ni 43-101 preliminary assessment victorio molybdenum … · 2013. 4. 30. · the victorio...

SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran SRK Project No. 160309

NI 43-101 Preliminary Assessment

Victorio Molybdenum-Tungsten Project Luna County, NM

Galway Resources Ltd. Suite 1050-625 Howe Street

Vancouver, BC Canada, V6C 2T6

SRK Project Number 160309

3275 West Ina Road, Suite 240

Tucson, AZ 85741

Effective Date: September 30, 2007

Report Date: April 15, 2008 Contributors: Endorsed by QPs: Martin Raffield – SRK Consulting, Denver, CO Allan V. Moran, R.G., C.P.G. Al Kuestermeyer – SRK Consulting, Denver, CO Bart Stryhas, PhD, C.P.G Mike Elder – SRK Consulting, Denver, CO Terry Mandziak – SRK Consulting, Denver, CO Enviroscientists, Inc., Reno, NV Water Management Consultants, Inc., Tucson, AZ _________________________ _________________________ Project Consultants Qualified Persons

Galway Resources Ltd.

Victorio Molybdenum-Tungsten Project NI 43-101 Preliminary Assessment

SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran I SRK Project No. 160309

Executive Summary (Item 3)

The Victorio Molybdenum-Tungsten Project is, in today’s commodity cycle, an attractive target for potential underground mining. Two underground mining options offer the potential for positive economics. A low-cost Block Cave bulk mining method could potentially produce 159 M lb of molybdenum (Mo) in concentrate and 7.7 M STU (154 million pounds) of tungsten (as WO3) in APT concentrate over a 17 year mine life. A selective mining method of Longhole Stoping with paste back-fill combined with Room and Pillar without back fill could potentially produce 62 M lb Mo in concentrate and 2.5 M STU of WO3 in APT concentrate over a 10 year mine life. A scoping study analysis of both options results in a 15% positive IRR and a $270M potential NPV (at 6% discount) for the block cave option and a 26% positive IRR and a $95M potential NPV for the selective mining option. These results are based on the current scoping level studies completed and described in this report. Economics are based Life-of-Mine (LoM) estimated average commodity prices of $15 molybdenum and $8 tungsten; significantly below the current commodity prices.

The Victorio Molybdenum-Tungsten Project is an advanced exploration property drilled in the late 1970’s and early 1980’s, totaling 71 drillholes for 166,016ft of historical drilling. The property had estimated mineral resources at that time, and had advanced to the point of preliminary project scoping studies and first-pass metallurgical bench-testing for possible mine development. The property had been inactive since the early 1980’s due to depressed tungsten and molybdenum commodity prices, until Galway secured an agreement for the property in 2006 and completed a six-hole confirmation drilling program, resource estimation by current industry standards, and a scoping study and preliminary economic assessment which are the focus of this report.

Property Description and Accessibility

The Victorio Molybdenum-Tungsten property is located in Sections 29 and 30, Township 24 South, Range 12 West, southwestern New Mexico. The geographic center of the property has UTM coordinates of approximately 3,564,716m North and 772,975m East (Zone 12). The property is on the south flank of the Middle Hills of the Victorio Mountains, Luna County, southwestern New Mexico, as shown on the Location Map in Figure 1. Access to the Victorio Mountains and the project area is readily available year round (Figure 2).

The Victorio Molybdenum-Tungsten Project consists of six unpatented lode mining claims held by Donegan Resources, Albuquerque, New Mexico, and 55 lode claims held jointly by Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC, located on



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran II SRK Project No. 160309

U.S. Federal lands administered by the U.S. Bureau of Land Management (BLM). Galway has an option agreement for all 61 unpatented claims of the Victorio Molybdenum-Tungsten Project, as defined in Section 3.7 of this report. NYAK Resources Inc., a subsidiary of Galway, has also located an additional 185 claims contiguous to and surrounding the optioned claims. The property land position is approximately 14,400ft in North-South extent by 16,500 ft in East-West dimension; for approximately 5085 acres in total land area.

Figure 1: Victorio Molybdenum-Tungsten Project Location Map

Victorio MountainsMolybdenum-Tungsten

Project

T E X A S

A R

I Z

O N

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COLORADO

MEXICO0 25 50 miles

0 80.5 km

U.S.A.

History

The Victorio Mountains mining district was first worked in the period of 1880 to 1886 by the Hearst Mining syndicate of San Francisco, California, with exploitation of oxidized argentiferous lead carbonate replacement ores at Mine Hill, located about 1.0mi southeast from and immediately adjacent to the Victorio Molybdenum-Tungsten deposit. Cumulative district historical production estimates from Mine Hill are 70,000-130,000T of lead, silver, gold, zinc, and copper ore (Hendrickson, 1977).



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran III SRK Project No. 160309

Tungsten was first described from Middle Hills in the early years of operation prior to 1904, and beryllium was identified by the New Jersey Zinc Company in 1948 (var. beryl and helvite) (Holser, 1953). At Middle Hills, limited wartime production of tungsten ores as quartz veins in skarn occurred from 1942 to 1944 from the Irish Rose and Tungsten Hill shafts. The primary ore mined at Tungsten Hill was scheelite, with minor galena, smithsonite, and helvite. Production from the Irish Rose Mine is recorded at 20,000T@ 1.0%WO3, with a historical net value of $70,000 (Dale and McKinney, 1959).

The area of the Victorio Molybdenum-Tungsten deposit was held by a number of individuals and was explored by several major mining companies from 1945 until the 1970s when Gulf Minerals acquired a joint-venture interest in the claims, and discovered the Victorio molybdenum-tungsten deposit. Gulf Minerals drilled 166,016ft in 71 holes from 1978 to 1982. By 1983, prior to cessation of all mineral exploration activities in Middle hills, they had advanced the property to a preliminary mining and engineering feasibility study (internal to Gulf) evaluating the project viability. All the historical data gathered by Gulf Minerals is well documented. The historical project data does not have an accounting of the total historical exploration dollars expended on the Victorio Molybdenum-Tungsten Project by all companies. However, in the author’s opinion, approximately $4.0 to $5.0 million historical dollars have been expended on the central Victorio Molybdenum-Tungsten deposit at Middle Hills.

Galway and SRK have examined the historical data used as the basic data that supports the resource estimate; and Galway has verified the geology, mineralization, and drill holes Mo and WO3 grades with six confirmatory core holes completed in 2007.

Geology

The Victorio Mountains geology consists of non-exposed Precambrian basement rocks that are unconformably overlain by a succession of Paleozoic and Mesozoic sedimentary and volcaniclastic plus Tertiary volcanic rocks. The package is intruded by mid-Tertiary dikes, sills, and breccias of basic to silicic composition, with accompanying rhyolite porphyry and a late-stage granitic intrusive.

The Victorio Molybdenum-Tungsten deposit at Middle Hills is a pyrometasomatic stratiform disseminated and stockwork vein deposit localized within the upper Cambrian/Ordovician Bliss sandstone and lower Ordovician El Paso limestone. The deposit is symmetric along the north flank of an east-west-trending gently doubly-plunging anticline. Molybdenum, and tungsten mineralization is distributed in fracture-controlled east-northeast-striking quartz veins, collectively forming an inverted-saucer and horseshoe-shaped deposit within



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran IV SRK Project No. 160309

competent calcareous arkoses and silty limestones. The molybdenum-tungsten deposit has dimensions of approximately 3,000 ft by 2,500 feet in plan, and is 25 to 400 feet in thickness. Sedimentary rocks are now largely altered to calc-silicate assemblages (skarn), with alteration effects extending out to + 5,000ft from the center of the deposit. Remnants of the highly-altered rhyolite to quartz latite porphyry sill associated with mineralization have been intersected in drilling only. The deposit is localized at approximately 1,500 feet in depth within the Upper Bliss sandstone and Lower El Paso limestone beneath the southwest flanks of the Middle Hills.

Mineralization is associated with quartz latite porphyry sills and is largely contained within quartz veins in calc-silicate altered rocks. Molybdenite and scheelite are the economic minerals of interest. Beryllium mineralization, in the form of beryl and helvite, are also distributed in veins and disseminations within altered rock, mostly lateral to and above the molybdenum-tungsten mineralization, but not yet fully defined. Oxidized base-metals mantos, jasperoids, and fault fracture veins at East and Mine Hills are located peripherally to the east and southeast of the molybdenum-tungsten deposit, beyond Galway controlled lands.

The weakly-mineralized and altered Victorio granite has been classified by some recent workers as a porphyry molybdenum system (McLemore et al, 2001; Donahue, 2002); however, the Victorio Molybdenum-Tungsten deposit appears to be floored by the weakly mineralized Victorio granite, and thus the granite is deemed not the source intrusive, based on Galway’s geological interpretations.

Resources

The Victorio Molybdenum-Tungsten deposit was modeled by industry standard block modeling techniques using Vulcan software. Resources were previously stated in a Galway NI 43-101 Technical Report on Resources dated February 28, 2007, and were re-modeled in mid-2007with the new Galway drill data. Geological shapes and limits to mineralization were derived from sections and 3-D shapes provided by Galway. These 3-D bodies were used to control the assignment of grade within each of the different host rocks. Only composites located within each rock type were used to assign grade to the blocks within the same rock type. Grade shells were used to control the projection limits of the resource estimate for molybdenum and tungsten. SRK used 15ft composite data to create polygonal outlines which snapped precisely to the composite boundaries in the drillholes based on a 0.05% cut-off for both molybdenum and tungsten. The polygons were then triangulated into separate 3-D grade shell solids for both molybdenum and tungsten. The block size used was 30ft by 30ft by 15ft. Resources for Victorio were restated from previous estimates using a $15 Mo price (previously $12) and $8 WO3, reflective of the expected Life-of-Mine average



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran V SRK Project No. 160309

anticipated commodity prices. The cut-off $ values used in Table 1 below are only for the purpose of reporting a combined Mo and WO3 insitu resource tonnage and grade, and are not a mining cut-off value.

Table 1: Victorio Project Combined Insitu Resources - Summary Resource Category

Dollar Value/Ton Cut-Off*

Average Dollar Value/Ton Total Tons

Average Grade Mo%

Average Grade WO3%

Indicated $25 $45.80 66.5 0.099 0.101Inferred $25 $40.92 41.9 0.088 0.091Indicated $35 $55.99 40.8 0.123 0.120Inferred $35 $51.21 22.0 0.115 0.105

* Cut off is based on dollar rock value calculated from contained Mo% valued at $15.00/lb combined with WO3% valued at $8.00/lb; and should not be confused with a mining cut off . A $ cut off is utilized to demonstrate insitu combined tonnage and grade when two or more commodities are present.

This Preliminary Assessment includes Inferred resources that have not been sufficiently drilled to have economic considerations applied to them. Until additional planned drilling is completed, and a final resource estimate is done, there is no certainty that Inferred resources will be converted to Measured or Indicated resources.

Property, Mining Rights and Location

The Victorio Molybdenum-Tungsten Project consists of 61 unpatented lode mining claims held by Donegan Resources, Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC. Galway has an option to secure a 100% interest in all 61 unpatented claims of the Victorio Molybdenum-Tungsten Project as further defined in Section 3 of this report. NYAK Resources Inc., a subsidiary of Galway, has also located an additional 125 unpatented claims contiguous with the claims held by Donegan and others (see Table 3.1 and Figure 3-2)

Upon completion of payments totaling $2.0 million over a 5-year period, as outlined in Section 3.7, Galway will own 100% interest in the Victorio Molybdenum-Tungsten Property, subject to an effective 2% Net Smelter Royalty (NSR production royalty) due to Donegan Resources and jointly to Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC on future production from the Victorio Molybdenum-Tungsten deposit.

Exploration/Development Potential

The deposit has been drilled on approximately 400 ft spacing, and Galway’s confirmation in-fill drilling results in 2007 verified the grades and continuity of mineralization. The deposit



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran VI SRK Project No. 160309

remains to be further in-fill drilled, as approximately 35% of the resources are classified as Inferred. While the Victorio Molybdenum-Tungsten deposit has been largely completely defined by drilling, a program of in-fill drilling may also have the potential to incrementally add tonnage on the periphery of the current drill pattern. There is potential for incrementally expanding the deposit to the northeast towards the Tungsten Hill Breccia Pipe, to the south-southeast from the present known configuration of the molybdenum-tungsten deposit, and to the east toward strong mineralization encountered in a drillhole approximately 1,000 feet east of the eastern edge of mineralization.

Mining

The Victorio Molybdenum-Tungsten deposit is a stockwork vein and disseminated deposit hosted in calc-silicate altered rocks. Due to the disseminated nature of the deposit it was not clear at the outset of the project as to whether the deposit would be suitable for bulk, non-selective mining methods such as block caving, or whether a selective method such as cut and fill or longhole stoping would be more suitable. It was decided early on in the project to analyze these two options side-by-side up until a point where a clear leader became apparent. These two options represent the opposite ends of the spectrum, and in later more detailed studies it may be appropriate to choose a middle ground in order to extract the most value from the deposit. This middle ground could consist of carrying out some selective mining in outlying areas of the deposit during the preparatory block cave development. This would enable the operation to produce earlier cash flow and take advantage of the projected high commodity prices in the near-term.

The polymetallic nature of the mineral deposit necessitated the calculation and use of Net Smelter Return (NSR) deposit valuation techniques. NSR takes into account all the off-site costs associated with, transporting, smelting and refining ore as well as mill recoveries and royalty payments. The NSR estimates the value of the rock in the ground taking into account all of these external cost drivers (Table 2).

The mine design process consisted of creating practical stope wireframes based on an NSR block model and an NSR cut-off value. The stope wireframes are evaluated against the block model for volume, tonnage, NSR value and metal grade. Recovery and mining dilution are applied in a spreadsheet environment to account for pillar loss and unplanned stope dilution. The mine design was carried out using Gemcom software.

Primary access development in the form of ramps, haulages, declines, hoisting shafts and ventilation raises was designed in order to determine the approximate quantities for capital



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran VII SRK Project No. 160309

costing. No in-ore development design, with the exception of the undercut level in the block cave scenario, was undertaken for this study.

The two mining scenarios examined are a panel block cave option that would mine the entire deposit, and a selective mining option that would mine the higher unit value portions of the deposit. The selective mining option includes a combination of longhole stoping with paste backfill for those portions of the deposit most amenable to that mining method, with room and pillar mining without backfill for other areas.

At the scoping study level the objective for accuracy is in the +/-40% range. As such, significant reliance was placed on the use of industry experts and benchmarking to estimate mine operating costs

Table 2: NSR Cut-off Value

Bulk mining Selective mining

Mining cost $/ton 4.50 17.50

Process cost $/ton 8.50 10.50

G&A $/ton 1.00 1.50

NSR Cut-off (total cost) $/ton 14.00 29.50

In the bulk mining $14/ton cut-off value option the filtered model was examined for its applicability to a block or panel caving methodology. A number of regular, rectangular footprint areas were designed varying both the base and the top of the stope shape to optimize the grade and tonnage recovery from the design. The base of the cave, the undercut level, was designed on a flat plane to improve the ability to create a continuous undercut slot. The top of the cave undulates according to the location of the mineable ore. Current caving theory predicts that draw is relatively well confined in the area above the drawcone thus allowing for varying draw heights between neighboring blocks. Block Cave parameters are shown in Table 3



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran VIII SRK Project No. 160309

Table 3: Block Cave Stope Estimation

Mining recovery % 100%

Tons ton 120,217,400

Mo grade % 0.0774

WO3 grade % 0.0853

Mo metal lbs 186,184,344

WO3 metal lbs 205,050,688

Average NSR $/ton 28.34

Rec

over

y

Total NSR value $ 3,406,960,000

Dilution % 15%

Tons ton 138,250,000

Mo grade % 0.0673

WO3 grade % 0.0742




Pote

ntia

lly M

inea

ble

Res

ourc

e

Dilu

ted


During a number of iterations of the various selective mining options it was decided to present the final design as a combination between longhole open stoping with pastefill and room and pillar stoping with benching. Table 4 presents the cut-off NSR values for the two mining methods.

Table 4: Selective mining methods NSR cut-off values

Longhole with pastefill Room and pillar with benching

Mining 20.35 13.08 Milling 10.00 10.00 G&A 1.50 1.50 Cut-off Value 31.85 24.58



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran IX SRK Project No. 160309

The design process was carried out in two phases. The first phase used the higher cut-off value and identified areas of the model that are suitable for the more expensive longhole mining method. Once the longhole design was complete the model was filtered at the lower room and pillar cut-off value to determine additional lower cost stoping potential. Selective mining parameters are shown in Table 5.

Table 5: Selective Mining Option

Longhole ton 18,131,000

Mo grade % 0.14

WO3 grade % 0.13

Room and Pillar ton 10,200,000

Mo grade % 0.10

WO3 grade % 0.09

Development $ 212,000

Mo grade % 0.09

Min

ed

WO3 grade % 0.08

Longhole



Room and Pillar



Development

Mo metal lbs 371,000

Pote

ntia

lly M

inea

ble

Res

ourc

e

Met

al

WO3 metal lbs 348,000

Processing

Initial metallurgical testing was completed on samples from Victorio Mountain in 1983 at Hazen Research, Inc. (“Hazen”) under a contract with Gulf Minerals. This test work indicated that satisfactory molybdenum and tungsten recoveries could be achieved using conventional gravity and flotation technologies. The results indicate that molybdenite responds well to conventional flotation techniques at grinds of 91 to 191 mesh, with



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recoveries of 60 to 75% and within acceptable impurity levels. Molybdenum recoveries are higher in rougher flotation for Bliss sandstone and andesite than the El Paso limestone/dolomite rock. Conclusions were that optimization of flotation conditions and the recirculation of intermediate cleaner tailings products could be expected to increase final recoveries to over 85% for molybdenum.

The test results indicate that scheelite also responds well to flotation with the addition of gravity table with recoveries of 74 to 77%. Hazen concluded that recoveries could likely be increased to 85%, for a 3% to 5% WO3 concentrate. Flotation proves effective at recovering 85% to +95% of the tungsten in the minus 150 mesh fractions. Tabling of the flotation tailings results in recovers of 50% to 60% of the tungsten not rejected by floatation. To affect improved tungsten recoveries in the range of 80% to 85%, and with concentrate grades of 3 to 5% WO3, the recovered scheelite product is considered suitable for APT process feed, not for direct sale of concentrate.

However, this 1982 test work resulted in of a complex suite of reagents and chemicals. Thus, additional test work was initiated in 2007 at Hazen to simplify the flow sheet and reagent scheme. Preliminary results of this test program are confirming the results of the 1982 program with a simplifier flow sheet and reagent scheme.

The proposed processing flow sheet for Victorio Mountains is based on the metallurgical test results as follows utilizing conventional technologies for the production of a separate MoS2 concentrate and APT:

• Crushing in a circuit with primary crusher, shorthead cone crusher and high pressure grinding rolls using a double-deck vibrating screen for size classification;

• Grinding using a ball mill and cyclones for size classification;

• Pyrite flotation;

• Molybdenum production in a rougher flotation-regrind-cleaner flotation circuit;

• Tungsten concentrate production in a rougher-cleaner flotation and gravity circuits;

• Molybdenum concentrate thickening, filtering and drying;

• Tungsten concentrate thickening and filtering; and

• APT production plant.



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran XI SRK Project No. 160309

Infrastructure

Infrastructure for the possible development of Victorio is excellent, with a major railway, rail siding, and interstate highway access located within 2.0 miles of the project. The topography is gently sloping on the south flank of the Victorio Mountains, amenable to site development that would have minimal visual or other impacts. Water is available for purchase from wells that tap gravel fill basins in the region, and a regional power grid is locate within 10 miles of the project. A natural gas pipeline traverses the property south of the deposit, and a pumping and pipeline junction station is located 2 miles southeast of the deposit.

Access to sources for a skilled workforce, technical skills and services, and necessary development equipment and supplies, are readily available from either Tucson, Arizona or El Paso, Texas, both being 200 miles or less distant from the property via interstate highway.

Figure 2: Victorio Project Infrastructure

Environmental/Permitting

The Victorio deposit and the immediate region is undeveloped, uninhabited, and of little use for stock grazing or minimal recreational uses; and therefore, there are no anticipated



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran XII SRK Project No. 160309

material issues related to permitting project development. The project will require a variety of federal, state, and local permits related to environmental issues. The permits needed are identified in Section 17.9 of this report, based on work for Galway Resources by Enviroscientists Inc. The review of permit requirements for the Project assumes a specific development scenario, which is based on the following assumptions:

• All project activities will occur on public lands administered by the Bureau of Land

Management (BLM); • The project will be permitted as a new underground, bulk tonnage, mine; • The project is not located within Critical Habitat, Wilderness or Cultural Resources

Areas; • No Threatened or Endangered Species occur within the Project area; • Hazardous wastes will not be stored onsite; • No surface waters are available to appropriate for use in the Project; • The project will require dewatering; • Total surface disturbance associated with the Project will be approximately 3,000 acres

within a 5,000 acre Project area; and • All solid waste will be disposed of in a new on-site landfill.

Enviroscientists recommends, and SRK concurs, that six baseline studies should be prepared as a part of the Environmental Impact Statement (EIS) for the project:

1) a geochemical baseline study; 2) a hydrological baseline study; 3) a dewatering assessment; 4) a vegetation baseline study; 5) a wildlife baseline study; and 6) a cultural baseline study

SRK recommends Galway pursue a strategy to initiate permitting based on the preliminary results presented in this report, the timing of which can only be assessed once the scope of the recommended baseline studies has been defined and the preliminary results reviewed. The process of completing baseline studies and an EIS, plus securing the necessary permits is estimated at this stage of the project to be a minimum of 24 months in a best-case scenario.

Capital and Operating Costs & Project Economics

SRK completed a technical economic model for both the bulk mining and selective mining options, based on scoping level cost inputs as shown in Table 6. Potentially mineable resources are shown in Table 7 and 8



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Table 6: Technical Economic Model inputs Model Parameter Technical Input

Block Cave Model Technical Input

LH Stope/R& P ModelGeneral Assumptions Pre-Production Period 5 yrs 3 yrs Mine Life 17 10 Operating Days per year 365 350Market Discount Rate (range) 6% 6% Mo Price Range $15.00/lb $20.00 – $15.00/lb WO3 Price $160/STU $194-$160/STURoyalty NSR – Mo (payfor) 90% 90% NSR – WO3 (APT payfor) 100% 100% NSR – Owner Obligation- lands (~2%; assumed buy-out) 0% 0%

Table 7: Mineable Resources

Mining Option NSR Cut-off ($/ton)

Resource (kT)

Grade (%Mo) Grade (%WO3)

Block Cave $14.00 138,841 0.07 0.07Selective $29.50 28,543 0.13 0.12

Table 8: LoM Production Summary Model Parameter Block Cave Model LH Stope/R& P

ModelResource Resource (kT) – Block Cave (incl. 15% dilution) 138,250 Resource (kT) – Long- Hole Stoping 18,131 Resource (kT) – Room and Pillar 10,200 Development ore (kT) 591 212 Mo Grade - combined (%) 0.07 0.13 WO3 Grade - combined(%) 0.07 0.12 Contained Mo (k-lb) 187,038 72,589 Contained WO3 (k-lb) 205,334 66,563Production Mine Production Rate (T/yr) 9,125,000 2,975,000 Mill Recovery Mo (%) 85 85 Mill Recovery WO3 (%) 75 75 Mo Produced 158,982 72,589 WO3 Produced 154,000 66,563

LoM Operating average costs are summarized in Table 9.



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Table 9: LoM Operating Cost Summary (US$000) Description Block Cave Model LH Stope/R& P

ModelMining 4.59 17.60Process 8.44 9.84G&A 0.75 1.50Total 13.78 28.94

LoM Capital costs are summarized in Table 10 Freight and import duties are included in the unit cost. A 35% contingency factor is applied to all capital cost estimates. Working capital is estimated based upon seven days cash, 30 days receivables and 60 days payables.

Table 10: LoM Capital Cost Summary (US$000) Description Block Cave Model LH Stope/R& P

ModelMining Equipment 162,266 94,220Mine Development 50,484 35,700Process Equipment 143,931 66,338Tailings 50,920 24,282Infrastructure 11,050 7,269Owner Costs 23685 14,607Total 442,337 242,416Working Capital 5,632 15,782

Project capital costs are estimated to be US$442 million over the LoM for the block cave option and $242 million for the selective mining option.

Indicative Economic Model results developed are summarized in Table 11. Based upon current assumptions presented in this section, pre-tax project NPV(6%) is US$270 million with an IRR of 15% for the block cave mining option and a NPV(6%) of $94 million with an IRR of 26% for the selective mining option.



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran XV SRK Project No. 160309

Table 11: Indicative Economic Results (US$000) Description Block Cave Model LH Stope/R& P

ModelProduction Ore Mined (kT) 138,841 28,543 Mo Produced (klb) 158,982 61,701 WO3 Produced (klb) 154,000 49,922Operating Margin Gross Revenue Mo 2,384,730 972,349 WO3 1,232,002 409,633

Gross Revenue 3,616,732 1,381,982 Royalty

Roasting charges –Mo, incl. losses 248,012 101,124Transportation – Mo conc. 4,880 1,894WO3 process losses 4,928 1,639Transportation – WO3 in APT conc. 13,289 4,308

Royalty 271,109 108,965 Gross Income from Mining 3,345,623 1,273,017

US$/T-ore $24.10 $44.60US$/lb- Mo-eq $23.45 22.99

Operating Costs Production Mining 637,103 502,384 Process 1,171,506 280,942 G&A 104,131 42,814

Subtotal Production 1,912,740 826,141US$/T-ore 13.78 $28.94

US$/lb- Mo-eq $13.41 $14.92 Operating Margin (EBITDA)

US$/T-ore $10.32 $15.66US$/lb- Mo $10.04 $8.07

Capital Costs Mining 212,750 129,920 Process 194,851 90,620 Infrastructure 11,050 7,269 Owner 23685 14,607 Total Capital Costs 442,337 242,416Cash Flow 990,547 204,460

IRR 15% 26NPV6% 270,482 94,414



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran XVI SRK Project No. 160309

Economic sensitivities for both cases are shown in the following graphs:

Figure 3: Bulk Mining Option Sensitivities

Block Cave Option

0

5

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15

20

25

-10% -5% Base 5% 10%

% change

IRR

Metal Prices

Operating Costs

Capital Costs

Figure 4: Selective Mining Option Sensitivities

LH and RP Option

0

5

10

15

20

25

30

35

40

45

-10% -5% Base 5% 10%

% Change

IRR

Metal Prices

Operating Costs

Capital Costs



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran XVII SRK Project No. 160309

Conclusions and Recommendations

The Victorio Molybdenum-Tungsten Project represents an advanced exploration property with a current resource estimate based on well documented historical drill data, which has been confirmed by recent Galway drilling, and is a viable property for potential development. The work to date includes a scoping study analysis of the potential mineability by two underground mining option, conventional milling and flotation recovery onsite of both tungsten and molybdenum. Indicative project economics are positive, and should be optimized going forward in a recommended pre-feasibility study. In light of current and forecast molybdenum and tungsten commodity prices, the Victorio Molybdenum-Tungsten Project warrants further evaluation. To advance the Victorio Molybdenum-Tungsten Project, SRK recommends a pre-feasibility level study be undertaken to assess several key issues that will affect a development decision for the property; those area for additional study include the following:

• Conduct additional in-fill drilling with the goal of a) converting Inferred resources to Indicated resources, and b) further defining the edge of the deposit with the objective of adding incremental tonnage; then re-examine the resource model (an estimated $2.14 million cost);

• Conduct a specific drilling program to define the deposit’s geotechnical characteristics with a goal of determining a) confirmation of the block-caveability characteristics of the deposit and b) inputs to a structural model for purposes of mine planning.

• Re-examine the mining options and associated operating and capital costs;

• Conduct a comprehensive metallurgical program to define optimal processing parameters, conceptual process flow sheets, and capital and operating costs;

• Initiate baseline environmental studies, as part of a program aimed at completing an Environmental Impact Study;

• Initiate a strategy to begin permitting the envisioned underground mining operation; and

• Re-examine the project technical economic model as part of an overall pre-feasibility study.

It is possible to complete a pre-feasibility study in a 10-12 month time frame at a cost estimate of approximately US $3.4 million ($2.14 M as in-fill drilling) as a Phase I program, and an estimated additional $1.5 million for a Phase II program of full feasibility study and preliminary engineering, in an additional 10-12 months, as presented in Section 19 of this report. All work, both Phase I pre-feasibility and Phase II full feasibility, are anticipated to



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take approximately 24 months to complete, run concurrently and in parallel with project permitting.

This Preliminary Assessment includes Inferred resources that have not been sufficiently drilled to have economic considerations applied to them. Until additional planned in-fill drilling is completed, and a final resource estimate is done, there is no certainty that Inferred resources will be converted to Measured or Indicated resources; therefore, there can be no certainty that this Preliminary Assessment will be realized.



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TABLE OF CONTENTS

Property Description and Accessibility....................................................................................... I History........................................................................................................................................ II Geology.....................................................................................................................................III Resources ..................................................................................................................................IV Property, Mining Rights and Location.......................................................................................V Exploration/Development Potential ...........................................................................................V Mining.......................................................................................................................................VI Processing .................................................................................................................................IX Infrastructure .............................................................................................................................XI Environmental/Permitting .........................................................................................................XI Capital and Operating Costs & Project Economics ................................................................ XII Conclusions and Recommendations .................................................................................... XVII 1.0 INTRODUCTION AND TERMS OF REFERENCE (ITEM 4) ....................................1 1.1 Terms of Reference .........................................................................................................1 1.2 Introduction.....................................................................................................................1 1.3 Purpose of Report............................................................................................................2 1.4 Sources of Information and Data ....................................................................................2 1.5 Field Involvement by Report Authors ............................................................................3

1.5.1 Allan V. Moran, R.G., C.P.G................................................................3 1.5.2 Bart Stryhas, PhD., C.P.G.....................................................................3

1.6 Definitions of Terms .......................................................................................................3 2.0 RELIANCE ON OTHER EXPERTS (ITEM 5) .............................................................4 3.0 PROPERTY DESCRIPTION AND LOCATION (ITEM 6)..........................................6 3.1 Location ..........................................................................................................................6 3.2 Property Description .......................................................................................................6 3.3 Surface Area of Property.................................................................................................6 3.4 Mineral Claims................................................................................................................6 3.5 Legal Surveys................................................................................................................13 3.6 Requirements to Maintain the Claims in Good Standing .............................................13 3.7 Titles and Obligations / Agreements.............................................................................13 3.8 Exceptions to Title Opinion ..........................................................................................15 3.9 Royalties and Other Encumbrances ..............................................................................15 3.10 Environmental Liabilities..............................................................................................16 3.11 Permits and Licenses.....................................................................................................16 4.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND

PHYSIOGRAPHY (ITEM 7) .......................................................................................18 4.1 Access 18 4.2 Physiography.................................................................................................................18 4.3 Climate and Operating Seasons ....................................................................................19 4.4 Vegetation .....................................................................................................................20 4.5 Local Resources and Infrastructure...............................................................................20 5.0 HISTORY (ITEM 8) .....................................................................................................22



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5.1 Project Expenditures .....................................................................................................24 5.2 Historical Mineral Resource and Mineral Reserve Estimates.......................................25 6.0 GEOLOGICAL SETTING (ITEM 9)...........................................................................27 6.1 Regional Geology .........................................................................................................28 6.2 Local Geology...............................................................................................................29

6.2.1 Lithology and Stratigraphy .................................................................34 6.2.2 Structural Geology..............................................................................40 6.2.3 Alteration ............................................................................................43

6.3 Mineralization ...............................................................................................................47 7.0 DEPOSIT TYPES (ITEM 10).......................................................................................50 8.0 MINERALIZATION (ITEM 11)..................................................................................52 9.0 EXPLORATION (ITEM 12) .......................................................................................59 9.1 Summary .......................................................................................................................59 9.2 Current Galway Exploration Program (2008)...............................................................60 9.3 Geotechnical Core Logging ..........................................................................................61 9.4 Oriented Drill Core .......................................................................................................61 10.0 DRILLING (ITEM 13) .................................................................................................63 10.1 Summary .......................................................................................................................63 10.2 Drilling Methods ...........................................................................................................63 11.0 SAMPLING METHOD AND APPROACH (ITEM 14)..............................................70 12.0 SAMPLE PREPARATION, ANALYSES AND SECURITY (ITEM 15)...................72 12.1 Sample Preparation .......................................................................................................72 12.2 Analytical Procedures ...................................................................................................72 12.3 Quality Control Procedures (QA/QC)...........................................................................73 12.4 Sample Security ............................................................................................................76 12.5 ISO 9000 Certification ..................................................................................................77 12.6 Recommendations.........................................................................................................77 13.0 DATA VERIFICATION (ITEM 16) ............................................................................78 13.1 Data Verification...........................................................................................................78

13.1.1 SRK Verification Samples..................................................................79 13.1.2 Historical Data Verification................................................................79

14.0 ADJACENT PROPERTIES (ITEM 17) .......................................................................84 15.0 MINERAL PROCESSING AND METALLURGICAL TESTING (ITEM 18) .........85 15.1 15.1 Metallurgical Testing ............................................................................................85 15.2 Hazen Research (1982) .................................................................................................85 15.3 Hazen Research (2007) .................................................................................................87 15.4 Review and Analysis of Metallurgical Test Work........................................................88 15.5 Processing Flow Sheet ..................................................................................................89 15.6 Recommendations.........................................................................................................89 16.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES (ITEM 19)......91 16.1 Introduction...................................................................................................................91 16.2 Resource Database ........................................................................................................91

16.2.1 Drillhole Database ..............................................................................91 16.2.2 Geology...............................................................................................91 16.2.3 Compositing........................................................................................92 16.2.4 Specific Gravity ..................................................................................93



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16.3 Variogram Analysis & Modeling..................................................................................94 16.3.1 Variogram Analysis ............................................................................94 16.3.2 Modeling.............................................................................................94

16.4 Model Verification........................................................................................................95 16.5 Resource Classification...............................................................................................103 16.6 Mineral Resource Statement .......................................................................................103 16.7 Mineral Resource Sensitivity ......................................................................................104 17.0 OTHER RELEVANT DATA AND INFORMATION (ITEM 20) ............................107 17.1 Summary of Exploration Activities and Progress.......................................................108 17.2 Resource Estimation ...................................................................................................108 17.3 Geotechnics .................................................................................................................108 17.4 Mining 112

17.4.1 Mining Overview..............................................................................112 17.4.2 Net Smelter Return (NSR) Estimation .............................................113 17.4.3 Cut-off NSR Value Estimation.........................................................114 17.4.4 Mine Design and Scheduling Process...............................................115 17.4.5 Bulk Mining......................................................................................117

Stope Design .....................................................................117 Development Design.........................................................120 Production Schedule .........................................................125 Mining Equipment ............................................................128 Operating Cost ..................................................................129 Capital Cost.......................................................................130

17.4.6 Selective Mining...............................................................................132 Stope Design .....................................................................132 Development Design.........................................................135 Production Schedule .........................................................136 Mining Equipment ............................................................140 Operating Cost ..................................................................140 Capital Cost.......................................................................141

17.4.7 Summary...........................................................................................143 17.4.8 Recommendations - Mining .............................................................143

Bulk Mining ......................................................................143 Selective Mining ...............................................................144

17.5 Metallurgy and Process Description ...........................................................................144 17.5.1 Process Description ..........................................................................144 17.5.2 Crushing............................................................................................149 17.5.3 Grinding............................................................................................149 17.5.4 Pyrite Flotation .................................................................................149 17.5.5 Molybdenum Flotation .....................................................................149 17.5.6 Tungsten Flotation ............................................................................150 17.5.7 Tungsten Gravity Concentration.......................................................150 17.5.8 APT Plant..........................................................................................150 17.5.9 Reagent/Chemical Handling.............................................................151 17.5.10 Process Design Criteria.....................................................................151 17.5.11 Mill Tailing.......................................................................................153



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17.6 Infrastructure ...............................................................................................................162 17.6.1 Access ...............................................................................................163 17.6.2 Power Supply and Substation ...........................................................163 17.6.3 Potable Water, Sewage .....................................................................163 17.6.4 Non-Potable Water ...........................................................................164 17.6.5 Buildings and Ancillary Facilities ....................................................164 17.6.6 Miscellaneous Infrastructure ............................................................164 17.6.7 Housing, Mancamp...........................................................................164

17.7 Owner’s Costs .............................................................................................................164 17.8 Hydrogeological Investigations ..................................................................................166

17.8.1 Hydrogeologic Setting ......................................................................166 17.8.2 Site Water Balance ...........................................................................168 17.8.3 Groundwater Quality ........................................................................169 17.8.4 Hydrogeologic Conceptual Model....................................................169 17.8.5 Estimated groundwater flow into the mine level ..............................170 17.8.6 Extent of dewatering impacts on nearby wells .................................171

17.9 Environmental Studies and Background Information.................................................174 17.9.1 New Mexico Water Rights ...............................................................174 17.9.2 Required Permits ..............................................................................175 17.9.3 Permit Requirement Assumptions ....................................................175 17.9.4 Federal Permit Requirements ...........................................................176 17.9.5 State of New Mexico Permit Requirements .....................................177 17.9.6 Luna County Permit Requirements ..................................................185 17.9.7 Environmental Document and Baseline Studies...............................185 17.9.8 Non-Governmental Organizations (NGOs)......................................187 17.9.9 Impacts..............................................................................................188 17.9.10 Social Impacts...................................................................................188

17.10 Preliminary Assessment ..............................................................................................189 17.10.1 Model Inputs.....................................................................................190 17.10.2 Operating Costs ................................................................................191 17.10.3 Capital Costs.....................................................................................192

17.11 Indicative Technical-Economic Results......................................................................193 18.0 INTERPRETATION AND CONCLUSIONS (ITEM 21).........................................197 18.1 Opportunity .................................................................................................................198

18.1.1 Resources..........................................................................................198 18.1.2 Mining and Processing .....................................................................198

18.2 Project Risks ...............................................................................................................198 18.2.1 Commodity Price Fluctuation...........................................................198 18.2.2 Infrastructure.....................................................................................199 18.2.3 Rock Mechanics................................................................................199 18.2.4 Mining Methods................................................................................199 18.2.5 Metallurgical Characteristics and processing costs ..........................200 18.2.6 Environmental and Permitting..........................................................200

19.0 RECOMMENDATIONS (ITEM 22).........................................................................201 19.1 Drilling ........................................................................................................................201 19.2 Resource Estimation Update .......................................................................................201



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19.3 Geotechnical Drilling and Analysis ............................................................................201 19.4 Mining Options and Cost Analysis .............................................................................201 19.5 Metallurgical Testing ..................................................................................................202 19.6 Processing Options/ Process Flow Sheet / Process Design.........................................202 19.7 Infrastructure ...............................................................................................................202 19.8 Environmental and Permitting ....................................................................................202 19.9 Economic Analysis and Pre-Feasibility ......................................................................203 19.10 Proposed Budget .........................................................................................................203 20.0 REFERENCES (ITEM 23) .........................................................................................205 21.0 CERTIFICATES OF AUTHOR .................................................................................210

LIST OF TABLES

Table Page Table 1: Victorio Project Combined Insitu Resources - Summary...................................V Table 2: NSR Cut-off Value .......................................................................................... VII Table 3: Block Cave Stope Estimation .........................................................................VIII Table 4: Selective mining methods NSR cut-off values ...............................................VIII Table 5: Selective Mining Option....................................................................................IX Table 6: Technical Economic Model inputs .................................................................XIII Table 7: Mineable Resources........................................................................................XIII Table 8: LoM Production Summary .............................................................................XIII Table 9: LoM Operating Cost Summary (US$000)......................................................XIV Table 10: LoM Capital Cost Summary (US$000) ..........................................................XIV Table 11: Indicative Economic Results (US$000)...........................................................XV Table 3-1: Victorio Molybdenum-Tungsten Project, List of Claims ....................................8 Table 5-1: Summary of Victorio Exploration Activity* .....................................................24 Table 5-2: Summary of Estimated Historical Expenditures – Victorio Mo-W Deposit* ...24 Table 5-3: Victorio Historical Undiluted Reserves (1983) .................................................25 Table 10-1: Galway Confirmation/In-fill Drilling ................................................................66 Table 13-1: Victorio Check Assays by SRK.........................................................................79 Table 15.1: Hazen Research Capital Cost Estimate for Victorio Mountains........................86 Table 15.2: Hazen Research Operating Cost Estimate for Victorio Mountains ...................87 Table 16-1: Specific Gravity Determinations of the Host Rocks..........................................93 Table 16-2: Variogram Results for 20ft Composite Data of Molybdenum and Tungsten....94 Table 16-3: Victorio Model Limits .......................................................................................95 Table 16-4: Statistical Comparisons of Raw Assays, Composite Assays and Block Model

Assays ................................................................................................................97 Table 16-5: Statistical Comparisons of Infill Drillhole Composite Assays and February

2007 Block Model Assays .................................................................................97 Table 16-6: Victorio Insitu Resource Statement - Summary ..............................................103 Table 16-7: Victorio Indicated Resource Sensitivity ..........................................................104 Table 16-8: Victorio Inferred Resource Sensitivity ............................................................104 Table 17.1: Preliminary Assessment Project Teams and Responsibilities .........................108



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran vi SRK Project No. 160309

Figure 17.2: Areas with low geotechnical information based on Galway’s planned drilling program............................................................................................................110

Table 17.2: Victorio NSR assumptions ..............................................................................114 Table 17.3: Victorio NSR value calculation .......................................................................114 Table 17.4: NSR Cut-off Value ..........................................................................................115 Table 17.5: Block Cave Stope Estimation ..........................................................................119 Table 17.6: Caving Option Production and Development Schedule ..................................127 Table 17.7: Mobile capital equipment for cave mining option...........................................128 Table 17.8: Cave mining cost profile..................................................................................129 Table 17.9: Underground mining capital summary – Caving Option.................................131 Table 17.10: Selective mining methods NSR cut-off values ................................................132 Table 17.11: Selective stope design criteria..........................................................................132 Table 17.12: Selective Mining Option..................................................................................137 Table 17.13: Selective Mining Production and Development Schedule ..............................138 Table 17.14: Detailed Production Schedule..........................................................................139 Table 17.15: Mobile capital equipment for selective mining option ....................................140 Table 17.16: Selective mining methods operating cost ........................................................141 Table 17.17: Underground mining capital summary – Selective Option .............................142 Table 17.18: Major Equipment List for Victorio Mountains................................................147 Table 17.19: Process Design Criteria....................................................................................152 Table 17.20: Tailings Storage Facility Cost Estimate...........................................................155 Table 17.21: Phase 1 Tailings Storage Facility Cost Estimate (Crest El. 4430) ..................156 Table 17.22: Phase 2 Tailings Storage Facility Cost Estimate (Crest El. 4475) ..................157 Table 17.23: Phase 3 Tailings Storage Facility Cost Estimate (Crest El. 4500) ..................158 Table 17.24: Phase 4 Tailings Storage Facility Cost Estimate (Crest El. 4510) ..................159 Table 17.25: Infrastructure Capital Summary – Block Caving Option ................................162 Table 17.26: Infrastructure Capital Summary – Selective Mining Option ...........................162 Table 17.27: Owner’s Costs Summary – Caving Option .....................................................165 Table 17.28: Owner’s Costs Summary – Selective Option ..................................................165 Table 17.29: Model Parameters ............................................................................................190 Table 17.30: Mineable Resources.........................................................................................190 Table 17.31: LoM Production Summary ..............................................................................191 Table 17.32: LoM Operating Cost Summary (US$000).......................................................191 Table 17.33: Estimated Processing Plant Operating Costs for Victorio Mountains.............192 Table 17.34: LoM Capital Cost Summary (US$000) ...........................................................192 Table 17.35: Initial Process Plant Capital Costs ($millions) ................................................193 Table 17.36: Indicative Economic Results (US$000)...........................................................194 Table 17.37: Bulk Mining Option Sensitivities ....................................................................195 Table 17.38: Selective Mining Option Sensitivities .............................................................195 Table 19.8.1: Phase I Recommendations and Estimated Costs .............................................203



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LIST OF FIGURES

Figure Page

Figure 1: Victorio Molybdenum-Tungsten Project Location Map .................................... II Figure 2: Victorio Project Infrastructure ...........................................................................XI Figure 3: Bulk Mining Option Sensitivities ...................................................................XVI Figure 4: Selective Mining Option Sensitivities ............................................................XVI Figure 3-1: Victorio Location Map ........................................................................................7 Figure 3-2: Claim Location Map – Victorio Molybdenum-Tungsten Project......................12 Figure 4-1: Victorio Project Map – Access and Infrastructure.............................................19 Figure 4-2: Victorio Molybdenum-Tungsten Project – Location/Access ............................21 Figure 6-1: Regional Geology Map......................................................................................29 Figure 6-2: Victorio Mountains Geology Map.....................................................................30 Figure 6-3: Cross–section A-A’ ...........................................................................................32 Figure 6-4: Stratigraphic Section..........................................................................................33 Figure 6-5: Local Geology Cross Section B-.B’(Galway 2008) ..........................................37 Figure 8-1: Distribution of Molybdenum-Tungsten Mineralization (Gulf 1982) ................55 Figure 8-2: Distribution of Molybdenum-Tungsten Mineralization (Galway 2008) ...........56 Figure 8-3: Drill Hole Location Map (Galway 2008) ..........................................................57 Figure 8-4: Cross Section 8.5 on figure 8-3(Galway 2007) .................................................58 Figure 10-1: Drillhole Location Map ....................................................................................64 Figure 10-2: Galway Confirmation/In-fill Drilling ................................................................67 Figure 10-3: Galway Recent Angle In-fill Drilling (Galway 2008) .......................................68 Figure 12-1: Standard versus ALS assays for Mo..................................................................75 Figure 12-2: Standard versus ALS assays for WO3...............................................................76 Figure 16-1: Victorio Mountain Typical Block Model Cross-section Showing Distribution of

Molybdenum......................................................................................................99 Figure 16-2: Victorio Mountain Typical Block Model Cross-section Showing Distribution of

Tungsten ..........................................................................................................100 Figure 16-3: Victorio Mountain Typical Cross-section Showing 15ft Assay Composites of

Molybdenum....................................................................................................101 Figure 16-4: Victorio Typical Cross-section Showing 15ft Assay Composites of Tungsten102 Figure 16-5: Grade Tonnage Curves for Indicated Resources at Victorio ...........................105 Figure 16-6: Grade Tonnage Curves for Inferred Resources at Victorio .............................105 Figure 17.1: Galway Planned drilling (as of 2007) ..............................................................109 Figure 17.3: Isometric view of orebody above $14/ton NSR value (looking north) ...........118 Figure 17.4: Orebody above $14/ton NSR and cave mining area (looking north) ..............118 Figure 17.5: Panel cave access and production development design...................................121 Figure 17.6: Undercut level..................................................................................................122 Figure 17.7: Production level ...............................................................................................123 Figure 17.8: Ventilation Level .............................................................................................124 Figure 17.9: Ventilation raises .............................................................................................125



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Figure 17.10: Cross section through orebody showing stope designs and cut off value contours............................................................................................................134

Figure 17.11: Longhole and room and pillar stope area design .............................................135 Figure 17.12: Selective mining development design .............................................................136 Figure 17.13: Simplified Process Flow Sheet for Victorio Project........................................146 Figure 17.14: Conceptual Tailings site – 140 MT Option .....................................................160 Figure 17.15: Conceptual Tailings Site – 19 MT Option.......................................................161 Figure 17.16: Hydrological Basemap.....................................................................................173 Figure 17.17: Bulk Mining Option Sensitivities ....................................................................196 Figure 17.18: Selective Mining Option Sensitivities .............................................................196

LIST OF APPENDICES

Appendix APPENDIX A Glossary of Terms and Acronyms APPENDIX B Preliminary Assessment Economic Model



SRK Consulting (U.S.), Inc. April 15, 2008 Allan V. Moran 1 SRK Project No. 160309

1.0 INTRODUCTION AND TERMS OF REFERENCE (Item 4)

1.1 Terms of Reference

SRK was originally commissioned by Galway in March, 2006, to prepare a Canadian National Instrument 43-101 (NI 43-101) compliant technical report for the Victorio Molybdenum-Tungsten Project, Luna County, New Mexico (SRK, 2006). That report was completed June 06, 2006. SRK completed a resource estimate and a NI 43-101 Technical Report on Resources for The Victorio Molybdenum-Tungsten Project dated February 28, 2007 (SRK, 2007, utilizing well documented historical drillhole data. Galway completed a limited program of confirmation/in-fill drilling culminating in May 2007. This Preliminary Assessment Technical Report addresses the resource update and scoping level studies conducted during the period of June through December, 2007. The effective date of this report is September 30, 2007; the date of the most current resource estimate tabulation of results, using a $15 Mo price.

1.2 Introduction

The Victorio Molybdenum-Tungsten Project is an advanced exploration property drilled in the late 1970’s and early 1980’s, totaling 71 drillholes for 166,016ft of historical drilling. The property had estimated mineral resources at that time, and had advanced to the point of preliminary project scoping studies and first-pass metallurgical bench-testing for possible mine development. The property had been inactive since the early 1980’s due to depressed tungsten and molybdenum commodity prices, until Galway secured an agreement on the property in 2006 and initiated confirmation drilling. This NI 43-101 Preliminary Assessment includes a current and updated NI 43-101 compliant resource estimate based on the significant amount of historical project data and Galway’s six-hole confirmation drilling program completed in early 2007; and the results of scoping level studies conducted by SRK since June 2007.

This report is a technical document based on the information available for the Victorio Molybdenum-Tungsten Project, and SRK’s knowledge of mining and processing methods and costs. This report has been prepared at the request of Robert Hinchcliffe, President and CEO, Galway (stock symbol is GWY on the TSX Venture Exchange). Galway is a Junior Exploration Company with offices at Suite1050 - 625 Howe Street, Vancouver, B.C., Canada, V6C 2T6. NYAK Resources, Inc. is a wholly-owned subsidiary company of Galway.




1.3 Purpose of Report

The purpose of this technical report on the Victorio Molybdenum-Tungsten Project is to provide a Preliminary Assessment, prepared according to NI 43-101 guidelines. Form NI 43-101F1 was used as the format for this report.

The intent of this Technical Report is to provide the reader with a comprehensive review of the historical exploration activities conducted at the Victorio Molybdenum Tungsten Project, the current SRK resource estimate update, and the results of scoping level studies on the potential to economically mine, and process the molybdenum-tungsten mineralization at Victorio. The conclusions and recommendations in this report, and specifically the preliminary economic analysis, are for the sole purpose of determining the potential economic viability of the project, and the areas of technical input that need clarification in a pre-feasibility or feasibility study. This report is expressly not intended to define any economic conclusions upon which to make a development decision for the project.

This report is prepared using the industry accepted Canadian Institute of Mining, Metallurgy and Petroleum (CIM) “Best Practices and Reporting Guidelines” for disclosing mineral exploration information, the Canadian Securities Administrators revised regulations in NI 43-101 (Standards of Disclosure For Mineral Projects) and Companion Policy 43-101CP, and CIM Definition Standards for Mineral Resources and Mineral Reserves (December 11, 2005).

1.4 Sources of Information and Data

The authors reviewed historical data provided by Galway Resources, conducted field investigations to confirm the data, and reviewed the project site. Most of the project data is historical data dating from the 1970’s and early 1980’s; Galway has completed six confirmatory core drill holes totaling 11,285 feet, and has initiated additional drilling. The historical data sources include 20 file boxes of hard copy reports, assay certificates, company memos and correspondence, and many hard copy maps and cross-sections; most data having been generated by exploration activities of Gulf Mineral Resources Inc. Skeletonized drill core is available for examination at the New Mexico Bureau of Geology & Mineral Resources at Socorro, New Mexico; and outcrops and old mine dump exposures of mineralized rock are accessible. Gulf Mineral Resources Inc. ceased exploration activities at Victorio Mountains in 1983. The total historical drill hole database is 162,209 feet of drilling in 69 drillholes. Galway drill core is available for review in their field office and core storage facility in Deming, New Mexico.




