Prepared by: ENVIRONMENTAL GEOCHEMISTRY INTERNATIONAL PTY LTD. 81A College Street, Balmain, NSW 2041 Australia

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1 Prepared by: ENVIRONMENTAL GEOCHEMISTRY INTERNATIONAL PTY LTD 81A College Street, Balmain, NSW 2041 Australia Telephone: (61-2) Facsimile: (61-2) ACN ABN For: ANGLO BASE METALS Killoran Moyne Thurles, Co. Tipperary Ireland June 2007 Document No. 1851/770 The Lisheen Mine GEOCHEMICAL CHARACTERISATION AND ARD ASSESSMENT OF TAILINGS SAMPLES

2 ii Contents 1.0 INTRODUCTION TESTING PROGRAM RESULTS Acid-Base Accounting and Sequential NAG Test Results Kinetic NAG Acid Buffering Characteristic Curve (ABCC) SGS LAKEFIELD ACID BASE AND MINERALOGICAL DATA CONCLUSION AND RECOMMENDATIONS...7 List of Tables (at back of report after text) Table 1: Table 2: Acid forming characteristics of tailings samples from the Lisheen Mine. Sequential NAG test results of samples from the Lisheen Mine. List of Figures (at back of report after tables except) Figure 1: Bathymetric survey of the Lisheen Mine. Figure 2: Kinetic NAG plot of sample 5-location 3. Figure 3: Kinetic NAG plot of sample 1-location 8. Figure 4: Kinetic NAG plot of sample 1-location 9. Figure 5: Kinetic NAG plot of sample 6-location 12. Figure 6: Acid buffering characteristic curve of sample 2-location 3. Figure 7: Acid buffering characteristic curve of sample 1-location 8. Figure 8: Acid buffering characteristic curve of sample 6-location 12.

3 THE LISHEEN MINE Geochemical Characterisation and ARD Assessment of Samples Page Introduction (EGi) was commissioned by Anglo Base Metals to carryout geochemical characterisation and ARD assessment of tailings samples from the Lisheen Mine, Ireland. The objectives of the test work were to: Determine the acid forming characteristics and ARD potential of tailings samples; and Evaluate reaction kinetics and likely lag period before onset of acid conditions. This report presents the results and findings of the geochemical test work, discusses the likely lag period and provides recommendations for further work. 2.0 Testing Program Ten (10) tailings samples from eight locations within the tailings dam at the Lisheen Mine were included in the testing program. The samples were collected by Australian Tailings Consultants (AST) and forwarded to EGi in May Figure 1 presents a bathymetric survey of the tailings storage facility prepared by ATC and shows the locations of all sampling sites. Samples for the geochemical program were selected from Locations 2, 3, 8, 9, 10, 12, 13 and 15. Three depth profile samples were included from Location 3 and one sample from the other locations. The samples were supplied as slurries and the liquor was decanted prior to oven drying the solids at 65ºC overnight. The samples then underwent the following testing programme: Total S; Acid neutralising capacity (ANC) testing; and Sequential net acid generation (NAG) testing. Selected samples underwent additional testing which included: Acid buffering characteristic curve (ABCC) testing; and Kinetic NAG testing. A short description of each test and calculated parameters is presented below. Total Sulphur Content The total sulphur content of each sample was determined by the Leco furnace method. Sulphur assays were carried out by Sydney Environmental Laboratory Pty Ltd.

