NI 43-101 REPORT - s1.q4cdn.coms1.q4cdn.com/722223210/files/doc_downloads/MasonGraphite_Tech... · project number: 2012-021 ni 43-101 report . technical report on the . preliminary

Project Number: 2012-021

NI 43-101 REPORT

TECHNICAL REPORT ON THE

PRELIMINARY ECONOMIC ASSESSMENT

LAC GUÉRET GRAPHITE PROJECT

QUEBEC – CANADA

Prepared for

MASON GRAPHITE

Prepared by

Edward Lyons, P. Geo.

Tekhne Research

Martin Magnan, Eng.

Guy Saucier, Eng.

Roche Ltd, Consulting Group

Jeffrey Cassoff, Eng., Lead Mining Engineer

Stéphane Rivard, Eng., General Manager Mineral Processing

Michel L. Bilodeau, Eng., M.Sc. (App.), Ph. D., Economic Analyst

Mary Jean Buchanan, Eng., M. Env., Senior Project Manager

Met-Chem Canada Inc.

Nicolas Skiadas, Eng., M. Eng.

Journeaux Assoc., Division of Lab Journeaux Inc.

Effective Date: April 22, 2013

Issue Date: June 6, 2013

MASON GRAPHITE Lac Guéret Graphite Project – PEA NI 43-101 Technical Report

June 2013

QPF-009-12/B

P:\2012-021\Texte\Rapports\PEA 43-101 Technical Report\2012-021 PEA 43-101 FINAL 2.docx

IMPORTANT NOTICE

This Report was prepared as a National Instrument 43-101Technical

Report for Mason Graphite (“Mason”) by Met-Chem Canada Inc. (“Met-

Chem”). The quality of information, conclusions and estimates contained

herein is consistent with the level of effort involved in Met-Chem’s

services, based on: i) information available at the time of preparation, ii)

data supplied by outside sources, and iii) the assumptions, conditions, and

qualifications set forth in this Report. This Report is intended for use by

Mason subject to the terms and conditions of its contract with Met-Chem.

This Report can be filed as a Technical Report with Canadian Securities

Regulatory Authorities pursuant to National Instrument 43-101,

Standards of Disclosure for Mineral Projects. Except for the purposes

legislated under Canadian securities laws, any other uses of this Report by

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

MASON GRAPHITE Lac Guéret Graphite Project – PEA NI 43-101 Technical Report

June 2013

QPF-009-12/B


DATE AND SIGNATURE PAGE - CERTIFICATES

Effective Date: April 22, 2013

Issue Date: June 6, 2013

Michel L. Bilodeau, Eng., M.Sc. (App.), Ph.D.

Independent Consultant

22, Labrador Street

Kirkland, QC, H9J 3W8

Telephone: 514-426-4210

Email: [email protected]

CERTIFICATE OF AUTHOR

To Accompany the Report entitled:

“NI 43-101 Technical Report on the Preliminary Economic Assessment Lac Guéret Graphite

Project, Québec-Canada” dated June 6th

, 2013 with effective date of April 22nd

, 2013.

I, Michel L. Bilodeau, Eng., do hereby certify that:

1) I am a retired (June 2009) Associate Professor from the Department of Mining and

Materials Engineering of McGill University, 3450 University St., Montréal, QC, Canada

H3A 2A7, and have taught on a contract basis the mineral economics course of the

mining engineering program at McGill in the Winter terms of 2010, 2011 and 2012;

2) I am a graduate of École Polytechnique de Montréal with a B.Eng. in Geological

Engineering (1970), and of McGill University with a M.Sc. (App.) in mineral exploration

(1972) and a Ph.D. in mineral economics (1975);

3) I am a member in good standing of the “Ordre des ingénieurs du Québec” (23799);

4) I have taught continuously in the areas of engineering economy, mineral economics and

mining project feasibility studies in the mining engineering program dispensed by McGill

University since my graduation from university, and have carried out in the capacity of

independent consultant several assignments related to the economic/financial analysis of

mining projects;

5) I have read the definition of "qualified person" set out in National Instrument 43-101 (NI

43-101) and certify that by reason of my education, affiliation with a professional

association (as defined by NI 43-101) and past relevant work experience in the mineral

industry that includes teaching for more than 30 years and consulting activities over the

past 20 years, I fulfill the requirements to be a “qualified person” for the purposes of NI

43-101;

6) I have participated in the preparation of the report entitled " NI 43-101 Technical Report

on the Preliminary Economic Assessment Lac Guéret Graphite Project, Québec-

Canada” dated June 6th

, 2013, as an Economic/Financial Analyst Consultant. I am

responsible for Section 22, part of Section 1 and part of Section 26;

7) I have not visited the site;

8) I have not had prior involvement with Mason Graphite and its Lac Guéret Graphite

Project and property that is the subject of the Technical Report;

9) I state that, as of the date of this certificate, to the best of my knowledge, information and

belief, the Technical Report contains all scientific and technical information that is

required to be disclosed to make the Technical Report not misleading.

10) I have no personal knowledge, as of the date of this certificate, of any material fact or

material change which is not reflected in this Technical Report;

11) I am independent of the issuer as defined in section 1.5 of NI 43-101;

12) I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has

been prepared in compliance with that instrument and form;

This 6th

day of June, 2013.

Original signed and sealed

(Signed) “Michel Bilodeau”

Michel L Bilodeau, Eng., M.Sc. (App.), Ph.D.

Economic/Financial Analyst

Consultant for Met-Chem Canada Inc.

Mary Jean Buchanan, Eng. M.Env.


555 René-Lévesque Blvd. West

Suite 300

Montreal, QC H2Z 1B1

Telephone: 514-288-5211 ext 246

Fax: 514-288-7937







, 2013.

I, Mary Jean Buchanan, Eng., M.Env. do hereby certify that:

1) I am a Senior Project Manager and Senior Environmental Engineer with Met-Chem

Canada Inc. (Met-Chem) with an office situated at Suite 300, 555 René-Lévesque Blvd.

West, Montréal, Canada;

2) I am a graduate of Université du Québec à Chicoutimi with B.Eng. in Geological

Engineering in 1983 and of the Université de Sherbrooke with a M.Env. (Master degree in

Environment) in 1997;

3) I am a member in good standing of the “Ordre des Ingénieurs du Québec” (38671);

4) I have practiced my profession for the mining industry continuously since my graduation

from university;



association (as defined by NI 43-101) and past relevant work experience that includes 27

years in consulting practice related to resource estimates, mine engineering and

environmental assessment, I fulfill the requirements to be a “qualified person” for the

purposes of NI 43-101;

6) I have supervised and participated in the preparation of the report entitled " NI 43-101

Technical Report on the Preliminary Economic Assessment Lac Guéret Graphite


, 2013 and am responsible for Sections 1, 2, 3,

18, 19, 20.5, 21, 24, 25, 26, 27, and part of 22;












This 6th

day of June 2013.


(Signed) “Mary Jean Buchanan”

Mary Jean Buchanan, Eng., M.Env.

Senior Project Manager


Jeffrey Cassoff, Eng.


555 René Lévesque Blvd. West

Suite 300

Montréal QC, H2Z 1B1

Telephone: 514-288-5211 ext 275

Fax: 514-288-7937







, 2013.

I, Jeffrey Cassoff, Eng, do hereby certify that:

1) I am the Lead Mining Engineer presently with Met-Chem Canada Inc. with an office

situated at Suite 300, 555 René-Lévesque Blvd West, Montréal, Canada;

2) I am a graduate of McGill University in Montréal with a Bachelor’s in Mining

Engineering obtained in 1999;

3) I am a member in good standing of the Ordre des Ingénieurs du Québec (Reg. 5002252);

4) I have worked as a mining engineer continuously since graduation from university in

1999;

5) I have read the definition of “qualified person” set out in National Instrument 43-101

(NI 43-101) and certify that by reason of my education, affiliation with a professional

association (as defined by NI 43-101) and past relevant work experience, I fulfill the

requirements to be a "qualified person" for the purposes of NI 43-101;




, 2013, under Met-Chem consultation company as Lead Mining

Engineer. I have participated, and I am responsible for sections 15 and 16 and part of

sections 1, 25 and 26;




9) I state that, as the date of the certificate, to the best of my qualified knowledge,

information and belief, the Technical Report contains all scientific and technical

information that is required to be disclosed to make the Technical Report not misleading;






This 6th

day of June, 2013.


(Signed) “Jeffrey Cassoff”

Jeffrey Cassoff, Eng.

Lead Mining Engineer



I, Edward Lyons, P.Geo., as an author of the technical report entitled “NI 43-101 Technical Report on the Preliminary Economic Assessment Lac Guéret Graphite Project, Québec-Canada” dated June 6

th, 2013 with

effective date of April 22nd

, 2013 prepared for Mason Graphite, do hereby certify that:

1) I am currently employed as a Geological Consultant and Director of Tekhne Research Inc. with the office at 1067 Portage Road, Victoria, BC V8Z 1L1.

2) I graduated with a Bachelor of Science (Honours) degree in Geology from the University of Missouri at Rolla in 1970.

3) I am a Professional Geoscientist enrolled with the Association of Professional Engineers and Geoscientists of British Columbia (APEGBC) (Member # 122136) and a géologue enrolled with the Ordre des géologues du Quebec (OGQ) (Member # 701).

4) I have worked as a geologist for a total of 42 years since my graduation from university.

5) I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify that, by reason of my education, affiliation with a professional association as defined in NI 43-101 and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101.

6) I am responsible for Sections 4 to 12, 14, and 23 technical report entitled “NI 43-101 Technical Report on the Preliminary Economic Assessment Lac Guéret Graphite Project, Québec-Canada” dated June 6, 2013;

7) I visited the Lac Guéret Property for one day on October 27, 2012. I visited the Lac Guéret Property for one day on 11 May 2012 for another report entitled ‘’Technical Report on the Lac Guéret Property’’ dated July 3, 2012. In the period September 2007-to October 2009. I visited the property various times, as well as having four campaigns of direct field experience on the property between August 2002 and to the end of May 2006.

8) I have prior involvement with the property that is the subject of the Technical Report. From August 2002 to June 2006, I developed the project for Quinto Mining Corp., including writing four NI 43-101 Technical Reports on the exploration results. Between 28 September – 9 October 2007, I relogged the core drilled in 2006 and conducted supplementary mapping for Quinto; on 7 October 2009, I visited the property for Quinto Mining as a subsidiary of Consolidated Thompson Iron Mines with potential project participants and subsequently wrote an in-house, unpublished version of this report for them.

9) As of the date of the certificate Technical Report, to the best of my knowledge, information, and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

10) I have no personal knowledge, as of the date of this certificate, of any material fact or material change which is not reflected in this Technical Report.

11) I am independent of Mason Graphite applying all the tests in section 1.5 of the NI 43-101.

12) I have read NI 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that instrument and form.

Victoria, June 6, 2013


"Edward Lyons"

Edward Lyons, P.Geo.

OGQ #701


I, Martin Magnan, Eng., as an author of the technical report entitled “NI 43-101 Technical Report on the Preliminary Economic Assessment Lac Guéret Graphite Project, Québec-Canada” dated June 6

th, 2013 with

effective date of April 22nd


1) I am currently employed as Project Manager – Environment Division of Roche Ltd, Consulting Group, 735, 5th

Street, Shawinigan, Québec (Canada) G9N 1G2;

2) I graduated from Laval University of Québec, Canada with a B. Sc. A. in Geological Engineering in 1990 and from Université du Québec à Chicoutimi of Québec, Canada with a M. Sc. A in Geology in 1994. I have practiced my profession continuously since my graduation;

3) I am a registered member of the Ordre des Ingénieurs du Québec (#126033);

4) I am a specialist in environment sciences since 13 years with a 10 years previous experience in exploration geology. My expertise includes environmental site assessment study, environmental impact assessment and rehabilitation plan. I have also been involved in scoping studies and feasibility studies. I have participated in gold, base metals and industrial minerals projects;

5) I have read the definition of "qualified person" set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI 43-101;

6) I am responsible for Section 20.0 except for 20.5 of the technical report entitled “NI 43-101 Technical Report on the Preliminary Economic Assessment Lac Guéret Graphite Project, Québec-Canada” dated June 6, 2013;


8) I have had no prior involvement with the properties that are the subject of this Technical Report.

9) I am an independent of Mason Graphite as defined in section 1.5 of NI 43-101.


11) As of the date of the Technical Report, to the best of my information, knowledge and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the Technical Report not misleading;


Shawinigan, June 6, 2013


Signed "Martin Magnan"

Martin Magnan, Eng. Environmental Projects Manager OIQ # 126033

Stephane Rivard, Eng.


555 René-Lévesque Blvd. West

Suite 300

Montreal, QC H2Z 1B1

Telephone: 514-288-5211 ext 216

Fax: 514-288-7937







, 2013.

I, Stephane Rivard, Eng. do hereby certify that:

1) At the time of the effective date of the Technical Report, I was General Manager Mineral

Processing department and a Senior Metallurgical Engineer with Met-Chem Canada Inc.

(Met-Chem) with an office situated at Suite 300, 555 René-Lévesque Blvd. West,

Montréal, Canada;

2) I am a graduate of Université LAVAL, Québec withd a B.Sc Eng. in Metallurgical and

Material Science Engineering in 1994;


4) I have practiced my profession for the mining industry continuously since my graduation

from university;



association (as defined by NI 43-101) and past relevant work experience that includes

more than 12 years in concentrators and operating plants and more than 5 years in

consulting practice related to mineral processing, I fulfill the requirements to be a

“qualified person” for the purposes of NI 43-101;




, 2013 and am responsible for Sections 13, 17 and part of Section

1, 25 and 26;












This 6th

day of June 2013.


(Signed) “Stéphane Rivard”

Stéphane Rivard, Eng.

General Manager Mineral Processing



I, Guy Saucier, Eng., as an author of the technical report entitled “NI 43-101 Technical Report on the Preliminary Economic Assessment Lac Guéret Graphite Project, Québec-Canada” dated June 6

th, 2013 with effective date of

April 22nd


1) I am Vice President, Mining and Mineral Processing and carried out this assignment as author/reviewer of Roche Ltd, Consulting Group, Suite 1500, 630, René-Lévesque West, Montréal, QC, Canada, H3B 1S6.

2) I am a graduate of École Polytechnique, University of Montréal, located in Montréal with a B. Ing in Geological Engineering in 1983;

3) I am a Senior Geological Engineer, Member of the Ordre des Ingénieurs du Québec (#37711), and a member of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), PDAC and SME;

4) I have worked as a geological engineer in the mineral industry for 29 years. My technical expertise includes resources evaluation, projects evaluation, mine design, and mine planning. I have been involved in several scoping studies and feasibility studies. I have participated in worldwide projects in gold, base metals, iron, coal, bauxite and industrial minerals;

5) I have read the definition of "qualified person" set out in National Instrument 43-101 (‘’NI 43-101’’) and certify that by reason of my education, affiliation with a professional association (as defined by NI 43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI 43-101;

6) I have supervised the Sections 4 to 12, 14, 20 except for Section 20.5, and 23 technical report entitled “NI 43-101 Technical Report on the Preliminary Economic Assessment Lac Guéret Graphite Project, Québec-Canada” dated June 6, 2013;


8) I have had no prior involvement with the properties that are the subject of this Technical Report.

9) I am independent of Mason Graphite as defined in section 1.5 of NI 43-101.


11) As of the date of the Technical Report, to the best of my information, knowledge and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the Technical Report not misleading;


Montreal, June 6, 2013


Signed "Guy Saucier"

Guy Saucier, Eng. OIQ # 37711

Nicolas Skiadas, Eng. M.Eng.


801 Bancroft

Pointe-Claire, QC H9R 4L6

Telephone: 514-630-4997 ext 223

Fax: 514-630-8937







, 2013.

I, Nicolas Skiadas, Eng., M.Eng. do hereby certify that:

1) I am a Senior Project Manager and Senior Geotechnical Engineer with Journeaux Assoc,

Division of Lab Journeaux Inc. with an office situated at 801 Bancroft, Pointe-Claire,

Quebec, Canada;

2) I am a graduate of McGill University with B.Eng. in Civil Engineering and Applied

Mechanics in 1977 and Master of Engineering in Civil Engineering and Applied

Mechanics (Geotechnical) in 1982;


4) I have practiced my profession for the mining industry for more than 20 years since my

graduation from university;



association (as defined by NI 43-101) and past relevant work experience that includes

more than 20 years in consulting practice related to geotechnical engineering, tailings

deposition and materials quantities and cost estimates, I fulfill the requirements to be a

“qualified person” for the purposes of NI 43-101;

6) I have participated in the preparation of the report " NI 43-101 Technical Report on the

Preliminary Economic Assessment Lac Guéret Graphite Project, Québec-Canada”

dated June 6th

, 2013, as a Tailings Consultant. I am responsible for Section 18.5 and part

of Sections 1 and 26;












This 6th

day of June 2013.


(Signed) “Nicolas Skiadas”

Nicolas Skiadas, Eng., M Eng.

Tailings Specialist


MASON GRAPHITE Lac Guéret Graphite Project – PEA NI 43-101 Technical Report Page i

June 2013

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TABLE OF CONTENTS

DATE AND SIGNATURE PAGE – CERTIFICATES

1.0 EXECUTIVE SUMMARY .............................................................................................................................. 1 1.1 Introduction ............................................................................................................................................. 1 1.2 Geology and Exploration ........................................................................................................................ 1 1.3 Issuer’s Interest ....................................................................................................................................... 1 1.4 Accessibility ............................................................................................................................................ 2 1.5 Climate .................................................................................................................................................... 2 1.6 Local Resources and Infrastructure ......................................................................................................... 2 1.7 History ..................................................................................................................................................... 2 1.8 Geology ................................................................................................................................................... 4 1.9 Mineralisation ......................................................................................................................................... 5 1.10 Mineral Processing and Metallurgical Testing ........................................................................................ 5 1.11 Mineral Resource Estimates .................................................................................................................... 6 1.12 Mineral Reserve Estimates ...................................................................................................................... 7 1.13 Mining Methods ...................................................................................................................................... 7 1.14 Recovery Methods .................................................................................................................................. 8 1.15 Infrastructure ........................................................................................................................................... 8 1.16 Market Studies and Contracts ................................................................................................................. 9 1.17 Environmental Studies, Permitting, Social or Community Impacts ........................................................ 9 1.18 Capital and Operating Costs .................................................................................................................. 11 1.19 Economic Analysis................................................................................................................................ 13 1.20 Important Caution Regarding the Economic Analysis .......................................................................... 13 1.21 Conclusions and Recommendations ...................................................................................................... 14

2.0 INTRODUCTION .......................................................................................................................................... 16 2.1 Terms of Reference – Scope of Work ................................................................................................... 16 2.2 Source of Information ........................................................................................................................... 18 2.3 Site Visit ................................................................................................................................................ 18 2.4 Units and Currency ............................................................................................................................... 18 2.5 Abbreviations ........................................................................................................................................ 18

3.0 RELIANCE ON OTHER EXPERTS ........................................................................................................... 21 4.0 PROPERTY DESCRIPTION AND LOCATION ....................................................................................... 22

4.1 Property Description ............................................................................................................................. 22 4.2 Property Location .................................................................................................................................. 22 4.3 Claim Titles ........................................................................................................................................... 23 4.4 Issuers Interest ....................................................................................................................................... 30 4.5 Legal Survey ......................................................................................................................................... 30 4.6 Environmental Liabilities ...................................................................................................................... 30 4.7 Significant Factors and Risks ................................................................................................................ 31

5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND

PHYSIOGRAPHY ......................................................................................................................................... 32 5.1 Accessibility .......................................................................................................................................... 32 5.2 Climate .................................................................................................................................................. 32 5.3 Local Resources and Infrastructure ....................................................................................................... 32 5.4 Physiography ......................................................................................................................................... 32

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6.0 HISTORY ....................................................................................................................................................... 34 6.1 General Overview ................................................................................................................................. 34 6.2 Historical Mineral Resources ................................................................................................................ 35

7.0 GEOLOGY SETTINGS AND MINERALIZATION ................................................................................. 36 7.1 Regional Geology ................................................................................................................................. 36 7.2 Local Geology ....................................................................................................................................... 40 7.3 Mineralization ....................................................................................................................................... 44

8.0 DEPOSIT TYPES........................................................................................................................................... 46 9.0 EXPLORATION ............................................................................................................................................ 48

9.1 Exploration Work .................................................................................................................................. 48 10.0 DRILLING ...................................................................................................................................................... 49

10.1 Previous Drilling ................................................................................................................................... 49 10.2 Recent Drilling ...................................................................................................................................... 50

11.0 SAMPLE PREPARATION, ANALYSIS AND SECURITY ...................................................................... 51 11.1 Sample Collection ................................................................................................................................. 51 11.2 Sample Preparation ............................................................................................................................... 51 11.3 Quality Assurance and Quality Control ................................................................................................ 53 11.4 Security ................................................................................................................................................. 53

12.0 DATA VERIFICATION ................................................................................................................................ 55 12.1 Field Verification .................................................................................................................................. 55 12.2 Database Verification ............................................................................................................................ 55

13.0 MINERAL PROCESSING AND METALLURGICAL TESTING ........................................................... 56 13.1 Introduction ........................................................................................................................................... 56 13.2 Previous Test Work Results .................................................................................................................. 56 13.3 Recent Test Work Results ..................................................................................................................... 56

14.0 MINERAL RESOURCES ESTIMATES ..................................................................................................... 61 14.1 Introduction ........................................................................................................................................... 61 14.2 Previous Mineral Resource Estimates ................................................................................................... 61 14.3 Exploration Database ............................................................................................................................ 61 14.4 Statistics ................................................................................................................................................ 69 14.5 Mineral Resource Estimation ................................................................................................................ 79

