Ingenieria Basica de Minera Panama

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Mina de Cobre PanamaBASIC ENGINEERING

SUMMARY REPORT

May 2012


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Project Cobre Panama Status Shovel-ready, ESIA approved December 2011

Project location Panama, Coln province Products Cu-Au and Mo concentrates

Sovereign rating Investment grade Features Botija, Colina, Valle Grande open pits

Concession area 13,000 ha Gyratory crushing, grinding, flotation

Life of mine 31 years Owner port site, Panamax capable

Start of Production 1Q16 Owner 300 MW coal-fired power

Capital Cost $US6.18b Concentrate pipeline

TIER I CHARACTERISTICS AVG ANNUAL PROD. Y2-16 LOM TOTAL LOM

Average annual production (Y2-16) 298 ktonnes Cu Cu ktonnes 298 266 8,237

Average annual production (LOM) 266 ktonnes Cu Au koz 106 87 2,705

C1 cash costs (Y2-16) $US0.72/lb Cu Ag koz 1,572 1,545 47,899

C1 cash costs (LOM) $US0.82/lb Cu Mo ktonnes 3.1 2.9 90.2

Strip ratio 0.58

Design mill throughput (Y1-9) 160 ktpd

Design mill throughput (Y10-31) 240 ktpd

RESERVE & RESOURCE ktonnes Cu (%) Au (g/t) Ag (g/t) Cu ktonnes Au koz Ag koz Mo ktonnes

Proven 258,000 0.57 0.14 1.6 1,478 1,126 13,020 25

Probable 2,061,000 0.38 0.06 1.4 7,781 4,041 91,008 145Total 2,319,000 0.40 0.07 1.4 9,258 5,167 104,028 169

Measured 262,000 0.56 0.13 1.5 1,476 1,118 12,979 24

Indicated 3,905,000 0.34 0.06 1.2 13,237 7,845 155,392 214

Total 4,167,000 0.35 0.07 1.3 14,715 8,963 168,454 238

Inferred 3,749,000 0.23 0.04 1.0 8,660 4,805 120,534 156

(resources inclusive of reserves)

CAPITAL COSTS $USm % AFTER TAX VALUATION

Mining 760 12 LT Consensus FW Curve 3Y Trl. Avg.

Process plant 1,184 19 Financed Case 1 14.3% 18.5% 19.2%Site and services 550 9 Financed Case 2 16.7% 21.9% 22.5%

Port site 543 9 Financed Case 1 $3.2b $4.8b $6.0b

Power plant 646 10 Financed Case 2 $3.5b $5.0b $6.3b

Total Direct 3,682 59 Financed Case 1 $2.4b $3.9b $4.9b

Construction indirects 844 14 Financed Case 2 $2.8b $4.2b $5.2b

Total field costs 4,526 73 Financed Case 1 $1.8b $3.2b $4.0b

EPCM 355 6 Financed Case 2 $2.2b $3.6b $4.4b

Owner Costs 885 14

Contingency 415 7

Total project cost 6,181 100

Sustaining capex 2,916

POTENTIAL FOR UPSIDE

Expand throughput beyond max planned 240ktpd Financed Case 1: $US1.6b in debt drawn over 3.5 yearsAccelerate increase to 240ktpd

Conversion of substantial resources beyond reserves Financed Case 2: $US1.6b in debt drawn over 3.5 years

$US1.2b upfront payment for 86% of MPSA precious metal

and on-going paid $400/oz Au and $6/oz Ag for PM stream

PROJECT ADVANTAGES

Low strip-ratio (one fifth of industry O/P Cu mine avg 2011 )

Ammenable to large scale, efficient mining LT Consensus: Flat $2.75/lb Cu, $15/lb Mo, $1,250/oz Au, $20/oz Ag

Powered by owner-built, 300mW coal-fired plant FW Curve: Forward curve dropping to LT Consensus

Proximity to tidewater, permitting inexpensive con transport (2016 start at $3.66/lb Cu, $1,785/oz gold and $31/oz Ag)

Clean concentrate 3Y Trail. Avg: Flat $3.42/lb Cu, $14.68/lb Mo, $1,316/oz Au, $24.90/oz Ag

Extensively reviewed by 3rd parties (capex and opex)

COBRE PANAMA FACT SHEET - PG 1

NPV10%

NPV9%

NPV8%

PROJECT DESCRIPTION

PROJECT ECONOMICS

IRR

Moly (%)

0.010

0.0070.007

0.009

0.005

0.006

0.004


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SCHEDULE UNIT COSTS ($US/t ORE MILLED) - LT CONSENSUS

Notice to proceed 2Q12 Labour Material Power Other Total LOM Total Y2-16

Mine/process construction start 2Q12 Mining 0.27 1.87 0.05 0.24 2.44 2.68

Process earthworks complete 4Q13 Processing 0.24 2.13 0.91 0.01 3.29 3.28

Plant to port road complete 4Q13 G&A 0.15 0.01 0.04 0.69 0.88 0.97

Port complete 2Q14 Site Services 0.11 0.07 0.01 0.09 0.28 0.3

Power line complete 3Q14 Total 0.77 4.08 1.01 1.03 6.88 7.23

Tailings dam complete 3Q15

Ore hits grinding lines 4Q15 UNIT COSTS ($US/t ORE MILLED)Power plant complete 4Q15 LT Consensus FW Curve 3YR Trl. Avg.

Start of production 4Q15 Mining 2.44 2.46 2.55

Concentrate shipment 1Q16 Processing 3.29 3.36 3.60

Commercial production 2Q16 G&A 0.88 0.88 0.89

RESOURCE ADDITIONS SINCE 2010 Site Services 0.28 0.28 0.28

(contained metal)

M&I FEED Increase Current

Cu (m lb) 25,800 6,641 32,441 Power($US/kWh) Y1-91,2 0.027 0.033 0.034

Au (k oz) 6,533 2,430 8,963 Power($US/kWh) Y10-312 0.05 0.05 0.055

Ag (k oz) 133,300 35,154 168,454 C1 cash cost ($US/lb) Y2-16 - Fin Case 1 0.72 0.74 0.77

Mo (m lb) 474 51 525 C1 cash cost ($US/lb) LOM - Fin Case 1 0.82 0.83 0.87 1-Power costs adjusted to reflect sales into grid 2-Power costs are quoted before D&A expense covering the $646m capital

INF FEED Increase Current NSR BY METAL

Cu (m lb) 16,600 2,492 19,092 Avg. Annual Avg. AnnualAu (k oz) 4,003 802 4,805 Y2-16 ($USm) LOM ($USm)

Ag (k oz) 103,100 17,434 120,534 Cu 1,557 1,389

Mo (m lb) 236 18 344 Au 121 100(resources inclusive of reserves) Ag 28 27

RESOURCE NOT IN MINE PLAN Cu ktonnes Cu mlbs Mo 93 86

Measured and Indicated 5,457 12,031 Total 1,798 1,602

Inferred 8,660 19,092

TAXATION VARIANCE FROM FEED CAPEX

Corporate tax rate 25% Capital costs $USm

Alternative minimum tax rate 1.17% FEED study estimate 4,320

Base metal royalty 5% Power plant 646

Precious metal royalty 4% Increased process plant estimate 403

Increased mining estimate 312

AVG LOM RECOVERIES Increased port site estimate 285

Copper 89.0% Other 215

Molybdnemum 53.3% Basic Engineering Estimate 6,181

Gold 52.4% Drivers:

Silver 46.1% Process Changed scope to achieve higher productivity

2 year tailings starter dam (vs. 1 prev)

CONCENTRATE ASSUMPTIONS Higher certainty of estimates

Copper TC $70/dmt Mining Fuel costs of $1.06/litre in capex (vs. $0.56 prev)

Copper RC $0.07/lb Higher certainty of earthwork estimates

Gold RC $5/oz Pre-strip costs moved from indirect to direct

Silver RC $0.50/oz BENEFITS TO PANAMAMolybdenum roast and freight $1.49/lb $110m regional development plan to maximize sustainable socio-economic benefits

Freight $41/t wet con Increased local access to healthcare, education, sanitation and clean drinking water

Copper Con Moisture 8% Generates $US20b purchases in national economy and $US3.6b in royalties and taxes

Losses and Insurance charges 0.25% Prioritizes local hiring and job-training, total salaries $US2.2b (locals and expats):

Peak total manpower during construction of 10,000

Average total manpower during operations of 2,100

PROJECT DETAIL

OTHER USEFUL INFORMATION

COBRE PANAMA FACT SHEET - PG 2

Total 6.88 6.98 7.32

Total LOM

COBRE PANAMA


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Minera Panama, S.A.

