Cobre Panama Basic Engineering Summary Report

Mina de Cobre Panama

BASIC ENGINEERING

SUMMARY REPORT

May 2012

PROJECT DESCRIPTION
Project Cobre Panama Status Shovel-ready, ESIA approved December 2011
Project location Panama, Colón province Products Cu-Au and Mo concentrates
Sovereign rating Investment grade Features Botija, Colina, Valle Grande open pits
Concession area 13,000 ha Gyratory crushing, grinding, flotation
Life of mine 31 years Owner port site, Panamax capable
Start of Production 1Q16 Owner 300 MW coal-fired power
Capital Cost $US6.18b Concentrate pipeline

TIER I CHARACTERISTICS AVG ANNUAL PROD. Y2-16 LOM TOTAL LOM
Average annual production (Y2-16) 298 ktonnes Cu Cu ktonnes 298 266 8,237
Average annual production (LOM) 266 ktonnes Cu Au koz 106 87 2,705
C1 cash costs (Y2-16) $US0.72/lb Cu Ag koz 1,572 1,545 47,899
C1 cash costs (LOM) $US0.82/lb Cu Mo ktonnes 3.1 2.9 90.2
Strip ratio 0.58
Design mill throughput (Y1-9) 160 ktpd
Design mill throughput (Y10-31) 240 ktpd

RESERVE & RESOURCE ktonnes Cu (%) Au (g/t) Ag (g/t) Moly (%) Cu ktonnes Au koz Ag koz Mo ktonnes
Proven 258,000 0.57 0.14 1.6 0.010 1,478 1,126 13,020 25
Probable 2,061,000 0.38 0.06 1.4 0.007 7,781 4,041 91,008 145
Total 2,319,000 0.40 0.07 1.4 0.007 9,258 5,167 104,028 169

Measured 262,000 0.56 0.13 1.5 0.009 1,476 1,118 12,979 24
Indicated 3,905,000 0.34 0.06 1.2 0.005 13,237 7,845 155,392 214
Total 4,167,000 0.35 0.07 1.3 0.006 14,715 8,963 168,454 238
Inferred 3,749,000 0.23 0.04 1.0 0.004 8,660 4,805 120,534 156
(resources inclusive of reserves)

PROJECT ECONOMICS

CAPITAL COSTS $USm % AFTER TAX VALUATION
Mining 760 12 LT Consensus FW Curve 3Y Trl. Avg.
Process plant 1,184 19 Financed Case 1 14.3% 18.5% 19.2%
IRR
Site and services 550 9 Financed Case 2 16.7% 21.9% 22.5%
Port site 543 9 Financed Case 1 $3.2b $4.8b $6.0b
NPV8%
Power plant 646 10 Financed Case 2 $3.5b $5.0b $6.3b
Total Direct 3,682 59 Financed Case 1 $2.4b $3.9b $4.9b
NPV9%
Construction indirects 844 14 Financed Case 2 $2.8b $4.2b $5.2b
Total field costs 4,526 73 Financed Case 1 $1.8b $3.2b $4.0b
NPV10%
EPCM 355 6 Financed Case 2 $2.2b $3.6b $4.4b
Owner Costs 885 14
Contingency 415 7
Total project cost 6,181 100
Sustaining capex 2,916
POTENTIAL FOR UPSIDE
Expand throughput beyond max planned 240ktpd Financed Case 1: $US1.6b in debt drawn over 3.5 years
Accelerate increase to 240ktpd
Conversion of substantial resources beyond reserves Financed Case 2: $US1.6b in debt drawn over 3.5 years
$US1.2b upfront payment for 86% of MPSA precious metals
and on-going paid $400/oz Au and $6/oz Ag for PM stream
PROJECT ADVANTAGES
Low strip-ratio (one fifth of industry O/P Cu mine avg 2011 )
Ammenable to large scale, efficient mining LT Consensus: Flat $2.75/lb Cu, $15/lb Mo, $1,250/oz Au, $20/oz Ag
Powered by owner-built, 300mW coal-fired plant FW Curve: Forward curve dropping to LT Consensus
Proximity to tidewater, permitting inexpensive con transport (2016 start at $3.66/lb Cu, $1,785/oz gold and $31/oz Ag)
Clean concentrate 3Y Trail. Avg: Flat $3.42/lb Cu, $14.68/lb Mo, $1,316/oz Au, $24.90/oz Ag
Extensively reviewed by 3rd parties (capex and opex)
COBRE PANAMA FACT SHEET - PG 1

PROJECT DETAIL
SCHEDULE UNIT COSTS ($US/t ORE MILLED) - LT CONSENSUS
Notice to proceed 2Q12 Labour Material Power Other Total LOM Total Y2-16
Mine/process construction start 2Q12 Mining 0.27 1.87 0.05 0.24 2.44 2.68
Process earthworks complete 4Q13 Processing 0.24 2.13 0.91 0.01 3.29 3.28
Plant to port road complete 4Q13 G&A 0.15 0.01 0.04 0.69 0.88 0.97
Port complete 2Q14 Site Services 0.11 0.07 0.01 0.09 0.28 0.3
Power line complete 3Q14 Total 0.77 4.08 1.01 1.03 6.88 7.23
Tailings dam complete 3Q15
Ore hits grinding lines 4Q15 UNIT COSTS ($US/t ORE MILLED) Total LOM
Power plant complete 4Q15 LT Consensus FW Curve 3YR Trl. Avg.
Start of production 4Q15 Mining 2.44 2.46 2.55
Concentrate shipment 1Q16 Processing 3.29 3.36 3.60
Commercial production 2Q16 G&A 0.88 0.88 0.89
RESOURCE ADDITIONS SINCE 2010 Site Services 0.28 0.28 0.28
(contained metal) Total 6.88 6.98 7.32
M&I FEED Increase Current
Cu (m lb) 25,800 6,641 32,441 Power($US/kWh) Y1-9 1,2 0.027 0.033 0.034
Au (k oz) 6,533 2,430 8,963 Power($US/kWh) Y10-31 2 0.05 0.05 0.055
Ag (k oz) 133,300 35,154 168,454 C1 cash cost ($US/lb) Y2-16 - Fin Case 1 0.72 0.74 0.77
Mo (m lb) 474 51 525 C1 cash cost ($US/lb) LOM - Fin Case 1 0.82 0.83 0.87
1-Power costs adjusted to reflect sales into grid 2-Power costs are quoted before D&A expense covering the $646m capital
INF FEED Increase Current NSR BY METAL
Cu (m lb) 16,600 2,492 19,092 Avg. Annual Avg. Annual
Au (k oz) 4,003 802 4,805 Y2-16 ($USm) LOM ($USm)
Ag (k oz) 103,100 17,434 120,534 Cu 1,557 1,389
Mo (m lb) 236 18 344 Au 121 100
(resources inclusive of reserves) Ag 28 27
RESOURCE NOT IN MINE PLAN Cu ktonnes Cu mlbs Mo 93 86
Measured and Indicated 5,457 12,031 Total 1,798 1,602
Inferred 8,660 19,092

