R ESOURCE ESTIMATION BY G EMCOM SOFTWARE

S IERRA DE S ANTA C RUZ

Authors: Mauricio Chiquin

Wilmer Teni
Abdiel Daz

August 2008

i
T ABLE OF CONTENTS Page

TABLES

ILLUSTRATIONS

S UMMARY 1
I. I NTRODUCTION 2
II. S ITUATION AND LOCALIZATION 3
III. G EOCHEMICAL MODEL 4
IV. G EOLOGICAL RESOURCE ESTIMATION 10
a. Database
b. Volumetric Weight
c. Model Construction
d. Geological Resource Estimation
e. Model Verification and Estimation
f. Resource Classification
V. C ONCLUSIONS 18
VI. R ECOMMENDATIONS 18

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T ABLES

Table 1: Behavior of the Different Elements in Function of

the Depth
Table 2: Density Survey According to Ore
Table 3: Statistics of the Fundamental Elements in the
Samples
Table 4: Geological Resources for the Different Content
Ranges and Ores
Table 5: Summary of the Geological Resources
Table 6: Summary and Comparison of Resources (more
than 0.4% Ni) by both methods

ILLUSTRATIONS

Illustration 1: Situation map

Illustration 2: Diagram of the Behavior of the Major
Elements Depending on Depth
Illustration 3: Behavior of Ni Depending on Depth
Illustration 4: Minor Elements
Illustration 5: Comparison Between Two Geological
Columns
Illustration 6 Diagram of Content vs. tonnage

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S UMMARY

The following study was conducted by the engineers Mauricio Chiquin and Wilmer Teni of
Nichromet Guatemala S.A. with the contribution of Abdiel Daz. It was carried out between the
dates July 27th and August 10th 2008.

We estimated and evaluated resources in 65.85% of the area in Sierra de Santa Cruz, where we
observed that the pits do not cross all the weathering crust. For this estimation, we used the
database generated by NICHROMET GUATEMALA S.A. This consists of 164 drill hole an 80%
of them in the form of drilling and a 20% of ring crusher trados and 1121 samples analyzed
for the following elements Al2O3 %, CaO %, SiO2 %, Fe2O3(T) %, K2O %, TiO2 %, MgO %,
MnO %, Na2O %, P2O5 %, LOI, CoO %, Cr2O3 %, Ni %..

A mineralized wall rock of 0.4 Ni on each of the sections was contoured, a block model formed
by 5,644,800 blocks of 250x125x1 m each was prepared.

As interpolation method we used the inverse distance squared (ID2). We estimated resources only
within a polygon containing the area of the slopes under the 25. These rose the 205 million tons
with 0.75 % of Ni in laterites and 34 million tons with 0.84% of Ni in saprolites, all in inferred
categories.

We checked this estimation by the method of grading the solid which has a difference of 6% in
tonnage and 1% in Ni,

1
 I- INTRODUCTION

The following study was conducted by the engineers Mauricio Chiquin and Wilmer Teni of
Nichromet Guatemala S.A. with the contribution of Abdiel Daz. It was carried out between the
dates July 27th and August 10th 2008

The aim of this study is to evaluate the geological resources for Ni in the Izabal1 project by using
the GEMCOM software, supported by the existence of 164 soundings and 1121 samples.

To determine the geological resources for Ni we took a mineralized wall rock that corresponds to
a grade of 0.4 %. This guarantees to group all the mineral with Ni contents that could be
economically exploitable without having to make any further modeling. The average content of
Ni is 0.77% with a total of 240 million tons.

From a total of 147 km2 (area of the Sierra de Santa Cruz plateau with slopes equal or less to 250)
we only evaluated 73 km2 that represents approximately the 50%. If we also consider that in
almost a 66% of the pits the mineral remained overhanging, resources around the 500 million
tons of Ni could be expected in the entire plateau.

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 II- SITUATION AND LOCALIZATION

On Illustration 1 we can see the contour of the 147.4 km2 that belongs to the area of Sierra de
Santa Cruz plateau with slopes under the 250 (red). To the right, we can see the 73 km2 of
evaluated area (cyan) that is hardly half of the entire plateau.