4 THE LISHEEN MINE Geochemical Characterisation and ARD Assessment of Samples Page 2 Maximum Potential Acidity The maximum potential acidity (MPA) is the amount of acid that could be generated by the sulphur contained within a sample assuming that all the sulphur occurs as reactive pyrite. The MPA of each sample was calculated from the total sulphur content as follows: MPA (kg H 2 SO 4 /t) = Total %S x Acid Neutralising Capacity The acid produced by pyrite oxidation will to some extent react with other minerals contained within a sample. This inherent acid buffering is quantified in terms of the acid neutralising capacity (ANC), which has the same units as MPA. The ANC was determined using a modified Sobek Method. This involved reacting a sample with a known amount of acid at a ph of less than 1 for 1 to 2 hours, then back-titrating the residual acidity to determine the amount of acid consumed by the sample. Net Acid Producing Potential The net acid producing potential (NAPP) is the amount of acid that potentially can be produced by a sample after allowance for the ANC. It is calculated by subtracting the ANC value from the MPA value. If the NAPP is negative then it is likely that the material has sufficient inherent buffering capacity to prevent acid generation. Conversely, if the NAPP is positive then the material may be acid generating. ANC/MPA Ratio The ANC/MPA ratio is essentially another way of looking at the balance between ANC and MPA, and provides an indication of the relative margin of safety with respect to the acid forming potential of a sample. A ratio less than 1 corresponds to a positive NAPP and indicates a material may be acid generating. Conversely, an ANC/MPA ratio of 2 or more generally signifies that there is a high probability that the material will remain circum-neutral in ph (i.e. the material should not be problematic with respect to ARD). Net Acid Generation NAG is a direct oxidation method of estimating the acid forming potential of a sample. The NAG test involves reaction of a sample with hydrogen peroxide to rapidly oxidise any sulphide minerals present. Both acid generation and acid neutralisation occur simultaneously during the NAG test, hence the end result represents a direct measurement of the net amount of acid that a sample can generate. If the sample after reaction has a ph of 4.5 or less (i.e. NAGpH 4.5) then it is likely to be acid generating. The actual amount of acidity generated is subsequently determined by titration of the mixture. False positive results may occur if the sample has a high organic content. Interferences such as these are generally identified by the combined use of the NAPP and NAG for sample classification. Sequential NAG Test Samples that have high sulphide contents may need to be reacted with hydrogen peroxide more than once to ensure complete oxidation of all the sulphides present. This multi-stage procedure is referred to as a sequential NAG test and involves reacting a sample several times using the procedure described above for the single stage NAG test (i.e. 2.5 g of

5 THE LISHEEN MINE Geochemical Characterisation and ARD Assessment of Samples Page 3 sample is reacted three or more times with 250 ml aliquots of 15% hydrogen peroxide). At the end of each stage, the sample is filtered to separate the solids and NAG liquor. The NAG liquor is assayed for ph and acidity, as per a standard NAG test. The solids are recovered for repeat oxidation using another aliquot of hydrogen peroxide the solid residue. The total NAG capacity of the sample is determined by summing the individual acid capacities from each stage. Kinetic NAG Testing The kinetic NAG test provides an indication of the reactivity of sulphides within a sample and provides a quick and qualitative assessment of the likely lag time before onset of acid conditions under field conditions. The method is similar to the standard NAG test, except that ph and temperature are monitored during the test. The reaction kinetics exhibited in the NAG test are extrapolated to the field situation on the basis of correlations previously derived by EGi from numerous leach column tests, field based test pads and field observations at other mine sites. Measurement of Acid Buffering Characteristic Curve (ABCC) The ABCC is determined by slowly acidifying a sample with dilute acid to around ph 3 over a 16 to 24-hour period. It represents a far less aggressive treatment of a sample than that applied in the ANC method, and it typically only accounts for more readily-available carbonates such as calcite and dolomite. When present in sufficient quantity, these minerals will typically buffer a waste rock at near-neutral ph, which is essential for maintaining low metal solubilities. 3.0 Results 3.1 Acid-Base Accounting and Sequential NAG Test Results Table 1 presents the acid-base accounting and NAG test results for the 10 tailings samples. The water cover at each sampling location and the sample depth below the tailings surface are also shown. The results show that the samples have an average total S content of 18.7%S ranging from 15.6 to 22.0%S and an average ANC of 445 kg H 2 SO 4 /t ranging from 342 to 557 kg H 2 SO 4 /t. Table 1 shows that 9 of the 10 samples are NAPP positive with NAPP values ranging from 33 to 316 kg H 2 SO 4 /t. The NAPP negative sample had the highest ANC and lowest total S content and is from Location 8, which is an exposed beach area in the western section of the tailings storage facility. To further investigate the acid potential of the samples, the NAPP value was compared with the net acid generation (NAG) test results. Samples are classified as non-acid forming (NAF), potentially acid forming (PAF) and uncertain (UC) according to the following characteristics:

6 THE LISHEEN MINE Geochemical Characterisation and ARD Assessment of Samples Page 4 NAF: Non-Acid Forming. NAPP negative and NAGpH greater than or equal to 4.5. PAF: Potentially Acid Forming. NAPP positive and NAGpH less than 4.5. UC: Uncertain. Conflicting NAPP and NAG results (i.e., NAPP positive and NAGpH greater than 4.5 or NAPP negative and NAGpH less than 4.5). Table 1 shows that the 3 samples with the lowest ANC and highest NAPP values (L2S3, L3S5 and L12S6) had single addition NAGpH values less than 4.5 and are classified as PAF. The other NAPP positive samples are classified as uncertain based on the single addition NAG test. However, when testing samples with high sulphide contents it is common for oxidation to be incomplete in the single addition NAG test. Sequential NAG testing overcomes this limitation to an extent through successive additions of peroxide to the same sample. Sequential NAG testing up to 3 stages was carried out on the samples and the results are presented in Table 2 for each stage. The lowest SeqNAGpH and the cumulative NAG value to Stage 3 are also shown on Table 1. The results show that the lowest SeqNAGpH was 2.5 or lower for all samples, confirming that all samples are PAF. As noted above, Samples L2S3, L3S5 and L12S6 acidified in the first stage of the sequential NAG test. The remainder of the samples acidified in the second stage, which generally indicates a long lag time before onset of acid conditions. However, it was noted during the NAG test that the ph value before boiling was lower than after boiling. The NAG test procedure requires the sample to be boiled after completion of the peroxide reaction to ensure that any residual peroxide is destroyed prior to solution assay. The increase in ph due to boiling probably reflects reaction with the residual ANC in these samples. Also, Table 1 shows that the cumulative NAG values to stage 3 of the Sequential NAG test exceed the NAPP values for all samples, this result also suggest that the ANC is unable to match the rate of acid generation during the NAG reaction. Since these low NAGpH values were observed prior to boiling, kinetic NAG tests were conducted to examine the reaction kinetics and to provide a qualitative assessment of the likely lag period. The kinetic NAG tests are discussed in the next section. 3.2 Kinetic NAG The kinetic NAG test provides an indication of sample reactivity and the lag (or induction) time before the onset of acid conditions. Four samples, L3S5, L8S1, L9S1 and L12S6 were tested and the results are presented in Figures 2 to 5. Figure 2 presents the kinetic NAG plot of sample L3S5. This sample had the highest total S content of 22.0%S and highest NAPP value of 316 kg H 2 SO 4 /t. This sample also

