cerro lindo polymetallic mine chavín district, chincha ...certificate of qualified person i, peter...

Cerro Lindo Polymetallic Mine Chavín District, Chincha Province, Perú NI 43-101 Technical Report on Operations

Prepared by:Mr Bill Bagnell, P.Eng.Dr Ted Eggleston, RM SMEMr Edward J.C. Orbock III, RM SMEMr William Colquhoun, FSAIMMMr Laurie Reemeyer, P.Eng.Mr Peter Cepuritis, MAusIMM (CP)Ms Juleen Brown, MAusIMM (CP)Dr Bing Wang, P.Eng

Prepared for: V.M. Holding S.A.

Report Effective Date: 30 June 2017

Project Number: Lima P00072

Amec Foster Wheeler Americas Limited 301 - 121 Research Drive, Saskatoon, SK, S7N 1K2,

Canada www.amecfw.com

CERTIFICATE OF QUALIFIED PERSON

I, William (Bill) Bagnell, P.Eng., am employed as Manager Mining with Amec Foster Wheeler Americas Limited (Amec Foster Wheeler).

This certificate applies to the technical report titled “Cerro Lindo Polymetallic Mine, Chavín District, Chincha Province, Perú, NI 43-101 Technical Report on Operations” that has an effective date of 30 June, 2017 (the “technical report”).

I am a Professional Engineer in the Provinces of Manitoba and Saskatchewan (#35339, and #12147 respectively). I graduated from the Technical University of Nova Scotia in 1996 with a Bachelor of Engineering, Mining Discipline.

I have practiced continuously in my profession for 21 years. I have been directly involved in pre-feasibility and feasibility level studies for underground projects in uranium, gold, potash and diamonds. I have been involved with mine operations in coal, potash, gold, and base metals.

As a result of my experience and qualifications, I am a Qualified Person as defined in National Instrument 43–101 Standards of Disclosure for Mineral Projects (NI 43–101).

I have not visited the Cerro Lindo Mine.

I am responsible for Sections 1.1 to 1.3, 1.13 to 1.15, 1.17, 1.20, 1.21, 1.23 to 1.26; Sections 2.3 to 2.7; Section 3; Section 15; Sections 16.1, 16.3 to 16.13; Sections 18.1 to 18.4, 18.7 to 18.11; Sections 20.4, 20.5; Sections 21.1, 21.2.1 to 21.2.2, 21.2.4 to 21.2.5, 21.3.1 to 21.3.3, 21.3.5, 21.3.6, 21.4; Section 24.1.4, 24.1.6, 25.7, 25.8, 25.10, 25.13, 25.14, 25.16; 26.1, 26.3.2, and Section 27 of the technical report.

I am independent of V.M. Holdings S.A. as independence is described by Section 1.5 of NI 43–101.

I have had no previous involvement with the Cerro Lindo Mine.

I have read NI 43–101 and the sections of the technical report for which I am responsible have been prepared in compliance with that Instrument.

Amec Foster Wheeler Americas Limited 301 - 121 Research Drive, Saskatoon, SK, S7N 1K2,


As of the effective date of the technical report, to the best of my knowledge, information and belief, the sections of the technical report for which I am responsible contain all scientific and technical information that is required to be disclosed to make those sections of the technical report not misleading.

Dated: 19 September, 2017.

“Signed and sealed”

William (Bill) Bagnell, P.Eng.

Amec Foster Wheeler E&C Services Inc. 10615 Professional Cir Suite 100, Reno, NV 89521,

USA www.amecfw.com


I, Dr. Ted Eggleston, RM SME, am employed as a Principal Geologist with AMEC E&C Services Inc. (Amec Foster Wheeler).

This certificate applies to the technical report titled “Cerro Lindo Polymetallic Mine, Chavín District, Chincha Province, Perú, NI 43-101 Technical Report on Operations” that has an effective date of 30 June, 2017 (the technical report).

I am a Registered Member of the Society for Mining, Metallurgy and Exploration (#4115851RM) and licensed as a Professional Geologist in the States of Wyoming (PG-1830) and Georgia (PG002016). I graduated from Western State University of Colorado with a BA degree in 1976 and from the New Mexico Institute of Mining and Technology with MSc and PhD degrees in Geology in 1982 and 1987 respectively.

I have practiced my profession for 40 years during which time I have been involved in the exploration for, and estimation of, mineral resources and mineral reserves, for various mineral exploration projects and operating mines. I have explored for, provided technical assistance for, or audited lead, zinc, silver and copper deposits including Arctic Camp (Alaska), Red Dog (Alaska), Touro (Spain), and Kidd Creek (Canada). I conducted regional exploration in Alaska, Arizona, Utah, Colorado, Wyoming, and Canada.


I visited the Cerro Lindo Mine 24 April to 28 April, 2017.

I am responsible for Sections 1.1, 1.3 to 1.9, 1.24, 1.25, 1.26; Section 2; Section 3; Section 4; Section 5; Section 6; Section 7; Section 8; Section 9; Section 10; Section 11; Section 12; Section 23; Section 24.1.1; Sections 25.1 to 25.4, 25.16; Section 26.1, 26.2; and Section 27 of the technical report.




Amec Foster Wheeler E&C Services Inc. 10615 Professional Cir Suite 100, Reno, NV 89521,

USA www.amecfw.com



“Signed and stamped”

Ted Eggleston, RM SME

Amec Foster Wheeler E&C Services Inc 10615 Professional Cir Suite 100, Reno, NV 89521,

USA www.amecfw.com

CERTIFICATE OF QUALIFIED PERSON I, Edward J.C. Orbock III am employed as a Principal Geologist and US Manager of Geology with Amec Foster Wheeler E&C Services Inc. (Amec Foster Wheeler).


I am a Registered Member of SME (#4038771). I graduated with a degree in Master’s of Science in Economic Geology from the University of Nevada, Reno, in 1992 and a Bachelor’s of Science degree in Geology from the University of New Mexico, in 1981.

I have practiced my profession for over 30 years since graduation. I have been directly involved in exploration, operations, and resource modeling for both precious and base metals projects in North and South America and Africa.


I visited the Cerro Lindo Mine from 24 to 28 April, 2017.

I am responsible for Sections 1.11, 1.12, 1.24, 1.25, 1.26; Sections 2.3, 2.4, 2.5, 2.6; Section 3; Section 14; Section 24.1.2; Section 25.6; Section 25.16; Section 26.3.1; and Section 27 of the technical report.






“Signed and stamped”

Edward J.C. Orbock, III, RM SME.

Amec Foster Wheeler Perú S.A. Calle Las Begonias 415, Piso 6 San Isidro Lima 27

Peru www.amecfw.com


I, William Colquhoun, FSAIMM, am employed as a Process Manager with Amec Foster Wheeler Perú SA (Amec Foster Wheeler).


I am a Fellow (Ref 54804) of the South African Institute of Mining and Metallurgy. I graduated from Strathclyde University in 1982 with a degree in Chemical and Process Engineering.

I have practiced my profession for 30 years since graduation. I have been directly involved in a review, site visit and gap analysis of the metallurgical and processing components of the Cerro Lindo in support of the preparation of this technical report.


I visited the Cerro Lindo Mine from 16 to 19 May, 2016.

I am responsible for Sections 1.2, 1.10, 1.16, 1.20, 1.21, 1.24, 1.25, 1.26; Sections 2.3, 2.4, 2.6; Section 3; Section 13; Section 17; Section 21.2.3, 21.3.4, 21.4; Section 24.1.5; Section 25.5, 25.9; 25.13, 25.14, 25.16, and Section 27 of the technical report.





Dated: 19 September, 2017

“Signed”

William Colquhoun, FSAIMM.


Peru www.amecfw.com

CERTIFICATE OF QUALIFIED PERSON I, Peter Cepuritis, MAusIMM (CP), am employed as a Technical Director Geomechanics with Amec Foster Wheeler Perú S.A. (Amec Foster Wheeler).

This certificate applies to the technical report titled “Cerro Lindo Polymetallic Mine, Chavín District, Chincha Province, Perú, NI 43-101 Technical Report on Operations” that has an effective date of 30 June, 2017.

I am a Chartered Professional and Member of The Australasian Institute of Mining and Metallurgy (#109802). I graduated from Royal Melbourne Institute of Technology with a Bachelor of Applied Science in Applied Geology (1990), a Master of Engineering Science in Mining Geomechanics (1997) and a Doctor of Philosophy in Rock Mechanics (2010) from Curtin University.

I have practiced my profession for 27 years of practical and consulting experience in geological and mining engineering since graduation and I have been directly involved in mine geotechnical engineering components of NI 43-101 and JORC reviews, due diligence, feasibility and mine design studies and reporting since 1992.


I have not visited the Cerro Lindo Mine.

I am responsible for Sections 1.24, 1.25, 1.26; Sections 2.3 and 2.6; Section 3; Section 16.2; Section 24.1.3; Section 25.16; and Section 27 of the technical report.


I have had previous involvement with the Cerro Lindo Mine in 2013 where I provided geomechanics input into life of mine planning studies.



Peru www.amecfw.com



“Signed”

Peter Cepuritis, MAusIMM (CP)

Amec Foster Wheeler Australia Pty Ltd Level 11, 144 Edward St, Brisbane, QLD, 4000

Australia www.amecfw.com

CERTIFICATE OF QUALIFIED PERSON I, Juleen Brown, MAusIMM, (CP), am employed as a Manager, Environment with Amec Foster Wheeler Australia Pty Ltd (Amec Foster Wheeler).

This certificate applies to the technical report titled “Cerro Lindo Polymetallic Mine, Chavín District, Chincha Province, Perú, NI 43-101 Technical Report on Operations” that has an effective date of 30 July, 2017.

I am a Chartered Professional (CP) and Member of the Australasian Institute of Mining and Metallurgy (MAusIMM) (#201809). I graduated from the University of Queensland in 1999 with a Bachelor of Engineering (Mining) degree, and from the University of Queensland in 2006 with a Masters of Environmental Management degree.

I have practiced my profession for 17 years. I have been directly involved in environmental management of mining operations, environmental input and planning into feasibility studies for mining projects, environmental and social due diligence of mining operations and projects, mine closure input and reviews, and managing large multidisciplinary Environmental and Social Impact Assessments to IFC standards. My experience includes coal and metalliferous mines in Australia, Asia-Pacific, and Ecuador.


I have not visited the Cerro Lindo Project.

I am responsible for Sections 1.18.1, 1.18.4 to 1.18.6, 1.24 to 1.26; Sections 2.3 and 2.6; Section 3; Sections 20.1, 20.2, 20.3, 20.8 to 20.12; Section 24.1.7; Sections 25.11.1, 25.16; and Section 27 of the technical report.


I have had no previous involvement with the Cerro Lindo Project.


Amec Foster Wheeler Australia Pty Ltd Level 11, 144 Edward St, Brisbane, QLD, 4000

Australia www.amecfw.com



“Signed”

Juleen Brown, MAusIMM (CP)

Amec Foster Wheeler Americas Limited 160 Traders Blvd. E., Suite 110, Mississauga, Ontario L4W 3K7


CERTIFICATE OF QUALIFIED PERSON I, Bing Wang, Ph.D., P.Eng., am employed as a Senior Associate, Technical Advisor with Amec Foster Wheeler Environment & Infrastructure, a division of Amec Foster Wheeler Americas Limited (Amec Foster Wheeler).


I am a member of Professional Engineers Ontario (Licence No.: 90293754). I graduated from McGill University, Montreal, Canada, with Master of Engineering and Doctor of Philosophy degrees in 1984 and 1990, respectively.

I have practiced my profession for 30 years since graduation. I have been directly involved in field of geo-environmental engineering with site investigations, scoping, prefeasibility and feasibility studies, detailed design and construction for tailings and water management facilities, including geotechnical assessments and implementations for mining projects in Canada and worldwide.


I have not visited the Cerro Lindo Operations.

I am responsible for Sections 1.18.2, 1.18.3, 1.24. 1.25, 1.26; Sections 2.3, 2.6; Section 3; Sections 18.5, 18.6; Sections 20.6, 20.7; Sections 25.11.2, 25.11.3, 25.16; Section 26.3.4, and Section 27 of the technical report.


I have had no previous involvement with the Cerro Lindo Operations.


Amec Foster Wheeler Americas Limited 160 Traders Blvd. E., Suite 110, Mississauga, Ontario L4W 3K7




“Signed and sealed”

Dr Bing Wang, P.Eng.

IMPORTANT NOTICE

This report was prepared as National Instrument 43-101 Technical

Report for V.M. Holding S.A. (Votorantim) by Amec Foster Wheeler

Perú SA (Amec Foster Wheeler). The quality of information,

conclusions, and estimates contained herein is consistent with the

level of effort involved in Amec Foster Wheeler’s services, based on i)

information available at the time of preparation, ii) data supplied by

outside sources, and iii) the assumptions, conditions, and qualifications

set forth in this report. This report is intended for use by Votorantim

subject to terms and conditions of its contract with Amec Foster

Wheeler. Except for the purposed legislated under Canadian

provincial and territorial securities law, any other uses of this report by

any third party is at that party’s sole risk.

Cerro Lindo Polymetallic Mine Chavín District, Chincha Province, Perú

NI 43-101 Technical Report on Operations

TOC i September 2017

Project Number: P00072

C O N T E N T S

1.0 SUMMARY ............................................................................................................... 1-1 1.1 Introduction ................................................................................................... 1-1 1.2 Principal Outcomes ...................................................................................... 1-1 1.3 Terms of Reference ...................................................................................... 1-2 1.4 Project Setting .............................................................................................. 1-2 1.5 Mineral Tenure, Surface Rights, Water Rights, Royalties and Agreements . 1-2 1.6 History .......................................................................................................... 1-2 1.7 Geology and Mineralization .......................................................................... 1-3 1.8 Drilling and Sampling .................................................................................... 1-4 1.9 Data Verification ........................................................................................... 1-5 1.10 Metallurgical Testwork .................................................................................. 1-6 1.11 Mineral Resource Estimation ........................................................................ 1-7 1.12 Mineral Resource Statement ........................................................................ 1-9 1.13 Mineral Reserve Estimation ........................................................................ 1-10 1.14 Mineral Reserve Statement ........................................................................ 1-11 1.15 Mining Methods .......................................................................................... 1-12 1.16 Recovery Methods ...................................................................................... 1-13 1.17 Project Infrastructure .................................................................................. 1-14 1.18 Environmental, Permitting and Social Considerations ................................ 1-14

1.18.1 Environmental Considerations ........................................................ 1-14 1.18.2 Tailings Storage Facility .................................................................. 1-14 1.18.3 Water Management ........................................................................ 1-15 1.18.4 Closure and Reclamation Planning ................................................ 1-16 1.18.5 Permitting Considerations ............................................................... 1-16 1.18.6 Social Considerations ..................................................................... 1-16

1.19 Markets and Contracts ............................................................................... 1-16 1.20 Capital Cost Estimates ............................................................................... 1-17 1.21 Operating Cost Estimates ........................................................................... 1-17 1.22 Economic Analysis ..................................................................................... 1-17 1.23 Sensitivity Analysis ..................................................................................... 1-19 1.24 Risks and Opportunities ............................................................................. 1-19 1.25 Interpretation and Conclusions ................................................................... 1-19 1.26 Recommendations ...................................................................................... 1-22

2.0 INTRODUCTION ...................................................................................................... 2-1 2.1 Introduction ................................................................................................... 2-1 2.2 Terms of Reference ...................................................................................... 2-1 2.3 Qualified Persons ......................................................................................... 2-4 2.4 Site Visits and Scope of Personal Inspection ............................................... 2-4 2.5 Effective Dates ............................................................................................. 2-5 2.6 Information Sources and References ........................................................... 2-5 2.7 Previous Technical Reports .......................................................................... 2-6

3.0 RELIANCE ON OTHER EXPERTS .......................................................................... 3-1



TOC ii September 2017


3.1 Introduction ................................................................................................... 3-1 3.2 Mineral Tenure, Surface Rights, and Royalties ............................................ 3-1 3.3 Environmental, Permitting and Social and Community Impacts ................... 3-1 3.4 Taxation ........................................................................................................ 3-2 3.5 Markets ......................................................................................................... 3-2

4.0 PROPERTY DESCRIPTION AND LOCATION ........................................................ 4-1 4.1 Introduction ................................................................................................... 4-1 4.2 Property and Title in Peru ............................................................................. 4-1

4.2.1 Regulatory Oversight ........................................................................ 4-1 4.2.2 Mineral Tenure .................................................................................. 4-1 4.2.3 Surface Rights .................................................................................. 4-3 4.2.4 Other Considerations ........................................................................ 4-3 4.2.5 Levies ............................................................................................... 4-3 4.2.6 Fraser Institute Survey ...................................................................... 4-3

4.3 Project Ownership ........................................................................................ 4-4 4.4 Mineral Tenure ............................................................................................. 4-4

4.4.1 Core Tenure ...................................................................................... 4-4 4.4.2 Exploration Tenure ........................................................................... 4-6

4.5 Surface Rights ............................................................................................ 4-11 4.5.1 Mine Site ......................................................................................... 4-11 4.5.2 Access Road, Power Transmission Line, and Water Pipeline ........ 4-11 4.5.3 Easements ...................................................................................... 4-11

4.6 Water Rights ............................................................................................... 4-12 4.7 Royalties ..................................................................................................... 4-13 4.8 Property Agreements .................................................................................. 4-13 4.9 Permitting Considerations .......................................................................... 4-13 4.10 Environmental Considerations .................................................................... 4-13 4.11 Social License Considerations ................................................................... 4-14 4.12 Comments on Section 4 ............................................................................. 4-14

5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY ..................................................................................................... 5-1 5.1 Accessibility .................................................................................................. 5-1 5.2 Climate ......................................................................................................... 5-1 5.3 Local Resources and Infrastructure .............................................................. 5-1 5.4 Physiography ................................................................................................ 5-3 5.5 Seismicity ..................................................................................................... 5-3 5.6 Comments on Section 5 ............................................................................... 5-3

6.0 HISTORY ................................................................................................................. 6-1 6.1 Exploration History ....................................................................................... 6-1 6.2 Production .................................................................................................... 6-2 6.3 Prior Estimates ............................................................................................. 6-2

7.0 GEOLOGICAL SETTING AND MINERALIZATION ................................................. 7-1 7.1 Regional Geology ......................................................................................... 7-1 7.2 Project Geology ............................................................................................ 7-1



TOC iii September 2017


7.2.1 Stratigraphy ...................................................................................... 7-5 7.2.2 Intrusive Rocks ................................................................................. 7-9

7.3 Mineralization ............................................................................................... 7-9 7.3.1 Mineralization Zoning ...................................................................... 7-12 7.3.2 Alteration ......................................................................................... 7-16 7.3.3 Metamorphism ................................................................................ 7-16 7.3.4 Structural Geology .......................................................................... 7-18

7.4 Exploration Potential ................................................................................... 7-18 7.5 Comments on Section 7 ............................................................................. 7-18

8.0 DEPOSIT TYPES ..................................................................................................... 8-1 8.1 Deposit Model ............................................................................................... 8-1 8.2 Discussion .................................................................................................... 8-1 8.3 Comments on Section 8 ............................................................................... 8-4

9.0 EXPLORATION ........................................................................................................ 9-1 9.1 Grids and Surveys ........................................................................................ 9-1 9.2 Geological Mapping ...................................................................................... 9-1

9.2.1 Surface Mapping ............................................................................... 9-1 9.2.2 Stope Mapping .................................................................................. 9-2

9.3 Geochemical Sampling ................................................................................. 9-2 9.4 Geophysics ................................................................................................... 9-2 9.5 Petrology, Mineralogy, and Research Studies ............................................. 9-5 9.6 Exploration Potential ..................................................................................... 9-5

9.6.1 Mine Area ......................................................................................... 9-5 9.6.2 Regional ............................................................................................ 9-8

9.7 Comments on Section 9 ............................................................................... 9-8

10.0 DRILLING ............................................................................................................... 10-1 10.1 Introduction ................................................................................................. 10-1 10.2 Phelps Dodge Drilling (1996–1997) ............................................................ 10-1 10.3 Milpo/Votorantim Drilling (1999–January 2017) ......................................... 10-1 10.4 Logging Procedures ................................................................................... 10-4 10.5 Recovery .................................................................................................... 10-4 10.6 Collar Surveys ............................................................................................ 10-4 10.7 Downhole Surveys ...................................................................................... 10-5 10.8 Geotechnical and Hydrological Drilling ....................................................... 10-6 10.9 Metallurgical Drilling ................................................................................... 10-6 10.10 Sample Length/True Thickness .................................................................. 10-6 10.11 Summary of Drill Intercepts ........................................................................ 10-6 10.12 Comments on Section 10 ......................................................................... 10-13

11.0 SAMPLE PREPARATION, ANALYSES, AND SECURITY .................................... 11-1 11.1 Sampling Methods ...................................................................................... 11-1

11.1.1 Geochemical Samples .................................................................... 11-1 11.1.2 Underground Channel Sampling .................................................... 11-1 11.1.3 Underground Long-Hole Sampling ................................................. 11-1 11.1.4 Core Sampling ................................................................................ 11-2



TOC iv September 2017


11.2 Density Determinations .............................................................................. 11-2 11.3 Analytical and Test Laboratories ................................................................ 11-3 11.4 Sample Preparation and Analysis .............................................................. 11-6

11.4.1 Geochemical Samples .................................................................... 11-6 11.4.2 Exploration Samples ....................................................................... 11-6 11.4.3 Mine Samples ................................................................................. 11-6

11.5 Quality Assurance and Quality Control ....................................................... 11-8 11.5.1 Phelps Dodge ................................................................................. 11-8 11.5.2 Milpo, 1999–2001 ........................................................................... 11-9 11.5.3 Milpo, 2012–2013 ........................................................................... 11-9 11.5.4 Milpo, 2014–2015 ........................................................................... 11-9 11.5.5 Current QC Protocol ....................................................................... 11-9

11.6 Databases .................................................................................................. 11-9 11.7 Sample Security ....................................................................................... 11-10 11.8 Comments on Section 11 ......................................................................... 11-10

12.0 DATA VERIFICATION ............................................................................................ 12-1 12.1 Audits and Reviews .................................................................................... 12-1

12.1.1 AMEC (2003) .................................................................................. 12-1 12.1.2 AMEC (2013) .................................................................................. 12-1 12.1.3 Amec Foster Wheeler (2016a) ........................................................ 12-2 12.1.4 Amec Foster Wheeler (2016b) ........................................................ 12-2 12.1.5 Amec Foster Wheeler (2017) .......................................................... 12-3

12.2 Quality Control Review ............................................................................... 12-3 12.2.1 Phelps Dodge ................................................................................. 12-3 12.2.2 Milpo, 1999–2001 ........................................................................... 12-3 12.2.3 Milpo, 2012 ..................................................................................... 12-4 12.2.5 Amec Foster Wheeler (2016b) ........................................................ 12-5 12.2.6 Current QC Protocol ....................................................................... 12-5 12.2.7 Amec Foster Wheeler (2017) .......................................................... 12-8

12.3 Comments on Section 12 ........................................................................... 12-8

13.0 MINERAL PROCESSING AND METALLURGICAL TESTING .............................. 13-1 13.1 Introduction ................................................................................................. 13-1 13.2 Metallurgical Testwork ................................................................................ 13-1

13.2.1 Background ..................................................................................... 13-1 13.2.2 Comminution ................................................................................... 13-2 13.2.3 Flotation .......................................................................................... 13-3

13.3 Recovery Estimates .................................................................................... 13-5 13.4 Metallurgical Variability ............................................................................... 13-8 13.5 Deleterious Elements ............................................................................... 13-11 13.6 Comments on Section 13 ......................................................................... 13-11

14.0 MINERAL RESOURCE ESTIMATES ..................................................................... 14-1 14.1 Introduction ................................................................................................. 14-1 14.2 Geological Models ...................................................................................... 14-1

14.2.1 Mineralized Solid Based on NSR Values ........................................ 14-1 14.2.2 Rock Type Solids ............................................................................ 14-3



TOC v September 2017


14.2.3 High-Grade Zinc Solids ................................................................... 14-3 14.3 Exploratory Data Analysis .......................................................................... 14-8 14.4 Density Assignment .................................................................................... 14-8 14.5 Composites ................................................................................................. 14-8 14.6 Grade Capping/Outlier Restrictions .......................................................... 14-13 14.7 Variography .............................................................................................. 14-13 14.8 Estimation/Interpolation Methods ............................................................. 14-13 14.9 Block Model Validation ............................................................................. 14-17

14.9.1 Visual Inspection ........................................................................... 14-17 14.9.2 Global Bias Checks ...................................................................... 14-20 14.9.3 Local Bias Checks, Swath Plots ................................................... 14-20 14.9.4 Change of Support Checks ........................................................... 14-20 14.9.5 Reconciliation ............................................................................... 14-23

14.10 Classification of Mineral Resources ......................................................... 14-23 14.11 Reasonable Prospects for Eventual Economic Extraction ....................... 14-24 14.12 Mineral Resource Statement .................................................................... 14-27 14.13 Factors That May Affect the Mineral Resource Estimate ......................... 14-27 14.14 Comments on Section 14 ......................................................................... 14-28

15.0 MINERAL RESERVE ESTIMATES ........................................................................ 15-1 15.1 Introduction ................................................................................................. 15-1 15.2 Mineral Reserves Statement ...................................................................... 15-1 15.3 Factors that May Affect the Mineral Reserves ............................................ 15-1 15.4 NSR Calculations ....................................................................................... 15-3 15.5 Underground Estimates .............................................................................. 15-3

15.5.1 Throughput Rate and Supporting Assumptions .............................. 15-4 15.5.2 Stope Sizing .................................................................................... 15-4 15.5.3 Dilution and Mine Losses ................................................................ 15-4 15.5.4 Cut-off Criteria ................................................................................ 15-5


16.0 MINING METHODS ............................................................................................... 16-1 16.1 Overview ..................................................................................................... 16-1 16.2 Geotechnical Considerations ...................................................................... 16-1

16.2.1 Geotechnical Assessments ............................................................ 16-1 16.2.2 Geotechnical Overview ................................................................... 16-4 16.2.3 Stope Sizing .................................................................................... 16-5

16.3 Hydrogeological Considerations ................................................................. 16-5 16.4 Mining Method Selection ............................................................................ 16-5

16.4.1 Sublevel Open Stoping ................................................................... 16-5 16.4.2 Mechanized Cut-and-Fill/Drift-and-Fill ............................................ 16-6

16.5 Dilution and Cut-off Grades ........................................................................ 16-8 16.6 Design Assumptions and Design Criteria ................................................... 16-8 16.7 Backfill ........................................................................................................ 16-8 16.8 Ventilation ................................................................................................... 16-9 16.9 Underground Infrastructure Facilities ......................................................... 16-9 16.10 Production Schedule .................................................................................. 16-9



TOC vi September 2017


16.11 Grade Control ........................................................................................... 16-14 16.12 Mining Equipment ..................................................................................... 16-15 16.13 Comments on Section 16 ......................................................................... 16-15

17.0 RECOVERY METHODS ........................................................................................ 17-1 17.1 Process Flow Sheet .................................................................................... 17-1 17.2 Plant Design ............................................................................................... 17-1

17.2.1 Underground and Surface Ore Handling ........................................ 17-1 17.2.2 Processing Plant ............................................................................. 17-1

17.3 Product/Materials Handling ........................................................................ 17-7 17.4 Energy, Water, and Process Materials Requirements ................................ 17-7

17.4.1 Power .............................................................................................. 17-7 17.4.2 Water .............................................................................................. 17-7 17.4.3 Consumables .................................................................................. 17-7

17.5 Comments on Section 17 ......................................................................... 17-10

18.0 PROJECT INFRASTRUCTURE ............................................................................. 18-1 18.1 Introduction ................................................................................................. 18-1 18.2 Road and Logistics ..................................................................................... 18-1 18.3 Stockpiles ................................................................................................... 18-1 18.4 Waste Rock Storage Facilities .................................................................... 18-1 18.5 Tailings Storage Facilities ........................................................................... 18-1 18.6 Water Management .................................................................................... 18-1 18.7 Built Infrastructure ...................................................................................... 18-3 18.8 Fuel ............................................................................................................. 18-3 18.9 Communications ......................................................................................... 18-3 18.10 Hazard Considerations ............................................................................... 18-4 18.11 Comments on Section 18 ........................................................................... 18-4

19.0 MARKET STUDIES AND CONTRACTS ................................................................ 19-1 19.1 Market Studies ............................................................................................ 19-1 19.2 Commodity Price Projections ..................................................................... 19-1 19.3 Streaming Agreement ................................................................................. 19-1 19.4 Contracts .................................................................................................... 19-3

19.4.1 Concentrates .................................................................................. 19-3 19.4.2 Operations ...................................................................................... 19-3


20.0 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT .................................................................................................................. 20-1 20.1 Introduction ................................................................................................. 20-1 20.2 Baseline Studies ......................................................................................... 20-2

20.2.1 Climate ............................................................................................ 20-2 20.2.2 Air Quality and Noise Levels ........................................................... 20-2 20.2.3 Water Quality .................................................................................. 20-2 20.2.4 Hydrology ........................................................................................ 20-3 20.2.5 Groundwater ................................................................................... 20-3 20.2.6 Groundwater Quality ....................................................................... 20-4



TOC vii September 2017


20.2.7 Seismicity ........................................................................................ 20-4 20.2.8 Biological Considerations ............................................................... 20-4 20.2.9 Social and Heritage Considerations ............................................... 20-5

20.3 Environmental Considerations/Monitoring Programs ................................. 20-6 20.4 Stockpiles ................................................................................................... 20-6 20.5 Waste Rock Storage Facilities .................................................................... 20-6 20.6 Tailings Storage Facility ............................................................................. 20-6

20.6.1 Overview ......................................................................................... 20-6 20.6.2 Design Criteria .............................................................................. 20-10 20.6.3 Site Investigations and Characterisation ...................................... 20-10 20.6.4 Tailings Characterisation .............................................................. 20-10 20.6.5 Construction and Operation .......................................................... 20-14 20.6.6 Monitoring ..................................................................................... 20-14 20.6.7 Tailings Storage Facilities and Contingency Dam Review............ 20-15 20.6.8 Closure ......................................................................................... 20-16

20.7 Water Management .................................................................................. 20-16 20.7.1 Infrastructure ................................................................................. 20-16 20.7.2 Water Supply and Water Treatment ............................................. 20-17 20.7.3 Monitoring ..................................................................................... 20-19

20.8 Soil Management ...................................................................................... 20-19 20.9 Closure Plan ............................................................................................. 20-21 20.10 Permitting ................................................................................................. 20-23 20.11 Considerations of Social and Community Impacts ................................... 20-29 20.12 Comments on Section 20 ......................................................................... 20-31

21.0 CAPITAL AND OPERATING COSTS .................................................................... 21-1 21.1 Introduction ................................................................................................. 21-1 21.2 Capital Cost Estimates ............................................................................... 21-1

21.2.1 Basis of Estimate ............................................................................ 21-1 21.2.2 Mine Capital Costs .......................................................................... 21-1 21.2.3 Infrastructure Capital Costs ............................................................ 21-1 21.2.4 Sustaining Capital ........................................................................... 21-1 21.2.5 Capital Cost Summary .................................................................... 21-2

21.3 Operating Cost Estimates ........................................................................... 21-2 21.3.1 Manpower ....................................................................................... 21-2 21.3.2 Basis of Estimate ............................................................................ 21-2 21.3.3 Mine Operating Costs ..................................................................... 21-7 21.3.4 Process Operating Costs ................................................................ 21-8 21.3.5 Infrastructure Operating Costs ........................................................ 21-8 21.3.6 General and Administrative Operating Costs ................................. 21-8


22.0 ECONOMIC ANALYSIS ....................................................................................... 22-11 22.1 Forward Looking Information .................................................................... 22-11 22.2 Methodology Used .................................................................................... 22-11 22.3 Financial Model Parameters ..................................................................... 22-12

22.3.1 Mineral Reserves and Mine Life ................................................... 22-12



TOC viii September 2017


22.3.2 Metallurgical Recoveries ............................................................... 22-12 22.3.3 Smelting and Refining Terms ....................................................... 22-12 22.3.4 Metal Prices .................................................................................. 22-13 22.3.5 Capital Costs ................................................................................ 22-13 22.3.6 Operating Costs ............................................................................ 22-13 22.3.7 Working Capital ............................................................................ 22-13 22.3.8 Taxes and Royalties ..................................................................... 22-13 22.3.9 Closure Costs and Salvage Value ................................................ 22-19 22.3.10 Financing .................................................................................. 22-19 22.3.11 Inflation ..................................................................................... 22-19

22.4 Economic Analysis ................................................................................... 22-19 22.5 Sensitivity Analysis ................................................................................... 22-20 22.6 Comments on Section 22 ......................................................................... 22-24

23.0 ADJACENT PROPERTIES .................................................................................... 23-1

24.0 OTHER RELEVANT DATA AND INFORMATION ................................................. 24-1 24.1 Risks and Opportunities ............................................................................. 24-1

24.1.1 Geology and Exploration ................................................................ 24-1 24.1.2 Mineral Resource Estimates ........................................................... 24-1 24.1.3 Geotechnical Considerations .......................................................... 24-1 24.1.4 Mineral Reserve Estimates and Mine Plan ..................................... 24-2 24.1.5 Metallurgy, Process Plant, and Marketing ...................................... 24-3 24.1.6 Infrastructure ................................................................................... 24-4 24.1.7 Environmental, Permitting and Social ............................................. 24-4 24.1.8 Financial Model ............................................................................... 24-4

25.0 INTERPRETATION AND CONCLUSIONS ............................................................ 25-1 25.1 Introduction ................................................................................................. 25-1 25.2 Mineral Tenure, Surface Rights, Water Rights, Royalties and Agreements25-1 25.3 Geology and Mineralization ........................................................................ 25-1 25.4 Exploration, Drilling and Analytical Data Collection in Support of Mineral

Resource Estimation .................................................................................. 25-2 25.5 Metallurgical Testwork ................................................................................ 25-2 25.6 Mineral Resource Estimates ....................................................................... 25-3 25.7 Mineral Reserve Estimates ......................................................................... 25-4 25.8 Mine Plan .................................................................................................... 25-5 25.9 Recovery Plan ............................................................................................ 25-5 25.10 Infrastructure .............................................................................................. 25-6 25.11 Environmental, Permitting and Social Considerations ................................ 25-6

25.11.1 Environmental, Closure, Permitting, and Social .......................... 25-6 25.11.2 Tailings Storage .......................................................................... 25-7 25.11.3 Water Management .................................................................... 25-7

25.12 Markets and Contracts ............................................................................... 25-7 25.13 Capital Cost Estimates ............................................................................... 25-8 25.14 Operating Cost Estimates ........................................................................... 25-8 25.15 Economic Analysis ..................................................................................... 25-8 25.16 Risks and Opportunities ............................................................................. 25-8



TOC ix September 2017


26.0 RECOMMENDATIONS .......................................................................................... 26-1 26.1 Introduction ................................................................................................. 26-1 26.2 Phase 1 ...................................................................................................... 26-1

26.2.1 Mine Area ....................................................................................... 26-1 26.2.2 Regional .......................................................................................... 26-1

26.3 Phase 2 ...................................................................................................... 26-2 26.3.1 Mineral Resource Estimates ........................................................... 26-2 26.3.2 Mine Planning ................................................................................. 26-2 26.3.3 Environmental, Social and Permitting ............................................. 26-3 26.3.4 Tailings ........................................................................................... 26-4

27.0 REFERENCES ....................................................................................................... 27-1

T A B L E S

Table 1-1: Principal Outcomes ......................................................................................................... 1-1 Table 1-2: Mineral Resource Summary Table ................................................................................ 1-10 Table 1-3: Mineral Reserves Statement ......................................................................................... 1-12 Table 1-4: Capital Cost Summary (US$ x 1,000) ........................................................................... 1-18 Table 1-5: Operating Cost Forecast ............................................................................................... 1-18 Table 1-6: Risk and Opportunity Summary .................................................................................... 1-20 Table 4-1: Mineral Tenure Table ...................................................................................................... 4-7 Table 4-2: Beneficiation Concession ................................................................................................ 4-9 Table 4-3: Exploration Tenure ........................................................................................................ 4-10 Table 6-1: Production History ........................................................................................................... 6-3 Table 6-2: Prior Mineral Resource Estimates ................................................................................... 6-4 Table 6-3: Prior Ore Reserve Estimates .......................................................................................... 6-5 Table 7-1: Dimensions of Main Mineralized Bodies ....................................................................... 7-12 Table 8-1: General Features of the Cerro Lindo Deposit ................................................................. 8-3 Table 10-1: Drilling Summary ........................................................................................................... 10-2 Table 10-2: Example Selected Orebody Drill Intercepts Table ........................................................ 10-9 Table 10-3: Example Selected Drill Intercepts Table, 2017 Exploration Drilling ............................ 10-11 Table 11-1: Mean Density by Domain .............................................................................................. 11-4 Table 11-2: Analytical and Test Laboratories ................................................................................... 11-5 Table 11-3: Detection Limits at Inspectorate Cerro Lindo and Lima ................................................ 11-8 Table 12-1: Summary of Duplicate Samples Inserted in Channel-Sample Batches during 2015

(Campos, 2016a) ........................................................................................................... 12-6 Table 12-2: Summary of SRM Samples Inserted in Channel Sample Batches during 2015

(Campos, 2016a) ........................................................................................................... 12-6 Table 12-3: Summary of Duplicate Samples Inserted in Core Sample Batches during 2015

(Campos, 2016a) ........................................................................................................... 12-6 Table 12-4: Summary of SRM Samples Inserted in Core Sample Batches during 2015 (Campos,

2016b) ........................................................................................................................... 12-7 Table 12-5: Quantities of Drill-Holes with QC Samples.................................................................... 12-7 Table 13-1: Feasibility Study Comminution Test Results ................................................................. 13-4 Table 13-2: Feasibility Study Metallurgical Performance Estimate .................................................. 13-4



TOC x September 2017


Table 13-3: Historical Metallurgical Performance ............................................................................. 13-6 Table 13-4: Forward Production Plan 2018–2025............................................................................ 13-7 Table 14-1: Rock Type and Block Model Codes .............................................................................. 14-4 Table 14-2: Zinc SPBHG Cutoff Grade Modeling Values ................................................................ 14-7 Table 14-3: EDA Univariate Statistics - Assays by Metal and Rock Type Domain .......................... 14-9 Table 14-4: Bulk Density Assignments by OB and Rock Type ...................................................... 14-11 Table 14-5: Outlier Restriction Capping Levels for Zn, Cu, Pb, and Ag ......................................... 14-14 Table 14-6: Zn Variography Parameters for Primary Rock Type ................................................... 14-15 Table 14-7: Zn Variography Parameters for Secondary Rock Type .............................................. 14-16 Table 14-8: Global Bias of In Situ Blocks by Rock Type, Measured, and Indicated ...................... 14-22 Table 14-9: Resource Classification Parameters – Basic Drill Hole Spacing Used – Number of

Holes and Search Size ................................................................................................ 14-25 Table 14-10:Mineral Resource Summary Table .............................................................................. 14-28 Table 15-1: Mineral Reserves Statement ......................................................................................... 15-2 Table 15-2: Process Recovery ......................................................................................................... 15-4 Table 15-3: Recovery and Dilution in Stopes Mined via SLOS/VRM ............................................... 15-5 Table 15-4: Recovery and Dilution in Stopes Mined via C&F/D&F .................................................. 15-6 Table 15-5: Commodity Prices used in NSR Calculations ............................................................... 15-6 Table 15-6: LOM Average Operating Costs for SLOS/VRM Production Stopes ............................. 15-8 Table 15-7: LOM Average Operating Costs for C&F/D&F Stopes ................................................... 15-8 Table 15-8: LOM Average Operating Costs ..................................................................................... 15-8 Table 16-1: Major Mining Contractors .............................................................................................. 16-4 Table 16-2: Underground Infrastructure Facilities .......................................................................... 16-12 Table 16-3: Production Schedule ................................................................................................... 16-13 Table 16-4: Production Schedule by Mining Method ...................................................................... 16-13 Table 16-5: Equipment Fleet .......................................................................................................... 16-16 Table 17-1: Concentrator Plant Major Equipment Summary ........................................................... 17-8 Table 17-2: Process Consumables .................................................................................................. 17-9 Table 19-1: Long-term Consensus Commodity Price Projections (US$) ......................................... 19-2 Table 20-1: Key Monitoring Requirements ....................................................................................... 20-7 Table 20-2: Waste Rock Storage Facilities ...................................................................................... 20-8 Table 20-3: Tailings Storage Facilities Key Design Parameters .................................................... 20-11 Table 20-4: Construction Requirements and Field Results ............................................................ 20-15 Table 20-5: Closure Plan Considerations ....................................................................................... 20-23 Table 20-6: Key Permits ................................................................................................................. 20-25 Table 21-1: LOM Capital Cost Estimate (US$ x 1,000) ................................................................... 21-3 Table 21-2: Personnel Count ............................................................................................................ 21-4 Table 21-3: Contractor Personnel Numbers (May, 2017) ................................................................ 21-4 Table 21-4: Cash Costs, 2013–2016 ................................................................................................ 21-5 Table 21-5: Operating Cost Forecast ............................................................................................... 21-7 Table 21-6: Process Operating Costs .............................................................................................. 21-9 Table 22-1: Depreciation (useful life in years) ................................................................................ 22-15 Table 22-2: Operating Profit Margin, Mining Royalties................................................................... 22-15 Table 22-3: Operating Profit Margin, Special Mining Tax .............................................................. 22-17 Table 22-4: Operating Profit Margin, Special Charge on Mining .................................................... 22-18 Table 22-5: Summary of Taxation Applicable to the Cerro Lindo Operations ................................ 22-20



TOC xi September 2017


Table 22-6: Plant Production .......................................................................................................... 22-21 Table 22-7: Gross Revenue by Concentrate (US$ million) ............................................................ 22-22 Table 22-8: Net Revenue by Concentrate ...................................................................................... 22-22 Table 22-9: LOM Tax and Royalty Payments ................................................................................ 22-22 Table 22-10:Cerro Lindo Operations, Summary Cash Flows and NPV (US$ million) .................... 22-23 Table 22-11:NPV Sensitivities (US$ million) ................................................................................... 22-23 Table 26-1: Proposed Exploration Programs ................................................................................... 26-2

F I G U R E S

Figure 2-1: Site Location Plan ........................................................................................................... 2-2 Figure 2-2: General Overview, Cerro Lindo Mine .............................................................................. 2-3 Figure 4-1: Ownership Organogram .................................................................................................. 4-5 Figure 4-2: Regional Mineral Tenure Plan ......................................................................................... 4-9 Figure 5-1: Settlements and Communities in the Mine Area of Influence ......................................... 5-2 Figure 6-1: Mineral Resource Prior Estimates, Annual Drilled Metres, and Run-of-Mine

Production by Year .......................................................................................................... 6-8 Figure 6-2: Ore Reserve Prior Estimates, Annual Drilled Metres, and Run-of-Mine Production by

Year ................................................................................................................................. 6-8 Figure 7-1: Regional Geology Map .................................................................................................... 7-2 Figure 7-2: VMS Deposits Within the Casma Metallotect ................................................................. 7-3 Figure 7-3: Geological Map of the Cerro Lindo Property ................................................................... 7-4 Figure 7-4: Stratigraphic Column of the Cerro Lindo Project ............................................................ 7-6 Figure 7-5: Detailed Stratigraphic Column for the Cerro Lindo Deposit ............................................ 7-7 Figure 7-6: Mineralized Trends and Mineralized Bodies ................................................................. 7-11 Figure 7-7: Zn, Cu, Pb and Ag Zonation Pattern (northwest section) ............................................. 7-13 Figure 7-8: Zn, Cu, Pb and Ag Zonation Pattern (southeast section) ............................................. 7-14 Figure 7-9: Average Statistics for Zn, Pb, Cu, and Ag Grades for the Main Mineralized Bodies .... 7-15 Figure 7-10: Surface Alteration Zoning at Cerro Lindo ...................................................................... 7-17 Figure 7-11: Structural Framework of the Cerro Lindo Deposit ......................................................... 7-19 Figure 8-1: Schematic Cross Section of Kuroko Massive Sulphide Descriptive Model .................... 8-2 Figure 9-1: Zinc Geochemical Anomalies from the Phelps Dodge Exploration Phase ..................... 9-3 Figure 9-2: Preliminary Results, Titan Surveys ................................................................................. 9-4 Figure 9-3: Exploration Potential in the Mine Area ............................................................................ 9-6 Figure 9-4: Exploration Drill Holes in the General Mine, and North Topará Area ............................. 9-7 Figure 9-5: Regional Exploration Targets .......................................................................................... 9-9 Figure 9-6: Colour Anomalies in Campanario–Patahuasi (view to southeast) ................................ 9-10 Figure 10-1: Drill-Hole Location Map ................................................................................................. 10-1 Figure 10-2: Schematic Showing Locations of Mineralized Bodies Discovered Since 2010 ............ 10-3 Figure 10-3: Example of Core Photography ..................................................................................... 10-5 Figure 10-4: Typical Cross Section Across Cerro Lindo.................................................................... 10-7 Figure 10-5: Location Map for Cross Section in Figure 10-4 ............................................................. 10-8 Figure 11-1: Distribution of Density Samples used for 2016 Mineral Resource Estimate by Year

Analyzed ........................................................................................................................ 11-4 Figure 11-2: Sample Preparation and Quality-Control Flowsheet (Milpo 2000–2001 program) ..... 11-7 Figure 13-1: Zn Recovery % vs Head Grade Geometallurgical Model ........................................... 13-10



TOC xii September 2017


Figure 13-2: Pb Recovery % vs Head Grade Geometallurgical Model ........................................... 13-10 Figure 13-3: Cu Recovery % vs Head Grade Geometallurgical Model ........................................... 13-11 Figure 14-1: Plan View Showing Location of OB Solids .................................................................... 14-2 Figure 14-2: Plan View Showing SPP and SPB (Including SBPHG), Major Mineralized Rock

Types, and Cross Cutting Barren Dike .......................................................................... 14-5 Figure 14-3: Plan View of High Grade SPB Zn Domain with North to South Cross Cutting Dikes ... 14-6 Figure 14-4: Plan View Location of Density Samples...................................................................... 14-12 Figure 14-5: Cross Section CL1200 Showing Rock Type from 3D Solids, Composites, and Blocks14-18 Figure 14-6: Cross Section CL1200 Showing Zinc Colour-Coded Grades of Composites and

Blocks .......................................................................................................................... 14-19 Figure 14-7: Cross Section CL1200 Showing Copper Colour-Coded Grades of Composites and

Blocks .......................................................................................................................... 14-21 Figure 14-8: Zn Swath Plot for SPB and SPBHG ............................................................................ 14-23 Figure 14-9: Cross Section CL1200 Showing Mineral Resource Colour-Coded Blocks, ................ 14-26 Figure 15-1: Historical Dilution and Recovery ................................................................................... 15-6 Figure 16-1: Mine Longitudinal Section ............................................................................................. 16-2 Figure 16-2: 1820 m Level ................................................................................................................. 16-3 Figure 16-3: Typical Sub-Level Stoping Primary/Secondary Mining Sequence Schematic .............. 16-7 Figure 16-4: Typical Cut & Fill Stope Plan and Sequence Schematic .............................................. 16-7 Figure 16-5: Mine Ventilation Schematic ......................................................................................... 16-10 Figure 16-6: Ventilation Schematic for OB-1 ................................................................................... 16-11 Figure 16-7: Production Schedule ................................................................................................... 16-13 Figure 16-8: Production Schedule by Mining Method ...................................................................... 16-14 Figure 17-1: Cerro Lindo Simplified Overall Process Material Flow Diagram ................................... 17-2 Figure 17-2: Cerro Lindo Simplified Overall Process Flowsheet ....................................................... 17-3 Figure 17-3: Cerro Lindo Process Plant Layout Schematic .............................................................. 17-4 Figure 18-1: Site Layout Plan ............................................................................................................ 18-2 Figure 20-1: Tailings Storage Facilities General Layout Image ........................................................ 20-9 Figure 20-2: Section through Pahuaypite 1 ..................................................................................... 20-13 Figure 20-3: Section through Pahuaypite 2 ..................................................................................... 20-13 Figure 20-4: Water Usage Schematic ............................................................................................. 20-20 Figure 20-5: Location Plan Showing Desalination Plant and Pipeline to Site ................................. 20-20 Figure 21-1: Cash Costs, 2013–2016 ................................................................................................ 21-6 Figure 21-2: Operating Costs, 2013–2016 ........................................................................................ 21-6 Figure 21-3: Operating Cost Forecast ............................................................................................... 21-7 Figure 22-1: Sensitivity Graph ......................................................................................................... 22-24



Page 1-1 September 2017


1.0 SUMMARY

1.1 Introduction

V.M. Holding S.A. (Votorantim) requested that Amec Foster Wheeler Perú S.A. (Amec Foster Wheeler) prepare an independent technical report (the Report) in compliance with the requirements of National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) and Form 43–101F1 Technical Report for Votorantim on the Cerro Lindo Operations (Cerro Lindo Operations or the Project), located in Chincha Province in Peru. The Cerro Lindo Operations comprise the Cerro Lindo underground zinc–lead–copper–silver mine (the Cerro Lindo Mine), a conventional comminution flotation process plant, a coastal desalination plant, and associated infrastructure. The mine produces separate zinc, lead–silver, and copper concentrates.

Compañía Minera – Milpo S.A.A. (Milpo) is a public limited company incorporated in Peru, which is an indirectly-owned subsidiary of VM Holding S.A. VM Holding S.A. holds a direct 0.17% equity interest in Milpo, and has an indirect 80.06% equity interest through its subsidiary Votorantim Metais – Cajamarquilla S.A. Votorantim thus has an indirect controlling interest in Milpo. The remaining shares are owned by minority interests.

1.2 Principal Outcomes

Table 1-1: Principal Outcomes

Mine Life (date from–to) 2018 to 2025

Net revenue (US$ million over life-of-mine)

Zinc concentrate 1,497

Copper concentrate 1,452

Lead concentrate 159

Total 3,108

Capital cost (US$ million over life-of-mine) 113

Operating cost (US$ million over life-of-mine)

Mining 806

Process 328

G&A (incl. maintenance) 378

Total 1,511

NPV@ 9% (US$ million) 762





1.3 Terms of Reference

The Report was prepared to support scientific and technical disclosure on the Cerro Lindo Operations in the initial public offering by V.M. Holding S.A.

1.4 Project Setting

The Cerro Lindo Mine is located in the Chavín District, Chincha Province, Ica Department of Perú, approximately 268 km southeast of Lima and 60 km from the coast. The current access from Lima is via the paved Pan American Highway south to Chincha (208 km) and then via an unpaved road up the Topará River valley to the mine site (61 km). Internal roadways connect the various mine-site components.

1.5 Mineral Tenure, Surface Rights, Water Rights, Royalties and Agreements

Amec Foster Wheeler was provided with a legal opinion that supports that Compañía Minera Milpo S.A.A. owns 100% of the core mineral tenure. The core tenure consists of 36 mining concessions, four mining claims, and one beneficiation concession, totalling 24,878.19 ha. All but five mining concessions have been granted and duly recorded in the Public Registry. Certain mineral concessions are subject to a penalty of US$20/ha since the minimum required levels of production or exploration expenditures stipulated under Peruvian regulations have not been met.

Ten additional mining concessions were acquired by Votorantim in the area, and subsequently transferred to Milpo. Collectively, these exploration tenure concessions cover an additional 6,835 ha, approximately.

The Cerro Lindo Operations currently hold surface rights or easements for the following infrastructure: mine site; access road, power transmission line, and water pipeline for the mine; old power transmission line to Cerro Lindo; new power transmission line to Cerro Lindo; desalination plant; water process plant, and the water pipeline from the desalination plant to the mine site.

The Project is not currently subject to third-party royalties. When the current Tax Stability Agreement expires in 2021, Milpo will be required to pay levies to the Peruvian Government for the last year of the proposed mine life (i.e. 2022).

To date Milpo has a total of six water licenses, one for use of seawater, and the remaining five for ground water extraction.

1.6 History

A number of companies have held interests in the Project, including BTX, Phelps Dodge, and Milpo. Exploration work completed on the Project area to date includes





geological mapping, rock chip and soil sampling, trenching, ground geophysical surveys, and exploration, definition and underground operational core drilling.

Feasibility studies were completed in 2002 and 2005, with mine construction commencing in 2006. Formal production started in 2007; the mine has been operational since that date.

Subsequently, several project expansions have increased the initial plant throughput capacity of 5,000 t/d to the current assumed life-of-mine (LOM) capacity of 20,600 t/d.

To date a number of mineralized zones have been delineated, including OB-1, OB-1x, OB-2, OB-2B, OB-3–4, OB-5B, OB-6, OB-6A, OB-6B, OB-7, and OB-8.

1.7 Geology and Mineralization

Cerro Lindo is classified as a Kuroko-style volcanogenic massive sulphide (VMS) deposit.

Mineralization is hosted in a pyroclastic unit composed of ash and lapilli-type polymictic tuffs of the Middle Cretaceous Huaranguillo Formation.

The deposit is 1,500 m long, 1,000 m wide, and has a current vertical development of 470 m. Mineralization consists of at least 10 discrete mineralized zones, OB-1, OB-1x, OB-2, OB-2B, OB 3–4, OB-5, OB-5B, OB-6, OB-6A, OB-6B, OB-7, and OB-8, and form a number of structural trends from southwest to northeast. The mineralized zones typically dip at 65° to the southwest.

The deposit comprises lens-shaped, massive bodies, composed of pyrite (50% to 90%), yellow sphalerite, brown sphalerite, chalcopyrite, and minor galena. Significant barite is present mainly at the upper portions of the deposit. A secondary-enrichment zone, composed of chalcocite and covellite, has formed near-surface where massive sulphides have oxidized. Silver-rich powdery barite remains at surface as a relic of sulphide oxidation and leaching.

The regional setting and local geology (lithological and structural controls, alteration pattern, mineral zonation), as well as the depositional environment and genesis of the deposit, are well understood and appropriate. That understanding is a useful guide in future exploration in the district, and adequate to support estimation of Mineral Resources and Mineral Reserves.

Exploration potential remains at OB-1 (open at depth), OB-1x (all directions), OB3–4 (open to northwest) OB-4 (potential for stacked mineralization), OB-5 (open to southeast) and OB-8 (additional mineralization potential of host rocks). Current exploration in the mine area is addressing the possible presence of various mineralized horizons at the upper levels of the southwestern flank of the mine, and at depth, below the 1,600 m level.





Outside the mine area, a number of prospects have been identified, which should be subject to additional exploration activity.

1.8 Drilling and Sampling

Between 1995 and April 2017, a total of 353,800 m was drilled in 2,617 surface and underground drill holes within the Project area. With the exception of 19 core holes completed by Phelps Dodge in 1996–1997, all remaining drilling has been completed on behalf of Milpo. Drill sizes have included HQ (63.5 mm) and NQ (46.7 mm) in the Phelps Dodge holes.

Geological and geotechnical logs have been completed on all core holes since 1999. Collar locations are surveyed by professional survey crews using total station instruments. Downhole surveys were consistently performed from 2000 onward using a variety of instruments including Tropari™, Sperry-Sun™, Eastman™, Flexit™, Reflex EZ-TRAC™, and gyroscopic instruments.

Amec Foster Wheeler is of the opinion that the quantity and quality of lithological, geotechnical, collar and downhole survey data collected in the exploration and infill-drill programs completed by Milpo since 2000 are sufficient to support Mineral Resource and Mineral Reserve estimation.

Several sample types have been collected as part of the production cycle, including underground channel, long-hole blast hole, and core sampling. Drill-hole and channel sample spacing is considered adequate for the type of deposit. Sample collection and core handling are in accordance with industry standard practices. Procedures to limit potential sample losses and sampling biases are in place. Sample intervals are consistent with the type of mineralization.

Prior to operations, samples were prepared by the Bondar Clegg facility in Lima and analyzed at the Bondar Clegg laboratory in Bolivia. Check assays were performed by SGS Lima. The laboratories at the time were certified for selected analytical techniques and independent of Milpo.

Once operations commenced, mine samples were assayed at the mine laboratory, which is not certified. The laboratory is independently managed by SGS (between 2007 and 2011) and currently by Inspectorate (between 2011 and 2016). Exploration samples since 2014 were analysed at SGS; however, in 2016, the laboratory was changed to Certimin Lima and then to Inspectorate late in 2016. Certimin Lima and Inspectorate are independent of Milpo, and hold accreditations for selected analytical methods.

Sample preparation of geological samples at the mine laboratory has followed similar procedures since 2007, including drying, crushing, secondary crushing and pulverizing to 95% minus 0.105 mm. Geological samples are assayed for zinc, copper, lead,





silver, and iron on 0.25 g aliquots, using aqua regia digestion and atomic absorption spectrometry (AAS) determination. Exploration samples sent to the commercial laboratories use the same sample preparation protocol as the mine laboratory. Analysis of exploration samples was by four-acid digestion with an AAS finish. Four-acid digestion followed by ICP-OES analysis was used for multi-element analysis of exploration samples.

The quality control (QC) protocol currently implemented includes the insertion of one coarse blank, one standard reference material (SRM), one twin sample, one coarse duplicate and one pulp duplicate in every 25-sample batch, representing in total a 20% insertion rate. The QC protocol implemented allows for proper assessment of precision, accuracy, and contamination. Insertion rates of QC samples were in line with general industry standards; however, the program has been substantially improved every year, and is now considered to be an industry-leading program.

A total of 1,345 samples collected from underground drill holes and drift walls, and were submitted to Certimin or Inspectorate for density determinations using the water-displacement method with wax-coated core. Those data are used to estimate density in the Mineral Resource estimate. Density determination procedures are consistent with industry-standard practices. The spatial distribution of density samples is adequate, and the density database is being updated with additional results as exploration drilling continues.

Mine data are stored in an Access™ database that is stored in the mine server at Cerro Lindo, but with regular backups to a central server in Lima. Access to the database is strictly controlled.

