La Guajira Coal Project San Juan Underground Coal Resource Statement Company Name: MPX Colombia Date: May 3, 2012 From: Ron Parent, P. Geo.
C O N T E N T S TERMS AND ACRONYMS...... I EXECUTIVE SUMMARY... I 1.0 INTRODUCTION... 1-1 2.0 LOCATION AND ACCESS, CLIMATE, INFRASTRUCTURE AND PHYSIOGRAPHY. 2-1 3.0 GEOLOGY... 3-1 3.1 General Geology... 3-1 3.2 Coal Geology... 3-3 3.3 Structural Geology... 3-5 4.0 COAL QUALITY... 4-1 5.0 DRILLING, SAMPLING AND DOWNHOLE GEOPHYSICS... 5-1 6.0 GEOLOGICAL DATABASE... 6-1 6.1 ACCESS Database... 6-1 6.2 Seam Correlations... 6-1 6.3 3D Seismic... 6-2 7.0 GEOLOGICAL MODELLING... 7-1 8.0 COAL RESOURCE CLASSIFICATION... 8-1 9.0 ESTIMATED COAL RESOURCES... 9-1 9.1 Resource Summary... 9-1 9.1.1 Measured and Indicated Resources... 9-1 9.1.2 Inferred Resources... 9-1 9.2 Bulk Density... 9-1 9.3 Coal Rank... 9-2 9.4 Reasonable Prospects of Economic Extraction... 9-2 10.0 ECONOMIC CONSIDERATIONS... 10-1 10.1 Coal Marketing Studies... 10-1 10.2 Mining Studies... 10-1 11.0 CONCLUSIONS... 11-1 12.0 CLOSING... 12-1 13.0 REFERENCES... 13-1 TOC i
L I S T O F T A B L E S Table 4-1: Seam Composite Data from Drillholes... 4-1 Table 5-1: Drilling Summary, San Juan Deposit... 5-1 Table 5-2: Average Sample Lengths for Each Year of Drilling... 5-3 Table 5-3: Summary of Log Completion... 5-3 Table 5-4: Seam Thickness Data Summary... 5-5 Table 7-1: Coal Quality Items in the 3D Block Model... 7-2 Table 9-1: San Juan Coal Resources Measured plus Indicated (in-situ coal >0.5 m thickness)... 9-1 Table 9-2: San Juan Coal Resources Measured plus Indicated (in-situ coal >0.5 m thickness) including coal quality.... 9-3 Table 9-3: San Juan Coal Resources Inferred (in-situ coal >0.5 m)... 9-1 L I S T O F F I G U R E S Figure 2-1: Property Holdings... 2-2 Figure 3-1: Stratigraphy of the Rancheria Valley... 3-2 Figure 3-2: Generalized Stratigraphic Column, San Juan Area... 3-4 Figure 3-3: Structural Fault Blocks... 3-6 Figure 3-4: Cross Section DHSEC-31... 3-7 Figure 3-5: Cross Section DHSEC-16... 3-8 Figure 3-6: Cross Section DHSEC-12... 3-9 Figure 5-1: Drillhole Locations... 5-2 Figure 6-1: 3D Seismic Interpretation... 6-3 Figure 8-1: Seam 0 Initial Classification... 8-2 Figure 8-2: Seam 0 Final Classification... 8-3 TOC ii
TERMS AND ACRONYMS adb AMEC arb db CIM ha Air dried basis AMEC Americas Limited As received basis Dried basis Canadian Institute for Mining and Metallurgy Hectares o C Degrees Celsius ID km m mm MPX Mt Mtpa Inverse distance Kilometres Metres Millimetres MPX Colombia Million tonnes Million tonnes per annum NI 43-101 National Instrument 43-101 Standards for Disclosure for Mineral Projects PCI PFS Project (the) Pulverized coal injection Pre-feasibility Study La Guajira Coal Project (the) QP Qualified Person (per NI 43-101 criteria) ROM Run-of mine Terms and Acronyms i
EXECUTIVE SUMMARY This document constitutes a summary of the underground coal resources estimated within the San Juan Area of the La Guajira Coal Project (Project) held by MPX Colombia. Total Measured plus Indicated resources contained in the 37 seams modelled are 5.215 billion tonnes. Included in this resource are 3.310 billion tonnes of PCI coal. A further Inferred resource of 426.3 million tonnes (Mt) is also included in the resource (252.2 Mt PCI). PCI Thermal Measured (000 s tonnes) Indicated (000 s tonnes) Inferred (000 s tonnes) 994,752 2,316,223 252,165 580,545 1,324,236 174,156 Totals 1,575,297 3,640,459 426,321 Total (000 s tonnes) 3,563,140 2,078,937 5,642,077 MPX Colombia has conducted exploration in the San Juan Area, Department of La Guajira, Colombia since 2009. During this time, exploration has focused on delineating coal resources contained in the Cerrejon Formation of Paleogene age. MPX Colombia has obtained coal tenures covering a large area in northeastern Colombia. The Project is located in the Department of La Guajira, Colombia, near the town of San Juan del Cesar. San Juan del Cesar is located approximately 850 kilometres (km) northeast of Bogota, the capital of Colombia, and approximately 70 km north of the city of Valledupar, the largest population centre in the area. The coal bearing Cerrejon Formation extends over 70 km along a northeast to southwest strikeline roughly coinciding with the Rancheria River Valley in the Departments of La Guajira and Cesar, Colombia. The January 2012 3D seismic interpretation the presence of eight main faults. These faults have a modelled ed displacement from a few metres to several hundred metres. In between the faults, the sedimentary package containing the coal seams is generally shallowly dipping to flat. Large scale, open folds are also present. The coal seams at San Juan are high volatile bituminous B and C, non-agglomerating. The majority of the coal seams in the resource will produce a thermal coal product. However, the following seams have characteristics suitable for use as a PCI product: Upper seams 120, 116, 115, 110, 100, 95, 90, 85 and 75 Lower seams 60, 55, 50, 45, 25, 20, 15, and 0 Executive Summary i
Ash contents for the coal seams modelled ed ranges from 1.8 to 16.1 % on an air dried basis. Heating values range from 11,326 to 13,471 BTU/lb. A total of 36 drill holes (33,093 metres drilled), completed in a three year period (2009-2011), constitute the drillhole database used for the coal resource estimate. An additional four holes completed in 2012 have been used to upgrade the resource classification in the vicinity of these holes to Indicated from Inferred. For this model, distances of 600, 1,200 and 2,100 m from drill intercepts were used to determine Measured, Indicated and Inferred coal resources, respectively. The resources include all coal seams greater than 0.5 m in thickness. Information from analogous deposits and from information provided by MPX Colombia indicates that the coal in the San Juan deposit can be considered to have reasonable prospects of economic extraction. These references include a coal marketing study by MPX Colombia s marketing department and an evaluation of the PCI potential for San Juan Coals prepared by ALSCoal for MPX. MPX Colombia has executed a professional work program that has advanced the project to a level to support a Pre-feasibility Study (PFS). The Measured and Indicated portions of the coal resource estimate meet the requirements to support mine design and are suitable for use in a PFS. Executive Summary ii
1.0 INTRODUCTION This document constitutes a summary of the underground coal resources estimated within the San Juan Area of the La Guajira Coal Project (Project) held by MPX Colombia. This coal resource statement has been prepared by AMEC Americas Limited (AMEC) in the context of ongoing work related to the preparation of a Pre-feasibility Study (PFS) and a Technical Report in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators (NI 43-101) (Canadian Securities Administrators, 2011b). MPX Colombia has conducted exploration in the San Juan Area, Department of La Guajira, Colombia since 2009. During this time, exploration has focused on delineating coal resources contained in the Cerrejon Formation of Paleogene age. MPX Colombia has obtained coal tenure covering a large area in northeastern Colombia. Mr. Ron Parent, Principal Geologist, is the Qualified Person (QP) responsible for preparing the coal resource estimates. Mr. Parent completed several site visits during 2011. They were conducted during: 21 March 4 April, 6 27 August, and 10 11 October. The effective date of the coal resource estimate is 7 February 2012. This represents the cut off date for inclusion of scientific and technical information used in preparing the resource estimate. Exploration drilling is ongoing, primarily in areas to the south of the current resource model, referred to as San Juan South. Page 1-1