Mina de Cobre Panama Project

BASIC ENGINEERING SUMMARY REPORT

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May 2012

Cautionary statement regarding forward-looking statements

This Basic Engineering Summary Report contains forward-looking statements with respect to the CobrePanama development project (Cobre Panama or the Project), including, without limitation, information

relating to future financial or operating performance, plans, outlook, financing plans, growth in cash flowand operating margin; projections, targets and expectations as to reserves, resources, results ofexploration (including targets) and related expenses, mine development mine production costs, drillingactivity, sampling and other data; receipt of construction permits; estimated grade levels; future recoverylevels; future production levels, capital costs, costs savings, cash and total costs of operations, productionof copper and other minerals; expenditures for environmental matters; projected mine life; reclamation andother post-closure obligations and estimated future expenditures for those matters; future copper, andother mineral prices (including the long-term estimated prices used in calculating mineral reserves).

All statements in this Basic Engineering Summary Report that address events or developments we expectto occur, are forward-looking statements. Forward-looking statements are statements that are nothistorical facts and are generally, but not always, identified by the words expects, plans, anticipates,believes, intends, estimates, projects, potential, target, plan, scheduled, forecast, budgetand similar expressions or their negative connotations, or that events or conditions will, would, may,

could, should or might occur. All such forward-looking statements are based on our opinions andestimates as of the date such statements are made. Forward-looking statements are necessarily basedon estimates and assumptions that are inherently subject to known and unknown risks, uncertainties andother factors, many of which are beyond our ability to control, that may cause the Projects actual results,level of activity, performance or achievements to be materially different from those expressed or implied bysuch forward-looking statements. Such factors include, without limitation:

price levels and volatility in the spot and forward markets for metals and;

access to the necessary capital to fund the development and construction of the Project;

the ability to develop and construct the Project in accordance with the currently projected budget andtimeline;

the uncertainties inherent in current and future legal challenges we or the Project are or may becomea party or subject to;

changes in national and local government legislation or regulations;

the lack of certainty with respect to foreign legal systems, which may not be immune from theinfluence of political pressure, corruption or other factors that are inconsistent with the rule of law;

the speculative nature of mineral exploration and development, including the risks of obtaining andmaintaining the validity and enforceability of the necessary licenses and permits and complying withpermitting requirements;

inherent hazards, risks and uncertainties associated with mining exploration, development andoperations, including accidents;

diminishing quantities or grades of reserves;

discrepancies between actual and estimated production, between actual and estimated costs,between actual and estimated reserves and resources and between actual and estimatedmetallurgical recoveries;

geotechnical issues;

the possibility of temporary or permanent shutdown;

the actual costs of reclamation;


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increased energy prices;

dependency of cash flow and earnings growth upon the development of our current reserve base andconverting our resource base to reserves and production;

actual capital costs, operating costs and expenditures, production schedules and economic returnsfrom the Project;

fluctuations in the international currency markets and the rates of exchange between currencies;

volatility of global financial conditions;

taxation, including with respect to tax laws and regulations that are unclear or subject to ongoingvarying interpretations;

significant capital requirements and additional funding requirements;

risks associated with joint ventures;

dependence on transportation, electric and water facilities and infrastructure;

fluctuation in the cost of significant inputs including fuel; delays or disruptions in supplies required for exploration, development, mining or processing,

activities;

disruptions arising from non-performance of off-take and other counterparties;

changes in environmental laws and regulations;

potential losses, liabilities and damages related to the Projects business which are uninsured oruninsurable;

regulation of greenhouse gas emissions and climate change issues;

labour disputes;

defective title to mineral claims or property or contests over claims to mineral properties; competition; and

the loss of key employees and the ability to attract and retain qualified personnel.

In addition, there are risks and hazards associated with the business of mineral exploration, developmentand mining, including environmental hazards, industrial accidents, unusual or unexpected formations,pressures, (and the risk of inadequate insurance or inability to obtain insurance to cover these risks) aswell as other risks, uncertainties and other factors.

Forward-looking statements are not guarantees of future performance, and actual results and futureevents could materially differ from those anticipated in such statements. All of the forward-lookingstatements contained in this Basic Engineering Summary Report are qualified by these cautionary

statements.

Although we have attempted to identify important factors that could cause actual results to differ materiallyfrom those contained in the forward-looking statements, there may be other factors that cause actualresults to differ materially from those which are anticipated, estimated or intended. There can be noassurance that such statements will prove to be accurate, as actual results and future events could differmaterially from those anticipated in such statements. You should not place undue reliance onforward-looking statements. We expressly disclaim any intention or obligation to update or revise anyforward-looking statements whether as a result of new information, events or otherwise.


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Market, ranking, industry data and forecasts

This Basic Engineering Summary Report includes industry data and forecasts that we obtained fromindustry publications and surveys, public filings and internal company sources. Industry publications,

surveys and forecasts generally state that the information contained therein has been obtained fromsources believed to be reliable, but there can be no assurance as to the accuracy or completeness ofincluded information. We have not independently verified any of the data from third-party sources, norhave we ascertained the underlying economic assumptions relied upon therein. We cannot guarantee theaccuracy or completeness of such information contained in this Basic Engineering Summary Report.

Cautionary notice regarding reserve and resource estimates

The disclosure in this Basic Engineering Summary Report uses mineral reserve and resourceclassification terms that comply with reporting standards in Canada, and certain mineral resourceestimates are made in accordance with Canadian National Instrument 43-101Standards of Disclosurefor Mineral Projects (NI 43-101). NI 43-101 is a rule developed by the Canadian SecuritiesAdministrators (the CSA) that establishes standards for all public disclosure an issuer makes of scientific

and technical information concerning mineral projects. Unless otherwise indicated, all reserve andresource estimates contained in this Basic Engineering Summary Report have been prepared inaccordance with NI 43-101. These standards differ significantly from the mineral reserve disclosurerequirements of the Securities and Exchange Commission (SEC) set out in Industry Guide 7.Consequently, reserve and resource information contained in this Basic Engineering Summary Report isnot comparable to similar information that would generally be disclosed by U.S. companies in accordancewith the rules of the SEC.

In particular, the SECs Industry Guide 7 applies different standards in order to classify mineralization as areserve. As a result, the definitions of proven and probable reserves used in NI 43-101 differ from thedefinitions in the SECs Industry Guide 7. Under SEC standards, mineralization may not be classified as areserve unless the determination has been made that the mineralization could be economically andlegally produced or extracted at the time the reserve determination is made. Among other things, all

necessary permits would be required to be in hand or issuance imminent in order to classify mineralizedmaterial as reserves under the SEC standards. Accordingly, mineral reserve estimates contained in thisBasic Engineering Summary Report may not qualify as reserves under SEC standards.

In addition, this Basic Engineering Summary Report uses the terms mineral resources, measuredmineral resources, indicated mineral resources and inferred mineral resources to comply with thereporting standards in Canada. The SECs Industry Guide 7 does not recognize mineral resources andU.S. companies are generally not permitted to disclose resources in documents they file with the SEC.Readers are specifically cautioned not to assume that any part or all of the mineral deposits in thesecategories will ever be converted into SEC defined mineral reserves. Further, inferred mineral resourceshave a great amount of uncertainty as to their existence and as to whether they can be mined legally oreconomically. Therefore, readers are also cautioned not to assume that all or any part of an inferredresource exists. In accordance with Canadian rules, estimates of inferred mineral resources cannot formthe basis of feasibility or pre-feasibility studies. It cannot be assumed that all or any part of mineralresources, measured mineral resources, indicated mineral resources or inferred mineral resourceswill ever be upgraded to a higher category. Readers are cautioned not to assume that any part of thereported mineral resources, measured mineral resources, indicated mineral resources or inferredmineral resources in this Basic Engineering Summary Report has demonstrated economic viability or iseconomically or legally mineable. In addition, the definitions of proven mineral reserves and probablemineral reserves under reporting standards in Canada differ in certain respects from the standards of theSEC. For the above reasons, information contained in this Basic Engineering Summary Report thatdescribes the Projects mineral reserve and resource estimates is not comparable to similar informationmade public by U.S. companies subject to the reporting and disclosure requirements of the SEC.


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The Projects proven and probable reserve estimates contained throughout this Basic EngineeringSummary Report are as of March 5, 2012, and are estimated based on information compiled by or underthe supervision of a qualified person as defined under NI 43 -101.

