NORTH RIVER NAMIB LEAD / ZINC PROJECT FEASIBILITY STUDY. Volume 1

Transcription

1 NORTH RIVER NAMIB LEAD / ZINC PROJECT Volume 1 Proprietary Information This document has been prepared by and remains the sole property of. It is submitted solely for use in conjunction with the submission for which it has been prepared and is to be held proprietary to Tenova Bateman SSA. The recipient agrees by receipt and/or use of this document to return it to upon request, and not to reproduce, copy, lend or otherwise disclose or dispose of the contents, directly or indirectly, and not to use it for any purpose other than intended for.

2 Page: 2 of 30 TABLE OF CONTENTS 1 CAPITAL COST ESTIMATE Introduction Battery Limits Estimate Criteria Work Breakdown Structure (WBS) Level 2) Estimate Methodology Indirect Costs Risks and Considerations Owner s Costs Exclusions Capital Cost Summary Cash Flow, Forward Escalation and Financial Modelling... 29

3 Page: 3 of 30 1 CAPITAL COST ESTIMATE 1.1 Introduction The following defines the (BOE) for the Feasibility Study for the treatment of ROM tonnes per annum Namib lead-zinc Project located near Swakopmund, Namibia for North River Resources (NRR) and the manner in which the Feasibility Study Estimate was compiled. The cost estimate covers the capital cost requirements only. The details of estimated costs are available in the Capital Cost Estimate Summary sheets. It must be stressed that this document must not be read in isolation and that all engineering disciplines basis of estimates must be consulted in conjunction with this document. Tenova Bateman have neither provided for cost escalation nor exchange rates fluctuations from the estimate base date. All costs are at base date of December The estimate was primarily compiled using deterministic estimating methodologies in which components of the project scope definition are quantitatively surveyed, generated and priced using the most realistic unit prices available. Deterministic estimating methods are typically used for Class 3 through to Class 1 estimates (AACEI Classification). This type of estimate is typically used for budgetary purposes or determining project viability and for appropriation or control baseline and will have to form the basis for the completion of a Control Budget Estimate (CBE) prior to project execution. These estimates are generally not intended to be used for detailed control baseline or for monitoring variation to the execution budget. The Namib Lead-Zinc Project comprises the establishment of a brownfields Lead-Zinc ore receiving, crushing, milling, flotation plant which included dewatering of tailings and concentrates. The works are to be executed on an existing mine which stopped production in 1992 and has since been dewatered by North River Resources.

4 Page: 4 of 30 The project is highly sensitive to capital cost and a fit for purpose approach has been adopted for the plant design considering the small scale ( tonnes/annum) and limited (approx. 7 years) lifespan of the plant. It is envisaged that the plant will treat ROM tonnes per annum, producing both lead and zinc flotation concentrates. This will be achieved by initial recovery of zinc concentrate from the existing tailings dump and then subsequent recovery of lead and zinc concentrates from the underground ore. It is intended that the overall design be based on the processing of fresh ore. The scope of this Feasibility Study estimate comprises: Initial recovery of Zinc concentrates from tailings (Option 1). Subsequent recovery of both Lead and Zinc concentrates from fresh ore (Option 2). 1.2 Battery Limits Incoming and Outgoing The major battery limits for the Tenova Bateman scope are: ROM ore storage and ore reception. Tipping point for incoming tailings from old dams. Lead flotation concentrate (filter cake) at drop point on Namib site. Zinc flotation concentrate (filter cake) at drop point on Namib site. Water supply at off-take point on existing Rossing line. Incoming flotation reagents and flocculant. Handling and disposal of generated tailings to tailings dam. Return water from tailings dam to plant storage pond. Diesel fuel storage tank.

