineral processing plant,
consumables and supplies, such as fuel, explosives, process reagents, equipment spare parts, and
food will need to be transported to the Project.

During both construction and operation, workers will need to be transported between the Project
and their home bases, assumed to be Salta or elsewhere in Argentina, for scheduled rest and
relaxation (R&R) breaks.

Final mineral processing products, bulk copper concentrate and molybdenum concentrate
packaged in one tonne bulk bags and containerized, are assumed to require transport to their final
markets in Asia and Chile, respectively.

18.10.2 Background

In order to address the transport options to meet the needs described above, the following studies
were completed:

Transport Survey: Taca Taca Mine, Transportes Universales S.A., June 30, 2011.

154
 Taca Taca Mine Access Road Photographic Survey, Ausenco, December 18, 2013.
Taca Taca Project Report Addendum to the Transport Survey: Taca Taca Mine, Transportes
Universales S.A., August 19, 2011.
Logistic Preliminary Report for Taca Taca Project – Argentina: Ports, Airports & Road
Restrictions in Chile, Agility Logistics Chile S.A.
Taca Taca Project Rail Study 2012/2013 Scoping Study, TFP Construcciones SRL, March
2013.

18.10.3 Argentinian Port Facilities

Two ports were considered: the Buenos Aires Port and the Zarate Port. The Buenos Aires Port was
dismissed by Transportes Universales Logistica Integral (TUSA), primarily because it is located in
the center of the city and is more expensive than the other option considered, Zarate Port.

The Zarate Port, operated by Terminal Zarate S.A., is located along the right riverbank of the
Parana River at km 110, approximately 100 km upriver from Buenos Aires. The natural draft at the
245 m long pier is 35 ft. It also has mooring towers at 50 m, allowing use by multi-purpose vessels
such as container carriers, car carriers, or general cargo vessels up to 270 m long.
2
The Zarate Port occupies an area of 120 ha, with ample container storage area, 8,900 m of
warehouse storage, and substantial land for expansion.

Two portainers are each capable of unloading 25-30 containers per hour, with maximum lifts of 40
tons at 36 m horizontal distance. Heavier lifts, and break bulk items, can be offloaded using the
vessel’s cranes, if available, or by a mobile crane located on the pier.

The port also has very good road access, located just 9 km from the Pan American highway
(National Route 9) and access to the rail transfer terminal located only 1 km from the port.

18.10.4 Road and Rail Transport from within Argentina to Taca Taca

The vast majority of items requiring transport to Taca Taca would either originate at the Zarate Port
or from the greater Buenos Aires metropolitan area.

While rail transport is technically possible, TUSA has concluded that it is not the best alternative.
Rail transport in Argentina has historically been unreliable and expensive.

For discussion purposes, road transport is divided into two segments: Zarate Port to Salta and Salta
to Taca Taca.

Zarate Port to Salta

Transport times are expected to range from three days for conventional trailers (less than 5
m wide and 5 m high), to 5-6 days for oversized loads requiring detours and temporary
raising of utility lines, to 7-8 days for overweight loads (greater than 100 tons) requiring
detours around weight restricted bridges.
Salta to Taca Taca
Two options exist for transport between Salta and Taca Taca, one for conventional loads and
one for oversize or overweight loads.

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 Conventional cargo may travel from Salta to San Antonio de los Cobres via Provincial Route
51, on to Cauchari via Route 51, and then to Taca Taca via Route 27.
Oversize and overweight loads will need to utilize Routes 8, 52, and 40 to reach San Antonio
de los Cobres. The remainder of the trip would be the same as for conventional cargo.
One segment of the existing route between Cauchari and Tolar Grande, known locally as “the
Seven Curves”, will be preserved in its current state for cultural/social reasons. A bypass
around this area, planned for construction during Year -4 in the Project schedule, has been
included in the Project capital cost estimate.