15.0 MINERAL RESERVE ESTIMATES ........................................................................................................... 81 16.0 MINING METHODS ..................................................................................................................................... 82

16.1 Mineral Resources ................................................................................................................................. 82 16.2 Mining Method ..................................................................................................................................... 84 16.3 Pit Optimization .................................................................................................................................... 84 16.4 Mine Design .......................................................................................................................................... 86 16.5 Mine Planning ....................................................................................................................................... 90 16.6 Mine Equipment Fleet ........................................................................................................................... 92 16.7 Mine Dewatering ................................................................................................................................... 94 16.8 Manpower Requirements ...................................................................................................................... 94

17.0 RECOVERY METHODS .............................................................................................................................. 96 17.1 Process Plant ......................................................................................................................................... 96 17.2 Flow sheets and Process Description .................................................................................................... 97 17.3 Utilities ................................................................................................................................................ 102 17.4 Plant Layout ........................................................................................................................................ 103

18.0 PROJECT INFRASTRUCTURE ............................................................................................................... 104 18.1 Main Access Road .............................................................................................................................. 104 18.2 Power .................................................................................................................................................. 104

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18.3 Camp Site Accommodations ............................................................................................................... 104 18.4 Site Roads ........................................................................................................................................... 106 18.5 Tailings Storage Facility ..................................................................................................................... 106 18.6 Buildings ............................................................................................................................................. 109 18.7 Site Power and Communication .......................................................................................................... 109 18.8 Site Services ........................................................................................................................................ 110

19.0 MARKET STUDIES AND CONTRACTS ................................................................................................ 111 19.1 Market Information ............................................................................................................................. 111 19.2 Price Forecast ...................................................................................................................................... 112

20.0 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT ........ 114 20.1 Environmental Baseline Study (EBS) ................................................................................................. 114 20.2 Mineralization, Waste and Tailings Characterization ......................................................................... 115 20.3 Regulatory Framework ........................................................................................................................ 116 20.4 Territorial Claims and Regional Relations .......................................................................................... 119 20.5 Mine Closure and Rehabilitation ......................................................................................................... 120

21.0 CAPITAL AND OPERATING COSTS ..................................................................................................... 122 21.1 Capital Cost ......................................................................................................................................... 122 21.2 Operating Cost .................................................................................................................................... 129

22.0 ECONOMIC ANALYSIS ............................................................................................................................ 132 22.1 General ................................................................................................................................................ 132 22.2 Assumptions ........................................................................................................................................ 132 22.3 Financial Model and Results ............................................................................................................... 134 22.4 Sensitivity Analysis ............................................................................................................................. 137 22.5 Important Caution Regarding the Economic Analysis ........................................................................ 141

23.0 ADJACENT PROPERTIES ........................................................................................................................ 142 24.0 OTHER RELEVANT DATA AND INFORMATION .............................................................................. 143 25.0 INTERPRETATION AND CONCLUSIONS ............................................................................................ 144 26.0 RECOMMENDATIONS ............................................................................................................................. 145 27.0 REFERENCES ............................................................................................................................................. 147

27.1 Geology ............................................................................................................................................... 147 27.2 Process ................................................................................................................................................ 148

LIST OF TABLES

Table 1.1 – Preliminary Test Work Results (LCT#2) .................................................................................................... 6 Table 1.2 – Mineral Resource Estimate (4% Cgr Cut-Off) ........................................................................................... 6 Table 1.3 – Graphite Price ............................................................................................................................................. 9 Table 1.4 – Summary of Life of Mine Costs Estimate (50,000 tpy Concentrate)........................................................ 11 Table 1.5 – Summary of Life of Mine Average Operating Cost Estimate................................................................... 12 Table 1.6 – Total Personnel Requirement ................................................................................................................... 12 Table 1.7 – Macro-Economic Assumptions................................................................................................................. 13 Table 1.8 – Technical Assumptions ............................................................................................................................. 13 Table 1.9 – Estimated Cost for Next Study Phase ....................................................................................................... 15 Table 2.1 – Qualified Persons and their Respective Sections of Responsibility .......................................................... 17 Table 2.2 – List of Abbreviations ................................................................................................................................ 18 Table 4.1 – Mineral Claim Titles ................................................................................................................................. 24 Table 6.1 – Summary of Exploration Work on the Lac Guéret Property by Quinto ................................................... 34 Table 7.1 – Regional Stratigraphic Column ................................................................................................................ 36 Table 7.2 – Property Stratigraphic Column (Youngest to Oldest) ............................................................................... 40 Table 10.1 – Drillholes Details .................................................................................................................................... 49 Table 13.1 – Sampling Sites Location ......................................................................................................................... 57

MASON GRAPHITE Lac Guéret Graphite Project – PEA NI 43-101 Technical Report Page iv

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Table 13.2 – Sample Remaining at SGS Minerals ...................................................................................................... 57 Table 13.3 – Preliminary Test Work Results (Test # F3) ............................................................................................ 59 Table 13.4 – Preliminary Test Work Results (LCT#2) ................................................................................................ 59 Table 14.1 – Density .................................................................................................................................................... 63 Table 14.2 – Drill Core Samples – Statistics ............................................................................................................... 65 Table 14.3 – Geological Units Definition .................................................................................................................... 68 Table 14.4 – Downhole Composites vs. Raw Assay Data ........................................................................................... 71 Table 14.5 – Semi-Variogram Parameters ................................................................................................................... 71 Table 14.6 – Mineral Resource Estimate (4% Cgr Cut-Off) ....................................................................................... 79 Table 16.1 – Mineral Resource Estimate (4% Cgr Cut-Off) ....................................................................................... 82 Table 16.2 – Pit Optimization Parameters ................................................................................................................... 85 Table 16.3 – Material Properties.................................................................................................................................. 86 Table 16.4 – Mine Production Schedule (in ‘000 t) ..................................................................................................... 91 Table 16.5 – Mining Equipment Fleet ......................................................................................................................... 92 Table 16.6 – Truck Productivities (Year 5) ................................................................................................................. 93 Table 16.7 – Mine Manpower Requirements .............................................................................................................. 95 Table 17.1 – Design Criteria ........................................................................................................................................ 96 Table 17.2 – Lac Guéret Process Mass Balance .......................................................................................................... 97 Table 19.1 – Monthly Prices for Crystalline Graphite as published in Industrial Minerals and 24 months average

(between April 2011 and April 2013) .............................................................................................................. 112 Table 19.2 – Graphite Price Forecasts ....................................................................................................................... 113 Table 20.1 –Accumulation Areas for Waste Rock Dump and Tailings Storage Facility .......................................... 121 Table 21.1 – Summary of Life of Mine Costs Estimate (50,000 tpy Concentrate).................................................... 123 Table 21.2 – Summary of Life of Mine Average Operating Cost Estimate............................................................... 129 Table 21.3 – Total Personnel Requirement................................................................................................................ 129 Table 21.4 – Summary of Estimated Mine Operating Costs by Type of Material..................................................... 130 Table 21.5 – Summary of Average Annual Process Plant Operating Costs .............................................................. 130 Table 21.6 – Summary of Annual Plant Administration and Services Costs............................................................. 131 Table 22.1 – Graphite Price Forecasts ....................................................................................................................... 132 Table 22.2 – Macro-Economic Assumptions............................................................................................................. 133 Table 22.3 – Technical Assumptions ......................................................................................................................... 133 Table 22.4 – Project Evaluation Summary ................................................................................................................ 136 Table 26.1 – Estimated Cost for Next Study Phase ................................................................................................... 146 LIST OF FIGURES

Figure 4.1 – Location Map .......................................................................................................................................... 22 Figure 4.2 – Claims Map ............................................................................................................................................. 23 Figure 7.1 – Regional Geology .................................................................................................................................... 39 Figure 7.2 – Mason Graphite Property Geology .......................................................................................................... 43 Figure 7.3 – GC-GR Graphite Zones Compilation ...................................................................................................... 44 Figure 14.1 – % Cgr vs. Density .................................................................................................................................. 64 Figure 14.2 – % S (tot) vs. Density.............................................................................................................................. 64 Figure 14.3 – Normal Histogram -% Cgr in All Samples Used in Model ................................................................... 65 Figure 14.4 – Cumulative Frequency - % Cgr in All Samples Used in Model ............................................................ 66 Figure 14.5 – Drill Grid Location ................................................................................................................................ 67 Figure 14.6 – Distribution of Sample Lengths............................................................................................................. 69 Figure 14.7 – Cumulative Probability Plot .................................................................................................................. 70 Figure 14.8 – Major Axis Semi-Variogram ................................................................................................................. 72 Figure 14.9 – Semi-Minor Axis Semi-Variogram ....................................................................................................... 72 Figure 14.10 – Vertical Section 1000NE of the Interpolated Grade Looking N40E ................................................... 74 Figure 14.11 – Plan View of the Interpolated Grade (-40m from the Surface) ........................................................... 75 Figure 14.12 – Vertical Section 1100 NE of the Categories Looking N40E ............................................................... 77 Figure 14.13 – Plan View of the Categories (at the Surface)....................................................................................... 78 Figure 16.1 – Mine General Layout............................................................................................................................. 83

MASON GRAPHITE Lac Guéret Graphite Project – PEA NI 43-101 Technical Report Page v

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Figure 16.2 – Pit Optimization Results ........................................................................................................................ 86 Figure 16.3 – Pit Wall Configuration .......................................................................................................................... 87 Figure 16.4 – Lac Guéret Pit Design ........................................................................................................................... 89 Figure 17.1 – Water Balance ....................................................................................................................................... 98 Figure 17.2 – Simplified Flow Sheet of Crushing and Processing Plant ..................................................................... 99 Figure 18.1 – General Site Layout ............................................................................................................................. 105 Figure 18.2 – Selected Tailings Storage Facility ....................................................................................................... 108 Figure 22.1 – Cash Flow Statement ........................................................................................................................... 135 Figure 22.2 – Before-Tax NPV8%: Sensitivity to Capital Expenditure, Operating Cost and Price ........................... 137 Figure 22.3 – Before-Tax NPV10%: Sensitivity to Capital Expenditure, Operating Cost and Price ........................... 138 Figure 22.4 – Before-Tax IRR: Sensitivity to Capital Expenditure, Operating Cost and Price ................................. 138 Figure 22.5 – After-Tax NPV8%: Sensitivity to Capital Expenditure, Operating Cost and Price .............................. 139 Figure 22.6 – After-Tax NPV10%: Sensitivity to Capital Expenditure, Operating Cost and Price ............................. 140 Figure 22.7 – After-Tax IRR: Sensitivity to Capital Expenditure, Operating Cost and Price ................................... 140 Figure 23.1 – Adjacent Claims to Lac Guéret Property ............................................................................................. 142

MASON GRAPHITE Lac Guéret Graphite Project – PEA NI 43-101 Technical Report Page 1

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1.0 EXECUTIVE SUMMARY

1.1 Introduction

This NI 43-101 Technical Report (Report) on the Lac Guéret Graphite Project has been

prepared at the request of Mason Graphite (Mason), a Montreal based company, to

present the Preliminary Economic Assessment (PEA) major findings. The PEA is based

on the Mineral Resources prepared by Roche Ltd. in July 2012. The effective date of the

Technical Report is April 22, 2013.

The Lac Guéret property is located approximately 300 km North of Baie-Comeau,

Quebec. Main access to Lac Guéret is from the paved all-weather Road 389 from Baie-

Comeau. The property is about 95 km on a main-haul gravel road, located about 200 km

North of Baie-Comeau.

Met-Chem was requested by Mason to provide a PEA Study for the exploitation of the

Lac Guéret graphite deposit. Met-Chem was to provide leadership for the mining, process

design, tailings, infrastructure, compilation of capital and operating cost estimates at a

confidence level of ± 35%, economic analysis and report preparation integrating

metallurgical testing for which information was provided by other consultants. The PEA

Report is intended to demonstrate the potential viability of the Project at a production rate

of about 50,000 tonnes per year of graphite concentrate in order to justify proceeding

with other phases of project development.

Process flowsheets were developed from a recent metallurgical testing program

performed by SGS Minerals Services. The capital cost and the operating cost estimates

have been developed for a 500 tonnes per day milling rate based on the 50,000 tonnes of

graphite concentrate per year target.

1.2 Geology and Exploration

The Lac Guéret Property is located in the Côte-Nord-Nouveau-Québec region in

northeastern Québec on the southwestern shore of the Manicouagan Reservoir. It is

centered at 51°07’N and 69°05’W. The property is named Lac Guéret, located in the

south-central part of the group. No other named topographic features on NTS topographic

sheet 22N/03 (1:50,000 scale) occurs on the property. It consists of 215 CDC claims

covering 11,630.34 hectares, all of which are 100% in the interest of Mason Graphite

with the claims in good standing until 17 July 2013. Previous option and joint venture

agreements have been successfully completed. No mineral royalty, net smelter return, or

any other residual interests are recorded.

1.3 Issuer’s Interest

Mason and Quinto entered a purchase agreement whereby the Issuer acquired a 100%

interest in the Lac Guéret Property. The total purchase price for the acquisition was

US$15,000,000 in cash, payable in instalments based on the achievement of certain

milestones over a five year period and the issuance of 2,041,571 warrants to Quinto, each


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warrant being exercisable for Mason Shares at an exercise price of CAD $0.75 until

April 5, 2014. An aggregate of $7,500,000 was paid on closing, with US$2,500,000 due

following the completion of a feasibility study and US$5,000,000 due on achievement of

commercial production (as defined below). If the feasibility study is not completed by

April 5, 2015, Mason Graphite is required to pay (a) US$1,250,000 on April 5, 2015, and

(b) US$1,250,000 on the earlier of (i) the fifth business day following the day on which a

feasibility study is completed; and (ii) October 5, 2015. If commercial production is not

achieved by October 5, 2016, Mason Graphite is required to pay (a) US$2,500,000 on

October 5, 2016; and (b) US$2,500,000 on the earlier of (i) the fifth business day

following the day on which commercial production is achieved; and (ii) April 5, 2017.

“Commercial Production” means the first 10,000 metric tonnes of graphite that has been

mined, sold and shipped from the Lac Guéret Property.

1.4 Accessibility

Access is by the all-weather Highway 389, 211 km north of Baie-Comeau, Québec, to the

logging road turnoff at the Manic-5 camp. Good gravel logging roads lead another 76 km

northwest to the property. An old main logging road crosses the graphite zones under

review.

1.5 Climate

The climate is typical boreal forest, with summer temperatures 15-30°C and winter to -

50°C. The spring and autumn are short with changeable weather. Precipitation occurs as

rain in the summer and snow in the winter, while spring and autumn are often mixtures of

both.

1.6 Local Resources and Infrastructure

The property is located 300 kilometres by road north-northwest of Baie-Comeau,

Québec, the nearest major population and service centre. The northeast corner of the

claim block lies on the southwestern shore of the Manicouagan Reservoir, commonly

known as the Manic 5 dam, owned by Hydro Québec. The hydroelectric dam is about

85 km southeast of the centre of the property.

Logging operations created access into the area. The main logging roads, designed for

100-tonne logging haul trucks; give good access throughout the claims. Logging ceased

in 2006 and the roads have not been maintained but remain in good condition overall as

of May 2012.

1.7 History

Historical work consists of exploration for iron in the late 1950s by Québec Cartier Mines

Ltd. Quinto Mining Corp. has conducted exploration programs since 2002 focusing on

the zones under review. No resource estimation has been published on either the graphite

deposit(s) or on the iron deposits. Quinto has explored only on the graphite stratigraphy,

since the iron deposits are appear to be too small to be economic in this region.


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Following several exploration campaigns, Quinto conducted a drill program on the

northeast part of the GC Graphite Zone to define a tonnage and grade of the graphite in

order to continue studies towards initiating an open pit mine. Twenty-four (24) NQ

drillholes totalling 2,149 metres were drilled at 50-m spacing on a grid 250 x 250 metres

The grid was superimposed on four existing trenches (2004); an existing drillhole, LG07

(2003), was also used. All drilling was done for Quinto.

The 2006 drill program included 24 inclined NQ holes totalling 2,146 m of core; one hole

from 2003 located in the centre of the grid, was also used for this study. The sites were

located along four established trenches which ahs channel samples cut in 2004. Casing

was pulled and the sites marked with wooden 1 x 2”stakes with the hole number

inscribed on aluminum tags stapled to the stakes. Ed Lyons observed eight of these sites

on his visit in May 2012. After the 2006 program, the core from the 2003 and 2006

programs was moved into a locked warehouse near Baie-Comeau, Québec, Ed Lyons

logged the 2006 core in the storage warehouse in 2007. Sample rejects and pulps are

stored at the PRA warehouse in Richmond, BC.

In the 2006 program, the typical core handling procedures were followed. The drill core

was logged on site, and sampled at intervals from 3.0-m maximum to 0.5-m, with the

average sample length of 2.35- m. Of the 2,284 m of core used for this study, 908

samples representing 2,135 m or 93.5% of the total core drilled was sampled. Samples

were saw-cut, bagged in plastic bags with numbered tags then packed into 20-L plastic

pails with secured closures. No blanks or standards were added in the field. The pails

were sent in four shipments by truck from Baie-Comeau, Québec to Process Research

Associates (PRA) in Richmond, BC for preparation and analysis by IPL Labs of

Richmond, BC. Samples from the 2003, 2004, and 2006 exploration programs were all

analysed at PRA.

Samples were received, logged in per the routine method at PRA, weighed and dried in a

specially made low-temperature oven to reduce potential volatilisation of carbon in the

samples. They were crushed and prepared for analysis using the standard LECO furnace

method. For graphite samples over 35%, PRA developed an alternative test technique A

check on the values of high-grade (>35% Cgr) was tested on all 2006 samples using a

differential loss on ignition (DLOI) method to compare with the standard LECO

techniques. They concluded that the LECO method at high concentrations tended to

overstate the % Cgr values somewhat. All the high-grade graphite samples used in the

resource model, except those in DDH LG-07, were analysed by the DLOI method.

Sulphur analyses were done on 124 samples using the standard LECO furnace method.

Standards were used by PRA as blind check samples in the sample stream sent to IPL. In

2004 samples were (in % Cgr with + precision): 12.96% (+0.59%), 15.64% (+0.44%),

19.62% (+0.57%), 32.36 % (+0.86%), and 89.44% (+1.90%). In 2006, a new standard,

Composite-3, was prepared by the lab from samples selected by Michel Robert for the

trenches TR27, TR62, TR67, and TR68 in the drill grid. The purpose was to add a mid-


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range reference material. PRA conducted round-robin assays by IPL, ACME labs

(Vancouver, BC) and COREM (QC). The value was 24.1% Cgr.

In Lyons’ opinion, the field handling, sampling and analytical procedures were properly

followed to industry standard practice.

1.8 Geology

The regional geology includes the most southwesterly of several elongate anticlinoria of

Gagnon Group metasediments that include the traditional iron formation stratigraphy of

the Wabush-Mont- Reed iron district. These units are metamorphosed equivalents of the

Labrador Trough (New Québec Orogen) sediments that occur around Schefferville,

Québec and north. The Southwest Manicouagan Anticlinorium shows a core of Denault

Fm dolomitic marble which lies beneath the Sokoman iron formation level on a platform

of Katsao Fm pelitic metasediments. Quartz-rich non/low oxide, iron-oxide, and iron-

silicate facies of the Sokoman Fm form infolded synclines and anticlines. The Sokoman

Fm quartzite non-oxide facies overlies the iron oxide-bearing facies. The upper portion

has a diachronous, transitional contact with the overlying Menihek pelitic sediments. The

basal part of the Menihek Formation unit, also called the “Upper Gneiss” by Clarke

(1977), forms the informal member, here named Lac Guéret Member of the Menihek Fm.

Both the Katsao and Menihek Fm gneisses have significant potassium feldspar, whereas

the paragneiss and schist of the Gagnon Group are deficient in K₂O.

Graphitic metasediments are concentrated in the Lac Guéret Member above and

separated from the Sokoman Fm iron deposits. Graphite also occurs in minor amounts in

the adjoining formations near the contact, but most of the potentially economical graphite

lies within the Member. This relationship is common in the district with examples at Lac

Knife (QC) and Kami iron deposit (Labrador City, NL). Graphite formed as beds within

clastic sedimentary basinal deposition under anoxic conditions that preserved the organic

carbon and precipitated primary sulphides, mainly pyrrhotite intimately intermixed with

the graphite. Sulphides are limited to this depositional regime and do not occur in the host

rocks outside of the deposits. Upper amphibolite (kyanite facies) metamorphism affected

all the rocks.

The conformation of the formations, including the graphite and iron oxide deposits, was

modified by upward of five periods of Grenville-related deformations. The second and

third events most strongly control the placement of the deposits into belts aligned

northeast and dipping moderately to steeply southeast. Gentle cross-folding created

interference fold patterns that affected the foliation dips. The deposits are essentially

foliation-parallel. Late extension caused local recrystallisation of host rocks, but with no

significant remobilisation of minerals. At this time, pyrite was formed from some of the

original pyrrhotite.


