new royal nickel corporation a preliminary assessment of … · 2016. 2. 4. · suite 900 - 390 bay...

SUITE 900 - 390 BAY STREET, TORONTO ONTARIO, CANADA M5H 2Y2 Telephone (1) (416) 362-5135 Fax (1) (416) 362 5763

Royal Nickel Corporation

A PRELIMINARY ASSESSMENT OF THE

DUMONT PROPERTY LAUNAY AND TRÉCESSON TOWNSHIPS,

QUEBEC, CANADA

30 September, 2010

William J. Lewis, B.Sc., P.Geo. Ing. Alan J. San Martin, MAusIMM

Richard M. Gowans, P.Eng. David Penswick, P.Eng.

Michel Lemieux, Eng., M.Sc. Pierre Primeau, P.Eng. Colin Hardie, P.Eng.

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Table of Contents Page

1.0 SUMMARY .................................................................................................................... 1 1.1 INTRODUCTION ....................................................................................................... 1 1.2 GEOLOGY AND MINERAL RESOURCES ............................................................. 1 1.3 MINING AND GEOTECHNICAL ISSUES ............................................................... 3

1.3.1 Geotechnical Issues .............................................................................................. 3 1.3.2 Open Pit Design ................................................................................................... 3 1.3.3 Production Schedule ............................................................................................ 4 1.3.4 Mining Fleet Requirements .................................................................................. 4

1.4 METALLURGICAL TESTWORK ............................................................................. 5 1.5 PROCESS AND INFRASTRUCTURE DESIGN ...................................................... 7

1.5.1 Proposed Flowsheet ............................................................................................. 7 1.5.2 Process Design Criteria ........................................................................................ 8 1.5.3 Infrastructure ........................................................................................................ 9

1.6 TAILINGS MANAGEMENT FACILITY .................................................................. 9 1.7 ENVIRONMENTAL ASPECTS ............................................................................... 10 1.8 CAPITAL COST ESTIMATE ................................................................................... 11 1.9 OPERATING COST ESTIMATE ............................................................................. 12 1.10 EVALUATION ......................................................................................................... 12

1.10.1 Base Case and Upside Case ............................................................................... 12 1.10.2 Sensitivity Analysis ........................................................................................... 14

1.11 CONCLUSIONS ....................................................................................................... 16 1.12 RECOMMENDATIONS ........................................................................................... 17

1.12.1 Proposed 2011 – 2012 Exploration Program ..................................................... 17 1.12.2 Further Recommendations ................................................................................. 18

2.0 INTRODUCTION AND TERMS OF REFERENCE .............................................. 20

3.0 RELIANCE ON OTHER EXPERTS ........................................................................ 25

4.0 PROPERTY DESCRIPTION AND LOCATION .................................................... 26 4.1 DUMONT PROPERTY MINERAL CLAIM AGREEMENTS ............................... 30

4.1.1 Griffis International Ltd. Mineral Claims .......................................................... 30 4.1.2 Marbaw International Nickel Corporation Mineral Claims ............................... 30 4.1.3 Sheridan-Ferderber Mineral Claims .................................................................. 31 4.1.4 Royal Nickel Claims .......................................................................................... 31

5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ....................................................... 32

6.0 HISTORY ..................................................................................................................... 35 6.1 ROYAL NICKEL EXPLORATION ......................................................................... 35 6.2 HISTORICAL MINING AND PRODUCTION ....................................................... 38 6.3 DUMONT PROPERTY RESOURCE AND RESERVE ESTIMATES ................... 38

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7.0 GEOLOGICAL SETTING ......................................................................................... 39 7.1 REGIONAL GEOLOGICAL SETTING ................................................................... 39 7.2 CONTACT RELATIONS, AREAL EXTENT AND AGE OF THE

DUMONT INTRUSION ........................................................................................... 40

8.0 DEPOSIT TYPES ........................................................................................................ 44

9.0 MINERALIZATION ................................................................................................... 45 9.1 DISSEMINATED NICKEL MINERALIZATION ................................................... 45

9.1.1 Nickel Mineralogy ............................................................................................. 45 9.2 CONTACT-TYPE NICKEL-COPPER-PGE MINERALIZATION ......................... 49 9.3 OTHER TYPES OF PGE MINERALIZATION ....................................................... 49

10.0 EXPLORATION .......................................................................................................... 50 10.1 2010 EXPLORATION PROGRAM .......................................................................... 50

10.1.1 Resource Definition Drilling.............................................................................. 50 10.1.2 Structural Drilling and Modelling ...................................................................... 50 10.1.3 Geotechnical Drilling and Studies ..................................................................... 52 10.1.4 Pilot Plant Test Drill Holes (NQ)....................................................................... 53 10.1.5 Geotechnical (Overburden) Drill Holes ............................................................. 53 10.1.6 Pilot Plant Sample Drill Holes (PQ) .................................................................. 53 10.1.7 Geological Mapping ........................................................................................... 53 10.1.8 Mineralogical Sampling ..................................................................................... 53 10.1.9 Overburden Modelling ....................................................................................... 54

10.2 2010 EXPLORATION RESULTS ............................................................................ 54 10.2.1 Results of the Geotechnical (Overburden) Drilling Program ............................ 55 10.2.2 Pilot Plant Test Drill Holes (NQ) Results .......................................................... 56 10.2.3 Results of the Pilot Plant Sample Drill Holes (PQ) Results .............................. 57 10.2.4 Results of the Mineralogical Sampling Program ............................................... 57 10.2.5 Results of the Overburden Modelling Program ................................................. 58 10.2.6 Results of the Crushing Testwork Hardness Domain Sampling ........................ 59

11.0 DRILLING ................................................................................................................... 62 11.1 2010 RESOURCE DEFINITION DRILLING PROGRAM ..................................... 62 11.2 RESULTS OF THE 2010 SECTIONAL DRILLING PROGRAM .......................... 64

12.0 SAMPLING METHOD AND APPROACH ............................................................. 69 12.1 ASSAY/GEOCHEMICAL SAMPLING ................................................................... 69 12.2 MINERALOGICAL MAPPING SAMPLING .......................................................... 70 12.3 PILOT PLANT SAMPLING ..................................................................................... 72

13.0 SAMPLE PREPARATION, ANALYSES AND SECURITY .................................. 73 13.1 SAMPLE COLLECTION AND TRANSPORTATION ........................................... 73

13.1.1 Core Logging and Sampling .............................................................................. 73 13.1.2 Sample Preparation and Analysis ...................................................................... 75 13.1.3 Control Samples ................................................................................................. 75

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13.2 MINERALOGICAL MAPPING SAMPLING .......................................................... 77 13.2.1 Sample Definition and Sampling ....................................................................... 77 13.2.2 Sample Preparation and Analysis ...................................................................... 78 13.2.3 Control Samples ................................................................................................. 80

13.3 PQ DRILLING .......................................................................................................... 80 13.4 RESULTS OF THE QA/QC PROGRAM ................................................................. 80 13.5 MICON COMMENTS ON THE QA/QC PROGRAM ............................................. 81

14.0 DATA VERIFICATION ............................................................................................. 82

15.0 ADJACENT PROPERTIES ....................................................................................... 85

16.0 MINERAL PROCESSING AND METALLURGICAL TESTING........................ 86 16.1 OVERVIEW .............................................................................................................. 86 16.2 TECHNOLOGY PARTNERS ................................................................................... 86 16.3 PHASE 2 TESTWORK ............................................................................................. 87

16.3.1 Comminution Testwork ..................................................................................... 87 16.3.2 Nickel Recovery Testwork ................................................................................ 87

16.4 RECOVERY EQUATIONS ...................................................................................... 91 16.5 CONCLUSIONS ....................................................................................................... 94 16.6 FUTURE WORK ....................................................................................................... 95

17.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ................... 96 17.1 MICON UPDATED 2010 RESOURCE ESTIMATE FOR THE

DUMONT PROPERTY ............................................................................................ 97 17.1.1 Modelling Methodology .................................................................................... 97 17.1.2 Compositing Data ............................................................................................ 102 17.1.3 Rock Density .................................................................................................... 104 17.1.4 Assay Sample Nickel Grade Statistics ............................................................. 108 17.1.5 Variography ..................................................................................................... 109 17.1.6 Data Interpolation Strategy Inside the Resource Block Model ....................... 110 17.1.7 Model Validation and Post Processing ............................................................ 111 17.1.8 Future Work ..................................................................................................... 113

17.2 MINERAL RESOURCE CLASSIFICATION ........................................................ 113 17.3 MINERAL RESOURCE ESTIMATES .................................................................. 114

