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Monitoring and Evaluation Report 2015

for the Impact Benefit Agreement

in relation to the

AAPPALUTTOQ RUBY- PINK SAPPHIRE PROJECT

GREENLAND

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Prepared by:

True north Gems Greenland Imaneq 33, 5. sal

Postboks 990 3900 Nuuk, Grønland

Table 1

Reporting and Evaluation activity Party/Parties DATE

Final Draft True North Gems Greenland 2016-01-18

Approval Government of Greenland

Kommuneqarfik Sermersooq

2016-01-18

2016-02-15

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Content

1. INTRODUCTION 4

2. TRUE NORTH GEMS GREENLAND (THE LICENSEE) 5

3. ACTIVITIES 5 3.1 Activities in General in 2014/2015 5 3.2 Mine site: Construction activities in 2014/2015 6 3.3 Shipping between Nuuk and Mine site 7 3.4 Activities for the coming years 7

Mine Site and shipping 7 Nuuk facilities 7

4 COOPERATION WITH AUTHORITIES AND IBA-PARTIES 8 4.1 The legal framework for the Rubi Mine at Aappaluttoq 8 4.2 True North Gems exploration and exploitation licenses 8 4.3 The Impact Benefit Agreement 9 4.4 Other approvals 10

5 GREENLAND WORKERS 11 5.1 Origin and gender of employees 11 5.2 Type of Job Categories 11

Foremen 13

6 EDUCATION 13 6.1 Educational activities in 2014/2015 13

Apprenticeships in 2014/2015 13 6.2 Allocated funds 14 6.3 Educational activities in the coming year 14

7 GREENLAND ENTERPRISES AND LOCAL BUSINESSES 15 7.1 Greenland enterprises 15 7.2 Local business opportunities for inhabitants in Qeqertarsuatsiaat 17

Supplies with fish and meet 17 Supplies from the local grocery store in Qeqertarsuatsiaat 17

7.3 Non-Greenlandic Companies 17

8 DEVELOPING GREENLANDIC ENTERPRISES 17 8.1 Contributions to develop other Greenlandic companies in the mining industry 17 8.2 Contributions to development of a gemstone industry in Greenland 18

Sale to local artisans etc. 18 Small scale miners 18 Polishing courses 18 Other potential contributions to the development of a gemstone industry in Greenland 19

9 TAX AND REVENUES FROM ROYALTIES 19 9.1 Public revenues in 2014/2015 19 9.2 Future fiscal benefits for Greenland 20

10 COMMUNICATION, CULTURAL ISSUES, FUNDS ETC. 20 10.1 Communication 20 10.2 Cultural and social fund 21

11 REVISION OF THE CONTENTS IN THE APPENDICES TO THE IBA 22

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1. Introduction The Aappaluttoq Ruby Project is located in southwest of Greenland (inhabitants: 55.984), approximately

150 kilometres south of the capital Nuuk (inhabitants: 16.992) and 20 km southeast of the settlement of

Qeqertarsuatsiaat (inhabitants: 198). The expected life of mine is 9 years and it is expected that the

annual mining rate will be an average of approx. 350,000 tonnes of which approx. 21,000 tonnes will be

ore. The production runs from the beginning of April to the end of November each year.

Figure 1: The Appaluttoq project - 63° o' 39" latitude and 50° 19* 11" longitude

On June 16th 2014 The Minister for Industry and Mineral Resources, The Mayor of Kommuneqarfik

Sermersooq and the Managing Director of True North Gems Greenland signed the Impact Benefit

Agreement (IBA)1 in Qeqertarsuatsiaat. The IBA is an agreement that sets conditions and targets for the

Aappaluttoq Ruby- & Pink Sapphire project to ensure that Greenland, the region and not least the local

community benefits from the project, mainly but not only in form of jobs, business opportunities

together with training and educational offers in relation to the mining industry. The IBA and the efforts

that the Company has put into the project, specifically to achieve the conditions and targets in the IBA,

will be evaluated in an annual report. The annually conducted evaluation will constitute the basis for

discussions concerning whether the appendices to the IBA will need adjustments for the following years

and whether the Company needs to pay special attention to certain subjects. It is the provisions in the

appendices to the IBA that stipulate the lion share of the different targets for the projects use of

Greenland Workers; training and educational activities; contributions to development of Greenland

business activities and companies; and other socio economic and sustainability matters.

This IBA Monitoring Report is the first of its kind for this project and it covers the period from June 2014

to June 2015 and has been drafted in close cooperation with the Ministry of Industry, Labour and Trade.

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http://naalakkersuisut.gl/~/media/Nanoq/Files/Publications/Raastof/ENG/Signed%20IBA%20TNG%20ENG%2016%2006.pdf

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Each section in the report gives an insight on how the project has performed in relation to targets

stipulated in the IBA:

Section 2 gives a short presentation of True North Gems Greenland; Section 3 gives a description of the

main project activities conducted since the initiation of construction in September 2014 (appendix 1 to

the IBA). Section 4 gives a short update on the cooperation with the authorities and the parties to the

IBA. Section 5 gives an account on the project’s use of Greenland workers. Section 6 gives an account of

the conducted training and educational activities. Section 7 and 8 gives an overview of the projects

contribution to Greenland businesses activities. Due to public interest in the Project’s tax contribution

this has been included in section 9. Section 10 describes other socio-economic or sustainability activities

conducted by True North Gems Greenland in the last year or so. Finally, Section 11 describes changes

made in the IBA based on lessons learned from the past Year.