Illustration 1: Situation map

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 III- G EOCHEMICAL MODEL

Based on the observation of abundance and behavior of the determining chemical components,
we can reach criteria that outline these aspects. By its abundance we can distinguish two groups
of elements: major elements and minor elements.

M AJOR ELEMENTS :

The Fe+ is the main indicator of laterites, mainly on the limonitic horizon that reaches up to
71.81 %, even though the average is 36.40%. As the limonite changes to saprolite, the Fe+
decreases.

The Si is generally high in the whole section, even though it decreases a little where the limonitic
horizon is more evident.

The Mg has a similar behavior to the Si with the difference that it is not present in the cover

The Al is a good indicator of argillaceous rock that can be related to kaolinization, it falls
gradually within the lateritic horizons

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Illustration 2: Diagram of the Behavior of the Major Elements Depending on Depth

M INOR E LEMENTS :

These elements are present in proportions lower than 5%. These elements are: Ni, Co, Mn and
Ti.

Ni is present in almost all the identified horizons, even in the cover when it is limonite or
elaborate saprolite. It has a notorious increase when entering the limonitic horizon increasing
gradually until it reaches values over 2%. The most consistent values are present in the saprolite
and its transition, under which its percentage falls to its normal value of 0.9% Ni. Illustration 3.

5
As we can see the Ni increases gradually but without reaching the maximum values that are
expected for neither an iron nickeliferous crust nor the abrupt descent when entering the bedrock.
Thus, we may conclude that this crust has not been completely crossed and therefore it has not
been totally evaluated.

As this is the ore element, it is important to highlight that there are two kinds of mineralization:
related to oxides (limonitic) and related to silicon dioxides (saprolitic). Both horizons present
mineralization.

Illustration 3: Behavior of Ni Depending on Depth

The Co has a similar behavior to the nickel, even though it associates to the limonitic horizon,
especially where manganese is high.

The Mn is a good indication of limonite; it presents a sudden increase in this horizon, decaying
when entering the saprolite. As we said before, it is associated with high values of Co and Fe.

The Ti is present in relatively high proportions within the limonitic horizons, where the protolith
could be gabbro.

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 Illustration 4: Minor elements

As on the previous illustration, the behavior of the minor elements also indicates that the auger
holes very likely did not go through the crust.

Table 1: Behavior of the Different Elements in Function of the Depth

Al2O3 CaO SiO2 Fe2O3 K2O TiO2 MgO MnO Na2O P2O5 CoO Cr2O3 Ni
DEPTH LOI
% % % % % % % % % % % % %
0_1 17.15 0.16 21.25 38.85 0.22 0.65 3.92 0.38 0.07 0.03 14.83 0.06 1.43 0.50
1_2 15.64 0.21 20.10 43.09 0.19 0.55 4.05 0.45 0.07 0.02 12.77 0.07 1.68 0.53
2_3 13.65 0.18 21.53 43.47 0.23 0.46 4.89 0.51 0.07 0.01 11.86 0.08 1.79 0.61
3_4 12.56 0.18 23.11 41.33 0.15 0.47 6.87 0.54 0.07 0.01 11.74 0.08 1.60 0.68
4_5 12.02 0.26 23.35 41.75 0.13 0.39 6.41 0.62 0.08 0.01 11.72 0.09 1.70 0.70
5_6 11.26 0.48 28.85 35.67 0.25 0.39 8.34 0.62 0.11 0.01 11.02 0.09 1.44 0.72
6_7 11.64 0.38 30.28 32.92 0.24 0.39 9.36 0.61 0.08 0.01 11.29 0.08 1.29 0.67
7_8 11.93 0.28 28.74 35.74 0.22 0.41 7.81 0.66 0.10 0.02 11.17 0.09 1.41 0.71
8_9 12.66 0.19 32.29 31.68 0.30 0.48 7.75 0.54 0.18 0.01 11.25 0.07 1.22 0.65
9_10 10.63 0.13 30.61 33.92 0.29 0.33 8.79 0.62 0.13 0.01 11.27 0.07 1.42 0.79
10_11 7.41 0.19 30.18 34.99 0.01 0.22 11.77 0.54 0.04 0.00 11.12 0.08 1.66 1.02
11_12 10.85 0.48 29.41 31.07 0.05 0.44 12.04 0.67 0.16 0.02 11.61 0.08 1.51 0.81
12_13 7.59 0.18 24.67 38.79 0.00 0.10 13.08 0.72 0.03 0.01 11.37 0.09 1.84 0.85
13_14 11.91 0.40 19.97 41.09 0.03 0.29 10.24 0.73 0.06 0.01 11.79 0.10 1.74 0.90