OTHER USEFUL INFORMATION

TAXATION VARIANCE FROM FEED CAPEX
Corporate tax rate 25% Capital costs $USm
Alternative minimum tax rate 1.17% FEED study estimate 4,320
Base metal royalty 5% Power plant 646
Precious metal royalty 4% Increased process plant estimate 403
Increased mining estimate 312
AVG LOM RECOVERIES Increased port site estimate 285
Copper 89.0% Other 215
Molybdnemum 53.3% Basic Engineering Estimate 6,181
Gold 52.4% Drivers:
Silver 46.1% Process Changed scope to achieve higher productivity
2 year tailings starter dam (vs. 1 prev)
CONCENTRATE ASSUMPTIONS Higher certainty of estimates
Copper TC $70/dmt Mining Fuel costs of $1.06/litre in capex (vs. $0.56 prev)
Copper RC $0.07/lb Higher certainty of earthwork estimates
Gold RC $5/oz Pre-strip costs moved from indirect to direct
Silver RC $0.50/oz BENEFITS TO PANAMA
Molybdenum roast and freight $1.49/lb $110m regional development plan to maximize sustainable socio-economic benefits
Freight $41/t wet con Increased local access to healthcare, education, sanitation and clean drinking water
Copper Con Moisture 8% Generates $US20b purchases in national economy and $US3.6b in royalties and taxes
Losses and Insurance charges 0.25% Prioritizes local hiring and job-training, total salaries $US2.2b (locals and expats):
Peak total manpower during construction of 10,000
Average total manpower during operations of 2,100

COBRE PANAMA
COBRE PANAMA FACT SHEET - PG 2

Minera Panama, S.A.
Mina de Cobre Panama Project
BASIC ENGINEERING SUMMARY REPORT

Cautionary statement regarding forward-looking statements

This Basic Engineering Summary Report contains forward-looking statements with respect to the Cobre
Panama development project (―Cobre Panama‖ or the ―Project‖), including, without limitation, information
relating to future financial or operating performance, plans, outlook, financing plans, growth in cash flow
and operating margin; projections, targets and expectations as to reserves, resources, results of
exploration (including targets) and related expenses, mine development mine production costs, drilling
activity, sampling and other data; receipt of construction permits; estimated grade levels; future recovery
levels; future production levels, capital costs, costs savings, cash and total costs of operations, production
of copper and other minerals; expenditures for environmental matters; projected mine life; reclamation and
other post-closure obligations and estimated future expenditures for those matters; future copper, and
other mineral prices (including the long-term estimated prices used in calculating mineral reserves).
All statements in this Basic Engineering Summary Report that address events or developments we expect
to occur, are ―forward-looking statements.‖ Forward-looking statements are statements that are not
historical facts and are generally, but not always, identified by the words ―expects,‖ ―plans,‖ ―anticipates,‖
―believes,‖ ―intends,‖ ―estimates,‖ ―projects,‖ ―potential,‖ ―target,‖ ―plan,‖ ―scheduled,‖ ―forecast,‖ ―budget‖
and similar expressions or their negative connotations, or that events or conditions ―will,‖ ―would,‖ ―may,‖
―could,‖ ―should‖ or ―might‖ occur. All such forward-looking statements are based on our opinions and
estimates as of the date such statements are made. Forward-looking statements are necessarily based
on estimates and assumptions that are inherently subject to known and unknown risks, uncertainties and
other factors, many of which are beyond our ability to control, that may cause the Project’s actual results,
level of activity, performance or achievements to be materially different from those expressed or implied by
such forward-looking statements. Such factors include, without limitation:
 price levels and volatility in the spot and forward markets for metals and;
 access to the necessary capital to fund the development and construction of the Project;
 the ability to develop and construct the Project in accordance with the currently projected budget and
timeline;
 the uncertainties inherent in current and future legal challenges we or the Project are or may become
a party or subject to;
 changes in national and local government legislation or regulations;
 the lack of certainty with respect to foreign legal systems, which may not be immune from the
influence of political pressure, corruption or other factors that are inconsistent with the rule of law;
 the speculative nature of mineral exploration and development, including the risks of obtaining and
maintaining the validity and enforceability of the necessary licenses and permits and complying with
permitting requirements;
 inherent hazards, risks and uncertainties associated with mining exploration, development and
operations, including accidents;
 diminishing quantities or grades of reserves;
 discrepancies between actual and estimated production, between actual and estimated costs,
between actual and estimated reserves and resources and between actual and estimated
metallurgical recoveries;
 geotechnical issues;
 the possibility of temporary or permanent shutdown;
 the actual costs of reclamation;

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Minera Panama, S.A.

 increased energy prices;
 dependency of cash flow and earnings growth upon the development of our current reserve base and
converting our resource base to reserves and production;
 actual capital costs, operating costs and expenditures, production schedules and economic returns
from the Project;
 fluctuations in the international currency markets and the rates of exchange between currencies;
 volatility of global financial conditions;
 taxation, including with respect to tax laws and regulations that are unclear or subject to ongoing
varying interpretations;
 significant capital requirements and additional funding requirements;
 risks associated with joint ventures;
 dependence on transportation, electric and water facilities and infrastructure;
 fluctuation in the cost of significant inputs including fuel;
 delays or disruptions in supplies required for exploration, development, mining or processing,
activities;
 disruptions arising from non-performance of off-take and other counterparties;
 changes in environmental laws and regulations;
 potential losses, liabilities and damages related to the Project’s business which are uninsured or
uninsurable;
 regulation of greenhouse gas emissions and climate change issues;
 labour disputes;
 defective title to mineral claims or property or contests over claims to mineral properties;
 competition; and
 the loss of key employees and the ability to attract and retain qualified personnel.

In addition, there are risks and hazards associated with the business of mineral exploration, development
and mining, including environmental hazards, industrial accidents, unusual or unexpected formations,
pressures, (and the risk of inadequate insurance or inability to obtain insurance to cover these risks) as
well as other risks, uncertainties and other factors.

Forward-looking statements are not guarantees of future performance, and actual results and future
events could materially differ from those anticipated in such statements. All of the forward-looking
statements contained in this Basic Engineering Summary Report are qualified by these cautionary
statements.

Although we have attempted to identify important factors that could cause actual results to differ materially
from those contained in the forward-looking statements, there may be other factors that cause actual
results to differ materially from those which are anticipated, estimated or intended. There can be no
assurance that such statements will prove to be accurate, as actual results and future events could differ
materially from those anticipated in such statements. You should not place undue reliance on
forward-looking statements. We expressly disclaim any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, events or otherwise.

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Market, ranking, industry data and forecasts

This Basic Engineering Summary Report includes industry data and forecasts that we obtained from
industry publications and surveys, public filings and internal company sources. Industry publications,
surveys and forecasts generally state that the information contained therein has been obtained from
sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of
included information. We have not independently verified any of the data from third-party sources, nor
have we ascertained the underlying economic assumptions relied upon therein. We cannot guarantee the
accuracy or completeness of such information contained in this Basic Engineering Summary Report.

Cautionary notice regarding reserve and resource estimates

The disclosure in this Basic Engineering Summary Report uses mineral reserve and resource
classification terms that comply with reporting standards in Canada, and certain mineral resource
estimates are made in accordance with Canadian National Instrument 43-101—Standards of Disclosure
for Mineral Projects (―NI 43-101‖). NI 43-101 is a rule developed by the Canadian Securities
Administrators (the ―CSA‖) that establishes standards for all public disclosure an issuer makes of scientific
and technical information concerning mineral projects. Unless otherwise indicated, all reserve and
resource estimates contained in this Basic Engineering Summary Report have been prepared in
accordance with NI 43-101. These standards differ significantly from the mineral reserve disclosure
requirements of the Securities and Exchange Commission (―SEC‖) set out in Industry Guide 7.
Consequently, reserve and resource information contained in this Basic Engineering Summary Report is
not comparable to similar information that would generally be disclosed by U.S. companies in accordance
with the rules of the SEC.