2.0 LOCATION AND ACCESS, CLIMATE, INFRASTRUCTURE AND PHYSIOGRAPHY The Project is located in the Department of La Guajira, Colombia, near the town of San Juan del Cesar. San Juan del Cesar is located approximately 850 kilometres (km) northeast of Bogota, the capital of Colombia, and approximately 70 km north of the city of Valledupar, the largest population centre in the area. The property is accessed via a network of paved and gravel roads. The property covers approximately 35,800 hectares (ha) (Figure 2-1). The Mining Licenses under where the resources were defined are concession # s GDI-081, HGS-13332 and GLL-15Z8. The regional climate is dry tropical with average annual precipitation ranging from 800 to 1,000 millimetres (mm), with most rainfall occurring in two wet periods over the year. Temperature range is a fairly constant 23 to 36 degrees Celsius ( o C) on an average monthly basis (J.T. Boyd Company, 2010). The lands in the Project area lie in the topographic divide between the Rio Cesar and Rio Rancheria drainage, to the south and north, respectively. Most of the Project area is within the alluvial valleys of those watersheds where the terrain is generally flat. Topography rises abruptly at the foothills of the Serrania de Perija Mountains immediately to the east of the concessions (J.T. Boyd Company, 2010). Predominant land use in the region is for agricultural production and for the grazing of cattle. The closest centers of commerce are Valledupar and Riohacha. MPX Colombia is currently in the process of identifying and acquiring surface rights necessary for mine development. Electrical power is available via the local electrical distribution grid although additional studies are necessary to determine if surplus capacity sufficient to support a major underground mining operation is available. There are a number of water sources available that would likely meet future mining needs. The Project area is near the established Cerrejon mining region that would be a source of certain skilled labour, however specialized underground mining crews would have to be brought in until local workers could be trained. Page 2-1
1,100,000 1,110,000 1,120,000 1,130,000 1,140,000 ± Potrerito 1,690,000 Riohacha 1,690,000 Colombia La Duda 1,680,000 Valledupar Venezuela Maracaibo Boca del Monte Sitio Nuevo Los Tunales El Playón Pondorito Los Pozos El Tablazo Cañaverales Corraleja Conejo 1,680,000 1,670,000 El Molino 1,670,000 T:\8 - ArcGIS\map layout files\arcgis v.10\san Juan - Coal Resource Statement figures\figure_2-1_san_juan_area_property_holdings.mxd 1,660,000 1,100,000 Legend MPX - San Juan Canaveralles Municipal Areas Road River 1,110,000 1,120,000 CLIENT: PROJECT: DATE: April 17, 2012 1,130,000 1,140,000 QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: 0 1.25 2.5 5 7.5 10 12.5 MPX - Colombia San Juan Property Holdings ANALYST: HK 1:250,000 Kilometres Figure 2-1 1,660,000
3.0 GEOLOGY 3.1 General Geology The coal bearing Cerrejon Formation extends over 70 km along a northeast to southwest strikeline roughly coinciding with the Rancheria River Valley in the Departments of La Guajira and Cesar, Colombia. The Cerrejon Formation is composed of transitional marine continental deposits of Paleogene age. It is over 1 km thick and conformably overlies the 170 to 440 metres (m) thick Manantial Formation with a gradational contact. Overlying the Cerrejon is the 0 75 m thick Tabaco and 300 m thick Palmito formations. A disconformity separates these overlying formations from the Cerrejon (Figure 3-1). Page 3-1
T:\8 - ArcGIS\map layout files\arcgis v.10\san Juan - Coal Resource Statement figures\figure_3-1_stratigraphy_of_the_rancheria_valley.mxd CLIENT: PROJECT: DATE: April 17, 2012 QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: MPX - Colombia San Juan Stratigraphy of the Rancheria Valley ANALYST: HK Figure 3-1
The Cerrejon is comprised predominately of calcareous and quartz sandstones, dark coloured siltstones and mudstones, black shales and coal seams with an occasional thin limestone. The regional dip is to the southeast and local folds and faulting are common. The Project area is situated roughly in the Rancheria Valley. The valley floor is overlain with a blanket of recent alluvial sediments that obscure any visible fault traces or outcropping of rock. The alluvium thicknesses range from less than 10 m near the foothills along the eastern edge of the valley to over 400 m in the central portion. Recent seismic surveys identify a series of structures interpreted as faults and associated folds in the area of the coal deposits. 3.2 Coal Geology Geologically the Cerrejon Formation is divided ded into three members, referred to as the Upper, Middle and Lower (Figure 3-1). The Lower and Middle members are present in the San Juan area. The coal seams in the two members are numbered, with Seam 130 approximately the highest (youngest coal) and Seam 0 (oldest) (or Seam 00, as it is sometimes referred to), the lowest numbered seam. The general stratigraphic location of these seams is presented in Figure 3-2. The Middle member is around 350 m thick, while the lowest member approaches 300 m in thickness (J.T. Boyd Company, 2010). Page 3-3
T:\8 - ArcGIS\map layout files\arcgis v.10\san Juan - Coal Resource Statement figures\figure_3-2_generalized_stratigraphic_column_san_juan_area.mxd CLIENT: PROJECT: Generalized Stratigraphic Column, San Juan Area DATE: April 17, 2012 QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: MPX - Colombia San Juan ANALYST: HK Figure 3-2
3.3 Structural Geology The January 2012 3D seismic interpretation the presence of eight main faults. These faults have a modelled ed displacement from a few metres to several hundred metres. In between the faults, the sedimentary entary package containing the coal seams is generally shallowly dipping to flat. Large scale, open folds are also present. More recent interpretations that post date the effective date of the model have refined and modified the position of the interpreted faults. This will be reflected in future iterations of the model. Fault blocks were interpreted as undisturbed sedimentary packages between the major faults. The location of the fault blocks is in Figure 3-3. Figures 3-4, 3-5, and 3-6 show the relationship between the faults, coal seams and alluvium contact in cross section. The resolution of the January 2012 seismic interpretation was 20 m such that fault displacements with less than 20 m offset may not be detected. The presence of unrecognized faults would be a risk to mine design and operations. More recent seismic interpretation, although preliminary, shows the ability to resolve structures down to 3 5 m. There is anecdotal evidence that there are relatively few compaction related faults in the nearby Cerrajon Mine. Page 3-5