1.5 Field Involvement by Report Authors

1.5.1 Allan V. Moran, R.G., C.P.G.

Allan Moran conducted an onsite review of the property during the period of March 30, 2006, and July 13, 2007. Mr. Moran is a “Qualified Person” as defined by NI 43-101, and is the Qualified Person responsible for all sections of this report.

1.5.2 Bart Stryhas, PhD., C.P.G.

Bart Stryhas conducted database verification in November, 2006, construction of a resource block model for the Victorio Molybdenum-Tungsten deposit in January, 2007, and an update resource model in June 2007. He is responsible for the resource estimation methodology and the resource numbers stated in Section 16 of this report. Bart is a Qualified person as defined by NI 43-101.

1.6 Definitions of Terms

American versions of Imperial English units of measure (U.S. Customary Units) are used in this report as these are the commonly used units of measure in the United States. Analytical results are generally reported as percent for tungsten (W; commonly reported as %W03), and for molybdenum (Mo; commonly reported as %Mo or %MoS2), and parts per million (ppm) for other trace elements (1,000ppm = 0.1%, 10,000ppm = 1.0%). Mining units are short tons, and dollars are expressed as U.S.$.

Estimates of costs in this report relating to mining, processing, and infrastructure are estimates to the standard level of a scoping study of approximately ±35% accuracy.

Appendix A provides a Glossary of terms and definitions used in this report.




2.0 Reliance on Other Experts (Item 5)

The authors, as Qualified Persons, have examined the historical data for the Victorio Molybdenum-Tungsten Property provided by Galway, have verified that data with Galway acquired drill data, and have relied upon all as the basic data to support the statements and opinions presented in this Preliminary Assessment. In the opinion of the authors, the Gulf Minerals Resources Inc. historical data is present in sufficient detail, is credible and verifiable in the field, and is a reasonable representation of the Victorio Molybdenum-Tungsten Project. Galway’s exploration data corroborates the historical data and has been collected in sufficient and acceptable detail.

It is suspected that some supporting back up information, such as original field mapping and drill core logging sheets, existed at one time, but are not now part of the project data files in possession of Galway. There is no known master file index that existed in the early 1980’s of the contents or location of all historical files; however, it is the opinion of the author, that there are no material gaps in the information for the Victorio Molybdenum-Tungsten Project. Sufficient information is available to prepare this report, and any statements in this report related to deficiency of information are directed at information which, in the opinion of the author, was not gathered by previous workers, or is information recommended to be gathered by Galway as the project moves forward.

This report includes technical information, which requires subsequent calculations to derive sub-totals, totals, and weighted averages. Such calculations inherently involve a degree of rounding and consequently can introduce a margin of error. Where these rounding errors occur, SRK does not consider them to be material.

The Author has relied upon the work of others to describe the land tenure and land title in New Mexico (referring respectively to Sections 3.5 – Legal Surveys, and Section 3.7 – Titles and Obligations/Agreements). The author is not qualified with respect to environmental laws in New Mexico, as regarding issues addressed in Section 3.10 of this report – Environmental Liabilities. SRK has reviewed the work of Enviroscientists Inc., and Water Management Inc., each of which are independent contributors, on behalf of Galway Resources, to this report with respect to project permitting and water resources, respectively. SRK concurs with their work and has relied upon and accepted their descriptions, conclusions, and recommendations.

The Authors and SRK are not insiders, associates, or affiliates of Galway, NYAK Resources, Donegan Resources Inc, or Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC. The results of this Preliminary Assessment are not




dependent upon any prior agreements concerning the conclusions to be reached, nor are there any undisclosed understandings concerning any future business dealings between Galway and the authors or SRK will be paid a fee for its work in accordance with normal professional consulting practice.




3.0 PROPERTY DESCRIPTION AND LOCATION (Item 6)

3.1 Location

The Victorio Molybdenum-Tungsten property is in Sections 29 and 30, Township 24 South, Range 12 West, New Mexico Baseline and Principal Meridian, Victorio Mining District (cf: Gage, Mine Hill), and the geographic center of the property has UTM coordinates of approximately 3,564,716m North and 772,975m East (Zone 12). The property is on the south flank of the Middle Hills of the Victorio Mountains, Luna County, southwestern New Mexico, as shown on the Location Map in Figure 3-1.

3.2 Property Description

The Victorio Molybdenum-Tungsten Project consists of six unpatented lode mining claims held by Donegan Resources, Albuquerque, New Mexico, and 55 lode claims held jointly by Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC, all Arizona based companies, located on U.S. Federal lands administered by the U.S. Bureau of Land Management (BLM). The Donegan claims cover approximately 110 acres of land in Sections 29 and 30, T. 24 S., R. 12 W. The claims of Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC, VIC 1 through 55 claims, cover approximately 1026 acres in Sections 29, 30, 31, and 32, T. 24 S., R. 12 W. Galway has an option on all 61 unpatented claims of the Victorio Molybdenum-Tungsten Project, as defined in Section 4.7 of this report. NYAK Resources Inc., a subsidiary of Galway, has also located an additional 185 Rob claims contiguous with the VIC claim block (see Table 3.1 and Figure 3-2).

3.3 Surface Area of Property

The property land position is approximately 14,400ft in North-South extent by 16,500ft in East-West dimension; for approximately 5,085 acres in total land area. Each unpatented lode mining claim is approximately 600ft by 1,500ft in size for approximately 20.67 acres of surface area (see Figure 3-2).

3.4 Mineral Claims

Ownership of unpatented mining claims is in the name of the holder (locator), with ownership of the minerals belonging to the United States of America, under the administration of the U.S. Bureau of Land Management (BLM). Under the Mining law of 1872 which governs the location of unpatented mining claims on Federal lands, the




locator has the right to explore, develop, and mine minerals on unpatented mining claims without payments of production royalties to the Federal government.

Figure 3-1: Victorio Location Map

Victorio MountainsMolybdenum-Tungsten

Project

T E X A S

A R

I Z

O N

A

COLORADO

MEXICO0 25 50 miles

0 80.5 km

U.S.A.




It should also be noted that there has been recent U.S. Congressional effort to change the 1872 mining law, to include the provision of federal production royalties; however, currently annual claim maintenance fees are the only federal encumbrances to unpatented mining claims. Information regarding recorded unpatented mining claims on file with the BLM can be searched on-line at http://www.blm.gov/lr2000/.

Unpatented lode mining claims in New Mexico are located in the field with four corner posts, and a location monument. At the time of the field inspection there were six unpatented mining claims of Donegan Resources, which were amended in 1978, fifty-five unpatented lode claims held jointly by Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC. In 2006, an additional sixty-four unpatented lode claims were staked by Galway’s subsidiary, NYAK Resources. The author did not seek to verify all claim posts in the field, which are typically 2 by 2in by 4ft (substantial) wooden posts; however, several claim posts and claim location notices were observed in the field. Lists of the current claims that comprise the Victorio Molybdenum-Tungsten Project are shown in Table 3-1.

The author has not verified the validity of the mining claims, their ownership, or the history of the land tenure in years past. Donegan Resources has provided to SRK copies of all work assessment and filings for their core group of claims and demonstrates continuity of ownership for the last three decades. Galway contracted a Landsman who conducted a land title search for the area, and has found, in addition to Galway claims, the Donegan and Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC, filings are the only unpatented claimants in the immediate district. A simplified version of the claim map is shown in Figure 3-2.

Table 3-1: Victorio Molybdenum-Tungsten Project, List of Claims Donegan Resources: BLM NMMC Luna County Claim Number Serial No. Book No. Page IR 3 (amended) 40208 17 634 Ogre (amended) 66946 19 447 Bogle (amended) 66953 19 446 Yahoo (amended) 66952 19 442 Unicorn (amended) 66949 19 444 Morlock (amended) 66947 19 440




Victorio Molybdenum-Tungsten Project, List of Claims (cont.) Hallelujah, South Branch, MRPGEO: BLM NMMC Claim Number Serial No. VIC # 1 174029VIC # 2 174030VIC # 3 174031VIC # 4 174032VIC # 5 174033VIC # 6 174034VIC # 7 174035VIC # 8 174036VIC # 9 174037VIC # 10 174038VIC # 11 174039VIC # 12 174040VIC # 13 174041VIC # 14 174042VIC # 15 174043VIC # 16 174830VIC # 17 174831VIC # 18 174832VIC # 19 174833VIC # 20 174044VIC # 21 174045VIC # 22 174046VIC # 23 NOT FILEDVIC # 24 NOT FILEDVIC # 25 174047VIC # 26 174048VIC # 27 174049VIC # 28 NOT FILEDVIC # 29 174834VIC # 30 174835VIC # 31 174050VIC # 32 174051VIC # 33 174052VIC # 34 174053VIC # 35 174054VIC # 36 174055VIC # 37 174056VIC # 38 174057VIC # 39 174836VIC # 40 174837VIC # 41 174838VIC # 42 174058VIC # 43 174059VIC # 44 174060VIC # 45 174061VIC # 46 174062VIC # 47 174063VIC # 48 174064VIC # 49 174065VIC # 50 174066VIC # 51 174067VIC # 52 174068VIC # 53 174069VIC # 54 174070VIC # 55 174071




Victorio Molybdenum-Tungsten Project, List of Claims (cont.)

Galway Claims: BLM NMMC Claim Number Serial No. ROB # 1 174163 ROB # 2 174164 ROB # 3 174165 ROB # 4 174166 ROB # 5 174167 ROB # 6 174168 ROB # 7 174169 ROB # 8 174170 ROB # 9 174171 ROB # 10 174172 ROB # 11 174173 ROB # 12 174174 ROB # 13 174175 ROB # 14 174176 ROB # 15 174177 ROB # 16 174178 ROB # 17 174179 ROB # 18 174180 ROB # 19 174181 ROB # 20 174182 ROB # 21 174183 ROB # 22 174184 ROB # 23 174185 ROB # 24 174186 ROB # 25 174187 ROB # 26 174188 ROB # 27 174189 ROB # 28 174190 ROB # 29 174191 ROB # 30 174192 ROB # 31 174193 ROB # 32 174194 ROB # 33 174195 ROB # 34 174196 ROB # 35 174197 ROB # 36 174198 ROB # 37 174199 ROB # 38 174200 ROB # 39 174201 ROB # 40 174202 ROB # 41 174203 ROB # 42 174204 ROB # 43 174205 ROB # 44 174206 ROB # 45 174207 ROB # 46 174208 ROB # 47 174209 ROB # 48 174210 ROB # 49 174211 ROB # 50 174212 ROB # 51 174213




Victorio Molybdenum-Tungsten Project, List of Claims (cont.)

Galway Claims: BLM NMMC Claim Number Serial No. ROB # 52 174214 ROB # 53 174215 ROB # 54 174216ROB # 55 174217ROB # 56 174218ROB # 57 174219ROB # 58 174220ROB # 59 174221ROB # 60 174222ROB # 61 174223ROB # 62 174224ROB # 63 174225ROB # 64 174226ROB #’s 65-185 N/A*

N/A*: Claims located by Galway in 2008, still in the filing process on the effective date of this report-NMMC numbers not available.




Figure 3-2: Claim Location Map – Victorio Molybdenum-Tungsten Project

Source: Galway, March 2008




3.5 Legal Surveys

Claim location notices for each claim are filed with the BLM and at the Recorder’s Office in Luna County, New Mexico, the county in which the claims are located. Copies of the individual claim notices and the detailed map showing their locations are on file with the state BLM office in Santa Fe, New Mexico, and with the Luna County Recorder’s office in Deming, New Mexico. The map and claim notices on file constitute the legal surveys for the property. The claim map, somewhat simplified for legibility, is shown as Figure 3-2. The County Recorder’s book, page, and document number are listed in Table 3-1, as are the BLM serial numbers (NMMC numbers) for the VIC 1 through VIC 55 unpatented claims staked in March 2006 and the ROB-1 through ROB-64 unpatented claims staked in late May of 2006. This information is sufficient to identify the specific claims, as filed with the BLM or Luna County respectively. Additional claims staked by Galway in February 2008, ROB-65 through ROB-185, were still in the filing process as of the date of this report; therefore, these claims do not yet have NMMC numbers.

3.6 Requirements to Maintain the Claims in Good Standing

To maintain mining claims in good standing, a claim holder must make annual maintenance fee payments to the BLM, in lieu of annual assessment work. Those claim fees include $125.00 per claim, plus the $10.00 per claim process fee of the annual filings, which currently total to approximately $135.00, plus minimal per claims costs of approximately $10.00 to 15.00 for claim recording fees in the County Courthouse in which the claims are located [Note: Initial BLM claim fees and filing costs for new claims total $165 per claim; including an initial $30.00 claim location fee, plus the annual maintenance fee and process fee]. Galway represents that all claim filings are current and that the claims are valid until August 31, 2008 when the next annual maintenance fee payments and filings are due.

3.7 Titles and Obligations / Agreements

Donegan Resources, Inc., Albuquerque, New Mexico, is the underlying owner of the six unpatented core claims, and Hallelujah Resources LLC, Scottsdale, Arizona, South Branch Resources LLC, Apache Junction, Arizona, and MRPGEO LLC, Gilbert, Arizona are the joint and equal owners of 55 unpatented claims, collectively comprising the Victorio Molybdenum-Tungsten Project, as described in Section 3.4 and 3.5 above. Galway secured the exclusive right to acquire 100% interest in all 61 unpatented claims comprising the Victorio Molybdenum-Tungsten Project, by the execution of an Agreement with an effective date of June 01, 2006 with Donegan Resources Inc, and June




01, 2006 with Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC.

The Agreement, between Galway and Donegan Resources Inc. is subject to a transaction between Galway and Donegan Resources Inc., which includes the following terms:

Payment of US$50,000 on the closing date; not later than June 1, 2006 (paid);

• Payment of a further US$100,000 on the first anniversary of the closing date (paid);

• Payment of a further US$200,000 on the second anniversary of the closing date;

• Payment of a further US$300,000 on the third anniversary of the closing date;

• Payment of a further US$350,000 on the fourth anniversary of the closing date;

• Payment of a further US$1,000,000 on the fifth anniversary of the closing date;

• Royalty payment of 2% Net Smelter Return on production derived from the six claims covering the presently-defined deposit; and

• Royalty payment of 1% Net Smelter Return on any production from adjacent claims in Sections 28 through 33, T. 24 S., R. 12 W., with a royalty reduction interest to 0.5% if royalty payments to other parties exceed 0.5%.

The Agreement, between Galway and Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC, is subject to a transaction between Galway. and Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC, with equal divisions thereof among the three parties, which includes the following terms:

• Payment of US$15,000 and issuance of 50,000 shares on the closing date (paid);

• Payment of a further US$25,000 and issuance of a further 50,000 shares on the first anniversary of the closing date (paid);

• Payment of a further US$40,000 and issuance of a further 50,000 shares on the second anniversary of the closing date;

• Payment of a further US$50,000 and issuance of a further 50,000 shares on the third anniversary of the closing date;

• The issuance of 200,000 shares upon commencement of commercial operations;

• Royalty payment of 1% of Net Smelter Return for production from the core claims over the presently-defined deposit, and with an outright purchase option of US$500,000 by Galway; and




• Royalty payment of 3% of Net Smelter Return for production from the adjacent claims peripheral to the presently-defined deposit.

Galway will be 100% owner of the Victorio Molybdenum-Tungsten Project, upon completion of the above payments, with no partial ownership applicable should Galway elect not to make all payments. The issuance of shares is dependent on approval of the TSX Venture Exchange.

3.8 Exceptions to Title Opinion

The claims listed in Table 3-1 are valid unpatented lode mining claims; with no known exceptions to the title.

3.9 Royalties and Other Encumbrances

Upon completion of the payments as outlined in Section 3.7, Galway will own 100% interest in the Victorio Molybdenum-Tungsten Property, subject to a Net Smelter Royalty (NSR production royalty) due to Donegan Resources and jointly to Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC on future production from Victorio.

Galway has the option to buy back from Hallelujah Resources LLC, South Branch Resources LLC, and MRPGEO LLC the 1% NSR primary royalty on production derived from the primary, or core, VIC claims (VIC 16-19, VIC-29-30, VIC 39-41), but excluding VIC-41, on or overlapping the presently defined deposit for $500,000, payable as to 50% on completion of a bankable feasibility study and the remainder no later than the end of the first full year of commercial production from the primary mining claims. Galway also has the option to buy down from 3% down to 2% the secondary NSR royalty on the VIC-41 and secondary (or peripheral claims, VIC 1-15, VIC-20-22, VIC 25-27, VIC-31-38, VIC 42-55) for the sum of US$1,500,000, payable as to 50% on completion of a bankable feasibility study and the remainder no later than the end of the first full year of commercial production from the secondary mining claims. For clarification, Galway will not pay any royalties to the group for any production derived from the Donegan claims.

An Area of Interest (AOI) applies to the agreement with Donegan Resources that includes all lands within Sections. 28 through 33 and outside of the external boundaries of the claims held at Victorio as of June 01, 2006. Any lands acquired by Galway within the AOI are subject to the terms and conditions of the Agreement.




3.10 Environmental Liabilities

Existing environmental liabilities are not described in the project files. The author is not a Qualified Person with respect to environmental issues; however, a brief site visit indicates the primary environmental liability that might exist would be related to historical surface disturbance and any related reclamation obligations. Drill access roads and drill sites were largely left un-reclaimed, as was the standard industry practice at the time. That disturbance at Victorio is minimal.

A document titled “Health, Safety, and Environmental Requirements”, by Gulf Mineral Resources Inc.’s Environmental Department, dated December 1982, is included in their pre-feasibility engineering report for the property. The report states more specifically that no major environmental sensitivities were identified associated with the site which could result in denial of permits. The report does identify areas where additional study is required, particularly in relation to cultural (archaeological) and biological resource issues.

3.11 Permits and Licenses

The Victorio Molybdenum-Tungsten Project has been inactive since the early 1980’s, until Galway initiated exploration began in 2006. Permits that are typically required include a Notice of Intent or a Plan of Operations obtained from the BLM; depending upon the amount of new surface disturbance that is planned. A Notice of Intent is for planned surface activities that anticipate less than 5.0 acres of surface disturbance, and usually can be obtained within a 30 to 60 day time period. A Plan of Operations will be required if there is greater than 5.0 acres of new surface disturbance involved with the planned exploration work. A Plan of Operations can take several months to be approved, depending upon the nature of the intended work, the level of reclamation bonding required, the need for archeological surveys, and other factors as may be determined by the BLM. Permitting is accomplished in concert with the local BLM office which for Victorio will be in Las Cruces, New Mexico. While BLM permits will be required for new surface disturbance with re-activation of the Victorio Molybdenum-Tungsten Project, it is not anticipated that there will be any significant issues that would preclude the issuance of operational permits.

Galway, in conjunction with the 2006/2007 drill program, has secured a BLM Notice of Intent permit, #NMNM 116671, to conduct as many as 24 drillholes, utilizing limited overland access from exiting roads. An archeological survey was conducted as part of that permit process; resulting in the elimination of one proposed drill hole to avoid minor




archeological fragment scatter; although there are no prehistoric archeological sites in the area. More recent archeological sites include minor +50 year old mining sites in the area, which pose no issue for exploration, but might need to be dealt with if the property were moved into a mine permitting stage. Galway also secured a State exploration permit, # LU014EM, to allow for the exploration drilling.

Section 17.9 of this report includes current scoping study information on the permitting process requirements to move the project forward, as detailed by Enviroscientists Inc. in their report dated June 10, 2007




4.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY (Item 7)

4.1 Access

The Victorio Molybdenum-Tungsten Project is accessed by driving west on Interstate Highway 10 from Deming, New Mexico, for 20mi, or east 42mi from Lordsburg New Mexico to exit #62, the Gage exit, then proceeding south for 2.2mi on a two-lane paved county road from the gas station stop at the I-10 exit, and then proceeding southwest for 0.5mi on an improved gravel road to a rock quarry at East Hill. From there a road continues another 0.7mi as unimproved dirt/gravel access west to the approximate center of the property. A series of drill and historical mine access roads transect the property and provide access to the historical drill sites and the lower south-facing slopes of the Victorio Mountains. The unimproved roads have not been maintained, but the dry desert climate makes them easily accessible with a four-wheel drive vehicle. The paved and gravel two-track access roads are relatively flat or at gentle grades and provide easy access to the property from the gas station at the Gage exit on I-10. Access into the Victorio Mountains is available year round.

4.2 Physiography

The Victorio Molybdenum-Tungsten Project lies in the Highlands portion of the Basin and Range physiographic province of southwestern New Mexico, which is a series of northerly to northwesterly-trending mountain ranges with typically 1,000 to 3,000ft of topographic relief above a relatively broad and flat intervening bolson plain largely devoid of any major drainage network. The Victorio Mountains are an anomalously isolated range with an overall trend of N. 60º to 75º W. The mountains consist of four segments: a northern narrow arcuate, or Main Ridge, including Victorio Peak; a somewhat parallel flanking east-west-trending series of lesser hills (Middle Hills) centered one-half mile due south of Victorio Peak; the East Hills, lying approximately one-half mile east of Middle Hills; and an east-northeast-trending hill approximately one mile southeast of Middle Hills that is named Mine Hill.

The maximum elevation in the Victorio Mountains range occurs along Main Ridge at Victorio Peak at 5,382ft, located approximately 1.0 mile north of the mineral deposit center. The surrounding bolson plain has an average elevation of approximately 4,500ft above sea level. The ground surface above the Victorio Molybdenum-Tungsten Project is




located on the gently-dipping southwestern slopes and pediment flats on the south side of Middle Hills at elevations of approximately 4,500ft.

The Union Pacific railroad line parallels Interstate 10 with a siding at Gage, and the El Paso Natural Gas pipeline traverses the flats three-quarter of a mile southwest of the mineral deposit center. El Paso Natural Gas maintains a pumping station 2mi southeast of the deposit, and has been the source of drilling water supplied to Gulf Minerals during the 1970’s drilling operations.

Figure 4-1: Victorio Project Map – Access and Infrastructure

4.3 Climate and Operating Seasons

The southwestern corner of New Mexico has a mild, dry climate, typical of the southwest U.S. Summers are hot (79.6ºF. July average daily temperature at Gage) and winters are cool (41.2ºF. January average daily temperature at Gage). Temperatures in the summer can attain highs in excess of 100ºF, and winter low temperatures can be in the low 20’sºF. Average annual precipitation at Gage siding is 9.93in with most falling in the summer




months from monsoon-type thunderstorms. Winter snowstorms are rare, and rarely accumulate more than a few inches of snow at a time, which quickly melts.

4.4 Vegetation

The hills and surrounding bolson plain support a typical Sonoran assemblage of creosote, mesquite, cholla, yucca, and prickly pear cactus, plus various grasses and plants. Drill sites and roads exhibit rapid re-growth of plants, mostly creosote bush.

4.5 Local Resources and Infrastructure

Deming is the nearest town to the Victorio Project, with a population of 14,000 (2,000 Census). Services at Deming are marginally adequate and supportive of services necessary for a mining population. Las Cruces, located 60mi east of Deming along Interstate 10, is the next nearest town with major services and a population of 74,000 (2,000 Census). As such, Las Cruces has all the services available to support mineral exploration and development activities in southwestern New Mexico.

Currently there are no access or surface use agreements in place for the Victorio Molybdenum-Tungsten Property, and a preliminary land check indicates that none are necessary. The current 2.7mi of paved and gravel County access road from Gage to the eastern property boundary is on BLM lands which are open to public access.

Electric power for domestic use is available at the Gage exit, and a major power grid is located sub-parallel to and about 5mi north of Interstate Highway 10. Power to southwestern New Mexico is provided by Columbus Electric Cooperative Inc. located in Deming, New Mexico.

Drilling contractors, heavy equipment contractors, and field technical personnel are all available from service companies and contractors from Tucson, Arizona, Las Cruces, New Mexico, and Albuquerque, New Mexico. Water sources for development and mining would be from ground water sources in the region. The water table is shallow; approximately at 4,350ft in elevation or 150ft in depth. Numerous ranch wells surround the district. In their tenure, Gulf Minerals did not proceed to a full-fledged groundwater resources investigation of the region, relying instead on published groundwater studies by the USGS and State Hydrology Office. Water sources will most likely be easily tapped in the graveled pediments and basins south of the Victorio Mountains. Drilling operations in the past have relied upon the hydrants at the El Paso Natural Gas pumping station, approximately 2 to 3mi southeast of the project.




Figure 4-2: Victorio Molybdenum-Tungsten Project – Location/Access




5.0 HISTORY (Item 8)

The Victorio Mountains mining district (cf: Gage or Mine Hill) was first worked in the period of 1880 to 1886 by the Hearst Mining syndicate of San Francisco, California, with exploitation of oxidized argentiferous lead carbonate replacement ores at Mine Hill, about 1.0mi southeast from the Victorio Molybdenum-Tungsten deposit. Aggregate total historical production was valued at $1,150,000 (Griswold, 1961). Sporadic mining by smaller concerns between 1904 and 1947 shipped ores valued at $565,000. Last ore shipments from the district occurred in 1947, with a cumulative district production estimate of $1,715,000 for 70,000-130,000T of lead, silver, gold, zinc, and copper ore. Mine Hill is covered by a series of patented claims held by the heirs to Gage Mining Company (Hendrickson, 1977).

Tungsten was first described from Middle Hills in the early years of operation prior to 1904, and beryllium was identified by the New Jersey Zinc Company in 1948 (var. beryl and helvite) (Holser, 1953). At Middle Hills, limited wartime production of tungsten ores as quartz veins in skarn occurred from 1942 to 1944 from the Irish Rose and Tungsten Hill shafts. The primary ore mined at Tungsten Hill was scheelite, with minor galena, smithsonite, and helvite. Production from the Irish Rose Mine is recorded at 20,000T@ 1.0%WO3, with a historical net value of $70,000 (Dale and McKinney, 1959).

The original Middle Hills claims (with the core claims of Ogre, Bogle, Yahoo, Griffin, Leprechaun, Unicorn, Goblin, Eloi, and Morlock, plus several others at Tungsten Hill, since dropped) were located in 1945-1948 by Donald S. Tedford, a Mining Engineer from Columbus, New Mexico and by Henry Eaton of Silver City, New Mexico. These predecessor claims were acquired in the early 1960’s by Charles Hagerman, a geologist from Santa Fe, New Mexico, and then By Donegan and Donegan. The core claims and a large block of surrounding claims were later acquired by Leland A. Hodges, Trustee, Fort Worth, Texas, in 1978, who joint-ventured them to Gulf Minerals, and added considerably to the claim group. Chevron (which acquired Gulf Minerals) relinquished the claims to Lendon Company Partnership (Leland Hodges Estate) in October 1986. B and P Investments, Fort Worth, Texas, received the quitclaims from the Lendon Company Partnership in April 1987. The property (eight original plus 143 added) was later quitclaimed by B and P Investments to Donegan Resources, Inc, Albuquerque, New Mexico in May 1992. Donegan Resources leased the property out to Lone Mountain Mining, Irving, Texas, in March 1994, who returned the claims to Donegan Resources in April 2000.




Since the 1950’s several major mining and exploration companies have held the Middle Hills property under lease or option agreements: Southern Union Production Corp (aeromagnetics, IP, and resistivity), Keradamex Inc. (drillholes K1 and K2), Humble/Exxon (IP, geochemistry, drillholes H1 through H4, deepening K2), Donegan and Donegan/Leonard Resources for Hodges Trust (IP, resistivity, and deepening drillhole K2), Rosario Resources Exploration (geologic mapping and deepening of drillhole K2), ASARCO (geologic mapping), Newmont (IP and gravity), Bethlehem Copper Corp. (drillholes VM 1 through 3), Amax Exploration USA (geologic mapping, geochemistry, JV drilling w/ Gulf, A1 through A4), and Gulf Mineral Resources, Inc, (GVM 1 through GVM-67, A2-A4, deepening H3). The companies conducted documented exploration and drilling investigations of the Victorio Molybdenum-Tungsten Project in the period from 1966 to 1983 (Bellamy, 1976; Heidrick, 1974, 1979, 1983). Prior to Gulf’s entry, approximately nine drillholes totaling about 10,000ft of core and rotary drilling had been completed. Only one drillhole, Humble’s H3 located adjacent to the Irish Rose shaft, cut encouraging but weak molybdenum-tungsten mineralization. Gulf Minerals, the primary mover on the property, drilled 166,016ft in 71 holes from 1978 to 1982. By 1983, prior to cessation of all mineral exploration activities in Middle hills, they had advanced the property to a preliminary mining and engineering feasibility study (internal to Gulf) evaluating project viability.

The results of the various exploration programs are contained in 20 plus file boxes and numerous rolled maps and cross-sections; and are the basis for the Victorio Molybdenum-Tungsten Project as it is defined in this NI 43-101 Preliminary Assessment. The historical project information, including historical resource/reserve estimates presented in this Section are considered significant and relevant project information to Galway.

Peripheral to the Victorio Hills Molybdenum-Tungsten deposit are oxidized low-grade base- and precious-metal jasperoidal veins, replacements, and mantos at East and Mine Hills, located east and southeast, respectively, from Middle Hills. In addition to earlier work listed above, three other major mining concerns explored and drilled the Mine Hill deposits from 1986 through 1993: Cominco American Resources, Inc. (1986 to 1988) for shallow precious metals, looking for a footwall deposit beneath an interpreted flat fault (Kuhn, 1988; McKelvey et al, 1989); Santa Fe Pacific Mining Inc. (1988 to 1991) for MVD-type and replacement zinc-copper deposits (Wessel, 1989, Wessel and Maciolek, 1989 a,b; Hahman, 1991, Wilkins, 1991); and Echo Bay Exploration, Inc. (1992 to 1993) for base- and precious metal replacement deposits (Wendland, 1993), following IP/magnetic anomalies and projection of mineralized zones. The Donegan Resources files for Victorio also include data for these prospective areas. However, these deposits are not




considered germane to the Gulf Mineral’s-delineated molybdenum-tungsten target at Middle Hills.

Table 5-1: Summary of Victorio Exploration Activity* GEOPHYSICS DRILLING

Company Year(s) Aeromag IP/R GndMag VLF Grav. DH Core

(ft) Rotary

(ft) Total

(ft) Southern Union Prod.Co 1966 72 line-mi 9.4 mi IP Keradamex 1970-71 2 1125.5

Humble Oil (Exxon Minerals) 1969-71 18.7 mi IP 4 4705.8

ASARCO 1973 Rosario Exploration 1974 Newmont Mining 1974? 6.5 mi IP Unk Bethlehem Copper Corp. 1976 2 4143, + spot core

Donegan & Donegan 1976 1.9 mi Gulf Minerals Resources 1977-82 >72 line-mi 7.2 mi CR 3.2 line mi Unk Unk 71 166,016 (Unk rot. pre-collar) Amax Exploration 1979

Cominco American Rscs. Inc. 1987-88 15 2735 RC Santa Fe Pacific Min. 1988-90 Reinterp Reinterp Unk Re-interp 5 3930 Echo Bay Exploration 1992-93 Aerodat .--> 11 1323 6916 RC AEM/AM (Unk) Total: > 144 li-mi 43.7 li-mi > 3.2 li-mi Unk Unk 110 173170 17724 190894.3

*Activity 1966-1993

5.1 Project Expenditures

The procured historical project data does not have an accounting of the total exploration dollars expended on the Victorio Molybdenum-Tungsten Project by all companies. It is however possible to provide a rough estimate of total expenditures, and in the author’s opinion, approximately $4.0 to $5.0 million historical dollars have been expended on the central Victorio Molybdenum-Tungsten deposit at Middle Hills, with an additional approximately $1.2million expenditures spent on the peripheral base- and precious-metals deposits of Mine Hill and East Hills.

Table 5-2: Summary of Estimated Historical Expenditures – Victorio Mo-W Deposit*

Company Land GP Core Assays Svys Roads Air

Photo Surv Met

Tests Salaries Totals

Humble Oil/Exxon 7,500 19,000 48,000 4,800 800 500 250,000 330,600 Gulf Mineral Resources 179,000 7,500 3,818,000 263,000 28,000 3,500 500 4,000 50,000 600,000 4,953,500

Total 186,500 26,500 3,866,000 267,800 28,000 4,300 1,000 4,000 50,000 850,000 5,284,100 *Estimated historical exploration expenditures 1969-1983.

This estimate is conservative, is an estimate of just the major direct costs, and does not include any lease payments made by the companies to land owners; all expenditure estimates are in historical dollars.




5.2 Historical Mineral Resource and Mineral Reserve Estimates

A summary report dated March 1983, “Victorio Project Geologic Report”, by T. L. Heidrick, Project Manager for Gulf Mineral Resources, Inc, is a final report on various aspects of the Victorio Molybdenum-Tungsten Project. The report documents “reserves” as defined at the time. The “reserve” numbers are listed below in Table 6-3, and were estimated using polygons and cross-section isopach maps, a 50ft minimum continuous thickness in a vertical-crater-retreat (VCR) conceptual mine design that had 57Mt of total material mined in all cases. The mine design did not access all 57Mt, only a portion of it. It is important to note the figures quoted by Gulf Minerals were derived by the use of polygonal prisms for calculation of the +0.20% reserves, and by polygons internal to isopachous thicknesses for the higher grade +0.30% and +0.40% reserve calculations. The Lower and Middle zones tend to coalesce to the southwest, and historical reserves within this zone of coalescence had been assigned as Lower Zone reserves. A detail breakdown of the historical reserves is available in the Gulf Mineral’s Victorio Project Geologic Report (Heidrick, 1983); however, the inconsistencies of estimation methodologies described above, and the lack of backup description to the estimations suggest that the detail is inappropriate to mention in this Preliminary Assessment. Therefore, only the summary of historical reserves is listed in Table 5-3.

Table 5-3: Victorio Historical Undiluted Reserves (1983)

CoG % (*) M-tons %Mo %WO3 +0.20% 57.7 0.129 0.142

+0.30% 18.9 0.177 0.174 +0.40% 4.1 0.214 0.208

Gulf Mineral Resources, 1983.

* Note: Historical reported CoG is a combined %Mo plus %WO3, which is not a true equivalent grade; and not a recognized standard method of reporting CoG of multiple commodities. It is stated here strictly for historical context, as reported in the historical documents; the individual commodity grades are reported.

Details of the “reserve classification” are not available for reconciliation with current CIM resource/reserve categories. The discussion of reserves refers to historical terms used at the time and are not sufficiently defined to be classified by CIM categories in use today. The historical reserve numbers should not be relied upon. Galway is not treating them as current mineral resources/reserves

Galway is reporting current and NI 43-101 compliant resources as defined in Section 16 of this report




As part of Gulf’s final end-of-project review, their Mining and Engineering group looked at several potential underground mining designs and plant and mine facilities, with the intent of establishing a threshold capital estimate that would be necessary to place the Victorio Molybdenum-Tungsten deposit into production.

Criteria leading to a choice of potential mining methodologies and designs were strongly influenced by the uniform grade-thickness of the molybdenum and tungsten mineralization, compressive rock strengths, and estimated geotechnical applicability for caving. The choice was narrowed to Vertical Crater Retreat (VCR) and/or Blasthole Stoping.

Proposed Mining Parameters, Victorio Deposit (Gulf-1983):

Ore solids SG: 3.0

Feed Grade: 0.138%Mo

0.182%WO3

Overall metal recoveries: 85%Mo

75%WO3

Final product Analysis: 56%Mo (in MoS2 concentrates)

62.5%Mo (in MoO3 final product)

2.6%WO3 (in scheelite flotation concentrates)

87%WO3 (in APT final product)

Production (proposed): 1,642,200lbs Mo/yr

1,911,000lbs WO3/yr (95,550 stu/yr)

The deposit was considered un-economical to mine in 1983 due to the depressed state of the metals commodity prices at that time.

This historical information is provided as a base-line guide for modern-day analysis and comparison only, and a reference point to describe the extent of historical evaluations. Galway does not recognize the information as applicable or timely, and presents it only as part of the historical database. Galway reports current resources for the Victorio Molybdenum-Tungsten Project as stated in Section 16 of this report, and the results of current scoping levels studies on the potential for mining and processing in Section 17 of this report.




6.0 GEOLOGICAL SETTING (Item 9)

The geology of the Victorio Mountains and the Victorio Molybdenum-Tungsten Deposit are varied in lithology, structure, alteration and mineralization, and can be considered complex in the overlapping of lithology with alteration and mineralization. For this NI 43-101 Preliminary Assessment, this section on geology is simplified in content, to provide an overview of the Victorio Molybdenum-Tungsten deposit. The reader is referred to Galway’s initial NI 43-101 technical report on Victorio Mountains for more discussion on geology (SRK, 2006)

The Victorio Mountains geology consists of non-exposed Precambrian basement rocks that are unconformably overlain by a succession of Paleozoic and Mesozoic sedimentary and volcaniclastic plus Tertiary volcanic rocks. The package is intruded by mid-Tertiary dikes, sills, and breccias of basic to silicic composition, with accompanying rhyolite porphyry and a late-stage granitic intrusive.

The Victorio Molybdenum-Tungsten deposit at Middle Hills is dominantly a pyrometasomatic stratiform disseminated and stockwork vein deposit localized within the upper Cambrian/Ordovician Bliss sandstone and lower Ordovician El Paso limestone. The deposit is along the north flank of an east-west-trending gently doubly-plunging anticline. Molybdenum, tungsten, and beryllium mineralization is distributed in fracture-controlled veins, collectively forming an inverted-saucer and horseshoe-shaped deposit within competent calcareous arkoses and silty limestones. Mineralization thickness ranges from 20 to 400ft and the average is 120ft.

Sedimentary rocks are now largely altered to marble and calc-silicate assemblages (skarn), with alteration effects extending out to + 5,000ft from the center of the deposit. Remnants of the highly-altered rhyolite to quartz latite porphyry sill associated with mineralization have been intersected in drilling, often engulfed within or adjacent to the Tungsten Hill Breccia Pipe and paragenetically late-stage Victorio Granite. The weakly-mineralized and altered Victorio granite lies below the molybdenum-tungsten mineralization, and its relationship to the mineralizing event is poorly understood. The Victorio molybdenum-tungsten mineralization been classified by some recent workers as a porphyry molybdenum system (McLemore et al, 2001; Donahue, 2002).

Much of the following information and discussion have been extracted from T.L. Heidrick’s 1983 report, “Victorio Project Geologic Report”, written at the curtailment of Gulf Mineral Resources’ exploration activities, and from an MSc. thesis by K.M. Donahue at New Mexico Tech (Donahue, 2002).




6.1 Regional Geology

The Victorio Mountains are a tectonically-anomalous mountain range situated within the Mexican Highlands portion of the southwestern Basin and Range. The mountains are sited at the coincidence of the northern extent of the west-northwest-trending Texas Lineament zone, a complex of Cretaceous thrusting, strike-slip faulting, and with the northeastern limits of the Mexican geosyncline and the Deming Volcanic Trough Axis. The Victorio Mountains are in the transition zone that separates the Burro Mountain Uplift to the north at Tyrone (Colorado Plateau positive high) and the Florida Mountains uplift to the east from the Basin and Range/ terrain to the south and west (Mack and Clemons, 1988). (Figure 6-1)

The Victorio Mountains are made up of a succession of Cambrian and Ordovician clastics and carbonate rocks unconformably deposited on a Precambrian basement (as defined in drill core only). Devonian through Permian strata typical of the southwestern New Mexico stratigraphic succession are notably absent from the section at Victorio Mountains. The hills are unconformably overlain with Lower Cretaceous sub-aerial clastic sedimentary rocks (Bisbee Formation). The Bisbee Formation is paraconformably overlain by clastic and volcaniclastic sediments of the Late Cretaceous/Paleocene “Hidalgo Formation”. Along the crest of Victorio Mountains, the Hidalgo Formation is conformably overlain by a thick sequence of late Eocene dacitic to quartz latitic flows, breccias, lahars, and tuffs, which in turn are overlain by Oligocene rhyolitic ashflow tuffs. Swarms of basic to silicic calc-alkaline Oligocene sills, dikes, and small apophyses intrude the entire section, and in turn are cut at depth by the 34.9ma Victorio garnetiferous two-mica granite.




Figure 6-1: Regional Geology Map

6.2 Local Geology

The Victorio Mountains stratigraphic section consists of Marine Paleozoic carbonate and clastic sedimentary rocks deposited on a poorly-understood Precambrian basement, and unconformably overlain with sub-aerial Cretaceous and Tertiary volcanic and volcaniclastic sedimentary sequences. Intrusive equivalents of the younger capping volcanics intrude the Middle Hills, and are spatially and temporally affiliated with molybdenum, tungsten, and beryllium mineralization.




Figure 6-2: Victorio Mountains Geology Map

Notes: See Figure 6-4 for explanation of unit names.




The Precambrian basement in the Victorio Mountains is poorly understood, as it is only intersected in drill core and details of its overall setting are limited. The units are described here because mineralization extends into the Precambrian basement rocks on the south and west ends of the deposit The greater proportion of the Precambrian rocks are a quartzo-feldspathic gneiss, made up of thin sub-vertical alternating laminae of siltstone, sandstone, and arkose carrying abundant bluish-gray quartz clasts. The gneiss is strongly foliated, and steeply-dipping, and interpreted as indicative of isoclinal folding.

The remaining Precambrian section is composed of amphibolite gneiss, or meta-diabase. The amphibolite displays weak- to moderately-contorted foliation and is rarely laminated. The lack of penetrative subvertical layering and transposition indicate the meta-diabase is a younger sill emplaced into the massive quartzo-feldspathic gneiss.

The gneiss basement has a well-developed 25 to 150ft thick regolith from deep paleo-weathering developed immediately beneath the Bliss sandstone. The unit is recognized in drill core by an overall bleached appearance, varying shallow to steeply-dipping foliation, and an overall disrupted “chaotic” nature.




Figure 6-3: Cross–section A-A’

Note: See Figure 6-4 for explanation of unit names.




Figure 6-4: Stratigraphic Section




6.2.1 Lithology and Stratigraphy

Sedimentary Rocks

The Victorio Molybdenum-Tungsten deposit at Middle Hills is hosted within a silty glauconitic quartzite unit that is gradational into a limy to dolomitic siltstone to silty dolomite in the upper 80ft of the Bliss Sandstone, and in the sandy dolomites of the Hitt Canyon Formation of the lower El Paso Group. The carbonates of the El Paso Group form the southern flanks of Middle and East Hills and the extreme northeastern tip of Mine Hill, and underlie the pediment adjoining Middle Hills to the south and southwest, where the Victorio Molybdenum-Tungsten mineralization is located.

Cambrian-Ordovician Bliss Sandstone

The Bliss sandstone is not exposed on the property. From drilling, it is seen to unconformably overlie the steeply-dipping Precambrian gneiss basement. Thickness of the Bliss is approximately 95 to 125ft, with an average thickness of 105ft. The Bliss is marked by a 3 to 36in thick basal conglomerate of subangular to subrounded gneiss and quartz vein pebbles set in a fine sand matrix. The next 10 to 25ft stratigraphically above the basal conglomerate is composed of clean arenite, containing blue gray quartz eyes derived from the quartzofeldspathic gneiss. The Cambrian-Ordovician boundary is placed at the top of the arenite unit.

The upper 80ft of the Bliss consists of a silty quartzite unit with an abundant glauconite component, and a limy to dolomitic siltstone to silty dolomite unit with or without significant glauconite or quartz sand grains. In the molybdenum-tungsten deposit, the glauconite-rich section is hydrothermally altered to secondary biotite, and the silty dolomite unit to actinolite-diopside skarn. The top of the Upper Bliss is gradational and difficult to pinpoint, partly due to inflation of the section by numerous quartz latite sills, particularly in the vicinity of the Tungsten Hill breccia pipe.

Ordovician El Paso Group

The overlying Ordovician El Paso group is gradationally conformable with the Bliss sandstone. The absolute thickness of the El Paso Group in the district is uncertain, due to poorly-documented flat faulting and emplacement of sub-horizontal wedge-like masses of intrusive breccia beginning 600ft to 700ft above the base. Lithologic details are also lacking, due to wide-spread alteration overprinting effects. Composited stratigraphic sections for the Victorio Mountains suggest a district-wide thickness of approximately 1,200ft for the El Paso Group. The El Paso Group sediments are the oldest outcropping




rocks in the district and form much of the southern flanks of Middle and East Hills as well as the extreme northeastern tip of Mine Hill. Drilling also demonstrates that the lower El Paso Group is a receptive host and carries a large portion of the Victorio molybdenum-tungsten deposit. The El Paso Group contains stromatolitic masses and fossil cephalopods and gastropods.

The lowermost portion of the El Paso Group is the arenaceous Hitt Canyon, which from a logging perspective is readily sub-divided into two sub-members. The lower 200 to 300ft is composed largely of thin brownish wavy- bedded dolomite or dolomitic limestone containing numerous sandy, shaly, or silty partings plus sandstone interbeds. Intercalated within this thin-bedded carbonate sequence are a few massive gray limestone and dolomite beds. The 300 to 400ft thick succession immediately overlying this sub-member is dominated by medium- to thick-bedded gray to dark-gray dolomitic limestone containing numerous zones of both nodular and bedded red-weathering chert that comprise the McKelligan and Padre Formations.

Ordovician Montoya Group

At Middle Hills the upper El Paso Group is unconformably overlain by a portion of Ordovician Montoya Group carbonates, seen in several small outcrops exposed along southern slopes, and in narrowly-exposed belts on the upper slopes. Along the northeast slope at Mine Hill one mile to the southeast, the Upper El Paso Group limestone is unconformably overlain by an approximately 300ft thick section of Middle and Upper Ordovician Montoya Formation.

At Mine Hill, the Montoya formation is seen to consist of massive dark-gray dolomite beds, roughly divided into three members: the Upham dolomite (cumulative thickness of 70ft), the Aleman formation (150ft thick), and the Cutter formation (50 to 125ft thickness). The Upham formation consists of 20ft of basal Cable Canyon dolomitic sandstone, succeeded by a 50ft thickness of dark gray, medium- to thick-bedded crinoidal dolomite. The Upham is succeeded by the Aleman Formation, a 150ft thick section of gray- to dark-gray, thin- to medium-bedded cherty dolomite. The upper Cutter Formation is 50ft to 150ft thick, light- to medium gray, thin- to medium- bedded calcic dolomite or dolomitic limestone with minor interbeds of limy shale. The Montoya is only sparingly exposed across the Victorio Mountains district, restricted to Mine and Middle Hills or as fault slivers caught up in the Victorio Mountains Fault.

At Middle Hills the Montoya is succeeded by a very thin layer of Silurian Fusselman dolomite beneath a profound angular unconformity separating marine Paleozoic sediments




from subaerial Late Cretaceous clastic rocks. At East Hills the Fusselman is found only as a small fault slice.

The entire Devonian through Permian stratigraphic section is missing from the Victorio Mountains region. In addition, some 900ft of Silurian Fusselman dolomite has been truncated in the intervening one-mile separation of Middle Hills from Mine Hill.

Cretaceous Sedimentary Rocks

At Middle Hills Lower Cretaceous sub-aerial clastic sediments form a 400 to 700ft thick section correlative with the Bisbee Group (cf: Lobo formation) that lies in strong angular discordance (10º to 25º) upon Montoya or Fusselman dolomites. The Fusselman is intermittently exposed only locally as thin outcrops along the contacts beneath the Bisbee Group. Bisbee Group lithologies vary laterally and vertically, but in general consist of lenticular thin to medium bedded clastic units grading downward from siltstone, sandstone, arkose, to conglomerate/breccia towards the base. Scattered intercalated limestone lenses often contain abundant Lower Cretaceous oyster-like mollusc and gastropod fossils.

At East Hills, thin (0 to 50ft thick) lenses of early Cretaceous volcanic conglomerate, sandstone, and greenish tuff (described below) underlie the Bisbee clastic section.

Paraconformably, overlying the Bisbee sediments at Middle Hills are 800 to 1,000ft thick section of Hidalgo formation equivalent clastic, volcaniclastic, and volcanic rocks.

The alluvial deposits surrounding the Victorio Mountains are of three types. The oldest (late Tertiary) are poorly cemented gravels, and predate the other two types of alluvium. The younger units are alluvial fans of boulders, coarse gravels, and sand overlain by stream, wind, and sheet wash alluvium composed of sand and silt with subordinate amounts of gravel.




Figure 6-5: Local Geology Cross Section B-.B’(Galway 2008)

Note: Various thin dikes and sills are not shown at this scale. See Figure 8.1 for location of geological cross section B-B’’




Igneous Rocks

Extrusive Rocks

The volcanic and volcaniclastic sequences in the Victorio Mountains range from early Tertiary to Mid-Tertiary in age assignment.

At Middle Hills the thick section of clastics and volcanics that paraconformably overlie Bisbee Group sediments are correlative with Hidalgo Formation volcanics of the Lordsburg area and Peloncillo Mountains to the west (Thorman and Drewes, 1980). From drilling, the basal 200ft of the Bisbee Group section is seen to be composed of a massive purple to gray dacitic flow breccia overlain by maroon, reddish-brown, to pale purple mudstone, siltsone, sandstone, and local lentricular beds of subrounded conglomerate with clasts derived from all previously-described rock sequences. The section progresses from subaerial volcanic and volcaniclastic rocks at the base to more conglomeratic, agglomeratic, tuffaceous and laharic at the top. Unaltered volcaniclastic and tuffaceous units petrographically are classified as andesite and dacite. Age dating of the Hidalgo andesite flows at Lordsburg yield ages of 67.3 and 54.9ma. The crest of the Victorio Mountains and northeast flank of Main Ridge consist of andesitic to dacitic volcanic rocks locally termed the Victorio Peak dacite. The aggregate stratigraphic thickness is quite variable but exceeds 1,000ft. Thorman and Drewes (1980) report a Late Eocene fission-track zircon date of 41.7 ± 2ma for a 5 to 10ft thick pyroclastic sheet of light-gray welded ashflow rhyolite tuff, but an Early Oligocene K/Ar date of 34.5 ±1.7ma was obtained from fresh biotite. The dacites and andesites compositionally and geochronologically are virtually identical to the porphyritic andesite-basalt and quartz latite porphyry sills and dikes that intrude the Middle Hills.

Intrusive Rocks

Outcropping intrusive igneous rocks are scarce in the Victorio Mountains, most are described from drilling. At Middle Hills two whitish north-striking alkalic granite (crowded rhyolite porphyry) dikes, correlative with the Victorio Peak dacite magmatic sequence, are exposed west and northeast of the Irish Rose shaft. Northwest of the shaft a sill and irregular discordant mass of hornblende andesite porphyry crop out. The rhyolite porphyry sill at the Irish Rose Mine intrudes dolostones and limestones of the El Paso Group.

Exploration drilling has revealed a suite of basic through silicic intrusive rocks that are spatially associated with the Victorio Molybdenum-Tungsten deposit. Whole-rock




geochemistry shows the district intrusive suite to be medium calc-alkaline, peraluminous to metaluminous, and part of a single differentiation series.

Heidrick (1983, p. 70) provides a succinct summary of the igneous rock sequence at the Victorio Molybdenum-Tungsten deposit as understood from drill core:

“…Field investigations coupled with bulk rock compositions, trace element analyses, and petrographic studies help define four major mappable/loggable suites of Tertiary intrusions with the following characteristics:

Basic – Petrogenetically the oldest and most mafic occurring as narrow 1’-3’ wide dikes, moderate to shallow dipping sheets, and extensive sub-horizontal sills of brownish black to dark gray, aphanitic, slightly porphyritic (hornblende and Ca-plagioclase), Mg-rich andesite-basalt with 45-52% SiO2 and a Rb/Sr ratio of 0.l- 0.2. .Logged as andesite (Ta), porphyritic andesite (Tpa), and spatially associated with intrusion breccia …

Intermediate – Extensive sills of dark to medium gray, fine to medium grained,

distinct1y porphyritic (hornblende and andesine plagioclase), quartz latite porphyry containing 61-66% Si02 and a Rb/Sr ratio of O.5-1.0 Logged as andesite porphyry (Tap), hornblende andesite porphyry (Thap) or quartz latite porphyry (Tqlp) …. Forms extensive sub-horizontal sills in the Bliss, Hitt Canyon, and upper El Paso in and peripheral to the Tungsten Hill pipe.