7 THE LISHEEN MINE Geochemical Characterisation and ARD Assessment of Samples Page 5 acidified in the single addition NAG test. The results show that the ph profile decreased from the beginning of the test and suggest that materials represented by this sample may have a short lag of days to weeks before onset of acid conditions. The distinct temperature peak indicates significant release of dissolved metals during oxidation resulting in the exothermic catalytic decomposition of the hydrogen peroxide oxidising reagent. Figures 3, 4 and 5 present the kinetic NAG plots for L8S1, L9S1 and L12S6, respectively. The ph profiles for these samples show strong buffering for 30 to 60 minutes in the NAG reaction, before decreasing to below ph 4. These profiles suggest lag times of 1 to 2 years before onset of acid conditions. This result is unusual since PAF materials from other sites with high S and high ANC typically show much longer lag times. This result may indicate that the ANC in the Lisheen tailings is slower reacting or not readily available. Acid buffering characteristic tests were carried out to further examine the nature of the ANC and the results are discussed in the next section. 3.3 Acid Buffering Characteristic Curve (ABCC) An acid buffering characteristic curve (ABCC) is produced by slow titration of a sample with acid, and provides an indication of the relative reactivity of the ANC measured. The acid buffering of a sample to ph 4 can be used as an estimate of the proportion of readily available ANC. ABCC tests were carried out on three selected samples and the results are presented in Figures 6 to 8. Calcite, dolomite, ferroan dolomite, magnesite and siderite standard curves are also plotted for reference. Calcite and dolomite readily dissolve in acid and exhibit strongly buffered ph curves in the ABCC test, rapidly dropping once the ANC value is reached. The siderite standard provides very poor acid buffering, exhibiting a very steep ph curve in the ABCC test. Ferroan dolomite is between siderite and dolomite in acid buffering availability. Figures 6, 7 and 8 present the ABCC plots for samples L3S2, L8S1 and L12S6, respectively. The samples have measured ANC values of 436, 557 and 342 kg H 2 SO 4 /t, respectively. The ABCC plots show that the three samples exhibit good ph buffering but at ph values 1 to 2 units lower than standard calcite or dolomite minerals. The plots suggest that all of the measured ANC is available but the shapes of the curves suggest that the ANC is slower reacting and follows the ferroan dolomite standard rather than dolomite or calcite. The presence of slow reacting ANC is most likely the reason for the unexpected short lag period indicated by the kinetic NAG test.

8 THE LISHEEN MINE Geochemical Characterisation and ARD Assessment of Samples Page SGS Lakefield Acid Base and Mineralogical Data SGS Lakefield conducted acid base analysis, single addition NAG test and multi-element analysis on 11 tailings samples, including 3 fresh tailings. SGS also carried out mineralogical investigations on 4 of the samples. The preliminary results of these investigations were provided to EGi for initial review and comparison. The final results and findings will be reported separately by SGS. The following provides a general review and comment on the results. Although none of the samples tested by SGS and EGi are duplicates, they all represent Lisheen Mine tailings. The average total sulphur content reported by SGS was 24.2%S compared to 18.7% by EGi. Although the SGS sulphur values were higher, the ANC was almost identical. Converting the SGS NP results to the same units as used by EGi (i.e. kgh 2 SO 4 /t) the average ANC reported by SGS was 450 kgh 2 SO 4 /t ranging from 351 to 560 kgh 2 SO 4 /t. These values are almost identical to the EGi results reported earlier of an average ANC of 445 kgh 2 SO 4 /t ranging from 342 to 557 kg H 2 SO 4 /t. The SGS results also identified one sample with excess ANC (i.e. NAPP negative) and this sample was from the same exposed beach area as the NAPP negative sample identified by EGi. The findings of the NAG tests are also consistent. It is important to note that SGS carried out the Single Addition NAG test, which is standard testing procedure but as discussed previously in this report, a Sequential NAG test is necessary when dealing with high sulphur and high ANC samples. However, the results of the SGS single addition NAG test are consistent with the EGi findings. SGS reported 3 samples (the fresh tailings samples) that acidified in the single addition test. These 3 samples had the lowest ANC and highest NAPP of all the samples. The EGi results identified 3 samples that acidified in the single addition tests and these samples also had the lowest ANC and highest NAPP values. In both cases, the ANC values were less than about 400 kgh 2 SO 4 /t. SGS did not measure the ph before the boiling step in the tests, so it is not possible to check if the ph was lower before boiling as was observed with the EGi samples. The SGS data confirms that almost all the sulphur is present as sulphide and the multielement results indicate about 2% Pb and 1% Zn in the tailings solids. The mineralogical results identified pyrite as the dominant sulphide mineral with trace amounts of sphalerite and galena. The SGS mineralogical and multi-element results suggest that dolomite is the dominant carbonate mineral with minor amounts of calcite. The results of the ABCC tests conducted by EGi and reported earlier, also suggest that the ANC was most likely dolomitic but appeared to react more like ferroan dolomite, rather than dolomite or calcite. The SGS mineralogical report indicates the presence of trace amounts of siderite and ankerite, but the extent of any iron replacement within dolomite is not known. It is