18.10.5 Chilean Port Facilities

Agility Logistics completed an evaluation of the three ports in the Antofagasta area, the major points
of which are summarized below:

Antofagasta Terminal International (ATI)

ATI is a privately operated terminal with four berths ranging from 130-220 m in length and
drafts of 9.1 to 11.6 m. Surface area totals 8.5 ha.
Cargo can be offloaded using ATI’s two 100 MT cranes, or vessels’ onboard cranes.
ATI receives break bulk and containerized cargo via regularly scheduled port calls by
numerous shipping companies, both coastal and transoceanic. ATI also serves a large
segment of the northern Chile mining industry by storing, handling, and loading mineral
products, such as copper concentrates.
The drawback to the ATI port is its location in the center of Antofagasta. Agility recommends
ATI for container freight only, even then with an area outside the city for staging ongoing
transport to Taca Taca to avoid demurrage charges, and to store empty containers on return.
Oversize and/or overweight freight would present difficulties exiting the port and transiting the
city due to narrow streets, overhead utilities, and traffic. Rail transport is not available.
Empresa Portuaria de Antofagasta (EPA)
EPA is a public wharf with three berths ranging from 180-210 m in length and drafts from
2
9.14 to 10.0 m. Surface area is only about 4,000 m .
EPA has no cranes for heavy lift or break bulk project cargo, instead relying on vessels’
cranes, if available.
Due to EPA’s location (same as ATI), it has the same issues mentioned above regarding
congestion, difficult egress from the city, etc.
Angamos Port – Mejillones
Mejillones is located 65 km north of Antofagasta and is accessed by excellent paved roads,
as well as rail. For road transport between Mejillones and the Project, it is not necessary to
traverse the city of Antofagasta. The berths are sheltered from the effects of bad weather by
its natural bay and a 192 m long breakwater which has been constructed parallel to the
shore.
Mejillones has four berths, ranging in length from 180-225 m with drafts from 10.7 to 12.5 m.
Offshore depths facilitate access to the berths without undue maneuvering by vessels.
Mejillones receives regularly scheduled port calls by liners providing break bulk, container,
and bulk carrier services.

156
 Unlike both ATI and EPA, Mejillones has more than adequate areas for temporary storage of
offloaded freight, including enclosed warehouses and empty containers. Additionally,
Mejillones has substantial area for expansion to facilitate storage of bulk concentrates.

18.10.6 Transport Chilean Port to Taca Taca

Depending on availability within Argentina and pricing, certain bulk consumables for operation may
be procured in Chile or purchased elsewhere and delivered to a Chilean port. All, or a portion, of
these consumables may be transported by rail by adding tank or flatbed rail cars to the empty
concentrate trains returning to the Project. The rail option will be discussed in Section 18.11.4.

Permanent plant equipment and materials for development and construction of mining and mineral
processing facilities at the Project will likely be purchased worldwide. For equipment or materials
originating in Asia or the west coast of the United States, offloading from ships will likely occur at
Mejillones, north of Antofagasta.

TUSA identified two potential truck transport routes, depending on Chilean customs requirements,
although subsequent discussions with Chilean officials have indicated that customs clearance at the
Project may be possible. Access from the Project to Paso Sico is shown below in Figure 18-6 and
the prospective routes, shown below in Figure 18-7 and Figure 18-8 are:

Antofagasta - Paso Sico (via Lacos, Socaine, and Peine) – Taca Taca (via Route 51 and
Route 27)
Antofagasta – Calama – San Pedro de Atacama – Paso Sico – Taca Taca (via Route 51 and
Route 27)

The first route described above is approximately 200 km shorter than the second route. Travel by
both of these routes would require approximately two days.

Figure 18-6: Exit from the Project along Ruta 27 and Access to Ruta 51 to Paso Sico (TUSA, 2011)

157
 Figure 18-7: Travel from Paso Sico to Antofagasta through Lacos, Socaine, and Peine (TUSA, 2011)

Figure 18-8: Travel from Paso Sico, to San Pedro de Atacama and Calama, arriving to Antofagasta (TUSA, 2011)

18.10.7 Transport of Workers

The Project is located approximately 230 km west of the city of Salta, and approximately 400 km by
road. During both construction and operation, workers will be transported between Salta and the
Project by road at specified intervals for their R&R. The travel time is approximately 8 hours,
depending on vehicle type, stops, and road conditions.

158
 If commercial rail operations between the Project and Salta are re-established by a rail operating
company in the future, employee transport could be by rail.