1,125,000 1,130,000 1,135,000 1,140,000 1,690,000 ± 1,690,000 La Duda SJ10-265 SJ11-339 SJ09-143 SJ09-149 SJ11-342 SJ09-144 1,685,000 1,680,000 Boca del Monte Los Tunales SJ11-343 SJ11-348 SJ11-345 SJ11-345CG SJ09-142 SJ11-337 SJ11-336R SJ11-336 SJ09-196 El Playón #* SJ11-338 SJ11-359 SJ10-256 SJ11-341 Pondorito SJ11-360 SJ11-356 SJ11-349 #* SJ10-253 SJ11-362 #* SJ11-340 SJ11-344 Cañaverales SJ09-165 SJ11-361 SJ11-358 #* SJ11-346 SJ11-357 SJ11-352R SJ11-352 El Tablazo Sitio Nuevo Los Pozos SJ11-350 SJ11-347 Corraleja SJ11-355 Conejo 1,685,000 1,680,000 SJ10-251 SJ11-354 T:\8 - ArcGIS\map layout files\arcgis v.10\san Juan - Coal Resource Statement figures\figure_3-3_location_of_structural_fault_blocks.mxd 1,675,000 1,125,000 Legend #* New Hole Core Hole Open Hole Concesion Forest Reserve Topographic Contour - 50 m Municipal Area Road River 1,130,000 Block Boundary Block 1 Block 2 Block 3 Block 4 Block 5 Block 6 Block 7 Block 8 CLIENT: PROJECT: DATE: 1,135,000 April 17, 2012 1,140,000 QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: 0 0.5 1 2 3 4 5 MPX - Colombia San Juan Structural Fault Blocks ANALYST: HK 1:100,000 Kilometres Figure 3-3 1,675,000
Block 5 Block 4 Block 3 Kilometres 1690000 1130000 1140000 ± 1690000 \\Van-fs1\p00169029\14.GIS\arcgis\shape files\magna_bogota_2012\figure_3-4_model_crosssection_dhsec-31.mxd Legend #* New Hole Core Hole Open Hole Cross Section Line Concesion Block Boundry Municipal Area Road River 1680000 Boca del Monte La Duda SJ09-149 SJ11-342 SJ11-343 SJ11-337 Sitio Nuevo SJ11-348 SJ09-142 SJ11-336 Los Tunales SJ11-336R SJ09-196 El Playón #* SJ11-338 SJ11-341 Pondorito SJ11-356 SJ10-256 SJ11-349 #* SJ11-362 #* SJ11-340 SJ11-344 Cañaverales SJ09-165 SJ11-361 #* SJ11-346 SJ11-358 SJ11-357 SJ11-352R SJ11-352 El Tablazo SJ10-251 1130000 SJ10-265 SJ11-339 SJ09-143 DHSEC-31 SJ11-350 SJ11-355 Los Pozos SJ11-347 SJ11-354 Corraleja 1:130,000 Conejo 0 1 2 4 6 8 Kilometers 1680000 1140000 CLIENT: PROJECT: DATE: ANALYST: April 17, 2012 HK QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: MPX - Colombia San Juan Cross Section DHSEC-31 Figure 3-4
Block 5 Block 4 Block 7 Block 6 Block 3 Kilometres 1690000 1130000 1140000 ± 1690000 \\Van-fs1\p00169029\14.GIS\arcgis\shape files\magna_bogota_2012\figure_3-5_model_crosssection_dhsec-16.mxd Legend #* New Hole Core Hole Open Hole Cross Section Line Concesion Block Boundry Municipal Area Road River 1680000 Boca del Monte La Duda SJ09-149 SJ11-342 SJ11-343 SJ11-337 Sitio Nuevo SJ11-348 SJ09-142 SJ11-345 SJ11-336 Los Tunales SJ11-345CG SJ11-336R SJ09-196 El Playón #* SJ11-338 SJ11-341 SJ11-359 Pondorito SJ11-356 SJ10-256 SJ11-349 #* SJ11-362 #* SJ11-340 SJ11-344 Cañaverales SJ11-361 SJ11-358 #* SJ11-346 SJ11-357 SJ11-352R SJ11-352 El Tablazo SJ10-251 SJ10-265 SJ11-339 SJ09-143 DHSEC-16 1130000 SJ11-350 SJ11-355 Los Pozos SJ11-347 SJ11-354 Corraleja 1:130,000 Conejo 0 1 2 4 6 8 Kilometres 1680000 1140000 CLIENT: PROJECT: DATE: ANALYST: April 17, 2012 HK QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: MPX - Colombia San Juan Cross Section DHSEC-16 Figure 3-5
Block 4 Block 8 Block 7 Block 6 Block 3 Kilometres 1690000 1130000 1140000 ± 1690000 \\Van-fs1\p00169029\14.GIS\arcgis\shape files\magna_bogota_2012\figure_3-6_model_crosssection_dhsec-12.mxd Legend #* New Hole Core Hole Open Hole Cross Section Line Concesion Block Boundry Municipal Area Road River 1680000 Boca del Monte La Duda SJ09-149 SJ11-342 SJ11-343 SJ11-337 Sitio Nuevo SJ11-348 SJ09-142 SJ11-345 SJ11-336 Los Tunales SJ11-345CG SJ11-336R SJ09-196 El Playón #* SJ11-338 SJ11-341 SJ11-359 Pondorito SJ11-356 SJ10-256 SJ11-349 #* SJ11-362 #* SJ11-340 SJ11-344 Cañaverales SJ09-165 SJ11-361 #* SJ11-346 SJ11-358 SJ11-357 SJ11-352R SJ11-352 SJ10-251 DHSEC-12 El Tablazo 1130000 SJ10-265 SJ11-339 SJ09-143 SJ11-350 SJ11-355 Los Pozos SJ11-347 SJ11-354 Corraleja 1:130,000 Conejo 0 1 2 4 6 8 Kilometres 1680000 1140000 CLIENT: PROJECT: DATE: ANALYST: April 17, 2012 HK QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: MPX - Colombia San Juan Cross Section DHSEC-12 Figure 3-6
4.0 COAL QUALITY The coal seams at San Juan are high volatile bituminous B and C, non-agglomerating. Initial indications were that the coal l would be used as a thermal product for export. ALS Coal of Australia has prepared an evaluation of the PCI (pulverized coal injection) characteristics of these seams (Bennett, 2012). The report concludes that the following seams have characteristics suitable for use as a PCI product: Upper seams 120, 116, 115, 110, 100, 95, 90, 85 and 75 Lower seams 60, 55, 50, 45, 25, 20, 15, and 0 Table 4-1 below is a summary of selected coal quality parameters for the coal seams in the geological model and used in the coal resource estimate, based on composites calculated from the individual sample analyses. Seam Table 4-1: No. of coal quality composites 0 7 13,502 5 5 13,353 10 3 11,326 15 7 12,613 20 6 13,135 25 7 12,706 26 1 13,045 30 5 12,474 35 4 12,755 37 2 12,653 40 5 12,909 45 5 12,960 46 5 12,548 47 4 12,461 50 5 12,453 52 4 12,002 55 6 12,424 57 1 12,297 60 5 12,373 65 3 12,234 67 2 12,173 70 3 12,569 75 3 12,009 80 1 12,535 Seam Composite Data from Drillholes BTU / lb Ash % (adb) (adb) FSI Volatile matter % (adb) Fixed carbon % (adb) Residual moisture % 2.42 2 38.27 54.15 5.14 2.92 2 38.60 53.16 5.34 16.10 1 33.03 45.82 5.06 8.08 2 37.58 49.34 5.01 4.13 2 37.39 53.39 5.13 6.07 2 39.14 49.40 5.41 1.30 n/a 41.10 49.80 7.70 5.57 3 37.17 50.49 6.79 3.81 2 38.45 50.74 7.01 3.70 n/a 38.65 49.73 7.98 3.01 1 38.95 51.02 7.06 2.04 1 38.43 51.78 7.77 4.27 1 38.25 49.80 7.68 4.09 1 37.00 50.71 8.20 4.48 1 36.86 50.35 8.36 7.98 1 36.13 46.78 9.15 4.01 0 37.24 50.45 8.30 4.11 n/a 37.63 49.74 8.47 2.41 1 37.48 50.34 9.79 2.16 0 37.18 50.10 10.56 3.83 1 38.27 48.69 9.21 3.76 1 39.25 48.15 8.81 2.61 1 37.96 47.96 11.44 1.80 n/a 39.80 49.10 9.40 Equilibrium moisture % Sulfur % (adb) 8.87 0.87 9.70 1.27 8.81 0.52 9.38 0.87 10.64 0.45 10.42 1.98 11.28 0.66 11.22 1.36 11.39 0.96 12.06 0.47 10.88 0.61 12.42 0.42 13.19 1.11 14.32 0.73 15.24 0.61 13.94 0.55 15.15 0.43 14.64 0.74 15.40 0.41 15.63 0.33 15.55 0.65 16.50 0.61 15.95 0.42 15.22 0.42 Page 4-1
Seam No. of coal quality composites BTU / lb Ash % (adb) (adb) FSI Volatile matter % (adb) Fixed carbon % (adb) Residual moisture % Equilibrium moisture % Sulfur % (adb) 85 1 12,084 3.45 1 38.15 48.07 10.22 15.11 0.54 90 4 12,131 3.39 1 37.08 48.37 11.17 15.37 0.34 92 3 12,383 3.32 1 39.22 47.20 10.26 16.19 0.44 95 3 11,767 5.62 0 37.75 42.31 14.39 n/a 0.52 100 2 12,788 2.30 0 40.35 43.65 13.75 n/a 0.60 105 3 11,683 11.14 0 38.25 36.78 13.81 14.13 0.43 110 2 12,187 11.21 0 38.02 37.13 13.69 n/a 0.30 112 2 13,471 2.72 n/a 40.47 47.36 9.46 n/a 0.31 113 2 12,993 4.65 n/a 43.74 37.02 14.62 n/a 0.32 115 3 13,123 4.10 0 43.03 40.46 12.40 n/a 0.30 116 2 12,616 7.95 n/a 41.14 36.83 14.08 n/a 0.31 117 2 12,701 7.20 0 43.45 36.60 12.80 n/a 0.63 120 2 12,007 11.83 0 40.18 34.55 13.45 n/a 0.38 Note: adb air dried basis; BTU - British Thermal Unit; FSI - free swelling index; lb - pound; n/a - seam quality parameters were not analysed for this coal seam; No. - number; % - percent. Bold indicates PCI product. Page 4-2
5.0 DRILLING, SAMPLING AND DOWNHOLE GEOPHYSICS A total of 36 drill holes completed in a three year period constitute the drillhole database used for the coal resource estimate. Core holes were used to obtain coal quality samples and geophysical logs and open holes (mud rotary) were used as infill to provide additional depth and thickness information from the geophysical logs. A breakdown of drilling by year and type is displayed in Table 5-1 below. Four additional holes drilled in 2012 were not included in database used in the geological model and resource estimate, but the preliminary results were compared to the interpreted model and to add confidence to the classification. Table 5-1: Year 2009 2010 2011 ALL Drilling Summary, San Juan Deposit Core Open Total length (metres) 3 3 3,690 1 3 2,300 12 14 27,103 16 20 33,093 Page 5-1