Silicic – Petrogenetica11y young; occurring as a composite stock and narrow discontinuous dikes of medium gray to salmon colored, microcrystalline to coarse- grained, biotite-muscovite-garnet-bearing granite having 70-78% Si02 and a Rb/Sr ratio of 20-40; or sub-vertical dikes and plugs of light colored cryptocrystalline biotite-muscovite-garnet-bearing felsite, rhyolite, or rhyolite porphyry carrying 70-78~% 5i02 and a Rb/5r ratio of 30-90. The youngest and areally most extensive silicic intrusion is the hypabyssal Victorio granite… which shows appreciable lateral/vertical compositional zoning.

Breccia – irregular, discontinuous dikes, irregular sills, and pipe of intrusive and intrusion breccia dominated by a light gray, black, or varicolored matrix composed of finely comminuted rock flour and andesite-basalt with variable sand to boulder size clasts of wall rock marble, quartzite, conglomerate, andesite-basalt, quartz latite porphyry, and quartzo-feldspathic gneiss.

The composite isopachous distribution of total igneous rock suites encountered during Gulf’s drilling program in the Irish Rose-Tungsten Hill area is shown …. A maximum thickness of 1636’ was penetrated in GVM A-1 near the suspected axis of the Tungsten Hill breccia pipe. Thicknesses decrease systematically outward from this point and within 2,000’ to the south pinch to zero and to 500’ or less in all other directions …). This differential outward thinning of total intrusions plus observed proliferation of dikes and sills and thickening of individual sills inward toward the pipe are believed indicative of a source area. for both breccias and basic to intermediate intrusions. The pronounced east-west to west- northwest orientation of total isopachous contours, however; probably reflect large-scale basement structural control ”




The Victorio granite is a medium- to coarse-grained biotite quartz monzonite composed of feldspar, quartz, and biotite ± muscovite plus trace magnesium-rich garnet, fluorite, pyrite, molybdenite, scheelite, and apatite. Dating of the granite and skarn alteration yields consistent K/Ar biotite dates of 34.9ma (Donahue, 2002). The granite has been logged as a two-mica garnetiferous quartz monzonite/granite, but whole-rock geochemistry (Sum of alkalies vs Ga/Al) indicates it is more akin to an A-type (anorogenic) granite than to an S-type granite (Donahue, 2002).

The Tungsten Hill Breccia Pipe is located at Middle Hills and lies northeast of the Irish Rose Mine on the southeastern face of the Hills. The pipe cuts both Paleozoic and Cretaceous rocks, and carries angular clasts of Victorio granite, andesite, rhyolite, limestone/marble, conglomerate, and sandstone. The pipe is cut by minor veinlets of pyrite and possibly molybdenite. Both clasts and matrix carry quartz, fluorite, muscovite, albite plus disseminated scheelite/powellite, molybdenite, pyrite, and base-metal sulfides. The Tungsten Hill Breccia Pipe lies northeast of the Victorio Molybdenum-Tungsten deposit

6.2.2 Structural Geology

Regional Tectonic Setting

Heidrick (1983, p 54) makes the following points about the Victorio Mountains:

“….The Victorios occupy a hingeline position separating Lower Cretaceous geosynclinal depositional patterns to the south from more stable platform conditions to the north (Burro Mountain uplift area)…. Structurally, the mountains straddle the long-lived Burro-Florida uplift (Elston, 1958) or Deming axis (Turner, 1962) on the north from a zone of Laramide thrusting, strike-slip faulting, and folding to the south (Elston, 1970). As suggested by Corbitt and Woodward (I970) and more recently by Drewes (1978), the Victorios may mark the leading edge of a north- to northeast-directed regional thrust plate. These mountains are physiographically transitional, separating the Basin and Range/Rio Grande rift province to the south and east from the differentially elevated Burro Uplift (Colorado Plateau) block to the north …

“It is apparent that major elements of regional structure-tectonic significance pass near or through the Victorio Mountains. Activation and protracted re-activation of these elements during Paleozoic and Mesozoic time is clearly mirrored by the remaining stratigraphic succession. It is suggested that reactivation of these regional elements continued on into the Cenozoic and provided depth-penetrating channel ways which allowed a diverse suite of Mid-Tertiary calc-alkaline magmas to attain supracrustal levels. Once tectonism,




volcanism and plutonism was focused, a unique setting conducive for the localization of precious, base, and ferro-alloy metallization existed in the Victorio Mountains area…”.

Gulf Minerals speculated on a linkage between the Victorio Mountains and caldera complexes of the region. The Victorio Mountains are sited between the Datil-Mogollon and Boot Heel volcanic fields (McIntosh and Bryan, 2000).

District Structural Geology

Both Middle Hills and Mine Hills are south to southwest-dipping homoclines, while Victorio Mountains Main Ridge is a northward-dipping homocline.

The Middle Hills property is cut by a series of west-northwest-trending, mineralization-controlling east-northeast, and younger north-northwesterly-trending fault and fractures systems. The Middle and East Hills are transected by the Victorio Fault, a district-wide structural element that has been interpreted as a major reverse fault (Kottlowki, 1960), thrust fault (Corbitt and Woodward, 1970), and as a strike-slip polyphase normal fault (Thorman and Drewes, 1980). The Victorio Fault is mapped along the southern slopes of Middle Hills, trending east-west.

Griswold (1961) described three groups of Victorio Mountains faults:

East-trending normal and reverse faults. Present along southern edges of the Middle and Mine Hills are normal faults. A high-angle east-trending reverse normal fault at East Hills places El Paso Group carbonates against Bisbee Group clastics. At Middle Hills an east-striking fault cuts one of the quartz latite dikes.

Northeast to east-northeast-striking normal faults at all four hills. This set of faults provides the pre- and post-ore primary controls of mineralized fractures and vein sets in the district. Protracted reactivation of mineralized fractures distinguishes the east-northeast sets.

Northwest-trending normal faults. These occur on the Middle Hills and on the east side of Mine Hill.

A new and detailed interpretation for the structural geology of the range was proposed by Gulf Minerals based on their extensive drilling activities in and around Middle Hills. Carefully measuring from the easily-recognized basal conglomerate of the Bliss sandstone as a datum reference point, they constructed isopach contours of overlying lithologic units and surfaces to reveal the following basement features important in understanding the structural evolution of the Victorio deposit:




• The Precambrian/Cambrian nonconformity appears to be structureless, except marginal to the Tungsten Hill breccia pipe.

• There is up to 700ft of subsidence on the Precambrian/Cambrian surface near the center of the breccia pipe.

• Isopach contouring of the Cambrian/Ordovician surface (unconformity) shows dips of 0º to 7º; and an east-west-trending doubly-plunging anticlinal flexure of 5º to 6º. Within the drilled area, this flexure amounts to over 750ft of relief. This structural element is termed the Victorio Mountains anticline.

The Bliss/El Paso surface shows less east-west elongation and a more positive domal geometry, with an additional east-northeast-trending anticlinal cross-folding element that projects into the Tungsten Hill breccia pipe. The axial trace of the Bliss/El Paso anticlinal surface is transposed 500ft south of the Cambrian/Ordovician axial trace. The complexity of the Bliss/El Paso anticlinal feature is due to emplacement of quartz latite porphyry sills into the Bliss sandstone.

All younger sedimentary surfaces (conformable and disconformable) are similarly affected by differential thickening of older underlying strata. Mapping and drillhole intercepts from Middle Hills to the Main Ridge demonstrates the progressive steepening and northward rotation of younger strata. Dips of lower Paleozoic rocks are 0º to 7º, while the Paleozoic/Cretaceous unconformity dips 20º to 30º north-northeast, and the Hidalgo and Victorio Peak dacite sequence on Main Ridge dip 30º-55º north-northeast.

Mapping and flow layering measurements indicate 95% of all intercepted igneous rocks associated with the deposit are emplaced as sub-horizontal to gently-dipping sills, except marginal to or within the Tungsten Hill breccia pipe, where cross-cutting dikes are more common.

Isopach contouring of total thickness of all igneous rocks intercepted above the Precambrian/Bliss surface demonstrates the following:

• The abundance of intrusive rocks increases northwards and an isopachous buildup occurs along a northwest-trending axis that crosses the Tungsten Hill breccia pipe. With increasing proximity to the pipe, the frequency, variety of intrusives, and the cumulative isopachous thickness increases substantially.

• Within the Bliss sandstone the cumulative thickness of quartz latite porphyry and intrusive breccia increases toward the wall of the Tungsten Hill Breccia Pipe. The neck of the Tungsten Hill Breccia served as a conduit for quartz latite porphyry and in turn was intruded by an assemblage of breccias.




• The Victorio Molybdenum-Tungsten deposit, as defined by the + 0.2% combined Mo + WO3 isograd, lies outside the limits of intrusion breccia and significant mineralization does not appear to be spatially related to cumulative increase or decrease of total igneous rocks.

• The Victorio granite, variable in composition from biotite quartz monzonite to garnet-muscovite granite, is interpreted as a late-stage affiliate of mineralization. The Victorio granite is structurally and stratigraphically high, attaining elevations of + 2,500ft above MSL. The stock is asymmetric, with shallow dips on the south and southwest, and steeper dips on the east.

The Victorio Mountains Fault, the major east-west trending fault separating Middle Hills from Main Ridge and exposed at Middle and East Hills, places older flat-lying El Paso/Montoya Formation carbonates over steeply-dipping to overturned Bisbee Group clastics. The decrease with depth of the measured dip of El Paso sediments led to an erroneous belief of a low-angle thrust fault (Corbitt and Woodward, 1970). The fault dips steeply south at 60º to vertical. Based on decreasing westward throw, absence of small scale thrusts, and its steep dip, the Victorio Fault has been reinterpreted by Gulf Minerals as a simple near-vertical reverse fault. The 0 to 1,000ft of differential throw required for this interpretation can be accounted for by emplacement of extensive fluidized breccia sheets, such as logged in the El Paso Group peripheral to the Tungsten Hill breccia pipe.

The east-northeast-striking mineralized fault-veins, veins, and mineralized joint sets forming jasperoids, mantos and shoots mapped at Mine Hill, cut both the Montoya and Fusselman Formations. Similar fault veins are mapped at Middle Hills, but are quartz-poor and carry significant muscovite, fluorite and tremolite with trace galena, sphalerite, chalcopyrite, and bismuthinite. Heidrick (1983, p.85) suggests comparable structural elements with similar east-northeast ± 20º strikes may serve as controls on the mineralized quartz veins of the Victorio Molybdenum-Tungsten deposit at depth.

6.2.3 Alteration

McLemore, et. al. (2001), have defined and subdivided alteration in the district into four subtypes: contact metasomatic, silicification (jasperoids and veins), sericitic/argillic, and calcite recrystallization. Contact metasomatic skarns are produced in proximity to rhyolite and mafic dikes and sills. It is strongest at the Victorio Molybdenum-Tungsten deposit and decreases towards the south. Contact skarn assemblages are anhydrous prograde, and turn into hydrous retrograde assemblages. Silicification occurs as pre-mineral-forming veins and as silica replacements in replacement breccias and along bedding planes. Sericitic/phyllic alteration is restricted to the Victorio granite (see below).




Hydrothermal alteration in the Middle Hills is associated with early-stage quartz latite porphyry sills and fluidized breccias, and to a lesser degree with the paragenetically late-stage Victorio granite. Alteration is widespread throughout the Paleozoic section to over 5,000ft from the center of the Victorio Molybdenum-Tungsten deposit, as calc-silicate and silicate alteration mineral assemblages.

Silicate Alteration

The quartz latite porphyry sills within the Bliss sandstone that are distal from the Victorio Molybdenum-Tungsten deposit (1,000ft to 3,000ft) carry minor propylitic alteration assemblages of chlorite-epidote-calcite. Along the molybdenum-tungsten deposit margins, the intensity of propyltization increases, with chlorite and minor epidote flooding of groundmass and partially replacing plagioclase and hornblende. Within the deposit, quartz latite porphyry is pervasively altered to actinolite, which replaces hornblende and plagioclase, and in turn is overprinted by massive pervasive and vein-controlled secondary biotite and phlogopite. Less than one-third of the altered quartz latite is strongly mineralized with molybdenum-tungsten.

Vein assemblages cutting the sills peripheral to the deposit consist of quartz-pyrite plus associated chalcopyrite, sphalerite, pyrrhotite, galena, and molybdenite; and variable calcite, pyrite, quartz-epidote, chlorite and actinolite. Veins immediately adjacent to the deposit contain quartz, albite, fluorite, and pyrite with lesser amounts of calcite, idocrase, biotite, actinolite, muscovite, molybdenite, idocrase, beryl, rhodochrosite and pyrrhotite. Veins within the deposit carry potassic assemblages of early secondary biotite, quartz-secondary biotite-molybdenite, secondary biotite-pyrite-molybdenite and magnetite veins with some albite and secondary orthoclase. Potassic assemblage veins are crosscut by a stockwork of quartz-molybdenite ± muscovite and pyrite-fluorite-scheelite-magnetite veins.

Intermediate series porphyry dikes and sills exhibit alteration assemblages similar to that seen in quartz latite porphyry sills emplaced above the Precambrian/Bliss contact. Intermediate sills are mostly absent from the molybdenum-tungsten deposit, but above the deposit exhibit pervasive replacement of groundmass, hornblende, and plagioclase grains by sericite-muscovite and/or secondary biotite.

Minor siliceous hypabyssal intrusives occur in and immediately surrounding the Victorio deposit. The Irish Rose crowded quartz porphyry (rhyolite porphyry) shows intense quartz-muscovite-fluorite alteration in outcrop. Secondary orthoclase flooding is associated with quartz-secondary K-spar-pyrite veins and stockwork quartz ± molybdenite




veining. Within felsite dikes, vein assemblages include quartz-pyrite, quartz-molybdenite, pyrite, quartz-fluorite-bismuthinite-albite-molybdenite and quartz-albite-orthoclase-molybdenite-pyrite. Sparse disseminated molybdenite and pyrite, plus very rare beryl, magnetite, and scheelite are also observed.

The Victorio granite, as described by McLemore et al (2001), is largely fresh or else contains weak argillic to weak phyllic alteration, with primary biotite often replaced by chlorite, sericite ± muscovite. Veins within the granite contain quartz, muscovite, galenobismuthite, bismuthinite, beryl, albite, and rhodochrosite and can also contain quartz-pyrite, and quartz-molybdenite with minor fluorite, muscovite, and secondary orthoclase. Calc-silicate endoskarn minerals are distributed within the several compositional phases of the granite.

Most of the logged intrusion breccias were emplaced prior to or during main stage hydrothermal alteration and mineralization. Tungsten Hill breccias occur stratigraphically above or laterally away from + 0.2% combined molybdenum-tungsten mineralization. Intrusion breccias are associated with greisen-type alteration. Clasts and matrix carry significant quartz, albite, muscovite, and fluorite plus lesser disseminated scheelite/powellite, helvite, molybdenite, and base-metal sulphides. Clasts can also be altered to calc-silicate assemblages. Veins cutting breccia clasts include combinations of idocrase, garnet, fluorite, muscovite, quartz, and albite, and accessory minerals of beryl, helvite, galenobismutite, huebnerite, scheelite, molybdenite, and base metals.

Calc-silicate Alteration

Alteration and mineralization assemblages vary with host rock, and with rock competence. The skarns of the Victorio District are best classified as magnesian skarns (Donahue, 2002). Phlogopite, fluorite, actinolite-tremolite, diopside, hedenbergite, chondrodite, muscovite, garnet, and magnetite are present. Tungsten, molybdenum, and beryllium mineralization are largely confined to fractures and veins, and less frequently as disseminations within altered sediments, e.g. “ribbon-rock’.

Alteration within Precambrian amphibolite (cf: metadiabase) is variable. Within the mineralized deposit the metadiabase shows intense secondary biotite (phlogopite) replacement of plagioclase and hornblende with lesser chlorite and pyrrhotite. Actinolite is found both as a massive replacement and within veins with phlogopite. Amphibolite peripheral to mineralization shows chlorite, sericite and minor phlogopite. With increasing proximity to the molybdenum-tungsten deposit, magnetite, pyrite, and




occasional pyrrhotite are found, along with silicified intervals or clots of garnet-pyrite and epidote.

Alteration within quartzo-feldspathic gneiss includes pervasive and vein assemblages. Groundmass mafics are weakly chloritized, while vein assemblages consist of quartz and quartz-albite, with sparse secondary biotite ± seconding orthoclase ± fluorite. Rare idocrase-beryl-pyrite-calcite ± fluorite ± muscovite ± molybdenite assemblages are present.

Upper portions of the Bliss sandstone show proximal and distal assemblages, relative to the molybdenum-tungsten deposit. Distal assemblages, 3,500 to 5,000ft from the center of the deposit, are a prograde metamorphic assemblage of pyroxene, hornblende, and albite-epidote hornfels metamorphism. A retrograde overprinting assemblage includes 5 to 10% actinolite in calcite matrix in the upper part of the unit, while the middle portions tend towards replacement by tremolite and serpentine with minor garnet. The lower portions of the Bliss include zones of garnet skarn and biotite plus tremolite, epidote, and diopside.

Proximal alteration assemblages within the Bliss sandstone are prograde assemblages of diopside/hedenbergite, phlogopite, and chondrodite-sericite-marble with hydrous retrograde overprints of phlogopite, actinolite, and veined actinolite-fluorite, respectively. The basal orthoquartzite carries minor phlogopite and chlorite, the middle unit is altered largely to phlogopite, fluorite, and lesser amounts of actinolite, diopside, hedenbergite, chondrodite, and muscovite. The upper dolomitic unit hosts massive diopside/hedenbergite-garnet skarn bodies with retrograde hydrous alteration to actinolite and phlogopite.

Within the El Paso Group the highly variable chemical composition of the carbonate units have produced multiple overlapping assemblages from contact metamorphism, pyrometasomatism, and late-stage greisen-type alteration. Diopside is predominant in the section. Early contact metamorphic and a successor pyrometasomatic event deposited diopside (dominant), tremolite, actinolite, garnet, idocrase and chondrodite. Both events are overprinted with greisen-dominant alteration developed by the addition of fluorine, potassium, and lesser beryllium and sodium; producing fluorite-muscovite-albite-beryl-wolframite assemblages.

Distal assemblages of the El Paso Group, 5,000ft from the deposit, and within the upper portions of the El Paso Group include tremolite and chondrodite with tremolite-muscovite replacing chert. At the base, distal sandy tremolite and muscovite and dolomite strata




above the Bliss contact are converted to dense diopsidic marble, whereas proximal to the deposit weak to moderate tremolite-serpentine and tremolite-chlorite are typical.

North of the deposit garnet-diopside-muscovite skarns crop out, while intensely metamorphosed diopside skarns are found beneath shallow gravel cover south of the Irish Rose decline. Peripheral to the deposit and within the Hitt Canyon Formation diopside is predominant, with varying retrograde assemblages of tremolite, muscovite, fluorite or actinolite. Garnet and idocrase are present but subordinate.

The Hitt Canyon Formation carries over 200ft of the alteration assemblage termed ribbon rock, a distinctive mottled irregular pale to green rock with sheaths of diopside replaced by dark green admixtures of tremolite-muscovite-fluorite. Diopside and idocrase can cross cut each other, and idocrase is often replaced by muscovite. Scheelite occurs as fine grains interstitial to diopside grains. Ribbon rock is the primary alteration type associated with the Victorio Molybdenum-Tungsten deposit. Overall zoning of Victorio Mountains calc-silicate skarns have proven difficult to delineate megascopically. Gulf has suggested the following calc-silicate zonation: proximal diopside skarn, chondrodite-fluorite-magnetite-muscovite skarn, tremolite-chondrodite-muscovite skarn, and most distal, chondrodite-muscovite marble.

At Mine Hill Santa Fe Pacific categorized four types of alteration: contact metasomatism (skarn), silicification, argillization, and carbonate recrystallization. Skarn development is restricted to Bliss and El Paso Group carbonates and is related to the Victorio granite, with intensity of skarn alteration decreasing from Middle Hills towards Mine Hill. Quartz veining is the primary carrier of base-metals, but carbonate rocks are replaced by silica along bedding planes and within breccia pipes.

6.3 Mineralization

Molybdenum and tungsten and lesser beryllium mineralization is spread as stockwork quartz veins and minor disseminations across a 2,500 by 3,000ft area, with substantial metal grades beginning at depths of approximately 1,500ft. The deposit is stratabound, albeit as a combination of competent fracturing, and favorable carbonate and silt/sand host rock. Molybdenite and scheelite are the primary ore minerals of molybdenum and tungsten, respectively, along with trace huebnerite and a suite of beryllium minerals, including beryl, helvite, and danalite. The deposit ranges in thickness from 25 to 400ft with an average thickness of 120ft. A summary of the Victorio district mineralogy is provided by Dunbar and McLemore, 2000.




Surface mineralization at Middle Hills is preferentially distributed in penetrative planar mineralized joint sets, veins, and dikes. The preferential strike direction for these structures as mapped by Heidrick is east-northeast (N. 50º to 70º E.). The Irish Rose Mine is developed on a 0.5 to 3.0ft wide north-south quartz vein dipping east at 50º to 70º. Compositions of vein swarms consists of milky to white and colorless quartz veins with lesser white to yellow muscovite, pale green to colorless beryl, scheelite, and fluorite. Calc-silicate skarns of grossluratite-tremolite-diopside-idocrase carry disseminated yellow helvite, scheelite, phlogopite, and fluorite along with galena, sphalerite, chalcopyrite, and pyrite

Molybdenite occurs in quartz veins with a wide assemblage of gangue minerals which crosscut most lithologies and skarn assemblages. It occurs sparsely to rarely as disseminations within quartz latite sills or skarn. It forms minor stockwork veins within the Victorio granite.

Scheelite occurs as fine disseminations and in quartz veins. Scheelite (which fluoresces blue-white (scheelite) to yellow (powellite) under short-wave ultraviolet light) shows a highly variable molybdenum content substitution (approaching var. seyrigite) (Willard, 1982). Microprobe analyses indicate 30% to 35% of all Victorio Mountains scheelite is fine-grained, disseminated, and has a distinctive yellow fluorescence indicating high molybdenum substitution in the mineral lattice. Some estimated 65% to 70% of Victorio scheelite is vein controlled or disseminated, medium- to coarse-grained, fluoresces blue to yellow and exhibits compositional zoning. The observed molybdenum zoning in scheelite crystals indicates two, possibly three, episodes of tungsten mineralization. Further, an estimated 80% of all the Victorio scheelite fluoresces cream to yellow, representing a range of 1% to 15% molybdenum substitution in scheelite.

A zone of low-grade tungsten-beryllium mineralization extending from 50ft below surface to at least 500ft depths occurs northeast of the main Victorio Molybdenum-Tungsten deposit, trending into the Tungsten Hill Breccia Pipe. The zone contains low-grade mineralization grading 0.076%WO3 and 0.023%BeO. Potential extensions of the zone, untested to date by drilling, project both to depth and towards the south. Mineralization consists of vein and disseminated scheelite, molybdic-scheelite, huebnerite and helvite and carrying only minor amounts of molybdenite and beryl. Vein assemblage minerals include idocrase, fluorite, muscovite, red garnet and pyrite with lesser scheelite, huebnerite, helvite, albite, beryl and rhodochrosite. Quartz is prominently absent from these vein assemblages. Blocks of El Paso Group marble are intensely altered to muscovite-fluorite-tremolite and are interspersed with bands or zones of ribbon rock. The




relationship of the tungsten-beryllium mineralization and associated Tungsten Hill Breccia to the Victorio molybdenum-tungsten deposit are not understood.

A near-horizontal low-grade shell of fluorite (1% to 3% CaF2) surrounds the Victorio Molybdenum-Tungsten deposit, mimicking the overall saucer-like geometry of the + 0.2% Combined Mo + WO3 mineralization shell.

Fluid inclusion geothermometry demonstrates the Victorio porphyry molybdenum and skarn deposits are the products of low- to moderate salinitiy fluids deposited at temperatures of 171º to 350ºC., and show evidence of repeated boiling and cooling by degassing of CO2 (Donahue, 2002). The distal Mine and East Hills carbonate base-metal replacement deposits are the products of slightly lower salinity and temperature (109º to 350ºC) and also display evidence of boiling and cooling. Analysis of sulfur and oxygen isotopic systematics confirms mixing of meteoric and magmatic water and resultant fluctuations in fluid chemistry. The isotopic studies provides a ready explanation for variable molybdenum content in scheelite, the contrasting skarns in the district, and indicate the likelihood that the various mineralization types formed from one magmatic source, i.e., the Middle Hills intrusive center.




7.0 DEPOSIT TYPES (Item 10)

The Victorio Mountains district hosts two distinct styles of mineralization; carbonate-hosted lead-zinc replacement deposits (Mine and East Hills), and the Victorio molybdenum-tungsten-beryllium deposit mineralization which is the subject of this report.

Carbonate-hosted replacement deposits comprise the jasperoidal veins and oxidized replacement mantos at Mine Hill and East Hill (McLemore and Lueth, 1991; McLemore, 1998, 2001). The primary metals are lead and zinc with silver, gold, and copper as byproducts. The mineralized bodies tend to be lens-like replacements of carbonate strata and are not fracture fillings per se, although fracturing acted as conduits to mineralizing fluids. The Mine and East Hill deposits are localized along N. 30º to 65º E and North-South striking fault and fracture systems that dip steeply to the northeast and east. Griswold (1961) noted there is evidence for both pre-mineral and post-mineral fault movement. Donahue (2002) provides a comparison of Carbonate-hosted Lead-Zinc deposits versus Mississippi Valley type deposits, and from fluid inclusion chemistry and isotopic systematics demonstrates the Mine and East Hills lead–zinc deposits have a direct link to a distal igneous source, and likely are related to the same igneous source that produced the molybdenum-tungsten mineralization. Carbonate-hosted deposits may be genetically related to, but are not part of the Victorio Molybdenum-Tungsten deposit.

The Victorio Molybdenum-Tungsten ± beryllium deposit at Middle Hills, the subject of this report, is a stockwork vein and disseminated deposit hosted in calc-silicate altered rocks (skarn) is stratiform, and is genetically related to intermediate to felsic sills and dikes that in turn closely pre-date or are coeval with the Victorio granite. The Victorio granite has since been classified by McLemore (2001) and Donahue (2002) as a porphyry molybdenum system due to its low-grade stockwork-style molybdenum mineralization. Donahue provides a side-by-side comparison table of Climax-type versus other porphyry molybdenum deposits, with Victorio mineralization indicated as a Climax type molybdenum system by the preponderance of similar characteristics. Porphyry molybdenum mineralization, albeit weak, is directly associated with the Victorio granite, and underlies the Victorio Molybdenum-Tungsten deposit. However, Galway’s geological interpretation concludes that the Victorio granite is not the source intrusive to the molybdenum-tungsten mineralization.

Higher-grade molybdenum zones consist of actinolite replaced by secondary biotite and phlogopite, which in turn are cut by veins of quartz-pyrite plus accessory chalcopyrite, pyrrhotite, galena, sphalerite, and molybdenite. Early quartz-biotite-molybdenite-pyrite ±




magnetite veins are cross-cut by quartz-molybdenite ± muscovite and pyrite-scheelite- fluorite-magnetite veins.




8.0 MINERALIZATION (Item 11)

As noted in Section 7.2.4 (Geology – Mineralization), the dominant mineralization of economic interest at Victorio Mountains is molybdenite and scheelite/powellite. Also of potential economic interest is beryllium mineralization as beryl and helvite-danalite, in association with low-grade scheelite. This section describes the mineralogy and areal distribution of the molybdenum-tungsten mineralization, the subject of this report.

Molybdenum-Tungsten Mineralogy

Significant molybdenum and tungsten mineralization is located south of Middle Hills. Extensive drilling and sampling of dumps, veins, mantos, and fault/fractures zones across the district demonstrates that Mo, WO3, and BeO mineralization is restricted to the Middle Hills area. Within the drill defined deposit, (i.e., within the + 0.2% combined mineralization shell outline) there is insufficient data from Gulf’s drilling to demonstrate significant Mo-W-Be zonation. Over 90% of outlined Mo + WO3 mineralization is contained within the Bliss and Lower El Paso Group sediments.

Within Bliss and El Paso sediments, molybdenite (MoS2) tends to occur as fine grains to coarser tightly-packed aggregates, both in quartz veins and in fracture fillings. Grains tend to be slender to broad lath-shaped cross-sections of platy crystals, often basal plates, with ragged outlines and rarely partly terminated; individual crystals can be sub-radiating, random, or parallel and needle to spindle shaped. Plates average 30 to 40 microns (range 5 to 200 microns) in size and occur as clusters of interlocked or detached crystal aggregates, and as individual grains in micro fractures in veinlets. Occasional minor amounts occur as finely disseminated grains in wall rock adjacent to veinlets, or as inclusions in other minerals, e.g., leucoxene/ilmenite and rarely in pyrrhotite. Coarser lath-shaped crystals can range from 1 x 3 to 120 by 500 microns, and often are bent, kinked, or with ends wedged apart by interleafing gangue minerals.

Scheelite is the primary tungsten mineral in the Victorio deposit. Scheelite grains tend to be zoned and from microprobe analysis are shown to have varying molybdenum contents, with molybdenum substituting for tungsten in the crystal lattice, i.e, forming a continuum between powellite (CaMoO4) and scheelite (CaWO4). Crystals can be rimmed or compositionally zoned. Scheelite/powellite is sited largely in quartz veins, with only trace amounts occurring as disseminations. The habits are blocky, elongated, and complexly shaped cross sections of tabular and irregular minerals, to occasionally equant to sub-equant, and granular to prismatic anhedral to subhedral crystals. Grains size ranges from 5 to 30, and up to 700 microns (aggregates). Within quartz veinlets, scheelite follows




molybdenite in order of deposition, with some replacement by scheelite of enclosing gangue minerals such that it encloses and entraps some molybdenite grains. There appears to be a general distribution in quartz veins of single and aggregated grain sizes of less than 50 microns, although metadiabase-hosted samples have scheelite crystals or aggregates that average 80 to 90 microns in size.

Accessory vein gangue minerals include very fine grained pyrite, pyrrhotite, magnetite, chalcopyrite, ilmentite, and leucoxene. Sulfide accessory minerals comprise only trace to very minor amounts in the Victorio deposit. Veins within the Hitt Canyon Formation of the El Paso Group are largely quartz-albite-molybdenite-scheelite-pyrite veins. Molybdenite is medium- to coarse-grained and equally distributed as both veins and disseminations within ribbon rock of the El Paso Group.

Molybdenum-Tungsten Distribution

Molybdenum and tungsten mineralization intercepts can be broken out into a Upper, Middle, and Lower Zone (Gulf Minerals designation). All three zones are shown as combined thickness of molybdenum-tungsten mineralization projected to surface in plan at a $40/ton cutoff on Galway’s map (Figures 8-1 and 8-2).

The Lower Zone is confined to Precambrian metadiabase/amphibolite, quartz latite porphyry sills, and Bliss sandstone. The Lower Zone is separated from the Middle Zone by 40 to 180ft of low-grade to un-mineralized material, and the zone always occurs within the Hitt Canyon Formation of the Lower El Paso Group. The base of the Middle Zone begins some 10 to 150ft above the Bliss-El Paso contact. The overall geometry of the deposit as defined by a + 0.2% combined grade thickness isograd (%Mo + %WO3), has an inverted saucer-shaped with a thin to barren component towards the center, and assumes an overall horseshoe shape in plan, opening to the northeast (see Figures 8-1, and 8-2). Overall the mineralization in plan is 2500ft by 3,000ft in size and 25 to +400ft thick. Mineralization within the Lower and Middle Zones tends to coalesce to the southwest into the “Main Zone”. The open end of the horseshoe represents the lower-grade or center of the deposit. In the southwest portion, the merged Lower and Middle zones (“Main Zone”) attain a thickness up to 437ft. The Upper zone is in peripheral areas away from the southeast portion of the Lower zone. The Upper zone varies from 50 to 100ft in thickness and occurs 250 to 500ft above the Bliss-El Paso contact.

The higher grade resource designation covers mineralized rock at a 0.4% combined (%Mo + %WO3) cut-off, and is localized along the southeastern and northwestern sides of the




deposit. Most of the higher-grade material occurs in Bliss sandstone and Hitt Canyon Formation of the El Paso group.

In total, the lower zone mineralization accounts for 82% of the + 0.2% combined mineralization and 41% of the + 0.3% combined. The middle zone mineralization represents 9.2% and 55% of the +0.2 and +0.3% combined mineralization, respectively. The upper zone represent 8.8% and 13.6% of the + 0.2% and + 0.3% combined mineralization, respectively.

Not shown on Gulf Minerals maps and sections is the low-grade tungsten-beryllium mineralization overlying the southeast “prong” of the horseshoe and trending to the northeast into the Tungsten Hill breccia pipe. The zone lacks molybdenum mineralization and is not included in any historical or current resource estimates, due to the low metals grades and the lack of complete sample assay data. The zone starts near surface and has only been explored with drilling to 500ft depths (see Figure 8-2).




Figure 8-1: Distribution of Molybdenum-Tungsten Mineralization (Gulf 1982)




Figure 8-2: Distribution of Molybdenum-Tungsten Mineralization (Galway 2008)




Figure 8-3: Drill Hole Location Map (Galway 2008)




Figure 8-4: Cross Section 8.5 on figure 8-3(Galway 2007)




9.0 EXPLORATION (Item 12)

9.1 Summary

Discussion in this section is related to historical exploration in the Victorio District, as well as the recently completed confirmation/in-fill drilling program of Galway. The Victorio Mountain has had a significant amount of good quality exploration work resulting in a body of high quality geological mapping, sampling geochemical information, geophysical surveys, and exploration drillhole geological logs and assays. It is the authors’ opinions that the various historical exploration data for Victorio Mountains, particularly the work of Gulf Minerals, is credible, verifiable in the field, was well thought out and executed, is well documented; and as a whole provides a comprehensive and reasonable representation of the geology and mineralization in the Victorio District and of the Victorio Molybdenum-Tungsten deposit. The drilling by Galway has confirmed the historical database and added confidence to the resource estimate.

Through the 1960’s the Victorio Mountains district was known as a past producer of minor lead-zinc ores with accessory silver, copper, and minor gold. Geologic mapping, geochemical sampling, and applied geophysical surveys were conducted across the district in the 1960’s and 1970’s in pursuit of porphyry copper mineralization followed by minor drilling and unsuccessful results. In 1977 Gulf Minerals developed a geologic model for a deep porphyry molybdenum system located somewhere beneath Middle Hills. Their first drillhole GVM-1 was sited near the Irish Rose Mine, and intersected significant molybdenum and tungsten mineralization below 1,500ft. Over the next five years Gulf defined the deposit, drilled seventy more drillholes to average depths of approximately 2300ft, and initiated a preliminary engineering feasibility study (Gulf’s designation for the in-house study). While there has been additional exploration drilling in the district since Gulf Minerals post 1983, those efforts had been directed primarily at base metals and precious metals in the Mine and East Hills area, until Galway initiated confirmation drilling on the molybdenum-tungsten resource late 2006.

The first geologic map of the district was prepared by Griswod (1961). Thorman and Drewes (1980) of the USGS produced an updated detailed geologic map of the district at 1:24,000 scale (1in = 2,000ft). Additional supporting work on the Victorio district is documented by McLemore (1998) and McLemore et al (2000, 2001 a) of the New Mexico Bureau of Mines and Geology.

The Victorio Mountains mining district was mapped in detail by Heidrick at 1:12,000 (1in = 1,000ft) and later at Middle Hills at 1:2400 (1in = 200ft) scales. Over 275 geochemical




samples were collected and analyzed. Geophysical surveys of aeromagnetics, ground magnetics, complex resistivity, gravity, and VLF EM-16 were conducted. The work is documented and verifiable, with copies of certified assay reports, maps, and surveys. The further delineation of the Victorio Molybdenum-Tungsten deposit at Middle Hills is fully backed up with excellent drill logs, copies of certified assay sheets, detailed cross-sectional and isopach maps, inter-office memos and reports, and daily drilling sheets.

The minerals exploration work elsewhere in the district (i.e., at Mine and East Hills) by Cominco American Resources, Santa Fe Pacific Mining, and Echo Bay Exploration is also documented by final project reports with geologic maps at 1:24,000, 1:12,000, 1:6,000, and 1:1200 scales, along with some copies of assays and assay summary sheets, reports of reinterpretation of geophysical surveys, and geophysical survey maps (McKelvey et al, 1988;. Wessel, 1989; Wessel and Maciolek, 1989 a,b; Hahman, 1991; Wilkins, 1991);

There has not yet been a comprehensive geologic effort to compile all district data, melding Middle Hills with Mine Hill and East Hills data along with the data from numerous drillhole intersections sited out in the pediments. Santa Fe Mining attempted a compilation of district data, but restricted their focus to Mine and East Hills. Galway has an excellent opportunity to compile all the district data and provide a comprehensive geologic interpretation of the district beyond the defined molybdenum-tungsten deposit. This work may provide insights into the genesis of the Victorio Molybdenum-Tungsten deposit, and to develop geologic models for “blue-sky” exploration drilling for similar buried molybdenum-tungsten targets in the region.

As defined by Galway’s recent confirmation drilling, closer spaced drilling offers the opportunity to refine the configuration of higher grade mineralized zones, and add confidence to the resource estimate. Galway’s exploration drilling was carried out in an appropriate manner, and in sufficient quantity and detail to confirm the historical drill data.

9.2 Current Galway Exploration Program (2008)

In the Fall of 2007, after the Effective Date of this report for the purpose of resource estimation, a second phase of core drilling was initiated by Galway. As of April 1, 2008, 16 holes had been completed, for a total footage of 32,043 feet, average depth 2,003 feet. This drill data has not been examined by SRK, and is not included with the resource estimate in Section 16, as the program is ongoing and the assay data are not yet complete. (See Figure 10.3). The information is presented here for completeness, and is part of the overall program of Recommendations as noted in Section 19 of this report.




All core completed to date in this program is HQ size with excellent core recovery. Twelve holes are vertical, and four are angle holes at minus 60 or 65 degrees, in a westerly direction. The angle holes are being drilled with the “Reflex ACT” Oriented Core System, to enable accurate determination of the attitude of veins and fractures. The oriented core tools are operated by the drilling contractor, Connors Drilling Inc. Deviation of all holes is determined by a down-hole gyro survey, completed by International Directional Services Inc at the completion of the drillhole.

Core logging for geological and geotechnical information in the current drilling program has been refined to insure consistency and efficiency. Geologic logging in the current program is routinely done through the use of a hand-held computer (PDA) which produces data which can be exported to paper logs. The objective is selection of important uniform geological, mineralization, and alteration features that reduce the subjective nature inherent in core logging.

9.3 Geotechnical Core Logging

The geotechnical core logging practice followed in Galway’s initial six-hole confirmation drilling program has been modified and refined following suggestions by Bruce Murphy of SRK. In Galway’s current practice, rock strength, nature of cemented joints, and persistence of micro-defects are estimated. Correlation factors to compare Q values derived from the two logging systems are being derived by logging several core intervals by both methods.

Review of the geotechnical logging done so far shows a consistent pattern between holes. The top 500-600 feet tend to be heavily fractured and jointed, then the Q value rises around 800 feet in depth. It continues to increase until 1,500 to 1,600 feet in depth, then trends down again. This decrease correlates with the Ordovician/Precambrian unconformable contact at 1,700 – 1,800 feet, which is typically very broken, and because of dike and vein contacts and lithological breaks within the Precambrian.

9.4 Oriented Drill Core

Four angle holes have been completed using the Reflex ACT oriented core system. In this system, the bottom of the core is marked by the driller when the inner tube is pulled from the hole, according to a gravity-responsive sensor which is incorporated in the core barrel. The sensor contains a timer which is synchronized with time recorded on a stopwatch on the surface. Both timers are started when the inner tube goes down the hole, and the surface timer is stopped when the run ends and the sensor is stabilized. On the surface,




the inner tube with core can then be rotated to the exact position it was at the time rotation stopped, and the bottom of the core is marked with a grease pencil.

In the logging facility, individual core runs are laid out in a trough made of angle iron. Core from the Victorio project is quite competent, and the natural fractures, and those made in the field to fit the core into a core box, are generally tight enough that core pieces can be rotated with respect to each other until a tight fit is obtained, thus aligning all core in its original orientation. With the marked bottom of the core down, a continuous line is drawn on the top of the entire core run, and the planar features are measured with a protractor to determine their attitude in 3-D space with respect to the top of the core.

Logging of the vertical holes shows that there are significant quantities of vertical to near-vertical quartz-molybdenite and scheelite bearing veins. Analysis of the oriented core from the angle holes enables mapping of attitude and orientation of all the veins that will allow for a structural interpretation.

Three holes have been analyzed in detail to date, GRV-82, 83 and 84. Above the mineralized zone the veining is dominantly dipping shallowly to the north-northeast. In GRV-82, within and below the mineralized zone the quartz-molybdenite veins continue to show this set of shallow dipping veins plus another set of near vertical veins dipping to the east-southeast. Further analysis of the veins shows that 58% of the quartz-molybdenite veins are dipping steeper than 60 degrees, and about 17% are steeper than 80 degrees.

Holes GRV-83 and 84 also contain a significant amount of near vertical quartz-molybdenite veining. Almost 49% of the veins dip greater than 60 degrees, and about 17% are steeper than 80 degrees.

Tungsten-bearing veins in GRV-83 and 84 are also steeply dipping. Approximately 50% of the veins which contain scheelite have dips greater than 60 degrees, and 27% dip greater than 80 degrees.

The accurate determination of attitudes of mineralized veins in oriented core from angle holes will enable conclusions to be drawn regarding possible bias in ore calculations caused by steeply dipping veins being cut, or not cut, in the vertical holes. This analysis is ongoing, and emphasis will continue on the angle drilling.

SRK concludes that the current drilling program of Galway, particularly the oriented angle core drilling, is an important step toward providing the necessary information to refine the resource estimate and to create a structural/geotechnical model for the Victorio deposit. The program is being well planned and executed.




10.0 DRILLING (Item 13)

10.1 Summary

Discussion in this section is related to historical drilling conducted by the companies that were active in the Victorio Mountains district during the period of 1969-1993, and Galway’s six-hole confirmation drilling program in 2006/2007.

Historical drilling activities were by standard drilling techniques at the time, which for the Victorio Molybdenum-Tungsten deposit was core drilling with lesser rotary drilling. Daily drill logs from historical drilling programs are present in the project files and provide some information. The Gulf Minerals drilling program describes specifics on daily drilling progress and products consumed for most of the drillholes.

The Victorio Mountains district has at least 110 known drillholes and at least 190,000ft of documented drilling completed since 1969. Of this, 166,016ft was completed at Middle Hills by Gulf Mineral Resources on the Victorio Molybdenum-Tungsten deposit. Drilling was typically on 400ft spacing, and the deposit drilling covers an area of 3,000ft across east-west, by 2,500ft north-south. Galway drilling added 11,285 feet of information in six core holes.

The core drilling methods used in Galway’s drilling and the historical drilling of the Victorio Molybdenum-Tungsten deposit at Middle Hills are typical of the industry standard methods at the time, are still industry standard methods today, and are valid and appropriate methods to define the molybdenum-tungsten mineralization.

10.2 Drilling Methods

Core drilling at Middle Hills was conducted by contractors, largely for Gulf Minerals Resources, Inc. Earlier drilling by Humble, both on and off the present day claim block, was also accomplished by diamond core drilling. Gulf Mineral Resources drilled 166,016ft of core, as HQ (2.5in dia) and NQ (2.0in dia) size core, with some rotary pre-collar. Joy Drilling, Tucson Arizona, and Longyear Drilling, Phoenix, Arizona, were the drilling contractors, commonly used drill contractors in the industry at the time.




Figure 10-1: Drillhole Location Map




Most of Gulf’s core holes from GVM- 15 to GVM-65, and A2 and A3, which intersected significant mineralization, were directionally surveyed with a gyroscopic down-hole survey system by MollenHauer Surveying, Tucson, Arizona, at the completion of the drillhole. Survey measurements were made at 100ft intervals to the bottom of the hole. The survey results are calculated for azimuth, X, and Y departures, and plotted at 1inch = 10ft on a plan map. All drillholes with available surveys used in Gulf’s resource analysis include corrections for drillhole deviation and are correctly projected onto the plane of the sections.

The drill core logging carried out by Gulf is very detailed. The logs are complete, carry large amounts of lithology-alteration-mineralization data, and show attention to detailed geology. RQD structural data is notably lacking, however, as are numeric structural attitudes and fracturing intensities. The logs are graphical hard copy logs; digital logs do not exist.

At Middle Hills it was standard procedure for drilling contractors to set surface casing at each hole to depths of 10 to 20ft depths by conventional rotary drilling. Some of the holes were pre-collared by rotary drilling down to appreciable depths (1,000 to 1,400ft), with core drilling completions; cuttings from rotary drilling were collected and assayed along with the drill core.

Galway drilling to date is comprised of 6 confirmation /infill drill holes as shown in Figure 10-2. Drilling is by a combination of pre-collar rotary drilling to less than 300ft in depth, and core drilling to planned depths of 1,800 to 2,000ft in vertical depth. The Galway drilling is summarized in Table 10-1 below. Galway conducted core drilling by industry standard procedures, with a QA/QC program in place for sample analyses, and geotechnical as well as geological logging. Galway core drilling is HQ is size, core being diamond-saw cut in half for sampling purposes, and drill holes are surveyed down-hole for deviations by either gyroscopic or single shot camera methods.

Galway geotechnical logging uses the Q system to gather the following structural and rock competency information (D. Milne; [http://www.nd.edu/~cneal/uwa/RockMassChar.pdf]):

• RQD – Rock Quality Designation; measurements of the number of fractures per interval of solid core;

• Joint Families – measurement of families of joint orientations; • Joint Roughness; • Alteration along joints; • Water influx estimation; and • Stress Reduction Factor – accounting for swelling clays, shears.




Table 10-1: Galway Confirmation/In-fill Drilling

Hole ID Pre-collar depth (ft) Core depth (ft)

GRV-70 287 1857

GRV-71 132 1917

GRV-72 177 1967

GRV-73 269 1877

GRV-74 158 1840

GRV-75 175 1827

Galway 2007 drill holes are shown in red on Figure 10-2 below. Galway 2007/2008 drilling is shown in Figure 10.3




Figure 10-2: Galway Confirmation/In-fill Drilling




Figure 10-3: Galway Recent Angle In-fill Drilling (Galway 2008)




Galway’s confirmation drilling program was directed at providing the following:

• Additional confirmatory assays within the molybdenum-tungsten deposit – as confirmation of the resource block model.

• Geotechnical information (Q System measurements) necessary to assess ground conditions for potential mining options.

• Core samples to confirm specific gravity measurements for insitu bulk density determinations.

• Fresh samples for mineralogical and metallurgical testing.

The drilling by Galway has added confidence to the current resource estimate, provided geotechnical information, and is being used for additional metallurgical testing; essentially accomplishing the intended goals. Current drilling is to provide angle holes across the deposit to add the understanding of the geology, and to provide additional geotechnical information




11.0 SAMPLING METHOD AND APPROACH (Item 14)

Gulf Mineral Resources Inc. drillhole database constitutes the bulk of the drillhole database used for the current resource estimate for the Victorio Molybdenum-Tungsten deposit at Middle Hills. That effort used the best practices for obtaining representative samples for assay using HQ and NQ core drilling. Gulf’s drilling and sampling procedures are documented by Heidrick (1983).

Drill core was transported from the Victorio drill sites to a rented core storage facility at the Deming airport. All core was first logged in a reconnaissance fashion at 1in = 50ft. From visual grade estimates the core was then either split with a conventional hydraulic core splitter or sampled selectively. Select sampling of low-grade intervals was accomplished by taking an approximately two-inch piece of core at evenly-spaced two-foot intervals that matched lithologic breaks, bagging the pieces, and sending off for an initial assay (Heidrick used the term “channel” sampling for this method of select sampling). If these select samples later assayed higher than visually estimated, the remaining core would be split and re-assayed to compliment grade and/or thickness of adjoining mineralized zones.

Mineralized drill core was split along the axis of the core so as to provide a 50% representative sample of the core. One half of the core was retained in the box, and the other half placed in canvas or cotton bags for assay. Sample intervals for core drilling were either 5.0ft or 10.0ft, and at natural lithological breaks; thus, intervals may be less than 5 or 10ft as dictated by geology in core. The sample interval is appropriate for the mineralization at Victorio. The bagged samples were assigned assay sample numbers from sample books, marked with the sample number; and the drillhole number and sampled interval were recorded in the sample books. The procedures used for sample numbers provided samples to the commercial assay labs without identification of drillhole numbers or sample intervals.

The drill core was later logged for a second time in detail on large 15 by 24in sheets. After assays were received, the completed logs were copied and drafted onto Mylar master log sheets. The sample numbers were entered into a master record book with the drillhole number and intervals.

Galway’s current drill program uses industry standard procedures. Drill core is cut and sampled on 10ft intervals exterior to mineralization, and on 5ft intervals interior to mineralization; sufficient to adequately sample the stockwork and disseminated




molybdenum and tungsten mineralization. Galway’s core is cut, sampled for analysis, photographed, and logged in a secure office/warehouse in Deming.

SRK examined the Galway core, Galway’s logging and sampling procedures, and the historical drill logs and assays; and considers both the historical and Galway sampling methods to be appropriate for this deposit. As mineralization is essentially flat lying, the vertical drill holes represent true thickness intercepts of mineralization. The 5 and 10 ft sampling intervals are appropriate for mineralized zones which are 25 to 400 feet in thickness.




12.0 SAMPLE PREPARATION, ANALYSES AND SECURITY (Item 15)

Gulf Minerals submitted all samples for assay to Southwestern Assayers and Chemists, Inc., Tucson, Arizona, later renamed Copper State Analytical Lab, Inc.; a reputable and state registered analytical lab that is still doing business. Second laboratory check samples were performed with a number of other well known analytical labs then servicing the mining industry. The ultimate disposition of the pulps and sample rejects is unknown, but they are believed to have been discarded in the early 1990’s when the lease on the core storage facility at Deming was allowed to lapse (Donegan, pers.comm.)

Galway’s confirmation/in-fill drilling utilized industry standard QA/QC procedures and analytical techniques.

12.1 Sample Preparation

All core or drill cuttings samples submitted by Gulf Mineral Resources to Southwestern Assayers & Chemists/ Copper State Analytical Lab (SWAC/CSAL) were first run through a primary jaw crusher followed by a roll crusher. The crushed samples were placed through a Jones splitter and sieved at ¼-inch mesh to guarantee a ¼in crush. A pulp sample was then made from a 200gm sample of the coarse material by pulverizing in a Buehler rotary mill. The resulting pulp was 95% minus 200-mesh. The pulp was next blended on a leather roll cloth before being bagged in a standard kraft pulp envelope and transferred for analysis. All pulps were later transferred to the Deming core facility for storage.

Galway drill core has been saw-cut, and sampled intervals shipped to ALS Chemex, Elko, Nevada for sample preparation. ALS uses an industry standard procedure for crushing and pulverizing core samples. Sample pulps are shipped to ALS Chemex, Vancouver, BC for analysis

12.2 Analytical Procedures

All Victorio samples submitted to the labs were analyzed by Atomic Absorption Spectroscopy (AAS), colorimetric, and gravimetric methodologies, standard analytical procedures of the time for routine analyses of base-metals and ferro-alloy metals. All samples were routinely analyzed for Mo, W, F, Be, and S. Occasional assays for Au, Ag, Sn, Bi, Zn, and U3O8 were also performed on select intervals. Heidrick (1983, p. 35) describes the analytical procedures as follows:




“.…The molybdenum analytical procedure at SWAC/CSAL includes a total dissolution of the sample with HF-HNO3-HClO4 acids, extraction with stannous chloride, potassium thiocyanate and ethyl alcohol, and analysis of the Mo in the organic extractant by atomic absorption. This procedure liberates molybdenum from all phases in the sample including that contained in molybdic scheelite. The tungsten procedure involves a total dissolution with HF-HNO3-HClO4 acids, drying, and eventual dissolution of the residue in a NaOH solution. After pH adjustment, the WO3 is extracted by zinc dithiol and ethyl acetate and final analysis determined colorimetrically. Samples with WO3 values above + 0.30% were re-analyzed by gravimetric methods…”.