5 Page: 5 of 30 In addition, reference must be made to all engineering disciplines battery limits documents that clearly define the Incoming and Outgoing Battery Limits of the scope of work for each discipline Temporary Construction Facilities A suitable fenced lay-down/contractors area within 100m of the site, suitably compacted, will be allocated to the contractors by the Client. The Client will be responsible for the supply and erection of security fencing, access control and security services for the duration of the works. The Client will provide all the necessary potable water supply for construction and operational requirements to the edge of the boundary of the areas allocated for the construction facilities. The contractors will be responsible for all necessary temporary electrical power supply and the power distribution network and water reticulation to the actual place of work. The contractors will also allow for their own waste water disposal and ablution facilities during the construction period. All site development which includes all infrastructure and utilities servicing the plants are assumed to be available and are therefore excluded from this estimate with the exception of the incoming 33kV overhead power line and water supply pipeline from the existing Rossing Line. It is assumed that the site has been cleared, prepared, graded and levelled by the client ready for construction, and that it is free of any other obstructions and does not require any drainage. Any underground utilities and services that could be affected during construction and/or the removal of old foundations have been excluded from the estimate.

6 Page: 6 of 30 It is assumed that Tenova Bateman personnel will utilise the on-site facilities to be provided by the Client during the construction period. The costs for these on-site facilities have been included in the estimate and comprise of: Site offices (3 off prefab modular containerized units complete with air conditioning) Office furniture Site vehicle (1 off utility vehicle) Standby generator (75kVA generator set) The Client will be responsible for the running and maintenance costs of the site vehicle and standby generator during the construction period. Tenova Bateman will be responsible for the accommodation and catering facilities for its construction personnel during the construction period. 1.3 Estimate Criteria Base Date/Escalation The base date of the estimate is December 2013 and will be subject to contract price adjustment and escalation as from 1st December Base Currency/Exchange Rates The estimate was compiled in South African Rand (ZAR). Prices for imported items quoted in ZAR but subject to foreign currency fluctuations have been converted to ZAR using the Rates of Exchange (ROE) as issued by the Client on 24th February 2014 and therefore no foreign currency or rate of exchange variations have been considered in the estimate. The indicative ROE issued by the Client and utilised in the cost estimate is shown below:

7 Page: 7 of 30 Currency (1=) Equivalent in ZAR US$ EURO GBP Approximately 28% of the total direct field costs have exposure to foreign currency fluctuations. It will fall within the Client scope of work to make adequate provision and risk allowance for cost escalation and rate of exchange variations or forward cover Accuracy This estimate for the Namib Lead-Zinc Project should be compared with the Tenova Bateman Estimator s Best Practice Guide PCNG Rev ) Class 2 estimate classification as a minimum and should be within an accuracy range of -5% to +15% at a probability of no more than 70% after inclusion of contingency. This closely conforms to the Association for the Advancement of Cost Engineering International (AACEI) Class 2 estimate classification guidelines. The Tenova Bateman Estimator s Best Practise Guide Class 2 estimate classification relates to costs that have mainly been obtained through firm bids and quotations based on defined work packages Scope of Pricing The scope on which the estimate is based is as follows: Process flow diagrams (PFD s). Equipment lists and data sheets. General arrangement layouts and drawings.

8 Page: 8 of 30 Bills of Quantities (BOQ s) / Materials Take-Offs (MTO s) (by Bateman). Engineering basis of estimate. The pricing for direct costs are based on a variety of sources as follows: Fixed and firm price quotations. Informal budget quotations. Tenova Bateman historical database / Schedule of unit rates. Factored or estimating allowances. Discipline engineers estimates. Allowance of a sum of money Estimating System and Format The overall capital cost estimate has been compiled using Microsoft Excel Estimate Structure The estimate has been formatted around the traditional code of account structure for direct cost calculation, indirect costs and EPC costs. 1.4 Work Breakdown Structure (WBS) Level 2) A project WBS level 2 was prepared clearly defining the major plant areas for ease of referencing and cost management. The cost estimate has been compiled in line with the WBS. The WBS level 2 reflects the following major plant areas: Area 100 Area 200 Area 300 Area 400 Area 500 Ore receiving and Crushing Tailings Receiving Milling Circuit Flotation Concentrate Dewatering / Thickening