Core boxes are transported to the core shed daily by personnel from the drilling company. Samples are transported by company or laboratory personnel using corporately-owned vehicles. Core boxes and samples are stored in safe, controlled areas. Chain-of-custody procedures are followed whenever samples are moved between locations, to and from the laboratory, by filling out sample submittal forms. Current sample storage procedures and storage areas are consistent with industry standards.

Amec Foster Wheeler considers data collection, analysis, storage, and security to be adequate to support Mineral Resource and Mineral Reserve estimation and mine planning.

1.9 Data Verification

Data verification has been performed by AMEC, a predecessor company to Amec Foster Wheeler, and mine personnel. AMEC conducted various verification programs at Cerro Lindo, initially in 2002–2003 during Milpo’s exploration programs prior to mine start-up, and later, in 2013, as part of high-level Mineral Resource reviews. AMEC





reviewed logging, density data and data integrity, and found no issues that would adversely affect Mineral Resource and Mineral Reserve estimation. Amec Foster Wheeler, as part of this Report, performed data verification that was mainly oriented at confirming the accuracy of data transference and/or data interpretation. Amec Foster Wheeler also reviewed the interpretation on selected geological cross-sections and plans in order to assess spatial continuity. The inspected data were considered acceptable to support Mineral Resource and Mineral Reserve estimates. Sample data collected adequately reflect the deposit dimensions, true widths of mineralization, and the style of the deposits.

Quality assurance and quality control (QA/QC) procedures were reviewed by a number of internal and external parties from 1996 to 2017, including Phelps Dodge, Milpo (both internal), AMEC and Amec Foster Wheeler (external). The QC program implemented at the mine ensures adequate monitoring of precision, accuracy, and contamination along the entire sampling-preparation-assaying process. Significant precision or accuracy issues that could affect the assay quality have not been identified to date in the QC program. Amec Foster Wheeler considers the assay data to be adequate to support Mineral Resource and Mineral Reserve estimates.

Drill data are typically verified prior to Mineral Resource estimation by rigorous and sophisticated software routines, as well as periodic comparison of the database to the original documents.

1.10 Metallurgical Testwork

The initial metallurgical testwork supported a plant design of 5,000 t/d; that plant commenced production in 2007. Subsequently, the plant has undergone a number of expansions, through the addition of parallel crushing, grinding and flotation lines and auxiliary equipment, and current production is forecast at 20,600 t/d.

Testwork on ore type, production blend and variability samples supported the plant designs, and included a full suite of comminution tests, flotation testwork, and penalty element analysis.

Overall, the conventional three-product flotation concentrator plant at Cerro Lindo has a good history of successfully treating the polymetallic mineralization mined, with good metal recoveries and concentrate grades being achieved that are similar to those projected in the original feasibility studies. Ore treatment throughput and metallurgical performance have both consistently improved since mill start-up, through a combination of plant expansions and ramp-up operating experience, improved ore zone characterization, and by implementing new process technology, equipment, and optimized reagent schemes.

Metallurgical parameters for the concentrator are well understood, and optimization and plant control is supported by ongoing research and development metallurgical





testing on samples of ore mainly based on: hardness work index, mineral flotation kinetics, flotation reagent scheme evaluation, flotation kinetics, grind sensitivity, mineralogy and routine circuit evaluations.

No material change in mineralization or ore types is expected in the mine plan to those that have been processed historically, and the historical process plant design, grind, flotation, metallurgical recovery and concentrate grade parameters should also be appropriate as the basis of the forward production plan.

Although some minor silver is recovered to zinc concentrate, the concentration is too low (31.1–62.2 g/t or 1–2 oz/t) to receive a credit (>93 g/t or >3 oz/t), and the total silver recovery is considered to be that reporting to the lead and copper concentrates.

Historical ore metallurgical variability by orebody zone or domain is considered to be low. The main variability in firstly the metallurgical recovery and secondly the concentrate grade is mainly driven by feed grade which is linear and relatively insensitive, within the range of typical low daily/monthly variations experienced, because of established ore blending and control practices. The geometallurgical recovery models are based on polynomials fitted to historical production data and in low grade ranges outside of the normal production data range these are extrapolated appropriately by considering a constant tail effect. Recovery is also appropriately capped at higher grades.

OB-2 contains material classed as “Cobre Soluble” or soluble copper (CS). The CS material can be economically processed without adverse impacts to the process plant performance if the process feed contains no more than 1.5% CS material. In a plant processing 20,800 t/d, this amounts to a maximum of 315 t/d CS material.

Cerro Lindo concentrate products are considered to be clean, contain low concentrations of deleterious penalty elements, and are of a relatively high quality that is consistently in excess of minimum specifications with little variability. Copper concentrates on average incur a minor penalty due to combined lead and zinc (6.5%) concentrations that on average marginally exceed the relatively low penalty threshold of 5% established in existing concentrate offtake agreements. This results in a minor penalty of about US$4/t of copper concentrate.

1.11 Mineral Resource Estimation

The Mineral Resource estimate was prepared by Votorantim staff. Amec Foster Wheeler reviewed Mineral Resource development, construction, estimation procedures, classification, and statements for the Cerro Lindo Mine, and conducted independent validation of the block model.





Bulk density determinations used for the current estimate were collected by Milpo from 2013–2016. A total of 658 density determinations were registered into the Cerro Lindo dataset, and includes 574 core samples and 84 grab samples.

Three models were constructed, a mineralized solid based on net smelter return (NSR) values, a rock type model, and a high-grade zinc model. Exploratory data analysis (EDA) was conducted by ore zone and domain. The Cerro Lindo drill hole data were composited into 2.5 m lengths for grade estimation. Amec Foster Wheeler considers the composite size to be reasonable for the 5 x 5 x 5 m block size used in the Mineral Resource block model.

Outlier restriction capping levels (thresholds) were used for zinc, lead, copper and silver. Outlier distances were set to 20–25 m. Composites that were within the outlier search distance were not capped during grade estimation. Composites that were beyond the outlier distance were set to the cap value prior to grade estimation.

Variography completed in support of modelling was performed using the commercially-available Supervisor or SAGE2001 software.

Grade estimation was completed in three passes by ore zone and geology domain using ordinary kriging (OK). Sample sharing across geology domains was addressed with a soft–firm–hard (SFH) coding determined by contact plots. A nearest-neighbour (NN) estimate was completed for comparison and validation using 5 m composites. The OK and NN estimates were completed for capped and uncapped grades.

Sample selection was based on quantitative kriging neighbourhood analysis (QKNA) from previous model updates. The sample selection was modified for each pass and was determined by ore zone, geology code, and the number of available samples. Octant restrictions permit one to three samples per octant.

Model validation checks included a global bias check where the OK estimate was compared to the NN grades at a zero cutoff, local bias checks using swath plots, change of support checks using Herco plots, and visual data inspection.

The Mineral Resources were initially classified using the 2012 Joint Ore Reserves Committee (JORC) Code, and reconciled to the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves (the 2014 CIM Definition Standards). Classification criteria included confidence in the modelling of orebodies and mineralized domains, reliability of sampling data, confidence in the block grade estimates for the various metals, variogram model parameters, drill hole spacing studies, visual inspections of mineralized domain geometries in relation to drill hole spacing, and production experience gained from mining operations. Based on these criteria, the Mineral Resource classification used a combination of the number of drill holes and distances





determined by variogram ranges. The preliminary result was then smoothed to eliminate isolated small patches and irregular shapes.

Assumptions used to assess reasonable prospects for eventual economic extraction include: metal prices of Zn: US$2,767/t (US$1.26/lb); Pb: US$2,235/t (US$1.01/lb); Cu: US$6,794/t (US$3.08/lb); and Ag: US$21.78/oz; no allowances for external dilution; an assumption of underground mining methods such as sub-level open stoping, cut-and-fill mining; and variable metallurgical recoveries that are based on a recovery curve. The cut-off applied to the Mineral Resource estimate is a US$27.80/t net smelter return (NSR), except for blocks adjacent to caved areas where an NSR of US$50.00/t was used for reporting.

1.12 Mineral Resource Statement

Mineral Resource estimates prepared by Votorantim staff and summarized in Table 1-2 are reported exclusive of Mineral Reserves. The estimates have an effective date of 31 December, 2016 and are reported using the 2014 CIM Definition Standards. The Qualified Person (QP) responsible for the estimate is Mr E.J.C. Orbock III, RM SME, an Amec Foster Wheeler employee. Mineral Resources are reported using a NSR cut-off.

Factors that could affect the Mineral Resource estimate include: additional infill and step out drilling of satellite deposits; changes in local interpretations of mineralization geometry and continuity of mineralization zones; domaining high-grade copper; density and domain assignments; changes to design parameter assumptions that pertain to stope design; dilution from internal and contact sources; changes to geotechnical and metallurgical recovery assumptions; increases resulting from improvements to mining method recovery as recommended by Amec Foster Wheeler; changes to the assumptions used to generate the NSR value including long-term commodity prices; and completion of a reconciliation model with an improved sampling program for the short-range model.





Table 1-2: Mineral Resource Summary Table

Category Tonnage (Mt)

Zn (%)

Cu (%)

Pb (%)

Ag (g/t)

NSR (US$/t)

Measured 3.7 2.49 0.77 0.35 25.7 96.34

Indicated 2.5 1.89 0.68 0.29 26.0 79.10

Total Measured + Indicated 6.2 2.25 0.73 0.32 25.8 89.41

Inferred 4.5 2.04 0.84 0.24 25.7 89.79

Notes to accompany Mineral Resource table:

1. Mineral Resource estimates were prepared by Votorantim staff. The Qualified Person responsible for the estimate is Edward J.C. Orbock III, RM SME., an Amec Foster Wheeler employee.

2. Mineral Resources are reported exclusive of the Mineral Resources converted to Mineral Reserves, and have an effective date of 31 December, 2016. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

3. Mineral Resources are reported at a net smelter return (NSR) cut-off of US$27.80 except for mineralization adjacent to caved areas where an NSR of US$50.00/t was used for reporting. The NSR calculations are based on head grade and historical plant performance. Metal prices used for the NSR calculation are: Zn: US$2,767/t (US$1.26/lb); Cu: US$6,794/t (US$3.08/lb); Pb: US$2,235/t (US$1.01/lb); and Ag: US$21.78/oz. The metallurgical recovery portion of the NSR calculations are based on polynomial equations for each of the concentrate elements, and incorporate considerations of sliding smelter payments that vary depending on the grade of the concentrate. Mining cost is US$14.04/t, processing cost is US$6.14/t, and G&A cost is US$7.62/t.

4. Mineral Resources are stated as in situ with no consideration for planned or unplanned mining dilution. Mineral Resources are reported on a 100% basis.

5. Milpo has entered into a silver streaming agreement with Triple Flag, beginning in December, 2016. The result is that revenues from silver sales will be lower than from market price. The reduced silver revenue has not been considered in NSR calculations or cut-off grade.

6. Totals may not sum due to rounding.

1.13 Mineral Reserve Estimation

The Mineral Reserves have been established based on actual costs and modifying factors from the Cerro Lindo Mine, and on operational level mine planning and budgeting.

The primary mining method used is sub-level open stoping (SLOS), also known as vertical retreat mining (VRM) with paste backfill. Typical SLOS/VRM stope dimensions are 20 m wide, 20 m long, and 30 m vertical level spacing. Maximum stope dimensions are dictated by the geotechnical conditions at the stope and its immediate surroundings. Approximately 85% of the Mineral Reserves will be mined using this method. The remainder will be mined using mechanized cut-and-fill (C&F) mining with paste backfill. C&F mining will be used to extract sill pillars, remnants, and irregular shapes. Typical heading sizes will be about 4 m x 4 m, and stopes may be overhand or lateral drift-and-fill (D&F) style extraction.

Mine planning for LOM is based on a steady state production rate of 20,600 t/d. The rate is similar to the rates currently being achieved and assumes that no major capital investment is required to achieve this target.





Mineral Reserves are reported inclusive of recovery losses and dilution. All dilution is assigned an NSR value of US$0.00/t. The NSR calculation procedure assumes that all orebodies have similar metallurgical performance and that blending ratios are not critical. Metallurgical performance does, however, vary with head grade; this has been considered in the process recovery and NSR calculation. The NSR cut-off value is based on contained metal, process recovery, freight, and treatment charges of the concentrate, metal prices, and other factors.

Planned dilution and recovery factors are based on historical values reported from the mine. The recovery and dilution factors are based on stope reconciliation reports from 2008 to 2015. Both dilution and recovery values reported by Votorantim are significantly lower than would normally be expected. This can partially be accounted for because early stopes were primary stopes, which had three walls in ore; all overbreak and sloughage was ore, and was not counted as dilution in the reconciliation. The low recovery factors also consider the tonnage lost between the theoretical reserve shapes and the actual stope design.

1.14 Mineral Reserve Statement

The Mineral Reserve estimates prepared by Votorantim staff, and included in Table 1-3 have an effective date of 30 June, 2017, and use the 2014 CIM Definition Standards. The QP responsible for the Mineral Reserves estimate is William Bagnell, P.Eng., an Amec Foster Wheeler employee. Mineral Reserves are reported using an NSR cut-off.

Factors that may affect the estimate include commodity prices and exchange rate assumptions, global markets, internal operating costs, government actions including changes to environmental, permitting, taxation and royalty regulations and laws, social licence to operate, geological and geotechnical unknowns, availability of skilled labour, and variations in metallurgical performance.

Cerro Lindo is an underground mine; as such, it faces a number of the same risks faced by all underground mines, including, but not limited to, unexpected ground conditions, seismic events, and ground water inflow. Issues that are specific to the Cerro Lindo Mine include: “receding face”, as ore must be trucked from the lowest mining levels to the crusher feed level; changes to cost estimate assumptions for the planned cut-and-fill mining as experience is gained with the conditions at Cerro Lindo; the quantity of dilution (primarily sloughed backfill) may increase as the mine deepens; geotechnical conditions due to greater depth may also contribute to increased dilution and reduced recovery; and failure of any of the infrastructure components, or a small change in ore or rock properties could prevent the mine from meeting its production targets for an extended period.





Table 1-3: Mineral Reserves Statement

Category Tonnage(Mt)

Zn Grade(%)

Cu Grade(%)

Pb Grade(%)

Ag Grade (g/t)

NSR (US$/t)

Proven 26.45 1.96 0.67 0.23 20.34 67.11

Probable 25.93 1.88 0.68 0.20 19.98 65.86

Total Proven and Probable 52.38 1.92 0.68 0.22 20.16 66.49

Notes to accompany Mineral Reserves table:

1. Mineral Reserves have an effective date of 30 June, 2017. The Qualified Person responsible for the estimate is William Bagnell, P.Eng., an Amec Foster Wheeler employee.

2. Mineral Reserves are reported on a 100% basis within engineered stope outlines assuming two mining methods: sub-level open stoping (SLOS) or vertical retreat mining (VRM) with paste backfill, and mechanized drift and fill/cut and fill (D&F/C&F) with paste backfill. Typical SLOS stopes are 20 m x 20 m x 30 m. Typical D&F/C&F rooms are 4 m x 4 m. Mineral Reserves incorporate dilution and mining recovery.

3. Mineral Reserves are reported at different net smelter return (NSR) cut-off values, depending on the mining method used: (a) for SLOS/VCM with paste backfill, the NSR cutoff is $27.80/t (b) for D&F/C&F, the NSR cut-off is $40.28/t. The NSR calculations are based on head grade and historical plant performance. Metal prices used for the NSR calculation are: Zn: US$1.09/lb; Pb: US$0.88/lb; Cu: US$2.68/lb; and Ag: US$18.94/oz. NSR calculations are based on polynomial equations for each of the concentrate elements, and incorporate considerations of sliding smelter payments that vary depending on the grade of the concentrate.

4. Milpo has entered into a silver streaming agreement with Triple Flag, beginning in December, 2016. The result is that revenues from silver sales will be lower than from market price. The reduced silver revenue has not been considered in NSR calculations or cut-off grade. The revenue reduction has been included in financial analysis.


1.15 Mining Methods

The Cerro Lindo Mine is relatively new; it has been operating since July 2007. The mine is completely mechanized, using rubber-tired equipment for all development and production operations. There is no shaft; all access is through 15 portals servicing adits, drifts and declines. Ore is extracted from nine separate orebodies, and delivered to the process plant via a series of conveyors. All ore is commingled during transport to the concentrator stockpile; ore from different orebodies is not segregated.

The primary mining method used at Cerro Lindo is SLOS/VRM with paste backfill. In future, areas of the mine that cannot be exploited using the standard SLOS method will be extracted using mechanized C&F and D&F mining methods.

The highest operating level is the 1970 m level, the lowest operating level is the 1620 m level, and the ultimate bottom level is planned to be the 1520 m level. Some ore from the upper levels is delivered to a concentrator stockpile on surface via truck, but most ore is delivered to grizzlies on the 1830 m level which serve the crusher installed on the 1820 m level. Crushed ore is delivered to the surface stockpile via inclined conveyor through a portal at the 1940 m level. From the surface stockpile, ore is delivered to the concentrator via a system of inclined overland conveyors.





The mine plan for the remainder of the LOM is based on a daily production rate of 20,600 t/d for 353 d/a. The annual production rate is, therefore, 7.27 Mt. Inferred Mineral Resources are not included in the mine plan.

Cerro Lindo is almost completely developed. With the exception of the bottom levels of OB-1 and OB-6 which are yet to be developed, and the pillar recovery and remnant mining, there is very little flexibility in the mining sequence. Mine planners use what flexibility they have to try to maintain uniform head-grades to the concentrator, and avoid geotechnical issues that can be a result of poor stope sequencing.

The mine ventilation circuit is complex. Each orebody is ventilated by a quasi-parallel split serving that orebody alone. Air enters the mine through 10 portals and is exhausted through five portals. The ventilation system is powered by 14 main fans, all installed underground on the exhaust circuit; one additional fan is planned. After reviewing the size of the mobile equipment fleet currently operating at Cerro Lindo, it is the opinion of the QP that the ventilation system is likely under-capacity and should be increased to properly support the proposed mining rates.

The mobile equipment fleet for Cerro Lindo consists of equipment owned by Milpo and numerous contractors. Since each entity is responsible for achieving its own goals independently, each entity has included spare equipment and capacity as it deems necessary. The haulage truck fleet is made up of a variety of truck manufacturers and capacities. Milpo reported that the haulage contractors are replacing their smaller and older units with large capacity (50 t) units. This will reduce congestion, improve haulage capacity, and reduce the load on the ventilation system. Availability of mobile equipment is reported to average 85%.

1.16 Recovery Methods

The Cerro Lindo plant is a relatively large polymetallic flotation-based concentrator treating up to 20,800 t/d (nameplate) or 7.3 Mt/a of ore from underground mining with a utilization of 97%.

Processing is based on conventional crushing, grinding, sequential lead and copper bulk flotation followed by zinc rougher flotation, subsequent copper and lead separation and cleaner flotation, zinc cleaner flotation, and concentrate thickening and filtration to produce separate concentrates of zinc, lead and copper with silver content.

Filtered lead, copper and zinc concentrates are discharged to dedicated storage bunkers below their filters. Each concentrate is reclaimed by front end loader, each bucket is ladle sampled and then loaded into trucks. Trucks are weighed on a truck-scale that is situated adjacent to the concentrate handling area prior to dispatch by road to the Port of Callao for sale in the case of lead and copper concentrates, and to Votorantim’s Cajamarquilla zinc refinery for the treatment of zinc concentrate.





Tailings are thickened and pumped to separate filter plants producing respectively an underground backfill product and dewatered tailings for trucking to and placement in a dry stack tailings disposal storage facility. As much as 90% of the process water from dewatered tailings is recycled with industrial fresh water being supplied from a desalination plant at the coast to meet site and process water make-up requirements.

1.17 Project Infrastructure

All key infrastructure required for mining and processing operations is constructed. This includes the underground mine, access roads, powerlines, water pipelines, desalination plant, offices and warehouses, accommodations, process plant/concentrator, conveyor systems, waste rock facilities, temporary ore stockpiles, paste-fill plant, and the dry-stack tailings storage facilities. A new fresh water pipeline from the desalination plant on the coast to the mine is projected to be completed during 2017.

Electrical power for the mine site at 220 kV is supplied from the national grid.

Stockpiles and bins are mainly provided for short-term operational ore control and emergency ore handling purposes, and are not intended to provide longer-term storage capacity. A large portion of mine development waste is used as backfill in stopes.

1.18 Environmental, Permitting and Social Considerations

1.18.1 Environmental Considerations

Votorantim completed the first environmental impact assessment (EIA) in 2001, with subsequent updates completed in support of additional infrastructure, such as the desalination plant, and plant expansions. These reports and updates were completed by independent third-party consultants. The most recent technical study was prepared by SRK Consulting in 2016. The site Environmental Monitoring Plan was established in the 2001 EIA, amended in 2007 and 2011, and updated in 2014.

Baseline studies included evaluation of climate, air quality, noise, hydrology, groundwater, water quality, seismicity, biology, and social setting.

1.18.2 Tailings Storage Facility

Tailings from the process plant are thickened and then further dewatered in either the paste plant to be deposited underground, or to the filter plant to the south of the process plant to be filtered and subsequently placed in two dry-stack storage facilities, Pahuaypite 1 and Pahuaypite 2. These storage facilities are located adjacent to the process plant. Pahuaypite 1 has a capacity of 6.3 Mm3 and Pahuaypite 2 has a





10 Mm3 capacity (16.3 Mm3 total dry stack capacity), with 8.8 Mm3 available as of May, 2017.

The Cerro Lindo filtered tailings deposits include the actual deposits and downstream dams to retain the solids that are eroded from the deposits by rain. The dams are lined with geomembrane and the facilities are built on the natural surface. The tailings storage facilities consist of various platforms with different elevations to allow sun-drying areas as filtered material moisture content is on average 12–14%. As the required moisture content is around 6.5%, drying is necessary to reach the specified compaction.

The tailings storage facilities receive approximately 50% of the tailings which are produced by the process plant facility, and the other 50% is dewatered to paste form, and pumped to the underground mine. The percentage varies throughout the year, due to the availability of the free volume underground, but the average remains close to 50/50.

Filtered tailings are transported to the platforms by truck and placed as specified in the design of the facilities, spread in lifts of 0.3 m, and compacted to 95% standard Proctor density.

Instrumentation in the filtered tailings deposits is monitored regularly, is formally registered, and an annual audit is undertaken by an independent consultant. The most recent annual evaluation of both deposits and dams was carried out in April, 2016 by Geoconsultoria. A review of the filter stacks and dams was undertaken by Ausenco Peru SAC in February, 2017. This review included a site inspection of Pahuaypite 1 and Pahuaypite 2 and associated dams, as well as a review of the dam design, construction, operation manual, emergency plan, geotechnical monitoring, groundwater monitoring, emergency response plan and closure plan.

1.18.3 Water Management

Surface drainage and rainfall are managed through channels and a check dam at the crest and at the perimeter of the deposits, directing flows to lined dams at the base of the deposits. Water collected in the contingency dams is pumped back to the filter plant.

Downstream of the Pahuaypite 1 and Pahuaypite 2 tailings deposits, contingency dams have been constructed to store sediment and water run-off. A drainage ditch was constructed at the foundation/base of the tailings deposits (basal drainage) to conduct surface flows from the foundation toward the contingency dams.

The mine has implemented a basic system of sedimentation and clarification of mine water, with the construction of three ponds. All mine process water is treated in the effluent treatment plant.





Clean water is diverted around the mine infrastructure, tailings, and waste rock facilities where possible.

Water is used both for industrial and domestic purposes. Industrial purposes include the processing plant, mine, water treatment plants and irrigation. Domestic purposes include campsite and offices. The water supply includes the treatment of all recirculated water before entering the water back to the process plant. It also includes pumping sea water into the desalination plant for a reverse osmosis treatment and supply to the process plant. A permit for groundwater extraction from five boreholes is current.

The approved monitoring plan requires ongoing surface and groundwater quality monitoring.

1.18.4 Closure and Reclamation Planning

A closure plan was developed as part of the original EIA, and has undergone revisions due to amendments to the EIAs as a result of changes to project components, including mine expansions. The approved period for implementing closure and post closure was 18 years. Post closure monitoring, assumed to extend for five years after closure, will include monitoring of hydrological, physical, geochemical and biological stability. The total updated closure budget estimate prepared in 2016 was about US$36.2 million, to be expended in or about 2027. Almost 50% of the budget was intended to be spent on progressive closure.

1.18.5 Permitting Considerations

The mine holds a number of current permits in support of operations. Milpo monitors and reviews the permit status for the operations using an ISO 14001 compliant environmental management system.

1.18.6 Social Considerations

Milpo has a Social Agreement for the development of the Chavin district signed in November, 2005. This agreement was updated in 2009, 2011, and 2012. The agreement cover items such as social investment, employment, participatory monitoring, and dispute resolution.

1.19 Markets and Contracts

Cerro Lindo is an operating mine with three main concentrate sales contracts in place. Terms within the contracts appear to be in line with what is publicly available on industry norms. Additional concentrate sales can be made at Milpo’s discretion. The LOMP assumes that all zinc concentrates will be sold to the Cajamarquilla smelter, and that the realized smelter premium will be credited to the mine as net revenue.





The zinc and lead concentrates are considered to be premium concentrates. The copper concentrate attracts a small penalty of about US$4/t due to intermittently higher than penalty lead and zinc levels.

Votorantim provided Amec Foster Wheeler with the metal price projections for use in the Report. Votorantim established the pricing using a consensus approach based on long-term analyst and bank forecasts prepared during 2015 and 2016.

Contracts have also been used for provision of goods and services required to operate the Cerro Lindo unit, including the mine, and a large portion of all support functions. The approximately 32 firms currently under contract are used for items such as underground mining, catering, security, tails haulage and stacking, concentrate hauling, and the mine site laboratory.

1.20 Capital Cost Estimates

Capital costs are inclusive of sustaining capital, and closure and reclamation costs. A cost summary is provided in Table 1-4.

1.21 Operating Cost Estimates

Operating costs forecast for the LOM are based on historical costs at Cerro Lindo, and on planned changes in mine operations. A cost summary is provided in Table 1-5.

1.22 Economic Analysis

The results of the economic analyses discussed in this section represent forward- looking information as defined under Canadian securities law. The results depend on inputs that are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those presented here. Information that is forward-looking includes:

Mineral Resource and Mineral Reserve estimates

Assumed commodity prices and exchange rates

The proposed mine production plan

Projected mining and process recovery rates

Sustaining costs and proposed operating costs

Assumptions as to closure costs and closure requirements

Assumptions as to environmental, permitting and social risks.





Table 1-4: Capital Cost Summary (US$ x 1,000)

Area 2018 2019 2020 2021 2022 2023 2024 2025

Mine 19,665 12,529 12,442 9,533 9,696 10,005 3,810 487

Plant 2,283 2,773 963 3,675 2,491 197 — —

Infrastructure 8,924 6,111 482 0 0 0 0 0

Environment 1,298 659 590 590 590 266 236 20

Carry Over 2017 2,969 — — — — — — —

Totals 35,139 22,072 14,477 13,798 12,777 10,468 4,046 506

Note: Totals may not sum due to rounding.

Table 1-5: Operating Cost Forecast

Cost Centre Units 2018 2019 2020 2021 2022 2023 2024 2025

Annual Production Mt 7.28 7.29 7.27 7.27 7.36 7.24 3.13 1.81

Mining US$/t 17.41 17.61 15.24 14.55 14.54 13.53 21.87 33.31

Plant US$/t 6.34 6.41 6.52 6.59 6.69 6.81 8.43 7.91

Maintenance US$/t 4.85 4.89 4.98 5.03 5.06 5.19 9.33 9.90

G&A US$/t 1.99 1.99 2.04 2.04 2.07 2.11 3.90 5.75

Totals US$/t 30.59 30.91 28.78 28.21 28.36 27.63 43.54 56.88

Note: Totals may not sum due to rounding.

Additional risks to the forward-looking information include:

Changes to costs of production from what is assumed

Unrecognized environmental risks

Unanticipated reclamation expenses

Unexpected variations in quantity of mineralised material, grade or recovery rates

Geotechnical and hydrogeological considerations during mining being different from what was assumed

Failure of plant, equipment or processes to operate as anticipated

Accidents, labour disputes and other risks of the mining industry.

The financial model that supports the Mineral Reserve declaration is a stand-alone model which calculates annual cash flows based on scheduled ore production, assumed processing recoveries, metal sale prices, projected operating and capital





costs and estimated taxes. The streaming agreement with Triple Flag is taken into account in the financial model.

Over the LOM, the Cerro Lindo Operations will realize US$4,000 million in gross revenue, and $3,108 million in net revenue.

Zinc concentrate makes up 48.2% of the net revenue, copper concentrate 46.7% and lead concentrate 5.1%. The proportions for copper and lead concentrates are reduced by the effect of the silver streaming agreement.

Over the LOM, the Cerro Lindo Operations earn undiscounted cash flows of $892 million, which results in an NPV of $762 million at a discount rate of 9%. The operation generates substantial free cash flow from 2018 to 2023, tapering away near the end of mine life.

1.23 Sensitivity Analysis

The sensitivity of NPV was determined against metal prices (all metals), head grade (all metals), site operating costs, offsite costs (conversion, treatment and refining charges, transport costs), and capital costs.

NPV is most sensitive to changes in metal prices, then head grade, especially zinc and copper. NPV is relatively insensitive to capital costs, as remaining capital requirements are comparatively low.

1.24 Risks and Opportunities

A summary of the key opportunities and risks identified by the QPs is provided in Table 1-6.

1.25 Interpretation and Conclusions

Under the assumptions in this Report, the Cerro Lindo Operations show a positive discounted cash flow over the life-of-mine and support Mineral Reserves. The mine plan is achievable under the set of assumptions and parameters presented.





Table 1-6: Risk and Opportunity Summary

Discipline Opportunity Risks

Geology and exploration

Exploration potential remains at OB-1, OB-4, OB-5 and OB-8. Current exploration in the mine area is addressing the possible presence of various mineralized horizons at the upper levels of the southwestern flank of the mine, and at depth, below the 1,600 m level. Geophysical anomalies identified north of the Topará River require additional investigation.

There are a number of regional exploration targets, that with further work, represent upside opportunity to identify mineralization that can potentially add to the resource base.

Mineral Resources

Step out and infill drilling at satellite deposits and areas of collapse have a high probability of identifying mineralization that may support Mineral Resource estimates.

Improved consistency of sampling for short range model at draw points will allow reconciliation to be used for measuring long range resource model performance and potentially indicate if planned dilution is being achieved

A high-grade copper domain may be needed to constrain smearing of metal into areas of lower copper grades. This would improve local variability keeping higher grades of copper within areas of high-grade copper and low copper grades to areas of low-grade copper. Higher confidence in copper estimation will improve mine planning and forecasting

Geotechnical

There is an opportunity to collect additional geotechnical data from the drilling programs in support of developing improved stope designs so as to increase ore recoveries from the stopes.

Geotechnical numerical modelling requires verification through instrumentation and monitoring data. It is recommended that an external third-party review be conducted on the current modelling practices as inconsistences were noted in initial element loading, field stress types, extents of external boundaries and meshing quality.

Out-of-plane stresses and strains may not be fully accounted for in the current mine models, which are performed using 2D software. The risk will be ameliorated when designs are transferred to the 3D software that is planned to be acquired.

Geotechnical conditions due to greater mining depths may contribute to increased dilution and reduced recoveries.

Mine plan

The deposit has not been closed off by exploration drilling. Ongoing exploration activities could support additional Mineral Resources being identified that could be converted, with the appropriate studies, to Mineral Reserves. This represents upside potential for the operation. Additional upside potential exists if the material currently classified as Measured and Indicated can be converted to Mineral Reserves with further mining studies.

The number of contractors, and the broad range of mobile equipment underground are greater than normally seen at comparable operations. There is the potential to reduce the mobile equipment fleet and manpower by rationalizing the numbers of contractors.

Some of the Mineral Reserves are to be extracted using mechanized C&F or D&F methods. These methods are not currently being used at Cerro Lindo, but are common in Peru, and are being used at Votorantim’s mines at the Cerro de Pasco mining complex (Atacocha and El Porvenir). The method, costs, productivity, and dilution/recovery factors are based on actual practices from Cerro de Pasco, but could subject to site-specific factors that may only be identified after mining begins.

The mine is planned to extend its depth to the 1520 m level, which is about 100 m below its current lowest level. The problem of the “receding face” will become a greater concern. All ore from these new areas will be required to be hauled up to the crusher feed level (the 1830 m level) by truck. This will increase operating






Planned and actual recovery of the SLOS stopes is lower than industry standard. It may be possible to improve recovery by implementing a concerted effort to improve stope design and mining practices.

costs, put more strain on the ventilation system, increase congestion, and increase the difficulty of meeting production requirements.

The dilution factors used in the Mineral Reserve calculation match the factors reported by the mine as actual dilution, based on survey and stope reconciliation. As the mine becomes deeper, and has a greater percentage of production from secondary stopes, the quantity of dilution (primarily sloughed backfill) may increase.

The mine, and its infrastructure, were not originally designed for the planned production rate of 20,600 t/d. All major components of the system are operating at or near peak capacity. A major failure of any of the infrastructure components, or a small change in ore or rock properties could prevent the mine from meeting its production targets for an extended period.

A major shutdown in the paste plant will have an immediate impact on stope production, and would be extremely difficult to make up.

If the ventilation system is determined to be undersized, mine production could be reduced until the system has been improved. If the ventilation system requires significant improvement, this may require unplanned capital expenditure, and diversion of limited mining resources to complete the required upgrades.

Metallurgy, process and markets

There is a risk that the actual silver recoveries over a longer period may be lower than the current assumptions if the mill feed grades are lower than the historical average from which the 67% silver recovery figure was derived.

If the mine is required to sell the zinc concentrate to external customers, there is a risk of a negative effect on the mine economics, as the zinc premium may not continue to be paid, and treatment and transport costs could be higher.

If terms for the copper concentrates vary from the current assumptions, there is a risk that offsite costs could increase, as the copper concentrates have zinc and lead impurities that could cause less favourable terms

Infrastructure

The infrastructure was not originally designed for the planned production rate of 20,600 t/d. Some of major components of the system are near peak capacity. A major failure of any of the infrastructure components could result in production delays or even losses.

Environmental and permitting

Closure costs as stated in the second Closure Plan amendment may be underestimated. No information was provided on the cover design for the waste rock storage and tailings dry stack facilities.

There is limited information on the geochemical characteristics of the waste rock storage facilities. There is a risk that this material could have metals






leaching or acid mine drainage potential.

Financial model

The financial model has assumed a flat payment rate for the silver metal in the Triple Flag streaming agreement. However, once 19.5 Moz has been delivered to Triple Flag, the payment terms alter. If this milestone is reached while the mine is still operational, there is some upside potential in the silver revenue, since after that point, Milpo will retain 75% of the payable silver, rather than the 35% allocated in the financial model. Allowing for actual and forecast silver production in 2017, it is anticipated that this milestone would be reached before the end of 2023.

An allowance has been made in the model for working capital based on a similar position at end of 2017 to that held on the Cerro Lindo balance as at 31 March, 2017. Any variation to the allocated allowance will have an effect on NPV.

Creation of new taxes, fees, and/or royalties or significant changes to the assumptions as to these in the Report will affect the cashflow estimates.

Hedging is not considered in the financial evaluation, which is performed at the mine level. Votorantim has corporate hedging arrangements in place. Should a future decision be made to implement hedging at the mine level, the cashflow estimates could be affected

1.26 Recommendations

Recommendations have been broken into two phases. The Phase 1 recommendations are made in relation to exploration activities, and include drilling, geological mapping, and geochemical and geophysical surveys. The total cost for the Phase 1 work is about US$97 million, of which about US$5 million per year would be spent on mine area exploration, and about US$7 million per year would be expended on regional exploration.

Recommendations proposed in Phase 2 are suggestions for improvements in current operating procedures, and the program is not contingent on the results of Phase 1 work. Phase 2 is estimated at US$730,000–$1,140,000.

Work suggested includes: refinements to the Mineral Resource estimation process; review of critical spares, mine infrastructure, mine ventilation, and supporting facilities to ensure these can meet production requirements; review mining practices to improve stope recoveries; complete a test mining campaign to evaluate the planned C&F/D&F methods; undertake additional reviews of selected aspects of environmental monitoring, water balance, and existing documentation; update the Closure Plan; and complete a review and sensitivity analysis of the compaction methods used in the dry stack tailings facilities.





2.0 INTRODUCTION

2.1 Introduction

VM Holding S.A. (Votorantim) requested that Amec Foster Wheeler Perú S.A. (Amec Foster Wheeler) prepare an independent technical report (the Report) in compliance with the requirements of National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) and Form 43–101F1 Technical Report for Votorantim on the Cerro Lindo Operations (Cerro Lindo Operations or the Project), located in Chincha Province in Peru. The Cerro Lindo Operations comprise the Cerro Lindo underground zinc–lead–copper–silver mine (the Cerro Lindo Mine), a conventional comminution flotation process plant, a coastal desalination plant, and associated infrastructure. The mine produces separate zinc, lead–silver, and copper concentrates.

Compañía Minera – Milpo S.A.A. (Milpo) is a public limited company incorporated in Peru, which is an indirectly-owned subsidiary of VM Holding S.A. VM Holding S.A. holds a direct 0.17% equity interest in Milpo, and has an indirect 80.06% equity interest through its subsidiary Votorantim Metais – Cajamarquilla S.A. Votorantim thus has an indirect controlling interest in Milpo. The remaining shares are owned by minority interests.

The Project location is shown in Figure 2-1. A site overview is included as Figure 2-2.

2.2 Terms of Reference

The Report was prepared to support scientific and technical disclosure on the Cerro Lindo Operations in the initial public offering by V.M. Holding S.A.

Mineral Resources and Mineral Reserves are reported in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves (May 2014; the 2014 CIM Definition Standards) and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (November 2003; 2003 CIM Best Practice Guidelines).

All measurement units used in this Report are metric units and currency is expressed in US dollars (US$), unless stated otherwise. The Peruvian currency is the Sol. The Report uses Canadian English. Peruvian convention uses a unit of ounces per tonne (oz/t) for silver estimates; tables originally provided to Amec Foster Wheeler using the Peruvian convention have been either converted to g/t units, or a g/t equivalent is provided together with the Peruvian convention.





Figure 2-1: Site Location Plan

Note: Figure courtesy Votorantim, 2017.

Desalination plant

CERRO LINDO MINE

Urban centres

Highway

Paved road

Unpaved road





Figure 2-2: General Overview, Cerro Lindo Mine

N

1 km

Note: Image from Google Earth; modified by Amec Foster Wheeler, 2017.





2.3 Qualified Persons

The following Amec Foster Wheeler staff serve as Qualified Persons (QPs) as defined in NI 43-101:

Mr William (Bill) Bagnell, P.Eng., Manager Mining

Dr Ted Eggleston, RM SME, Principal Geologist

Mr Edward J.C. Orbock III, RM SME, Principal Geologist and Manager, Geology

Mr William Colquhoun, FSAIMM, Process and Study Manager

Mr Laurie Reemeyer, P.Eng., Process Consultant

Dr Peter Cepuritis, MAusIMM, CP, Technical Director, Geomechanics

Ms Juleen Brown, MAusIMM, CP., Manager, Environment

Dr Bing Wang, P.Eng., Senior Associate Engineer, Geotechnical.

2.4 Site Visits and Scope of Personal Inspection

The following QPs performed a site visit from 24 to 28 April, 2017:

Dr Ted Eggleston reviewed data collection, database integrity, and geological model construction. Discussions on geology and mineralization were held with Cerro Lindo personnel, and field site inspections were performed. Dr. Eggleston visited active mining operations to review the geology of the deposits and visit operating drill machines, inspected the main mine laboratory and reviewed procedures. He worked with site geological personnel reviewing aspects of data storage (database) and analytical quality control

Mr Ed Orbock physically reviewed examples of underground channel samples and infill drill stations. Discussions were held on geology, controls on mineralization, and modeling methodology that incorporate geology into digital format with Cerro Lindo Mine geology staff. Mr. Orbock conducted visual reviews of the block model in cross sections and plans, covering geology, mineralization, and high-grade zinc domain, block grades for zinc, lead, copper, and silver, and Mineral Resource classification.

Mr William Colquhoun visited the Cerro Lindo site from 16 to 19 May, 2016. During that visit, he inspected the process plant, and held discussions on plant operating practices with Votorantim staff.





2.5 Effective Dates

There are a number of effective dates, as follows:

Date of the Mineral Resource estimate: 31 December, 2016

Date of the Mineral Reserve estimate: 30 June, 2017

Date of supply of the last information on mineral tenure and permitting: 23 June, 2017

Date of letter regarding taxation considerations that supports the financial analysis: 14 July, 2017

Date of financial analysis: 30 June, 2017

The overall effective date of the Report is taken to be the date of the financial analysis and Mineral Reserve estimates, and is 30 June, 2017.

2.6 Information Sources and References

Mr Joe Hinton, MAusIMM, and Mr Felipe Riquelme, Amec Foster Wheeler employees, visited the site from 15 to 22 May, 2016:

Mr Hinton visited the tailings storage facility and held discussions on tailings management practices with Votorantim staff

Mr Riquelme reviewed some of the current environmental practices in the field and held discussions on aspects of environmental, permitting and social operations with Votorantim staff.

Mr Riquelme also visited the Votorantim corporate offices in Sao Paulo on 26 May, 2017, to discuss aspects of the environmental, permitting and social operations with Votorantim staff.

Mr Hinton provided specialist input on aspects of tailings facility management to Dr Wang, and Mr Riquelme provided specialist input on aspects of water management and environmental, permitting, and social considerations to Ms Brown.

Dr Armando Simon, P.Geo., Mr Tim Kuhl, RM SME, and Mr Ken Brisebois, P.Eng., Amec Foster Wheeler employees, visited the site from 15 to 22 May, 2016:

Dr Simon reviewed data collection, database integrity, and geological model construction. Discussions on geology and mineralization were held with Votorantim personnel, and field site inspections were performed

Mr Kuhl reviewed aspects of mine reconciliation practices





Mr Brisebois reviewed data collection and database integrity and discussed geology and mineralization with Votorantim personnel, reviewed geological and block model construction, and reviewed Mineral Resource estimation procedures and some of the corporate protocols supporting the estimates.

Dr Simon provided specialist input on aspects of geology, mineralization and data verification to Dr Eggleston. Mr Kuhl provided specialist input on aspects of mine reconciliation, and Mr Brisebois provided specialist input on aspects of Mineral Resource estimation to Mr Orbock.

Mr John Barber, P.E., an Amec Foster Wheeler employee, visited the site from 24 to 28 April, 2017. Mr John Barber toured underground workings, including production stopes, backfill placement, the crushing and conveying system, and development areas. He also met with Cerro Lindo technical staff and management personnel to collect mining data, answer questions, and clarify issues. Mr Barber also visited the site from 15 to 22 May, 2016. During this visit, he toured the paste plant, the tailings plant, and active mine workings. Mr Barber provided specialist input on aspects of mine planning and cost estimation to Mr Bagnell. Mr Barber also provided specialist input on aspects of cost estimation to Mr Reemeyer.

Mr Scott Marisett, P.Eng., an Amec Foster Wheeler employee, visited the site from 24 to 28 April, 2017. During that visit he inspected core handling facilities, the underground operations, the shotcrete plant, the lower paste plant and the testing facilities. During the site visit, Mr Marisett also had discussions with site personnel regarding areas such as the geomechanical database, data collection procedures (geomechanical data), stope dimensions, key technical hazards (risks and opportunities), ground support, dilution, drill-and-blast methodologies, mining methods, numerical modelling, geomechanical design validation, and geotechnical input into mine design. Mr Marisett provided specialist geotechnical input to Dr Cepuritis.

The key information sources for the Report include the reports and documents listed in Section 3.0 (Reliance on Other Experts) and Section 27.0 (References) of this Report were used to support the preparation of the Report. Additional information was sought from Votorantim and Amec Foster Wheeler personnel where required.

2.7 Previous Technical Reports

No previous technical report under NI 43-101 has been filed on the Project.





3.0 RELIANCE ON OTHER EXPERTS

3.1 Introduction

The QPs have relied upon the following other expert reports, which provided information regarding mineral rights, surface rights, property agreements, royalties, taxation and marketing sections of this Report.

3.2 Mineral Tenure, Surface Rights, and Royalties

The QPs have not independently reviewed ownership of the Project area and any underlying property agreements, mineral tenure, surface rights, or royalties. The QPs have fully relied upon, and disclaim responsibility for, information derived from Votorantim and legal experts retained by Votorantim for this information through the following documents:

Osterling Abogados, 2017a: Legal opinion - Cerro Lindo Mine: report prepared for Votorantim and Amec Foster Wheeler, 23 June, 2017, 74 p.

Osterling Abogados, 2017b: Addendum report of legal opinion – Cerro Lindo Mine: report prepared for Votorantim and Amec Foster Wheeler, 21 July, 2017

Alfaro, D.O., 2017: Confirmation of Production Rate: email titled “Cerro Lindo MRMR Statement Draft”, 28 June, 2017.

This information is used in Section 4 of the Report. The information is also used in support of the Mineral Resource estimate in Section 14, the Mineral Reserve estimate in Section 15, the permitting information in Section 20, and the financial analysis in Section 22.

3.3 Environmental, Permitting and Social and Community Impacts

The QPs have fully relied upon, and disclaim responsibility for, information supplied by Votorantim staff and experts retained by Votorantim for information related to environmental (including tailings, waste rock storage, water management) permitting and social and community impacts as follows:

Chavez, Z.G.,2017: Section 20 Content for Cerro Lindo Report: document prepared by Votorantim for Amec Foster Wheeler, dated 31 July, 2017.

This information is used in Section 20 of the Report. This information is also used in support of the Mineral Resource estimate in Section 14, the Mineral Reserve estimate in Section 15, and the financial analysis in Section 22.





3.4 Taxation

The QPs have fully relied upon, and disclaim responsibility for, information supplied by Votorantim experts on the taxation considerations applied to the financial model as follows:

Bertoncini, M.A., 2017: Taxation Assumptions for the Financial Model of Cerro Lindo: document prepared by Votorantim for Amec Foster Wheeler, dated 14 July, 2017.

This information is also used in support of the Mineral Reserve estimate in Section 15, and the financial analysis in Section 22.

3.5 Markets

The QPs have not independently reviewed the marketing or metal price forecast information. The QPs have fully relied upon, and disclaim responsibility for, information derived from Votorantim experts for this information through the following document:

Torres, C., and Marinho, F., 2017: Market Assumptions for Cerro Lindo Report: document prepared by Votorantim for Amec Foster Wheeler, dated 27 July, 2017.

This information is used in Section 19, the Mineral Reserves estimate in Section 15, and in support of the financial analysis in Section 22.

Metals marketing, global concentrate market terms and conditions, and metals forecasting are specialized businesses requiring knowledge of supply and demand, economic activity and other factors that are highly specialized and requires an extensive database that is outside of the purview of a QP. The QPs consider it reasonable to rely upon Votorantim for such information as the company is a well-known supplier of zinc, lead, and copper concentrates to the market, and maintains a specialist marketing and contracts department that tracks these concentrate markets.





4.0 PROPERTY DESCRIPTION AND LOCATION

4.1 Introduction

The Cerro Lindo Mine is in the Chavin district, Chincha Province, Ica Department, and located at approximately 392,780 E and 8,554,165 N, using the UTM_WGS84 datum.

4.2 Property and Title in Peru

The QPs have not independently verified the following information which is in the public domain, and have sourced the data from Ernst and Young (2015) and KPMG (2013) as well as from official Peruvian Government websites.

4.2.1 Regulatory Oversight

The right to explore, extract, process and/or produce minerals in Peru is primarily regulated by mining laws and regulations enacted by Peruvian Congress and the executive branch of government, under the 1992 Mining Law. The law regulates nine different mining activities: reconnaissance; prospecting; exploration; exploitation (mining); general labour; beneficiation; commercialisation; mineral transport; and mineral storage outside a mining facility.

The Ministry of Energy and Mines (MINEM) is the authority that regulates mining activities. MINEM also grants mining concessions to local or foreign individuals or legal entities, through a specialized body called The Institute of Geology, Mining and Metallurgy (Ingemmet).

The Environmental Evaluation and Oversight Agency (OEFA) monitors environmental compliance.

4.2.2 Mineral Tenure

Ingemmet can currently grant four different concession types:

Mining concession (allows exploration and mining activities). Concessions are termed mining claims (Petitorio Minero) when in the application phase, and mining concessions (Concesión Minera) after grant. No exploration or mining activities can be conducted on a mining claim

Production or beneficiation concession (allows processing, refining and concentrating activities)

General labour concession (allows the title-holder to provide ancillary services to mining concession title-holder)

Mining transport concession.





Mining concessions can be granted separately for metallic and non-metallic minerals. Concessions can range in size from a minimum of 100 ha to a maximum of 1,000 ha.

A granted mining concession has an indefinite term, providing that:

Annual concession fees (Derecho de Vigencia), currently US$3/ha, are paid. Failure to pay the applicable license fees for two consecutive years will result in the cancellation of the mining concession

Minimum expenditure commitments or production levels are met. The minima are divided into two classes (Osterling, 2016):

Mining Concessions granted on or before October 10, 2008 must meet the Minimum Annual Production Target of US$100.00/ha/a for metallic concessions, within a statutory term of six years from the time the concession title was granted. The applicable penalty is US$6.00/ha/a from Year 7 until Year 12. As of the 12th year, the applicable penalty increases to US$20.00/ha/a.

Mining Concessions granted after October 10, 2008 must meet the Minimum Annual Production Target of One Tax Unit (Unidad Impositiva Tributaria - UIT) per hectare per year, within a statutory term of 10 years. For 2016, 1 UIT equals S/. 3,950.00 or approximately US$1,190.00). The applicable penalty is equal to 10% of the Minimum Annual Production Target per hectare per year.

Mining Concessions will lapse automatically if any of the following events take place:

The annual fee is not paid for two consecutive years.

The applicable penalty is not paid for two consecutive years.

Between Years 15 to 19 following the year after the mining concession was granted, the Minimum Annual Production Target is not met and the mining concession holder:

Cannot demonstrate that such non-compliance is due to force majeure or an act of God, or

Does not demonstrate investments equivalent to no less than 10 times the amount of the applicable penalty due

The Minimum Annual Production Target is not met within 20 years following the year after the concession was granted.

Beneficiation concessions follow the same rules as for mining concessions. A fee must be paid that reflects the nominal capacity of the processing plant or level of production. Failure to pay such processing fees or fines for two years would result in the loss of the beneficiation concession.





4.2.3 Surface Rights

The Peruvian Government retains ownership of all subsurface land and mineral resources.

Mining companies must negotiate agreements with surface landholders, or establish easements.

Expropriation procedures have been considered for cases in which landowners are reluctant to allow mining companies to have access to a mineral deposit. Once a decision has been made by the Government, the administrative decision can only be judicially appealed by the original landowner as to the amount of compensation to be paid.

4.2.4 Other Considerations

Mining companies must submit and receive approval for an environmental impact study that includes a social relations plan, certification that there are no archaeological remains in the area, and a draft mine closure plan. Closure plans must be accompanied by payment of a monetary guarantee.

In April 2012, Peru’s Government approved the “Prior Consultation Law” that requires prior consultation with indigenous communities before any infrastructure or projects, in particular mining and energy projects, are developed in their areas.

Mining companies also have to separately obtain water rights from the National Water Authority and surface lands rights from individual landowners.

4.2.5 Levies

Levy payments are project-specific in Peru. Companies, such as Milpo, that have a Tax Stability Agreement in force do not pay levies for the duration of the agreement. Once such an agreement expires, however, levies are payable to the government. The levies payable on the Project are discussed in Section 22.3.9.

4.2.6 Fraser Institute Survey

Amec Foster Wheeler has used the Investment Attractiveness Index from the 2016 Fraser Institute Annual Survey of Mining Companies report (the Fraser Institute survey) as a credible source for the assessment of the overall political risk facing an exploration or mining project in Peru.

Amec Foster Wheeler has relied on the Fraser Institute survey because it is globally regarded as an independent report-card style assessment to governments on how attractive their policies are from the point of view of an exploration manager or mining





company, and forms a proxy for the assessment by industry of political risk in Peru from the mining perspective.

The Fraser Institute annual survey is an attempt to assess how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment.

Overall, Peru ranked 28 out of 104 jurisdictions in the survey in 2016.

4.3 Project Ownership

All mineral concessions are held in the name of Compañía Minera Milpo S.A.A. An organogram of the Votorantim ownership interest is provided in Figure 4-1.

4.4 Mineral Tenure

4.4.1 Core Tenure

Mineral Concessions

Mineral tenure consists of 36 mining concessions, four mining claims, and one beneficiation concession, located in the districts of Chavin, Lunahuana, San Juan de Yanac, Grocio Prado, Pueblo Nuevo and Pacaran, provinces of Chincha and Cañete, departments of Lima and Ica in Peru.

All but five mining concessions have been granted and duly recorded in the Public Registry. The UTM coordinates of these mining concessions, which determine their location within the official grid, have been recorded in the Mining Cadaster.

Five mining concessions (Cerro Lindo 19, Cerro Lindo 21, Cerro Lindo 22, Cerro Lindo 24, and Cerro Lindo 25), are pending registration in the Public Registry. The Comunidad Campesina San Luis de Huañupiza filed an opposition claim in 2016 on three of these concessions, Cerro Lindo 26, Cerro Lindo 27, and Cerro Lindo 28, on the basis that the concessions cover agricultural areas. The legal opinion indicates that there is a reasonable expectation that the objection will not be upheld.

Certain mineral concessions are subject to a penalty of US$20/ha since the minimum required levels of production or exploration expenditures required under Peruvian legislation have not been met. At the effective date of the legal opinion, the minimum required production level was US$100/ha/a. The minimum required exploration expenditures that would result in non-payment of penalties was 10 times the penalty/ha/a. Amec Foster Wheeler was advised that all penalties applicable to the mineral rights to June 2017 had been paid in full when due.





Figure 4-1: Ownership Organogram






The mineral concessions are not subject to outstanding liens or encumbrances, and are not pledged in any way.

None of the mineral concessions are located within a natural protected area or an urban or urban expansion area.

A list of the concessions is provided in Table 4-1. In total, they cover about 24,878.19 ha, once concession overlaps have been accounted for. Figure 4-2 provides a regional overview of the general Project area.

Mineral Claims

Mineral claims are in process of being titled as mineral concessions. The titling procedure required by the regulatory authorities is being followed by Milpo. When the mineral concessions are granted to Milpo, they will be registered in Milpo’s name.

Overlaps

The Cerro Lindo 19 concession overlaps with a third-party concession, Lunahuana 25. The area of overlap is about 60 ha, meaning the effective area of the Cerro Lindo 19 concession is approximately 840 ha. The overlap area is located outside the current operational area.

The Inca road network Qhapaq Ñan is overlapped by three mineral concessions, Checho 500 M, Checho 700 M, and Nuevo Horizonte 2008 M. Any mining activities in this area would require archaeological clearance. The overlap area is located outside the current operational area.

Beneficiation Concession

One beneficiation concession is current, granted to Milpo on 10/10/2006. The concession covers an area of 518.78 ha (Table 4-2). Amec Foster wheeler was advised that Milpo has paid the relevant annual fees to maintain the beneficiation concession for 2013 to 2017.

4.4.2 Exploration Tenure

Ten additional mining concessions were acquired by Votorantim in the area, and subsequently transferred to Milpo (Table 4-3). Collectively, these concessions cover an additional 6,835 ha, approximately. The tenure locations were included in Figure 4-2.