2. True North Gems Greenland (the licensee) True North Gems Inc. (TNG) is a public junior exploration company dedicated to the exploration and

Development of colored gemstone deposits. TNG is committed to the realization of shareholder value

through development of the first ethically sourced commercial ruby mining operation, in partnership

with the people of Greenland. The Company’s shares are traded on TSX Venture Exchange (in Toronto,

Canada) under the symbol TGX. Prior to being granted an exploitation permit in March 2014 the

Greenlandic subsidiary, True North Gems Greenland A/S (TNGG) was set up. In 2012 TNG entered into a

Joint Venture with the highly Arctic experienced Norwegian mining company Leonard Nilsen & Sønner

(LNS). The Joint Venture made LNS a partner in the “Aappaluttoq-project” and co-owner of TNGG and at

the same time making the Greenlandic based subsidiary to LNS, which is LNS-Greenland, the operator.

By the end of June 2015, LNS had 7% ownership in TNGG. Once the construction phase has a completion

of 50% LNS will get additional 5%, at 75% a further 5% (total of 10%) and on a completion of 100% LNS

will get another 10% making a total of 27%.

Greenland Venture has also invested in TNGG and by doing so acquired an ownership of 0.66%.

True North Gems Greenland is based in Nuuk. At the moment TNGG runs all planning and administration

from the office in Nuuk. At the moment, the project is in the construction phase. Later this year it is

planned to go into production, and by that time the Company will also have established a Rough

Handling and Cleaning facility and the Administration facility will be prepared to include a Sorting facility.

3. Activities

3.1 Activities in General in 2014/2015 A detailed description of the necessary facilities for constructing the mine and getting it into production

can be found in the Social Impact Assessment, which are available on the Greenland Government and

the company’s web site2 and a short description can also be found in appendix 1 to the IBA.

As it appears in this section, then the activities since September 2014 have been construction activities

at the mine site and shipping activities between Nuuk and the mine site. When the IBA was signed in

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http://naalakkersuisut.gl/~/media/Nanoq/Files/Hearings/2013/TNG%20QEQ/Documents/VSB%20%20endelig%20version%20v52Eng.pdf http://www.truenorthgems.com/ (Choose under ”Greenland Ruby”)

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June 2014, all focus from True North Gems Greenland and LNS-Greenland (JV Partner and operator)

were on the mine site and getting the construction started.

Picture 1: The Camp and Helipad June 2015

3.2 Mine site: Construction activities in 2014/2015 The Operator had done excellent planning and a few days after initiating the construction phase in

September 2014 the operator broke ground at the site. Though late in the season and facing an early –

and very cold – winter, the operator has been able to continue the construction with only minor delays.

The construction phase has been a very busy period and both the Company and the operator have

utilized several suppliers and sub-contractors. In Section 7 all Greenlandic suppliers, sub-contractors and

vendors are listed in Table 13. As it appears in Table 2 most of the facilities are currently (July 2015)

under construction. The only part of the facilities where construction is not initiated is the open pit mine.

Table 2: Status for construction at mine site - July 2015

Installation/facility Status

Pit Construction has not yet begun

Camp

Accommodation for 43 persons Finishing interior Details

Health Clinic Finishing interior Details

Kitchen Finishing interior details.

Applying for approval of Quality Management Program

Canteen Finishing interior

Activity Room Finishing interior

Electric Plant Under construction

Water supply Under construction

Waste Water plant Under construction

Helipad Under construction

Working on having flight site Manual approved

Harbour – Outer Port Under Construction

Roads Work trails established

Applying for approval to complete road constructions

Lowering water level Has begun

Process Plant Construction has begun

Workshop Construction has begun

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3.3 Shipping between Nuuk and Mine site From the time construction began in September 2014, the operator has had to move a considerable

volume of building equipment, machines, tools, fuel and spare parts required for the construction, along

with workforce and supplies for these between Nuuk and the mine site. The operator has prioritized to

ship by sea as much as possible. However, the long and extremely hard winter 2014/2015 meant that

from January to mid-May 2015 it was impossible to access the site by sea, thus the operator had to use

helicopters to bring in/out workers and to sling in supplies and building equipment to the extent

possible. The following local transport operators have been used for logistical tasks in relation to the

project:

Table 3: Local transport operators

Local transport operators

LNS-Greenland

Greenland Boat Charter Royal Arctic Line

Air Greenland

The very comprised construction phase has resulted in a lot of traffic from both helicopters and vessels

arriving/leaving the site. The Company is pleased that this has been possible without causing any

problems for the local hunters and fishers.

3.4 Activities for the coming years Mine Site and shipping

The Company is only planning for a minimal exploration for this season (2015) so the main traffic will be

between Nuuk, Qeqertarsuatsiaat and the Site in relation to finishing the construction phase and going

into production.

The camp is close to being operational and the transition into the production phase is planned to take

place in 3rd Quarter 2015. We do not expect to close down this winter. Later this year and in connection

to commissioning the process facility at the mine site, it is the plan that a test production will be started.

The exact time for this is still not decided as key pieces of the equipment for the Process Line are still

being purchased.

Nuuk facilities

Of the three project facilities in Nuuk, only the TNGG office has been established. At the moment (July

2015) this is placed in the same building as Bank of Greenland. The company is planning to have its

sorting facility in the same building, however the Company is considering plans for a future facility in

Nuuk that will provide a long term solution (over several Years) for the needs of the Company.

The project also operates with a Rough-Handling and HF-Cleaning Facility. Initially this was planned to

take place at the laboratory at NunaMinerals, but given the uncertainty of the future of the company

thus also the building, the Company has found it necessary to plan for an alternative solution. This is

already being looked into coordinated with both the Municipality and with the relevant mineral

authorities.