9 Page: 9 of 30 Area 600 Area 700 Area 800 Reagents Receiving, Make-up and Distribution Plant Services Plant General 1.5 Estimate Methodology Earthworks and Infrastructure The bulk earthworks and levelling of the site are excluded from the estimate. The works are to be executed on a brownfield site and the Client is responsible for providing levelled terraced areas, principally consisting of exposed marble surface. It is assumed that the structures will be located on terraces that have previously been established. The ROM pad scope of work comprises an earth ramp access to the stockpile, a reinforced earth wall, and an earth ramp and terrace for access to the tip bin including a jockey slab to provide a working surface for the front-end loader and to protect the bin against impact. Physical barriers such as bollards have not been included in the estimate due to lack of Client definition. The ROM pad costs are based on preliminary designs based on information extracted from the mechanical layout drawings. The drawings were then quantified (rough material take-offs) and priced using all-inclusive unit rates derived from Tenova Bateman historical database of pricing information for recently completed cost studies. The demolition and preparatory work to carry out the ROM pad scope of work are excluded from the estimate and fall within the Client s scope of works.

10 Page: 10 of 30 The preliminary and general (P&G s) allowance has been assumed at 35% of the total direct costs for the earthworks based on the P&G s percentage allowance priced by the recommended civil works contractor. No cognisance has been taken of the underground structures as the location and extent of this is currently not known. The infrastructure works comprises of: Supply and installation of the 7km water supply pipeline from the existing Rossing Water Line. Supply, delivery, installation and commissioning works for the 33kV overhead distribution power line to the site boundary obtained from the existing Nampower grid. Supply, installation, testing and commissioning an extension of the 33kV overhead power line from the site boundary to the site transformer. The infrastructure costs are based on pricing obtained through single sourcing from formal budget quotations submitted by Pexmart cc (water supply) and Power Line Africa (33kV overhead power line). The quotations include for contractor s P&G s, material and labour Civil Works In the absence of a geotechnical report, it is assumed that all structures will be constructed atop the exposed marble or prepared surfaces. In general excavation is limited to the installation of drainage sumps approximately 1 metre deep and consisting of precast concrete pipes. The civil scope of work was estimated using a combination of statistical factors and preliminary sizing of critical elements. Preliminary designs were then performed based on information extracted from the mechanical general

11 Page: 11 of 30 arrangement layout drawings. The drawings were then quantified (material take-offs) to produce bills of quantities (BOQ s) which were priced using unit rates received through competitive bidding from a formal tender submission by Kennedy and Botes Civil Engineers and Contractors (B&K Civils). The contractor s preliminary and general (P&G s) allowance has been priced at 31% of the total direct costs for the civil works. Contractor indirect costs (P&G s) caters for the contractor s mobilisation and demobilisation including establishment and later removal of construction plant and equipment, contractor s manual indirect and non-productive labour, scaffolding, safety equipment, personal protective equipment, transport and travelling, accommodation and supervision including contractual requirements relating to finance costs, insurance, bonds and work permits. Demolition of existing structures and grubbing up of foundations are excluded from the estimate and fall within the Client s scope of works. All rates applied to the civil works reflect the preferred contractor s pricing based on technical and commercial adjudication of the formal, competitive bid received. The costs for the following on-site facilities and equipment have either been obtained from single source budget/informal quotations or Tenova Bateman historical cost data information: Site Offices, Furniture & Computers Protective Clothing (PPE) Mobile Equipment Workshop Tools Telephone Data Laboratory Facility & Equipment