Table 4-1: Mineral Tenure Table

Mining Concession (Name)

Code Public Registry Code

Area (ha)

Actual Area (ha)

Location (District/City/Region) Title Number Grant Date

Febrero 1979 10009257X02 02026393 1,000 998.77 Chavin/Chincha/Ica RD.031-88-EMDGM- DCM 18/04/1988

Cerro Lindo 10000049Y01 02018851 1,000 998.77 Chavin/Chincha/Ica RD.141-84-EM-DCM 10/12/1984

Cerro Lindo 12 010210100 13596017 500 15.24 Chavin/Chincha/Ica 00198-2001-INACC/J 11/05/2001

Cerro Lindo 13 010210200 12695744 900 10.54 Lunahuana-Chavin/Chincha/Ica 00202-2001-INACC/J 11/05/2001

Cerro Lindo 23 010273415 13611414 1,000 602.28 Lunahuana- Chavin/Cañete-Chincha/Ica-Lima 003105-2015-INGEMMET/PCD/PM 30/09/2015

Festejo 10 10011858X01 02027470 1,000 1,000 Chavin/Chincha/Ica 8525-94-RPM 30/11/1994




Festejo 9M 010174812 13615927 800 800 Chavin/Chincha/Ica 004487-2012-INGEMMET/PCD/PM 31/10/2012

Cerro Lindo 24 010273515 Title in Process 1,000 660.90 Chavin/Chincha/Ica 259-201-INGEMMET/PCD/PM 15/03/2017

Cerro Lindo 25 010273615 Title in Process 1,000 786.09 Chavin/Chincha/Ica 001674-2016-INGEMMET/PCD/PM 15/11/2016

Cerro Lindo 26 010273715 Title in Process 1,000 1,000 Chavin-San Juan de Yanac/Chincha/Ica Title in Process Title in Process

Cerro Lindo 27 010273815 Title in Process 500 500 Chavin-San Juan de Yanac/Chincha/Ica Title in Process Title in Process

Cerro Lindo 28 010273915 Title in Process 500 500 Chavin-San Juan de Yanac/Chincha/Ica Title in Process Title in Process

Cerro Lindo 12-B Fraccionado

010210100A 13616219 200 0.83 unahuana–Chavin/Cañete–Chincha/Ica 00773-2001-INACC/J 31/07/2001

Cerro Lindo 14 010377204 12528871 999 999.43 Grocio Prado–Pueblo Nuevo/Chincha/Ica 01264-2005-INACC/J 21/03/2005

Cerro Lindo 15 010377104 12528882 200 200 Grocio Prado/Chincha/Ica 01263-2005-INACC/J 21/03/2005

Cerro Lindo 17 010488308 12525671 100 100 Grocio Prado/Chincha/Ica 000904-2009-INGEMMET/PCD/PM 16/03/2009

Cerro Lindo 18 010430411 13600117 300 232.39 Grocio Prado/Chincha/Ica 002097-2012-INGEMMET-PCD/PM 31/05/2012

Cerro Lindo 19 010273015 Title in Process 900 747.78 Lunahuana/Cañete/Lima 000169-2017-INGEMMET/PCD/PM 28/02/2017

Cerro Lindo 20 010273115 Title in Process 700 568.37 Lunahuana/Cañete/Lima Title in Process Title in Process

Cerro Lindo 21 010273215 Title in Process 800 493.75 Lunahuana/Cañete/Lima 1789-2016-INGEMMET/PCD/PM 28/11/2016

Cerro Lindo 22 010273315 Title in Process 300 300 Lunahuana–Pacaran/Cañete/Lima 0767-2016-INGEMMET/PCD/PM 18/10/2016

Cerro Lindo 5 010209200 13613580 900 900 Lunahuana–Pacaran/Cañete–Chincha/Ica 00338-2001-RPM 22/02/2001

Cerro Lindo 6 010209300 P-13616230 1,000 875.97 Lunahuana–Chavin/ Cañete–Chincha/Ica 00383-2001-RPM 6/03/2001

Checho 500 M 010051313 P-13611454 500 481.15 Grocio Prado–San Vicente de Cañete/Chincha –Cañete /Ica

001785-2013-INGEMMET/PCD/PM 31/05/2013





Mining Concession (Name)

Code Public Registry Code

Area (ha)

Actual Area (ha)

Location (District/City/Region) Title Number Grant Date

Checho 700 M 010051213 P-13613538 700 700 San Vicente de Cañete/Cañete/Ica 002036-2013-INGEMMET/PCD/PM 17/06/2013

Contopa 44 010167797 P-02031014 300 300 Grocio Prado/Chincha/Ica 5372-97-RPM 25/07/1997

Festejo 1 11025895X01 P-02027481 1,000 1,000 Lunahuana/Cañete/Ica 7632-94-RPM 21/11/1994



Festejo 30 010938595 P-02029871 1,000 875.59 Lunahuana/Cañete/Ica 4676-96-RPM 19/08/1996

Festejo 5 1025899X01 P-02027479 1,000 1,000 Pacaran/Cañete/Lima 7050-94-RPM 31/10/1994

Julia I M 010225414 P-13595461 400 400 Grocio Prado–Pueblo Nuevo/Chincha/Ica 003470-2014-INGEMMET/PCD/PM 12/11/2014

Kala I M 010225614 P-13613582 200 200 Grocio Prado–Pueblo Nuevo/Chincha/Ica 000807-2015-INGEMMET/PCD/PM 17/04/2015

Kala M 010225514 P-13613554 100 100 Grocio Prado/Chincha/Ica 003336-2014-INGEMMET/PCD/PM 31/10/2014

Mariale Segunda 010432706 P-12086766 900 900 Chavin–Pueblo Nuevo/Chincha/Ica 005625-2006-INACC/J 20/12/2006

Nuevo Horizonte 2008 M

010104614 P-13613581 300 230.34 Grocio Prado/Chincha/Ica 002435-2014-INGEMMET/PCD/PM 31/07/2014

Ponciana 1 M 010225714 P-13615933 400 400 Pueblo Nuevo/Chincha/Ica 003362-2014-INGEMMET/PCD/PM 31/10/2014

28,399 24,878.19

Note: Areas have been rounded to the nearest whole hectare. Area column is the area applied for, and is inclusive of areas of concession overlap. Actual area is the corrected area, removing concession overlaps.





Figure 4-2: Regional Mineral Tenure Plan


Table 4-2: Beneficiation Concession

Beneficiation Concession

Code Area (ha)

Title Number Grant Date

Cerro Lindo P0000506 519 119-2007-MEM/DGM 10/10/2006

Note: Areas have been rounded to the nearest whole hectare.





Table 4-3: Exploration Tenure

Register Number

Concession

Name Holder Status Date Inscription

Available Area(ha)

010125408 Owen 6 M Compañía Minera Milpo S.A.A. D.M. Titulado D.L. 708 2/1/2008 999.2



010246710 Owen 9 Compañía Minera Milpo S.A.A. D.M. Titulado D.L. 708 6/17/2010 38.1

010140608 Vm 142 Compañía Minera Milpo S.A.A. D.M. Titulado D.L. 708 2/7/2008 P-01014211 1,000

010140708 Vm 143 Compañía Minera Milpo S.A.A. D.M. Titulado D.L. 708 2/7/2008 P-01014210 400

010354306 Vm 21 Compañía Minera Milpo S.A.A. D.M. Titulado D.L. 708 8/15/2006 P-12177428 1,000




6,835.4

Note: Areas have been rounded.





4.5 Surface Rights

The Cerro Lindo Operations currently hold surface rights or easements for the following infrastructure:

Mine site

Access road, power transmission line, and water pipeline for the mine

Old power transmission line to Cerro Lindo

New power transmission line to Cerro Lindo

Desalination plant

Water process plant

Water pipeline from the desalination plant to the mine site.

4.5.1 Mine Site

The 500 ha surface rights for the mine site were acquired in November 2005 from the Comunidad Campesina de Chavín. The acquisition is registered in the Public Registry (Partida 11026701). The Public Registry shows a mortgage to the amount of S /. 200,000.00 in favour of Comunidad Campesina de Chavín. The legal opinion indicates that Milpo has paid 100% of the amount; however, this payment has not been noted in the Public Registry.

4.5.2 Access Road, Power Transmission Line, and Water Pipeline

A usufruct right for 150 ha was obtained in November 2005 from the Comunidad Campesina de Chavín. The acquisition is registered in the Public Registry (Partida 11025833). The right is in force until the Mineral Reserves are depleted; however, under Article 1001 of the Civil Code the term would be limited to 30 years (i.e. the right would be in force until 2035).

4.5.3 Easements

A permanent easement was granted in August 2014 (Ministerial Resolution 368-2014-MEM/DM) for a 60 kV powerline (S.E. Desert–Tower 39).

A second easement was granted in May 2013 (Ministerial Resolution 082-2013-MEM/DM) for a new 60 kV power transmission line (S.E. Desert–SE Cerro).

The desalination plant is built on a 13 ha property that Milpo states has been in the company’s possession since April 2007. However, a 2017 investigation identified that the land is State-owned. During May 2017, Milpo requested an occupation easement from the Superintendent of State Property (SBN) under Law 30327 and Supreme





Decree 2-2016-VIVIENDA. At the Report effective date, the Ministry of Energy and Mines had issued Auto Directoral 287-2017-MEM-DGM/DTM, which indicates the first stage of the procedure has been completed. The legal opinion indicates that it is unlikely that the easement application would be denied.

The seawater intake at Jahuay Beach covers about 1,495 ha. Milpo states that this property has also been in the company’s possession since April 2007. An authorization to use the aquatic area was granted by the Peruvian Navy in 2008 (Directorate Resolution 466-2008-MGP-DCG) and modified in 2012 (Directorate Resolution 706-2012-MGP/DCG). The 2012 modification allowed Milpo to install four water extraction pipelines, and one effluent discharge pipeline in the ocean. The area available for aquatic purposes was increased to 1,390.10 m2. Required payments for 2016 and 2017 have been made. A 2017 investigation indicated that the land area used is State-owned. During May 2017, Milpo requested an occupation easement from SBN. At the Report effective date, the Ministry of Energy and Mines had issued Auto Directoral 283-2017-MEM-DGM/DTM, which indicates the first stage of the procedure has been completed. The legal opinion indicates that it is unlikely that the easement application would be denied.

The legal opinion noted that Milpo had been in possession of all lands used for the water pipeline from the desalination plant to the mine site since April, 2007. The 2017 land ownership investigation found three lots crossed by the pipeline were State property. During May 2017, Milpo requested three occupation easements from SBN. Three Auto Directorals have been granted, 282-2017-MEM-DGM/DTM (0.1 ha), 291-2017-MEM-DGM/DTM (7.9 ha), and 290-2017-MEM-DGM/DTM (6.1 ha), by the Ministry of Energy and Mines. These indicate the first stage of the procedure has been completed. The Ministry of Energy and Mines has sent the dossiers to the SBN for procedural completion. The legal opinion indicates that it is unlikely that the easement application would be denied. One lot of the water pipeline overlaps on State property that is registered with the Public Registry (Partida 11022650). Based on this, the property owner is the Special Project of National Transportation Infrastructure (PROVIAS). No charges or encumbrances are registered against that lot.

4.6 Water Rights

To date Milpo has a total of six water licenses, one for use of seawater, and the remaining five for ground water extraction.

Votorantim holds a Water Use License granted by Resolución Administrativa N° 033-2012-ANA-ALA MOC. This allows Milpo to use water from the Pacific Ocean as follows:

3,153,600 m3 per year for mining activities for the Cerro Lindo Mine

3,153,600 m3 per year for industrial activities





3,153,600m3 per year to supply water for Cerro Lindo’s workforce.

Under the Water Resources Law and its regulations, the use of ocean water is not subject to fees. Given the latter, the legal opinion considered that the surface water license for use of seawater in the desalination plant is in full force and effect.

Votorantim also holds five groundwater usage rights for water wells that are owned by Votorantim:

Administrative Resolution N° 057-2009-ANA-ALACH.P (Well N° IRHS 182) allows Votorantim to use 220,752 m3 per year (7 L/sec) for industrial activities

Administrative Resolution N° 058-2009-ANA-ALACH.P (Well N° IRHS 183) allows Milpo to use 283,824 m3 per year (9 L/sec) for industrial activities

Administrative Resolution N° 026-2011-ANA-ALA SJ (Well N° IRHS 179) allows Milpo to use 630,720 m3 per year (20 L/sec) for mining activities

Administrative Resolution N°27-2011-ANA-ALA S.J. (Well N° IRHS-180) allows Milpo to use 175,680 m3 per year (5 L/sec) for mining activities

Administrative Resolution N°28-2011-ANA-ALA S.J. (Well N° IRHS-181) allows Milpo to use 220,752 m3 per year (7 L/sec) for mining activities.

Proof of payment of the applicable fees for years 2013, 2014, 2015, and 2016 (payments correspond to the preceding year) were provided and the legal opinion supported that the ground water licenses are in full force and effect.

4.7 Royalties

The Project is not subject to any royalties other than those that would be payable to the Government once the Tax Stability Agreement expires (see also discussion in Section 22.3.9.

4.8 Property Agreements

Other than the surface rights agreements discussed in Section 4.5, there are no other agreements currently in effect.

4.9 Permitting Considerations

Project permitting is discussed in Section 20.

4.10 Environmental Considerations

The environmental considerations relevant to the Project are discussed in Section 20.





4.11 Social License Considerations

The social considerations relevant to the Project are discussed in Section 20.

4.12 Comments on Section 4

The legal opinion and additional information provided by Milpo and Votorantim experts supports the following:

Milpo has been duly incorporated, and is a valid corporate entity under the laws of Peru. The company may conduct business in Peru and has the requisite power and authority to own property and assets in Peru

Milpo has the rights to acquire, hold, and transfer title in the listed mining concessions, and has the rights to carry out exploration, development and production with respect to the listed mining concessions

Mining concessions and mineral claims held in the name of Milpo are appropriately registered to Milpo, are valid, and are in good standing. The mineral concessions are not subject to outstanding liens or encumbrances, and are not pledged in any way

The surface rights to a property of 500 ha and the usufruct of 150 ha are recorded in the Public Registry. Milpo holds sufficient surface rights for the mining operations

Sufficient water rights are held to support operations

Votorantim advised that to the extent known, there are no other significant factors and risks that may affect access, title or right or ability to perform work on the Project.





5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY

5.1 Accessibility

The Project is located in the province of Chincha, department of Ica, about 200 km south of Lima.

The closest commercial airport is Jorge Chavez, at Callao. The closest airport to the Project is in Pisco, Ica, but usage is restricted to the military and emergencies.

Concentrate from the mine is trucked 255 km from the mine site to the Port of Callao.

Additional information on Project access is included in Section 18.

5.2 Climate

The mine is situated in an arid, cold-temperate climate (see also discussion in Section 20.2.1).

Rainfall in the region of the operation is minimal, varying on an average monthly basis from 24 mm to 36 mm in the dry season and 108–150 mm in the wet season. The evaporation rate is approximately 1,500 mm. Rains, when they occur, are typically concentrated in the months of December to March, and for the rest of the year precipitation generally rare and sporadic.

Mining operations are conducted on a year-round basis.

5.3 Local Resources and Infrastructure

The general setting of the mine site and associated infrastructure in relation to key settlements is included as Figure 5-1.

The mine is located upslope of a number of small villages and settlements. The closest settlements are within the Chavín and the Topará River valley communities, comprising:

Chavín community: 2,800 persons and 17 settlements

Topará River valley community: 590 families and five settlements.

The communities provide some of the mine workers, with about 122 people working directly for Milpo, and an additional 110 persons being employed by contractors to the operations.

All goods and services for the operations are brought in by road from major regional centres or Lima. Additional information on infrastructure is provided in Section 18 and Section 20.





Figure 5-1: Settlements and Communities in the Mine Area of Influence






5.4 Physiography

The Project area is located in the occidental Andes at an average elevation of 2,000 masl. The mine setting is typified by rugged topography and steep slopes.

The Project area is dissected by ravines (quebradas) developed as part of the dendritic drainage pattern feeding the Topará River.

Vegetation is limited on hill slopes, and is predominantly cacti species. Along river valleys patches of coastal forest may occur; however, these are favoured areas for agricultural activities, and little of the original vegetation remains. During baseline studies conducted in support of environmental permitting a total of 58 flora species were identified. Following five half-yearly monitoring surveys, the species identified has increased to 85 plant species belonging to 27 families. Two flora species recorded are protected by national legislation.

5.5 Seismicity

Seismicity considerations are discussed in Section 20.2.6.


There is sufficient suitable land available within the mineral tenure held by Milpo for tailings disposal, mine waste disposal, and installations such as the process plant and related mine infrastructure. All necessary primary infrastructure has been built on site and is sufficient for the projected life-of-mine (LOM) plan (LOMP) (see; however, comments on ventilation and paste fill in Section 16).

A review of the existing power and water sources, manpower availability, and transport options (see Sections 18 and 20), indicates that there are reasonable expectations that sufficient labor and infrastructure will continue to be available to support the Mineral Resources, Mineral Reserves, and the proposed LOMP.





6.0 HISTORY

6.1 Exploration History

Artisanal-style mining began in the early 1960s, when outcropping barite bodies were mined for use by the oil industry.

The Cerro Lindo deposit was discovered by BTX in 1967, during a colour anomaly reconnaissance program. Colour anomalies result from weathering of pyrite-rich rocks which causes the formation of various reddish iron oxide minerals. Various geochemical sampling and geological studies were subsequently completed. Milpo acquired the property in 1984.

After acquisition, Milpo prepared access roads and conducted geological mapping, trenching, approximately 3,000 m of underground development and 3,500 m of drilling. Phelps Dodge optioned the property in 1996, and completed 6,700 m of widely-spaced, mostly vertical core drilling, as well as an electromagnetic (EM) moving-loop geophysical survey, which produced a prominent anomaly over the Cerro Lindo deposit. Phelps Dodge returned the property to Milpo in 1997.

Milpo resumed exploration in 1999, conducted a thorough review of previous work at and decided to proceed with an extensive exploration program, consisting of core drilling and underground drift development. This program was completed in three distinct phases from 1999 through 2001.

During the course of the three phases, a total of 28,371 m (129 holes) of core drilling and 1,365 m of underground drifting were completed. Drift development provided access for delineation drilling and exploration of the southeastern portion of OB-1. During this program, OB-1 and OB-2 were better studied, the presence of OB-5 was confirmed, and the drill grid density required for a feasibility study was achieved.

AMEC Simons/GRD Minproc (2002) and GEMIN (2005) completed feasibility studies. Mine construction started in 2006.

At the beginning of operations, the plant had a 5,000 t/d treatment capacity; in 2011, the first expansion concluded with a plant capacity of 10,000 t/d. During 2012, a second expansion resulted in a new processing capacity of around 15,000 t/d; and the third expansion was completed in 2014, with a capacity of about 18,000 t/d (Milpo, 2016x). Current capacity is a nameplate 20,800 t/d, with actual production scheduled at 20,600 t/d over the LOMP.

Milpo has been granted approval for the terms of reference for an updated EIA in which an expansion to 22,500 t/d is contemplated (see Section 20).

Systematic exploration restarted in 2007. This exploration resulted in discovery of new mineralized bodies (OB-6 in 2006; OB-7 in 2009; OB-6A in 2010; OB-6B in 2011; OB-





2B and OB-8 in 2012; OB-5B in 2013; OB-3–4 in 2014; OB-8 in 2015; and OB1x in 2016), as well as increasing and improving the confidence classification of estimated Mineral Resources and Mineral Reserves in previously-known mineralized bodies.

6.2 Production

A summary of production to date is included in Table 6-1.

6.3 Prior Estimates

Votorantim received exemptive relief from the second part of the definition of “historical estimates” under NI 43-101 in order to disclose a summary of the prior Mineral Resource and Ore Reserve estimates from 2011 to 2015 for the Cerro Lindo Operations as historical estimates.

Section 1.1 of NI 43-101 defines “historical estimate” as follows: “means an estimate of the quantity, grade, or metal or mineral content of a deposit that an issuer has not verified as a current mineral resource or mineral reserve, and which was prepared before the issuer acquiring, or entering into an agreement to acquire, an interest in the property that contains the deposit”.

The relief granted by the Canadian Securities Administrators to Votorantim allows the prior estimates to disclosed as “historical estimates” even though Votorantim was the owner of the Cerro Lindo Operations at the time of the estimates.

These prior estimates are considered by Votorantim to be useful for the purpose of illustrating Votorantim’s ability to replenish Mineral Resources and Ore Reserves during mining activities. Votorantim does not intend to update or verify the prior estimates as current. A portion of the material in the estimates has been mined out.

Table 6-2, Table 6-3, and the accompanying table footnotes summarize the Mineral Resource and Ore Reserve estimates for 2011–2015, and provide, where known, the key parameters, assumptions, and methods that were used by Votorantim staff in preparing the estimates.

The QP has not done sufficient work to classify the prior estimates as current Mineral Resources or Mineral Reserves. Votorantim is not treating the prior estimates as current estimates; the current Mineral Resource estimates are provided in Section 14 of this Report and the current Mineral Reserves in Section 15.





Table 6-1: Production History

Unit 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 First Half 2017

Tonnage Mt 0.635 1.97 2.41 2.53 3.14 3.79 5.38 5.93 6.76 7.35 3.50

Zn Grade % 3.19 4.12 3.51 3.14 3.15 3.08 3.12 3.06 2.83 2.56 2.39

Cu Grade % 0.4 0.59 0.76 0.79 0.81 0.86 0.77 0.79 0.68 0.66 0.70

Pb Grade % 0.49 0.58 0.43 0.34 0.34 0.29 0.32 0.33 0.31 0.29 0.26

Ag Grade oz/t 1.1 1.08 0.91 0.96 0.84 0.74 0.75 0.75 0.75 0.73 0.71

Ag Grade g/t 34.21 33.59 28.30 29.86 26.13 23.02 23.33 23.33 23.33 22.71 22.08

Note: first half 2017 actual production.





Table 6-2: Prior Mineral Resource Estimates

Confidence Classification Units 2011 2012 2013 2014 2015

Measured

Tonnage (Mt) 16.90 19.67 24.06 27.35 25.05

Grade Zn (%) 2.53 2.69 2.78 2.64 2.90

Grade Pb (%) 0.32 0.34 0.34 0.32 0.36

Grade Cu (%) 0.81 0.83 0.79 0.66 0.79

Grade Ag (g/t) 27.68 28.85 27.99 24.88 28.30

Indicated

Tonnage (Mt) 12.95 9.16 14.39 18.51 16.00

Grade Zn (%) 2.01 2.29 2.07 1.74 2.28

Grade Pb (%) 0.21 0.28 0.24 0.19 0.25

Grade Cu (%) 1.21 0.77 0.80 0.68 0.83

Grade Ag (g/t) 31.10 26.00 24.88 19.91 26.44

Total Measured and Indicated

Tonnage (Mt) 29.85 28.83 38.44 45.86 41.05

Grade Zn (%) 2.30 2.57 2.51 2.28 2.66

Grade Pb (%) 0.27 0.32 0.30 0.27 0.32

Grade Cu (%) 0.98 0.81 0.79 0.67 0.81

Grade Ag (g/t) 29.17 27.95 26.83 22.87 27.58

Inferred

Tonnage (Mt) 24.16 10.99 12.06 9.18 15.04

Grade Zn (%) 1.90 1.59 1.81 2.01 2.71

Grade Pb (%) 0.20 0.13 0.16 0.17 0.30

Grade Cu (%) 0.74 0.77 0.68 0.71 0.84

Grade Ag (g/t) 19.60 17.72 17.11 17.73 25.82

Notes to accompany prior Mineral Resource estimate table:

1. Mineral Resource estimates for the Cerro Lindo Operations have an effective date of 31 December of the previous year, such that the 2011 estimate was prepared as of 31 December, 2010, the 2012 estimate was prepared as of 31 December, 2011, the 2013 estimate as of 31 December 2012, the 2014 estimate as of 31 December 2013, and the 2015 estimate as of 31 December, 2014.

2. Mr Enrique Garay, MAIG, employed as the Exploration Manager with Votorantim, was the Competent Person responsible for each Mineral Resource estimate, and supervised the Votorantim personnel who prepared the estimates.

3. Mineral Resources were reported exclusive of the Mineral Resources converted to Ore Reserves.

4. Mineral Resources are not Ore Reserves, and do not have demonstrated economic viability.

5. The Mineral Resources were assumed to be extracted using sub-level open stoping (SLOS) and vertical retreat mining (VRM) methods.

6. The estimates were reported using variable cut-off criteria, based on net smelter returns (NSRs). The NSR covered mining, processing, and other costs. Cut-offs were: 2011: US$20.81/t; 2012: US$30.47/t; 2013: US$26.66/t; 2014: US$22.60/t; 2015: US$24.99/t.

7. Metal prices used were variable: zinc: 2011, US$2,275/t; 2012, US$2,225/t; 2013, US$2,415/t; 2014, US$2,200/t; 2015, US$2,145/t; lead: 2011, US$1,845/t; 2012, US$2,500/t; 2013, US$2,000/t; 2014, US$1,958/t; 2015, US$1,721/t; copper: 2011, US$7,480/t; 2012, US$9,000/t; 2013, US$7,200/t; 2014, US$6,600/t; 2015, US$5,991/t; silver: 2011, US$18.40/oz; 2012, US$35.00/oz; 2013, US$16.60/oz; 2014, US$17.00/oz; 2015, US$15.50/oz.





8. Metallurgical recovery assumptions were variable: zinc: 2011, 91.92%; 2012, 92.43%; 2013, 92.53%; 2014, 92.32%; 2015, 92.67%; lead: 2011, 70.91%; 2012, 72.45%; 2013, 73.15%; 2014, 73.38%; 2015, 73.6%; copper: 2011, 83.00%; 2012, 84.92%; 2013, 82.67%; 2014, 83.03%; 2015, 83.37; silver: 2011, 66.26%; 2012, 69.46%; 2013, 66.19%; 2014, 62.61%; 2015, 65.95%.

9. Mineral Resources were stated as in situ with no consideration for planned or unplanned external mining dilution.

10. Rounding may result in apparent summation differences.

Table 6-3: Prior Ore Reserve Estimates

Confidence Category Unit 2011 2012 2013 2014 2015

Proved

Tonnage (Mt) 15.01 20.71 22.17 20.00 23.04

Grade Zn (%) 3.41 3.70 3.34 3.10 2.71

Grade Pb (%) 0.39 0.42 0.38 0.33 0.29

Grade Cu (%) 0.74 0.73 0.71 0.70 0.71

Grade Ag (g/t) 27.99 29.17 26.44 24.57 24.57

Probable

Tonnage (Mt) 21.32 14.87 12.43 19.90 23.08

Grade Zn (%) 2.34 2.20 2.13 2.23 2.20

Grade Pb (%) 0.25 0.23 0.23 0.21 0.22

Grade Cu (%) 0.75 0.76 0.75 0.74 0.80

Grade Ag (g/t) 24.57 23.53 20.84 19.91 24.26

Total Proven and Probable

Tonnage (Mt) 36.33 35.58 34.60 39.91 46.12

Grade Zn (%) 2.78 3.07 2.91 2.67 2.45

Grade Pb (%) 0.31 0.34 0.33 0.27 0.25

Grade Cu (%) 0.75 0.74 0.72 0.72 0.76

Grade Ag (g/t) 25.99 26.81 24.43 22.24 24.42

Notes to accompany prior Ore Reserve estimate table:

1. Ore Reserves have an effective date of 31 December of the previous year, such that the 2011 estimate was prepared as of 31 December, 2010, the 2012 estimate was prepared as of 31 December, 2011, the 2013 estimate as of 31 December 2012, the 2014 estimate as of 31 December 2013, and the 2015 estimate as of 31 December, 2014.

2. Mr Carlos Guzman, employed as a Mine Planning Manager with Votorantim, was responsible for each Ore Reserve estimate, and supervised the Votorantim personnel who prepared the estimates.

3. The estimates were reported using variable cut-off criteria, based on net smelter returns (NSRs). The NSR covered mining, processing, and other costs. Cut-offs were: 2011: US$20.81/t; 2012: US$30.47/t; 2013: US$26.66/t; 2014: US$22.60/t; 2015: US$24.99/t. In each case, the NSR cut-off was based on the budget forecast prepared by Votorantim’s Strategic Planning department for that year.

4. Metal prices used were variable: zinc: 2011, US$2,275/t; 2012, US$2,225/t; 2013, US$2,415/t; 2014, US$2,200/t; 2015, US$2,145/t; lead: 2011, US$1,845/t; 2012, US$2,500/t; 2013, US$2,000/t; 2014, US$1,958/t; 2015, US$1,721/t; copper: 2011, US$7,480/t; 2012, US$9,000/t; 2013, US$7,200/t; 2014, US$6,600/t; 2015, US$5,991/t; silver: 2011, US$18.40/oz; 2012, US$35.00/oz; 2013, US$16.60/oz; 2014, US$17.00/oz; 2015, US$15.50/oz.

5. Operating cost assumptions varied by year: 2011: mining cost of US$10.91/t, process cost of US$6.11/t, other costs of US$7.40/t; 2012: mining cost of US$11.32/t, process cost of US$6.23/t, other costs of US$6.60/t; 2013:





mining cost of US$13.10/t, process cost of US$7.64/t, other costs of US$8.60/t; 2014: mining cost of US$13.79/t, process cost of US$7.16/t, other costs of US$8.20/t; 2015: mining cost of US$16.13/t, process cost of US$6.57/t, other costs of US$9.8/t.

6. In all instances, the mining method was sublevel open stoping (SLOS), assuming typical stope dimensions of 25 x 30 x 30 m. The dilution assumptions used in the estimate varied by stope, based on orebody thickness, and on the minimum operational criteria used. Planned mining dilution averaged 5%. On average, operational mining dilution averaged about 7%. A mining recovery of 75% was assumed.

7. Metallurgical recovery assumptions were variable: zinc: 2011, 91.92%; 2012, 92.43%; 2013, 92.53%; 2014, 92.32%; 2015, 92.67%; lead: 2011, 70.91%; 2012, 72.45%; 2013, 73.15%; 2014, 73.38%; 2015, 73.6%; copper: 2011, 83.00%; 2012, 84.92%; 2013, 82.67%; 2014, 83.03%; 2015, 83.37; silver: 2011, 66.26%; 2012, 69.46%; 2013, 66.19%; 2014, 62.61%; 2015, 65.95%.

8. Rounding may result in apparent summation differences.

Mineral Resource and Ore Reserve estimates were prepared by Votorantim staff, using the guidance and confidence classifications set out in the 2004 edition of the Joint Ore Reserves Committee (JORC) Code (2004 JORC Code). There is no assurance that the prior estimates are in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves (May 2014; the 2014 CIM Definition Standards) or the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (November 2003; 2003 CIM Best Practice Guidelines), and the prior estimates should not be regarded as consistent with those standards in all aspects.

Mineral Resources were prepared under the supervision of a Competent Person. MineSight™ software was used in the Mineral Resource estimation process. Block models were updated annually, and typically used a 5 m block size, assuming underground mining using sublevel open stoping (SLOS) mining methods. Estimation was performed using ordinary kriging (OK). Confidence classifications assigned were based on an assessment of drill hole spacing, kriging variance, and data quality sourced from quality assurance and quality control (QA/QC) programs. Cut-off criteria and metallurgical recovery assumptions were based on historical data from the Cerro Lindo Operations.

Ore Reserves were prepared under the supervision of an appropriately experienced mining professional, but who did not have Competent Person status at the time of the estimates. MineSight™ software was used in the Ore Reserve estimation process. The stope designs assumed an average size of 25 x 30 x 30 m. The block model was adjusted for operational dilution; dilution assumptions used in the estimate varied by stope, based on orebody thickness, and on the minimum operational criteria used.

A portion of the Ore Reserves were supported by mine plans and mining assumptions that included Mineral Resources; this was allowed under the 2004 JORC Code. On





average, planned dilution averaged 5%, and operational mining dilution averaged about 7%. A mining recovery of 75% was assumed.

Ore Reserves also considered other Modifying Factors, including infrastructure, economic, marketing, legal, environmental, social, and governmental factors.

Figure 6-1 is a graphic of the prior estimates that shows the Mineral Resources, drilling completed each year, and the run-of-mine (ROM) production data for each year from 2011 to 2015. Figure 6-2 shows the Ore Reserves against the same drilling and ROM production data.





Figure 6-1: Mineral Resource Prior Estimates, Annual Drilled Metres, and Run-of-Mine Production by Year

Note: Figure prepared by Amec Foster Wheeler, 2017.

Figure 6-2: Ore Reserve Prior Estimates, Annual Drilled Metres, and Run-of-Mine Production by Year






7.0 GEOLOGICAL SETTING AND MINERALIZATION

7.1 Regional Geology

The Cerro Lindo deposit is located in a 30 km by 10 km northwest-trending belt of marine volcano–sedimentary rocks of the Middle Albian to Senonian (mid-Cretaceous) Huaranguillo Formation belonging to the Casma Group (Zalazar and Landa, 1993), which is surrounded by Tertiary intrusions of the Coastal Batholith (Figure 7-1).

The Casma Group is dominated by porphyritic andesites, erupted in a failed back-arc basin through an unexposed older basement as a result of extensional tectonics during subduction of oceanic lithosphere. The Casma volcano–sedimentary rocks extend for 1,600 km along the Pacific Ocean, from Ica, Southern Peru, to Piura, Northern Peru.

Upper Cretaceous to Tertiary intrusive rocks of the Coastal Batholith intrude the Casma Group over most of its extent. In the Cerro Lindo region, this intrusive belt is composed of granodiorites, monzogranites and diorites of calc-alkaline affinity. Emplacement of the batholith occurred episodically over a period of 64 million years between 101 Ma and 37 Ma.

Emplacement of the batholith generated intense contact metamorphism of the adjacent volcano–sedimentary rocks. In the Cerro Lindo area, a medium-grade regional andalusite–cordierite metamorphism developed. Finally, andesitic porphyry dykes intrude the volcanic rocks and Coastal Batholith lithologies.

The Huaranguillo Formation fills the Cañete volcano–sedimentary basin, one of several similar basins that form the Casma metallotect at the western side of the Andean Cordillera Occidental. This metallotect includes a number of important volcanogenic massive sulphide (VMS) deposits, including Tambogrande, Perubar, Cerro Lindo, Potrobayo, Totoral, María Teresa, Aurora Augusta and Palma (Figure 7-2).

7.2 Project Geology

Geological mapping at 1:10,000 scale was completed by Hinostroza (2016). Figure 7-3 shows the resulting map.





Figure 7-1: Regional Geology Map






Figure 7-2: VMS Deposits Within the Casma Metallotect

N

Note: Figure from Gariépy and Hinsotroza, 2004.





Figure 7-3: Geological Map of the Cerro Lindo Property

Note: Figure from Hinostroza, 2016.





7.2.1 Stratigraphy

The Huaranguillo Formation at the property consists of an approximately 2,250 m thick back-arc basin sequence extending northwest–southeast for about 10 km x 5 km. This formation has been surrounded and intruded by the Coastal Batholith.

Zalazar and Landa (1993) divided the Huaranguillo Formation in the Cerro Lindo area into two members: a lower member, composed of shales, tuffs and andesites, and an upper member, formed of limestones, shales and volcanic rocks. Hinostroza (2016) later divided the Huaranguillo Formation into three units (Figure 7-4):

A 1,000 m thick lower unit composed of rhyolitic–rhyodacitic volcanoclastic rocks, including a 150 m thick andesitic pyroclastic flow

A 650 m thick intermediate unit, consisting of andesitic lavas, breccias and volcaniclastic flows

A 550 m thick upper unit, composed of andesitic lavas and limestones at the bottom (150 m), followed by silicified limestones (200 m), and topped by limestones and shales.

Late-stage feldspar porphyritic dykes occur throughout the property, cutting both the Casma Group and Coastal Batholith rocks. At Cerro Lindo, these form a northeast–southwest-trending swarm.

Rhyolitic to rhyodacitic rocks predominate in the deposit area. Flow, brecciated and laminated textures exhibiting amygdules are frequent, as are andesitic pillow lavas. Intense thermal metamorphism produced porphyroblastic and granoblastic structures. The main rock-forming minerals are quartz, feldspar, biotite, sericite, andalusite, and pyrite.

Mineralization is hosted by a pyroclastic unit composed of ash and lapilli-type polymictic tuffs (Figure 7-5) with sub-rounded, well classified fragments. Some lapilli have centimetre-scale, pencil-like shapes, due to development of an incipient schistosity.

Exhalite layers, typical of VMS deposits, are locally observed at the bottom or top of massive sulphide bodies, where they form finely laminated, thin (<1 m) horizons composed of silica (chert) and various sulphides. These layers are limited to the immediate area of the sulphide deposits.





Figure 7-4: Stratigraphic Column of the Cerro Lindo Project






Figure 7-5: Detailed Stratigraphic Column for the Cerro Lindo Deposit






From bottom to top, the detailed stratigraphy is as follows (refer to Figure 7-5):

Unit J, Pamoc lava: this unit, 95 m thick, is divided into three sub-units:

Lower subunit: rhyolitic flows with ash–lapilli tuffs (75 m in thickness) Middle subunit: greenish, massive rhyolite (5 m) Upper subunit: rhyolitic, clastic breccias, locally with sericitic alteration, and

biotite and andalusite (15 m)

Unidad I, Lower Topará Member: lapilli, monomictic tuffs, with subrounded centimetre-scale clasts. Strong sericitic alteration, variable pyritization (1% to 35%), sparse silicic and chloritic alteration, moderate to strong presence of biotite and andalusite (20 m to 35 m)

FW Tuff, Upper Topará Member: felsic ash tuffs, showing strong sericitization, pyritization (10% to 50%) and silicification in places. Some portions of this unit exhibit semi-massive sulphide mineralization (3 m to 30 m)

Massive Sulphides: massive sulphide bodies with semi-massive sulphides at the base, alternating with pyritic and baritic levels, and interlayered volcanic horizons and enclaves

Unit A, Huapunga Member: stratified, lapilli, polymictic tuffs, with 0.3 to 6.0 mm subangular to subrounded clasts. Occasionally, some clasts are elongated due to intense stress. Strong sericitization with increased pyrite (10% to 50%), and sporadic chlorite alteration (20 m to 50 m)

Unit B, Lower Era Member: porphyritic, rhyolitic flow breccias, with subangular to subrounded clasts of 0.3 cm to a 6.0 cm diameter, and white reactive borders within greenish, hyaloclastic matrix. Silicification is observed in some drill holes, as well as rare biotite and andalusite (10 m to 30 m)

Unit H, Upper Era Member: rhyolitic flow breccias, with diffuse greenish clasts of 10 cm to 50 cm diameter. Locally showing weak sericitization (50 m to 85 m)

Unit D, Tambilla Member: greyish, lapilli tuffs, with 0.3 cm to 5.0 cm greyish subrounded clasts. Moderate sericitic alteration with increasing presence of pyrite (10% to 50%). In two drill holes, massive sulphide–barite bodies as thick as 2 m were encountered (40 m to 70 m) in this unit

Unit E, Sill Member: porphyritic sill of intermediate composition, with feldspar and amphibole phenocrysts, forming a massive, homogeneous unit (27 m)

Unit H4, Ladera Member: greenish porphyritic flow breccias of rhyolitic composition, with 10 mm to 50 mm feldspar phenocrysts; weak sericitic alteration (65 m).





7.2.2 Intrusive Rocks

Coastal Batholith intrusive rocks, with ages ranging from Upper Cretaceous to Tertiary, were intruded between 101 Ma and 37 Ma. The batholith is primarily composed of granodiorites surrounding roof pendants of the volcano–sedimentary units. Some minor microdiorite, diorite, and gabbro bodies, as well as numerous dykes, cut the volcano–sedimentary sequences. The most common are microdiorite, medium-grained diorite, granodiorite, and andesitic porphyry (the latter also cuts the granodioritic intrusion).

7.3 Mineralization

The known massive sulphide zones at Cerro Lindo extend for about 1,500 m long and 1,000 m wide with a vertical development of about 470 m. The mineralized bodies usually dip to the southwest at 65° on average, although OB-5B dips to the northeast.

The deposit comprises a number of lens-shaped, massive sulphide bodies, composed of pyrite (50% to 90%), yellow to brown sphalerite, chalcopyrite, and minor galena. Significant barite is present mainly in the upper portions of the deposit. A secondary-enrichment zone, composed of chalcocite and covellite, formed near surface. Silver-rich powdery barite remains at surface as a relic from sulphide oxidation and leaching.

A number of massive sulphide bodies have been identified to date: OB-1, OB-1x, OB-2, OB-2B, OB 3–4, OB-5, OB-5B, OB-6, OB-6A, OB-6B, OB-7, and OB-8. They form a number of structural trends from southwest to northeast:

Trend 1: OB-1x, discovered in the second quarter of 2016. The zone is currently 250 m long, and situated between the 1,600 m and 1,800 m levels. Mineralization averages about 9 m thickness. This body is being actively explored and remains open in all directions

Trend 2: OB-1 and OB-5B, extends for about 1,000 m between the 1,550 m and 1,850 m levels. OB-1 is expected to continue at depth

Trend 3: OB-2, OB-5 and OB-6, which has been outlined over 1,100 m, between the 1,600 m and 2,000 m levels

Trend 4: OB-2B, OB-6B, OB-6A, OB-7, currently known to extend for 1,300 m, between the 1,690 m and 2,020 m levels

Trend 5: OB-8, discovered at the end 2015 on the 1,500 m level; currently known to extend for 300 m vertically, from the 1,500 m to 1,800 m levels and covers 700 m along strike. Mineralization is copper-rich, and is under active exploration. Pyrrhotite was noted for the first time in the Cerro Lindo area, and its presence in OB-8 may be indicative of a feeder zone for the hydrothermal system





Trend 6: OB-3–4, discovered in 2014, and located in the northern zone of the Topará Fault. Mineralization appears to be elongated north–south, potentially due to right lateral movement along the Topará Fault. Mineralization is under active exploration.

Locations of the mineralized bodies are included in Figure 7-6, and Table 7-1 shows the currently-delineated dimensions of each mineralized body.

From bottom to top in the deposit profile, three massive sulphide types and a semi-massive sulphide unit have been recognized:

Pyritic, homogeneous, primary massive sulphide (SPP): This unit includes almost exclusively pyrite, less than 10% barite and minor interstitial chalcopyrite. Structure is equigranular, usually coarse-grained (3 mm to 6 mm), but also includes fine-grained portions (0.4 mm to 2 mm)

Copper-rich, baritic homogeneous primary sulphides (Cu–SPB): This unit contains more than 50% total sulphides (including barite), and more than 10% barite. Barite is associated with sulphides in this case because it was deposited at the same time as the sulphides from the same solution. Structure is homogeneous, and is composed of barite, pyrite, pyrrhotite, chalcopyrite and brown sphalerite. Sulphides typically occur as intergrowths and patches, and brown sphalerite is included in chalcopyrite grains. There is less pyrite than in the Zn-SPB unit. The Cu-SPB is usually found within or near the contact with Zn–SPB (described below) and SPP

Zn-rich, banded, baritic primary sulphides (Zn–SPB): This unit comprises more than 50% of total sulphides (including barite), and more than 10% barite. The Zn–SPB unit contains variable proportions of pyrite, barite, yellow sphalerite and galena. It is typically banded and has a coarse grainsize (3 mm to 6 mm)

Semi-massive sulphides (SSM): This unit contains between 20% and 50% sulphides, which are mostly represented by barren pyrite as disseminations, patches, stringers and stockworks. This mineralization is usually fine-grained as compared to massive sulphides. SSM forms a variable envelope, 20 m to 80 m thick, around the massive sulphide bodies. The sulphide proportion decreases outward. It is better developed in the footwall.





Figure 7-6: Mineralized Trends and Mineralized Bodies






Table 7-1: Dimensions of Main Mineralized Bodies

Description Unit Mineralized Body

OB-1 OB-1x OB-2 OB-2B OB-3–4 OB-5 OB-5B OB-6 OB-6A OB-6B OB-7 OB-8

Length m 350 250 450 420 150 350 635 200 460 200 170 600

Width m 60 10 220 60 20 65 80 50 70 60 50 30

Average thickness

9 20 30

Depth m 300 200 300 170 100 380 245 300 240 160 60 300

Top elevation

m 1,850 1800 1,940 1,960 1,800 1,980 1,805 2,000 2,020 1,920 1,860 1800

Bottom elevation

m 1,550 1600 1,640 1,690 1,700 1,600 1,560 1,700 1,780 1,760 1,700 1500

The lead content is usually low, and is mainly associated with high-grade zinc zones, and locally with late quartz veins or small volcanic enclaves. These enclaves represent approximately 2% to 3% of the deposit volume, and commonly measure 0.5 m to 10 m in diameter. Silver grades correlate well with copper and lead.

7.3.1 Mineralization Zoning

Cerro Lindo, as is typical of Kuroko-style VMS deposits, is characterized by a distinct mineralization zonation. Figure 7-7 and Figure 7-8 show the chemical zonation patterns in two typical cross-sections. Amec Foster Wheeler notes that:

Zinc content is higher in the Zn–SPB units

Copper content is higher in Cu–SPP units. However, copper is also found in the SPB unit

Lead grades are higher in SPB units, and are significantly reduced in SPP units. Some lead is found in SPP associated with SPB or in enclaves

The silver content is significantly higher in SPB, but it is sometimes also important in SPP units. The presence of silver in SPB is due to its affinity for lead.

Figure 7-9 shows the average zinc, copper, lead and silver grade statistics for the main mineralized bodies. Amec Foster Wheeler notes that:

Zinc, lead and silver grades are always higher in SPB than in SPP; copper grades are always higher in SPP

The copper grades tend to decrease from the northwest to the southeast; whereas zinc, lead and silver grades tend to increase in the same direction.

This is explained by considering that the proximal portion of the deposit is located to northwest, whereas the distal portion is located to the southeast.





Figure 7-7: Zn, Cu, Pb and Ag Zonation Pattern (northwest section)

Note: Figure courtesy Votorantim, 2017. Blue: SPB; pink: SPP.





Figure 7-8: Zn, Cu, Pb and Ag Zonation Pattern (southeast section)

Note: Figure courtesy Votorantim, 2017. Blue: SPB; pink: SPP.





Figure 7-9: Average Statistics for Zn, Pb, Cu, and Ag Grades for the Main Mineralized Bodies

Barite-bearing primary sulfide

Pyrite-bearing primary sulfide

Mineralized BodyoptAg SPP – optAg SPB%Cu SPP – %Cu SPB%Pb SPP – %Pb SPB%Zn SPP – %Zn SPB

Cu/Zn SPP – Cu/Zn SPB

Note: Figure courtesy Votorantim, 2017. Area within the black box is the legend/key.

Barite bearing primary sulphide





7.3.2 Alteration

The alteration pattern at Cerro Lindo is represented by extensive, pervasive sericite–pyrite alteration around the deposit, both in the footwall and the hanging wall. Some silicification is locally observed. Alteration is usually more intense in the footwall and in the vicinity of OB-2, where original textures are barely recognized.

Pyritization occurs in veinlets and disseminations, and extends for a least 100 m around the deposit. Weathering products of pyrite, as limonite, hematite and goethite produce a rare, reddish colour anomaly at surface. Dark grey to black, chloritic alteration associated with chalcopyrite stringer mineralization is observed mainly in zones of weakness and faults.

Lower-temperature alteration frequently occurs in the hanging wall upper horizons, and usually limited to minor pyrite, magnetite, quartz, actinolite, and chlorite (Figure 7-10).

Argillic alteration is observed at surface, above the mineralized bodies, as is pyritization, sericitization, weak silicification, and argillic alteration.

Surface colour anomalies, produced as a result of sulphide weathering, are well represented in some portions of the area. Sulphides are oxidized to limonite, hematite, goethite and other secondary minerals. Bleaching of sodium and calcium-bearing rocks has occurred, and is a typical alteration style seen in VMS deposits.

7.3.3 Metamorphism

Intense contact metamorphism of the volcano–sedimentary sequences near the contacts with the Coastal Batholith intrusions reaches the garnet–cordierite–andalusite facies. Most andalusite formed at the footwall, probably as a result of strong sericitization (K increase).

Typically, secondary porphyroblastic textures developed in volcanic rocks as a result of contact metamorphism. Granoblastic textures are also common. However, drilling indicates that the intensity of metamorphism is irregular. Nearly 10% of the volcanic rocks still retain the primary flow breccias and banding textures.

Massive sulphides at Cerro Lindo have been recrystallized to grain sizes ranging from 2 mm to 5 mm; however, about 10% of the sulphides, mainly pyrite–chalcopyrite, show a very week metamorphism where the grain size rarely exceeds 0.5 mm.





Figure 7-10: Surface Alteration Zoning at Cerro Lindo

N

60 m






7.3.4 Structural Geology

The Huaranguillo Formation rocks have been moderately to intensely folded and faulted in the Project area. The structural pattern corresponds to open folds accompanied by a weak to very weak schistosity. However, certain shear zones locally produce intense schistosity.

A number of fault systems are recognized:

A system of syn-volcanic faults, related to the formation of the deposit, have a northwest to southeast strike

A conjugate fault system, striking northeast–southwest, that controls the Topará Fault; the Topará Fault displays right lateral movement

Late north–south fault system that controls the emplacement of barren dykes that cut the main mineralized zones.

Reverse fault along the contact between rhyolite and the rocks of the Coastal Batholith.

These fault systems have defined structural blocks, and the paleosurface on which the deposit was probably formed (Figure 7-11).

7.4 Exploration Potential

Exploration potential for the Project is discussed in Section 9.


In the opinion of the QP, the regional setting and the local geology (the lithological and structural controls, the alteration pattern, the mineral zonation), as well as the depositional environment and genesis of the deposit, are well understood, represent a useful guide in future exploration in the district, and support the estimation of Mineral Resources and Mineral Reserves.





Figure 7-11: Structural Framework of the Cerro Lindo Deposit






8.0 DEPOSIT TYPES

8.1 Deposit Model

Gariépy and Hinostroza (2014) highlighted the similarities between the Cerro Lindo deposit and the Kuroko deposits in Japan. Kuroko deposits have been described by Ishihara (1974), Franklin et al. (1981), Ohmoto and Skinner (1982), and Urabe et al. (1983). Figure 8-1 is a schematic cross-section through a Kuroko-style deposit.

Singer (1986) defined the Kuroko volcanogenic massive sulphide (VMS) descriptive deposit model as copper- and zinc-bearing massive sulphide deposits in marine volcanic rocks of intermediate to felsic composition. These deposits are hosted by Archean to Cenozoic marine rhyolite, dacite, and subordinate basalt and associated sediments, principally organic-rich mudstone or pyritic, siliceous shale. Lava flows, tuffs, pyroclastic rocks, and breccias are common volcanic rock types. Felsic (rhyolitic) domes are sometimes associated.

The depositional environment consists of hot springs related to marine volcanism, probably with anoxic marine conditions. Lead-rich deposits associated with abundant fine-grained volcanogenic sedimentary rocks. Black smokers are analogous modern deposits associated with back arc basins.

Kuroko deposits comprise an upper stratiform massive (>60% sulphide) zone (black ore) containing pyrite + sphalerite + chalcopyrite ± pyrrhotite ± galena ± barite ± tetrahedrite ± tennantite ± bornite with lower stratiform massive zone (yellow ore) –pyrite + chalcopyrite ± sphalerite ± pyrrhotite ± magnetite and a basal stringer (stockwork) zone–pyrite + chalcopyrite (gold and silver).

Following descriptions by AMEC (2002), Gariépy and Hinostroza (2014), Lavado (2015) and Imaña (2015), the general features of the Cerro Lindo deposit are presented in Table 8-1. These features clearly support the classification of Cerro Lindo as a Kuroko-type volcanogenic massive sulphide deposit.

8.2 Discussion

Enrique Garay (Corporate Manager, Geology and Exploration at Milpo, pers. comm. 11 July, 2017) highlighted the similarities between the Cerro Lindo Mine, and the Perseverance deposit, located in the Matagami Mining District, Quebec, Canada (Pierre et al., 2016), that are suggestive of a sub-set of Kuroko-type deposits that formed by subseafloor replacement.





Figure 8-1: Schematic Cross Section of Kuroko Massive Sulphide Descriptive Model

Note: Figure from Singer, 1986.





Table 8-1: General Features of the Cerro Lindo Deposit

Type General Features

Lithologies Rhyolite, dacite, rhyodacite, minor andesite

Rock textures Lava flows, breccias and tuffs

Age Lower Cretaceous

Mineralogy Pyrite, sphalerite, galena, barite; chalcopyrite mainly in stringer zones

Ore textures/structures Massive and coarse-grained to banded and fine-grained; stockworks in stringer zones

Zoning Sphalerite-rich to pyrite-rich zones

Alteration Sericitic, pyritic, chloritic

Ore control Lens-shaped bodies; stringer zones.

Geochemical signature Zn, Pb, Ba, Ag, Cu mainly in massive and banded portions; Cu also occurs in stringer zones

Depositional environment

Proximity to volcanic centre, volcanic depression with volcano-clastic contribution

Tectonic setting Graben-like structure within back-arc basin

The description of the Perseverance deposit that is relevant to the comparison is summarized below.

Sulphide zones are predominantly hosted in the footwall rhyolite. Relicts of a thinly laminated tuffaceous unit within the mineralized bodies form roof pendants or “enclaves”. Sulphide replacement of the laminated tuff is intricate. These features were considered by Pierre, et al., (2016) to be indicative of deposit formation via subseafloor replacement. The mode of emplacement was suggested to be migration of metal-bearing fluids along permeable steep synvolcanic structures, which simultaneously allowed for infiltration of seawater, causing mixing, cooling, and sulphide deposition in the subseafloor environment. Stratigraphic relationships suggested that massive sulphide formation was active at Perseverance while tuffaceous sedimentation was ongoing on the seafloor. Development of massive sulphide zones that progressively extended along subvertical structures was accompanied by pipe-like sericite–chlorite alteration halos.

Garay (pers. comm., 17 July 2017) noted that:

the Cerro Lindo mineralized bodies are elongated to the northwest, and are hosted in the lower rhyolite unit. Based on the mineralization distribution, there appears to be zones outward from a core SPP assemblage that is copper-rich (Cu–Zn–Pb–Ag) to a distal SPB assemblage that is zinc-rich (Zn–Pb–Ag–(Cu)). The distal assemblage occurs at the edges and to the top of the mineralized bodies. Mineralization in OB-8, which consists of chalcopyrite–pyrrhotite, may be associated with deeper zones of the hydrothermal system such as a feeder zone, since this is the first time pyrrhotite has been identified in a mineralized zone.





This interpretation of a similar sub-seafloor setting for deposition would modify the ore controls and depositional environment discussed in Table 8-1 to include that the key controls on orebody location are both stratigraphic and structural, and that deposition occurred in a subseafloor setting.


The characteristic features of the Cerro Lindo deposit which support it being classified as a Kuroko-type VMS deposit are as follows:

The deposit is hosted by felsic to intermediate submarine volcanic flows and volcaniclastic sedimentary rocks

Lens-type mineralized bodies; stringer zones

Presence of massive and banded textures in the mineralization

Predominant mineralization represented by pyrite, sphalerite, galena, chalcopyrite and barite

Massive, banded and stockwork textures

Sericitic–pyritic alteration.

Characteristic zoning from zinc-rich to pyrite-rich.

In the QP’s opinion, the Kuroko-style VMS model is an appropriate model to use for exploration vectoring.





9.0 EXPLORATION

9.1 Grids and Surveys

The surface topographic map in the mine area is derived from a photogrammetric survey carried out by Geofoto S.A. (Geofoto). The survey produced 1:8,000 scale air photos, which were tied to ground survey control points. From the air photos, Geofoto produced contour maps with 1 m intervals.

During the initial exploration period, collar location surveys were completed using a theodolite-triangulation method, with results stored directly in UTM coordinates using the PSAD 56 datum. In the early 1990’s, Milpo established fixed monuments that were tied to a survey monument in the National Grid System. The accuracy of the surveys was later checked by Milpo using GPS units, and all results were confirmed to be within 1 m (AMEC, 2002).

In recent years, the mine Survey Group has translated all coordinates to the WGS-84 datum, which is currently used. Two B-Level National Grid points are used as reference for all topographical measurements; one is at surface, the second is located within the mine. The latter was established using a Leica total-station instrument. An external contractor (Topigesa) was hired to validate the underground topographic grid.

9.2 Geological Mapping

9.2.1 Surface Mapping

Zalazar and Landa (1991) prepared the first geologic map on the region while working for the state-owned Ingenmet. In addition, various geological mapping campaigns and studies were conducted by Phelps Dodge and Milpo during late 1990s and early 2000s (Ly, 1999; Canchaya, 2001), but no details were available to Amec Foster Wheeler.

More recently, Lavado (2015) and Canales (2016) conducted detailed geological mapping campaigns on the area:

Lavado (2015) mapped 1,300 ha in the mine area and its immediate vicinity at 1:4,000 scale. The mine stratigraphy and alteration pattern, as well as factors controlling the mineral deposition, were better outlined

Canales (2016) conducted a 1:10,000 geological mapping program that extended over 13,700 ha. The program included detailed 1:2,000 mapping over 450 ha in the immediate mine area. This program was accompanied by systematic lithogeochemical sampling (described in Section 9.3), and by 8,112 m drilling in 15 drill holes in the Topará North sector. Six holes intercepted mineralized intervals at different elevations.





The purpose of the mapping program was to provide a better basis for future exploration in the area. The deposit geology was considerably updated, and a 3D geological model was assembled.

Results and conclusions from these studies form the basis of the geology descriptions in Section 7 of this Report.

9.2.2 Stope Mapping

Currently, Milpo geologists conduct stope mapping at 1:500 scale. In reconnaissance areas, stopes are spaced every 10 m, but in production areas the spacing is reduced to 6 m. For every stope a folder is prepared. The folder includes maps of the upper and lower levels, as well as geological cross-sections showing the long holes and sampling data.

9.3 Geochemical Sampling

Gariépy and Hinostroza (2004) and Milpo (2016e) refer to geochemical studies conducted by Phelps Dodge between 1996 and 1997. The Cerro Lindo deposit was clearly marked by intense zinc anomalies (Figure 9-1). No additional details on these studies were available to Amec Foster Wheeler.

9.4 Geophysics

There is limited available information on geophysical programs performed in the Project area.

Gariépy and Hinostroza (2004) reported on an induced polarization (IP) survey conducted by BTX that identified five IP anomalies in the mine area. They also refer to a Protem (electromagnetic moving loop) survey conducted by Phelps Dodge, which revealed a strong anomaly over the deposit. However, no other details were provided on any of the surveys.

In 2012, Quantec performed a TITAN Method 24 survey over the area of the Cerro Lindo Mine, with approximately 23-line km of data collected. Arce (2014) re-processed and reinterpreted the data.

Currently, the TITAN survey is being extended to the north and south of the 2012 survey boundaries, and the 2012 survey area is being infilled. Approximately 19 lines of survey, for about 93 line km, has been budgeted. Preliminary results, together with the existing data, identified the known mineralized bodies, provided indications of mineralization continuity to the southeast, and are suggestive of the presence of sulphide bodies to the north of Topará Creek. Figure 9-2 shows the locations of the proposed and completed lines, and the provisional interpretations to date.





Figure 9-1: Zinc Geochemical Anomalies from the Phelps Dodge Exploration Phase






Figure 9-2: Preliminary Results, Titan Surveys






Imaña (2015) presented various resistivity cross-sections resulting from a magnetotelluric survey. The sections did not include legends or scales, and no details were available. Imaña (2015) recommended the use of magnetotelluric and electromagnetic methods, both from surface and underground, in future exploration campaigns, given the massive nature of the Cerro Lindo mineralization.

Reinterpretation of the Imaña (2015) data resulted in better definition of OB-8, and extensions of other deposits.

9.5 Petrology, Mineralogy, and Research Studies

Gariépy and Hinostroza (2004) reviewed core from 70 drill holes from OB-2 and OB-5. The paper summarized the deposit geology, and proposed a Kuroko-type VMS genetic model for the formation of the deposit, based on submarine deposition of hydrothermal solutions within a graben structure located into a volcanogenic-sedimentary basin.

This work was complemented with a detailed lithogeochemical study on 74 samples that were analyzed for major elements, yttrium and zirconium (Hinostroza, 2016).

Imaña (2015) collected 431 rock-ship samples from various drill holes located close to OB-6 and OB-7 as part of a lithogeochemical study oriented at deciphering the chemical and volcanic stratigraphy of the deposit, and chemical modifications occurred as a result of hydrothermal alteration.

9.6 Exploration Potential

9.6.1 Mine Area

Known mineralized bodies remain open to the south (refer to Figure 7-11).