In particular, the SEC’s Industry Guide 7 applies different standards in order to classify mineralization as a
reserve. As a result, the definitions of proven and probable reserves used in NI 43-101 differ from the
definitions in the SEC’s Industry Guide 7. Under SEC standards, mineralization may not be classified as a
―reserve‖ unless the determination has been made that the mineralization could be economically and
legally produced or extracted at the time the reserve determination is made. Among other things, all
necessary permits would be required to be in hand or issuance imminent in order to classify mineralized
material as reserves under the SEC standards. Accordingly, mineral reserve estimates contained in this
Basic Engineering Summary Report may not qualify as ―reserves‖ under SEC standards.

In addition, this Basic Engineering Summary Report uses the terms ―mineral resources,‖ ―measured
mineral resources,‖ ―indicated mineral resources‖ and ―inferred mineral resources‖ to comply with the
reporting standards in Canada. The SEC’s Industry Guide 7 does not recognize mineral resources and
U.S. companies are generally not permitted to disclose resources in documents they file with the SEC.
Readers are specifically cautioned not to assume that any part or all of the mineral deposits in these
categories will ever be converted into SEC defined mineral reserves. Further, ―inferred mineral resources‖
have a great amount of uncertainty as to their existence and as to whether they can be mined legally or
economically. Therefore, readers are also cautioned not to assume that all or any part of an inferred
resource exists. In accordance with Canadian rules, estimates of ―inferred mineral resources‖ cannot form
the basis of feasibility or pre-feasibility studies. It cannot be assumed that all or any part of ―mineral
resources,‖ ―measured mineral resources,‖ ―indicated mineral resources‖ or ―inferred mineral resources‖
will ever be upgraded to a higher category. Readers are cautioned not to assume that any part of the
reported ―mineral resources,‖ ―measured mineral resources,‖ ―indicated mineral resources‖ or ―inferred
mineral resources‖ in this Basic Engineering Summary Report has demonstrated economic viability or is
economically or legally mineable. In addition, the definitions of ―proven mineral reserves‖ and ―probable
mineral reserves‖ under reporting standards in Canada differ in certain respects from the standards of the
SEC. For the above reasons, information contained in this Basic Engineering Summary Report that
describes the Project’s mineral reserve and resource estimates is not comparable to similar information
made public by U.S. companies subject to the reporting and disclosure requirements of the SEC.

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The Project’s proven and probable reserve estimates contained throughout this Basic Engineering
Summary Report are as of March 5, 2012, and are estimated based on information compiled by or under
the supervision of a ―qualified person‖ as defined under NI 43-101.

Important Notice
This report shall not constitute an offer to sell or a solicitation of an offer to purchase any securities of
Inmet Mining Corporation in the United States or any other jurisdiction. Any securities of Inmet Mining
Corporation have not and will not be registered under the U.S Securities Act of 1933, as amended (the
―Securities Act‖), or the securities laws of any other jurisdiction and may only be offered and sold in the
United States pursuant to an exemption from the registration requirements of the Securities Act and
applicable state securities laws

.

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Contents
1 INTRODUCTION .........................................................................................................15
1.1 A Tier 1 Copper Asset ........................................................................................16
1.2 Concession, Permits and Socio-Environmental Commitments ......................19
1.3 Capital Costs ......................................................................................................19
1.4 Operating Costs..................................................................................................20
1.5 Project Economics .............................................................................................21
1.6 Third Party Reviews ...........................................................................................22
1.7 Risks and Opportunities ....................................................................................23
1.8 Project Execution ...............................................................................................25
1.9 Conclusions ........................................................................................................26
2 TECHNICAL SUMMARY ............................................................................................27
2.1 Project Description .............................................................................................27
2.1.1 Geology and Mineral Resources ................................................................29
2.1.2 Mine Plan and Mineral Reserves ................................................................33
2.1.3 Metallurgy.....................................................................................................39
2.1.4 Mine Waste Management ............................................................................43
2.1.5 Solid and Hazardous Waste Disposal ........................................................44
2.1.6 Tailings Management Facility .....................................................................44
2.1.7 Water Management ......................................................................................46
2.1.8 Power Plant ..................................................................................................47
2.1.9 Project Infrastructure / Ancillary Facilities ................................................49
2.1.10 Port ...............................................................................................................50
2.1.11 Pipelines .......................................................................................................51
2.1.12 Balance of Plant ...........................................................................................52
2.2 INDEPENDENT THIRD-PARTY REVIEWS ..........................................................52
2.2.1 Independent Tailings Review Board (ITRB) ...............................................52
2.2.2 URS Corporation Independent Review.......................................................53
3 PRIVILEGE TO OPERATE .........................................................................................54
3.1 Panama ...............................................................................................................54
3.1.1 Mining in Panama: Changes to the Mineral Code in 2012........................56
3.1.2 Contract Law 9 .............................................................................................57
3.1.3 MPSA’s Panamanian Society Participation ...............................................58
3.2 Inmet’s Approach To Corporate Responsibility ...............................................58
3.3 Cobre Panama: Inmet’s Commitment in Action ..............................................59

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3.3.1 Regulatory Context for Environmental and Social Impact Assessments 61
3.4 Socio-environmental Context of the Project.....................................................63
3.4.1 Environmental Baseline Conditions ...........................................................63
3.4.2 Social Baseline Conditions .........................................................................65
3.4.3 Community Relations and Community Development Activities...............67
3.4.4 Project Socio-environmental Actions and Benefits ..................................69
3.4.5 Partnerships.................................................................................................71
4 CAPITAL COST ESTIMATE .......................................................................................73
4.1 Basis of Estimate................................................................................................73
4.1.1 Site Investigation .........................................................................................74
4.2 Capital Cost (CAPEX $US) .................................................................................75
4.2.1 Contract budgetary incentives ...................................................................79
4.3 Sustaining Capital (SUSEX) ...............................................................................79
4.4 Independent Third Party Review – Capital Cost Estimate ...............................80
5 OPERATING COST ESTIMATE .................................................................................82
5.1 Basis of Estimate................................................................................................82
5.2 Operating Cost Estimate (OPEX) .......................................................................83
5.3 Brook Hunt C1 Cash Cost ..................................................................................86
5.4 Independent Third Party Reviews .....................................................................88
5.4.1 Process Plant Operating Cost Estimate .....................................................88
5.4.2 Benchmark of Mining Cost .........................................................................89
5.4.3 Power Plant Operating Cost Estimate ........................................................89
5.4.4 Power Plant Coal Supply Analysis .............................................................90
6 PROJECT ECONOMICS ............................................................................................91
6.1 Modelling Assumptions .....................................................................................91
6.2 Value and Returns ..............................................................................................93
6.3 Sensitivity Results ..............................................................................................95
6.4 Cash Costs..........................................................................................................96
6.5 Net Smelter Returns ...........................................................................................99
6.6 Project Cash Flows .......................................................................................... 101
6.6.1 Debt Case ................................................................................................... 101
6.6.2 Debt plus Stream Case .............................................................................. 102
6.7 Upside of Resource Value Not Reflected in Traditional Discounted Cash Flow
Valuation ........................................................................................................... 103
7 PROJECT FINANCING ............................................................................................. 104