12 Page: 12 of 30 Change Houses The refurbishments costs for the main workshop building and explosives store have been included in the estimate based on single source quotation obtained from MaxSpan Roofing CC as furnished by the Client Structural Steelwork Structural steelwork quantities have been extracted from the Namib Lead- Zinc Plant mechanical general arrangement layout drawings for the different plant areas. Approximate quantities were extracted from a combination of preliminary design and sizing of critical elements and volumetric take-offs to produce structural bills of quantities (BOQ S). The supply, shop detailing, fabrication, painting and erection cost for structural steel is based on unit rates obtained through competitive bidding from Concor Engineering priced bills of quantities for the structural, mechanical, platework and piping (SMPP) package. The supply cost includes for transportation to site, Swakopmund, Namibia based on the total tonnage of approximately 65 tons of structural steelwork. Contractor s indirect field cost (P&G s) has not been apportioned from the overall P&G s for the SMPP Contractor and is reflected in the Capital Cost Estimate summary sheet. The preliminary and general allowance has been priced at 187% of the total direct field costs for the SMPP Contract. It will be necessary to conduct further bid clarifications and interrogate the P&G s allowance with the preferred SMPP contractor prior to execution. The costs of major construction equipment including cranes and scaffolding have been priced within the SMPP contractor s P&G s costs.

13 Page: 13 of 30 All rates applied to the structural steelwork estimates reflects the preferred contractor s pricing based on technical and preliminary commercial adjudication of the formal, competitive bid received. Provision has been included in the estimate for 13 tons of secondary pipe supports and fittings not covered by the structural discipline. The estimated total tonnage of steel has been priced using the unit rates for supply and erection derived from the SMPP contract Platework and Liners Platework quantities and items preliminary bill of quantities (BOQ) rev. F was compiled by the relevant discipline engineer. For each platework item, the platework area has been estimated from the mechanical layouts and volumes required according to the Process Flow Diagrams (PFD s). The following values were then used in calculating the platework mass: Bins and Sumps Platework Thickness based on 8mm Density of Steel based on 7860kg/m3 Stiffeners & Flanges based on 25% Allowance (added to mass of flat measured platework) Chutes and Bag Breaker Platework Thickness based on 8mm Density of Steel based on 7860kg/m3 Stiffeners & Flanges based on 25% Allowance (added to mass of flat measured platework) The ROM hopper lining is included with the crushing plant package. All transfer chutes and bins are VRN lined internally. All sumps and tanks are rubber lined internally.

14 Page: 14 of 30 The supply cost is based on the total estimated platework tonnages multiplied by the unit rates obtained from the Concor Engineering priced bills of quantities for the SMPP package. The supply cost includes for transportation to Swakopmund, Namibia. The erection unit rates in Namibia are based on the Concor Engineering priced unit rates. The contractor s indirect field cost (P&G s) has not been apportioned from the overall P&G s for the SMPP Contractor and is reflected in the Capital Cost Estimate summary sheet. Provision has been made for 6mm thick HDPE plate lining to the sumps Conveyor Mechanicals The conveyor mechanicals have been priced within the mechanical equipment costs Mechanical Equipment The mechanical equipment list rev F. identifying and quantifying the major mechanical equipment was prepared by the discipline engineer from process flow diagrams (PFDs). The mechanical equipment packages complete with relevant specifications was issued to selected vendors to obtain current market prices. The estimate reflects the recommended vendor s pricing based on technical evaluation and commercial adjudication of the bids received. The mechanical equipment supply pricing comprises of formal fixed and firm price bids, budget quotations and Tenova Bateman historical database of pricing information obtained from recently completed cost studies. Tenova Bateman will be responsible for the preparation of procurement documentation for the Client to place orders and will assist with the logistics

15 Page: 15 of 30 for delivery to Swakopmund, Namibia of the mechanical equipment packages. The costs for the supply of the following mechanical equipment were obtained either through formal fixed and firm price bids or budget quotations: Ball Mill Flotation Cells Crushing Plant Mobile Impact Crusher (Option 1 Only) Hydro cyclones Thickeners Filter Presses Conveyors Centrifugal Pumps Peristaltic Pumps Dosing Pumps Froth Pumps Agitators Samplers Weighbridge Belt Feeders (BQ) Tanks (BQ) Fire Water Pumps and Tanks Flocculant Make-up (BQ) Air Compressors Diesel Storage & Dispensing Facility Hoists The costs for the on-site erection and installation of the mechanical equipment are based on unit rates extracted from the SMPP Contract submitted by Concor Engineering through competitive bidding.