1,125,000 1,130,000 1,135,000 1,140,000 1,690,000 ± 1,690,000 La Duda SJ10-265 SJ11-339 SJ09-143 1,685,000 1,680,000 Boca del Monte SJ11-348 Los Tunales Sitio Nuevo SJ09-149 SJ11-342 SJ09-144 SJ11-343 SJ09-142 SJ11-337 SJ11-345 SJ11-336R SJ11-336 SJ11-345CG SJ09-196 El Playón #* SJ11-338 SJ10-256 SJ11-341 SJ11-359 Pondorito SJ11-360 SJ11-356 #* SJ10-253 SJ11-349 SJ11-362 #* SJ11-340 SJ11-344 Cañaverales SJ09-165 SJ11-361 #* SJ11-358 SJ11-346 SJ11-357 Corraleja Conejo 1,685,000 1,680,000 SJ11-352R SJ11-352 El Tablazo Los Pozos SJ11-350 SJ11-347 SJ11-355 SJ10-251 SJ11-354 T:\8 - ArcGIS\map layout files\arcgis v.10\san Juan - Coal Resource Statement figures\figure_5-1_drillhole_locations.mxd 1,675,000 1,675,000 1,125,000 Legend #* New Hole Core Hole Open Hole Concesion Forest Reserve Topographic Contour - 50 m Municipal Area Road River 1,130,000 CLIENT: PROJECT: DATE: 1,135,000 April 17, 2012 1,140,000 QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: 0 0.5 1 2 3 4 5 MPX - Colombia San Juan Drillhole Locations ANALYST: HK 1:100,000 Kilometres Figure 5-1
Coal samples were obtained for analysis from the cored holes and sent to SGS Laboratories in Baranquilla. The laboratory was visited by representatives of MPX Colombia and AMEC prior to the 2011 sampling program to ensure that quality standards were being followed. Coal quality tests performed included proximate and ultimate analysis and ash mineral composition. on. Proximate analyses were reported on an as received basis (arb) and on an air dried basis (adb). The coal seams were sampled by ply in most cases, whole seam composites were derived from the individual sample qualities and used to interpolate the coal quality in the model. The table below (Table 5-2) illustrates the average sample length for each drilling campaign: Table 5-2: Year Average Sample Lengths for Each Year of Drilling Average Sample Length (m) 2009 2.40 2010 0.34 2011 0.61 Core that remained after testing is being stored at MPX Colombia s core storage facility in San Juan del Cesar. Upon completion of the hole, where drillhole conditions permitted, geophysical logging was carried out by Weatherford downhole logging contractors. Typical logs included: Gamma, density, resistivity and calliper; Down hole deviation survey; Dipmeter; and Sonic. A summary of logs completed for each hole is included in Table 5-3 below. Table 5-3: Summary of Log Completion Hole-ID Deviation Gamma Resistivity Density Calliper Dipmeter Sonic SJ09-142 Yes Yes No Yes No No No SJ09-143 No No No No No No No SJ09-144 No No No No No No No SJ09-149 Yes Yes Yes Yes Yes Yes Yes SJ09-165 Yes Yes Yes Yes Yes No No SJ09-196 Yes Yes Yes Yes Yes Yes Yes SJ10-251 No Yes No Yes No No No SJ10-253 Yes Yes No Yes No No No SJ10-256 Yes Yes Yes Yes Yes Yes Yes Page 5-3
Hole-ID SJ10-265 SJ11-336 SJ11-336R SJ11-337 SJ11-338 SJ11-339 SJ11-340 SJ11-341 SJ11-342 SJ11-343 SJ11-344 SJ11-345 SJ11-345CG SJ11-346 SJ11-347 SJ11-348 SJ11-349 SJ11-350 SJ11-351 SJ11-352 SJ11-352R SJ11-353 SJ11-354 SJ11-355 SJ11-356 SJ11-357 SJ11-358 Deviation Gamma Resistivity Density Calliper Dipmeter Sonic No No No No No No No Yes Yes No Yes No No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No Yes Yes Yes Yes Yes No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes No No No No No No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes No No No No No No No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Sample intervals from core sampling were checked and corrected, where required, such that the sample interval matched the geophysical log interval for each coal seam. A summary of seam thickness data from the drilling is presented in Table 5-4 below. Page 5-4
Table 5-4: Seam Seam Thickness Data Summary No. Intersections 0 20 5 19 10 20 15 20 20 22 25 21 26 6 30 16 35 13 37 6 40 19 45 20 46 12 47 14 50 16 52 15 55 18 57 9 60 16 65 13 67 7 70 13 75 13 80 12 85 11 90 13 92 7 95 12 100 11 105 11 110 8 112 4 113 6 115 7 116 6 117 6 120 6 Average Thickness (m) Minimum Thickness (m) Maximum Thickness (m) 2.8 1.2 3.6 1.0 0.4 2.7 2.5 0.2 7.4 3.7 1.3 8.0 2.9 1.0 3.9 2.2 0.2 5.9 1.6 0.7 2.5 1.5 0.3 3.3 1.8 0.2 8.2 1.4 0.7 1.9 2.5 0.6 5.2 6.0 2.0 9.7 2.0 0.2 4.9 1.0 0.2 3.1 2.5 0.2 4.5 2.0 0.9 3.8 3.3 0.5 10.8 1.3 0.5 2.5 3.4 1.6 5.2 2.8 1.4 4.0 1.1 0.6 1.6 1.4 0.3 2.9 3.1 1.2 12.2 1.8 0.7 3.0 2.6 0.3 5.5 3.3 0.7 10.7 1.0 0.3 1.5 2.5 1.4 4.5 2.6 0.3 5.4 2.9 0.9 8.6 3.9 0.8 8.4 4.2 0.5 5.8 5.0 0.2 10.3 6.3 3.4 12.5 3.3 0.2 7.8 1.6 0.4 4.8 7.7 2.7 14.9 Standard Deviation (m) 0.6 0.5 1.9 1.8 0.6 1.8 0.7 0.9 1.9 0.5 1.4 2.2 1.6 0.7 1.0 0.9 2.9 0.7 1.2 0.9 0.4 0.8 2.7 0.5 1.3 2.6 0.5 0.9 1.5 2.3 2.4 2.2 3.3 3.2 2.6 1.5 4.4 Page 5-5
6.0 GEOLOGICAL DATABASE 6.1 ACCESS Database A Microsoft ACCESS CESS database was created only for the purposes of this resource estimation process. It contains interdependent relationships among the various tables as required to maintain data integrity (i.e., a one-to-many relationship between the header and lithology table such that you cannot have information in the lithology table for a hole that is not in the header table). Primary keys and validation rules were also set up to provide further data integrity. Examples include: a primary key on the Hole-Iensure that the database cannot have two holes with the same name; and a validation rule on the azimuth of each borehole was created, such that the azimuth must be between 0 and 359 degrees to ensure that incorrect values cannot be entered into the field. field in the header table was used to MPX Colombia has a SQL Server database at their offices in Valledupar. This database was created by Gemcom for the purposes of controlling all entry and reporting of data for the exploration program, including coal quality, geology, geotechnical, gas, hydrogeological and more. AMEC has not reviewed this database. The following tables are included in the database: Header; Survey; Lithology; Sample; Coal quality; Geophysics; and Dipmeter. Several weeks were spent compiling the available information and checking the lithological and sample intervals for congruence with the geophysical log information. 6.2 Seam Correlations Preliminary seam correlations were made by MPX Colombia Geologists in the field as the drilling program was ongoing and revised upon the reception of coal quality data. These correlations were then passed on to AMEC for verification and consistency with the model interpretation. Final seam correlations were made by AMEC using the geophysical logs, seam intersection thickness and structural position to determine the most appropriate Page 6-1