Important NoticeThis report shall not constitute an offer to sell or a solicitation of an offer to purchase any securities ofInmet Mining Corporation in the United States or any other jurisdiction. Any securities of Inmet MiningCorporation have not and will not be registered under the U.S Securities Act of 1933, as amended (theSecurities Act), or the securities laws of any other jurisdiction and may only be offered and sold in theUnited States pursuant to an exemption from the registration requirements of the Securities Act andapplicable state securities laws

.


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Contents

1 INTRODUCTION ......................................................................................................... 15

1.1 A Tier 1 Copper Asset ........................................................................................ 16

1.2 Concession, Permits and Socio-Environmental Commitments ...................... 19

1.3 Capital Costs ...................................................................................................... 19

1.4 Operating Costs .................................................................................................. 20

1.5 Project Economics ............................................................................................. 21

1.6 Third Party Reviews ........................................................................................... 22

1.7 Risks and Opportunities .................................................................................... 23

1.8 Project Execution ............................................................................................... 25

1.9 Conclusions ........................................................................................................ 26

2 TECHNICAL SUMMARY ............................................................................................ 272.1 Project Description ............................................................................................. 27

2.1.1 Geology and Mineral Resources ................................................................ 29

2.1.2 Mine Plan and Mineral Reserves ................................................................ 33

2.1.3 Metallurgy ..................................................................................................... 39

2.1.4 Mine Waste Management ............................................................................ 43

2.1.5 Solid and Hazardous Waste Disposal ........................................................ 44

2.1.6 Tailings Management Facility ..................................................................... 44

2.1.7 Water Management ...................................................................................... 46

2.1.8 Power Plant .................................................................................................. 472.1.9 Project Infrastructure / Ancillary Facilities ................................................ 49

2.1.10 Port ............................................................................................................... 50

2.1.11 Pipelines ....................................................................................................... 51

2.1.12 Balance of Plant ........................................................................................... 52

2.2 INDEPENDENT THIRD-PARTY REVIEWS .......................................................... 52

2.2.1 Independent Tailings Review Board (ITRB) ............................................... 52

2.2.2 URS Corporation Independent Review....................................................... 53

3 PRIVILEGE TO OPERATE ......................................................................................... 54

3.1 Panama ............................................................................................................... 54

3.1.1 Mining in Panama: Changes to the Mineral Code in 2012 ........................ 56

3.1.2 Contract Law 9 ............................................................................................. 57

3.1.3 MPSAs Panamanian Society Participation............................................... 58

3.2 Inmets Approach To Corporate Responsibility ............................................... 58

3.3 Cobre Panama: Inmets Commitment in Action.............................................. 59


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3.3.1 Regulatory Context for Environmental and Social Impact Assessments 61

3.4 Socio-environmental Context of the Project ..................................................... 63

3.4.1 Environmental Baseline Conditions ........................................................... 63

3.4.2 Social Baseline Conditions ......................................................................... 65

3.4.3 Community Relations and Community Development Activities............... 67

3.4.4 Project Socio-environmental Actions and Benefits .................................. 69

3.4.5 Partnerships ................................................................................................. 71

4 CAPITAL COST ESTIMATE ....................................................................................... 73

4.1 Basis of Estimate ................................................................................................ 73

4.1.1 Site Investigation ......................................................................................... 74

4.2 Capital Cost (CAPEX $US) ................................................................................. 75

4.2.1 Contract budgetary incentives ................................................................... 79

4.3 Sustaining Capital (SUSEX) ............................................................................... 79

4.4 Independent Third Party ReviewCapital Cost Estimate ............................... 80

5 OPERATING COST ESTIMATE ................................................................................. 82

5.1 Basis of Estimate ................................................................................................ 82

5.2 Operating Cost Estimate (OPEX) ....................................................................... 83

5.3 Brook Hunt C1 Cash Cost .................................................................................. 86

5.4 Independent Third Party Reviews ..................................................................... 88

5.4.1 Process Plant Operating Cost Estimate ..................................................... 88

5.4.2 Benchmark of Mining Cost ......................................................................... 895.4.3 Power Plant Operating Cost Estimate ........................................................ 89

5.4.4 Power Plant Coal Supply Analysis ............................................................. 90

6 PROJECT ECONOMICS ............................................................................................ 91

6.1 Modelling Assumptions ..................................................................................... 91

6.2 Value and Returns .............................................................................................. 93

6.3 Sensitivity Results .............................................................................................. 95

6.4 Cash Costs .......................................................................................................... 96

6.5 Net Smelter Returns ........................................................................................... 99

6.6 Project Cash Flows .......................................................................................... 1016.6.1 Debt Case ................................................................................................... 101

6.6.2 Debt plus Stream Case .............................................................................. 102

6.7 Upside of Resource Value Not Reflected in Traditional Discounted Cash Flow

Valuation ........................................................................................................... 103

7 PROJECT FINANCING ............................................................................................. 104


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8 RISKS AND OPPORTUNITIES ................................................................................. 107

8.1 Project Risk Management ................................................................................ 107

8.1.1 Special Considerations ............................................................................. 110

8.2 Opportunities .................................................................................................... 113

9 PROJECT EXECUTION ............................................................................................ 116

9.1 Project Background.......................................................................................... 116

9.2 Project Organization......................................................................................... 116

9.3 Health and Safety ............................................................................................. 119

9.4 Environmental Management Plan .................................................................... 119

9.5 Labour Relations, Training and Hiring ............................................................ 121

9.6 Sequence of Construction ............................................................................... 122

9.6.1 EPCM Scope Under JVP ............................................................................ 122

9.6.2 EPC Scope Yet to be Awarded .................................................................. 123

9.6.3 EPC Scope Under SK E&C ........................................................................ 123

9.7 Materials Management and Logistics ............................................................. 123

9.7.1 Logistics Strategy ...................................................................................... 123

9.8 Procurement ..................................................................................................... 124

9.9 Security ............................................................................................................. 124

9.10 Project Master Schedule and Key Milestones ................................................ 124

9.11 Independent Reviews ....................................................................................... 127

9.11.1 Independent Project Schedule Review .................................................... 1279.11.2 Independent Project Readiness Assessment .......................................... 127

9.11.3 Independent Project Controls Health Check ........................................... 127

10 OPERATIONAL READINESS ................................................................................... 129

11 MARKETING AND MARINE TRANSPORT OF CONCENTRATE ............................ 133

11.1 Scope and Summary ........................................................................................ 133

11.2 Composition of Revenue and Price Assumptions ......................................... 133

11.3 Copper Prices and Trends ............................................................................... 134

11.4 Concentrate Quality.......................................................................................... 135

11.5 Summary of Copper Concentrate and Freight Market Expectations ............ 13611.6 Preliminary Copper Concentrate Sales Plan .................................................. 137

11.7 Summary of Molybdenum and Freight Market Expectations ........................ 138


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List of Tables

Table 1-1 Tier 1 Characteristics ................................................................................... 15

Table 1-2 Metal Production .......................................................................................... 17Table 1-3 Cobre Panama Mineral Reserves ................................................................ 17

Table 1-4 Cobre Panama Mineral Resources .............................................................. 17

Table 1-5 Basic Engineering Capital Cost by Major Area ............................................. 20

Table 1-6 C1 Cash Costs($US/lb of Cu) at Copper Price Scenario of $US2.75/lb. ....... 20

Table 1-7 Summary of Operating Costs by Component ($US/t of ore milled) ............... 21

Table 1-8 After-Tax Economics: Debt Case ................................................................. 22

Table 1-9 After-Tax Economics: Debt plus Stream Case ............................................. 22

Table 1-10 Third Party Reviews ..................................................................................... 23

Table 1-11 Project Milestones ........................................................................................ 26

Table 2-1 Tier 1 Characteristics ................................................................................... 27

Table 2-2 Cobre Panama Mineral Resources .............................................................. 31

Table 2-3 Mine Production Schedule ........................................................................... 35

Table 2-4 Mining Schedule by Pit ................................................................................ 36

Table 2-5 Cobre Panama Mineral Reserve .................................................................. 39

Table 2-6 Recovery Forecast Algorithms ..................................................................... 40

Table 2-7 Mill Production Schedule .............................................................................. 42

Table 3-1 Cobre Panamas Progress in Implementing the IFC Performance Standards61

Table 4-1 Basic Engineering Capital Cost by Major Area ............................................. 78

Table 4-2 FEED Study to Basic Engineering Capital Cost Estimate Variances ............ 78

Table 4-3 FEED Study to Basic Engineering Variance Description .............................. 79

Table 5-1 Total Operating Cost Summary .................................................................... 83

Table 5-2 Summary of Operating Costs per Year ($US/t of ore milled)* ....................... 83

Table 5-3 Summary of Operating Costs by Component ($US/t of ore milled)* ............. 84