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1.9 Mineralisation

Graphite occurs as lenses and beds up to 2000 m long and 10-80m thick deposited in the

original sedimentary rocks at the start of basinal deposition at ~1.75 billion years (Ga),

based on age-dating (Clark and Wares 2004). They have been folded and metamorphosed

during the Grenville Orogeny ~1.12 Ga. Graphite grades range from minor to 53.50%

Cgr (carbon-as-graphite). Carbonate was not observed in the gangue. Two general types

of graphite were observed. In samples grading below ~25% Cgr, the flakes are discrete

medium to coarse groups and crystals to 3-mm in crystalline quartz-rich feldspar-biotite

gneiss (QFB_GN) matrix. It is not known if the flakes show a consistent size range

relative to the Cgr grade. These were called Units 1 and 2 in the resource estimation

below. Above ~25% Cgr, the graphite changes its character to include a significant

portion of very fine-grained graphite that appears to not have recrystallised during the

high metamorphism. This has been described in several deposits and arises from an

abundance of potential recrystallisation centres with diffuse attraction gradients

(Marshall, et al., 2000). This unit, called Unit 3 in the estimation, often shows a distinct

crush or cataclastic breccia texture where large clasts of fine-grained graphite schist up to

35-cm long have their foliations rotated. The “matrix” is very coarsely recrystallised pure

graphite flake-books to 8-mm long growing more or less perpendicular from the clast

margins. The economic potential of this unit is likely the extraction of the “matrix”

graphite. The origin of the breccia, which is only found in this high-graphite rock, is

likely the rheological weakness of the unit due to graphite that permits early ductile

failure during deformation. It forms a distinctive steep axial plunge atypical of the

deformations in the other rocks.

1.10 Mineral Processing and Metallurgical Testing

The purpose of the test work program was to characterise the Lac Guéret deposit and to

produce a flow sheet that would allow for the production of saleable graphite concentrate

with a graphite grade greater than 96% carbon while maximising graphite recovery and

graphite flake size.

To develop the optimal flow sheet, several grinding, flotation and polishing tests were

performed at the SGS Mineral Services facility in Lakefield, Ontario. Overall, the test

program was successful in terms of demonstrating that a good product can be made from

Lac Guéret graphite mineralisation.

The mineralogical characterisation conducted at SGS confirmed that the graphite

occurred as crystalline and flaky graphite. Graphite flakes ranged in size from 50 microns

to 1 mm, with an average particle size of 300 microns.

Lac Guéret mineralisation does not require complex treatment for successful

beneficiation. Graphite mineralisation is upgraded by flotation and polishing grinding.

The scouring action during polishing grinding ensures that the final concentrate grade is

maximised.


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A conceptual flow sheet capable of producing a graphite concentrate meeting the graphite

markets’ requirements was developed.

Table 1.1 lists lock-cycle test (LCT) #2 results sorted into final product categories.

Table 1.1 – Preliminary Test Work Results (LCT#2)

Concentrate Particle Size Weight

%

Assay

% C(t)

Distribution

% C(t)

Plus 50 mesh (+300 micron) 18.6 96.9 19.0

Plus 80 mesh (+180 micron) 14.1 96.2 14.4

Plus 150 mesh (+105 micron) 13.1 96.2 13.3

Minus 150 mesh (–105 micron) 54.2 91.7 53.3

Total Concentrate 100.0 93.7 100.0 Source: SGS Project 13838-001, Final Report – May 21, 2013 – Table was modified by recalculation.

The test work sample was of lower grade than the actual mineral deposit. The test work

indicated a progressive improvement in the results and the test work results are therefore

considered reproducible.

1.11 Mineral Resource Estimates

The Mineral Resource estimation for the NE GC Zone graphite drill grid on the Lac

Guéret Property is summarised in the table below with a 4% cut-off. The geological

interpretation and model included eight units (four units with two subdivisions): Unit 1 is

defined by % Cgr between 4-10%; Unit 2 has 10-27% Cgr, while Unit 3 contains 27%

Cgr or more. Waste has less than 4% Cgr. The calculated amount of sulphides below and

above 20% nominal total sulphides (pyrrhotite + pyrite) formed the two subdivisions to

account for density differences. The units sensibly interlayer, and since there may be

metallurgical difference among them, it seemed prudent to carry the complexity through

the model. The reported units are the weighted averages of the low- and high-sulphide

units. Hence, Unit 1 includes Units 1a and 1 b, etc.

Table 1.2 – Mineral Resource Estimate (4% Cgr Cut-Off)

Resource Estimate (4% Cgr cut-off)

Categories Unit Tonnes Grade

(% Cgr)

Measured (M)

Unit 1 (4 to 10% Cgr) 31,200 7.82

Unit 2 (10 to 27% Cgr) 122,800 14.85

Unit 3 ( > 27 % Cgr) 144,900 36.72

All units 298,900 24.39

Indicated (I)

Unit 1 (4 to 10% Cgr) 2,672,500 8.09

Unit 2 (10 to 27% Cgr) 2,089,200 16.83

Unit 3 ( > 27 % Cgr) 2,535,300 36.20


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(% Cgr)

All units 7,297,000 20.24

M + I

Unit 1 (4 to 10% Cgr) 2,703,700 8.67

Unit 2 (10 to 27% Cgr) 2,212,000 18.30

Unit 3 ( > 27 % Cgr) 2,680,200 36.96

All units 7,595,900 20.40

Inferred

Unit 1 (4 to 10% Cgr) 1,272,600 7.56

Unit 2 (10 to 27% Cgr) 714,200 17.54

Unit 3 ( > 27 % Cgr) 771,500 33.10

All units 2,758,300 17.29

Notes:

- Effective as of June 22, 2012. - Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

- Numbers may not add up due to rounding.

1.12 Mineral Reserve Estimates

No mineral reserve estimates can be produced based on a Preliminary Economic

Assessment.

1.13 Mining Methods

Met-Chem evaluated the potential for an open pit mine at Lac Guéret to produce

50,000 tonnes of graphite concentrate per year. The Mineral Resources used for the PEA

are based on the July 3, 2012 “NI 43-101 Report, Technical Report on the Lac Guéret

Graphite Project” completed by Roche Ltd.

Since this study is at a PEA level, NI 43-101 guidelines allow inferred mineral resources

to be used in the optimization and mine plan.

The mining method selected for the Project is a conventional open pit drill and blast

operation with articulated haul trucks and wheel loaders. Vegetation, topsoil and

overburden will be stripped and stockpiled for future reclamation use. The mineralization

and waste rock will then be drilled, blasted and loaded into articulated haul trucks with

front end wheel loaders. The mineralized material will be hauled roughly 1.4 km to the

primary crusher and the waste rock will be hauled to the waste rock dump.

The mine will operate year round, four (4) days per week, ten (10) hours per day. Since

the mill will operate seven (7) days per week, a run of mine stockpile will be maintained

to provide a constant supply of feed to the crusher. During the three (3) days when the

mine is not operating, the crusher will be fed by one of the mine’s front end loaders from

the stockpile.


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The pit that has been designed for the Lac Guéret deposit is approximately 400 m long

and 220 m wide at surface with a maximum pit depth of 100 m. The pit includes 3,871 kt

of Mineral Resources with an average Cgr grade of 27.4% and has a strip ratio of 0.8:1

with 328 kt of overburden and 2,619 kt of waste rock. The proportion of Inferred Mineral

Resources that are contained within this pit shell is 13%. The remaining Mineral

Resources that were not included in the pit design for the 22 year mine life has an

average Cgr grade of 15.3%. These resources can be mined at a strip ratio of 1.8:1.

A production schedule (mine plan) was developed for the Project to produce

50,000 tonnes of graphite concentrate per year. Using the mill recovery of 96.6% and a

targeted concentrate grade of 93.7% results in an average run of mine feed of 176,000

tonnes per year at an average Cgr of 27.4%.

The fleet of equipment will include two (2) articulated haul trucks (28.1 tonne payload),

two (2) wheel loaders (7.8 tonne bucket), one (1) drill, one (1) track dozer, one (1) road

grader and one (1) boom truck.

1.14 Recovery Methods

The graphite concentrate will be recovered by a flotation process. The combination of

primary coarse and rougher flotation followed by cleaner column flotation will recover

96.6% of the graphite at an average graphite grade of 93.7% carbon.

The processing area can be divided into crushing, grinding, beneficiation, dewatering,

product screening and packaging, and tailings disposal. The concentrator is designed to

produce 50,000 dry tonnes per year of saleable graphite concentrate in four (4) basic size

classes, +50 mesh (300 microns), –50+80 mesh (180 microns), +150 mesh (105 microns)

and –150 mesh. It is expected that other size classes will be available as needed once the

plant is operating.

1.15 Infrastructure

Mining equipment, tailings storage facility, as well as infrastructure and services have

been added to complete the investment cost of the project.

Lac Guéret Project is located about 90 km from the closest Hydro-Québec infrastructure.

Power will be supplied by five (5) Diesel Generators: the total power requirement is

estimated at 4 MW.

A tailings storage facility, located about 3 km from the plant, was designed to contain a

22 year operation. The scheme of operation proposes the transfer of free water from the

tailings pond to a polishing pond to allow for sedimentation of fine particles and other

minerals. Water will be then transferred from the polishing pond to the plant to be used in

processing.

Provision has been made for ancillary buildings and facilities such as maintenance garage

and storage, office complex, change house and canteen and permanent camp.


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1.16 Market Studies and Contracts

An independent market study is expected to be carried out as the project will proceed to

Feasibility Studies. However, no independent analysis of the market for graphite

concentrate or price survey have been conducted to date for the Lac Guéret Graphite

Project. Similarly, no sales contract has been secured at this early stage of the project.

A 24-month average has been developed based on the last two (2) years minimum,

maximum and average prices for coarse, medium and fine crystalline graphite as

published by Industrial Minerals. After reaching a record high for the most part of 2011

and 2012, graphite prices have been decreasing in recent months. An average price

developed on this basis for the economic analysis is given in Table 1.3 for Lac Guéret

graphite concentrate.

Table 1.3 – Graphite Price

Product Classification Proportion (%) Average Grade (%Cgr) Price (CAD/t)

+50 mesh 18.4% 96.30% 2,200

-50 mesh +80 mesh 12.2% 96.40% 2,000

-80 mesh +150 mesh 14.3% 95.60% 1,500

-150 mesh 55.1% 91.70% 1,200

Average 100% 93.70% 1,525

1.17 Environmental Studies, Permitting, Social or Community Impacts

Environmental baseline studies have been carried out in summer 2012. The following

environmental components have been characterized/described: climatology, soil quality,

surface water quality, sediment quality, groundwater quality, vegetation and wetlands,

fish and fish habitats, herpetofauna, archaelogical potential, social and economic aspects.

Large and small mammal surveys have been carried out in winter 2013 and avifauna

surveys will be carried out in spring and summer 2013.

Surface waters were neutral to weakly acidic and showed low hardness and very low

concentrations for most metals. Groundwater were weakly acidic with moderate hardness

and low conductivity and metals concentrations.

The flora is dominated by evergreen forests (93 %, including 71 % of balsam fir with

black spruce forest type). Important forest fire in 1996 and important forest harvesting

between 2000 and 2004 have resulted in regeneration forests in 67 % of the study area.

No rare or endangered species were observed. The large mammal species present in the

study area are the Black bear, the Moose and the Woodland caribou. The habitats present

in the property are of low potential for caribou but caribou groups are located nearby and

mitigation and follow-up measures for this protected species should be put in place.

Four lakes and 13 streams were characterized for fishes and fish habitats potential. A

total of 468 fishes were caught from four species: Brook trout, Pearl dace, White sucker


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and Longnose sucker. All lakes and ten streams showed fish habitats potential. No rare or

endangered species were caught.

Preliminary archeological study has identified 25 potential archaeological sites based on

availability of chert and quartzite as well as land use of the territory by the Innus.

An environmental characterization (acid generation potential and metal leaching

potential) of mineralization, waste (and if possible tailings) will be carried out in summer

2013.

According to Section 2 of the Regulation respecting environmental impact assessment

and review, the construction of a graphite processing plant with processing capacity of

500 metric tons or more per day is subjected to the environmental impact assessment and

review procedure (BAPE procedure). The average processing rate is 176,000 t/y or

482 t/d. Throughout the mine life there will be days when the processing rate exceeds

500 t/d because of the variation of the feed grade. As a result of this production rate, an

application for an ESIA and review procedure is required. However, if the mine plan is

maintained below 500 t/d during the subsequent Feasibility Study, only an application for

a certificate of authorization under Section 22 of the Environment Quality Act (EQA)

would be necessary.

At the federal level, the Regulations Designating Physical Activities prescribe the

physical activities that constitute a “designated project” which may require an

environmental assessment under the Canadian Environmental Assessment Act (CEAA).

The threshold is 1,500 t/d for a graphite mine. However, if it was determined that it is

required to pump more than 200,000 m³/y of groundwater for keeping dry the open pit

and for freshwater needs at the processing plant, the CEAA process would be triggered

The Regulations modifying the Regulations Designating Physical Activities was issued

on April 20th

, 2013. Among modifications are exclusions of groundwater extraction

activities and industrial mineral mines, including graphite. Consequently, and considering

that the adoption of those amendments is much likely to be done rapidly, it is highly

probable that the CEAA 2012 process would not be triggered and that therefore no

federal permitting would be required other than an Authorization to Alter Fish Habitat

under Section 35 of the Fisheries Act.

The Project is located on the traditional territory of the Innu Nation. The Lac Guéret

project is located on the ancestral territory of the Nitassinan of Pessamit. On their

traditional territory (Nitassinan), the Innu claim Uashaunnuat Indian title: aboriginal and

treaty rights to the land and all its natural resources.

Important negotiations involving both the federal and provincial governments are

currently underway with some of the Innu communities of Quebec, which follows the

signature of an Agreement-In-Principle (AIP), which was entered into March 31, 2004.

At this time, the Innu of Pessamit (west of Baie-Comeau), Uashat mak Mani-Utenam

(Sept-Îles) and Matimekush-Lac John (near Schefferville) are not part of any agreement,


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as they intend to settle their own land claims directly with both levels of government. The

communities of Uashat mak Mani-Utenam and Matimekosh-Lac-John are part of the

Ashuanipi Corporation, which has represented them in the comprehensive territorial

negotiations since 2006.

Furthermore, in 2008, Ekuanitshit, Matimekush-Lac John, Pessamit, Uashat mak Mani-

Utenam and Unamen Shipu founded the Alliance stratégique Innue (Innu Strategic

Alliance), which consists of an Innu population of approximately 12,000 and represents

70% of the total members of the Innu Nation living in Quebec. The mandate of the

alliance is to enable the parties to defend their rights, common interests, and to conduct

joint initiatives to achieve political, economic and judicial results in a cooperative

manner.

Mason Graphite will have to conduct consulting session, directly with the local Innu First

Nation to establish sustainable relationships with all local and regional stakeholders. On

April 18, 2012, Mason received consent from the Pessamit Innu First Nation to proceed

with the exploration program. This is a complex process governed by existing treaty and

non-treaty rights. A large step to the project’s success depends on thoughtful engagement.

This will lead to an Impact Benefits Agreement.

1.18 Capital and Operating Costs

1.18.1 Capital Cost

The capital cost estimate of Mason’s Lac Guéret graphite project is based on Met-Chem’s

standard methods applicable for a Preliminary Economic Assessment study to achieve the

accuracy level of ± 35%.

The initial capital cost for the scope of work is estimated as $ 129.7 M including

$ 89.9 M for direct costs, $ 21.8 M for indirect costs and $ 18 M for contingency (all

monetary figures in CAD). The total life of mine capital cost is estimated at $140.5 M of

which $129.7 M is initial capital and $10.8 M is sustaining capital. The sustaining capital

cost covers for closure and rehabilitation of the site and replacement of mine fleet

equipment as well as costs related to the construction of the tailings storage facility and

waste rock stockpiling area to their final design. The capital cost is summarized in Table

1.4.

Table 1.4 – Summary of Life of Mine Costs Estimate (50,000 tpy Concentrate)

Item Description

Initial Capital

(Total Rounded)

($)

Sustaining Capital

(Total Rounded)

($)

Total Capital

(Total Rounded)

($)

Direct Cost

Open Pit Mine 8,026,000 1,819,000 9,854,000

Process 55,264,000 55,264,000

Tailings and Water Management 4,271,000 4,463,000


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Item Description

Initial Capital

(Total Rounded)

($)

Sustaining Capital

(Total Rounded)

($)

Total Capital

(Total Rounded)

($)

Infrastructure Mine Site 16,478,000 16,478,000

Power and Communication 5,300,000 5,300,000

Service Vehicles 595,000 595,000

Total Direct Cost 89,935,000 96,216,000

Indirect Costs 21,768,000 21,768,000

Closure and Rehabilitation 4,493,000 4,493,000

Contingency 17,987,000 17,987,000

Total Capital Cost 129,689,000 10,775,000 140,464,000

1.18.2 Operating Cost

Operating costs have been developed for Mining, Processing, Tailings Management, Site

Services and Administration.

The life of mine average operating cost estimate is evaluated at 390 $/tonne of

concentrate (see Table 1.5 for a summary of average operating cost estimate).

Table 1.5 – Summary of Life of Mine Average Operating Cost Estimate

Area Average Operating Cost

($/tonne of concentrate)

Mining 35.74

Processing 221.21

Tailings Management Included in Processing Costs

Plant Administration, Infrastructure & Tech. Serv. 132.66

Total Average Operating Costs 389.61

Table 1.6 presents the estimated personnel requirements for the Project. This workforce

level accounts for duplication of staff employees on rotation.

Table 1.6 – Total Personnel Requirement

Area Number

Mine 11

Processing 52

Management, Administration and Technical

Services 17

Total Manpower 80


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1.19 Economic Analysis

The financial results indicate positive before-tax Net Present Values (NPV) of

CAD 363.7 M and CAD 282.6 M at discount rates of 8 % and 10 % per year,

respectively. The before-tax Internal Rate of Return (IRR) is 33.7 % and the payback

period is 2.5 years.

The after-tax Net Present Values are CAD 217.4 M and CAD 165.4 M at discount rates

of 8% and 10% respectively. The after-tax Internal Rate of Return is 27.0% and the

payback period is 2.8 years. The main macro-economic assumptions used are given in

Table 1.7.

Table 1.7 – Macro-Economic Assumptions

Item Unit Base Case Value

Average Graphite Concentrate Price CAD/tonne 1525

Exchange Rate CAD/USD 1.00

Life of Mine years 22

Discount Rate 1 % per year 8.0%


The main technical assumptions used in the economic analysis are given in Table 1.8.

Table 1.8 – Technical Assumptions

Total Mineral Resources Mined (Life Of Mine) M tonnes 3.87

Average Mineral Resources Mined per Year tonnes per year 176,000

Processing Design Rate tonnes/day 500

Average ROM Grade to Mill % Cgr 27.4

Average Concentrate Grade % Cgr 93.7

Average Process Recovery over Mine Life % 96.6

Average Tonnes of Concentrate Produced per year tonnes per year 50,000

Total Tonnes of Concentrate Produced over Mine Life M tonnes 1.09

Average Mining Operating Cost ($ / tonne mined) 6.00

Average Mining Operating Cost ($ / tonne concentrate) 35.74

Average Process Operating Cost ($ / tonne milled) 62.59

Average Process Operating Cost ($ / tonne concentrate) 221.21

Average General & Administration Cost ($ / tonne concentrate) 132.66

1.20 Important Caution Regarding the Economic Analysis

The economic analysis contained in this report is preliminary in nature. It incorporates

inferred mineral resources that are considered too geologically speculative to have the

economic considerations applied to them that would enable them to be categorized as

mineral reserves. It should not be considered a prefeasibility or feasibility study. There


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can be no certainty that the estimates contained in this report will be realized. In addition,

mineral resources that are not mineral reserves do not have demonstrated economic

viability.

The results of the economic analysis are forward-looking information that is subject to a

number of known and unknown risks, uncertainties and other factors that may cause

actual results to differ materially from those presented here.

1.21 Conclusions and Recommendations

Considering the positive results of the PEA, Met-Chem recommends that the project

continues to the next phase of development, the Feasibility Study.

Met-Chem recommends a series of additional studies and tests to advance to the next

phase and minimize risks. The main recommendations include:

• Obtain detailed topography contour to improve design and location of infrastructure

and tailings storage facility and in order to reach Feasibility Study level of cost

estimate.

• Perform rock mechanics as well as hydrogeological studies to further confirm rock

slopes, rock permeability, ground and underground water flows and water balance

in order to validate the open pit mining technical parameters.

• Complete metallurgical testing to bring the project to a Feasibility Study level. The

next phase will include pilot plant test work to verify the robustness of the flow

sheet. The optimization of the graphite flakes sizes recovery will also be looked

into. Settling and filtration testing will be done on pilot plant concentrate. The

sulphide removal from mill tailings will be looked into again.

• Perform geotechnical field work for the Feasibility Study to confirm assumptions

used for the tailings storage facility design and waste piles in this PEA report. A

series of boreholes and test pits will be required for determination of soil and

bedrock horizons and mechanical properties beneath the tailings pond dykes to

permit study of the short and long term stability of the dykes and permeability of

underlying soils and rocks as well as determine the soil types and their permeability

below the deposited tailings. All test pits and boreholes shall be surveyed for

northing, easting and ground elevation. Standpipes or piezometers shall be installed

to record the ground water table in the proposed tailings pond area.

• Perform laboratory analysis of the samples retrieved in tailings storage area such as

grain size analysis, water content and soil identification according to the Unified

Soil Classification System (USCS). If soil samples are cohesive (clay) additional

testing shall include Atterberg limits and consolidation tests. Unconfined

compression tests shall be done on selected bedrock cores.

• Perform field investigation to locate borrow banks for suitable materials for

construction of the various dykes, pads and roads as well as concrete aggregates


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during the Feasibility Study to determine quantities available and distance from the

various facilities.