During the construction period, construction contractors will bear the responsibility for transporting
their workers between the Project and Salta. For the Project’s permanent operations workforce,
light vehicles, including buses, vans, and pickups with trained drivers, have been included in
estimated capital and operating costs for employee transport. In both cases, workers whose home
bases are not in Salta have been assumed to travel beyond Salta at their own expense.

18.11 Concentrate Storage, Handling, and Transport

18.11.1 Introduction

Throughout the 28-year life of the mine, the Project is estimated to produce approximately 21.6 dmt
of copper concentrates and approximately 228,000 dmt of molybdenum concentrates. Annual
totals of copper concentrate are estimated to range from 511,782 dmt in the first year, to peaks of
1,025,680 dmt and 1,094,594 dmt in Years 2 and 10, respectively.

Molybdenum concentrates are estimated to total 4,318 dmt in the first year, and then range
between 13,484 dmt and 3,793 dmt in Years 10 and 16, respectively.

The PEA contemplates bulk copper concentrates will be transported by rail to the Port of Mejillones,
located approximately 65 km north of Antofagasta, Chile. Figure 18-9 shows the route from Taca
Taca to the Chilean border at Socompa, and on to the Port of Mejillones.

This PEA is preliminary in nature and includes inferred mineral resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is no certainty that the results of this PEA will
be realized. Mineral resources that are not mineral reserves have no demonstrated economic
viability.

159
 Figure 18-9: Map of Railway Routes between Taca Taca and Mejillones (TFP, 2013)

Copper concentrates are envisioned to be stored while awaiting regularly scheduled vessels for
ongoing shipment to smelters in Asia.

Molybdenum concentrates are anticipated to be packaged in one tonne bulk bags, loaded into sea
containers, and also transported by rail to the Port of Mejillones. At Mejillones, the molybdenum
concentrates may be transferred to trucks for the final leg of transport to a purchaser in Chile.

The infrastructure associated with onsite transportation, onsite storage and loading, train operation
and unloading, storage and ship loading at Mejillones is described below.

18.11.2 Onsite Transportation

After thickening and filtering to achieve a moisture content of approximately 9% (w/w), copper
concentrate is planned to be temporarily stockpiled in the copper concentrate handling building,
located adjacent to the concentrator. An FEL and five 20 t trucks are planned for transporting the
concentrate to the railcar load-out facility, located approximately 2.5 km to the northeast. Refer to
Figure 18-10 for the relative locations of the facilities.

160
18.11.3 Onsite Storage and Loading

The PEA contemplates that copper concentrate will be stockpiled in a concrete-walled enclosed
storage area. An FEL is envisioned to maintain the stockpile, as well as transfer the concentrate to
a feed hopper on the tail end of a transfer conveyor. The transfer conveyor is planned to convey
the concentrate to an elevated load-out bin which straddles the rail spur. The load-out bin is
envisioned to have three hydraulically operated clamshell-type gates through which the concentrate
would flow into the railcar being loaded. The gates, operated by an operator manning a control
panel in an enclosed control room located adjacent to the load-out bin, are envisioned to be cycled
in a sequence to equally distribute the concentrate in the railcar. Railcar weight during the loading
process is planned to be monitored by track mounted load cells, allowing the operator to maximize
loading without exceeding rail system limits. Indexing of empty cars into loading position would
occur automatically, allowing a 28-car train to be loaded with 48.5 wmt of copper concentrate per
car in a total elapsed time of 1 h and 10 min.

Additional time may be required for inspection of railcars (allowed at 2 h and 20 min) and train
formation (estimated at 1 h). Up to four hours have been allowed for minor repairs, as required.

18.11.4 Evaluation of Existing Rail Infrastructure and Rolling Stock

TFP Construcciones SRL (TFP) completed a rail study to:

Evaluate the condition of the existing rail line between Salta and Socompa, located on the
border with Chile, a distance of 571.1 km.
Evaluate the extent and condition of Belgrano Cargas S.A.’s (the current rail operator) rolling
stock.
Estimate the cost to rehabilitate the rail system, particularly from the Project to Socompa, to a
condition which would support the frequency and weight of the anticipated trains to meet the
Project’s needs.
Assess the potential of rehabilitating the abandoned maintenance facilities located in Tolar
Grande for the Project’s use, or, alternatively, estimate the cost to construct new rolling stock
maintenance facilities at the Project.
Evaluate the assessment of the Chilean rail segment (394 km of the total 529 km distance
from the Project to Mejillones), by the Chilean rail company, Ferrocarril de Antofagasta
(FCAB), and incorporate appropriate information into TFP’s overall evaluation, cost
estimates, and recommendations.
Identify potential commercial options for rail transport between the Project and Mejillones,
and recommend the most favorable option.

