Advancing The Zafranal Project Bruce L. Turner Executive Director, Compañía Minera Zafranal 6 March 2017 Peru Day PDAC 2017
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History: From Discovery to Consolidation 2004 2009 2010 2013 2017 Discovery by Teck Optioned to AQM Teck/AQM form JV Mitsubishi Materials Joins partnership Teck acquires AQM 2004: Discovered by Teck Resources Limited (Teck) as a part of a generative exploration program in the southwest Peru Porphyry Copper Belt 2009: Option Agreement between Teck and AQM Copper establishes AQM as the exploration operator 2010: Option Agreement amended whereby Teck and AQM formed a 50/50 JV in Compañia Minera Zafranal () a Peruvian company established for the project 2013: Mitsubishi Materials invested US$22.6 M and committed to spend an additional US$15 M to acquire a 20% interest in the project from AQM Copper 2004 Discovery Drilling 2017: Teck acquires AQM increasing their interest in the project to 80%
Zafranal Project: Regional Location
Zafranal Project: Work History 2009-2013 Resource drilling, metallurgy and initial engineering studies First mineral resource report prepared in compliance with Form 43-101F1 and NI 43-101 issued December, 2010 Preliminary Economic Assessment (PEA) report prepared in compliance with Form 43-101F1 and NI 43-101 issued January, 2013 2014-2016 Prefeasibility Studies, geotechnical, hydrology, reserve definition drilling, engineering, and metallurgy Environmental baseline and water exploration Prefeasibility Study (PFS) report prepared in compliance with Form 43-101F1 and NI 43-101 issued June, 2016 2017 Preparing budgets and plan for owner s approval of feasibility study program leading to preparation of EIAd and submission in 2018
Geology: Large Scale Cu-Au Porphyry
Zafranal: Reserves and Resources Mineral Reserves Mineral Resources 1 Category/Type Mt Cu (%) Au (g/t) Cu (Mlbs) Au (koz) Category/Type Mt Cu (%) Au (g/t) Cu (Mlbs) Au (koz) Proven Measured & Indicated Mixed 0.4 0.48% 0.11 4 1 Supergene 97 0.61% 0.08 1,308 233 Hypogene 105 0.25% 0.07 660 249 Total Proven 202 0.44% 0.07 1,972 483 Probable Mixed 2 0.40% 0.11 16 6 Supergene 78 0.50% 0.06 861 156 Hypogene 118 0.27% 0.06 694 246 Total Probable 198 0.36% 0.06 1,571 408 Proven & Probable Mixed 2 0.41% 0.11 20 8 Supergene 175 0.56% 0.07 2,169 389 Hypogene 224 0.27% 0.07 1,354 495 Total Proven & Probable 401 0.40% 0.07 3,543 891 Mixed 23.5 0.28 0.12 146 91 Supergene 183.6 0.55 0.07 2,234 413 Hypogene 260.2 0.27 0.07 1,543 586 Total Measured & Indicated Inferred 467.3 0.38 0.07 3,925 1,089 Mixed 7.8 0.22 0.09 37 23 Supergene 8.7 0.3 0.04 57 11 Hypogene 4.9 0.18 0.03 20 5 Total Inferred 21.4 0.24 0.06 114 38 (1) Mineral resources are reported inclusive of mineral reserves Copper in Reserves 3.5 Blbs Copper in Resources 1 4.0 Blbs Note: See NI 43-101 Technical Report dated June 10, 2016 for notes accompanying mineral reserve and resource estimates
Hydrology has undertaken hydrology studies in support of an EIA and to identify possible water sources for the project A brackish groundwater resource has been identified that has the potential to supply the mine for its operational life Located approximately 35km south of Zafranal this groundwater resource has built up as a result of decades of irrigation in the Majes I farming areas The groundwater is brackish (salty) and unsuitable for irrigation, human or animal consumption, however it is suitable for industrial use at mine site Pumping water from this brackish groundwater resource is not expected to have an adverse impact on surface activities within the irrigation district Site Hydrology and Water Sources M T B 10x 3B m 3 The estimated volume of stored brackish groundwater is approximately 3 billion m 3, which is at least ten times greater than the total life of mine water requirement volume M Mine T Tailings Storage Facility B Brackish groundwater resource