Table 5-4 FEED Study vs. Basic Engineering Operating Costs .................................... 85

Table 5-5 Operating and Input Cost Estimates at Selected Copper Price Assumptions86

Table 5-6 Years 2-16 C1 Cash Cost ($US/lb) .............................................................. 87


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Table 5-7 Life of Mine C1 Cash Cost ($US/lb) ............................................................. 87

Table 5-8 Power Costs at Selected Copper Price Assumptions ($US/kWh) ................. 89

Table 6-1 Modelling Assumptions ($US) ...................................................................... 91Table 6-2 Pre-Financing Sponsor Funding Requirement ............................................ 92

Table 6-3 Financing Assumptions ................................................................................ 93

Table 6-4 Metal Price Assumptions ($US) ................................................................... 94

Table 6-5 After-Tax Economics: Debt Case ................................................................. 94

Table 6-6 After-Tax Economics: Debt plus Stream Case ............................................. 95

Table 6-7 Years 2-16 Cash Costs Based on Payable Copper ($US/lb) ........................ 96

Table 6-8 Life of Mine Cash Costs Based on Payable Copper (US/lb) ......................... 96

Table 6-9 Year 2-16 C3 Costs ($US/lb)........................................................................ 98

Table 6-10 Life of Mine C3 Costs ($US/lb) ..................................................................... 98

Table 6-11 Life of Mine Revenues and NSR (Consensus LT Prices) ........................... 100

Table 6-12 Construction Period Funding RequirementDebt Case ($US) .................. 101

Table 6-13 Construction Period Funding RequirementDebt plus Stream Case ($US)

.................................................................................................................. 102

Table 7-1 Independent Funding Breakdown .............................................................. 104

Table 7-2 Inmets Funding Plan................................................................................. 104

Table 7-3 Total Project Funding ................................................................................. 105

Table 8-1 Key Project Risks and Treatment Plans ..................................................... 112

Table 8-2 Potential Reserves Should Indicated Resources at Balboa and Brazo be

Converted to Reserves .............................................................................. 114

Table 9-1 Project Milestones ...................................................................................... 125

Table 10-1 Elements of and Assurance of Operational Readiness .............................. 129

Table 11-1 Forecast Copper Concentrate Commercial Terms ..................................... 138

Table 11-2 Molybdenum Concentrate NSR Calculation* .............................................. 139


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List of Figures

Figure 2-1 Site & Infrastructure Map ............................................................................. 28

Figure 2-2 Mineral Deposits and Defined Resources Plan Map .................................... 30Figure 2-3 Increase in Resources Since FEED Study ................................................... 31

Figure 2-4 Contained Copper Endowment (resource proxy) for Undeveloped Copper

Deposits ....................................................................................................... 32


Deposits Not Controlled by >$10b Market Cap or Sovereigns ...................... 32

Figure 2-6 Summary of Mining Schedule ...................................................................... 34

Figure 2-7 Mining Schedule Shown by Type of Material Moved and by Pit ................... 34

Figure 2-8 Inferred Resource In-Pit ............................................................................... 37

Figure 2-9 Plan View of Site Infrastructure and Design Pits .......................................... 38

Figure 2-10 Plan View of TMF Including Dams ............................................................... 45

Figure 3-1 IHS Comparative Historical Risk Showing Panamas Risk Trending Down.. 55

Figure 3-2 Estimated Cobre Panama Job Additions ...................................................... 56

Figure 3-3 Pro-Mining Demonstration of 2,500 People March 10, 2012 ........................ 67

Figure 5-1 Breakdown of Operating Costs by Function and Input Cost ......................... 84

Figure 5-2 Comparison of Cobre Panamas C1 Cost on the 2020 Projected Brook Hunt

Cost Curve ................................................................................................... 88

Figure 6-1 NPV Sensitivities.......................................................................................... 95

Figure 6-2 Comparison of Project C1 Costs on the Projected 2020 Brook Hunt Cost

Curve ........................................................................................................... 97

Figure 6-3 Comparison of Project C3 Costs on the Projected 2020 Brook Hunt Cost

Curve ........................................................................................................... 99

Figure 6-4 Payable Cu Production and C1 Cash Cost by Year (Consensus LT Prices

Debt Case)................................................................................................. 100

Figure 6-5 Project Life After-Tax Cash Flows (Debt Case)* ........................................ 101

Figure 6-6 Project Life After-Tax Cash Flows (Debt + Stream Case)* ........................ 102

Figure 8-1 Plan of Distribution of Resources 2012 ...................................................... 113

Figure 8-2 Plan of Distribution of Resources 2012 ...................................................... 115

Figure 9-1 Project Schedule ........................................................................................ 126


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Figure 11-1 Cobre Panama NSR by Metal Based on Long-term Consensus Prices ...... 133

Figure 11-2 Gap Between Base Case Mine Production and Demand that Needs to be

Filled with Capacity Additions .................................................................... 134

Figure 11-3 Forecast vs Actual Sources of Supply 2003-2010 ...................................... 135

Figure 11-4 Historical Trends in Treatment and Refining Changes in Real 2011 Dollars137

k thousand

m million

b billion

oz troy ounceslb pounds

kt thousand tonnes

kTon thousand tons

ktpd thousand tonnes per day

mt million tonnes

mt/a million tonnes per annum

US$/t US dollars per tonne

Cu Copper

Au Gold

Ag Silver

Mo Molybdenum

bbl barrel

l litre

mW megawatt

kWh kilowatt hour

dmt dry metric tonne

wmt wet metric tonne

LOM life of mine

g/t grams per tonne

GLOSSARY


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1 INTRODUCTION

The Mina de Cobre Panama Project (Cobre Panama; the Project) consists of a conventional

open pit mine and the associated infrastructure to produce copper-gold and molybdenumconcentrates. The concession for the Project covers an area of 130 square kilometres (km2) and

is located in the Donoso District, Coln Province in north central Panama.

Cobre Panamasprojected significant annual production at first quartile cash costs, long mine

life, extensive mineral reserves and resources, and high proportion of net revenues from copper

all provide exceptional exposure to copper. With the Environmental and Social Impact

Assessment (ESIA) regulatory approval for the Project already received, a strong social license

and Basic Engineering completed, the Project is construction-ready. It is essentially the only

Tier 1 copper asset not in the hands of a senior mining company.

Table 1-1 Tier 1 Characteristics

Tier 1 Characteristic

Life of Mine 31 years

Capital Cost $US6.18b

Annual production (Yr 2-16)

Annual production (LOM)

298 kt

266 kt

C1 cash costs (Yr 2-16)

C1 cash costs (LOM)

$US0.72/lb Cu

$US0.82/lb Cu

Strip Ratio 0.58

Scale 160 ktpd to 240 ktpd throughput with further expansion capacity

IRR (debt financing)

NPV @ 8% ($m)

IRR (debt plus stream financing)

NPV @ 8% ($m)

Consensus Long-Term

14.3%

3,200

16.7%

3,500

Forward Curve

(declining to

consensus)

18.5%

4,800

21.9%

5,000

3YR Trailing Avg.

(SEC case)

19.2%

6,000

22.5%

6,300

Annual free cash flow

(Yr 2-16, debt financing)

Annual free cash flow

(LOM, debt financing)

$US0.90b

$US0.81b

Copper reserves*

Copper resources (M&I)*

Copper resources (Inferred)*

9.3 mt

14.7 mt

8.7 mt

Concentrate Clean concentrate not expected to draw penalties

Logistics Proximity to tidewater and Panama Canal

*See Table 1-3 and Table 1-4


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Cobre Panama would be developed as a conventional truck and shovel open pit mine with a

concentrator that uses the direct application of proven technology (crushing, grinding, flotation)

to produce copper-gold and molybdenum concentrates. A 300 mW coal-fired power plant and

ship loading port facilities are also part of the Project.

Basic Engineering was conducted by Joint Venture Panama Inc. (JVP), a joint venture led by

SNC-Lavalin Group Inc. (70%) with partners GyM S.A. (a member of Graa y Montero Group)

(15%) and Techint International Construction Corp. (15%) between November 2010 and March

2012. The purpose of Basic Engineering was to further develop the scope and execution plan

for the Project, and to serve as the basis for detailed engineering, procurement and construction.

This work builds on the March 2010 Front End Engineering Design Study (FEED) Study. Basic

Engineering provides:

A capital cost estimate with an accuracy of +10%/-10%

A Project Execution Plan in readiness for the full Notice to Proceed

A detailed Level 3 Project Master Schedule

Detailed engineering for site capture and civil works and

Initial Work Packages and contracting strategy to support procurement activities.