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8 RISKS AND OPPORTUNITIES ................................................................................. 107
8.1 Project Risk Management ................................................................................ 107
8.1.1 Special Considerations ............................................................................. 110
8.2 Opportunities .................................................................................................... 113
9 PROJECT EXECUTION ............................................................................................ 116
9.1 Project Background.......................................................................................... 116
9.2 Project Organization......................................................................................... 116
9.3 Health and Safety ............................................................................................. 119
9.4 Environmental Management Plan.................................................................... 119
9.5 Labour Relations, Training and Hiring ............................................................ 121
9.6 Sequence of Construction ............................................................................... 122
9.6.1 EPCM Scope Under JVP ............................................................................ 122
9.6.2 EPC Scope Yet to be Awarded.................................................................. 123
9.6.3 EPC Scope Under SK E&C ........................................................................ 123
9.7 Materials Management and Logistics ............................................................. 123
9.7.1 Logistics Strategy...................................................................................... 123
9.8 Procurement ..................................................................................................... 124
9.9 Security ............................................................................................................. 124
9.10 Project Master Schedule and Key Milestones ................................................ 124
9.11 Independent Reviews ....................................................................................... 127
9.11.1 Independent Project Schedule Review .................................................... 127
9.11.2 Independent Project Readiness Assessment .......................................... 127
9.11.3 Independent Project Controls Health Check ........................................... 127
10 OPERATIONAL READINESS................................................................................... 129
11 MARKETING AND MARINE TRANSPORT OF CONCENTRATE ............................ 133
11.1 Scope and Summary ........................................................................................ 133
11.2 Composition of Revenue and Price Assumptions ......................................... 133
11.3 Copper Prices and Trends ............................................................................... 134
11.4 Concentrate Quality.......................................................................................... 135
11.5 Summary of Copper Concentrate and Freight Market Expectations ............ 136
11.6 Preliminary Copper Concentrate Sales Plan .................................................. 137
11.7 Summary of Molybdenum and Freight Market Expectations ........................ 138

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List of Tables
Table 1-1 Tier 1 Characteristics ...................................................................................15
Table 1-2 Metal Production ..........................................................................................17
Table 1-3 Cobre Panama Mineral Reserves ................................................................17
Table 1-4 Cobre Panama Mineral Resources ..............................................................17
Table 1-5 Basic Engineering Capital Cost by Major Area .............................................20
Table 1-6 C1 Cash Costs($US/lb of Cu) at Copper Price Scenario of $US2.75/lb. .......20
Table 1-7 Summary of Operating Costs by Component ($US/t of ore milled) ...............21
Table 1-8 After-Tax Economics: Debt Case .................................................................22
Table 1-9 After-Tax Economics: Debt plus Stream Case .............................................22
Table 1-10 Third Party Reviews .....................................................................................23
Table 1-11 Project Milestones........................................................................................26
Table 2-1 Tier 1 Characteristics ...................................................................................27
Table 2-2 Cobre Panama Mineral Resources ..............................................................31
Table 2-3 Mine Production Schedule ...........................................................................35
Table 2-4 Mining Schedule by Pit ................................................................................36
Table 2-5 Cobre Panama Mineral Reserve ..................................................................39
Table 2-6 Recovery Forecast Algorithms .....................................................................40
Table 2-7 Mill Production Schedule..............................................................................42
Table 3-1 Cobre Panama’s Progress in Implementing the IFC Performance Standards61
Table 4-1 Basic Engineering Capital Cost by Major Area .............................................78
Table 4-2 FEED Study to Basic Engineering Capital Cost Estimate Variances ............78
Table 4-3 FEED Study to Basic Engineering Variance Description ..............................79
Table 5-1 Total Operating Cost Summary ....................................................................83
Table 5-2 Summary of Operating Costs per Year ($US/t of ore milled)* .......................83
Table 5-3 Summary of Operating Costs by Component ($US/t of ore milled)* .............84
Table 5-4 FEED Study vs. Basic Engineering Operating Costs ....................................85
Table 5-5 Operating and Input Cost Estimates at Selected Copper Price Assumptions86
Table 5-6 Years 2-16 C1 Cash Cost ($US/lb) ..............................................................87

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Table 5-7 Life of Mine C1 Cash Cost ($US/lb) .............................................................87
Table 5-8 Power Costs at Selected Copper Price Assumptions ($US/kWh) .................89
Table 6-1 Modelling Assumptions ($US) ......................................................................91
Table 6-2 Pre-Financing Sponsor Funding Requirement ............................................92
Table 6-3 Financing Assumptions ................................................................................93
Table 6-4 Metal Price Assumptions ($US) ...................................................................94
Table 6-5 After-Tax Economics: Debt Case .................................................................94
Table 6-6 After-Tax Economics: Debt plus Stream Case .............................................95
Table 6-7 Years 2-16 Cash Costs Based on Payable Copper ($US/lb) ........................96
Table 6-8 Life of Mine Cash Costs Based on Payable Copper (US/lb) .........................96
Table 6-9 Year 2-16 C3 Costs ($US/lb)........................................................................98
Table 6-10 Life of Mine C3 Costs ($US/lb) .....................................................................98
Table 6-11 Life of Mine Revenues and NSR (Consensus LT Prices) ........................... 100
Table 6-12 Construction Period Funding Requirement – Debt Case ($US) .................. 101
Table 6-13 Construction Period Funding Requirement – Debt plus Stream Case ($US)
.................................................................................................................. 102
Table 7-1 Independent Funding Breakdown .............................................................. 104
Table 7-2 Inmet’s Funding Plan ................................................................................. 104
Table 7-3 Total Project Funding ................................................................................. 105
Table 8-1 Key Project Risks and Treatment Plans ..................................................... 112
Table 8-2 Potential Reserves Should Indicated Resources at Balboa and Brazo be
Converted to Reserves .............................................................................. 114
Table 9-1 Project Milestones...................................................................................... 125
Table 10-1 Elements of and Assurance of Operational Readiness .............................. 129
Table 11-1 Forecast Copper Concentrate Commercial Terms ..................................... 138
Table 11-2 Molybdenum Concentrate NSR Calculation* .............................................. 139

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List of Figures
Figure 2-1 Site & Infrastructure Map .............................................................................28
Figure 2-2 Mineral Deposits and Defined Resources Plan Map ....................................30
Figure 2-3 Increase in Resources Since FEED Study ...................................................31
Figure 2-4 Contained Copper Endowment (resource proxy) for Undeveloped Copper
Deposits .......................................................................................................32
Figure 2-5 Contained Copper Endowment (resource proxy) for Undeveloped Copper
Deposits Not Controlled by >$10b Market Cap or Sovereigns......................32
Figure 2-6 Summary of Mining Schedule ......................................................................34
Figure 2-7 Mining Schedule Shown by Type of Material Moved and by Pit ...................34
Figure 2-8 Inferred Resource In-Pit ...............................................................................37
Figure 2-9 Plan View of Site Infrastructure and Design Pits ..........................................38
Figure 2-10 Plan View of TMF Including Dams ...............................................................45
Figure 3-1 IHS Comparative Historical Risk Showing Panama’s Risk Trending Down ..55
Figure 3-2 Estimated Cobre Panama Job Additions ......................................................56
Figure 3-3 Pro-Mining Demonstration of 2,500 People March 10, 2012 ........................67
Figure 5-1 Breakdown of Operating Costs by Function and Input Cost .........................84
Figure 5-2 Comparison of Cobre Panama’s C1 Cost on the 2020 Projected Brook Hunt
Cost Curve ...................................................................................................88
Figure 6-1 NPV Sensitivities..........................................................................................95
Figure 6-2 Comparison of Project C1 Costs on the Projected 2020 Brook Hunt Cost
Curve ...........................................................................................................97
Figure 6-3 Comparison of Project C3 Costs on the Projected 2020 Brook Hunt Cost
Curve ...........................................................................................................99
Figure 6-4 Payable Cu Production and C1 Cash Cost by Year (Consensus LT Prices
Debt Case)................................................................................................. 100
Figure 6-5 Project Life After-Tax Cash Flows (Debt Case)* ........................................ 101
Figure 6-6 Project Life After-Tax Cash Flows (Debt + Stream Case)* ........................ 102
Figure 8-1 Plan of Distribution of Resources 2012 ...................................................... 113
Figure 8-2 Plan of Distribution of Resources 2012 ...................................................... 115
Figure 9-1 Project Schedule ........................................................................................ 126

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Minera Panama, S.A.