17.3.1 Economic Discussion and Cut-off Grade ........................................................ 114 17.3.2 August, 2010 Mineral Resource Estimates ...................................................... 116

17.4 DUMONT PROPERTY EXPLORATION POTENTIAL ...................................... 123

18.0 OTHER RELEVANT DATA AND INFORMATION ........................................... 124 18.1 GEOTECHNICAL WORK ..................................................................................... 125

18.1.1 Open-Pit Rock Mechanics ............................................................................... 125 18.1.2 Open-Pit Soil Mechanics ................................................................................. 125 18.1.3 Waste Impoundments....................................................................................... 126

18.2 MINE DESIGN ........................................................................................................ 127 18.2.1 Overview .......................................................................................................... 127

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18.2.2 Techno-Economic Model ................................................................................. 128 18.2.3 LG Ultimate Pit Shell ....................................................................................... 129 18.2.4 Detailed Mine Design ...................................................................................... 131 18.2.5 Base Case Design ............................................................................................. 131

18.3 MINING ................................................................................................................... 136 18.3.1 Overburden Mining .......................................................................................... 136 18.3.2 Rock Mining .................................................................................................... 136 18.3.3 Equipment Maintenance .................................................................................. 137 18.3.4 Mining Fleet Selection ..................................................................................... 137 18.3.5 Support Equipment .......................................................................................... 137

18.4 PROCESSING ......................................................................................................... 138 18.4.1 Design Criteria ................................................................................................. 139 18.4.2 Primary and Secondary Crushing .................................................................... 139 18.4.3 Drying .............................................................................................................. 140 18.4.4 Tertiary and Quaternary Crushing ................................................................... 140 18.4.5 Grinding ........................................................................................................... 140 18.4.6 Ferro-Nickel Circuit ......................................................................................... 141 18.4.7 Nickel Sulphide Circuit.................................................................................... 141 18.4.8 Scavengers ....................................................................................................... 141 18.4.9 Concentrate Dewatering and Load-Out ........................................................... 141 18.4.10 Tailings Thickening ......................................................................................... 142 18.4.11 Product Quality ................................................................................................ 142

18.5 INFRASTRUCTURE .............................................................................................. 143 18.5.1 Site Layout ....................................................................................................... 143 18.5.2 Off-Site Infrastructure ...................................................................................... 145 18.5.3 Logistics ........................................................................................................... 145

18.6 MANPOWER .......................................................................................................... 145 18.7 ENVIRONMENTAL STUDIES ............................................................................. 145

18.7.1 Environmental Management Plan .................................................................... 146 18.8 ENVIRONMENTAL PERMITTING ...................................................................... 148 18.9 MARKETING ......................................................................................................... 149

18.9.1 Nickel Sulphide Concentrate ........................................................................... 150 18.9.2 Ferro-nickel Concentrate ................................................................................. 151 18.9.3 Commercial Terms........................................................................................... 152

18.10 SCHEDULE ............................................................................................................. 152 18.11 CAPITAL COST ESTIMATE ................................................................................. 154

18.11.1 Summary .......................................................................................................... 154 18.11.2 Mining Capital ................................................................................................. 154 18.11.3 Processing Capital ............................................................................................ 155 18.11.4 Tailings Management Facility ......................................................................... 156 18.11.5 Infrastructure Capital ....................................................................................... 157 18.11.6 Indirect Capital ................................................................................................. 157 18.11.7 Initial Capital Contingency .............................................................................. 158 18.11.8 Sustaining Capital ............................................................................................ 158 18.11.9 Working Capital ............................................................................................... 159

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18.12 OPERATING COST ESTIMATE ........................................................................... 160 18.12.1 Summary .......................................................................................................... 160 18.12.2 Labour .............................................................................................................. 160 18.12.3 Energy .............................................................................................................. 161 18.12.4 Mining Operating Costs ................................................................................... 161 18.12.5 Processing Operating Costs ............................................................................. 162 18.12.6 General and Administrative Operating Costs .................................................. 162

18.13 EVALUATION ....................................................................................................... 163 18.13.1 Key Assumptions ............................................................................................. 163 18.13.2 Economic Results............................................................................................. 164 18.13.3 Sensitivity Analysis ......................................................................................... 168

19.0 INTERPRETATION AND CONCLUSIONS ......................................................... 170

20.0 RECOMMENDATIONS ........................................................................................... 171 20.1 2011 – 2012 EXPLORATION PROGRAM ............................................................ 171 20.2 FURTHER RECOMMENDATIONS ...................................................................... 173

21.0 REFERENCES ........................................................................................................... 175

22.0 SIGNATURE PAGE .................................................................................................. 179

23.0 CERTIFICATES........................................................................................................ 180

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List of Tables Page

Table 1.1 Summary of the Mineral Resource Estimate at a Cut-off Grade of

0.20% Nickel ..................................................................................................... 2

Table 1.2 In-Pit Diluted Portion of the Mineral Resources ............................................... 4

Table 1.3 Mining Fleet – Base Case .................................................................................. 5

Table 1.4 Average Composite Sample Parameters and Estimated Nickel Recoveries .......................................................................................................... 6

Table 1.5 Capital Cost Summary ..................................................................................... 11

Table 1.6 Estimated Site Operating Cost Summary ........................................................ 12

Table 1.7 Summary Metrics ............................................................................................. 13

Table 1.8 Sensitivity of NPV to a Selection of Discount Rates ....................................... 15

Table 2.1 Participants in Dumont Preliminary Assessment ............................................. 20

Table 2.2 List of Abbreviations ....................................................................................... 23

Table 9.1 Nickel Bearing Mineral Abundance by Mineralization Type.......................... 46

Table 10.1 Summary of the Royal Nickel Drilling Programs on the Dumont Property by Category ....................................................................................... 51

Table 10.2 Dumont Property 2010 Exploration Expenditures ........................................... 52

Table 10.3 Summary for the Oriented Structural Drill Holes ............................................ 55

Table 10.4 Summary for the Pilot Plant Sample Drill Holes (PQ) Program ..................... 57

Table 10.5 Summary of Principal Minerals in Mineralogical Samples Received to August 16, 2010 ........................................................................................... 58

Table 10.6 Summary of the Drop-Weight Breakage Evaluation ....................................... 61

Table 10.7 Summary of the SMC Break Evaluation ......................................................... 61

Table 10.8 Summary of the UCS Results .......................................................................... 61

Table 11.1 Sectional Drilling Program Drill Hole Collar Information .............................. 63

Table 11.2 2010 Drilling Program Mineralized Intersections at a 0.25% Nickel Cut-off Grade ................................................................................................... 68

Table 12.1 EXPLOMINTM Mineralogical Sample Preparation Procedure at ALS-Chemex Laboratories ....................................................................................... 71

Table 13.1 Summary of the Specifications for the Standard Reference Material samples ............................................................................................................ 76

Table 13.2 SGS Lakefield Daily Quality Checks for Qemscan Analysis .......................... 80

Table 16.1 Phase 2 Metallurgical Testwork Composite Samples ...................................... 88

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Table 16.2 Average Composite Sample Parameters and Estimated Nickel Recoveries ........................................................................................................ 90

Table 16.3 Metallurgical Testwork Results From Domain Composite Samples ............... 93

Table 17.1 List of Interpreted Structural Domains for the Dumont Project ...................... 99

Table 17.2 Block Model versus Solid Volume Check ..................................................... 102

Table 17.3 Missing Assays by Structural Domain within the Resource Wireframe ...................................................................................................... 103

Table 17.4 Statistics for Results for Nickel Raw Samples from All Domains 1 (D1) to 7 (D7) ................................................................................................ 108

Table 17.5 Statistics for Results for Density Raw Samples from All Domains Domain 1 (D1) to 7 (D7) ............................................................................... 109

Table 17.6 Experimental Variogram Parameters ............................................................. 109

Table 17.7 Variogram Models Used for Percent Nickel .................................................. 110

Table 17.8 Search Parameters used for the Ordinary Kriging Interpretation .................. 110

Table 17.9 Example Corrections for Over-Smoothing in Awaruite Content .................. 112

Table 17.10 Dumont Cut-off Grade Calculation ............................................................... 115

Table 17.11 Summary of the Dumont Mineral Resources at a 0.20% Nickel Cut-off Grade in all Domain Solids by Category and Structural Domain: Cumulative ..................................................................................................... 117