• Perform condemnation drilling for Lac Guéret mine site and infrastructure location

such as the tailings storage facility, waste rock stockpile, primary crusher, process

plant, buildings, etc.

• Carry out soil geotechnics fieldwork and testing in order to provide foundations

design parameters as the project will advance to feasibility studies.

• Carry out thorough environmental characterisation of overburden, run of mine,

waste rock material as per Guideline 019;

• Carry out testing of the tailings and waste rock lithology for geochemical properties

such as ABA (acid base accounting), humidity cell or kinetic tests (coarse and fine

fractions), fresh and aged supernatant analysis (coarse and fine fractions) and

physical/mechanical properties such as size distribution, specific gravity, Atterberg

limits, proctor maximum dry density and optimum water content, maximum density

by vibrator and by drying, minimum density, settling, low and overburden stress

consolidation settlement.

• Conduct consulting sessions with local Innu First Nation.

• Carry out a detailed market study on the graphite product situation by a specialized

firm as the project advances to Feasibility Study. With this market study, the

analysis of the future price trend of graphite concentrate should be addressed.

The estimated cost for the next study phase has been estimated and is provided in Table

1.9.

Table 1.9 – Estimated Cost for Next Study Phase

Study Phase Cost Estimate

($ M)

Additional Geological Work 1.2

Feasibility Study 2.0

Metallurgical Testwork 1.0

Other Site Studies 0.8

Environmental Studies 1.0

Total 6.0


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2.0 INTRODUCTION

Mason Graphite (Mason) is a Montreal based company contemplating a project for the

construction, installation and operation of a graphite processing facility (the Lac Guéret

Graphite Project) to be located approximately 300 km North of Baie-Comeau, Quebec

(the Project).

Mason has recently received (July 2012), the Mineral Resources Technical Report on the

Lac Guéret Project prepared by Roche Ltd. Consulting Group (Roche Ltd). The report

reviewed the work completed by Mason to date and recommended further actions by

Mason to take the project to the Preliminary Economic Assessment stage.

This NI 43-101 Technical Report (Report) on the Lac Guéret Project has been prepared at

the request of Mason to present the Preliminary Economic Assessment (PEA) major

findings. The PEA is based on the Mineral Resources (effective date June 22nd

, 2012) as

issued by Roche Ltd in the July 3rd

, 2012 Technical Report.

The PEA Report was prepared by Met-Chem and was completed May 31, 2013.

The effective date of the Technical Report is April 22nd

, 2013.

2.1 Terms of Reference – Scope of Work

Met-Chem was requested by Mason to provide a PEA Study for the exploitation of the

Lac Guéret graphite deposit. Met-Chem was to provide leadership for the mining, process

design, tailings, infrastructure, compilation of capital and operating cost estimates at a

confidence level of ± 35%, economic analysis and report preparation integrating

metallurgical testing for which information was provided by other consultants.

Process flowsheets were developed from a recent metallurgical testing program

performed by SGS Minerals Services. The capital cost and the operating cost estimates

have been developed for a 500 tonnes per day milling rate.

The PEA Report is intended to demonstrate the potential viability of the Project at a

production rate of about 50,000 tonnes per year of graphite concentrate in order to justify

proceeding with other phases of project development.

Services from specialized firms were retained in the execution of the scope of work.

Table 2.1 provides a list of qualified persons and their respective sections of

responsibility. The certificates for people listed as Qualified Persons can be found at the

beginning of the Report under Date and Signature – Certificates.


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Table 2.1 – Qualified Persons and their Respective Sections of Responsibility

Section Title of Section Qualified Person (QP)

1.0 Summary Met-Chem – Mary Jean Buchanan

2.0 Introduction Met-Chem - Mary Jean Buchanan

3.0 Reliance on Other Experts Met-Chem - Mary Jean Buchanan

4.0 Property Description and Location Tekhne Research - Edward Lyons

Roche Ltd. – Guy Saucier

5.0 Accessibility, Climate, Local Resources,

Infrastructure and Physiography

Tekhne Research - Edward Lyons


6.0 History Tekhne Research - Edward Lyons


7.0 Geological Setting and Mineralization Tekhne Research - Edward Lyons


8.0 Deposit Types Tekhne Research - Edward Lyons


9.0 Exploration Tekhne Research - Edward Lyons


10.0 Drilling Tekhne Research - Edward Lyons


11.0 Sample Preparation, Analyses and Security Tekhne Research - Edward Lyons


12.0 Data Verification Tekhne Research - Edward Lyons


13.0 Mineral Processing and Metallurgical Testing Met-Chem - Stephane Rivard

14.0 Mineral Resource Estimates Tekhne Research - Edward Lyons


15.0 Mineral Reserve Estimates LEFT BLANK FOR PEA STUDY

16.0 Mining Methods Met-Chem - Jeffrey Cassoff

17.0 Recovery Methods Met-Chem - Stephane Rivard

18.0 Project Infrastructure (with exception of 18.5) Met-Chem - Mary Jean Buchanan

18.5 Tailings Storage Facility Nicolas Skiadas (Journeaux &Assoc.)

19.0 Market Studies and Contracts Met-Chem - Mary Jean Buchanan

20.0 Environment Studies Permitting and Social or

Community Impact (with the exception of 20.5)

Roche Ltd. – Martin Magnan


20.5 Mine Closure and Rehabilitation Met-Chem - Mary Jean Buchanan

21.0 Capital and Operating Costs Met-Chem – Mary Jean Buchanan

22.0 Economic Analysis Michel L. Bilodeau Consultant Met-Chem

23.0 Adjacent Properties Tekhne Research - Edward Lyons


24.0 Other Relevant Data and Information Met-Chem – Mary Jean Buchanan

25.0 Interpretation and Conclusions Met-Chem – Mary Jean Buchanan

26.0 Recommendations Met-Chem – Mary Jean Buchanan

27.0 References Met-Chem – Mary Jean Buchanan


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In addition to their respective sections, the qualified persons are also responsible for their

portions included in the Summary, the Capital and Operating Costs, the Interpretation and

Conclusions and the Recommendations.

2.2 Source of Information

The information presented in this Technical Report has been derived from Met-Chem’s

Preliminary Economic Assessment report titled: “Preliminary Economic Assessment of

the Lac Guéret Graphite Project, Québec, Canada, May 31st 2013” and excerpts from

Roche Ltd Technical Report titled: “NI 43-101 Report, Technical Report on the Lac

Guéret Project, July 3rd

2012”.

The Technical Report summarizes various studies and fieldwork done by Mason and

Consultants for the development of the Project. The reports are listed in Section 27.

2.3 Site Visit

The following persons have visited the site:

• Edward Lyons, P. Geo, Tekhne Research visited the site for one day on

May 11, 2012 and October 27, 2012.

• Yves A. Buro, Eng., Met-Chem visited the site on August 6, and 7, 2012.

2.4 Units and Currency

In this report, all prices and costs are expressed in Canadian Dollars (CAD or $).

Quantities are generally stated in Système International d’Unités (SI) metric units, the

standard Canadian and international practice, including metric tonnes (tonnes, t) for

weight, and kilometer (km) or meters (m) for distance.

2.5 Abbreviations

Abbreviations used in this report are listed in Table 2.2.

Table 2.2 – List of Abbreviations

Description Abbreviation

Acid Rock Drainage ARD

Bureau d’Audience Publique sur l’Environnement BAPE

Canadian dollar CAD or $

Canadian Environmental Assessment Act CEAA

Canadian Environmental Protection Act CEPA

Carbon as graphite Cgr

Certificate of Authorization CofA

Cubic meter m3

Cubic meter per hour m3/h

Environmental Impact Assessment EIA

Environmental Impact Statement EIS


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Engineering Procurement Construction Management EPCM

Environmental Quality Act EQA

Feet ft

General and Administration G & A

Gross Combined Weight GCW

Government of Québec GQ

Gram per liter g/L

Grams g

Grams/tonne or parts per million g/t

Hectare ha

Heating, ventilation, and air conditioning HVAC

Horsepower hp

Kilogram per liter kg/L

Kilograms kg

Kilometers km

Kilotonnes kt

Kilovolt kV

Kilowatt kW

Kilowatt hour per tonne kWh/t

Liter per hour L/h

Low voltage LV

Motor control centre MCC

Medium voltage MV

Megawatt MW

Megawatt hour per day MWh/d

Metal Leaching ML

Metal Mining Effluent Regulation MMER

Meters m

Metric tonnes Tonnes or t

Microns m

Milligram per liter mg/L

Millions of cubic meter Mm3

Millions of metric tonnes Mt

Millions of metric tonnes per year Mtpy

Ministère Développement Durable, Environnement,

Faune et Parcs MDDEFP


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Ministry of Natural Resources and Wildlife MNR

Ministère des ressources naturelles Service du

développement et du milieu miniers MRN

Ministry of Sustainable Development, Environment,

Fauna and Parks MSDEFP

Minus 150 mesh -150 mesh

National Instrument 43-101 NI 43-101

Non Acid Generating NAG

Parts per million, parts per billion ppm, ppb

Preliminary Economic Assessment PEA

Regional County Municipality RCM

Mason Graphite Mason

Run of Mine ROM

Specific gravity s. g.

Square meter m2

Tonnes per cubic meter t/m3

Tonnes per day tpd

Tonnes per hour tph

Tonnes per month tpm

Tonnes per year tpy

US dollar USD or US$

Volt V


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3.0 RELIANCE ON OTHER EXPERTS

This Report has been prepared by Met-Chem for Mason. The information, conclusions,

opinions, and estimates contained herein are based on:

• Information available to Met-Chem at the time of the preparation of this Report

with an effective date of April 22, 2013;

• Assumptions, conditions and qualifications as set forth in this Report; and

• Data, reports, and opinions supplied by Mason and other third party sources.

The Reports supplied and forming the basis of this Technical Report are listed in Section

27.

Met-Chem believes that information supplied to be reliable but does not guarantee the

accuracy of conclusions, opinions, or estimates that rely on third party sources for

information that is outside the area of technical expertise of Met-Chem. As such,

responsibilities for the various components of the Summary, Conclusions and

Recommendations are dependent on the associated sections of the Report from which

those components were developed.

Met-Chem relied on the following reports and opinions for information that is outside the

area of technical expertise of Met-Chem:

• Tailings Storage Facility: Journeaux Assoc., Division of Lab Journeaux Inc.

• 3-Dimensional Geological Block Model (effective date June 22, 2012): Roche Ltd.

• Metallurgical testing: SGS Minerals Services.

• Information on Graphite Concentrate Pricing provided by Mason.

The PEA is preliminary in nature and it includes Inferred Mineral Resources, as allowed

in the NI 43-101 guidelines for such a study, that are considered too speculative

geologically to have the economic considerations applied to them that would enable them

to be categorized as mineral reserves. There is no certainty that the conclusions reached

in the PEA will be realized. Mineral resources that are not mineral reserves do not have

demonstrated economic viability.

This Report is intended to be used by Mason as a Technical Report with Canadian

Securities Regulatory Authorities pursuant to provincial securities legislation. Except for

the purposes contemplated under provincial securities laws, any other use of this Report

by any third party is at the party’s sole risk.

Permission is also given to use portions of this Report to prepare advertising, press

releases and publicity material, provided such advertising, press release and publicity

material does not impose any additional obligations upon, or create liability for, Met-

Chem.


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4.0 PROPERTY DESCRIPTION AND LOCATION

4.1 Property Description

The property covers a total of 11,630.34 hectares in 215 CDC claims on NTS topographic

map sheets 22K14 and 22N03.

4.2 Property Location

The claim group is in the Côte-Nord-Nouveau-Québec region in northeastern Québec

approximately 260 km north of Baie-Comeau, QC on the southwestern shore of

Reservoir Manicouagan. It is centered at 51°07’N and 69°05’W. The property is named

for Lac Guéret, located in the south-central part of the group. No other named

topographic features on NTS map 22N03 (1:50,000 scale) occurs on the property.

Figure 4.1 – Location Map

Mason Graphite Corp. MASON GRAPHITE


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4.3 Claim Titles

Table 4.1 lists the details of the registered claims, based on information from the

MRNF’s Gestim website updated as June 22, 2012. Figure 4.2 shows the location of

individual claims within the registered claim group. The claims were consolidated into

groups with common anniversary dates in 2007. Quinto has maintained them in good

standing by payment of taxes and payment in lieu of work. The assessment report for the

2006 drilling and related expenditures was not been filed with MRNF for assessment

credit. On June 20, 2012, the claims were registered in the name of Mason Graphite.

Mason provided Roche with the Opinion of Title by Heenan Blaikie dated April 4, 2012.

Mason is the registered holder of a 100% interest in the claims which comprise the Lac

Guéret Property with no registered encumbrances or royalties.

Since the publishing of the NI 43-101 Technical Report on the Lac Guéret Graphite

Project issued on July 3, 2012, no renewals of the Mineral Claim Titles was provided to

Roche. However, requests for renewal have been sent to the Ministère des Ressources

naturelles du Québec on May 14, 2013. For the time being, the expiration is due on

July 17, 2013 as stipulated. Figure 4.2 shows the claims and the claim numbers.

Figure 4.2 – Claims Map

MASON GRAPHITE


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Table 4.1 – Mineral Claim Titles


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4.4 Issuers Interest

Mason and Quinto entered a purchase agreement whereby the Issuer acquired a 100%

interest in the Lac Guéret Property. The total purchase price for the acquisition was

US$15,000,000 in cash, payable in instalments based on the achievement of certain

milestones over a five year period and the issuance of 2,041,571 warrants to Quinto, each

warrant being exercisable for Mason Shares at an exercise price of CAD $0.75 until

April 5, 2014. An aggregate of $7,500,000 was paid on closing, with US$2,500,000 due

following the completion of a feasibility study and US$5,000,000 due on achievement of

commercial production (as defined below). If the feasibility study is not completed by

April 5, 2015, Mason Graphite is required to pay (a) US$1,250,000 on April 5, 2015, and

(b) US$1,250,000 on the earlier of (i) the fifth business day following the day on which a

feasibility study is completed; and (ii) October 5, 2015. If commercial production is not

achieved by October 5, 2016, Mason Graphite is required to pay (a) US$2,500,000 on

October 5, 2016; and (b) US$2,500,000 on the earlier of (i) the fifth business day

following the day on which commercial production is achieved; and (ii) April 5, 2017.

“Commercial Production” means the first 10,000 metric tonnes of graphite that has been

mined, sold and shipped from the Lac Guéret Property.

4.5 Legal Survey

The claims have not had any legal surveys.

4.6 Environmental Liabilities

Environmental liabilities related to exploration activities are limited to reclamation of

trenches as necessary. No mining activity has occurred in this area. Limited surface

excavation for road materials occurs in several locations on the property; they are each

less than 0.5 ha and are the responsibilities of the registered claim owner, such as Kruger

Forestry for dolomite and road gravel. Reclamation costs are the responsibility of Kruger,

while the dolomite pits are the responsibility of Mason.

The ownership of surface rights over the Property was not ascertained by Roche nor

provided by Mason. Historical forestry permits were actively used through 2007 by

Kruger Forestry over the Lac Guéret Property. The current status is not known.

11,630.34 ha


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4.7 Significant Factors and Risks

There are no other significant factors and risks other than as disclosed herein that may

affect access, title, or the right or ability to perform work on the property.

Mason has requested the usual permit from the MRNF and the SOPFEU.

There are no known legal or title risks which may affect access, or the right or ability to

perform work on the property.

The known socio-economic risks which may affect access can affect the ability to

perform work on the property is the obligation to reach agreements with Pessamit Innu

First Nation. On April 18, 2012, Mason received consent from the Pessamit Innu First

Nation to proceed with the exploration program.


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5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND

PHYSIOGRAPHY

5.1 Accessibility

Access to the property is via the paved all-weather Route 389 from Baie-Comeau,

Québec to Wabush, Labrador. At Km 200.5, south of the Manicouagan 5 Dam, a main-

haul gravel logging road turns northwest from the paved road. It continues about 95 km

north-northwest from the highway toward the southwest shore of Lac Manicouagan. The

Lac Guéret property is located in a system of logging roads that are not maintained at this

time, but were in sound condition in May 2012. Numerous logging roads cross and

around the property and give good access to the claim block.

5.2 Climate

The northern boreal forest region receives an extreme range of weather conditions

throughout the year. Summers are short, from June to September with variably dry to wet

with local storms, which may give heavy rainfall. Humidity ranges from very dry to quite

humid. Lightning from thunderstorms is a frequent cause of forest fires, which are a

normal hazard in any 10-year period. Autumn is quite changeable with abrupt shifts from

almost summery conditions to frost and back in 48 hours. As the autumn progresses,

colder days are more frequent, and snow may start as early as late September, but more

commonly, snow stays on the ground after mid-November. Winter is cold with very short

days and temperatures to -40°C. Snow may come in storms with 30 cm snowfalls. Spring

is the opposite of autumn in the variability of daily temperatures and precipitation. It lasts

from April to June. However, frost may occur in any month of the year as well as above

freezing temperatures. The weather affects exploration work by restricting the mapping

and trenching and other activities where access to the soil surface is required to summer

and fall. Drilling and geophysical surveys can be conducted year-round.

5.3 Local Resources and Infrastructure

The property is located 300 kilometres by road north-northwest of Baie-Comeau,

Québec, the nearest major population and service centre. The northeast corner of the

claim block lies on the southwestern shore of Reservoir Manicouagan, a large circular

lake impounded by Barrage Daniel Johnson, more commonly known as the Manic 5 dam,

owned by Hydro Québec. The hydroelectric dam is about 85 km southeast of the centre

of the property.

Logging operations between 1998 and 2006 created access into the area. The resulting

logging roads, designed for 100-tonne logging haul trucks, created new outcrops and give

good access throughout the claims. Logging ceased in 2006 and the roads have not been

maintained but remain in good condition overall as of May 2012.

5.4 Physiography

Elevations range from 1175 m on the reservoir to just over 2150 m on a ridge some

10.5 km southwest of the lakeshore. The topography is mainly undulating glacial


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landforms, which thinly cover the outcrop surface. Glacial outwash plains and kame

deposits are common. The glaciers moved from the north and scoured the pre-existing

north- and northeast-trending structures to create linear valleys now filled with streams,

lakes, bogs, and glacial materials. Locally, linear low rounded cliffs occur.

The boreal forest covers the area. The two dominant plant communities, typified by the

black spruce – fir and black birch – hemlock association, are common through the region.

The understory plants for both communities are several rhododendron species called

labrador tea, tag alder, ash, pin cherry, and various types of berry bushes, of which

blueberry is ubiquitous. Forest fire is part of the boreal forest ecology. In the early 1990s,

a particularly dry summer led to numerous natural fires. About 30% of the forest on the

property was burned in various degrees.


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6.0 HISTORY

6.1 General Overview

6.1.1 Prior Ownership

Prior to the access developed by logging companies in the region in the late 1990s, the

geographical isolation of this area has hindered exploration. The author researched the

Québec Ministry of Natural Resources website for assessment files. The only assessment

reports on claims situated near or on the Lac Guéret claims were filed by Québec Cartier

Mining Co. in 1962. They had two claim blocks totalling 100 quarter-mile claims in the

area of the property from 1959 until at least 1971. Roche does not know when these

claims expired. They were acquired based on regional airborne magnetometer mapping

that picked up anomalies indicating significant iron formation in geology similar to the

Mt. Reed – Mt. Wright iron deposits about 150 km to the northeast. Québec Cartier

maintained their interest to at least 1971. The Lac Guéret claim group covers their former

holdings. No other assessment reports filed with the Ministry of Natural Resources

Québec are available for the property area since at least 1935.

6.1.2 Historical Exploration Work

Québec Cartier conducted their major work in 1962 (Ferreira 1962a, 1962b). Baselines

were cut on three grids-cutting with lines turned at 300 ft intervals for a total of 61

(98.5 km). Geological mapping and dip-needle magnetometer surveys were carried out at

1:2400 scale on the grids. Six inclined AX-size diamond drill holes were drilled for a

total of 2,301 ft. (701.3 m). Most of the footage (1,820 ft. or 554.7 m) was drilled in five

holes around “Iron” and “Barrage” Lakes. Québec Cartier reported a global average of all

samples at 36% Fe. The individual samples range from 12.9% to 40.5% Fe in mainly

magnetite and lesser specular hematite iron oxide facies formation. Intervals range from

138 ft. (42.1 m) to 420 ft. (128.0 m). No further work appears to have been done after

1962.

Following the discovery of graphite at the GR (graphite road) showing on a logging road

by Phil Boudrias, Quinto optioned a block of claims that forms the core of the present

Lac Guéret Property from Exploration Esbec (Sept-Îles, QC) in 2002 and added claims

on its own account to cover the favourable stratigraphy around the iron formation as well

as the iron formation core itself.

Table 6.1 – Summary of Exploration Work on the Lac Guéret Property by Quinto

Year Works Trench (m) Drilling (m)

2002

Initial evaluation, discovery of GC Zone,

prospecting, 17 line-km grid; 12 line-km VLF-

mag ground survey

7 (643 m)

2003 Trench mapping, property reconnaissance 50 (4,409 m) w/1,023

channel samples

10 NQ DDH

(1,206m w/421

samples)


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Year Works Trench (m) Drilling (m)

2004

Joint Venture with SOQUEM; airborne EM-mag

survey; Field verification of anomalies; detailed

stripping and trenching with detailed geological

mapping

18 trenches & stripping

(2087 m) 1584 m

channel-sampled w/ 407

samples

2005 Property mapping (assessment work)

2006 Drilling

24 NQ DDH

(2,149 m);

w/901 samples

2007 Technical studies: met testwork, resource model

started; studies incomplete

The 2006 exploration program included trenching two trenches northeast of TR68, named

TR69 and TR70, and a diamond drill program of 24 NQ holes totalling 2,148.6 metres.