Figure 11-1 Cobre Panama NSR by Metal Based on Long-term Consensus Prices...... 133
Figure 11-2 Gap Between Base Case Mine Production and Demand that Needs to be
Filled with Capacity Additions .................................................................... 134
Figure 11-3 Forecast vs Actual Sources of Supply 2003-2010 ...................................... 135
Figure 11-4 Historical Trends in Treatment and Refining Changes in Real 2011 Dollars137

GLOSSARY

k thousand
m million
b billion
oz troy ounces
lb pounds
kt thousand tonnes
kTon thousand tons
ktpd thousand tonnes per day
mt million tonnes
mt/a million tonnes per annum
US$/t US dollars per tonne
Cu Copper
Au Gold
Ag Silver
Mo Molybdenum
bbl barrel
l litre
mW megawatt
kWh kilowatt hour
dmt dry metric tonne
wmt wet metric tonne
LOM life of mine
g/t grams per tonne

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1 INTRODUCTION

The Mina de Cobre Panama Project (Cobre Panama; the Project) consists of a conventional
open pit mine and the associated infrastructure to produce copper-gold and molybdenum
concentrates. The concession for the Project covers an area of 130 square kilometres (km2) and
is located in the Donoso District, Colón Province in north central Panama.
Cobre Panama’s projected significant annual production at first quartile cash costs, long mine
life, extensive mineral reserves and resources, and high proportion of net revenues from copper
all provide exceptional exposure to copper. With the Environmental and Social Impact
Assessment (ESIA) regulatory approval for the Project already received, a strong social license
and Basic Engineering completed, the Project is construction-ready. It is essentially the only
Tier 1 copper asset not in the hands of a senior mining company.
Table 1-1 Tier 1 Characteristics

Tier 1 Characteristic
Life of Mine 31 years
Capital Cost $US6.18b
Annual production (Yr 2-16) 298 kt
Annual production (LOM) 266 kt
C1 cash costs (Yr 2-16) $US0.72/lb Cu
C1 cash costs (LOM) $US0.82/lb Cu
Strip Ratio 0.58
Scale 160 ktpd to 240 ktpd throughput with further expansion capacity
Consensus Long-Term Forward Curve 3YR Trailing Avg.
(declining to (SEC case)
consensus)
IRR (debt financing) 14.3% 18.5% 19.2%
NPV @ 8% ($m) 3,200 4,800 6,000
IRR (debt plus stream financing) 16.7% 21.9% 22.5%
NPV @ 8% ($m) 3,500 5,000 6,300
Annual free cash flow $US0.90b
(Yr 2-16, debt financing)
Annual free cash flow $US0.81b
(LOM, debt financing)
Copper reserves* 9.3 mt
Copper resources (M&I)* 14.7 mt
Copper resources (Inferred)* 8.7 mt
Concentrate Clean concentrate not expected to draw penalties
Logistics Proximity to tidewater and Panama Canal

*See Table 1-3 and Table 1-4

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Cobre Panama would be developed as a conventional truck and shovel open pit mine with a
concentrator that uses the direct application of proven technology (crushing, grinding, flotation)
to produce copper-gold and molybdenum concentrates. A 300 mW coal-fired power plant and
ship loading port facilities are also part of the Project.

Basic Engineering was conducted by Joint Venture Panama Inc. (JVP), a joint venture led by
SNC-Lavalin Group Inc. (70%) with partners GyM S.A. (a member of Graña y Montero Group)
(15%) and Techint International Construction Corp. (15%) between November 2010 and March
2012. The purpose of Basic Engineering was to further develop the scope and execution plan
for the Project, and to serve as the basis for detailed engineering, procurement and construction.
This work builds on the March 2010 Front End Engineering Design Study (FEED) Study. Basic
Engineering provides:
• A capital cost estimate with an accuracy of +10%/-10%
• A Project Execution Plan in readiness for the full Notice to Proceed
• A detailed Level 3 Project Master Schedule
• Detailed engineering for site capture and civil works and
• Initial Work Packages and contracting strategy to support procurement activities.

The total estimated capital cost to bring the Project into operation is $US6.2b (expressed in Q3
2011 dollars), over half of which is based on firm quotes. Sustaining capital is estimated to be
$US2.9b required over the mine life. This includes an expansion in the form of adding a third
crushing and grinding line to the process plant to increase capacity from 160ktpd to 240ktpd,
which would to be ready for production in Year 10. Operating costs are estimated to be
$US6.88/t of ore milled, with mining costs benefitting from a life of mine strip ratio of 0.58 tonnes
waste per tonne of ore. The power cost of $US1.01/t of ore milled is an endorsement of the
decision in 2011 to undertake the capital cost to build a coal-fired power plant. Assuming a full
Notice to Proceed in May 2012, first concentrate would be scheduled for early 2016.
Reconciliations to the 2010 FEED Study can be found in Sections 4 (Capital Costs) and 5
(Operating Costs).

1.1 A Tier 1 Copper Asset

The Project has the key attributes of a Tier 1 copper asset with substantial exposure to copper,
projected long life, low operating costs and significant expansion potential in a geopolitically
favourable jurisdiction.

Cobre Panama’s projected average annual copper production of 298kt for Years 2-16 and 266kt
over the life of operations are indicative of a world class asset. The expected 31 year life with
these levels of output would provide exceptional exposure to copper.

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Table 1-2 Metal Production
Annual Average Annual Average Total
Years 2-16 Life of Operations Life of Operations
Copper (kt) 298 266 8,237
Molybdenum (kt) 3.1 2.9 90.2
Gold (koz) 106 87 2,705
Silver (koz) 1,572 1,545 47,899

Estimated C1 cash costs (see Section 5 for definition) of $US0.72/lb for Year 2-16 and
$US0.82/lb for the life of the operation would put the Project in the very favourable position of
being in the first quartile of the projected industry cost curve.