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4 Cooperation with authorities and IBA-parties

4.1 The legal framework for the Rubi Mine at Aappaluttoq Starting a mine is a mayor decision and requires years of planning, preparation and work. This section

describes in headlines what is required, who is responsible for preparing material and who is approving

the material.

According to section 2 in the Mineral Resource Act then “the Greenland Self-Government has the right to

control and use mineral resources in the subsoil in Greenland”. This means that since the 1st of January

2010 the Greenland Self-Government has had control of the mineral resources and the subsoil.

Consequently, even though Greenland is still a part of the Danish Realm, then the Danish authorities do

not have not have any influence upon the decision concerning granting an exploration or an exploitation

licence in Greenland.3 In other words and in contrast to other regions in the Arctic then the people of

Greenland or its representative political institutions, Naalakkersuisut (the government) and Inatsisartut

(the parliament), draft and adopt the policy and terms for the mining industry in Greenland. For further

information about Greenland’s mineral policy, please consult “The Oil and Mineral Strategy for 2014 to

2018” issued by the Greenland Government: http://govmin.gl/component/content/article/7-about-

bmp/about-bmp/136-oil-and-mineral-strategy.

Mid-2015 there is three authorities in Greenland, who are responsible for different aspects of Mineral

Resource activities

Table 4: Mineral Resource Authorities

Mineral Resource Authorities (MRA)

Ministry of Mineral Resources (MMR) The MMR and the underlying Mineral Licence and Safety Authority (MLSA) are responsible for the licence administration,

technical and geological matters.

Ministry of Industry, Labour and Trade (MILT) MILT is the appropriate authority for issues concerning Industry and Labour policy including social impact assessments (SIA) and Impact Benefit Agreements (IBA) for mineral resources companies and similar related socio economic matters.

Environmental Agency for Mineral Resource Activities

(EAMRA)

EAMRA is the appropriate authority for all mineral resources environmental issues including Environmental Impact Assessments (EIA).

Kommuneqarfik Sermersooq (the municipality), including the local Council for the Settlement of

Qeqertarsuatsiaat, is not a mineral resource authority. However as mentioned below in section 4.3, then

the municipality is a party to the IBA.

4.2 True North Gems exploration and exploitation licenses In 2004, True North Gems Inc. received Exploration Licenses 2008/01 and 2008/46 by the Bureau of

Mineral and Petroleum (now the MLSA), which allowed the Company to conduct exploration for

minerals south for Qeqertarsuatsiaat. Specifically the Company started exploring for corundum (Rubies

and Pink Sapphires). In 2008 the Company announced that they wanted to submit an application for

Exploitation of Corundum. According to section 76 in the Mineral Resource Act, then when a mineral

resource activity is assumed to have a significant impact on the social conditions then a licence for and

approval of the activity can be granted only when a social sustainability assessment (SSA) has been made

3 The exception, which proves this rule is minerals, which contain radioactive elements such as uranium or thorium.

This is due to that Greenland’s security and foreign policy is still drafted in coordination with the Danish authorities (mainly the “Ministry of Foreign Affairs of Denmark”)

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of the performance of the activity. Consequently, the following years the Company held information

meetings and workshops at Qeqertarsuatsiaat while preparing the required application material.

True North Gems submitted application material for an Exploitation Permit June 14th 2013, this included:

An Environmental Impact Assessment (EIA)

A Social Impact Assessment (SIA)

A Pre-Feasibility Study (PFS)

The framework for these documents is explained in guidelines set out by the Mineral Resource

Authorities (MRA) subordinated the Government of Greenland. Before submitting the actual application,

the Mineral Resource Authorities had to accept the application material to make sure the materiel meet

the requirements.

Subsequently the EIA and SIA were uploaded to the government’s website, www.Naalakkersuisut.gl, and

a public consultation began on the 17th of June and expired on the 12th of September 2013. Prior to the

public consultation period the company held independent community meetings and during the

consultation period the company together with the Minister for Industry and Mineral Resources Jens-

Erik Kirkegaard and the Minister for Housing, Nature and Environment Mette Lynge held official hearing

meetings in Nuuk, Paamiut and Qeqertarsuatsiaat. Minutes were taken from the meetings and the

company as well the Greenland authorities subsequently had to address the orally raised comments

during the meetings as well as the written comments submitted during the public consultation period.

This was done in a White Paper. The White Paper is available in Danish and Greenlandic on the following

webpage: http://naalakkersuisut.gl/da/H%C3%B8ringer/Arkiv-over-h%C3%B8ringer/2013/TNG-QEQ

The White Paper was subsequently used to make a revision of the social impact assessment. Finally, the

White Paper as well as the final version of the SIA were approved by the Government, in connection to

that True North Gems Greenland A/S was granted an exploitation licence on the 3rd of March 2014.

4.3 The Impact Benefit Agreement The final Social impact Assessment was used as the basis for negotiating the IBA, which as mentioned in

section 1 was signed in Qeqertarsuatsiaat in June 2014 between the three parties to the Impact Benefit

Agreement:

Table 5: Parties to the IBA

Parties to the Impact Benefit Agreement

True North Gems Greenland

Kommuneqarfik Sermersooq (the Municipality)

Naalakkersuisut (the Greenland Government)

Prior to the signing of the IBA, the municipality had held meetings with the local Council for the

Settlement of Qeqertarsuatsiaat and the local population. During these council meetings and public

meetings, the municipality had engaged in dialogues to agree on a mandate to negotiate the IBA on

behalf of the local population. The Ministry of Industry and Mineral Resources (now the Ministry of

Industry, Labour and Trade) had held meetings with the union and Employers Association to agree on a

mandate on behalf of the parties from the labour market.