The 2014–2016 exploration programs identified a number of new mineralized zones, including OB-1x, OB-3–4, and OB-8 (see also drill intercept examples in Table 10-3):

OB-1x is open in all directions

OB-3–4 is open to the north–northwest, and at depth

OB-8 is open to the northwest and southeast, and at depth.

OB-4, hosted by a pyroclastic sequence similar to that present in the main mineralized zone, has been interpreted as a stacked body. Recent drilling has identified a new massive sulphide body in the hanging wall, also hosted by a lapilli-tuff sequence, which supports the idea that the deposition took place in at least three different levels.

Current exploration in the mine area is addressing the possible presence of various mineralized horizons at the upper levels of the southwestern flank of the mine, and at depth, below the 1,600 m level (Hinostroza, 2016); Milpo, 2016a; Figure 9-3 and Figure 9-4).





Figure 9-3: Exploration Potential in the Mine Area






Figure 9-4: Exploration Drill Holes in the General Mine, and North Topará Area






9.6.2 Regional

From a regional prospective, Canales (2016) reviewed various potential exploration prospects. Some of these had been recognized and sampled by Phelps Dodge geologists in 1996–1997 (Toldo Grande, Puca Toro, Pucasalla, Orcco Cobre, Millay, Patahuasi), whereas others have been recently identified (e.g. Ventanayoc).

The main prospects are briefly described below and locations are given in Figure 9-5:

Pucasalla–Orcocobre: Barite outcrop and anomaly with copper oxide mineralization (chrysocolla) in rhyolitic volcanic rocks and in fractures related to dioritic–andesitic dykes; alteration patterns similar to Cerro Lindo (phyllic, silicification). Geochemical sampling in this area indicated strongly anomalous zinc and barium values on surface. A drilling program is planned

Patahuasi–Millay: colour anomaly in volcanic rocks; phyllic alteration; pyrite stockwork; geochemical anomalies

Toldo Grande–Pucatoro: Colour anomaly in favorable rhyolitic volcanic rocks; alteration pattern similar to that present at Cerro Lindo (phyllic, silicification)

Ventanalloc: Granodiorite with granodioritic and rhyolitic breccias; evidence of porphyry copper style mineralization in the Coastal Batholith in contact with rhyolitic volcanics; outcrops exhibiting pyrite, copper oxide mineralization, chalcopyrite and molybdenite in thin patches

Chavín del Sur: Manto-type mineralization, breccias and veins associated to favorable limestone horizons; silica alteration and manganese oxide stains in fractures. Six drill holes intercepted mineralized (zinc–lead–silver) mantos.

The Almacen prospect (refer to Figure 4-2) comprises surface geochemical copper anomalies. In addition, various colour anomalies (Figure 9-6), some of them with barite outcrops, extend over 20 km in the property area, and remain to be explored.


Amec Foster Wheeler considers the exploration programs completed and proposed for the Project to be appropriate to the style of the mineralization and the current degree of geological knowledge.

The exploration potential has been adequately addressed from practical and theoretical points of view. There are significant indications of additional mineralization in the Cerro Lindo Mine area, identified from both geophysical and drill data, which warrant investigation. There is also good exploration potential in the regional area surrounding the mine, and a number of targets warrant additional exploration.





Figure 9-5: Regional Exploration Targets






Figure 9-6: Colour Anomalies in Campanario–Patahuasi (view to southeast)

Cerro Campanario

Campanario: color anomaly (silica, sericite, iron oxides)

Fresh, medium-grained granodiorite-tonalite

Patahuasi: color anomaly (silica, sericite, pyrite, iron oxides)

Note: Figure from Canales, 2016. The photograph scale is variable, depending on whether the reference point selected is in the foreground, middle ground and background, thus an overall scale indicator would be misleading. The photograph looks to the southeast.





10.0 DRILLING

10.1 Introduction

Between 1995 and April 2017, a total of 353,800 m in 2,617 holes were drilled within the Project area (Table 10-1). With the exception of Milpo’s 1995 down-the-hole (DTH) campaign (29 holes totaling 3,550 m), all drilling was core cut with diamond-tipped tools. Drill hole locations are shown in Figure 10-1.

10.2 Phelps Dodge Drilling (1996–1997)

Phelps Dodge completed 13 core holes, totaling 4,938 m, during the 1996–1997 campaign (refer to Table 10-1). The holes were drilled using a combination of HQ (63.5 mm) and NQ (46.7 mm) core diameters (AMEC, 2002). Additional details of drilling procedures used during this campaign were not available.

10.3 Milpo/Votorantim Drilling (1999–January 2017)

Between 1999 and January 2017, Milpo completed 2,575 core drill holes (both surface and underground) totaling 345,311 m (refer to Table 10-1). The core was predominantly NQ (45 mm) size, particularly on drill holes not exceeding 200 m length, although HQ (61 mm) and BQ (36.5 mm) sizes were also used as necessary.

Since 2010, all drilling has been underground, oriented mainly at identifying new mineralized zones (Figure 10-2), infill drilling, and covering areas where sufficient information was lacking in the geological model. In 2015–2017, some drilling targeted suspected, undiscovered, mineralized zones.

Infill drilling for Mineral Resource re-categorization uses BQ diameter tools, with individual holes as long as 120 m. These holes are drilled radially from underground stations that are separated by 25 m, with as many as five drill holes per station (AMEC, 2013).

Planned underground drilling during 2017 is intended to recognize new mineralized zones, support upgrades of confidence categories in known mineralized zones, and support reconciliation or ore control. Some drilling will target the largely unknown OB-8 area north of the currently identified mineralization.





Figure 10-1: Drill-Hole Location Map

OB1

OB2

OB2B

OB5B

OB6BOB8

OB6A

OB6

OB5

OB7






Table 10-1: Drilling Summary

Company Year Holes Meterage (m) Type Contractor Downhole Survey Assay Laboratory

Milpo 1995 29 3,550 DTH

Phelps-Dodge 1996 13 4,938 DDH PD

Milpo 1999 18 4,879 DDH BR SS-TP-ES BC

Milpo 2000 47 11,558 DDH BR/FC SS-TP-ES BC

Milpo 2001 64 11,934 DDH - SS-TP-ES BC

Milpo 2007 46 3,652 DDH IG Flexit SGS

Milpo 2008 86 15,460 DDH ID Flexit SGS

Milpo 2009 189 18,605 DDH ID Flexit SGS

Milpo 2010 182 21,736 DDH ID Flexit IP

Milpo 2011 176 21,308 DDH ID/RD Flexit IP

Milpo 2012 100 25,640 DDH RD Reflex IP



Milpo 2015 377 46,996 DDH RD/EX Reflex IP

Milpo 2016 729 85,793 DDH RD/EX Reflex IP

Milpo 2017 3 1,219 DDH EX Gyro IP

Totals 2,617 353,800

Note: PD: Phelps Dodge; BR: Bradley; FC: Foraco; IG: Ingeomin; ID: Ingeodrilling; RD: Rockdrill; EX: Explomin; SS: Sperry-Sun; TO: Tropari: ES: Eastman; BG: Bondar Clegg; IP: Inspectorate.





Figure 10-2: Schematic Showing Locations of Mineralized Bodies Discovered Since 2010

Note: Figure prepared by AMEC, 2013.





10.4 Logging Procedures

Prior to 1999, qualified technicians, under the supervision of the chief geologist, collected geotechnical information. The technicians received training from Phelps Dodge in core handling and geotechnical data collection. While calculating core recovery, wooden blocks registering depth were verified, allowing discrepancies to be identified.

Geological logs were then completed by Phelps Dodge geologists. Initially, the entire core was reviewed and the main lithological contacts were identified and marked. Individual assay intervals were then marked within these main units. A description of each interval was completed and recorded on the geological log sheet. Descriptions included lithology, mineralogy, structure and alteration. Finally, an assay number was assigned to the interval and written on the box with a permanent ink marker (AMEC, 2002).

Geological and geotechnical logs have been prepared for all core drilled by Milpo since 1999. Logging rules have not been significantly modified since 1999 and current logging is conducted following a written protocol (Milpo, 2015a).

After placing the core boxes on racks, all core is washed with clean water, and main contacts, structural, alteration, and mineralization features are identified. Their position in the core is marked with permanent markers.

Geological and geotechnical logging is then conducted using hand-held tablets provided with a specially designed logging format. Pre-defined codes are used for geological logging, and features not accounted for in the codes are described as written comments. Geotechnical observations currently include core recovery, rock quality designation (RQD), fracture density, and fracture roughness measurements. After logging, and prior to cutting the core, all boxes are photographed (Figure 10-3). The core photographs are stored in the database.

10.5 Recovery

Core recovery has usually exceeded 95% in the Milpo drill campaigns.

10.6 Collar Surveys

Underground drill hole collars are initially marked by geologists, and later formally surveyed by the mine Survey group using Leica total station instruments.

The mine surveyors also surveyed the channel sample locations.

Surface drill hole collars are marked and surveyed by the mine surveyors after drill hole completion using total station instruments. The mine survey group also initially orients the drill rigs following indications provided by geologists.





Figure 10-3: Example of Core Photography


10.7 Downhole Surveys

According to AMEC (2002), downhole surveys were not completed during the Phelps Dodge program. However, most of the Phelps Dodge holes were drilled vertically using HQ core and the deviation was assumed to be minor. In addition, massive sulphide intercepts occurred at shallow depths so significant deviations were not expected. Amec Foster Wheeler concurs with these assumptions.

During Milpo´s earliest drilling program, dip deviations were measured using acid tests which precludes azimuth deviation measurements. Details of those tests are not recorded. Azimuth deviation was not considered critical and was assumed to be minimal.

During Milpo’s later drill programs, hole deviations were measured using Sperry Sun™, Tropari™ and Eastman™ equipment. An experienced representative of the drilling company was in charge of the surveys, and Milpo geologists regularly checked the procedure. In the case of the Tropari™ test, Milpo geologists read the instrument to confirm the contractor’s values.

The Flexit™ single shot instrument was used between 2007 and 2014. From 2014 to 2016, the REFLEX EZ-TRAC™ instrument was used. Currently, the drilling contractors conduct downhole surveys with gyroscopic instruments on holes exceeding 100 m length, with readings every 20 m. The downhole survey data are





delivered to the database administrator digitally as csv files, and physically on paper (and digital pdf) form.

10.8 Geotechnical and Hydrological Drilling

Some exploration holes doubled as geotechnical holes. Those holes were logged in detail by geotechnical engineers but were later sampled and analyzed as exploration holes.

10.9 Metallurgical Drilling

AMEC (2002) noted that four PQ-size holes were drilled in OB-5 to obtain metallurgical bulk samples. The holes targeted previous drill intercepts, and two of the holes were ‘true’ parallel twin holes (CL-00-80/MET-01-03 and CL-00-82/MET-01-04). The metallurgical holes were logged for geology and compared favourably to the corresponding twin holes. Amec Foster Wheeler has had no reference to other metallurgical samples.

10.10 Sample Length/True Thickness

Depending on the dip of the drill hole, and the dip of the mineralization, drill intercept lengths are typically greater than true thickness of the mineralized body. Locations of drill stations and geometry of the deposits rarely permit determination of true thickness with a single drill hole. Interpretations of the drill data such as that in Figure 10-4 and Figure 10-5 are required to determine true thickness.

10.11 Summary of Drill Intercepts

Due to the large number of holes drilled at Cerro Lindo, there are a significant number of mineralized intercepts. Table 10-2 lists representative intercepts from several identified mineralized bodies to provide an illustration of the range of drill thicknesses, and assay values that can be encountered.

Table 10-3 includes a list of representative intercepts from exploration drilling conducted during January–June 2017. These are included to provide an illustration of the range of drill thicknesses and assay values that have been encountered during recent exploration drilling.





Figure 10-4: Typical Cross Section Across Cerro Lindo






Figure 10-5: Location Map for Cross Section in Figure 10-4






Table 10-2: Example Selected Orebody Drill Intercepts Table

Mineralized Body

Hole ID Easting Northing Elevation(m)

Azimuth(º)

Inclination(º)

From (m)

To (m)

Intercept(m)

Zn (%)

Cu (%)

Pb (%)

Ag (oz/t)

Ag (g/t)

OB-1

CL-16-1917 392610.1 8553880.5 1745 308.5 25 24.8 35.55 10.75 6.87 0.12 0.14 0.2 6.2

CL-16-1918 392610.2 8553880.6 1745 343.5 25 14.95 30.4 15.45 4 0.06 0.42 0.17 5.3

CL-16-1918 392610.2 8553880.6 1745 343.5 25 50.65 66.65 16 3.11 0.43 0.44 0.91 28.3

CL-16-2002 392705.7 8553939.7 1743 156.2 18 101.6 104.3 2.7 21.74 4.11 0.28 5.47 170.1

CL-16-2094 392526.7 8553970.2 1703 29.5 -67 3.2 36.05 32.85 0.51 1.57 2.87 5.12 159.2

OB-2

CL-16-1980 392882.9 8554192.0 1859 318.1 -27 50.75 70 19.25 2.86 0.29 0.04 0.15 4.7

CL-16-1981 392882.9 8554191.9 1858 336.5 -48 35.8 51 15.2 3.72 0.09 0.01 0.1 3.1

CL-16-2123 393254.4 8553902.3 1922 312.1 -18 60 77 17 5.38 0.3 0.6 1.44 44.8

CL-16-2127 393254.3 8553902.7 1922 333.7 -14 56.2 74.65 18.45 4.36 0.17 0.5 0.78 24.3

OB-2B

CL-16-1971 393105.9 8554271.8 1857 58.9 -26 0 26.35 26.35 2.66 0.32 0.17 0.37 11.5

CL-16-1995 393097.9 8554273.9 1859 288 19 0 40.1 40.1 1.53 0.69 0.07 0.47 14.6

CL-16-2179 393093.2 8554276.3 1858 17.9 -9 0 47.25 47.25 4.38 0.51 0.26 0.45 14.0

CL-16-2183 393093.2 8554276.5 1857 16.4 -33 7.25 17.9 10.65 8.66 0.29 1.14 1.15 35.8

CL-16-2185 393093.3 8554276.4 1857 3.6 -29 0 16.25 16.25 5.55 0.8 0.3 0.62 19.3

OB-5

CL-16-1908 393207.7 8553928.6 1687 250.1 23 51.6 76 24.4 2.36 1.79 0.01 0.98 30.5

CL-16-1926 393138.8 8553851.6 1689 68.1 -24 31.6 50 18.4 1.71 3.57 1.31 4.88 151.8

CL-16-1959 393343.7 8553746.5 1861 44.2 22 29.5 50.8 21.3 8.47 0.09 0.96 0.8 24.9

CL-16-1961 393343.7 8553746.5 1860 58.5 11 19.45 29.35 9.9 6.97 0.16 0.2 0.25 7.8

CL-16-1986 393275.6 8553738.7 1689 28.9 -53 0 35 35 6.86 0.07 0.24 0.12 3.7

OB-5B

CL-16-1976 393195.9 8553747.1 1718 302.6 -37 19.2 27.2 8 6.41 0.1 0.07 0.09 2.8

CL-16-1978 393195.9 8553747.0 1718 264.8 -25 4.5 19.45 14.95 4.38 0.93 0.02 0.49 15.2

CL-16-1984 393053.9 8553831.1 1720 269.2 -12 41.5 52.2 10.7 3.45 0.91 1.35 1.53 47.6

CL-16-2114 393070.2 8553791.8 1719 247.9 -24 16.85 29.3 12.45 5.06 0.37 0.07 0.32 10.0

CL-16-2114 393070.2 8553791.8 1719 247.9 -24 35.9 51.5 15.6 3.82 0.08 0.49 0.52 16.2

OB-6

CL-16-1946 393459.7 8553737.1 1857 27.3 -70 7.5 20.1 12.6 8.78 0.1 0.49 0.49 15.2

CL-16-1964 393521.6 8553745.4 1862 209.9 27 29.1 51 21.9 13.92 0.1 0.87 0.38 11.8

CL-16-1965 393521.3 8553744.8 1861 196.9 13 30.25 47 16.75 10.52 3.18 0.01 0.2 6.2

CL-16-2078 393399.8 8553623.9 1759 267 -9 121.85 131.8 9.95 6.83 0.1 0.19 0.88 27.4

OB-6A CL-16-1895 393575.6 8553919.9 1990 127.4 -12 12.6 25.4 12.8 4.31 0.05 1.51 3.07 95.5





Mineralized Body


Azimuth(º)

Inclination(º)

From (m)

To (m)

Intercept(m)

Zn (%)

Cu (%)

Pb (%)

Ag (oz/t)

Ag (g/t)

CL-16-1902 393605.0 8553820.2 1993 42.5 9 38 67.4 29.4 2.72 0.31 0.14 0.39 12.1

CL-16-1909 393604.9 8553820.1 1992 40.6 -5 47.6 91.9 44.3 3.26 0.42 0.34 0.7 21.8

CL-16-1940 393606.2 8553875.2 1931 40.3 19 19.5 27.5 8 13.91 0.12 2.85 3.05 94.9

CL-16-1940 393606.2 8553875.2 1931 40.3 19 29.1 48.3 19.2 5.69 0.23 0.07 0.25 7.8

CL-16-1967 393619.5 8553985.8 1966 220.4 0 0 4.45 4.45 13.12 0.07 0.34 0.34 10.6

CL-16-2165 393617.1 8553865.3 1902 347.2 34 23.95 40.15 16.2 0.33 2.92 9.1 26.22 815.5

OB-6B

CL-16-1988 393360.1 8554060.0 1831 94.6 -47 0 6.4 6.4 9.14 0.47 1.04 0.95 29.5

CL-16-1990 393365.4 8554075.5 1835 175.7 41 9.25 16.5 7.25 12.24 0.49 0.08 0.51 15.9

CL-16-1990 393365.4 8554075.5 1835 175.7 41 38.4 41.5 3.1 14.51 4.58 2.74 5.59 173.9

OB-7

CL-16-1912 393863.7 8553642.0 1837 335.6 -11 37 41.65 4.65 17.77 0.24 0.88 2.16 67.2

CL-16-1914 393863.8 8553642.1 1837 358.6 -21 28 33.8 5.8 13.45 0.3 0.35 0.86 26.7

CL-16-2012 393901.2 8553612.5 1869 64.6 -17 49.7 62.1 12.4 18.71 0.17 4.19 2.04 63.5

CL-16-2017 393902.4 8553614.7 1869 38.3 -18 32.45 43.6 11.15 15.79 0.26 2.31 1.01 31.4

CL-16-2132 393923.1 8553615.8 1842 21.3 47 28.6 35 6.4 11.82 0.49 0.86 0.7 21.8

CL-16-2184 393958.3 8553598.7 1844 45.4 25 31.5 43.3 11.8 5.58 0.07 1.51 1.42 44.2





Table 10-3: Example Selected Drill Intercepts Table, 2017 Exploration Drilling

Mineralized Body


Azimuth(º)

Inclination(º)

Depth (m)

From (m)

To (m)

Intercept(m)

Zn (%)

Cu (%)

Pb (%)

Ag (oz/t)

Ag (g/t)

1

CL-17-2801 392636.896 8554048.037 1628.989 247.749 -16.057 80.00 0.00 74.20 74.20 0.51 0.78 0.11 0.89 27.7

CL-17-2803 393866.025 8553962.927 1973.679 85.717 13.944 252.40 0.00 40.95 40.95 0.13 0.75 0.13 1.64 51.0

CL-17-2811 392636.970 8554047.867 1629.747 218.024 10.076 90.00 0.00 37.75 37.75 0.11 1.05 0.32 2.01 62.5

CL-17-2818 393865.231 8553962.887 1974.094 84.271 24.344 314.40 3.20 80.00 76.80 0.16 0.71 0.04 0.67 20.8

CL-17-2673 393306.138 8554199.805 1897.908 179.012 35.252 60.00 5.75 93.40 87.65 2.84 0.29 0.14 0.42 13.1

CL-17-2820 394071.813 8553558.406 1876.725 22.404 -69.689 595.00 11.20 45.50 34.30 0.06 0.57 0.05 0.62 19.3

CL-17-2828 393524.286 8554190.501 1869.389 13.706 -21.991 500.00 0.00 80.00 80.00 0.14 1.18 0.11 1.23 38.3

1X CL-17-2743 394072.721 8553560.478 1872.700 24.140 -54.796 605.10 198.20 204.40 6.20 0.69 0.05 0.23 1.64 51.0

2B

CL-17-2631 393215.501 8553636.625 1692.883 272.004 -24.443 369.20 0.00 35.30 35.30 2.62 0.26 0.32 0.43 13.4

CL-17-2632 393327.061 8554224.510 1895.465 43.146 -60.533 33.00 0.00 32.60 32.60 2.91 0.40 0.45 0.69 21.5

CL-17-2633 393327.282 8554224.807 1896.064 42.358 -34.930 33.00 0.00 28.80 28.80 2.22 0.26 0.61 0.79 24.6

CL-17-2644 393241.624 8553648.218 1755.534 44.602 -43.708 42.00 0.00 37.25 37.25 2.73 0.79 0.72 2.46 76.5

CL-17-2626 393242.523 8553644.863 1756.747 197.090 -19.425 100.00 0.00 43.00 43.00 3.35 0.35 0.45 0.79 24.6

CL-17-2627 393324.068 8554220.823 1896.554 222.563 -40.340 43.00 0.00 21.40 21.40 2.82 0.10 0.63 0.86 26.7

CL-17-2629 393173.311 8554417.600 1787.917 80.735 -18.715 628.60 0.00 20.95 20.95 3.95 0.73 0.76 0.97 30.2

5

CL-17-2726 393865.888 8553964.488 1972.499 45.315 -19.856 315.80 55.80 78.90 23.10 2.69 0.18 0.69 2.75 85.5

CL-17-2867 392945.680 8553786.621 1722.636 242.353 -50.120 50.00 47.20 66.85 19.65 1.64 0.29 0.37 1.67 51.9

CL-17-2872 392844.651 8553728.051 1726.973 73.729 11.342 135.00 50.90 101.35 50.45 0.03 0.31 1.09 4.69 145.9

CL-17-2874 393300.573 8554236.267 1880.975 265.648 10.509 50.00 0.00 20.30 20.30 0.06 0.62 1.27 4.92 153.0

5B

CL-17-2776 392658.705 8554016.565 1630.120 178.076 1.289 90.00 0.00 24.80 24.80 1.31 0.37 0.10 0.52 16.2

CL-17-2779 393146.294 8554203.626 1924.301 96.777 0.967 300.00 0.00 5.95 5.95 3.01 0.07 0.13 0.31 9.6

CL-17-2780 393866.013 8553962.975 1973.132 85.883 -1.810 353.60 173.70 179.70 6.00 0.01 0.19 0.52 3.95 122.9

CL-17-2871 393305.150 8554240.785 1881.258 329.024 9.846 50.00 8.30 74.30 66.00 1.03 0.18 0.42 2.02 62.8

5C

CL-17-2637 393339.813 8554204.175 1897.216 44.224 18.833 70.00 87.00 114.40 27.40 2.77 0.61 1.13 2.87 89.3

CL-17-2645 393339.632 8554203.880 1898.295 45.000 45.395 70.00 95.60 128.40 32.80 2.00 0.37 0.39 1.33 41.4

CL-17-2650 393339.787 8554204.122 1897.695 72.905 30.613 70.00 100.70 117.00 16.30 2.07 0.81 0.25 1.97 61.3

CL-17-2654 393339.824 8554204.169 1896.057 72.146 -25.201 40.00 18.40 40.00 21.60 2.25 0.30 0.51 0.95 29.5





Mineralized Body


Azimuth(º)

Inclination(º)

Depth (m)

From (m)

To (m)

Intercept(m)

Zn (%)

Cu (%)

Pb (%)

Ag (oz/t)

Ag (g/t)

6

CL-17-2895 393690.513 8554036.618 1967.732 34.707 -7.853 390.20 1.30 10.30 9.00 2.29 0.54 0.03 0.41 12.8

CL-17-2898 392844.260 8553726.780 1726.804 96.224 9.110 220.50 0.00 10.65 10.65 2.28 0.70 0.03 0.52 16.2

CL-17-2901 393183.876 8553663.095 1722.164 223.228 18.879 150.00 3.55 17.40 13.85 2.13 0.55 0.02 0.44 13.7

6A

CL-17-2669 393306.130 8554199.532 1897.096 224.055 24.577 50.00 51.30 71.30 20.00 2.23 0.29 0.28 0.59 18.4

CL-17-2870 392945.387 8553786.735 1722.850 200.708 -49.132 50.00 40.15 47.50 7.35 2.49 0.03 0.31 0.36 11.2

CL-17-2873 392957.611 8553774.316 1725.607 217.508 46.800 40.00 34.90 45.20 10.30 2.85 0.03 0.75 0.92 28.6

CL-17-2878 392957.557 8553774.403 1722.433 217.431 -47.952 60.00 0.00 11.40 11.40 1.18 0.23 0.38 0.58 18.0

6C

CL-17-2788 394072.666 8553560.179 1872.163 25.361 -63.064 603.70 29.20 35.45 6.25 0.85 0.03 0.60 4.49 139.7

CL-17-2792 392636.962 8554047.878 1629.869 289.323 15.272 60.00 110.70 117.20 6.50 1.31 0.14 1.06 1.78 55.4

CL-17-2793 392638.368 8554047.401 1629.259 290.067 -14.873 80.00 130.75 137.30 6.55 0.99 0.10 0.82 2.58 80.2

CL-17-2809 392843.076 8553728.298 1724.985 43.497 -64.427 583.00 145.50 173.25 27.75 1.18 0.13 0.41 5.76 179.2

8 CL-17-2634 393239.128 8553644.923 1755.601 225.300 -40.167 60.00 367.30 387.90 20.60 2.65 0.19 0.23 0.25 7.8

CL-17-2668 392714.826 8553860.866 1726.052 219.860 -44.312 454.20 420.60 451.60 31.00 4.87 0.15 0.06 0.10 3.1

9

CL-17-2649 393236.803 8553648.292 1756.912 252.698 -15.814 184.30 29.40 84.40 55.00 2.75 0.32 1.46 2.60 80.9

CL-17-2671 393306.085 8554199.720 1897.267 200.556 24.424 50.00 20.10 55.80 35.70 6.94 0.42 1.25 2.45 76.2

CL-17-2789 392636.921 8554047.884 1629.266 289.252 0.127 80.00 55.40 72.70 17.30 0.02 0.32 0.60 3.35 104.2

CL-17-2813 392636.998 8554047.984 1627.706 219.987 -60.014 100.00 429.00 437.90 8.90 0.03 0.69 0.01 0.41 12.8

CL-17-2879 394072.796 8553560.142 1873.386 24.958 -19.523 560.90 29.40 84.40 55.00 2.75 0.32 1.46 2.60 81.0

CL-17-2916 394072.985 8553560.463 1873.734 24.811 0.299 592.20 20.10 55.80 35.70 6.94 0.42 1.25 2.45 76.2






Amec Foster Wheeler considers the quantity and quality of the lithological, geotechnical, collar and down hole survey data collected in the exploration and infill-drill programs completed by Milpo since 2000 to be sufficient to support Mineral Resource and Mineral Reserve estimation.

The QP also notes:

Core logging by Milpo meets industry standards for massive sulphide exploration

Collar surveys have been conducted by Milpo using industry-standard instrumentation

Downhole surveys were conducted using instrumentation that was industry-standard at the time the holes were drilled

Drilling is normally inclined. Depending on the dip of the drill hole, and the dip of the mineralization, drill intercept widths are typically greater than true widths

Drill orientations are generally appropriate for the mineralization style, and have been drilled at orientations that are as reasonable as possible for the orientation of mineralization for the bulk of the deposit area.

No material factors were identified with the data collection from the drill programs that could adversely affect Mineral Resource or Mineral Reserve estimation.





11.0 SAMPLE PREPARATION, ANALYSES, AND SECURITY

11.1 Sampling Methods

11.1.1 Geochemical Samples

Geochemical samples were collected at different stages during the Project life. Information on sampling methods and results is sparse. Rock-chip samples were collected from soil (by Phelps Dodge; Milpo, 2016d), core (Imaña, 2015) or from rock outcrops (Canales, 2016). Additional details on sampling methods were not available.

At Cerro Lindo, surface geochemical sampling has been largely superseded by drilling.

11.1.2 Underground Channel Sampling

The channel sampling procedure has remained the same since 2000, and the procedure is described in formal protocols (Milpo, 2015c; 2015d). Samples are collected from cross-cuts, perpendicular to strike, and from both mineralized and barren zones (foot and hanging wall).

Sample locations are marked with a paint line on the rib approximately 1 m off the drift floor. Channel borders are then cut using an electric diamond saw, after which the samples are collected using a pneumatic or electric hammer or, rarely, a chisel and hammer between the cut borders. Samples are collected in a bucket with minimal loss of sample. Channel samples are 1.5 m long, 6 cm wide and 3 cm deep, with sample weight ranging from 4 kg to 8 kg (in barren zones, less than 4 kg). All cross-cuts are channel sampled, with the exception of those portions covered by shotcrete for safety purposes. In those cases, short infill holes are drilled instead.

Amec Foster Wheeler observed channel sampling in early 2016; however, channel sampling was abandoned in lieu of additional drilling later in 2016.

11.1.3 Underground Long-Hole Sampling

Upward oriented blast holes were sampled until late 2016. The drill cuttings produced from every 1.5 m-long advance was collected in buckets and submitted to the laboratory for assaying.

Blast-hole fans, consisting of 17 holes, are drilled every 2.2 m of drift advance. One in three face advances (every 6.6 m) was fully sampled, and the samples were submitted to the Mine laboratory for preparation and analysis. This information, together with the results of channel sampling, was used for ore control but was discontinued in 2016.





11.1.4 Core Sampling

Phelps Dodge

Core was sampled every two metres over the length of the hole, and split using a diamond saw. Half of the core was submitted for assaying; the other half was stored at the Project site.

Milpo

The sample interval was initially 1.5 m to 2.0 m, except when encountering lithological, structural or mineralogical breaks. All sulphide material was sampled, and additional “bracket” samples were taken on either side in the surrounding volcanic rocks, which ensured that the entire mineralized zone was sampled and provided data for dilution analysis (AMEC, 2002).

Current exploration core sampling follows written protocols (Milpo, 2015b; 2015d; 2016c), and consists of half-core sampling of N-sized core on (usually systematic) 1.5 m intervals. The remaining half-core is kept as backup. Major mineralized body contacts are respected. Infill drilling is typically B-sized core and is sampled in its entirety.

11.2 Density Determinations

Density and/or specific gravity (SG) data have been collected by Milpo and predecessors throughout the history of the project. It is not clear from the record which data type were actually collected. Density is a measure of the mass per unit volume of a material. In the case of geological materials, SG is the unitless ratio of the density of the sample to the density of water. At a water temperature of 4o C, the numerical value of density and SG for a given sample is exactly equivalent. At any other temperature, the values are different, but for temperatures of <40o C, the discrepancy is in the third or fourth decimal place and is thus well within anticipated errors of the methodology. For that reason, density in g/cm3 and SG are typically used interchangeably and not reported separately. In the case of Cerro Lindo, both density and SG data have been collected and used as “density” results. The errors introduced are very small and will not affect Mineral Resource estimation. Amec Foster Wheeler uses the term “density” for both density and SG data in this discussion for simplicity.

AMEC (2002) reported that intervals of diamond drill core were used to obtain density information by rock type, for approximately 3,000 samples prior to 2002. Bondar Clegg in Lima produced the initial bulk density determinations using the standard water-displacement method on wax-coated core.

Additional sampling and measurements were completed at site by Milpo, using the water-displacement method, but without wax coating. The suitability of these





measurements was verified by testing 135 samples previously submitted to Bondar Clegg. Those data were not used for the current Mineral Resource estimate as they were later determined by Milpo to be suspect.

Beginning in 2013, a new sampling campaign was initiated to update, and improve, the density database. In total, 1,345 samples were collected from underground drill holes and drift walls, and submitted to an external laboratory (Certimin and Inspectorate) for SG determinations using the water-displacement method with wax-coated core. These samples are well distributed in the deposit (Figure 11-1). The 2016 mean and median density data by domain are summarized in Table 11-1.

11.3 Analytical and Test Laboratories

No details were available regarding laboratory procedures prior to the Milpo 1999 drilling campaign, including the Phelps Dodge drill program.

Table 11-2 summarizes the laboratories used in preparing and analysing exploration and mine samples at Cerro Lindo since 1999.

Samples from drilling and underground sampling programs completed by Milpo from 1999 to 2001 were prepared at the Bondar Clegg facility in Lima and analyzed at the Bondar Clegg laboratory in Bolivia (AMEC, 2002). Bondar Clegg’s laboratories in Lima and Bolivia were not certified; however, both followed protocols set out by Bondar Clegg’s Vancouver laboratory, which had ISO 9001 certification.

The check or umpire laboratory used was SGS Lima (SGS), which was an ISO 9001 certified laboratory.

Starting in 2007, all mine samples have been processed at the Cerro Lindo Mine laboratory (Mine laboratory), which was managed by SGS (between 2007 and 2011) and by Inspectorate (between 2011 and 2017). From 2014, exploration samples were processed at Inspectorate Lima; however, that laboratory was replaced in early 2016 by Certimin Lima. Later in 2016, Inspectorate Lima became the primary laboratory.

Inspectorate Lima has ISO 9001, ISO 14001 and ISO 19007 certification. Certimin holds ISO 9001 and NTP-ISO/IEC 17025 and 17021 certifications and is accredited by the Organismo Peruano de Acreditación (INACAL).

The Cerro Lindo Mine laboratory (the Mine laboratory) is neither certified nor accredited.





Figure 11-1: Distribution of Density Samples used for 2016 Mineral Resource Estimate by Year Analyzed


Table 11-1: Mean Density by Domain

Domain N Median Mean CV

Vol (1) 263 2.84 2.88 0.06

Dike (3) 6 2.79 2.79 0.02

SSM (5) 58 3.53 3.58 0.12

Enclave (29) 28 2.93 3.04 0.11

HG Shell (99) 82 4.52 4.52 0.03

Domain SPP

Mineralized Area N Median Mean CV

OB-1 42 4.80 4.54 0.11

OB-2 30 4.81 4.81 0.01

OB-5 12 4.76 4.71 0.04

OB-6 19 4.80 4.77 0.02

OB-7 * 2 4.74 4.72 0.03

22 81 4.68 4.58 0.07

55 12 4.68 4.71 0.03

61 39 4.74 4.72 0.03

62 16 4.86 4.78 0.04

all 253 4.77 4.70 0.05





Domain SPB

Mineralized Area N Median Mean CV

OB-1 18 4.62 4.60 0.03

OB-2 7 4.57 4.57 0.04

OB-5 14 4.62 4.63 0.03

OB-6 8 4.46 4.47 0.03

OB-7 6 4.52 4.53 0.04

22 9 4.34 4.36 0.05

55 32 4.51 4.43 0.04

61 76 4.48 4.39 0.08

62 * 1 4.48 4.39 0.08

all 171 4.52 4.49 0.05

Note: *Data from nearby zone 61 used in addition.

Table 11-2: Analytical and Test Laboratories

Laboratory Name

Location Period of Use

Comments Certified / Accredited

Independent

Bondar Clegg Lima 1999–2001 Preparation of drilling and underground samples. Protocols set out by Bondar Clegg Vancouver which is ISO 9001 accredited

Not accredited Yes

Bondar Clegg Bolivia 1999–2001 Drilling and underground sample analyzed. Protocols set out by Bondar Clegg Vancouver which is ISO 9001 accredited

Not accredited Yes

SGS Lima 1999–2017 Check laboratory ISO 9001 Yes

Mine laboratory Cerro Lindo site

2007–2011 Processing of all mine samples. Managed by SGS.

No No

Mine laboratory Cerro Lindo site

2011–2017 Processing of all mine and process samples. Managed by Inspectorate Lima.

No No

Inspectorate Lima 2014–2016 Processing of exploration samples

ISO 9001 ISO 14001 ISO 19007

Yes

Certimin Lima 2016–2017 Processing of exploration samples

ISO 9001 NTP-ISO/IEC 17025 and 17021 Accredited by Organismo Peruano de Acreditación INACAL

Yes

Inspectorate Lima 2016– 2017 Primary laboratory for exploration samples

ISO 9001 ISO 14001 ISO 19007

Yes





11.4 Sample Preparation and Analysis

11.4.1 Geochemical Samples

Lithogeochemical samples collected by Imaña (2015) were analysed at ACME Laboratories Vancouver using lithium metaborate fusion and inductively-coupled plasma-mass spectrometry (ICP-MS) for major oxides, and for refractory and rare-earth elements. An ICP-MS package with multi-acid digestion was used to analyse other elements. Additional details regarding geochemical sample preparation and assaying during this study were not available.

11.4.2 Exploration Samples

The sample preparation procedure at Bondar Clegg Lima involved the following operations (Figure 11-2; AMEC, 2002):

Jaw-crushing to 2 mm (10 mesh ASTM)

Homogenization and splitting to obtain a 250 g sub-sample using a Jones splitter

Pulverizing the sub-sample to 90% minus 0.106 mm (150 mesh Tyler).

Samples were assayed at Bondar Clegg Bolivia for silver, copper, lead, zinc, and gold. No details were available regarding the assay methods.

Since 2007, exploration samples sent to Certimin and Inspectorate are prepared using the same procedure as is used by the Mine laboratory discussed in the following section. Analyses of silver, zinc, copper and lead are performed by four-acid digestion followed by atomic absorption spectroscopy (AAS). A four-acid digestion followed by ICP-OES analysis is used for multielement analyses on all samples.

11.4.3 Mine Samples

Since 2007, sample preparation of geological samples at the Mine laboratory has followed similar procedures:

Drying at 105°C ± 5°C in stainless steel trays

Primary crushing to 3/4" using a Rhino jaw crusher

Secondary crushing to better than 85% minus 2 mm (10 mesh ASTM) using a Rocco jaw crusher. A Boyd crusher with dedicated rotary splitter was acquired in 2016 and is now in service





Figure 11-2: Sample Preparation and Quality-Control Flowsheet (Milpo 2000–2001 program)

Note: Figure prepared by AMEC, 2002.

Homogenization and splitting to obtain a 200 g to 250 g sub-sample using a Jones splitter with 28 1-cm-wide chutes. The dedicated rotary splitter attached to the Boyd crusher is now used

Pulverizing the collected sub-sample to 95% minus 0.105 mm (140 mesh ASTM) in a TM Andina™ ring pulverizer.

Geological samples average 3 kg to 5 kg. All preparation workstations are provided with compressed air hoses for cleaning and good dust extraction setup. Sieve checks are conducted on 3% of randomly chosen crushed and pulverized samples; however, only one set of checks (the first one) is formally recorded every day. Results are posted in the laboratory for all personnel to review.

Geological samples are assayed for silver, copper, lead, zinc and iron using 0.25 g aliquots, aqua regia digestion, and atomic absorption spectrometry (AAS) determination. Detection limits for Inspectorate Cerro Lindo and Lima are summarized in Table 11-3.





Table 11-3: Detection Limits at Inspectorate Cerro Lindo and Lima

Laboratory Aliquot Detection Limit

Ag Cu Pb Zn Fe

Inspectorate Cerro Lindo 0.25 g 0.9 g/t (0.03 oz/t)

0.01% 0.01% 0.01% 0.01%

Inspectorate Lima 0.5 g 1 g/t 0.01% 0.001% 0.001% 0.01%

Laboratory personnel collect samples manually from various positions in the process flow to determine the head, concentrate and tailing grades in 12-hour composites. The high-grade concentrate samples are prepared at separate facilities from the exploration samples to avoid possible contamination of lower grade samples. Tailings are assayed using procedures similar to procedures for geological samples with concentrates requiring the use of volumetric methods for copper, lead, and zinc due to the higher grades.

During Milpo’s later drilling phases, the program included the insertion of coarse blanks and SRMs, as well as coarse-reject and pulp duplicates (refer to Figure 11-1).

Internal quality control (QC) protocol includes the insertion of coarse duplicates (10%) and pulp duplicates (10%) as well as one standard reference material (SRM), one coarse blank and one pulp blank in each batch of 33 samples. The laboratory uses two SRMs: one for low grades, and one for high grades. Every month, 30 geological samples and 10 plant samples are submitted to Inspectorate Lima for external control.

The Mine laboratory uses a proprietary global laboratory information management system (LIMS) for digitally registering all measurements (including scale weights), without any human intervention in the data flow. The LIMS determines the position where control samples must be inserted, and assess the results of the QC, indicating if those results are acceptable or not. Acceptable results are then directly transferred into the mine database.

11.5 Quality Assurance and Quality Control

11.5.1 Phelps Dodge

The Phelps Dodge drilling campaign included a thorough QC program, including the use of blanks, standards and duplicates. AMEC (2002) reviewed the results for all zinc values greater than 1% and concluded that this work was completed to an acceptable industry standard.





11.5.2 Milpo, 1999–2001

A QC program was put in place during the feasibility study (AMEC, 2002). During the early drilling, the program did not include SRMs or blanks, but samples were submitted for external control to SGS. Zinc data showed acceptable analytical performance.

11.5.3 Milpo, 2012–2013

AMEC (2013) reviewed the QC protocol implemented at the time, together with QC data from 2012 (Milpo, 2011b). The protocol included the insertion of quarter-core twin samples, twin channel samples, coarse and pulp duplicates, two SRMs for core samples and one SRM for channel samples, and coarse blanks. The insertion rates were not specified.

11.5.4 Milpo, 2014–2015

Campos (2016a, 2016b) described the QC program implemented during 2014 and 2015 for channel and core samples, respectively, which was similar to the program implemented in 2012–2013 (AMEC, 2013). During 2015, 975 channel samples (including 183 control samples) were submitted to the laboratory. The overall insertion rate for QC samples was 19.2%.

11.5.5 Current QC Protocol

The QC protocol currently implemented at the mine includes the insertion of one coarse blank, one SRM, one twin sample, one coarse duplicate and one pulp duplicate in every 25-sample batch, representing in total a 20% insertion rate. The coarse blank material is obtained from a nearby granodiorite pit.

11.6 Databases

Mine data are stored in an Access™ database which is stored in the Mine server at Cerro Lindo, with regular backups to a central server in Lima. Access to the database is strictly controlled.

Logging and sampling data are digitally entered into the database by downloading the information from the logging tablets.

Collar coordinates are digitally entered by the surveyors in Excel™ files in a server managed by the Survey group. Every Friday, the database administrator e-mails the Survey group a special empty form, which is completed by the surveyors and then stored in the Survey group server. The completed form is returned to the database administrator in pdf format. Using internal routines, the database administrator later captures this information from the Survey group server and saves it in the mine server.





Assay data are captured from the LIMS server using custom routines, and this information is then entered into the Access™ database. The laboratory also issues *.csv and pdf-format certificates, but only the information that is digitally captured from the server is considered to be the true record.

Personnel from the Geology department conduct daily quality-control checks on the data entry. A first check consists of identifying duplicate sample numbers or lack of information for certain intervals. Every month, all the assay data entered in the server are compared with a compilation of individual *.csv files issued by the laboratory. Paper records are stored at a safe location at the mine.

11.7 Sample Security

Core boxes are transported every day to the core shed by personnel from the drilling company. Analytical samples are transported by company or laboratory personnel using corporately-owned vehicles. Core boxes and samples are stored in safe, controlled areas.

Chain-of-custody procedures are followed whenever samples are moved between locations, to and from the laboratory, by filling out sample submittal forms.


A description of the drilling programs, including sampling and recovery factors, are included in Section 10.

All collection, splitting, and bagging of RC and core samples was performed by Milpo personnel from 1999 to the effective date of this Report. No material factors were identified with the drilling programs that could affect Mineral Resource or Mineral Reserve estimation.

The following were noted:

Data are collected following project-approved sampling protocols in accordance with industry standard practices. Those procedures limit potential sample losses and sampling biases

Drill hole and channel sample spacing is considered adequate for the type of deposit

Density determination procedures are consistent with industry-standard practices. The spatial distribution of density samples is adequate, and the density database is regularly expanded with new data

Sample preparation and assaying for samples that support Mineral Resource estimation has followed approximately similar procedures for most drill programs





since 1999. The preparation and assay procedures are adequate for the type of deposit, and follow industry standard practices

The QC protocol implemented during the last three years supports assessments of precision, accuracy and contamination. Insertion rates of QC samples meets industry standards. The program has been substantially improved year-on-year and exceeds current industry standard practices. The results of this program are discussed in Section 12

Data collected were subject to validation. Verification is performed on all digitally collected data uploaded to the Mine database, and includes checks on surveys, collar coordinates, lithology data, and assay data. The checks are appropriate, and consistent with industry standards

Sample security has relied upon the fact that the samples were always attended or locked in the on-site sample preparation facility. Chain-of-custody procedures consist of preparing sample submittal forms that are sent to the laboratory with sample shipments to make certain that all samples are received by the laboratory

Current sample storage procedures and storage areas are consistent with industry standards.

Data validation of the drilling and sampling program is discussed in Section 12, and includes a review of the database audit results.





12.0 DATA VERIFICATION

AMEC (now Amec Foster Wheeler) conducted various verification programs at Cerro Lindo, initially during Milpo’s exploration programs, prior to mine start-up (AMEC, 2002), and later, as part of high-level Mineral Resource estimate reviews (AMEC, 2013), Amec Foster Wheeler (2016a and 2016b).

12.1 Audits and Reviews

12.1.1 AMEC (2003)

AMEC has worked closely with Milpo at Cerro Lindo since 2002. AMEC performed several tests to verify the data and data collection procedures. These included site visits to review and confirm findings by Milpo geologists.

Logging Checks

AMEC, together with the project geologists, reviewed core from nine holes, and that geological logging at Cerro Lindo was acceptable and in accordance with the project requirements.

Density Checks

AMEC reviewed the measurement equipment and procedures used by both Bondar Clegg and Milpo’s site geologists (see Section 11.2), and concluded that there was a good agreement between the two datasets.

Data Integrity Checks

AMEC checked 10% of the assay and geological data from each drilling campaign in the database against original assay certificates and geological logs. No errors were noted with the assay data. The lithological data had a 0.3% error rate and the recovery data showed a 0.6% error rate. The data were considered acceptable.

12.1.2 AMEC (2013)

AMEC conducted a high-level review of Milpo’s operational procedures and concluded that Milpo’s geologists followed adequate, formally approved, work protocols during exploration and mine operation.

AMEC also reviewed the QC program implemented at the mine. The conclusions of this review are presented in Section 12.2.3.





12.1.3 Amec Foster Wheeler (2016a)

Data Checks

Most data are digitally entered into the Mine database. Therefore, data verification was mainly concerned with confirming the accuracy of data transference and/or data interpretation. Amec Foster Wheeler reviewed core from three holes and found that the core was properly cut and the observed lithological contacts approximately matched the logged depths. Amec Foster Wheeler compared the lithology records of 15 digital logs with the corresponding records in the database and did not identify any errors. Amec Foster Wheeler compared the assay data from 14 assay certificates with the corresponding records in the database and did not identify any errors. Amec Foster Wheeler considered the project database to be adequate to support Mineral Resource estimation and mine planning.

Geological Interpretation

Amec Foster Wheeler reviewed the interpretation on selected geological cross-sections and plans to assess the spatial continuity. During the review, Amec Foster Wheeler did not find significant discrepancies. Amec Foster Wheeler concluded that the geological interpretation respected the data recorded in the logs and cross-sections, as well as the interpretation from adjoining sections, and was consistent with the known characteristics of this deposit type.

12.1.4 Amec Foster Wheeler (2016b)

Database Record Checks

Amec Foster Wheeler compared the collar coordinates recorded in the database for 20 drill holes with the survey reports archived by Milpo and did not find any discrepancies. Downhole surveys records from one drill hole were compared with the original drill hole survey records and no discrepancies were found. Amec Foster Wheeler also compared randomly selected assay certificates from 12 drill holes with the corresponding records in the database and did not find any discrepancies.

A total of 280 lithology records from 13 drill holes were compared from original scanned log files with the corresponding records in the database. Amec Foster Wheeler did not find any differences.

Geological Model Review

Amec Foster Wheeler reviewed the geological model by comparing geological wireframes to drill hole data and concluded that the wireframes were reasonable and adequately honour the drilling data.





12.1.5 Amec Foster Wheeler (2017)

Database Audit

Amec Foster Wheeler completed a thorough audit of the 2010–2017 portion of the Cerro Lindo database in early 2017. Amec Foster Wheeler concluded that the data in the database were adequate to support Mineral Resource estimation and mine planning. Amec Foster Wheeler found a small number of errors that were immediately corrected by Cerro Lindo.

In addition, Amec Foster Wheeler reviewed the integrity of downhole surveys and found a number of individual surveys that exhibited excessive deviations. Review of plots of azimuth and inclination versus depth revealed several surveys that are suspect. Those surveys are currently under review.

Geological Model Review

Amec Foster Wheeler reviewed the geological model by comparing geological wireframes to drill hole data and concluded that the wireframes were reasonable and adequately honor the drilling data.

12.2 Quality Control Review

12.2.1 Phelps Dodge

The Phelps Dodge drilling campaign included a thorough QC program, including the use of blanks, standards and duplicates. AMEC (2002) reviewed the results for all zinc values greater than 1% and concluded that this work was completed to an acceptable industry standard.

12.2.2 Milpo, 1999–2001

A QC program was put in place during the feasibility study (AMEC, 2002). During Phase 1, the program did not include SRMs or blanks; however, samples were submitted for external control to SGS. Zinc data showed acceptable analytical performance.

During Phases 2 and 3, the program included insertion of SRMs and coarse blanks as well as coarse reject and pulp duplicates. AMEC (2002) summarized the results as follows:

Copper and zinc SRMs were submitted with every batch and results were within control limits. The copper accuracy was adequately controlled

Check assays of copper and zinc show adequate agreement and no apparent bias





No significant copper and/or zinc contamination during sample preparation and assaying was identified

Coarse duplicate samples met acceptable criteria. The sample preparation protocol appeared to be adequate.

12.2.3 Milpo, 2012

AMEC (2013) reviewed the QC protocol implemented at the time, together with QC data from 2012 (Milpo, 2011b). The protocol included the insertion of quarter-core twin samples, twin channel samples, coarse and pulp duplicates, two SRMs for core samples and one SRM for channel samples, and coarse blanks. The insertion rates were not specified.

AMEC (2013) concluded that:

Sampling precision for zinc, copper, lead and silver was within or close to acceptable limits; however, AMEC (2013) recommended that twin samples be collected from the remaining half-core rather than quarter-core

Subsampling precision for zinc, lead, and silver was within acceptable limits, but the copper error rate exceeded the limits

Analytical precision was apparently poor for zinc, copper, and silver, and acceptable for lead

Accuracy was monitored using SRMs documented on a limited inter-laboratory test. Although biases appeared to be reasonable for the two SRMs used on core-sample submissions, AMEC (2013) recommended that SRMs be better documented by analysis at additional laboratories. Data from the SRM used for channel sample submissions were not presented

Blank samples did not indicate the presence of significant contamination during preparation and/or assaying.

12.2.4 Milpo, 2014–2015 (Amec Foster Wheeler 2016a)

Campos (2016a, 2016b) described the QC program implemented during 2014 and 2015 for channel and core samples, respectively, which was similar to the program implemented in 2012–2013 (AMEC, 2013). During 2015, 975 channel samples (including 183 control samples) were submitted to the laboratory. The overall insertion rate was 19.2%. Table 12-1 summarizes the results of the QC samples from channel-sample batches which were assessed following Amec Foster Wheeler recommended data processing procedures.





Conclusions resulting from the review included:

Sampling and subsampling precision for lead and silver are within acceptable limits (10%), but failure rates for copper on all duplicates and for zinc on twin samples and coarse duplicates considerably exceed the acceptable limits (refer to Table 12-2). This may be the result of poor sampling practices, but Campos (2016a) suggested that the practical lower detection limit is actually higher than believed by the laboratory. In that case, the true failure rates could be lower

Most SRMs exhibit bias values within or relatively close to the acceptable limits (±5%). Only MCL-03 Certimin for copper produced a very high positive bias (Table 12-2). However, due to the very low copper grade of the MCL-03 SRM for copper (0.04%), Amec Foster Wheeler recommends not using it as a SRM for copper. Low coefficients of variation (not exceeding 2.3%) suggest good analytical precision at those grade levels for all elements.

Based on the results of the coarse blank data, no significant contamination during preparation or assaying occurred.

Table 12-3 and Table 12-4 summarize the results of the QC samples in core sample batches.

12.2.5 Amec Foster Wheeler (2016b)

Amec Foster Wheeler reviewed the QC data from 2016 campaign.

During the 2016 update, the QC program performed by Milpo was almost complete. Check samples were not included; however, Milpo related that check sampling was scheduled for the whole 2016 campaign.

Table 12-5 shows QC samples for 2016 campaigns up to the closure of the database for the Mineral Resource estimate discussed in Section 14.

12.2.6 Current QC Protocol

The current QC protocol includes the insertion of one coarse blank, one SRM, one twin sample, one coarse duplicate and one pulp duplicate in every 25-sample batch, representing in total a 20% insertion rate. The coarse blank material is obtained from a nearby granodiorite pit.

Amec Foster Wheeler reviewed the monthly QC reports corresponding to January to April 2016 (Vera, 2016a, 2016b, 2016c; López, 2016), and the raw QC data from 2016 and 2017. The monthly QC reports are concise and well organized.





Table 12-1: Summary of Duplicate Samples Inserted in Channel-Sample Batches during 2015 (Campos, 2016a)

Twin Samples Coarse Duplicates Pulp Duplicates

Samples Failures

Failure

Rate (%) Samples Failures

Failure


Failure

Rate (%)

Zn (%) 39 7 17.9 36 7 19.4 31 2 6.5

Cu (%) 39 11 28.2 36 8 22.2 31 4 12.9

Pb (%) 39 2 5.1 36 1 2.8 31 0 0

Ag (g/t) 39 1 2.6 36 1 2.8 31 1 3.2

Table 12-2: Summary of SRM Samples Inserted in Channel Sample Batches during 2015 (Campos, 2016a)

Element Samples Best Value Mean Bias (%) CV (%)

Low-grade

SRM

MCL-01

Zn (%) 10 0.99 0.94 -5.2 1.2

Cu (%) 10 0.90 0.85 -5.2 0.9

Pb (%) 10 0.33 0.30 -8.3 1.9

Ag (g/t) 10 26.44 26.13 -1.2 2.3

Medium-grade

SRM

MCL-02

Zn (%) 6 2.49 2.43 -2.3 0.7

Cu (%) 6 1.58 1.65 4.0 0.5

Pb (%) 6 0.65 0.65 -0.7 0.6

Ag (g/t) 6 40.75 40.43 -0.5 1.7

High-grade

SRM

MCL-03

Certimin

Zn (%) 20 6.22 6.06 -2.5 0.4

Cu (%) 20 0.04 0.05 16.3 0.0

Pb (%) — — — — —

Ag (g/t) 20 19.28 19.91 3.9 1.7

High-grade

SRM

MCL-03

Zn (%) 6 5.22 4.90 -6.1 2.3

Cu (%) 6 0.79 0.77 -3.4 0.7

Pb (%) — — — — —

Ag (g/t) 6 19.91 19.91 0 2

Table 12-3: Summary of Duplicate Samples Inserted in Core Sample Batches during 2015 (Campos, 2016a)

Twin Samples Coarse Duplicates Pulp Duplicates

Samples Failures

Failure


Failure


Failure

Rate (%)

Zn (%) 737 49 6.6 790 87 11.0 767 54 7.0

Cu (%) 737 55 7.5 790 74 9.4 767 37 4.8

Pb (%) 737 29 3.9 790 10 5.2 767 21 2.7

Ag (g/t) 737 12 1.6 790 37 4.7 767 22 2.9





Table 12-4: Summary of SRM Samples Inserted in Core Sample Batches during 2015 (Campos, 2016b)

Element Samples Best Value Mean Bias (%) CV (%)

Low-grade

SRM

CL-01

Zn (%) 139 0.99 0.94 -5.0 1.9

Cu (%) 139 0.90 0.90 -4.9 1.3

Pb (%) 139 0.33 0.30 -7.8 2.5

Ag (oz/t) 139 0.85 0.85 -0.2 2.6

Ag (g/t) 139 26.44 26.44 -0.2 2.6

Medium-grade

SRM

MCL-02

Zn (%) 136 2.49 2.42 -2.1 7.2

Cu (%) 136 1.58 1.65 4.2 1.0

Pb (%) 136 0.65 0.65 -0.9 1.6

Ag (oz/t) 136 1.31 1.31 -0.4 1.9

Ag (g/t) 136 40.75 40.75 -0.4 1.9

Medium-grade

SRM

Certimin

Zn (%) 18 3.58 3.62 1.0 0.6

Cu (%) 18 0.39 0.41 5.6 1.2

Pb (%) 18 0.03 0.04 22.2 26.5

Ag (oz/t) 18 0.27 0.30 11.9 3.1

Ag (g/t) 18 8.40 9.33 11.9 3.1

High-grade

SRM

MCL-03

Certimin

Zn (%) 355 6.22 6.06 -2.5 0.5

Cu (%) 355 0.04 0.05 15.7 4.4

Pb (%)

Ag (oz/t) 355 0.62 0.65 4.3 1.4

Ag (g/t) 355 19.28 20.22 4.3 1.4

High-grade

SRM

MCL-03

Zn (%) 155 5.22 6.06 -2.5 0.5

Cu (%) 155 0.79 0.77 -2.9 1.2

Pb (%) 155 0.38 0.37 -4.0 2.3

Ag (oz/t) 155 0.64 0.64 0.6 2.1

Ag (g/t) 155 19.91 19.91 0.6 2.1

Table 12-5: Quantities of Drill-Holes with QC Samples

Year Total Twin Samples Coarse Blanks Pulp Duplicates SRMs Check Samples

2016 418 701 599 686 701 0

Amec Foster Wheeler concluded that:

Duplicate failure rates are usually below or very close to the industry-accepted limits. Therefore, sampling, subsampling and analytical precisions are generally within acceptable limits





Most bias values lie within the acceptable ±5% range. However, high-grade zinc values were on average, underestimated by approximately 8% from January to March, 2017. The underestimation returned to an acceptable level in April; however, this should be followed up given the importance of zinc in the deposit

Most coefficients of variations are below 5% suggesting good analytical precision. This is in agreement with pulp duplicate data.