Table 17.12 Summary of the Dumont Mineral Resources Between the 5500 and 9100 Section Lines at a 0.20% Nickel Cut-off Grade by Category and Structural Domain: Cumulative ..................................................................... 118

Table 17.13 Summary of the Measured, Indicated and Inferred Mineral Resource in the Seven Structural Domain Solids at a Cut-off of 0.20% Nickel ........... 118

Table 18.1 Participants in Dumont Preliminary Assessment ........................................... 124

Table 18.2 Cost Inputs to the LG Algorithm ................................................................... 128

Table 18.3 Nested Pit Shell Phases .................................................................................. 129

Table 18.4 Base Case – Detailed Production Schedule (Years 1 – 15) ........................... 134

Table 18.5 Base Case – Detailed Production Schedule (Years 16+) ............................... 135

Table 18.6 Mining Fleet – Base Case .............................................................................. 137

Table 18.7 Capital Cost Summary ................................................................................... 154

Table 18.8 Mining Capital Cost Summary – Base Case .................................................. 155

Table 18.9 Process Plant Capital Cost Summary ............................................................. 156

Table 18.10 Tailings Management Capital Cost Summary ............................................... 157

Table 18.11 Infrastructure Capital Cost Summary ............................................................ 157

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Table 18.12 Indirect Capital Cost Summary ...................................................................... 158

Table 18.13 Initial Capital Cost Contingency .................................................................... 158

Table 18.14 Sustaining Capital Cost Summary ................................................................. 159

Table 18.15 Estimated Site Operating Cost Summary ...................................................... 160

Table 18.16 Estimated Process Operating Cost ................................................................. 162

Table 18.17 Estimated General and Administrative Operating Cost ................................. 162

Table 18.18 Summary Metrics ........................................................................................... 164

Table 18.19 Annual Cash flow – Base Case (80,000 t/d) .................................................. 166

Table 18.20 Annual Cash flow – Upside Case (100,000 t/d) ............................................ 167

Table 18.21 Sensitivity of NPV to a Selection of Discount Rates ..................................... 169

Table 20.1 Proposed Budget for Work in 2011 and 2012 ............................................... 172

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List of Figures Page

Figure 1.1 Simplified Metallurgical Flow Diagram ............................................................ 6

Figure 1.2 Processing Flowsheet ......................................................................................... 8

Figure 1.3 Base Case (80,000 t/d) LOM After-Tax Net Cash Flow ................................. 13

Figure 1.4 Upside Case (100,000 t/d) LOM After-Tax Net Cash Flow ............................ 14

Figure 1.5 Sensitivity of NPV - Base Case (80,000 t/d) ................................................... 15

Figure 1.6 Sensitivity of NPV - Upside Case (100,000 t/d) .............................................. 15

Figure 4.1 Dumont Property Location Map ...................................................................... 27

Figure 4.2 Dumont Property Mineral Claims .................................................................... 28

Figure 4.3 Location Map Showing the Arctic-St. Lawrence Drainage Divide and Agricultural Zone Lands as they Relate to the Dumont Property ................... 29

Figure 5.1 Map Indicating Access and Geographical Features in the Area of the Dumont Property ............................................................................................. 33

Figure 5.2 Access Road for the Dumont Property ............................................................ 34

Figure 7.1 Magnetometer Survey of the Dumont Property ............................................... 40

Figure 7.2 Geological Map of the Dumont Sill ................................................................. 41

Figure 7.3 Cross-Sectional View on Line 8100E Showing the Position of the Three Nickel-Enriched Layers ......................................................................... 43

Figure 9.1 Photo of the Dumont Mineralization in Core (Field of View = 5 cm) ............ 45

Figure 9.2 Sulphide Mineralization Type (EXP_18) ........................................................ 47

Figure 9.3 Alloy Mineralization Type (EXP_43) ............................................................. 47

Figure 9.4 Mixed Mineralization Type (EXP_15) ............................................................ 48

Figure 9.5 Block Model for the Dumont Project Illustrating the Mineralization Type Distribution ............................................................................................. 48

Figure 10.1 Geological Map Showing the Location of the Non-Resource Drilling ........... 55

Figure 10.2 Typical Domaining of a Drill Hole (09-RNC-218A-I) .................................... 56

Figure 10.3 Drill Hole Locations with Mineralogical Mapping Sample Results and Planned Sampling ..................................................................................... 58

Figure 10.4 Overburden Thickness Map ............................................................................. 59

Figure 11.1 Locations of the Resource Definition Drill Hole Collars on the Dumont Property ............................................................................................. 62

Figure 11.2 View of a Rouillier Drill Rig (July, 2010 Site Visit) ....................................... 63

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Figure 11.3 Plan and Sectional View (7000E) Illustrating the Drill Hole Distribution and Assay Results ........................................................................ 65



Figure 12.1 Assay Sampling Protocol ................................................................................. 69

Figure 12.2 EXPLOMINTM Sampling Protocol .................................................................. 71

Figure 13.1 Core Logging Facilities in Amos ..................................................................... 74

Figure 14.1 Royal Nickel Office Core Logging Facilities in Amos ................................... 82

Figure 14.2 Interior View of the Logging Facilities in Amos ............................................. 82

Figure 16.1 Simplified Metallurgical Flow Diagram .......................................................... 90

Figure 16.2 Locations of Domain Composite Samples ....................................................... 91

Figure 16.3 Cross-Section Showing a Typical Downhole Distribution of Domain Composite Samples ......................................................................................... 92

Figure 17.1 Magnetic Intensity Map of the Dumont Project with Interpreted Lineaments ..................................................................................................... 100

Figure 17.2 Drilling Information used for the Mineral Resource Model .......................... 103

Figure 17.3 Plot of SG versus Nickel Grade for Domain 1 at the Dumont Property ........ 105







Figure 17.10 Location of the Seven Structural Domain Solids Involved in the Mineral Resource Estimate and their Structural Boundaries (Grey) ............. 119

Figure 17.11 Block Model for the Dumont Project Illustrating the Grade Distribution along with the Drill Hole Distribution ...................................... 120

Figure 17.12 Block Model for the Dumont Project Illustrating the Distribution of the Mineralization Type with the Drill Hole Distribution ............................. 121

Figure 17.13 Block Model for the Dumont Project Illustrating the Resource Categories with the Drill Hole Distribution ................................................... 122

Figure 18.1 Evaluation of Nested Shells ........................................................................... 130

Figure 18.2 LG Ultimate Pit Shell..................................................................................... 130

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Figure 18.3 End of Mine Life Pit Faces ............................................................................ 131

Figure 18.4 Base Case Mining Schedule........................................................................... 132

Figure 18.5 Base Case Schedule for Mill Feed ................................................................. 133

Figure 18.6 Base Case Nickel Production ......................................................................... 133

Figure 18.7 Processing Flowsheet ..................................................................................... 138

Figure 18.8 Site Layout at the End of Open Pit Operations .............................................. 143

Figure 18.9 Project Development Schedule ...................................................................... 153

Figure 18.10 LOM Mining Unit Costs and One-Way Haulage Distance ........................... 161

Figure 18.11 Base Case LOM After-Tax Net Cash Flow (80,000 t/d) ............................... 165

Figure 18.12 Upside Case LOM After-Tax Net Cash Flow (100,000 t/d) .......................... 165

Figure 18.13 Sensitivity of NPV - Base Case (80,000 t/d) ................................................. 168

Figure 18.14 Sensitivity of NPV - Upside Case (100,000 t/d) ............................................ 169