16 Page: 16 of 30 Contractor s indirect field cost (P&G s) has not been apportioned from the overall P&G s for the SMPP Contractor and is reflected in the Capital Cost Estimate summary sheet. The preliminary and general allowance has been priced at 187% of the total direct field costs for the SMPP Contract. It will be necessary to conduct further bid clarifications and interrogate the P&G s allowance with the preferred SMPP contractor prior to execution. The pricing for the on-site erection and installation of mechanical equipment includes costs for major construction equipment such as cranes and scaffolding which have been priced within the SMPP contractor s P&G s Pipework and Valves The scope of work used for the piping priced BOQ covered the process and utility pipe and tubing systems. The piping bills of quantities (BOQ s) were generated from MTO s derived from process lines modelled from the mechanical 3D model, mechanical general arrangement drawings and piping layout comprising of single line routings supported by the Process flow diagrams (PFD S). The PFD s were redlined with preliminary line numbers and valves to facilitate control and revisions to the BOQ s. The pipe lengths and elbow quantities were recorded by the drawing office and the remaining pipe fittings estimated by the discipline engineer. Additional quantities were allowed for in the BOQ to cater for pipe lines smaller than 65NB. The following pipe layouts were created for the study:- 7km Overland Water Supply Pipe Line Tailings Slurry Delivery Line

17 Page: 17 of 30 Tailings Reclaim Water Return Line The piping supply and installation packages comprise of:- Manual Control Valves Metallic Piping (Carbon Steel) Non-Metallic/Plastic Piping (HDPE) Bolts & Gaskets Pipe Supports (U-bolts and pipe clamps) The supply and installation packages for piping complete with specifications were issued to selected vendors to obtain current market prices. The estimate reflects the recommended vendor s pricing based on technical and commercial adjudication of the bids received. The piping and valves estimated costs are based on the pricing submitted by the Structural, Mechanical, Platework and Piping (SMPP) contractor, Concor Engineering, through a competitive bidding process. The costs include for the supply and delivery of all piping materials to Swakopmund, Namibia including offloading, storage on site, on site handling and site erection and installation complete with new pipe support systems. An allowance to cater for detail design components such as vents, drains, instrument connections, flushing points, etc. has been included in the estimate. NDT testing, hydro-testing, painting and insulation including all quality documentation is included in the cost. Contractors indirect field cost (P&G s) has not been apportioned from the overall P&G s for the SMPP Contractor and is reflected in the Capital Cost Estimate summary sheet.

18 Page: 18 of 30 The preliminary and general allowance has been priced at 187% of the total direct field costs for the SMPP Contract. It will be necessary to conduct further bid clarifications with the preferred SMPP contractor prior to execution. Provision has been made for air piping and ducting costs from the blower to all re-agents based on Tenova Bateman historical database of pricing information obtained from recently completed cost studies. The costs for stainless steel tubing for the transportation of re-agents are based on single source budget quotation obtained from Pentair Valves and Controls. The costs for the pressure reducing valves are based on an informal budget quotation obtained from Duplex Liquid Meters. Piping and Instrumentation Diagrams (P&ID s) are excluded from the Tenova Bateman scope of works at this stage of the project and have therefore not been prepared for the project study Electrical The relevant discipline engineer produced and issued electrical equipment list for preparation of electrical packages, specifications and bills of quantities (BOQ s) for electrical bulks for inclusion within the estimate. The mechanical load list was used to create a corresponding electrical load list from which the single line diagrams (SLD s), cable schedules, bill of quantities (BOQ s) and electrical equipment list was developed. The BOQ s was then used to quantify the electrical requirements for the plant. Plant general arrangement layouts were used for estimating the lighting, cable and cable rack quantities. The following electrical equipment packages supply prices are based on preferred vendor quotes obtained through formal, competitive bidding:

19 Page: 19 of 30 Low Voltage Motor Control Centres (LV MCC s) Containerized Low Voltage Substation Containerized Transformers The vendor package for the low voltage MCC s includes for the supply of 2 off UPS including detail design, factory acceptance testing (FAT), internal cabling and installation of the MCC s and UPS s in containers. The containers are modified and equipped as per specification complete with ventilation, air conditioning and fire protection. A provisional allowance has been included in the estimate for the procurement of an emergency standby generator set for provision of emergency power supply to small motors, instrumentation UPS and MCC control power supply UPS. The change-over between diesel generator and grid power will be manual. Provision for earthing and lightning protection is included in the estimate based on the vendor quote obtained from HHK Earthing & Lightning Protection Systems through competitive bidding. Provision has been made within the vendor quote for earth conductivity survey on site. The electrical scope of work includes all electrical equipment installation, reticulation and distribution of electrical power to all electrical motors and other electrical loads in the plant. The scope also covers the reticulation and distribution of small power including plant lighting. The supply of small electrical equipment such as light fittings, local isolators, socket outlets and motor control station as well as electrical materials such as cables, cable racking, cable terminations and support steel is also included. Electrical bulks and installation contractor s estimated costs are based on unit rates submitted by SMEI Projects for the Electrical Installation Contract obtained through competitive bidding. Technical bid evaluations and

20 Page: 20 of 30 commercial bid adjudications were conducted to identify the preferred Electrical Installation contractor. The preliminary and general allowance has been priced at 65% of the total direct field costs for the electrical installation contract Control and Instrumentation Control and Instrumentation costs have been factored from the mechanical equipment total cost based on industry accepted norms for the Beneficiation and Materials Handling areas. A provisional allowance has been included for cyanide detectors based on a single source budget quotation from Drager SA. Contractor s P&G s are factored based on a percentage of the total capital costs for control instrumentation works. The preliminary and general allowance has been assumed at 65% of the total direct field costs for the control and instrumentation works based on the P&G s percentage allowance priced by the recommended Electrical Installation contractor Growth Allowances Experience tells us that there is a gap between what is known and identified during the estimating process and what is expected during the execution or construction phase. The addition of growth is intended to allow for the most likely cost in the estimate. For this reason an allowance for growth on quantities and prices should be included in the estimate. A quantity growth allowance is a subjective amount added to the material take-off (MTO) based on the degree of engineering completed and a comparison to historical experience of the expected quantity.

21 Page: 21 of 30 Estimates are generally based on budget quotations that rarely take into account firm specifications or commercial terms and conditions. A price growth allowance is an amount added to the price of materials and equipment to account for the cost difference between the budgetary amount quoted now and the expected firm price quotation obtained prior to execution. The following growth allowances have been included in the estimate based on guidelines recommended by the Tenova Bateman Estimator s Best Practice Guide for a class 2 estimate classification: Earthworks - 15% Civil Works - 8% Structural Steel - 8% Mechanical Equipment - 5% Piping - 10% Electrical Packages - 5% Electrical Installation contract - 10% Control and Instrumentation - no growth allowance (factored) Traditionally, the accuracy range in an OOM estimate accounts for the growth allowances, considering the conceptual nature of the estimate and the defined scope of work. No allowance for growth in quantities and price has been included for Control & Instrumentation for reasons that the discipline costs have been factored and already includes allowances for design growth and wastage Allowance for Transport of Equipment The costs for sea freight and inland transportation costs included in the estimate for delivery of equipment from the country of origin to Swakopmund, Namibia is based on formal competitive logistics costs obtained from reputable freight forwarders. The package types vary from

22 Page: 22 of 30 40ft containers, wooden skids, break bulk, skeleton crates, full crates and pallets. The estimate reflects the recommended logistics services vendor s pricing based on technical bid evaluation and commercial bid adjudication of the tenders received An allowance has been included for the delivery to site of equipment excluded from the logistics services vendor package. The logistics costs will have to be firmed up through competitive bidding from reputable freight forwarding companies prior to execution. Marine insurance, customs/import duty and import VAT are excluded Allowance for Commissioning Spares Only An allowance based on a factored percentage of the total capital cost of equipment was allowed for commissioning spares only. These costs should be verified with detailed spare listings and quotations before execution. No allowance for strategic or two year critical spares has been included in the estimate as instructed by the Client Allowance for Re-agents The cost for first fills of re-agents comprising steel balls for the mills and flocculants for the tailings thickening has been estimated and provided by the process engineer. These costs should be verified with detailed quotations before execution Allowance for First Fills of Lubricants An allowance based on a factored percentage of the total mechanical and electrical equipment supply cost was allowed for first fills of lubricants.