No significant contamination during preparation or assaying was identified for any of the studied elements.

12.2.7 Amec Foster Wheeler (2017)

Amec Foster Wheeler did a high-level review of 2016–2017 QC data received since the database was closed for the current Mineral Resource estimate and found some data errors. Those errors were corrected prior to the current estimate in Section 14 being completed.


Legacy data verification was completed primarily by Amec Foster Wheeler predecessor companies. Amec Foster Wheeler has reviewed the appropriate data and reports and is of the opinion that the data verification programs undertaken on the data collected in previous campaigns adequately support the geological interpretations, and the analytical and database quality.

The QP considers the analytical data to be sufficiently accurate and precise to support Mineral Resource estimation and mine planning and the project database to be sufficiently error free to support Mineral Resources, Mineral Reserves, and mine planning.





13.0 MINERAL PROCESSING AND METALLURGICAL TESTING

13.1 Introduction

The process flowsheet used at Cerro Lindo uses standard polymetallic flotation industry practice and conventional technology to treat underground VMS ore containing zinc, lead, copper, and precious metals to produce zinc, lead, and copper concentrates with silver content (see Section 17). Processing for the current LOM is based on a steady-state production throughput of 20,600 t/d.


AMEC Simons/GRD Minproc and GEMIN completed feasibility studies in 2002 and 2005 respectively. Metallurgical testwork was conducted to support these studies, and they formed the basis of the conventional polymetallic flotation concentrator process design that was subsequently constructed and started up in 2006. At the beginning of operations, the plant had a lower 5,000 t/d treatment capacity and processed higher grades than the current operation. The plant was designed for subsequent expansion to treat lower-grade ore later in the mine life.

13.2.1 Background

The Cerro Lindo deposit is a classic Kuroko-style VMS deposit, with a number of distinct orebodies that are clustered together. OB-1, OB-2 and OB-5 were used as the basis for the feasibility study. OB-3 and OB-4, although known at the time, were not sufficiently delineated for inclusion in the studies.

From bottom to top in the deposit profile, three massive sulphide zones and a semi-massive sulphide unit have been recognized (see Section 7.3). Based on the zoning structure and mineralization the Cerro Lindo deposit can be classified into three main and two minor ore types:

High copper, massive pyrite, with chalcopyrite: Typically 2–5% Cu with 0–1.5% Zn. Lead grades are very low. Occasional semi-massive ores also contain economic grade

High zinc–baritic ore (barite content of 40–60%) with massive pyrite mineralisation containing sphalerite: Typically zinc content is about 6–8% Zn. Copper grades are low, in the order of 0.5% Cu. Lead content is typically low, but can reach as much as 1% Pb

Mixed–baritic (barite content of 40–60%): The mineralization typically has grades that range from 2–6% Zn, 1–2% Cu, and 0–4% Pb. High-grade lead areas can be present, but are not common





Enclave: The mineralization consists of small zones of silica replacement of a massive pyrite ore type. Mineralization is typically 0–2% Cu, 1–5% Pb, and has a low zinc content. This ore type is more consistent in its lead content, carries a higher precious metals content, and also contains relatively higher levels of arsenic, antimony and bismuth. This ore type represents less than 3% of ore

Supergene: This is a small secondary enrichment zone of massive pyrite ore type with chalcocite and covellite mineralogy. There can be some evidence of soluble copper, which may be derived from chalcocite.

Milpo completed an extensive exploration program in three distinct phases from 1999 through 2001, comprising core drilling and underground drift development for the basis of the feasibility studies and related metallurgical studies.

The metallurgical testwork sampling program for the feasibility studies was conducted in two phases. Initially, the samples focused on the full range of ore types within OB-2. This was followed up with OB-5 samples, once OB-5 was selected for initial production.

The OB-2 samples consisted of multiple samples of each major ore type. Samples were taken from existing exploration drifts and cross cuts, by drilling and blasting material from the walls. Ore type, production blend and variability samples were produced by compositing. The composite samples were made up from individual ore type samples. Production blend samples were produced from the ore type composites. In total, 24 samples were taken, with a total sample mass of 7,700 kg.

The OB-5 samples consisted of material from four metallurgical-sample core drill holes. The drill hole locations were selected to represent material from early production stopes and both OB-5 lenses.

The samples from each sampling program were used to prepare ore type and production blend composites close to the expected average LOM grades.

Sample preparation and head assays were performed by Lakefield Research in Lima. Head assays were performed by acid digest followed by ICP. Four composite head samples representing each ore type were subject to mineralogical examination. The results showed that the Cerro Lindo mineralogy consisted of coarse-grained pyrite and sphalerite, with finer-grained chalcopyrite associated with both the pyrite and the sphalerite.

13.2.2 Comminution

Comminution testwork was conducted by MinnovEx of Canada (MinnovEx semi-autogenous grind (SAG) power index (SPI) tests), and Lakefield Research of Chile (all other comminution testwork).





A full suite of comminution testing was conducted on the composite samples. This consisted of JK drop weight tests, MinnovEx SPI tests, unconfined compressive strength (UCS) tests, and impact crusher, rod and ball mill work indices. The results are presented in Table 13-1.

Basic comminution testing comprising Minnovex SPI, rod and ball mill work indices were also conducted on each of the three production blends, and 13 ore type variability composites. The comminution results indicated that the main ore types can be considered very soft with respect to impact and crushing breakage as well as moderately soft to ball mill grinding with little variability in hardness. The average plant feed ball mill work index is about 12.4 kWh/t and is relatively consistent due to the low inherent variability in ore hardness and the blended nature of the underground feed.

13.2.3 Flotation

Testwork for flotation circuit development was completed by Optimet Laboratories of Australia.

The flotation testwork consisted of bench-scale batch flotation tests, followed by locked cycle tests of the optimised batch circuit configuration. Testwork included circuit configuration, and reagent and grind size optimisation. Locked cycle flotation tests were carried out for each production blend composite. A large-scale (60 kg) batch test was also conducted to provide concentrate and tailings samples for further testwork. No pilot scale testwork was performed.

Overall the metallurgical testing results for the feasibility studies were positive, confirming a relatively soft, friable ore with coarse-grained mineralization that could be expected to respond well to a standard polymetallic grinding–flotation concentrator process plant flowsheet with good zinc–lead–copper recoveries and concentrate qualities.

The projected metallurgical performance that formed the basis of the 2005 feasibility study recovery and concentrate production schedules is shown in Table 13-2.

Two sets of penalty element analysis from drill hole samples were conducted. The first set consisted of 52 samples from 14 OB-2 drill holes, covering the major ore types (baritic massive sulphide (SPB, high-Zn ore), pyritic massive sulphide (SPP, copper ore) and volcanics (V, enclave material). The second set consisted of a further 213 samples from 14 holes covering the same major ore types within OB-5. In general, the massive sulphides exhibited low arsenic (30–90 ppm), antimony (10–40 ppm), bismuth (20–25 ppm), mercury (<5 ppm) and cadmium (50–80 ppm) penalty element concentrations.





Table 13-1: Feasibility Study Comminution Test Results

Test Unit Ore Type

Cu Zn Mixed Enclave Supergene

Abrasion Index 0.12 0.02 0.07 0.24 0.11

UCS MPa 136 108 98 94 136

Impact Crusher Wi 2.6 1.3 1.6 3.6 3.6

Rod Mill Wi kWh/t 7.9 4.2 7.4 12.6 8.7

Ball Mill Wi kWh/t 8.8 9.5 10.2 11.2 11.1

SAG Power Index 12 3 6 23 18

A 60.2 79.9 73.8 61.5 51.9

b 6.20 8.35 7.25 3.29 2.31

ta 2.91 4.07 2.25 2.48 2.51

SG 4.71 4.51 4.21 3.66 2.78

Table 13-2: Feasibility Study Metallurgical Performance Estimate

Stream Mass Assay Distribution (%)

%Cu %Pb %Zn Ag g/t Cu Pb Zn Ag

Average Higher Zn Grade

Feed 100 0.5 0.9 7.4 46 100 100 100 100

Cu concentrate 1.5 26.5 1.5 1.8 239 82.5 2.5 0.4 7.9

Pb concentrate 0.9 0.9 60.6 4.4 1571 2.2 79.2 0.7 40.2

Zn concentrate 8.9 0.11 0.6 58.3 38.1 2.7 7.9 95.3 9.9

Tailings 88.8 0.07 0.1 0.3 22 12.6 10.4 3.6 42

Average Lower Zinc Grade

Feed 100 0.8 0.45 4.2 30 100 100 100 100

Cu concentrate 2.5 27 1.5 1.1 95 85.9 8.5 0.7 8

Pb concentrate 0.6 2.8 46.8 5.6 1,500 2.1 62.1 0.8 29.7

Zn concentrate 7.1 0.3 0.6 56.4 42.3 2.4 9.4 93.8 9.9

Tailings 89.8 0.08 0.1 0.22 18 9.6 20 4.7 52.4

The enclave volcanic material concentrations (which comprised <3% of the ore) exhibited higher penalty element concentrations, including arsenic (230 ppm), antimony (220 ppm), bismuth (100 ppm), mercury (<10 ppm) and cadmium (390 ppm). Overall, the concentrate quality produced could be expected to be commercially clean and not attract any significant penalties as indicated by concentrate qualities in the feasibility locked cycle testing and recent operating history.

Following the Project start-up, systematic development exploration recommenced in 2007, with seven new orebodies identified between 2006 and 2013. Based on historical production, these new orebodies exhibit very similar metallurgical





performance to the original OB-2 and OB-5 orebodies and types delineated in the original feasibility studies with little variability indicated.

In 2011, the first plant expansion concluded with a capacity of 10,000 t/d. During 2012, a second expansion resulted in a new processing capacity of around 15,000 t/d; and the third expansion was completed in 2014, with a capacity of about 18,000 t/d (Milpo, 2015). Work on a fourth plant expansion and debottlenecking was completed during 2015 and 2016. The LOMP production rate will be 20,600 t/d.

At this capacity, the total installed power of the grinding mills of 8,250 kW (8,000 kW at mill shell) starts limiting higher throughputs considering an average ball mill work index of about 12.4 kWh/t and a milled product P80 target size of 150 µm that requires about 8,000 kW of power with a fine crushed product feed of 4 mm. The grinding plant is currently operating close to its practical installed throughput capacity.

Overall the conventional three-product flotation concentrator plant at Cerro Lindo has a good history of successfully treating the polymetallic mineralization, with good copper and zinc metal recoveries, and concentrate grades that are similar to those projected in the original feasibility studies. For construction, the lead–copper flotation circuit was changed from the sequential lead and copper flotation evaluated in feasibility testing to bulk lead–copper flotation and separation. This resulted in better lead and silver recoveries and concentrate grades being achieved in practice than those indicated by feasibility testing.

Throughput and metallurgical performance have also consistently improved since start-up in 2006, through a combination of plant expansions and ramp-up operating experience, improved ore zone characterization, and by implementing finer crushing, new process technology, equipment, and optimized reagent schemes.

Metallurgical parameters for the concentrator are well understood, and optimization and plant control is supported by ongoing research and development metallurgical testing on samples of ore mainly based on: hardness work index, mineral flotation kinetics, flotation reagent scheme evaluation, flotation kinetics, grind sensitivity, mineralogy and routine circuit evaluations.

13.3 Recovery Estimates

Cerro Lindo ore is considered to have excellent metallurgical characteristics, and this is reflected in the high recoveries and good concentrate grades achieved historically (Table 13-3).

Although some minor silver is recovered to zinc concentrate, the concentration is too low (31.1–62.2 g/t or 1–2 oz/t) to receive a credit (>93 g/t or >3 oz/t), and the total silver recovery is considered to be that reporting to the lead and copper concentrates.





Table 13-3: Historical Metallurgical Performance

Benchmarks Unit Item 2013 2014 2015 2016

Production tonnes 5,382,455 5,854,152 6,760,519 7,345,265

Mill Head Grade

oz/t Ag 0.75 0.75 0.75 0.73

g/t Ag 23.3 23.3 23.3 22.7

% Cu 0.77 0.79 0.68 0.66

% Pb 0.32 0.33 0.31 0.29

% Zn 3.11 3.06 2.84 2.56

Cu Concentrate

% Cu recovery 82.7 83.0 83.3 84.1

% Cu concentrate grade 26.1 26.5 26.1 26.3

oz/t Concentrate Ag grade 11.3 10.6 11.8 12.7

g/t Concentrate Ag grade 351 330 367 395

% Ag recovery (to Cu) 36.8 35.1 34.6 37.4

Pb Concentrate

% Pb recovery 73.1 73.6 73.0 74.1

% Concentrate Pb grade 65.5 66.5 65.4 64.6

oz/t Concentrate Ag grade 61.1 56.3 68.4 67.1

g/t Concentrate Ag grade 1,900 1,751 2,127 2,087

% Concentrate Ag recovery (to Pb) 29.5 27.5 31.3 31.6

% Concentrate Ag recovery (Cu + Pb)

66.3 62.7 65.9 68.9

Zn Concentrate % Zn Recovery 92.5 92.3 92.7 92.2

% Concentrate Zn grade 55.8 57.0 58.8 58.9

No material change in mineralization or ore types is expected in the mine plan to those that have been processed historically, and the historical process plant design, grind, flotation, metallurgical recovery and concentrate grade parameters should also be appropriate as the basis of the forward production plan (Table 13-4). Ore geometallurgical head grade recovery correlation models have been established using historical production performance statistic data and are applied in Table 13-4.

Processing for LOM is based on a steady state production throughput of 20,600 t/d. This rate is similar to the current plant design nameplate rating and throughputs currently being achieved, and assumes that no major capital investment is required to achieve this target.





Table 13-4: Forward Production Plan 2018–2025

Plan Unit Item 2018 2019 2020 2021 2022 2023 2024 2025

Production Treatment

kt 7,282 7,292 7,273 7,275 7,357 7,240 3,131 1,809

Mill Head Grade

oz/t Ag 0.61 0.70 0.65 0.63 0.64 0.67 0.61 0.72

g/t Ag 19.0 21.8 20.2 19.6 19.9 20.8 19.0 22.4

% Cu 0.62 0.77 0.67 0.68 0.71 0.67 0.65 0.78

% Pb 0.24 0.22 0.19 0.20 0.19 0.22 0.20 0.20

% Zn 1.97 1.92 1.81 1.84 1.86 1.90 1.55 1.63

Cu Concentrate

% Cu recovery 82.6 86.1 83.8 84.1 84.8 83.7 83.4 86.1

% Cu mill head grade 25.7 25.8 26.5 26.3 26.0 26.0 26.0 26.0

oz/t Concentrate Ag grade 11.06 9.94 11.24 10.56 10.05 11.35 10.63 10.22

g/t Concentrate Ag grade 344 309 350 328 313 353 331 318

% Ag recovery (to Cu) 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5

Pb Concentrate

% Pb recovery 68.8 67.7 64.4 65.2 64.8 67.6 65.2 65.1

% Concentrate Pb grade 63.0 62.5 62.1 62.0 63.1 63.0 60.2 61.6

oz/t Concentrate Ag grade 72.28 88.95 101.36 93.05 98.40 85.53 87.13 106.56

g/t Concentrate Ag grade 2,248 2,767 3,153 2,894 3,061 2,660 2,710 3,314

% Concentrate Ag recovery (to Pb) 30.7 30.7 30.7 30.7 30.7 30.7 30.7 30.7

% Concentrate Ag recovery (Cu + Pb)

67.2 67.2 67.2 67.2 67.2 67.2 67.2 67.2

Zn Concentrate

% Zn Recovery 90.0 89.7 89.0 89.2 89.3 89.6 87.3 87.9

% Concentrate Zn grade 58.3 58.3 58.0 58.0 58.0 58.0 57.5 57.7





13.4 Metallurgical Variability

The Cerro Lindo ore is considered to be in the lower end of moderate hardness, with low variability in this parameter for ball mill grinding. The target primary grind particle size is about P80 of 150 µm. Testwork indicates that metallurgical performance is relatively insensitive to variations in primary grind in this range, but if the ore is coarser and below 44% -74 µm, then metallurgical recovery performance objectives are not achieved because of a higher proportion of losses in the coarse particle sizes (mesh 70 and 100).

Historical ore metallurgical variability by orebody zone or domain is considered to be low. The main variability is recovery with head grade.

Ore geometallurgical head grade recovery correlation models have been established using historical production performance statistic data. Amec Foster Wheeler independently reviewed these. The geometallurgical recovery models are based on polynomials fitted to recent historical daily production data. In low-grade ranges outside of the normal production data range, these are appropriately extrapolated at the polynomial model grade breakpoint (where recovery starts to be overstated relative to a constant tail model) by considering a constant tail effect. Recovery is also appropriately capped at higher grades.

The following equations form the basis of the NSR block model and LOM cashflow recovery calculations:

Where:

Rec = recovery

HG = head grade

Cu Rec%

CuHG > 1.0%: Cu Rec% = 89.0% CuHG<1.0%>0.26%: Cu Rec % = 56.15+57.9*(HG*100)-24.78*(HG*100)2

CuHG <0.26%>0.08%: Cu Rec % = (HG*100-0.08)/HG CuHG <0.08%: Cu Rec % = 0

Zn Rec%

ZnHG > 4.0%: Zn Rec% = 94.0% ZnHG<4.0%>0.46%: ZnRec% = 68.96+17.14*(HG*100)-

3.856*(HG*100)2+0.2859*(HG*100)3 ZnHG <0.46%>0.11%: Zn Rec % = (HG*100-0.11)/HG ZnHG <0.11%: Zn Rec % = 0





Pb Rec%

PbHG > 0.50%: Pb Rec% = 80.0% PbHG<0.50%>0.0.08%: Pb Rec% = 38.12+(HG*100)*172-178.2*(HG*100)2 PbHG <0.08%>0.04%: Pb Rec % = (HG*100-0.04)/HG PbHG <0.04%: Pb Rec % = 0

The silver recovery forecast for the copper and lead concentrates is based on a fixed 67.2% recovery value derived from historical data distributed between Pb and Cu concentrates. Amec Foster Wheeler’s review of the historical data for 2015–2016 indicates that while the 67.2% figure is within the range of historical values, more variable recoveries can be expected on a monthly basis. There is an overall trend in the lead concentrate data for lower silver recoveries with lower lead grades. A similar, but less well correlated trend appears to occur with copper, whereby at higher copper grades, there appears to be an increase in silver content. There is a risk that the actual recoveries over a longer period may be lower than the current assumptions if the mill feed grades are lower than the historical average from which the overall 67.2% recovery figure was derived.

These equations are incorporated directly into the block model recovery NSR calculation as algorithms.

The geometallurgical recovery models are summarized in Figure 13-1 to Figure 13-3 for zinc, lead, and copper, respectively.

One orebody (OB-2) contains material classed as “Cobre Soluble” or soluble copper (CS). This material contains a variety of secondary copper sulphides and copper oxides. These minerals can have adverse effects on process plant performance, but the magnitude of these effects is usually dependent on the amount of the materials in the process stream.

Amec Foster Wheeler reviewed information provided by Milpo, and is of the opinion that that the CS material can be economically processed without adverse impacts to the process plant performance if the process feed contains no more than 1.5% CS material. In a plant with a nameplate capacity of 20,600 t/d, this amounts to a maximum of 310 t/d CS material that can be incorporated on a daily basis.

Table 13-3 shows concentrate grades are relatively insensitive to head grade, within the range of typical low daily/monthly variations experienced during 2013 to 2016, and because of established ore blending and control practices. These head grades are similar to those planned forward in the LOM plan, and, based on recent history, the use of a fixed concentrate grade shown in Table 13-4 as a basis for projecting LOM concentrate grades is considered to be reasonable.





Figure 13-1: Zn Recovery % vs Head Grade Geometallurgical Model

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

0.00% 1.00% 2.00% 3.00% 4.00% 5.00%

Note: Figure prepared by Amec Foster Wheeler, 2017. Y axis shows zinc recovery, X axis shows the zinc head grade.

Figure 13-2: Pb Recovery % vs Head Grade Geometallurgical Model

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60%

Note: Figure prepared by Amec Foster Wheeler, 2017. Y axis shows lead recovery, X axis shows the lead head grade.





Figure 13-3: Cu Recovery % vs Head Grade Geometallurgical Model

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20%

Note: Figure prepared by Amec Foster Wheeler, 2017. Y axis shows copper recovery, X axis shows the copper head grade.

13.5 Deleterious Elements

Cerro Lindo lead and zinc concentrate products in general are considered to be clean, contain relatively low concentrations of deleterious penalty elements, and are of a relatively high quality that is consistently in excess of minimum specifications with little variability.

Copper concentrates on average incur a minor penalty due to combined lead and zinc (6.5%) concentrations that on average marginally exceed the relatively low penalty threshold of 5% established in existing concentrate offtake agreements. This results in a minor penalty of about US$4/t.


Metallurgical recovery accounting and sampling practices are considered to be adequate (see additional discussion in Section 17). Historical theoretical and actual monthly metallurgical balance reconciliations are considered to be good with no material biases indicated.

Plant and concentrate samples are analyzed and reported on site in a laboratory adjacent to the plant that is operated by an independent third-party industry specialist assay/analysis contractor.





The use of testwork and plant historical geometallurgical recovery algorithms and fixed concentrate grades used as a basis to forecast these parameters in the forward production plan is considered to be appropriate.

There are no specific requirements that must be considered in terms of concentrate treatment.





14.0 MINERAL RESOURCE ESTIMATES

14.1 Introduction

Amec Foster Wheeler reviewed Mineral Resource development, construction, estimation procedures, classification, and statements for the Cerro Lindo Mine, and conducted independent validation of the block model.

14.2 Geological Models

Three-dimensional (3D) models were constructed:

Mineralized solid based on net smelter return (NSR) values

Rock type

High-grade zinc.

14.2.1 Mineralized Solid Based on NSR Values

Votorantim uses NSR values to define mineralized grade shells known as “OB”. Construction of the OB shells is an important step in the modeling process because the OB shells define the volume of the mineralized material.

An NSR value was calculated for each assay interval using the formula:

NSR=10.15*Zn + 8.12*Pb + 33.84*Cu + 4.61*Ag

A NSR cutoff of $17/t was used to define the mineralized/waste boundaries of the OB grade shells. NSR data were imported into the commercially-available Leapfrog software and OB grade shell solids were constructed. Fourteen OB solids are defined. The OB solids (Figure 14-1) were imported into commercially-available MineSight software for the construction of the block model.

Reporting solids were also constructed by excluding mined stopes and mine development from the OB solids. The reporting solids are used for resource and reserve determinations.

The block model was coded with the OB solids based on total volume percent (%OB), and block code (OBODY).

The OB solids defining the economic area are considered reasonable and are supported by drill hole data.





Figure 14-1: Plan View Showing Location of OB Solids






14.2.2 Rock Type Solids

Geology rock type solids are constructed within the NSR mineralized solids based on geology observation in the logging of drill holes and channel samples. The geological model (Table 14-1) consists of nine geology domains (GEOCD).

Wireframe solids representing the geology domains were constructed in Leapfrog. The solids are imported into MineSight and are used for coding the block model. Figure 14-2 shows two major mineralized rock types, SPP and SPB (including SPBHG) and north to south, cross cutting barren dikes. SPP and SPB (including SPBHG) represents approximately 95.7% of the modeled rock type volume.

Block model tagging of the cross cutting, unmineralized dikes uses a volume threshold of 10% to code a block. This has overestimated the total volume of dikes within the block model as compared to the volume represented by the dike’s 3D solid. Amec Foster Wheeler recommends a threshold closer to 50% or a threshold that results in a block model volume that closely matches the 3D dike solid volume. Mineralized rock-type solids should also be modeled through the dikes and then clipped by the dike solid.

The geological solids define reasonable geological domains and are supported by drilling and mine mapping data.

14.2.3 High-Grade Zinc Solids

The high-grade zinc portion of the baritic massive sulphides domain (SPBHG) was implemented in January 2017. SPBHG Zn values are interpreted to be localized along structural features. The SPBHG domain was constructed only in the mineralized baritic massive sulphides (SPB). The purpose of the SPBHG domain was to control the smearing of high-grade zinc values during grade estimation, as shown in Figure 14-3.

Modeling of SPBHG used varying zinc composite cut-off grades by OB domain as listed in Table 14-2.





Table 14-1: Rock Type and Block Model Codes

Rock Type (Model Code) Comment

Dike (3): Barren dyke

SSM (5): Mineralized semi-massive sulphides

SPP (6): Mineralized pyritic massive sulphides

SOP (7): Mineralized oxidized sulphides

SPB (9): Mineralized baritic massive sulphides

SPBHG (99): baritic massive sulphides (high-grade Zn)

SOB (10): Mineralized oxidized baritic sulphides

SBL (11): Mineralized leached zone

Enclave (29): Barren internal waste.





Figure 14-2: Plan View Showing SPP and SPB (Including SBPHG), Major Mineralized Rock Types, and Cross Cutting Barren Dike






Figure 14-3: Plan View of High Grade SPB Zn Domain with North to South Cross Cutting Dikes






Table 14-2: Zinc SPBHG Cutoff Grade Modeling Values

OB Domain Zn Composite Cut-Off Grade (% Zn)

OB2 (2): 7.4

OB2B (22): 3.6

OB5 (5): 6.4

OB5B (55): 9.4

OB6 (6): 6.4

OB6A (61): 7.6

OB6B (62): 3.33

OB7 (7): 9.0.

The SPBHG model should be monitored closely against mine reconciliation. Some modifications will likely be required.

Tagging of blocks with the SPBHG solids assigned a total volume percent and block rock type code of 99. SPBHG blocks that were less than 76.77% by total volume and not along the OB mineralized boundaries, were flagged as a mixed block with both low-grade and high-grade zinc volumes and values. Two zinc grade estimations were stored in the block, a low-grade zinc estimation using SPB (GEOCD 9) composites and a high-grade zinc estimation using SPBHG (GEOCD 99) composites respectively.

A weighted zinc block grade was calculated using the following formula:

ZNBLK = (HGZN Volume/100*HGZN) + ((%OB-HGZN Volume)/100*LGZN)

where:

ZNBLK: Weighted zinc block grade

HGZN Volume: High grade zinc volume in %

HGZN: Ordinary kriged interpolated high-grade zinc value from GEOCD 99 composite

LGZN: Ordinary kriged interpolated low-grade zinc value from GEOCD 9 composite

%OB: Percent NSR solid volume.

After the resource model was released to engineering for Mineral Reserve analysis, an error was noted in the above calculations. “HGZN Volume” and “(%OB-HGZN Volume)” should have been divided by %OB instead of 100. This in effect has diluted the weighted zinc block grade. An overall expected high zinc grade of approximately 7.71% was reduced to 7.51%. This should be corrected in the next model update.





14.3 Exploratory Data Analysis

Exploratory data analysis (EDA) was conducted by OB and rock type domain:

Histograms, cumulative probability plots, and decile analysis were used to determine outliers

Box plots were used to compare geology domains

Contact plots were used to investigate grade profiles between geology domains and determine the extent of sample sharing across the geology contacts within the OB domains. Soft-firm-hard boundaries were determined for each of the variables to be estimated (zinc, copper, lead and silver).

Table 14-3 lists EDA univariate statistics for Zn%, Cu%, Pb%, and Ag oz/t within the drill hole database by rock type. The majority of the Zn is contained in three rock types, mineralized pyritic massive sulphides (SPP), SPB, and SPBHG. SPBHG is the high-grade zinc portion of SPB and is treated as a separate domain during zinc grade estimation. SPBHG and SPB generally has higher mean zinc values than SPP. SPP generally has higher mean copper values than SBPHG and SPB.

14.4 Density Assignment

Bulk density determinations used for the current estimation have been carried out by Milpo since 2013 and up to 2016. Table 14-4 summarizes the density assignments for the Cerro Lindo dataset, and Figure 14-4 shows the locations of the density samples. A total of 658 density determinations were registered into the Cerro Lindo dataset, and includes 574 core samples and 84 grab samples.

14.5 Composites

The Cerro Lindo drill hole and channel sample data was composited into 2.5 m length composites for grade estimation. The compositing procedure was controlled by the OB solids and tagged with rock type domains from the drill hole geology data. Amec Foster Wheeler considers the composite size to be reasonable for the 5 x 5 x 5m block size used in the Mineral Resource block model.

A second composite file consisting of 5 m length composites was constructed and used for the estimate of the nearest-neighbour (NN) model used for model validation. Amec Foster Wheeler considers the 5 m composites to be appropriate for the NN model.





Table 14-3: EDA Univariate Statistics - Assays by Metal and Rock Type Domain

Metal Rock Type Model Code Count Mean Min Max CV STD

Zinc

%

DIKE 03 1,469 0.869 0.000 30.330 2.533 2.201

SSM 05 3,364 1.852 0.010 41.860 1.479 2.738

SPP 06 31,797 1.009 0.000 36.380 2.115 2.134

SOP 07 348 0.411 0.010 3.850 1.302 0.535

SPB 09 22,018 3.542 0.000 60.590 0.861 3.050

SOB 10 167 1.364 0.000 9.210 1.226 1.672

SLB 11 59 0.282 0.000 4.360 3.152 0.890

ENCLAVE 29 3,871 1.041 0.000 26.810 2.205 2.295

SPBHG 99 8,117 10.325 0.000 66.920 0.588 6.070

ALL All 139,195 1.681 0.000 66.920 2.060 3.463

UNDEF Undefined 67,985 0.280 0.000 35.050 3.654 1.024

Lead %

DIKE 03 1,457 0.207 0.000 19.020 4.440 0.918

SSM 05 3,363 0.418 0.000 14.250 2.206 0.923

SPP 06 31,662 0.124 0.000 39.560 4.934 0.610

SOP 07 348 0.062 0.000 1.390 2.379 0.147

SPB 09 21,960 0.417 0.000 59.660 2.210 0.922

SOB 10 167 0.253 0.000 2.360 1.659 0.420

SLB 11 59 1.845 0.010 5.020 0.711 1.311

ENCLAVE 29 3,869 0.542 0.000 29.230 2.475 1.340

SBPHG 99 8,111 1.114 0.000 22.130 1.400 1.560

ALL All 138,625 0.252 0.000 63.700 3.331 0.839

UNDEF Undefined 67,629 0.121 0.000 63.700 5.144 0.620

Copper %

DIKE 03 1,469 0.348 0.000 8.210 1.834 0.639

SSM 05 3,363 0.639 0.010 12.510 1.430 0.914

SPP 06 31,811 0.990 0.000 33.360 1.027 1.017

SOP 07 365 0.989 0.020 14.650 1.405 1.390

SPB 09 22,064 0.640 0.000 22.430 1.479 0.947

SOB 10 169 1.906 0.040 7.840 0.818 1.560

SLB 11 65 0.161 0.000 2.630 2.880 0.465

ENCLAVE 29 3,870 0.732 0.000 15.890 1.504 1.100

SPBHG 99 8,117 0.430 0.000 16.400 1.985 0.853

ALL All 139,452 0.483 0.000 33.360 1.714 0.828

UNDEF Undefined 68,159 0.154 0.000 15.520 2.333 0.358

Silver

Oz/t

DIKE 03 1,461 0.810 0.000 46.080 3.342 2.706

SSM 05 3,364 1.371 0.010 50.380 1.707 2.340

SPP 06 31,795 0.780 0.000 94.900 1.824 1.423





Metal Rock Type Model Code Count Mean Min Max CV STD

SOP 07 348 0.547 0.030 4.300 1.193 0.653

SPB 09 22,017 0.923 0.000 131.070 1.836 1.694

SOB 10 167 0.973 0.080 7.190 0.817 0.795

SLB 11 59 3.160 0.560 8.850 0.610 1.928

ENCLAVE 29 3,870 1.619 0.000 60.830 1.792 2.902

SPBHG 99 8,117 1.197 0.000 31.670 1.511 1.807

ALL All 138,743 0.730 0.000 138.600 2.603 1.899

UNDEF Undefined 67,545 0.487 0.000 138.600 4.173 2.033

Silver

g/t

DIKE 03 1,461 25.2 0.0 1,433.2 3.342 2.706

SSM 05 3,364 42.6 0.3 1,567.0 1.707 2.340

SPP 06 31,795 24.3 0.0 2,951.7 1.824 1.423

SOP 07 348 17.0 0.9 133.7 1.193 0.653

SPB 09 22,017 28.7 0.0 4,076.7 1.836 1.694

SOB 10 167 30.3 2.5 223.6 0.817 0.795

SLB 11 59 98.3 17.4 275.3 0.610 1.928

ENCLAVE 29 3,870 50.4 0.0 1,892.0 1.792 2.902

SPBHG 99 8,117 37.2 0.0 985.0 1.511 1.807

ALL All 138,743 22.7 0.0 4,310.9 2.603 1.899

UNDEF Undefined 67,545 15.1 0.0 4,310.9 4.173 2.033

Note: CV = co-efficient of variation, STD = standard deviation. The conversion from oz/t to g/t has involved rounding of the g/t value from an already rounded oz/t value, and therefore the g/t value may show minor discrepancies from the original unrounded date the EDA table was based on.





Table 14-4: Bulk Density Assignments by OB and Rock Type

OB Rock Type Model Code Density (g/cm3)

OB Rock Type Model Code Density (g/cm3)

OB-1 OB-8

SSM 5 3.58 SPP 6 4.4

SPP 6 4.54 SPB 9 4.4

SPB 9 4.6 OB1X

SSM ENCLAVE 29 3.04 SSM 5 3.58

SPBHG 99 4.6 OB2-B

OB-2 SSM 5 3.78

SSM 5 3.78 SPP 6 4.57

SPB 6 4.82 SPB 9 4.36

SOP 7 4.61 ENCLAVE 29 3.04

SPBHG 9 4.57 SPBHG 99 4.36

SOB 10 4.61 OB-5B

SLB 11 4.61 SSM 5 3.58

ENCLAVE 29 3.04 SPP 6 4.71

SPBHG 99 4.57 SPB 9 4.43

OB-3 ENCLAVE 29 3.04

SPP 6 4.72 SPBHG 99 4.43

SPB 9 4.5 OB-5C

OB-5 SPB 9 4.43

SSM 5 3.58 OB-6A

SPP 6 4.71 SSM 5 4.39

SPB 9 4.63 SPP 6 4.78

ENCLAVE 29 3.04 SPB 9 4.42

SPBHG 99 4.63 ENCLAVE 29 3.04

OB-6 SPBHG 99 4.42

SSM 5 3.58 OB-6B

SPP 6 4.77 SSM 5 3.78

SPB 9 4.47 SPP 6 4.77

ENCLAVE 29 3.04 SPB 9 4.39

SPBHG 99 4.47 ENCLAVE 29 3.04

OB-7 SSM 5 3.58 SPBHG 99 4.39

SPP 6 4.72 OB-6C

SPB 9 4.53 SPP 6 4.72

ENCLAVE 29 3.04 SPB 9 4.43

SPBHG 99 4.53





Figure 14-4: Plan View Location of Density Samples






14.6 Grade Capping/Outlier Restrictions

Outliers were determined for each OB and rock type domain using histograms and cumulative probability plots. Decile analysis was implemented to provide additional validation of the outlier threshold.

The plots commonly show outliers at the 98th to 99th percentile. This is generally supported by the decile analysis. The final outlier threshold was selected at lower percentiles in response to grade reconciliation with the mine and process. It was also used to reduce global bias. The plots also frequently show curves suggesting multiple populations.

Table 14-5 lists the outlier restriction capping level (threshold) for zinc, lead, copper and silver. Outlier distances were set to 20 to 25 m. Composites that are within the outlier search distance were not capped during grade estimation. Composites that are beyond the outlier distance were set to the cap value prior to grade estimation.

14.7 Variography

Previous variography was completed using the commercially-available Supervisor software. Updates to variography in January 2017 were completed with SAGE2001 for OB domains that included >15% additional drilling completed during 2016.

Votorantim constructed isotropic down-the-hole variograms to set the nugget value domained by OB and rock type. Two-structure spherical models were developed in each case with angular tolerances of 22.5º and lag distances ranging from 10–40 m.

Examples of zinc variography parameters are shown in Table 14-6 and Table 14-7 for primary and secondary rock types respectively.

14.8 Estimation/Interpolation Methods

The Cerro Lindo block model consists of 5 x 5 x 5m blocks. The model is rotated to azimuth 315. The block model was coded for OB and rock type domain.

Grade estimates are completed for zinc, lead, copper and silver. The 2.5 m length composites were used for the grade estimation. The grade estimation was completed by honoring the OB and rock type domain using ordinary kriging (OK). Sample sharing across rock type domains was addressed with a SFH coding determined by contact plots. An NN estimate was completed for comparison and validation using 5 m composites. The OK and NN estimates were completed for capped and uncapped grades.

Capping was implemented using outlier restriction with a distance threshold ranging from 20 to 25 m. Capping thresholds are implemented by OB and rock type domain.





Table 14-5: Outlier Restriction Capping Levels for Zn, Cu, Pb, and Ag

OB Rock Type

Cap Grade

Cap Grade

Cap Grade

Cap Grade

Zn (%) Cu (%) Pb (%) Ag (g/t)

OB-1

5 15.76 1.77 2.7 3.52 6 5.62 4.82 1.51 4.74 9 6.2 3.79 1.36 2.61 99 19 3.79 1.36 2.61

OB-2

5 23.36 2.39 5.24 5.02 6 8.56 5.3 2.05 6.41 7 1.99 4.01 0.51 2.27 9 9.99 4.31 2.79 4.71 10 5.41 5.4 1.47 2.09 11 2.27 1.14 4.38 6.06 99 23.36 1.14 4.38 6.06

OB-3 6 2.87 1.27 0.8 1.29 9 7.52 1.24 4.83 7.11

OB-5

5 20.4 2.6 4.49 6.68 6 10.49 3.34 1.68 4.99 9 10.43 3.24 2.66 7.85 99 21.81 3.24 2.66 7.85

OB-6

5 18.65 2.34 2.89 2.91 6 7.43 2.99 3.39 3.76 9 10.41 2.38 1.97 3.47 99 18.65 2.38 1.97 3.47

OB-7

5 23.23 1.36 7.25 11.87 6 12.95 2.88 2.76 4.33 9 12.13 2.16 4.26 6.22 99 23.23 2.16 4.26 6.22

OB-8 6 1.94 1.11 0.5 0.26 9 6.51 0.5 1.26 2.44

OB-X1 5 none 7.5 0.075 7.5

OB-22

5 10.18 1.77 2.37 3.95 6 3.42 3.95 0.94 3.6 9 3.88 2.82 0.99 2.25 99 10.18 2.82 0.99 2.25

OB-5B

5 28.58 1.84 3.84 2.8 6 10.68 3.49 3.39 5.61 9 11.79 1.86 2.47 4.02 99 28.58 1.86 2.47 4.02

OB-5C 6 none none none none 9 5.68 0.36 1.72 7.09

OB-6A

5 28.14 2.64 5.64 4.97 6 9.47 4.75 3.72 4.16 9 11.97 4.7 3.92 6.42 99 26.59 4.7 3.92 6.42

OB-6B

5 22.48 3.32 4.15 5.91 6 7.23 2.75 2.1 5.54 9 8.69 3.17 1.65 4.89 99 20.37 3.17 1.65 4.89

OB-6C 6 3.36 1.15 0.9 1.19 9 9.13 1.58 3.42 4.8





Table 14-6: Zn Variography Parameters for Primary Rock Type

OB Rock Type Nugget Structure 1 Structure 2 MineSight Rotations

Sill 1 Major Semi Minor Sill 2 Major Semi Minor Azn DipN DipE

OB-1

6 0.13 0.5 12 17 15 0.37 110 67 28 116 20 -57

9 0.2 0.66 6 25 30 0.14 52 48 32 306 36 -70

99 0.18 0.61 7 15 5 0.21 48 36 20 306 36 -70

OB-2

6 0.24 0.55 12 2 11 0.21 69 62 60 125 30 -90

9 0.2 0.7 8 11 9 0.1 57 34 35 145 23 45

99 0.19 0.46 10 4 10 0.35 45 32 24 300 37 61

OB-3 6 0.08 0.71 48 27 5 0.21 76 75 20 160.1 44.1 104

9 0.21 0.41 14 2 5 0.38 30 30 30 145.1 44.1 104

OB-5

6 0.24 0.48 8 11 5 0.28 45 28 22 127 17 -43

9 0.19 0.6 20 18 9 0.21 60 55 35 341 28 66

99 0.2 0.67 8 17 10 0.13 68 55 34 305 35 68

OB-6

6 0.05 0.32 2 4 1 0.63 37 34 20 318 6 40

9 0.2 0.54 15 10 5 0.26 45 32 14 305 35 68

99 0.23 0.54 15 6 10 0.23 46 36 17 341 66 24

OB-7

6 0.1 0.73 2 4 1 0.17 62 39 38 200 8 83

9 0.21 0.61 11 10 6 0.18 55 45 32 305 35 -61

99 0.21 0.53 9 11 7 0.26 50 36 25 274 25 -49

OB-8 6 0.1 0.73 2 4 1 0.16 29 39 62 199.6 7.6 6.5

9 0.2 0.3 20 20 20 0.5 40 40 40 0 0 0

OB-2B

6 0.21 0.5 23 7 7 0.29 80 47 32 315 45 80

9 0.19 0.56 17 9 10 0.25 55 50 18 315 45 80

99 0.15 0.68 8 5 7 0.17 35 30 25 309 65 61

OB-5B

6 0.23 0.56 7 13 10 0.21 40 30 18 286 57 -72

9 0.26 0.5 18 16 13 0.24 66 45 38 313 15 -51

99 0.21 0.6 6 7 7 0.19 52 45 18 274 28 -61

OB-5C 6 0.23 0.56 7 13 10 0.21 51 52 27 286 57 -72

9 0.26 0.5 18 16 13 0.24 66 45 38 313 15 -61

OB-6A

6 0.1 0.55 20 40 18 0.35 80 64 38 303 23 -59

9 0.2 0.63 10 5 12 0.17 64 48 25 317 59 -78

99 0.21 0.53 9 11 7 0.26 50 36 25 102 25 -63

OB-6B

6 0.33 0.4 27 30 4 0.27 40 25 12 300 23 -55

9 0.17 0.66 38 8 5 0.17 66 40 18 130 68 60

99 0.15 0.68 8 12 15 0.17 48 30 20 302 23 -59

OB-6C 6 0.1 0.55 20 40 18 0.35 80 64 38 303 23 -59

9 0.2 0.63 10 5 12 0.17 64 48 25 317 24 -60





Table 14-7: Zn Variography Parameters for Secondary Rock Type

OB Rock Type Nugget Structure 1 Structure 2 Mine Sight Rotations

Sill 1 Major Semi Minor Sill 2 Major Semi Minor Azn DipN DipE

OB-1 5 0.2 0.31 5 16 21 0.49 80 48 45 320 0 10

OB-2

5 0.24 0.55 12 2 11 0.21 69 62 60 125 30 90

7 0.17 0.47 8 35 10 0.36 62 50 40 98.4 14.5 153.4

10 0.17 0.47 8 35 10 0.36 60 62 40 98.4 14.5 153.4

11 0.17 0.47 8 35 10 0.36 60 62 40 98.4 14.5 153.4

OB-5 5 0.24 0.48 8 11 5 0.29 120 100 53 126.8 17.4 137.8

OB-6 5 0.05 0.32 2 4 1 0.62 37 34 20 317.7 6.4 -140.4

OB-7 5 0.1 0.73 2 4 1 0.16 62 39 30 199.6 7.6 6.5

OB-X1 5 0.26 0.5 18 16 13 0.24 66 45 38 30 15 -50

OB-2B 5 0.21 0.5 26 13 10 0.29 68 54 18 305.4 -24.6 -101

OB-5B 5 0.23 0.56 7 13 10 0.21 51 40 27 285.7 72 32.9

OB-6A 5 0.21 0.61 7 7 5 0.19 74 46 30 110.5 21.6 151.8

OB-6B 5 0.33 0.4 27 30 4 0.26 65 42 12 0 70 -90

The outlier restriction uses a MineSight option which caps the sample grade at the grade threshold beyond a distance threshold.

The grade estimation was completed in three passes. Pass 1 uses a search that is half the variogram range. Pass 2 uses a search that is equal to the variogram range. Pass 3 uses a search that is twice the variogram range.

The sample selection was based on quantitative kriging neighbourhood analysis (QKNA) analysis from previous model updates. The sample selection was modified for each pass and was determined by OB and rock type, and the number of available samples. Sample selection by pass included:

Pass 1 – Min 3 and max of 7 to 9

Pass 2 – Min 3 and max of 16

Pass 3 – Min 1 to 2 and max of 20 to 25.

Octant restrictions permit one to three samples per octant.

Amec Foster Wheeler believes some over-smoothing is occurring in Pass 3 with a high number of samples; however, blocks estimated in Pass 3 will likely be classified as Inferred Mineral Resources.

Amec Foster Wheeler recommends a 5 to 10 m dilution skin be added to the Mineral Resource model. This will provide a dilution grade for contact dilution for stopes at the boundaries of the OB domain.





Monthly reconciliation tabulations are recommended to monitor the model performance. Votorantim should monitor the zinc model and compare the SPBHG domain against stope grades and mine production. The SPBHG domain will likely require tuning.

Amec Foster Wheeler considers the grade estimation to be reasonable. It is important for the mine to have a reconciliation process to monitor the performance of the Mineral Resource model. Estimation domains are considered reasonable, but should be reviewed with regular model updates.

14.9 Block Model Validation

14.9.1 Visual Inspection

Amec Foster Wheeler reviewed the following on cross sections and plans:

Interpolated elements: zinc, lead, copper, and silver

Density

Rock type

NSR shell

Density

Mineral Resource classification.

Plans and cross sections of the above items visually look reasonable against drill hole composites.

Figure 14-5 is a cross section at CL1200 showing rock type 3D solids, composites, and blocks filling NSR solids. Composites are projected on to the cross section from 20 m in both directions. Block model rock types reasonably honor rock type composites.

Figure 14-6 is a cross section at CL1200 showing zinc colour-coded grades of composites and blocks. Zinc block grades match well with zinc composite grades, where cool colours such as blue represent lower zinc grades and hot colours such as red and magenta represent higher zinc grades.





Figure 14-5: Cross Section CL1200 Showing Rock Type from 3D Solids, Composites, and Blocks

Note: Figure prepared by Amec Foster Wheeler, 2017. Blue = SPP, red = SPB, magenta = SPBHG, green = dike. Section looks northwest.





Figure 14-6: Cross Section CL1200 Showing Zinc Colour-Coded Grades of Composites and Blocks

Note: Figure prepared by Amec Foster Wheeler, 2017. Section looks northwest.





Figure 14-7 is a cross section at CL1200 showing copper colour-coded grades of composites and blocks. Copper block grades match well with copper composite grades, where cool colours such as blue represent lower copper grades and hot colours such as red and magenta represent higher copper grades.

14.9.2 Global Bias Checks

Model validation includes checks for global bias. The global bias check by rock type compares the OK estimate to the NN grades at a zero cut-off. Domains with a global bias exceeding ±5% should be reviewed. Table 14-8 lists global bias of in situ blocks for Measured and Indicated. In primary rock types, zinc blocks show no global bias. Primary SPBHG copper blocks show a high positive global bias of 24.9%. This may indicate possible smearing of copper grades and should be reviewed. A high-grade copper domain may be warranted. SPBHG blocks show a negative bias for lead and silver; these two may be related since silver is strongly associated with lead. In secondary rock types, there are a number of positive and negative biases, which are generally not significant due to low tonnages. When reviewing total tonnages, all global biases are evened out.

14.9.3 Local Bias Checks, Swath Plots

Local bias for zinc, lead, copper, and silver were checked with swath plots. Swath plots compare the OK estimate to the NN grades at orthogonal swaths through the OB domains. Some local bias was observed but is commonly associated with areas with low sample counts. Figure 14-8 shows an example of a zinc swath plot through SPB and SPBHG. OK peaks and valleys match well with the peaks and valleys of the NN model, indicating local bias is not observed.

Additional model validation should include reconciliation of the Mineral Resource model updates to the previous one to three years of mine production and process data.

Ongoing model validation should include monthly reconciliation against mine production and process data. Trends can be identified and adjustments to the Mineral Resource model can be implemented where needed in the next model update.

14.9.4 Change of Support Checks

An independent check on the degree of smoothing in the block model estimates for zinc, copper, lead, and silver were assessed using the discrete Gaussian or Hermitian polynomial change of support method (Herco) described by Journel and Huijbregts, (1978). The block size or standard mining unit (SMU) tested was 5 x 5 x 5 m. The grade–tonnage curves match reasonably well near cut-off grades for Measured and Indicated Mineral Resources.





Figure 14-7: Cross Section CL1200 Showing Copper Colour-Coded Grades of Composites and Blocks

Note: Figure prepared by Amec Foster Wheeler, 2017. Section looks northwest.





Table 14-8: Global Bias of In Situ Blocks by Rock Type, Measured, and Indicated

Primary Rock Type Tonnes OK Zn%

NN Zn% Rel. %Dif. OK Cu% NN Cu% Rel. %Dif. OK Pb% NN Pb% Rel. %Dif. OK Ag ppm NN Ag ppm Rel. %Dif.

SPP 59,515,931 0.9028 0.8963 0.7% 0.9883 0.9985 -1.0% 0.1254 0.1081 16.0% 0.7538 0.7408 1.8%

SPB 34,444,393 3.3775 3.3817 -0.1% 0.6438 0.6585 -2.2% 0.414 0.3854 7.4% 0.885 0.9045 -2.2%

SPBHG 15,663,192 7.4017 7.4853 -1.1% 0.559 0.4475 24.9% 0.8153 1.008 -19.1% 1.0825 1.197 -9.6%

Secondary Rock Type Tonnes OK Zn%

NN Zn% Rel. %Dif. OK Cu% NN Cu% Rel. %Dif. OK Pb% NN Pb% Rel. %Dif. OK Ag ppm NN Ag ppm Rel. %Dif.

SSM 2,218,745 1.5503 1.5085 2.8% 0.6286 0.6537 -3.8% 0.3343 0.3465 -3.5% 1.0841 1.1009 -1.5%

SOP 205,722 0.3481 0.3476 0.1% 0.7565 0.8034 -5.8% 0.0584 0.0468 24.8% 0.4836 0.4713 2.6%

SOB 130,262 1.9445 2.2473 -13.5% 1.858 2.2862 -18.7% 0.1648 0.1337 23.3% 0.8807 0.8897 -1.0%

SLB 35,656 0.1031 0.0868 18.8% 0.0507 0.0304 66.8% 1.4436 1.51 -4.4% 2.9754 3.1801 -6.4%

TOTAL 112,213,902 2.5823 2.5913 -0.3% 0.8158 0.8113 0.6% 0.3148 0.3239 -2.8% 0.8468 0.8623 -1.8%

Note: areas of high bias highlighted.





Figure 14-8: Zn Swath Plot for SPB and SPBHG


14.9.5 Reconciliation

The protocol for mine production sampling (short range model) is to collect a grab sample from buckets at active draw points at the beginning of each work shift. However, sampling has not been consistent. Drill holes for stope blasting are not sampled. Amec Foster Wheeler recommends that Cerro Lindo collect draw point samples on a consistent basis.

14.10 Classification of Mineral Resources

Criteria used by Cerro Lindo to determine classification are as follows:

Confidence in modelling of OB and rock type domains. These models, in particular the SPB and SPP domains, control tonnage delineation of Resource blocks, particularly along the margins

Reliability of sampling data. This includes database integrity as well as laboratory quality assurance and control





Confidence in estimation of block grades for the various metals

Drill hole spacing studies related to confidence in estimating grade

Variogram model parameters

Visual assessments of the geometries of mineralized domain in relation to drill hole spacing

Production experience in the deposit.

Based on the criteria listed above, Mineral Resource classification is based on number of drill holes and distances determined by variogram ranges as follows (see also Table 14-9):

Measured Mineral Resource: 3 holes, ⅓ to ½ variogram range

Indicated Mineral Resource: 3 holes, ½ of the variogram range (1st structure)

Inferred Mineral Resource: 2 holes, two times the variogram range (2nd structure).

The initial classification result was then smoothed to eliminate isolated small patches and irregular shapes, yielding more realistic shapes from a mining perspective. The classification variable was only set within the modelled mineralized domains and OB shapes within the block model. Figure 14-9 shows an example of Mineral Resource classification along cross section CL1200.

Amec Foster Wheeler conducted a drill spacing study using confidence limits based on NSR values. Results confirm that Mineral Resource classification parameters as developed by Votorantim are reasonable.

The Mineral Resource Classification and validation should also include monthly reconciliation of the Mineral Resource model against, short range model, mine production, and process data.

14.11 Reasonable Prospects for Eventual Economic Extraction

For the material available in the Measured and Indicated categories at Cerro Lindo, reasonable prospects for eventual economic extraction of the resource base are established using the breakeven net smelter return (NSR) cutoff criteria applied during the process of designing and blocking out conceptual sub-level open stope (SLOS) and cut-and-fill (C&F) stope volumes. Conceptual stope volumes and portions of these volumes that are not scheduled (and converted to Mineral Reserves) remain in the Measured and Indicated Mineral Resource categories.

The Inferred material is reported at the cut-off in-situ within the interpreted geological models.





Table 14-9: Resource Classification Parameters – Basic Drill Hole Spacing Used – Number of Holes and Search Size

Search Distance (m)

Category No. of Holes Major Semi-major Minor

Measured 3 26 26 26

Indicated 3 50 50 50

Inferred 2 150 150 150





Figure 14-9: Cross Section CL1200 Showing Mineral Resource Colour-Coded Blocks,

Note: Figure prepared by Amec Foster Wheeler, 2017. Magenta = Measured, green = Indicated, yellow = Inferred. Section looks northwest.





Mineral Resources are reported at a NSR cut-off of US$27.80/t, except where blocks are adjacent to caved areas where an NSR of US$50.00/t was used for reporting. The NSR calculations are based on head grade and historical plant performance. Metal prices used for the NSR calculation are: Zn: US$2,767/t (US$1.26/lb); Pb: US$2,235/t (US$1.01/lb); Cu: US$6,794/t (US$3.08/lb); and Ag: US$21.78/oz. The metallurgical recovery portion of the NSR calculations are based on polynomial equations for each of the concentrate elements, and incorporate considerations of sliding smelter payments that vary depending on the grade of the concentrate. Metallurgical recovery graphs for zinc, lead, and copper are shown in Figure 13-1, Figure 13-2, and Figure 13-3 respectively, in Section 13. The assumed mining cost is US$14.04/t, processing cost is US$6.14/t, and general and administrative (G&A) cost is US$7.62. Mining dilution is assumed to be 0% and mining recovery is at 100%.

14.12 Mineral Resource Statement

The Mineral Resources were initially classified using the 2012 Joint Ore Reserves Committee (JORC) Code, and reconciled to the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves (the 2014 CIM Definition Standards).

Mineral Resource estimates prepared by Votorantim staff and summarized in Table 14-10 are reported exclusive of Mineral Reserves. The estimates have an effective date of 31 December, 2016 and are reported using the 2014 CIM Definition Standards. The QP responsible for the estimate is Mr E.J.C. Orbock III, RM SME, an Amec Foster Wheeler employee.

14.13 Factors That May Affect the Mineral Resource Estimate

Factors that may affect the Mineral Resource estimates include:

Additional infill and step out drilling of satellite deposits

Changes in local interpretations of mineralization geometry and continuity of mineralization zones

Domaining high-grade copper

Density and domain assignments

Changes to design parameter assumptions that pertain to stope design

Dilution from internal and contact sources

Changes to geotechnical and metallurgical recovery assumptions

Increases resulting from improvements to mining method recovery as recommended by Amec Foster Wheeler





Table 14-10: Mineral Resource Summary Table

Category Tonnage (Mt)

Zn (%)

Cu (%)

Pb (%)

Ag (g/t)

NSR (US$/t)

Measured 3.7 2.49 0.77 0.35 25.7 96.34

Indicated 2.5 1.89 0.68 0.29 26.0 79.10

Total Measured + Indicated 6.2 2.25 0.73 0.32 25.8 89.41

Inferred 4.5 2.04 0.84 0.24 25.7 89.79

Notes to accompany Mineral Resource table:

1. Mineral Resource estimates were prepared by Votorantim staff. The Qualified Person responsible for the estimate is Edward J.C. Orbock III, RM SME., an Amec Foster Wheeler employee.

2. Mineral Resources are reported exclusive of the Mineral Resources converted to Mineral Reserves, and have an effective date of 31 December, 2016. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

3. Mineral Resources are reported at a net smelter return (NSR) cut-off of US$27.80/t except for mineralization adjacent to caved areas where an NSR cut-off of US$50.00/t was used for reporting. The NSR calculations are based on head grade and historical plant performance. Metal prices used for the NSR calculation are: Zn: US$2,767/t (US$1.26/lb); Cu: US$6,794/t (US$3.08/lb); Pb: US$2,235/t (US$1.01/lb); and Ag: US$21.78/oz. The metallurgical recovery portion of the NSR calculations is based on polynomial equations for each of the concentrate elements, and incorporate considerations of sliding smelter payments that vary depending on the grade of the concentrate. Mining cost is US$14.04/t, processing cost is US$6.14/t, and G&A cost is US$7.62.

4. Mineral Resources are stated as in situ with no consideration for planned or unplanned mining dilution. Mineral Resources are reported on a 100% basis.

5. Milpo has entered into a silver streaming agreement with Triple Flag, beginning in December, 2016. The result is that revenues from silver sales will be lower than from market price. The reduced silver revenue has not been considered in NSR calculations or cut-off grade.


Changes to the assumptions used to generate the NSR value including long-term commodity prices

Completion of a reconciliation model with an improved sampling program for the short-range model.


Amec Foster Wheeler has the following comments on the Cerro Lindo Mineral Resources:

Cerro Lindo geology staff is knowledgeable of the local geology and mineralization

Modelling of 3D geological domains adequately represents data from drill holes and channel samples

EDA supports geological domains as developed by geology staff

Capping levels as selected by cumulative probability plots are supported by decile analysis

Interpolation studies have shown that the high-grade zinc domain has prevented high-grade zinc from being smeared in areas with predominately low-grade zinc





Milpo should institute validation procedures to check block model geological volumes against 3D geologic wireframe solid volumes.