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1.0 SUMMARY 1.1 INTRODUCTION At the request of Royal Nickel Corporation (Royal Nickel), Micon International Limited (Micon) has prepared this Preliminary Assessment of Royal Nickel’s Dumont Property located in western Quebec, Canada. The study is based on Micon’s August, 2010 mineral resource estimate and comprises an open pit mine plan, production schedule, fleet requirements and designs for processing plant, tailings management facility and other required infrastructure. Mining, processing and infrastructural capital and operating costs are estimated and a discounted cash flow forecast is given. A base case evaluation of the property is presented, based on a processing throughput rate of 80,000 t/d. A second (“Upside”) case is also shown, based on a throughput of 100,000 t/d, utilizing the maximum electrical grid power available to the project on a planning basis. The Dumont Property is located in the western portion of Quebec approximately 25 km west of the city of Amos, 60 km northeast of the industrial and mining city of Rouyn-Noranda and 70 km northwest of the city of Val D’Or. Royal Nickel advises that the Dumont Property consists of 138 contiguous mineral claims totalling 5,884.63 ha. Four sets (blocks) of claims are recognised: 50 claims staked by Royal Nickel itself, 24 claims purchased outright from Griffis International Ltd; 58 claims purchased from Marbaw International Nickel Corporation (subject to a future consideration and a retained NSR royalty) and 6 claims purchased from Sheridan-Ferderber (subject to a retained NSR royalty). The mineral claims confer subsurface rights only. Surface rights for approximately 25% of the property are held privately, the rest is public land. There are no known formal native land claims covering the Dumont Property. 1.2 GEOLOGY AND MINERAL RESOURCES The Dumont sill lies within the Abitibi subprovince of the Superior geologic province of the Archean age Canadian Shield. The sill is one of several mafic to ultramafic intrusive bodies that form an irregular, roughly east-west alignment, between Val d’Or, Quebec and Timmins, Ontario. It comprises a lower ultramafic zone which averages 450 m in true thickness and an upper mafic zone about 250 m thick. The ultramafic zone is subdivided into the lower peridotite, dunite and upper peridotite subzones. Cumulus nickel sulphide and alloy minerals occur in parts of the dunite subzone and locally in the lower peridotite. Pentlandite ((Ni,Fe)9S8), heazlewoodite (Ni3S2) and awaruite (Ni2.5Fe) are the principal nickel minerals with lesser amounts of millerite (NiS). Historically, three mineralized layers have been identified within the dunite subzone using a 0.35% Ni cut-off grade. The middle layer has the highest average nickel grade of 0.5% and is the most laterally extensive, persisting over a strike length of 2,400 m with an average thickness of 24 m. A higher grade zone within the middle layer averages 0.71% nickel over a strike length of 730 m and has a true thickness of 14 m.

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The property has been explored sporadically since the early 1970’s. Royal Nickel acquired the property in 2006 and since then has conducted its own exploration, including in-fill and step-out drilling, metallurgical testwork and engineering studies. The effective date of the current resource estimate is August 16, 2010. The estimate is based on the exploration database which contains a total of 70,577 m of assay results from 223 drill holes that Royal Nickel has obtained through its 2007 to 2010 drilling programs. The total metreage for the 223 holes available for the resource estimate is 90,212 m. Micon’s estimate of the mineral resource is based on the geological information and assaying data for the Dumont Property available as of April 22, 2010, a structural model developed for Royal Nickel by Itasca Consulting, economic parameters developed in preparation for this preliminary assessment, and a resource block model prepared by Golder Associates that models the abundance of pentlandite, heazlewoodite, awaruite, olivine, magnetite, serpentine, brucite and coalingite, as well as the grade distributions of nickel, copper, cobalt, chromium, platinum, palladium and gold, and specific gravity. Micon reviewed the block model extensively and in some cases the model was refined in discussions with Royal Nickel. The final resource classification criteria remain the same as those used in previous reports.

Table 1.1 Summary of the Mineral Resource Estimate at a Cut-off Grade of 0.20% Nickel

(As of August 16, 2010)

Mineral Resource Category

Resource (000 t)

Grade (% Ni)

Nickel (000 t)

Contained Ni (Million lbs)

Measured 155,680 0.29 447 985 Indicated 1,003,487 0.27 2,707 5,967 Measured+Indicated 1,159,167 0.27 3,154 6,952 Inferred 581,405 0.25 1,451 3,198

Mineral resources that are not mineral reserves do not have demonstrated economic viability. There are no mineral reserves presently identified on the Dumont Property. The stated mineral resources are not materially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant issues, unless stated in this report, to the best knowledge of the authors. The impact of mining, metallurgical, infrastructure and other factors that could materially affect this mineral resource estimate are described in Section 18 of this technical report. The mineral resource estimate as of the effective date of August 16, 2010 is compliant with the current CIM standards and definitions required by NI 43-101 and is, therefore, reportable as a mineral resource by Royal Nickel. There is the potential to find additional mineralization on the Dumont Property. This potential includes extensions to the current zones of mineralization in the resource model both at depth and on the northwest and southeast ends of domains 1 and 7. Exploration either

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at depth or on the flanks of the deposit may contribute further mineral resources to the Dumont Property. 1.3 MINING AND GEOTECHNICAL ISSUES The mining aspects of the preliminary assessment comprised studies of the safe slope angles for the open pit, calculation of the NSR value of the recoverable mineralisation within each element of the 3D block model of the resource, provisional estimates of unit operating costs for each material, open pit optimization to determine the economic limits of mining, scheduling of material movement to mill, stockpile or waste dumps so as to maximize NPV, and estimation of capital and operating costs for the required mining fleet. 1.3.1 Geotechnical Issues Genivar assessed the safe slope angles for the open pit in unconsolidated overburden and in rock. Genivar concluded that, based on its analysis of soil types at similar projects in the Dumont area, safe slope angles for the open pit walls in overburden would be:

3H:1V (18°) in fine-grained material slope angles 2H:1V (27°) in coarse-grained material

Applying a factor of safety of 1.5, it was concluded that in rock, safe slope angles would be:

47° on the hanging wall of the open pit 52° on the footwall of the open pit

Impoundments for waste rock will have slopes of 24° (2.25H:1V), composed of 15 m lifts with face angles equivalent to the angle of repose of approximately 34° (1.5H:1V) with 11 m berms. The impoundments will reach a maximum height of 10 lifts, or 150 m. 1.3.2 Open Pit Design In order to determine the economic limits of open pit mining, NPV Scheduler software was used to apply the Lerchs-Grossmann (LG) algorithm to the recoverable NSR values and provisional unit cost estimates for each element in the 3D resource block model, taking account of the slope angles given above. NSR values were based on recovery equations derived from regression analysis of results from test work on representative composite samples. The equations also considered expected differences in the metallurgical response of the three styles of mineralization:

Sulphide mineralization, mainly pentlandite and heazlewoodite Alloy mineralization, dominated by the alloy mineral awaruite Mixed mineralization, containing significant levels of sulphides and alloy styles

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The recovery equations allowed the recovery of Ni to nickel sulphide and ferro-nickel concentrates to be estimated discretely for every block in the resource model. The recovered nickel was then combined with assumptions regarding percentage payables for the different concentrates, treatment and refining charges (TC/RCs) and the long-term Ni price to yield an NSR value for each block. The LG algorithm produces, in addition to the ultimate limits for the open pit, a series of nested shells used to guide the sequence of mining. The detailed pit design incorporates a high-grade, low-strip-ratio starter pit and 5 pushbacks into progressively lower-grade and/or higher-strip-ratio material. The optimal parameters for the mining schedule – including milling rate, low-grade stockpile strategy and cut-off grade – were selected through iteration. The optimized NSR cut-off value is C$14.00/t. Table 1.2 summarizes the in-pit diluted portion of the mineral resources included in the mine plan. Note that the scoping-level engineering design is not sufficient to justify classification of this material as a mineral reserve. No value was attributed to the inferred resource within the open pit: for the purpose of the preliminary assessment it was treated as waste rock.

Table 1.2 In-Pit Diluted Portion of the Mineral Resources

Mineral Resource

Category Resource

(000 tonnes) Grade (% Ni)

Nickel (000 t)

Contained Ni (million lbs)

Measured 135,304 0.29 387 853 Indicated 760,733 0.27 2,071 4,565 Measured + Indicated 896,037 0.27 2,458 5,418 Inferred 29,491 0.25 73 162

1.3.3 Production Schedule Through analysis of multiple schedules reflecting different rates of mining and processing, an optimal schedule has been arrived at which accelerates mining to a rate which exceeds that required to keep the mill supplied. In doing so, the opportunity arises to selectively feed the mill with higher value material while stockpiling the rest. Once the open pit has been completed, it can be used as a repository for tailings arising from milling of the stockpiled material. This strategy results in a higher NPV than one in which the mining rate is matched to the milling rate. 1.3.4 Mining Fleet Requirements The mining fleet requirement is summarized in Table 1.3. In addition to purchase of the new units identified here, provision has been made in the sustaining capital estimate for rebuilding some of this equipment.