The use of AAS, gravimetric, and colorimetric assay methodologies were standard laboratory procedures for the time. Present-day determinations for molybdenum and tungsten samples utilize X Ray Fluorescence Spectroscopy (XRF), mass spectrometry inductively coupled plasma (MS-ICP), and Neutron Activation methods.

Galway is utilizing ALS Chemex as the primary laboratory and SGS as a secondary lab for the analysis of core samples. ICP is the primary analytical method employed by Galway.

12.3 Quality Control Procedures (QA/QC)

Gulf Minerals recognized early on in their drilling program that questions persisted about the precision and accuracy of tungsten analyses. Gulf initially purchased and used molybdenum and tungsten standards from Hazen Research, Inc., Golden, Colorado, and Canadian Metallurgical Standards. Due to the limited assay ranges of the standards, and deposit mineralogy, Gulf prepared sets of their own standards (Heidrick, p. 36):

“….A program was initiated to supply assay control samples compatible to the ores encountered on the project. Seven (7) Victorio Mountain project drill core sample rejects (assigned numbers GV 1 through 7) were selected with a range of assay values for Mo and WO3 that were representative of host rock lithology. Samples were sent to the Research and Development Group at Mountain States Engineers (MSE), for preparation. The entire bulk sample, seven to eight pounds each, was pulverized, sieved and re-pulverized to minus 200-mesh and blended for four hours. A number of samples were selected at random from each bulk pulp and assayed for Mo and W03 to determine sample homogeneity. After the preparation and assaying by MSE was completed, pulps were sent to seven other laboratories for triplicate Mo-WO3 assays on each of the samples. Participating labs included Barringer Resources – Denver, Southwestern Assayers and Chemists (SWAC) - . Tucson, Skyline Laboratories – Tucson, Chemical and




Mineralogical Services (CMS) – Salt Lake City, Hazen Research, Inc. (HRI) –Golden, Rossbacher Laboratory Ltd. – Vancouver and Rocky Mountain Geochemical Corp. –Salt Lake City. There were only minor discrepancies among reported Mo values from each of the various laboratories, but serious discrepancies occurred with the WO3 assays. The highest WO3 values were reported by the three metallurgical assay laboratories, HRI, MSE and SWAC. Based on their greater experience with ore grade materials and their similar results, the values of these three laboratories were considered most representative and were averaged to obtain tentatively “acceptable” values for tungsten. Six other samples, GV 8 through 13, with generally lower values, were later selected, prepared, and certified through the same process”.

“The routine use of the assay control samples started in October 1980 on drillhole GVM 17. The control samples were submitted under a sample book number along with the split or channel samples (select samples) at a frequency of one control to every five to ten drill samples. As assay results were received, the control sample assay values were recorded in a log book, “decoded” and the “accepted” values were written alongside the assay value on the certificate for the scrutiny by the geological staff. Assay batches containing control samples that did not assay within ~1.5% of the acceptable value were sent back to the laboratory for re-analysis (at the laboratory’s own expense) if the errant control sample occurred within a potential ore zone”.

“Through time the reported molybdenum values were quite acceptable with little variation; however, considerable change in reported WO3 values has occurred since the early drilling. The initiation of better assay procedures by SWAC during 1980 substantially increased the · WO3 values. For example, duplicate WO3 analyses from drillhole GVM 1 in August 1981 showed an average increase over the original January 1979 assays of 41.5%. GVM 2 was also re-assayed. Tungsten assays that utilized the CANMET standards were erratic prior to October 1980. Duplicate and triplicate WO3 assays from ore zones on more recent drillholes display good repeatability.”

“Statistical analysis of the control sample data collected since the initiation of the program was done to evaluate the precision of the ore zone assays. Only the control sample assays from ore zone batches were used for the calculation since sample batches outside the ore zone were not re-analyzed even if the standard values were unacceptable. Table 1 summarizes the data for range, mean (x), standard deviation (SD), relative standard deviation (RSC), 95% confidence range, and the “accepted” value of the sample as determined from the original multiple laboratory averages. The 95% confidence range is defined as the mean plus-or-minus two standard deviations calculated in percent. Figure




17 represents a plot of the mean of each control sample versus its 9.5% confidence range and a best fit curve showing the approximate 95% confidence range that might be expected from the assay data. The observed 95% confidence range for Mo is approximately ± 8.5% or ± 85 ppm at 1,000 ppm Mo and for WO3 is ± 16% or 160 ppm at 1,000 ppm WO3. The precision of both elements is within acceptable confidence ranges, respectively, and is acceptable relative to prescribed standards of the exploration industry. The means of the collective SWAC/CSAL data on the control sample compared to the original “accepted” values from the multiple laboratories is shown on Figure 18. As illustrated, depending on the accuracy of the multiple laboratory data, the routine assay data appears to be accurate. .”[note: reference for Gulf Minerals Report Table 1 and Figures 17 & 18; the tables and figures not presented in this NI 43-101 Preliminary Assessment]

Gulf Mineral Resources’ Quality Assurance and Quality Control of their assay program are judged to be quite good and far above the norm for exploration group procedures of the time. However, there is no way to judge the variability of historic assays against present-day analytical techniques as the historic pulps and coarse rejects are no longer available for comparison.

Galway has a QA/QC program in place; submitting a control sample with every 20 drill samples. In addition, every 20th drill sample is prepared with duplicate pulps, the duplicate sent to SGS labs for a check against the primary analysis from ALS Chemex (Vancouver, BC). Control samples are selected from one of six commercially available standards and/or a blank sample of silica sand. Standard samples include two for tungsten and molybdenum, two for molybdenum only, and two for tungsten only. Standard reference sample materials were purchased by Galway from CANMET and CDN Resource laboratories, both industry suppliers of sample standards.

Results of Galway analyses for 42 silica sand blanks are only four sample with greater than 0.0010% Mo, and a high value of 0.0026%. Similarly for WO3 assays on blanks, only three samples returned values greater than 0.009% Wo3, and a high value of 0.0163% WO3. The blank sample assays indicate ALS sample preparation and analysis in acceptable.

Molybdenum analyses from ALS check quite well against the CANMET and CDN standards as shown for 41 samples pairs in Figure 12-1

Figure 12-1: Standard versus ALS assays for Mo




Standards vs ALS Chemex - Mo%y = 0.9731x + 0.0058

R2 = 0.9933

0.0000

0.0500

0.1000

0.1500

0.2000

0.2500

0.3000

0.3500

0.0000 0.0500 0.1000 0.1500 0.2000 0.2500 0.3000

Standard

ALS

Che

mex

Tungsten analyses from ALS as compared to the CANMET and CDN standards are shown for 35 sample pairs in Figure 12-2. As will Gulf’s experience, Galway’s analyses for tungsten are shown to vary, depending upon grade from the Standard’s grade. While the overall correlation is good, the higher grade tungsten values will have variability, and will require multiple check analyses and checks by alternate analytical procedures to minimize variance of grade utilized in the drill hole database going forward. For the limited drilling conducted thus far, Galway has checked tungsten analyses by both ICP and XRF methods.

Figure 12-2: Standard versus ALS assays for WO3

Standards vs ALS Chemex - WO3%y = 0.7656x + 0.049

R2 = 0.9067

0.0000

0.2000

0.4000

0.6000

0.8000

1.0000

1.2000

0.0000 0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 1.4000

Standard

ALS

Che

mex

12.4 Sample Security

There are no statements in the Victorio data files concerning the security procedures in force during Gulf’s tenure at Middle Hills, except that analytical labs were never told the




drillhole numbers or interval sequences of bagged samples. Industry norms at the time were to permit no outsiders to view, handle, transport, or engage in discussions of the project with project geologists or managers. Galway is storing core in a locked warehouse in Deming, New Mexico; the facility where core is cut and logged.

12.5 ISO 9000 Certification

The assays of five check samples collected by the author were sent to ALS-Chemex for both XRF and ICP determined tungsten analyses. ALS Chemex, at its North American laboratories, holds ISO 9002:1994 and ISO 9001:2000 certifications. SGS Lakefield is and accredited ISO/IEC 17025 laboratory.

The certification process for analytical labs was not common practice in the 1970’s and early 1980’s.

12.6 Recommendations

Additional drilling by Galway to in-fill the drilling pattern and increase confidence in the resource should continue to use a rigorous program of QA/QC, as currently in place, with the addition of multiple outside analytical checks, particularly for tungsten.




13.0 DATA VERIFICATION (Item 16)

Data verification has been accomplished by the following:

Visual inspection of alteration, rock types, and structure in outcrop at prospects and mine dumps at Middle Hills, in the immediate vicinity of the Victorio Molybdenum-Tungsten deposit;

Location in the field of historical drill sites that are marked with drillhole identification, and correspond to location on maps;

Assays for five rock samples collected by the author that confirm tungsten and molybdenum mineralization;

Core drilling by Galway that confirms, by analysis and visually, the presence of both tungsten and molybdenum mineralization.

• Copies of assay certificates from commercial analytical laboratories that confirm the molybdenum and tungsten mineralization; and

• Copies of external lab test results (metallurgical) that also confirm tungsten mineralization.

• Comparison of the in-fill drill holes to the original block model constructed from only historical drill data.

13.1 Data Verification

Much of the drill core pertinent to the mineralized intercepts that define the Victorio Molybdenum-Tungsten deposit at Middle Hills was donated to the New Mexico Bureau of Geology & Minerals Resources, Socorro, New Mexico, in the 1990’s. Due to the large volume of drill core, the archived core storage for 22 of 24 Gulf drillholes was reduced by the staff to skeletonized representative samples of mineralized intercepts, as one or two representative pieces of core several inches in length. The authors and Galway have not yet had the opportunity to examine the core in storage at the New Mexico Bureau of Mines and Mineral Resources. Galway has verified historical drilling results with new core holes that visually and analytically replicate historical information.

Visual inspection in the field confirms the geology as described in summary reports. Quartz veining, skarn minerals (garnet and diopside-tremolite) and accessory base-metals and casts after former sulfides are visible in outcrop and Galway’s core. Identification of scheelite mineralization is often difficult in oxidized weathered outcrops, and so was not directly confirmed in the field outcrops, but scheelite/powelite was viewed under and




ultraviolet light in core samples as dissemination in the rock and in veinlets in Galway core.

Also visible in the field are a significant number of historical drill roads and drill sites. The vast majority of Gulf Minerals’ drillholes are located in the field with several feet of standpipe or thick rebar set in concrete at the former drillhole collars. Galway’s drill holes are capped and marked.

13.1.1 SRK Verification Samples

During a field visit to the Victorio Molybdenum-Tungsten deposit, the author collected five hand samples of alteration/mineralization exposures from surface prospect pits and former mine dumps. The samples were collected as dump grab samples of the best looking examples of mineralization, for the sole purpose of verifying presence of anomalous molybdenum and tungsten.

Table 13-1: Victorio Check Assays by SRK

Sample Mo /AAS Mo/ ICP W / XRF W / ICP Be / ICP Number (ppm) (ppm) (ppm) (ppm) (ppm) VM-1 142 147 3000 3050 135.50 VM-2 217 179.5 3890 480 496.00 VM-3 7 5.6 70 68.6 3.34 VM-4 20 16.8 1420 1360 67.10 VM-5 12 8.15 870 890 133.00 Sn / ICP Cu / ICP Pb / ICP Zn / ICP Ag /ICP (ppm) (ppm) (ppm) (ppm) (ppm) VM-1 31.0 927.0 2030ft 2570 34.80 VM-2 62.1 745.0 2000 1690 40.30 VM-3 0.9 27.3 51.9 62 0.77 VM-4 300.0 1800.0 18,800 24,500 357.00 VM-5 237.0 1130.0 76.4 2090 4.38

The values are in accord with surface dump and vein sampling geochemistry reported by the various lessors in the district.

13.1.2 Historical Data Verification

Introduction

Galway requested the Victorio Molybdenum-Tungsten Deposit project files be converted into a digital database for application in a resource estimate. The original project files




were generated from 1977 to 1983. They exist only in hard copy and are judged to be sound and sufficient to produce a reliable resource estimate.

Victorio Database Background

During Gulf Mineral’s exploration tenure on the property from 1977 to 1983 the resource drilling data from 71 holes was hand compiled into “Victorio Project: Drillhole Assay Data Summary Sheets”. It is presumed that the Gulf Minerals drill data was manually compiled and cross checked for the accuracy of collar locations, intervals and assays. This database was used by their engineering division for preparation of 18 northwest-southeast cross-sections for a molybdenum-tungsten resource estimation and a preliminary VCR underground mine design.

Hard copy documents used in the preparation of the SRK digital database were mainly from the bound “Drillhole Assay Data Summary Sheets” located in the 20 boxes of data files stored at Donegan Resources office in Albuquerque, NM. Most but not all holes are entered with assay summary data. Each drillhole’s summary sheet contains the collar Northing and Easting coordinates in local mine grid, a elevation in feet above mean sea level, the total depth, assay intervals and assay results including analysis for Molybdenum, Tungsten (as WO3), Beryllium (as BeO), Sulfur and Fluorine. Scattered within the Donegan files are additional assays for base and precious metals, total iron and other ferro alloy metals. SRK’s database presents all values in weight percent; any levels reporting in parts per million (PPM) in the original assays were converted to weight percent for uniformity (GVM-1 through GVM-50, GVM-A1 through GVM-A4).

Assay data for drillholes GVM-51 through GVM-67 are absent from the Gulf master compilation book. The assay data and collar locations for most of these holes were located in unspecified files of Donegan Resources. At this time collar coordinates have never been found for drillholes GVM-66 and GVM-67. They are believed to be located off the study area and were not considered in the resource estimate.

The assay data for GVM-56 through GVM-67 by necessity has been hand assembled and manually entered. The data is overlapping, some places incomplete, mixed in with assay standard data and contains multiple re-assays. The most recent assays in all instances have been utilizes in the final database. Duplicate and triplicates assays were averaged and the average input to the final database.

All the Gulf drillholes are vertically inclined. Drillholes GVM-15 through GVM-65 and GVM-A2 through GVM-A3 have down hole deviation surveys conducted by Mollen-Haur Surveying, Tucson, Arizona. Each drillhole survey book has quadrant and departure




angle measurements taken at 100ft intervals over the entire length of the hole. Quadrant measurements have been converted to standard azimuth angles clockwise from North=0o or 360o.

SRK Database Construction

The SRK digital database was constructed by scanning the Gulf Minerals Assay Summary sheets into OmniPage Pro, version 15 and saving the output into MS Excel 2003 data sheets. The optical character recognition (OCR) program produces approximately 80% correct conversion of the data. All data was printed from the Excel data sheets and cross referenced to the master copies. Corrections were entered manually as needed. The files were then rechecked by a second person and again corrected as needed

During the original SRK data compilation partial assay intervals of drillholes GVM-33 through GVM-64 could not be found in the hard copy data files and were left absent from the SRK database. Galway personnel were later able to retrieve this data and generated the necessary records to complete the missing data entries. The data retrieved by Galway was all listed in weight percent on the original assay certificates so no data conversion was required. Galway hand entered the assay data into the appropriate intervals in two separate data sheets. They then subtracted one data sheet from the other to locate any errors which would appear as non zero values. Corrections were made as necessary and the corrected data was merged into the final database.

The geologic database was compiled by Galway personnel from the original Gulf Minerals drill logs. They categorized the rocks using a formation name and a lithology description. There are twenty formation names used to categorize the various rocks. The formations have been qualified and in some cases further subdivided by lithologic descriptions. Twenty nine lithologic rock names are used to describe the various formations.

A total of 71 drillholes have been entered into the SRK database for the Victorio Molybdenum-Tungsten Project. The database now consists of four Excel data files. (1) A collar table includes XYZ coordinates for all the drillhole collars listed in local mine grid northing, easting and elevation in feet above mean sea level. This table also includes the total length of the drillhole measured in feet. (2) A Survey file contains directional down hole survey data where available, or the original vertical collar orientation if the hole was not surveyed. The down hole survey data is presented as: from/to in feet, departure angle, degree of dip and azimuth angle of the dip bearing. (3) An assay file lists; hole number, assay interval as from/to in feet and assay results, all listed as weight percent. Assay data




is included for Molybdenum, Tungsten (as WO3), Beryllium (as BeO), Sulfur and Fluorine. In some of the data, the original assay were reported in PPM and subsequently converted to weight percent. In these cases the original PPM data remains in the data files. (4) A comment file describes the designators for “No Assay (-1)”, “No Recovery (-2)” and general comments.

To verify the final database, the excel data files were printed out with a header labeling all columns and a footer describing the file name. This hard copy of the electronic version was then checked against the original data source.

The collar coordinates were checked against two original sources. For drillholes GVM-1 through GVM-49 and GVM-A1 through GVM-A4 the summary data sheet produced by Gulf Minerals titled “Drillhole Collar Coordinates and Elevations” and dated 8/3/82 was used. For drillholes GVM-50 through GVM-65 the original drill logs were used. One hundred percent of the collar location data was verified and no errors were found.

The drillhole orientation and down hole survey data was also verified from two sources. Where deviation surveys were absent the drillhole orientation was verified from original drill logs. The drillholes with down hole deviation surveys were checked against the original data files. A total of 188 entries representing 20% of the data were checked. For each record, three variables were proofed, the measurement location down the hole, the deviation from vertical and the bearing of this deviation from north. Only four bad entries were found and corrected representing a 0.14% error.

The assay intervals and assay data values were verified from the “Drillhole Assay Data Summary Sheets” and from original assay data sheets. A total of 625 intervals were checked for seven variables representing 10% of the total data. Only nine errors were found and corrected representing a 0.2% error.

The geologic database was spot checked for accuracy. A total of 5% of the entries were verified for intervals and formation name. No errors were found.

Galway Database

Galway verified/adjusted the basic assay database independently from the basic backup data and added geological information to the database. Galway geologists then constructed a 3-D geological model of the deposit geology and mineralization envelopes using Vulcan software. Galway added their six confirmation/in-fill drillhole data to the database. And SRK verified the Galway database against hard-copy drill logs and assay data prior to conducting resource estimation, as described in Section 16 of this report.




In summary, the Victorio assays appear credible and verifiable both from field sampling and in digital format. Gulf’s QA/QC program and outside independent analyses generally confirm the presence of molybdenum and tungsten mineralization. Galway’s confirmation drilling and QA/QC results further verify the project database and added confidence in the integrity of the Victorio Molybdenum-Tungsten deposit geological and assay data.




14.0 ADJACENT PROPERTIES (Item 17)

Properties immediately adjacent to the Victorio Molybdenum-tungsten deposit are the jasperoidal base-metal carbonate replacement deposits at Mine Hill and East Hills, described earlier. The adjacent properties are discussed in this report as the mineralization at Mine and East Hills, may be related to the Victorio Molybdenum-Tungsten deposit on a district metal zonation scale, but they are not part of the molybdenum-tungsten mineralization deposit at Victorio Mountains; and thus have no bearing on the stated molybdenum-tungsten resource.




15.0 MINERAL PROCESSING AND METALLURGICAL TESTING (Item 18)

15.1 15.1 Metallurgical Testing

Gulf Minerals was the primary historical company that actively explored and drill defined significant quantities of molybdenum-tungsten-beryllium mineralization at Middle Hills. Depressed metal commodity prices and an overall downturn in the mining industry led to closure of the Minerals Division of Gulf Oil in 1983, just prior to their merger with Chevron. Metallurgical research on the molybdenum-tungsten deposit was initiated towards the end of Gulf’s tenure on the property. The discussion in this section of the Preliminary Assessment is an abstract of the preliminary work done by Gulf Minerals. Galway has initiated preliminary confirmatory and other metallurgical testing for the Victorio Mountains molybdenum-tungsten deposit at Hazen Research as discussed in Section 15.1.2.

15.2 Hazen Research (1982)

Hazen Research, Inc. of Golden, Colorado (“Hazen”) was contracted by the Engineering Group at Gulf Minerals in June 1982 to determine: (1) the amenability of Victorio molybdenite and scheelite mineralization to conventional flotation and gravity recovery methods in completing metallurgical test work, (2) establish process plant design criteria and flow sheet, and (3) capital and operating cost estimates. Gulf was considering direct marketing of molybdenite (MoS2) concentrates, and assumed scheelite concentrates would be fed for ammonium paratungstate production (APT).

The metallurgical investigation at the Victorio Mountains molybdenum-tungsten deposit utilized rejects from six core holes representing five lithological types: El Paso limestone/dolomite, Bliss sandstone, andesite, Precambrian gneiss, and Precambrian amphibolite. The molybdenum and tungsten occur as molybdenite and scheelite, respectively.

The flowsheet adopted for flotation test work was conventional, consisting of rougher or rougher plus scavenger flotation. Rougher concentrates were cleaned, usually without any regrinding, two or three times by re-flotation. Rougher flotation was conducted with approximately 33% solids. Collectors used for the testing were oleic acid, napthenic acid, and amyl sulfosuccinamate. Alkalinity control was by use of lime and sodium carbonate.

The results indicate that molybdenite responds well to conventional flotation techniques at grinds of 91 to 191 mesh, with recoveries of 60 to 75% and within acceptable impurity




levels for Cu, Pb, Zn, Fe, and P2O5. Molybdenum recoveries are higher in rougher flotation for Bliss sandstone and andesite, and lower in limestone/dolomite rock. Conclusions were that optimization of flotation conditions and the recirculation of intermediate cleaner tailings products could be expected to increase final recoveries to over 85% for molybdenum.

The test results indicate that scheelite also responds well to flotation with the addition of gravity table with recoveries of 74 to 77%. By re-circulating the intermediate concentration products and using more refined flotation and gravity test conditions, Hazen concluded that recoveries could likely be increased to 85%, for a 3% to 5% WO3

concentrate. Flotation proves effective at recovering 85% to +95% of the tungsten in the minus 150 mesh fractions. Tabling of the flotation tailings results in recovers of 50% to 60% of the tungsten not rejected by floatation. To affect improved tungsten recoveries in the range of 80% to 85%, Hazen concluded that better gravity equipment and separate treatment of classified coarse and fine-grained (i.e., sand and slime) fraction were indicated. With concentrate grades of 3 to 5% WO3, the recovered scheelite product is considered suitable for APT process feed, not for direct sale of concentrate.

Chief diluents in the process circuit are fluorite, calcite, and amphibole (actinolite-tremolite). Fluorspar concentrates were not produced during bench-scale testing, due to low CaF2 head grade. Recovery of fluorite tends to follow that of scheelite. Tabling tests demonstrate higher fluorite upgrades are possible, as tabling readily separates scheelite from calcite and fluorite.

The grades and recovery of scheelite by flotation are very dependent on head grades. Tungsten concentrations increase sharply for flotation with increasing fineness of grind, whereas gravity concentration of coarser fractions is higher. For flotation tailings, the coarser fractions contain the highest concentration of tungsten.

In Hazen Research’s 1982 study for Gulf, they prepared capital and operating cost estimates for a 2,000 tpd ore processing plant and APT plant for the production of a marketable molybdenite concentrate and APT. Tables 15.1 and 15.2 summarize Hazen’s capital and operating cost estimates in 1983 dollars, respectively.

Table 15.1: Hazen Research Capital Cost Estimate for Victorio Mountains

Capital Cost Category Capital Cost (1982$) Buildings/ Shops/Office (1) 2,279,500 Crushing (2) 874,200 Primary Grinding (2) 2,032,000 Mo Flotation (2) 1,099,200




Mo Roasting (2) 910,200 Pyrite Flotation/Tailings Thickener (2) 283,900 WO3 Flotation (2) 335,300 WO3 Gravity (2) 164,000 Process Piping (Materials & Labor) 854,800 Electrical (Materials & Labor) 1,139,800 Instrumentation 171,000 Plant Services (3) 398,900 Civil (4) 569,900 Subtotal $11,112,700 Engineering & Construction 2,778,200 Contingency @ 15% 1,666,900 Subtotal Mill $15,557,800 APT Plant 25,000,000

Totals $40,557,800

(1) Includes mill building, crusher building, assay office, mill machine shop, and administration. (2) Installed process equipment. (3) Includes water distribution, sewer, compressed air, etc. (4) Includes site development, tailings, water supply, and roads.

Table 15.2: Hazen Research Operating Cost Estimate for Victorio Mountains

Operating Cost Category Annual Cost (1982$) Cost (1982$)/ Ton Ore Supervision (1) 307,428 0.44 Operating Labor 907,750 1.30 Reagents/Chemicals 3,017,000 4.31 Operating Supplies 371,000 0.53 Maintenance 700,101 1.00 Power 1,344,000 1.92 Fuel 14,480 0.02 Technical and Analytical (1) 394,560 0.56 Water Treatment 27,216 0.04 APT Conversion 3,167,483 4.52

Totals $10,251,018 $14.64

(1) Included in General & Administrative.

15.3 Hazen Research (2007)

In May 2007, Hazen was contracted by Galway to complete a metallurgical test program on two sample composites provided by Galway. These composites were identified as an El Paso limestone and Bliss sandstone. The objectives of the program were to complete:

• Chemical and mineralogical analysis;

• Grind curve to determine the liberation size characteristics;

• Optimize molybdenum and scheelite recoveries using flotation; and




• Simplify the complex flotation reagent scheme used in the 1982 test program.

Future metallurgical work is to examine sheelite recovery by gravity methods. Figures 15.1 and 15.2 show the metallurgical test flow sheets for Hazen’s program.

Forty-two tests have been completed focusing on improving the molybdenum recovery at different grind times and reagent schemes. A second set of tests were completed for direct scheelite flotation only to upgrade the scheelite while depressing fluorite, carbonate, and other gangue using a variety of flotation collectors.

Preliminary results of this test program indicate the following:

Test Work Results

Mo rougher/1 cleaner flotation 80% Mo recovery in 1st cleaner concentrate

WO3 rougher/1 cleaner flotation 68% WO3 recovery in 1st cleaner concentrate

Mo rougher/7 cleaner flotation 88% Mo recovery in cleaner concentrates

Mo/WO3 ro/cl flotation 87% Mo recovery and 54% WO3 recovery in 4th cleaner concentrates

Direct WO3 ro/cl flotation 65% WO3 recovery in cleaner concentrate

Mo locked-cycle flotation (4) 86% Mo recovery in 4th cleaner and scavenger concentrates

15.4 Review and Analysis of Metallurgical Test Work

SRK’s review and analysis of the metallurgical test work are summarized below:

• Bond work indices are relatively soft ranging from 7 to 8 for limestone to 12 for andesite sill;

• At grinds of about P80 150 mesh, recoveries of 85% and 74 to 77% are estimated for molybdenum and tungsten into their respective concentrates using flotation for the molybdenum and flotation-gravity for tungsten;

• A final molybdenum concentrate grade of 54 to 56%Mo would be produced by rougher flotation, two regrinds and four stages of cleaning;

• A final tungsten concentrate grade of 3 to 5%WO3 would be produced by rougher flotation and three stages of cleaning, and gravity concentration; and

• APT would be produced from the 3 to 5%WO3 concentrate in a conventional circuit of autoclaves, counter-current filtration, solvent extraction, and crystallization.




SRK has based its processing flow sheet on Hazen’s metallurgical test work.

15.5 Processing Flow Sheet

The proposed processing flow sheet for Victorio Mountains is based on the metallurgical test results as follows utilizing conventional technologies for the production of a separate MoS2 concentrate and APT:







• Tungsten concentrate thickening and filtering; and

• APT production plant.

A full description of the processing flow sheet is contained in Section 17.1.19.

15.6 Recommendations

It was noted in the work done by Hazen for Gulf that further refinements to the process flowsheet for the Victorio Mountains molybdenum-tungsten mineralization could result in improved bench-scale recoveries and concentrate grades for both molybdenum and tungsten. Concurrent with the drilling program proposed in this report, the coarse rejects from the assay laboratory of split core samples should be set aside for possible metallurgical testing.

SRK recommends a complete metallurgical testing program, sufficient for pre-feasibility level process flow sheet design be part of the ongoing work at Victorio Mountains. In addition to the work in progress or contemplated by Galway, the following metallurgical test work is recommended on representative samples:

• Crushing index testing for high-pressure grinding rolls;

• Abrasion index;




• Grinding tests for rod mill, ball mill and SAG (SPI) work indices;

• Locked cycle flotation tests for both molybdenum and tungsten process flow sheets;

• Settling tests for process plant tailings, molybdenum and tungsten concentrates;

• Filtration tests on molybdenum concentrates;

• Variability and optimization testing of molybdenum and tungsten flow sheets for grind size, pH and reagent scheme; and

• APT testing of tungsten concentrates from flotation and gravity circuits




16.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES (Item 19)

16.1 Introduction

The resource estimation of this report is an updated model of a SRK estimation presented in February 2007. The modeling procedures are identical to those previously presented. The database and geologic interpretation has only changed by the additional information from the 6 infill drillholes completed by Galway during 2007.

16.2 Resource Database

16.2.1 Drillhole Database

The drillhole database was compiled and verified by SRK personnel and is determined to be of high quality. The database consists of five Microsoft Excel spreadsheets containing collar locations, drillhole orientations with down hole deviation surveys, assay intervals with results, geologic intervals with formation and rock types and a general comment sheet. The database was verified and minor adjustments made prior to starting the modeling procedure. The appropriate codes for missing samples and no recovery were used during the modeling procedures.

The database contains information from 75 drillholes totaling 175,643of drilling. The maximum drillhole depth is 3,200ft and the average is 2,350ft. All holes were drilled vertically, seventy percent have been surveyed for down hole deviations.

A histogram of original assay lengths in Appendix C shows that the majority are in the range of 5 to 10ft however there are a large number of 50ft assay intervals. Inspection of the data reveals that these large assay intervals are located primarily within the un-mineralized portion of the deposit and therefore do not significantly affect the integrity of the ore grade assays.

16.2.2 Geology

The Victorio Mountains stratigraphic section consists of Cretaceous and Tertiary volcanic sequences overlying Paleozoic carbonate and clastic sedimentary rocks deposited on a Precambrian basement. Intrusive equivalents of the younger capping volcanics intrude the section and are spatially and temporally affiliated with molybdenum, tungsten, and beryllium mineralization.

Mineralization occurs within four different rock types. These include: Precambrian basement, Cambrian-Ordovician Bliss Sandstone, Ordovician El Paso Group and Tertiary




Andesite sills and dikes. The Precambrian basement is intersected only in drill core. The units are predominantly a quartzo-feldspathic gneiss and amphibolite gneiss. The Bliss Sandstone on this property is also encountered only in drilling. The unit consists of a basal conglomerate overlain by clean arenite grading upwards into silty quartzite and dolomitic units. The top of the Bliss is difficult to pinpoint as it grades into the thinly bedded units of the El Paso group. This in turn grades upward into more massively bedded dolomitic limestone. The carbonate units of both the Bliss and El Paso formations host a large portion of the mineralization.

The stratigraphic section has been locally thickened by the introduction of numerous andesitic sills. These are mineralized and in some locations appear to have formed barriers to the mineralization fluids. The Tungsten Hill Breccia Pipe is located approximately 2,500ft northeast of the main molybdenum and tungsten mineralization but its relation to the ore deposit is not yet fully understood.

The area is cut by numerous fault sets which overprint a large scale anticline. The anticline is interpreted to be related to thickening of the stratigraphic section by the emplacement of the intrusive sills. The faults have been described by three orientations and displacements; an east striking set with normal and reverse movement, a northeast striking set with normal movement and a northwest striking set with normal movement.

The molybdenum and tungsten mineralization appears to occur together for the most part although they each define a unique grade shell of anomalous mineralization. The Tungsten occurs in a shallow low grade envelope and also at depth in proximity to the molybdenum mineralization. Zoning in scheelite crystals suggests two and possibly three episodes of mineralization. Approximately 80% of the scheelite fluoresces cream to yellow, representing a range of 1% to 15% molybdenum in the scheelite. The bulk of the molybdenum mineralization occurs slightly deeper than the main tungsten zone.

For the resource estimation, a 3-D shape for each rock type was constructed. This was used to assign a majority rock type to both the blocks and the composites. Grade was assigned to each rock type by using only the composites from the same rock type. Densities were also assigned to each block based on which rock type they fell within.

16.2.3 Compositing

The assay data for molybdenum and tungsten was first plotted on histogram and cumulative frequency graphs to understand the basic statistical distribution of the raw data. The histogram plots for both molybdenum and tungsten show a strong positive skewness and the cumulative frequency plot illustrates a continuous population set with




no major changes in slope. There is a definite inflection of these curves located at the 0.05% grade where they change from a concave to convex shape. The raw data was composited on 15ft intervals starting at the collar and breaking on changes in formation. It was also composted on 20ft bench intervals for use in the variogram modeling. The 15ft composites of molybdenum and tungsten were plotted on histogram graphs.

16.2.4 Specific Gravity

Specific gravity determinations were taken from a Gulf Minerals report by Heidrick (1983). In this report Gulf has presented 25 tonnage factors representing all four of the mineralized host rocks. The tonnage factors were averaged and then converted into specific gravities as tons/ft3. Details of the specific gravities are presented below in Table 16-1. During the modeling procedure each block was assigned the appropriate density depending upon which rock type its center was located within.

Table 16-1: Specific Gravity Determinations of the Host Rocks

Formation Tonnage Factors (ft3/ton Density (ton/ft3) tap 11.58 tap 11.58

11.58 tap 11.62 mean 11.59 0.086281 oep 10.14 oep 10.21 oep 10.08 oep 10.54 oep 11.21 oep 10.69 oep 10 oep 9.93 oep 10.05 oep 10.34 mean 10.319 0.096909 cob 11.79 cob 10.76 cob 11.45 cob 10.37 mean 11.0925 0.090151 pc 10.9 pc 11 pc 11 pc 11 pc 10.83 pc 10.94




pc 10.69 mean 10.90857 0.091671

16.3 Variogram Analysis & Modeling

16.3.1 Variogram Analysis

Variogram analysis was conducted on 20ft bench composite data to determine appropriate projection ranges and to test for any preferred orientation of the mineralization. Variograms were constructed using Vulcan software in 36 directions and in 10 inclinations. The best variograms for both molybdenum and tungsten were in the vertical down hole direction likely due to abundance of data in that orientation. The molybdenum data showed a preferred orientation at azimuth 3100 dipping -100. The tungsten data showed a preferred orientation at azimuth 3200 dipping 100. Ranges, nugget values and total sill values are presented below in Table 16-2. It should be noted that drillhole spacing in this deposit is typically on 400ft spacing. Therefore the ranges presented in the variography should be considered as guidelines rather than definitive.

Table 16-2: Variogram Results for 20ft Composite Data of Molybdenum and Tungsten

Data Orientation Range Nugget Total Sill

Mo Vertical 300ft 0.0006 0.0015

Mo 400, -100 300ft 0.0006 0.0015

Mo 3100, -100 300ft 0.0006 0.0015

WO3 Vertical 300ft 0.0006 0.0017

WO3 500, -100 400 0.0006 0.0017

WO3 3200, -100 400 0.0006 0.0017

16.3.2 Modeling

The Victorio deposit was modeled primarily for its molybdenum and tungsten content however in the final model run the quantities of beryllium and sulfur were also analyzed. As described above, the resource estimates were calculated from 15ft down hole composites with breaks at formation contacts. The block size used was 30ft by 30ft by




15ft. The model boundaries based on local mine grid coordinates are presented in Table 16-3 below.

Table 16-3: Victorio Model Limits

Minimum Maximum

Northing 16,200 19,600

Easting 16,000 20,300

Elevation 2,100 4,700

The four host rock formations were first interpreted in cross section and then triangulated into 3-D wireframe bodies by Galway geologists. These bodies were used to control the assignment of grade within each of the different host rocks. In this case, only the composites located within each rock type were used to assign grade to only the blocks within the same rock type.

Grade shells were used to control the projection limits of the resource estimate for molybdenum and tungsten. SRK used the 15ft composite data to create polygonal outlines which snapped precisely to the composite boundaries in the drillholes based on a 0.05% cut-off for both molybdenum and tungsten. The polygons were then triangulated into separate 3-D grade shell solids for both molybdenum and tungsten.

The grade estimates were conducted such that a first run was completed using only composite data from within each grade shell to assign grade to blocks for the corresponding grade shell. A second run was then conducted to estimate blocks outside of a given grade shell but internal to the other grade shell using composites with the same location criteria. At the end of each run a dollar value was assigned to each block based on its estimated content of molybdenum and tungsten. The dollar value was calculated using $15.00/lb for Molybdenum and $8.00/lb for WO3. Once this was completed, the tonnage was tabulated by reasonable dollar cut-offs and the average grades for molybdenum and tungsten were calculated for all block within the combined grade shells.

16.4 Model Verification

The Victorio model presented in February 2007 was run using five different sets of estimation parameters including Inverse Distance Weighting to the second, third and fourth power and ordinary Kriging. In addition the minimum and maximum number of




composites required to assign grade to a block was varied between a minimum of three and maximum of eight to a minimum of five and maximum of 12. Ore hosting lithologies were also combined to evaluate the outcome of the model. The block size was varied between a 15ft cube to a 30ft cube and ultimately a 30ft by 30ft by 15ft block size was chosen due to the semi flat lying nature of the mineralization and the drill hole spacing. The modeling algorithms were applied to the confining grade shells of molybdenum and tungsten created by SRK and also compared with grade shells created by Galway.

The resulting block grades were compared to the raw assay values and composite assay values to review the statistical distribution and average grade of each (Table 16-4). This data was further subdivided to compare the correlations among the four ore host rocks. The various models display a strong stability. Minor variations in tons and grade are seen but the estimated metal content varied little.

Verification of the current model was conducted by comparing the results of the 2007 infill drilling against the February 2007 block model. This was accomplished by creating 3-D cylindrical shapes at each infill drillhole with radii of one half the distance to the adjacent drillholes within the grade shell. The block grades from the February 2007 model were then tabulated within the cylinder and compared to the assay composite results of the corresponding drillhole. The results, presented below in Table 16-5 indicate that the infill drilling as a whole did confirm the block model. However, results from certain individual drill holes did exhibit strong variability from the estimated block grades. This information suggests that within high priority areas, where the drill spacing is currently 200’-400’, it should be reduced to at least the 150’-250’ spacing of the Galway infill drill program.

Typical block model cross sections for molybdenum and tungsten derived from the Inverse Distance Weighted to the 3rd power are shown in Figures 16-1 and 16-2 respectively. For comparison, the 15ft assay composites of molybdenum and tungsten for these same sections are shown in Figures 16-3 and 16-4 respectively.




Table 16-4: Statistical Comparisons of Raw Assays, Composite Assays and Block Model Assays

Raw Assays 15ft Composites Final Block Model

Formation Commodity Mean Variance Mean Variance Mean Variance

Molybdenum 0.097 0.016 0.092 0.007 0.074 0.004 El Paso

Tungsten 0.106 0.006 0.100 0.003 0.095 0.002

Molybdenum 0.094 0.014 0.090 0.009 0.085 0.004 Bliss

Tungsten 0.124 0.018 0.122 0.013 0.111 0.006

Molybdenum 0.087 0.013 0.076 0.005 0.082 0.004 Andesite

Tungsten 0.047 0.006 0.039 0.005 0.010 0.002

Molybdenum 0.095 0.007 0.087 0.002 0.075 0.002 Precambrian

Tungsten 0.096 0.005 0.098 0.003 0.073 0.002

Molybdenum 0.097 0.013 0.092 0.007 0.079 0.003 Combined

Tungsten 0.114 0.010 0.108 0.006 0.097 0.003

Table 16-5: Statistical Comparisons of Infill Drillhole Composite Assays and February 2007 Block Model Assays

DHID Mo Comps Mo Blocks % Mo Variance to Blocks

Wo3 Comps

Wo3 Blocks

% Wo3 Variance to Blocks

GVM-70 0.085 0.097 -12 0.081 0.142 -43

GVM-71 0.099 0.085 16 0.092 0.067 37

GVM-72 0.131 0.105 25 0.098 0.083 18

GVM-73 0.103 0.118 -13 0.084 0.098 -14

GVM-74 0.069 0.046 50 0.089 0.104 -14




GVM-75 0.097 0.085 14 0.093 0.105 -11

Avg Var 13 Avg Var -5




Figure 16-1: Victorio Mountain Typical Block Model Cross-section Showing Distribution of Molybdenum




Figure 16-2: Victorio Mountain Typical Block Model Cross-section Showing Distribution of Tungsten




Figure 16-3: Victorio Mountain Typical Cross-section Showing 15ft Assay Composites of Molybdenum




Figure 16-4: Victorio Typical Cross-section Showing 15ft Assay Composites of Tungsten




16.5 Resource Classification

The Mineral Resources are classified under the categories of Measured, Indicated and Inferred Mineral resources according to CIM guidelines. Classification of the resources reflects the relative confidence of the grade estimates, primarily as a function of sample spacing relative to geological and geo-statistical observations regarding the continuity of mineralization.

In this study, the blocks were assigned to Indicated or Inferred based on the distance to the closest composite. All blocks were estimated by at least two drillholes and those estimated where the distance to the closest composites was within 137ft were classified as indicated. The remainder of the blocks were estimated as inferred. This projection distance was determined primarily from the down hole variograms and reflects a distance slightly less than one half the average range.

16.6 Mineral Resource Statement

Based on visual comparison of block grade distribution relative to drillhole composites and histogram comparison between the same, the Inverse Distance Weighting to the 3rd power using a 15ft cube and a minimum of three and maximum of eight composites was chosen as the most appropriate estimation method for Victorio. The tonnage and grade at two $ cut-offs for indicated and inferred resources at Victorio are shown in Table 16-6.

Table 16-6: Victorio Insitu Resource Statement - Summary Resource Category

Dollar Value/Ton Cut-Off*

Average Dollar Value/Ton Total Tons

Average Grade Mo%

Average Grade WO3%

Indicated $25 $45.80 66.5 0.099 0.101Inferred $25 $40.92 41.9 0.088 0.091Indicated $35 $55.99 40.8 0.123 0.120Inferred $35 $51.21 22.0 0.115 0.105

* Cut off is based on dollar rock value calculated from contained Mo% valued at $15.00/lb combined with WO3% valued at $8.00/lb; and should not be confused with a mining cut off . A $ cut-off is utilized to demonstrate combined tonnage and grade when two or more commodities are present.




16.7 Mineral Resource Sensitivity

The grade tonnage distribution for indicated and inferred resources at Victorio are listed below in Tables 16-7 and 16-8 and shown in Figures 16-5 and 16-6 respectively. In order to determine a realistic cut-off value both the quantity of molybdenum and tungsten had to be considered at differing values. A combined dollar value was assigned by the parameters described above and this cut-off value was used to generate the resource statement.

Table 16-7: Victorio Indicated Resource Sensitivity

Indicated Resource

$ Cut-off Average $ Value Tons(M) Mo % WO3 %

25 45.80 66.5 0.099 0.10130 50.85 52.2 0.110 0.11135 55.99 40.8 0.123 0.12040 61.43 31.6 0.136 0.13045 67.05 24.4 0.150 0.13850 72.46 19.1 0.164 0.14555 77.61 15.2 0.178 0.152

Table 16-8: Victorio Inferred Resource Sensitivity Inferred Resource

$ Cut-off Average $ Value Tons(M) Mo % WO3 %

25 40.92 41.9 0.088 0.09130 45.94 30.5 0.101 0.09835 51.21 22.0 0.115 0.10540 56.31 16.1 0.129 0.11045 61.63 11.6 0.143 0.11750 67.32 8.3 0.158 0.12455 72.24 6.3 0.171 0.131




Figure 16-5: Grade Tonnage Curves for Indicated Resources at Victorio

Victorio 2007 Indicated Resource

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

25 30 35 40 45 50 55

$ Value Cutoff

Tons

(M)

40.00

45.00

50.00

55.00

60.00

65.00

70.00

75.00

80.00

Valu

e U

S$*

Tons(M) Value

* US$ Value is calculated from contained Mo% valued at $15.00/lb combined with WO3% valued at $8.00/lb.

Figure 16-6: Grade Tonnage Curves for Inferred Resources at Victorio

Victorio 2007 Inferred Resource

0.05.0

10.0

15.020.025.030.0

35.040.045.0

25 30 35 40 45 50 55

$ Value Cutoff

Tons

(M)

35.00

40.00

45.00

50.00

55.00

60.00

65.00

70.00

75.00

Valu

e U

S$*

Tons(M) Value




* US$ Value is calculated from contained Mo% valued at $15.00/lb combined with WO3% valued at $8.00/lb.




17.0 OTHER RELEVANT DATA AND INFORMATION (Item 20)

The Victorio Molybdenum-Tungsten deposit is well situated for potential future development from an infrastructure perspective. It is located 1.5mi south of the divided 4-lane Interstate Highway at an off-ramp, near a major natural gas pipeline and high voltage transmission lines. The deposit location is obscured from direct view from the Interstate Highway by the Main Ridge and Middle Hills of the Victorio Mountains, such that development facilities will all be south of the Victorio Mountains. A potential underground mine at this location will have minimal impact on the immediate area.

New Mexico has an active mining industry, such that both state agencies and local communities in southwestern New Mexico are familiar with mining activities; and in the case of local communities, would likely welcome the opportunity for jobs.

While there have been no socio-economic assessments or detailed environmental baseline work; there are no known or previously identified issues that would materially affect the ability to proceed with further exploration and development work at the project, or to preclude the potential development of an underground mine and supporting milling complex.

This Section of the report presents a summary progress update for the Scoping Level study of the Victorio Project, and includes a Preliminary Assessment economic analysis for the Project that incorporates both Indicated and Inferred Resources. This Preliminary Assessment includes Inferred resources that have not been sufficiently drilled to have economic considerations applied to them. Until the additional planned drilling is completed, and a final resource estimate is done, there is no certainty that Inferred resources will be converted to Measured or Indicated resources; therefore, there can be no certainty that this Preliminary Assessment will be realized.

The Preliminary Assessment is being undertaken by a team of collaborating consultants, as presented in Table 17.1. SRK is the overall manager. A strong Galway owner’s team compliments the work of the Scoping Study and this Preliminary Assessment.




Table 17.1: Preliminary Assessment Project Teams and Responsibilities

Study Element Responsibility

Resource Estimation SRK

Mine Conceptual Design SRK

Geotechnics SRK

Hydrogeology Water Management Inc

Process Conceptual Flowsheet SRK

Process Plant Conceptual Design SRK

Infrastructure SRK

Environmental Management/Permitting Enviroscientists Inc

Marketing and Product Pricing Galway

Project Economics SRK

17.1 Summary of Exploration Activities and Progress

Six hole in-fill confirmation drilling program completed by Galway, additional drilling in progress. See Sections 9.0 through 13.0 of this report for a detailed discussion

17.2 Resource Estimation

See Section 16.0 for details

17.3 Geotechnics

A mining option of block caving, and/or an option of selective mining without back-fill will require a better understanding of the rock mechanics issues for the Victorio deposit. A combined geological/geotechnical drilling program, with some additional dedicated geotechnical drilling and a comprehensive structural geological model that will result in a comprehensive geotechnical model is recommended. This evaluation program to a pre-feasibility level is estimated at a cost of $240 000 – 275 000, including a caveability and fragmentation assessment.




For the geotechnical part of the pre-feasibility study further drill holes will need to be included in the lower grade areas to test the deposit conditions. Figure 17.2 is a planned combination exploration drilling program and geotechnical drilling program intended by Galway. Figure 17.3 shows SRK’s recommendations for additional geotechnical drilling.

Figure 17.1: Galway Planned drilling (as of 2007)




Figure 17.2: Areas with low geotechnical information based on Galway’s planned drilling program.

Possible lower grade block cave areas that will require additional geotech drilling

Additional geotechnical drillholes – caving evaluation



Additional geotechnical drillholes – caving evaluation

A decision needs to be reached as to whether the focus of the evaluation program would be on a higher grade partial extraction methodology or whether the program would need to also focus on the lower grade potential block caving area as well. For both cases the following general geotechnical recommendations apply:

• Structural geological features: A structural geology study by a good structural

geologist will be important. The drill program should include a detailed logging of all structural features.

• All drill holes need to have a level of detailed geotechnical logging. • Orientated Drill core: This is critical for caveability and fragmentation studies as well

as for more conventional method designs. All the planned angle holes (SE and NW) would need to be orientated. It is suggested that 60% of the other planned holes be orientated as well. That would require the dips of those holes to be initiated at a maximum of 75º. The azimuth of dip would be varied to avoid a drilling bias on joint orientation.




• Alternatively 40% could be orientated and the remaining holes could be evaluated using an acoustic televiewer (ATV) to determine the orientation of the prevailing rock fabric. The use of an ATV would also enable the determination of the prevailing stress directions by evaluating the directions of borehole break-outs.

• Rock strength evaluations: An extensive program of point load testing and laboratory uniaxial compressive strength (UCS) testing is required. The UCS values are used to generate the correlation coefficients to convert the point load tests.

Non-caving methods:

• If these become the methods of choice the extent of detailed geotechnical logging can be reduced to focus only within and immediately around the deposit.

Caving methods:

• Additional definition and orientated geotechnical drilling will be required in the lower grade areas. The minimum amount of additional geotechnical drillholes is indicated in Figure 17.3. If these can be used as resource holes, so much the better.

• All drill holes will need to be logged geotechnically from surface down to below the deposit so that the caving characteristics of all areas will be determined. Caveability and fragmentation studies would be undertaken using this information.

A comprehensive hydrogeology program would need to form part of the geotech evaluation program within the deposit area, both ore and overlaying waste if a caving method is to be investigated.

Geotechnical Prefeasibility Study Costs

Approximate costs associated with the various geotechnical prefeasibility activities include:

• Structural evaluation: $40 000 • Rock Mass Assessment and conventional mining assessment ~$65 000 • Caveability and Fragmentation Assessment: $35 000 • Site visits and Project Management and QC $30 000 • QC logging Evaluations during drilling program – Senior Geotech on site 40 - 60 % of

the time ~$80 000. This is to ensure the QC of the whole geotech program. This will be required for both mining cases.

• Laboratory testing $25 000

Thus the geotechnical evaluation would be in the order of ~$275 000+. This excludes:

• The ATV program. • Minimum, four additional drill holes that are specifically targeted for geotechnical

information in the lower grade areas. These are specifically for a caving assessment.




• Following the initial structural study, further targeted geotech holes may be required to target structures for hydrologic evaluations and further geotech evaluations.

17.4 Mining

17.4.1 Mining Overview

The Victorio Molybdenum-Tungsten deposit is a stockwork vein and disseminated deposit hosted in calc-silicate altered rocks. The molybdenum and tungsten mineralization within the deposit is represented by a geostatistical block model, the preparation of which is described in the previous sections.

Due to the disseminated nature of the deposit it was not clear at the outset of the project as to whether the deposit would be suitable for bulk, non-selective mining methods such as block caving, or whether a selective method such as cut and fill or longhole stoping would be more suitable. It was decided early on in the project to analyze these two options side-by-side up until a point where a clear leader became apparent. It is understood that these two options represent the opposite ends of the spectrum and that in later more detailed studies it may be appropriate to choose a middle ground in order to extract the most value from the deposit. This middle ground could consist of carrying out some selective mining in outlying areas of the deposit during the preparatory block cave development. This would enable the operation to produce earlier cash flow and take advantage of the projected high metal prices in the near-term.

The polymetallic nature of the deposit necessitated the calculation and use of Net Smelter Return (NSR) deposit valuation techniques. NSR takes into account all the off-site costs associated with, transporting, smelting and refining ore as well as mill recoveries and royalty payments. The NSR estimates the value of the rock in the ground taking into account all of these external cost drivers. It enables the engineer to focus solely on the operational mining, processing and general costs that are associated with mining the ore.