The total estimated capital cost to bring the Project into operation is $US6.2b (expressed in Q3

2011 dollars), over half of which is based on firm quotes. Sustaining capital is estimated to be

$US2.9b required over the mine life. This includes an expansion in the form of adding a third

crushing and grinding line to the process plant to increase capacity from 160ktpd to 240ktpd,

which would to be ready for production in Year 10. Operating costs are estimated to be$US6.88/t of ore milled, with mining costs benefitting from a life of mine strip ratio of 0.58 tonnes

waste per tonne of ore. The power cost of $US1.01/t of ore milled is an endorsement of the

decision in 2011 to undertake the capital cost to build a coal-fired power plant. Assuming a full

Notice to Proceed in May 2012, first concentrate would be scheduled for early 2016.

Reconciliations to the 2010 FEED Study can be found in Sections 4 (Capital Costs) and 5

(Operating Costs).

1.1 A Tier 1 Copper Asset

The Project has the key attributes of a Tier 1 copper asset with substantial exposure to copper,

projected long life, low operating costs and significant expansion potential in a geopolitically

favourable jurisdiction.

Cobre Panamas projected average annual copper production of 298kt for Years 2-16 and 266kt

over the life of operations are indicative of a world class asset. The expected 31 year life with

these levels of output would provide exceptional exposure to copper.


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Table 1-2 Metal Production

Annual AverageYears 2-16

Annual AverageLife of Operations

TotalLife of Operations

Copper (kt) 298 266 8,237Molybdenum (kt) 3.1 2.9 90.2Gold (koz) 106 87 2,705Silver (koz) 1,572 1,545 47,899

Estimated C1 cash costs (see Section 5 for definition) of $US0.72/lb for Year 2-16 and

$US0.82/lb for the life of the operation would put the Project in the very favourable position of

being in the first quartile of the projected industry cost curve.

Table 1-3 Cobre Panama Mineral Reserves

Category Tonnes

(x 1000)

Cu

%

Au

g/t

Ag

g/t

Mo

%

Cu

(x1000)

Tonnes

Au

(x1000)

ounces

Ag

(x1000)

ounces

Mo

(x1000)

tonnes

Proven 258,000 0.57 0.14 1.6 0.010 1,478 1,126 13,020 25

Probable 2,061,000 0.38 0.06 1.4 0.007 7,781 4,041 91,008 145

Total 2,319,000 0.40 0.07 1.4 0.007 9,258 5,167 104,028 169

Table 1-4 Cobre Panama Mineral Resources

Category Tonnes

(x 1000)

Cu

%

Au

g/t

Ag

g/t

Mo

%

Cu

(x1000)

Tonnes

Au

(x1000)

ounces

Ag

(x1000)

ounces

Mo

(x1000)

tonnes

Measured 262,000 0.56 0.13 1.5 0.009 1,476 1,118 12,979 24

Indicated 3,905,000 0.34 0.06 1.2 0.005 13,237 7,845 155,392 214

Total 4,167,000 0.35 0.07 1.3 0.006 14,715 8,963 168,454 238

Inferred 3,749,000 0.23 0.04 1.0 0.004 8,660 4,805 120,534 156

Notes to mineral reserves and resources tableMineral reserves and resources are shown on a 100 percent basis for each property. Except as stated, mineral resources areexclusive of mineral reserves.The mineral reserve and resource estimates are prepared in accordance with the CIM Definition Standards On Mineral Resourcesand Mineral Reserves, adopted by CIM Council on November 14, 2004, and the CIM Estimation of Mineral Resources and Mineral


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Reserves Best Practice Guidelines, adopted by CIM Council on November 23, 2003, using geostatistical and/or classical methods,plus economic and mining parameters appropriate to each project. You will find the definitions and guidelines at www.cim.org.Estimates for all operations are prepared by or under the supervision of a qualified person as defined in National Instrument 43-101(usually an engineer or geologist).There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the

estimates of the mineral reserves.Mineral resources which do not form part of the mineral reserves do not have demonstrated economic viability.Mineral resources as at March 5, 2012, were estimated by Robert Sim, P. Geo., of SIM Geological Inc. Mineral reserves as atDecember 31, 2011 were estimated by William Rose, P.E., of WLR Consulting, Inc., a qualified person under National Instrument 43-101.Reserve estimates are based on the following assumptions:- copper price: $US2.25 per pound- gold price: $US1,000 per ounce- silver price: $US16 per ounce- molybdenum price: $US13.50 per pound- Mining costs : $US1.66 per tonne of ore mined, $US 1.96 per tonne of waste mined and- Milling and general and administration cost: $US 5.27 per tonne of ore milled, average life of mine metallurgical recoveries: 89percent for copper, 52 percent for gold, 46 percent for silver and 53 percent for molybdenum.Mineral resources include mineral reserves.Resource grades are estimated using ordinary kriging with a nominal block size of 25 metres by 25 metres by 15 metres. Resourcesare limited inside a pit shell defined by a copper price of $US2.60 per pound, $1.75 per tonne mining cost and $7.02 per tonne totalsite operating cost, and are tabulated at a cut-off grade of 0.15 percent copper

Measured and Indicated (M&I) resources have grown to approximately 32.4b lb of copper and

9.0m oz of gold. This represents a 26% increase of 6.6b lb of copper and a 37% increase of

2.4m oz of gold over the FEED Study. In addition, inferred mineral resources have grown to

19.1billion lbs of copper and 4.8m oz of goldan increase of 2.5b lb of copper (15 percent) and

an increase of 0.8m oz gold (20 percent) over the FEED Study.

Currently there are 12b lb of contained copper in M&I mineral resources and some 19b lb of

copper in inferred mineral resources not exploited in the mine plan. While mineral resources do

not have demonstrated economic viability, based on commonly used market precedent, these

additional units of copper could potentially be valued at between $US0.03 and $US0.06/lb in theground, suggesting an option value on those copper units of between $US0.9b and $US1.8b.

This is especially true once the infrastructure is in place and the mine is operating.

If work progresses to allow us to move these resources into reserves, it would provide

opportunities to:

extend mine life beyond the current 31 years; and/or

accelerate the addition of a third line to the process plant that would increase

production in Years 3 to 9; and/or

justify expanding the planned operation beyond 240ktpd throughput.

Cobre Panama would enjoy a number of other positive attributes. In an industry with a trend of

increasing presence of deleterious elements in concentrates, the Project would have a clean

concentrate. The port, located on tide water, would be only 30 km from the mine site, allowing

for ease of exporting concentrates as well as importing supplies. This would provide a unique


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opportunity to potentially enhance profitability through swaps to reduce transportation costs and

to share the benefit of reduced penalties with swap counterparties.

1.2 Concession, Permits and Socio-Environmental Commitments

The Project exploration and mining concession was granted under Law 9 of February 26, 1997,

promulgated by the Legislative Assembly of Panama. This, in addition to an amended Mineral

Resources Code in Panama, provides clarity on the fiscal framework for Cobre Panama. The

ESIA approval was received in December 2011 and gives the Project the right to obtain the

balance of the permits required to commence operations. Several such construction permits

have already been obtained.

MPSA has created an existing privilege to operate locally by building relationships with local

communities, an intention to comply with the International Finance Corporation sPerformance

Standards on Environmental and Social Sustainability and by meeting its responsibility to ensurethat the benefits of the Project are shared with the people of Panama.

1.3 Capital Costs

The estimated capital cost of $US6.18b is based on a comprehensive estimate comprised of

over 9,000 lines and 800 pages as well as third party reviews of the process and outcome.

Adding further to the confidence in the figures is the inclusion of lump sum turnkey contracts,

firm price estimates and vendor quotes for well over ninety per cent of the capital cost.


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Table 1-5 Basic Engineering Capital Cost by Major Area

AreaCAPEX Total

($US)% of Project

Mining 760 12

Process Plant 1,184 19

Site & Services 550 9

Port Site Facilities 543 9

Power Plant 646 10

Total Direct Costs 3,682 59

Construction Indirects 844 14

Total Field Costs 4,526 73

EPCM Services 355 6

Owner Costs 885 14

Contingency* 415 7

Project Total Costs 6,181 100

Note:Totals may not add due to rounding*Contingency: The contingency table provided to the estimate reviewers had an overall Project contingency of 9.63% (as apercentage of Total Installed Cost (TIC)). When owners costs (mine preproduction, mine equipment and Owners ProjectManagement (PM)) and contingency on owners costs are removed, the remaining value is 11.18%. The percentage is in line withwhat might be expected of an Authority for Total Cost Management (AACE) Class 2 engineering estimate which is described inSection 4.4.