OB domains should be modeled across dikes and then clipped by the dike solids

A drill spacing study using NSR supports the Mineral Resource classification scheme

Some local grade bias was observed, but this is commonly associated with areas with low sample counts

In primary rock types, zinc blocks show no global bias

In primary rock type SPBHG, copper shows a high positive global bias of 24.9%. This may indicate possible smearing of high copper grades and should be reviewed. A high-grade copper domain may be warranted

SPBHG shows a negative bias for lead and silver; these two may be related since silver is strongly associated with lead

In secondary rock types, there are a number of positive and negative global biases, which are generally not significant due to low tonnage. When reviewing total tonnages, global biases are evened out

Visual review of grades, rock type model, and resource classification on cross section and plans show good agreement with drill hole composites

The short-range model sampling is inconsistent.

Post-processing was conducted on the resource classification to smooth out classification groups. However, there are still a few isolated outliers. This indicates that post-processing was stopped prior to full optimization.





15.0 MINERAL RESERVE ESTIMATES

15.1 Introduction

The Mineral Reserves have been established based on actual costs and modifying factors from the Cerro Lindo Mine, and on operational level mine planning and budgeting.

15.2 Mineral Reserves Statement

Mineral Reserves in Table 15-1 use the 2014 CIM Definition Standards. The QP responsible for the Mineral Reserves estimate is William Bagnell, P.Eng., an Amec Foster Wheeler employee. Mineral Reserves are reported using a net smelter return (NSR) cut-off.

15.3 Factors that May Affect the Mineral Reserves

The Cerro Lindo mine has been in operation since July 2007. Annual mine production has increased from 1.97 Mt/a in 2008 to 7.35 Mt/a in 2016.

The ability to safely and economically extract the Mineral Reserves are, as with most mining operations, subject to variations, including but not limited to, in the key following areas:

Commodity price assumptions

Global markets

Internal operating costs

Government actions including changes to environmental, permitting, taxation and royalty regulations and laws

Social licence to operate

Geological and geotechnical unknowns

Availability of skilled labor

Variations in metallurgical performance.





Table 15-1: Mineral Reserves Statement

Category Tonnage(Mt)

Zn Grade(%)

Cu Grade(%)

Pb Grade(%)

Ag Grade (g/t)

NSR (US$/t)

Proven 26.45 1.96 0.67 0.23 20.34 67.11

Probable 25.93 1.88 0.68 0.20 19.98 65.86

Total Proven and Probable 52.38 1.92 0.68 0.22 20.16 66.49

Notes to accompany Mineral Reserves table:

1. Mineral Reserves have an effective date of 30 June, 2017. The Qualified Person responsible for the estimate is William Bagnell, P.Eng., an Amec Foster Wheeler employee.

2. Mineral Reserves are reported on a 100% basis within engineered stope outlines assuming two mining methods: sub-level open stoping (SLOS) or vertical retreat mining (VRM) with paste backfill, and mechanized drift and fill/cut and fill (D&F/C&F) with paste backfill. Typical SLOS stopes are 20 m x 20 m x 30 m. Typical D&F/C&F rooms are 4 m x 4 m. Mineral Reserves incorporate dilution and mining recovery.

3. Mineral Reserves are reported at different net smelter return (NSR) cut-off values, depending on the mining method used: (a) for SLOS/VCM with paste backfill, the NSR cutoff is $27.80/t (b) for D&F/C&F, the NSR cut-off is $40.28/t. The NSR calculations are based on head grade and historical plant performance. Metal prices used for the NSR calculation are: Zn: US$1.09/lb; Pb: US$$0.88/lb; Cu: US$2.68/lb; and Ag: US$18.94/oz. NSR calculations are based on polynomial equations for each of the concentrate elements, and incorporate considerations of sliding smelter payments that vary depending on the grade of the concentrate.

4. Milpo has entered into a silver streaming agreement with Triple Flag, beginning in December, 2016. The result is that revenues from silver sales will be lower than from market price. The reduced silver revenue has not been considered in NSR calculations or cut-off grade. The revenue reduction has been included in the financial analysis.


Cerro Lindo is an underground mine; as such, it faces a number of the same risks faced by all underground mines, including, but not limited to, unexpected ground conditions, seismic events, and ground water inflow.

Issues that are specific to the Cerro Lindo Mine include:

The mine is planned to extend its depth to the 1520 m level, which is about 100 m below its current lowest level. The problem of the “receding face” will become a greater concern. All ore from these new areas will be required to be hauled up to the crusher feed level (the 1830 m level) by truck. This will increase operating costs, put more strain on the ventilation system, increase congestion, and increase the difficulty of meeting production requirements

Cerro Lindo management plans to introduce mechanized cut-and-fill (C&F) mining with paste backfill, beginning in late 2017. This method will be used to extract sill pillars, remnants, and irregular shapes not readily amenable to extraction using the mine standard sub-level open stoping (SLOS) method. The method, costs, productivity, and dilution/recovery factors are based on actual practice at other Milpo mines, but is subject to site specific factors that may only be determined after mining begins

The dilution factors used in the Mineral Reserve estimate match the factors reported by the mine as actual dilution, based on survey and stope reconciliation.





As the mine becomes deeper, and has a greater percentage of production from secondary stopes, the quantity of dilution (primarily sloughed backfill) may increase

Geotechnical conditions due to greater depth may also contribute to increased dilution and reduced recovery

The mine, and its infrastructure, were not originally designed for the planned production rate of 20,600 t/d. All major components of the system are operating at or near peak capacity. A failure of any of the infrastructure components, or a small change in ore or rock properties could prevent the mine from meeting its production targets for an extended period.

The deposit has not been closed off by exploration drilling. Ongoing exploration activities could support additional Mineral Resources being identified that could be converted, with the appropriate studies, to Mineral Reserves. This represents upside potential for the operation. Additional upside potential exists if the material currently classified as Measured and Indicated Mineral Resources can be converted to Mineral Reserves with additional mining studies.

15.4 NSR Calculations

NSR calculations are based on historical performance of the concentrator, and current smelter contracts. NSR calculations include transportation, and all treatment and refining charges (TCs/RCs). They do not include the impact of royalties, severance taxes, or the silver streaming agreement.

Process recovery varies by head grade. The recovery calculations are polynomials, and are bounded by maximum and minimum grades. Table 15-2 lists the recovery ranges, and recovery percentages for each of the three concentrates produced. Silver recovery to the lead and copper concentrates are fixed about the threshold grade shown.

15.5 Underground Estimates

The Mineral Reserves for the Cerro Lindo Mine are based on the Mineral Resources and block model discussed in Section 14, on several years’ historical performance and cost data, on detailed mine planning for the years 2017 and 2018, and on planning efforts for the life-of-mine (LOM).

The primary mining method used is SLOS with paste backfill. Approximately 85% of the Mineral Reserves will be mined using this method. The remainder will be mined using mechanized C&F mining with paste backfill.





Table 15-2: Process Recovery

Zn Concentrate Pb Concentrate Cu Concentrate

Grade Range Recovery Grade Range Recovery Grade Range Recovery

below 0.11% 0.0% below 0.04% 0.0% below 0.08% 0.0%

0.11% to 0.46% 0.0% - 76.1% 0.04% - 0.08% 0.0% - 50.0% 0.08% - 0.26% 0.0% - 69.2%

0.46% - 4.0% 76.1% - 94.0% 0.08% - 0.45% 50.0% - 80.0% 0.26% - 1.0% 69.2% - 89.0%

> 4.0% 94.0% > 0.45% 80.0% > 1.0% 89.0%

Ag in Zn Concentrate Ag in Pb Concentrate Ag in Cu Concentrate

Grade Range Recovery Grade Range Recovery Grade Range Recovery

Ag not paid in Zn concentrate

< 6.5 g/t or < 0.21 oz/tt

0.0% < 6.5 g/t or < 0.21 oz/t

0.0%

> 6.5 g/t or > 0.21 oz/t

19.30% > 6.5 g/t or > 0.21 oz/t

30.80%

Typical SLOS stope dimensions are 20 m wide, 20 m long, and 30 m vertical level spacing. Maximum stope dimensions are dictated by the geotechnical conditions at the stope and its immediate surroundings.

C&F mining will be used to extract sill pillars, remnants, and irregular shapes. Typical heading sizes will be about 4 m x 4 m, and stopes may use overhand or lateral drift-and-fill (D&F) style extraction.

15.5.1 Throughput Rate and Supporting Assumptions

Mine planning for LOM is based on a steady state production rate of 20,600 t/d. This rate is similar to the rates currently being achieved and assumes that no major capital investment is required to achieve this target.

15.5.2 Stope Sizing

Stope sizes are discussed in Section 16.2.3 and Section 16.4.

15.5.3 Dilution and Mine Losses

Mineral Reserves are reported inclusive of recovery losses and dilution. All unplanned dilution is assigned a grade of $0.00/t NSR.

Planned dilution and recovery factors are based on historical values reported from the mine. Recovery and dilution factors for the SLOS/VRM stopes are reported in Table 15-3.





Table 15-3: Recovery and Dilution in Stopes Mined via SLOS/VRM

Recovery Dilution

Primary Stope 85.8% 1.8%

Secondary Stope 72.0% 7.5%

The recovery and dilution factors are based on stope reconciliation reports from 2008 to 2015.

Both dilution and recovery values reported by Votorantim are significantly lower than would normally be expected. This can partially be accounted for because early stopes were primary stopes, which had three walls in ore; all overbreak and sloughage was ore, and was not counted as dilution in the reconciliation.

Historical recovery and dilution percentages are presented in Figure 15-1.

The recovery values are impacted by the practice of comparing the final stope volume against the theoretical stope volume (reserve shape) determined before the stope development mapping and sampling are considered. In practice, the design stope volume is always less than the theoretical volume.

Table 15-4 reports the recovery and dilution factors used for the D&F and C&F stopes. These factors are based on actual performance in overhand mechanized C&F stopes reported from Votorantim’s Cerro de Pasco mining complex, but have been adjusted for conditions at Cerro Lindo by taking into consideration that mining of sill pillars and remnants will recover less ore and result in higher amounts of dilution when operating near old workings and backfilled areas.

15.5.4 Cut-off Criteria

The various orebodies being exploited at Cerro Lindo are polymetallic, containing economic quantities of zinc, copper, lead and silver. Metallurgically, they perform the same in the process plant. The evaluation of mineral blocks and stopes is based on a calculated revenue that considers all marketable elements from the block (stope). The NSR calculation procedure is based on the assumption that all orebodies have similar metallurgical performance and that blending ratios are not critical.

The NSR calculations assume that all zinc concentrate will be sold to Votorantim’s Cajamarquilla smelter.

A cut-off value, based on the NSR of the material being evaluated, is used in preference to a cut-off grade. The NSR value is based on contained metal, process recovery, freight, and treatment charges of the concentrate, metal prices, and other factors. The NSR value is based on planned operating costs, and is, in effect, a breakeven cost. Commodity prices used for the NSR calculation are shown in Table 15-5.





Figure 15-1: Historical Dilution and Recovery


Table 15-4: Recovery and Dilution in Stopes Mined via C&F/D&F

Recovery Dilution

Cuts against or directly above old SLOS stopes 75% 10%

New mining areas 90% 10%

Table 15-5: Commodity Prices used in NSR Calculations

Metal Price (US$) Units Price (US$) Units

Zn 2,406 US$/tonne 1.09 US$/lb

Cu 5,908 US$/tonne 2.68 US$/lb

Pb 1,943 US$/tonne 0.88 US$/lb

Ag 18.94 US$/troy ounce 18.94 US$/troy ounce





Votorantim used a 10-year forecast price for their NSR calculations. However, the current mine life is eight years. Amec Foster Wheeler compared the two price models and the difference was not material (total delta was <0.1%). As a result, Amec Foster Wheeler accepted Votorantim’s price forecasts for use in the NSR calculations.

The cut-off value calculated is the head grade delivered to the process plant, inclusive of stope recovery and dilution. Block model grades and calculated NSR are the in-situ grade and value respectively.

The formula for calculating the NSR value was developed based on actual concentrator performance for the years 2015 and 2016. The equations are based on actual non-linear recovery factors for zinc, lead, and copper. The cut-off is the calculated mill-head NSR that covers all operating costs. Costs included are mine development costs, production mining and haulage costs, stope backfill costs, mine service costs, process costs including tailings storage. Sustaining capital costs and other capital recovery factors are not included in the NSR calculations. The value used for mine planning can be considered to be a break-even cut-off value.

Life-of-mine average operating costs for SLOS/VRM production stopes are shown in Table 15-6. The NSR used is US$27.80/t. This value is based on actual 2016 operating costs for SLOS/VRM stopes at the Cerro Lindo Mine.

Life-of-mine average operating costs for the C&F/D&F stopes are shown in Table 15-7. These costs are based on known costs at Cerro Lindo, historical costs and production factors from Milpo’s Cerro de Pasco mining complex, and on pre-feasibility-level engineering work undertaken at Cerro Lindo.

Life-of-mine average operating costs for all ore, including development ore, is shown in Table 15-8. This can be considered a break-even operating cost.


The QP is of the opinion that the Mineral Reserve estimation has been undertaken with reasonable care and have been classified using the 2014 CIM Definition Standards.

Some of the included Mineral Reserves are to be extracted using mechanized C&F or D&F methods. These methods are not currently being used at Cerro Lindo, but are common in Peru, and are being used at Milpo’s mines within the Cerro de Pasco mining complex (Atacocha and El Porvenir). All material to be mined using C&F methods are classified as “Probable”.





Table 15-6: LOM Average Operating Costs for SLOS/VRM Production Stopes

Cost Centre Units Cost


Mining US$/t 14.82

Plant US$/t 6.68

Maintenance US$/t 5.29

G&A US$/t 2.18

Subtotal US$/t 28.98

Fixed Costs US$/t 3.47

Variable Costs US$/t 25.51

Total Costs US$/t 28.98

Table 15-7: LOM Average Operating Costs for C&F/D&F Stopes


Mining US$/t 30.00

Plant US$/t 7.13


G&A US$/t 3.10

Total US$/t 46.90




Table 15-8: LOM Average Operating Costs


Mining US$/t 16.55

Plant US$/t 6.73


G&A US$/t 2.30

Total US$/t 31.04




Note: costs are for all ore, including development





16.0 MINING METHODS

16.1 Overview

The Cerro Lindo Mine is relatively new; it has been operating since July 2007. The mine is completely mechanized, using rubber-tired equipment for all development and production operations. There is no shaft; all access is through 15 portals servicing adits, drifts and declines. Ore is being extracted from nine separate orebodies, and delivered to the concentrator stockpile on surface. All ore is comingled during transport to the concentrator stockpile; ore from different orebodies is not segregated.

The highest operating level is the 1970 m level, the lowest operating level is the 1620 m level, and the ultimate bottom level is planned to be the 1520 m level.

A longitudinal section through the mine is presented as Figure 16-1.

Some ore from upper levels is delivered to a concentrator stockpile on surface via truck, but most ore is delivered to grizzlies on the 1830 m level which serve the crusher installed on the 1820 m level. Crushed ore is delivered to the surface stockpile via inclined conveyor through a portal at the 1940 m level. From the surface stockpile, ore is delivered to the concentrator via a system of inclined overland conveyors.

A simplified map of the 1820 m level is shown in Figure 16-2. It shows development in ore, planned development for 2016, three portals, and the conveyor incline.

The Cerro Lindo mine is operated by Milpo, but there are numerous mining-related contractors employed by Milpo to perform much of the work underground. A list of major contractors and their duties is provided in Table 16-1.

In addition to management, contractor oversight and supervision, and technical services, Milpo crews perform some lateral development, and all stope preparation, stope production drilling, and mucking. Production blasting is done by Incimmet, a contractor.

16.2 Geotechnical Considerations

16.2.1 Geotechnical Assessments

Independent geotechnical assessments have been commissioned for the Cerro Lindo deposit, including by AMEC in 2014, and SRK in 2017.

SRK completed a geomechanical 3D modelling exercise and evaluation of the overall stability conditions within the mine.





Figure 16-1: Mine Longitudinal Section






Figure 16-2: 1820 m Level






Table 16-1: Major Mining Contractors

No. Contractor Duty

1 Incimmet Mine development & Production Blasting

2 AESA Mine development

3 Unicon Shotcrete and concrete

4 Dinet Rock haulage

5 American Rock haulage, light vehicles

6 Sandvik Equipment maintenance

7 Atlas-Copco Equipment maintenance

8 Ferreyros (Caterpillar) Equipment maintenance

These assessments have recommended design standards for development and production stope openings, backfill strength requirements, maximum stope dimensions, and guidance for stope sequencing.

16.2.2 Geotechnical Overview

The main lithological units have been described and modelled with acceptable detail to support geotechnical characterization and hazard evaluation related to mining activities. As related to the mining method employed at the time of the assessment, rock mass conditions are well understood and appropriate for the current mining depths, the rock reinforcement types, and geotechnical input into the mine production and development.

No major flaws were identified with these processes. Cerro Lindo is an established mining operation, and staff have a well-developed understanding of the geotechnical, hydrogeology, geology, and mining methods required to safely extract the mineralization.

A formal stope design process has been established that recognises the geotechnical interpretations/recommendations for the stope design and performance.

The geotechnical mapping and data analysis protocols include industry-standard practices such as detailed descriptions of the various structural domains and their characteristics. This work is based on field mapping, geological modelling, and limited geotechnical core drilling.

Geotechnical characterization must be a continuous proactive process as new mining areas are accessed. Amec Foster Wheeler recommends that Votorantim commence geotechnical logging of all core holes to provide a more robust geotechnical database for operations.





Geotechnical numerical modelling requires verification through instrumentation and monitoring data. It is recommended that an external third party review be conducted on the current modelling practices as inconsistences were noted in initial element loading, field stress types, extents of external boundaries and meshing quality. These could significantly affect the outcome of the model. As a general recommendation, an effort should be made to construct three-dimensional models of the mine to properly account for the influence of out-of-plane stresses and strains. Amec Foster Wheeler was advised that Votorantim intend to integrate a FLAC3D or similar geotechnical modeling packages into their mine planning process.

Geotechnical conditions due to greater depth may also contribute to increased dilution and reduced recovery. This should be addressed through the stope design process.

There is an opportunity to collect additional geotechnical data from the drilling programs to improve geotechnical knowledge which will assist in improved stope designs and subsequent recovery factors and reduced dilution. Recent field work consisted of geomechanical logging of 2,402 m of drilling, distributed throughout the mineralized bodies and intercepts with mineralized structures.

16.2.3 Stope Sizing

Typical SLOS stope dimensions depend on the ground conditions and are 20 m wide, and usually 20 m long. Stope dimensions may vary because of orebody geometry or local geotechnical conditions. Typically stopes range from 12 to 22 m wide x 25 to 30 m long x 30 m high. In the lower levels of OB-1 and OB-2, the vertical level interval has been reduced to 20 m to manage changing geotechnical conditions with depth.

16.3 Hydrogeological Considerations

The Cerro Lindo Mine does not produce any significant quantities of water and exploration drilling to date has not intersected any water-bearing structures that could introduce major inflows into the mine. The only pumping required is to remove process water from the workings. This water is collected, treated, and recycled for use in the operation.

The underground mine is a net consumer of water; it requires more water than the groundwater that flows in. Considering all groundwater and recirculated water, the mine requires approximately 864 m3/day of makeup water to meet its needs.

16.4 Mining Method Selection

16.4.1 Sublevel Open Stoping

The primary mining method used at Cerro Lindo is SLOS/VRM with paste backfill.





The stopes are accessed on levels of 30 m vertical interval by production crosscuts that extend from a footwall lateral access to the hanging wall. As noted in Section 16.2.3, in the lower levels of OB-1 and OB-2, the vertical level interval has been reduced to 20 m. Stopes are 20 m wide, and usually 20 m long (across strike); stope dimensions may vary because of orebody geometry or local geotechnical conditions. After mining, the stopes are backfilled with cemented paste fill made from the tailings stream. The paste is allowed to cure before an adjacent stope is mined.

Amec Foster Wheeler reviewed the stope design practices used at Cerro Lindo. The stope design practices include consideration of geology, geotechnical, mining, and operational factors. It is the opinion of the QP that these practices are adequate to provide efficient and safe stope designs.

Stopes are mined in a primary–secondary sequence, progressing from hanging wall to footwall, and from bottom to top (Figure 16-3). In future, areas of the mine that cannot be exploited using the standard SLOS method will be extracted using other mining methods.

16.4.2 Mechanized Cut-and-Fill/Drift-and-Fill

Mechanized C&F and D&F mining methods will be used to extract sill pillars, remnants, and irregular shaped portions of the deposit. Although these methods have not previously been used at the Cerro Lindo Mine, they are commonly used in Peru, including at Milpo’s Cerro de Pasco operations (Atacocha and El Porvenir). Paste fill will be the primary backfill method used.

Because of the geometry of the orebodies, sill pillars at Cerro Lindo typically have large horizontal extent, but the vertical thickness is usually limited to about 20 m. The sill pillars will be mined from bottom up, in horizontal slices 4 m thick. For geotechnical and safety reasons, the top slice that intersects the stopes above is not included in the mine plan or in Mineral Reserves.

Figure 16-4 shows a typical sill pillar extraction plan, where the existing development for the tops of the stopes below that have been mined and filled. Mining on the horizon is by 4 mW by 4 mH rooms that are backfilled as soon as the room is completed. After the backfill has reached sufficient strength, the adjacent room is mined and filled.

Because of the multiple accesses into the sill pillars, and the large available area, production planning has assumed that two mining faces, and two backfill rooms are available at all times. As each horizontal slice is completed, the next lift above will be extracted.





Figure 16-3: Typical Sub-Level Stoping Primary/Secondary Mining Sequence Schematic


Figure 16-4: Typical Cut & Fill Stope Plan and Sequence Schematic






Extraction of remnants and pillars that are more vertical in orientation will be by similar methods, except that the restricted footprint area will limit active faces to one mining and one backfill face. In the narrowest zones, only one face may be available for work.

C&F mining will be performed by a mix of Milpo and contractor crews.

16.5 Dilution and Cut-off Grades

Dilution is discussed in Section 15.4.3. A discussion of the cut-off grades is provided in Section 15.4.4.

16.6 Design Assumptions and Design Criteria

The mine plan for the remainder of the LOM is based on a daily production rate of 20,600 t/d for 353 d/a. The annual production rate is, therefore, 7.27 Mt.

Stopes schedules are not driven by metallurgical requirements, although mine planners and grade control geologists do attempt to maintain relatively constant mill head grades.

16.7 Backfill

Stopes are backfilled with cemented paste. The paste plant is located on the surface, near the exhaust portals. It is supplied with whole mill tailings by pipeline from the process plant.

The paste plant operates two identical vacuum filter trains to supply 300 t/hr of filter cake to the paste mixers. The nominal binder percentage is 3% cement, although this can be varied as and if required. Paste is pumped underground to its point of use. Paste distribution pipelines enter the mine through the 1970 m level exhaust portals, and are laid along the floor of the drifts through much of their route.

Total required paste delivery is 5,000 m3/day. The existing plant operates at 95% availability and meets these requirements; however, the plant has very little redundancy and make-up capacity. The plant is equipped with stand-by pumps for delivering paste to the stopes.

Stopes are filled in three vertical lifts. The bottom lift, approximately 5–6 m high, is filled with paste having 5% cement. This is allowed to cure for two days, before the balance of the stope is filled with 3% cement paste.





16.8 Ventilation

The mine ventilation circuit is complex. Figure 16-5 is a high-level schematic of the mine ventilation system. It shows all portals, main fans, airflows, and main interconnecting ramps and raises.

Each orebody is ventilated by a quasi-parallel split serving that orebody alone. Figure 16-6 illustrates the vent circuit for OB-1; this is a typical arrangement seen in all the Cerro Lindo mining areas.

A total of 1.86 Mcfm enter the mine through 10 portals and exhaust through five portals. The ventilation system is powered by 14 main fans, all of which are installed underground on the exhaust circuit. The fans draw exhaust air from different mining areas, and direct it through the dedicated exhaust level to the four exhaust portals on the 1970, 1950, and 1940 m levels. An additional fan is planned in 2017 to complete the vent circuit for OB-7.

After reviewing the size of the mobile equipment fleet currently operating at Cerro Lindo, it is the opinion of the QP that the ventilation system is likely under-capacity and should be increased to properly support the proposed mining rates.

16.9 Underground Infrastructure Facilities

The infrastructure for the mine is relatively straightforward. The mine is accessed via ramps and declines; there is no shaft and associated infrastructure. The key underground facilities are summarized in Table 16-2.

16.10 Production Schedule

The production schedule is based on mining the remaining Mineral Reserve at a rate of 20,600 t/d. A production table is included as Table 16-3, and reported by mining method in Table 16-4. An illustrative figure of the production schedule is included as Figure 16-7, and by mining method in Figure 16-8.

Cerro Lindo is almost completely developed. With the exception of the bottom levels of OB-1 and OB-6, which are yet to be developed, and the pillar recovery and remnant mining, there is very little flexibility in the mining sequence. The mine planners use what flexibility is available to try to maintain uniform head-grades to the concentrator, and avoid geotechnical issues that can be a result of poor stope sequencing.

The initiation of C&F mining beginning in late 2017 will allow the recovery of sill pillars, remnants, and irregular shapes. Trial mining in the remnant areas will begin using miners experienced with C&F methods in other Votorantim operations. After local C&F skills have been developed, mining will commence to extract the large sill pillars above the 1820 m level, and remnants around areas otherwise mined out.





Figure 16-5: Mine Ventilation Schematic

Note: Figure courtesy Milpo, 2017.





Figure 16-6: Ventilation Schematic for OB-1

Note: Figure courtesy Milpo, 2017.

Exhaust flow

Exhaust raise

Intake flow

Intake raise





Table 16-2: Underground Infrastructure Facilities

Area Comment

Ramps Three main ramps provide primary access to and haulage routes from the lower levels; these ramps are being deepened to access the lowermost levels of the mine. In addition, there are local ramps at each orebody which provide communication and access to stopes and development areas.

Electrical power The mine is serviced by a power reticulation system which supplies about 7MW to the mine. Power is distributed to all working areas where appropriate connection boxes are provided for mobile equipment and equipment such as fans and pumps to connect.

Service water Water is at a premium in Cerro Lindo. All water is recycled and re-used as much as possible. Service water is primarily used underground for drilling water, cooling, dust control, and concrete/shotcrete service. Service water is provided from a central plant-wide source and distributed underground via a system of pipelines to all working areas.

Dewatering The mine makes very little water from geological sources. Service water is collected and pumped to the surface where it is treated for reuse.

Compressed air Almost all drilling equipment is electric over hydraulic, and is equipped with on-board air compressors. Compressed air is used for miscellaneous uses such as construction, ground repair, and similar uses. A compressed air reticulation system delivers compressed air from surface compressors to areas where it is needed.

Communications The mine is equipped with a leaky feeder radio system and hard wired telephones to select locations. The mine is serviced by an underground communications center, manned 24 hrs/day, which can contact any site facility, including emergency response, should there be any problems.

Maintenance facilities

There are two service level shops underground. Both are operated by maintenance contractors, Caterpillar and Atlas-Copco. These shops are equipped to perform routine preventive maintenance and light repairs. Mobile equipment requiring major maintenance is taken to shop facilities on the surface. Contractors providing support for the mine maintain their own equipment on surface, and do not use the underground shop facilities.

Fuel and lubricants

Mobile equipment is fueled underground by service equipment, operated by the equipment owner. Each contractor services its own equipment. There is no fuel storage underground. Small quantities of lubricant and hydraulic oils are stored in service bays.

Change rooms Available for Milpo personnel

Warehouse and supply

Most materials are stored on surface in a variety of warehouses and storage yards. Most mining supplies and materials are provided to the contractors through the Milpo warehouse system.





Table 16-3: Production Schedule

Period Unit 2018 2019 2020 2021 2022 2023 2024 2025

Mine plan Mt 7.28 7.29 7.27 7.27 7.36 7.24 3.13 1.81

Zn grade % 1.97 1.92 1.81 1.84 1.86 1.90 1.55 1.63

Cu grade % 0.62 0.77 0.67 0.68 0.71 0.67 0.65 0.78

Pb grade % 0.24 0.22 0.19 0.20 0.19 0.22 0.20 0.20

Ag grade oz/t 0.61 0.70 0.65 0.63 0.64 0.67 0.61 0.72

Ag grade g/t 18.85 21.83 20.30 19.59 19.85 20.74 18.98 22.40

Table 16-4: Production Schedule by Mining Method

Period Unit 2018 2019 2020 2021 2022 2023 2024 2025

SLOS/VRM Mt 6.57 6.22 6.48 6.43 6.49 6.46 2.30 0.44

C&F/D&F Mt 0.33 0.51 0.77 0.80 0.85 0.78 0.83 1.37

Development Mt 0.38 0.56 0.02 0.04 0.01 — — — Total Mt 7.28 7.29 7.27 7.27 7.36 7.24 3.13 1.81

Figure 16-7: Production Schedule

0

5

10

15

20

25

0

1

2

3

4

5

6

7

8

2018 2019 2020 2021 2022 2023 2024 2025

Ag Grade (g/t)

Annual Production (M

t), Grade (%)

Axis Title

Mine Plan Mt Zn Grade % Cu Grade % Pb Grade % Ag Grade g/t






Figure 16-8: Production Schedule by Mining Method

Note: Figure prepared by Amec Foster Wheeler, 2017. VRM = vertical retreat mining (includes SLOS), CAF = cut-and-fill mining (includes D&F).

16.11 Grade Control

Grade control at Cerro Lindo is based on the block model, stope reserve grade, infill drilling, and daily production sampling.

When possible, the mine planners schedule stopes to provide a uniform feed grade to the concentrator. This is not always possible because stope sequencing issues, backfill availability, and development sequencing may override the grade control requirements.

Muck from stopes is sampled every shift. It is not safe to enter the stope to take samples, so the grade control geologist takes a grab sample from either the mucker bucket or the truck bed.

Using the results of the grab samples, and the forecast grades, grade control geologists provide daily draw orders to the mine operations team to prevent spikes in grade delivered to the concentrator.





16.12 Mining Equipment

The mobile equipment fleet for Cerro Lindo is composed of equipment owned by Milpo and numerous contractors. Since each entity is responsible for achieving its own goals independently, each entity has included spare equipment and capacity as it deems necessary. A summary of the fleet by equipment class and operator is shown in Table 16-5.

The haulage truck fleet is made up of a variety of truck manufacturers and capacities. Milpo indicated that the haulage contractors are replacing their smaller and older units with large capacity (50t) units. This will reduce congestion, improve haulage capacity, and reduce the load on the ventilation system.

Availability of mobile equipment is reported to average 85%.


Based on actual operating results and conditions, the geotechnical and hydrological factors included in the plans are suitable.

The mining method being used is appropriate for the deposits being mined. The implementation of mechanized cut & fill mining is appropriate to recover pillars, remnants, and irregular shapes.

The mine plan itself is based on successful mining philosophy and planning, and presents low risk.

Inferred Mineral Resources are not included in the mine plan.

The mobile equipment fleet presented is the actual fleet that is achieving current production targets.

The mine has undergone a number of expansions in the production rate since operations commenced in 2007. All mine infrastructure and supporting facilities should be reviewed to ensure that they meet the needs of the current mine plan and production rate.

A major shutdown in the paste plant will have an immediate impact on stope production, and will be extremely difficult to make up. Amec Foster Wheeler recommends that Milpo review critical spares inventory, and consider the construction of additional backfill plant capacity.

The mine ventilation system appears to be undersized. It should be evaluated and compared against the mobile equipment fleet and compared against the requirements of the complete 20,600 t/d mine plan.





Table 16-5: Equipment Fleet

Operator LHD Truck Drill/Scale Shotcrete Utility Light Vehicle Total by Operator

Milpo 11 0 21 0 8 1 41

Contractor

AESA 3 0 8 0 4 7 22

American 1 12 4 0 5 33 55

Dinet 0 52 0 0 3 9 64

Explomin Del Perú 0 0 0 0 0 5 5

Incimmet 3 0 7 0 14 10 34

Master Drilling 0 0 0 0 0 3 3

Reinsambiental 0 0 0 0 2 0 2

Sandvik 0 0 0 0 0 2 2

Tecnomin Data SRL 0 0 0 0 0 4 4

Transminza 0 0 0 0 3 2 5

TUMI 0 0 0 0 0 3 3

Unicon 0 0 0 16 1 3 20

VYP ICE SAC 0 0 0 0 1 2 3

Total by Equipment Type 18 64 40 16 41 84 263

The number of contractors, and the broad range of mobile equipment underground are greater than normally seen in peer operations. There is the potential to reduce the mobile equipment fleet and manpower by rationalizing the numbers of contractors.





17.0 RECOVERY METHODS

17.1 Process Flow Sheet

The Cerro Lindo plant is a relatively large polymetallic flotation-based concentrator that can process 7.27 Mt/a of ore from underground mining with a utilization of 97%. The mine plan assumes a production rate of 20,600 t/d.


Tailings are thickened and pumped to separate filter plants producing respectively an underground backfill product and dewatered tailings for trucking to and placement in a dry stack tailings disposal storage facility. As much as 90% of the process water from dewatered tailings is recycled with industrial fresh water being supplied from a desalination plant at the coast to meet site and process water make-up requirements.

A simplified flow diagram and flowsheet are shown in Figure 17-1 and Figure 17-2.

17.2 Plant Design

17.2.1 Underground and Surface Ore Handling

Ore crushed underground to less than 100 mm by a primary jaw crusher (1.07 m by 1.40 m) fed by a vibrating grizzly feeder, is conveyed on a series of conveyors (CV 02-05) out of the mine portal (1,945 masl) up about 200 m in elevation to the plant (2,167 masl) and discharged to either one of two plant coarse ore stockpiles. When the primary crusher is stopped for maintenance ore is transported directly to surface by 25–35 t dump trucks and stockpiled in “Cancha 100”. This surface stockpile is reclaimed by a front-end loader 996H and excavator 336D and fed to a mobile primary crusher (Lokotrack). The Lokotrack crushed product discharges onto the underground plant feed overland conveyor (CV04).

17.2.2 Processing Plant

Figure 17-3 shows the layout of the Cerro Lindo processing facilities.

Each plant coarse ore stockpile feeds parallel two-stage screening and crushing and screening circuits with the second stage in closed circuit to produce fine ore with a P80 of 4 mm. Each crushing plant discharges to a fine ore mill feed bins that provide a total of 16 h storage capacity.





Figure 17-1: Cerro Lindo Simplified Overall Process Material Flow Diagram






Figure 17-2: Cerro Lindo Simplified Overall Process Flowsheet






Figure 17-3: Cerro Lindo Process Plant Layout Schematic






The fine ore bins are reclaimed and fed at 900 t/h (total) to two ball mill circuits each in closed circuit with bulk flash flotation and (five-deck) high-frequency Stacker Sizer screens, producing a milled bulk lead-copper rougher flotation feed P80 product of 150 to 170 µm. Zinc sulphate and sodium metabisulphite reagents are added to the grinding circuit for flotation conditioning. One mill circuit installed for the original 5,000 t/d plant is equipped with a 4.41 m diameter by 7.16 m (3,000 HP) ball mill, and the second mill circuit installed for expansions to 21,000 t/d is equipped with two 5.03 m diameter by 7.31 m (4,000 HP) ball mills operating in series with each other.

Bulk lead and copper flotation is conducted initially in tank cells in rougher and scavenger stages (Cells: two 100 m3, four 70 m3, three 50 m3, one 30 m3) at a neutral pH by the addition of xanthate collector and frother reagents. The bulk rougher concentrate is directed to a two-stage cleaner-scavenger flotation circuit (cells: one 30 m3, ten 5 m3, four 10 m3 and two 30 m3 for upgrade.

The bulk lead and copper circuit second cleaner product is combined with the flash flotation bulk concentrate from the grinding circuit and directed to a separation circuit. In the separation flotation circuit, the slurry is conditioned in tanks (two 10 m3) with lime to raise the pH and flotation reagents are added to flotation tank cells (cells: two 5 m3, two 10 m3) to produce separate lead rougher and final copper-rich tailings concentrate streams. The lead rougher concentrate is directed to a two-stage closed-circuit cleaner flotation circuit (cells: four 5 m3, four 5 m3) for upgrade. The final second lead cleaner and copper concentrate streams are subsequently thickened and filtered in vacuum filters to produce separate lead and copper concentrates that are discharged to dedicated copper (1,500 t) and lead (500 t) concrete storage bunkers below the respective filters.

Following lead and copper bulk flotation, the flotation tails are conditioned in tanks by adjusting the pH to 11.0 with lime slurry and the addition of copper sulphate solution. The tails are then floated by adding collector and frother reagents in a three-stage zinc rougher and scavenger tank cell flotation circuit (cells: four 100 m3, four 70 m3, two 70 m3 and six 40 m3) to produce a zinc rougher concentrate. The zinc rougher concentrate is directed to a three-stage closed-circuit cleaner flotation circuit (cells: one 30 m3, nine 10 m3, eight plus three 5 m3, five 5 m3 and three 30 m3 for upgrade). The final zinc cleaner concentrate slurry is subsequently thickened and filtered in vacuum filters to produce zinc concentrate that is discharged to a concrete bunker (3,000 t) below the zinc filters.

Plant final tailings comprise combined zinc rougher and the zinc first cleaner scavenger tailings and are directed to tailings thickening at the plant. The thickened tailings underflow is pumped to a splitter dividing the total tailings roughly about 50% to a paste backfill plant and the remainder to a tailings filtration plant. These plants are located adjacent to each other, below the concentrator elevation, and close to the mine backfill entry portal and dry stack tailings storage facility. Process water recovered by





tailings thickening is clarified and pumped to one of three by 3,600 m3 tanks for recycle to the process. Water recovered by the filtration plants is also directed to these tanks as well as fresh industrial make-up water.

In the backfill and tailings dewatering plants, horizontal vacuum filters are employed to dewater tailings to about 12% moisture. About 90% of the total tailings water is recovered and recycled to the plant as process water.

In the tailings filtration plant, the filter cake is discharged and conveyed to a stockpile adjacent to the plant. This stockpile is reclaimed by front-end loader and trucks for subsequent placement, grading, and compaction on the tailings dry stack storage facilities Pahuaypite 1 and Pahuaypite 2 (see Section 20.6).

Cement and fly-ash are added to the paste plant filter cake discharge in a mixer to produce a paste of about 83% solids content that is pumped underground by high-pressure positive displacement pumps (Putzmeister).

Plant process control, automation and monitoring is effected by a modern, distributed, local programmable logic controller (PLC), and central-control room and camera system, as well as on-line X-ray analysis of concentrate and tailings streams.

Modern weightometers, slurry samplers, mass flow meters, and weigh scales are employed to collect plant mass flow information and samples for metallurgical accounting and management information purposes.

A plant spillage contingency pond (concrete 10,000 m3) is provided (2104 masl) for emergency containment below the elevation of the plant platform and tailings thickeners.

The concentrator building is a metal-frame structure of 19 m high, covered with light galvanized sheet to the operating platform level. Bridge cranes are provided in the grinding and flotation areas for maintenance. The concentrator plant also has the following auxiliary service areas and infrastructure:

Reagent building. Located northeast of the flotation building this is used to store, prepare, and distribute process reagents

Blower and compressor building. Located southeast of the flotation building adjacent to main motor control and electrical substation

Motor control and electrical substation, control room and office building

Laboratory building. Plant and concentrate samples are analyzed and reported on site in a laboratory adjacent to the plant operated by an independent third-party industry specialist assay/analysis contractor

Maintenance workshops. These are provided in the extreme northeast of the main concentrator building to support planned maintenance





Truck weigh-scale and control station. This is installed adjacent to the concentrate load out area.

Reagent warehouse. This is installed to the extreme east of the concentrator to provide storage for delivered reagents.

A summary of the major equipment used in the concentrator, tailings filter and paste plants is shown in Table 17-1.

17.3 Product/Materials Handling

Filtered lead, copper and zinc concentrates are discharged to dedicated storage bunkers below their filters. Each concentrate is reclaimed by front end loader, each bucket is ladle sampled and then loaded into trucks. Trucks are weighed on a truck-scale that is situated adjacent to the concentrate handling area prior to dispatch by road to the Port of Callao for sale in the case of lead and copper concentrates, and to Votorantim’s Cajamarquilla zinc refinery for the treatment of zinc concentrate.

17.4 Energy, Water, and Process Materials Requirements

17.4.1 Power

The power supply is discussed in Section 18.8.

17.4.2 Water

The plant uses process water with up to 90% recycled from tailings dewatering and 10% industrial process water produced by a desalination plant at the coast supplies the mine site and plant make-up water requirements. The desalination plant was expanded in 2016 to output 60 L/s of industrial process water with the addition of a fifth desalination module. This will supply the requirements of the mine site and plant make-up industrial and potable water (treated on mine) requirements to sustain the 20,600 t/d operation.

17.4.3 Consumables

The main process consumables are shown in Table 17-2.





Table 17-1: Concentrator Plant Major Equipment Summary

Item Description Quantity

1 Coarse ore bins UG 500 t (1) and 1,000 t (1) 2

2 Coarse ore feeders HF1655 and HF1345 2

3 Vibrating grizzly feeder 2,600 x 4,500 1

4 Jaw crusher 42 ft x 55 inches 1

5 Coarse ore stockpile 30,000 t 1

6 Secondary screen, 3,000 x 8,000 2

7 Secondary crusher, H6800 2

8 Tertiary screen, 3,600 x 7,000 2

9 Tertiary crusher, H7800 2

10 Fine stockpile 8,000 t 1

11 Fine stockpile 6,000 t 1

12 Ball mill N° 1, 14.5 x 23.5 ft, 3,000 Hp 1

13 High frequency screen derrick, 5 Hp 6

14 Flash flotation unit cell 23 m3 2

15 Ball mill N° 2, 16.5 x 24 ft, 4,000 Hp 2

16 High frequency screen derrick, 5Hp 8



19 Bulk flotation cell 70 m3 2



22 Bulk flotation cleaner cell 10 m3 5



25 Zinc conditioners 100 m3 4

26 Zinc rougher flotation cells 70 m3 4 + 4

27 Zinc rougher flotation cells 40 m3 6

28 Zinc cleaner flotation cells 10 m3 9



31 Zinc regrind mill, 250 Hp, 8 ft x 7 ft with cyclone of 15 inches 1





Item Description Quantity

32 Pb–Cu separation conditioners 10 m3 2

33 Pb–Cu separation flotation cells 5 m3 3 + 1

34 Pb–Cu separation primary cleaner flotation cells 1.5 m3 8

35 Pb–Cu separation secondary cleaner flotation cells 1.5 m3 4

36 Pb concentrate thickener, 6 m diameter 2

37 Pb disc filter, 9 ft x 6 ft diameter 1

38 Cu concentrate thickener, 12 m diameter 1

49 Cu disc filter, 9 ft x 6 ft diameter 2

40 Zn concentrate thickener, 22 m diameter 1

41 Zn disc filter, 9 ft x 6 ft diameter, 9 ft x 12 ft diameter 1 + 2

42 Tailings thickener, 18 m and 22 m 2

43 Tailings paste thickener, 22 m 1

44 Tailings belt filter, 75 m2 3

45 Tailings dewater thickener clarifier, 15 m 1

46 Tailings paste belt filter, 75 m2 2

47 Tailings paste thickener clarifier, 8 m 2

48 Cement silo, 300 t 2

49 Flyash silo, 150 t 2

50 Paste mixer, 1.5 m3, 100 Hp 2

51 Process recycled water tank, 3,600 m3 3

52 Process recycled water treatment plant 1

53 Fresh industrial water tank, 7,200 m3 1

Table 17-2: Process Consumables

Consumables Unit Unit/t $/Unit

Steel Balls Kg 1.00 0.88

Sodium Cyanide Kg 0.14 1.90

Zinc Sulphate Kg 0.26 0.72

Copper Sulphate Kg 0.28 1.93

Zinc Oxide Kg 0.05 2.90

Lime Kg 0.65 0.19

Petroleum D2 (Gal) Gal 0.02 3.00

PAX Z-6 Kg 0.02 3.97

SIPX Z-11 Kg 0.04 1.82






Processing is based on a conventional three-product flotation concentrator plant which has a good history of successfully treating Cerro Lindo polymetallic mineralization to produce separate and marketable lead, zinc and copper concentrates, with credits received for silver in lead and copper.

The plant has been continually expanded since operations began in 2007 at the original design capacity of 5,000 t/d by the addition of parallel crushing, grinding and flotation lines and auxiliary equipment. The current nameplate capacity of the plant of 20,800 t/d is compatible with the 20,600 t/d mine plan production throughput rate. The plant will operate with a high 97% utilization to meet the annual throughput requirement, and has very little redundancy and make-up capacity.

Milpo maintenance staff indicate that there are currently no maintenance issues or concerns with the condition of major main plant equipment and strategic capital spares are maintained to ensure that the plant continually meet the needs of the current mine plan and production rate.

Cerro Lindo ore is considered to have excellent metallurgical characteristics and this is reflected in the high recoveries and concentrate grades achieved historically. No material change to mineralization or ore types is planned in the mine plan to that processed historically, and the historical process plant design, grind, flotation, metallurgical recovery and concentrate grade parameters are considered to be appropriate as the basis of the forward production plan.

Some minor areas of copper mineralization have been identified in the resources with higher levels of secondary copper that could potentially result in some transient zinc losses to lead and zinc penalties in copper if processed in isolation. However, this ore type is appropriately domained in the resource model, and is managed in mine planning through established ore-control blending practices.

There are no specific requirements that must be considered in terms of concentrate treatment. Cerro Lindo concentrate products are considered to be clean, contain no deleterious penalty elements, and are of high quality consistently in excess of minimum specifications with little variability. A very minor penalty is incurred by copper concentrate.

Metallurgical recovery accounting and sampling practices are considered to be adequate. The primary accounting assay head sampler is an in-line pipe slurry type sampler. This type of sampler is not considered to be best industry practice for sampling an accounting stream; a full cross stream sampler is preferred. At low or variable throughputs, some sampling bias might be experienced with a pipe sampler. Current and historical plant metallurgical accounting has been very good with no bias indicated, possibly as a result of the plant capacity and throughput generally being fully





utilized. This should be monitored and reviewed, however, and the potential replacement of the pipe sampler with a cross stream slurry sampler assessed on a cost-benefit basis.





18.0 PROJECT INFRASTRUCTURE

18.1 Introduction

A site infrastructure layout plan is presented in Figure 18-1.

18.2 Road and Logistics

The current access from Lima is via the Panamericana Sur to Chincha (179.4 km) and then via an unpaved dirt road (60 km) Huamanpuquio up the river valley. This dirt road also provides access to the district of Chavín (82 km), 51 km from where it bifurcates into the mine.

Internal roadways connect the various mine-site components including:

Underground mine access portals

Concentrator plant

Waste storage

Tailings

Main offices, administration and camp.

18.3 Stockpiles

Stockpiles are discussed in Section 20.4.

18.4 Waste Rock Storage Facilities

Waste rock storage facilities are discussed in Section 20.5.

18.5 Tailings Storage Facilities

Tailings storage facilities are discussed in Section 20.6.

18.6 Water Management

Water supply and water management is discussed in Section 20.4.





Figure 18-1: Site Layout Plan

Note: Figure courtesy Votorantim, 2017. Relleno sanitario = landfill.





18.7 Built Infrastructure

All infrastructure required for mining and processing operations is constructed. This includes the underground mine, access roads, powerlines, water pipelines, desalination plant, offices and warehouses, accommodations, process plant/concentrator, conveyor systems, waste rock facilities, temporary ore stockpiles, paste-fill plant, and the dry-stack tailings storage facilities. A new fresh water pipeline from the desalination plant on the coast to the mine is projected to be completed during 2017.

A site layout plan was included as Figure 18-1.

Electrical power for the mine site at 220 kV is supplied from the national grid by two independent tied-in sources for redundancy, namely the Chilca Independence 220 kV, through a branch to a substation called Desert. This substation has a twin transformer capacity of 6.66–8.33 MVA (ONAN-ONAF), 220/60 / 22.9 kV and two transmission lines supply power to the mine-site sub-station and the desalination and pumping plant at Jahuay. Secondary substations on site transform the distribution voltage 10 kV to 480 V to 120 V for equipment through distribution boards and motor control centres.

The breakdown in site demand is:

Mine: 7 MW

Desalination and water supply pumping: 4 MW

Plant: 25 MW (28 kWh/t)

Camp: 0.5 MW

Based on the above, the overall site demand required to sustain the 20,600 t/d operation is estimated to be about 36.5 MW, which the current system just meets. The system capacity can be increased further to 50 MW, but this would require an additional incremental investment of about $US15 million.

18.8 Fuel

There is no fuel storage facility underground. All underground equipment is fueled from service trucks which are reloaded on surface. Underground equipment that regularly travels to the surface, such as shotcrete transmixers and supply trucks, are fueled on surface.

18.9 Communications

Communications throughout the mine are by radio and telephone. There is a central control room for the underground mine that serves as a command centre in the event of an emergency.





18.10 Hazard Considerations

The mine site is located in a seismically-active area. A seismic hazard study was completed for the tailings storage facilities (see Section 20.6.5).


Infrastructure required for mining operations has been constructed and is operational. Due to the increases in throughput rate, much of the infrastructure is at, or near, capacity. All mine and process infrastructure and supporting facilities should be reviewed to ensure that they meet the needs of the current mine plan and production rate.





19.0 MARKET STUDIES AND CONTRACTS

19.1 Market Studies

Cerro Lindo is an operating mine with concentrate sales contracts in place. As a result, market studies are not relevant to the operation.

Milpo provided Amec Foster Wheeler with a spreadsheet detailing the concentrate sales for 2015; these supported that no contaminant element penalties are incurred in the zinc or lead concentrates. The zinc and lead concentrates are considered to be premium concentrates.

The copper concentrate attracts a small penalty of about US$4/t due to intermittently higher than penalty lead and zinc levels.

19.2 Commodity Price Projections

Votorantim provided Amec Foster Wheeler with the metal price projections for use in the Report. Votorantim established the pricing using a consensus approach based on long-term analyst and bank forecasts prepared during 2015 and 2016.

Amec Foster Wheeler reviewed the key input information, and considers that the data reflect a range of analyst predictions that are consistent with those in use by Amec Foster Wheeler and industry peers. Based on these sources, Amec Foster Wheeler agrees that Votorantim’s price projections are acceptable as long-term consensus prices for use in mine planning and financial analyses for the Cerro Lindo Operations in the context of this Report.

The long-term price forecasts that are applicable to the Cerro Lindo Operations are summarized in Table 19-1.

No exchange rate assumptions apply for the financial model, since all costs and revenues were estimated on a US dollar basis.

19.3 Streaming Agreement

A Milpo entity has concluded has a silver streaming agreement with Triple Flag Mining Finance Bermuda Ltd (Triple Flag) on silver production from the Cerro Lindo Operations. The agreement includes an upfront payment of US$250 million to Milpo and Triple Flag will pay 10% of the spot silver price at the time of delivery for each ounce of silver delivered under the agreement (Triple Flag, 2016a).

Initially, Triple Flag will be entitled to 65.0% of all payable silver until such time as 19.5 Moz of silver have been delivered under the agreement. Thereafter, Triple Flag Bermuda will be entitled to 25.0% of payable silver (Triple Flag, 2016a). The first delivery of silver occurred in January, 2017.





Table 19-1: Long-term Consensus Commodity Price Projections (US$)

Commodity Unit 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Mineral Reserves Mineral Resources

Zn $/t 2,650 2,723 2,564 2,408 2,338 2,338 2,338 2,338 2,338 2,338 2,338 2,406.03 2,766.93

Cu $/t 5,165 5,256 5,508 6,021 6,042 6,042 6,042 6,042 6,042 6,042 6,042 5,907.94 6,794.13

Pb $/t 2,067 1,955 1,989 1,956 1,933 1,933 1,933 1,933 1,933 1,933 1,933 1,943.16 2,234.64

Ag $/oz 17.51 18.46 18.75 19.31 19.45 18.91 18.91 18.91 18.91 18.91 18.91 18.94 21.78





The silver streaming agreement includes the entire existing Cerro Lindo mine and infrastructure, all located south of the Topará River in what is defined as the “Stream Area” (Triple Flag, 2016b). Triple Flag is also entitled to a right of first refusal on any future streams within the Stream Area, including any future developments north of the Topará River.

19.4 Contracts

19.4.1 Concentrates

Milpo provided Amec Foster Wheeler with supporting documentation that indicates the following main concentrate sales contracts are in place:

A lead concentrate sales framework contract is in place with Glencore International AG

A zinc concentrate sales contract is in place with Trafigura Peru S.A.C.

A copper concentrate sales contract is in place with Louis Dreyfus Commodities Peru S.R.L.

Terms within the contracts appear to be in line with what is publicly available on industry norms.

Additional concentrate sales can be made at Milpo’s discretion. In 2015, sales were recorded to Votorantim and MRI. In 2016, copper concentrate was sold to Glencore, Louis Dreyfus and MRI in 2016 and lead concentrate was sold to Glencore and Trafigura. The majority of the zinc concentrates in 2016 were sent to the Votorantim Cajamarquilla zinc smelter; however, zinc concentrates were also sold to Glencore, Trafigura, and Optamine.

The LOMP assumes that all zinc concentrates will be sold to the Cajamarquilla smelter, and that the realized smelter premium will be credited to the mine as net revenue.

19.4.2 Operations

Contracts have also been used for provision of goods and services required to operate the Cerro Lindo unit, including the mine, and a large portion of all support functions (see Section 21.2). The approximately 32 firms currently under contract are used for items such as underground mining, catering, security, tails haulage and stacking, concentrate hauling, and the mine site laboratory.


Cerro Lindo is an operating mine with concentrate sales contracts in place.





The QP has reviewed the information provided by Votorantim on marketing, contracts, metal price projections and exchange rate forecasts, and note that the information provided is consistent with the source documents used, and that the information is consistent with what is publicly available on industry norms. The information is considered acceptable for use in mine planning and financial analyses for the Cerro Lindo Operations in the context of this Report.

Long-term metal price assumptions used in the Report are based on a consensus of price forecasts for those metals estimated by numerous analysts and major banks. The analyst and bank forecasts are based on many factors that include historical experience, current spot prices, expectations of future market supply, and perceived demand. Some of the long-term metal prices supporting the Mineral Resources, Mineral Reserves, and the economic analysis in this Report are higher than the current market prices. Over a number of years, the actual metal prices can change, either positively or negatively from what was earlier predicted. If the assumed long-term metal prices are not realized, this could have a negative impact on the operation’s financial outcome. At the same time, higher than predicted metal prices could have a positive impact.





20.0 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT

20.1 Introduction

Information regarding the environmental and social considerations for the mining operation are summarized from the approved environmental assessments which include the 2001 Environmental Impact Assessment (EIA; Ecotec, 2001), 2003 update addendum to the EIA (Ecotec, 2003) and its subsequent amendment (Tecnología XXI, 2007). It also includes the EIA for the desalination plant (CESEL, 2007), EIA for the Expansion to 10,000 t/d (Especialistas Ambientales, 2010), its subsequent amendment (Especialistas Ambientales, 2011), an EIA update (SNC Lavalin, 2014) and three separate environmental technical assessment reports (sustainability technical reports or Informe Técnico Sustentatorio) for an expansion to 17,988 t/d (Engineers & Environmental, 2014), process optimization (Votorantim, 2014) and Pahuaypite 1 tailings storage expansion (SRK, 2016a). In February 2017, the Ministry of Energy and Mines, through resolution No. 094-2017-MEM-DGM-DTM/PB, approved an expansion to 20,000 t/d. An EIA update terms of reference for an expansion to 22,500 t/d has been filed with the regulatory authorities. Under Article 3 of Supreme Decree Nº 030-2016-EM there is provision for a mining operation to add 5% additional capacity without needing to file a formal resolution, providing no additional equipment or modifications are required to the plant. Under this article, Milpo can produce at the planned LOM 20,600 t/d rate, as the 600 t/d over the permitted 20,000 t/d rate is within the 5% tolerance allowed under the decree.

According to the 2016 Environmental Report, Milpo invested about US$3.1 million in environmental programs in 2016, an increase in expenditure of almost 270% over 2015. The efficiency of the reverse osmosis plant (for desalination) was optimized through a 10% improvement of the filtration process. Surface water supply increased by 7% with respect to the previous year, and groundwater supply usage decreased by 1.5%. The recirculated water flow has been reduced from 94% to 91%. The Cerro Lindo Mine has an approved discharge for the desalination plant of 1,521 megalitres to the Pacific Ocean. The 2016 Environmental Report states that Milpo invested an estimated US$5 million in 26 separate social programs.

The site Environmental Monitoring Plan was established in the 2001 EIA, and amended in 2007 and 2011. Milpo has been complying with the monitoring requirements since 2009. Amec Foster Wheeler independently verified that the required reporting had been completed for 2016.

Milpo has lodged an application to expand the processing plant up to 22 500 t/d and is currently in the process of an EIA amendment. The National Service of Environmental





Certification (SENACE) approved the Terms of Reference for the EIA during March 2016.

20.2 Baseline Studies

The Cerro Lindo Operations include the process plant, waste rock facilities, dry stack tailings storage facilities, and ancillary facilities, covering an area of about 215 ha, within the influence area of the Chavín district and Chavín community, and the Topará River basin.

The information regarding the baseline conditions for the physical, biological and social components were obtained from the EIA Amendment for the Expansion to 10 000 t/d (Especialistas Ambientales, 2010), an EIA update completed by SNC Lavalin in 2014 (SNC Lavalin, 2014), and a detailed technical memorandum prepared by SRK Consulting in 2016 (SRK, 2016a).

20.2.1 Climate

The Cerro Lindo Mine is located at the Topará valley, which has a semi-warm and very dry climate.

Annual temperatures fluctuate from about 11.4 to 18.5ºC. Relative humidity is higher during the summer months (70–86%) than in winter (typically 30%).