seam numerical code. Because of time constraints, the assumption was made that there are no repetitions of the seams caused by thrust faults. It is acknowledged that improvements to the geological model can be made using advanced interpretation of the 3D seismic data that may include structural repetitions of the coals seams in some of the fault blocks. Also, the 2012 drill results, when finalized, will improve the accuracy of the interpretations and should be included an updated coal resource estimate prior to feasibility study. AMEC believes that the current model is representative of the coal volume of the deposit as a whole and honours the data set as of the close-off date of the database. 6.3 3D Seismic MPX Colombia has carried out a large 3D high resolution seismic campaign over the deposit (112 km 2 area and 1200 km of seismic lines) under the guidance of OGX, a sister company of MPX Colombia - part of the EBX holding company - during the latter half of 2011. OGX continues to work on the interpretation of the seismic data in conjunction with various companies in the world specialized in 3D seismic data processing, including LandOcean and Geomage. This involved data collection points on surface at a 24 by 24 m spacing, with the final grid in subsoil resulting in a bin of 12 by 21 m (area of each pixel of the image). Interpretation and processing of this very large data set is time intensive. At the time of finalization of the geological modelling, ling, the seismic surveys were completed, but iterations of the data processing and interpretation was still ongoing. The seismic interpretation version supplied to AMEC in January 2012 was used by AMEC in the geological model and resource estimate. The fault surface interpretations, the base of the alluvium and the base of the Seam 0 were supplied to AMEC as DXF files. Information from some of the latest drillholes completed in 2011 were not available to OGX at the time they developed their structural model based on the seismic data. As a result, AMEC reinterpreted some portions of the seismically interpreted bottom of Seam 0 to ensure that the AMEC prepared geological model honoured the 2011 drilling information. Subsequent to the January 2012 seismic interpretation, OGX provided a revised seismic interpretation model which indicates that there are some areas where the geological model can be improved. Additional processing of the seismic data is ongoing, generating high resolution structural interpretation, including the possibility of mapping individual coal seams. This advanced seismic interpretation will likely lead to significant improvements of the geological model and refinements of the coal resource estimate. These improved seismic interpretations, along with the most recently completed drill hole data, should be used to update the coal resource estimate prior to feasibility study. Page 6-2
T:\8 - ArcGIS\map layout files\arcgis v.10\san Juan - Coal Resource Statement figures\figure_6-1_3d_seismic_interpretation.mxd CLIENT: PROJECT: MPX - Colombia San Juan 3D Seismic Interpretation DATE: ANALYST: April 17, 2012 HK JOB No: PROJECTION: Figure 6-1 167577 QA/QC: Magna Sirgas Zone NAD 83 MV
7.0 GEOLOGICAL MODELLING In order to be included in the geological model, a coal seam had to have at least 2 drillhole intersections greater than 1.5 m. After the drillhole database was verified by the cut off date of 31 December 2011, the following steps were carried out during the preparation of the geological model using MineSight software: 1. Creation of surfaces for the base of the alluvium and the base of Seam 0 using the seismic interpreted information provided, along with the drillhole information which contains 20 intersections of the base of Seam 0. 2. Importation of the fault surfaces interpreted from the seismic data. 3. Creation of geological cross sections along a series of variably spaced intervals corresponding to the location of the drillholes such that a small projection (less than 50 m) was required to honour the drillhole on section. The interpreted sections included faults, surface topography, alluvium-bedrock contact, and base Seam 0. 4. Creation of a series of interpreted false seam intersections for holes where a seam in the model was not intersected in the drillhole. A false seam 0.5m thick controlled the position of the seams and allowed modeling of the pinch out. 5. Stacking of the seam bottoms and tops upwards from the base of Seam 0 and clipping at the faults. The seam thicknesses were interpolated from the composites using inverse distance (ID) to a power of 2.5 with a 15,000 m search radius. 6. The resulting cross section polylines were then used to create a 3D wireframe of the top and bottom surfaces by linking. 7. Determination of the areal extents for each seam (areas where the seam thickness was > 0.5 m). The 0.5m thickness was selected for the purpose of modeling so that the coal resource model would extend beyond and would not limit the areal extent of future reserve estimates. 8. Creation of solids from the seam surfaces. 9. Coding the resulting solids to a MineSight 3D block model (3 seams per block) with dimensions of 25 by 25 by 10 m (height) and rotated 38.5 degrees east such that the model x is parallel to the overall strike of the deposit. Three seams per block were used to ensure that the block model was able to capture all coal seams. 10. Assigning average coal quality (using interpolation at ID -1 ) for each seam to the block model. A total of 15 coal quality items were included in the model, these are listed in Table 7-1. 11. Fine-tuning of coal quality interpolation between holes using inverse distance at a power of 2 in order to model the detailed quality variations between holes. This step Page 7-1
involves a smaller interpolation distance that may not extend to the limits of the model. 12. A final interpolation of seam true thickness, dip, and coal fraction (that portion of the seam that is not parting material) using the same interpolation parameters as used for the seam thickness modelling (ID at 2.5). Table 7-1: Coal Quality Items in the 3D Block Model Block Model Item ASH FSI VM FC RM EQM S BTU TM C H N HGI NA2O P2O5 Basis Minimum Maximum Units adb 0 100 % n/a 0 10 None adb 0 100 % adb 0 100 % n/a 0 30 % n/a 0 30 % adb 0 20 % adb 0 100,000 BTU/lb n/a 0 100 % adb 0 100 % adb 0 100 % adb 0 100 % n/a 0 4,000 None db 0 100 % db 0 100 % Page 7-2
8.0 COAL RESOURCE CLASSIFICATION The San Juan coal deposit consists of seams in 8 distinct fault blocks. The geological complexity of the San Juan deposit as a whole can be considered moderate. The Companion Policy 43-101CP (Canadian Securities Administrators, 2011a) references Paper 88-21 of the Geological Survey of Canada: A Standardized Coal Resource/Reserve Reporting System for Canada (Hughes et al, 2011) (GSC Paper 88-21) as a guidance document when preparing coal resource estimates. GSC Paper 88-21 indicates that the distance from nearest data point for a deposit with a moderate geology type classified as Measured, Indicated and Inferred should be: 0-450; 450-900; and 900-2400 m, respectively. For this model, distances of 600, 1,200 and 2,100 m from drill intercepts were used to determine Measured, Indicated and Inferred coal resources, respectively. The larger distances for Measured and Indicated was partly based on the 3D seismic data providing of additional data point coverage between the drill holes and the latest interpretations showing individual coal seams traceable over relatively long distances. The selected distance used for Inferred coal resources, is less than the higher range 2400m recommended under GSC Paper 88-21 because most of the coal in the Inferred category is located along the southeast edge of the model, and juxtaposes an interpreted fault between the San Juan and Canaverales deposit. The location of this fault is not well defined, hence the limitation on the Inferred extrapolation distance. An area in the central portion of the deposit was originally classified as Inferred based on drill hole spacing (Figure 8-1). Four additional al holes were completed in this area in early 2012, with preliminary results only available after the database was closed for the resource estimate. However, the preliminary results of the four drill holes were in reasonable agreement (approximate number of seams and coal thicknesses) with the seams projected by the geological model. The decision was then made to re-classify this area of Inferred resources to Indicated (Figure 8-2) to allow inclusion in the mine design of the PFS. While some changes in the model will be required to incorporate the holes in the model, AMEC believes that when this is done, it will not materially affect the overall resource estimate. No limitation on resources was considered for depth from surface within the model with the maximum depth of the model 1500 to 1600 metres below surface. Although underground coal mines are known to operate at these depths, mining costs would be expected to increase with depth and there is a risk that a portion of the deeper coal resources may not be economic, depending on the ground conditions. Page 8-1