1.4 Operating CostsC1 cash costs during Years 2-16 of operation are expected to average $US0.72/lb of copper and

for the life of operations average $US0.82/lb (see Section 5 for further details). These costs

should put Cobre Panama in the first quartile of the projected industry curve and support the

economic robustness of the operation under most foreseeable market conditions.

Table 1-6 C1 Cash Costs($US/lb of Cu) at Copper Price Scenario of $US2.75/lb.

Cost Item Average Yr 2-16 Life of Operations

Mine 0.30 0.32

Plant 0.37 0.44G&A 0.11 0.12

Site services 0.03 0.04

Offsite costs 0.30 0.30

By-product credits (0.40) (0.40)C1* 0.72 0.82

Note: Totals may not add due to rounding


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Table 1-7 Summary of Operating Costs by Component ($US/t of ore milled)

Cost Centre Total Labour Material Power Other

Mine 2.44 0.27 1.87 0.05 0.24

Process Plant 3.29 0.24 2.13 0.91 0.01

G&A 0.88 0.15 0.01 0.04 0.69

Site Services 0.28 0.11 0.07 0.01 0.09

Total 6.88 0.77 4.08 1.01 1.03

A third party review of process plant operating costs concluded that the estimate of operating

costs was realistic and consistent with other operating concentrators. A separate reviewer

concluded that the Projects mining productivity ratios were at the average or slightly

conservative as compared to other similar open-pit mining operations.

Analysis of costs for input commodities such as oil (diesel), freight, steel (grinding media),

ammonia (explosives) and coal (power) has demonstrated a strong correlation to the historical

price of copper. When prices of oil and other raw materials are relatively high, statistically

significant correlations demonstrate that it is reasonable to expect that the economic

environment is robust and, likewise, so presumably would be the price of copper. The cost

assumptions for these commodities can therefore linked to price assumptions for copper over

the long term. The life of mine operating costs estimate of $US6.88/t of ore milled is based on a

long-term copper price assumption of $US2.75/lb. Table 5-5 shows the various input costs used

for each metal price scenario in the $US2.75/lb copper case oil is $US68.68/bbl, diesel is

$US0.62/l, coal is $US82.54/t, steel grinding media is $US935.25/t, explosives are $US936.21/tand concentrate freight cost was $US41.21/t. In the $US3.42/lb copper case oil is

$US80.53/bbl, diesel is $US0.72/l, coal is $US96.93/t, steel grinding media is $US1,143.62/t,

explosives are $US1,011.18/t and concentrate freight cost was $US48.32/t.

1.5 Project Economics

Three metal price scenarios were used to evaluate the Project economics: Consensus Long-

Term ($US2.75/lb), Forward Curve, and Three Year Trailing Average ($US3.42/lb). It is our

belief that the Consensus Long-Term price is conservative and does not reflect anticipated

supply-demand dynamics (see Section 11 Marketing for additional discussion). Two financing

structures were considered in the Project economic analysis:

1. a levered case with third party and subordinate shareholder debt, and

2. a levered case with third party and subordinate shareholder debt, plus a gold and silver

stream sale.


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These structures represent Inmet Mining Corporations (Inmets) financing assumptions applied

to 100% of the Project. All scenarios and cases appear to provide solid returns that range from

14.3% to 22.5% after-tax IRR.

Table 1-8 After-Tax Economics: Debt Case

Metal Price Scenario

($USm) Consensus Long-Term

Forward Curve

(declining to

consensus)

3-Year Trailing Average (SEC

case)

IRR 14.3% 18.5% 19.2%

NPV @ 8% 3,200 4,800 6,000

NPV @ 9% 2,400 3,900 4,900

NPV @ 10% 1,800 3,200 4,000

Table 1-9 After-Tax Economics: Debt plus Stream Case

Metal Price Scenario

($USm) Consensus Long-Term

Forward Curve

(dropping to

consensus)

3-Year Trailing Average (SEC

case)

IRR 16.7% 21.9% 22.5%

NPV @ 8% 3,500 5,000 6,300

NPV @ 9% 2,800 4,200 5,200

NPV @ 10% 2,200 3,600 4,400

However, readers should be aware that the static Discounted Cash Flow valuation methodology

employed in the analysis does not capture the value of the optionality embedded in a long-life

asset and additional mineral resources that may be incorporated into the mine plan.

1.6 Third Party Reviews

Many recent projects in the mining industry have been impacted by unreliable capital estimates.To ensure the reliability of Cobre Panamas capital estimate, third party reviews of key aspects

of the Project overall were undertaken to mitigate risks and improve the confidence of estimates.


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Table 1-10 Third Party Reviews

Scope Reviewer Outcome

Overall Project Chlumsky, Ambrust & Meyer(CAM)Independent

Engineer

Confirmative

Capex Legico-CHP ConfirmativeOpex AMEC ConfirmativePower Sunrise Americas & Wood

MackenzieConfirmative

Tailings URS Corporation ConfirmativeTailings ITRB ConfirmativeProject Controls KPMG ConfirmativeProject Readiness IPA Confirmative

1.7 Risks and Opportunities

Cobre Panama stakeholder risks and opportunities were identified and risk mitigants put in place

as part of Basic Engineering.

Cost Escalation Quotes to build the power plant and the process plant (together a significant component

of Project capital expenditures) were and are being written on a Lump Sumand Not to

Exceed basis in order to reduce the likelihood that these components will bring the

Project over budget. These quotes will be received from audited vendors with the

sophistication and balance sheet to manage costs and deliver on budget.

The advanced stage of engineering for the Project (currently 38% completed) in

combination with the large portion of firm bids received to-date (58%) should furtherreduce the potential for unforeseen costs.

Panamas use of the US currency is another positive characteristic of the Project that

should reduce the potential for material cost escalation due to foreign exchange

fluctuation.

The manner in which the Request for Quotationprocess was conducted should reduce

the potential for cost overruns. The Projects Engineering, Procurement and

Construction (EPC) and Engineering, Procurement, Construction and Management

(EPCM) contracts are designed to incent contractors to stay on budget and on schedule.

We believe the quotes obtained are materially conservative in some cases the labour

multiplier (unit of work over unit of time) used for work on the Project is as high as threetimes what would normally be employed and some of the quotes for individual work

packages have small overlaps in scope (which could potentially reduce costs).

By the end of 2012, 50% of the Project expenditures are expected to be committed

against firm quotes currently in hand.

Overall Project contingency is 9.6% (as a percentage of TIC). When owners costs (mine

preproduction, mine equipment and owners project management (PM)) and contingency


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on owners costs are removed, the remaining contingency level is 11.2%. This

percentage is in line with what might be expected of an AACE Class 2 engineering

estimate.

The Project is actively considering early group purchase of bulk commodities (to lock insome costs of steel, diesel, cement) for construction and passing out to suppliers.

Low Cost Production from a Low Grade Mine Cobre Panama is amenable to large scale, open pit mining methods that should result in

the efficient handling of ore and waste.

Mining costs should benefit from a very low strip ratio, roughly one fifth of the average

(0.58 vs 2.53Source: Brook Hunt) for all open pit copper mines in 2011.

The Projects proximity to the coast and the low altitude of the Project should allow the

mine and the port to be located close together, thus decreasing linear maintenance and

allowing for integrated management of remote facilities.

The project would have access to low-cost, self-generated power that takes advantage ofproximity to a coal source.

Management Depth Inmet has developed three mines within the tenure of the current management; the Las

Cruces, ayeli and Troilus mines.

For the Project, Inmet has recruited a strong owners team (detailed in Section 9) that

has relevant experience in construction and operations. Further, reputable Engineering,

Procurement and Construction contractors with a proven history of quality have been

selected.

Support for the Project Approval of the ESIA is in our view indicative of governmental support for the Project.

Permits post-ESIA approval are being received.

Extensive engagement and cooperation at both the government and community levels.

At the community level, the current level of support in the Project area indicates that

community engagement efforts are working and a recent study shows overwhelming

support for the Project (Section 3.3.3).

Minera Panama, S.A. (MPSA) has received free prior and informed consent of the

indigenous communities who will be physically and economically displaced by the

Project.

MPSA has continuous engagement with the local communities and a broad range ofstakeholders and is delivering employment to local residents.

Mine Life Current mineral resources are in excess of the Basic Engineering mine plan and point to

the potential for mine life extension and expansions beyond the currently planned

addition of a third crushing and grinding line to the process plant.


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Acceleration of Third Line Moving the third line addition forward could enhance the mill throughput by approximately

50% in Years 3 to 9 and would make Cobre Panama one of the ten largest copper mines

in the world in terms of annual production.