Higher rainfall occurs between December and March and lower rainfall is typically from April to November.

The predominant wind direction is from the southwest.

20.2.2 Air Quality and Noise Levels

Concentrations of the air quality parameters (particulate matter, gases, and metals) that were evaluated through 2010–2014 were found to be below the Peruvian National Standards. Monitoring results were forwarded to the General Directorate of Environmental Affairs (DGAAM) and to the OEFA on a quarterly basis.

Noise levels during the same monitoring timeframe were found to be below the National Standard for industrial areas in both day and night monitoring periods (24 hour period for both measurement intervals).

20.2.3 Water Quality

The mining operation is located at the upper Topará River basin. The local topography is rugged, with deep gorges and ravines. Near to sea level, coastal valleys have developed, and the basal Pucasalla Formation volcanic rocks are covered by more recent alluvial and colluvial sedimentary deposits (SVS, 2012). The Topará River





flows seasonally, with higher flow during the period from January to March. Since there is not much flow available, farming activities typically rely on groundwater.

Surface water quality monitoring for Topará River shows that levels of organic, inorganic and metals concentration parameters stated in the National legislation are below the water quality maximum limits (Inspectorate, 2015).

Sediment loads have been monitored at the same stations as water quality and compared with the Canadian Interim Sediment Quality Guidelines (ISQG) and Probable Effect Level (PEL) standards. The Canadian standards were used since Peru does not currently have such standards. Data show that arsenic, cadmium, mercury, lead and zinc were consistently above the ISQG limits. A study by Amphos 21, (2016) a third-party consultant, confirmed that the elements noted were as a result of natural erosive and weathering processes from the surrounding lithologies, and were not sourced from the mine.

20.2.4 Hydrology

The Topará River basin has a drainage area of 400 km2, a total length of 60 km, and an elevation range between 0 masl and 4,400 masl.

The average flow was estimated in the 2014 EIA update, and was based on four years of data obtained from four hydrometric stations in the period 2008–2012 (SNC Lavalin, 2014). SNC Lavalin noted that the timeframe over which data were collected was limited. The flow obtained was estimated at 54.5 L/s for the section between 1,878 and 1,428 masl.

The EIA update (SNC Lavalin, 2014) identifies the Topará River basin as a dry basin based on the low precipitation records for the area during the 2008–2012 monitoring period (about 63 mm average per year).

20.2.5 Groundwater

The basin can be divided into two sectors in hydrogeological terms:

Andean dissected flank with narrow valleys of less than 100 m wide, and detrital accumulations with thicknesses of <4 m

Foothills to the Andean front and the coastal plains where the valley widens from 400 m to 800 m.

The groundwater level was monitored in 15 wells. The levels found within the wells that had a total depth of 50 m were between 11.3 m and 50 m; for wells that had a total depth of 150 m, the levels were between 8.9 m and 124.6 m; and for wells that had a depth that was greater than 150 m were between 19 m and 170.7 m. The marked differences in water table levels reflect the different installation altitudes of the





monitoring piezometers (1775–2175 masl). Groundwater variation over time was not considered significant.

During normal rainfall years, the precipitation averages about 63 mm, and the annual evaporation average rate is 1,700 mm; thus, the recharge of the groundwater levels from infiltration is negligible.

Local communities do not use groundwater sources for potable or farming purposes.

20.2.6 Groundwater Quality

SNC Lavalin established five monitoring stations for groundwater quality as part of the 2014 EIA update. Results were referentially compared with the National Standards for surface water quality for irrigation, as Peru does not currently have groundwater standards.

Results show that levels of organic, inorganic and metals concentration parameters stated in the National Standards are above the water quality maximum referential limits for irrigation purposes for conductivity; fats, oils and grease; chloride; sulphate; calcium; sodium; nitrate; nitrite; and manganese.

Milpo plans to undertake a hydrogeological study to determine if there have been any changes to the groundwater makeup by comparing a newly-collected dataset to the data collected prior to commencement of mining operations. This study is also planned to investigate whether there is any linkage between groundwater and surface waters.

20.2.7 Seismicity

The mine is situated in a seismically-active portion of the Circum-Pacific Belt (Technology XXI, 2007). Seismic events have occurred since the mine opened in 2007, causing temporary power losses and short-term road closures.

20.2.8 Biological Considerations

The primary flora zones include:

Desert Montaine Under Subtropical scrub (md-MBS) at lower elevations

Desert Montaine Subtropical scrub (md-MS) at higher elevations, and along the western Andes slopes.

These correspond to permanent arid xeric vegetation, and temporary grasslands. The development of vegetative cover is affected by the low rainfall and mountainous terrain. In the region surrounding the mining operation, one vulnerable species (Caesalpinia spinosa (tara)) and one near-threatened species (Acacia macracantha





(Huarango)) have been identified. These grow in dry ravines, and are outside the mine’s area of influence.

Monitoring results show 20 endemic species and seven species that are on the Appendix 2 CITES (2014) list and Supreme Decree N° 043-2006-AG were found in the general area of the operations. Milpo has procedures in place for threatened species management, and has designated conservation areas within the operations for species relocation or transplantation. Once a species has been moved, a full relocation report is prepared. Monitoring of the conservation areas is also undertaken.

There are no natural protected areas within the mine’s area of influence.

20.2.9 Social and Heritage Considerations

Approximately 1,096 people, based on 2007 census figures, live in the Chavín district, and 98% of the population is classified as rural. Due to the elevation and rugged topography, much of the land is classified as unsuitable for agriculture. The primary land use is nomadic cattle grazing, with herds being constantly moved to locations where there is sufficient grass for food.

Chavín village is not regularly used (SNC Lavalin, 2014), with most villagers residing in Chincha. The mine direct influence area covers some regions of the Chavín district, including Marcocancha, Huirpina, Chitiapata, San Juan de Luyo, St. Florian and Chavín, and their respective villages and sectors (refer to Figure 5-1). Towns and villages within the area of Grotius Prado within the Topará River valley include Pauna, Buenavista, Chuspa, La Capilla, and Conoche. The indirect mine influence area is considered to be the entire province of Chincha and the general Ica region, as these areas benefit from mine royalty and taxation payments.

Milpo conducted archeological surveys as part of the EIA process, and holds the following “Nonexistence of Archaeological Remains” (CIRA) certificates (SNC Lavalin, 2014):

CIRA No. 2006-0110, for the Jahuay–Cerro Lindo road, which confirms that there are no archaeological remains in the 60 km long road easement

CIRA No. 2007-253 (July, 2007), for the mining operations, desalination plant area, and the powerline, which confirms that there are no archaeological remains in the 443.92 ha mine direct influence area (area also includes a buffer zone around the operations). One small (2.16 ha) archaeological site, Patahuasi, was identified within the area reviewed for the CIRA permit. Amec Foster Wheeler was not provided with any information on how the site is managed

CIRA No. 2010-381 (September, 2010), for the power transmission line easement.





20.3 Environmental Considerations/Monitoring Programs

The Environmental Monitoring Plan was established in the 2001 EIA, amended in 2007 and 2011, and updated in 2014. Current monitoring requirements are summarized in Table 20-1. Milpo has been subject to the reporting and monitoring requirements outlined in Table 20-1 since 2009.

Milpo provided support that the required monitoring reporting had been completed and sent to the relevant regulatory authorities for the 2016 year.

20.4 Stockpiles

Ore stockpiles are discussed in Section 17.1. Stockpiles and bins are mainly provided for short-term operational ore control and emergency ore handling purposes, and are not intended to provide longer-term storage capacity. Consequently, no oxidation/recovery issues are reported or expected.

20.5 Waste Rock Storage Facilities

Currently four waste rock storage facilities can be used (Knight Piésold, 2015), see Table 20-2. The main facility, No.100, is located in the valley to the north of the process plant (refer to Figure 18-1).

The waste rock storage facilities have a relatively low storage capacity, as a large portion of mine development waste is used as stope backfill.

20.6 Tailings Storage Facility

20.6.1 Overview

Tailings from the process plant are thickened and then further dewatered in either the paste plant to be deposited underground, or to the filter plant to the south of the process plant to be filtered and subsequently placed in two dry-stack storage facilities, Pahuaypite 1 and Pahuaypite 2. These storage facilities are located adjacent to the process plant. Pahuaypite 1 has a capacity of 6.3 Mm3 and Pahuaypite 2 has a 10 Mm3 capacity (16.3 Mm3 total dry stack capacity), with 8.8 Mm3 available as of May, 2017.

The Cerro Lindo filtered tailings deposits include the actual deposits and downstream dams to retain the solids that are eroded from the deposits by rain. The dams are lined with geomembrane and the facilities are built on the natural surface.





Table 20-1: Key Monitoring Requirements

Monitoring Requirement Source Document / License Reporting

Frequency

Consolidated mining and metallurgical activities report

Annually

Environmental sustainability report Article 148 ° of S.D. No. 040-2014-EM Annually

Water quality EIA (Especialistas Ambientales, 2011)

EIA update (SNC Lavalin, 2014) Quarterly

Pumping

R. Adm. No. 057-2009-ANA-ALACH.P, April 8, 2009

Authorization to drill and license to use underground water well Jahuay No. 04, R. Adm. No. 058-2009-ANA-ALACH.P, April 8, 2009

Authorization to drill and license to use underground water well Jahuay No. 05

Monthly

Quality monitoring of effluents from the desalination plant

R. D. No. 0466-2008 / DCG Quarterly

Effluent quality monitoring R. D. No. 0030-2010-ANA-DCPRH Authorization to discharge treated industrial wastewater from the desalination plant

Monthly

Effluent quality monitoring R.D No. -002-2015-ANA-DGCRH. Authorization for discharge of treated industrial wastewater from the desalination plant

Monthly

Participatory surface water quality monitoring EIA (Especialistas Ambientales, 2011)

EIA update (SNC Lavalin, 2014) Quarterly

Annual statement of solid waste management (industrial, domestic waste and industrial zone camp and sanitary waste)

EIA (Especialistas Ambientales, 2011)

EIA update (SNC Lavalin, 2014) Annually

Manifestos Hazardous Solid Waste EIA (Especialistas Ambientales, 2011)

EIA update (SNC Lavalin, 2014

Monthly (when provision is made; presentation of report)

Health and safety (SSO) monthly report EIA (Especialistas Ambientales, 2011)

EIA update (SNC Lavalin, 2014 Monthly

Safety management system audit provisions and occupational health audits for mining companies


EIA update (SNC Lavalin, 2014 Annually

Statement for controlled chemical supplies (IQF)


EIA update (SNC Lavalin, 2014 Monthly

Progress report on mine plan EIA (Especialistas Ambientales, 2011)


Half-yearly (presentation of report)

Yearly report on environmental commitments for the energy supply infrastructure

Article 8-DS.029-94-EM Annually

Air Quality D. S No. 003-2008-MINAM; D.S. N° 074-2001-PCM; D.S. N° 069-2003-PCM


EIA update (SNC Lavalin, 2014 Quarterly

Noise Monitoring D. S No. 085-2003-PCM EIA (Especialistas Ambientales, 2011)






Monitoring Requirement Source Document / License Reporting

Frequency

Non-ionized radiation DS Nº 010-2005-PCM EIA (Especialistas Ambientales, 2011)

EIA update (SNC Lavalin, 2014 Half-yearly

Soil quality monitoring RD No. 239-2011-MEM / AAM


EIA update (SNC Lavalin, 2014 Annually

Sediment quality monitoring RD No. 239-2011-MEM / AAM



Monitoring water biota RD No. 239-2011-MEM / AAM



Quality monitoring groundwater RD No. 239-2011-MEM / AAM



Biological monitoring CL RD No. 239-2011-MEM / AAM DS No. 034-2004-AG DS No. 043-2006-AG



Rainfall station RD No. 239-2011-MEM / AAM-



Continuous sampling, monthly report

Water quality monitoring EIA (Especialistas Ambientales, 2011)


Initially monthly, but quarterly since 2014

Table 20-2: Waste Rock Storage Facilities

Waste Facility Name Easting Northing Elevation m Area

(m2)

Capacity

(m3)

Waste Dump No.1 392 609 8 553 760 1,960 10,925 97,600

Waste Dump No. 2 391 819 8 553 470 2,030 44,615 389,500

Waste Dump No. 7 392 084 8 552 034 2,178 8,960 55,400

Waste Dump No. 100 392 183 8 553 668 1,900 71,385 1,800,000

The tailings storage facilities consist of various platforms with different elevations to allow sun-drying areas as filtered material moisture content is on average 12–14%. As the required moisture content is around 6.5%, drying is necessary to reach the specified compaction. Figure 20-1 displays the general layout of the facilities.

The tailings storage facilities receive approximately 50% of the tailings which are produced by the process plant facility, and the other 50% is dewatered to paste form, and pumped to the underground mine. The percentage varies throughout the year, due to the availability of the free volume underground, but the average remains close to 50/50.





Figure 20-1: Tailings Storage Facilities General Layout Image

Note: Satellite image displaying Pahuaypite 1 and Pahuaypite 2 to the south of the process plant. North is toward the top of the image. The photograph shows a portion of the mine site that is approx. 1 km across.





Filtered tailings are transported to the platforms by truck and placed as specified in the design of the facilities, spread in lifts of 0.3 m, and compacted to 95% standard Proctor density.

20.6.2 Design Criteria

Table 20-3 displays key design criteria for Pahuaypite 1 and Pahuaypite 2.

20.6.3 Site Investigations and Characterisation

The tailings storage facilities are located on the western flank of the Western Cordillera and in the middle section of the valley of the Topará River, which has eroded the geological formations present in the valley, resulting in smooth and steep slopes.

The valleys where the tailings storage facilities are sited are on the left flank of Pahuaypite creek and adjacent to the filtration plant. The flanks have slopes of 15° to 25°.

Subsurface conditions at the site were investigated by drill holes, test pits and seismic refraction surveys. These investigations assisted in the development of the geological/geotechnical model for the site.

The geological/geotechnical model of the site is broadly characterised by outcropping, moderately weathered granodiorite that is partially covered in alluvial deposits as well as colluvial and eluvial deposits that range in thickness from 1–4 m.

The granodiorite is of medium strength, and is slightly to moderately weathered and fractured. At the base of the valley, alluvial deposits were about 4 m thick, and were removed so as to construct the run-off collection dam on rock.

20.6.4 Tailings Characterisation

Geochemical Characterisation

As part of update of the Closure Plan carried out by SVS Ingenieros in 2012, geochemical testing was performed on waste rock and tailings samples. Testing included acid base accounting (ABA), with the values arising from ABA referred to as the maximum potential acidity (MPA) and neutralizing capacity (ANC). Results from the tests indicated that the tailings have the potential to generate acid drainage.





Table 20-3: Tailings Storage Facilities Key Design Parameters

Item Value Unit

Tailings production rate (approx.) 17,000 t/d

Total tailings storage capacity 20 Mm3

Tailings dewatering belt filtered

Tailings deposited underground: tailings filtered and stacked 50:50 %

Tailings fines content (filtration plant) 88% %

Tailings dry density 2.7 t/m3

Pahuaypite 1 capacity 10 Mm3

Pahuaypite 2 capacity 10 Mm3

Pahuaypite 1 final elevation 2,290. m

Maximum height 42 m

Crest width 10 m

Pahuaypite 2 final elevation 2,130 m

Maximum height 57 m

Crest width 8 m

Maximum embankment height 10.9 m

Tailings lift thickness (compacted) 0.3 m

Deposited tailings slopes 1:2 V:H

Leaching tests carried out demonstrated the mobility of various elements (in agreement with the previous closure plan studies) including; copper, zinc and lead. Other elements of interest that are also mobile, to a lesser degree, include; arsenic, cadmium, manganese and nickel. These results reinforced the requirement to deposit the tailings appropriately to comply with environmental standards and Peruvian regulations. Surface water management for the filtered tailings deposits is discussed in this section.

Physical Characteristics

From laboratory testing undertaken, the filtered tailings are classified as a non-plastic or low plasticity silt or ML using the Unified Soil Classification System (USCS).

Design Considerations

In order to design a filtered tailings storage facility with low operating and construction costs, ease of construction, and adequate storage capacity, different geometries based on the same design concept were used.

The high seismicity of the region and rugged topography requires compaction of the filtered tailings. The Pahuaypite 1 and 2 tailings storage facilities consist of tailings at





a moisture content of 12–14% that are placed by direct tipping from a truck onto the platform to dry to an approximate moisture content of 6.5%. Tailings are then spread by tractor and compacted by rollers to a density of 95% standard Proctor.

The design does not permit the formation of a phreatic level at a depth of less than 60 m in the tailings deposit, and results in a higher factor of safety in terms of stability.

The starter dam is the main structure that controls the stability of the dry stack facility. In year zero the starter dam contained the materials that made up the lower platform. The intermediate dam is a temporary structure covered by the filtered tailings.

Figure 20-2 and Figure 20-3 display typical sections through the filtered tailings deposits and the platform configuration that allows rotation between each of the facilities to permit drying of the placed tailings.

Stability

The Peruvian Ministry of Energy and Mines (MEM) states that for design of waste rock and tailings storage facilities, a seismic event with a return period of 475 years and a probable maximum flood with a return period of 500 years for the closure stage should be considered. During the operation phase, it is recommended to use a seismic event with a return period of 100 years and a probable maximum flood with a return period of 100 years.

A seismic hazard study was completed by Zergeosystem (2010) for the Cerro Lindo operation and this study estimated a maximum design horizontal acceleration of 0.38 g for rock and 0.46 g for soils, both for a return period of 475 years. Similarly, for a 100 year return period, an acceleration of 0.23 g in soil and rock was estimated. The seismic coefficient used in the analysis for operating conditions was 0.12 and for post-closure the coefficient was 0.20.

The minimum factors of safety (FS) for the physical stability of tailings deposits are:

FS minimum static conditions: 1.5

FS minimum for pseudo-static operating conditions (return period of 100 years): 1.2

FS pseudo-static minimum closing conditions (return period of 475 years): 1.0.

An evaluation of the potential for liquefaction in the deposited tailings was carried out by SVS Ingenieros in 2010, and the study concluded that, given the compacted tailings characteristics, the tailings do not have the potential to liquefy.





Figure 20-2: Section through Pahuaypite 1

Figure 20-3: Section through Pahuaypite 2

Note: Figures courtesy Votorantim, 2017. Cota = level; banqueta de 5 m = 5 m bench; linea del Proyecto = line of projection. In Pahuaypite 2, green = deposited in 2013; blue = deposited in 2014, and brown = deposited in 2015.

Deposited 2010

Deposited 2010

Deposited 2011

Deposited 2011

Deposited 2012

Deposited 2012

Deposited 2013

Deposited 2013

Deposited 2014

Deposited 2014

Platform 3

Original surface

Historic deposits

SECTION EJE-1

Platform 2 Current surface

Platform 1

Platform 4





Water Management

Surface drainage and rainfall are managed through channels and a check dam at the crest and at the perimeter of the deposits, directing flows to lined dams at the base of the deposits.

Perimeter channels are trapezoidal and lined with masonry and geotextile with variable dimensions of between 0.70 m to 3.00 m depth and bases ranging from 2.00 m to 5.00 m. Downstream of the Pahuaypite 1 and Pahuaypite 2 tailings deposits, contingency dams to store sediment and water run-off have been constructed.

The dams are lined with double high-density polyethylene (HDPE) geomembrane that is 2.00 mm thick, and which is anchored at the perimeter. Water collected in the contingency dams is pumped back to the filter plant.

A drainage system was constructed at the foundation/base of the tailings deposits (basal drainage) to conduct surface flows from the foundation toward the contingency dam. The system consists of a drainage ditch lined in geotextile to protect the filter.

20.6.5 Construction and Operation

The construction of the tailings stack used data measurements including compaction, density, and moisture data, and topographic profiles to verify the compliance of the built stack with the geometric design assumptions.

According to the design requirements, the degree of compaction must attain 95% for a compacted lift thickness of 0.3 m.

During 2015 the results shown in Table 20-4 were obtained for the principal construction characteristics of Pahuaypite 1 and Pahuaypite 2 as reported in the annual evaluations (Geoconsultaria, 2016).

As noted in the annual inspection reports, recommended values were achieved for both filtered tailings deposits and the safety of each is considered satisfactory (Geoconsultaria, 2016).

20.6.6 Monitoring

Instrumentation in the filtered tailings deposits is monitored regularly, is formally registered (Geoconsultaria, 2016), and an annual audit is undertaken by an independent consultant. The most recent annual evaluation of both tailings storage facilities and associated contingency dams was carried out in April, 2016 by Geoconsultoria (documents MP02-RT-05 and MP02-RT-06).





Table 20-4: Construction Requirements and Field Results

Characteristic Required Pahuaypite 1 Pahuaypite 2

Compaction 95% 96 to 98% 96 to 98%

Minimum Dry density 2.76 t/m³ 2.96 t/m³ 3.08 t/m³

Max. Compaction moisture Content 9% 6.3 % average 6.3 % average

The Geoconsultoria evaluation concluded that, based on the interpretation of monitoring data and routine site inspections, the condition of the tailings storage facilities and associated contingency dams can be considered satisfactory in terms of safety. Geoconsultoria noted that groundwater levels measured by piezometers in the area of tailings deposits indicated that the level is below the foundation. The report summarized that topographic survey points (monuments) do not currently indicate deformations, and concluded that the deposits are in a stable condition. Geoconsultoria determined that the tailings facilities are being constructed correctly in terms of geometry and compacted as specified in the design with adequate values of grade of compaction and moisture content achieved.

20.6.7 Tailings Storage Facilities and Contingency Dam Review

A review of the tailings storage facilities and associated contingency dams was undertaken by Ausenco Peru SAC in February, 2017 (Ausenco, 2017). This review included a site inspection of Pahuaypite 1 and Pahuaypite 2 tailings facilities and associated contingency dams, as well as a review of the facility designs, construction, operations manual, emergency plan, geotechnical monitoring, groundwater monitoring, emergency response plans and closure plan.

Recommendations from the Ausenco report include:

Close monitoring of tension cracks noted in the Pahuaypite 1 platform

Verification of changes in sections of the drainage channels in both platforms

Carry out a dam break study and area of inundation plan.

The dam break and inundation plan could then be incorporated into the emergency action plan along with dates for emergency drills to be carried out by Votorantim’s operational personnel.

Ausenco recommended a review and sensitivity analysis of the compaction methods of the filtered tailings to consider compaction of tailings in the outer shell of the stack, with the objective of reducing the volume of material to be compacted, while maintaining an acceptable level of geotechnical stability of the structures.





20.6.8 Closure

The tailings deposits surfaces are to be rehabilitated to conform to the natural slope and shape of the area, so as to support the integration and physical stability of the deposits.

The maintenance period is expected to be five years, with bi-annual inspections for the first two years and annual inspections for the last three years.

Inspections will determine if the cover placed is providing sufficient protection. Where deterioration of cover material is noted, the recuperation and or replacement of material is to be undertaken as soon as possible.

Additional information on closure requirements is provided in Section 20.9.

20.7 Water Management

20.7.1 Infrastructure

The primary driver for water management is to ensure that the quality and quantity of water sources on the environmental influence area of the Cerro Lindo mine site is not impacted by the operation.

Hydraulic infrastructure designs have been implemented to ensure hydrologic stability such that only minimum work or periodic maintenance is required in general. However, the occurrence of an extreme event may require a hydrological maintenance program to be implemented, due to erosion or sedimentation and/or unforeseen clean up and repair. This would apply throughout the drainage system and would include channels around ponds, dams and tailings deposits.

Surface drainage and rainfall are managed through channels and a check dam at the crest and at the perimeter of the deposits, directing flows to lined dams at the base of the deposits. Water collected in the contingency dams is pumped back to the filter plant.

Perimeter channels are trapezoidal, and lined with masonry and geotextile with variable dimensions of 0.70 m to 3.00 m depth and bases ranging from 2–5 m. Downstream of the Pahuaypite 1 and Pahuaypite 2 tailings deposits, contingency dams have been constructed to store sediment and water run-off.

A drainage system was constructed at the foundation/base of the tailings deposits (basal drainage) to conduct surface flows from the foundation toward the contingency dam. The system consists of a drainage ditch lined in geotextile to protect the filter.

The mine has implemented an effluent treatment plant that consists of a basic system of mine water clarification using three contingency ponds. The method consists of





settling sediments by their own weight in the first pond, adding a lime slurry in the second to obtain a pH between 7–8, and controlling conductivity to regulate initial metal elements present in the water. The third pond assists with precipitation of fines and water clarification prior to the water being recirculated to the process plant.

Run-off from the filtered tailings deposits is captured in two geomembrane-lined dams at the downstream toe of the Pahuaypite 1 and Pahuaypite 2 tailings facilities. A check dam is located at the head of the valley of the Pahuaypite 2 facility to intercept run-off from further upstream.

Clean water is diverted around the mine infrastructure, tailings, and waste rock facilities where possible.

Water in the tailings deposits contains reagent residues from the process plant, and as a result, water that comes into contact with the tailings material is considered to be contact water, and is sent to the effluent treatment plant. Because the facilities are not covered, some of the water that comes into contact with the tailings facilities may not fully drain to the effluent treatment plant, and there is a risk that this water may come into soil contact.

20.7.2 Water Supply and Water Treatment

The original EIA (Ecotec, 2001) described the Topará Rover as the water supply for the Project and included a total of three water treatment plants for mining effluents, domestic wastewater, and potable water. The EIA also stated that the treated mining effluents would be discharged. However, the 2003 EIA addendum (Ecotec, 2003) updated some of the hydrological assumptions for the Project, such as replacing the fresh water supply sourced from the Topará Rover with desalinated and recycled water; eliminating the water dam, and eliminating mining effluent discharge (100% of the mining effluents recirculated), thereby making the Project “zero mining discharge”.

The desalination plant discharges to Jahuay Beach, which was approved by Directorate Resolution No. 002-2015-ANA-DGCRH for an annual flow of 2 270 592 m3 (72 L/s). The discharge permit was current until January 2017; and Votorantim confirmed that a renewal application had been lodged. Votorantim also noted that the ANA had provided a response that a new or updated resolution will not be required, as Votorantim is not planning to amend or change any of the activities that were allowed under the permit.

An additional permit was approved for the installation of submarine pipelines through which the effluent from the desalination process would be discharged into the ocean (Directorate Resolution No 0706-2012-MGP/DCG).

A permit to recycle a total annual 3,689,712 m3 volume of industrial wastewater has been granted (Directorate Resolution No. 1382/2007/DIGESA/SA (May, 2007). This





permit remains in effect as long as Votorantim does not amend or change any of the activities that were allowed under the permit.

Recycled water was to be obtained from the thickening mineral process, thickening tailings process and filter process. In addition, an overflow pond and storm events pond were to be constructed. All the environmental impact statements approved up to date have confirmed the “zero mining discharge” condition for the operations.

An updated hydrological water balance for the mine should be developed to verify the water supply, and outline a water management strategy for the proposed 22,500 t/d expansion case covered in the terms of reference for a future EIA that was approved on 31 March, 2016.

A permit is in place for the re-use of domestic wastewater for irrigation purposes (Directorate Resolution No 107-2014-ANA-AAA-Cañete-Fortaleza), and allows for an amount of 0.28 L/s for three years. The permit expires in October 2018. Based on information in a water balance (2016) document provided by Milpo, the total amount being recycled is currently 0.61 L/s. Wastewater usage above the originally permitted amount of wastewater is allowed, providing all of the water is actually wastewater.

The water supply for the Cerro Lindo mine includes the treatment of all recirculated water before entering the water back to the process plant (Engineers & Environmental, 2014). It also includes pumping sea water into the desalination plant for a reverse osmosis treatment and supply to the process plant at a rate of 54.7 L/s for use in industrial and campsite areas (Engineers & Environmental, 2014). The total water re-use flow is 520.5 L/s (Engineers & Environmental, 2014), of which 484 L/s is used in the process plant. The water balance provided by Milpo, and reviewed by Amec Foster Wheeler, had a water input rate of 52.09 L/s, which is slightly below the 54.7 L/s described by Engineers & Environmental (2014). The 2016 water balance has 2,645.23 ML/a (84 L/s) sourced from the desalination plant. A further 519.11 ML/a (16.5 L/s) comes from groundwater wells. Milpo is authorized to extract 3,153.6 ML/a under RA-033-2012-ANA-ALA MOC for the desalination plant. The amount actually abstracted in the 2016 water balance is under the permitted figure. The permit has no expiry date.

A permit for groundwater extraction from five boreholes is current, and allows for an extraction of 16.46 L/s (Water Balance, Milpo 2016). Permits RA-026-2011-ANA-ALA-SJ; RA-027-2011-ANA-ALA-SJ; RA-028-2011-ANA-ALA-SJ; RA-057-2009-ANA-ALACH.P; RA -058-2009-ANA-ALACH.P allow Milpo to extract 1513.11 ML/a from groundwater sources; again, the amount in the water balance is below this figure. All of these permits have no expiry date.





Water is used both for industrial and domestic purposes (Figure 20-4). Industrial purposes include the processing plant, mine, water treatment plants and irrigation. Domestic purposes include campsite and offices.

The pumping system from the desalination plant is divided into three stages to transport the water approximately 45 km to an elevation of 2,200 m. Three pump stations are located along the 6 inch pipeline route from the desalination plant to the mine site. The desalination water supply system is shown in Figure 20-5.

20.7.3 Monitoring

The approved monitoring plan requires surface and groundwater quality monitoring as stated in the EIA modification for the expansion to 10 000 MTD (Especialistas Ambientales, 2011). This EIA approved six surface and four groundwater monitoring stations.

Votorantim provided monitoring reports for these surface water stations for 2015. The reports show monitored parameters to be below the limit established at the under the General Water Law of 1972. Groundwater monitoring reports were not presented.

Environmental technical assessment reports completed by Milpo in 2014, Engineers & Environmental in 2014, and SRK Consulting in 2016, updated the number of monitoring stations to a total of 13 surface water quality, six sediment load, and five groundwater quality stations.

Amec Foster Wheeler assumes that Cerro Lindo mine does not have an approved “Adequacy and Implementation Plan for Environmental Quality Standards”, thus three out of the four reports for 2015 (the 2016 reports were not provided) were compared with the General Water Law (1972) instead of the actual regulation (Supreme Decree No 002-2008-MINAM). The plan should be reviewed to ensure it adequately covers contact and non-contact water monitoring requirements and meets the applicable standards.

20.8 Soil Management

In compliance with the Supreme Decree No. 002-2013-MINAM, which established the national soil quality standards, and Ministry Resolution No. 085-2014-MINAM, which enforces the obligation to present a Soil Decontamination Plan, the Cerro Lindo mine has completed a report for identifying soil-contaminated sites (Knight Piésold, 2015).





Figure 20-4: Water Usage Schematic


Figure 20-5: Location Plan Showing Desalination Plant and Pipeline to Site






The report provisionally identified three sites with potential soil contamination for evaluation. After the fieldwork and laboratory analysis were completed and results evaluated, the findings were that none of the sites had elevated concentrations of organic or inorganic components. Votorantim concluded that it was unlikely that the Project would need for to proceed to the next stage, which was characterization of soil contaminants. The report was presented to the Ministry of Energy and Mines during April 2015 and is still undergoing evaluation. There could be recommendations or requirements provided as a result of the review that may need to be addressed.

Amec Foster Wheeler notes that confirmation of the acceptance and approval of the report and its findings should be obtained in writing from the relevant regulatory authorities.

20.9 Closure Plan

A formal Closure Plan was prepared in 2009, and has subsequently been modified and updated/amended three times.

The initial Closure Plan (Knight Piésold, 2009) was approved by Directorate Resolution No. 326-2009-MEM / AAM and incorporates closure measures for the components approved in the 2004 EIA under R. D. No. 325-2004/MEM/AAM. These components included: two mine portals; the processing plant; two tailings plants (filtered tailings and paste plant) and one tailings storage facility (Pahuaypite 1); three waste rock facilities (waste rock facilities N°1, N°2 and N°7); four water treatment plants (for potable water and desalination water); pipeline; domestic wastewater treatment plant; industrial effluent treatment plant (contingency/sediment ponds); and ancillary facilities such as the campsite, gas station, access roads, and electrical supply.

The approved period for implementing closure and post closure was 18 years. Post closure monitoring, assumed to extend for five years after closure, will include monitoring of hydrological, physical, geochemical and biological stability.

The total amount for the closure plan was estimated at approximately $13.8 million at the time. Amec Foster Wheeler was advised that closing costs are reviewed annually, and are included as costs in each operational centre for budgeting, cost control, and financial planning.

The first amendment of the Closure Plan (SVS, 2012) was approved by RD 432-2012-MEM-AAM. This amendment addressed operational changes approved in the EIA for the production expansion to 10,000 t/d. The new components formalized in the amendment included: mine components consisting of mine portals and ventilation raises; a processing plant expansion; addition of two new tailings plants (filter and paste); one new tailings facility and contingency pond (Pahuaypite 2); waste rock facilities (N°100); a landfill; a new treatment plant for recovered water; and ancillary





facilities (water and energy supply, workshops; storage facilities, campsites). The closure budget was estimated at approximately US$26 million at the time.

Milpo presented an update to the Closure Plan (SVS, 2012), which was approved by RD No. 084-2013-MEM/AAM in compliance with the Supreme Decree No. 033-2005-EM. The update included process plant expansion to 14,990 t/d (RD 298-2011-MEM-DGMN).

The second Closure Plan amendment (Geoservice, 2016) was approved by RD 287-2016-MEM-DGAAM. This second amendment addressed the operational changes included in the environmental technical assessment reports approved under RD 069-2014-MEM-DGAAM (expansion to 10,000 t/d) and RD 391-2014-MEM-DGAAM (expansion to 17,988 t/d). The total updated closure budget estimate at the time was about US$36.2 million to be expended in or about 2027. Almost 50% of the budget was intended to be spent on progressive closure.

Under that Closure Plan, surface components will be dismantled, and the ground surfaces will be leveled and contoured. No revegetation or rehabilitation of the aquatic habitat is proposed.

During closure and post-closure, maintenance would include inspection of all channels, regular cleaning, and verification of surfaces in and around facilities. The maintenance period is projected to be five years; semi-annual maintenance will be undertaken during the first two years and will be performed annually for the three subsequent years.

A summary of the key considerations for the Closure Plan are included in Table 20-5.

The Closure Plan was designed to address remediation of the operational areas, and to meet Peruvian engineering requirements for such plans. The approved plans meet Peruvian regulations.

Under article 2 of RD 287-2016-MEM-DGAAM, Milpo was requested to provide an annual financial guarantee to the Ministry of Energy and Mines, using estimation factors set out in the decree. A letter of guarantee was provided for 2017–2018, and must be updated annually.

Amec Foster Wheeler notes that after the current EIA for the proposed 22,500 t/d option is approved by the Ministry of Energy and Mines, a new Closure Plan should be prepared and presented to the relevant authorities.

The financial analysis in Section 22 includes a closure allocation of about US$36 million.





Table 20-5: Closure Plan Considerations

Area Closure Requirements and Considerations

Mine facilities area

All facilities should be dismantled; concrete plugs installed; topography contoured to match original surfaces. Contact water is not considered to be closure risk.

Process plant

All facilities should be dismantled; surface contoured, and placement of a cover layer. The ground surface will be sloped to avoid water accumulations.

General site Progressive closure activities will be undertaken to remove unsuitable materials. Drainage ditches will be installed, and a cover layer laid down.

Tailings storage facility

Progressive closure activities will be undertaken to prevent water from accumulating in the facilities; drainage ditches will be installed, and a cover layer laid down.

Desalination plant

All facilities should be dismantled; surface contoured, and placement of a cover layer.

Inorganic waste and landfill

All facilities should be dismantled; surface contoured, and placement of a cover layer.

Laydown area

Progressive closure activities will be undertaken to remove unsuitable materials. Drainage ditches will be installed, the surface contoured as required and a cover layer laid down.

Power and transmission lines

All facilities should be dismantled; surface contoured as required, and placement of a cover layer where required.

Roads Surface should be contoured as required, and placement of a cover layer where required.

20.10 Permitting

The legal framework for mining activities in Peru is enforced by the following main legislation:

General Mining Law, Supreme Decree No. 014-92

General Environmental Law No. 28611 and its amendment by Legislative Decree No. 1055

National Environmental Impact Assessment Law No. 27446

Regulation for the National Environmental Impact Assessment Law, Supreme Decree No. 019-2009-MINAM

Regulation for Environmental Management and Protection for Mining Exploitation, Storage and Transport Activities, approved by Supreme Decree. No. 040-2014-EM

Legislative Decree No. 757, Law for Private Investment Growth.

The former environmental protection legislation (Supreme Decree 016-93-EM) dictated that when the expansion of a process plant was less than 50%, an application for the approval of the expansion was the only requirement, an additional environmental





impact assessment was not stipulated. In accordance with this legislation, Votorantim obtained three expansion approvals (one for expansion of the plant capacity to 14,990 t/d, and two for expansions of the approved mining area to incorporate additional ground from exploration concessions).

In 2009, the Ministry of Environment, through the Supreme Decree N° 019-2009-MINAM, a requirement that requires companies to update information in their current EIAs during the fifth year after the start of the Project. Supreme Decree No 040-2014-EM established that mining companies with more than one approved EIA and amendments should provide an Integrated EIA in accordance with the Terms of Reference approved by Ministry Resolution No 116-2015-MEM/DM.

Votorantim updated the EIA during 2014 (SNC Lavalin, 2014). This update was presented to the Ministry of Energy and Mines in September 2014. Amec Foster Wheeler could not confirm that the updated EIA had been approved by the Ministry of Energy and Mines.

Votorantim filed a detailed technical memorandum, prepared by SRK Consulting in 2016, in accordance with Supreme Decree No 040-2014-EM. This allowed Votorantim to formalize several components that had not previously been approved in the existing environmental assessments, including: four mine portals; 10 storage/warehouse facilities (core storage, reagent storage, small equipment and maintenance sheds); access road; expansion/modification of eight campsites; expansion of the gas station and an additional gas tank installation at the process plant; water diversion pipelines; construction of an office at the tailings area and nine additional workshops; modifications to the solid waste landfill and storage areas, waste rock facility, three ponds, electric substation, desalination system, process plant, and water treatment plant areas.

The existing monitoring plan was not modified. Currently the monitoring stations include air quality, environmental noise, non-ionizing radiation, soil quality, superficial water quality, sediment loads, groundwater quality, marine water and effluent quality, wildlife, and hydrobiology stations.

The key permits required for the operation include the permits listed in Table 20-6.

Continuous reviews should be undertaken to ensure proper compliance and effective monitoring, and to ensure that the requirements of each permit are reported to the relevant national authority in compliance with legal requirements. Milpo monitors and reviews the permit status for the operations using an ISO 14001 compliant environmental management system.





Table 20-6: Key Permits

Regulatory Authority

Permit Number Purpose Grant Date Duration (validity)

Ministry of Energy and Mines - General Directorate for Mining

RD N° 015-2017-C Mining operation certificate 03/11/2016 31/12/2017

RD 190-2007-MEM-DGM /V

Authorization for the construction and installation of the Cerro Lindo processing plant and ancillary/complementary facilities.

17/02/2007 -—

RD 992-2009 MEM-DGM/V

Authorization for construction of the expansion to 7,490 t/d.

21/12/2009 -—

RD 895-2007-MEM-DGM/V

Processing concession title and authorization to operate the processing plant.

13/07/2007 -—

RD No. 119-2007-MEM -DGM/V

Authorization for processing plant. 13/02/2007 -—


Authorization and construction approval to expand the process plant throughput rate from 5,000 to 7,490 t/d.

21/12/2009 -—


Authorization to increase plant throughput from 5,000 to 7,490 t/d.

14/01/2010 -—

RD 298-2011-MEM-DGMN

Authorization to increase plant throughput from 7,490 to 14,990 t/d.

16/08/2011 -—


Authorization and construction approval of the process plant expansion to 17,988 t/d.

19/09/2014 -—


Authorization for construction of activities listed in the detailed technical memorandum and expansion of process plant from 17,988 t/d to 20 000 t/d.

06/02/2017 -—


Authorization to construct and operate the Pahuaypite 2 filtered tailings facility and contingency dams.

10/08/2011 -—


Authorization for construction and operation of contingency dams associated with the tailings storage facilities.

18/01/2012 -—


Authorization for operating the tailings facility and contingency pond.

03/05/2012 -—


Authorization for expansion of mineral tenure for construction and operation of a fresh water storage tank and associated infrastructure.

10/08/2012 -—


Authorization for expansion of mineral tenure

16/08/2013 -—








Operating authorization for temporary storage of tailings to an elevation of 2,030 m, and associated contingency dam.

25/04/2012 -—


Authorization for construction and installation of additional infrastructure for optimization of metallurgical processes.

02/28/2014 -—


Authorization for operation of the 325 HP Loco track crusher.

05/11/2015 -—

-RD No. 232-2006-MEM/DGM -RD No. 249-2010-MEM/DGM 30/12/2010 -RD No. 768-2011-MEM/DGM -RD No. 148-2013-MEM/DGM -RD No. 1772-2015-MEM/DGM

Authorization for use of ANFO explosives in underground mining works.

-26/05/2006 -30/12/2010 -10/06/2011 -No expiration -09/16/2015

-—

RD No. 139-2007-MEM/DGM

Mining plan approval and authorization to commence underground mining activities commence underground mining of metal ores using SLOS and paste fill.

17/08/2007 -—


Technical mining report for Pahuaypite 1 tailings facility

06/09/2016 -—

R.S. N° 363-2014-MEM/DM

Easement for transmission line. 13/08/2014 -—

R.S. N° 082-2013-MEM/DM

Easement for transmission line. 01/03/2013 -—

Ministry of Energy and Mines – General Directorate of Environmental Affairs

RD No. 326-2009-MEM-AAM

Mine closure plan. 20/10/2009 -—

RD No. 432-2012-MEM/AAM

First modification of mine closure plan.

19/12/2012 -—

RD No. 084-2013-MEM/AAM

Update of mine closure plan. 22/03/2013 -—

RD 287-2016-MEM-DGAAM

Second modification of mine closure plan.

29/09/2016 -—

RD 325-2004 MEM-AAM Environmental impact study. 02/07/2004 -—

RD 134-2007-MEM-AAM Environmental impact study for the supply of water, power and desalination plant.

02/04/2007 -—

RD 204-2007-MEM-AAM First EIA amendment. 08/06/2007 -—

RD 168-2010-MEM-AAM Second EIA amendment (expansion of the process plant to 10,000 t/d)

17/05/2010 -—







RD 391-2014-MEM-AAM Environmental technical assessment report (expansion of the process plant to 17,988 t/d)

31/07/2014 -—


Environmental technical assessment report for the modification of equipment and components in the process plant (by-pass and third mill).

30/01/2014 -—


Detailed technical memorandum. 01/09/2016 -—

National Certification Service for Sustainable Investments - SENACE

RD N° 048-2016-SENACE/DCA

Environmental technical assessment report for expansion of Pahuaypite 1 and contingency pond.

18/07/2016 -—

Ministry of Transport and Communications

RD 037-2006-MTC-16 Environmental impact study for the Jahuay–Cerro Lindo access road.

30/05/2006 -—

RD 0698-2015-MTC/28 Authorization to establish and operate three radio stations.

05/25/2015 5 years

Ministry of Culture

CIRA No. 2006-0110

Certificate of absence of archaeological remains for the proposed route of the Jahuay–Cerro Lindo access road.

19/12/2006 -—

CIRA Certificate No. 2007-253

Certificate of absence of archaeological remains for the industrial zone of the Cerro Lindo mining project.

23/07/2007 -—

CIRA Certificate No. 2010-381

Certificate of absence of archaeological remains for the transmission line easement.

08/09/2010 -—

R.D 128-2013-DGPC-VMPCIC/MC

Archeological monitoring plan (for new transmission line).

21/02/2013 -—

Nuclear Peruvian Institute

License No 3818.C2 Register for installation of fixed nuclear measurer.

17/07/2007 -—

Res. 2285-16-IPEN/OTAN Register for installation of fixed nuclear measurer

23/08/2016 22/08/2021







General Directorate for Environmental Health

RD1382/2007/DIGESA/SA Sanitary authorization for the project treatment system, and recirculation of treated wastewater.

17/05/2007 -—

National Water Authority

RA 026/2011-ANA-ALA S.J.

License use of groundwater for mining purposes from the water borehole IRHS-179.

29/04/2011 -—


License use of groundwater for mining purposes from the water well IRHS-180.

29/04/2011 -—



29/04/2011 -—

RA N° 057-2009-ANAALACH-P


08/04/2009 -—

RA N° 058-2009-ANAALACH-P


08/04/2009 -—

RA 033-2012-ANA-ALA MOC

License to use seawater for desalination.

02/03/2012 -—

RA 107-2014-ANA-AAA-Cañete FORTRESS

Authorization reuse of treated domestic wastewater from the Domestic Wastewater Treatment Plant (PTARD).

02/05/2014 3 years (from 31/10/2012)

RA 002-2015-ANA-DGCRH

Authorization for discharge of treated industrial wastewater.

08/01/2015 07/01/2019

Peruvian Navy V.200-1853 V.200-2166

Authorization for discharge from three high density polyethylene subsea pipelines.

04/09/201203/10/2012

DICSCAMEC RD No. 2034-IN-1703-2 Operating licence renewal for a Type A explosives magazine.

19/06/2012 -—

SUCAMEC

176-2016-SUCAMEC-Gepp

Global authorization for the acquisition and use of explosives, supplies and related items.

27/01/2016 -—

RD N° 261-2017-SUCAMEC-DGPP

Global authorization for the use of explosives.

02/02/2017 02/02/2018

RD N° 126-2015-SUCAMEC-GEPP

Operating license for underground explosive storage facility.

20/01/2015 20/01/2020

RD 2034-2012-IN-1703-2 Operating license for underground explosive storage facility.

19/06/2012 19/06/2017

Ministry of Energy and Mines – General Directorate of Electricity

RS No. 004-2008-EM Concession granting Milpo the right to construct and operate electric power transmission lines.

07/02/2008 -—

RS No. 006-2012-EM Amendment to Concession Contract No. 310-2007.

21/01/2012 -—

OSINERGMIN Register No 0002-CDFJ-11-2007

Direct consumer of liquid fuels for 20,000 gallons of diesel.

14/07/2007 -—







Resolution No 5616-2013-OS/GFHL

Modifies the Register No 0002-CDFJ-11-2007 (extension to 40,000 gallons).

30/04/2013 -—

OSINERGMIN No. 2653-2012-OS / CORUs

Approval of favorable technical report for modification No. 207890-M-051-2012 to grant Milpo the status of direct consumer of liquid fuels.

23/03/2012 -—

OSINERGMIN No. 1265-2013-OSGFHL

Approval of favorable technical report for modification No. 233736-M-051-2013 to grant Milpo the status of direct consumer of liquid fuels.

3/10/2013 -—

General Directorate for Captaincy and Coast Guard

R. D. 034-2007-DCG Right to use an aquatic area for installation of a submarine pipeline.

07/02/2007 -—

R. D. 466-2008-DCG Amendment of right to use of an aquatic area for installation of six subsea pipelines.

09/07/2008 -—

R. D. 0706-2012-MPG/ DCG

Amendment of the right to use of an aquatic area to expand the water area for the installation of five subsea pipelines (R. D. 466-2008-DCG).

23/07/2012 23/07/2042

Captaincy resolution No. 121-2015

Right to use of an aquatic area to install four signal buoys

05/06/2015 05/06/2020

SUNAT

31111 90000426 Registration register confirming two-yearly property audit.

27/08/2013 -—

6C2000-2015-R-0000891 Renewal of registration register confirming two-yearly property audit.

08/28/2015 -—

20.11 Considerations of Social and Community Impacts

Milpo has a Social Agreement for the development of the Chavin district signed in November, 2005. Through this agreement, Milpo and the Community would jointly develop sustainable projects or build public infrastructure. The agreement cover items such as social investment, employment, participatory monitoring, and resolution disputes.

The Social Agreement committee is chaired by the Rural Community of Chavín, and Chavín municipality. Milpo and other social organization representatives are also included in the committee membership.

The first addendum for the Social Agreement was signed during January 2009. This defined what Milpo’s economic contributions to the community would be, and requested the approval of the EIA prior to the 10,000 t/d mine expansion.





The second addendum for the Social Agreement was signed in November 2011, and approved the implementation of a Development Program for Chavín and the Topará valley in the framework of a Community Action Plan and Development Plan. It also restated Milpo’s economic contribution obligations to the community.

The third addendum for the Social Agreement included the Topará Valley Association, was signed during 2012, and had the purpose of establishing fixed amounts of economic resources that Milpo would provide to the community. It also defined the guidelines for the Development Program for Chavín and the Topará River valley.

According to the 2016 “Annual Memory” document (Votorantim, 2016) the following social programs were implemented in 2016:

Access to surface lands program

Social agreements program

Resettlement program

Community relations management program

Conflict mitigation program

Communication for development program

Commitment fulfillment program

Water and sanitary program

Telecommunications and electrification program

Healthy housing program

Community infrastructure program

Road improvement program

Education and health infrastructure program

Vulnerable groups program

Quality of education improvement program

Health services improvement program

Infant nutrition program

Work creation program

Opportunities for superior education program

Andes productive program





Agricultural productive process enhancement program

Fisheries productive process enhancement program

Enhancement of entrepreneurship program

Local leaders’ capacities enhancement program

Efficient water storage program

Reforestation and deforestation program.

Milpo has also implemented participative monitoring for air and noise quality, surface water quality, and ocean water quality.

Milpo completed two rounds of negotiation with the Cerro Lindo labor unions.

Milpo has a complaints resolution program that registered 92 cases in 2016. A total of 42 of the complaints were resolved, 18 are still ongoing, and in 32 cases, outcomes are under negotiation.


Amec Foster Wheeler recommends that Milpo considers acquisition of additional surface rights to cover areas where some infrastructure (e.g. pipelines or ventilation installations) may be located if the mine decides on further expansions.

The current Closure Plan engineering design was prepared to meet the Peruvian national requirements. Votorantim considers the closure cost estimate to be at a feasibility study-level of accuracy. The closure costs should be regularly updated during the life-of-mine.

Continuous reviews are conducted to ensure proper compliance and effective monitoring, and to ensure that the requirements of each permit are reported annually to the relevant national authority in compliance with legal requirements.

Specific areas that require careful management or follow-up activities include:

Monitor the development of the EIA amendment that supports the mine expansion to 22,500 t/d, as approved in the March 31, 2016 terms of reference for an updated EIA

Ensure that the environmental management plan adequately addresses and monitors any potential additional effects on water quality

Conduct continuous reviews to ensure proper compliance and effective monitoring, and to ensure that the requirements of each permit are reported to the relevant national authority in compliance with legal requirements





Update the Closure Plan including the components that were regularized through the detailed technical report approved by Directorate Resolution No 258-2016-MEM-DGAAM

Develop an updated hydrological water balance for the mine to verify the water supply and management for the proposed 22,500 t/d expansion

Review the “Adequacy and Implementation Plan for Environmental Quality Standards” document

Confirm if, after the ongoing EIA is approved by the Ministry of Energy and Mines, a new Closure Plan will be required to be approved by the relevant regulatory authorities

Evaluate the potential to acquire surface land easements in areas that may be required to support mining operations, should additional expansion plans be contemplated

Maintain the commitments made under the Social Agreement.





21.0 CAPITAL AND OPERATING COSTS

21.1 Introduction

The Cerro Lindo Mine has been in production since 2007, and has been in an expansion phase since 2011. It is reaching a steady state production rate of 20,600 t/d. Costs are well understood and no major changes are expected through the LOM.


21.2.1 Basis of Estimate

There are no major capital expenditures scheduled beyond 2017.

21.2.2 Mine Capital Costs

All expansion and modernization projects for the Cerro Lindo Operations are scheduled to be completed by the end of 2018. These projects are underway and are designed to strengthen the ability of the mine to maintain planned production.

Other than that, there are no additional major capital expenditures planned for the mine during the LOM.

21.2.3 Infrastructure Capital Costs

There are no new capital expenditures scheduled for the Infrastructure group during LOM. Sustaining capital costs are described in Section 21.2.4.

21.2.4 Sustaining Capital

Sustaining capital expenditures for the Cerro Lindo Mine are grouped under a single classification: Sostenimiento. Going forward through the LOM, Milpo has budgeted US$10 million per year ($11.8 million in 2018) for sustaining capital for the entire operation, but has not itemized the budget. The sustaining capital figures included in the financial model are reported to be based on historical averages and allowances, not detailed planning.

In the later years of a typical mining operation, sustaining capital is primarily focused on replacing operating equipment.

In the case of the mine itself, the level of development activities will decrease as the mine approaches the end of the LOM, so the need to replace development equipment will reduce to zero. Contractors own and operate much of the mobile equipment, and they are responsible for its replacement. As a result, the requirements for sustaining capital for the mine will decrease as the Mineral Reserves are exhausted.





All of the proposed C&F mining will be performed by contractors. They will supply their own equipment, so capital will not be required from the Votorantim operations to acquire the C&F mining equipment.

Section 21.3.4 contains a discussion of the process-related costs.

The QPs consider the sustaining capital budget to be sufficient for this operation.

21.2.5 Capital Cost Summary

The capital budget for 2017 through to the end of the LOM is presented in Table 21-1. Both capital and sustaining capital costs are reported. These costs include closure and reclamation costs.


The Cerro Lindo mine is operated by a team of Milpo personnel who perform management and technical functions, and critical operating tasks such as production mining, and process, backfill, and tailing plant operations. Other activities such as mine development, ore haulage, and other functions are done by contractors.

21.3.1 Manpower

The 2017 employee figures as at April 2017 are provided in Table 21-2.

Cerro Lindo makes extensive use of contractors to perform certain tasks for the operation. A list of all 32 contractors, with employee headcounts as at April 2017 is provided as Table 21-3.

21.3.2 Basis of Estimate

Operating costs forecast for the LOM are based on historical costs at Cerro Lindo, and on planned changes in mine operations.

Table 21-4 and Figure 21-1 show the actual costs for 2013, 2014, 2015, and 2016.

Table 21-5 and Figure 21-2 show the operating cost forecast for the LOM.





Table 21-1: LOM Capital Cost Estimate (US$ x 1,000)

Area Purpose 2018 2019 2020 2021 2022 2023 2024 2025

Mine 19,6650 12,529 12,442 9,533 9,696 10,005 3,810 487

Dispatch / network communications Modernization 2,163 197 — — — — — —

New Pahuaypite dry stack facility trencher Sustaining 5,408 492 — — — — — —

Mine projects Sustaining — 1,082 1,180 1,180 1,180 639 590 266

Putzmeister pump Sustaining 1,623 147 — — — — — —

Mobile equipment replacement Sustaining 9,713 9,785 10,436 7,744 7,926 8,776 2,901 197

Scoops 4,489 4,897 4,897 6,033 5,000 4,897 408 —

Simbas 2,596 1,210 2,685 236 974 2,685 236 —

Jumbos 649 1,573 1,652 138 — — 1,514 138

Scaler 1,460 1,755 959 885 1,696 959 723 59

Rockbreaker 519 350 244 452 256 236 20 —

Mine plan replacement Environment 541 590 590 590 590 590 320 25

Investment in technology and information IT 216 236 236 20 — — — —

Plant 2,283 2,773 963 3,675 2,491 197 — —

New power line Sustaining 865 79 — — — — — —

Girdle Reinforcement: 2nd stage Sustaining 865 79 — — — — — —

Critical plant equipment Sustaining 553 2,616 963 3,675 2,491 197 — —

General Infrastructure 8,924 6,111 482 — — — — —

23 km of pipeline to 10 in Sustaining 4,327 2,989 236 — — — — —

Camp construction and infrastructure Sustaining 2,704 2,950 246 — — — — —

Transformers Sustaining 811 74 — — — — — —

Main access road improvements Environment 1,082 98 — — — — — —

Environment 1,298 659 590 590 590 266 236 20

Sanitation expansion Environment 541 49 — — — — — —

Upgrade potable water plant Environment 216 20 — — — — — —

Environmental plans Environment 541 590 590 590 590 266 236 20

Carry Over 2017 2,969

Total General 35,139 22,072 14,477 13,798 12,777 10,468 4,046 506

Note: Totals may not sum due to rounding





Table 21-2: Personnel Count

Employer Personnel Numbers

Milpo 583

Contractors 2,145

Total 2,698

Table 21-3: Contractor Personnel Numbers (May, 2017)

Company Area Service Total Headcount

1 Administracion De Empresas S.A.C. Mine Mine Excavations 142

2 American Renta Car S.A.C. Surface Car Rental 83

3 Atlas Copco Peruana S.A. Maintenance Equipment Maintenance Services 39

4 Dinet Mine Ore and Waste Transport 164

5 Distribuidora De Mangueras Hidraulicas S.A.C

Maintenance Hydraulic Hosepipes 5

6 E.K.A. Mining S.A.C. Maintenance Maintenance Plant 68

7 Empresa De Transportes Y Servicios Genuinos S.C.R.L.

Plant Trucks Rental 36

8 Explomin Geology DDH Drilling 122

9 Ferreyros S.A. Maintenance Equipment Maintenance Services 20

10 Impromec Maintenance Crane Rental 7

11 Incimmet S.A. Mine

Mine Excavations

326 Auxiliary Services

Civil Works and Fill

12 Inspectorate Services Peru S.A.C. Geology Sample Analysis 13

13 Jyn Soluciones Mineras S.A.C Environmental Area

Forestation, irrigation and cleaning 45

14 Master Drilling Peru S.A.C. Mine Raise Drilling RB 42

15 Movil Tours RRHH Personnel transportation services 23

16 Proactiva Environmental Area Perú S.A.C.(Veolia)

Plant Water Treatment 19

17 Prosegur RRHH Security Services 46

18 Reimsambiental S.A.C. Environmental Area

Collection of Solid Waste 22

19 S.G. Natclar S.A.C. RRHH Medical Services 11

20 Sandvik Del Peru S.A. Maintenance Equipment Maintenance Services 16

21 Saturno Plant Concentrate Transport 35

22 Sodexo RRHH Food Services

157 Hostel Services

23 Systems Support & Services S.A. Management IT Support 2

24 Tecnomin Data E I R Ltda Maintenance Maintenance Plant 165





Company Area Service Total Headcount

25 Transporte Minero Za E.I.R.L. Environmental Area

Roads Spraying 15

26 Transportes San Alejandro S.A.C Logistic Cement Transport 42

27 Union De Concreteras S.A Mine Shotcrete Services 110

28 V Y P Ice S.A.C. Projects Metalworking Projects 82

29 Transaltisa S.A. Logistic Freight Transport 143

30 Tumi Mine Perforacion chimeneas slot 30

31 Ransa Logistic Perforacion chimeneas slot 12

32 Disal RRHH Bathrooms Rental 3

33 Lv Contratistas Generales RRHH Personnal Transport 10

34 Ecoserm - Chavin Logistic Aggregates Transport 26

35 Jmd RRHH Civil Works and Fill 11

36 Los Sauces Maquinarias Projects Metalworking Projects 53

Total 2,145

Table 21-4: Cash Costs, 2013–2016

Area Units 2013 2014 2015 2016

Production

Days per Period 365 365 365 366

Tonnes produced kt 5,382.5 5,925.9 6,760.5 7,345.2

t/d 14,746 16,235 18,522 20,069

Cash Costs

Mine US$/dmt 13.79 16.13 13.78 13.58

Plant US$/dmt 7.16 6.57 6.67 6.26

Administration US$/dmt 1.59 2.92 1.53 1.74

Maintenance US$/dmt 6.61 6.02 5.50 5.40

Other Services US$/dmt - 0.86 0.72 0.82

Total US$/dmt $29.15 $32.50 $28.20 27.80





Figure 21-1: Cash Costs, 2013–2016


Figure 21-2: Operating Costs, 2013–2016






Table 21-5: Operating Cost Forecast

Cost Centre Units 2018 2019 2020 2021 2022 2023 2024 2025

Annual Production Mt 7.28 7.29 7.27 7.27 7.36 7.24 3.13 1.81

Mining US$/t 17.41 17.61 15.24 14.55 14.54 13.53 21.87 33.31

Plant US$/t 6.34 6.41 6.52 6.59 6.69 6.81 8.43 7.91

Maintenance US$/t 4.85 4.89 4.98 5.03 5.06 5.19 9.33 9.90

G&A US$/t 1.99 1.99 2.04 2.04 2.07 2.11 3.90 5.75

Totals US$/t 30.59 30.91 28.78 28.21 28.36 27.63 43.54 56.88

Figure 21-3: Operating Cost Forecast


21.3.3 Mine Operating Costs

Mine operating costs include all development, including ramps to new levels, vertical development connecting these levels, exploration development, and miscellaneous permanent infrastructure such as sumps, air doors, fan installations, and substations. In addition to development, operating costs include stope preparation (including additional ground support), production drill and blast, mucking, all rock haulage, backfill system, and mine services.