Three holes totaling 235.8 m were also drilled in the graphite stratigraphy outside of the

GC-GR area for assessment purposes, but are not discussed herein. The trenches were

channel sampled using a concrete saw, but no records are available of the number of

samples, where they were taken are available, nor the analytical results. Lyons observed

the trenches in May 2007 and noted that they extended the TR68 geology to the NE some

80 metres.

6.2 Historical Mineral Resources

Québec Cartier Mining Co. included an in-house “resource estimation” for iron oxides

which occur in the centre of the current property in their assessment reports (Ferreira

1962a, 1962b). These were based on six AX drill holes scattered over several kilometres.

These estimates are not cited here as they are not within the CIM guidelines for resources

nor do these reports discuss graphite mineralisation.


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7.0 GEOLOGY SETTINGS AND MINERALIZATION

7.1 Regional Geology

The results of the 2004 field campaign (Lyons 2004b) and the 2006 drilling (not reported)

improved our understanding of the regional, as well as property geology. In addition, the

lithotectonic synthesis of the Labrador Trough by Clark and Wares (2004) revised the

standard stratigraphy of the Labrador Trough, which is the protolith of the Gagnon Group

on the property. The synthesis also changes some fundamental perspectives and

interpretations applicable to the subject property.

The regional geology is shown in compilation maps by the Geological Survey of Canada

(Davidson, 1996) and the Québec Ministry of Natural Resources (Marcoux and

Avramtchev, 1990) and is summarised by Hocq (1994). The regional stratigraphic section

around the property, shown on Figure 7.1 with the Québec government regional mapping

codes, is (from youngest to oldest).

Table 7.1 – Regional Stratigraphic Column

CENOZOIC

Quaternary

Q Pleistocene glacial deposits, unconsolidated

MESOZOIC

Triassic

Mcc Manicouagan impact crater complex (monzonite, latite, breccia)

MIDDLE PROTEROZOIC

G16 Shabogamo mafic intrusives

G15 Monzonite – granodiorite intrusives (? klippes)

G14 Gabbro (nappé – klippes?)

PALEOPROTEROZOIC – ARCHEAN

Gagnon Group

HBG_GN Hornblende-garnet gneiss – basalt sill-dyke complex coeval with Menihek Fm (small scale)

G12 Menihek Fm. (quartzofeldspathic gneiss) also called Upper Paragneiss (Clarke, 1977)

G12a Lac Guéret Member (informal) of Menihek Fm (graphite-quartz schist and graphite- quartz-feldspar-biotite-(garnet) gneiss)

------------------- diachronous contact -------------------------------

G11a Sokoman Fm. non-Fe oxide member (quartzite-rich sediments )

G11 Sokoman Fm. (iron formation) Age 1885 – 1878 Ma

------------------- unconformity -----------------------------------------

G9 Denault Fm. (dolomitic marble with calcsilicates + quartz) Age < 2060 Ma

------------------- unconformity -----------------------------------------

G8 Katsao Fm. (granite gneiss, minor amphibolite) Age 2170 - 2140 Ma


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The Grenville Province rocks characteristically have been subjected to medium to high

metamorphism and multiple periods of deformation. Metamorphism in the region is the

upper amphibolite facies (kyanite subfacies).

Pre-Grenville and possibly early-Grenville deformation appears to have been destroyed

by intense middle-Grenville orogenies. Dr. Réal Daigneault (Daigneault, 2004) made a

structural field study on the graphite area on the property while Ed Lyons was mapping

the area. He noted that the central two periods of deformation (D2 and D3) control the

present distribution of the lithology, but there is evidence for one prior and at least two

later deformation events, as well.

The property covers most of the most southwesterly exposures of the Gagnon Group

stratigraphy related to the Sokoman iron formation in the Gagnon Terrane. The Gagnon

Terrane on the property includes most of the broad anticlinorium elongated north-

northeast. The oval shaped structure is compressed from the southeast to its present form.

The core of the anticlinorium is mainly Denault Fm crystalline dolomitic marble. The

typical footwall to the Sokoman Fm, the Wishart Fm quartzite, appears not to be present

as a mappable unit. The Sokoman Fm iron formation outcrops mainly in both the centre

and edges, where they occur as linear, doubly folded (interference folds) anticlines and

synclines on the scale of 0.5 to 2.5 km. Silicate facies of the Wabush were recognized in

recently logged areas in the southern part of the anticlinorium, but have not been mapped

historically. The quartzite mapped near the graphite zones appears to be the upper, non-

oxide, facies of the Sokoman Fm, not the Wishart quartzite.

The Sokoman Fm quartzite and the overlying Menihek Fm contact can be traced around

the margins of the anticlinorium by airborne EM conductors with variable magnetic

signatures. Little mapping has been done in the northwest. Foliations are steep SE-

dipping to vertical in the northwest, while on the southeastern margin, foliations dip from

steep to more commonly moderate to shallow toward the SE. The major D2 deformation

was caused by collision from the southeast, as is common throughout the Gagnon

Terrane, leading to overturned folds and thrust faults dipping SE. The anticlinorium

generally occupies a low plateau delimited by steep flanks to the SE and NW in

particular.

The Lac Guéret Nord sector property covers most of the outlier of iron formation Gagnon

Group as a plateau described above. Work by SOQUEM Inc. in 2003-04 on the southern

block of the Lac Guéret Property shows folded bands of silicate-rich iron formation with

minor Fe-oxide and sulphide facies probably interbedded with other non-iron formation

metasediments, but not the dolomitic marble. The graphitic horizon is present as linear

bands to 10-m wide. The folds are dominantly strike E-W to WNW with steep south dips.

The two zones, distinct in regional detailed aeromagnetic survey (SOQUEM, 2002),

appear to be the most southwesterly outlier of Gagnon Group. It appears to be separated

by erosion from the core Gagnon Group package on the Lac Guéret Nord property. The

southern units mark the south limit of the Gagnon Terrane where the Allochthonous


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Boundary Thrust Fault (ABT) that marks the Parautochthon – Polycyclic Allochthon

boundary.

Post-Grenville folding and extensional brittle faulting occurred with mainly modest

vertical offsets. This pattern has been noticed by Ed Lyons in the iron belt between Mont-

Reed and Wabush. These are shown as thrust faults in Figure 7.1.

The Middle Proterozoic units in the region are shown by Marcoux and Avramtchev

(1990) as a group of basic to intermediate intrusives. However, Hocq (1994) shows them

as regional-scale (tens of kilometres) klippes transported by subhorizontal nappé folding

and thrust displacement on decollément planes.

The most significant known geological event in the area since the end of the Grenville

event was the impact of a large (~ 5-km diameter) bolide 214 + 1 million years ago in the

Triassic Period (Monastersky, 1998). The impact created the Manicouagan Crater with a

floor diameter of 55 km and final rim diameter of 86-95 km (Grieve, 1983). Part of the

eroded annular ring of collapsed impact crater walls is now filled by the Reservoir

Manicouagan. The base of the impacted centre underlies Île Réne-Levasseur. The current

floor is estimated at 230 m deep by 55 km diameter (Morris et al., 1993). The shock ring

outside the crater probably extends several to ten kilometres outside of the crater. This

would affect much of the rocks underlying the Lac Guéret Property, including the

graphite zone, although no shocked quartz has been noted in the graphite zones in thin

section. This transient, high-speed event likely did not affect the graphite flake size.

The last geological event was the Pleistocene glaciation and deglaciation. Where outcrops

of softer graphite-biotite schist trend north to northeast, the glaciers cut cliffs and cross-

cut the schistosity. The melting of the ice formed sandy outwash plains with isolated

large erratics, kames, drumlins, and a few eskers. Moraine development in the area of the

property seems minor.

The economic geology in the Gagnon Group historically lies in the Gagnon Group

metasediments. They host the Sokoman iron formation mined at Mt. Reed – Lac Jeannine

– Mt. Wright area near Fermont, as well as the deposits at Wabush. The graphite deposits

occur in the basal part of the Menihek Fm pelitic schist and gneiss overlying the

Sokoman Formation and can be considered as marking the final deposition in the

Sokoman. This stratigraphy also hosts the Lac Knife graphite deposit as well as graphitic

paragneiss units south and west of the Fire Lake iron mine; the basal graphite lenses also

occur above the Kami deposit in Labrador City, NL.


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Figure 7.1 – Regional Geology

Mason Graphite Corp. Mason Graphite Corp.

MASON GRAPHITE


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7.2 Local Geology

7.2.1 Stratigraphy

The stratigraphy of the GC and GR graphite zones is shown schematically in Table 7.2.

Table 7.2 – Property Stratigraphic Column (Youngest to Oldest)

The Denault and Sokoman Formations in the core of the synclinorium are overlain by the

non-oxide facies of the Sokoman noted elsewhere in the Gagnon Terrane near the iron

mines. The quartzite is thin to thick bedded with locally well-preserved bedding features,

including rare graded beds. Thin beds also include 1-10% magnetite crystals at a

stratigraphic level only slightly below the start of the major graphite deposition. The

quartzite locally has interbeds of white coarsely crystalline diopside (calc-silicate) and

white tremolite as well as pale green amphibole and red-brown garnet (species unknown).

Diopside, identified by MRNFP geologists by XRD, occurs in monomineralic lenses to

two metres thick. Graphite occurs as rare isolated flakes and thin beds in quartzite (not in

the marble) near the top of the unit. The quartzite is up to 140 m true thickness but often

is less, especially with the iron formations near the core of the synclinorium. The

Sokoman quartzite complex forms the footwall of the major graphite intervals in the GC

and GR zones.

The informally named Lac Guéret Member (G11a) of the Menihek Fm is the basal facies

of the Nault paragneiss (the Upper Paragneiss of Clarke (1977)). The Member is quartz-

rich towards the base and gradually increases in plagioclase, biotite, muscovite, and

garnet up section. Clarke (1977) reported graphite occurring sporadically through the

Nault (Upper Paragneiss). On the property, it is concentrated towards the base, although

graphite also occurs in minor amounts (< 1% Cgr) throughout the Menihek. In the Lac

Guéret Member, graphite more typically occurs as beds and bands of 4% to 51% Cg over


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widths of 2 to 200 metres. This is discussed in more detail under Mineralisation. Graphite

can also occur as isolated narrow beds in the quartzite proper. Overall, the Member

appears to represent a transitional depositional environment from dominantly chemical

Sokoman to dominantly clastic Menihek sediments. The diachronous contact shows the

interlayering of quartzite-rich and micaeous rocks typical of a contemporaneous change

in deposition styles

Hornblende-garnet-amphibole coronitic gneiss is another distinct rock type that is

localised in the Lac Guéret Member. Clarke (1977) noted this unit, named Hornblende-

Biotite Garnet Gneiss (HBG-GN) as occurring at the base of his the Upper Paragneiss

unit and remarks that it appears to be formational at the transition from quartzite to

paragneiss near Mt-Reed and Mt Wright iron mines. At Lac Guéret, It forms thin

continuous bands and domal dykes in the GC graphite zone. In core, the mafic and

sedimentary beds at interbanded on the decimeter scale locally; the mafic contains no

graphite. The lateral extent is usually several hundred metres. Ed Lyons interprets these

as metamorphosed basalt or andesite sill-dyke complexes that intruded the

metasediments. The same pattern is common near the Kami iron deposit at Labrador

City, NL.

The Menihek Fm paragneiss hangingwall is variable with leucosomic and melanosomic

bands that typically contain medium to coarse quartz, plagioclase, cinnamon-coloured

biotite, muscovite, garnet, and dark green amphibole. Occasionally, sillimanite needles

were noted, marking the upper amphibolite facies. The coarse banding and biotite colour

are typical in the examples shown by Clarke (1977) for his Upper Paragneiss near

Gagnon, QC. The unit also includes minor bands of bright dark to medium green

amphibolite with dark cinnamon garnet and/or black-brown biotite. Minor graphite +

biotite-rich bands occur throughout the unit. Other units observed but not mapped include

light-coloured, iron-deficient quartzofeldspathic gneiss with muscovite and pale rose

garnets, and hornblende-biotite amphibolite bands.

7.2.2 Structure

The Labrador Trough protolith had two and possibly three tectonic events before the

Grenville deformation. These were probably destroyed or severely modified beyond

recognition during the Grenville orogeny. Locally, some remnant features may survive in

isolated outcrops. At least four periods of deformation during the Grenville affected the

property. The first deformation, D1 with rare examples of preserved as tubular folds

(Daigneault, 2004).

The second deformation, D2 was the formation of the foliation F1 It is the most prominent

and likely earliest folding related to the Grenville Orogeny. The regional lineation axis is

oriented 055°. Plunges are variable from flat to shallow (< 20°) to the southwest. The

plunges change in several domains of approximately 400-m length. From the northeast to

southwest, the graphite zone from L22+50N to L17+50N plunges shallowly SW. From


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L13+50N to L17+50 N, it is flat plunging. The shallow plunge continues from L13+50N

through L8+00N where trenching ends.

D3 deformation folded the F1 schistosity into tight subvertical to moderately dipping

isoclinal folds striking northeast to east-northeast and dipping southeast. This is the major

control of the conformation of the graphite beds. A number of late, small-scale pegmatite

dykes, previously thought to be migmatite, in graphite schist have been folded and

transposed by this event

Within the graphite zones, the “high grade” beds (HiG type in previous reports) with

>25% graphite appears to form crushed or cataclastic breccias in local bands. Fragments

of the host generally form 80-90% of the unit with rotation of foliated clasts subparallel

with the main trend. The “matrix” is recrystallised graphite flakes up to 8-mm length

approximately perpendicular to the clast margins with no associated minerals. It also

shows an unusual deformation, here called D3. The foliation strikes parallel with F1 but

shows a steep plunge to the southwest. Lyons interprets this feature as the result of

rheologically weak ductile high-grade graphite bands that absorbed most of the

compression and transpression associated with the D2 and D3 events. This deformation is

restricted to the HiG graphite bands in the GC and GR zones.

The fourth major deformation, D4, folded of the D3 structures. It is aligned around a

~308° axis with a steep southeast plunge. It is expressed as shallow crenulations on tight

D3 folds, as a kink of the quartzite-graphite contact on L13N, and the open flexure on

L16N that changes the trend of the GC graphite zone form NE to ENE across the 2006

drill grid. It also accounts for the more northerly flexure on the GR Zone. It forms the

interference folds of the Sokoman Fm package in the centre of the synclinorium on the

scale of 1-km.

A key element of the anticlinorium model is that it is relatively shallow, probably less

than 250 metres. The exact depth is unknown. Drilling by QCM (Ferriera 1962a) showed

that the anticline tested by drill holes on both flanks changed from tight to open folding in

120-m depth. The style of folding and the limited drill results on the GC Zone indicates

that the graphite beds continue down beyond 100-m depth with some flattening (see

sections in 2006 drill program).


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Figure 7.2 – Mason Graphite Property Geology

Mason Graphite

Corp.

MASON GRAPHITE


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Figure 7.3 – GC-GR Graphite Zones Compilation

7.3 Mineralization

Graphite of Unit 1 (4-10% Cgr) and Unit 2 (10-25% Cgr) forms fine to coarse crystal

flakes (<0.01 to >4-mm diameter) in quartz and quartzofeldspathic gneiss and schist. The

in-situ organic material was concentrated during post-Labrador Trough deposition and

Mason Graphite

Corp.

MASON GRAPHITE


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recrystallised during the Grenville orogeny. It does not appear to have been enriched by

tectonics or hydrothermal remobilisation.

Unit 3 (+25% Cgr) is characterised by a distinct pattern in flake distribution. The

tendency is for clasts or non-recrystallised centres of the original very fine to amorphous

pre-metamorphic graphite schist to be enveloped by recrystallised very coarse (2 to -+8-

mm length) and pure graphite flakes as a result of ductile brecciation. The coarse flake

graphite visually forms 7-12% of the total rock and constitutes the potentially

economically viable product. The rest of the HiG material may have more amorphous

graphite.

Sulphides are present mainly as pyrrhotite and less frequently as pyrite. Pyrrhotite occurs

commonly with graphite, especially at grades greater than 10% Cg, as 3-5% fine-grained,

disseminated to blebs and patches 0.3- to 4-mm long aligned parallel with the schistosity.

It is visible in drill core, but less so in outcrop. Outcrops rarely show significant iron

oxidation when trenched and show minor white ferric sulfate efflorescence on fresh

surfaces. Pyrite occurs locally as coarse recrystallisation of associated with late

northwesterly extensional gashes seen in several trenches and in drill core in the GC

Zone. It is not associated with other hydrothermal minerals such as quartz or calcite in the

late open-space veinlets. In core, pyrite crystals occur adjacent to finer-grained pyrrhotite

blebs with sharply defined crystal margins for the pyrite and no local change in

crystallinity in the pyrrhotite. Chalcopyrite, sphalerite, and molybdenite have been

observed in thin section (Rioux, 2008). The first two occur as late and fairly clean

sulphide grains interstitial to pyrrhotite and pyrite. Molybdenite occurs locally within

graphite flakes with the lamellae aligned with the basal planes of both minerals; the

molybdenite was formed during the genesis of graphite and predates micro-folding of

graphite. No other sulphide minerals have been noted. ICP chemical analyses of 120

samples in 2004 showed no geochemically significant amounts of metals associated with

the graphite.

The depth of the mineralisation is uncertain, as was mentioned under Structure above. It

is probable that the folded graphite bands are constrained within a broad vertical

envelope. This envelope is the actual outline of the deposit.

Interpretation of the sections for the Mineral Resource shows the effects of structure on

localising the graphite deposits. The general trend shows the ~20° SW plunge. The

continuity of the structures between 50 metre sections shows rapid changes particularly in

the Unit 3 (HiG) type. This is interpreted as the result of the focusing of compression on

the higher graphite beds which have a predilection for ductile folding and sliding. The

graphite can glide readily, thus moving but with little fault brecciation. The HiG units

observed to the SW in cleaned outcrops show intense isoclinal folds with amplitudes

often less than 5 metres, where the adjacent lower grade graphite schist and quartz-rich

sediment bands are folded in the scale of 10-100 m amplitudes. This ductility makes

interpreting the higher grade units more difficult.


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8.0 DEPOSIT TYPES

The graphite beds form an integral part of the sediments of the informally named Lac

Guéret Member of the Menihek Formation. The graphite originated in part as carbon-rich

sediments in arenaceous and pelitic turbidite beds that were part of a marine basin of

increasing depth relative to earlier deposition. The protolith in the Labrador Trough has

low levels of kerogen (sedimentary carbon) associated with a variety of lithologies, but

none are nearly as high in carbon as even the medium grade graphite at Lac Guéret

(T. Clark, pers comm, 2004).

Graphite is chemically stable over a wide range of pressure and temperature conditions

and is only very poorly reactive with other common hydrothermal solutes. The potential

for concentration of grade by plastic flow is minimal since dry minerals do not flow

plastically under the metamorphic high pressures and temperatures. (Thickness can

change due to sectional compression or attenuation.) Remobilisation of sulphides during

metamorphism is facilitated by local-scale hydrothermal solution and redeposition

(Marshall, et al., 2000). Thus, the most probable carbon concentration mechanisms

occurred before the first level of metamorphism sealed the rock porosity. Two

possibilities may account for the graphite. One could be the result of exceptionally high

initial organic deposition concurrent with sedimentation. The second model derives the

carbon from the movement of hydrocarbons during diagenesis, when the rocks were

being compressed and lithified. However, the origin of the beds of abnormally rich

graphite (locally over 50% Cg) cannot be derived from simple bio-organic sediments,

even if they are 100% biological materials. It is possible that a paleo-petroleum process

during diagenesis may have upgraded the carbon content. One model that was proposed

involved reduction of carbonate to graphite. Dolomite and calcite contain 13% and 12%

carbon, so they could be potential carbon sources for deposits generally 12% Cgr or less

assuming total carbon transformation of a fixed amount to carbonate. However, most of

the Lac Guéret graphite grades tend to exceed that limit.

The value of a graphite deposit depends only partly on the graphite grade. More

important is the quality and purity of the graphite crystal (flake) that can be extracted. A

potentially economic graphite deposit must demonstrate that the degree of

recrystallisation is high. The recrystallisation dynamics of graphite is poorly understood.

When carbon/graphite levels are over ~20%, the graphite apparently resists

recrystallisation (B. Marshall, pers. comm. 2004). In the high-grade material (HiG) at Lac

Guéret, zones of fine-grained graphite, interpreted locally as crushed or cataclastic

breccia clasts, are surrounded by recrystallised coarse flake graphite. Where graphite

grades are less than 25%, recrystallisation is more complete. Thus, the apparently lower

grade, non-HiG material may have an economic value similar to richer grade material.

Metallurgical testing is needed to verify these factors.

The same conditions that controlled the carbon deposit also controlled sedimentary or

diagenetic iron sulphide. The original sulphide was probably pyrrhotite deposited as fine


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grains with the carbon and in lenses with quartz and negligible carbon. Both occur in the

same horizon but probably in a semi-independent relationship. Sulphides known to date

on the property are located within the graphite horizons, not isolated in

hangingwall/footwall stratigraphy. One area on the horizon several kilometres north of

the drill grid shows sulphide in high-quartz gneiss with only minor graphite. Thus, the

reductive sedimentary basin environment appears to show a range of sulphur-carbon

relationships.


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9.0 EXPLORATION

9.1 Exploration Work

To the exception of the drilling campaign conducted in 2012 (see Section 10.2), Mason

has not conducted any exploration work on the Lac Guéret Property.