9 THE LISHEEN MINE Geochemical Characterisation and ARD Assessment of Samples Page 7 recommended that further mineralogical investigations be carried out to better characterise the composition of the dolomite and the carbonate cement referred to by SGS. The SEM photomicrographs produced by SGS clearly show that pyrite and dolomite are closely associated which much of the pyrite encased in dolomite. Visually it appears that there is a high exposed surface area of pyrite minerals and although there is an equally high surface area of dolomite, the slow reactivity of the dolomite compared to the pyrite in the NAG reaction is probably the reason for the low NAGpH results after 1 or 2 stages of the sequential NAG test. 5.0 Conclusion and Recommendations The results of acid base and NAG testing of representative tailings samples from the Lisheen Mine tailings storage facility confirm that the tailings are potentially acid forming with a high sulphur grade of about 20%S and a high acid neutralising capacity (ANC) of about 450 kgh 2 SO 4 /t. Even though the tailings have a high ANC, kinetic NAG tests suggest lag times of only 1 to 2 years before onset of acid conditions. This result is unusual since potentially acid forming materials from other sites with high S and high ANC typically show much longer lag times. However, the ANC in the Lisheen Mine tailings appears to be slower reacting and typical of ferroan dolomite, rather than dolomite or calcite. The relatively slow reactivity of the ANC compared to acid generation from pyrite is probably the reason for the indicated shorter lag times. Mineralogical investigations carried out by SGS indicate that pyrite and dolomite are the major mineral components in the tailings and they are closely associated with each other. Significant exposure of pyrite and dolomite surfaces was observed and it as likely that the slower reactivity of the dolomite is unable to keep pace with pyrite generated acidity in the NAG test reaction. However, under atmospheric oxidation and reaction rates the dolomite may be more effective resulting in a longer lag time of more than 2 years and possibly 5 to 10 years. Even though it might take some time before ARD generation occurs in exposed Lisheen tailings, it is possible that there could be localised areas that experience a short term lowering of ph when material is initially exposed, before recovering back to circum neutral conditions. This short-term effect is due to the difference in the initial kinetics of the fast reacting pyrite component and slower reacting dolomite. It is recommended that laboratory columns and field lysimeters be set up to collect real time data on oxidation and acid generation rates. Results from these tests will provide continual updates and refinements to the actual lag time. The laboratory columns will be run under ideal atmospheric oxidising conditions while the field tests will more closely simulate field rates under seasonal temperature and periods of higher moisture content and lower availability of oxygen.

10 THE LISHEEN MINE Geochemical Characterisation and ARD Assessment of Samples Page 8 The columns and field lysimeter will provide early warning of the onset of acid conditions and thus identify any need to spot treat exposed beaches with crushed limestone (calcite) or to raise the water table and thus isolate the tailings from atmospheric oxygen.

11 Location (L) and Sample (S) Number Depth below tailings surface (m) Depth of Water (m) Table 1: Acid forming characteristics of tailings samples from the Lisheen Mine. ACID-BASE ANALYSIS Total %S MPA ANC NAPP ANC/MPA Ratio L2S PAF L3S PAF L3S PAF L3S PAF L8S PAF L9S PAF L10S PAF L12S PAF L13S ? PAF L15S PAF KEY MPA = Maximum Potential Acidity (kgh 2 SO 4 /t) NAGpH = ph of NAG liquor NAF = Non-Acid Forming ANC = Acid Neutralising Capacity (kgh 2 SO 4 /t) NAG (ph4.5) = Net Acid Generation capacity to ph 4.5 (kgh 2 SO 4 /t) PAF = Potentially Acid Forming NAPP = Net Acid Producing Potential (kgh 2 SO 4 /t) NAG (ph7.0) = Net Acid Generation capacity to ph 7.0 (kgh 2 SO 4 /t) PAF-LC = PAF - lower capacity Single Addition NAGpH Lowest Seq. NAGpH NAG (ph7.0) to stage 3 UC = Uncertain Classification ARD Classification (expected classification in brackets)