After signing the IBA and in order to secure adequate and timed communication between the

Municipality, the local Community and the Company a Work Group at the municipal level has been

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established. This Group has regular meetings and the minutes from the meetings are being made

available on the Municipality’s website. Members of this group are the mayor of Kommuneqarfik

Sermersooq, Director of the Employment Section, other staffs from the municipality, The Chairman of

the Council for the Settlement of Qeqertarsuatsiaat and Kapisilliit, the Foreman for the Local Fishing and

Hunting Organization, the managing director from the Company, a staff member from the Company and

the Project Manager from the Operator in charge of the Project.

4.4 Other approvals Besides, the above-mentioned document an approval of the Production and Abandonment plans

pursuant to section 19 and section 43 in the Mineral Resource Act was granted in August 2014.

Furthermore, since September 2014 the Mineral Licence and Safety Agency (MLSA) has, in accordance

with section 86 in the Mineral Resource Act, granted the approvals of activity plans mentioned in Table

6. The activities mentioned in table 6 cannot be initiated before approval has been obtained.

Naalakkersuisut granted the first approval of the activity plan in September 2014, which allowed the

Company to initiate the construction of some of the infrastructure related to the project.

Table 6: Significant approvals of activity plans since September 2014

Activities Date of Approval

Mobilization 24th

September 2014

First Road approval 7th

October 2014

Harbour and Fuel Depot approval 17th

October

Camp and Second Road approval 20th

November 2014

Explosive Depot and Third Road approval 15th

December 2014

Installation of Camp Modules approval 22nd

December 2014

Lowering Water Level approval 14th

April 2015

Process Plant and Workshop approval 11th

May 2015

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5 Greenland Workers

5.1 Origin and gender of employees According to the IBA, the Company is committed to initiate programs that will help to ensure that a

minimum of 70% of all employees during construction will be Greenlandic Workers. Since the

construction phase started in September 2014 the Company and the operator, have had 100%

Greenlandic Workers hired. In July 2015, a total of 79 workers have been engaged of which 43 workers

are hired at the moment.

For True North Gems Greenland all 5 employees are residents of Nuuk. The operator has also had

success hiring local people. For the operator the main part of all hired people comes from

Kommuneqarfik Sermersooq, followed by Kommune Kujalleq and then Qeqqata Kommunia and

Qaasuitsup Kommunia (see table 7 and 8). A total of 7 people from the nearby settlement

Qeqertarsuatsiaat have been hired to work at the site since the start of construction. Of these 6 persons

are still working on the project. Approx. 9% of all hired people and approx. 14% of the people working at

the site at the moment have been recruited from the nearby settlement. Though these numbers may be

perceived as relatively low numbers, it is the opinion of the operator that this is a success. It is also a

goal for the Company and the operator that the percentages will increase once the project goes into

production.

Table 7 and 8: origin of workers distributed on Municipalities in Greenland (June 2014 to July 2015)

Origin LNSG TNGG Total

Kujalleq 24 0 24

Sermersooq 44 5 49

Qeqqata 5 0 5

Qaasuitsup 1 0 1

Foreign 0 0 0

Total 74 5 79

% LNSG TNGG Total

Kujalleq 32,4 0,0 30,4

Sermersooq 59,5 100,0 62,0

Qeqqata 6,8 0,0 6,3

Qaasuitsup 1,4 0,0 1,3

Foreign 0,0 0,0 0,0

Total 100,0 100,0 100,0

The Company hire solely on qualifications irrespectively of the applicant’s or candidate’s gender. So far

at the Company’s office in Nuuk two out of five are women.

Table 9 and 10: Gender-ratio

Gender LNSG TNGG Total

Men 67 3 70

Women 7 2 9

Total 74 5 79

% LNSG TNGG Total

Men 90,5 60,0 88,6

Women 9,5 40,0 11,4

Total 100,0 100,0 100,0

5.2 Type of Job Categories The Company is right now developing an Organization Chart, covering all positions at the Mine site and

the Nuuk Facilities. It is the intention to use this chart in connection to the monitoring and the annual

evaluation of the activities, which are requirements according to the IBA. Table 11 shows the different

types of Job Categories that already are – or will become – needed for the project. The column to the

right shows if the job category is being used and if so – for how long time has it been activated. The

positions that have been activated reflect that the mine is under construction.

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Table 11: Types of Job Categories

Job category Job period Positions activated

Mine site

Mine Manager 12 months Not yet hire

Camp Manager 12 months 9 months

Engineer 12 months Not yet hired

Geologist 12 months Not yet hired

Supervisors 12 months 9 months

Excavator operators 12 months 9 months

Dozer operators 12 months 9 months

Truck operators 12 months 9 months

Driller 12 months 9 months

Blaster 12 months 9 months

Loader operator 12 months 9 months

Crusher-operator 12 months Not yet hired

Jigs-operator 12 months Not yet hired

Process Plant Sorters 12 months Not yet hired

Mechanics 12 months Not yet hired

Electricians 12 months Not yet hired

Apprentices 12 months Not yet hired

Administrative staff 12 months 9 months

Chef 12 months 9 months

Kitchen staff 12 months 9 months

Cleaning staff 12 months 9 months

Nuuk Facilities

Administrative staff 12 months 12 months

Rough Handlers 12 months Not yet hired

Sorters 12 months Not yet hired

Apprentice 12 months Not yet hired

The success with hiring local people is undoubtedly a consequence of an unfortunately high

unemployment rate within the construction sector in general and specifically in the region of

Kommuneqarfik Sermersooq, and the closure of the Nalunaq Goldmine in South Greenland, combined

with positive interest in the project from the people of Greenland. The Company and operator have

received more than 400 unsolicited applications covering expertise, knowhow and skilled labor in all

branches and on all levels. This clearly signifies the positive interest that the people of Greenland has

shown in the project. As a consequence, there has been no need to apply for skilled labour, yet. Nor has

there been a need to initiate pre-employment programs or to arrange for qualification courses together

with the Naalakkersuisut and/or the Municipality.