23 Page: 23 of 30 These costs should be verified with detailed quotations before execution Allowance for Vendor Assistance during Construction An allowance for vendor assistance during construction and commissioning based on a factored percentage of the mechanical, electrical and control instrumentation equipment supply cost has been allowed for within the estimate. These costs should be verified with detailed man-hour estimates and quotations prior to execution. 1.6 Indirect Costs Engineering, Procurement and Construction Management These costs cover the project management, detailed engineering and procurement, and construction management, pre-commissioning (C1 & C2) and cold commissioning (C3) costs directly associated with the implementation of the project. Hot commissioning (C4) assistance is excluded from the estimate. Should hot commissioning assistance be required, this will be charged at day work rates to be agreed. A detailed man-hours estimate based on the EPCM scope of work, project schedule, defined deliverables and required resources has been included in the estimate. The EPCM costs are based on a reimbursable contract type using Bateman 2014 WIP rates for computing the man-hour costs. The WIP rates are subject to escalation from January 2015 to project completion.

24 Page: 24 of 30 A fee of 10% of the total man-hours costs has been included within the EPCM costs Bonds and Guarantees An allowance based on a factored percentage of the Total Net Cost (TNC) has been included in the estimate to cater for bonds and guarantees Insurance Insurance included in the estimate is an allowance for project related risks which are insurable. It is dependent on project variables and project specific circumstances. It typically includes for the following: o Contractors All Risk on construction and site activities typical cover - this depends on the extent of cover required o Third Party Liability insurance typical cover o Medical Evacuation and casavac typical cover. This depends on the area, location and the detailed circumstances o Marine Cargo and difference in excess typical cover The following risks are not allowed for in the estimate and thus excluded due to the specific requirements the owner may have. These should be strongly considered in addition to those listed above: o o o Delay in Start-up insurance (DSU) Project Specific required professional indemnity Advance Loss of Profits (ALOP) An allowance based on a factored percentage of the Total Net Cost (TNC) been included in the estimate for insurance. The insurance estimate allowance should be finalized by performance of an insurance review by specialized parties, once the exact requirements of the owner and the project are available in more detail.

25 Page: 25 of Contingency Contingency is a sum of money included in an estimate to allow for uncertainty. Project contingency is not intended to cover scope changes or project exclusions. Scope changes are covered by the Owner s contingency. Since no quantitative risk analysis has been done on the capital estimate and considering the engineering/scope definition currently available and the estimating methodologies followed, a nominal contingency allowance of 12% has been included in the estimate. The typical level of contingency recommended is between 10% and 15% based on the Tenova Bateman Estimator s Best Practice Guide Class 2 estimate classification. 1.7 Risks and Considerations No risk review has been held to quantify risks to the project. The estimate therefore does not qualify or quantify risk. However a few items identified at this stage need to be considered further: No geotechnical information has been received from the Client. The earthworks and civil works costs are therefore based on certain assumed geotechnical conditions. This may have significant impact on the costs for these disciplines during execution. The validity of all quotations received will have expired by the assumed contract start date of 15th May It will be necessary to verify and re-validate all quotations prior to their expiry dates. Cost escalation from study through to project completion is a risk that will be borne by the client. All budgetary and informal quotations for equipment supply will have to be confirmed through a formal, competitive bid process prior to execution.