Table 1-3 Cobre Panama Mineral Reserves

Category Tonnes Cu Au Ag Mo Cu Au Ag Mo
(x1000) (x1000) (x1000) (x1000)
(x 1000) % g/t g/t %
Tonnes ounces ounces tonnes

Proven 258,000 0.57 0.14 1.6 0.010 1,478 1,126 13,020 25

Probable 2,061,000 0.38 0.06 1.4 0.007 7,781 4,041 91,008 145

Total 2,319,000 0.40 0.07 1.4 0.007 9,258 5,167 104,028 169

Table 1-4 Cobre Panama Mineral Resources

(x1000) (x1000) (x1000) (x1000)
(x 1000) % g/t g/t %

Measured 262,000 0.56 0.13 1.5 0.009 1,476 1,118 12,979 24

Indicated 3,905,000 0.34 0.06 1.2 0.005 13,237 7,845 155,392 214

Total 4,167,000 0.35 0.07 1.3 0.006 14,715 8,963 168,454 238

Inferred 3,749,000 0.23 0.04 1.0 0.004 8,660 4,805 120,534 156
Notes to mineral reserves and resources table
Mineral reserves and resources are shown on a 100 percent basis for each property. Except as stated, mineral resources are
exclusive of mineral reserves.
The mineral reserve and resource estimates are prepared in accordance with the CIM Definition Standards On Mineral Resources
and Mineral Reserves, adopted by CIM Council on November 14, 2004, and the CIM Estimation of Mineral Resources and Mineral

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Reserves Best Practice Guidelines, adopted by CIM Council on November 23, 2003, using geostatistical and/or classical methods,
plus economic and mining parameters appropriate to each project. You will find the definitions and guidelines at www.cim.org.
Estimates for all operations are prepared by or under the supervision of a qualified person as defined in National Instrument 43-101
(usually an engineer or geologist).
There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the
estimates of the mineral reserves.
Mineral resources which do not form part of the mineral reserves do not have demonstrated economic viability.
Mineral resources as at March 5, 2012, were estimated by Robert Sim, P. Geo., of SIM Geological Inc. Mineral reserves as at
December 31, 2011 were estimated by William Rose, P.E., of WLR Consulting, Inc., a qualified person under National Instrument 43-
101.
Reserve estimates are based on the following assumptions:
- copper price: $US2.25 per pound
- gold price: $US1,000 per ounce
- silver price: $US16 per ounce
- molybdenum price: $US13.50 per pound
- Mining costs : $US1.66 per tonne of ore mined, $US 1.96 per tonne of waste mined and
- Milling and general and administration cost: $US 5.27 per tonne of ore milled, average life of mine metallurgical recoveries: 89
percent for copper, 52 percent for gold, 46 percent for silver and 53 percent for molybdenum.
Mineral resources include mineral reserves.
Resource grades are estimated using ordinary kriging with a nominal block size of 25 metres by 25 metres by 15 metres. Resources
are limited inside a pit shell defined by a copper price of $US2.60 per pound, $1.75 per tonne mining cost and $7.02 per tonne total
site operating cost, and are tabulated at a cut-off grade of 0.15 percent copper

Measured and Indicated (M&I) resources have grown to approximately 32.4b lb of copper and
9.0m oz of gold. This represents a 26% increase of 6.6b lb of copper and a 37% increase of
2.4m oz of gold over the FEED Study. In addition, inferred mineral resources have grown to
19.1billion lbs of copper and 4.8m oz of gold – an increase of 2.5b lb of copper (15 percent) and
an increase of 0.8m oz gold (20 percent) over the FEED Study.

Currently there are 12b lb of contained copper in M&I mineral resources and some 19b lb of
copper in inferred mineral resources not exploited in the mine plan. While mineral resources do
not have demonstrated economic viability, based on commonly used market precedent, these
additional units of copper could potentially be valued at between $US0.03 and $US0.06/lb in the
ground, suggesting an option value on those copper units of between $US0.9b and $US1.8b.
This is especially true once the infrastructure is in place and the mine is operating.

If work progresses to allow us to move these resources into reserves, it would provide
opportunities to:

• extend mine life beyond the current 31 years; and/or

• accelerate the addition of a third line to the process plant that would increase
production in Years 3 to 9; and/or

• justify expanding the planned operation beyond 240ktpd throughput.

Cobre Panama would enjoy a number of other positive attributes. In an industry with a trend of
increasing presence of deleterious elements in concentrates, the Project would have a clean
concentrate. The port, located on tide water, would be only 30 km from the mine site, allowing
for ease of exporting concentrates as well as importing supplies. This would provide a unique

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opportunity to potentially enhance profitability through swaps to reduce transportation costs and
to share the benefit of reduced penalties with swap counterparties.

1.2 Concession, Permits and Socio-Environmental Commitments

The Project exploration and mining concession was granted under Law 9 of February 26, 1997,
promulgated by the Legislative Assembly of Panama. This, in addition to an amended Mineral
Resources Code in Panama, provides clarity on the fiscal framework for Cobre Panama. The
ESIA approval was received in December 2011 and gives the Project the right to obtain the
balance of the permits required to commence operations. Several such construction permits
have already been obtained.

MPSA has created an existing privilege to operate locally by building relationships with local
communities, an intention to comply with the International Finance Corporation’s Performance
Standards on Environmental and Social Sustainability and by meeting its responsibility to ensure
that the benefits of the Project are shared with the people of Panama.

1.3 Capital Costs

The estimated capital cost of $US6.18b is based on a comprehensive estimate comprised of
over 9,000 lines and 800 pages as well as third party reviews of the process and outcome.
Adding further to the confidence in the figures is the inclusion of lump sum turnkey contracts,
firm price estimates and vendor quotes for well over ninety per cent of the capital cost.

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Table 1-5 Basic Engineering Capital Cost by Major Area
CAPEX Total
Area % of Project
($US)
Mining 760 12
Process Plant 1,184 19
Site & Services 550 9
Port Site Facilities 543 9
Power Plant 646 10
Total Direct Costs 3,682 59
Construction Indirects 844 14
Total Field Costs 4,526 73
EPCM Services 355 6
Owner Costs 885 14
Contingency* 415 7

Project Total Costs 6,181 100

Note: Totals may not add due to rounding
*Contingency: The contingency table provided to the estimate reviewers had an overall Project contingency of 9.63% (as a
percentage of Total Installed Cost (TIC)). When owner’s costs (mine preproduction, mine equipment and Owner’s Project
Management (PM)) and contingency on owner’s costs are removed, the remaining value is 11.18%. The percentage is in line with
what might be expected of an Authority for Total Cost Management (AACE) Class 2 engineering estimate which is described in
Section 4.4.

1.4 Operating Costs
C1 cash costs during Years 2-16 of operation are expected to average $US0.72/lb of copper and
for the life of operations average $US0.82/lb (see Section 5 for further details). These costs
should put Cobre Panama in the first quartile of the projected industry curve and support the
economic robustness of the operation under most foreseeable market conditions.

Table 1-6 C1 Cash Costs($US/lb of Cu) at Copper Price Scenario of $US2.75/lb.

Cost Item Average Yr 2-16 Life of Operations

Mine 0.30 0.32
Plant 0.37 0.44
G&A 0.11 0.12
Site services 0.03 0.04
Offsite costs 0.30 0.30
By-product credits (0.40) (0.40)
C1* 0.72 0.82

Note: Totals may not add due to rounding

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Table 1-7 Summary of Operating Costs by Component ($US/t of ore milled)

Cost Centre Total Labour Material Power Other

Mine 2.44 0.27 1.87 0.05 0.24

Process Plant 3.29 0.24 2.13 0.91 0.01

G&A 0.88 0.15 0.01 0.04 0.69

Site Services 0.28 0.11 0.07 0.01 0.09

Total 6.88 0.77 4.08 1.01 1.03

A third party review of process plant operating costs concluded that the estimate of operating
costs was realistic and consistent with other operating concentrators. A separate reviewer
concluded that the Project’s mining productivity ratios were at the average or slightly
conservative as compared to other similar open-pit mining operations.
Analysis of costs for input commodities such as oil (diesel), freight, steel (grinding media),
ammonia (explosives) and coal (power) has demonstrated a strong correlation to the historical
price of copper. When prices of oil and other raw materials are relatively high, statistically
significant correlations demonstrate that it is reasonable to expect that the economic
environment is robust and, likewise, so presumably would be the price of copper. The cost
assumptions for these commodities can therefore linked to price assumptions for copper over
the long term. The life of mine operating costs estimate of $US6.88/t of ore milled is based on a
long-term copper price assumption of $US2.75/lb. Table 5-5 shows the various input costs used
for each metal price scenario – in the $US2.75/lb copper case oil is $US68.68/bbl, diesel is
$US0.62/l, coal is $US82.54/t, steel grinding media is $US935.25/t, explosives are $US936.21/t
and concentrate freight cost was $US41.21/t. In the $US3.42/lb copper case oil is
$US80.53/bbl, diesel is $US0.72/l, coal is $US96.93/t, steel grinding media is $US1,143.62/t,
explosives are $US1,011.18/t and concentrate freight cost was $US48.32/t.