The mine design process consisted of creating practical stope wireframes based on an NSR block model and an NSR cut-off value. The stope wireframes are evaluated against the block model for volume, tonnage, NSR value and metal grade. Deposit recovery and mining dilution are applied in a spreadsheet environment to account for pillar loss and unplanned stope dilution. The mine design was carried out using Gemcom software.

Primary access development in the form of ramps, haulages, declines, hoisting shafts and ventilation raises was designed in order to determine the approximate quantities for capital




costing. No in-ore development design, with the exception of the undercut level in the block cave scenario, was undertaken for this study.

At the scoping study level the objective for accuracy is in the +/-40% range. As such, significant reliance was placed on the use of industry experts and benchmarking to estimate mine operating costs.

17.4.2 Net Smelter Return (NSR) Estimation

The following assumptions were made regarding the Victorio deposit and were used to determine the Net Smelter Return value of the blocks in the model. Mill process recoveries were estimated at 85% for molybdenum and 75% for tungsten trioxide. The plant will produce a molybdenum concentrate with a grade of 54% and a tungsten concentrate with a grade of 87%. The molybdenum concentrate will be freighted 220 miles to Tucson, Arizona for refining. The refinery pay-for is 90% for the molybdenum concentrate. Molybdenum is sold in pounds of metal.

The plant will produce tungsten as ammonium paratungstate or (“APT”). APT is sold in short ton units (STU’s), each containing 20lbs of tungsten metal. It is assumed APT will be sold directly to a refinery a distance of 1000 miles from Victorio. APT is sold to the refinery at an estimated 100% pay-for. Freight charges are estimated at $0.15/ton/mile.

For the purpose of this NSR calculation the long-term value for molybdenum is estimated at $15/lb and APT at $160/STU. This is significantly below the current prices of $35/lb for molybdenum and $250/STU for APT. However, based on a review of recent feasibility studies, SRK feels that these are appropriate long-term values.

Table 17.2 shows the NSR input parameters and Table 17.3 shows the calculation used to convert the molybdenum and tungsten grades to a combined NSR value for each block in the model.




Table 17.2: Victorio NSR assumptions

Process loss 15%

Pay for 10%

Freight 0.24%

TOTAL Loss 24%

Molybdenum

Selling price $15/lb

Process loss 25%

Pay for 0%

Freight 1.27%

TOTAL Loss 26%

Tungsten

Selling price $160/STU

Table 17.3: Victorio NSR value calculation

Molybdenum grade x $229

Tungsten grade x $118

Calculation $229 = $15/lb x 2000 / 100 x 0.85 x 0.9 x 0.9976

$118 = $160/stu x 0.75 x 0.9873

The NSR value for each block in the model is calculated by adding together the two grade products.

17.4.3 Cut-off NSR Value Estimation

Prior to commencing mine design work it was necessary to estimate mining, processing and G&A costs for both the bulk and selective mining methods. These costs are used in conjunction with the NSR model to determine the economically mineable portion of the deposit. While the determination of mining costs, NSR cut-off and mining shapes is in reality an iterative process, only the final iteration is presented in this document.

Table 17.4 shows the mining, processing and G&A costs for the bulk and selective mining methods.




Table 17.4: NSR Cut-off Value

Bulk mining Selective mining

Mining cost $/ton 4.50 17.50

Process cost $/ton 8.50 10.50

G&A $/ton 1.00 1.50

NSR Cut-off (total cost) $/ton 14.00 29.50

The bulk mining cost of $4.50/ton is based on the average operating cost of a panel cave over its lifespan. Costs generally start out higher than this while the undercut, production level, drawpoints and drawcones are being developed in advance of the cave. As the operation matures and the development activity reduces the costs reduce and can be as low as $2.50/ton towards the end of the life of the cave. The source of this cost profile is personal communication with industry expert’s Chris Page and Jarek Jacubek (SRK Vancouver).

The selective mining cost of $17.50/ton is based on a combination of room and pillar with benching and longhole open stoping with pastefill. The source of this cost information is the Western Mines Cost Handbook (2007).

The processing cost ranges between $8.50/ton and $10.50/ton depending on the throughput and plant size. These values are significantly lower than the $19.50/ton indicated by testing during the 1980’s. SRK believes that an updated suite of reagents and chemicals will lead to cost reduction. The higher envisioned throughput rated, and modern control technology would also have an impact on reducing costs.

G&A costs are set at $1.00/ton for the bulk mining option producing at 25,000 tons/day and $1.50/ton for the selective option mining at 8,500 tons/day.

The total cost for the two options indicate the cut-off values above which mining is profitable. These cut-off values are used to filter the block model to identify the economic mining areas.

17.4.4 Mine Design and Scheduling Process

Using the cut-off value estimates for bulk and selective mining methods shown on Table 17.4 the block model was filtered to identify areas of potentially mineable resource. At the scoping study level note that all categories of resource have been used in the mine design.




Inferred material has not been removed as it would be in pre-feasibility and feasibility level studies.

The filtered models were examined in 50ft sections and polylines were generated around the economic ore in each section. The polylines were then viewed in 3D and refined to produce viable stope shapes. The polylines were linked to form stope wireframes. The wireframes were evaluated against the block model to produce volume, tons, metal grades and NSR values for each stope.

The evaluation data was transferred to a spreadsheet where recovery and unplanned dilution was applied as a function of the mining method proposed.

For each of the two options a scoping level infrastructure development design was undertaken including the following areas:

• Main decline and ramp access from surface

• Hoisting shaft where applicable

• Ventilation shafts

• Primary deposit access in the case of selective methods

• Undercut, production and ventilation levels in case of bulk method

• Major ore and waste movement infrastructure These designs were carried out to various levels of detail as applicable to obtain a preliminary mining schedule. Contingencies were added in the economic model as a function of the level of detail applied in the design. For example a high level of detail was applied to the undercut level design in order to determine the earliest possible start date for production from the cave. A low contingency of 10% was added in the economic model. On the other end of the spectrum, only very provisional design was carried out on the ventilation level design so this received a 40% contingency in the economic model.

The production schedule was prepared based on modeling access development rates and timeframes to prepare the stopes. These rates and timeframes were tempered by expert knowledge of historical projects.

The production schedule was incorporated in a technical economic model along with operating and capital costs to determine the Net Present Value and Internal Rate of Return for the different options.




17.4.5 Bulk Mining

Stope Design

In the bulk mining $14/ton cut-off value option the filtered model was examined for its applicability to a block or panel caving methodology. A number of regular, rectangular footprint areas were designed varying both the base and the top of the stope shape to optimize the grade and tonnage recovery from the design. The base of the cave (the undercut level) was designed on a flat plane to improve the ability to create a continuous undercut slot. The top of the cave undulates according to the location of the mineable ore. Current caving theory predicts that draw is relatively well confined in the area above the drawcone thus allowing for varying draw heights between neighboring blocks.

Figure 17.3 shows a view of the block model filtered above $14/ton NSR. At this cut-off the ore material forms a relatively continuous, massive block, well suited to a caving method. Figure 17.4 shows the final stope shape (green) overlaying the NSR cut-off model (red). The stope shape was determined by identifying the ore in sections and linking these sections together to form a wireframe. A base level for the undercut was chosen at an elevation where the majority of the undercut was at the bottom of the $14/ton ore. As outlined on Figure 17.4, the ore that is outside the stope wireframe is either too narrow for caving or is too high above the undercut to be economic. This ore outside the cave outline represents an upside potential for starting a more selective mining operation early in the mine life during the development of the undercut and production levels but before caving commences. Early ore production would benefit from the higher prices predicted in the short term or this material could be stockpiled and used to ramp up to full production more quickly when the cave starts.




Figure 17.3: Isometric view of deposit above $14/ton NSR value (looking north)

Orebody >$14/ton NSR

Figure 17.4: Deposit above $14/ton NSR and cave mining area (looking north)

Orebody >$14/ton NSR

Cave mining shape




In preparing the stope wireframe a minimum cave height of 100m was assumed. This is lower than most caving operations currently in production and is considered to be the lower limit for successful caving. In the Victorio situation there is value outside the $14/ton ore model, thus the dilution carries grade which is included in the model.

Dilution has been applied to the caving scenario at a rate of 15%. In order to obtain a correct estimation of the grade of this dilution, the overall height of the block cave area was increased by 15%, thus increasing the tonnage by 15% and diluting the overall grade of the model with rock containing a lower NSR value.

Table 17.5 shows the results of the estimation of the cave stope wireframe. The diluted model shows 140M tons with an average NSR value of $24.09/ton.

Table 17.5: Block Cave Stope Estimation

Mining recovery % 100%

Tons ton 120,217,400

Mo grade % 0.0774

WO3 grade % 0.0853




Rec

over

y


Dilution % 15%

Tons ton 138,250,000

Mo grade % 0.0673

WO3 grade % 0.0742




Pote

ntia

lly M

inea

ble

Res

ourc

e

Dilu

ted





Due to the relatively large footprint and low height of the cave, in comparison to some of those in operation today, it is proposed that a panel cave methodology is applied. The panel cave differs from the block cave in that a moving cave front is established. This front migrates across the deposit and early drawpoints can be complete while others are in production and yet others are still to be developed. In a true block cave the whole deposit is essentially pre-developed and all drawpoints are drawn simultaneously.

Development Design

Figure 17.5 shows the panel cave access and production development design used to determine the capital development costs and the production buildup schedule.

Conveyor Decline It was determined that for a production rate of 25,000 tons per day, a conveyor decline would be the most cost effective method of transporting ore out of the mine. The decline has four straight runs; 2,400 ft, 4,800 ft, 4,800 ft and 3,000 ft, and a gradient of 16%. Three transfer stations will feed ore between the overlapping straight sections. The connecting drifts for equipment access between the straight sections have not been designed and are not shown on the drawing. These connections, in addition to remucks, sumps, transformer cutouts and safety bays, are accounted for in the 15% contingency built into the economic model for the decline.

The decline will be developed 18 ft wide by 15 ft high to allow access for both mobile mining equipment and the conveyor installation.




Figure 17.5: Panel cave access and production development design

Cave mining shape (transparent)Conveyor decline

Production level

Ventilation raiseboreUndercut level

Ventilation level

Escape/Ventilation raisebore

Conveyor transfer 1

Conveyor transfer 2

Conveyor transfer 3

Portal

Undercut Level

The undercut level is developed at the bottom of the deposit as shown in Figure 17.6. The undercut drifts are 15 ft wide by 13 ft wide. The purpose of the undercut is to provide access to the bottom of the deposit for drilling and blasting of the cave initiation slot. The undercut drifts are driven out of the undercut level crosscut at a center-to-center spacing of 50 ft. When the undercut drifts reach the far end of the deposit a slot cut is commenced between the drifts to open the undercut for caving. The slot cut is retreated in a staggered pattern back towards the undercut level crosscut. In this study the undercut level is well detailed and a contingency of only 5% has been added to the economic model.

There are a number of ways of drilling and blasting the slot but this detail is beyond the scope of this level of study. The sequencing of blasting of the slot and tying this in with development of the production level, the production drawcones and the cave initiation span will be examined in conjunction with the geotechnical characteristics of the rockmass during the next phase of the study.




Figure 17.6: Undercut level

Undercut access ramp

Production Level

Figure 17.7 shows the production level that is sited 56 ft below the undercut level. Like the undercut level, the production drifts are driven from a production level crosscut out to the far side of the deposit. While they are outside the limit of the main deposit target, there will be some areas of the production drifts that will be treated as ore.

The spacing of the drifts is 100 ft center-to-center, double the spacing of the undercut drifts. The detail of the drawcone crosscuts and the drawcones themselves have not been designed and are accounted for in the 15% contingency that is applied to the capital development in the early stages of the project, and in the higher operating cost during the early production years.




Figure 17.7: Production level

Production access ramp

Ventilation Level

Figure 17.8 shows the general arrangement of the ventilation level that is sited 50 ft floor-to-floor below the production level. The intention of the ventilation crosscut (access side) is to provide an intake or return ventilation path for the undercut and production drifts during the development phase, thus limiting the ventilation duct requirements as much as possible. Raisebore or drop raises will be used to connect the three levels. Once the production drifts reach the far side of the deposit, raisebore or dropraise holes will be put down to the ventilation crosscut (far side), allowing through-flow ventilation during production operations. The ventilation level will be used as a return system thus reducing the dust and diesel emissions present in the areas where personnel are working.

A 50% contingency has been added to the ventilation level in the economic model to account for the low level of design detail applied to this area of the study.




Figure 17.8: Ventilation Level

Ventilation and Escape Raisebores

Figure 17.9 shows the two primary ventilation raise systems. The first system is a series of three approximately 700 ft ventilation raises that are driven concurrent with the ramp development and are initially used to improve the efficiency of the development ventilation system by reducing the length of the vent duct required. Once a raise breakthrough is attained, the surface fan outside the portal can be moved to a new location up-ramp from the vent raise crosscut and the vent tube can be removed from the decline to that point. Fresh air is then drawn down the ramp into this vent tube where it is fed to the face. From the face the exhaust air returns to surface via the raise. When the second raise connection is made, new fans will be installed on the up-ramp side of the connection and the vent tube is removed from the decline to this point. The first raisebore connection to the ramp will be blocked off with a bulkhead to prevent recirculation. The fans installed at the first connection will probably be left in place to operate as booster fans.




Figure 17.9: Ventilation raises

Vent raise crosscuts

Ventilation raiseboresEscape/Ventilation raisebore

The second primary ventilation raise will be drilled to the lowest access level on the mine using a directionally drilled pilot hole to ensure a completely vertical raisebore orientation. An absolutely vertical raise is required to accommodate the secondary function of this raisebore, which will be to act as an emergency escape route. It is proposed to immediately follow the reaming of this hole with shotcrete lining using a robot application method. Due to the 2,000 ft length of this raise it will be necessary to break into the raise at two positions down its length and carry out the shotcrete process in three sections, one from surface and two underground.

When the raise is complete, it will be equipped with an emergency egress system consisting of rope guides, a small hoist and a conveyance. Because the primary function of the raise will be ventilation, it will be necessary to interlock the hoist with the fans to reduce the ventilation flow in the raise when the hoist is used in an emergency or during shaft inspections.

Production Schedule

Table 17.6 shows the development schedule inclusive of contingency. The conveyor decline development begins in 2009 and mines at a rate of 625 ft/month for two and a half




years. During 2011 development ramps up to 2,800 ft/month as the undercut, production and ventilation levels commence.




Total 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Units or Avg. 1 2 3 4 5 6 7 8 9 10 11 12

MINE DEVELOPMENTContingency Conveyor decline (18x15ft)

15% Development ft 18,192 7,501 7,257 3,434 - - - - - - - - - Total tons 466,619 192,408 186,141 88,070 - - - - - - - - -

Undercut level (15x13ft) - 5% Development ft 74,550 15,750 10,500 5,250 5,250 5,250 5,250 5,250 3,150 3,150 3,150

Total tons 1,381,039 291,769 194,513 97,256 97,256 97,256 97,256 97,256 58,354 58,354 58,354 Production level (17x15ft)

15% Development ft 47,150 9,200 5,750 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 Total tons 1,142,209 222,870 139,294 55,718 55,718 55,718 55,718 55,718 55,718 55,718 55,718

Ventilation level (18x15ft)50% Development ft 9,750 5,250 1,500 1,500 1,500 - - - - - -

Total tons 250,088 134,663 38,475 38,475 38,475 - - - - - - TOTAL HORIZONTAL DEV

Development ft 149,642 7,501 7,257 33,634 17,750 9,050 9,050 7,550 7,550 7,550 5,450 5,450 5,450 Total tons 3,239,954 192,408 186,141 737,372 372,281 191,449 191,449 152,974 152,974 152,974 114,071 114,071 114,071

MINE PRODUCTIONBlock Cave

Tons tons 138,250,000 3,000,000 6,000,000 9,125,000 9,125,000 9,125,000 9,125,000 9,125,000 9,125,000 Mo grade % 0.0673 0.0673 0.0673 0.0673 0.0673 0.0673 0.0673 0.0673 0.0673 Wo grade % 0.0742 0.0742 0.0742 0.0742 0.0742 0.0742 0.0742 0.0742 0.0742

Total 2021 2022 2023 2024 2025 2026 2027 2028 2029Units or Avg. 13 14 15 16 17 18 19 20 21

MINE DEVELOPMENTContingency Conveyor decline (18x15ft)

15% Development ft 18,192 - - - - - - - - - Total tons 466,619 - - - - - - - - -

Undercut level (15x13ft) - 5% Development ft 74,550 3,150 3,150 3,150 3,150 - - - - -

Total tons 1,381,039 58,354 58,354 58,354 58,354 - - - - - Production level (17x15ft)

15% Development ft 47,150 2,300 2,300 2,300 2,300 2,300 2,300 - - - Total tons 1,142,209 55,718 55,718 55,718 55,718 55,718 55,718 - - -

Ventilation level (18x15ft)50% Development ft 9,750 - - - - - - - - -

Total tons 250,088 - - - - - - - - - TOTAL HORIZONTAL DEV

Development ft 149,642 5,450 5,450 5,450 5,450 2,300 2,300 - - - Total tons 3,239,954 114,071 114,071 114,071 114,071 55,718 55,718 - - -

MINE PRODUCTIONBlock Cave

Tons tons 138,250,000 9,125,000 9,125,000 9,125,000 9,125,000 9,125,000 9,125,000 9,125,000 6,000,000 4,625,000 Mo grade % 0.0673 0.0673 0.0673 0.0673 0.0673 0.0673 0.0673 0.0673 0.0673 0.0673 Wo grade % 0.0742 0.0742 0.0742 0.0742 0.0742 0.0742 0.0742 0.0742 0.0742 0.0742

Table 17.6: Caving Option Production and Development Schedule




In 2012 the rate drops to 1,500 ft/month as the undercut and production levels get into position and the focus turns to longhole slot drilling and drawpoint and drawbell development. In 2013 the development total drops further to 750 ft/month, with the commencement of the ramp up of cave production at 8,500 tons/day. In 2014 the cave production rate doubles to an average of 17,000 tons/day and reaches full capacity in 2015 at 25,000 tons/day. The development continues at a steady state of 450 ft/month until 2024 when it tails off as the production level is completed by 2026.

Cave production continues at a steady state of 25,000 tons/day until 2028, when it starts to ramp down as the footprint reduces to completion in 2029. In the current design the grade of the cave is constant throughout the life of the mine. During the pre-feasibility study it will be necessary to model the grade from individual drawpoints and their changes over time to obtain a more realistic grade profile over the life of the mine.

Mining Equipment

Table 17.7 presents the mobile capital mining equipment purchase schedule as it relates to the development and production schedule.

Table 17.7: Mobile capital equipment for cave mining option

Equipment Total units 2009 2010 2011 2012 2013 2014 2015

Jumbo dev 3 3 Bolter 3 3 6yd LHD 3 3 12yd LHD 14 3 2 3 3 3 40T Haul truck 8 4 2 2 Fuel truck 2 1 1 Hiab 3 3 Lube truck 3 2 1 Scissor lift 3 3 Anfo loader 3 3 Minecat 3 2 1 Tractor 4 2 2 Forklift 2 1 1 Forklift LHD 1 1 Backhoe 1 1 Grader 2 1 1 Mobile Top hammer drill 4 2 2 Emulsion loader 2 2 2 Blockhole drill 5 2 2 1 Shotcrete sprayer 1 1 Shotcrete haul mixer 1 1 Diamond drill 2 2




It is anticipated that the conveyor decline will be mined by a development contract company and that the operator will take over as development commences on the undercut, production and ventilation levels in 2011. The development mining equipment presented above (jumbos and bolters) is based on the 2011 high development requirement and it would probably be advantageous to the project to continue with the contractor for another year to reduce the capital equipment cost to the company.

The 12yd load-haul-dump (LHD) machines will be used primarily for mucking cave material from the production level, however five of these units have been purchased early on to assist with development mucking of the large headings on the production and ventilation levels.

40T trucks are shown in the fleet but consideration could be given to using a larger unit in the next phase of the study.

Drilling of the undercut slot and the production drawbells uses four mobile top hammer rigs and longhole loading is carried out using mobile emulsion loaders.

A robot arm shotcrete sprayer and a shotcrete haul-mixer truck are included in the fleet for dealing with ground control issues, when bolts and screen are not suitable.

Operating Cost

Table 17.8 shows the annual cave stoping cost per ton from 2013 to 2029. Once production commences all the continuing development costs for the undercut, production and ventilation levels become operating costs and are rolled into the cave mining cost per ton. For this reason in the early years when the development effort is high, the cost per ton is also high. Costs reduce over the progression of the cave life as the cave matures and the development requirements reduce.

The average cost over the life of the mine is $4.68/ton.

The source of this scoping level cost estimate is personal communication with Dr. Chris Page and Mr. Jarek Jakubec of SRK Vancouver, both recognized industry experts in the field of cave mining.

Table 17.8: Cave mining cost profile

Average 2013 2014 2015 2016 2017 2018 2019 2020 2021

Block cave stoping $/ton 4.68

8.00

8.00

8.00

7.00

7.00

5.00

4.00

4.00

4.00




2022 2023 2024 2025 2026 2027 2028 2029

Block cave stoping $/ton 4.00

4.00

4.00

2.50

2.50

2.50

2.50

2.50

Capital Cost

Table 17.9 presents a summary of the underground mining capital costs. The underground mobile equipment estimates are based on the 2007 pricing from a major manufacturer. Raiseboring cost and the cost of installation of an emergency egress hoisting system are based on estimates supplied by a major shaft sinking contracting company. All other costs were estimated using data in the Western Mine Cost Services Handbook (2007).




2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026Units Total -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Mine EquipmentUG Mobile Equip US$000 46,160 21,550 9,570 9,020 3,260 2,760

UG Mobile Rebuild US$000 59,749 6,465 2,871 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 UG Conveyor US$000 8,825 1,505 2,524 2,524 2,272

Conveyor Rebuild US$000 6,250 417 417 417 417 417 417 417 417 417 417 417 417 417 417 417 Contingency (20%) US$000 24,197 - - 301 505 4,815 2,452 1,887 2,028 1,210 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000

Sub-total US$000 145,181 - - 1,806 3,028 28,888 14,711 11,324 12,170 7,257 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 Mine UG Infrastrucutre

Primary Vent Raises US$000 9,788 509 509 2,029 6,740 Egress Raise Equip US$000 2,000 2,000

Surface Fans US$000 1,400 700 700 UG Fans US$000 300 150 150 Pumping US$000 250 250

Shop US$000 500 500 UG Contingency (20%) US$000 2,848 - - 272 152 406 1,618 400 - - - - - - - - - - - - -

Sub-total US$000 17,085 - - 1,631 911 2,435 9,708 2,400 - - - - - - - - - - - - - Mine Development

Conveyor Decline US$000 15,819 6,523 6,310 2,986 Undercut Level US$000 15,000 9,000 6,000

Production Level US$000 8,450 5,200 3,250 Ventilation Level US$000 4,550 2,450 700 700 700

Contingency (15%) US$000 6,665 - - 978 947 2,903 1,138 350 350 - - - - - - - - - - - - Sub-total US$000 50,484 - - 7,501 7,257 22,539 11,088 1,050 1,050 - - - - - - - - - - - -

Grand Total US$000 212,750 - - 10,939 11,196 53,862 35,506 14,774 13,220 7,257 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000

Pre-production

Table 17.9: Underground mining capital summary – Caving Option




17.4.6 Selective Mining

During a number of iterations of the various selective mining options it was decided to present the final design as a combination between longhole open stoping with pastefill and room and pillar stoping with benching. Table 17.10 presents the cut-off NSR values for the two mining methods.

Table 17.10: Selective mining methods NSR cut-off values


Mining 20.35 13.08 Milling 10.00 10.00 G&A 1.50 1.50 Cut-off Value 31.85 24.58

The design process was carried out in two phases. The first phase used the higher cut-off value and identified areas of the model that are suitable for the more expensive longhole mining method. Once the longhole design was complete the model was filtered at the lower room and pillar cut-off value to determine additional lower cost stoping potential.

Stope Design

Table 17.11 shows the design criteria used for the preparation of the longhole and room and pillar stopes. These criteria were used to determine the overall areas of the deposit that are applicable to each mining method. No detailed individual stope design was carried out in this scoping study.

Table 17.11: Selective stope design criteria


Maximum stope height 120 ft 60 ft Minimum vertical stope separation 25 ft 40 ft

Recovery 80% 50%

Detailed stope design will be required to progress the work to the pre-feasibility level and at that stage the maximum stope widths, heights and lengths and the pillar dimensions will be refined using rock mechanics analysis techniques coupled with geotechnical knowledge of the deposit.




In this study the maximum height of the longhole stopes are 120 ft. If this proves at a later stage to exceed the stability capacity of the rockmass, the stopes can be mined in two cuts of 60 ft each. The minimum separation between longhole stopes is 25 ft with the understanding that they are mined in a bottom to top sequence and that the lower stopes are tight filled to prevent bed separation. The recovery relates to the amount of the overall stope block that can be recovered taking into account pillar losses and sterilization.

The room and pillar areas are designed on the basis of a 20 ft top slice and a 40 ft maximum bench height. At this depth and in this rockmass preliminary pillar strength/stress calculations indicate that a recovery of approximately 50% can be expected over the deposit widths present in the model. This 50% recovery includes barrier pillars that will be required in areas with large spans. A minimum vertical stope separation of 40 ft has been modeled but it may be possible to superimpose pillars and have a smaller separation. Where room and pillar areas overly each other the sequence should be bottom up, but where a longhole area is above a room and pillar area, the longhole should be mined first.

Figure 17.10 shows a representative NW-SE cross section through the deposit. Cut-off value contours are shown at $32/ton for longhole and $24.50 for room and pillar mining in addition to $40/ton and $50/ton. The deposit was first evaluated on 50 ft sections to identify longhole mining areas using the criteria in Table 17.11. The higher cut-off values were shown at all times on the sections to ensure that high grade was not left out above or below the 120 ft high stope blocks. Note that the stope areas identified had to be consistent with the sections on either side and as such it was not always possible to capture all the ore in the outline.




Figure 17.10: Cross section through deposit showing stope designs and cut off value contours

Longhole stope area

Room and pillar stope area

$50 cut-off value

$40 cut-off value

$32 cut-off value

$24.50 cut-off value

Figure 17.11 shows the final longhole and room and pillar area design. Evaluation of this design against the block model resulted in 17 million tons of longhole ore at 0.15% molybdenum and 0.14% tungsten; and 15 million tons of room and pillar ore at 0.11% molybdenum and 0.10% tungsten.

The next phase of the design process entailed applying recovery and dilution percentages to the identified stoping areas. The longhole stoping has 80% recovery and the room and pillar has 50%. Dilution of 15% is applied to all mining areas, however because of the selective nature of the mining and the fact that there is almost always lower grade ore above the stope blocks, this dilution is applied at 50% of the average grade of the stope block that it relates to.

The application of recovery and dilution results in 18 million tons of longhole ore at 0.14% molybdenum and 0.13% tungsten; and 10Mt of room and pillar ore at 0.10% molybdenum and 0.09% tungsten.




Figure 17.11: Longhole and room and pillar stope area design

Longhole stope area

Room and pillar stope area

Development Design

Figure 17.12 shows the development design for the selective mining option. Access from surface is via a 15ft x 15ft spiral ramp system connected at regular intervals by drop raises to improve the ventilation efficiency. 15ft x 15ft access declines with a vertical spacing of 125 ft are driven from the surface ramp through the center of the deposit in a northwesterly direction. The vertical spacing of these declines will allow stope access drifts to reach all the individual stope areas in the design. These two declines will also allow the intake ventilation to be separated from the exhaust for each block.




Figure 17.12: Selective mining development design

Longhole stopingRoom and pillar stoping

Access declines

Hoisting raisebore shaft

Ramp from surface

Stope access drifts

Ventilation raises

Vent raisebore

Vent drop raises

Ore and wastepassraisebores

A 10ft diameter, ventilation raisebore will be developed on the north side of the property. A directionally drilled, 15ft diameter raisebore will be developed close to the ramp to be used as a hoisting/ventilation shaft. An orepass and wastepass system will be developed that can be accessed by trucks from both the upper and lower declines. The hoisting system will be sized to meet the 8,500 ton/day ore production requirements in addition to waste development. Additional capacity will also be available for truck haulage in the ramp.

Production Schedule

Tables 17.12 and 17.13 shows the development and production schedule for the selective mining option. The surface ramp development begins in 2009 and advances at a rate of 720 ft/month. In 2010 the surface ramp is down to a position where the declines and ore access drifts can start. In 2011 the ore access drifts are in a position such that the stope production ramp up can start. A production rate of 1.5Mt is achieved in 2011 and this ramps up to 3Mt by 2012. Production continues at this level until the end of the mine life in 2020.




The mine is scheduled to produce a constant two-thirds of its tons from longhole stopes and one-third from the lower grade room and pillar areas. The production rate is 5,500 tons per day of longhole ore and 3,000 tons per day of room and pillar ore for a total of 8,500 tons per day. Table 1.1.6.3.2 shows the stope production schedule broken down by stope area and mining method.

Note in the schedule that the stopes have been mined in order of high grade to low grade to maximize the value of the deposit

Table 17.12: Selective Mining Option

Longhole ton 18,131,000

Mo grade % 0.14

WO3 grade % 0.13

Room and Pillar ton 10,200,000

Mo grade % 0.10

WO3 grade % 0.09

Development $ 212,000

Mo grade % 0.09

Min

ed

WO3 grade % 0.08

Longhole



Room and Pillar



Development

Mo metal lbs 371,000

Pote

ntia

lly M

inea

ble

Res

ourc

e

Met

al

WO3 metal lbs 348,000




Total 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Units or Avg. 1 2 3 4 5 6 7 8 9 10 11 12

MINE DEVELOPMENTContingency Access Ramp (17x15')

20% Development ft 18,840 8,640 10,200 - - - - - - Waste tons 456,399 209,304 247,095 - - - - - -

Declines (17x15ft)20% Development ft 6,480 - 6,120 360 - - - - -

Waste tons 156,978 - 148,257 8,721 - - - - - Ore Access Drifts (15x15ft)

20% Development ft 20,400 - 3,600 7,200 7,200 2,400 - - - Waste tons 436,050 - 76,950 153,900 153,900 51,300 - - -

MINE PRODUCTIONLonghole stope ore

Tons tons 18,131,270 1,000,000 1,925,000 1,925,000 1,925,000 1,925,000 1,925,000 1,925,000 1,925,000 1,925,000 1,731,270 Mo grade % 0.1416 0.1612 0.1612 0.1675 0.1693 0.1396 0.1396 0.1193 0.1157 0.1122 0.1301 Wo grade % 0.1295 0.1444 0.1444 0.1269 0.1158 0.1480 0.1291 0.1340 0.1366 0.1270 0.0892

Room-and-pillar stope oreTons tons 10,199,720 500,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,299,720

Mo grade % 0.1074 0.1653 0.1626 0.1277 0.0975 0.0923 0.0893 0.0633 0.0879 0.0971 0.0914 Wo grade % 0.0940 0.0669 0.0702 0.0993 0.1228 0.1040 0.1002 0.1439 0.0920 0.0706 0.0703

Table 17.13: Selective Mining Production and Development Schedule




Tonnage Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10LH1 80% 3,818,985 0.1612 0.1444 1,000,000 1,925,000 893,985 LH6 80% 2,739,909 0.1730 0.1118 1,031,015 1,708,894 LH2 80% 3,284,681 0.1396 0.1480 216,106 1,925,000 1,143,575 LH5 80% 1,167,686 0.1396 0.1013 781,425 386,261 LH9 80% 3,072,264 0.1142 0.1422 1,538,739 1,533,525 LH7 80% 1,015,563 0.1219 0.1145 391,475 624,088 LH3 80% 920,573 0.0982 0.1512 920,573 LH4 80% 2,111,608 0.1301 0.0892 380,338 1,731,270 RP13x 50% 117,326 0.1742 0.0562 117,326 RP18x 50% 1,468,327 0.1626 0.0702 382,674 1,050,000 35,653 RP15x 50% 288,195 0.0878 0.1900 288,195 RP19x 50% 254,518 0.1630 0.0425 254,518 RP21x 50% 291,280 0.1528 0.0408 291,280 RP8x 50% 394,372 0.0941 0.1348 180,354 214,018 RP20x 50% 252,016 0.1316 0.0605 252,016 RP3 50% 339,510 0.0673 0.1800 339,510 RP7 50% 153,346 0.1297 0.0569 153,346 RP2 50% 365,165 0.0702 0.1645 91,111 274,054 RP16x 50% 416,594 0.1135 0.0570 416,594 RP7x 50% 829,200 0.0846 0.1125 359,351 469,849 RP19xa 50% 290,148 0.0855 0.1057 290,148 RP1 50% 112,538 0.1286 0.0221 112,538 RP11x 50% 437,970 0.0831 0.1081 177,465 260,505 RP4x 50% 1,276,583 0.0567 0.1557 789,495 487,088 RP9x 50% 1,174,841 0.1149 0.0369 562,912 611,929 RP6 50% 210,932 0.0724 0.1188 210,932 RP5 50% 817,065 0.0721 0.1167 227,139 589,926 RP17x 50% 302,899 0.1134 0.0303 302,899 RP10x 50% 406,895 0.1030 0.0329 406,895

28,330,989 TOTAL 1,500,000 2,975,000 2,975,000 2,975,000 2,975,000 2,975,000 2,975,000 2,975,000 2,975,000 3,030,990 18,131,270 1,000,000 1,925,000 1,925,000 1,925,000 1,925,000 1,925,000 1,925,000 1,925,000 1,925,000 1,731,270 10,199,720 500,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,299,720

Total Moly grade 0.1625 0.1617 0.1534 0.1439 0.1229 0.1219 0.0995 0.1059 0.1069 0.1135 3000 Tung grade 0.1186 0.1182 0.1172 0.1183 0.1325 0.1189 0.1375 0.1209 0.1071 0.0811 5500 LH Moly grade 0.1612 0.1612 0.1675 0.1693 0.1396 0.1396 0.1193 0.1157 0.1122 0.1301

Tung grade 0.1444 0.1444 0.1269 0.1158 0.1480 0.1291 0.1340 0.1366 0.1270 0.0892 R&P Moly grade 0.1653 0.1626 0.1277 0.0975 0.0923 0.0893 0.0633 0.0879 0.0971 0.0914

Tung grade 0.0669 0.0702 0.0993 0.1228 0.1040 0.1002 0.1439 0.0920 0.0706 0.0703

Mining ScheduleMoly grade Tung grade

Diluted

Longho

leRo

om and

Pillar

Stope Extraction ratio

Table 17.14: Detailed Production Schedule




Mining Equipment

Table 17.15 presents the underground mobile equipment and purchase date requirements for the selective mining option. Development begins in 2009 using a contractor to mine the surface ramp. The mine will take over for the decline and ore access development in 2010. The equipment fleet is designed to support waste development, room and pillar stoping and longhole stoping operations.

Table 17.15: Mobile capital equipment for selective mining option

Equipment Total units

2009 2010 2011 2012

Jumbo dev 1 1 Jumbo prod 2 1 1

Bolter 3 2 1 6yd LHD 4 3 1 8yd LHD 4 2 2

40T Haul truck 7 4 3 Fuel truck 2 1 1

Hiab 2 1 1 Lube truck 2 1 1 Scissor lift 4 2 2

Anfo loader 2 2 Minecat 2 1 1 Tractor 4 2 2 Forklift 1 1

Forklift LHD 1 1 Backhoe 1 1

Grader 2 1 1 Mobile ITH 2 1 1

Mobile Top hammer drill 3 2 1 Emulsion loader 2 1 1

Blockhole drill 2 1 1 Shotcrete sprayer 1 1

Shotcrete haul mixer 1 1 Diamond drill 2 1 1

Operating Cost

Table 17.16 presents the mining operating cost breakdown for longhole stoping with pastefill and room and pillar mining with benching. The cost data was prepared using a zero based methodology and then checked against data provided by Western Mine Cost Services (2007).




The most significant difference between the two mining methods is the $8.00/ton ore mined cost for pastefill in the longhole method.

Table 17.16: Selective mining methods operating cost

Longhole with pastefill Operating

cost [$/ton ore]

Room and pillar with benching

Operating cost

[$/ton ore]

LH stoping 5.83 Room and pillar stoping 6.56 Mucking 1.83 Mucking 1.83 Haulage 0.84 Haulage 0.84 Hoisting 0.60 Hoisting 0.60 Electrical 1.14 Electrical 1.14 Management 2.11 Management 2.11

Mining

Pastefill 8.00

Mining

TOTAL 20.35 TOTAL 13.08 Capital Cost

Mobile equipment capital is $34M over three years with rebuild costs of $3.8M applied every year thereafter. The rebuild cost is calculated as 30% of the fleet value every three years.

The principal items in the underground infrastructure section are the hoisting and ventilation raisebores at $1.3M and $3.5M; and the pastefill plant at $5M for the initial installation and two subsequent upgrades totaling $1M. The pastefill plant capital includes the underground distribution system installation. Ground support and equipping of the hoisting shaft is expected to cost $8.5M.

Mine access capital development will cost $35.7M over a five year period.

Each of the cost areas has a contingency applied that varies according to the level of detail applied to the cost estimation. Table 17.17 provides the capital cost breakdown over the life-of-mine for the selective mining option.




Total 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Units or Avg. -2 -1 1 2 3 4 5 6 7 8 9 10

CAPITAL COSTSMine Equipment

UG Mobile Equip US$000 34,430 16,715 14,365 3,350UG Mobile Rebuild US$000 23,750 3,750 3,750 3,750 3,750 3,750 3,750 833 417Contingency (20%) US$000 11,636 3,343 2,873 670 750 750 750 750 750 750 167 83

Sub- total US$000 69,816 20,058 17,238 4,020 4,500 4,500 4,500 4,500 4,500 4,500 1,000 500Mine UG Infrastru

Exhaust Raise US$000 1,292 1,292Hoisting Raise US$000 3,486 3,486Backfill Plant US$000 6,000 5,000 500 500

Surface Fans US$000 500 500UG Fans US$000 200 100 100Pumping US$000 150 150

Shop US$000 500 500Contingency (20%) US$000 1,226 100 747 378

Sub- total US$000 13,354 600 9,483 2,270 500 500Mine Hoist Shaft

Hoist Shaft Equip US$000 8,500 8,500Contingency (30%) US$000 2,550 2,550

Sub- total US$000 11,050 11,050Mine Development

Access Ramp US$000 15,700 7,200 8,500Declines US$000 3,510 3,315 195

Ore Access Drifts US$000 10,540 1,860 3,720 3,720 1,240Contingency (20%) US$000 5,950 1,440 2,735 783 744 248

Sub- total US$000 35,700 8,640 16,410 4,698 4,464 1,488 - - - - - - - 129,920 9,240 45,951 35,256 8,484 6,488 4,500 4,500 5,000 4,500 4,500 1,000 500

Pre-production

Table 17.17: Underground mining capital summary – Selective Option




17.4.7 Summary

Both bulk and selective mining options for the Victorio deposit have been analyzed in this study. While both options have returned positive NPV and IRR values, the scope and magnitude of the operations vary dramatically.

The bulk mining option using a panel cave method, mines 140Mt and has a lifespan of 17 years. This method relies on a very high throughput of 25,000 tons per day to pay back the large capital investment of $440M ($212M mining only).

The selective mining option uses a combination of longhole mining with pastefill and room and pillar mining with benching, to extract the higher value portions of the deposit. In this option 28.5Mt is mined over a 10 year mine life. A significantly lower capital outlay of $242M ($130M mining only) is required for the 8,500 ton per day operation.

17.4.8 Recommendations - Mining

The following recommendations for more detailed work during the pre-feasibility level study are made. This is not supposed to be an exhaustive list of every task necessary to upgrade the study from scoping to pre-feasibility; rather it highlights the areas that SRK considers to be most important.

Bulk Mining

• Detailed geotechnical assessment to determine the caveability of the deposit.

• Preliminary design criteria should be prepared relating to undercut slot design and drawbell and drawpoint design.

• Use of Gemcom PCBC to optimize and schedule block caving. PCBC allows the evaluation of multiple scenarios varying block size, dilution, cut-off grade and other factors. During the scoping study evaluation a single wireframe was used to determine the average grade of the deposit, PCBC will show the grade variation over time and allow more detailed planning to be carried out.

• The issue of the low cave height compared to current worldwide caving operations needs to be addressed primarily as it relates to expected dilution and production rate.

• The expected cave dilution must be analyzed in detail using analytical, modeling, expert opinion and case history data. The dilution value will have the greatest single impact on the overall project economics and therefore must be firmly justifiable.

• Detailed development design and scheduling will be carried out and the progression of the undercut and cave front will be linked to the development requirements.




• Determine the production rate that is most suitable for the cave mining sequence that is designed.

• Prepare a production sensitivity analyses by varying production rate, dilution and grade. This will give an indication of project risk and assist with the decision between bulk and selective methods.

• Mining costs need to be addressed using a zero base approach and the Victorio deposit geometry which is quite different to other caving operations.

Selective Mining

• Detailed geotechnical assessment to provide geotechnical design criteria for longhole and room and pillar stoping.

• Detailed mine design, stope sequencing and production scheduling

• Testing to determine suitability of material to paste backfill preparation, pastefill flow characteristics and cement requirements.

• Preliminary backfill plant design

• More detail needs to be applied to the question of whether ore and waste should be trucked up the ramp or whether capital should be spent on a hoisting shaft.

17.5 Metallurgy and Process Description

17.5.1 Process Description

The process flow sheet for this study is based on a daily ore throughput rates of 8,500t and 25,000t for the production of a molybdenum concentrate as MoS2 and tungsten as ammonium paratungstate (APT). The process facility is comprised of several circuits as follows:







• Tungsten concentrate thickening and filtering;




• APT production plant;

• Tailings disposal; and

• Reagent handling and utilities.

Figure 17.13 shows a simplified flow sheet for the processing and APT plants of the proposed Victorio Mountain concentrator. Table 17.18 contains a major equipment list.




Figure 17.13: Simplified Process Flow Sheet for Victorio Project




Table 17.18: Major Equipment List for Victorio Mountains

8,500 tpd Case 25,000 tpd Case

Equipment Number Description Number Description

Primary Crusher 1 Jaw; 36 inch by 48 inch; 200 hp 1 Gyratory; 42 inch by 65 inch; 400 hp Bridge Crane 1 35 ton with 7.5 ton auxiliary 1 75 ton with 15 ton auxiliary Pan Feeders 2 48 inch wide by 10 ft long; 10 hp 3 48 inch wide by 15 ft long; 15hp Belt Conveyor 1 36 inch wide by 150 ft; 50 hp; with metal detector 1 54 inch wide by 200 ft; 75hp; with metal detector Vibrating Screens 1 5 ft by 14 ft; double-deck; 15 hp 2 10 ft by 20 ft; double-deck; 50 hp Belt Conveyors 5 24 inch wide by 60 ft; 15 hp 5 36 inch wide by 75 ft; 20 hp Belt Conveyor - Fine Ore Bins 1 36 inch wide by 150 ft; 50 hp 1 42 inch wide by 175 ft; 50 hp Secondary Crusher 1 Shorthead Cone; heavy duty; 3 ft dia; 100 hp 1 Shorthead Cone; heavy duty; 7 ft dia; 350 hp High-Pressure Grinding Rolls 1 150 tpd capacity 1 325 tph capacity Conveyor Belts 3 36 inch wide by 50; 20 hp 6 42 inch wide by 60 ft; 25 hp Ball Mills 1 16 ft diameter by 30 ft long; 4,500 hp 2 20 ft diameter by 34 ft long; 8,500 hp each Cyclones 3 26 inch diameter 8 26 inch diameter Cyclone Feed Pumps 2 1,100 gpm, 60 hp each; 1 operating; 1 standby 4 3,200 gpm; 150 hp each; 2 operating; 2 standby Flotation Feed Pumps 2 900 gpm, 50 hp each; 1 operating; 1 standby 4 2,550 gpm; 75 hp each; 2 operating; 2 standby Mo Rougher Flotation Cells 6 1,500 cu ft; 125 hp; each 18 1,500 cu ft; 125 hp; each Mo 1st Cleaner Flotation Cells 5 500 cu ft; 40 hp; each 15 500 cu ft; 40 hp; each Mo 1st Cleaner Regrind Mill 1 10 ft diameter by 18 ft long; 1,000 hp 1 12 ft diameter by 24 ft long; 1,750 hp Mo 1st Cleaner Regrind Cyclones 2 10 inch diameter 5 10 inch diameter Mo 2nd Cleaner Flotation Cells 4 100 cu ft; 15 hp; each 8 150 cu ft; 20 hp; each Mo 2nd Cleaner Regrind Mill 1 8 ft diameter by 10 ft long; 500 hp 1 10 ft diameter by 16 ft long; 750 hp Mo 2nd Cleaner Regrind Cyclones 2 10 inch diameter 5 10 inch diameter Mo 3rd Cleaner Flotation Cells 3 40 cu ft; 7.5 hp; each 8 40 cu ft; 7.5 hp; each Mo 4th Cleaner Flotation Cells 3 40 cu ft; 7.5 hp; each 8 40 cu ft; 7.5 hp; each Mo Concentrate Thickener 1 10 ft diameter; 5 hp 1 36 ft diameter; 7.5 hp Mo Concentrate Filter 1 Drum filter; 250 sq ft area; 15 hp 2 Drum filter; 744 sq ft area; 40 hp; each Mo Rotary Dryer 1 4 ft diameter by 30 ft long; 20 hp; gas-fired 1 7 ft diameter by 50 ft long; 110 hp; gas-fired Pyrite Flotation 5 1,000 cu ft; 75 hp; each 15 1,000 cu ft; 75 hp; each

WO3 Rougher Flotation Cells 5 1,000 cu ft; 75 hp; each 15 1,000 cu ft; 75 hp; each

WO3 1st Cleaner Flotation Cells 4 150 cu ft; 20 hp; each 13 150 cu ft; 20 hp; each

WO3 2nd Cleaner Flotation Cells 4 100 cu ft; 15 hp; each 13 100 cu ft; 15 hp; each




WO3 3rd Cleaner Flotation Cells 4 60 cu ft; 10 hp; each 10 60 cu ft; 10 hp; each

WO3 Gravity Concentrators 3 Concentrating tables; rougher/cleaner; 10 hp 10 Concentrating tables; rougher/cleaner; 10 hp

WO3 Concentrate Thickener 1 40 ft diameter; 5 hp 1 130 ft diameter; 15 hp

WO3 Concentrate Filter 1 Disc filter; 500 sq ft area; 6 disc; 6 ft dia;1.5 hp 1 Disc filter; 1,500 sq ft area; 10 disc; 10.5 ft dia; 5 hp Tailings Thickener 1 50 ft diameter; 7.5 hp 1 170 ft diameter; 25 hp

WO3 Concentrate Digestion 3 Autoclaves, 30 hp each 10 Autoclaves; 30 hp each Autoclave Filtration 3 CCD Filtration; 3 stages 3 CCD Filtration; 3 stages

Molybdenum Removal 1 MoS3 precipitation/filtration 3 MoS3 precipitation/filtration Tungsten Recovery 1 Tungsten solvent extraction 1 Tungsten solvent extraction APT Product 1 APT crystallizer/filter/dryer 1 APT crystallizer/filter/dryer

Lime Slaker 1 2,000lbs/hr 1 5,000lbs/hr




17.5.2 Crushing

The RoM underground ore will be received from the mine in haulage vehicles and will be dumped directly into the primary crusher. The ore will be reduced from a typical underground RoM size to less than 6in. The ore will be conveyed to a crushed ore stockpile with approximately one day of live storage. Ore will be reclaimed from beneath the stockpile by two reclaim feeders. The reclaim feeders will feed onto a double-deck vibrating screen. Plus 2 inch material will be crushed in a shorthead cone crusher and returned to the vibrating screen. Minus 2 inch plus ½ inch will be reduced in high pressure grinding rolls and returned to the vibrating screen. The vibrating screen undersize of minus ½ inch will be fed to the grinding circuit.

17.5.3 Grinding

The grinding circuit will be comprised of a ball mill operating in closed circuit with cyclones for size classification. The ore will be fed directly into the ball mill from the mill feed conveyor. Water will be added to the mill at a rate sufficient to make an ore – water slurry that is 60% solids by weight. Slurry from the ball mill discharge sump will be pumped to a set of cyclones which will separate the slurry particles by size fraction. The finer size fractions with a product size of 80% passing 200 mesh will report to the overflow of the cyclone and exit the grinding circuit to flotation. Particles that are coarser than 200-mesh will report to the underflow of the cyclone and will flow by gravity to the ball mill. Water will be added to the cyclone underflow as it enters the ball mill until a slurry density of 60% solids is obtained. The ore slurry will be circulated to the cyclones and back to the ball mill until the required product size is obtained and it exits through the overflow of the cyclones.

17.5.4 Pyrite Flotation

Prior to molybdenum flotation, a pyrite flotation will be done to remove the contained pyrite in order to remove pyrite as a contaminant and enhance the effectiveness of molybdenum and tungsten flotation downstream. Pyrite flotation will be performed at a pH of 9.0 utilizing xanthate as the flotation collector. The rougher pyrite concentrate will be pumped to the tailings storage facility. Less than 0.3% of the molybdenum and tungsten will report with the pyrite concentrate to tailings.

17.5.5 Molybdenum Flotation

The tailing from the pyrite flotation circuit will be pumped to a conditioner ahead of molybdenum rougher flotation circuit. Molybdenum rougher flotation will be done at a pH of 10.3 utilizing lime, sodium silicate, syntax L, vapor oil, and frother as reagents.

The molybdenum rougher concentrate will be directed to a regrind circuit consisting of a ball mill operating in closed-circuit with cyclones. The reground rougher concentrate will be cleaned in the first stage molybdenum cleaners to remove carry over gangue materials that may have been floated in the initial rougher flotation process. The first stage molybdenum




cleaning will be done at a pH of 10.3 utilizing lime, sodium silicate, vapor oil, sodium cyanide and MIBC frother as reagents.

The first molybdenum cleaner concentrate will be pumped to a second regrind circuit consisting of a ball mill operating in closed-circuit with cyclones in the same configuration with the regrind cyclone overflow to the second stage molybdenum cleaner. The second stage molybdenum cleaning will be done at a pH of 10.5 utilizing frother as the reagent.

Two additional stages of molybdenum cleaning will be done at a pH of 10.5 using lime, vapor oil, MIBC frother and sodium cyanide as the reagents for producing the final molybdenum concentrate at 54%MoS2.

The final molybdenum concentrate will be pumped to a thickener for initial dewatering. The thickened molybdenum concentrate is further dewatered using a disc filter and is then dried in a drier to a 4% moisture content. The dried molybdenum concentrate is packaged into bulk bags or drums for shipment.

17.5.6 Tungsten Flotation

The tailing from the molybdenum flotation circuit will be pumped to a conditioner ahead of the tungsten flotation circuit. Tungsten rougher flotation is performed at a 10.5 pH utilizing flotation reagents for recovering the contained WO3 minerals. The tungsten concentrate from rougher flotation will be directed to three stages of concentrate cleaning operating at a pH of 10.2. The three stages of tungsten cleaners will produce a tungsten concentrate of 3 to 5%WO3 which will be pumped to a thickener for initial dewatering. The thickened tungsten concentrate is further dewatered using disc filter. The filtered tungsten concentrate will be sent for processing to the APT plant.

17.5.7 Tungsten Gravity Concentration

The flotation tailing from the rougher tungsten circuit will be fed to the tungsten gravity concentration circuit consisting of two gravity tables, one rougher and one cleaner, to recover any contained WO3 minerals not recovered by flotation. The gravity concentrate from the cleaner table will be forwarded to the aforementioned tungsten thickener. The tailing from gravity concentration circuit, the final process plant tailing, will be thickened with the thickener underflow being pumped to tailings impoundment.