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Table 1.3 Mining Fleet – Base Case

Unit

Overburden Rock Size

Example No. Reqd Size

Example

No. Reqd

Init. Sust. Init. Sust.Rotary Drill n/a - - - 270 mm Ø P&H XP320 4 1+ Production FEL 13 m3 Cat 992 7 - 43 m3 LeTorneau L2350 1 3 Rope Shovel n/a - 55 m3 P&H 4100 XPC 3 1+ Haul Truck 100 t Cat 777 27 - 360 t Cat 797 17+ 32+ Track Dozer 13 m3 Cat D9 3 1 27 m3 Cat D11 2 3- Rubber Tyre Dozer 8 m3 Cat 834 3 1 25 m3 Cat 854 2 3- Grader 16-ft blade Cat 16M 3 1 24-ft blade Cat 24M 3 4- Water Tanker 40 t Cat 769 2 - 135 t Cat 785 2 - + One additional unit is required for the Upside Case. - One less unit is required for the Upside Case 1.4 METALLURGICAL TESTWORK Initial metallurgical testwork was carried out on samples from the Dumont Property in 1971–1972, and focused on grinding, flotation and magnetic separation but achieved an overall nickel recovery of around 55%. Royal Nickel’s testwork commenced with Phase 1 in 2007-2008 at SGS Minerals in Lakefield, Ontario under the management of Royal Nickel’s independent metallurgical consultants, Mineral Solutions. Tests were performed on composite samples representing the three different styles of mineralization that have been identified, namely sulphide, alloy and mixed. Different flowsheets were used for each style of mineralization, but all incorporated wet grinding as the initial stage. Encouraging results were obtained for sulphide mineralization, but the recovery and concentrate grade for both the alloy and mixed mineralization samples was poor due to excessive slimes and high viscosity. Phase 2 of the current program, which began in late 2008, was also managed by Mineral Solutions. During this phase, the process concept changed significantly, with the focus on pre-treatment to remove chrysotile fibres and brucite slimes. With the resulting reduction in slimes and lowered pulp viscosity, nickel recovery and concentrate grades improved markedly. This flowsheet was then developed into a standard process test to perform variability analysis on domain composite samples. The metallurgical performance for the three styles of mineralization (sulphide, alloy and mixed) using a common flowsheet was estimated by Mineral Solutions using the results from the Phase 2 metallurgical testwork program. These estimates, based on the standard simplified flowsheet presented in Figure 1.1, are summarized in Table 1.4.

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Figure 1.1 Simplified Metallurgical Flow Diagram

Table 1.4

Average Composite Sample Parameters and Estimated Nickel Recoveries

Description Units Style of Mineralization Sulphide Alloy Mixed

Average Sample Grades

Minimum % Ni 0.28 0.24 0.21 Maximum % Ni 0.53 0.48 0.59 Average % Ni 0.42 0.33 0.36 Cut-off % Ni 0.17 0.17 0.18

Average Ni Deportment

Ni in Pentlandite % of Total Ni 20 17 31 Ni in Heazlewoodite % of Total Ni 67 5 17 Ni in Awaruite % of Total Ni 6 56 27 Ni in Silicates % of Total Ni 7 22 25

Ni Recovery to Rougher Concentrate

Minimum 1 % of Contained Ni 62 31 34 Maximum 1 % of Contained Ni 78 79 79 Average 1 % of Contained Ni 70 55 56 Adjusted Recovery2 % of Contained Ni 78 61 62

1 Recovery to rougher concentrate, excludes contribution from fibre and slimes scavenger circuits. 2 Adjustment includes contribution from fibre and slimes scavenger circuits which increases overall recovery to

rougher concentrate by a minimum of 6% (alloy and mixed mineralization) to a maximum of 8% (sulphide mineralization). These estimates are based on recovering approximately 50% of the contained Ni reporting to these scavenging circuits.

Tailings

Tailings

Tailings

Flotation Conc.

Flotation Conc.

Flotation Conc.

Flotation Conc.

Final Mag. Conc.

Rougher and Scavenger Flotation

Cleaner Flotation

Tailings Tailings

Mag. Sep. Rougher Mag. Sep. Cleaner and Regrind

Flash Float

Grinding and De-sliming Stage 2

Tailings

Defibering Dynamic Classification

Fluff Float

Grinding and De-sliming Stage 1

Slime Float

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Regression analysis was used to develop nickel recovery equations. Each equation was applied to the entire modeled resource for domains 1 through 7 and an average recovery was calculated for each of the three types of mineralization (sulphide, alloy, and mixed). These calculated recoveries were compared to the average recoveries calculated by Mineral Solutions using results from repeated flowsheet testing of the three types of mineralization. The equations selected for use in the preliminary assessment were those that resulted in the lowest variance between calculated and idealized recoveries. These equations then had adjustment factors applied to account for the variance between calculated results and the average recoveries estimated by Mineral Solutions. The equations also include a provision for additional recovery of nickel from the fibre and slimes removal scavenger circuits. In February, 2010, Royal Nickel commissioned Minerals Associates Inc. (Minerals Associates) to design and construct a continuous mini pilot plant (MPP) on the Phase 1 preliminary assessment at a throughput of 20-50 kg/h. This plant was completed in July, 2010 and testing of samples commenced in August, 2010. The MPP testwork is being performed to confirm the laboratory metallurgical performance (recovery, concentrate grades and reagent dosage) for the various mineralization types. Flowsheet optimization work will further investigate both sulphide and magnetic cleaning circuits (concentrate grade and recovery), and optimize reagent and energy costs. A trade-off study to evaluate alternative primary grinding options will also be completed. 1.5 PROCESS AND INFRASTRUCTURE DESIGN 1.5.1 Proposed Flowsheet The key elements of the flowsheet are:

Four-stage crushing, with Vertical Shaft Impact (VSI) crushers used for tertiary and quaternary crushing.

Ore drying, to ensure moisture content in VSI feed does not exceed 2%.

De-fibering of crushed mill feed using air classifiers.

Grinding by ball mills, followed by de-sliming.

Scavenger circuits to recover approximately 50% of nickel associated with the fibres and slimes (or approximately 5% of total contained nickel).

Magnetic separation, with the magnetic concentrate further separated into ferro-nickel and nickel sulphide concentrates by flotation.

Flotation of the magnetic separation tails to recover the bulk of nickel sulphide concentrate, which will be combined with concentrates from the scavenger and magnetic circuits.

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Cleaning of the separate ferro-nickel and nickel sulphide concentrates.

The fibre, slimes and rock tails will be combined into a single tailings product for disposal.

The proposed flowsheet for the concentrator is shown in Figure 1.2.

Figure 1.2 Processing Flowsheet

1.5.2 Process Design Criteria The concentrator design was developed by BBA, based on the conceptual metallurgical flowsheet provided by Mineral Solutions and the following design criteria:

The plant will treat 80,000 t/d, with feed grading an average of 0.27% Ni over the life of operation.

The plant will operate continuously, 24 h/d, 365 d/y.

Conventional gyratory and cone crushers used for primary and secondary crushing will have availability averaging 75%.

VSI crushers used for tertiary and quaternary crushing will have average availability of 85%.

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Grinding and flotation area equipment availability will be 95%.

Dryers have been sized to treating 32% of the total feed, and reducing the moisture content from 4% to 2%.

Equipment sizes are based on an assumed weight recovery to cleaner concentrate of approximately 2.0%. (The actual weight recovery is forecast at 0.5%).

The average Bond ball work index is 21.3 kWh/t. 1.5.3 Infrastructure The following site infrastructure will be required to support mining and processing operations:

Administration building.

Concentrate warehouse.

Fuel farm, with a facility to separately store diesel and fuel oil, mainly for the open pit and for the concentrator driers, respectively. Total capacity of the fuel farm will be approximately 10 days average consumption, or 2 ML of diesel and 3 ML of fuel oil.

Mine workshop based on the maximum fleet size of 50 360-t haul trucks, and associated support equipment.

Electrical sub-station at 120 MW and associated reticulation system.

Sewage treatment and a landfill site. Off-site infrastructure includes a 28 km electrical power line to connect with the grid near Amos. The water balance developed for the preliminary assessment indicates that, on average, at least 95% of process water requirements could be met through the re-use of process water (from the TMF) or from inflows to the open pit that would be captured in a sump. The remainder, averaging 337 m3/h (or 93 L/s), will be drawn from a pumping station to be constructed on the Villemontel River immediately south of the Dumont Property and approximately 3 km from the concentrator. 1.6 TAILINGS MANAGEMENT FACILITY Tailings from the fibre, slimes and flotation streams will be combined into a single product, which will have a relatively low density of 45% solids after thickening. During operation of the open pit, underflow from the tailings thickener will be pumped into the tailings management facility (TMF) using positive displacement pumps. After open-pit operations are complete, tailings generated from the treatment of lower-grade stockpiles will be pumped into the mined-out pit using lower-cost centrifugal pumps.