1,125,000 1,130,000 1,135,000 1,140,000 1,690,000 ± 1,690,000 La Duda SJ10-265 SJ11-339 SJ09-143 SJ09-149 SJ11-342 SJ09-144 1,685,000 1,680,000 Boca del Monte Los Tunales SJ11-343 SJ11-348 SJ11-345 SJ11-345CG SJ09-142 SJ11-337 SJ11-336R SJ11-336 SJ09-196 El Playón #* SJ11-338 SJ11-359 SJ10-256 SJ11-341 Pondorito SJ11-360 SJ11-356 SJ11-349 #* SJ10-253 SJ11-362 #* SJ11-340 SJ11-344 Cañaverales SJ09-165 SJ11-361 SJ11-358 #* SJ11-346 SJ11-357 SJ11-352R SJ11-352 El Tablazo Sitio Nuevo Los Pozos SJ11-350 SJ11-347 Corraleja SJ11-355 Conejo 1,685,000 1,680,000 SJ10-251 SJ11-354 T:\8 - ArcGIS\map layout files\arcgis v.10\san Juan - Coal Resource Statement figures\figure_8-1_seam_00_initial_classification.mxd 1,675,000 1,125,000 Legend #* New Hole Core Hole Open Hole Road Municipal Area River Concesion Topographic Contour - 50 m Forest Reserve 1,130,000 Measured Indicated Inferred CLIENT: PROJECT: DATE: 1,135,000 April 17, 2012 1,140,000 QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: 0 0.5 1 2 3 4 5 MPX - Colombia San Juan Seam 00 - Initial Classification ANALYST: HK 1:100,000 Kilometres Figure 8-1 1,675,000
1,125,000 1,130,000 1,135,000 1,140,000 1,690,000 ± 1,690,000 La Duda SJ10-265 SJ11-339 SJ09-143 SJ09-149 SJ11-342 SJ09-144 1,685,000 1,680,000 Boca del Monte Los Tunales SJ11-343 SJ11-348 SJ11-345 SJ11-345CG SJ09-142 SJ11-337 SJ11-336R SJ11-336 SJ09-196 El Playón #* SJ11-338 SJ11-359 SJ10-256 SJ11-341 Pondorito SJ11-360 SJ11-356 SJ11-349 #* SJ10-253 SJ11-362 #* SJ11-340 SJ11-344 Cañaverales SJ09-165 SJ11-361 SJ11-358 #* SJ11-346 SJ11-357 SJ11-352R SJ11-352 El Tablazo Sitio Nuevo Los Pozos SJ11-350 SJ11-347 Corraleja SJ11-355 Conejo 1,685,000 1,680,000 SJ10-251 SJ11-354 T:\8 - ArcGIS\map layout files\arcgis v.10\san Juan - Coal Resource Statement figures\figure_8-2_seam_00_final_classification.mxd 1,675,000 1,125,000 Legend #* New Hole Core Hole Open Hole Road Municipal Area River Concesion Topographic Contour - 50 m Forest Reserve 1,130,000 Measured Indicated Inferred CLIENT: PROJECT: DATE: 1,135,000 April 17, 2012 1,140,000 QA/QC: PROJECTION: 167577 MV Magna Sirgas Zone NAD 83 JOB No: 0 0.5 1 2 3 4 5 MPX - Colombia San Juan Seam 00 - Final Classification ANALYST: HK 1:100,000 Kilometres Figure 8-2 1,675,000
9.0 ESTIMATED COAL RESOURCES 9.1 Resource Summary 9.1.1 Measured and Indicated Resources A total of 5.215 billion lion tonnes of coal (3.310 PCI and 1.904 Thermal), contained in seams > 0.5 m thick, fall into the Measured and Indicated categories. Table 9-1 summarizes the tonnages by seam and category, while Table 9-2 gives a detailed breakdown of tonnages and coal quality. Table 9-1: San Juan Coal Resources Measured plus Indicated (in-situ coal >0.5 m thickness) Seam 0 5 10 15 20 25 26 30 35 37 40 45 46 47 50 52 55 57 60 65 67 70 75 80 85 Measured (000 s tonnes) Indicated (000 s tonnes) 80,898 167,677 32,064 58,663 80,115 168,688 106,349 207,425 82,661 160,466 66,842 122,292 11,914 18,466 29,625 60,549 28,700 82,420 10,984 15,559 60,010 122,593 157,849 275,419 29,358 70,069 16,089 41,089 71,334 176,673 38,592 87,413 75,282 166,168 13,939 29,307 40,947 127,027 44,263 88,499 11,426 27,354 24,284 53,095 51,347 137,876 27,682 58,578 36,396 90,968 Total (000 s tonnes) 248,575 90,727 248,803 313,774 243,127 189,134 30,380 90,174 111,120 26,543 182,603 433,268 99,427 57,178 248,007 126,005 241,450 43,246 167,974 132,762 38,780 77,379 189,223 86,260 127,364 Page 9-1
Seam 90 92 95 100 105 110 112 113 115 116 117 120 Total Measured + Indicated PCI Measured (000 s tonnes) Indicated (000 s tonnes) 45,461 115,337 4,796 6,565 37,962 86,157 37,667 81,957 36,832 88,444 33,932 106,142 11,207 42,316 23,218 92,885 47,885 170,763 16,731 67,812 7,485 25,527 43,171 142,221 1,575,297 3,640,459 994,752 2,316,223 Thermal 580,545 1,324,236 Note: Bold indicates PCI coal product. Total (000 s tonnes) 160,798 11,361 124,119 119,624 125,276 140,074 53,523 116,103 218,648 84,543 33,012 185,392 5,215,756 3,310,975 1,904,781 Page 9-2
Table 9-2: San Juan Coal Resources Measured plus Indicated (in-situ coal >0.5 m thickness) including coal quality. Seam category Tonnes (000's) True Thickness (m) ASH (adb) Free Swelling Index Volatile Matter (adb) Fixed Carbon (adb) Residual Moisture Equilibrium Moisture BTU / lb Total Moisture Carbon Hydrogen Nitrogen Hargrove Index Density Na2O % P2O5 % Sulfur (adb) 0 5 10 15 20 25 26 30 35 37 40 45 248,575 2.82 2.23 2 80,898 2.87 2.20 1 167,677 2.77 2.26 1 90,727 1.15 3.22 2 32,064 1.21 3.33 1 58,663 1.09 3.11 1 248,803 3.52 20.18 2 80,115 3.89 21.10 1 168,688 3.15 19.25 1 313,774 4.03 6.92 2 106,349 4.27 6.49 1 207,425 3.79 7.34 1 243,127 2.91 3.80 2 82,661 2.97 3.86 1 160,466 2.85 3.73 1 189,134 2.92 5.80 2 66,842 3.30 5.89 1 122,292 2.54 5.70 1 30,380 2.05 1.30 11,914 1.99 1.30 18,466 2.11 1.30 90,174 1.82 5.26 2 29,625 1.96 5.51 1 60,549 1.68 5.01 1 111,120 3.48 3.34 2 28,700 3.65 3.29 1 82,420 3.31 3.38 1 26,543 1.60 3.86 10,984 1.54 3.86 15,559 1.66 3.85 182,603 2.78 3.09 2 60,010 2.87 3.00 1 122,593 2.70 3.18 1 433,268 6.17 1.88 2 157,849 6.38 1.77 1 275,419 5.97 1.98 1 38.31 54.73 4.71 8.67 13588 11.18 79.67 5.45 1.54 38.31 54.80 4.68 8.62 13596 11.08 79.73 5.46 1.54 38.32 54.66 4.73 8.71 13579 11.28 79.62 5.45 1.54 38.67 53.35 4.76 9.53 13407 12.52 79.42 5.37 1.50 38.63 53.27 4.77 9.52 13391 12.49 79.40 5.36 1.50 38.72 53.43 4.74 9.53 13423 12.54 79.45 5.37 1.50 31.53 43.43 4.87 8.65 10745 11.43 63.79 4.45 1.31 31.20 42.82 4.89 8.47 10606 11.37 62.98 4.39 1.29 31.86 44.04 4.85 8.82 10883 11.49 64.61 4.50 1.33 37.63 50.19 5.28 9.55 12741 11.43 76.21 5.41 1.44 37.63 50.45 5.43 9.60 12778 11.48 76.51 5.42 1.44 37.62 49.93 5.12 9.50 12704 11.38 75.91 5.40 1.43 37.59 53.55 5.11 10.61 13183 12.79 79.12 5.40 1.59 37.53 53.51 5.14 10.61 13169 12.76 79.12 5.40 1.59 37.65 53.58 5.08 10.60 13198 12.82 79.12 5.40 1.59 39.55 49.69 4.98 10.30 12805 11.45 75.22 5.44 1.49 39.47 49.63 5.01 10.31 12784 11.49 75.13 5.42 1.50 39.63 49.74 4.94 10.29 12825 11.41 75.32 5.45 1.49 41.10 49.80 7.70 11.30 13045 11.39 76.11 5.66 1.58 41.10 49.80 7.70 11.30 13045 11.39 76.12 5.66 1.58 41.10 49.80 7.70 11.30 13045 11.39 76.11 5.66 1.58 37.24 50.19 7.33 12.22 12399 13.65 62.05 4.37 1.27 37.11 50.03 7.37 12.32 12364 13.68 63.76 4.48 1.30 37.36 50.35 7.29 12.11 12434 13.62 60.35 4.26 1.23 39.15 50.74 6.78 11.31 12875 12.46 76.46 5.39 1.46 39.17 50.78 6.77 11.30 12884 12.45 76.47 5.39 1.46 39.13 50.70 6.79 11.32 12866 12.47 76.45 5.39 1.46 38.46 49.48 8.25 12.09 12595 15.97 72.80 5.29 1.26 38.45 49.48 8.26 12.08 12593 15.99 76.44 5.55 1.32 38.46 49.48 8.23 12.09 12597 15.96 69.17 5.02 1.19 38.77 51.69 6.48 10.84 12966 13.28 77.90 5.34 1.41 38.65 51.77 6.60 10.89 12964 13.46 78.05 5.34 1.42 38.88 51.61 6.35 10.79 12969 13.09 77.74 5.35 1.41 38.57 52.07 7.52 12.21 13038 14.42 79.29 5.47 1.43 38.60 52.11 7.54 12.22 13049 14.31 79.46 5.48 1.43 38.53 52.03 7.49 12.20 13028 14.53 79.12 5.46 1.43 53 1.30 0.70 0.09 0.88 53 1.30 0.67 0.09 0.87 53 1.30 0.73 0.10 0.88 50 1.29 3.50 0.04 1.18 51 1.30 3.80 0.04 1.18 49 1.28 3.20 0.04 1.18 61 1.46 0.52 62 1.47 0.51 60 1.44 0.52 50 1.34 2.85 0.60 0.82 50 1.33 3.07 0.64 0.81 49 1.34 2.62 0.55 0.83 51 1.30 0.61 0.07 0.44 51 1.30 0.69 0.08 0.45 51 1.30 0.53 0.06 0.44 53 1.30 0.47 0.01 2.03 53 1.30 0.50 0.01 2.03 53 1.30 0.43 0.01 2.03 0.66 0.66 0.66 49 1.03 1.16 51 1.16 1.14 48 0.89 1.18 53 1.30 0.34 0.05 1.06 54 1.30 0.41 0.06 1.05 53 1.30 0.27 0.04 1.06 1.15 0.44 1.21 0.44 1.09 0.44 52 1.30 5.10 0.03 0.61 52 1.30 5.72 0.04 0.61 52 1.30 4.49 0.03 0.62 50 1.30 4.98 0.05 0.42 50 1.30 5.64 0.06 0.42 50 1.30 4.32 0.05 0.42 Page 9-3