17.5.8 APT Plant

The combined, filtered tungsten concentrates from flotation and gravity will be the feed material to the APT plant. The tungsten concentrate will be subjected to autoclave leaching in a sodium carbonate solution. The leached concentrate will be filtered in a counter-current system with the residue pumped to tailings impoundment. The filtrate will be passed through a press filter to remove any contained silica which will be pumped to the tailings impoundment. Molybdenum will be removed from the clarified PLS using sodium hydrosulfide to precipitate the molybdenum as MoS3 which will be filtered as a separate




product. After removal of the molybdenum, the PLS will be processed in a solvent extraction circuit for transfer of the contained tungsten into a pregnant strip solution. The contained tungsten in the strip solution will be crystallized, filtered, dried, and packaged for shipment to market. The final APT product will contain 87%WO3.

17.5.9 Reagent/Chemical Handling

Consumables such as the flotation and solvent extraction reagents/chemicals and grinding media for the milling circuit are stored on site within fenced or concrete containment areas. Reagents and chemicals are brought to site dry whenever possible, to minimize the cost for freight, and are mixed in reagent mix tanks for weekly reagent consumptions. All reagent/chemical handling facilities are within lined containment areas. Metering pumps distribute the reagents/chemicals to the grinding and flotation circuits via pipelines throughout the plant facilities.

17.5.10 Process Design Criteria

Table 17.19 provides the process design criteria for the Victorio Mountains process facilities.




Table 17.19: Process Design Criteria

Design Criteria Units Value Ore Production Rate tpd 8,500/25,000 Annual Operating Basis days/yr 365 Daily Operating Basis hrs/day 24 Annual Ore Production Mtpyr 2.6/8.2 Process Plant Availability % 93 APT Plant Availability % 95 Ore Specific Gravity 3.0 Ore Feed Grades: Molybdenum %Mo 0.13/0.07 Tungsten %WO3 0.12/0.07 Overall Recoveries: Molybdenum as MoS2 % 85.0 Tungsten as APT % 75.0 Final Product Assays: Molybdenum as MoS2 %Mo 54.0 Tungsten as APT %WO3 87.0 Annual Production: Molybdenum as Mo Mlbs 6.2/9.4 Tungsten as WO3 as APT Mlbs 5.0/9.0 Crushing Circuit: Ore Moisture % 5.0 RoM Ore Feed Size inches <9, <16 Crushed Ore Size inches <6 Milling Circuit: BWI - Limestone kWh/t 7-8 BWI - Sandstone kWh/t 9-10 BWI - Andesite kWh/t 12 Average BWI kWh/t 10 Primary Grind P80 Mesh 200 Ball Mill Circulating Load % 300 Mo Rougher Flotation: Rougher Feed Density % 33 Rougher Flotation pH 10.3 Rougher Retention Time minutes 17 Mo Cleaner Flotation: stages 4 1st Stage Retention Time minutes 60 2nd Stage Retention Time minutes 30 3rd Stage Retention Time minutes 15 4th Stage Retention Time minutes 20 MoS2 Conc. Settling Rate ft2/tpd 15 MoS2 Conc. Filtering Rate tphr/ft2 0.0033 Pyrite Flotation: Flotation Retention Time minutes 15 Flotation pH 9.0 WO3 Rougher Flotation:




Table 17.19: Process Design Criteria (Cont.)

Design Criteria Units Value Rougher Feed Density % 35 Rougher Flotation pH 10.5 Rougher Retention Time minutes 12 WO3 Cleaner Flotation: stages 3 1st Stage Retention Time minutes 8 2nd Stage Retention Time minutes 6 3rd Stage Retention Time minutes 6 WO3 Conc. Settling Rate ft2/tpd 10 WO3 Conc. Filtering Rate tphr/ft2 0.0025 Tailings Settling Rate ft2/tpd 5

17.5.11 Mill Tailing

SRK developed a conceptual Tailings Storage Facility (TSF) design to support a conceptual level cost estimate (defined as +/- 40% level of costing accuracy) for the Victorio Mountain Project. Costing assumptions included the following:

• Conventional slurry tailings storage, assuming an average dry density of 85 pcf. No tradeoffs were performed to consider alternative placement technology or optimize the construction volumes.

• Tailings were placed at a 0% slope;

• The TSF Impoundment would need to be constructed with a barrier system to inhibit seepage losses to the environment. SRK assumed that this would consist of a synthetic geomembrane placed on a prepared subgrade surface;

• SRK developed a stage capacity curve for the conceptual TSF layout, and estimated that the TSF would be constructed in four phases;

• The first phase will consist of a starter embankment sized to contain approximately 2 years of tailings material. The Starter Embankment will be constructed of compacted Structural Fill.

• Subsequent raises will be constructed from cycloned sands. However, Interim Berms (assumed to be 20 feet high for each of the three phases) would need to be constructed from compacted Structural Fill to increase the stability the of cycloned sands;

• The TSF Embankment foundation would be lined with a synthetic geomembrane to inhibit seepage losses to the environment;

• Engineering was estimated to be 1% of the total construction costs;

• EPCM costs were estimated to be 5% of the total construction costs;




• No closure costs were allowed for;

• No Owner costs were allowed for; and

• Contingency was estimated to be 40% of the total construction costs and was provided to reflect uncertainties associated with:

• Level of design and assumptions;

• Inclusion of only high level costing items;

• Topography and topographic accuracy;

• Additional embankment height required to account for tailings slope and freeboard;

• Seepage recovery within the Embankment, including solution management, in addition to seepage monitoring wells;

• Solution recovery (barges, pumps, etc) within the impoundment; and

• Escalation in contractor unit prices from such items as crude oil prices.

Capital cost estimates are presented in Tables 17.20 through 17.24. Assuming that the Phase 1 Capital costs would be considered CAPEX and any subsequent capital costs would be considered OPEX, SRK has estimated that the CAPEX would be about $50.9M, and total subsequent OPEX costs would be $94.1M.




Table 17.20: Tailings Storage Facility Cost Estimate Item No. Item Quantity Units Unit Cost Cost Subtotal100 Site Preparation $ 6,816,063

110 Mobilization and Demobilization 1 ls 7% $ 6,497,313

120 Clear and Grub 1,275 acres $ 250.00 $ 318,750 200 Earthworks $ 23,500,000 210 Compacted Fill 6,600,000 yd3 $ 2.50 $ 16,500,000 220 Subgrade Preparation 60,000,000 ft2 $ 0.10 $ 6,000,000 230 Diversion Channel 10,000 lf $ 100.00 $ 1,000,000 300 Geosynthetics $ 36,000,000

310 Primary Geomembrane 60,000,000 ft2 $ 0.60 $ 36,000,000

400 Overliner $ 33,000,000 410 Overliner Material 4,400,000 yd3 $ 7.50 $ 33,000,000

Sub Total of All Capital Cost Items $ 99,316,063

500 Construction and Engineering

510 Engineering 1% $ 993,161 520 EPCM 5% $ 4,965,803 530 Owner Costs 0% $ - 540 Contingency 40% $ 39,726,425

Total Capital Cost $

145,001,451




Table 17.21: Phase 1 Tailings Storage Facility Cost Estimate (Crest El. 4430) Item No. Item Quantity Units Unit Cost Cost Subtotal100 Site Preparation $ 2,377,319


120 Clear and Grub 383 acres $ 250.00 $ 95,625 200 Earthworks $ 11,800,000 210 Compacted Fill 3,600,000 yd3 $ 2.50 $ 9,000,000 220 Subgrade Preparation 18,000,000 ft2 $ 0.10 $ 1,800,000 230 Diversion Channel 10,000 lf $ 100.00 $ 1,000,000 300 Geosynthetics $ 10,800,000

310 Primary Geomembrane 18,000,000 ft2 $ 0.60 $10,800,000




510 Engineering 1% $ 348,773 520 EPCM 5% $ 1,743,866 530 Owner Costs 0% $ - 540 Contingency 40% $ 13,950,928 Total Capital Cost $ 50,920,885




Table 17.22: Phase 2 Tailings Storage Facility Cost Estimate (Crest El. 4475) Item No. Item Quantity Units Unit Cost Cost Subtotal100 Site Preparation $ 2,646,250


120 Clear and Grub 564 acres $ 250.00 $ 140,888 200 Earthworks $ 5,152,000 210 Compacted Fill 1,000,000 yd3 $ 2.50 $ 2,500,000 220 Subgrade Preparation 26,520,000 ft2 $ 0.10 $ 2,652,000 230 Diversion Channel - lf $ 100.00 $ - 300 Geosynthetics $ 15,912,000





510 Engineering 1% $ 382,962 520 EPCM 5% $ 1,914,812 530 Owner Costs 0% $ - 540 Contingency 40% $ 15,318,500 Total Capital Cost $ 55,912,524




Table 17.23: Phase 3 Tailings Storage Facility Cost Estimate (Crest El. 4500) Item No. Item Quantity Units Unit Cost Cost Subtotal

100 Site Preparation $ 1,203,756


120 Clear and Grub 235 acres $ 250.00 $ 58,650

200 Earthworks $ 3,604,000

210 Compacted Fill 1,000,000 yd3 $ 2.50 $ 2,500,000 220 Subgrade Preparation 11,040,000 ft2 $ 0.10 $ 1,104,000 230 Diversion Channel - lf $ 100.00 $ -

300 Geosynthetics $ 6,624,000


400 Overliner $ 6,072,000

410 Overliner Material 809,600 yd3 $ 7.50 $ 6,072,000

Sub Total of All Capital Cost Items

$ 17,503,756


510 Engineering 1% $ 175,038 520 EPCM 5% $ 875,188 530 Owner Costs 0% $ -

540 Contingency 40% $ 7,001,502

Total Capital Cost $ 25,555,483




Table 17.24: Phase 4 Tailings Storage Facility Cost Estimate (Crest El. 4510) Item No. Item Quantity Units Unit Cost Cost Subtotal100 Site Preparation $ 583,023

110 Mobilization and Demobilization 1 ls 7% $ 559,762

120 Clear and Grub 93 acres $ 250.00 $ 23,262 200 Earthworks $ 2,937,867 210 Compacted Fill 1,000,000 yd3 $ 2.50 $ 2,500,000 220 Subgrade Preparation 4,378,666 ft2 $ 0.10 $ 437,867 230 Diversion Channel - lf $ 100.00 $ - 300 Geosynthetics $ 2,627,199


400 Overliner $ 2,408,266 410 Overliner Material 321,102 yd3 $ 7.50 $ 2,408,266



510 Engineering 1% $ 85,564 520 EPCM 5% $ 427,818 530 Owner Costs 0% $ - 540 Contingency 40% $ 3,422,542 Total Capital Cost $12,492,279




Figure 17.14: Conceptual Tailings site – 140 MT Option




Figure 17.15: Conceptual Tailings Site – 19 MT Option




17.6 Infrastructure

The caving option requires $11 million in capital and the selective mining option requires $7.3 million in capital. The mine site infrastructure capital summary for the caving option is presented in Table 17.25. The capital summary for the selective mining option is presented in Table 17.26.

Table 17.25: Infrastructure Capital Summary – Block Caving Option

Total 2010 2011 2012 2013 2014 Units or Avg. -3 -2 -1 1 2CAPITAL COSTS Infrastructure Offices/Support Facil $000s 4,000 1,200 2,400 400 Changehouse/Dry $000s 1,500 450 900 150 Warehouse/Shop $000s 1,650 495 990 165 Guard House $000s 50 50 Water/Sewer $000s 250 250 Communication $000s 200 200 Fencing $000s 100 100 Access Road $000s 250 250 Power System $000s 500 500 Contingency (30%) $000s 2,550 1,049 1,287 215 0 Total $000s 11,050 0 4,544 5,577 930 0

Table 17.26: Infrastructure Capital Summary – Selective Mining Option

Total 2010 2011 2012 2013 2014 Units or Avg. -1 1 2 3 4CAPITAL COSTS Infrastructure Offices/Support Facil $000s 2,667 800 1,867 Changehouse/Dry $000s 750 225 525 Warehouse/Shop $000s 825 248 578 Guard House $000s 50 50 Water/Sewer $000s 250 250 Communication $000s 200 200 Fencing $000s 100 100 Access Road $000s 250 250 Power System $000s 500 500 Contingency (30%) $000s 1,678 787 891 0 0 0 Total $000s 7,269 3,409 3,860 0 0 0




Offices and support facilities capital includes the mine office/administration building and general site grading, undisturbed surface water drainage and disturbed area surface water runoff collection facilities. The changehouse/dry facilities capital includes the locker room, lamp room, safety and training facilities. The warehouse/shop facilities capital includes the parts warehouse, maintenance facility, fuel storage and explosive storage. These capital costs vary with the mine type and production rate.

The guardhouse, water/sewer facilities, communication facilities, fencing, access road, and power system are fixed capital costs for either option.

A 30% contingency is added to all infrastructure capital.

Both mining options operate at less than design capacity in the first year of production. Infrastructure capital spending occurs in conjunction with pre production development and first year production.

17.6.1 Access

The mine site is accessed via an existing paved and gravel road from the Gage-Interstate 10 exit. The mine is approximately 2.7 miles from Interstate 10. The existing road requires upgrading for increased road traffic. Road capital expenditures are $250k for either mining option.

Rail access is also at the Gage-Interstate 10 exit. Union Pacific Railroad (formerly Southern Pacific) maintains the siding. No capital improvements are included for the use of this siding.

17.6.2 Power Supply and Substation

Domestic power is present at the Gage-Interstate 10 exit. Additional power is located 5 miles north of the Gage exit. Power, via pole line, is required at the mine site. Power is supplied by Columbus Electric Cooperative Inc. in Deming, NM.

The domestic power service at the Gage exit requires upgrading and the mine requires a new 2-mile line. Capital costs totaling $500k are included for a power line and substation. Power capital expenditures are the same for either mining option.

17.6.3 Potable Water, Sewage

Potable water will be treated from ground water wells within the immediate area. Until sufficient water rights can be obtained, it is likely that water will be purchased from nearby sources. A gravity water distribution system will supply the facilities.

A leach field sewage system will treat domestic sewage. The sewage system will be a gravity flow collection system.

The water and sewage treatment system capital costs total $250k.




17.6.4 Non-Potable Water

Prior to the potable water treatment plant, non-potable water will be drawn from the ground water wells and distributed by a gravity system to the appropriate mining and processing facilities. Capital costs associated with non-potable water are included with the water and sewage treatment system.

17.6.5 Buildings and Ancillary Facilities

The mine buildings and ancillary facilities total $7.2 million for the cave option and $4.2 million for the selective mining option.

The cave option includes $4.0 million and the selective mining option includes 2.7 million for the mine office/administration building and general site grading, undisturbed surface water drainage and disturbed area surface water runoff collection facilities.

The cave option includes $1.5 million and the selective mining option includes $0.8 million for the changehouse/dry facilities, locker room, lamp room, safety and training facilities.

The cave option includes 1.6 million and the selective mining option includes $0.8 million for the parts warehouse, maintenance facility, fuel storage and explosive storage.

17.6.6 Miscellaneous Infrastructure

Both the cave option and the selective mining options include $50k for a guardhouse, $100k for fencing, and $200k for communications systems.

17.6.7 Housing, Mancamp

No temporary housing or construction camp is included. Construction and operations personnel will commute from the surrounding towns.

17.7 Owner’s Costs

The owner’s costs for the caving option are estimated at $23.7 million as summarized in Table 17.27. The owner’s costs for the selective mining option are estimated at $14.6 million as summarized in Table 17.28.




Table 17.27: Owner’s Costs Summary – Caving Option

Total 2008 2009 2010 2011 2012 2013 2029 Units or Avg. -5 -4 -3 -2 -1 1 17CAPITAL COSTS Owner Costs Management $000s 2,500 500 500 500 500 500 Feasibility Study $000s 3,500 1,000 1,000 1,000 500 Environmental $000s 1,500 500 1,000 EPCM - Mill $000s 11,072 3,321 6,643 1,107 First Fills - Mill $000s 2,582 774 1,549 258 Spares - Mill $000s 3,321 996 1,993 332 Indirects/Equip - Mill $000s 4,814 1,444 2,888 481 Start-up & Commission $000s 300 90 180 30 Final Reclamation $000s 20,000 20,000 Equip Salvage $000s (20,000) (20,000) First Fills Salvage $000s (2,582) (2,582) Spares Salvage $000s (3,321) (3,321) Contingency (0%) $000s 0 0 0 0 0 0 0 0 Total $000s 23,685 2,000 2,500 1,500 7,627 13,753 2,209 (5,903)

Table 17.28: Owner’s Costs Summary – Selective Option

Total 2008 2009 2010 2011 2012 2013 2020 Units or Avg. -3 -2 -1 1 2 3 10CAPITAL COSTS Owner Costs Management $000s 2,000 500 500 500 500 Feasibility Study $000s 3,000 1,000 1,000 1,000 Environmental $000s 1,500 500 1,000 EPCM - Mill $000s 5,103 1,531 3,572 First Fills - Mill $000s 777 233 544 Spares - Mill $000s 1,531 459 1,072 Indirects/Equip - Mill $000s 2,804 841 1,963 Start-up & Commission $000s 200 60 140 Final Reclamation $000s 10,000 10,000 Equip Salvage $000s (10,000) (10,000) First Fills Salvage $000s (777) (777) Spares Salvage $000s (1,531) (1,531) Contingency (0%) $000s 0 0 0 0 0 0 0 0 Total $000s 14,607 2,000 2,500 4,625 7,791 0 0 (2,308)




Management costs of $500k per year include project oversight during the preproduction years. Feasibility costs of $3.5 and $3.0 million for the options include upgrading the resource and preparation of a feasibility study. Environmental costs of $1.5 million for either option are included.

Engineering, procurement, construction, and management (EPCM), warehouse first fills of operating supplies, equipment spare parts inventory, other construction equipment and supplies, and start-up and commissioning of the operation are estimated at $22.1 million for the cave option and $10.4 million for the selective mining option. The first fills inventory and the spare parts inventory are salvaged at the end of the mine life.

Final reclamation and closure costs are estimated at $20 and $10 million. Equipment salvage values at the end of the mine life are estimated to offset these closure costs.

Owner’s costs do not include any additional contingencies.

17.8 Hydrogeological Investigations

Section 17.7 of the report is largely excerpted from a separate study for Galway Resources by Water Management Consultants, Inc, dated July 2007.

A preliminary hydrogeologic impact assessment was conducted by Water Management Consultants, Inc. (WMC) as part of the scoping level study of the project (WMC, 2007). The scoping level study was developed to help assess the following key hydrologic issues:

Dewatering feasibility and the potential to supply the mill with dewatering flows,

Hydraulic connections to the adjacent alluvial basin, and

Potential for impacting adjacent water rights as a result of mine dewatering.

The study developed a preliminary hydrogeologic conceptual model, discussed key hydrologic issues, and inventoried existing water rights. Information contained in this NI-43101 is based on the WMC preliminary hydrogeologic impact assessment. No independent verification of the information was made by SRK. A summary of the preliminary hydrogeologic impact assessment is provided below.

17.8.1 Hydrogeologic Setting

The project site is in the Mimbres Basin, a 4,410 square-mile surface water drainage system. The location of the project site is shown in Figure 17.16, along with an inventory of wells within a six-mile radius.

Approximately 36 wells have been identified within a six-mile radius of the project site. The average depth of these wells is 327 feet, and the average depth to water in these wells




is 160 feet (Figure 17.16). If the area circumscribed by the 6-mile radius circle is divided in quarters, there are:

• 0 wells located in the southwest quarter,

• 5 wells located in the northwest quarter,

• 14 wells locate in the northeast quarter, and

• 17 wells located in the southeast quarter. Wells located in the northeast quarter are the least likely to be influenced by mine dewatering activity because of the presence of the Victorio mountain block. Wells 2, 3, and 4 on Figure 17.16 reside immediately outside of the 6-mile radius, but were included in the northwest quadrant count because they are close to it. Any recharge associated with the mountains should help protect the wells to the north-northeast from groundwater withdraws, and wells north of I-10 are located too far upgradient from the mine to be impacted. The wells most threatened by mine dewatering are wells in the southeastern quadrant of the circumscribing 6-mile radius circle. There are no wells in the southwestern quadrant.

Surface water hydrology in the Mimbres Basin consists mainly of ephemeral streams on top of basin fill alluvium, and intermittent mountain streams. The Mimbres River is the largest stream in the basin. The Seventysix Draw, which is located approximately three miles south of the project site, is an example of an ephemeral stream. In the project area, runoff from the Victorio Mountains generally flows south toward the Seventysix Draw by overland flow through some small channels that could be classified as gullies. Soils near the project site are skeletal with sparse desert vegetation.

The basin fill aquifer, also called a bolson in New Mexico, is the major water-yielding unit in the Mimbres Basin and ranges in thickness from zero to approximately 3,700 feet. Recharge to the aquifer occurs as infiltration from ephemeral streams, infiltration from precipitation and stream flow, groundwater underflow from adjacent basins and infiltration from marginal spring flow. A significant amount of recharge also occurs as so called “mountain front recharge” where runoff from steep bedrock first encounters the alluvial sediments.

Groundwater flows through alluvium and permeable units of sandstone and conglomerate in the area. Groundwater flow in bedrock is limited to fractured zones or karst zones in carbonate rocks. The groundwater flow direction is generally southward from upland areas in the northern part of the basin.




The transmissivity of the aquifer ranges from 10 to 50,000 square feet per day (ft2/day). Calculated hydraulic conductivity ranges from 0.03 to 800 ft/day and is approximately 18 ft/day in the Deming area. Storage coefficient values range from 0.02 to 0.24 for unconfined conditions and from 0.0004 to 0.004 for confined conditions.

The ore body is located in bedrock beneath the southern flanks of the Victorio Mountains at a depth of approximately 1,400 feet. The thickness of alluvium overlying bedrock at the site probably ranges from 10 to 400 feet, and thickens to the east and toward the south. The ore body is located much deeper than the wells that have water rights adjacent to the site.

There are two core holes installed by Galway in 2006 that can be used to measure the groundwater elevation in the project area. Data indicate that the depth to water may not have equilibrated but is on the order of 200 to 300 ft bgs. At one point in time there was a large difference in the groundwater in each well, which suggested that one well may have been influenced by water levels in the overlying alluvium, while the other may have been influenced by bedrock pressures. Data from these wells has not been collected in the past several months (as of July 2007).

17.8.2 Site Water Balance

A preliminary water balance for the project site was conducted to estimate the potential amount of groundwater recharge occurring in the drainage area containing the ore-body. The most likely source of recharge in the project site area is infiltration of occasional storm flows in the ephemeral streams beds, and to some extent recharge into the moderately karstic limestones north of the project area on the southern flanks of the Victorio Mountains.

A sub-basin watershed was delineated that encompasses the project site and is shown on Figure 17.16. The surface area of this sub-basin is approximately 235,100,800 square feet or 5,400 acres. Approximately 30% of this area encompasses the southern flanks of the middle hills and the surface footprint of the project site.

The Soil Conservation Service (SCS) Curve Number method was used to estimate total runoff for the period from 1991 to 2007 for daily rainfall data taken from the National Weather Service data base for Deming, New Mexico. The database also had daily evapotranspiration data. A Microsoft Excel spreadsheet was used to calculate infiltration and recharge estimates for the site sub-basin. The recharge that was calculated by this method was minimal (only 0.82 inches or 16,065,220 cubic feet for the period of record). This is about 12 gpm on average, and represents a very minor amount of water. It is likely




that recharge in the area cannot be considered for mine use, and will not offset groundwater withdraws for dewatering purposes. With an average annual rainfall of 9.36 inches, and an average annual evapotranspiration of 51.6 inches or greater, WMC considered these results to not be surprising.

In the USGS hydrologic study of the Mimbres Basin cited above a detailed water budget calculation for the entire Mimbres basin aquifer indicated that total inflow (recharge from surface water plus inflow from bedrock) was 76,000 acre-feet per year (ac-ft/yr) out of a total of 3,160,000 acre-feet of annual precipitation (using a weighted average precipitation of 13-inches per year over the entire basin area). For a portion of the aquifer near the Mexico-US border that encompasses the project site, inflow was estimated to be 4,000 ac-ft/yr (an average flow rate of 2,500 gpm). The potential contribution to this inflow derived from the project area sub-basin is negligible, based on the recharge estimate.

The conclusion made by WMC is that water removed from the basin-scale water budget by impounding or otherwise storing storm runoff will not create a significant deficit in the basin scale water budget.

17.8.3 Groundwater Quality

No data on groundwater quality was provided for inclusion into this report.

17.8.4 Hydrogeologic Conceptual Model

WMC developed a preliminary hydrogeologic conceptual model of the project area with the objective of providing a framework for evaluating the potential for supplying the mill with mine dewatering flows and to evaluate the potential groundwater flow paths that could cause impacts on adjacent groundwater users. WDC based their model on the geologic description in the 43-101 prepared by SRK in June 2007 (SRK, 2007) and a U.S. Geologic Survey Water Resources report (“Hydrologic Framework and Preliminary Simulation of Ground-Water in the Mimbres Basin”) by Hansen et al (1994).

WMC considered the development of a preliminary two-dimensional numerical model to evaluate groundwater flow in the Mimbres basin-fill aquifer in the USGS hydrologic study of the Mimbres Basin to be an important aspect of the report. Boundary conditions were defined to simulate the flow of water into and out of the aquifer and included no-flow, constant-flow and constant-head blocks. The Victorio Mountains included both no-flow and constant-flow blocks. Other model inputs for the project site included the following:




• Hydraulic conductivity of 0.7 feet per day.

• Measured (and simulated) water level contours of 4,100 feet above mean sea level (amsl).

• Storage coefficient value of 0.04. The State Engineer’s Office uses the model results to evaluate groundwater impacts relative to water rights.

WMC considered the hydraulic conductivity values above to be inappropriate for the potential mine project, and that the values are probably too high. In WMC’s opinion, applying the above values would be likely to produce a conservative (high) estimate of the area of influence of potential mine dewatering, however, this could only be confirmed with site investigations.

17.8.5 Estimated groundwater flow into the mine level

Dewatering flows for the project would be somewhat dependant on the mining method used. The ore body is relatively deep, approximately 1,400 ft below ground surface and 1,200 to 1,300 ft below the estimated local groundwater levels at the site. Therefore, some groundwater inflows will occur during mining. Initial assessments of core from the property suggest that dewatering flow rates would probably be relatively modest. The ore body itself appears to be tight and un-fractured, but if a bulk mining method was used, groundwater inflow would be controlled more by the surrounding rock mass and structure than the ore zone itself. Groundwater would flow into the mine level from an overlying fractured and potentially dewatered zone. The extent of this zone is currently unknown. Groundwater could be collected in sumps and pumped to the surface for use in the mill.

If a bulk mining method was used, then hydraulic communication with the overlying hydrogeologic units would eventually be established. Assuming a mine footprint of 3,000 ft x 3,000 ft and a base elevation at around 1,000 ft below static groundwater levels suggest a dewatered zone volume of about 9 billion cubic feet (ft3). Assuming that the effective porosity of the dewatered zone above the mine (after fracturing due to bulk mining methods develops) ranges from 1% to 3%, there are about 675,000,000 to 2,000,000,000 gallons of water available.

This volume of water corresponds to an average inflow of 130 to 385 gpm to the mine level. This water is conceptualized to be obtained from removal of groundwater storage over a 10 year mine life. This discharge rate would be supplemented by lateral inflow from any district scale structural features, which may or may not be present, and local recharge.




Therefore, the estimated dewatering flow rates are predicted to range from 150 to 400 gallons per minute (gpm), with the assumption that a bulk mining method is used to extract the ore. However, this water source will take time to develop, so water will need to be purchased initially from adjacent water rights holders for mine construction, start-up, and the first few years of mine operations.

At this time, based on the limited amount of rock strength data and on the unknown extent of mining and the methods to be used, it is impossible to precisely quantify the amount of groundwater inflow to the mine level, but the above estimated range seems reasonable based on previous experience in similar situations.

17.8.6 Extent of dewatering impacts on nearby wells

The extent of the dewatered zone above the deposit is unknown; therefore, the extent of dewatering impacts is unknown. Depending on the degree of fracturing resulting from ore removal, a dewatered zone will propagate upward from the mine level and will begin to encounter the alluvial sediments. As the alluvium drains, water levels in wells adjacent to the project area may or may not be affected, depending primarily on the extent of the dewatered zone and the continuity of the alluvium.

However, if the district bedrock system is tight and unfractured, then the area of influence affected by mine dewatering would be unlikely to propagate significantly beyond the project area footprint. For this scenario, the main impact to the Mimbres basin would be the loss of the estimated 12 gpm of project area sub-basin recharge that would get intercepted by the mine project. Given the scale of the basin, this would probably not be detected in alluvial water wells adjacent to the project area.

To some extent, the bedrock barrier will lessen or minimize the effect of mine dewatering to the east, and the same can be said about areas to the north and northwest. No wells were found in the southwestern quadrant of the search radius, so no impacts are possible.

However, wells 30 and 31 located close to the northwest area of the project site are sufficiently close to the dewatered zone above the mine that they may be affected. Wells located due south of the site completed in alluvial basin fill may also be affected by lateral groundwater flow in the alluvium toward the dewatered zone above the mine. The wells to the south, however, are located south of small outlying hills that are cored by bedrock, which may provide some buffer to dewatering impacts. Again, the full extent of impacts is unknown at this time.




More significant impact to the basin could occur if either 1) the district bedrock system is more pervasively conductive than thought, or 2) there were major bedrock structures connecting the mine area to the basin. Through-going faults oriented in the proper direction could provide conduits for flow from the basin-fill alluvium. Because the mine elevation is far beneath basin groundwater levels, there would be a potential for dewatering to pull water from the basin, if any such connections exist. Typically, in similar settings, geologic structures create barriers between the basin and the range, and so the scenario described is considered improbable.

WMC concluded that hydrogeologic investigations and testing will be needed to assess the hydrogeologic relationship between the mine area and the basin, and to demonstrate the lack of connection and impact.




Figure 17.16: Hydrological Basemap.




17.9 Environmental Studies and Background Information

Section 17.9 of the report is largely excerpted from a separate study for Galway Resources by Enviroscientists, Inc., dated June 2007.

Enviroscientists, Inc., (Enviroscientists) completed an assessment of the permit requirements for the project (Enviroscientists, 2007). The assessment identified the following:

• the assumptions used in the development of the permit assessment; • the federal, state, and local permits necessary to develop the project; • the baseline studies necessary to complete the permit acquisition; • the non-governmental organizations (NGOs) that oppose mining in New Mexico; • the potentially significant environmental, social, and positive impacts of the project;

and, • the overall strategy for the project permit acquisition.

The results of the reviews are provided below. It is SRK’s understanding that a Galway permit acquisition strategy is pending.

17.9.1 New Mexico Water Rights

The New Mexico Office of the State Engineer (SEO) assesses water rights and potential impacts based on administrative blocks. An administrative block consists of four sections of land. For example, the Galway Victorio Mountain project site is in the administrative block defined as Sections 29, 30, 31 and 32 of T24S, R12W. No water rights exist within this particular administrative block.

The SEO requires a two-dimensional finite difference model to define an area of impact that is equivalent to 36 square miles (i.e.: the eight administrative blocks adjacent to an administrative block of interest). A non-pumping static water level of 128 feet below ground surface (bgs) and a dynamic water level (pumped) of 230 feet are considered to be the economic pumping level by the SEO. A dynamic water level in excess of 230 feet bgs is considered non-economical for agricultural purposes.

The SEO does not distinguish between groundwater in alluvium and underlying rock. All of the wells reviewed that fell within the 6-mile search radius were completed in alluvium. None of the wells was developed in bedrock units underlying the alluvium.

According to the SEO, the Mimbres Basin is a closed basin, which means no new water rights are available. For example, if water was required for a mine in the Mimbres Basin,




the rights would have to be purchased or leased from an existing water rights holder because water rights are non-transferable. However, it is possible to physically and legally transfer water from one location to another via a pipeline. If the water appropriation is transferred in this manner, the land from which the water rights were purchased or leased would have to lie fallow. The basin is considered closed because it has been determined that aquifer outflow (e.g. groundwater underflow to other groundwater basins, irrigation/consumptive use, stock and domestic use) exceeds inflow or recharge.

A review by WMC of groundwater in and surrounding the project area is presented in Section 17.8 above.

17.9.2 Required Permits

The project will require a variety of federal, state, and local permits related to environmental issues. The permits needed, as identified by Enviroscientists (2007), are discussed below. SRK did not conduct an independent review of the permit needs.

17.9.3 Permit Requirement Assumptions

The review of permit requirements for the Project assumes a specific development scenario, which is based on the following assumptions:

• All project activities will occur on public lands administered by the Bureau of Land Management (BLM);

• The project will be a new underground, bulk tonnage, mine; • The project will be permitted as a New Mine; • There will be no radioactive materials on site, negating the needs for a Radioactive

Materials License; • The project is not located within Critical Habitat, Wilderness or Cultural Resources

Areas, or in a cemetery; • No Threatened or Endangered Species occur within the Project area. • Hazardous wastes will not be stored onsite beyond the provisions allowed for in the

Resource Conservation and Recovery Act, thereby negating the need for a Hazardous Waste Permit;

• No surface waters are available to appropriate for use in the Project. • The project will require dewatering. • Total surface disturbance associated with the Project will be approximately 3,000

acres within a 5,000 acre Project area; • All solid waste will be disposed of in a new on-site landfill.




17.9.4 Federal Permit Requirements

Plan of Operations

A Plan of Operations (Plan) will be required by the BLM prior to authorizing the surface operations associated with the underground mine. The application should include a reclamation plan, a fluid management plan, a monitoring plan, an emergency response plan, and both temporary and tentative permanent closure plans. The approval time frames for the Plan will be dependent on the BLM’s processing time frames associated with the BLM’s preparation of the National Environmental Policy Act (NEPA) document (Environmental Impact Statement [EIS]). In addition, bonding must be in place prior to the Plan being authorized. The BLM office for this Project is the Las Cruces office.

Section 404 Permit

Section 404 of the Clean Water Act (CWA) requires that any project which has the potential to cause dredge or fill in Waters of the U.S. obtain a Section 404 permit. The U.S. Corps of Engineers (Corps) must make a Waters of the U.S. determination, and from this determination the type of Section 404 permit that will be required can be made. The determination by the Corps can take several months to be completed. If the Project activities can be completed under a Section 404 Nationwide Permit, then the approval time frames are approximately one to two months. However, if the Project activities require the acquisition of a Section 404 Individual Permit, then the approval the permit is tied to the completions of the NEPA document.

Storm Water Permit

The State of New Mexico does not have the authority to issue National Pollution Discharge Elimination Permits (NPDES) under the CWA. These permits are issued by the Region 6 office of the Environmental Protection Agency (EPA). All construction sites that disturb more than one acre and certain industrial facilities are required to obtain a storm water permit as part of the CWA. A Notice of Intent (NOI) to comply with the requirements of the multi-sector general storm water permit will need to be filed. A Storm Water Pollution Prevention Plan will then need to be prepared for the Project. The NOI application includes the following information:

• details about the owner and operator; • the location of the construction activity; and • preparation of a Storm Water Pollution Prevention Plan.




There are no fees or bonds required and the NOI application can be completed on-line through the EPA’s web page.

Explosives Permit

There are several federal agencies involved in the management of explosives. There are no state or county permits required for the storage, use or transportation of explosives. These agencies and their management roles include the following:

• Bureau of Alcohol, Tobacco, and Firearms (ATF) regulates the distribution and

manufacture of explosives as well as storage; • Mine Safety and Health Administration (MSHA) regulates hazards associated with the

use of explosives in a mine environment; and • Department of Transportation (DOT) regulates the transportation of explosives on

roadways throughout the Untied States and mandates packaging and labeling requirements.

ATF requires that a User of Explosives permit (User Permit) application be completed. This User Permit is issued for three-year periods, subject to renewal, and requires the following information be completed:

• operational information including address and type of business, • the individual social security number for each individual using explosives, • detailed information on the owners and operators of the facility using explosives, and • maps indicating the storage and housing locations of explosives.

The DOT and MSHA requirements are regulatory procedures that must be followed, specifically regarding storage, transport and labeling. There are no permits, notices or applications that need to be completed.

17.9.5 State of New Mexico Permit Requirements

New Mining Permit

Under the New Mexico Mining Act an operation permit is required for any new mine. The Mining and Minerals Division (MMD) of the New Mexico Energy, Minerals and Natural Resources Department has the responsibility to issue permits associated with mining in New Mexico. The main purpose of these permits is to protect the natural environment and ensure that any mining area is reclaimed to a self-sustaining ecosystem with an approved post-mine land use. There are two different types of new mine permits




that can be issued by MMD. These are the New Mining Permit and the Minimal Impact New Mining Permit. Applications for these permits are reviewed by several governmental divisions of the state of New Mexico. One of these divisions is the New Mexico Historic Preservation Division. The Mining Environmental Compliance Section (MECS) of the New Mexico Environment Department (NMED) participates as an advisor in the implementation of the New Mexico Mining Act and Non Coal Mining Regulations by reviewing and commenting on mine permits and closeout plans, coordinating environmental protection requirements at mine sites with the MMD.

A Minimal Impact Operation New Mining Permit is one which does not exceed ten acres of surface disturbance. A New Mining Permit is one which does exceed ten acres. Development of the project will exceed the ten-acre minimum and will, therefore, require a New Mining Permit. The New Mining Permit application requires the following information:

• a map of the proposed permit area; documentation showing the legal right to mine the

area; • owner and operator contact information; • a list of other mines controlled by the operator, including relevant environmental

information regarding those operations; • locations of all separate but interrelated operations; • a list of all required state and federal environmental permits; • a sampling and analysis plan; any relevant baseline data; and • specific details of the proposed mining operation and reclamation plan.

Six copies of the submission should be included. Before the permit is issued, financial assistance must be in place. The application fee is $350.00 and the annual fee is $250.00.

Air Quality Operating Permit

Prior to obtaining an air quality operating permit, a NOI and General Construction Permit (GCP) must be obtained. The NOI and GCP are issued by the Air Quality Bureau (AQB) of the NMED. The Air Quality Permit and Notice of Intent, Universal Application Form must be completed. This form includes the following information:

• company information; current facility status; facility location information; • proposed operating schedule; • process flow sheet and plot plan; emission calculations and all documentation of those

calculations; • proof of public notices;




• descriptions of routine operations; • PSD applicability determination for all sources; • a discussion demonstrating compliance with both state and federal requirements; • explanation of mitigation measures to be taken during malfunction, startup or

shutdown; • air quality dispersion modeling information; and • a list of emission control equipment.

No construction of stationary sources may occur prior to obtaining the GCP. Examples of stationary sources at the project would include, but are not limited to, the ore crushing circuit, and portable generators.

The application for a GCP will include basic facility information, process and equipment details, emission calculations, proof of public notices and an application fee. The Air Quality Operating Permit is issued by the Environmental Improvement Board as a part of the Environmental Improvement Act. Within the first 30 days of receipt of the permit application, the AQB will notify the applicant of any additional information required. From the time of acceptance of the application, the permit will take approximately 90 days to complete, this includes the 30 day public review period. Once AQB issues the Permit to Construct, construction of the stationary sources can begin. Within one year after the commencement of operations, an application for a Permit to Operate must be filed with AQB.

The application fee for a GCP is $500.00. There is no application fee for the Permit to Operate, however, there is a Permit to Operate emission fee which will be invoiced by the NMED. This fee will be calculated based upon the allowable emission rate and the fee per ton of pollutant emitted.

Ground Water Discharge Permit

A Ground Water Discharge Permit will be required for the site. The intent of the Ground Water Discharge Permit is to minimize impacts to ground water from any potential sources, including tailings impoundments, any waste rock piles, ore stockpiles, industrial process ponds, and milling facilities. The Ground Water Discharge Permit is issued by the Ground Water Quality Bureau of the Water and Waste Management Division of NMED under the Water Quality Act. The permit is issued for all sources of discharges that have the potential to enter directly or indirectly into the ground water system, such as a tailings impoundment. The application should include the following information:

• quantity, quality and flow characteristics of the discharge; • location of the discharge;




• depth to and total dissolved solids concentration of ground water most likely to be affected;

• flooding potential of the site; • geological and hydrological information; • operational, monitoring, closure and contingency plans; and • corrective action or abatement plan for existing ground water contamination.

Financial assurance may be required and needs to be in place prior to the permit being issued. The application can take Ground Water Quality Bureau up to 180 days to complete; this includes the 30 day public notice and comment period.

The permit filing fee is $100.00. The annual permit fees range from $1,150.00 to $13,000.00, depending on the type of discharge and the volume associated with the discharge.

Permit to Construct and Operate a Dam (Tailings Permit)

The Dam Safety Unit of the Office of the State Engineer has responsibility for issuance of permits to construct and operate a dam. The application is required for any dam that is located ten feet above the lowest surface ground water or which holds more than ten acre-feet water, and detailed engineering plans are required. The information to be included in the application includes applicant details, the purpose of the dam, the hazard classification, and an assessment of the up gradient drainage area.

The application fee is $25.00. The dam examination fee is $100.00, plus an additional $2.00 for each $1,000.00 of dam construction costs for examining plans and specifications. There is a $25.00 fee for the Certificate of Construction fee.

Permit to Appropriate the Public Ground Waters of the State of New Mexico

The Permit to Appropriate the Public Ground Waters of the State of New Mexico is issued by the Water Right Unit, which is a part of the State Engineer’s Office. All artesian wells must be drilled by a certified water well driller in accordance with the State Engineer. The Permit to Appropriate the Public Ground Water of the State of New Mexico application and application process is very similar to that for the surface waters. The application includes the following applicant information:

• the name of the affected ground water basin; • the location of the proposed well; • the intended beneficial use of the water; and




• for those wells that are to be drilled on lands not owned by the applicant, a statement from the land owner allowing the well to be drilled and allowing use of the water for the purpose intended.

Once the application is submitted to the Water Rights Unit, a Notice of Application will be completed, which must be published in a local newspaper near the project area for three consecutive weeks. An affidavit stating that the Notice of Application was published will be added to the application form. Applications to divert three acre-feet or less will not require a Notice of Publication. Once the affidavit has been attached to the application form, it can be processed.

As soon as practicable after the well is complete, the applicant will submit to the Water Right Unit the following two documents: the Final Inspection Report and the Proof of Application of Waters to Beneficial Use document. If, after three years of the issuance of the Permit to Appropriate Ground Waters of the State of New Mexico, the applicant has not submitted these documents to the Water Right Unit, there are provisions for an extension. The underground water appropriation fees are $25.00 per well, $25.00 for the Certificate of Construction, and $25.00 for the License to appropriate.

The New Mexico Office of the State Engineer (SEO) assesses water rights and potential impacts based on administrative blocks. An administrative block consists of four sections of land. For example, the Galway Victorio Mountain project site is in the administrative block defined as Sections 29, 30, 31 and 32 of T24S, R12W. No water rights exist within this particular administrative block.

The SEO requires a two-dimensional finite difference model to define an area of impact that is equivalent to 36 square miles (i.e.: the eight administrative blocks adjacent to an administrative block of interest). A non-pumping static water level of 128 feet below ground surface (bgs) and a dynamic water level (pumped) of 230 feet are considered to be the economic pumping level by the SEO. A dynamic water level in excess of 230 feet bgs is considered non-economical for agricultural purposes.

The SEO does not distinguish between groundwater in alluvium and underlying rock. All of the wells reviewed that fell within the 6-mile search radius were completed in alluvium. None of the wells was developed in bedrock units underlying the alluvium.

According to the SEO, the Mimbres Basin is a closed basin, which means no new water rights are available. For example, if water was required for a mine in the Mimbres Basin, the rights would have to be purchased or leased from an existing water rights holder because water rights are non-transferable. However, it is possible to physically and




legally transfer water from one location to another via a pipeline. If the water appropriation is transferred in this manner, the land from which the water rights were purchased or leased would have to lie fallow. The basin is considered closed because it has been determined that aquifer outflow (e.g. groundwater underflow to other groundwater basins, irrigation/consumptive use, stock and domestic use) exceeds inflow or recharge.

A review by WMC of groundwater in and surrounding the project area is presented in Section 17.8 above.

Dewatering Permit

The Water Rights Unit of the SEO also issues permits for mine dewatering as a part of the Mine Dewatering Act. These submissions include a mine dewatering plan, hydrologic and engineering studies showing the effects of the mine dewatering, a plan explaining how the applicant will mitigate any effects of mine dewatering and the application fee. The dewatering notice will be published in a local newspaper once a week for three consecutive weeks. The application fee is $25.00 per point of diversion.

Hazardous Waste Handlers Permit

NMED is responsible for the regulation of all hazardous wastes in the state, as part of the New Mexico Hazardous Waste Act as an authorized state program under the Solid Waste Disposal Act and by the Resource Conservation and Recovery Act. The Hazardous Waste Permit is issued by the Environmental Improvement Board of the Hazardous Waste Bureau, which is part of NMED. The permit application document is the federal Environmental Protection Agency (EPA) form 8700-12, which must be submitted to the Hazardous Waste Bureau of NMED. They will then issue the applicant an EPA identification number. The EPA form 8700-12 requires the following information:

• name, • location, • installation mailing address, • installation contacts, • owner information, • type of regulated waste activity, and • a description of the hazardous wastes to be generated.

No facility that has the potential to generate hazardous wastes can commence operations without a Hazardous Waste Permit. The application and annual fees are dependent on the generator status as either a Large Quantity Generator (LQG) whose fee in 2006 was




$2,500.00 or a Small Quantity Generator (SQG) whose fee in 2006 was $200.00. An additional annual fee is based upon the total annual production of hazardous waste generated and the type of waste generated.

Solid Waste Facility Permit

A solid waste permit must be obtained prior to construction of a solid waste disposal facility. The application must include details regarding type of the facility and the local hydrogeology, and operational, monitoring, and closure plans. The Solid Waste Permit application must include the construction fee of $3,000.00. The annual fee is based on a sliding scale which takes into consideration the estimated volume and types of solid waste placed in the landfill. The fees vary from $6,000.00 to $10,000.00 for an industrial landfill. The state may also require a financial assurance, depending on the size and type and material placed in the landfill.

Public Water Supply

In New Mexico, the Environmental Improvement Board under the NMED has the responsibility to regulate all drinking waters in the state. The drinking water regulations are a part of the Environmental Improvement Act and also the federal Safe Drinking Water Act. Applicants must include the application form, the engineering design report, a disinfection plan, water system capacity development information and two sets of complete plans. Applications for a public water supply must be submitted to the Environmental Improvement Board at least 30 days prior to commencement of construction. Once construction is complete, before the new system can be used as a potable source, the facility must demonstrate that it can meet all current Drinking Water Standards. There are no fees associated with this application.

Petroleum Tank Registration, Closure, Investigation, Reclamation

Petroleum storage tanks are regulated by the Petroleum Storage Tank (PST) Bureau of NMED. It is their mandate to oversee the installation, operation, closure, investigation, and cleanup of both above ground and underground petroleum storage tanks as a part of the New Mexico Hazardous Waste Act. The PST Bureau must be notified 30 days prior to the installation of any petroleum storage tanks. For new tanks, the applicant must complete a New Mexico PST Registration Form or an EPA form 7530. These forms include owner information, location of tank information, detailed description of the condition of the tank, and relevant contact information. Once the tanks are registered with the PST Bureau, a certificate particular to each tank must be located on site within the vicinity of the tank. There is an annual fee of $100.00 per tank per year.




Mine Registry Forms

A Mine Registry Form must be submitted to the New Mexico Energy, Mineral and Natural Resources Department prior to the start of mine operations. The application includes the following information:

• mine name and address, • operator and owner information, • name of person in charge of the operation, • the type of mine, and the commodity to be produced, • a topographic location map and description, • the annual estimated production and sales amounts, • mine explosive and employment information; • a description of any improvements made every year, • method of extraction, and • the production of minerals by estate classification.

There is no fee associated with this registration. The registration form must also be completed annually by April 30th.

Notification of Opening and Closing Mines

The State Inspector of Mines must be notified prior to commencing exploration and mining operations. Notification requires submittal of a completed Notice of Commencement or Closing of Mine Operation Form. There is no fee or baseline data required for this notification.

Fire Marshall

As a requirement of the state of New Mexico, all new industrial facilities must submit a chemical storage plan to the state Fire Marshall. This plan shall include a listing of all chemicals stored and used at the facility, a map identifying those areas and locations of all fire fighting equipment. There are no fees associated with this permit.

Electrical Permit

A New Mexico state electrical permit must be obtained by the electrical contractor once all electrical components are installed and working properly. The fees associated with this permit are based on the amount of electrical work completed.




17.9.6 Luna County Permit Requirements

Luna County requires a building permit for structures that are greater than 200 square feet. This permit must be obtained before construction commences. In order to obtain the permit, detailed designs will be submitted to the Luna County Planning Department located in the town of Deming, New Mexico. Permits fees are assessed based on the final constructed size of the building.

A septic permit and a well permit must also be obtained from the Luna County Planning Department. Permit fees for both of these permits are based on the amount of plumbing and the amount of water used. These permits are often obtained by contractors working on construction projects within Luna County.

17.9.7 Environmental Document and Baseline Studies

The preparation of an Environmental Impact Statement (EIS) will be required using available existing data and collected baseline information to analyze the 15 critical elements and other resources present in the areas of analysis associated with the project and the Cumulative Effects Study Areas (CESAs). The EIS process will be conducted in accordance with NEPA regulations (40 CFR 1500 et. seq.), BLM guidelines for implementing NEPA in BLM Handbook H-1790-1, and BLM Washington Office Bulletin 94-310. The intent of the EIS is to assess the direct, indirect, residual, and cumulative effects of the project and to determine the significance of those effects. Mitigation of impacts and residual impacts, if any, will also be addressed in the EIS. The third party contractor hired to complete the EIS will conduct a comprehensive evaluation of each analysis area and an evaluation of the respective CESA for each resource as defined in the DAS or as determined through consultation with the BLM. A Preparation Plan for the preparation of the EIS in conformance with BLM NEPA Handbook H-1790-1, Chapters V.B.1b and V.C.2 will also be required. The Preparation Plan will establish the critical path schedule for the completion of the document. In addition, the Preparation Plan will formalize the responsibilities and direction for management of the critical path.

Enviroscientists recommended that six baseline studies be prepared as a part of the Environmental Impact Statement (EIS) for the project:

1) a geochemical baseline study; 2) a hydrological baseline study; 3) a dewatering assessment; 4) a vegetation baseline study; 5) a wildlife baseline study; and 6) a cultural baseline study.




A brief description of each baseline study recommended by Enviroscientists is provided below.

Geochemical Baseline Study

A thorough evaluation of the acid rock development (ARD) potential of any surface waste rock piles, ore stockpiles, and the future tailings impoundment needs to be completed. This evaluation of ARD issues would be required to determine the potential for the degradation of surrounding surface water and ground water resources. A waste rock management and stockpile plan, or tailings management plan, and engineering controls might need to be developed to mitigate any risks identified in the ARD evaluation.

Hydrological Baseline Study

An extensive hydrologic assessment will be necessary for the Dewatering Permit, mine planning, and as part of the Project EIS to identify the source and extent of any existing hydrologic issues as well as characteristics of the ground water system. Prior to any new project development, a detailed surface water and ground water sampling and characterization program will be required, and further evaluation of the waste materials will be required to quantify the potential impacts of trace metals on the site hydrologic system.

Dewatering Assessment

A dewatering assessment will be needed to evaluate the potential impacts to the ground water table from mining operations. This assessment will also be needed to identify potential mitigation measures to minimize the effect of these impacts.

Vegetation Baseline Study

A vegetative survey of the entire project area is likely to be required. This survey would also determine the presence of any special status plant species. A baseline vegetation study will also need to be completed to quantify the vegetative cover in areas to be used as reference areas, as well as areas to be disturbed as part of the project. The study will identify vegetation community, individual species within the communities, the presences of special status species, and the percent cover and density of desirable and exotic species of plants to use for future vegetation bond release.

Wildlife Baseline Study




Due to the potential presence of bats, there is a potential need for off-site bat habitat mitigation. Due to the potential for the presence of migrating birds of prey, there may be a need for protective measures concerning utility poles or the construction of perches for raptor migration. A determination of any special status wildlife species would need to be made and a full wildlife survey is likely to be required.