The Company is aware that initiatives are being done politically to mitigate the high unemployment rate

and will be ready to implement programs when indications show the need for such in order to maintain

the high percentage of Greenland workers.

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Persons who are hired during the construction phase at the mine site will be offered positions for the

production phase at the mine site.

Foremen

According to the IBA the Company is responsible for initiating measures to enable the Greenlandic

workforce to obtain positions on foreman-level. As mentioned above there has been no need to initiate

special measures for this purpose. 100% of the workforce are Greenlandic, this also include formen and

managers on all levels.

For TNGG the plan has been to hire an administrative leader during 2015. This happened in February.

This person has been fully engaged in finding systems and routines for the office.

6 Education

6.1 Educational activities in 2014/2015 Through the construction phase the Operator has had workers on different courses. These have

primarily been HSE-Related:

6 persons have taken Course in Arctic First Aid and Fire (Danish language)

8 persons have taken Course in Arctic First Aid and Fire (Greenlandic language)

3 persons have taken Course in Work Safety Coordinator

6 persons have taken Course in Medicinkiste-B

4 persons have taken Maintenance Course in Blasting.

Over the last 12 months TNGG have had staff members on:

1 person has taken Course in Arctic First Aid and Fire (Greenlandic language)

3 Persons have taken Course in ISO-9001

In addition to this 1 person has started the Gemology Education, GEM-A, which takes 2 Years.

Apprenticeships in 2014/2015

Through the IBA the Company is committed to hire 5 apprentices, starting in the construction phase and

continuing through the production phase. 4 of them shall be in connection to the mine site.

An unfortunate consequence of the comprised construction phase (see section 1) has been that the

operator hasn’t succeeded in establishing 4 apprenticeships though a Construction Machine Mechanic

Apprentice finished his apprenticeship at the project in December 2014. Neither has True North Gems

Greenland succeeded in establishing 1 apprenticeship. Several factors have resulted in difficulties

fulfilling this requirement. One of them is that the construction phase has been comprised. This means

that different professions have been on site for short periods. Another is that the winter 2014/15

started early resulting in slow progress for preparing roads and camp area. Consequently, the staff

worked the whole winter and only living in few tents. It was only possible to provide accommodation for

19 people at the site leaving no room for apprentices. Finally, the operator has had a period of time

where they have had to adjust their activities and organization (not affecting the Ruby Project) which

prevented them for moving apprentices around between different projects.

Also, the Company didn’t hire a person to be in charge of the administration until February 2015. This

person is now working on getting the office approved for apprenticeship.

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Even though the abovementioned reasons are considered as legitimate explanations for not fulfilling the

requirement, then TNGG still finds it problematic. The hiring of apprentices will therefore be given a very

high priority going into the production phase.

Through the construction phase the operator has had two internships for engineer students coming

from Artek, Sisimiut.

6.2 Allocated funds According to provision 10.3 in the IBA the Company must allocate 250.000 kr. each of the first and

second project year for educational purposes, of which half of that amount can be used to educate

employees employed by the Company and it’s operator.

The table below shows the amount that the Company has use on education in 2015. The courses are

listed under section 6.1. Far most of the courses have been executed by branch schools and have taken

place here in Greenland.

Table 12: Educational funds

Educational funds 2015

True North Gems Greenland 102,748 DKK

LNS-Greenland 377,615 DKK

Total 492,862 DKK

6.3 Educational activities in the coming year Prior to starting the production at the mine site ISS-Greenland and True North Gems Greenland will

initiate a special training program for the security staff. True North Gems Greenland will also coordinate

and initiate a training program for the people who are going to work at the Nuuk facilities as rough-

handlers, lab-assistants and sorters.

The operator will also start recruiting for people to work at the site. These will be given special training

and instructions if – and when – needed. Some positions require certain skill-sets. It is the opinion of the

Company and the operator that most of these are already available here in Greenland. Some can be

acquired by initiating special educational programs (coordinated with the municipality and the

Government) and a few number of positions will initially be hired from outside Greenland (See section

8). When hiring foreign workers, because of the requirement for special skills, it is the plan for the

Company and operator, to execute a program that will enable the organization to transfer knowledge

and skills from the foreign worker to local workers. The Canadian Process Engineer, hired by TNGG,

responsible for designing the Process Line will be in charge of implementing the process line, instruct

and train the operators and make sure that all required know-how will be transferred to the operating

company. It is expected that the Process Engineer will be on site for 3-4 months, however this obviously

depends on the success of getting the process line up and running.

Prior to entering the production phase both the Company and the operator in charge of production will

hire and train the required workforce. To the extent required this will be coordinated with the

Municipality, The Mining School and other relevant Branch Schools. Special focus will be on the Process

Plant at the Mine site and the Rough-handlers and Lab-assistants at the Cleaning facility and Sorters at

the Sorting facility in Nuuk.

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The Company will – in good time – coordinate screening and recruitment of applicants for the Rough-

handling-, Cleaning- and Sorting facilities in order start educating these. The Canadian gemologist who

has developed the sorting matrix and made the educational curriculum will be in charge of executing the

training program for these assisted by the Company’s own Process Engineer. The training will take place

in Nuuk. The training program consists partly of a 2-3 weeks course followed by on-the-job training,

supervised by the Canadian gemologist and the Company’s Process Engineer.