26 Page: 26 of 30 Logistics costs related to transportation of equipment and materials to site needs to be firmed up based on final equipment specifications sizing and tonnages. The estimate does not consider the risk in foreign exchange variations. This will be for client scope. No escalation allowance has been included in the estimate. Cost escalation from study through to project completion is a risk that will be borne by the client. 1.8 Owner s Costs This estimate specifically excludes Owner s costs. These costs shall fall under the Client scope of work. Owner s costs will not be included in the estimate unless specifically directed and provided by the Owner. Generally Owner s costs are, but not necessarily limited to, the following: Owner's project management team and consultants Owner s contingency for changes in scope or additional work Pre-development costs (cost of study, etc.) Land acquisition Community relations Insurance as indicated above Business systems Loss of production and efficiency resulting from implementation Owner s start-up and commissioning crew Project taxes, fees, duties, customs, permitting and approvals Development fees and approval costs of statutory authorities Cost of any disruption to normal operations Cost of shutdowns Working capital or any additional stay in business capital (sustainability capital)

27 Page: 27 of 30 Pre-production costs (operator training) Workplace health and safety fees Site medicals and safety induction services Medical staff and practitioners during construction Geotechnical, site survey and soils testing Environmental considerations (EIA) Operational readiness Finance fees or cost of capital Provisional sums based on Client information and consultancy budget estimates have been included in the estimate for the following Owner s cost: Tailings Storage Facility capital costs allowance (Provision of circa US$ included in the estimate) 1.9 Exclusions The following costs are specifically excluded from the estimate: Costs of EIA permitting and regulatory compliance requirements, together with any costs associated with process design changes necessitated by the outcome of such investigations Any costs associated with process design changes necessitated by the outcome of geotechnical investigations, site surveys and metallurgical test work Any costs associated with statutory requirements, local permits, licensing, royalties and approvals, social, community or environmental requirements Owner s costs unless provided by Owner Owner s contingency allowance

28 Page: 28 of 30 Development fees and approval costs of Statutory Authorities unless specifically included Value Added Tax (VAT) and Goods & Services Tax (GST) Sales tax, excise duties, import surcharges, withholding, service or other taxes unless specifically included Financing costs Marketing costs Business system costs Pre-development and operational readiness costs Operational costs (included in the Operating Costs Estimate) Higher level management systems (MIS, MES or ERP) External auditing costs Appointment of Approved Inspection Authority (AIA) Permit applications unless specifically included Escalation from the estimate base date unless specifically included Foreign currency exchange rates variations from the estimate base date Money for risk in schedule variances from what has been assumed Any cost resulting from weather conditions other than fair Schedule acceleration costs Schedule delays and associated costs, such as those caused by: o Unexpected site conditions o Weather conditions other than fair o Unidentified ground conditions o Labour disputes Force Majeure Any cost for a logistical study or resulting increase in capital cost as a result of such a study For Brownfields work, the cost of any disruption to normal operations All infrastructure, bulk earthworks and site development

29 Page: 29 of 30 ROM stockpile blending and management strategy Test work and laboratory costs Special tools and general equipment for maintenance Any spares costs in excess of allowances made EPCM contractor support charges and Owner s costs associated with hot commissioning activities (Only assistance to Client) Provision of landscaping and nursery services Facilities for disposal of hazardous products generated by operations Mining and mine closure/rehabilitation costs Site security during construction Medical staff and practitioners including emergency vehicles during construction Communications and Data/IT infrastructure Laboratory information management systems (LIMS) 1.10 Capital Cost Summary Refer to the Cost Estimate Summary sheets which are provided separately to this document Cash Flow, Forward Escalation and Financial Modelling Cash Flow An indicative cash flow forecast has been prepared on the basis of a generic typical project monthly expenditure expressed as a percentage of the total project cost assigned to an S-Curve based on the duration of the project. The project cash flow will have to be prepared on the basis of the proposed implementation schedule by taking the total cost for each package and the vendor payment terms and spreading it across its duration according to the dates in the schedule.

30 Page: 30 of Forward Escalations No escalation allowance has been included in the estimate. The Client should make appropriate allowance for forward escalation Financial Modelling Financial Modelling is excluded from the Tenova Bateman scope of work