Seam category Tonnes (000's) True Thickness (m) ASH (adb) Free Swelling Index Volatile Matter (adb) Fixed Carbon (adb) Residual Moisture Equilibrium Moisture BTU / lb Total Moisture Carbon Hydrogen Nitrogen Hargrove Index Density Na2O % P2O5 % Sulfur (adb) 46 47 50 52 55 57 60 65 67 70 75 80 85 99,427 2.99 4.18 2 29,358 3.14 4.09 1 70,069 2.84 4.27 1 57,178 1.42 4.60 2 16,089 1.48 4.83 1 41,089 1.36 4.37 1 248,007 2.93 4.60 2 71,334 2.91 4.73 1 176,673 2.95 4.47 1 126,005 2.23 6.82 2 38,592 2.28 7.12 1 87,413 2.19 6.52 1 241,450 4.65 3.30 2 75,282 4.92 3.47 1 166,168 4.38 3.12 1 43,246 1.74 4.10 13,939 1.78 4.10 29,307 1.71 4.10 167,974 3.35 2.45 2 40,947 3.47 2.35 1 127,027 3.24 2.54 1 132,762 2.92 2.42 44,263 2.90 2.33 88,499 2.93 2.50 38,780 1.30 3.80 2 11,426 1.29 3.80 1 27,354 1.30 3.80 1 77,379 1.71 4.02 2 24,284 1.81 3.95 1 53,095 1.61 4.09 1 189,223 4.77 2.32 2 51,347 5.05 2.31 1 137,876 4.50 2.33 1 86,260 1.90 1.80 27,682 1.95 1.80 58,578 1.85 1.80 127,364 2.99 3.40 2 36,396 3.09 3.40 1 90,968 2.89 3.40 1 38.11 50.32 7.40 12.83 12605 14.35 76.21 5.47 1.51 38.10 50.41 7.39 12.84 12613 14.30 76.32 5.47 1.51 38.11 50.22 7.40 12.82 12597 14.39 76.10 5.46 1.51 36.71 50.57 8.14 13.57 12404 16.13 74.64 5.11 1.53 36.61 50.37 8.22 13.06 12359 16.20 74.63 5.11 1.53 36.82 50.77 8.06 14.07 12449 16.06 74.65 5.12 1.54 36.64 50.30 8.52 17.13 12436 20.60 75.76 5.28 1.48 36.50 50.22 8.62 17.55 12408 21.19 75.74 5.28 1.48 36.78 50.38 8.42 16.71 12465 20.00 75.78 5.29 1.49 36.59 47.56 9.07 13.77 12125 15.82 70.01 4.97 1.36 36.49 47.33 9.10 13.63 12098 15.83 68.91 4.89 1.33 36.69 47.79 9.04 13.90 12151 15.80 71.11 5.05 1.39 37.52 51.03 8.16 15.51 12546 18.48 75.72 5.35 1.42 37.43 50.82 8.28 15.80 12508 18.81 78.03 5.51 1.46 37.61 51.24 8.03 15.21 12583 18.15 73.41 5.19 1.38 37.63 49.70 8.50 14.60 12297 14.98 0.02 0.00 37.63 49.70 8.50 14.60 12297 14.98 37.63 49.70 8.50 14.60 12297 14.98 0.02 0.00 37.62 50.39 9.57 15.41 12382 17.56 76.29 5.34 1.51 37.82 50.52 9.33 15.03 12439 16.97 76.41 5.33 1.52 37.42 50.25 9.81 15.78 12325 18.15 76.16 5.36 1.51 36.83 49.94 10.85 12.74 12148 17.47 77.07 5.15 1.44 36.95 49.96 10.79 12.67 12171 17.48 77.76 5.23 1.46 36.70 49.92 10.91 12.81 12125 17.47 76.38 5.07 1.43 38.58 48.87 8.69 15.38 12247 15.68 76.36 5.24 1.64 38.65 48.90 8.59 15.35 12261 15.63 76.38 5.24 1.64 38.52 48.83 8.79 15.41 12232 15.74 76.33 5.23 1.64 38.72 48.18 9.04 16.37 12376 16.84 55.20 3.83 1.13 38.69 48.33 8.96 16.23 12398 16.72 51.19 3.56 1.05 38.74 48.02 9.11 16.50 12353 16.96 59.22 4.11 1.21 37.28 47.82 12.52 15.87 11825 19.32 77.06 4.77 1.31 37.25 47.81 12.56 15.87 11818 19.35 77.05 4.77 1.31 37.31 47.83 12.48 15.87 11832 19.29 77.07 4.77 1.31 39.80 49.10 9.40 15.20 12535 16.43 0.03 0.00 39.80 49.10 9.40 15.20 12535 16.43 39.80 49.10 9.40 15.20 12535 16.43 0.03 0.00 38.15 48.10 10.20 15.10 12084 18.01 76.27 5.13 1.38 38.15 48.10 10.20 15.10 12084 18.01 76.27 5.13 1.38 38.15 48.10 10.20 15.10 12084 18.01 76.27 5.13 1.38 48 1.30 1.08 48 1.29 1.10 48 1.30 1.06 51 1.24 0.01 0.76 49 1.19 0.77 53 1.28 0.01 0.76 51 1.30 2.03 0.05 0.57 51 1.30 2.27 0.05 0.57 51 1.30 1.78 0.05 0.57 57 0.99 0.00 0.00 0.54 56 0.99 0.54 58 0.99 0.00 0.00 0.54 54 1.22 7.74 1.13 0.40 54 1.26 7.70 1.06 0.41 53 1.17 7.79 1.19 0.39 56 0.00 0.74 56 0.74 56 0.00 0.74 43 1.24 6.46 0.06 0.40 43 1.25 6.51 0.06 0.41 43 1.23 6.40 0.06 0.39 44 1.19 5.08 0.07 0.34 44 1.20 5.17 0.07 0.33 44 1.18 4.99 0.07 0.34 55 1.30 5.03 0.15 0.64 55 1.30 4.95 0.15 0.64 55 1.30 5.11 0.16 0.64 54 1.18 2.64 0.07 0.55 54 1.17 2.45 0.06 0.52 54 1.19 2.83 0.07 0.57 46 1.30 1.04 0.33 0.37 45 1.30 0.80 0.25 0.36 48 1.30 1.28 0.40 0.37 55 0.00 0.42 55 0.42 55 0.00 0.42 52 1.30 2.55 0.07 0.54 52 1.30 2.55 0.07 0.54 52 1.30 2.55 0.07 0.54 Page 9-4
Seam category Tonnes (000's) True Thickness (m) ASH (adb) Free Swelling Index Volatile Matter (adb) Fixed Carbon (adb) Residual Moisture Equilibrium Moisture BTU / lb Total Moisture Carbon Hydrogen Nitrogen Hargrove Index Density Na2O % P2O5 % Sulfur (adb) 90 92 95 100 105 110 112 113 115 116 117 120 160,798 5.05 2.83 2 45,461 5.35 2.73 1 115,337 4.75 2.92 1 11,361 1.28 2.91 2 4,796 1.23 3.03 1 6,565 1.33 2.78 1 124,119 2.73 7.00 37,962 2.83 7.13 86,157 2.63 6.86 119,624 3.24 2.31 37,667 3.48 2.31 81,957 3.00 2.31 125,276 4.06 16.12 36,832 4.39 16.17 88,444 3.74 16.07 140,074 4.94 11.47 33,932 5.35 11.55 106,142 4.53 11.39 53,523 4.82 2.58 11,207 5.58 2.49 42,316 4.06 2.67 116,103 5.08 4.60 23,218 6.08 4.58 92,885 4.07 4.61 218,648 7.97 3.87 47,885 8.31 3.99 170,763 7.63 3.75 84,543 3.50 9.61 16,731 4.02 10.29 67,812 2.99 8.93 33,012 1.70 7.57 7,485 1.89 7.65 25,527 1.52 7.48 185,392 9.35 14.72 43,171 9.98 15.22 142,221 8.71 14.22 36.99 48.69 11.50 15.48 12092 20.48 77.16 4.87 1.48 37.04 48.63 11.59 15.50 12115 20.63 77.33 4.85 1.48 36.93 48.74 11.41 15.45 12068 20.32 76.99 4.89 1.48 38.87 47.64 10.56 16.29 12186 18.98 77.05 5.10 1.49 38.86 47.48 10.61 16.22 12224 19.21 77.38 4.94 1.47 38.88 47.80 10.51 16.35 12147 18.75 76.72 5.25 1.52 36.56 42.27 14.21 11234 16.75 71.85 4.81 1.56 36.49 42.20 14.20 11192 16.88 71.80 4.81 1.55 36.64 42.33 14.21 11276 16.61 71.91 4.82 1.56 40.24 43.90 13.59 12746 14.81 75.72 5.33 1.67 40.26 43.86 13.61 12754 14.81 75.72 5.33 1.67 40.23 43.94 13.57 12738 14.81 75.72 5.33 1.67 36.88 33.82 13.18 11.17 11074 12.14 61.78 4.30 1.15 36.81 33.91 13.10 9.59 11056 10.42 53.04 3.69 0.99 36.95 33.72 13.25 12.74 11092 13.85 70.51 4.91 1.31 37.93 37.18 13.46 12149 37.90 37.19 13.39 12137 37.96 37.16 13.53 12160 40.54 47.85 9.03 13498 40.59 48.18 8.74 13517 40.49 47.52 9.32 13480 42.81 38.68 13.93 13034 17.78 42.49 39.27 13.69 13049 17.87 43.14 38.09 14.17 13019 17.70 43.53 39.80 12.81 13167 9.62 43.11 40.76 12.14 13153 10.34 43.95 38.83 13.47 13182 8.91 40.49 36.82 13.08 12349 9.82 40.23 36.82 12.67 12240 9.83 40.76 36.81 13.49 12457 9.82 42.94 37.13 12.41 12564 42.82 37.26 12.31 12531 43.06 37.00 12.50 12596 38.91 33.93 12.42 11549 12.18 38.70 33.83 12.24 11471 12.17 39.13 34.03 12.59 11628 12.19 17 1.76 0.65 0.00 0.34 10 1.80 0.39 0.00 0.33 24 1.72 0.90 0.01 0.34 52 1.20 8.19 0.47 0.51 51 1.20 10.89 0.36 0.47 53 1.20 5.49 0.57 0.54 50 1.20 3.96 0.07 0.42 50 1.20 3.92 0.07 0.41 50 1.20 4.00 0.07 0.43 1.03 7.17 0.11 0.61 0.99 7.17 0.11 0.61 1.06 7.17 0.11 0.61 1.27 10.40 0.02 0.37 1.26 8.93 0.02 0.37 1.27 11.88 0.03 0.38 1.40 0.30 1.40 0.30 1.40 0.30 1.29 0.31 1.30 0.31 1.28 0.31 1.11 0.32 1.11 0.31 1.10 0.32 1.42 0.31 1.45 0.30 1.38 0.32 1.85 0.29 1.91 0.28 1.78 0.30 1.20 0.63 1.20 0.63 1.20 0.63 1.47 0.34 1.48 0.33 1.45 0.34 Page 9-5