Major conclusions of TFP’s report are briefly summarized below:

Substantial rehabilitation of the existing rail line is required for the service planned. Scope
was developed and costs estimated for specific sections of the track between the Project and
Socompa.
Belgrano Cargas’ existing rolling stock is old, in poor condition, and is not well-suited for the
Project application.

162
 While the Tolar Grande abandoned maintenance and repair facilities could be rehabilitated,
the result would not be as functional as a new facility at the Project. Obtaining the right to
use the facility from Belgrano Cargas also may not be possible.
Currently, it does not appear that Belgrano Cargas will be able to provide contracted third
party rail services to meet the Project’s currently anticipated needs.
Three independent rail companies own portions of the rail lines between the Project and
Mejillones: Belgrano Cargas – the Argentinian section; Ferronor – the initial segment within
Chile; and FCAB – the final segment arriving at Mejillones. Rather than operation by three
independent rail companies and the coordination difficulties and inefficiencies that would
certainly result, TFP recommends a single operator for the entire trip.
There is no existing, or even potential, independent third party operator capable of providing
the complete freight service needs.
Primarily for the preceding reasons, but also for better control of product shipment and cost
effectiveness, TFP recommends purchase of new rolling stock (engines and railcars) by
Lumina Copper and operation of its own trains between the Project and Mejillones.

18.11.5 Train Components, System Description and Operation Equipment (Rolling Stock)

The initial capital and sustaining capital cost estimates discussed in Item 21.0 of this PEA, include
purchase of the following new rolling stock in the Project years indicated:

Item Number Units Project Year

Initial
8 -1
Locomotives

Additional
7 1
Locomotives

Initial Railcars 139 -1

Additional
139 1
Railcars

18.11.6 Infrastructure

New or rehabilitated infrastructure included in Project initial capital and sustaining capital estimates
includes the following items:

Construction of a new rail spur, sidings (3,465 m of rail in total) and associated switches to
connect the Project concentrate load-out facility to the existing main line in project Year -1.
Construction of a new maintenance and repair facility for locomotives and railcars located
adjacent to the concentrate load-out facility and rail spur. This facility would be constructed
in project Year -1.
Rehabilitation of 40.5 km of track between the Project and Socompa which have been
identified as requiring upgrading to meet the frequency and loading of Taca Taca rail traffic.
This work would be completed by the Project, in equal increments over five years (Project
Year -1 through Year 4). The cost in Year -1 has been included in initial capital, with the
remaining four years included in sustaining capital.

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18.11.7 System Description and Operation

Each train is planned to consist of 28 wagons (railcars), each loaded with 48.5 wmt of copper
concentrate. Each train would therefore transport 1,358 wmt. Wagons are covered to meet
environmental requirements, to avoid loss of concentrates, and to avoid introduction of moisture
during winter months in the mountain passes.

Locomotives could be added or removed from trains at different points along the route, to either the
head or tail of the train, to provide additional power or braking capacity, respectively. Of the 15 total
locomotives, 14 are planned to be active at all times, with one spare unit.

18.11.8 Operating Schedule

Highlights of the system operation are:

Trains are scheduled to depart the Project approximately every 8 h throughout the year,
including Sundays and holidays.
15 d/y have been allowed for rail service interruption due to severe weather (blizzards in the
mountains) or landslides onto the tracks.
During peak concentrate production in operating Years 2 and 10, 975 trains per year would
run.
As currently scheduled, each train would take 20 h to reach Mejillones and an additional 20 h
to return. With unloading and an allowance for miscellaneous repairs, if required, a train will
complete one cycle approximately every three days.

Rolling stock, track, and spur maintenance, are included in annual operating costs, as detailed in
Section 21.15 of this PEA.