Cultural Baseline Study

The Project Area will need a complete cultural resources survey. A Class III (transects with 15 to 30 meter spacing) type of survey will be required. In addition to field surveys to determine the presence of artifacts or historical sites, the BLM will need to conduct consultation with the local Native American groups. An ethnographic study may also be required. This would consist of hiring an ethnographer to conduct interviews, make phone calls, and determine if Native American traditional values are present in the project area.

17.9.8 Non-Governmental Organizations (NGOs)

There are several NGOs operating in New Mexico, including anti-mining NGOs. However, there are no anti-mining NGOs operating specifically in Luna County. Most of the anti-mining NGOs are focused on two issues (preventing development of new uranium mines and bonding requirements). These NGOs have had limited success in both these aspects in New Mexico.

In 2005, NGOs prevented the development of a uranium mine and mill complex on Navajo lands on New Mexico and Arizona. This prompted the Navajo Nation Council to pass the Dine Natural Resources Act, which basically prevents any future development of uranium resources on Navajo lands.

The NGOs also appear to have had some influence on New Mexico’s regulatory requirements specifically related to bonding. The two main NGOs pushing for this mining regulation reform are Westerners for Responsible Mining and Amigos Bravos. Westerners for Responsible Mining is a Washington-based group that focuses on corporate responsibility. Amigos Bravos started as a river conservation organization, and now has two offices, one each in Albuquerque and Taos. This group pays some attention to mining and mining regulatory reform. The regulatory changes these two groups have initiated are specifically limited to bonding within the State of New Mexico. Together, Westerners for Responsible Mining and Amigos Bravos have focused some of their attention on contamination in the Red River, in which they attributed to Molycorp’s Questa Mine.




There is also one local northwestern New Mexico NGO called Voices from the Earth that is specifically targeting molybdenum mining in the state as well as the Questa Mine. Voices from the Earth is based in Albuquerque as a part of the Southwest Research and Information Center. They have also worked closely with the Taos-based Amigos Bravos to develop a full reclamation and closure plan for the Questa Mine. The plan has been filed with the agencies, but not yet accepted by Molycorp.

Although there are no NGOs specifically targeting their attentions on the development of a new tungsten/molybdenum mine in southern New Mexico, the NGOs seem to work closely together and have had some success with their environmental campaigns. It is likely that a new development could expect some attention from Westerners for Responsible Mining and potentially from both Amigos Bravos and Voices from the Earth, as they are both very vocal about the Questa molybdenum mine.

17.9.9 Impacts

The greatest potential for risk in the current project design of the Victorio Project would come from ARD from any surface waste rock piles and the tailings impoundment. Identification of mitigation may be required as part of the development of the Victorio Project and would be further refined in the hydrological and geochemical evaluations, as well as during the NEPA process.

17.9.10 Social Impacts

Negative social impacts would be limited to those recreational users of the project area. With development of the project, access to the area would be limited. Recreational enthusiasts would have minimal access to the project and would have to move their activities to other locations. There might also be interest to local tribal groups.

Positive impacts are anticipated for the town of Deming, which is located within 20 miles of the project. The median household income for Deming is $20,081.00 (Census 2000). The median income for Luna County is $20,784.00 (Census 2000). Currently, in Luna County 27.2 percent (Census 2000) of the population is living below the poverty line and in Deming it is 28.5 percent (Census 2000). A new development, such as the Victorio Project, would improve the standard of living in Luna County and particularly in the town of Deming through the employment of individuals at pay scales that would be significantly greater than the median income.

Conclusions:




The following conclusions and recommendations were made in the hydrogeologic study and permit acquisition assessment:

• The water supply is estimated at about 675,000,000 to 2,000,000,000 gallons of water. • The estimated dewatering flow rates are predicted to range from 150 to 400 gallons

per minute (gpm). The extent of dewatering impacts is unknown. Wells 30 and 31, which are located close to the northwest area of the project site, are sufficiently close to the dewatered zone above the mine that they may be affected.

• Water will need to be purchased initially from adjacent water rights holders for mine construction, start-up, and the first few years of mine operations.

• Hydrogeologic investigations and testing will be needed to assess the hydrogeologic relationship between the mine area and the basin, and to demonstrate the lack of connection and impact.

• The project will require federal, state, and local environmental permits. • Enviroscientists recommends that six baseline studies be prepared as a part of the EIS

for the project: 1) a geochemical baseline study; 2) a hydrological baseline study; 3) a dewatering assessment; 4) a vegetation baseline study; 5) a wildlife baseline study; and 6) a cultural baseline study.

• The greatest potential for environmental risk in the current project design of the Victorio Project would come from ARD from any surface waste rock piles and the tailings impoundment.

• Negative social impacts would be limited to those recreational users of the project area. Positive social impact is associated with the economic benefits of employment at the mining operations.

• Enviroscientists expects that the project could draw some attention from NGOs such as Westerners for Responsible Mining and potentially from Amigos Bravos and Voices from the Earth.

• SRK reviewed the permit lists and found it to be complete, based on the assumptions stated in the assessment, with the exception of the possibility of the need for a waste water treatment plant (WWTP) permit. The need for a WWTP will be based on mine operations and can be assessed during the pre-feasibility study.

17.10 Preliminary Assessment

An indicative technical-economic analysis of the Victorio Molybdenum-Tungsten Project has been completed and is presented in this section. The economic model (Model), shown in Appendix B, is pre-tax and assumes 100% equity to depict the technical merits of the project. This Preliminary Assessment includes Inferred resources that have not been sufficiently drilled to have economic considerations applied to them. Until additional in-fill drilling is completed, and a final resource estimate is done, there is no certainty that Inferred resources will be converted to Measured and Indicated resources; therefore, there can be no certainty that this Preliminary Assessment will be realized. In-fill drilling by




Galway Resources was limited to one portion of the deposit, and this drilling did confirm the mineralization and resulted in the establishment of a portion of the deposit as Indicated Resources.

17.10.1 Model Inputs

Operating parameters and criteria described throughout this report have been incorporated into the Model. Basic Model inputs are summarized in Table 17.29.

Table 17.29: Model Parameters Model Parameter Technical Input

Block Cave Model Technical Input

LH Stope/R& P ModelGeneral Assumptions Pre-Production Period 5 yrs 3 yrs Mine Life 17 10 Operating Days per year 365 350Market Discount Rate (range) 6% 6% Mo Price Range $15.00/lb $20.00 – $15.00/lb WO3 Price $160/STU $194-$160/STURoyalty NSR – Mo (payfor) 90% 90% NSR – WO3 (APT payfor) 100% 100% NSR – Owner Obligation- lands (~2%; assumed buy-out) 0% 0%

The LoM production summary (Table 17.30) is based upon a (Measured, Indicated & Inferred) resource estimate of derived from the October 2007 resource statement

Table 17.30: Mineable Resources

Mining Option NSR Cut-off ($/ton)

Resource (kT)

Grade (%Mo) Grade (%WO3)

Block Cave $14.00 138,841 0.07 0.07Selective $29.50 28,543 0.13 0.12

The following assumptions are also used.




Table 17.31: LoM Production Summary Model Parameter Block Cave Model LH Stope/R& P

ModelResource Resource (kT) – Block Cave (incl 15% dilution) 138,250 Resource (kT) – Long- Hole Stoping 18,131 Resource (kT) – Room and Pillar 10,200 Development ore (kT) 591 212 Mo Grade - combined (%) 0.07 0.13 WO3 Grade - combined(%) 0.07 0.12 Contained Mo (k-lb) 187,038 72,589 Contained WO3 (k-lb) 205,334 66,563Production Mine Production Rate (T/yr) 9,125,000 2,975,000 Mill Recovery Mo (%) 85 85 Mill Recovery WO3 (%) 75 75 Mo Produced 158,982 72,589 WO3 Produced 154,000 66,563

17.10.2 Operating Costs

LoM Operating costs are summarized in Table 17.32.

Table 17.32: LoM Operating Cost Summary (US$000) Description Block Cave Model LH Stope/R& P

ModelMining 4.59 17.60Process 8.44 9.84G&A 0.75 1.50Total 13.78 28.94

Process operating cost assumptions are shown in Table 17.33.

The operating costs for the processing and APT plants are estimated at $9.18 and $7.76/t ore processed for the 8,500 and 25,000 tpd cases, respectively, as summarized in Table 17.33. These exclude the costs for tailings disposal which are discussed in Section 17.5.11.




Table 17.33: Estimated Processing Plant Operating Costs for Victorio Mountains

8,500 tpd Case 25,000 tpd Case

PROCESS OPERATING COST Annual Costs Cost/t Ore % of Total Annual Costs Cost/t Ore % of Total

Labor - Operations 3,596,903 1.21 13.2 4,197,500 0.46 5.9

Labor - Laboratories 403,479 0.14 1.5 547,500 0.06 0.8

Labor - Maintenance 1,219,750 0.41 4.5 1,916,250 0.21 2.7

Crushing/Grinding Liners/Media 2,510,603 0.84 9.2 7,700,588 0.84 10.9

Reagents/Chemicals 11,007,500 3.70 40.3 33,774,217 3.70 47.7

Power/Fuels 6,644,068 2.23 24.3 18,888,750 2.07 26.7

Maintenance Repair Parts/Supplies 1,874,250 0.63 6.9 3,650,000 0.40 5.2

Mobile Equipment 57,731 0.02 0.2 94,203 0.01 0.1

Totals $27,314,282 $9.18 100.0 $70,769,007 $7.76 100.0

A large suite of reagents/chemicals is required in the processing/APT circuits which accounts for about 40-48% of the total operating costs. The total plant labor forces for salaried and hourly employees are estimated at 66 and 88 personnel for the 8,500 and 25,000 tpd cases, respectively. The labor costs are based on current rates in New Mexico and include 35% for fringe burdens and an 8% allowance for overtime for hourly labor. A power cost of $0.055/kwhr was used for electricity

17.10.3 Capital Costs

LoM capital costs are summarized in Table 17.34. Freight and import duties are included in the unit cost. A 20% to 40% contingency factor is applied to the various capital cost estimates.

Working capital is estimated based upon 7 days cash, 30 days receivables and 60 days payables.

Table 17.34: LoM Capital Cost Summary (US$000) Description Block Cave Model LH Stope/R& P

ModelMining Equipment 162,266 94,220Mine Development 50,484 35,700Process Equipment 143,931 66,338Tailings 50,920 24,282Infrastructure 11,050 7,269Owner Costs 23685 14,607Total 442,337 242,416Working Capital 5,632 15,782

The initial capital costs for the process plant are estimated at $66 and $144 million for the 8,500 and 25,000 tpd cases, respectively, as summarized in Table 17.35. These capital costs include a 30% contingency. These costs exclude the costs for construction of the tailings dam




and costs for EPCM, spare parts, first fills, indirects, commissioning/startup and plant mobile equipment.

Table 17.35: Initial Process Plant Capital Costs ($millions)

Capital Cost Category 8,500 tpd

25,000 tpd

Total Direct Equipment $27,258 $59,554 Construction Labor 8,177 17,866 Total Installed Equipment $35,435 $77,420 Civil Works/Concrete 1,973 4,159 Structural Steel 2,203 4,645 Electrical/Instrumentation 4,075 8,748 Buildings/Laboratory 2,835 6,039 Paints/Sealants 269 581 Pipings/Valves/Couplings 2,876 6,147 Transportation 1,363 2,978 Total Capital Cost before Contingency $51,030 $110,717 Contingency @ 30% 15,309 33,215 Total Capital Cost with Contingency $66,338 $143,932

The capital costs for the process plant are based on the equipment lists presented in Section 17.5 Sustaining capital costs are estimated at $200,000 and 430,000 per year beginning in Year 4 of production.

Infrastructure capital costs estimated to be US$11.05 million over the LoM for the cave option and $7.27 million for the selective mining option. There are no sustaining capital costs associated with project infrastructure. Process related infrastructure is included in the process capital cost estimate.

Owner capital costs estimated to be US$23.69 million over the LoM for the cave option and $14.61 million for the selective mining option. There are no sustaining capital costs associated with owner cost capital. EPCM is estimated to be 12.5% of capital cost and is the largest portion of owners costs. Initial spares are estimated to be 5% of related capital cost.

17.11 Indicative Technical-Economic Results

Model results developed in Appendix B are summarized in Table 17.36. Based upon current assumptions presented in this section, pre-tax project economic analysis of both options results in a + 15% positive IRR and a $270M potential NPV (at 6% discount) for the block cave option and a + 26% positive IRR and a $95M potential NPV (6%) for the selective mining option.




Table 17.36: Indicative Economic Results (US$000) Description Block Cave Model LH Stope/R& P

ModelProduction Ore Mined (kT) 138,841 28,543 Mo Produced (klb) 158,982 61,701 WO3 Produced (klb) 154,000 49,922Operating Margin Gross Revenue Mo 2,384,730 972,349 WO3 1,232,002 409,633

Gross Revenue 3,616,732 Royalty

Roasting charges –Mo, incl. losses 248,012 101,124Transportation – Mo conc. 4,880 1,894WO3 process losses 4,928 1,639Transportation – WO3 in APT conc. 13,289 4,308

Royalty 271,109 108,965 Gross Income from Mining 3,34,623 1,273,017

US$/T-ore $24.10 $44.60US$/lb- Mo-eq $23.45 22.99

Operating Costs Production Mining 637,103 502,384 Process 1,171,506 280,942 G&A 104,131 42,814

Subtotal Production 1,912,740 826,141US$/T-ore 13.78 $28.94

US$/lb- Mo-eq $13.41 $14.92 Operating Margin (EBITDA)

US$/T-ore $10.32 $15.66US$/lb- Mo $10.04 $8.07

Capital Costs Mining 212,750 129,920 Process 194,851 90,620 Infrastructure 11,050 7,269 Owner 23685 14,607 Total Capital Costs 442,337 242,416Cash Flow 990,547 204,460

IRR 15% 26NPV6% 270,482 94,414

Economic model sensitivities are shown in tables 17.37 and 17.38 and graphed in Figures 17.7 and 17.8




Table 17.37: Bulk Mining Option Sensitivities

Block Cave mining Option Description -10% -5% Base 5% 10% NPV 6%,$000's

Metal Prices 125,311

197,896

270,482

343,068

415,653

Operating Costs 356,188

313,335

270,482

227,629

184,776

Capital Costs 302,107

286,295

270,482

254,670

238,857

Project IRR Metal Prices 10.8 13.1 15.2 17.3 19.2 Operating Costs 17.8 16.5 15.2 13.9 12.6 Capital Costs 16.9 16.0 15.2 14.5 13.8

Table 17.38: Selective Mining Option Sensitivities Longhole Stoping with backfill, Room and Pillar Description -10% -5% Base 5% 10% NPV 6%,$000's

Metal Prices 18,364

56,389

94,414

132,438

170,463

Operating Costs 132,482

113,448

94,414

75,379

56,345

Capital Costs 112,860

103,637

94,414

85,190

75,967

Project IRR Metal Prices 11.1 18.8 25.7 32.1 38.2 Operating Costs 31.8 28.8 25.7 22.4 18.9 Capital Costs 31.7 28.5 25.7 23.0 20.7




Figure 17.17: Bulk Mining Option Sensitivities

Block Cave Option

0

5

10

15

20

25

-10% -5% Base 5% 10%

% change

IRR

Metal Prices

Operating Costs

Capital Costs

Figure 17.18: Selective Mining Option Sensitivities

LH and RP Option

0

5

10

15

20

25

30

35

40

45

-10% -5% Base 5% 10%

% Change

IRR

Metal Prices

Operating Costs

Capital Costs




18.0 INTERPRETATION AND CONCLUSIONS (Item 21)

The Victorio Molybdenum-Tungsten property is an advanced stage exploration property, and scoping studies completed indicate the potential for development. It had undergone extensive exploration drilling and preliminary metallurgical testing during the period of 1969 through 1983, including the activities of two major minerals exploration companies; Humble/Exxon, and Gulf Mineral Resources. Total historical expenditures on the property are estimated at between $4.0 and $5.0 million. The current resource estimate by SRK compares well with the historical estimate by Gulf Minerals in 1983 (internal Company documentation). Galway drilling has confirmed molybdenum-tungsten mineralization and provide added confidence in the resource model. Current reported insitu Indicated resources are 66.5 million tons grading 0.099% Mo and 0.010% WO3, with an additional Inferred resource of 41.9 million tons grading 0.088% Mo and 0.091% WO3 (based on a $25 per ton dollar cut-off calculated from contained Mo% valued at $15.00/lb combined with WO3% valued at $8.00/lb) – the larger resource used for a conceptual block cave mining option in the scoping study.

A conceptual mine plan has indicated a potentially mineable resource for both block cave bulk mining of the entire deposit and selective mining of a portion of the deposit by a combination of longhole stoping and paste backfill and room and pillar without backfill. The conceptual mine plan envisions decline access and conveyor haulage from a block cave mining plan for a 17 year mine life or a 10 year mine life for the selective option.

The property has historically undergone preliminary first-pass metallurgical research, with encouraging recoveries of 75% and 85% predicted, respectively, for tungsten and molybdenum. While much additional metallurgical work is necessary to confirm and optimize the process recoveries of Mo an WO3, the historical information is used as a basis for standard processing by milling and flotation, with the envisaged production of a saleable Mo concentrate and the production onsite of tungsten as APT.

This Preliminary Assessment has be conducted as a study of the potential mineablility of the project, utilizing industry standard criteria for Scoping level studies at ±35 to 40% on costing estimates. The results indicate the two underground mining options offer the potential for positive economics; with a low-cost Block Cave bulk mining method that could produce 159 M lb of Mo in concentrate and 7.7 M STU of WO3 in APT concentrate over a 17 year mine life. A selective mining method of Longhole Stoping with paste back-fill combined with Room and Pillar without back fill could produce 62 M lb Mo in concentrate and 2.5 M STU of WO3 in APT concentrate over a 10 year mine life. A




scoping study analysis of both options results in a + 15% positive IRR and a $270M potential NPV (at 6% discount) for the block cave option and a + 26% positive IRR and a $95M potential NPV for the selective mining option. This Preliminary Assessment includes Inferred resources that have not been sufficiently drilled to have economic considerations applied to them. Until additional planned drilling is completed, and a final resource estimate is done, there is no certainty that Inferred resources will be converted to Measured or Indicated resources; therefore, there can be no certainty that this Preliminary Assessment will be realized.

18.1 Opportunity

18.1.1 Resources

The resource estimate conducted by SRK follows current industry standards and resource classification is in accordance to CIM guidelines. There are many variables in that resource estimation process that are risks in achieving a desirable resource estimate, and include the variability of assay grades. Replication of historical drillhole average grades, distribution of grades, and variations from nearby drillholes and the existing resource model, with the addition of new in-fill drillholes will aid in the confidence level of resource estimation. Infill-drilling has the potential to convert Inferred resources to Indicated resource classification; however, there is no guarantee that an Indicated resource of sufficient size to be of economic interest to Galway can be achieved with additional drilling. Incremental resource expansion might be possible on the flank of the deposit, particularly the east and southeast side where drill spacing is the widest.

18.1.2 Mining and Processing

Mining and processing costs are estimated here based on the best available project and industry knowledge, assumptions, and comparables; however there are is much room for additional project specific study of mining options and costs, and processing optimizations and related costs, such that these parameters can be a significant opportunity for improving the economics of the Victorio Project.

18.2 Project Risks

18.2.1 Commodity Price Fluctuation

The current price for tungsten products, typically APT, is at record highs for the last three decades, and is currently at US$250 to $260/STU ($12.5 to $13.0/lb) (Metal Bulletin) - nearly triple the commodity price of the early 1980’s. Molybdenum prices are also at




historically high levels for the past 25 years, at over $30.00/lb. Molybdenum and tungsten had been relatively dead commodities from the 1980’s until 2005; and the current Mo price of over $30.00/lb demonstrates the need to move the project forward rapidly to take advantage of the high commodity price cycles. Long term stability of commodity prices and availability of supplies to meet worldwide demands are risk factors for the Victorio Molybdenum-Tungsten Property.

Commodity prices used for this study are based on industry averages for similar studies, and should be further examined by purchase of, or the initiation of an independent market analysis for tungsten and molybdenum. Commodity price projections used show declining prices from $31/lb of Mo in 2009 to $15/lb in 2013, and the time lag of starting production at Victorio is such that the current high Mo prices are not fully realized by either mining option. Continued Mo prices above $30/lb for the next few years will have a positive effect on the economics of Victorio.

18.2.2 Infrastructure

Infrastructure for Victorio is excellent, in that power and water are available to purchase, and both highway and rail access are located within 2 miles of the project to facilitate transport and delivery of construction equipment and supplies. Infrastructure is not a project risk.

18.2.3 Rock Mechanics

A mining option of block caving, and/or an option of selective mining without back-fill will require a better understanding of the rock mechanics issues for the Victorio deposit. A combined geological/geotechnical drilling program, with some additional dedicated geotechnical drilling and a comprehensive structural geological model that will result in a comprehensive geotechnical model is recommended. This evaluation program to a pre-feasibility level is estimated at a cost of $240 000 – 275 000, including a caveability and fragmentation assessment.

18.2.4 Mining Methods

Until a geotechnical study can be completed to further assess the amenability of the deposit to block caving, the costs associated with block caving in this scoping study are a moderate risk factor. Rock mechanics criteria will also have a significant effect on the amenability of the deposit to selective mining (room and pillar or cut and fill) without back-fill. This risk can be further defined and perhaps minimized with the rock mechanics study recommended.




18.2.5 Metallurgical Characteristics and processing costs

The Victorio project is sensitive to process operating costs; and the current level of understanding of the process costs and optimization of process recoveries in a project risk. That risk can be mitigated by conducting a pre-feasibility/feasibility level study and complete metallurgical work-up for Victorio mineralization types. A complete metallurgical testing program is estimated to cost approximately $150,000 for testing, and $250,000 to develop the process design costing.

18.2.6 Environmental and Permitting

Preliminary hydrogeological study has indicated that minimal water will acquired through de-watering the mine, therefore, water will need to be purchased for mine construction. At least two water wells in the area are located close to the northwest area of the project site, are sufficiently close to the likely dewatered zone above the mine that they may be affected. The extent of dewatering impacts is unknown without further study. Water will need to be purchased initially from adjacent water rights holders for mine construction, start-up, and the first few years of mine operations.

Permits to conduct operations are required and can be an indeterminate amount of time, depending on the state and federal agencies involved; however, the process is defined and should be initiated.

The greatest potential for environmental risk in the current conceptual project design at the Victorio Project would come from acid rock drainage (ARD) from any surface waste rock piles and the tailings impoundment.

Negative social impacts would be limited to those recreational users of the project area. Positive social impact is associated with the economic benefits of employment at the mining operations and to the nearby town of Deming. The project could draw some attention from NGOs.




19.0 RECOMMENDATIONS (Item 22)

This scoping study’s economic analysis indicates a positive cash flow and IRR, and suggests that the Victorio Project should be taken the next step to pre-feasibility/feasibility level study to better quantify all assumptions and inputs to the current economic model. The specific areas to be addressed as part of a pre-feasibility study are listed below and the proposed budget of $3.4 million to facilitate the recommended work program is shown in Section 19.9.

19.1 Drilling

In-fill drilling will be required to convert a substantial portion of the Inferred resources to Indicated resource classification. This is required as only Indicated or Measured resources can be converted to reserves in a pre-feasibility study. Initially, the in-fill drilling can be done as surface core holes to test continuity of the deposit as was done with the confirmatory drilling by Galway; later, in-fill drilling can be done as closer spaced underground core drilling, once underground access is available.

A program of surface drilling of approximately 15 holes will adequately test the resource with in-fill spacing sufficient to address the potential conversion of Inferred to Indicated classification. An estimated total expenditure off $2.14M would complete the 15 hole drill program, inclusive of surveying and assaying.

19.2 Resource Estimation Update

The resource model should be updated with new drilling to confirm grade, continuity of grade, and variations from the previous model.

19.3 Geotechnical Drilling and Analysis

A program of dedicated geotechnical drill holes in required to assess the caveability of the deposit. A program consisting of additional dedicated geotechnical core holes is recommended, followed by a detailed structural/geotechnical analysis; estimated cost of $275,000.

19.4 Mining Options and Cost Analysis

Detailed mining options should be examined including other selective mining options, in trade-off analysis to determine the best combination of mining methods that will provide the lowest costs and the maximum extraction. This should be done after in-fill drilling for




resource conversion and after definitive geotechnical studies have been completed. The estimated cost is $100,000.

19.5 Metallurgical Testing

A complete metallurgical characterization of the deposit processing criteria is recommended, to include optimization of process flotation recovery circuits for molybdenum, optimization of recoveries for tungsten and an accurate assessment of associated capital and operating costs. Assessment of producing a higher grade tungsten concentrate for direct sale should be part of the program as a trade-off study against APT process from tungsten concentrate. The programs should be devised by a consultant metallurgist in conjunction with Galway staff and a metallurgical research laboratory such as Hazen. Galway has initiated a test program, with an initial objective of producing a higher grade tungsten concentrate. SRK understand the work will continue toward the development of a final process flowsheet. The goal is sufficient information for a minimum pre-feasibility level of costing. A preliminary estimate for such a program is estimated at $150,000.

19.6 Processing Options/ Process Flow Sheet / Process Design

As part of a pre-feasibility/feasibility study; development of the process flow chart and the related capital and operating costs should be done at an estimated cost of $200,000.

19.7 Infrastructure

Infrastructure is well established for the project, with the main component being the cost and routing of a power line to the project, and sourcing water supply. Infrastructure design costing for non-site infrastructure items, is estimated at $50,000.

19.8 Environmental and Permitting

Hydrogeologic investigations and testing will be needed to assess the hydrogeologic relationship between the mine area and the basin, and to demonstrate the lack of connection and impact. A detailed hydrogeological study is recommended as part of a pre-feasibility/feasibility study.

The project will require several federal, state, and local environmental permits, and the timing of those permits is uncertain; the permitting process should be initiated as soon as practical when Galway has a permitting strategy in place. Enviroscientists recommends that six baseline studies be prepared as a part of the EIS for the project: 1) a geochemical




baseline study; 2) a hydrological baseline study; 3) a dewatering assessment; 4) a vegetation baseline study; 5) a wildlife baseline study; and 6) a cultural baseline study.

19.9 Economic Analysis and Pre-Feasibility

Completing the above studies would allow for pre-feasibility level engineering analysis and re-evaluation of the technical economic model

19.10 Proposed Budget

Phase I program to complete the above recommended studies is presented in table 19.8.1; and would take the project to completion of a Pre-Feasibility study

Table 19.8.1: Phase I Recommendations and Estimated Costs

Phase I Months Cost

In-fill Drilling (15 holes to 1900 ft/ea @ $75/ft all in cost)

10-12 $2,137,500

Resource estimation 1 20,000

Geotechnical Drilling/Analysis 4 275,000

Mine design/costing 2 100,000

Metallurgical testing program 8-12 150,000

Process design/costing (including tailings) 2 200,000

Infrastructure design/costing 1 50,000

Environmental baseline studies 5-9 200,000

EIS / Permitting 10-14 200,000

Pre-Feasibility Report 2 50,000

Total cost of Phase I Pre-Feasibility 10-12 $3,382,500

Phase II Cost Estimate A Phase II program would be completion of full feasibility study level engineering and design studies, particularly the mine design and process plant design and related facilities,




complete the environmental/permitting process and the feasibility report, based on the results of Phase I. Phase II costs will be an additional US$1,500,000.

The total estimated costs of the Phase I and Phase II programs for the purpose of this report are estimated at US$4,882,500.

Timing of Proposed Work

The estimated time frame to complete the Phase I work, and complete a pre-feasibility study, is 10 to 12 months, and Phase II work could take an additional 12 months. Environmental baseline studies, an EIS, and permitting are critical path items, at this stage, for the project development. The critical timing for completion of the pre-feasibility study are primarily the metallurgical test work, an secondarily the in-fill drilling program. An option for Galway is to proceed with mine evaluation studies, metallurgical testing, hydrogeological studies, and permitting, all run in parallel, with the goal of completing a pre-feasibility study in 10-12 months, while permitting is ongoing, and completion of a full feasibility study in an additional 12 months time period; an estimated 24 months total to completion of full feasibility and permitting. Depending upon the outcome of a pre-feasibility study and the progress on permitting, the decision to proceed with initial site development could be prior to completion of full feasibility.




20.0 REFERENCES (Item 23)

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2 Bellamy, J.R., 1976, Summary Drilling Report on the Victorio Mountains

Property, Luna County, New Mexico: private internal report prepared by Bethlehem Copper Corp. 5 p.

3 Corbitt, L.L., and Woodward, L. A., 1970, Thrust faults of the Florida Mountains,

New Mexico, and their regional tectonic significance, in Tyrone-Big Hatchet Mountains-Florida Mountains region: New Mex. Geol. Soc. 21st Field Conf. Guidebook, p.69-74.

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5 Donahue, K.M., 2002, Geochemistry, Geology and Geotechnology of the Victorio Mining District, Luna County, New Mexico; Linking Skarn and porphyry systems to carbonate-hosted lead-zinc replacement deposits; New Mexico Bureaus of Mines and Mineral Resources Open-File Report 471, 186p.

6 Donegan, B., 2006, Pers. Comm. to S. W. More, February 2006.

7 Dunbar, N.W., and McLemore, V.T., 2000, Preliminary mineralogy of the Victorio

District, New Mexico, New Mexico Geology, v.22, no.1, p.12-13.

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New Mexico: Bull. 72, New Mex. Bur. Mines Minl. Rsces. Pp.69-93.

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1->38, K2, A1->A4.




12 Gulf Minerals, 1982, Victorio Mountain Project: Summary of Geophysical Work Performed: private internal reports prepared by Gulf Minerals Resources, Inc. 63 p. + plates.

13 Hahman, W. R., 1991, Report of Investigations, Victorio Mining District, Luna County, NM: private report prepared for Santa Fe Pacific Mining, Inc., 38 p.

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Preliminary Simulation of Ground-Water in the Mimbres Basin, Southwestern New Mexico, U.S. Geological Survey, Water Resources Report 94-4011, Prepared in Cooperation with the New Mexico State Engineer Office, Albuquerque, New Mexico, 90 pp.

15 Heidrick, T.L, 1974, Geochemistry Supplement – Victorio Mountain Report dated

09/9/74: internal report prepared for Rosario Resources Exploration. p.4.

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17 Heidrick, T.L, 1983b, Heidrick, T.L., 1979, Victorio MTS. Project Luna Co., New

Mexico Statement of Geologic Overview: internal memo prepared by Gulf Minerals, 3 p. + plates.

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drilling in the Victorio Mountains, Luna County, New Mexico: private memo prepared by Gulf Mineral Resources, Inc. 5 p.

19 Hendrickson, R.W., 1977, Evaluation of the Mine Hill Property, Victorio Mining

District, Luna County, New Mexico: private report prepared for Gage Mining Company, 29 p.

20 Hodgson, S. A., 2000, Structural geology and Laramide tectonics of the Little

Hatchet Mountains, southwestern New Mexico, in Lawton, T.F., McMillan, N.J. and McLemore, V.T., eds., Southwest Passage: New Mex. Geol. Soc. Guidebook 51, p.109-117.

21 Holser, W.T., 1953, Beryllium minerals in the Victorio Mountains, Luna County,

New Mexico: Amer. Mineralogist, v.38, p. 599-611.

22 Klein, D. P, 1987, Aeromagnetic map of the Silver City 1º by 2º quadrangle, New Mexico and Arizona: U.S. Geol. Survey, Misc. Invstgns. Map I-1310, scale: 1:250,000.

23 Kuhn, Paul W., 1988, Victorio Mountain Summary Report: private internal report

prepared for Comino American Resources, Inc: 26 p. + plates + appendices.




24 Maciolek, J.B., 1989, Interpretation of geophysical data for Victorio Mountains: private report prepared for Santa Fe Pacific Mining, Inc, 40 p. + plates.

25 Mack, G. H., and Clemons, R.E., 1988, Structural and stratigraphic evidence for

the Laramide (early Tertiary) Burro uplift in southwestern New Mexico: in Mack, G.H., Lawton, T.F., and Lucas, S.G., eds. Cretaceous and Laramide Tectonic Evolution of Southwestern New Mexico: New Mex. Geol. Soc. Guidebook 39, p.59-66.

26 Milne, D., Hadjigeorgiou, J. and Pakalnis, R.; Rock mass Characterization for

Underground hard Rock Mines – Q System described; [http://www.nd.edu/~cneal/uwa/RockMassChar.pdf]

27 McIntosh, W.C., and Bryan, C., 2000, Chronology and geochemistry of the Boot

Heel Volcanic Field, New Mexico: in Lawton, T.F., McMillan, N.J. and McLemore, V.T., eds., Southwest Passage: New Mex. Geol. Soc. Guidebook 51, p. 157-174.

28 McLemore, V. T., 1998, Insights into origin of carbonate-hosted Ag and Pb-Zn

replacement deposits in the Black Range, Sierra and Grant Counties, New Mexico (abs.): New Mexico Geology, v. 20, no.2, p.49.

29 McLemore, V. T., 2001, Silver and gold in New Mexico: New. Mex. Bur. Geol.

and Minl. Rscs., Resource Map 21, 60 p.

30 McLemore, V. T., Lueth, V.W., 1996, Lead-Zinc deposits in carbonate rocks in New Mexico: Soc. Econ. Geols, Spec. Pubn, no 4, p.264-276.

31 McLemore, V. T., Donahue, K., Breese, M. L., Arbuckel, J., Jones, G., 2001,

Mineral-resources assessment of Luna County, New Mexico: New Mex. Bur. Geol. and Minl. Rsces. Open File Rpt. 459, 153 p.

32 McLemore, V.T., Dunbar, N., Heizler, M.T., Donahue, K., 2000, Geology and

mineral deposits of the Victorio mining district, Luna County, New Mexico – Preliminary observations: in Lawton, T.F., McMillian, N.J., and McLemore, V.T., eds., Southwest Passage, New Mec. Geol. Soc., Guidebook 51. p. 267-276.

33 McKelvey, G. E., Kuhn, P.W., and Leinhart, J.B., 1988, Mineral Potential of the

Victorio Mountains, Luna County, New Mexico: private internal report prepared by Cominco American Resources, Inc. 59 p.

34 Speer, W. E., 1985, Mineralized Paleokarst in New Mexico: the Mississippi

Valley-Type “Rio Grande District”: private report p.24 + memo 6 p.




35 SRK Consulting Inc., 2006, National Instrument 43-101 Technical Report, Victorio Mountains Advanced Exploration, Molybdenum-Tungsten Project, Luna County, New Mexico, June 6.

36 SRK Consulting, Inc., 2007, National Instrument 43-101 Technical Report, on

Resources, Victorio Mountains Advanced Exploration, Molybdenum-Tungsten Project, Luna County, New Mexico, February 28.

37 Thorman, C.H., and Drewes, H., 1980, Geologic map of the Victorio Mountains,

New Mexico: U.S. Geol. Surv. Misc. Field Map, MF 1175, scale 1:24,000.

38 Water Management Consultants, Inc., 2007: Galway Resources Victorio Project, Preliminary Hydrogeologic Impact Assessment, July.

39 Wendland, D, 1993, Summary report of Echo Bay Exploration drilling results:

priv. letter to B. Donegan, Donegan Resources, 5 p.

40 Wessel, G.R., 1989, Memo with description of shallow soil sample drilling: private internal report by Santa Fe Pacific Mining Inc., 6p.

41 Wessel, G.R., and Maciolek, J., 1989a, An evaluation of the Mine Hill Area,

Victorio Mountains, Luna County, New Mexico: Potential for undiscovered metallic mineralization; private report prepared for Santa Fe Pacific Mining, Inc., pp. 1-32.

42 Wessel, G.R., and Maciolek, J., 1989b, An Evaluation of the Mine Hill Area,

Victorio Mountains, Luna County, New Mexico: private report prepared for Santa Fe Pacific Mining, Inc., pp. 33-52.

43 Wilkins, J.L., 1991, Report on the Zinc Potential at the Victorio Mo-W Deposit,

Luna County, New Mexico: private report prepared for Santa Fe Pacific Mining, Inc: 4 p.

44 Willard, P. D., 1982, Molybdenum in Scheelite at the Victorio Mountains Project,

Luna County, New Mexico: private internal report prepared by Gulf Minerals Resources, Inc. 11 p.

45 Wynn, J.C., 1981, Complete Bouguer gravity anomaly map of the Silver City 1º

by 2º quadrangle, New Mexico-Arizona: U.S. Geol. Surv. Miscellaneous Investigations. Map I-1310-C, scale 1:250,000.

46 Hazen Research, Inc. “Victorio Mountains Project – Molybdenum and Tungsten

Recovery Studies,” prepared for Gulf Mineral Resources Company, December 2, 1982.




47 Hazen Research, Inc. “Metallurgical Summary Hazen Project 10614,” letter report prepared for Galway Resources dated January 4, 2008.




21.0 Certificates of Author

Allan V. Moran Principal Geologist

SRK Consulting (U.S.) Inc. 3275 W. Ina Rd, Suite 240

Tucson, Arizona, U.S.A. 85741 Phone: 520-544-3688

Email: [email protected]

CERTIFICATE of AUTHOR

1. I, Allan V. Moran, a Registered Geologist and a Certified Professional Geologist, do hereby certify that:

2. I am currently employed as a consulting geologist to the mining and mineral exploration industry, as Principal Geologist with SRK Consulting (U.S.) Inc, with an office address of 3275 W. Ina Rd., Tucson, Arizona, USA, 85741.

3. I graduated with a Bachelors of Science Degree in Geological Engineering from the Colorado School of Mines, Golden, Colorado, USA; May 1970.

4. I am a Registered Geologist in the State of Oregon, USA, # G-313, and have been since 1978.

5. I am a Certified Professional Geologist through membership in the American Institute of Professional Geologists, CPG - 09565, and have been since 1995.

6. I have been employed as a geologist in the mining and mineral exploration business, continuously, for the past 35 years, since my graduation from university.

7. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. The Technical Report is based upon my personal review of the information provided by the issuer. My relevant experience for the purpose of the Technical Report is:

8. Vice President and U.S. Exploration Manager for Independence Mining Company, Reno, Nevada, 1990-1993

9. Manager, Exploration North America for Cameco Gold Inc., 1988-2002

10. Exploration Geologist in Nevada for Freeport McMoRan Gold, 1980-1988




11. Exploration Geologist involved with tungsten exploration in Idaho and Montana, 1971-1972

12. Mine Geologist for Molycorp, Questa, New Mexico, 1973-1975

13. I am responsible for the content, compilation, and editing of all sections of the technical report titled “NI 43-101 Preliminary Assessment, Victorio Molybdenum-Tungsten Project, Luna County, New Mexico”, and dated April 15, 2008 (the “Technical Report”) relating to the Victorio Molybdenum-Tungsten Project. I have personally visited the Victorio Molybdenum-Tungsten Project in the field on March 30, 2006.

14. I have not had prior involvement with the property that is the subject of the Technical Report, other than previous Technical reports dated February 28, 2007 and June 6, 2006.

15. As of the date of this certificate, to the best of my knowledge, information and belief, the Technical Report contains all the scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

16. I am independent of the issuer applying all of the tests in Item 1.4 of National Instrument 43-101.

17. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that instrument and form.

18. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them, including electronic publication in the public company files on their websites accessible to the public, of the Technical Report.

Dated this April 15, 2008 in Tucson, Arizona,

Signature of Qualified Person

Allan V. Moran

Printed Name of Qualified Person




Sealed




CERTIFICATE of AUTHOR

1. I, Bart Stryhas, CPG., do hereby certify that:

2. I am Principal Resource Geologist with SRK Consulting (US), Inc.,7175 W. Jefferson Avenue, Lakewood, CO USA 80235

3. I graduated with a Doctorate degree in Geology from the Washington State University in 1988.

4. I am a member of the American Institute of Professional Geologists.

5. I have worked as a Geologist for a total of 20 years since my graduation in minerals exploration, mine geology, project development and resource estimation. I have conducted resource estimations since 1988 and have been involved in technical reports since 2004.

6. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101.

7. I too am responsible for the Resource Section of the technical report “NI 43-101 Preliminary Assessment, Victorio Molybdenum-Tungsten Project, Luna County, New Mexico”, and dated April 15, 2008 (the “Technical Report”) relating to the Victorio Molybdenum-Tungsten Project .

8. I have not had prior involvement with the properties that are the subject of the Technical Report, other than a prior NI 43-101 Technical Report dated February 28, 2007.

9. I am not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose with makes the Technical Report misleading.

10. I am independent of the issuer applying all of the tests in section 1.4 of National Instrument 43-101.

11. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been prepared in the compliance with that instrument and form.

12. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report.




Dated this April 15, 2008

“signed”

Signature of Qualified Person

Bart Stryhas, CPG

“sealed”




APPENDIX A Glossary of Terms and Acronyms




21.1.1 Mineral Resources

The mineral resources and mineral reserves have been classified according to the “CIM Standards on Mineral Resources and Reserves: Definitions and Guidelines” (November 2005). Accordingly, the Resources have been classified as Measured, Indicated or Inferred, the Reserves have been classified as Proven, and Probable based on the Measured and Indicated Resources as defined below.

A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.

An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes.

An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough for geological and grade continuity to be reasonably assumed.

A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough to confirm both geological and grade continuity.

21.1.2 Mineral Reserves (there are not current reserves at Victorio)

A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A




Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.

A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some circumstances a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.

A ‘Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.

21.1.3 Units of Measure The following list of conversions is provided for the convenience of readers that are more familiar with the Metric system.

Linear Measure

1 foot (ft) = 0.3048 meters 1 yard (yd) = 3.0ft = 0.9144 meters 1 mile (mi) = 5,280ft = 1.6093 kilometers

Area Measure

1 acre = 0.4047 hectares 1 square mile = 640 acres = 259 hectares

Weight

1 short ton (T) = 2000 pounds (lb) = 0.9072 metric tons (tonnes(t)) 1 pound (lb) = 16 ounces (oz) = 0.4536 kilograms (kg) = 14.583 troy ounces

Analytical Values

1.0 gram/tonne = 1.0 ppm = 0.02917 oz Troy/short ton = 0.03215 oz Troy/tonne 1.0 oz Troy/tonne (oz/t) = 31.1035 grams/tonne (g/t) 1.0 oz Troy/short ton (oz/T) = 34.2857 grams/tonne (g/t) 1.0 Short Ton Unit (STU) = 1.0 short ton of ore containing 1% metal, which is equal

to 20 pounds (about 9.072 kg) tungsten (W). Tungsten can be priced in the U.S. as $ per STU.

1.0 Metric Ton Unit (MTU) = 1.0 metric tonne of ore containing 1% metal, which is equal to 10 kilograms of WO3 or 7.93 kilograms of tungsten (W). Internationally tungsten can be prices as $ per MTU.




1.0% MoS2 = 0.5994% Mo 1.0% Mo = 1.6666% MoS2 1.0% WO3 = 0.7928% W All dollar amounts used in this report are US$.

21.1.4 Acronyms Frequently used acronyms are listed below:

AAS Atomic absorption spectroscopy, an analytical procedure (cf: AA).

ICP Inductively-coupled plasma emission spectroscopy, an analytical procedure

QA/QC Quality Assurance/Quality Control; procedures used to assure accuracy and consistency of analytical results

APT Ammonium paratungstate which is a chemical tungsten compound that is often the end product of mineral processing of tungsten ores - a tungsten product that is sold.

STU Short-ton-unit of tungsten product; as defined under analytical values above.

21.1.5 Glossary of Mining, Geological and Other Technical Terms Beryl: A complex beryllium aluminosilicate mineral with the formula Be3Al2Si6O18 (3BeO. Al2O3.6SiO2). A primary ore mineral of beryllium.

Bolson: A term applied in the desert regions of the southwest U.S. to an extensive, flat, saucer-shaped, alluvium filled basin, almost surrounded by mountains from which surface drainage has no surface outlet and often terminates in a playa or dry lake.

Helvite: A manganiferous beryllium tektosilicate mineral with the formula Mn4(BeSiO4)3S. A minor ore mineral of beryllium.

Greisen: A granitic rock composed of quartz, mica, and topaz, with minor tourmaline, rutile, cassiterite (a tin mineral), and wolframite (a tungsten mineral). Greisenization is a hydrothermal alteration process in which feldspar and muscovite are converted to an aggregate of quartz, topaz, tourmaline, and lepidolite.

Victorio Molybdenum-Tungsten Project and Victorio Project: Used synonymously and interchangeably in this report for the unpatented mining claims at Middle Hills that comprise the property land position and the immediately adjacent geological features, both of which encompass the Victorio Molybdenum-Tungsten deposit as defined by historical drilling.




Lamping: A term meaning the use of an ultraviolet light (lamp) to identify the presence of fluorescent minerals such as scheelite, a tungsten bearing mineral.

Molybdenite: A metallic bluish-gray mineral of molybdenum and sulfur with the composition MoS2. The primary ore mineral of molybdenum.

Powellite: A calcium and molybdenum bearing mineral with the composition CaMoO4, a common associate of scheelite and molybdenite. It commonly fluoresces yellow to pale yellow.

“Reserves”: In this document “reserves” is a historical term, as used at the time, for drill defined mineralization. There is insufficient information available to reconcile this terminology, as used in this report, with current CIM categories of resources/reserves. Therefore, the term should not be relied upon, and is not considered a current or NI 43-101 compliant definition of mineralization.

Scheelite: A calcium and tungsten bearing mineral with the composition CaWO4, which is a common tungsten ore mineral. It typically fluoresces cold blue-white under an ultraviolet light, and slightly yellowish with molybdenum substitution.

Skarn: An old Swedish mining term for silicate gangue minerals (amphibole, pyroxene, garnet, etc.) of certain iron-ore and sulfide deposits that have replaced limestone and dolomite carbonate rocks, typically involving the introduction (metasomatic replacement) of large amounts of silica, aluminum, iron, and magnesium.

Tactite: A rock of complex mineralogical composition formed by contact metamorphism (with an intrusive), and metasomatism of carbonate rocks. In practical use it can be synonymous with “skarn”.

Wolframite: (Fe,Mn)WO4, an intermediate mineral member of the huebnerite-ferberite series of iron and manganese tungsten minerals; an ore mineral of tungsten.

Skarn: An old Swedish mining term for silicate gangue minerals (amphibole, pyroxene, garnet, etc.) of certain iron-ore and sulfide deposits that have replaced limestone and dolomite carbonate rocks, typically involving the introduction (metasomatic replacement) of large amounts of silica, aluminum, iron, and magnesium.

Tactite: A rock of complex mineralogical composition formed by contact metamorphism (with an intrusive), and metasomatism of carbonate rocks. In practical use it can be synonymous with “skarn”.




Wolframite: (Fe,Mn)WO4, an intermediate mineral member of the huebnerite-ferberite series of iron and manganese tungsten minerals; an ore mineral of tungsten.

21.1.6 Commonly Used Abbreviations Abbreviation Unit or Term AA atomic absorption ANFO ammonium nitrate fuel oil Ag silver Au gold °C degrees Centigrade CCD counter-current decantation CIL carbon-in-leach CoG Cut-off-Grade cfm cubic feet per minute ConfC confidence code CRec core recovery CSS closed-side setting CTW calculated true width ° degree (degrees) dia. diameter EIS Environmental Impact Statement FA fire assay ft foot (feet) ft2 square foot (feet) ft3 cubic foot (feet) gal gallon gpm gallons per minute HDPE Height Density Polyethylene hp horsepower HTW horizontal true width ICP induced couple plasma ID2 inverse-distance squared ID3 inverse-distance cubed kA kiloamperes kT thousand short tons kTpd thousand short tons per day kTpy thousand short tons per year kV kilovolt kW kilowatt kWh kilowatt-hour kWh/t kilowatt-hour per metric tonne lb pound LHD Long-Haul Dump truck LLDDP Linear Low Density Polyethylene Plastic LOI Loss On Ignition LoM Life-of-Mine Mt million tonnes MTW measured true width MW million watts m.y. million years NGO non-governmental organization NI 43-101 Canadian National Instrument 43-101 NPV Net Present Value OSC Ontario Securities Commission oz troy ounce % percent ppb parts per billion ppm parts per million




QA/QC Quality Assurance/Quality Control RC rotary circulation drilling RoM Run-of-Mine RQD Rock Quality Description SEC U.S. Securities & Exchange Commission s second SG specific gravity SPT standard penetration testing st (T) short ton (2,000 pounds) Tph tons per hour Tpd tons per day Tpy tons per year TSF tailings storage facility TSP total suspended particulates µ micron or microns V volts VFD variable frequency drive W watt XRD x-ray diffraction yr year




APPENDIX B Preliminary Assessment Economic Model

printed:3/31/2008-10:44 AM

Exhibit B.1: Indicative Economics 22 Feb 2008COMPANY Galway Resources Ltd.