Further Expansion under Extended Resource There is a significant mineral resource under the Basic Engineering plan, exclusive of

mineral reserves, that is largely near surface and proximal to the planned plant. This

could potentially support future expansion.

Exploration Potential In late 2010 MPSA initiated a concession-wide exploration program via airborne

geophysical survey. This survey identified known shallow mineralization and generated

numerous targets. One of the first targets tested in early 2011 resulted in the discovery of

the Balboa deposit. An extensive exploration program for 2012 is underway with 36holes testing additional targets on the concession.

1.8 Project Execution

A project execution plan has been developed to move Cobre Panama from completion of Basic

Engineering through design, construction and commissioning phases all the way to shipment of

the first concentrate anticipated in the first quarter of 2016. The MPSA Project team would grow

from 50 today to 107 members at its peak in 2013.

Milestones from the Project master schedule are presented below.


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Table 1-11 Project Milestones

Milestone Date

(Estimated)

Notice to Proceed 2Q12

Mine/Process Plant Construction Start 2Q12

Port Site Construction Camp Complete 4Q12

Process Plant Bulk Earthworks Complete 4Q13

Coast Road Open (Plant to Port Site) 4Q13

Port Dock Facility Construction Complete 2Q14

230 kV Power Transmission Line Construction Complete 3Q14

Tailings Starter Dam Construction Complete 3Q15

Introduction of Ore to Grinding Line No. 1 4Q15Power Plant CompleteUnit No. 1 Operational 4Q15

Introduction of Ore to Grinding Line No. 2 4Q15

Power Plant CompleteUnit No. 2 Operational 4Q15

Start of Production 4Q15

Shipment of Concentrate 1Q16

Commercial Production 2Q16

1.9 Conclusions

With Basic Engineering completed, detailed engineering underway, key permits in process, and

continued efforts to maintain and enhance its privilege to operate locally, Cobre Panama is a

construction-ready Tier 1 project. With few such assets in a construction-ready position and not

already in the hands of a senior mining company, we believe the Project has potential value

beyond what is estimated in the NPV analysis.


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2 TECHNICAL SUMMARY

2.1 Project Description

Cobre Panama would be a world-class Tier 1 asset based on projected mine life, annual

production, cash costs, scalability and annual cash flow.

Table 2-1 Tier 1 Characteristics

Tier 1 Characteristic

Life of Mine 31 years

Annual production (Yr 2-16)

Annual production (LOM)

298 kt

266 kt

C1 cash costs (Yr 2-16)

C1 cash costs (LOM)

$US0.72/lb Cu

$US0.82/lb Cu

Strip Ratio 0.58

Scale 160 ktpd to 240 ktpd throughput with

further expansion capacity

Annual free cash flow (Yr 2-16) at $US2.75/lb Cu, debt financing

Annual free cash flow (LOM) at $US2.75/lb Cu, debt financing

$US0.90b

$US0.81b

Copper reserves*

Copper resources (M&I)*

Copper resources (Inferred)*

9.3 mt

14.7 mt

8.7 mt

Concentrate Clean concentrate not expected to draw

penalties

Logistics Proximity to tidewater and Panama

Canal

*See Table 1-3 and 1-4

Cobre Panama would be developed as a conventional truck and shovel open pit mine with a

concentrator employing proven technology (crushing, grinding, flotation) to produce copper-gold

and molybdenum concentrate. A 300 mW coal-fired power plant and ship loading port facilities

would also be part of the Project.

The Project would be within an exploration and mining concession covering 130 km2located in

the Donoso District, Coln Province in north-central Panama. The development would be close

to tidewater and would be advantaged by its proximity to the Panama Canal which provides

increased flexibility in sourcing supplies from both the Gulf of Mexico (North America) and South

America as well as providing convenient shipping of mine concentrates to global markets.


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Figure 2-1 Site & Infrastructure Map


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The Project infrastructure, ancillary support facilities and systems would include:

Three open pits (the Botija, Colina and Valle Grande deposits) which would be

progressively developed; Ore crushing, conveying and stockpiling facilities, consisting of two gyratory crushers,

belt conveyors and a pad for crushed ore stockpiling for the initial Botija pit; Provisions for a second crusher and associated conveying and stockpiling facilities to

handle ore from the Colina and Valle Grande pits A 160 ktpd process plant consisting of two lines; Provisions for an addition of a third line in the concentrator expanding its capacity to 240

ktpd throughput in Year 10 with negligible infrastructure modifications; A slurry pipeline to transport concentrate to the port facility; A port facility including concentrate loading and coal offloading facilities; A 300 megawatt coal-fired power plant; A coast access road, connecting the process plant with the port facility; Plant and truck repair shop; Warehouse and tank farm; Camp and administrative offices; Facilities and systems for environmental monitoring and management of effluents in

compliance with Project commitments; and Transmission line from the power plant at the port facility to the process plant and

switchyard, continuing south to connect with the Panamanian grid at the Llano Sanchezsubstation.

2.1.1 Geology and Mineral Resources

Copper-gold-molybdenum porphyry-style mineralization was discovered in central Panama

during a regional survey by the United Nations in 1968. Exploration has since outlined five large

deposits and several smaller ones on the concession. Drill programs have been conducted by

the United Nations Development Program (1968-1969), Panama Mineral Resources

Development Company (PMRD), a Japanese consortium (1970-1980), Inmet-Adrian Resources-

Teck as MPSA (1990-1997), Petaquilla Copper (2006-2008), and Inmet and Teck and then

Inmet as MPSA (2007-2009). A total of 1,275 diamond drill holes (230,555 m) have been

completed.

The relevant deposits are all porphyry copper deposits and include Botija, Colina, Medio, Valle

Grande, Brazo and Balboa. All of the porphyry-style mineralization on the property is hosted in

granodiorite, feldspar-quartz-hornblende porphyry, and adjacent andesitic volcanic rocks. Thescope of the Basic Engineering, as well as the approved ESIA, only covers the development of

the Botija, Colina, Medio and Valle Grande deposits.


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Figure 2-2 Mineral Deposits and Defined Resources Plan Map

Cobre Panama mineral resources (inclusive of reserves) were re-estimated in early 2012 to

incorporate the 171 holes completed since the 2010 FEED Study (see Table 2-2). The increase

in measured and indicated resources reflected conversion of inferred resources into indicated

resources on the Brazo deposit and the addition of the Balboa resource. Most of the increase in

inferred resources came from Balboa.


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Table 2-2 Cobre Panama Mineral Resources

Contained Metal (x1000)

Category Tonnes

(x 1000)

Cu

%

Au

g/t

Ag

g/t

Mo

%

Cu

Tonnes

Au

ounces

Ag

ounces

Mo

tonnes

Measured

Indicated

262,000

3,905,000

0.56

0.34

0.13

0.06

1.5

1.2

0.009

0.005

1,476

13,237

1,118

7,845

12,979

155,392

24

214

Total 4,167,000 0.35 0.07 1.3 0.006 14,715 8,963 168,454 238

Inferred 3,749,000 0.23 0.04 1.0 0.004 8,660 4,805 120,534 156

Mineral resources which do not form part of the mineral reserves do not have demonstrated economic viability.Mineral resources as at March 5, 2012 were estimated by Robert Sim, P. Geo., of SIM Geological Inc.Mineral resources include mineral reserves.Resource grades are estimated using ordinary kriging with a nominal block size of 25 metres by 25 metres by 15 metres. Resourcesare limited inside a pit shell defined by a copper price of $USUS2.60 per pound, $US1.75/t mining cost and $US7.02/t total siteoperating cost, and are tabulated at a cut -off grade of 0.15 percent copper.

Figure 2-3 Increase in Resources Since FEED Study

Cobre Panama has one of the largest undeveloped resources in the Metals Economics Group

(MEG) and Brook Hunt databases (see Figure 2-4). As a copper deposit not held by a major

(>$US10b market cap or sovereign), Cobre Panama stands out even more (Figure 2-5).


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Deposits

Based on MEG, Brook Hunt and in the case of Cobre Panama, Inmet databases.

Figure 2-5 Contained Copper Endowment (resource proxy) for Undeveloped

Copper Deposits Not Controlled by >$10b Market Cap or Sovereigns

Based on MEG, Brook Hunt and in the case of Cobre Panama, Inmet databases.