12 Location (L) and Sample (S) Number Location Number Total S (%) ANC Table 2: Sequential NAG test results of samples from the Lisheen Mine. NAPP STAGE 1 STAGE 2 STAGE 3 NAGpH NAG (ph4.5) NAG (ph7.0) NAGpH NAG (ph4.5) NAG (ph7.0) NAGpH NAG (ph4.5) NAG (ph7.0) (kg H 2 SO 4 /t) (kg H 2 SO 4 /t) (kg H 2 SO 4 /t) (kg H 2 SO 4 /t) L2S L3S L3S L3S L8S L9S L10S L12S L13S L15S

13 Figure 1: Bathymetric Survey of the Lisheen Mine to f c Fo op r i yr ns ig pe ht ct ow ion ne pu r r rp eq os ui es re o d nl fo y. ra ny ns en Co se ru he ot.

14 ph ph Temperature ( C) Temperature C Sample Characteristics Total %S = 22.0 ANC (kg H 2 SO 4 /t) = 356 NAPP (kg H 2 SO 4 /t) = 316 NAGpH = Time (minutes) Figure 2: Kinetic NAG plot of sample 5-location 3 (L3S5). ph Time (minutes) ph Temperature ( C) Temperature C Sample Characteristics Total %S = ANC (kg H 2 SO 4 /t) = 557 NAPP (kg H 2 SO 4 /t) = -80 NAGpH = 4.6 Figure 3: Kinetic NAG plot of sample 1-location 8 (L8S1). ph ph Temperature ( C) Temperature C Sample Characteristics Total %S = 20.2 ANC (kg H 2 SO 4 /t) = 451 NAPP (kg H 2 SO 4 /t) = 167 NAGpH = Time (minutes) Figure 4: Kinetic NAG plot of sample 1-location 9 (L9S1).

15 ph ph Temperature ( C) Temperature C Sample Characteristics Total %S = 19.2 ANC (kg H 2 SO 4 /t) = 342 NAPP (kg H 2 SO 4 /t) = 247 NAGpH = Time (minutes) Figure 5: Kinetic NAG plot of sample 6-location 12 (L12S6).

16 Sample 2, Location 3: ANC=436 kg H2SO4/t Readily Avail. ANC=434 kg H2SO4/t Calcite Std: ANC=435 kg H2SO4/t Dolomite Std: ANC=435 kg H2SO4/t Ferroan Dol Std: ANC=435 kg H2SO4/t ph 5 4 Magnesite Std: ANC=435 kg H2SO4/t Siderite Std: ANC=435 kg H2SO4/t Acid Added (kg H 2 SO 4 /t) Figure 6: Acid buffering characteristic curve of sample 2-location 3 (L3S2). Sample 1, Location 8: ANC=557 kg H2SO4/t Readily Avail. ANC=716 kg H2SO4/t ph Calcite Std: ANC=560 kg H2SO4/t Dolomite Std: ANC=560 kg H2SO4/t Ferroan Dol Std: ANC=560 kg H2SO4/t Magnesite Std: ANC=560 kg H2SO4/t Siderite Std: ANC=560 kg H2SO4/t Acid Added (kg H 2 SO 4 /t) Figure 7: Acid buffering characteristic curve of sample 1-location 8 (L8S1).

17 ph Sample 6, Location 12: ANC=342 kg H2SO4/t Readily Avail. ANC=412 kg H2SO4/t Calcite Std: ANC=340 kg H2SO4/t Dolomite Std: ANC=340 kg H2SO4/t Ferroan Dol Std: ANC=340kg H2SO4/t Magnesite Std: ANC=340kg H2SO4/t Siderite Std: ANC=340 kg H2SO4/t Acid Added (kg H 2 SO 4 /t) Figure 8: Acid buffering characteristic curve of sample 6-location 12 (L12S6).