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Table 2: Density Survey According to Ore

Limonites Saprolites Total Ore

Pit final sample (total 164) 50 58 108
% according to type of ore 30.49 35.37 65.85
Finished pits in ore zone 108
Ni average grade in the final
0.90
sample

Analyzing illustrations 1, 2 and 3 we can observe that the pits did not cross the entire weathering
crust. With the aim of establishing technical criteria of evaluation, we made a comparison with a
typical column in the zone of Baja Verapaz, that cut all the sequence from the laterites to the
bedrock.(we considered these for not having any more recent geographically nor genetically data)
We compared the behavior of the major and minor elements. Evidently they have a similar
behavior only that according to this comparison the pits in Sierra de Santa Cruz must have
remained overhanging at the entrance of the transition zone, as seen on the following chart.

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Illustration 5: Comparison between Two Geological Columns
Geological column of a crust in Baja Verapaz and behavior of the different mayor and minor elements to the right and
average behavior of the pits in Sierra de Santa Cruz to the left

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IV- G EOLOGICAL RESOURCE ESTIMATION

a. Database

For this estimation, we used the database generated by NICHROMET GUATEMALA S.A.
This consists of 164 drill holes an 80% of them in the form of drilling and a 20% of ring
crusher trados and 1121 samples analyzed for the following elements Al2O3 %, CaO %,
SiO2 %, Fe2O3(T) %, K2O %, TiO2 %, MgO %, MnO %, Na2O %, P2O5 %, LOI, CoO %,
Cr2O3 %, Ni %. This was imported to the GEMCOM format, corrected and validated during
these works. It is worth highlighting that this database had a high level of elaboration. It was
finally made up in the following way: a Header table with the coordinates X, Y and Z of the
collars of the auger holes and its total depth. On this table the Z of the auger holes assigned to
the topographic surface was corrected for considering little reliable the equipment with which
this variable was measured. A table (Assay) with the information of all the chemical analysis
of the main elements, (Surveys) with all the inclinometer information of the pit and a
lithology table with the lithologic codes.

Type of Ore Codes

limonites 1
saprolites 2

Type of rocks codes

waste 20

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Table 3 shows a summary of the statistics with the information of the main elements in the
samples

Table 3: Statistics of the Fundamental Elements in the Samples

Parameter Ni Si Mn Mg Fe Co Al Ti
Minimum Cutoff Value 0.34 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Maximum Cutoff Value 2.66 78.16 2.21 35.87 71.81 0.41 34.16 4.19
Total Number of Samples 663 1119 1119 1119 1119 1119 1119 1119
Used
Mean 0.80 26.46 0.46 5.42 36.37 0.07 15.06 0.60
Median N/A N/A N/A N/A N/A N/A N/A N/A
Geometric Mean 0.72 N/A N/A N/A N/A N/A N/A N/A
Natural LOG Mean 0.33 N/A N/A N/A N/A N/A N/A N/A
Standard Deviation 0.41 16.93 0.38 7.63 18.53 0.07 7.95 0.55
Variance 0.17 286.48 0.14 58.22 343.30 0.00 63.21 0.30
Log Variance 0.22 N/A N/A N/A N/A N/A N/A N/A
Coefficient of Variation 0.51 0.64 0.83 1.41 0.51 0.98 0.53 0.92
Moment 1 about 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Arithmetic Mean
Moment 2 about 0.17 286.48 0.14 58.22 343.30 0.00 63.21 0.30
Arithmetic Mean
Moment 3 about 0.10 1954.30 0.07 831.98 383.22 0.00 129.85 0.21
Arithmetic Mean
Moment 4 about 0.15 181637.2 0.10 19536.93 215578.9 0.00 8600.1 0.47
Arithmetic Mean 7 5 8
Moment Coefficient of 1.41 0.40 1.27 1.87 0.06 1.43 0.26 1.25
Skewness
Moment Coefficient of 5.21 2.21 4.72 5.76 1.83 5.32 2.15 5.03
Kurtosis

No composites were built, as the samples are, in their greatest number of a constant length (1 m)
which is considered an adequate support for any statistics or geostatistics method.