Development for the LOM Mineral Reserves is expected to be completed in 2018, so it is reasonable to expect operating costs to decrease in the later years. This will be partially offset by the fact that haulage costs from the bottom levels will increase, and the production of ore by C&F methods, which has a higher unit cost, will be increasing.





The last two years of the LOMP (2024 and 2025) show an increase in operating costs per tonne. This is due to the fact that many costs are fixed and do not decrease with the production rate. This is common in mines reaching the end of their life.

21.3.4 Process Operating Costs

Table 21-6 summarizes the historical and LOM forecast process operating cost by plant area and variable and fixed cost components.

Plant energy costs are based on a plant consumption of about 32.5 kWh/t and a unit cost of US$0.064/kWh.

Unit operating costs compare reasonably with benchmarking at this level of operation.

The overall processing cost of US$9.08/t is considered relatively high but is largely driven by tailings dewatering and dry stack placement costs of about US$3.06/t. When considering only the direct concentrator cost of about US$6.02/t, this benchmarks reasonably with other similar polymetallic concentrators with conventional slurry tailings disposal. Historical costs were used as the basis for cost projections, and were divided into fixed and variable cost components. The LOM costs have been determined by applying fixed costs and variable costs at the respective forecast tonnages. This is considered a reasonable basis for cost forecasts.

21.3.5 Infrastructure Operating Costs

Infrastructure operating costs are based on historical costs. This is appropriate as production rates have reached a steady state.

21.3.6 General and Administrative Operating Costs

G&A operating costs are based on historical costs. This is appropriate as production rates have reached a steady state.


Capital costs are reported inclusive of sustaining capital and closure and reclamation costs

Operating costs are based on historical values and known, site-specific factors.





Table 21-6: Process Operating Costs

Year Unit 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Production milled kt 5,854 6,761 7,345 7,246 7,282 7,292 7,272 7,275 7,357 7,240 3,131 1,809

Total Process (excluding maintenance)

$/t 6.65 6.67 6.26 6.57 6.34 6.41 6.52 6.59 6.69 6.81 8.43 7.91

Variable cost $/t 6.05 6.11 5.77 6.21 5.92 5.99 6.06 6.13 6.20 6.30 7.40 6.56

Fixed cost $/t 0.60 0.56 0.49 0.36 0.42 0.42 0.46 0.46 0.50 0.51 1.03 1.36

Total Process (excluding maintenance)

$M 38.93 45.09 45.98 47.61 46.18 46.74 47.43 47.94 49.23 49.30 26.39 14.32

Variable cost $M 35.44 41.30 42.41 44.97 43.15 43.68 44.08 44.59 45.58 45.62 23.18 11.86

Fixed cost $M 3.49 3.79 3.57 2.64 3.04 3.07 3.35 3.35 3.65 3.69 3.22 2.45

Plant maintenance $/t 2.70 2.68 2.96 3.04 3.07 3.35 3.35 3.65 3.69 3.22 2.45

$M 18.25 19.71 21.47 21.47 21.69 22.04 22.24 22.65 22.85 17.79 10.86

Total plant (including maintenance)

$/t 9.37 8.94 9.53 9.38 9.48 9.87 9.94 10.34 10.50 11.65 10.37

$M 63.35 65.69 69.08 67.66 68.43 69.48 70.18 71.88 72.15 44.19 25.18

Process area (including maintenance)

$/t 9.37 8.94

Crushing $/t 1.27 1.21

Grinding $/t 2.56 2.38

Flotation $/t 0.89 0.90

Concentrate handling

$/t 0.01 0.01

Tailings deposition $/t 1.17 1.26

Tailings filtration $/t 2.03 1.80

Plant supervision $/t 0.75 0.81

Other services $/t 0.59 0.47

Laboratory $/t 0.10 0.11





Year Unit 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Processing cost metrics

Tailings filtration/deposit

$/t 3.20 3.06

Total process (excluding tailings)

$/t 6.17 5.89





22.0 ECONOMIC ANALYSIS

22.1 Forward Looking Information

The results of the economic analyses discussed in this section represent forward- looking information as defined under Canadian securities law. The results depend on inputs that are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those presented here. Information that is forward-looking includes:

Mineral Resource and Mineral Reserve estimates

Assumed commodity prices

The proposed mine production plan

Projected mining and process recovery rates

Sustaining costs and proposed operating costs

Assumptions as to closure costs and closure requirements

Assumptions as to environmental, permitting and social risks.

Additional risks to the forward-looking information include:

Changes to costs of production from what is assumed

Changes to government regulations, tax rates or royalties, or other government levies

Unrecognized environmental risks

Unanticipated reclamation expenses

Unexpected variations in quantity of mineralised material, grade or recovery rates

Geotechnical and hydrogeological considerations during mining being different from what was assumed

Failure of plant, equipment or processes to operate as anticipated

Accidents, labour disputes and other risks of the mining industry.

22.2 Methodology Used

The financial model that supports the Mineral Reserve declaration is a stand-alone model which calculates annual cash flows based on scheduled ore production, assumed processing recoveries, metal sale prices, projected operating and capital costs and estimated taxes.





The Project has been valued using a discounted cash flow (DCF) approach on a 100% basis. Estimates have been prepared for all the individual elements of cash revenue and cash expenditures for ongoing operations. Cash flows are assumed to occur at the end of each period.

22.3 Financial Model Parameters

Votorantim produced a stand-alone financial model for the Cerro Lindo Operations that was checked and validated by Amec Foster Wheeler. The model included the mine and mill production plans, and all on-site and off-site costs, smelter and refinery payment terms and costs, and estimated taxes. All costs and prices are in real 2018 US dollars.

22.3.1 Mineral Reserves and Mine Life

The financial model covers life of mine production from 2018 to 2025.

Mineral Reserves in the financial model are as summarized in Section 15.

22.3.2 Metallurgical Recoveries

The financial model includes the projected metal recoveries based on head grade regressions presented in Section 13.

22.3.3 Smelting and Refining Terms

The model assumes the following for concentrate treatment and refining:

All zinc concentrates are treated at Votorantim’s Cajamarquilla smelter. The assumed conversion cost is US$482 to US$492/t contained zinc in concentrate, at an overall zinc recovery of 93.8%. Transport costs of approximately $27/dmt are included.

Copper concentrates are sold externally and include provision for typical copper treatment and refining charges (US$75 to US$90/dmt concentrate, 7.5 to 9 c/lb payable copper in concentrate), and transport costs of approximately US$60/dmt. Payment is received for 95.8% of copper contained in copper concentrate.

Lead concentrates are sold externally and include provision for typical lead treatment charges (US$196 to US$279/dmt concentrate), and transport costs of approximately US$90/dmt. Payment is received for 95% of lead contained in lead concentrate.

Silver is paid at 90% and 95% in copper and lead concentrate respectively. There is a refining charge of $0.50/payable oz Ag in copper concentrate, and US$1.74/payable oz Ag in lead concentrate.





22.3.4 Metal Prices

Metal prices used were provided in Section 19 (refer to Table 19-1).

Because the zinc concentrate is internally treated at the Cajamarquilla smelter, a zinc premium is assigned to the mine. This adds revenue of US$105/t of recovered zinc at the smelter.

22.3.5 Capital Costs

The financial model includes the LOM capital cost schedule, totalling US$113 million (see Section 21.1).

22.3.6 Operating Costs

The financial model includes operating costs outlined in Section 21.2, totalling US$1,511 million over the LOM.

22.3.7 Working Capital

The financial model includes a schedule of working capital. This includes adjustments for inventories, accounts receivable and accounts payable. Votorantim has estimated that the Cerro Lindo Mine will hold US$94 million of working capital at the end of 2017, based on the Cerro Lindo Operations balance sheet of 31 March, 2017. This is primarily due to high levels of accounts receivables. The change in working capital over the LOM contributes US$60 million to the Cerro Lindo NPV.

22.3.8 Taxes and Royalties

The taxation inputs for the model were generated and applied by Votorantim. Votorantim advised that the following considerations were used (Bertoncini, 2017).

Corporate Income Tax

Peruvian companies are subject to income tax on their Peruvian and non-Peruvian income. The general income tax rate is 29.50% from 2017 onwards. The general tax rate was 30.00% until 2014 and 28.00% for 2015 and 2016.

To promote investments in Peru, investors and Peruvian companies may enter into an agreement with the Peruvian government, called the Legal Stability Agreement, to stabilize guarantees for a period of time. In March 2002, Milpo entered into a guarantee and investment protection contract, or stability agreement, with the Mining Ministry (Ministerio de Energía y Minas or MINEM), through director’s resolution N. 1332-2007-MEM/DGM. Pursuant to the stability agreement, Milpo can apply a special income tax rate of 20.00% since 2007 for the Cerro Lindo Mine, which is valid through 2021. The 29.50% income tax rate will become applicable on January 1, 2022.





Depreciation

Depreciation of fixed assets is calculated under the straight-line method to allocate their cost less residual value over the estimated useful life of the assets or the mine. The useful life is different for accounting and tax purposes (Table 22-1).

For the model, the assumption adopted is to consider an estimated tax deduction of depreciation of 50.00% of the accounting depreciation amount, since in general the useful life for tax purposes is longer than the useful life for accounting purposes.

Value-Added Tax

Sale of goods within Peruvian territory, services performed or used in Peru and importation of goods into Peru are subject to a value-added tax (VAT) called Impuesto General a las Ventas (IGV) at 18.00%. Exports of goods are exempt.

The amount of the IGV is payable on a monthly basis, and the IGV levied on the purchase of goods and services (IGV input) may be used as fiscal credit against the IGV generated by the Peruvian company’s operations (IGV output).

The model considers the sales and costs net of IGV.

Net Operating Losses

Votorantim did not consider any operating or non-operating tax losses in the financial model.

Mining Fees

Mining Royalties

The Mining Royalty Law was amended by Law No. 29,788 on September 28, 2011 and, effective October 1, 2011, holders of mining concessions are required to pay a mining royalty (Regalía Minera) to the Peruvian government for the exploitation of metallic and non-metallic resources. The amount of the royalty is payable on a quarterly basis and is equal to the greater of (i) an amount determined in accordance with a statutory scale of tax rates from 1.00 to 12.00% based on a company operating profit margin and applied to the company’s operating profit and (ii) 1% of a company’s net sales, in each case during the applicable quarter.

The scale of marginal and effective rates is provided in Table 22-2.





Table 22-1: Depreciation (useful life in years)

Asset Accounting Tax

Buildings and other constructions Between 5 and 20 years 34 years

Machinery and equipment Between 3 and 10 years 5 years

Vehicles 3 years 5 years

Furniture and fixtures Between 3 and 5 years 10 years

Other equipment Between 3 and 10 years 10 years

Computer equipment 3 years 4 years

Table 22-2: Operating Profit Margin, Mining Royalties

Scale No. Lower Limit (Li)

Upper Limit (Ls)

Marginal Rate(Tmg)

Effective Rate(TE)

1 0% 10% 1.00 1.00%

2 10% 15% 1.75 1.30%

3 15% 20% 2.50 1.60%

4 20% 25% 3.25 1.90%

5 25% 30% 4.00 2.30%

6 30% 35% 4.75 2.60%

7 35% 40% 5.50 3.00%

8 40% 45% 6.25 3.30%

9 45% 50% 7.00 3.70%

10 50% 55% 7.75 4.10%

11 55% 60% 8.50 4.40%

12 60% 65% 9.25 4.80%

13 65% 70% 10.00 5.20%

14 70% 75% 10.75 5.60%

15 75% 80% 11.50 5.90%

16 More than 80% 12.00% 6.30%





The model considers the effective rate (TE) which is calculated as follows:

Where:

TE: Effective rate

Ls: Upper limit

Li: Lower limit

MgO: Operating margin of the Company, which is the result of the operating income over revenue (from 0% to 100%).

Tmg: Marginal rate (from 1.00 to 12.00%).

Special Mining Tax

According to Law No. 29789, published on September 28, 2011, the holders of mining concessions should pay a Special Mining Tax (Impuesto Especial a la Minería, or IEM) to the Peruvian government, payable on a quarterly basis and calculated on the basis of the operating profit derived exclusively from the sale of metallic resources, with rates between 2.00% and 8.40%.

The marginal and effective rate scale is included as Table 22-3.

The model considers the effective rate (TE) which is calculated with the same formula as the effective rate to mining royalties, but with different marginal rates (Tmg):

Where:

TE: effective rate.

Ls: Higher Limit

Li: Lower Limit







Table 22-3: Operating Profit Margin, Special Mining Tax


Upper Limit (Ls)

Marginal Rate(Tmg)

Effective Rate(TE)

1 0% 10% 2.00% 2.00%

2 10% 15% 2.40% 2.13%

3 15% 20% 2.80% 2.30%

4 20% 25% 3.20% 2.48%

5 25% 30% 3.60% 2.67%

6 30% 35% 4.00% 2.86%

7 35% 40% 4.40% 3.05%

8 40% 45% 4.80% 3.24%

9 45% 50% 5.20% 3.44%

10 50% 55% 5.60% 3.64%

11 55% 60% 6.00% 3.83%

12 60% 65% 6.40% 4.03%

13 65% 70% 6.80% 4.23%

14 70% 75% 7.20% 4.43%

15 75% 80% 7.60% 4.63%

16 80% 85% 8.00% 4.82%

17 More than 85% 8.40% 5.02%

Special Charge on Mining

According to Law No. 29790, holders of mining concessions that are subject to administrative legal stability under an Agreement of Guarantees and Measures for Investment Protection entered into with the Ministry of Energy and Mining shall pay a Special Charge on Mining (Gravamen Especial a la Mineria or GEM). The Special Charge on Mining is payable on a quarterly basis and is calculated on the basis of the operating profit derived exclusively from the sale of metallic resources with rates between 4.00% and 13.12%. Holders of a stability agreement signed until 2004, which is Milpo´s case, are not subject to the mining royalty during the period of the stability agreement.

The scale of marginal and effective rates is provided in Table 22-4.





Table 22-4: Operating Profit Margin, Special Charge on Mining


Upper Limit (Ls)

Marginal Rate(Tmg)

Effective Rate(TE)

1 0% 10% 4.00 4.00%

2 10% 15% 4.57 4.19%

3 15% 20% 5.14 4.43%

4 20% 25% 5.71 4.68%

5 25% 30% 6.28 4.95%

6 30% 35% 6.85 5.22%

7 35% 40% 7.42 5.50%

8 40% 45% 7.99 5.77%

9 45% 50% 8.56 6.05%

10 50% 55% 9.13 6.33%

11 55% 60% 9.70 6.61%

12 60% 65% 10.27 6.89%

13 65% 70% 10.84 7.18%

14 70% 75% 11.41 7.46%

15 75% 80% 11.98 7.74%

16 80% 85% 12.55 8.02%

17 More than 85% 13.12% 8.31%

The model considers the effective rate (TE) which is calculated with the same formula as the effective rate to mining royalties and special mining tax, but with different marginal rates (Tmg):

Where:

TE: Effective rate

Ls: Upper limit

Li: Lower limit



Therefore, the Cerro Lindo Operations are currently subject to the Special Charge on Mining (GEM) at effective tax rates between 4.00% and 8.31% until 2021, and as of 2022 it will be subject to the Special Mining Tax (IEM) at effective tax rates between 2.00% and 5.02% as well as the Mining royalty.





Profit Sharing

Workers of mining companies are entitled to a profit sharing of 8% of taxable profits (worker’s participation payment), which is distributed among them with reference to the number of days worked during the year (50% of the shareable amount), and to their total income (the other 50%). This is a deductible expense for corporate income tax purposes.

Summary

Table 22-5 summarizes the Peruvian taxes and participation.

22.3.9 Closure Costs and Salvage Value

Closure costs of US$36.2 million are included in the financial model in 2026.

22.3.10 Financing

The model incorporates silver streaming in accordance with the Triple Flag agreement. There are no other financing costs associated with the Cerro Lindo Operations.

22.3.11 Inflation

There is no allowance for inflation in the financial model.


The economic analysis is based on the production plan provided as Table 22-6.

Over the LOM, the Cerro Lindo Operations will realize US$4,000 million in gross revenue, and $3,108 million in net revenue. Table 22-7 shows the breakdown of revenue between zinc, copper and lead concentrates.

Zinc concentrate makes up 48.2% of the net revenue, copper concentrate 46.7% and lead concentrate 5.1%. The proportions for copper and lead concentrates are reduced by the effect of the silver streaming agreement. After assigning respective conversion, treatment, refining and transport charges, and deducting the allowances for silver streaming, the breakdown of net revenue by metal is determined in Table 22-8.

Zinc and copper provide the largest components of net revenue, with minor contributions from lead and silver. The silver contribution has been reduced due to the effect of the silver streaming agreement.





Table 22-5: Summary of Taxation Applicable to the Cerro Lindo Operations

Unit Income Tax

IGV Mining Royalty Special Mining Tax (IEM)

Special Charge on Mining (GEM)

Worker´s Participation

Cerro Lindo (until 2021)

20.00%

18%

N/A N/A 4.00%-8.31%1 of operating profit

8% on taxable profits Cerro Lindo

(2022 onwards) 29.50%

1.00%-6.30% * of operating profit or 1.00% of net sales

2.00%-5.02% * of operating profit

N/A

Note: * = effective tax rate.

Table 22-9 shows the expected taxation over the LOM.

Table 22-10 shows revenue, costs and cash flow calculations, followed by discounted cash flows and NPV. Over the LOM, the Cerro Lindo Operations earn undiscounted cash flows of $892 million, which results in an NPV of $762 million at a discount rate of 9%. The operation generates substantial free cash flow from 2018 to 2023, tapering away near the end of mine life.

Given that the mine is generating an immediate positive cash flow, payback period and IRR calculations are not relevant.

22.5 Sensitivity Analysis

The sensitivity of NPV was determined against the following parameters:

Metal prices (all metals)

Head grade (all metals)

Site operating costs

Offsite costs (conversion, treatment and refining charges, transport costs)

Capital costs.

Table 22-11 shows the summary of NPV for -20% to +20% variations in the above parameters. These are also shown in Figure 22-1.

NPV is most sensitive to changes in metal prices, then head grade, especially zinc and copper. NPV is relatively insensitive to capital costs, as remaining capital requirements are comparatively low.





Table 22-6: Plant Production

Period Unit 2018 2019 2020 2021 2022 2023 2024 2025 Total

Mill Production

Ore milled kt/a 7,282 7,292 7,273 7,275 7,357 7,240 3,131 1,809 48,658

Zinc % Zn 1.97 1.92 1.81 1.84 1.86 1.90 1.55 1.63 1.85

Copper % Cu 0.62 0.77 0.67 0.68 0.71 0.67 0.65 0.78 0.69

Lead % Pb 0.24 0.22 0.19 0.20 0.19 0.22 0.20 0.20 0.21

Ag g/t Ag 19.0 21.8 20.2 19.6 19.9 20.8 19.0 22.4 20.2

Zinc Concentrate Production

Zinc recovery % 90.0 89.7 89.0 89.2 89.3 89.6 87.3 87.9 89.3

Contained zinc in concentrate kt 129 125 117 120 122 123 42 26 805

Zinc concentrate grade % Zn 58.3 58.3 58.0 58.0 58.0 58.0 57.5 57.7 58.1

Zinc concentrate kt 222 215 202 206 210 213 74 45 1,386

Copper Concentrate Production

Copper recovery % 82.6 86.1 83.8 84.1 84.8 83.7 83.4 86.1 84.3

Contained copper in concentrate kt 37 48 41 42 44 40 17 12 282

Copper grade % Cu 25.7 25.8 26.5 26.3 26.0 26.0 26.0 26.0 26.0

Copper concentrate kt 146 188 154 158 170 155 66 46 1,083

Silver recovery to Cu concentrate % 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5

Contained Ag in Cu concentrate koz Ag 1,610 1,866 1,731 1,671 1,713 1,761 697 475 11,523

Silver grade in Cu concentrate g/t Ag 345 308 348 330 314 355 330 317 330

Lead–Silver Concentrate Production

Lead recovery % 68.8 67.7 64.4 65.2 64.8 67.6 65.2 65.1 66.4

Contained lead in concentrate kt 12 11 9 9 9 11 4 2 68

Lead grade % Pb 63.0 62.5 62.1 62.0 63.1 63.0 60.2 61.6 62.4

Lead concentrate kt 19 18 14 15 15 17 7 4 109

Silver recovery to Pb concentrate % 30.7 30.7 30.7 30.7 30.7 30.7 30.7 30.7 30.7

Contained Ag in Pb concentrate koz Ag 1,357 1,573 1,459 1,409 1,444 1,484 587 400 9,713

Silver grade g/t Ag 2,249 2,765 3,154 2,893 3,061 2,659 2,709 3,316 2,784





Table 22-7: Gross Revenue by Concentrate (US$ million)

Zn Concentrate

Cu–Ag Concentrate

Pb–Ag Concentrate

Total

Zinc 1,925 1,925

Copper 1,578 1,578

Lead 125 125

Silver 197 175 372

Gross revenue 1,925 1,775 300 4,000

Transport (37) (65) (10) (112)

Conversion/treatment/refining (390) (147) (39) (576)

Streaming (112) (93) (204)

Net revenue 1,497 1,452 159 3,108

Table 22-8: Net Revenue by Concentrate

Metal Gross (US$ million)

Offsite Charges (US$ million)

Streaming (US$ million)

Net (US$ million)

Net Proportion (%)

Zinc 1,925 (428) 1,497 48.2

Copper 1,578 (206) 1,372 44.1

Lead 125 (33) 93 3.0

Silver 372 (21) (204) 146 4.7

Total 4,000 (688) (204) 3,108 100.0

Table 22-9: LOM Tax and Royalty Payments

Tax Type Years paid Amount Paid (US$ million)

Mining royalty 2022–2025 23

Special Mining Tax (IEM) 2022–2025 20

Special Charge on Mining (GEM) 2018–2021 62

Participation 2018–2025 107

Income Tax 2018–2025 287

Total 500





Table 22-10: Cerro Lindo Operations, Summary Cash Flows and NPV (US$ million)

2018 2019 2020 2021 2022 2023 2024 2025 2026 LOM

Gross payable metal 604 649 585 588 608 593 225 149 0 4,000

Offsite costs (106) (112) (98) (100) (104) (104) (39) (25) 0 (688)

Silver streaming (28) (33) (31) (30) (30) (31) (12) (8) 0 (204)

Net revenue 470 505 456 457 473 457 174 115 0 3,108

Operating costs (223) (225) (209) (205) (209) (200) (136) (103) 0 (1,511)

Other costs/provisions (9) (9) (9) (8) (7) (7) (6) (2) 0 (56)

Participation payments (17) (19) (17) (17) (18) (18) (2) 0 0 (107)

EBITDA 222 251 221 227 239 232 30 10 0 1,434

Depreciation (34) (34) (32) (32) (25) (13) (12) (8) 0 (189)

EBIT 188 218 189 196 215 220 19 2 0 1,245

Local and income taxes (52) (61) (53) (55) (81) (82) (8) (0) 0 (392)

Net income 136 157 135 141 134 138 11 2 0 853

Depreciation 34 34 32 32 25 13 12 8 0 189

Working capital 21 (7) 9 (1) (3) 2 55 8 10 94

Closure 0 0 0 0 0 0 0 0 (36) (36)

Capex (35) (22) (14) (14) (13) (10) (4) (1) 0 (113)

Free cashflow 156 161 162 158 143 142 73 17 (26) 987

Discounted @ 9% 150 141 131 117 97 88 42 9 (12) 762

NPV @ 9% 762

Table 22-11: NPV Sensitivities (US$ million)

Range Metal Price

(all metals)

Head Grade(all metals)

Site Operating Costs

Offsite Costs (conversion, treatment and refining charges, transport costs)

Capital Costs

-20% 368 432 922 835 780

-10% 565 597 842 799 771

0% 762 762 762 762 762

10% 958 926 681 726 753

20% 1153 1089 600 689 744





Figure 22-1: Sensitivity Graph

200

300

400

500

600

700

800

900

1000

1100

1200

‐25% ‐20% ‐15% ‐10% ‐5% 0% 5% 10% 15% 20% 25%

NPV

US$ M

Cerro Lindo NPV sensitivity

Metal price Head grade Site opex Offsite costs Capex



The Cerro Lindo Operations realizes an NPV of $762 million based on the LOM production plan, assumed metal prices, and integrated treatment of zinc concentrates through Votorantim’s Cajamarquilla smelter.

NPV is sensitive to head grade and metal prices, especially zinc and copper.






23.0 ADJACENT PROPERTIES

This section is not relevant to this Report.





24.0 OTHER RELEVANT DATA AND INFORMATION


24.1.1 Geology and Exploration

Opportunities

Exploration potential remains at OB-1, OB-4, OB-5 and OB-8. Current exploration in the mine area is addressing the possible presence of various mineralized horizons at the upper levels of the southwestern flank of the mine, and at depth, below the 1,600 m level. Geophysical anomalies identified north of the Topará River require additional investigation

There are a number of regional exploration targets, that with further work, represent upside opportunity to identify mineralization that can potentially add to the resource base.

24.1.2 Mineral Resource Estimates

Opportunities

Step out and infill drilling at satellite deposits and in areas of collapse have a high probability of identifying mineralization that may be able to support additional Mineral Resource estimates

Improved consistency of sampling for short-range model at draw points will allow reconciliation to be used for measuring the long-range resource model performance, and potentially indicate if planned dilution is being achieved.

Risks

A high-grade copper domain may be needed to constrain smearing of metal into areas of lower copper grades. This would improve local variability keeping higher grades of copper within areas of high-grade copper and low copper grades to areas of low-grade copper. Higher confidence in copper estimation will improve mine planning and forecasting.

24.1.3 Geotechnical Considerations

Opportunities

There is an opportunity to collect additional geotechnical data from the drilling programs in support of developing improved stope designs so as to increase ore recoveries from the stopes.





Risks

Numerical modelling requires verification through instrumentation and monitoring data. It is recommended that an external third-party review be conducted on the current modelling practices as inconsistences were noted in initial element loading, field stress types, extents of external boundaries and meshing quality. These could significantly affect the outcome of the model

Out-of-plane stresses and strains may not be fully accounted for in the current mine models, which are performed using 2D software. The risk will be ameliorated when designs are transferred to the 3D software that is planned to be acquired

Geotechnical conditions due to greater mining depths may contribute to increased dilution and reduced recoveries.

24.1.4 Mineral Reserve Estimates and Mine Plan

Opportunities

The deposit has not been closed off by exploration drilling. Ongoing exploration activities could support additional Mineral Resources being identified such that some or all of this material could be converted, with the appropriate studies, to Mineral Reserves. This represents upside potential for the operation. Additional upside potential exists if the material currently classified as Measured and Indicated can be converted to Mineral Reserves with additional mining studies

The number of contractors, and the broad range of mobile equipment underground are greater than normally seen at comparable operations. There is the potential to reduce the mobile equipment fleet and manpower by rationalizing the numbers of contractors

Planned and actual recovery of the SLOS stopes is lower than industry standard. It may be possible to improve recovery by implementing a concerted effort to upgrade stope design and mining practices.

Risks

Some of the Mineral Reserves are to be extracted using mechanized C&F or D&F methods. These methods are not currently being used at Cerro Lindo, but are common in Peru, and are being used at Milpo’s mines at the Cerro de Pasco mining complex (Atacocha and El Porvenir). The method, costs, productivity, and dilution/recovery factors are based on actual practices from Cerro de Pasco, but could subject to site-specific factors that may only be identified after mining begins






The dilution factors used in the Mineral Reserve calculation match the factors reported by the mine as actual dilution, based on survey and stope reconciliation. As the mine becomes deeper, and has a greater percentage of production from secondary stopes, the quantity of dilution (primarily sloughed backfill) may increase

The mine, and its infrastructure, were not originally designed for the planned production rate of 20,600 t/d. All major components of the system are operating at or near peak capacity. A major failure of any of the infrastructure components, or a small change in ore or rock properties could prevent the mine from meeting its production targets for an extended period

A major shutdown in the paste plant will have an immediate impact on stope production, and would be extremely difficult to make up

If the ventilation system is determined to be undersized, mine production could be reduced until the system has been improved. If the ventilation system requires significant improvement, this may require unplanned capital expenditure, and diversion of limited mining resources to complete the required upgrades.

24.1.5 Metallurgy, Process Plant, and Marketing

Risks

The silver recovery forecast for the copper and lead concentrates is based on a fixed recovery value derived from historical data. Amec Foster Wheeler’s review of the historical data for 2015–2016 indicates that while the 67% figure is within the range of historical values, more variable recoveries can be expected on a monthly basis. There is an overall trend in the lead concentrate data for lower silver recoveries with lower lead grades. A similar, but less well correlated trend appears to occur with copper, whereby at higher copper grades, there appears to be an increase in silver content. There is a risk that the actual recoveries over a longer period may be lower than the current assumptions if the mill feed grades are lower than the historical average from which the 67% recovery figure was derived

If the mine is required to sell the zinc concentrate to external customers, there is likely to be a negative effect on the mine economics, as there is a risk that the zinc premium will not continue to be paid, and that treatment and transport costs could be higher





If terms for the copper concentrates vary from the current assumptions, there is a risk that offsite costs could increase, as the copper concentrates have zinc and lead impurities that could cause less favourable terms.

24.1.6 Infrastructure

Risks

The infrastructure was not originally designed for the planned production rate of 20,600 t/d. Some of major components of the system are near peak capacity. A major failure of any of the infrastructure components could result in production delays or even losses.

24.1.7 Environmental, Permitting and Social

Risks

Closure costs as stated in the second Closure Plan amendment may be underestimated. No information was provided on the cover design for the waste rock storage and tailings dry stack facilities

There is limited information on the geochemical characteristics of the waste rock storage facilities. There is a risk that this material could have metals leaching or acid mine drainage potential.

24.1.8 Financial Model

Opportunities

The financial model has assumed a flat payment rate for the silver metal in the Triple Flag streaming agreement. However, once 19.5 Moz has been delivered to Triple Flag, the payment terms alter. If this milestone is reached while the mine is still operational, there is some upside potential in the silver revenue, since after that point, Milpo will retain 75% of the payable silver, rather than the 35% allocated in the financial model. Allowing for actual and forecast silver production in 2017, it is anticipated that this milestone would be reached before the end of 2023.

Risks

An allowance has been made in the model for working capital based on a similar position at end of 2017 to that held on the Cerro Lindo balance as at 31 March, 2017. Any variation to the allocated allowance will have an effect on NPV

Creation of new taxes, fees, and/or royalties or significant changes to the assumptions as to these in the Report will affect the cashflow estimates





Hedging is not considered in the financial evaluation, which is performed at the mine level. Votorantim has corporate hedging arrangements in place. Should a future decision be made to implement hedging at the mine level, the cashflow estimates could be affected.





25.0 INTERPRETATION AND CONCLUSIONS

25.1 Introduction

The QPs note the following interpretations and conclusions in their respective areas of expertise, based on the review of data available for this Report.

25.2 Mineral Tenure, Surface Rights, Water Rights, Royalties and Agreements

Legal opinion was provided that supports that Votorantim owns the mineral tenure in which mining operations are hosted.

Current mineral title in the core tenements area comprises of 36 mining concessions, four mining claims, and one beneficiation concession. Penalties are payable on certain of the concessions since the minimum required levels of production or exploration expenditures stipulated under Peruvian regulations have not been met. There are an additional 6,835 ha in 10 mining concessions that were acquired by Votorantim and subsequently transferred to Milpo.

The Cerro Lindo Operations currently hold surface rights or easements for the following infrastructure: mine site; access road, power transmission line, and water pipeline for the mine; old power transmission line to Cerro Lindo; new power transmission line to Cerro Lindo; desalination plant; water process plant, and the water pipeline from the desalination plant to the mine site.

The Project is not subject to third-party royalties. When the current Tax Stability Agreement expires in 2021, Milpo will be required to pay levies to the Peruvian Government for the last year of the proposed mine life.

25.3 Geology and Mineralization

Cerro Lindo is classified as a volcanogenic massive sulphide (VMS) deposit, and exploration programs using this deposit model are appropriate for the Project.

Knowledge of the deposit settings, lithologies, mineralization style and setting, and structural and alteration controls on mineralization is sufficient to support Mineral Resource and Mineral Reserve estimation.

Exploration potential remains at OB-1, OB-4, OB-5 and OB-8. Current exploration in the mine area is addressing the possible presence of various mineralized horizons at the upper levels of the southwestern flank of the mine, and at depth, below the 1,600 m level. Geophysical anomalies identified north of the Topará River require additional investigation.





25.4 Exploration, Drilling and Analytical Data Collection in Support of Mineral Resource Estimation

The quantity and quality of the lithological, geotechnical, collar and downhole survey data collected in the exploration and infill drill programs completed by Milpo since 2000 are sufficient to support Mineral Resource and Mineral Reserve estimation.

Drill orientations are appropriate for the mineralization style, and have been drilled at orientations that are acceptable for the orientation of mineralization for the bulk of the deposit area. Depending on the dip of the drill hole, and the dip of the mineralization, drill intercept lengths are typically greater than true thickness of the mineralized body. Locations of drill stations and geometry of the deposits rarely permit determination of true thickness with a single drill hole. Interpretations of the drill data are required to determine true thickness.

All collection, splitting, and bagging of RC and core samples were carried out by Milpo personnel from 1999 to 2016. No material factors were identified with the drilling programs that could affect Mineral Resource or Mineral Reserve estimation.

Sample preparation and assaying for samples that support Mineral Resource estimation has followed approximately similar procedures for most drill programs since 1999. The preparation and assay procedures are adequate for the type of deposit, and follow industry standard practices.

Sample security procedures met industry standards at the time the samples were collected. Current sample storage procedures and storage areas are consistent with industry standards.

Data collected were subject to validation. Verification is performed on all digitally collected data uploaded to the Mine database, and includes checks on surveys, collar coordinates, lithology data, and assay data. The checks are appropriate, and consistent with industry standards.

Legacy data verification was completed primarily by Amec Foster Wheeler predecessor companies. Amec Foster Wheeler has reviewed the appropriate data and reports and is of the opinion that the data verification programs undertaken on the data collected in previous campaigns adequately support the geological interpretations, and the analytical and database quality. Data collected have been sufficiently verified that they can support Mineral Resource and Mineral Reserve estimation and be used for mine planning purposes.


Ore treatment throughput and metallurgical performance have both consistently improved since start-up in 2006, through a combination of plant expansions and ramp-





up operating experience, improved ore zone characterization, and by implementing new process technology, equipment, and optimized reagent schemes.

No material change in mineralization or ore types is expected in the mine plan to those that have been processed historically, and the historical process plant design, grind, flotation, metallurgical recovery and concentrate grade parameters should also be appropriate as the basis of the forward production plan.

Historical ore metallurgical variability by orebody zone or domain is considered to be low. The main variability in firstly the metallurgical recovery and secondly the concentrate grade is mainly driven by feed grade which is linear and relatively insensitive, within the range of typical low daily/monthly variations experienced, because of established ore blending and control practices.

Ore geometallurgical head grade recovery correlation models have been established using historical production performance statistical data. The geometallurgical recovery models are based on polynomials fitted to historical production data and in low grade ranges outside of the normal production data range these are extrapolated appropriately by considering a constant tail effect. Recovery is also appropriately capped at higher grades.

Cerro Lindo concentrate products are considered to be clean, contain low concentrations of deleterious penalty elements, and are of a relatively high quality that is consistently in excess of minimum specifications with little variability. Copper concentrates on average attract a very minor penalty.

25.6 Mineral Resource Estimates

Mineral Resource estimation was performed by Votorantim staff, and was based on three block models. An NSR grade shell was used to define mineralized domains. Grade estimates were completed for zinc, lead, copper and silver. Composites of 2.5 m in length were used for the grade estimation. Metal grades were capped using outlier restriction prior to estimation. OK estimation was performed in three passes, using octant searches, and with search ranges based on variography. The sample selection was determined by ore zone, geology code, and the number of available samples. The resulting estimate was validated using a combination of visual, swath plot, and Herco checks.

Amec Foster Wheeler reviewed Mineral Resource development, construction, estimation procedures, classification, and statements for the Cerro Lindo Mine, and conducted independent validation of the block model.

Mineral Resources have been estimated using standard practices for the industry, and conform to the 2014 CIM Definition Standards.





Mineral Resources have an effective date of 31 December, 2016. Mineral Resources are stated exclusive of Mineral Reserves on an in-situ basis, and exclude application of planned and unplanned contact dilution and mining recovery factors. Mineral Resources have had reasonable prospects of eventual economic extraction considerations applied.

Factors that could affect the Mineral Resource estimate include: additional infill and step out drilling of satellite deposits; changes in local interpretations of mineralization geometry and continuity of mineralization zones; domaining high-grade copper; density and domain assignments; changes to design parameter assumptions that pertain to stope design; dilution from internal and contact sources; changes to geotechnical and metallurgical recovery assumptions; increases resulting from improvements to mining method recovery as recommended by Amec Foster Wheeler; changes to the assumptions used to generate the NSR value including long-term commodity prices; completion of a reconciliation model with an improved sampling program for the short-range model.

The reduced silver revenue from the silver streaming agreement has not been considered in NSR calculations or cut-off grades when reporting Mineral Resources.

25.7 Mineral Reserve Estimates

The mine plan is based on Measured and Indicated Mineral Resources. The Mineral Reserves have been established based on actual costs and modifying factors from the Cerro Lindo Mine, and on operational level mine planning and budgeting. Mine planning for the LOM is based on a steady-state production rate of 20,600 t/d. Mineral Reserves are reported inclusive of recovery losses and dilution.

The current Mineral Reserve estimates are based on the most current knowledge, permit status and engineering and operational constraints. Mineral Reserves have been estimated using standard practices for the industry, and conform to the 2014 CIM Definition Standards.

The reduced silver revenue from the silver streaming agreement has not been considered in NSR calculations or cut-off grades when reporting Mineral Reserves.

Factors that may affect the estimates include: commodity prices and exchange rate assumptions; global markets; internal operating costs; government actions including changes to environmental, permitting, taxation and royalty regulations and laws; social licence to operate, geological and geotechnical unknowns, availability of skilled labour, and variations in metallurgical performance. Cerro Lindo is also an underground mine; as such, it faces a number of the same risks faced by all underground mines, including, but not limited to, unexpected ground conditions, seismic events, and ground water inflow. Issues that are specific to the Cerro Lindo mine include “receding face” issues, non-familiarity with the C&F and D&F mining methods in the conditions





existing at Cerro Lindo, potential increases in dilution due to production from secondary stopes, and changing geotechnical conditions. All key components of the system are operating near peak capacity. A failure of any of the major infrastructure components, or a small change in ore or rock properties could prevent the mine from meeting its production targets for an extended period.

25.8 Mine Plan

The mine is completely mechanized, utilizing rubber-tired equipment for all development and production operations. There is no shaft; all access is through 15 portals servicing drifts and declines. Ore is being extracted from 10 separate orebodies, and delivered to the concentrator stockpile on surface. All ore is comingled during transport to the concentrator stockpile; ore from different orebodies is not segregated.

Current mining uses SLOS methods with paste backfill. Approximately 85% of the Mineral Reserves will be mined using this method. The remainder will be mined using mechanized C&F mining with paste backfill. The mining method being used is appropriate for the deposits being mined.

The mine ventilation circuit is complex. Each orebody is ventilated by a quasi-parallel split serving that orebody alone. The ventilation system is under-capacity and should be increased to properly support the proposed mining rates.

The mine plan for the remainder of the LOM is based on a daily production rate of 20,600 t/d for 353 d/a. The annual production rate is, therefore, 7.27 Mt. Cerro Lindo is almost completely developed. With the exception of the bottom levels of OB-1 and OB-6 which are yet to be developed, and the pillar recovery and remnant mining, there is very little flexibility in the mining sequence. The mine plan itself is based on successful mining philosophy and planning, and presents low risk.

The mobile equipment fleet for Cerro Lindo is composed of equipment owned by Milpo and numerous contractors. Since each entity is responsible for achieving its own goals independently, each entity has included spare equipment and capacity as it deems necessary. The mobile equipment fleet appears to be sufficient to achieve the proposed LOMP.

25.9 Recovery Plan






The plant has a good history of successfully treating Cerro Lindo polymetallic mineralization to produce separate and marketable lead, zinc, and copper concentrates, with credits received for silver in lead and copper.

Tailings are thickened and pumped to separate filter plants producing respectively an underground backfill product and dewatered tailings for trucking to and placement in a dry stack tailings disposal storage facility.

As much as 90% of the process water from dewatered tailings is recycled with industrial fresh water being supplied from a desalination plant at the coast to meet site and process water make-up requirements.

25.10 Infrastructure

Infrastructure required for mining operations has been constructed and is operational.

Due to the increases in throughput rate, much of the infrastructure is near, capacity. All mine and process infrastructure and supporting facilities, including critical spares, should be reviewed to ensure that they can meet the needs of the current mine plan and production rate.

25.11 Environmental, Permitting and Social Considerations

25.11.1 Environmental, Closure, Permitting, and Social

Votorantim completed the first environmental impact assessment (EIA) in 2001, with subsequent updates completed in support of additional infrastructure, such as the desalination plant, and plant expansions. These reports and updates were completed by independent third-party consultants. The most recent technical study was prepared by SRK Consulting in 2016. The site Environmental Monitoring Plan was established in the 2001 EIA, and amended in 2007 and 2011. Milpo provided support that the required monitoring reporting had been completed and sent to the relevant regulatory authorities for the 2016 year. Baseline studies included evaluation of climate, air quality, noise, hydrology, groundwater, water quality, seismicity, biology, and social setting.

A closure plan was developed as part of the original EIA, and has undergone revisions due to amendments to the EIAs as a result of changes to project components, including mine expansions. Amec Foster Wheeler notes that after the EIA update that is currently in preparation is approved by the Ministry of Energy and Mines, a new Closure Plan should be prepared and presented to the relevant authorities.

The mine holds a number of current permits in support of operations. Milpo monitors and reviews the permit status for the operations using an ISO 14001 compliant environmental management system.





Milpo has a Social Agreement for the development of the Chavin district signed in November, 2005. This agreement was updated in 2009, 2011, and 2012. The agreement cover items such as social investment, employment, participatory monitoring, and dispute resolution.

25.11.2 Tailings Storage

Tailings are either sent underground as backfill, or placed in two dry-stack facilities on surface.

Instrumentation in the filtered tailings deposits is monitored regularly, is formally registered, and an annual audit is undertaken by an independent consultant.

A review of the filter stacks and dams was undertaken by Ausenco Peru SAC in February, 2017. This review included a site inspection of Pahuaypite 1 and Pahuaypite 2 and associated dams, as well as a review of the dam design, construction, operation manual, emergency plan, geotechnical monitoring, groundwater monitoring, emergency response plan and closure plan.

25.11.3 Water Management

Water management uses a series of ponds, dams, and channels to manage contact and non-contact water. Non-contact water is diverted around the mine infrastructure, tailings, and waste rock facilities where possible.

Water is used both for industrial and domestic purposes. Industrial purposes include the processing plant, mine, water treatment plants and irrigation. Domestic purposes include campsite and offices. The water supply includes the treatment of all recirculated water before entering the water back to the process plant. It also includes pumping sea water into the desalination plant for a reverse osmosis treatment and supply to the process plant. A permit for groundwater extraction from five boreholes is current.

The approved monitoring plan requires ongoing surface and groundwater quality monitoring.

25.12 Markets and Contracts

Terms within the contracts appear to be in line with what is publicly available on industry norms. Additional concentrate sales can be made at Milpo’s discretion.

Votorantim provided Amec Foster Wheeler with the metal price projections for use in the Report. Votorantim established the pricing using a consensus approach based on long-term analyst and bank forecasts prepared during 2015 and 2016. Votorantim has also provided Amec Foster Wheeler with corporate projections for exchange rates for the LOM.





Contracts have also been used for provision of goods and services required to operate the Cerro Lindo unit, including the mine, and a large portion of all support functions. The approximately 32 firms currently under contract are used for items such as underground mining, catering, security, tails haulage and stacking, concentrate hauling, and the mine site laboratory.


Capital costs are reported inclusive of sustaining capital and closure and reclamation costs, and total US$113 million over the LOM.


Operating costs are based on historical values and known, site-specific factors and total US$1,511 million over the LOM.




A number of risks and opportunities were identified by Amec Foster Wheeler staff, and have been discussed in the Report in the relevant discipline areas or in Section 24.

Opportunities include:

Exploration potential remains at OB-1, OB-4, OB-5 and OB-8. Current exploration in the mine area is addressing the possible presence of various mineralized horizons at the upper levels of the southwestern flank of the mine, and at depth, below the 1,600 m level. Geophysical anomalies identified north of the Topará River require additional investigation

There are a number of regional exploration targets, that with further work, represent upside opportunity to identify mineralization that can potentially add to the resource base

Step out and infill drilling at satellite deposits and in areas of collapse have a high probability of identifying mineralization that may be able to support Mineral Resource estimate

Improved consistency of sampling for short range model at draw points will allow reconciliation to be used for measuring long range resource model performance and potentially indicate if planned dilution is being achieved





There is an opportunity to collect additional geotechnical data from the drilling programs in support of developing improved stope designs so as to increase ore recoveries from the stopes

The deposit has not been closed off by exploration drilling. Ongoing exploration activities could support additional Mineral Resources being identified that could be converted, with the appropriate studies, to Mineral Reserves. This represents upside potential for the operation. Additional upside potential exists if the material currently classified as Measured and Indicated can be converted to Mineral Reserves with additional mining studies

The number of contractors, and the broad range of mobile equipment underground are greater than normally seen at comparable operations. There is the potential to reduce the mobile equipment fleet and manpower by rationalizing the numbers of contractors

Planned and actual recovery of the SLOS stopes is lower than industry standard. It may be possible to improve recovery by implementing a concerted effort to improve stope design and mining practices

The financial model has assumed a flat payment rate for the silver metal in the Triple Flag streaming agreement. However, once 19.5 Moz has been delivered to Triple Flag, the payment terms alter. If this milestone is reached while the mine is still operational, there is some upside potential in the silver revenue, since after that point, Milpo will retain 75% of the payable silver, rather than the 35% allocated in the financial model. Allowing for actual and forecast silver production in 2017, it is anticipated that this milestone would be reached before the end of 2023

Risks include:

A high-grade copper domain may be needed to constrain smearing of metal into areas of lower copper grades. This would improve local variability keeping higher grades of copper within areas of high-grade copper and low copper grades to areas of low-grade copper. Higher confidence in copper estimation will improve mine planning and forecasting

Geotechnical numerical modelling requires verification through instrumentation and monitoring data. It is recommended that an external third-party review be conducted on the current modelling practices as inconsistences were noted in initial element loading, field stress types, extents of external boundaries and meshing quality. These could significantly affect the outcome of the model

Out-of-plane stresses and strains may not be fully accounted for in the current mine models, which are performed using 2D software. The risk will be ameliorated when designs are transferred to the 3D software that is planned to be acquired





Geotechnical conditions due to greater mining depths may contribute to increased dilution and reduced recoveries

Some of the Mineral Reserves are to be extracted using mechanized C&F or D&F methods. These methods are not currently being used at Cerro Lindo, but are common in Peru, and are being used at Milpo’s mines at the Cerro de Pasco mining complex (Atacocha and El Porvenir). The method, costs, productivity, and dilution/recovery factors are based on actual practices from Cerro de Pasco, but could subject to site-specific factors that may only be identified after mining begins


The dilution factors used in the Mineral Reserve calculation match the factors reported by the mine as actual dilution, based on survey and stope reconciliation. As the mine becomes deeper, and has a greater percentage of production from secondary stopes, the quantity of dilution (primarily sloughed backfill) may increase

The mine, and its infrastructure, were not originally designed for the planned production rate of 20,600 t/d. Major components of the system are operating at or near peak capacity. A major failure of any of the infrastructure or mine components, or a small change in ore or rock properties from those expected, could prevent the mine from meeting its production targets for an extended period

A major shutdown in the paste plant will have an immediate impact on stope production, and would be extremely difficult to make up

If the ventilation system is determined to be undersized, mine production could be reduced until the system has been improved. If the ventilation system requires significant improvement, this may require unplanned capital expenditure, and diversion of limited mining resources to complete the required upgrades

There is a risk that the actual silver recoveries over a longer period may be lower than the current assumptions if the mill feed grades are lower than the historical average from which the 67% silver recovery figure was derived

If the mine is required to sell the zinc concentrate to external customers, there is likely to be a negative effect on the mine economics, as there is a risk that the zinc premium will not continue to be paid, and that treatment and transport costs could be higher





If terms for the copper concentrates vary from the current assumptions, there is a risk that offsite costs could increase, as the copper concentrates have zinc and lead impurities that could cause less favourable terms

Closure costs as stated in the second Closure Plan amendment may be underestimated. No information was provided on the cover design for the waste rock storage and tailings dry stack facilities

There is limited information on the geochemical characteristics of the waste rock storage facilities. There is a risk that this material could have metals leaching or acid mine drainage potential

An allowance has been made in the model for working capital based on a similar position at end of 2017 to that held on the Cerro Lindo balance as at 31 March, 2017. Any variation to the allocated allowance will have an effect on NPV

Creation of new taxes, fees, and/or royalties or significant changes to the assumptions as to these in the Report will affect the cashflow estimates

Hedging is not considered in the financial evaluation, which is performed at the mine level. Votorantim has corporate hedging arrangements in place. Should a future decision be made to implement hedging at the mine level, the cashflow estimates could be affected.





26.0 RECOMMENDATIONS

26.1 Introduction

Recommendations have been broken into two phases. The Phase 1 recommendations are made in relation to exploration activities. Recommendations proposed in Phase 2 are suggestions for improvements in current operating procedures, and the program is not contingent on the results of Phase 1 work. The total cost for the Phase 1 work is about US$97 million. Phase 2 is estimated at US$730,000–$1,140,000.

26.2 Phase 1

Votorantim has prepared provisional exploration programs and budgets for near-mine and regional exploration (Table 26-1). The target of the programs is identifying mineralization that can support Mineral Resource estimation, and eventually, potentially, conversion to Mineral Reserves.

26.2.1 Mine Area

Current exploration activities are focused on the southwestern portion of the mine, and at depth, below the 1,600 m level (refer to Figure 9-2). Underground development will be required in support of drill programs. The mine program will involve about 225,000 m of core drilling, at an average cost of about US$40/m.

Additional geological mapping, geophysical surveys, and geochemical surveys are planned to support the drilling effort. Amec Foster Wheeler recommends that the exploration move forward.

The planned budget of about US$5 M/a is appropriate for the type of deposit and stage of development.

26.2.2 Regional

Exploration programs are planned for the Pucasalla–Orcocobre, Toldo Grande–Pucatoro, Patahuasi–Millay, Chavin del Sur and Ventanalloc prospects (refer to Figure 9-4). The regional exploration program will include about 233,000 m of core drilling, at an average cost of about US$60/m. Additional geological mapping (assumed at 1:2,000 scale), and geophysical and geochemical surveys are proposed to support the drilling efforts.

Greenfields geophysical anomalies and colour anomalies identified in the area will also require additional investigation.

The planned budget of about US$7 M/a is appropriate for a regional exploration program for the deposit type.





Table 26-1: Proposed Exploration Programs

Units Mine Area Regional Total

Core drilling m 225,000 233,000 458,000

Core drilling US$ million 22.4 22.9 45.3

Underground development required to support drill programs

US$ million 11.1 22.5 33.6

Geology and geological mapping US$ million 0.3 1 1.3

Geochemistry US$ million 3.1 1.6 4.7

Geophysics US$ million 0.4 0.6 1.0

Permits and authorizations US$ million 1.5 1.5

Program support US$ million 1.7 7.9 9.6

Total US$ million 39.1 57.9 97.0

26.3 Phase 2

26.3.1 Mineral Resource Estimates

Amec Foster Wheeler recommends a 5 to 10 m dilution skin be added to the Mineral Resource model. This will provide a dilution grade for contact dilution for stopes at the boundaries of the mineralized zones.

Ongoing model validation should include monthly reconciliation against mine production and process data. Trends can be identified and adjustments to the Mineral Resource model can be implemented where needed in the next model update. Votorantim should monitor the zinc model and compare the HG Zn domain against stope grades and mine production, because the HG Zn domain will likely require tuning. Additional model validation should include reconciliation of the Mineral Resource model updates to the previous one to three years of mine production and process data.

Depending on whether the work performed is done internally or by a third party, these programs are estimated at US$30,000 to US$40,000.

26.3.2 Mine Planning

The mine has undergone a number of expansions in the production rate since operations commenced in 2007. All mine infrastructure and supporting facilities should be reviewed to ensure that they meet the needs of the current mine plan and production rate.

Amec Foster Wheeler recommends that Milpo review critical spares inventory, and considers the construction of additional backfill plant capacity.





The mine ventilation system appears to be undersized. It should be evaluated and compared against the mobile equipment fleet, and compared against the requirements of the complete 20,600 t/d mine plan.

A review should be conducted of planning and mining practices for the SLOS/VRM to identify and implement improved practices that could improve ore recovery in stopes.

A test mining campaign should be immediately executed to evaluate the mechanized C&F/D&F methods to confirm expected costs, productivities, and other operating factors.

It is recommended that geotechnical data is collected and analysed on an ongoing basis. Results from periodic and independent 3D numerical modelling should be incorporated into the mine planning process to ensure optimal stope designs, and to ensure dilution and recovery targets are met in line with changing geotechnical conditions with depth.

These programs are estimated at US$400,000 to US$500,000.

26.3.3 Environmental, Social and Permitting

The environmental management plan should be reviewed to ensure that it adequately addresses and monitors any potential additional effects on water quality.

Confirmation should be sought from regulatory authorities that the 2015 Knight Piésold report on soil contamination has been approved.

Continuous reviews should be undertaken to ensure proper compliance and effective monitoring, and to ensure that the requirements of each permit are reported to the relevant national authority in compliance with legal requirements.

A review of the Adequacy and Implementation Plan for Environmental Quality Standards” document should be conducted.

If a proposal to expand the mine to a 22,500 t/d rate, as approved in the March 31, 2016 terms of reference for an updated EIA, becomes part of the mine plan, then the following will be required:

Development of the EIA amendment that supports the mine expansion should be monitored

Develop an updated hydrological water balance for the mine to verify the water supply and management requirements

Verify if the current desalination plant will meet the mine expansion water requirements, and if any additional water permits would be required





Confirm if, after the ongoing EIA is approved by the Ministry of Energy and Mines, a new Closure Plan will be required to be approved by the relevant regulatory authorities

Evaluate the potential to acquire surface land easements in areas that may be required to support mining operations, should additional expansion plans be contemplated

The Closure Plan should be updated to include the components that were regularized through the detailed technical report approved by Directorate Resolution No 258-2016-MEM-DGAAM

The water balance should be reviewed in relation to the water recirculated permit allowance, since it appears that the total recirculated water is greater than the permit limits. Due to the greater water retention and re-use, any potential impacts on the environment and the plant should be investigated.

These programs are estimated at $200,000–$400,000.

26.3.4 Tailings

Ausenco recommended a review and sensitivity analysis of the compaction methods of the filtered tailings to consider compaction of tailings in the outer shell of the stack, with the objective of reducing the volume of material to be compacted, while maintaining an acceptable level of geotechnical stability of the structures. Amec Foster Wheeler notes that such a review may result in some cost savings.

This program is estimated at US$100,000–$200,000.





27.0 REFERENCES

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Jackson, T., and Green, K.P., 2016: Fraser Institute Survey of Mining Companies, 2016: 74 p.

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