18.11.9 Unloading, Storage, and Ship Loading

Lumina Copper management and MTB staff toured the Mejillones port facilities in August 2012 and
met with port management personnel. During the visit, Mejillones management informed the
visitors that Mejillones has a completed design and plans to complete additional infrastructure,
which could be used to unload railcars, temporarily warehouse, and load vessels with Project
concentrates. This information was reconfirmed by Mejillones when recontacted by H&H in
February 2013 to request port fees. Port fees subsequently provided were incorporated in the cash
flow model described in Section 22.0 of this PEA.

Reportedly, similar railcar unloading operations have demonstrated unloading rates of

approximately 500 tph.

Concentrate would be conveyed to a 50,000-70,000 wmt enclosed stockpile for temporary storage
pending arrival of scheduled vessels. For vessel loading, concentrate would be transferred to a
feed hopper for an overland conveyor, discharging to a telescoping (and perhaps slewing)
shiploader. Depending on the shiploader’s characteristics, the vessel may or may not have to be
repositioned for discharging to different holds. Loading rates will allow loading vessels in less than
two to three days to avoid additional charges by the shipping line.

164
18.12 Ancillary Site Buildings and Facilities

Various ancillary facilities would be located near the concentrator. The buildings and facilities
include the following:

Single story administration building

Assay lab and a small metallurgical lab facility
Changehouse for concentrator personnel
First aid or clinic building
Gatehouse at the entrance to site
Two-story concentrator warehouse and an attached workshop building
Potable water system
Sewage treatment plant

Mine ancillary facilities would be located near the primary crusher approximately 1 km west of the
concentrator. These facilities include:

Truck shop with eight truck bays and six bays for light vehicles. Prior to Year 8, an additional
4 truck bays are planned to be added. The facility includes two overhead cranes and a lube
storage facility.
Two-story warehouse with offices
Tire shop
Maintenance and welding shop
Truck wash bay
Fuel storage depot
Effluent treatment facility
Mine explosives storage facility located approximately 1 km to the west of the ROM storage
area.
Commercially available packaged sewage treatment plants will need to be installed at the main
concentrator facilities, the mine support facilities, and the camp. Effluent will need to meet
Argentinian regulations for discharge, or undergo additional treatment until it does or will be
recycled for reuse. Technical details will be developed during the next phase of Project
development.

18.13 Permanent Camp

18.13.1 Introduction

Due to the remote location of the Project and the absence of any nearby infrastructure for providing
accommodations and meals for the permanent workforce, plans call for construction of a permanent
camp. The specific location for the camp has not been determined, but as a basis for the PEA, it
has been assumed to be located within 10 to 12 km of the Project, easily accessible from the main
access road.

165
 A leading Argentinian camp and catering contractor supplied separate proposals for designing,
manufacturing, transporting, and erecting a modular camp; and for providing catering, camp
maintenance, and cleaning services.
18.13.2 Basis for Sizing of Facilities

The facility has been sized for 752 inhabitants. The total permanent Taca Taca workforce is
estimated to be 1,100 personnel, of which 21 would be based in Salta. One hundred and nine
management, technical, and administrative personnel are assumed to work dayshift and return to
their home base one week per four week period. These individuals’ accommodation units would be
assigned to them, i.e., they will return to the same unit after their R&R.

Technical support staff, operators, mechanics, skilled craft labor, and laborers are expected to form
four crews, with two crews onsite at any time working 12-hour shifts and the remaining two crews
on rotation. The specific rotation period has not been established at this stage of the study, but is
expected to be in the range of two to four weeks on and two to four weeks off. The exact rotation
cycle is anticipated to be determined at a later stage of Project development, considering worker
safety, travel distances/time to return workers to their home bases, and conditions necessary to
attract and maintain a skilled and motivated workforce.