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 b. Volumetric Weight

At this moment there is no data of volumetric weight (density samples) for which we decided to
deliver the resources in m3.

c. Model Construction

As from the information of the pit samples, we classified the sampling intervals according to the
type of ore, depending on the relation between the Ni and the Mg.

Ore Code Ni_% Mg_%

Limonite 1 >0.4 % < 10 %

Saprolite 2 >0.4% 10 %

On the one hand, we defined two section series, the first North-South facing to the E and the
second East-West facing to the North, both with a spacing of 50 m. All the pits were plotted; a
mineralized wall of 0.4 % Ni was contoured in each of the sections. Between the pits spaced at
more than 50 m the body extended with the orebody average strength. An interpolation by half
between the positive and negative pits was made. With this information a solid model of the ore
zone was built with values over the 0.4 % Ni.

On the other hand, with this information a block model was initialized and updated. It was
formed by 98 rows of 125 meters each (Y oriented) 64 columns of 250 m each (X oriented) and
900 levels of 1 m each (in the vertical), thus having a cubic space that would make room for any
interpretation of projection within the deposit. We obtained in this way a model formed by
5,644,800 blocks of 250x125x1 m each.

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 For each block the following information was modeled: kind of ore, grades of the most
important elements, percentage of the block occupied by the solid, among others.

A structural analysis by the three fundamental directions was made; downhole, strike and dip.
On the first all the elements adjusted reasonably to the spherical model, almost ideal. Notice
that on this direction the samples are spaced by 1 m. On the rest of the directions the samples
are spaced between 500 to 1000 m that is why their modeling was not considered adequate.

As interpolation method we used the inverse distance squared (ID2). We ran many tests for
each element. A first one with a searching distance double to the surveyed exploration
network (1000x5000m); we used for this estimation a minimum of 2 samples and a
maximum of 16 with 3 block subdivisions in all the directions. The blocks that were not
estimated under these conditions, were estimated with the double of the initial parameters and
their values have obviously a lower level of certainty. In all cases a cross validation was made
with correlation coefficients between 0.6 and 0.8. The results are not shown due to a question
of time.

d. Geological Resource Estimation

Once that we had the 3D orebody model as well as the grade model for the different types of
ores, the geological resources for different content ranges and types of ores were estimated but
only within a polygon enclosing the area of slopes under 25. That is to say that only the
resources in solid and block model that had this condition were estimated.