Prefeasibility Study Completed Open pit mine and concentrator to process a variable throughput of 55 to 64 kt/d of copper ore Annual production profile of 120,000 tonnes per year of copper over the first five year period Average production of 75,000 tonnes of copper per year over the 19 year life of operations Clean ore and concentrate: no deleterious elements and all impurities are below smelter penalty thresholds Zafranal has ~4B lbs of copper and ~1.1 Moz of gold contained in measured and indicated resources 87% of measured and indicated mineral resources have been converted to proven and probable mineral reserves Access to low-cost power and potential for nearby water supply Large 47,252 ha prospective mineral concessions located distant from agricultural areas and local communities Project Highlights (100% basis) 1 $496M After-Tax NPV 8% $1.16B Initial CapEx $1.59/lb C1 Cash Costs over Life of Mine 3.5 Blbs Cu P&P Reserves 15.9% After-Tax IRR 4 Year Payback Period 0.40% Avg. Copper Reserve Grade 0.9 Moz Au P&P Reserves Note: See NI 43-101 Technical Report dated June 10, 2016 (1) Project economics at US$3.00/lb Cu and US$1,200/oz Au 4.7 Life-of-Mine to Payback Ratio
W N S E Project Layout V Ω T C Z C Tunnel Conveyor Ore Transport Direction P R 1 km. C - Primary Crusher P - Processing Plant T - Tailings Storage Facility Z - Zafranal Main Pit R - Primary Access Road C - Camp Ω - 220kv Power Line V - Victoria Pit
NPV (US$M) Economic Highlights Copper Price $2.50/lb $3.00/lb $3.50/lb Undiscounted Cash Flows US$M Pre-Tax $1,204 $2,711 $4,236 After-Tax $648 $1,649 $2,623 After-Tax NPV US$M at Discount Rates 8% ($5) $496 $978 10% ($101) $333 $749 Internal Rate of Return IRR % 7.9% 15.9% 22.1% $1,200 25.0% $1,000 $800 After-Tax NPV 8% and IRR Sensitivity to Copper Price 20.0% $600 15.0% $400 10.0% After-Tax NPV 8% After-Tax IRR $200 $0 US$2.50/lb US$3.00/lb US$3.50/lb 5.0% -$200 Note: See NI 43-101 Technical Report dated June 10, 2016 (1) Project economics at US$3.00/lb Cu and US$1,200/oz Au 0.0%
Key Exploration Permits Environmental Certification (EIAsd) Hydrogeological water studies permits Water use authorization Land access permits Archaeological permits (CIRA) and monitoring plan Fuel storage authorization Septic tanks authorization Water treatment plant permit
Environmental Management Plan Environmental Protection Policy Environmental Regulation for Mining Exploration Environmental Certification Internal Audits Inspection by Environmental authority (OEFA) Environmental Control and Mitigation Program Solids Residue and Effluent Management Program Environmental Monitoring Program Remediation and Closure Program
Health and Safety Management Plan Safety and Health Policy Safety and Health Regulation for Mining Safety training of Employees and contractors Health and Safety Management Plan driven by prevention Risk Assessment Processes for all the activities Periodical medical check ups and trials Emergency Response Plan Internal and external auditing and inspections to assess performance
Engagement with our Communities SOCIAL RESPONSIBILITY POLICIES Community Relations Conduct and Business Ethics Code Social investment Local Employment and Purchasing PLANS AND PROGRAMS Communication and Information Education and health Capacity Building Productive and local development Participatory environmental monitoring Addressing complaints and queries Formalization of Informal Miners Working Table for sustainable development planning
Working with our Communities
Project Outlook The future development of the Zafranal Project depends on the following important factors: Confirmation of the viability of the brackish water resource option for the project production stage Shareholder s funding for the feasibility and EIAd studies The support of the government with the Adelanto Social" program to address the priority needs of the area of influence The support of the authorities and communities in the project influence area Land use agreement for the development of the project Approval of the project EIAd Increase in long-term copper price
Mesa de Trabajo del Proyecto Zafranal COMPANIA MINERA ZAFRANAL Calle Dante Alighieri B1 Urb. Los Pinos, Cercado Arequipa Perú Tel. (51 54) 369145