9.1.2 Inferred Resources A total of 426.321 million tonnes (Mt) of coal > 0.5 m thick fall into the Inferred category (252.165 PCI, 174.156). A summary of the Inferred tonnages by seam are presented in Table 9-3 below. Due to the Inferred nature of this resource, no detailed coal quality is presented here. It can be assumed that the seams quality will be similar to the quality reported from the composites presented earlier in Table 4-1. Table 9-3: Seam 15 20 37 40 46 57 67 80 92 95 100 105 110 117 Total PCI Thermal San Juan Coal Resources Inferred (in-situ coal >0.5 m) Inferred Tonnes (000 s) 88,383 68,166 8,378 47,156 29,195 15,068 11,895 16,050 3,173 28,358 24,113 37,346 43,145 5,895 426,321 252,165 174,156 9.2 Bulk Density Canadian Institute for Mining and Metallurgy (CIM) coal sub-committee indicates in their best practices for coal (CIM, 2003) that caution should be exercised when discussing bulk density and specific gravity of coal, as these are parameters with very different values. It also states that in no circumstances should specific gravity values be used as a substitute for bulk density to estimate coal tonnage. GSC Paper 88-21 (Hughes et al, 1999) provides a table of in-situ bulk density values for volume-weight conversion by coal rank and ash content and recommends using the bulk densities in this table for the conversion of volumes to tonnages. The seam bulk density used for conversion from volume to tonnages was calculated based on the resulting block s ash content by the formula below extrapolated from Table 1 of GSC Paper 88-21: Bulk Density = 0.0092 x ASH + 1.2713 Page 9-1
9.3 Coal Rank Classified primarily on their heating value, the ASTM rank of the coal seams at San Juan are bituminous B and C high volatile non-agglomerating. Typically coals of this rank are used as a thermal coal product for power generation and occasionally for PCI applications in steel making. 9.4 Reasonable Prospects of Economic Extraction For the purposes of assessing reasonable prospects of economic extraction, the following assumptions were used when assessing reasonable prospects of economic extraction: A minimum coal seam thickness of 0.5 m 1 ; Mining cost of $28.83 / tonne; and Commodity price of $100 / tonne for thermal coal. Commodity price of $131 / tonne for upper seams PCI coal Commodity price of $132 / tonne for lower seams PCI coal (Bennett, 2012) 1 Optimistic assumptions are used in the resource estimation to provide flexibility of options for future mine design. Long-wall mining methods are proposed for the San Juan deposit, which have a practical minimum mining width of 1.4m. Widths less than this would require plow mining that have lower productivity and typically require pilot tests to show amenability of the method to the deposit. Page 9-2
10.0 ECONOMIC CONSIDERATIONS 10.1 Coal Marketing Studies MPX Colombia has completed a study on the market potential for the potential products from the San Juan deposit (MPX Colombia Marketing Department, 2011). Colombian coals have become well established in international thermal coal markets. Production has more than doubled from about 34 Mt per year in 2000 to over 85 Mt in 2011. This growth is expected to continue to increase going forward, with identified projects potentially adding 40-60 Mt per year to this annual total to 2020. Overall, it is reasonable to assume that market demand for Colombian coals would continue to increase over the longer term. Various forecasts of market price for thermal coals are available. Although these vary considerably, most project a price over the 2012 2020 period of around US$ 100 / tonne, followed by some declines to more stable prices thereafter. For the purposes of assessing reasonable prospects of economic extraction, a US$ 100 / tonne long term price was assumed for a thermal coal product. ALS Coal in their evaluation (Bennett, 2012) of the PCI potential of the San Juan deposit that the potential PCI product would garner a price of $131 - $132 per tonne. 10.2 Mining Studies Conceptual mining and marketing studies by MPX Colombia and their consultants have been undertaken concurrent with exploration to consider likely development options for the San Juan deposit. A prefeasibility mine design is currently underway. In considering reasonable prospects for economic extraction, the following assumptions were made: A target production rate of 30 million tonnes per annum (Mtpa) run-of-mine (ROM) thermal coal and assumed the coal produced would be a fuel source for MPX Colombia-owned power stations in Brazil and for sale on the open market. Capital costs included the costs associated with driving a single decline into the main working areas and the development of one service shaft and four air shafts for ventilation plus sufficient development equipment, production equipment and infrastructure / facilities to fully operate a mine of this size. The direct operating costs have been estimated at an average of $28.93 per ROM tonne over the 30 years of the planned operation. Costs include mining activities from the mining faces to the stockpile area at the portals. The tonnage nage estimates are based on mineable ROM tonnes developed from the conceptual mine plans and MPX Colombia-derived geological model between 50 m below the weathered surface of the Cerrejon Formation and a total depth of 1,200 m. Page 10-1
11.0 CONCLUSIONS MPX Colombia has executed a professional work program that has advanced the Project to a level to support a PFS. The Measured and Indicated portions of the coal resource estimate meet the requirements to support mine design and are suitable for use in a PFS. AMEC acknowledges that new information generated after the database was closed, will improve the interpretations and resource estimate. These include improvements that can be made in the correlation of the seams as a result of a key assumption adhered to during the modelling ling that there were no repeats of seams in the drillholes caused by low-angle faulting. AMEC believes that the overall tonnages and general spatial location of coal estimated for the San Juan deposit to be representative of the deposit as a whole. Page 11-1
12.0 CLOSING AMEC would like to acknowledge the help of MPX Colombia and OGX (MPX Colombia s sister company who provided the seismic interpretation) in providing data needed to declare the coal resources at San Juan. Page 12-1
13.0 REFERENCES Bennett, Phillip. 2012. PCI Evaluation of San Juan Coal Seams. ALS Coal Report for MPX Colombia. Canadian Institute of Mining, Metallurgy and Petroleum (CIM). 2003. Estimation of Mineral Resources and Mineral Reserves, Best Practice Guidelines: Canadian Institute of Mining, Metallurgy and Petroleum, 23 November 2003, http://www.cim.org/committees/estimation2003.pdf. Canadian Securities Administrators (CSA). 2011a. Companion Policy 43-101CP to National Instrument 43-101, Standards of Disclosure for Mineral Projects, June 30 th, 2011. Canadian Securities Administrators (CSA). 2011b. National Instrument 43-101 Standards of Disclosure for Mineral Projects. June 2011. Hughes, J.D., L. Klatzel-Mudry and D.J. Nikols. 1989. A Standardized Coal Resource / Reserve Reporting System for Canada. Geological Survey of Canada Paper 88-21. J.T. Boyd Company. 2010. Exploration Status: Coal Resources and Reserves Department of La Guajira, Colombia. JT Boyd Report No. 3387.1 MPX Colombia Marketing Department. 2011. Thermal Coal Market Briefing & SJN Coal as PCI. Internal company report. Prado, David and Ruiz, Juan. 2011. 3D Seismic Report. MPX Colombia Internal Company Report, in Spanish Ruiz, Juan. 2012. Summary of Most Recent 3D Seismic Interpretation with Examples Illustrating Continuity. MPX Colombia Internal Company Report, in Spanish. Page 13-1