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Table 4: Geological Resources for the Different Content Ranges and Ores
Volume AL2O3 SiO2 TiO2 Ni CoO MgO Fe2O3 Volume AL2O3 SiO2 TiO2 MnO Ni CoO MgO Fe2O3
Class 3
MnO (%) 3
(m ) (%) (%) (%) (%) (%) (%) (%) (m ) (%) (%) (%) (%) (%) (%) (%) (%)
Ore 1 (Limonites) Ore 2 (Saprolites)
>2.3 15478 2.83 42.34 0.03 0.32 2.35 0.04 15.79 22.44
2.2 26935 2.72 42.54 0.03 0.31 2.32 0.04 16.47 21.78
2.1 5108 9.05 43.37 0.21 0.22 2.13 0.03 8.18 24.83 262475 4.96 40.28 0.08 0.29 2.16 0.04 12.16 27.16
2.0 13104 7.74 40.99 0.17 0.27 2.09 0.04 8.12 28.25 405198 5.05 40.28 0.08 0.29 2.13 0.04 12.14 27.15
1.9 124640 9.87 40.18 0.32 0.26 1.96 0.04 6.04 29.59 633146 5.12 40.36 0.09 0.29 2.06 0.04 12.57 26.69
1.8 134264 10.11 39.84 0.34 0.27 1.95 0.04 5.98 29.71 715654 5.18 40.37 0.10 0.29 2.04 0.04 12.61 26.60
1.7 159424 10.95 39.55 0.37 0.26 1.93 0.04 5.45 29.79 793348 5.17 40.42 0.10 0.29 2.01 0.04 12.85 26.35
1.6 374229 12.77 37.15 0.50 0.30 1.76 0.04 5.08 30.15 1066036 5.12 38.96 0.10 0.28 1.91 0.04 14.92 25.82
1.5 534893 13.07 33.89 0.47 0.36 1.70 0.05 5.92 31.75 1697559 6.25 36.59 0.15 0.31 1.78 0.05 14.56 27.24
1.4 1052061 13.86 33.35 0.46 0.31 1.57 0.04 4.91 33.11 2072327 6.14 36.79 0.15 0.31 1.72 0.05 15.01 26.77
1.3 2395469 14.40 34.32 0.57 0.32 1.44 0.05 4.55 31.99 4412256 5.54 36.69 0.12 0.32 1.53 0.05 16.59 26.05
1.2 6447538 11.75 27.32 0.39 0.47 1.32 0.07 5.53 39.69 6513284 5.48 36.31 0.11 0.33 1.44 0.05 16.57 26.47
1.1 16170764 11.54 24.63 0.37 0.51 1.22 0.08 5.48 42.29 7128502 5.59 36.32 0.11 0.33 1.41 0.05 16.38 26.59
1.0 30140376 11.81 23.03 0.36 0.53 1.14 0.08 5.69 42.90 8235984 6.00 36.02 0.14 0.34 1.36 0.05 16.14 26.75
0.9 54333215 11.76 21.88 0.33 0.55 1.05 0.08 5.79 43.87 9753240 6.50 35.37 0.17 0.35 1.30 0.05 15.55 27.47
0.8 83313179 11.99 21.05 0.34 0.57 0.98 0.09 5.36 44.83 13420286 6.84 35.73 0.18 0.35 1.18 0.05 14.58 27.92
0.7 108988541 12.87 21.00 0.40 0.56 0.93 0.09 4.98 44.30 18571866 7.76 34.79 0.26 0.34 1.06 0.05 14.65 27.53
0.6 142946208 13.94 20.32 0.48 0.56 0.86 0.09 4.61 43.90 23956437 8.39 33.66 0.30 0.35 0.97 0.05 14.42 28.06
0.5 182064253 14.96 20.56 0.55 0.54 0.79 0.08 4.34 42.62 29137584 9.06 32.91 0.35 0.35 0.89 0.05 14.08 28.33
0.4 205471169 15.59 20.24 0.59 0.52 0.75 0.08 4.14 42.36 33818511 9.24 32.74 0.36 0.35 0.84 0.05 13.97 28.32
Total 205471169 15.59 20.24 0.59 0.52 0.75 0.08 4.14 42.36 33818511 9.24 32.74 0.36 0.35 0.84 0.05 13.97 28.32

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Table 5 shows the total summary of the estimated resources.