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10.0 DRILLING

10.1 Previous Drilling

Table 10.1 lists the drillhole data for the 2006 holes plus LG-07 (2003) which form the

basis of the Mineral Resources estimation.

Table 10.1 – Drillholes Details

Hole ID Zone Length (m) Azi Dip UTM N UTM E Elev Drill Dates Section

LG-07 GC 136.00 326 -45 5663785.4 495766.97 530.9 24-27/09/03 1050

LG-11 GC 120.20 320 -60 5663738 495818 524 12-13/07/06 1050

LG-12 GC 129.10 320 -45 5663720 495822 536 16-16/07/06 1050

LG-13 GC 74.60 320 -45 5663759 495796 525 14/07/06 1050

LG-14 GC 75.80 320 -45 5663707 495860 512 14/07/06 1050

LG-15 GC 81.00 320 -45 5663810 495730 546 16-19/07/06 1050

LG-16 GC 56.20 320 -45 5663836 495697 552 19/07/06 1050

LG-17 GC 141.00 320 -42.5 5663685 495808 509 20-22/07/06 1000

LG-18 GC 83.70 320 -48 5663716 495765 512 22-23/07/06 1000

LG-19 GC 140.20 320 -46 5663747 495731 535 23-24/07/06 1000

LG-20 GC 90.00 320 -44 5663784 495698 537 24-25/07/06 1000

LG-21 GC 75.00 320 -45 5663818 495662 546 19-20/07/06 1000

LG-22 GC 84.00 320 -44 5663794 495863 517 26/07/06 1100

LG-23 GC 132.40 320 -45 5663794 495822 544 27-29/07/06 1100

LG-24 GC 78.00 320 -45 5663826 495783 533 29-30/07/06 1100

LG-25 GC 85.20 320 -45 5663861 495749 541 30-31/07/06 1100

LG-26 GC 74.10 320 -45 5663730 495892 522 6-7/08/06 1100

LG-28 GC 139.50 320 -45 5663808 495895 511 1/08/06 1150

LG-29 GC 75.90 320 -45 5663877 495863 528 02/08/06 1150

LG-30 GC 74.30 320 -45 5663866 495823 538 2-3/08/06 1150

LG-31 GC 60.00 320 -45 5663866 495787 544 03/08/06 1150

LG-32 GC 57.00 320 -46 5663933 495752 548 3-4/08/06 1150

LG-34 GC 72.00 320 -44 5663819 495949 508 5-6/08/06 1200

LG-35 GC 74.40 320 -45 5663858 495914 519 05/08/06 1200

LG-37 GC 75.00 320 -45 5663925 495844 535 4-5/08/06 1200

24 DDH 2006 2,148.60 UTM = NAD83 Z19

1 DDH 2003 136.00

TOTAL 2,284.60


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Of the 2,284.60 metres cored, 2,135.5 m were sampled and analysed (93.5% of the core).

Recovery was very good (+98%) with moderate to high RQD values typical of these

rocks. 908 samples were taken with 2.35 m average sample length. Cores were placed in

wooden half-diameter trays used in the region; were covered with a second tray and

transported to the geology logging area. The length of the run was marked by wooden

blocks typically from run to run (3.0 metres).

Drilling was performed by Forages La Virole of Rimouski QC under the guidance of

Daniel Lapointe, P.Geo.

10.1.1 Reliability of Work

Lyons, as a Qualified Person, has visited the project site at the start of the program in

June 2006 as well as subsequently in May 2007 and October 2009, and on 14 May 2012

for this report. In his opinion, after reviewing the data results, the works were reliably

executed as reported.

10.2 Recent Drilling

Since the last Mineral Resource Estimate dated June 22, 2012, an intensive drilling

program was conducted from July 2012 to November 2012. As provided by Mason

Graphite (“Mason”), 163 new drill holes were drilled totaling 26,548 metres. Close to

17,000 samples were selected for chemical analysis and sent to Agat Lab. The analysis

results are not yet available for compilation. Since no new data in the existing mineral

resource area are available, the 2012 data did not change the data on which the Mineral

Resource was based. Once all data analysis of the July-November 2012 drilling program

will be available, an update of the Mineral Resource Estimate will be performed.

The current PEA report is based on the Mineral Resource Estimate effective as of

June 22, 2012.


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11.0 SAMPLE PREPARATION, ANALYSIS AND SECURITY

11.1 Sample Collection

11.1.1 Sampling Approach and Methodology

Core sampling in 2003 (LG-07), done by Lyons, had maximum sample length of 2.0 and

minimum of 0.75 m with breaks at major lithological changes. Sample lengths in the

2006 program had the maximum length of 3.0 and minimum of 0.5 m with less than 25

samples less than 1.0 m long.

Trench channel sampling of trenches TR27, TR62, TR67, and TR68 done in 2004 was

done to match the width and diameter of NQ diamond drill core (Lyons, 2004b). Lyons

observed similar sample channels in TR69 and TR70 of 2006.

Samples were saw-cut parallel with the core axis. Three-part sample tags with unique

numbers were used. One part was stapled in the corebox at the start of the sample run.

One half of the sample was placed into plastic bags with a second tag. The third part, in

the sample book, was preserved for the company’s records.

Samples were shipped in 20-litre sealed plastic pails in four shipments by truck from

Baie-Comeau, QC to Process Research Associates (Richmond, BC) for analysis.

Inspectorate Exploration and Mining Services Ltd. (Inspectorate) acquired in Sept. 2008

Process Research Associates (PRA) Group; Vancouver, Canada which also included

International Plasma Laboratories (IPL). Inspectorate is ISO 9001:2008 certified.

ALS Chemex is as well ISO 9001:2008 certified.

The data from both core and trench samples were used in the geological and block model

and in the resource estimation.

11.2 Sample Preparation

11.2.1 Relation of Issuer to Sample Analysis

No one related to the Issuer, Mason as an employee, officer, director, or associate was

involved with the samples at any time during sampling, transportation, sample

preparation, or assaying.

Mason has no relationship with Process Research Associates, International Plasma

Laboratory Ltd., ALS Chemex, or Assayers Canada Ltd and is totally independent of

these companies.

11.2.2 Sample Preparation, Assaying, and Analytical Procedures

The sampling crew brought the daily production of samples to the camp where they were

stored in a trailer. The samples were checked for agreement between the enclosed sample

tags and the number written on the outside of the bag; bag closures were also checked

and repaired as needed. Samples were stored in a closed cube van rented specifically for

sample handling. Periodically, they packaged the samples for shipment in plastic 20-L


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pails. The foreman and another worker prepared and double-checked a list of which listed

sample numbers in each container and their weights. The samples were driven in the

locked van to Transport Thibodeau Inc. in Baie-Comeau, Québec for shipment by truck

to Process Research Associates in Vancouver.

Upon receipt at Process Research Associates (PRA) at 9145 Shaughnessy St., Vancouver,

BC, the samples were checked against the delivery documents, which included a detailed

list of sample numbers in each bag, for completion. PRA maintains a reception list with a

description of each sample for integrity of packaging, largest particle size, and moisture

content. All documents are stored in the main contract file at PRA.

Samples preparation is initiated with an Instruction and Handling Sheet prepared by the

laboratory manager. Details, including sample identification, air-dried weight, and

approximate riffled out weight, are recorded. Each sample is first weighed and the weight

recorded. It is then put into a steel pan for handling with an identification tag attached.

The sample is dried in a custom-made furnace at low temperatures specifically not to

damage other organics that might be associated with graphite.

The sample is crushed in a jaw crusher (and cone crusher, if required) set at 6 mesh

(Taylor) or 3.3 mm. The crusher(s) is thoroughly cleaned before and after each sample.

The crushed sample is quartered with a 0.75 in (1.91 cm) riffle and a subsample of 200 to

300 grams is placed into another clean steel pan with an identification tag.

The subsample is pulverised in a stainless steel rotary shatter box to 95% minus

74 microns. The shatter box is cleaned with silica sand before and after each sample. The

subsample is mixed and quartered again to about 50 gr. in a stainless steel riffler. Rejects

are combined with the original sample.

The main sample is bagged in a polyethylene bag and stored in a covered 5-gallon plastic

container. The contract number and sample numbers are written on the sample bag and

container. The 50-gr subsample is bagged in a polyethylene bag and marked with the

contract and identification numbers and is sealed.

PRA prepares a purchase order for the assayer, listing all samples. The information is

kept in the client’s contract file and is registered in PRA’s central purchase order ledger.

The assayer, International Plasma Laboratory Ltd. (IPL) at #200 – 11620 Horseshoe

Way, Richmond, BC, picks up the samples. Upon receipt, the samples are logged in their

system with purchase order and list of sample numbers. The 50-gr samples were analysed

for graphite following the ASTM 1915-01 method with some modifications. The method

has two steps: one is the removal of all non-graphite carbon by heating and leaching with

aqua regia; the second is the complete combustion of the sample using a LECO CS-300

carbon-sulphur analyzer in an oxygen-rich atmosphere with a catalyst to convert all

carbon to CO2. The CO2 is detected with an infrared absorption spectrometer and

compared with standards to calculate the carbon content of the sample.


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A check on the values of high-grade (>35% Cgr) was tested on all 2006 samples using a

differential loss on ignition (DLOI) method to compare with the standard LECO

techniques. They concluded that the LECO method at high concentrations tended to

overstate the %Cgr values somewhat. All the high-grade graphite samples used in the

resource model, except those in DDH LG-07, were analysed by the DLOI method.

IPL reports the assay results to PRA email and by signed certificate. PRA evaluates the

data with reference to their standards and internal checks. Once PRA completes its

review, it sends the results to the client.

Canadian Association of Environmental Analytical Laboratories and the BC Ministry of

Environment Land and Parks have certified international Plasma Laboratory Ltd. In

1997, IPL participated in the CANMET Proficiency Testing Program for Mineral

Analysis Laboratories. The laboratory is certified under ISO 9002.1994 and is audited on

a regular basis.

Michel Robert, P. Eng., the Qualified Person at Process Research Associates, stated that

International Plasma Laboratory Ltd., the primary assayer and ALS Chemex Canada Ltd.

(AC), the referee laboratory, are independent of Process Research Associates and offers

their services on a commercial basis only.

Rejects and pulps are stored at the PRA warehouse on a continuing basis.

11.3 Quality Assurance and Quality Control

Quality control was done at two levels for the samples. Process Research Associates adds

two duplicate samples and two standards with non-indicative labels in each run of 20

samples for a total batch of 24 samples. International Plasma Labs of Vancouver, BC,

following the ISO 9002.1994 requirements, adds an internal standard as the 21st sample

in a batch of 40 samples. Each 1st and 20

th client samples are also duplicated. These are in

addition to the four unidentified standards and duplicates introduced into the batch by

PRA. Every 10th

determination, defined as sample, duplicate, or standard, is a blank

sample supplied by PRA.

In addition, PRA send one of the duplicate samples and one of the standard samples from

each batch to Assayers Canada Inc. for analysis as an independent check.

Blanks enter the sample stream when PRA sends the sample to IPL for analyses.

No blanks or standards were added in the sample stream in the field.

11.4 Security

The samples were close control from the drill to shipment. They were stored in the van

used for transportation of the shipments from the field to delivery to the shipper’s office

in Baie-Comeau, QC. While it is remotely possible to change the samples, in fact, during

the period of sampling, no one, except the geologist, knew which material had the higher

grades. The visual estimates made by the geologist were only approximations of actual

grades. I believe that the potential for sample manipulation in the field to be very low.


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Following the drill program in 2006, the drill core was moved from the field site to a

secure warehouse at Baie-Comeau, QC.

At present, no blank samples are included with the sample sent from the field to PRA. In

order to increase the quality control, this should be done in future programs.

In Lyons’ opinion, the sampling procedures and handling in the field, sample preparation,

sample and data security, and the analytical procedures were sufficient to maintain the

integrity of the samples as representative of the material sampled.


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12.0 DATA VERIFICATION

12.1 Field Verification

Lyons directed the Lac Guéret exploration work in the field from 2002 through mid-2006

and helped establish the 2006 drill program executed by Daniel Lapointe, P. Geo. He

relogged the 2006 core in May 2007 in the secure storage site at Baie-Comeau, QC

following which he visited the drill grid site. He also consulted with Quinto during 2006

and 2007 related to metallurgical issues and initial efforts to make a geological model in

2007. The 2006 drill sites are marked with wooden stakes and the casing has been pulled

out. Locations were made with a hand-held GPS unit. He recommends that a Total

Station survey be done of the drill grid to tie in the 2006 drill collars, which should be

marked more permanently and the trenches and roads.

Lyons knows of no known limitations regarding the field data besides the normal data

ranges inherent in the methods described.

12.2 Database Verification

Database verification is discussed in Section 14.0 Mineral Resource Estimates.

Lyons knows of no known limitations regarding the field data besides the normal data

ranges inherent in the methods described.


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13.0 MINERAL PROCESSING AND METALLURGICAL TESTING

13.1 Introduction

The purpose of the test work program was to characterise the Lac Guéret deposit and to

produce a flow sheet that would allow for the production of saleable graphite concentrate

with a graphite grade greater than 96% carbon while maximising the weight recovery.

To develop the optimal flow sheet, several grinding, flotation and polishing tests were

performed at the SGS Mineral Services facility in Lakefield. Overall, the test program

was successful in terms of demonstrating that a good product can be made from Lac

Guéret graphite mineralisation.

The mineralogical characterisation conducted at SGS confirmed that the graphite

occurred as crystalline and flaky graphite. Graphite flakes ranged in size from 50 microns

to 1 mm, with an average particle size of 300 microns.

Lac Guéret mineralisation does not require complex treatment for successful

beneficiation. Graphite concentrate is upgraded by flotation and polishing grinding. The

scouring action during polishing grinding ensures that the final concentrate grade is

maximised.

A conceptual flow sheet capable of producing a graphite concentrate meeting the graphite

markets’ requirements was developed.

13.2 Previous Test Work Results

Process Research Associates Ltd. (PRA) reported to Quinto Technology Inc. in 2005 on

the Lac Guéret deposit, that there was an “absence of deleterious non-flake graphite” and

that the test work “demonstrated the ease of production of a high value material”.

13.3 Recent Test Work Results

13.3.1 Collection of the Samples for Test Work Purposes

The Lac Guéret Project site was visited on August 6 and 7 of 2012 by Yves A. Buro,

Eng., Met-Chem; in order to identify sampling sites for test work purposes. The

following is a summary of the visit and sampling recommendations.

Following a review of geology and types of mineralisation from available drillhole,

several outcrops with existing channel samplings location were visited. The

mineralisation variations, changes in sulfides content and surface oxydation were

observed on outcrops.

The following recommendations were made for the collection of the samples:

• Selected lines for sampling:

– LG208 to LG210 (100 m of channel sampling), 17 m West of LG118 to

LG125 (60 m of channel sampling), 17 m West of LG134 to LG141 (20 m of

channel sampling) and from outcrops close to LG49.


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• Remove a few centimeters from the oxidised surface before sampling.

The final location of the samples collected, were provided by the client on

August 25, 2012 with the following list. Table 13.1 lists the sample location. Final

location and size of some of the sampling sites were somewhat modified for easier

accessibility.

Table 13.1 – Sampling Sites Location

Name East North Elevation

S1-DEBUT 495874 5663903 529

S1-FIN 495917 5663864 516

S2-DEBUT 495709 5663686 532

S2-FIN 495672 5663705 536

S3-DÉBUT 495393 5663345 541

S3-FIN 495426 5663234 527

S4-DÉBUT 495321 5663277 552

S4-FIN 495313 5663291 540

The sample was received in three shipments at the SGS Minerals site in September and

October 2012.

A total of four batches, Batch #1 to Batch #4 weighing around 1,250 kg in total, were

received for testing at SGS. Batch #1 comprised of channel samples between holes LG-

208 and LG-210. Batch #2 had samples from nearby hole LG-49. Batch #3 consisted of

channel samples between holes LG-118 and LG-125 while Batch #4 channel samples

between holes LG-134 and LG-141. Batch #1 and Batch #2 were selected for initial

testing maintaining a 50:50 weight ratio. The remaining samples along with Batch #3 and

Batch #4 were stored in a freezer to minimize sample oxidation, a list of which is

provided in Table 13.2.

Table 13.2 – Sample Remaining at SGS Minerals

Project # Label # Net Weight

(kg) Sample Description

13838-001 12-8748 248.6 Batch #1 – 1¼” Reject – Drum 1 of 2




13838-001 12-8750 142.8 Batch #3 – as received

13838-001 12-8751 73.5 Batch #4 – as received


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13.3.2 Summary of the Test Work Program

SGS Mineral Services is a mineral test center located in Lakefield, Ontario, Canada. SGS

conducted mineralogical characterisation, preliminary metallurgical test work including

grinding, flash flotation, conventional flotation, magnetic separation and heavy liquid

separation tests.

13.3.3 Comminution Test Work

The MacPherson grindability test is an indication of the amount of energy required in an

autogenous grinding system. AWi averaged 6.4 kWh/t, which is very low.

The Bond Rod Mill Work Index is an indication of the amount of energy required in rod

mill grinding system. RWi averaged 8.7 kWh/t, which is very low.

The Bond Ball Mill Work Index is an indication of the amount of energy required in ball

mill grinding system. BWi averaged 13.2 kWh/t, which is medium.

13.3.4 Heavy Liquid Separation Test Work

A heavy liquid separation test conducted on the Lac Guéret composite sample showed

that the sample is not amenable to dense media separation. The aim of the test work was

to evaluate the possibility of pre-concentrating graphite concentrate prior to grinding.

13.3.5 Flotation Test Work

Nineteen bench scale tests and three lock-cycle tests were conducted. For tests F1, F2 and

F3, minus 10 mesh graphite was ground in a rod mill for one minute floated in two stages

to produce a coarse concentrate. The coarse tailings were ground with steel media and

floated to produce a rougher concentrate. The rougher tailings are the main part of final

tailings.

This approach was selected to minimize breakage of graphite flakes. Coarse flotation was

conducted to recover coarser flakes. The tailings from the coarse flotation were ground to

float graphite which may have had a layer of gangue on it. The grinding step on the

coarser tailings was to liberate finer graphite locked with the gangue minerals.

Sulphide flotation tests were performed on the rougher tailings to verify the possibility of

producing non acid generating (NAG ) tailings, which could be stored in a separate pond.

The initial tests were not successful in lowering the rougher tailings to the NAG level. As

the total amount of final tailings is not very large it was decided to use one tailings pond

and further test work was stopped.

All flotation tests used kerosene and methyl isobutyl carbinol (MIBC) as collector and

frother respectively. Both are typical reagents for flotation of graphitic mineralisation.

Table 13.3 shows the results of flotation test F3. The total graphite recovery was 99.5%.

The coarse flotation concentrate had a particle size distribution where 80% of the

particles are smaller than (P80 of) 230 microns.


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Table 13.3 – Preliminary Test Work Results (Test # F3)

Preliminary Flotation

Products

Weight

%

Assay

% C(t)

Distribution

% C(t)

Coarse Concentrate 39.2 48.2 82.8

Rougher Concentrate 16.8 22.7 16.7

Rougher Tailings 44.0 0.23 0.5

Head (calculated) 100.0 22.8 100.0

Head (direct)

22.7

Source: SGS Project 13838-001, Final Report - May 21, 2013 – Table was modified.

For later tests F6 and F10, the combined coarse and rougher concentrates were subjected

to open circuit cleaner flotation tests. The open cleaner flotation tests consisted of five

cleaner flotation steps to produce a primary cleaner concentrate. Prior to cleaner flotation,

the combined concentrate sample was polished for liberating gangue minerals. Polishing

is typically adopted in graphite flotation for improving graphite concentrate grade

without destroying the graphite flakes. Ceramic rather than steel grinding media are used

for minimizing graphite flake breakage. The fifth cleaner concentrate produced a

concentrate over 85% C (t).

This primary cleaner concentrate was screened and underwent secondary cleaning as

required. The coarse particles plus 50 mesh (300 microns) were considered final graphite

product. The finer particles were re-polished and refloated to produce a saleable final

product for each size distribution class. The Lock Cycle Tests (LCT) performed two

separate cleaning steps. The primary cleaners produced again a fifth cleaner concentrate.

This fifth cleaner concentrate was upgraded in separate secondary cleaner stages.

The fifth cleaner concentrate was classified into three size fractions, using a 50 mesh and

an 80 mesh screens. The plus 50 mesh is considered final product. The –50+80 mesh and

–80 mesh fractions are separately re-polished and re-floated. The +80 mesh concentrate is

a final product. The –80 mesh concentrate is screened using a 150 mesh screen into two

fine fractions, both fractions are final products. Table 13.4 lists LCT#2 test work results

are sorted into final product categories.

Table 13.4 – Preliminary Test Work Results (LCT#2)

Concentrate Particle Size Weight

%

Assay

% C(t)

Distribution

% C(t)

Plus 50 mesh (+300 micron) 18.6 96.9 19.0

Plus 80 mesh (+180 micron) 14.1 96.2 14.4

Plus 150 mesh (+105 micron) 13.1 96.2 13.3

Minus 150 mesh (–105 micron) 54.2 91.7 53.3

Total Concentrate 100.0 93.7 100.0 Source: SGS Project 13838-001, Final Report – May 21, 2013 – Table was modified by recalculation.


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The test work sample was of lower grade than the actual mineral deposit. The test work

indicated a progressive improvement in the results and the test work results are therefore

considered reproducible.

13.3.6 Conclusions

Lock cycle test #2 produced a graphite concentrate with 45% of the graphite flakes

coarser than 105 microns.