Finally, as briefly mentioned previously, the Company is now in contact with the local Business School in

order to make a contract for an office apprenticeship of one (1). It is the plan that this apprenticeship

can start up in 3rd Quarter 2015. In relation to the production, the Operator will establish four (4)

apprenticeships.

7 Greenland Enterprises and local businesses

7.1 Greenland enterprises It has been a part of the Company’s strategy from the beginning, to make this project beneficial for all of

Greenland. A way to do this is to make sure that local Greenlandic companies are allowed to benefit

from the project as well.

As a consequence of this strategy a Joint Venture Partnership was entered with LNS-Greenland (See

section 2). By making this local company (with Norwegian owners) a partner, we made sure that we had

a local operator who will be responsible for the construction and the production.

During the construction phase TNGG has among others made contracts with two subcontractors: ISS-

Greenland. This contract makes ISS-Greenland responsible for the security setup with both hardware

and manpower, both on site and in Nuuk-facilities. This contract is expected to generate 10-12 jobs, all

Greenland workers. ISS-Greenland will earn revenue on several million DKK over the lifetime of the mine

subsequently contributing to the taxation system. All Greenland workers will be educated, so they will

possess the necessary skills.

Secondly, True North Gems has made contract with Blue Water Shipping Greenland. This contract makes

Blue Water Shipping Greenland responsible for transportation of all material and machines required for

the Process-Line at the site from distant parts of the world to the Aappaluttoq site. This contract doesn’t

generate new jobs, as it is a short-time project that will be solved within the already existing

organization. The revenue will be moderate but will benefit Greenland.

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Finally, several other Greenland companies have been used. Table 13 shows a list of Greenlandic

companies who has been used by the Company and/or our operator since the IBA was signed in June

2014.

Table 13: List of sub-contractors, suppliers and vendors

AES Grønland CSR Greenland IF-Forsikring Plan2Move/Culture Crosing

Malling & Hansen Damm Deloitte Inuplan Polar Oil

Air Greenland Departementet for Råstoffer Inu:IT Polar-EL

Arctic Import Dot.gl ISS-Greenland Pon-Cat Grønland

Arctic Logo Godthaab Bryghus K K Engros Rambøll

Arcti Umiaq Line Godthåb Olietransport Larsen og Co. Royal Arctic Line

Arssarnerit Godthåb Skibsentreprenør LNS-Greenland Sermitsiaq AG

Bang.gl Greenland Boat Charter MDC-Data Siunnersortit-IT

Bidstrup Consulting Greenland Venture Mittarfeqarfiit Stark

Blue Water Shipping Grønlands Bådcenter Nukissiorfiit Sømandshjemmet I Nuuk

Boman Qujan Grønlands Erhverv Nunaminerals Tele-Post Greenland

Brugsen Grønlands Kontorforsyning Nuna Advokaterne Transparency Greenland

Brøndum Grønland Grønlands Revisionskontor Nuuk Forsamlingshus Qalut Voning Grønland

Café Esmaralda GrønlandsBanken Nuuk Transport Usissat

Café Chili HJ-Tek O.S.Electronic Vejle-Rejser

Café Mik Hotel Hans Egede Orsiivik Vinslottet

Café Prego Hotel Nordbo Pilersuisoq Willis

Comby HP Entreprenør Maskiner Pisiffik Yamatek

The table shows that at least 72 Greenlandic companies have been used since the IBA was signed in June

2014. As the project has developed the Company has entered contracts with some of the service-

providers and suppliers.

Table 14 shows contracts that have been entered with Greenlandic Enterprises and contract packages

that the Company consider making contracts for.

Table 14: Contracts relevant to the project.

No. Contract package Greenland Enterprises

awarded contracts

Joint

venture

Other

contract

1 Construction LNS-Greenland X

2 Civil Engineering LNS-Greenland X

3 Mine Operation LNS-Greenland X

4 Security ISS-Greenland X

5 Boat Charter N/A1)

Not yet

6 HF-Cleaning Process N/A Not yet

7 Fuel Polar Oil Not yet

8 Transport by sea Blue Water Shipping X

9 Transport of gem-stones Mittarfeqarfiit2)

Not yet

10 Transport by air Air Greenland X

11 Tele Communication Tele Greenland X

1) Tender will be prepared by 3rd quarter 2015. 2) Mittarfeqarfiit operates as local agent for G4Si

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7.2 Local business opportunities for inhabitants in Qeqertarsuatsiaat Most of the companies mentioned in section 7.1 are based in Nuuk. Even though the settlement of Qeqertarsuatsiaat by all standards has a very small population (198 inhabitants on the 1st of January 2015) then there are some services, which the inhabitants are able to provide:

Supplies with fish and meet

The Company, the Work Group and the Local Fishing and Hunting Organization have held meetings in order to establish the ground for future cooperation on buying/selling supplies of fish, birds and meet from animals for the people working at the site. Everybody agrees that this is possible and a good idea. Meetings including the operator to finalize an agreement are eminent.

Supplies from the local grocery store in Qeqertarsuatsiaat

It has been a request from the local settlement that supplies for e.g. the kitchen at the camp could be done through the local grocery store (Pilersuisoq), however this is not yet possible. In the construction phase the fluctuation of workers coming/going through the Camp have changed on a weekly basis. Also, buying the quantity required for running the camp makes the price level very relevant and so far Pilersuisoq has not been competitive on price level.

7.3 Non-Greenlandic Companies Due to no Greenland company is able to provide services regarding designing, producing and delivering

Electrical Board and control Units for the Process Plant, this will be provided by the Denmark based

Automatic Syd A/S.