BUSINESS UNIT Victorio ProjectOPERATION LH + Room&Pillar

Total 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031Units or Avg. -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

PRODUCTION SUMMARYOre Mined kst 28,543 0 0 0 172 1,540 2,975 2,975 2,975 2,975 2,975 2,975 2,975 2,975 3,031 0 0 0 0 0 0 0 0 0 0 0Ore Milled kst 28,543 0 0 0 0 1,712 2,975 2,975 2,975 2,975 2,975 2,975 2,975 2,975 3,031 0 0 0 0 0 0 0 0 0 0 0Backfill (35%) kst 9,990 0 0 0 0 599 1,041 1,041 1,041 1,041 1,041 1,041 1,041 1,041 1,061 0 0 0 0 0 0 0 0 0 0 0Mo Concentrate dst 57,130 0 0 0 0 4,130 7,572 7,186 6,741 5,756 5,706 4,661 4,959 5,005 5,415 0 0 0 0 0 0 0 0 0 0 0Wo3 Concentrate stu 2,496,119 0 0 0 0 146,433 263,760 261,411 263,891 295,575 265,296 306,784 269,666 238,954 184,350 0 0 0 0 0 0 0 0 0 0 0Mo Produced klb 61,701 0 0 0 0 4,460 8,178 7,761 7,281 6,216 6,162 5,034 5,355 5,405 5,849 0 0 0 0 0 0 0 0 0 0 0Wo3 Produced klb 49,922 0 0 0 0 2,929 5,275 5,228 5,278 5,912 5,306 6,136 5,393 4,779 3,687 0 0 0 0 0 0 0 0 0 0 0

GROSS INCOME FROM MININGMARKET Factor: 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.000 0.000

Moly $/lb 18.25 31.00 30.00 20.00 18.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00Tungsten APT $/stu 181.92 268.00 261.00 194.00 180.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00

NSR-MOLYPayable Moly

Moly in Concentrate klb 61,701 0 0 0 0 4,460 8,178 7,761 7,281 6,216 6,162 5,034 5,355 5,405 5,849 0 0 0 0 0 0 0 0 0 0 0Deduction 10.00% (6,170) 0 0 0 0 (446) (818) (776) (728) (622) (616) (503) (536) (540) (585) 0 0 0 0 0 0 0 0 0 0 0Premium 0.00% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Losses 0.25% (154) 0 0 0 0 (11) (20) (19) (18) (16) (15) (13) (13) (14) (15) 0 0 0 0 0 0 0 0 0 0 0Payable Moly klb 55,377 0 0 0 0 4,003 7,339 6,965 6,534 5,579 5,531 4,518 4,806 4,851 5,249 0 0 0 0 0 0 0 0 0 0 0

Gross RevenueMoly US$000 972,349 0 0 0 0 89,208 147,198 116,413 109,211 93,239 92,436 75,510 80,329 81,075 87,728 0 0 0 0 0 0 0 0 0 0 0Other US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Gross Revenue US$000 972,349 0 0 0 0 89,208 147,198 116,413 109,211 93,239 92,436 75,510 80,329 81,075 87,728 0 0 0 0 0 0 0 0 0 0 0

Roasting ChargesDeduction US$000 (97,235) 0 0 0 0 (8,921) (14,720) (11,641) (10,921) (9,324) (9,244) (7,551) (8,033) (8,107) (8,773) 0 0 0 0 0 0 0 0 0 0 0Premium US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Losses US$000 (2,431) 0 0 0 0 (223) (368) (291) (273) (233) (231) (189) (201) (203) (219) 0 0 0 0 0 0 0 0 0 0 0Insurance 0.15% (1,459) 0 0 0 0 (134) (221) (175) (164) (140) (139) (113) (120) (122) (132) 0 0 0 0 0 0 0 0 0 0 0Penalties 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Roasting Charges US$000 (101,124) 0 0 0 0 (9,278) (15,309) (12,107) (11,358) (9,697) (9,613) (7,853) (8,354) (8,432) (9,124) 0 0 0 0 0 0 0 0 0 0 0Freight & Marketing

Loading $0.10 (6) 0 0 0 0 (0) (1) (1) (1) (1) (1) (0) (0) (1) (1) 0 0 0 0 0 0 0 0 0 0 0Transportation $33.00 (1,885) 0 0 0 0 (136) (250) (237) (222) (190) (188) (154) (164) (165) (179) 0 0 0 0 0 0 0 0 0 0 0

Sampling $0.05 (3) 0 0 0 0 (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) 0 0 0 0 0 0 0 0 0 0 0Freight US$000 (1,894) 0 0 0 0 (137) (251) (238) (223) (191) (189) (155) (164) (166) (180) 0 0 0 0 0 0 0 0 0 0 0

NSR - Mo Concentrate US$000 869,331 0 0 0 0 79,794 131,639 104,068 97,629 83,352 82,634 67,502 71,811 72,477 78,425 0 0 0 0 0 0 0 0 0 0 0Realized Price US$/lb-Mo 15.699 0.000 0.000 0.000 0.000 19.932 17.936 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

GROSS INCOME FROM MINING (Continued)NSR-TUNGSTEN

Payable APTTungsten in Concentrate stu 2,496,119 0 0 0 0 146,433 263,760 261,411 263,891 295,575 265,296 306,784 269,666 238,954 184,350 0 0 0 0 0 0 0 0 0 0 0

Deduction 0.00% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Premium 0.00% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Losses 0.25% (6,240) 0 0 0 0 (366) (659) (654) (660) (739) (663) (767) (674) (597) (461) 0 0 0 0 0 0 0 0 0 0 0Payable Wo3 stu 2,489,879 0 0 0 0 146,067 263,101 260,757 263,232 294,836 264,632 306,017 268,992 238,356 183,889 0 0 0 0 0 0 0 0 0 0 0

Gross RevenueWo3 US$000 409,633 0 0 0 0 28,408 47,477 41,826 42,223 47,292 42,447 49,085 43,147 38,233 29,496 0 0 0 0 0 0 0 0 0 0 0

Other US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Gross Revenue US$000 409,633 0 0 0 0 28,408 47,477 41,826 42,223 47,292 42,447 49,085 43,147 38,233 29,496 0 0 0 0 0 0 0 0 0 0 0

ProcessingDeduction US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Premium US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Losses US$000 (1,024) 0 0 0 0 (71) (119) (105) (106) (118) (106) (123) (108) (96) (74) 0 0 0 0 0 0 0 0 0 0 0

Insurance 0.15% (614) 0 0 0 0 (43) (71) (63) (63) (71) (64) (74) (65) (57) (44) 0 0 0 0 0 0 0 0 0 0 0Penalties 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Processing US$000 (1,639) 0 0 0 0 (114) (190) (167) (169) (189) (170) (196) (173) (153) (118) 0 0 0 0 0 0 0 0 0 0 0Freight & Marketing

Loading $0.10 (3) 0 0 0 0 (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) 0 0 0 0 0 0 0 0 0 0 0Transportation $150.00 (4,304) 0 0 0 0 (252) (455) (451) (455) (510) (457) (529) (465) (412) (318) 0 0 0 0 0 0 0 0 0 0 0

Sampling $0.05 (1) 0 0 0 0 (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) 0 0 0 0 0 0 0 0 0 0 0Freight US$000 (4,308) 0 0 0 0 (253) (455) (451) (455) (510) (458) (529) (465) (412) (318) 0 0 0 0 0 0 0 0 0 0 0

NSR - APT Concentrate US$000 403,686 0 0 0 0 28,042 46,832 41,207 41,598 46,593 41,820 48,360 42,509 37,667 29,060 0 0 0 0 0 0 0 0 0 0 0Realized Price US$/lb-Wo 3 8.086 0.000 0.000 0.000 0.000 9.599 8.900 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Gross Income from MiningNSR Moly Conc US$000 869,331 0 0 0 0 79,794 131,639 104,068 97,629 83,352 82,634 67,502 71,811 72,477 78,425 0 0 0 0 0 0 0 0 0 0 0NSR APT Conc US$000 403,686 0 0 0 0 28,042 46,832 41,207 41,598 46,593 41,820 48,360 42,509 37,667 29,060 0 0 0 0 0 0 0 0 0 0 0

NSR US$000 1,273,017 0 0 0 0 107,835 178,470 145,275 139,228 129,944 124,453 115,862 114,319 110,144 107,485 0 0 0 0 0 0 0 0 0 0 0Realized Price $/lb-Mo Eq 22.99 0.00 0.00 0.00 0.00 26.94 24.32 20.86 21.31 23.29 22.50 25.64 23.78 22.71 20.48 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00Royalty $000s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

GROSS INCOME $000s 1,273,017 0 0 0 0 107,835 178,470 145,275 139,228 129,944 124,453 115,862 114,319 110,144 107,485 0 0 0 0 0 0 0 0 0 0 0Realized Price $/lb-Mo Eq 22.99 0.00 0.00 0.00 0.00 26.94 24.32 20.86 21.31 23.29 22.50 25.64 23.78 22.71 20.48 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

OPERATING MARGINOperating Costs

MININGUnit Costs Factor: 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.000 0.000

Long hole stoping US$/ton 20.35 20.350 20.350 20.350 20.350 20.350 20.350 20.350 20.350 20.350 20.350 20.350Room and pillar US$/ton 13.08 13.080 13.080 13.080 13.080 13.080 13.080 13.080 13.080 13.080 13.080 13.080

Other US$/ton 0.00 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Mining US$/ton - 0.000 17.461 17.784 17.784 17.784 17.784 17.784 17.784 17.784 17.784 17.233

Mining CostLong hole stoping US$000 368,971 0 0 0 0 20,350 39,174 39,174 39,174 39,174 39,174 39,174 39,174 39,174 35,231 0 0 0 0 0 0 0 0 0 0 0

SRK ConsultingCONFIDENTIAL

1 of 2LHandRP.jme.(v006)_22Feb08_FINAL.xls-c

printed:3/31/2008-10:44 AM

Exhibit B.1: Indicative Economics 22 Feb 2008COMPANY Galway Resources Ltd.



Room and pillar US$000 133,412 0 0 0 0 6,540 13,734 13,734 13,734 13,734 13,734 13,734 13,734 13,734 17,000 0 0 0 0 0 0 0 0 0 0 0Other US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Mining US$000 502,384 0 0 0 0 26,890 52,908 52,908 52,908 52,908 52,908 52,908 52,908 52,908 52,232 0 0 0 0 0 0 0 0 0 0 0$/ton $17.60 $0.00 $17.46 $17.78 $17.78 $17.78 $17.78 $17.78 $17.78 $17.78 $17.78 $17.23

PROCESSUnit Costs Factor: 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.000 0.000

Labor US$/ton 1.76 1.760 1.760 1.760 1.760 1.760 1.760 1.760 1.760 1.760 1.760 1.760Supplies & Materials US$/ton 7.40 7.400 7.400 7.400 7.400 7.400 7.400 7.400 7.400 7.400 7.400 7.400

Mill G&A US$/ton 0.02 0.020 0.020 0.020 0.020 0.020 0.020 0.020 0.020 0.020 0.020 0.020Tailings US$/ton 0.89 0.000 0.000 0.000 1.220 1.220 1.220 1.220 1.220 1.220 1.220 1.220Process US$/ton - 0.000 0.000 0.000 9.180 9.180 9.180 10.400 10.400 10.400 10.400 10.400 10.400 10.400 10.400 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Process CostLabor US$000 50,236 0 0 0 0 3,013 5,236 5,236 5,236 5,236 5,236 5,236 5,236 5,236 5,335 0 0 0 0 0 0 0 0 0

Supplies & Materials US$000 211,218 0 0 0 0 12,669 22,015 22,015 22,015 22,015 22,015 22,015 22,015 22,015 22,429 0 0 0 0 0 0 0 0 0Mill G&A US$000 571 0 0 0 0 34 60 60 60 60 60 60 60 60 61 0 0 0 0 0 0 0 0 0

Tailings US$000 18,918 0 0 0 0 0 0 2,359 2,359 2,359 2,359 2,359 2,359 2,359 2,404 0 0 0 0 0 0 0 0 0Process US$000 280,942 0 0 0 0 15,716 27,311 29,670 29,670 29,670 29,670 29,670 29,670 29,670 30,228 0 0 0 0 0 0 0 0 0

$/ton $9.84 $0.00 $10.21 $9.18 $9.97 $9.97 $9.97 $9.97 $9.97 $9.97 $9.97 $9.97G&A Factor: 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.000 0.000

On-Site Infrastructure $1.50 42,814 0 0 0 258 2,310 4,463 4,463 4,463 4,463 4,463 4,463 4,463 4,463 4,546 0 0 0 0 0 0 0 0 0Corporate Overheads 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

G&A US$000 42,814 0 0 0 258 2,310 4,463 4,463 4,463 4,463 4,463 4,463 4,463 4,463 4,546 0 0 0 0 0 0 0 0 0$/ton $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50

Total Operating Costs US$000 826,141 0 0 0 258 44,916 84,681 87,040 87,040 87,040 87,040 87,040 87,040 87,040 87,006 0 0 0 0 0 0 0 0 0Unit Cost $/lb-Mo Eq 14.919 0.000 0.000 11.220 11.538 12.496 13.320 15.602 15.737 19.265 18.109 17.943 16.576 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

$/ton $28.94 $1.50 $29.17 $28.46 $29.26 $29.26 $29.26 $29.26 $29.26 $29.26 $29.26 $28.71

Operating Margin US$000 446,876 0 0 0 (258) 62,919 93,790 58,235 52,188 42,905 37,413 28,822 27,280 23,104 20,479 0 0 0 0 0 0 0 0 0Cumulative US$000 - 0 0 0 (258) 62,661 156,451 214,686 266,874 309,778 347,192 376,014 403,293 426,398 446,876 446,876 446,876 446,876 446,876 446,876 446,876 446,876 446,876 446,876

$/ton $15.66 -$1.50 $40.86 $31.53 $19.57 $17.54 $14.42 $12.58 $9.69 $9.17 $7.77 $6.76

Cash CostMoly Conc US$000 103,018 0 0 0 0 9,415 15,560 12,345 11,581 9,888 9,803 8,008 8,519 8,598 9,303 0 0 0 0 0 0 0 0 0APT Conc US$000 5,946 0 0 0 0 366 645 618 624 699 628 726 638 565 436 0 0 0 0 0 0 0 0 0

Royalty US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Operating US$000 826,141 0 0 0 258 44,916 84,681 87,040 87,040 87,040 87,040 87,040 87,040 87,040 87,006 0 0 0 0 0 0 0 0 0

Cash Cost US$000 935,105 0 0 0 258 54,697 100,885 100,004 99,246 97,627 97,470 95,773 96,197 96,203 96,746 0 0 0 0 0 0 0 0 0Unit Cost $/lb-Mo Eq 16.886 0.000 0.000 0.000 0.000 13.663 13.746 14.357 15.188 17.500 17.623 21.198 20.014 19.832 18.431 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

$/ton 32.76 0.00 0.00 0.00 1.50 35.52 33.91 33.61 33.36 32.82 32.76 32.19 32.33 32.34 31.92 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

PROJECT CASH FLOWCapital Costs

Mine Equipment US$000 94,220 0 0 600 29,541 30,558 4,020 5,000 4,500 4,500 5,000 4,500 4,500 1,000 500 0 0 0 0 0 0 0 0 0Mine Development US$000 35,700 0 0 8,640 16,410 4,698 4,464 1,488 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Process Equipment US$000 66,338 0 0 0 19,902 46,437 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Tailings US$000 24,282 0 0 0 0 8,870 15,413 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Infrastructure US$000 7,269 0 0 0 3,409 3,860 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Owner Costs US$000 14,607 0 2,000 2,500 4,625 7,791 0 0 0 0 0 0 0 0 (2,308) 0 0 0 0 0 0 0 0 0

Total US$000 242,416 0 2,000 11,740 73,887 102,213 23,897 6,488 4,500 4,500 5,000 4,500 4,500 1,000 (1,808) 0 0 0 0 0 0 0 0 0Working Capital

Cash US$000 35,406 0 0 0 11 1,925 3,629 3,730 3,730 3,730 3,730 3,730 3,730 3,730 3,729 0 0 0 0 0 0 0 0 0 15 350A/R US$000 109,116 0 0 0 0 9,243 15,297 12,452 11,934 11,138 10,667 9,931 9,799 9,441 9,213 0 0 0 0 0 0 0 0 0 30 350A/P US$000 160,304 0 0 0 44 9,377 17,295 17,143 17,014 16,736 16,709 16,418 16,491 16,492 16,585 0 0 0 0 0 0 0 0 0 60 350

Working Capital US$000 15,782 0 0 0 33 (1,791) (1,632) 961 1,349 1,868 2,311 2,757 2,962 3,321 3,643 0 0 0 0 0 0 0 0 0Change US$000 0 0 0 33 (1,825) 159 2,593 388 518 444 446 205 359 322 (3,643) 0 0

Total Capital US$000 242,416 0 2,000 11,740 73,920 100,389 24,056 9,081 4,888 5,018 5,444 4,946 4,705 1,359 (1,486) (3,643) 0 0 0 0 0 0 0 0

CASH FLOW $000s 204,460 0 (2,000) (11,740) (74,178) (37,470) 69,734 49,154 47,299 37,886 31,970 23,877 22,575 21,745 21,964 3,643 0 0 0 0 0 0 0 0Cumulative $000s - 0 (2,000) (13,740) (87,918) (125,387) (55,654) (6,499) 40,800 78,686 110,656 134,532 157,107 178,853 200,817 204,460 204,460 204,460

Present Value 6.0% 94,414 0 (1,887) (10,449) (62,281) (27,999) 49,159 32,690 29,676 22,425 17,852 12,578 11,219 10,195 9,715 1,520 0 0NPV - 0 (1,887) (12,335) (74,616) (102,616) (53,456) (20,766) 8,910 31,335 49,187 61,765 72,984 83,179 92,893 94,414 94,414 94,414

Peak Funding $000s 74,178IRR % 26%


2 of 2LHandRP.jme.(v006)_22Feb08_FINAL.xls-c

printed:3/31/2008-10:49 AMExhibit B.1: Indicative Economics 22 Feb 2008COMPANY Galway Resources Ltd.



PRODUCTIONOre Production

Long hole stoping kst 18,131 1,000 1,925 1,925 1,925 1,925 1,925 1,925 1,925 1,925 1,731 0 0 0 0 0 0 0 0 0 0 0Room & pillar kst 10,200 500 1,050 1,050 1,050 1,050 1,050 1,050 1,050 1,050 1,300 0 0 0 0 0 0 0 0 0 0 0

Development ore kst 212 172 40 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total kst 28,543 0 0 0 172 1,540 2,975 2,975 2,975 2,975 2,975 2,975 2,975 2,975 3,031 0 0 0 0 0 0 0 0 0 0 0

GradeCombined

Mo % 0.13% 0.00% 0.00% 0.00% 0.09% 0.16% 0.16% 0.15% 0.14% 0.12% 0.12% 0.10% 0.11% 0.11% 0.11% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Wo3 % 0.12% 0.00% 0.00% 0.00% 0.08% 0.12% 0.12% 0.12% 0.12% 0.13% 0.12% 0.14% 0.12% 0.11% 0.08% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Long Hole StopingMo % 0.14% 0.00% 0.00% 0.00% 0.00% 0.16% 0.16% 0.17% 0.17% 0.14% 0.14% 0.12% 0.12% 0.11% 0.13% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Wo3 % 0.13% 0.00% 0.00% 0.00% 0.00% 0.14% 0.14% 0.13% 0.12% 0.15% 0.13% 0.13% 0.14% 0.13% 0.09% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Room and pillar

Mo % 0.10% 0.00% 0.00% 0.00% 0.00% 0.17% 0.16% 0.13% 0.10% 0.09% 0.09% 0.06% 0.09% 0.10% 0.09% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Wo3 % 0.09% 0.00% 0.00% 0.00% 0.00% 0.07% 0.07% 0.10% 0.12% 0.10% 0.10% 0.14% 0.09% 0.07% 0.07% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Development oreMo % 0.09% 0.00% 0.00% 0.00% 0.09% 0.08% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Wo3 % 0.08% 0.00% 0.00% 0.00% 0.08% 0.08% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Contained Metal

CombinedMo klb 72,589 0 0 0 305 4,943 9,621 9,130 8,566 7,313 7,250 5,922 6,300 6,359 6,881 0 0 0 0 0 0 0 0 0 0 0

Wo3 klb 66,563 0 0 0 284 3,621 7,034 6,971 7,037 7,882 7,075 8,181 7,191 6,372 4,916 0 0 0 0 0 0 0 0 0 0 0Long Hole Stoping

Mo klb 51,018 0 0 0 0 3,224 6,206 6,449 6,518 5,375 5,375 4,593 4,454 4,320 4,505 0 0 0 0 0 0 0 0 0 0 0Wo3 klb 46,856 0 0 0 0 2,888 5,559 4,886 4,458 5,698 4,970 5,159 5,259 4,890 3,089 0 0 0 0 0 0 0 0 0 0 0

Room and pillarMo klb 21,201 0 0 0 0 1,653 3,415 2,682 2,048 1,938 1,875 1,329 1,846 2,039 2,376 0 0 0 0 0 0 0 0 0 0 0

Wo3 klb 19,359 0 0 0 0 669 1,474 2,085 2,579 2,184 2,104 3,022 1,932 1,483 1,827 0 0 0 0 0 0 0 0 0 0 0Development ore

Mo klb 371 0 0 0 305 66 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Wo3 klb 348 0 0 0 284 64 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

PROCESSMilled Ore

Begin Tons kst 0 0 0 0 172 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Mined (in) kst 28,543 0 0 0 172 1,540 2,975 2,975 2,975 2,975 2,975 2,975 2,975 2,975 3,031 0 0 0 0 0 0 0 0 0 0 0

Milled (out) kst 28,543 0 0 0 0 1,712 2,975 2,975 2,975 2,975 2,975 2,975 2,975 2,975 3,031 0 0 0 0 0 0 0 0 0 0 0End Tons kst 0 0 0 172 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Begin Moly klb 0 0 0 0 305 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Mined Moly (in) klb 72,589 0 0 0 305 4,943 9,621 9,130 8,566 7,313 7,250 5,922 6,300 6,359 6,881 0 0 0 0 0 0 0 0 0 0 0

Milled Moly (out) klb 72,589 0 0 0 0 5,248 9,621 9,130 8,566 7,313 7,250 5,922 6,300 6,359 6,881 0 0 0 0 0 0 0 0 0 0 0End Moly klb 0 0 0 305 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Begin Wo3 klb 0 0 0 0 284 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Mined Wo3 (in) klb 66,563 0 0 0 284 3,621 7,034 6,971 7,037 7,882 7,075 8,181 7,191 6,372 4,916 0 0 0 0 0 0 0 0 0 0 0

Milled Wo3 (out) klb 66,563 0 0 0 0 3,905 7,034 6,971 7,037 7,882 7,075 8,181 7,191 6,372 4,916 0 0 0 0 0 0 0 0 0 0 0End Wo3 klb 0 0 0 284 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Moly ConcentrateConcentrate (dst) 54% 57,130 0 0 0 0 4,130 7,572 7,186 6,741 5,756 5,706 4,661 4,959 5,005 5,415 0 0 0 0 0 0 0 0 0 0 0Moly

Moly (klb) 85.0% 61,701 0 0 0 0 4,460 8,178 7,761 7,281 6,216 6,162 5,034 5,355 5,405 5,849 0 0 0 0 0 0 0 0 0 0 0Other (klb) 85.0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total Moly klb 61,701 0 0 0 0 4,460 8,178 7,761 7,281 6,216 6,162 5,034 5,355 5,405 5,849 0 0 0 0 0 0 0 0 0 0 0

Tungsten (APT) ConcentrateConcentrate stu 2,496,119 0 0 0 0 146,433 263,760 261,411 263,891 295,575 265,296 306,784 269,666 238,954 184,350 0 0 0 0 0 0 0 0 0 0 0Concentrate dst 87% 28,691 0 1,683 3,032 3,005 3,033 3,397 3,049 3,526 3,100 2,747 2,119 0 0 0 0 0 0 0 0 0 0 0Tungsten

Wo3 (klb) 75.0% 49,922 0 0 0 0 2,929 5,275 5,228 5,278 5,912 5,306 6,136 5,393 4,779 3,687 0 0 0 0 0 0 0 0 0 0 0Other (klb) 75.0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Tungsten klb 49,922 0 0 0 0 2,929 5,275 5,228 5,278 5,912 5,306 6,136 5,393 4,779 3,687 0 0 0 0 0 0 0 0 0 0 0


1 of 1LHandRP.jme.(v006)_22Feb08_FINAL.xls-prod



Total 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Units or Avg. -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10


UG Mobile Equip US$000 34,430 16,715 14,365 3,350UG Mobile Rebuild US$000 23,750 3,750 3,750 3,750 3,750 3,750 3,750 833 417Contingency (20%) US$000 11,636 0 0 0 3,343 2,873 670 750 750 750 750 750 750 167 83

Mine UG InfrastruExhaust Raise US$000 1,292 1,292Hoisting Raise US$000 3,486 3,486Backfill Plant US$000 6,000 5,000 500 500

Surface Fans US$000 500 500UG Fans US$000 200 100 100Pumping US$000 150 150

Shop US$000 500 500Contingency (20%) US$000 1,226 0 0 100 747 378 0 0 0 0 0 0 0 0 0

Mine Hoist ShaftHoist Shaft Equip US$000 8,500 8,500

Contingency (30%) US$000 2,550 0 0 0 0 2,550 0 0 0 0 0 0 0 0 0subtotal US$000 94,220 0 0 600 29,541 30,558 4,020 5,000 4,500 4,500 5,000 4,500 4,500 1,000 500

Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total US$000 94,220 0 0 600 29,541 30,558 4,020 5,000 4,500 4,500 5,000 4,500 4,500 1,000 500

Mine DevelopmentAccess Ramp 15,700 7,200 8,500

Declines 3,510 3,315 195Ore Access Drifts 10,540 1,860 3,720 3,720 1,240

Contingency (20%) 5,950 0 0 1,440 2,735 783 744 248 0 0 0 0 0 0 0subtotal $000s 35,700 0 0 8,640 16,410 4,698 4,464 1,488 0 0 0 0 0 0 0

Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total $000s 35,700 0 0 8,640 16,410 4,698 4,464 1,488 0 0 0 0 0 0 0

ProcessEquipment $000s 35,435 10,631 24,805 0

Mill Building $000s 15,594 4,678 10,916 0Contingency (30%) $000s 15,309 0 0 0 4,593 10,716 0 0 0 0 0 0 0 0 0

subtotal $000s 66,338 0 0 0 19,902 46,437 0 0 0 0 0 0 0 0 0Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total $000s 66,338 0 0 0 19,902 46,437 0 0 0 0 0 0 0 0 0Tailings

Site Preparation $000s 1,147 419 728EarthWorks $000s 3,695 1,350 2,345

Geosynthetics $000s 6,120 2,235 3,885Overliner $000s 5,670 2,071 3,599

Engineering (1%) $000s 166 0 0 0 0 61 106 0 0 0 0 0 0 0 0EPCM (5%) $000s 832 0 0 0 0 304 528 0 0 0 0 0 0 0 0

Owners Cost (0%) $000s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Contingency (40%) $000s 6,653 0 0 0 0 2,430 4,223 0 0 0 0 0 0 0 0

subtotal $000s 24,282 0 0 0 0 8,870 15,413 0 0 0 0 0 0 0 0Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total $000s 24,282 0 0 0 0 8,870 15,413 0 0 0 0 0 0 0 0


1 of 2LHandRP.jme.(v006)_22Feb08_FINAL.xls-capex



Total 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Units or Avg. -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10

CAPITAL COSTSInfrastructure

Offices/Support Facil $000s 2,667 800 1,867 0Changehouse/Dry $000s 750 225 525 0Warehouse/Shop $000s 825 248 578 0

Guard House $000s 50 50Water/Sewer $000s 250 250

Communication $000s 200 200Fencing $000s 100 100

Access Road $000s 250 250Power System $000s 500 500

Contingency (30%) $000s 1,678 0 0 0 787 891 0 0 0 0 0 0 0 0 0subtotal $000s 7,269 0 0 0 3,409 3,860 0 0 0 0 0 0 0 0 0

Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total $000s 7,269 0 0 0 3,409 3,860 0 0 0 0 0 0 0 0 0

Owner CostsManagement $000s 2,000 500 500 500 500

Feasibility Study $000s 3,000 1,000 1,000 1,000Environmental $000s 1,500 500 1,000

EPCM - Mill $000s 5,103 1,531 3,572 0First Fills - Mill $000s 777 233 544 0

Spares - Mill $000s 1,531 459 1,072 0Indirects/Equip - Mill $000s 2,804 841 1,963 0

Start-up & Commission $000s 200 60 140 0Final Reclamation $000s 10,000 10,000

Equip Salvage $000s (10,000) (10,000)First Fills Salvage $000s (777) (777)

Spares Salvage $000s (1,531) (1,531)Contingency (0%) $000s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

subtotal $000s 14,607 0 2,000 2,500 4,625 7,791 0 0 0 0 0 0 0 0 (2,308)Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total $000s 14,607 0 2,000 2,500 4,625 7,791 0 0 0 0 0 0 0 0 (2,308)

TOTAL CAPITAL $000s 242,416 0 2,000 11,740 73,887 102,213 23,897 6,488 4,500 4,500 5,000 4,500 4,500 1,000 (1,808)


2 of 2LHandRP.jme.(v006)_22Feb08_FINAL.xls-capex

printed:3/31/2008-10:54 AM

Exhibit B.2: Indicative Economics 18 Jan 2007 - DRAFTCOMPANY Galway Resources Ltd.

BUSINESS UNIT Victorio ProjectOPERATION Block Caving

Total 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031Units or Avg. -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

PRODUCTION SUMMARYOre Mined kst 138,841 0 0 0 0 200 76 3,175 6,140 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 6,000 4,625 0 0Ore Milled kst 138,841 0 0 0 0 0 0 3,451 6,140 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 6,000 4,625 0 0Mo Concentrate dst 147,206 0 0 0 0 0 0 3,674 6,537 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 6,360 4,902 0 0Wo3 Concentrate stu 7,700,015 0 0 0 0 0 0 174,883 336,307 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 333,717 257,240 0 0Mo Produced klb 158,982 0 0 0 0 0 0 3,968 7,060 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 6,868 5,294 0 0Wo3 Produced klb 154,000 0 0 0 0 0 0 3,498 6,726 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 6,674 5,145 0 0

GROSS INCOME FROM MININGMARKET

Moly $/lb 16.86 31.00 30.00 20.00 18.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00Tungsten APT $/stu 172.52 268.00 261.00 194.00 180.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00

NSR-MOLYPayable Moly

Moly in Concentrate klb 158,982 0 0 0 0 0 0 3,968 7,060 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 6,868 5,294 0 0Deduction 10.00% (15,898) 0 0 0 0 0 0 (397) (706) (1,045) (1,045) (1,045) (1,045) (1,045) (1,045) (1,045) (1,045) (1,045) (1,045) (1,045) (1,045) (1,045) (687) (529) 0 0

Premium 0.00% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Losses 0.25% (397) 0 0 0 0 0 0 (10) (18) (26) (26) (26) (26) (26) (26) (26) (26) (26) (26) (26) (26) (26) (17) (13) 0 0

Payable Moly klb 142,686 0 0 0 0 0 0 3,561 6,336 9,375 9,375 9,375 9,375 9,375 9,375 9,375 9,375 9,375 9,375 9,375 9,375 9,375 6,164 4,752 0 0Gross Revenue

Moly US$000 2,384,730 0 0 0 0 0 0 59,515 105,901 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 103,024 79,415 0 0Other US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Gross Revenue US$000 2,384,730 0 0 0 0 0 0 59,515 105,901 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 156,683 103,024 79,415 0 0

Roasting ChargesDeduction US$000 (238,473) 0 0 0 0 0 0 (5,951) (10,590) (15,668) (15,668) (15,668) (15,668) (15,668) (15,668) (15,668) (15,668) (15,668) (15,668) (15,668) (15,668) (15,668) (10,302) (7,941) 0 0

Premium US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Losses US$000 (5,962) 0 0 0 0 0 0 (149) (265) (392) (392) (392) (392) (392) (392) (392) (392) (392) (392) (392) (392) (392) (258) (199) 0 0

Insurance 0.15% (3,577) 0 0 0 0 0 0 (89) (159) (235) (235) (235) (235) (235) (235) (235) (235) (235) (235) (235) (235) (235) (155) (119) 0 0Penalties 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Roasting Charges US$000 (248,012) 0 0 0 0 0 0 (6,190) (11,014) (16,295) (16,295) (16,295) (16,295) (16,295) (16,295) (16,295) (16,295) (16,295) (16,295) (16,295) (16,295) (16,295) (10,715) (8,259) 0 0Freight & Marketing

Loading $0.10 (15) 0 0 0 0 0 0 (0) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (0) 0 0Transportation $33.00 (4,858) 0 0 0 0 0 0 (121) (216) (319) (319) (319) (319) (319) (319) (319) (319) (319) (319) (319) (319) (319) (210) (162) 0 0

Sampling $0.05 (7) 0 0 0 0 0 0 (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) 0 0Freight US$000 (4,880) 0 0 0 0 0 0 (122) (217) (321) (321) (321) (321) (321) (321) (321) (321) (321) (321) (321) (321) (321) (211) (163) 0 0

NSR - Mo Concentrate US$000 2,131,838 0 0 0 0 0 0 53,203 94,671 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 92,099 70,993 0 0Realized Price US$/lb-Mo 14.941 0.000 0.000 0.000 0.000 0.000 0.000 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 14.941 0.000 0.000

GROSS INCOME FROM MINING (Continued)NSR-TUNGSTEN

Payable APTTungsten in Concentrate stu 7,700,015 0 0 0 0 0 0 174,883 336,307 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 333,717 257,240 0 0

Deduction 0.00% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Premium 0.00% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Losses 0.25% (19,250) 0 0 0 0 0 0 (437) (841) (1,269) (1,269) (1,269) (1,269) (1,269) (1,269) (1,269) (1,269) (1,269) (1,269) (1,269) (1,269) (1,269) (834) (643) 0 0Payable Wo3 stu 7,680,765 0 0 0 0 0 0 174,446 335,467 506,259 506,259 506,259 506,259 506,259 506,259 506,259 506,259 506,259 506,259 506,259 506,259 506,259 332,883 256,597 0 0

Gross RevenueWo3 US$000 1,232,002 0 0 0 0 0 0 27,981 53,809 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 53,395 41,158 0 0

Other US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Gross Revenue US$000 1,232,002 0 0 0 0 0 0 27,981 53,809 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 81,205 53,395 41,158 0 0

ProcessingDeduction US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Premium US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Losses US$000 (3,080) 0 0 0 0 0 0 (70) (135) (203) (203) (203) (203) (203) (203) (203) (203) (203) (203) (203) (203) (203) (133) (103) 0 0

Insurance 0.15% (1,848) 0 0 0 0 0 0 (42) (81) (122) (122) (122) (122) (122) (122) (122) (122) (122) (122) (122) (122) (122) (80) (62) 0 0Penalties 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Processing US$000 (4,928) 0 0 0 0 0 0 (112) (215) (325) (325) (325) (325) (325) (325) (325) (325) (325) (325) (325) (325) (325) (214) (165) 0 0Freight & Marketing

Loading $0.10 (9) 0 0 0 0 0 0 (0) (0) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (0) (0) 0 0Transportation $150.00 (13,276) 0 0 0 0 0 0 (302) (580) (875) (875) (875) (875) (875) (875) (875) (875) (875) (875) (875) (875) (875) (575) (444) 0 0

Sampling $0.05 (4) 0 0 0 0 0 0 (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) 0 0Freight US$000 (13,289) 0 0 0 0 0 0 (302) (580) (876) (876) (876) (876) (876) (876) (876) (876) (876) (876) (876) (876) (876) (576) (444) 0 0

NSR - APT Concentrate US$000 1,213,785 0 0 0 0 0 0 27,568 53,014 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 52,605 40,550 0 0Realized Price US$/lb-Wo3 7.882 0.000 0.000 0.000 0.000 0.000 0.000 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 7.901 0.000 0.000

Gross Income from MiningNSR Moly Conc US$000 2,131,838 0 0 0 0 0 0 53,203 94,671 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 140,067 92,099 70,993 0 0NSR APT Conc US$000 1,213,785 0 0 0 0 0 0 27,568 53,014 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 80,004 52,605 40,550 0 0

NSR US$000 3,345,624 0 0 0 0 0 0 80,771 147,684 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 144,704 111,543 0 0Realized Price $/lb-Mo Eq 23.45 0.00 0.00 0.00 0.00 0.00 0.00 22.68 23.31 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 0.00 0.00

0.00Royalty $000s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

GROSS INCOME $000s 3,345,624 0 0 0 0 0 0 80,771 147,684 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 220,071 144,704 111,543 0 0Realized Price $/lb-Mo Eq 23.45 0.00 0.00 0.00 0.00 0.00 0.00 22.68 23.31 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 23.47 0.00 0.00


1 of 2DRAFT Victorio.blockcave.MPR.008_FINAL.xls-cf

printed:3/31/2008-10:54 AM

Exhibit B.2: Indicative Economics 18 Jan 2007 - DRAFTCOMPANY Galway Resources Ltd.


Total 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031Units or Avg. -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

OPERATING MARGINOperating Costs

MININGUnit Costs Factor: 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.000 0.000

Block Caving US$/ton 5.03 8.000 8.000 8.000 8.000 8.000 7.000 7.000 5.000 4.000 4.000 4.000 4.000 4.000 4.000 2.500 2.500 2.500 2.500 2.500Other US$/ton 0.00 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Mining US$/ton - 0.000 0.000 0.000 0.000 8.000 8.000 8.000 8.000 8.000 7.000 7.000 5.000 4.000 4.000 4.000 4.000 4.000 4.000 2.500 2.500 2.500 2.500 2.500 0.000 0.000Mining Cost

Block caving US$000 637,103 0 0 0 0 1,600 608 25,400 49,120 73,000 63,875 63,875 45,625 36,500 36,500 36,500 36,500 36,500 36,500 22,813 22,813 22,813 15,000 11,563Other US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Mining US$000 637,103 0 0 0 0 1,600 608 25,400 49,120 73,000 63,875 63,875 45,625 36,500 36,500 36,500 36,500 36,500 36,500 22,813 22,813 22,813 15,000 11,563$/ton $4.59 $8.00 $8.00 $8.00 $8.00 $8.00 $7.00 $7.00 $5.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $2.50 $2.50 $2.50 $2.50 $2.50

PROCESSUnit Costs Factor: 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.000 0.000

Labor US$/ton 0.73 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730 0.730Supplies & Materials US$/ton 7.02 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020 7.020

Mill G&A US$/ton 0.01 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010Tailings US$/ton 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678 0.678Process US$/ton - 0.000 0.000 0.000 0.000 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 8.438 0.000 0.000

Process CostLabor US$000 101,354 0 0 0 0 0 0 2,519 4,482 6,661 6,661 6,661 6,661 6,661 6,661 6,661 6,661 6,661 6,661 6,661 6,661 6,661 4,380 3,376

Supplies & Materials US$000 974,664 0 0 0 0 0 0 24,226 43,103 64,058 64,058 64,058 64,058 64,058 64,058 64,058 64,058 64,058 64,058 64,058 64,058 64,058 42,120 32,468Mill G&A US$000 1,388 0 0 0 0 0 0 35 61 91 91 91 91 91 91 91 91 91 91 91 91 91 60 46

Tailings US$000 94,100 0 0 0 0 0 0 2,339 4,161 6,185 6,185 6,185 6,185 6,185 6,185 6,185 6,185 6,185 6,185 6,185 6,185 6,185 4,067 3,135Process US$000 1,171,506 0 0 0 0 0 0 29,119 51,808 76,995 76,995 76,995 76,995 76,995 76,995 76,995 76,995 76,995 76,995 76,995 76,995 76,995 50,627 39,025

$/ton $8.44 $0.00 $0.00 $9.17 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44 $8.44G&A

On-Site Infrastructure $0.75 104,131 0 0 0 0 150 57 2,381 4,605 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 4,500 3,469Corporate Overheads 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

G&A US$000 104,131 0 0 0 0 150 57 2,381 4,605 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 6,844 4,500 3,469$/ton $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75

Total Operating Costs US$000 1,912,740 0 0 0 0 1,750 665 56,900 105,533 156,838 147,713 147,713 129,463 120,338 120,338 120,338 120,338 120,338 120,338 106,651 106,651 106,651 70,127 54,056Unit Cost $/lb-Mo Eq 13.405 0.000 0.000 0.000 0.000 15.979 16.655 16.730 15.756 15.756 13.810 12.836 12.836 12.836 12.836 12.836 12.836 11.376 11.376 11.376 11.376 11.376

$/ton $13.78 $8.75 $8.75 $17.92 $17.19 $17.19 $16.19 $16.19 $14.19 $13.19 $13.19 $13.19 $13.19 $13.19 $13.19 $11.69 $11.69 $11.69 $11.69 $11.69

Operating Margin US$000 1,432,884 0 0 0 0 (1,750) (665) 23,871 42,152 63,233 72,358 72,358 90,608 99,733 99,733 99,733 99,733 99,733 99,733 113,420 113,420 113,420 74,578 57,487Cumulative US$000 - 0 0 0 0 (1,750) (2,415) 21,456 63,608 126,840 199,198 271,555 362,163 461,896 561,628 661,361 761,094 860,826 960,559 1,073,979 1,187,399 1,300,819 1,375,397 1,432,884

$/ton $10.32 -$8.75 -$8.75 $7.52 $6.87 $6.93 $7.93 $7.93 $9.93 $10.93 $10.93 $10.93 $10.93 $10.93 $10.93 $12.43 $12.43 $12.43 $12.43 $12.43

Cash CostMoly Conc US$000 252,892 0 0 0 0 0 0 6,311 11,230 16,616 16,616 16,616 16,616 16,616 16,616 16,616 16,616 16,616 16,616 16,616 16,616 16,616 10,925 8,422APT Conc US$000 18,217 0 0 0 0 0 0 414 796 1,201 1,201 1,201 1,201 1,201 1,201 1,201 1,201 1,201 1,201 1,201 1,201 1,201 790 609

Royalty US$000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Operating US$000 1,912,740 0 0 0 0 1,750 665 56,900 105,533 156,838 147,713 147,713 129,463 120,338 120,338 120,338 120,338 120,338 120,338 106,651 106,651 106,651 70,127 54,056

Cash Cost US$000 2,183,849 0 0 0 0 1,750 665 63,625 117,559 174,655 165,530 165,530 147,280 138,155 138,155 138,155 138,155 138,155 138,155 124,467 124,467 124,467 81,841 63,086Unit Cost $/lb-Mo Eq 15.305 0.000 0.000 0.000 0.000 0.000 0.000 17.867 18.553 18.630 17.657 17.657 15.710 14.737 14.737 14.737 14.737 14.737 14.737 13.277 13.277 13.277 13.277 13.277

$/ton 15.73 0.00 0.00 0.00 0.00 8.75 8.75 20.04 19.15 19.14 18.14 18.14 16.14 15.14 15.14 15.14 15.14 15.14 15.14 13.64 13.64 13.64 13.64 13.64

PROJECT CASH FLOWCapital Costs

Mine Equipment US$000 162,266 0 0 3,438 3,939 31,323 24,419 13,724 12,170 7,257 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 0 0 0Mine Development US$000 50,484 0 0 7,501 7,257 22,539 11,088 1,050 1,050 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Process Equipment US$000 143,931 0 0 0 0 43,179 86,359 14,393 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Tailings US$000 50,920 0 0 0 0 25,460 25,460 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Infrastructure US$000 11,050 0 0 0 0 4,544 5,577 930 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Owner Costs US$000 23,685 0 2,000 2,500 1,500 7,627 13,753 2,209 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (5,903)

Total US$000 442,337 0 2,000 13,439 12,696 134,671 166,655 32,305 13,220 7,257 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 0 0 (5,903)Working Capital

Cash US$000 81,975 0 0 0 0 75 29 2,439 4,523 6,722 6,331 6,331 5,548 5,157 5,157 5,157 5,157 5,157 5,157 4,571 4,571 4,571 3,005 2,317 15 350A/R US$000 286,768 0 0 0 0 0 0 6,923 12,659 18,863 18,863 18,863 18,863 18,863 18,863 18,863 18,863 18,863 18,863 18,863 18,863 18,863 12,403 9,561 30 350A/P US$000 374,374 0 0 0 0 300 114 10,907 20,153 29,941 28,377 28,377 25,248 23,684 23,684 23,684 23,684 23,684 23,684 21,337 21,337 21,337 14,030 10,815 60 350

Working Capital US$000 5,632 0 0 0 0 225 86 1,545 2,971 4,356 3,183 3,183 836 (337) (337) (337) (337) (337) (337) (2,097) (2,097) (2,097) (1,379) (1,063)Change US$000 0 0 0 0 225 (140) 1,460 1,426 1,384 (1,173) 0 (2,346) (1,173) 0 0 0 0 0 (1,760) 0 0 718 1,379

Total Capital US$000 442,337 0 2,000 13,439 12,696 134,896 166,516 33,765 14,646 8,642 4,826 6,000 3,653 4,826 6,000 6,000 6,000 6,000 6,000 4,240 6,000 0 718 (4,524)

CASH FLOW $000s 990,547 0 (2,000) (13,439) (12,696) (136,646) (167,181) (9,894) 27,506 54,591 67,531 66,358 86,954 94,906 93,733 93,733 93,733 93,733 93,733 109,180 107,421 113,420 73,860 62,011Cumulative $000s - 0 (2,000) (15,439) (28,135) (164,782) (331,962) (341,857) (314,351) (259,760) (192,229) (125,871) (38,916) 55,990 149,723 243,456 337,189 430,922 524,655 633,835 741,256 854,676 928,535 990,547

Present Value 6.0% 270,482 0 (1,887) (11,961) (10,660) (108,237) (124,927) (6,580) 17,257 32,312 37,709 34,957 43,214 44,496 41,458 39,112 36,898 34,809 32,839 36,086 33,494 33,363 20,496 16,234NPV - 0 (1,887) (13,847) (24,507) (132,744) (257,671) (264,252) (246,994) (214,682) (176,973) (142,016) (98,803) (54,307) (12,849) 26,263 63,160 97,970 130,808 166,894 200,388 233,751 254,248 270,482

Peak Funding $000s 167,181IRR % 15.2%


2 of 2DRAFT Victorio.blockcave.MPR.008_FINAL.xls-cf

printed:3/31/2008-10:54 AMExhibit B.2: Indicative Economics 18 Jan 2007 COMPANY Galway Resources Ltd.


Total 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030Units or Avg. -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

PRODUCTIONOre Production

Block cave stoping kst 138,250 3,000 6,000 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 6,000 4,625 0Development ore kst 591 200 76 175 140 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total kst 138,841 0 0 0 0 200 76 3,175 6,140 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 6,000 4,625 0Grade

CombinedMo % 0.07% 0.00% 0.00% 0.00% 0.00% 0.07% 0.06% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.00%

Wo3 % 0.07% 0.00% 0.00% 0.00% 0.00% 0.03% 0.01% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.00%Block cave stoping

Mo % 0.07% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.00%Wo3 % 0.07% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.00%

Development oreMo % 0.07% 0.00% 0.00% 0.00% 0.00% 0.07% 0.06% 0.08% 0.08% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Wo3 % 0.02% 0.00% 0.00% 0.00% 0.00% 0.03% 0.01% 0.03% 0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Contained Metal

CombinedMo klb 187,038 0 0 0 0 272 86 4,309 8,306 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 8,080 6,229 0

Wo3 klb 205,334 0 0 0 0 103 23 4,538 8,968 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 8,899 6,860 0Block cave stoping

Mo klb 186,184 0 0 0 0 0 0 4,040 8,080 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 8,080 6,229 0Wo3 klb 205,051 0 0 0 0 0 0 4,450 8,899 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 8,899 6,860 0

Development oreMo klb 853 0 0 0 0 272 86 269 226 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Wo3 klb 283 0 0 0 0 103 23 89 69 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

PROCESSMilled Ore

Begin Tons kst 0 0 0 0 0 200 276 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Mined (in) kst 138,841 0 0 0 0 200 76 3,175 6,140 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 6,000 4,625 0

Milled (out) kst 138,841 0 0 0 0 0 0 3,451 6,140 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 9,125 6,000 4,625 0End Tons kst 0 0 0 0 200 276 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Begin Moly klb 0 0 0 0 0 272 359 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Mined Moly (in) klb 187,038 0 0 0 0 272 86 4,309 8,306 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 8,080 6,229 0

Milled Moly (out) klb 187,038 0 0 0 0 0 0 4,668 8,306 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 12,289 8,080 6,229 0End Moly klb 0 0 0 0 272 359 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Begin Wo3 klb 0 0 0 0 0 103 125 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Mined Wo3 (in) klb 205,334 0 0 0 0 103 23 4,538 8,968 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 8,899 6,860 0

Milled Wo3 (out) klb 205,334 0 0 0 0 0 0 4,664 8,968 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 13,534 8,899 6,860 0End Wo3 klb 0 0 0 0 103 125 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Moly ConcentrateConcentrate (dst) 54% 147,206 0 0 0 0 0 0 3,674 6,537 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 9,672 6,360 4,902 0Moly

Moly (klb) 85.0% 158,982 0 0 0 0 0 0 3,968 7,060 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 6,868 5,294 0Other (klb) 85.0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total Moly klb 158,982 0 0 0 0 0 0 3,968 7,060 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 10,446 6,868 5,294 0

Tungsten (APT) ConcentrateConcentrate stu 7,700,015 0 0 0 0 0 0 174,883 336,307 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 507,528 333,717 257,240 0Concentrate dst 87% 88,506 0 0 0 2,010 3,866 5,834 5,834 5,834 5,834 5,834 5,834 5,834 5,834 5,834 5,834 5,834 5,834 5,834 3,836 2,957 0Tungsten

Wo3 (klb) 75.0% 154,000 0 0 0 0 0 0 3,498 6,726 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 6,674 5,145 0Other (klb) 75.0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Tungsten klb 154,000 0 0 0 0 0 0 3,498 6,726 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 10,151 6,674 5,145 0


1 of 2DRAFT Victorio.blockcave.MPR.008_FINAL.xls-prod

printed:3/31/2008-10:56 AMExhibit B.2: Indicative Economics 18 Jan 2007 - DRAFTCOMPANY Galway Resources Ltd.


Total 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029Units or Avg. -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17


UG Mobile Equip US$000 46,160 21,550 9,570 9,020 3,260 2,760UG Mobile Rebuild US$000 59,749 6,465 2,871 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583

UG Conveyor US$000 8,825 1,505 2,524 2,524 2,272Conveyor Rebuild US$000 6,250 417 417 417 417 417 417 417 417 417 417 417 417 417 417 417

Contingency (20%) US$000 24,197 0 0 301 505 4,815 2,452 1,887 2,028 1,210 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 0 0 0Mine UG Infrastrucutre

Primary Vent Raises US$000 9,788 509 509 2,029 6,740Egress Raise Equip US$000 2,000 2,000

Surface Fans US$000 1,400 700 700UG Fans US$000 300 150 150Pumping US$000 250 250

Shop US$000 500 500UG Contingency (20%) US$000 2,848 0 0 272 152 406 1,618 400 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

subtotal US$000 162,266 0 0 3,438 3,939 31,323 24,419 13,724 12,170 7,257 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 0 0 0Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total US$000 162,266 0 0 3,438 3,939 31,323 24,419 13,724 12,170 7,257 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 0 0 0Mine Development

Conveyor Decline 15,819 6,523 6,310 2,986Undercut Level 15,000 9,000 6,000

Production Level 8,450 5,200 3,250Ventilation Level 4,550 2,450 700 700 700

Contingency (15%) 6,665 0 0 978 947 2,903 1,138 350 350 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0subtotal $000s 50,484 0 0 7,501 7,257 22,539 11,088 1,050 1,050 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total $000s 50,484 0 0 7,501 7,257 22,539 11,088 1,050 1,050 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

ProcessEquipment $000s 77,420 23,226 46,452 7,742

Mill Building $000s 33,296 9,989 19,978 3,330Contingency (30%) $000s 33,215 0 0 0 0 9,964 19,929 3,321 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

subtotal $000s 143,931 0 0 0 0 43,179 86,359 14,393 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total $000s 143,931 0 0 0 0 43,179 86,359 14,393 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Tailings

Site Preparation $000s 2,377 1,189 1,189EarthWorks $000s 11,800 5,900 5,900

Geosynthetics $000s 10,800 5,400 5,400Overliner $000s 9,900 4,950 4,950

Engineering (1%) $000s 349 0 0 0 0 174 174 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0EPCM (5%) $000s 1,744 0 0 0 0 872 872 0 0 0 0 0 0 0 0 0 0 0 0 0 - - 0 0

Owners Cost (0%) $000s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - - 0 0Contingency (40%) $000s 13,951 0 0 0 0 6,975 6,975 0 0 0 0 0 0 0 0 0 0 0 0 0 - - 0 0

subtotal $000s 50,920 0 0 0 0 25,460 25,460 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total $000s 50,920 0 0 0 0 25,460 25,460 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0CAPITAL COSTS

InfrastructureOffices/Support Facil $000s 4,000 1,200 2,400 400

Changehouse/Dry $000s 1,500 450 900 150Warehouse/Shop $000s 1,650 495 990 165

Guard House $000s 50 50Water/Sewer $000s 250 250

Communication $000s 200 200Fencing $000s 100 100

Access Road $000s 250 250Power System $000s 500 500

Contingency (30%) $000s 2,550 0 0 0 0 1,049 1,287 215 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0subtotal $000s 11,050 0 0 0 0 4,544 5,577 930 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total $000s 11,050 0 0 0 0 4,544 5,577 930 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Owner CostsManagement $000s 2,500 500 500 500 500 500

Feasibility Study $000s 3,500 1,000 1,000 1,000 500Environmental $000s 1,500 500 1,000

EPCM - Mill $000s 11,072 3,321 6,643 1,107First Fills - Mill $000s 2,582 774 1,549 258

Spares - Mill $000s 3,321 996 1,993 332Indirects/Equip - Mill $000s 4,814 1,444 2,888 481

Start-up & Commission $000s 300 90 180 30Final Reclamation $000s 20,000 20,000

Equip Salvage $000s (20,000) (20,000)First Fills Salvage $000s (2,582) (2,582)

Spares Salvage $000s (3,321) (3,321)Contingency (0%) $000s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

subtotal $000s 23,685 0 2,000 2,500 1,500 7,627 13,753 2,209 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (5,903)Sensitivity 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total $000s 23,685 0 2,000 2,500 1,500 7,627 13,753 2,209 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (5,903)

TOTAL CAPITAL $000s 442,337 0 2,000 13,439 12,696 134,671 166,655 32,305 13,220 7,257 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 0 0 (5,903)


1 of 1DRAFT Victorio.blockcave.MPR.008_FINAL.xls-capex

ni 43-101 preliminary assessment victorio molybdenum … · 2013. 4. 30. · the victorio...

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