1.5 Project Economics
Three metal price scenarios were used to evaluate the Project economics: Consensus Long-
Term ($US2.75/lb), Forward Curve, and Three Year Trailing Average ($US3.42/lb). It is our
belief that the Consensus Long-Term price is conservative and does not reflect anticipated
supply-demand dynamics (see Section 11 ―Marketing‖ for additional discussion). Two financing
structures were considered in the Project economic analysis:

1. a levered case with third party and subordinate shareholder debt, and
2. a levered case with third party and subordinate shareholder debt, plus a gold and silver
stream sale.

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These structures represent Inmet Mining Corporation’s (Inmet’s) financing assumptions applied
to 100% of the Project. All scenarios and cases appear to provide solid returns that range from
14.3% to 22.5% after-tax IRR.

Table 1-8 After-Tax Economics: Debt Case

Metal Price Scenario

Forward Curve
3-Year Trailing Average (SEC
($USm) Consensus Long-Term (declining to
case)
consensus)
IRR 14.3% 18.5% 19.2%
NPV @ 8% 3,200 4,800 6,000
NPV @ 9% 2,400 3,900 4,900
NPV @ 10% 1,800 3,200 4,000

Table 1-9 After-Tax Economics: Debt plus Stream Case

Metal Price Scenario

Forward Curve
3-Year Trailing Average (SEC
($USm) Consensus Long-Term (dropping to
case)
consensus)
IRR 16.7% 21.9% 22.5%
NPV @ 8% 3,500 5,000 6,300
NPV @ 9% 2,800 4,200 5,200
NPV @ 10% 2,200 3,600 4,400

However, readers should be aware that the static Discounted Cash Flow valuation methodology
employed in the analysis does not capture the value of the optionality embedded in a long-life
asset and additional mineral resources that may be incorporated into the mine plan.

1.6 Third Party Reviews
Many recent projects in the mining industry have been impacted by unreliable capital estimates.
To ensure the reliability of Cobre Panama’s capital estimate, third party reviews of key aspects
of the Project overall were undertaken to mitigate risks and improve the confidence of estimates.

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Table 1-10 Third Party Reviews

Scope Reviewer Outcome
Overall Project Chlumsky, Ambrust & Meyer Confirmative
(CAM) – Independent
Engineer
Capex Legico-CHP Confirmative
Opex AMEC Confirmative
Power Sunrise Americas & Wood Confirmative
Mackenzie
Tailings URS Corporation Confirmative
Tailings ITRB Confirmative
Project Controls KPMG Confirmative
Project Readiness IPA Confirmative

1.7 Risks and Opportunities
Cobre Panama stakeholder risks and opportunities were identified and risk mitigants put in place
as part of Basic Engineering.
Cost Escalation
 Quotes to build the power plant and the process plant (together a significant component
of Project capital expenditures) were and are being written on a ―Lump Sum‖ and ―Not to
Exceed‖ basis in order to reduce the likelihood that these components will bring the
Project over budget. These quotes will be received from audited vendors with the
sophistication and balance sheet to manage costs and deliver on budget.
 The advanced stage of engineering for the Project (currently 38% completed) in
combination with the large portion of firm bids received to-date (58%) should further
reduce the potential for unforeseen costs.
 Panama’s use of the US currency is another positive characteristic of the Project that
should reduce the potential for material cost escalation due to foreign exchange
fluctuation.
 The manner in which the ―Request for Quotation‖ process was conducted should reduce
the potential for cost overruns. The Project’s Engineering, Procurement and
Construction (EPC) and Engineering, Procurement, Construction and Management
(EPCM) contracts are designed to incent contractors to stay on budget and on schedule.
 We believe the quotes obtained are materially conservative – in some cases the labour
multiplier (unit of work over unit of time) used for work on the Project is as high as three
times what would normally be employed and some of the quotes for individual work
packages have small overlaps in scope (which could potentially reduce costs).
 By the end of 2012, 50% of the Project expenditures are expected to be committed
against firm quotes currently in hand.
 Overall Project contingency is 9.6% (as a percentage of TIC). When owner’s costs (mine
preproduction, mine equipment and owner’s project management (PM)) and contingency

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on owner’s costs are removed, the remaining contingency level is 11.2%. This
percentage is in line with what might be expected of an AACE Class 2 engineering
estimate.
 The Project is actively considering early group purchase of bulk commodities (to lock in
some costs of steel, diesel, cement) for construction and passing out to suppliers.

Low Cost Production from a Low Grade Mine
 Cobre Panama is amenable to large scale, open pit mining methods that should result in
the efficient handling of ore and waste.
 Mining costs should benefit from a very low strip ratio, roughly one fifth of the average
(0.58 vs 2.53 – Source: Brook Hunt) for all open pit copper mines in 2011.
 The Project’s proximity to the coast and the low altitude of the Project should allow the
mine and the port to be located close together, thus decreasing linear maintenance and
allowing for integrated management of remote facilities.
 The project would have access to low-cost, self-generated power that takes advantage of
proximity to a coal source.

Management Depth
 Inmet has developed three mines within the tenure of the current management; the Las
Cruces, Çayeli and Troilus mines.
 For the Project, Inmet has recruited a strong owner’s team (detailed in Section 9) that
has relevant experience in construction and operations. Further, reputable Engineering,
Procurement and Construction contractors with a proven history of quality have been
selected.

Support for the Project
 Approval of the ESIA is in our view indicative of governmental support for the Project.
 Permits post-ESIA approval are being received.
 Extensive engagement and cooperation at both the government and community levels.
 At the community level, the current level of support in the Project area indicates that
community engagement efforts are working and a recent study shows overwhelming
support for the Project (Section 3.3.3).
 Minera Panama, S.A. (MPSA) has received free prior and informed consent of the
indigenous communities who will be physically and economically displaced by the
Project.
 MPSA has continuous engagement with the local communities and a broad range of
stakeholders and is delivering employment to local residents.

Mine Life
 Current mineral resources are in excess of the Basic Engineering mine plan and point to
the potential for mine life extension and expansions beyond the currently planned
addition of a third crushing and grinding line to the process plant.

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Acceleration of Third Line
 Moving the third line addition forward could enhance the mill throughput by approximately
50% in Years 3 to 9 and would make Cobre Panama one of the ten largest copper mines
in the world in terms of annual production.

Further Expansion under Extended Resource
 There is a significant mineral resource under the Basic Engineering plan, exclusive of
mineral reserves, that is largely near surface and proximal to the planned plant. This
could potentially support future expansion.

Exploration Potential
 In late 2010 MPSA initiated a concession-wide exploration program via airborne
geophysical survey. This survey identified known shallow mineralization and generated
numerous targets. One of the first targets tested in early 2011 resulted in the discovery of
the Balboa deposit. An extensive exploration program for 2012 is underway with 36
holes testing additional targets on the concession.