-

5

10

15

20

25

30

35

40

CuContainedin

total

endowment(resourceproxy)(mt)

Undeveloped Copper Deposits

Pre-feasibility

0

5

10

15

20

25

KSM Galore

Creek

Haquira Casino Schaft

Creek

Red Chris Cobre

Panama

Sentinel

CuContainedin

totalen

dowment(resourceproxy)(mt)

Copper Deposits not controlled by >$10b Mkt Cap or SovereignsPre-feasibility Feasibility Construction Ready


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2.1.2 Mine Plan and Mineral Reserves

The mine production schedule has been developed to maximize early revenues and improve overall

Project returns utilizing a conventional mining fleet. The economics of Cobre Panama would benefit

from a low life of mine strip ratio of 0.58 tonnes of waste for every tonne of ore. Mine operationswould be scheduled for two 12-hour shifts per day, 365 days per year.

A series of analyses were conducted for Basic Engineering to determine economic pit limits and the

mining phase development sequence for three mineral deposits in the concession area: Botija,

Colina, and Valle Grande. The concentrator site would be centrally located within 2 km of all threedeposits as well as the stockpile (Figure 2-9). A fourth smaller deposit, Medio, is about 500 m

northeast of the Colina pit. The new block model incorporates a small Medio pit which was targeted

by recent drilling and is part of the mine production schedule in Years 11-14.

The economic pit limit evaluations, open pit development sequence plans, and reserve estimates are

based on metal prices of $US2.25/lb Cu, $US13.50/lb Mo, $US1,000/oz Au, and $US16.00/oz Ag.

Over the life of the Project, forecast concentrator recoveries used are based on the revised BasicEngineering flow sheet forecasts and should average about 89% for Cu, 53% for Mo, 52% for Au,

and 46% for Ag. Weighted average mining costs of $US1.77/t were used in the pit limit analyses,

along with base ore processing and general/administration costs of $US3.83/t and $US1.44/t,

respectively. The costs used to estimate mineral reserves are conservative compared to the Basic

Engineering final operating cost summarized in Section 5.2.

The ultimate pit plans and mining phase designs have not changed from the FEED Study of March

2010, with the exception of the Medio pit extension. The open pit development sequence has been

adjusted to reflect slightly lower effective cut-off grades that have resulted from increased copper

recoveries and higher metal prices used to define ore in the Basic Engineering Study. These minorreserve changes resulted in an increase in ore tonnages of about 8%.

2.1.2.1 Mine Production Schedule

A third grinding circuit is planned to be added to the concentrator, which would commence operationin Year 10, increasing the base ore processing rate capacity from 160ktpd to 240ktpd. Mine

operations would be scheduled for two 12-hour shifts per day, 365 days per year. Mining department

manning levels should vary between about 850 and 956 people during the operating years, includingboth salaried and hourly workers, expatriates, and nationals. Four rotating crews would provide

continuous operator and maintenance coverage in the mine. The concentrator is anticipated to

operate an estimated 31.1 years, including the processing of about 193 mt of stockpiled ore during

Years 28 to 31 (Figure 2-6 below and Table 2-3).


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Figure 2-6 Summary of Mining Schedule

Figure 2-7 Mining Schedule Shown by Type of Material Moved and by Pit


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Table 2-3 Mine Production Schedule

Time Period Ore to ROM

Stockpile

or Mill

(kt)

To Saprock

Ore

Stockpile

(kt)

To

Low-Grade

Ore

Stockpile

(kt)

Waste

Rock

& Saprolite

(kt)

Total

Material

(kt)

Strip Ratio Contractor

(kt)

Owner

(kt)

Cu-Au (Cu

26%)

Concentrate

Production

(k dmt)

Prior to M-15* 214 1,751 766 47,552 50,282 234.41 50,282 - -PP M-15 to M0 1,227 7,643 9,478 50,406 68,755 55.02 12,912 55,843 -

Y1 50,241 5,382 14,006 47,089 118,718 1.27 7,351 111,367 789

Y2 58,062 2,108 23,897 31,762 115,829 0.99 376 115,452 1,077

Y3 58,400 739 23,592 21,099 103,831 0.78 6,476 97,355 1,114

Y4 58,654 4,331 18,520 22,135 103,640 0.77 5,614 98,026 1,137

Y5 58,400 9,519 14,424 21,493 103,837 0.78 8,680 95,157 1,122

Y6 57,950 4,843 4,844 37,793 105,429 0.82 9,806 95,623 1,161

Y7 58,400 11,391 4,167 32,884 106,842 0.83 13,019 93,823 1,185

Y8 58,400 4,167 2,489 45,337 110,392 0.89 10,138 100,254 1,111

Y9 57,360 7,085 1,961 62,567 128,973 1.25 3,119 125,854 933

Y10 85,407 1,378 - 49,906 136,691 0.60 586 136,106 1,344

Y11-Y15 437,152 1,291 - 247,902 686,345 0.57 38,422 647,923 5,830

Y16-Y20 438,001 5,571 - 251,978 695,550 0.59 44,565 650,985 5,858

Y21-Y25 411,876 8,216 - 128,054 548,147 0.33 28,895 519,252 4,702

Y26-Y31** 428,310 - - 55,953 484,263 0.13 - 484,263 4,318

Total 2,320,054 75,414 118,145 1,153,910 3,667,523 0.58 240,238 3,427,284 31,681*M denotes months e.g. M minus fifteen**Includes 147,957 kt of ore stockpile reclamation in Years 26 to 31


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Table 2-4 Mining Schedule by Pit

Time Total Ore Milled or to ROM Ore Stockpile To Saprock Ore Stockpile To Lowgrade Ore Stockpile Waste Rock and Saprolite Total

Period B C VG M B C VG M B C VG M B C VG M Ktonnes

Prior to M-15 214 - - - 1,751 - - - 766 - - - 47,552 - - - 50,282

PP M-15 to M-0 1,227 - - - 7,643 - - - 9,478 - - - 50,406 - - - 68,755

Y1 52,241 - - - 5,382 - - - 14,006 - - - 47,089 - - - 118,718

Y2 58,062 - - - 2,108 - - - 23,897 - - - 31,762 - - - 115,829

Y3 58,400 1 - - 49 691 - - 23,591 1 - - 9,520 11,579 - - 103,831

Y4 56,595 2,059 - - - 4,331 - - 16,818 1,702 - - 4,834 17,301 - - 103,640

Y5 46,412 11,988 - - - 9,519 - - 10,767 3,657 - - 1,507 19,986 - - 103,837

Y6 35,332 22,617 - - - 4,842 0 - 1,022 3,797 25 - 9,542 23,039 5,212 - 105,429

Y7 23,731 33,084 1,585 - - 9,814 1,577 - - 3,377 790 - 5,452 11,552 15,880 - 106,842

Y8 13,585 40,686 4,129 - 27 429 3,710 - 199 352 1,938 - 27,200 3,411 14,726 - 110,392

Y9 7,036 39,753 10,571 - 36 3,532 3,517 - 171 577 1,214 - 49,903 3,353 9,311 - 128,973

Y10 16,219 63,426 5,762 - - 690 689 - - - - - 41,006 4,050 4,850 - 136,691

Y11-Y15 164,073 164,432 91,316 17,331 49 339 903 - - - - - 147,894 74,758 5,359 19, 891 686, 345

Y16-Y20 272,047 164,402 1,552 - - 5,001 570 - - - - - 24,950 147,678 79,351 - 695,550

Y21-Y25 16,342 284,198 111,337 - - - 8,216 - - - - - 331 35,825 91,898 - 548,147

Y26-Y31 77,599 84,587 266,124 - - - - - - - - - - 2,023 53,930 - 484,264

Total 899,114 911,233 492,375 17,331 17,044 39,187 19,182 - 100,715 13,462 3,968 - 498,948 354,555 280,516 19,891 3,667,523

B = Botija Pit, C = Coli na Pit, VG = Valle Grande Pit, M = Medio Pi t


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The Cobre Panama pit design used for mineral reserve estimates is based only on M&I

resources. Inferred mineral resources, which amount to 321 Mt at 0.26% Cu within current pit

design, are treated as waste. An increased confidence level on the inferred mineral resources

could result in those being converted to mineral reserves and integrated into a revised mineplan, which would significantly improve Project economics by both lowering the strip ratio and

benefiting from increased tonnage. Figure 2-8 illustrates the inferred resources in the current

mine plan pits.

Figure 2-8 Inferred Resource In-Pit

Note: Inferred mineral resources highlighted in pink.


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Figure 2-9 Plan View of Site Infrastructure and Design Pits

Total material within the designed ultimate pits is estimated to be 3.501bt. Contained metal from

proven and probable mineral reserves is projected to be approximately 20.4b lb of copper, 373m

lb of molybdenum, 5.17m oz of gold, and 104m oz ounces of silver.


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Table 2-5 Cobre Panama Mineral Reserve

Category Tonnes

(x 1000)

Cu

Ingenieria Basica de Minera Panama

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