The Lac Guéret deposit produced a concentrate grade of above 96 percent for the

fractions coarser than 105 microns; the finer fraction was about 92% while the overall

carbon recovery was above 95 percent.

Sulphide flotation did not yield clean enough sulphide tailings to set up a separate

sulphide removal process section.

13.3.7 Future Test Work

The next phase will include pilot plant test work on the Lac Guéret mineral deposit to

verify the robustness of the flow sheet.

The optimization of the recovery of the graphite flake sizes will be looked into.

Settling and filtration testing will be done on pilot plant concentrate.

Further, the sulphide removal from mill tailings should be looked into again.


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14.0 MINERAL RESOURCES ESTIMATES

14.1 Introduction

The Mineral Resource estimation is based on the Quinto Mining Corp. exploration data

and the geological model provided by Lyons working with Geospark Consulting

(Nanaimo, BC) based on a Quinto in-house study in 2009. The current model was

simplified by them to include three mineralized units and one waste unit defined by the

graphite content. All data provided by Geospark was imported in Gemcom (GEMS).

Grade interpolation was done with ordinary kriging in the GEMS mining software

module.

Interpretation of the sections for the Mineral Resource shows the effects of structure on

localising the graphite deposits. The general trend shows the ~20° SW plunge. The

continuity of the structures between 50 metre sections shows rapid changes particularly in

the Unit 3 (HiG) type. This is interpreted as the result of the focusing of compression on

the higher graphite beds which have a predilection for ductile folding and sliding. The

graphite at higher grades can glide readily, thus moving with little fault brecciation. The

HiG units observed to the SW in cleaned outcrops show intense isoclinal folds with

amplitudes often less than 5 metres, where interlayered mafic sills and the adjacent lower

grade graphite schist and quartz-rich sediment bands are folded in the scale of

10-100 metres amplitudes. This anisotropic ductility makes interpreting the higher grade

units more difficult.

14.2 Previous Mineral Resource Estimates

No previous mineral resource estimations were made on the graphite deposits.

14.3 Exploration Database

The database used for this resource estimation was provided by Geospark Consulting in a

digital format. Following the receipt of the database, Roche validated that all data was

imported by cross-checking with Geospark. All relevant data was imported in GEMS, the

following files were imported in the GEMS database:

• Assay.csv

• DHColl.csv

• DHsurvey.csv

• Lith.csv

The database contained results from 24 diamond drill holes and four trenches. The

following information was extracted in GEMS from the files mentioned above:

• DHColl: 24 diamond drillhole collars and 4 trench coordinates from DHColl.

Easting, northing, elevation and the maximum depth of each holes was the

information extracted from this files


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• DHsurvey: 24 records associated to the drill holes were extracted from these files.

The fields included following information: hole identification, depth, azimuth, and

dip.

• Assay: 906 records of intervals inside drillholes or trenches for Cgr % were

imported in GEMS database.

The database was built by Geospark for Quinto over several years in Access (2007-2009).

It was imported to the Minesight™ software workspace where multiple tables can be

manipulated in one workspace.

Following measures were followed by Geospark to create the Roche database:

1. Comparing original electronic (PDF) copies of the signed analytical certificates

for graphite, ICP element analyses, sulphur, and density were compared with the

existing database; Minor corrections and additions were made.

2. Validation of overlaps between interval units in assay and geological intervals

were done.

3. Checks of the drill collar coordinates, including elevations, inclinations, and

azimuths, were done. Several collars plotted in unexpected places; these were

adjusted to fit the known field conditions and a separate set of coordinates was

kept in the database noting these adjustments.

4. Checking for inconsistencies in the geological codes as well as verifying

minimum-maximum field values. These were verified independently by Caroline

Vallat of Geospark Consulting.

5. The assay data matched the database with the exception of two data entry errors

that were corrected. The sample interval checks encountered three examples

arising from keypunch errors, which were amended.

6. Collar elevations of original collar coordinate data were based on hand-held GPS

readings. No DGPS surveying was done.

7. A digital contour map made in 2006 by GPR (Montréal, QC) for Quinto was

contoured on 1-m intervals; the elevations were interpolated from this topography

and added to the database as corrected coordinate information.

No other errors were discovered that would impact the Mineral Resource estimation.

14.3.1 Density

Density data was compiled by Geospark. A fix value of density was attributing to each

block for each unit. For the block model, the average between low and high value was

given to each bloc inside the units. The densities assigned to the units are tabulated below

(Table 14.1).


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Table 14.1 – Density

Unit Density

Unit 1 2.675

Unit 2 2.575

Unit 3 2.5

Waste 2.725

Specific gravity measurements were taken on 40 samples of crushed core from the 2006

samples in March 2007. The immersion method was used on samples weighing 285 to

315 grams. Total sulphur analyses were done on 38 of the 40 samples by the LECO

method at the same time. The original list of samples selected by AMEC, during the

initial resource estimation in 2007 for Quinto, included 60 samples. Many of the ones not

tested included the higher grade (>10% Cgr) that would have been useful; the reason for

the change is unknown.

The measured density ranges from 2.37 to 3.03 kg/m2. The interplay of density between

increasing graphite, which ranges from 1 to 53.80% Cgr, and sulphur, which ranges from

nil to 15.7%, affect the density used in the model units.

Figure 14.1 shows the relation between %Cgr and density for the 40 measured samples.

The populations for low and high sulphide are distinct albeit close as would be expected,

with a gradual decrease in SG as graphite increases more rapidly than sulphide.

The 2009 model used both high- and low-sulphur variants as units yielding more

complexity than was manageable. The current model was simplified from that data and

included both high- and low-sulphur variants as one unit. The density of the present units

was the simple average of the two sets.


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Figure 14.1 – % Cgr vs. Density

Figure 14.2 shows the same parameters for % S (tot) and density for 38 sample pairs. The

sulphur vs. density shows a variable correlation with increasing % S (tot). The increase in

density is due to the higher proportion of sulphides % vs. Cgr% with lower graphite

grades including more sulphides.

Figure 14.2 – % S (tot) vs. Density

%Cgr vs. Density

0

0.5

1

1.5

2

2.5

3

3.5

0 10 20 30 40 50 60

% Cgr

De

ns

ity

(g

/cc

)

High sulfide = +20%

Low sulfide= < 20%

?

Unit 1b Unit 2b Unit 3b

N = 40 sample pairs

Figure 8

Unit 3a Unit 2a Unit 3a

%S (tot) vs. Density

0

0.5

1

1.5

2

2.5

3

3.5

0 2 4 6 8 10 12 14 16 18

% S (tot)

De

ns

ity

(g

/cc

)

N = 38 sample pairs

Figure 9


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14.3.2 Sample Distribution

The statistics of the graphite samples used in the modeled volumes are shown in Table

14.2 and the grade distribution is shown in Figure 14.3 (normal histogram) and Figure

14.4 (cumulative frequency).

Table 14.2 – Drill Core Samples – Statistics

Sample Count Min Max Mean Median Std. Dev. Var.

Cgr% All Units 599 0.02 52.59 19.13 14.8 15.13 228.99

Cgr% Unit 1 143 0.15 24.47 7.50 6.12 4.88 23.86

Cgr% Unit 2 131 0.06 38.41 15.93 15.94 6.95 48.26

Cgr% Unit 3 228 5.25 52.59 35.00 36.89 10.16 103.18

Cgr% Waste 97 0.02 23.38 3.29 2.15 3.84 14.73

Figure 14.3 – Normal Histogram -% Cgr in All Samples Used in Model


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Figure 14.4 – Cumulative Frequency - % Cgr in All Samples Used in Model

The samples plotted are not the statistical representation of the entire GC zone deposit,

but, form only a subset that was included within the NE GC model. Samples from the

same drill holes that tested rocks outside the model were not included.

The population appears to be two normally distributed groups: one from 0 to ~10% and

the other above 10%, based on the cumulative frequency plot. The histogram shows a

small second population of +31% Cgr material in Units 3a and 3b. The extent of this

population is unknown outside the drill grid. Unit 3 rock elsewhere typically is between

27% and 45% Cgr; the values above 45% Cgr are uncommon.

14.3.3 Geological section and Geological interpretation

Geological model was provided by Lyons and Geospark to Roche as four AutoCAD files

(.dxf). The four units included in that model are based on the graphite content. All units

were imported as a triangulation in GEMS. No errors which will affect the volume

calculation were detected during the interpretation. Due to the complexity of the deposit

and the differences in ductility of the high-grade graphite Unit 3, the geological model

shows a variable continuity between sections. For estimation purpose, the different units

in the geological model have been only used for grade interpolation and not used for the

geostatistics. Geostatistics have been performed in all units together within the deposit

envelope.

The geological modeling procedures included:


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• Geological interpretation and digitizing of lithological boundaries;

• Creation of 3D TIN (triangulated irregular net) solids model;

• Database manipulation;

• Block and grade estimation;

• Classification and reporting of Mineral Resources.

14.3.4 Geological Interpretation and Digitising

a) Section Definitions

The drilling was done on a grid aligned 310, even though the holes themselves

were oriented at 320. Five lines were spaced notionally 50 m apart and were

actually drilled adjacent to or in trenches TR27, TR62, and TR68. Two grid lines

1100NE and 1150 NE straddled TR67 to maintain the 50-m spacing. Holes were

spaced about 50-m notionally apart horizontally on section (Figure 14.5).

Figure 14.5 – Drill Grid Location


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b) Geological Interpretation

Five vertical cross sections at 50-m spacing and four level plans at 50-m elevations

were created by Caroline Vallat with the drill traces, % Cgr, visual% pyrrhotite and

pyrite as colour range bars and lith-codes in text. The sections were in a ± 25-m

depth from the section plane. The boundaries of the geological and mineralised

units were interpreted manually by Lyons. Vallat digitized them in Minesight ™

then created intermediate vertical cross sections at 10-m intervals, synthetic long

sections at 25-m spacing and level plans at 25-m spacing. After initial adjustments,

Lyons and Vallat adjusted the model together.

One of the persistent problems with using lithologies as controls distinct from

mineralisation in this deposit is that the graphite is an integral component of the

host lithology. The beds are visually distinct, but the boundaries are defined over

some width by ranges of grade. The graphite host rock, a quartz-rich quartz-

feldspar-biotite gneiss, does not have any distinctive “key horizons” internal

between the footwall and hanging wall stratigraphy. These give good limits to the

graphite stratigraphy overall, but don’t necessarily resolve potential folds and/or

fault displacements. The graphite lithologies tend to show more folding than

neighbouring rocks do, but there are few controls in the neighbouring rocks to

demonstrate folding in them, either, except at the centimetre- to meter-scale. Thus

the interpretation depended mainly on correlation of graphite rich units with

interspersed internal waste bands (%Gr <4%). These turned out to be relatively

continuous and internally consistent in thickness and extent. Experience from

extensive trenching supports the confidence in the lateral continuity along strike.

However, grades perpendicular to the bedding planes change abruptly and the units

can change rapidly in the dip-plane.

Six units with characteristics are tabulated below:

Table 14.3 – Geological Units Definition

Unit Name % Cgr

Range Flake characteristic (visual) Lithologic Host

Unit 1 4-10 mainly coarse>200µ Qzt, QFB gneiss

Unit 2 >10-27 significant coarse>200µ Qzt, QFB gneiss

Unit 3 >27 very coarse in bands/veinlets; most Gr

is very fine QFB gneiss

Waste <4 isolated medium to coarse Qzt, QFB gneiss

FW – QZT variable generally medium to coarse Qzt±marble, calcsilicate,

gneiss

HW –

QFB_GN variable generally medium to coarse

Variable gneiss w/cinnamon

phlogopite


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Units 1-3 are based primarily on the range of %Cgr grade. The stratigraphic units

are bounding units to the graphite stratigraphy and only are included in the resource

if the mineralisation is in the adjacent Units 1-3. Waste is internal to the Units 1-3

boundaries.

c) Topographic Surface

The GPR topographic model, commissioned by Quinto in 2006, was used to limit

the top of the model.

14.4 Statistics

14.4.1 Length

Basics statistics were run through the model for samples length. The histogram of Figure

14.6 showed the distribution of the sample length. More than 85% of the samples have a

length below 3 metres. The calculated mean for the samples length is 2.35 metres.

Figure 14.6 – Distribution of Sample Lengths

14.4.2 Distribution

Cumulative plot were generated from the raw assays of the Lac Guéret database. A break

in the trend at the Figure 14.7 is observed around 46 Cgr%. This value was used as the

capping grade for the grade interpolation.


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Figure 14.7 – Cumulative Probability Plot

14.4.3 Composite

Composites were calculated from top to bottom of the drillholes. The composites were

calculated for a maximum of 3 metres inside the modeled units .The units are based on

Cgr grades. The composite database was generated with the mining software GEMS.

Composite were calculated from the raw Cgr assay value.

To avoid the creation of small composite interval inside the mineralized zone, a minimal

value of 50% of the composite size of 3 metres was needed to create the composite. As a

result, all composites with a length value under 1.50 metres were excluded from the

database.

Table 14.4 shows the comparison of the basics statistics between raw assay and the

3 metres selected composite, in both case only value inside the geological model were

used.

Composite data were exported as a point value corresponding to the middle of the

interval. A zero value was attributed to interval with no data (no Cgr assay recorded in

the database).


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Table 14.4 – Downhole Composites vs. Raw Assay Data

Down Hole Composites vs. Raw Assays inside geological units

3 metres composites Raw assays

Number of samples 719 906

Minimum Value 0 0

Maximum Value 53.79 53.89

Average 19.65 18.66

Standard Deviation 14.66 14.81

14.4.4 Spatial analysis: Variography

Variography was run on the composite and includes all units. Semi-variograms were

created using the geostatstical tools in GEMS. Due to the geology provided, different

techniques were considered to analyse the variance of the grade throughout the model.

All composite data were analysed together. This was done to allowed the analysis to take

as much data available and this without the possible bias imposed by the units already

base graphite content.

The variography study was performed on all composites. Variography was run in all

directions with GEMS to find the best semi-variograms. Search orientation of the ellipse

was determined by the semi-variogram as a result of a principal azimuth of 165, a

principal dip of -20 deg and intermediate azimuth of 150 deg. Anisotropy was interpreted

with the semi variogram and set to 60 metres along the x axis, 40 metres along the y and

50 metres along the z axis. To interpolate the search ellipse, a minimum of one octant

with a maximum of three samples by octant was used. This rule allowed the search

ellipse to interpolate a maximum of blocks, these parameters was taken to classify the

resource later in the process. All relevant parameters of the search ellipse are in the Table

14.5. Two methods were used: inverse distance (ID) and ordinary kriging (OK). The two

methods gave the same results with respects to resource categories, grade, and tonnes.

The ordinary kriging method yielded a smoother continuity that conformed better to

Lyons’ geological experience with Lac Guéret and other graphite deposits in the Gagnon

Terrane.

Table 14.5 – Semi-Variogram Parameters

Semi-Variogram Parameters

Number of structures 1

Nugget 30

Sill 215

Range in X 60

Range in Y 40

Range in Z 50


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Semi-Variogram Parameters

Principal Azimut 165

Principal Dip -20

Intermediate Azimut 150

Figure 14.8 – Major Axis Semi-Variogram

Figure 14.9 – Semi-Minor Axis Semi-Variogram


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14.4.5 Block Model

A 3D block model was constructed in GEMS based on the exploration database and the

geological domains furnished by Geospark. The block model is aligned on the general

trend of the geological units. Parameters of the block models are listed below:

• Origin: 49 53 25 E, 56 63 775 N, 700 Elev.;

• Rotation: 40 degrees counter clockwise;

• Number of blocks: 220 columns, 225 rows, 130 level;

• Block size: 3 metres * 3 metres * 3 metres.

The following attributes are used in the block model: rock type, density, Cgr%, class,

distance, drilling, octant, samples. Rock type and density value were assigned during the

block creation with the given geological units. An air value with a density of 0 was

attributed to all blocks above the rock surface. Rock type was used during the

interpolation as boundaries.

14.4.6 Grade Interpolation

The grade interpolation was completed by using the 3 metres composites for Cgr% in

GEMS. Composites were assigned a rock type corresponding to the unit. Only

composites tagged with the rock type were used to interpolate the same unit. All units

were interpolated with the method of ordinary kriging. Interpolation was restricted inside

the search ellipse defined with the parameters of the variogram (see Table 14.5). All

grade values exceeding 46% Cgr were capped at 46% Cgr. A minimum of two samples

and a maximum of 25 samples were used to estimate the grade. Figure 14.10 and Figure

14.11 show a typical vertical section and plan view of the interpolated grade.


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Figure 14.10 – Vertical Section 1000NE of the Interpolated Grade Looking N40E


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Figure 14.11 – Plan View of the Interpolated Grade (-40 m from the Surface)


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14.4.7 Mineral Resource Classification

The mineral resource was classified inside the block model in GEMS. The Mineral

Resource is classified under the Measured, Indicated, and Inferred categories according

to the CIM guidelines. Resource is classified according to the confidence of the

geological continuity. Following the recommendation of Lyons, the resource

classification inside GEMS was done following statistical information by blocks

combined with field experience. All the following attributes have been gives to each

block during the interpolation: number of drillholes used to interpolated, number of

octants used for interpolate, number of composites used, and the distance of the

composites used. Relevant factors such as confidence in the density and topographic

surface was considered as well during the process. Figure 14.12 and Figure 14.13 show a

typical vertical section and plan view of the categories.


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Figure 14.12 – Vertical Section 1100 NE of the Categories Looking N40E


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Figure 14.13 – Plan View of the Categories (at the Surface)


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14.5 Mineral Resource Estimation

14.5.1 Global Mineral Resource Estimates

The mineral resource estimate presented in this report is effective as of 21 June 2012. The

following classifications were used: Measured, Indicated, and Inferred. Inferred,

Indicated, and Measured categories of Mineral Resources are recognized in order of

increasing geological confidence. Mineral Resources are not equivalent to Mineral

Reserves as no economic viability has been demonstrated. In addition, there can be no

assurance that Mineral Resources in a lower category may be converted to a higher

category, or that Mineral Resources may be converted to Mineral Reserves.

All mineralised zones were used in this estimate. Table 14.6 shows the Mineral

Resources estimated inside the mineralised zones with a 4% cut-off.




(% Cgr)

Measured (M)

Unit 1 (4 to 10% Cgr) 31,200 7.82

Unit 2 (10 to 27% Cgr) 122,800 14.85

Unit 3 ( > 27 % Cgr) 144,900 36.72

All units 298,900 24.39

Indicated (I)

Unit 1 (4 to 10% Cgr) 2,672,500 8.09

Unit 2 (10 to 27% Cgr) 2,089,200 16.83

Unit 3 ( > 27 % Cgr) 2,535,300 36.20

All units 7,297,000 20.24

M + I

Unit 1 (4 to 10% Cgr) 2,703,700 8.67

Unit 2 (10 to 27% Cgr) 2,212,000 18.30

Unit 3 ( > 27 % Cgr) 2,680,200 36.96

All units 7,595,900 20.40

Inferred

Unit 1 (4 to 10% Cgr) 1,272,600 7.56

Unit 2 (10 to 27% Cgr) 714,200 17.54

Unit 3 ( > 27 % Cgr) 771,500 33.10

All units 2,758,300 17.29

Notes:

- Effective as of June 22, 2012.

- Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. - Numbers may not add up due to rounding.


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14.5.2 Potential Liabilities affecting Mineral Resource Estimation

There are no known environmental risks which can affect the Mineral Resource

estimates.

There are no known permitting risks which can affect the Mineral Resource estimates.

There are no known legal risks which can affect the Mineral Resource estimates.

There are no known title risks which can affect the Mineral Resource estimates.

There are no known taxation risks which can affect the Mineral Resource estimates.

The known socio-economic risks which can affect the Mineral Resource estimates is the

obligation to reach agreements with Pessamit Innu First Nation.

The known marketing risks involve demonstration that the deposits and metallurgy can

supply markets with desired products.

There are no known political risks or other risk factors that can affect the Mineral

Resource estimates.


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15.0 MINERAL RESERVE ESTIMATES

No Mineral Reserves have been estimated for the Lac Guéret Graphite Project.


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16.0 MINING METHODS

Met-Chem evaluated the potential for an open pit mine at Lac Guéret to produce

50,000 tonnes of graphite concentrate per year. This section of the report discusses the pit

design, mine plan and fleet requirements that were estimated for the PEA and which form

the basis for the Mine Operating and Capital Cost estimate presented in Section 21.

Figure 16.1 provides a general layout of the mine.

16.1 Mineral Resources

The Mineral Resources used for the PEA are based on the July 3, 2012 “NI 43-101

Report, Technical Report on the Lac Guéret Graphite Project” completed by Roche Ltd.

Table 16.1 summarizes the Mineral Resource estimate.


Categories Tonnes (All

units)

Grade

(% Cgr)

Measured (M) 298,900 24.39

Indicated (I) 7,297,000 20.24

M + I 7,595,900 20.40

Inferred 2,758,300 17.29

A 3-Dimensional Geological Block Model for the Lac Guéret Graphite Project was

supplied to Met-Chem by Roche Ltd. in the form of a comma delimited text file. The text

file contained the coordinates of each block in the model as well as their graphite grade

value, density and resource classification. The block model is composed of blocks that

are 3 m x 3 m x 3 m high. Met-Chem imported this information into MineSight®

Version

7.0 to create a 3-Dimensional mine planning block model. MineSight® is commercially

available software that has been used by Met-Chem for the past 25 years. The mine

planning model was checked to ensure the validity and the integrity of the import.