1.8 Project Execution
A project execution plan has been developed to move Cobre Panama from completion of Basic
Engineering through design, construction and commissioning phases all the way to shipment of
the first concentrate anticipated in the first quarter of 2016. The MPSA Project team would grow
from 50 today to 107 members at its peak in 2013.
Milestones from the Project master schedule are presented below.

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Table 1-11 Project Milestones
Milestone Date
(Estimated)
Notice to Proceed 2Q12
Mine/Process Plant Construction Start 2Q12
Port Site Construction Camp Complete 4Q12
Process Plant Bulk Earthworks Complete 4Q13
Coast Road Open (Plant to Port Site) 4Q13
Port Dock Facility Construction Complete 2Q14
230 kV Power Transmission Line Construction Complete 3Q14
Tailings Starter Dam Construction Complete 3Q15
Introduction of Ore to Grinding Line No. 1 4Q15
Power Plant Complete – Unit No. 1 Operational 4Q15
Introduction of Ore to Grinding Line No. 2 4Q15
Power Plant Complete – Unit No. 2 Operational 4Q15
Start of Production 4Q15
Shipment of Concentrate 1Q16
Commercial Production 2Q16

1.9 Conclusions

With Basic Engineering completed, detailed engineering underway, key permits in process, and
continued efforts to maintain and enhance its privilege to operate locally, Cobre Panama is a
construction-ready Tier 1 project. With few such assets in a construction-ready position and not
already in the hands of a senior mining company, we believe the Project has potential value
beyond what is estimated in the NPV analysis.

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2 TECHNICAL SUMMARY

2.1 Project Description
Cobre Panama would be a world-class Tier 1 asset based on projected mine life, annual
production, cash costs, scalability and annual cash flow.

Table 2-1 Tier 1 Characteristics

Tier 1 Characteristic

Life of Mine 31 years

Annual production (Yr 2-16) 298 kt
Annual production (LOM) 266 kt
C1 cash costs (Yr 2-16) $US0.72/lb Cu
C1 cash costs (LOM) $US0.82/lb Cu
Strip Ratio 0.58
Scale 160 ktpd to 240 ktpd throughput with
further expansion capacity
Annual free cash flow (Yr 2-16) at $US2.75/lb Cu, debt financing $US0.90b
Annual free cash flow (LOM) at $US2.75/lb Cu, debt financing $US0.81b
Copper reserves* 9.3 mt
Copper resources (M&I)* 14.7 mt
Copper resources (Inferred)* 8.7 mt
Concentrate Clean concentrate not expected to draw
penalties
Logistics Proximity to tidewater and Panama
Canal

*See Table 1-3 and 1-4

Cobre Panama would be developed as a conventional truck and shovel open pit mine with a
concentrator employing proven technology (crushing, grinding, flotation) to produce copper-gold
and molybdenum concentrate. A 300 mW coal-fired power plant and ship loading port facilities
would also be part of the Project.
The Project would be within an exploration and mining concession covering 130 km2 located in
the Donoso District, Colón Province in north-central Panama. The development would be close
to tidewater and would be advantaged by its proximity to the Panama Canal which provides
increased flexibility in sourcing supplies from both the Gulf of Mexico (North America) and South
America as well as providing convenient shipping of mine concentrates to global markets.

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Figure 2-1 Site & Infrastructure Map

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Minera Panama, S.A.

The Project infrastructure, ancillary support facilities and systems would include:

 Three open pits (the Botija, Colina and Valle Grande deposits) which would be
progressively developed;
 Ore crushing, conveying and stockpiling facilities, consisting of two gyratory crushers,
belt conveyors and a pad for crushed ore stockpiling for the initial Botija pit;
 Provisions for a second crusher and associated conveying and stockpiling facilities to
handle ore from the Colina and Valle Grande pits
 A 160 ktpd process plant consisting of two lines;
 Provisions for an addition of a third line in the concentrator expanding its capacity to 240
ktpd throughput in Year 10 with negligible infrastructure modifications;
 A slurry pipeline to transport concentrate to the port facility;
 A port facility including concentrate loading and coal offloading facilities;
 A 300 megawatt coal-fired power plant;
 A coast access road, connecting the process plant with the port facility;
 Plant and truck repair shop;
 Warehouse and tank farm;
 Camp and administrative offices;
 Facilities and systems for environmental monitoring and management of effluents in
compliance with Project commitments; and
 Transmission line from the power plant at the port facility to the process plant and
switchyard, continuing south to connect with the Panamanian grid at the Llano Sanchez
substation.

2.1.1 Geology and Mineral Resources
Copper-gold-molybdenum porphyry-style mineralization was discovered in central Panama
during a regional survey by the United Nations in 1968. Exploration has since outlined five large
deposits and several smaller ones on the concession. Drill programs have been conducted by
the United Nations Development Program (1968-1969), Panama Mineral Resources
Development Company (PMRD), a Japanese consortium (1970-1980), Inmet-Adrian Resources-
Teck as MPSA (1990-1997), Petaquilla Copper (2006-2008), and Inmet and Teck and then
Inmet as MPSA (2007-2009). A total of 1,275 diamond drill holes (230,555 m) have been
completed.
The relevant deposits are all porphyry copper deposits and include Botija, Colina, Medio, Valle
Grande, Brazo and Balboa. All of the porphyry-style mineralization on the property is hosted in
granodiorite, feldspar-quartz-hornblende porphyry, and adjacent andesitic volcanic rocks. The
scope of the Basic Engineering, as well as the approved ESIA, only covers the development of
the Botija, Colina, Medio and Valle Grande deposits.

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May 2012

Minera Panama, S.A.

Figure 2-2 Mineral Deposits and Defined Resources Plan Map

Cobre Panama mineral resources (inclusive of reserves) were re-estimated in early 2012 to
incorporate the 171 holes completed since the 2010 FEED Study (see Table 2-2). The increase
in measured and indicated resources reflected conversion of inferred resources into indicated
resources on the Brazo deposit and the addition of the Balboa resource. Most of the increase in
inferred resources came from Balboa.

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May 2012

Minera Panama, S.A.

Table 2-2 Cobre Panama Mineral Resources

Contained Metal (x1000)

(x 1000) % g/t g/t %

Measured 262,000 0.56 0.13 1.5 0.009 1,476 1,118 12,979 24

Indicated 3,905,000 0.34 0.06 1.2 0.005 13,237 7,845 155,392 214

Total 4,167,000 0.35 0.07 1.3 0.006 14,715 8,963 168,454 238

Inferred 3,749,000 0.23 0.04 1.0 0.004 8,660 4,805 120,534 156

Mineral resources which do not form part of the mineral reserves do not have demonstrated economic viability.
Mineral resources as at March 5, 2012 were estimated by Robert Sim, P. Geo., of SIM Geological Inc.
Mineral resources include mineral reserves.
Resource grades are estimated using ordinary kriging with a nominal block size of 25 metres by 25 metres by 15 metres. Resources
are limited inside a pit shell defined by a copper price of $USUS2.60 per pound, $US1.75/t mining cost and $US7.02/t total site
operating cost, and are tabulated at a cut-off grade of 0.15 percent copper.

Figure 2-3 Increase in Resources Since FEED Study

Cobre Panama has one of the largest undeveloped resources in the Metals Economics Group
(MEG) and Brook Hunt databases (see Figure 2-4). As a copper deposit not held by a major
(>$US10b market cap or sovereign), Cobre Panama stands out even more (Figure 2-5).

Page 31
May 2012

Cobre Panama Basic Engineering Summary Report

Cobre Panama Basic Engineering Summary Report

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