Table 5: Summary of the Geological Resources

Volume AL2O3 SiO2 TiO2 MnO Ni CoO MgO Fe2O3

Class 3
(m ) (%) (%) (%) (%) (%) (%) (%) (%)
> 2.3 15478 2.83 42.34 0.03 0.32 2.35 0.04 15.79 22.44
2.2 26935 2.72 42.54 0.03 0.31 2.32 0.04 16.47 21.78
2.1 267583 5.02 40.33 0.08 0.29 2.16 0.04 12.10 27.12
2.0 418301 5.12 40.30 0.08 0.29 2.12 0.04 12.04 27.18
1.9 757785 5.79 40.34 0.13 0.28 2.05 0.04 11.65 27.09
1.8 849918 5.84 40.30 0.13 0.28 2.03 0.04 11.71 27.02
1.7 952772 6.00 40.29 0.14 0.28 2.00 0.04 11.79 26.84
1.6 1440265 6.85 38.55 0.19 0.29 1.88 0.04 12.70 26.80
1.5 2232452 7.67 36.03 0.22 0.32 1.76 0.05 12.76 28.18
1.4 3124388 8.43 35.77 0.24 0.31 1.67 0.05 12.01 28.66
1.3 6807726 8.30 35.95 0.26 0.32 1.50 0.05 12.84 27.90
1.2 12960822 8.32 32.25 0.23 0.39 1.39 0.06 11.58 32.45
1.1 23299267 9.48 28.67 0.28 0.45 1.28 0.07 9.25 36.86
1.0 38376359 10.37 26.24 0.30 0.48 1.19 0.07 8.27 38.92
0.9 64086456 10.83 24.27 0.30 0.51 1.09 0.08 7.52 40.97
0.8 96733465 11.16 23.43 0.31 0.53 1.01 0.09 6.85 42.09
0.7 127560406 12.01 23.34 0.38 0.52 0.95 0.08 6.62 41.45
0.6 166902645 13.01 22.55 0.45 0.52 0.88 0.08 6.26 41.25
0.5 211201837 14.01 22.55 0.52 0.51 0.81 0.08 5.91 40.32
0.4 239289680 14.54 22.31 0.55 0.49 0.77 0.07 5.76 40.04
Total 239289680 14.54 22.31 0.55 0.49 0.77 0.07 5.76 40.04

15
Illustration 6 shows the curve grade tonnage that illustrates the behavior of tonnage and the Ni
grade as that cut-off grade changes

Illustration 6: Diagram of Content vs. tonnage

e. Model Verification and Estimation

Additionally and with the objective of verifying the estimation made by the block model,
resources over 0.4% Ni were estimated, by the method of assigning grades to the solid. This
consists of estimating an average grade to the entire solid using the grades of each weighted pit
by the volume of its influence in the solid, equivalent to the geological polygonal method of
traditional calculus methods. Results are shown on Table 7.

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Table 6: Summary and Comparison of Resources (more than 0.4% Ni) by both methods

Volume AL2O3 SiO2 TiO2 MnO Ni CoO MgO Fe2O3

Method soundings samples
(m3) (%) (%) (%) (%) (%) (%) (%) (%)
Block 23928968
14.54 22.31 0.55 0.49 0.77 0.07 5.76 40.04
Model 0
Assignation
25513203
of grades to 128 517 11.97 21.77 0.40 0.64 0.78 0.10 6.91 42.36
9
the solid
Difference 6% -21% -2% -38% 23% 1% 27% 17% 5%

f. Resource Classification

Having the indication that we count with part of an explored deposit with some 164 auger holes,
1121 samples distributed in a 73 Km2 area, in a network of approximately 1000*500 m and
assuming that the sampling and research that have taken place in the different stages respond to
the standards in use (to be revised), we can affirm that we count with enough confidence to
proceed with the estimation of resources in the deposit.

As from what has been said before and considering that an ore concentration or occurrence has
been identified and that a measurement and limited samplings have been completed, but with
insufficient data to allow the geological continuation and/or grade of resources be classified as
inferred with a reliable interpretation.

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V- C ONCLUSIONS

1. According to a cut-off grade of 0.4 % Ni a quantity of 239,928,680 Tons (240

million tons) was estimated with 0.77 % Ni, classified as inferred resources.

2. Only the 49.5 % of the concession area has been evaluated and in 65.85 % of the
pits mineral remained overhanging, the resources volume will always be higher
than estimated.

3. The Ni contents increase in depth in both cuts (laterites and saprolites)

4. Resources were given in m3 as we do not count with the P.V. (density) of laterites
and saprolites in Sierra de Santa Cruz.

VI- R ECOMMENDATIONS

1. Drill with more powerful machines, preferably diamond drilling with witness
sample recovery in all the area as we get the permits, as well as increase density in
the drill network.

2. Take at least 30 samples of laterites as well as the same number of saprolites to

determine the volumetric weight of both in order to give resources including this
parameter.

3. Obtain a more detailed and trustworthy topography of the area.

4. Each pit should be tied to topographic instruments.

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