KEN Storkøkken, based in Denmark, has been in charge of designing the kitchen and providing the

kitchen equipment. The kitchen for a camp of this size requires a kitchen of industrial size and quality,

which is not available in Greenland.

Novus Engineering has been in charge of the process design for the HF-Facility in Nuuk and the Process

Plant at the site. Novus has been chosen for this assignment because they have the knowledge,

expertise and experience in designing gem-stone production lines.

Novus has also been in charge of procuring the process equipment from all around the world. The

procuring of this equipment outside Greenland has been necessary because these kinds of equipment

are not available in Greenland.

8 Developing Greenlandic Enterprises

8.1 Contributions to develop other Greenlandic companies in the mining industry So far, the Company has prioritized Greenlandic companies as JV-partners, subcontractors and suppliers

when Greenlandic companies have been able to provide the required product/services (see section 7).

The main priorities for finding subcontractors are as follows:

Price

Quality

Time for deliverance

Consistency and supply

Jobs for Greenlandic workers

Apprenticeships in Greenland

Other benefits for Greenland

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Other requirements or standards, either which shall be fulfilled or which the company encourages it

potential suppliers to fulfill are:

ISO9001

ISO14001

ISO18001

Technical equipment shall be CE-Certified

Chartering vessels shall be certified by the Danish Maritime Authority

It is the opinion of the Company that we have fulfilled the goals to develop Greenlandic Enterprises in

full both by entering a Joint Venture with the Greenlandic company, LNSG, and also by entering a

contract with ISS-Greenland and other Greenlandic companies. To some extend this will have significant

impact on these companies ability to provide new products in Greenland and to become attractive to

other mining projects in the future.

Yet an example of transfer of knowledge is the symbiosis between the company Novus, in charge of

designing the production processes and the Greenlandic company, Inuplan. Novus are specialized in

making production processes within gemstones, but have no knowledge or experience in setting up a

production line in Greenland, where everything have to be adjusted to Danish/Greenlandic and/or EU-

Standards. Therefor we have had Novus designing the process components and then Inuplan has made

sure, that their design was adjusted to standards and regulations here in Greenland.

8.2 Contributions to development of a gemstone industry in Greenland Sale to local artisans etc. According to provisions in the IBA, TNGG will work together with a local approved selling agent to

facilitate the sale of corundum to local artisans and individuals, who wish to purchase material produced

from the Aappaluttoq deposit. Due to the project is not in the production yet, this cooperation has not

started yet, but the company is considering different strategies for establishing this cooperation.

Small scale miners

Also, the Company has established contact to several small scale miners in Greenland. This is not organized in the same way as with the Municipality, mostly because the small scale miners are not represented in one – or more – organization(s). It is recommended that efforts are made to establish some kind of forum where dialogue between the different parties can take place. The Company is open to dialogue and coorporation between the different parties and will continue engaging in constructive dialogues with the small-scale miners.

The Company acquired a new Exploration Licence near Manniitsoq. This resulted in some confusion among some small-scale miners. The misunderstandings were identified and dialogues were initiated between the MLSA, the Company and the small-scale miners. This resulted in establishing a constructive dialogue between some of the small-scale miners and the Company.

Polishing courses

As part of the IBA the Company is requested to arrange for two annual polishing courses at the Polishing Facility in Qeqertarsuatsiaat. In June 2015 the 1st course was planned and executed. The Canadian instructor, Brad Wilson, who also held the very first courses back in 2008 was responsible for running the course. The course had been arranged and planned together with the Municipality and the local council for the Settlement. The courses are established to inspire locals to engage in activities related to the project. To give locals the basic knowledge to start up on their own and to show them techniques and provide knowledge and tools for them to develop from. There were 5 local people taking part in the

19

course and it is the opinion of the Company that the course was a success. The course had a lot of positive attention from the local community and it was requested by several locals that similar courses would be arranged.

Other potential contributions to the development of a gemstone industry in Greenland

Finally, the company is aware that the Ministry of Industry, Labour and Trade together with Ministry of

Mineral Resources have drafted but not yet finalized “A statement concerning social perspectives on the

development of a Greenlandic gemstone industry”. The draft was submitted for public consultation in

the first half of 2015.

TNGG looks forward to the publication of the final version of the statement and is open for contributing

to the different measures in the statement including the aforementioned sale to local artisans and the

annually held polishing courses.

9 Tax and revenues from royalties

9.1 Public revenues in 2014/2015 The Company is still not in the production phase and no sale hasn’t been approved yet. This also means

that the Company still hasn’t begun paying any royalties as the royalty is based on the turnover of a sale.

However, since the IBA was entered in June 2014, the project has generated the following personal

income tax from people working for the Company or the Operator.

Table 15: Personal income tax paid to Greenlandic Municipalities from July ’14 to June ’15

July 2014 to June 2015 TNGG

(Thousands)

LNSG

(Thousands)

Total

(Thousands)

Personal Income Tax 1,048 5,379 6,427

AMA4 0,025 0,125 0,150

Total 1,073 5,504 6,577

4Social security contributions

The Table doesn’t show personal income tax derived from the construction phase or value added to the

Greenlandic Society by using a vast majority of Greenlandic sub-contractors and suppliers.

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9.2 Future fiscal benefits for Greenland In February, the Company announced the new Pre-Feasibility Study. The Pre-Feasibility Study shows the

potential of the Project throughout the lifetime of the mine (9 Years). The Feasibility Study shows new

numbers and also a considerable increase in the Government Take for Greenland. Table 16 shows key

numbers from the new Feasibility Study.