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Studies to date indicate the waste products at Dumont will be benign, with no acid generated. Thus, the tailings will not require sub-aqueous disposal; nor will it be necessary to line the TMF with an impervious membrane. The TMF will be a conventional terrestrial facility that uses approximately 20% of the waste rock from the open pit for construction of an impoundment dyke. Clay in the underlying overburden, where present, will essentially act as a low permeability membrane. On closure, the TMF will contain 618 Mt of tailings, while the impoundment dykes will contain 197 Mt of waste rock. The maximum height will be 41 m. Golder has prepared the preliminary designs for the TMF and construction costs have been estimated using the cost model for the earthmoving fleet. Golder PasteTec has identified the pumping system that will be required, and its estimated cost. 1.7 ENVIRONMENTAL ASPECTS Environmental studies are well advanced, with the following work having been completed:

Three phases of environmental baseline studies were completed during the 2007– 2009 period in order to establish the pre-development environmental condition of the property and identify potential areas of impact.

A preliminary geochemistry study on a representative sample of mineralization, waste and potential tailings from the Dumont deposit to determine acid rock drainage and leaching characteristics.

Future studies are planned and include:

Further geochemical analysis to fully understand and predict the behaviour of tailings and waste rock, with a particular focus on the potential for metal leaching.

Construction of an experimental in-situ tailings cell to quantify the potential for carbon sequestration under operating conditions by the serpentine component of the tailings.

Hydrological studies to quantify the impact of proposed operations on the local water table and a nearby aquifer-bearing esker.

Quantifying the impact of mining operations on existing wetlands and fish habitats, and identifying opportunities for mitigation.

Characterization of the soils in the area that would be impacted by operations. Once the project scope is finalized during the pre-feasibility study, a Project Notice will be submitted to the Quebec Ministère du Dèveloppement durable, de l’Environnement et des Parcs (MDDEP), or Ministry of Sustainable Development, Environment and Parks. MDDEP will accordingly advise on the scope and requirements of an environmental impact study (EIS).

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The project scope is such that this study would be assessed jointly at the provincial and federal levels under the Canada-Quebec Cooperation Agreement. It is expected this assessment could take up to two years from the time of submission of the Project Notice before the granting of a Certificate of Authorization to commence construction. The assessment period would run in parallel with the feasibility study and detailed engineering and the overall impact on the project’s critical path would thus be minimal. The scope of the project will result in permits being required from a number of federal departments, including:

Department of Fisheries and Oceans Canada (DFO) as baseline studies have identified several species of fish inhabiting wetlands within the footprint of disturbance.

Natural Resources Canada (NRCan) as storage and manufacture of explosives requires a licence from this agency.

1.8 CAPITAL COST ESTIMATE The capital cost estimate (±40%) summarized in Table 1.5 is expressed in real January, 2010 terms and assumes a long-term exchange rate of US$0.90/C$1.00.

Table 1.5 Capital Cost Summary

US$ millions Base Case

(80,000 t/d) Upside Case (100,000 t/d)

Initial Capital Mine $448 $457 Process Plant $709 $859 Tailings Dam $124 $138 Infrastructure $131 $152 Indirects $242 $274 Contingency $369 $424 Sub-Total $2,023 $2,304 Sustaining Capital Mine Fleet $331 $354 Mill $367 $361 Tailings Dam $159 $153 Closure $100 $100 Contingency $181 $182 Sub-Total $1,139 $1,150 Total Capital $3,162 $3,454

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1.9 OPERATING COST ESTIMATE A summary of operating costs (±40%) is provided in Table 1.6.

Table 1.6 Estimated Site Operating Cost Summary

Area Units Base Case

(80,000 t/d) Upside Case (100,000 t/d)

Mining US$/t mined 1.57 1.52 US$/t treated 3.51 3.40 Processing US$/t treated 6.75 6.63 G&A US$/t treated 0.52 0.42 Sub-Total Site Costs US$/t treated 10.78 10.45 US$/lb Ni 2.94 2.85 TC/RCs US$/lb Ni 1.18 1.18 By-Product Credit US$/lb Ni (0.16) (0.16) Net C1 Cash Costs+ US$/lb Ni 3.96 3.87

+ C1 costs include mining, processing, site administration and refining, net of by product credits 1.10 EVALUATION 1.10.1 Base Case and Upside Case The evaluation included the following key macroeconomic assumptions:

A long-term price for nickel of $7.50/lb. Sensitivity analysis considered a range of ±10%, or $6.75/lb – $8.25/lb.

A long-term price for cobalt of $12.00/lb. As the contribution of cobalt is only 1.7% of total NSR, it was not included in the sensitivity analysis.

A long-term exchange rate of US$/C$ = 0.90. Sensitivity analysis considered a range of ±10%, or US$/C$ = 0.81 - 0.99.

Long-term oil price of $80/bbl. The impact of the variation in oil price was included within the sensitivity analysis of changes in total operating costs.

Table 1.7 summarizes key metrics for the base case and the upside case. Figure 1.3 illustrates the LOM free cash flow (FCF) for the base case, while Figure 1.4 illustrates the upside case. This preliminary assessment is preliminary in nature; and there is no certainty that the preliminary assessment will be realized. Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Inferred resources have not been included in this preliminary assessment.

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Table 1.7 Summary Metrics

Item Units Base Case

(80,000 t/d) Upside Case (100,000 t/d)

Mill Feed1 million tonnes 896 896 Grade % Ni 0.27 0.27 Waste million tonnes 1,115 1,115 Stripping Ratio ore:waste 1.24 1.24 Concentrator Recovery % of contained Ni 65.5% 65.5% Payables % of recovered Ni 92.5% 92.5% Recovered Ni million lb 3,551 3,551 Payable Ni million lb 3,286 3,286 Mill Throughput thousand t/d 80 100 Project Life years 31 25 Peak Ni million lb/y 145.1 176.2 Annual Payable Ni million lb/y 106.0 131.5 Site Operating Costs US$/tonne ore 10.78 10.45 Net C1 Costs2 US$/lb Ni 3.96 3.87 Initial Capital US$ million 2,023 2,304 Sustaining Capital US$ million 1,139 1,150 Total Capital US$ million 3,162 3,454 Pre-Tax NPV10% US$ million 1,073 1,433 Pre-Tax IRR % 17.3 19.1 Post-Tax NPV10% US$ million 488 694 Post-Tax IRR % 14.1 15.4 Note 1: Diluted in-pit measured and indicated resources Note 2: C1 costs include mining, processing, site administration and refining, net of by product credits.

Figure 1.3 Base Case (80,000 t/d) LOM After-Tax Net Cash Flow

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Figure 1.4 Upside Case (100,000 t/d) LOM After-Tax Net Cash Flow

1.10.2 Sensitivity Analysis Figure 1.5 and Figure 1.6 illustrate the sensitivity of the base case and upside case, respectively, to the potential variation of ±10% in the following key input assumptions:

Long-term nickel price (±10%: $6.75/lb – $8.25/lb) Long-term exchange rate (±10%: US$/C$ = 0.81 – 0.99) Average concentrator recovery (±10%: 59.0% – 72.1%) Average head grade (±10%: 0.247% Ni – 0.301% Ni) Total capital costs (±10%: $2,846 million – $3,478 million) Site operating costs (±10%: $9.70/t – $11.86/t) TC/RCs (±10%: $1.06/lb – $1.30/lb)

Both cases display similar behaviour, with results most sensitive to the nickel price (a 1% change has an impact of $40 million on the base case and $47 million on the upside case), head grade and recovery (for either, a 1% change has an impact of $38 million on the base case and $44 million on the upside case) exchange rate of C$/US$ (a 1% change has an impact of $24 million on the base case and $28 million on the upside case). Results are equally sensitive to variation in capital and operating costs (for either, a 1% change has an impact of $17 million on the base case and $19 million on the upside case). Variation in TC/RCs would have a lesser impact (a 1% change will have an impact of $7 million on the base case and $8 million on the upside case). The project NPV for the Base Case and Upside Case over a range of discount rates is given in Table 1.8.

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Figure 1.5 Sensitivity of NPV - Base Case (80,000 t/d)

Figure 1.6 Sensitivity of NPV - Upside Case (100,000 t/d)

Table 1.8 Sensitivity of NPV to a Selection of Discount Rates

Case IRR

(%)

US$ million Undiscounted

Cash Flow NPV at Discount Rate

8% 9% 10% Base Case Pre-Tax 17.3 8,178 1,682 1,353 1,073 Post Tax 14.1 5,267 904 680 488 Upside Case Pre-Tax 19.1 8,182 2,098 1,742 1,433 Post Tax 15.4 5,226 1,146 904 694

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1.11 CONCLUSIONS The preliminary assessment has identified the following as generating optimal economic returns from development of the Dumont Property:

An open pit designed to extract 2,011 Mt of total material, including 171 Mt overburden and 1,840 Mt of ore and waste rock. Mining should be performed using the largest class of equipment available, including 360-t haul trucks. For the hanging wall rocks, an acceptable factor of safety (1.5) will be achieved with a 47° slope angle, while the more competent footwall rocks will allow the same factor of safety to be achieved using a 52° slope. In overburden, slope angles will be reduced to 18° in fine-grained material and 27° in coarse-grained material.