Two crews of shift workers, or 526 to 534 workers, are envisioned to be onsite and resident in the
camp at any one time.
The remainder of the available beds (approximately 59) has been included for visitors, such as
Lumina Copper management, Salta-based employees, vendors, subcontractors, delivery truck
drivers, train crews, etc.
18.13.3 Description of Facilities
A fresh water supply and power supply are planned to be provided to the facility. Otherwise, the
camp, consisting of the following components, would be self-sufficient:

Refrigerated, frozen, perishable, and non-perishable food storage facilities

Fully equipped kitchen for food preparation
Common dining facilities, including furniture and supplies, to seat the scheduled workforce in
two sittings
Recreational facilities
Laundry facilities
Potable water treatment plant, including storage
Waste water treatment plant
Sewage treatment
Communications system
Four levels of fully furnished and supplied accommodation units, as listed below, to be
assigned based on job, work hours, and seniority.
Table 18-4: Camp Arrangement

Type Unit Beds per Room Bathroom Arrangements Number of Beds

Private 1 Private 48
Semi-Private 2 Share by 2 rooms 128
Dormitory 2 32 rooms/Ablution Block 576

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19 Market Studies and Contracts

19.1 Introduction

H&H completed a marketing study for the Project. Using contacts with smelters and recent data
from other projects, H&H analyzed the following marketing aspects in its report: supply and demand
for both copper and molybdenum concentrates, including anticipated production from new projects
in the construction or planning stages; smelter capacities, utilization, and the impacts on TCs, RCs,
and payfors; ocean freight costs; and future metals pricing.

These marketing aspects are summarized below.

19.2 Supply and Demand

While supply and demand dictates pricing for many items, it is only one consideration for metals
such as copper and molybdenum. Speculation by investors complicates market analysis. Less
than transparent data by China regarding production and inventories further complicates analysis of
supply and demand, as does the impact of worldwide economic conditions.

The trend to more affluent populations on the whole, as well as sustained population growth in the
populous countries of China and India, support steady growth in demand for copper, in particular,
for housing and other infrastructure.

In the short term, existing inventories are expected to be drawn down as new projects and
expansions of existing operations are planned for completion. Both of these factors are expected to
place downward pressure on copper pricing until later in the decade. At that point, the steadily
increasing demand mentioned above is expected to overtake and surpass the increases in supply.

Uncertainty in the supply and demand scenario summarized above is introduced by: new or
expanded production facilities coming online later than originally planned; cancellation of new or
expanded production facilities due to market, general economic, or company financial conditions; or
management of the market sector by the government in a large consumer/producer such as China.

19.3 Smelter Capacities and Utilization

For the most part, smelter capacity is fixed. The relationship between capacity and utilization
dictates a smelter’s profitability, hence its setting of TCs, RCs, and payfors. There is significant
variability of utilization among smelters across the industry, hence considerable variability of TCs,
RCs, and payfors. In order to obtain more concentrates, some smelters are agreeing to lower
charges.

In the long term, TCs and RCs are expected to increase for smelters to better cover their costs.
However, it is worth noting that Lumina Copper may expect to receive premium terms for its clean
concentrate. According to H&H, a number of smelters need clean concentrates to blend with their
substantial supplies and inventories of dirty concentrates.

H&H’s forecasts for TCs, RCs, and payfors have been incorporated in the Project cash flow.

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19.4 Ocean Freight

During the minerals boom period, shipping companies aggressively built vessels to transport the
mineral products from producers to markets. Currently, the availability of vessels significantly
exceeds the need. Many vessels remain idle with financial building costs exceeding their current
value.

Opportunities for reasonable freight costs are available, particularly with negotiation of long-term
freight contracts. H&H’s forecast for freight cost of $53 wmt for shipment to Asia has been
incorporated in the Project cash flow.

19.5 Future Metals Pricing

After much analysis and discussion, H&H forecast the following metal prices for the Project as
shown below in Table 19-1.

Table 19-1: Metal Price Forecast

Product Price Range/lb Recommend Price/lb

Copper $2.90 - $4.10 $3.10

Molybdenum $11.00 - $15.00 $13.00

Gold $1,350 - $1,900 $1,650

Silver $26.00 - $38.00 $35.00

In addition to the H&H forecast, consideration was given to a $2.89/lb consensus long-term price
forecast made by 21 financial institutions (Thomson One Analytics, March 2013).

The Qualified Person of this section has reviewed the above pricing forecast studies and analyses
and is satisfied that the results of these studies and analyses support the pricing forecast used in
the economic analysis of the PEA. The PEA economic analysis utilizes the following more
conservative pricing forecast (Table 19-2), which has been applied throughout the projected 28 year
mine life of the Project.

Table 19-2: Project Metals Pricing

Product Price

Copper $2.75/lb

Molybdenum $12.00/lb

Gold $1,200/Toz

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