Table 16: Government take in life of mine

(Over 9 Years) US$

(Million)

DKK

(Million)

Turnover 573 3,134

Operating Costs 94 514

Capital Expenditures 27 148

Free Cashflow before Tax 452 2,472

Company Tax/Royalties 170 930

Free Cashflow after Tax 282 1,542

Personal Income Tax 17 93

Total Government Take 187 1,023

The table shows a considerable increase in the Government Take for the Project compared to the

previous PFS, where the Company Tax/Royalty was estimated to DKK 90 mio. The increase is largely

explained by new conservative prices for the Greenlandic rough stones, based on valuations from 2015.

10 Communication, cultural issues, funds etc.

10.1 Communication It has been part of the Company’s Communication Strategy to be as open and transparent as possible in

order to mitigate rumours and doubts and instead contribute to the discussions of the mineral resources

in general and to this project in specific by always being available and focusing on telling facts. Being a

new company operating within this new growing sector in Greenland there will always be room for

improvements, though it should be said, that we have tried very hard within a small organization.

Being available, open and transparent has been necessary on all levels. The company believes that the

fact that we have a headquarter based in Nuuk, assisted by a very dedicated, specialized parent

company, with a very small staff, in Vancouver, Canada, has helped and made the result possible.

Though the Company has only 5 persons hired, these are all locals. They are all dedicated, well educated,

experienced and skilled and they all have very detailed knowledge of the project meaning, which make

them all capable of informing about the project. Within this small organization both Greenlandic, Danish

and English are spoken. This has enabled us to use both Greenlandic and foreign medias and to start our

own Facebook-profile allowing everybody to ask questions to be answered.

(https://www.facebook.com/truenorthgems?fref=ts)

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TNGG has held Information-meetings about the project for:

Table 17: Information-meetings and Presentations until June 2015

Information-meetings until June 2015

Political Parties: Siumut, Atassut, Demokraatit, Inuit Ataqatigiit, Partii Naalaraq.

Grønlænderhuset in Aalborg, Denmark

Public Meeting in Qeqertarsuatsiaat (April 30

th 2015)

Department of Mining and Geological Engineering, Alaska

The Committee of Mineral Resources of the Greenland Parliament

ICC ISS-Greenland LV72, Round Table, Lion’s Club

The Committee of Finances and Taxes of the Greenland Parliament

Inutek Greenland Business Association

Staff association at the Hospital in Nuuk

Ambassador of Canada to Denmark (visit in Greenland)

German Trade Delegation

Sermersooq Police

Within the same period meetings have been held with the Joint Group (Municipality, Local Board and

Company) and with different offices within the Municipality.

The Following media corporations have been given interviews for articles:

Table 18: Given interviews for articles until June 2015

Given interviews for articles until June 2015

Sermitsiaq/ Oil & Minerals (Greenlandic newspaper)

Nuuk TV KNR (Greenlandic Broadcasting Coperation – TV)

KNR (Greenlandic Broadcasting Coperation – Radio)

Politiken (Danish newspaper)

Mandagsavisen France-2 TV-2 (Denmark)

DR (Danish Broadcasting Coperation)

Suluk Magazine UNA Business New York Times

Time Magazine The Finnish Journal of Foreign Affairs

Several International Free-Lance Journalists

GEO-Magazine

10.2 Cultural and social fund Pursuant to provision 12.3 in the IBA, the Company is requested in 2015 to allocate 100.000 DKK for social and cultural purposes. The Company ended up using 102.748 DKK on cultural activities. The funds were used to run a polishing course in Qeqertarsuatsiaat, where 5 participants received instructions and training for a week. The experiences learned during this course will be used when planning for the next polishing course, which the Company expects will take place in Qeqertarsuatsiaat during the spring 2016.

Table 19: Social and Cultural fund

Social and cultural funds 2015

True North Gems Greenland 102,748 DKK

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11 Revision of the contents in the appendices to the IBA On the Basis of the annual Draft for a Monitoring Report and Evaluation Report, the parties shall

subsequently hold meetings to determine the targets (contents) in the appendices for the subsequent

year. Due to the project is still in the construction phase the parties have seen no reason to make

significant changes to the contents of the appendices. The changes made are mainly due to that the

mine is expected to go into production soon and due to the appendix (appendix 3) concerning reporting

has been phrased so it also covers more than just the construction period. The changes in the contents

of the appendices to the IBA are listed in table 19 and the updated appendices will be uploaded on the

following webpage: www.Naalakkersuisut.gl.

Finally, for the benefit of facilitating the monitoring and the evaluation of the IBA all the provisions in the

appendices have been numbered. However, this has not caused any change in the contents of the

appendices (i.e commitments) and has therefore not been considered as such.

Table 19: Changes in the appendices for the following year

Changes in contents of the appendices to the IBA

The relevant

appendix/appendices in 2014

No. Description of change of contents in the appendices

Appendix 1 1 Updated so it includes the production and processing activities

for the coming years.

2 A reference for drafting a study for possible further processing

activities in Greenland has been added.

Appendix 2 3 One provision has been rephrased to give a more accurate

description of how the company engage in an open dialogue

with the citizens of Qeqertarsuatsiaat.

4 A provision has been deleted due to that the type of courses

are already provided by the government or/and the

municipality

Appendix 3 5 Has been updated so TNGG will include in royalties, corporate

tax and income tax in the annual report

6 Has been updated so it is explicitly stated that TNGG also will

report on Mineral resource activities in the annual monitoring

and evaluation report.

7 The wording of the appendix has been updated to cover the

life of mine and not only the construction phase

8 It has been clarified that the licensee only has to submit

documentation on request from any of the other parties to

the agreement.

Appendix 7 9 Table A 7.1.1 has been updated

10 Table A.7.1.2 has been updated