A mining rate that will be accelerated relative to the requirements of the mill, with open-pit mining completed in 20 years compared to the 31-year life-of-project. The accelerated mining rate will allow an elevated NSR cut-off value of C$14.00/t to be applied in the initial years of project life as well as providing a void for impounding approximately 30% of the tailings that will ultimately be produced.

A steady-state milling rate of 80,000 t/d will maximize economic returns within the amount of grid power currently available to the project. Assuming utilization of the maximum electrical grid power available to the project on a planning basis, returns could be enhanced by increasing throughput to 100,000 t/d.

A process flowsheet that includes 4-stage dry crushing followed by the removal of chrysotile fibres and brucite slimes before extraction of separate nickel sulphide and ferro-nickel concentrates. The crushing and screening operations will be equipped with dust extraction systems to ensure personnel are not exposed to any fibres. Chrysotile will be mixed with one or more of the other tailings products to ensure there are no fugitive airborne emissions from the TMF.

This scope of design is estimated to require an initial capital investment of $2,023 million, and have average net C1 costs of $3.96/lb Ni. At a long-term Ni price of $7.50/lb, the post-tax NPV10% is estimated to be $488 million, while the IRR would be 14.1%. Undiscounted payback occurs near the end of the fifth year of production.

Sensitivity studies suggest that the base case is sufficiently robust to withstand an adverse change of more than 10% in nickel price, head grade or process recovery, and at least 20% adverse change in capital, operating costs and C$/US$ exchange rate. The project is less sensitive to TC/RC terms. Consequently, Micon concludes that continued development of the Dumont Property, including work to complete a Preliminary Feasibility Study, is justified.

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1.12 RECOMMENDATIONS 1.12.1 Proposed 2011 – 2012 Exploration Program Following upon the results of the Preliminary Assessment, Royal Nickel plans to continue to explore the Dumont Property in 2011 with the goal of refining the deposit model and collecting geotechnical and environmental data, and completing metallurgical testwork to support the completion of a Preliminary Feasibility Study. Based on the results of the Preliminary Feasibility Study, further exploration, geotechnical and metallurgical work will be initiated later in 2011 and continue into 2012 to support a Feasibility Study. The total expenditure for the 2011 exploration and drilling program, further metallurgical and other studies to complete the Preliminary Feasibility Study and initiate data collection for the Feasibility Study is estimated to be approximately C$29,000,000. The objectives of the work to be completed in 2011 are as follows:

Outline additional resources that may occur inside the currently proposed pit shell.

Increase drilling density in high value portions of the deposit that are currently in the indicated category.

Continue to refine the geometallurgical model of the Dumont deposit based on drilling, geochemistry, mineralogy and metallurgical testing completed to date.

Collect geotechnical data on rock mechanics and overburden properties in order to refine models of pit wall slopes and to select locations for surface infrastructure.

Continue to characterize the environmental behaviour of tailings and waste rock.

Engage stakeholders in consultation.

Characterize local hydrological and hydrogeological regimes.

Continue to operate a pilot plant based on the standard test procedure developed by Royal Nickel for the Dumont mineralization to demonstrate the commercial viability of the process.

Complete a Preliminary Feasibility Study based on the geometallurgical model and metallurgical process development results to optimize parameters for a Feasibility Study.

Initiate additional exploration and metallurgical work to support a Feasibility Study as indicated by the Preliminary Feasibility Study.

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Royal Nickel has also proposed to spend a further C$30,700,000 in 2012 to complete the Feasibility Study on the Dumont Project. However, this expenditure will be based on the results and conclusions contained in the Preliminary Feasibility Study. Micon has reviewed Royal Nickel’s proposal for further exploration and studies on its Dumont Property and considers that the budget for the proposed program is reasonable. Micon recommends that Royal Nickel implements the program as proposed, subject to either funding and other matters which may cause the proposed program to be altered in the normal course its business activities or alterations which may affect the program as a result of exploration activities themselves. 1.12.2 Further Recommendations Further development of the Dumont Property should address key risks and opportunities that have been identified through the following work program:

Resource modelling. While the opportunity to extend the resource model along strike and at depth has been noted, the current measured and indicated resource (>1,100 Mt above a 0.20% Ni cut-off grade) is sufficient for the purposes of the Preliminary Feasibility Study. Resource modelling should focus on updating the database of mineralogical measurements and revising the forecast proportions of various Ni-bearing minerals accordingly.

Geometallurgy. The geometallurgical model should continue to be refined based on

drilling, geochemistry, mineralogy and metallurgical testwork.

Geotechnical studies. Additional rock and soil mechanics holes should be drilled and samples taken that would allow the mechanical properties of overburden and rock to be determined. These studies could lead to revised designs for pit slopes and waste impoundments. A preliminary geotechnical study of the area proposed for the primary crusher and process plant should also be performed to gain a better understanding of civil work requirements and construction costs.

Hydrological studies. Holes drilled for geotechnical samples should be used to gain a

better understanding of the expected inflows to the pit. Measurements should also be taken to determine the flow rate in the Villemontel River, and the sustainable flow rate that would be available to the project.

Metallurgical testing should focus on three areas:

o Establishing the repeatability of results achieved to date, through testing of larger-

scale samples that capture the range of variability in mineralogy and associated metallurgical response that will be experienced during commercial operations, thereby improving confidence in the recovery forecasts.

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o Optimizing project value by determining set points for Ni recovery, concentrate grades and costs that yield maximum NPV and IRR.

o Investigating alternatives to 4-stage dry crushing that may be lower cost and/or

require less power and thus be amenable to increased scale.

The potential benefit of using natural gas in place of fuel oil to power the dryers should be investigated.

Tailings produced from the metallurgical pilot plant should be tested to establish the

optimal concept for impoundment. It is possible that the current concept (combining three tailings products into a single stream with a relatively low solids content) may be replaced with an alternative that entails creating separate higher- and lower-density streams. If soil conditions allow it, the ultimate height of the TMF may be increased in order to reduce the overall footprint of the facility.

Environmental and socio-economic studies and public consultation should proceed

with the objective of permitting the project in line with the feasibility timing and assume that there will be a joint provincial and federal review process.

Anticipating the expected requirements of pending revisions to Quebec’s Mining Act,

closure costs in the cash flow model are split into (i) bond payments, incurred over the first five years of operation (amounting to 100% of the costs for which bonds are required), and (ii) decommissioning and monitoring costs, reflected as a lump sum at the end of the mine life. Estimated reclamation costs and bonding requirements should be reassessed in the next phase of development.

Discussions with potential off-takers should be held, towards obtaining heads of

agreement regarding off-take terms and conditions.

Results from the various tests and studies listed above should be incorporated into a revised mine design and LOM schedule.

Once the revised open pit design, production schedule, and modified flowsheet have

been completed, they should be used to generate new capital and operating cost estimates to the level of accuracy normally associated with a Preliminary Feasibility Study, and an updated economic evaluation could then be prepared.

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2.0 INTRODUCTION AND TERMS OF REFERENCE At the request of Mr. Tyler Mitchelson, President and CEO of Royal Nickel Corporation (Royal Nickel), Micon International Limited (Micon) has been retained to review and compile the results of independent work carried out for Royal Nickel comprising a Preliminary Assessment of its Dumont Property located in western Quebec, Canada. Participants in the study are listed in Table 2.1. The role of each participant is more fully described below.

Table 2.1 Participants in Dumont Preliminary Assessment

Activity Lead Organization Qualified Person

Project Management A.St. Jean Royal Nickel Geology Exploration and Database A.St. Jean Royal Nickel A. San Martin Mineralogy S. Downing SGS W. Lewis Resource Model O. Tavchandjian Golder A. San Martin Resource Estimate W. Lewis Micon W. Lewis Geotechnical Slopes, Designs M. Garon Genivar D. Penswick Hydrology O. Fala Genivar Mining Concept Selection D. Penswick Independent

D. Penswick LG Pit Design A.von Wielligh Prysm Resources Detailed Pit Design and Schedule R. Kear Independent Design Review M. Garon Genivar Processing Flowsheet Concepts and Design R. Salter Mineral Solutions R. Gowans Testwork J. Marois CTMP Engineering Design C. Hardie BBA C.Hardie Tailings Design, Concept R. Ouellet Golder M. Lemieux Pumping P. Primeau Golder Paste Tec P. Primeau Environmental Baseline Studies and Testwork D. Blanchet Genivar n/a Water Balance C. Hardie BBA Closure Plan D. Penswick Independent D. Penswick Schedule and Execution Plan D. Penswick Independent Capital Cost Estimate Mining D. Penswick Independent D. Penswick Processing, Infrastructure M. Fitzgibbon BBA C.Hardie Tailings M. Lemieux Golder M. Lemieux Operating Cost Estimate Mining D. Penswick Independent D. Penswick Processing C. Hardie BBA C.Hardie Tailings M. Lemieux Golder M. Lemieux G&A D. Penswick Independent D. Penswick Evaluation and Report D. Penswick Independent

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The geological setting of the property, mineralization style and occurrences, and exploration history were described in earlier reports by Golder (2010), Lewis and San Martin (2010, 2009 and 2008), Lewis (2007), Caron (2004), Oswald (1988), Duke (1986), Honsberger (1971) and in various government and private publications. The relevant sections of those reports are reproduced herein. The Preliminary Assessment is based on the mineral resource estimate prepared by Micon and disclosed in its most recent technical report entitled “NI 43-101 Technical Report, Mineral Resource Estimate for the Dumont Property Launay And Trécesson Townships, Quebec, Canada” dated August 30, 2010. Prior to that, Micon had prepared four other Technical Reports. In chronological order, these are:

“NI 43-101 Technical Report on the Dumont Property, Launay and Trécesson Townships, Quebec, Canada” dated August 15, 2007;

“NI 43-101 Technical Report, Preliminary Mineral Resource Estimate for the Dumont Property, Launay and Trécesson Townships, Quebec, Canada” dated April 30, 2008;

“NI 43-101 Technical Report, Updated Mineral Resource Estimate for the Dumont Property, Launay and Trécesson Townships, Quebec, Canada” dated January 23, 2009; and

“NI 43-101 Technical Report, Mineral Resource Estimate for the Dumont Property, Launay and Trécesson Townships, Quebec, Canada” dated April 5, 2010.

Geotechnical studies were carried out for Royal Nickel by Genivar engineers, working under the supervision of independent mining engineer David Penswick, P.Eng. Open pit optimization was conducted by Prysm Resources (Pty) Ltd and open pit mine design and scheduling by Robin Kear. This work, carried out under the supervision of David Penswick, was also reviewed by Genivar. Mining capital and operating cost estimates were prepared by David Penswick. Quebec’s Centre de Technologie Minérale et de Plasturgie (CTMP) carried out a metallurgical testwork program under the supervision of independent consulting metallurgist Robert Salter, Ph.D, P.Eng., who prepared the process flowsheet. The results of this work, and the development of the metallurgical parameters used in the evaluation of the property, have been reviewed by Micon’s principal metallurgist, Richard Gowans, P.Eng. Process and infrastructural designs, water balance and associated capital and operating cost estimates (±40%) were prepared by BBA Engineering of Quebec. Tailings management facility designs have been prepared by Golder Associates Ltd (Golder) while Golder Paste Technology Ltd (Golder PasteTec) was responsible for estimates related to tailings pumping equipment. David Penswick estimated costs for construction of earthworks using the fleet operating cost model.

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Mr Lewis has undertaken five visits to the Dumont Property, the most recent of which took place July 20-23, 2010. Previous visits were on May 8-9, 2007, January 29-31, 2008, October 16-18 and 20-22, 2008, and October 16-18, 2009. Mr Penswick visited the property on August 10, 2010. The prime reports prepared by Royal Nickel’s consultants as components of the preliminary assessment are listed as follows:

Aker Solutions (various) Dumont Nickel Conceptual Study Update August, 2008

Genivar (O. Fala) Restricted Hydrogeological Study (for the) Dumont Nickel Project November, 2009

Genivar (various) Conceptual Review Dumont Property November 24, 2009

Genivar (L. Li) Preliminary Stability Analysis of Slopes January, 2010

Genivar (D. Blanchet) Preliminary Slope Evaluation of the Overburden Dumont

Project April 26, 2010

Prysm Resources (A. Swart) Dumont Nickel Project Open-Pit Optimization Study June, 2010

D. Penswick Recovery Equations Used in Scoping Study June 2, 2010

Golder (G. Warren) GeoMetallurgical Modeling of the Dumont project June 28, 2010

BBA (various) Scoping Study for the Dumont Nickel Ore Project (draft) July 16,

2010

R.M. Kear Dumont Project Preliminary Mine Plans August, 2010

Micon (Lewis and San Martin) NI 43-101 Technical Report Mineral Resource Estimate for the Dumont Property August 30, 2010

All currency amounts are stated in US dollars or Canadian dollars, as specified, with commodity prices typically expressed in US dollars. Quantities are generally stated using the Système International d’Unités (SI) or metric units, the standard Canadian and international practice, including metric tonnes (t), kilograms (kg) or grams (g) for weight, kilometres (km) or metres (m) for distance and hectares (ha) for area. Wherever applicable, imperial units have been converted to SI units for reporting consistency. Table 2.2 provides a list of the abbreviations used throughout this report.

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Table 2.2 List of Abbreviations

Term Abbreviation

Barrel(s) bbl Canadian dollar C$ Canadian National Railway CNR Cobalt Co Cubic metre(s) m3 Cubic metres per hour m3/h Days per year d/y Degree(s) o Degrees Celsius oC Foot(feet) ft Front-end loader FEL Gram(s) g Gold Au Hectare(s) ha High pressure grinding roll HPGR Hour(s) h Hour(s) per day h/d Inch(es) in Index of rock strength IRS Internal rate of return IRR Iron Fe Kilogram(s) kg Kilograms per hour kg/h Kilometre(s) km Kilowatt(s) kW Kilowatthour(s) kWh Kilowatthours per tonne kWh/t Lerchs-Grossmann LG Life-of-mine LOM Litre(s) L Litres per second L/s Low intensity magnetic separator LIMS Magnesium/magnesium oxide Mg/MgO Megawatt(s) MW Metre(s) m Metres per second m/s Micron(s) μm Milligrams mg Millimetre(s) mm Millimetres per year mm/y Million M Million tonnes Mt Million tonnes per year Mt/y Million years old Ma Minute(s) min Net present value NPV Net present value at discount rate of 10% per year NPV10% Net smelter return NSR Neutralization potential NP

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Term Abbreviation Nickel Ni Palladium Pd Parts per billion ppb Parts per million ppm Platinum Pt Platinum group elements PGE Pound(s) lb Pounds per year lb/y Preliminary Feasibility Study PFS Provincial water quality objectives PWQO Quality Assurance/Quality Control QA/QC Rock quality designation RQD Second s Semi-autogenous grinding SAG Square metre(s) m2

Square kilometre(s) km2 Tailings management facility TMF Three-dimensional 3D Tonne(s) t Tonnes per cubic metre t/m3 Tonnes per day t/d Tonnes per hour t/h Tonnes per year t/y Treatment charge/refining charge TC/RC Unconfined compressive strength UCS United States dollars US$ or $ Vertical-axis time domain electromagnetic VTEM Vertical shaft impact VSI Volt(s) V

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3.0 RELIANCE ON OTHER EXPERTS Micon has reviewed and analyzed data provided by Royal Nickel, its consultants and previous operators of the property and, augmented by its direct field examination, has drawn its own conclusions therefrom. Micon has not carried out any independent exploration work, drilled any holes or carried out any extensive program of sampling and assaying on the property. However, during its field visit in 2007, Micon did collect five quarter-core samples from the zone of mineralization located on the Dumont Property. The results of this sampling program are contained in the August 15, 2007 and April 30, 2008 Technical Reports. While exercising all reasonable diligence in checking, confirming and testing it, Micon has relied upon Royal Nickel’s presentation of its project data and that of previous operators of the Dumont Property, in formulating its opinion. The various agreements under which Royal Nickel holds title to the mineral claims for this project have not been reviewed by Micon, and Micon offers no legal opinion as to the validity of the mineral title claimed. A description of the property, and ownership thereof, is provided for general information purposes only. Comments on the state of environmental conditions, liability, and estima

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