Roche Ltd. also supplied a topographic surface and a surface representing the bottom of

the overburden contact. All blocks between these surfaces were considered as

overburden. Overburden is defined as loose sand and gravels that can be excavated

without the need for drilling and blasting.


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Figure 16.1 – Mine General Layout


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16.2 Mining Method

The mining method selected for the Project is a conventional open pit drill and blast

operation with articulated haul trucks and wheel loaders.

Vegetation, topsoil and overburden will be stripped and stockpiled for future reclamation

use. The mineralization and waste rock will then be drilled, blasted and loaded into

articulated haul trucks with front end wheel loaders. The mineralized material will be

hauled roughly 1.4 km to the primary crusher and the waste rock will be hauled to the

dump.

To properly manage water infiltration into the pit, a sump will be established at the

lowest point on the pit floor. Water collected in this sump will be pumped to a collection

point at surface.

The mine will operate year round, four (4) days per week, ten (10) hours per day. Since

the mill will operate seven (7) days per week, a run of mine stockpile will be maintained

to provide a constant supply of feed to the crusher. During the three (3) days when the

mine is not operating, the crusher will be fed by one of the mine’s front end loaders from

the stockpile. The mine fleet requirements and manpower are based on this work

schedule.

16.3 Pit Optimization

Open pit optimization was conducted on the deposit to determine the economic pit limits.

The optimization was carried out during the initial stage of the Project using the initial

cost, sales price and pit and plant operating parameters. The pit optimization was re-

evaluated after a preliminary mine plan was completed and the cost, sales price and pit

and plant operating parameters were better defined.

The pit optimization was done using the Economic Planner optimizer of MineSight®

. The

optimizer operates on a net value calculation for all the blocks in the model, i.e. revenue

from sales of graphite concentrate less operating cost. The formula is presented below:

Concentrate Tonnage = Mineralized Tonnage x Recovery x Grade of Feed /

Concentrate Grade.

Revenue = Concentrate Tonnage x Sales Price.

Net Value = Revenue – (Mining Cost + Processing Cost + Transportation Cost + General

& Administration Cost).

Since this study is at a PEA level, NI 43-101 guidelines allow inferred mineral resources

to be used in the optimization and mine plan. Table 16.2 presents the pit optimization

parameters.


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Table 16.2 – Pit Optimization Parameters

Item Value Units

Mining Cost – Overburden 5.00 $/t (mined)

Mining Cost – Mineralization / Waste Rock 6.00 $/t (mined)

Processing Cost 50.00 $/t (milled)

Concentrate Transport Cost 20.00 $/t (conc.)

General, Admin & Infrastructure Cost 60.00 $/t (conc.)

Sales Price 1,275 $/t (conc.)

Plant Recovery 96.6 %

Concentrate Grade 93.7 %

Overall Pit Slope 45 Deg

* The cost parameters are preliminary estimates for developing the economic pit and should not be

confused with the operating costs subsequently developed for the PEA and given elsewhere in this

report.

16.3.1 Cut-off Grade

Using the economic parameters presented above, Met-Chem calculated a cut-off grade of

4.1% Cgr for the Project. The cut-off grade is used to determine whether the material

being mined will generate a profit after paying for the processing, transportation and

administrative costs. Material that is mined below the cut-off grade is sent to the waste

dump.

The cut-off grade of 4.1% confirms the minimum grade of 4.0% used for the Mineral

Resource estimate.

16.3.2 Pit Optimization Results

The optimized pit shell contains 10.1 Mt of mineralization with an average Cgr grade of

19.9%. The proportion of Inferred Mineral Resources that are contained within this pit

shell is 25%.

The optimized pit shell does not account for mining dilution and mining recovery, nor

does it provide an access ramp into the pit. These items are discussed in the Mine Design

section of this report.

Figure 16.2 presents a typical section through the deposit showing the optimized pit shell.

Upon completion of the PEA, Met-Chem confirmed that the pit optimization exercise

was still valid using the updated cost estimate developed in the Study.


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Figure 16.2 – Pit Optimization Results

At an annual production rate of 50,000 tonnes of graphite concentrate, this mineralization

would be sufficient for a 40 year mine life. The mine plan has been limited to 22 years

for this PEA since the extra duration has little effect on the Project’s economics.

16.4 Mine Design

Met-Chem designed a pit that resulted in a 22 year mine life for the Project. The

following section provides the parameters that were used for the detailed pit design.

16.4.1 Material Properties

Table 16.3 defines the material properties used for the mine design and mine plan. The

densities for the mineralization and waste rock were supplied by Roche Ltd. with the

block model while the remaining parameters were taken from Met-Chem’s internal

database. These properties are important for determining the mine equipment fleet

requirements.

Table 16.3 – Material Properties

Material Type

In-Situ Dry

Density

(t/m3)

Moisture

Content (%)

Swell

Factor (%)

Overburden 2.10 5 30

Waste 2.75 5 30

Mineralization 2.5 – 2.675 5 30


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16.4.2 Geotechnical Pit Slope Parameters

Met-Chem used an overall pit slope of 45° for the final pit walls. The final pit wall

includes an 8.8 m catch bench for every two (2), 6 m high benches and accounts for a 75°

face angle. This design is based on Met-Chem’s internal database for similar deposits in

the region. Met-Chem recommends a complete pit slope analysis if the Project advances

to the Feasibility stage. The pit wall configuration is illustrated in Figure 16.3. A

minimum mining width of 30 m has been considered for in the pit design for working

areas.

Figure 16.3 – Pit Wall Configuration

16.4.3 Haul Road Design

The ramps and haul roads were designed with an overall width of 15 m. For double lane

traffic, industry practice indicates the running surface width to be a minimum of 3 times

the width of the largest truck. The overall width of a 28 tonne articulated haul truck is

2.9 m which results in a running surface of 8.6 m. The allowance for berms and ditches

increases the overall haul road width to 15 m.

A maximum ramp grade of 10% was used. This grade is acceptable for a 28 tonne

articulated haul truck.


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16.4.4 Mine Dilution and Mining Recovery

During the mining operation, material at the mineralization and waste rock contacts will

not be separated perfectly. This effect is accounted for as either dilution, mining recovery

or a combination of both. A mining recovery of 98% has been applied to account for this.

In other words, it was assumed that 2% of the mineralized material within the pit will be

sent to the waste dump rather than the plant.

16.4.5 Pit Design

The pit that has been designed for the Lac Guéret deposit is approximately 400 m long

and 220 m wide at surface with a maximum pit depth of 100 m. The total surface area of

the pit is roughly 7 ha. The overburden thickness averages 2 m with a range of 0 m to

6 m.

The ramp accesses the pit at the 502 m elevation on the East side. The ramp descends

down the South wall and incorporates switchbacks at the 484 m and 460 m elevations.

The lowest point in the pit is at the 448 m elevation.

The pit includes 3,871 kt of Mineral Resources with an average Cgr grade of 27.4% and

has a strip ratio of 0.8:1. 328 kt of overburden and 2,619 kt of waste rock are included in

the pit. The proportion of Inferred Mineral Resources that are contained within this pit

shell is 13%.

The remaining Mineral Resources that were not included in the pit design for the 22 year

mine life has an average Cgr grade of 15.3%. These resources can be mined at a strip

ratio of 1.8:1. Figure 16.4 shows the Lac Guéret pit design.

16.4.6 Dump Design

A waste rock dump was designed on the northeast side of the pit beyond the limits of the

mineralized zone. The waste dump was designed with an overall slope of 25° to account

for the revegetation that is required with the closure plan. The dump has a capacity of

1.2 million m3, a top elevation of 544 m and a footprint area of 8.5 ha. The maximum

height of the dump is 40 m.

An area of roughly 4 ha on the northwest side of the pit has been dedicated for the topsoil

and overburden stockpiles. These stockpiles will be 15 m high. The dump and stockpile

layouts are shown on Figure 16.1.


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Figure 16.4 – Lac Guéret Pit Design


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16.5 Mine Planning

A production schedule (mine plan) was developed for the Project to produce 50,000

tonnes of graphite concentrate per year. Using the mill recovery of 96.6% and a targeted

concentrate grade of 93.7% results in an average run of mine feed of 176,000 tonnes per

year (482 tpd) at an average Cgr of 27.4%.

A pre-production phase of eight (8) months has been planned to achieve the following

objectives:

• Clear vegetation and topsoil;

• Supply road construction material;

• Supply construction material for the tailings dyke;

• Strip overburden and waste rock to expose the mineralization;

• Stockpile 5,000 tonnes of feed ahead of the crusher.

The schedule produces 45,000 tonnes of concentrate in the first year of production which

accounts for a plant ramp up.

The mine plan has been developed by advancing several benches concurrently. This will

allow for the blending of higher and lower grade material. An average of 1,580 tonnes of

material will be mined each day during the 22 year mine life.

The mine production schedule is presented in Table 16.4. End of period maps showing

the pit and dump advances are provided in the May 2013 Preliminary Economic

Assessment Report.


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Table 16.4 – Mine Production Schedule (in ‘000 t)

Description Units Pre Year Year Year Year Year Year Year Year

Total Prod 01 02 03 04 05 6 - 10 11 - 15 16 - 22

Concentrate kt 0 45 50 50 50 50 250 250 350 1,094

44

ROM to Plant kt 5 164 183 184 187 188 961 838 1,161 3,871

Cgr % 26.4 26.4 26.3 26.2 25.8 25.8 25.2 28.9 29.2 27.4

Total Waste kt 294 212 146 203 244 203 693 517 434 2,947

Overburden kt 219 0 0 109 0 0 0 0 0 328

Waste Rock kt 75 212 146 93 244 203 693 517 434 2,619

Total Material

Moved kt 299 376 329 387 431 391 1,653 1,356 1,595 6,817

Strip Ratio

n/a 1.3 0.8 1.1 1.3 1.1 0.7 0.6 0.4 0.8


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16.6 Mine Equipment Fleet

The mine will be operated with an owner fleet. Table 16.5 presents the mine equipment

fleet that is required for the Project. The table identifies the Caterpillar equivalent to give

the reader an appreciation for the size of each machine. Fleet selection and requirements

are discussed in this section of the report.

Table 16.5 – Mining Equipment Fleet

Equipment Model Description Units

Haul Truck CAT 730 Payload – 28.1 tonne 2

Loader CAT 966K Payload – 7.8 tonne (3.9 m3) 2

Production Drill CAT MD5050 Hole Diameter – 102 mm 1

Track Dozer CAT D6T Power – 250 kW 1

Road Grader CAT 160M Power – 163 kW 1

Boom Truck1 n/a n/a 1

Pickup Truck n/a n/a 4

Lighting Plant n/a 8 kW 4

1 The boom truck will be equipped with a water tank to spray the roads for dust suppression.

16.6.1 Haul Trucks

The haul truck selected for the Project is an articulated off road truck with a nominal

payload of 28.1 tonnes. This size truck was selected since it matches well with the

production requirements and offers the durability that is required for a mining operation.

The following parameters were used to calculate the number of trucks required to carry

out the mine plan. These parameters result in 1,458 working hours per year for each

truck.

• Mechanical Availability – 90%;

• Utilization – 90%;

• Nominal Payload – 28.1 tonnes (16.9 m3 heaped);

• Shift Schedule – One (1), ten (10) hour shift per day, four (4) days per week;

• Operational Delays – 55 min/shift (this includes 15 minutes for equipment

inspection and 40 minutes for lunch and coffee breaks. Refuelling will done during

breaks or at the end of the shift);

• Job Efficiency – 95% (57 min/h; this represents lost time due to queuing at the

shovel and dump as well as interference along the haul route);


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• Rolling Resistance – 3%.

Haul routes were generated for each period of the mine plan to calculate the truck

requirements. These haul routes were imported in Talpac©

, a commercially available

truck simulation software package that Met-Chem has validated with mining operations.

Talpac©

calculated the travel time required for a 28.1 tonne haul truck to complete each

route.

Haul productivities (tonnes per work hour) were calculated for each haul route using the

truck payload and cycle time. The load time is calculated using a wheel loader with a

3.9 m3 (7.8 tonne) bucket as the loading unit. This size wheel loader which is discussed in

the following section loads a 28.1 tonne haul truck in four (4) passes.

Table 16.6 shows the cycle time and productivity for the mineralization and waste haul

routes in Year 5 as an example.

Table 16.6 – Truck Productivities (Year 5)

Material Cycle Times (min) Productivity

Travel Spot Load Dump Total Loads/h t/h

Mineralization 8.70 0.75 3.00 1.00 13.45 4.46 163

Waste 3.30 0.75 3.00 1.00 8.05 7.45 272

Truck hour requirements were calculated by applying the tonnages hauled to the

productivity for each haul route.

16.6.2 Loaders

The main loading machine selected for the Project is a wheel loader with a 3.9 m3

(7.8 tonne) bucket. This size loader is a good match for a 28.1 tonne haul truck and is a

suitable loader to handle the production requirements as well as the face heights

expected. Although one (1) loader is sufficient to mine the tonnages presented in the

mine plan, a second loader has been added to the fleet to manage the stockpile rehandling

and as a backup machine. For mine planning purposes, Met-Chem assumed that 65% of

the run of mine feed will be stockpiled and rehandled. This assumption is based on the

following:

• Since the mine will only be operating four (4) days per week, 43% of the material

must be fed to the crusher during the other three (3) days;

• Since the operation is very small, there may be extended periods of waste stripping.

During this time, the crusher will be fed from the stockpile.

The stockpile will be located close to the crusher pad and will have a capacity of 5,000

tonnes (10 days). A loader cycle time of 3.0 minutes has been assumed for the rehandle

calculations.


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16.6.3 Drilling and Blasting

The mineralized material and waste rock will be drilled and blasted. Blast patterns have

been identified for the Project. Production drilling will be done using a hydraulic track

drill with 102 mm (4 inch) diameter holes. One (1) drill is required for the Project,

assuming an 85% mechanical availability, a 90% utilization and a penetration rate of

25 m/h. There will typically be one blast per week for approximately 6,000 t of material.

Blasting will be carried out by the mine operator using both packaged explosives and

ANFO bags that will be transported to site by the supplier. It was assumed that 60% of

the explosives will be packaged and 40% will be ANFO. The explosives, detonators,

boosters and cord will be stored in the explosives magazine. The location of the magazine

is shown on Figure 16.1.

16.7 Mine Dewatering

Prior to mining activities, a ditch will be established around the perimeter of the pit to

intercept water before it infiltrates into the pit. Rain water and ground water that is

collected in the pit will be collected in an in-pit sump and pumped to a settling pond at

surface.

A ditch system will be established around the footprint of the waste dump and stockpiles.

Water collected in these ditches will be directed to settling ponds. All water that is

collected in the ditches and sumps will be sampled prior to discharge into the

environment or treated if required.

Met-Chem recommends that a hydrogeological study be carried out if the Project

advances to the Feasibility stage. This study will provide an estimate of the quantity of

water that is expected to be encountered during the mining operation.

16.8 Manpower Requirements

The mine workforce for the Project is 11 employees. These employees will work four (4)

days per week, ten (10) hours per day. The operators will be versatile employees so they

can operate all types of equipment. Table 16.7 summarizes the mine manpower

requirements.


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Table 16.7 – Mine Manpower Requirements

Description # Employees

Truck Operator 2

Loader Operator 2

Drill Operator / Blaster 1

Dozer / Grader Operator 1

Mechanic1 2

Mining Engineer / Superintendent 1

Geologist 1

Surveyor 1

Total Mine Workforce 11 1 The number of mechanics is increased to 3 in Year 6.


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17.0 RECOVERY METHODS

The graphite concentrate will be recovered by flotation process. The combination of

primary coarse and rougher flotation followed by cleaner column flotation will recover

96.6% of the graphite at an average graphite grade of 93.7% carbon.

17.1 Process Plant

The processing area can be divided into crushing, grinding, beneficiation, dewatering,

product screening and packaging, and tailings disposal. The concentrator is designed to

produce 50,000 dry tonnes per year of saleable graphite concentrate in four (4) product

size classes, +50 mesh (300 microns), –50+80 mesh (180 microns), +150 mesh

(105 microns) and –150 mesh. It is expected that other size classes will be available as

needed once the plant is operating.

17.1.1 Design Criteria

All throughput rates are based on the concentrate production of 50,000 dry tonnes of

graphite concentrate. The graphite recovery of 96.6 percent is based on test work results,

carried out as part of preliminary metallurgical test work for flow sheet development.

The beneficiation plant will operate for 24 hours per day, seven (7) days per week,

52 weeks per year. For the processing facilities the operating percentage is 92%, while

the crusher will operate at 33.3%. The concentrator capacity has been established at an

average rate of 482 dry tonnes per day or at a nominal throughput rate of 21.8 dry tonnes

of run of mine material per hour.

The crusher, concentrator and the product packaging facilities have been sized to meet

the parameters in Table 17.1 as well as the mass balance and the water balance that were

prepared.

Table 17.1 – Design Criteria

Plant Capacity

Parameter Units Value

Total ROM processing rate dry tonnes per year 176,000

Crusher operating time percentage 33.3

Nominal crushing rate dry tonnes per hour 60.3

Concentrator operating time percentage 92.0

Nominal processing rate dry tonnes per hour 21.8

Design concentrate production rate dry tonnes per year 50,000

Combined graphite grade percentage 93.7

Total graphite recovery percentage 96.6


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17.1.2 Mass Balance and Water Balance

The process plant mass balance has been calculated based on the flow sheet developed

and the design criteria previously discussed. Table 17.2 below shows a summary of the

Mass Balance in terms of throughput rate in “wet” tonnes per hour.

Figure 17.1 shows a more detailed water balance. The throughput and flows are nominal

rates in tph and m3/h. One (1) m

3/h is one (1) tph for water.

Table 17.2 – Lac Guéret Process Mass Balance

Streams Entering the System Streams Exiting the System

Streams

Dry

Solids

(tph)

Water

(m3/h)

Total

Mass

(tph)

Streams

Dry

Solids

(tph)

Water

(m3/h)

Total

Mass

(tph)

SAG Mill Feed to

Concentrator 21.8 1.2 23

Evaporation from

Dryer - 1.1 1.1

Fresh Water From

Lac Galette - 12.0 12.0 Final Concentrate 6.2 0.0 6.2

Reclaim Water

from Tailings Pond - 28.1 28.1 Final Tailings 15.6 40.2 40.2

Total Entering 21.8 41.3 63.1 Total Exiting 21.8 41.3 63.1

17.2 Flow sheets and Process Description

A simplified flow sheet of the process is presented in Figure 17.2 summarizes the

different steps of the processing plant.

This flow sheet, being very general, is included to follow the detailed description of the

process areas.


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D

Area IN OUT DIFF

25.4 Crushing & FOB 25.4 25.4 0.0

Run Of Mine 1st

Grind & Coarse 786.7 786.7 0.0

2nd

Grind & Rougher 701.0 701.0 0.0

LEGEND Pol ishing & Cleaner 576.7 576.7 0.0

25.4 Average flow in m3/d Conc. Dewatering 266.2 266.2 0.0

Water in slurry stream Bagging System 0.1 0.1 0.0

Water stream Final Ta i l ings 887.3 887.3 0.0

25.4 Mi l l feed bin discharge Process Water Tank1128.1 1128.1 0.0

Process Plant 911.5 911.5 0.0

Differences may be due to rounding

761.4

Water to Primary Grinding

Coarse Concentrate 351.0

435.7 Coarse Ta i l ings

Fresh Water Make-up

265.0

265.3 Tota l Recycled Water

Water to Secondary Grinding 863.1

20

Rougher Ta i l s 574.3

126.7 Rougher Concentrate

98.9

Di lution water

Cleaner Ta i l s 313.0

263.7 Cleaner Concentrate

Di lution water

Dryer Evaporation 2.5

24.0

242.0

6 Thickener O / F

0.1 Dry Concentrate

Final Tailings 887.3

0.1

Final Screened Concentrate

Tailings Pond 621.1 Recla im Water

266.2 Accumulation within Ta i l ings

Revision:

April 24 th 2013

WATER BALANCE

2012-021

Preliminary Economic Assessment - Lac Guéret Project

Mason Graphite

Evaporation / Precipi tation

1128.1

Process

Water Tank

Crushing and

Mill Feed Bin

Primary Grinding

and Coarse Flotation

Secondary Grinding

and Rougher Flotation

Polishing

and Cleaner Flotation

Concentrate Dewatering (Thickening,

Filtering and Drying)

Dry Screening

and Bagging Systems

Figure 17.1 – Water Balance


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Figure 17.2 – Simplified Flow Sheet of Crushing and Processing Plant


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17.2.1 Crushing

The Run of Mine (ROM) material, containing 27.4% graphite, with a moisture content of

5%, will be dumped into a feed hopper by the mine trucks. A grizzly on top of hopper

minimizes oversize boulders going to the Jaw crusher. A rock breaker, on the hopper

breaks the oversize boulders. A vibrating grizzly feeder feeds a Jaw crusher and the

crushed material, with a maximum size of 155 mm, falls onto a sacrificial conveyor,

which discharges the crushed material onto the SAG mill feed bin conveyor. The crushed

material from the crushing plant will have a particle size of 80% less than (P80) 93 mm.

There will be provision for a ten (10) days ROM of mine stockpile at the crusher.

17.2.2 Primary Grinding and Coarse Flotation

A SAG mill grinds the crushed material received from the SAG mill feed bin via two belt

feeders under the bin. The SAG mill operates in closed circuit with a screen. SAG mill

discharge is pumped to a vibrating screen with 2.0 mm sieve openings. The screen

oversize falls by gravity back into the SAG mill. The screen undersize (P80 = 840

microns) is pumped to the coarse flotation circuit. The concentrate from the coarse

material flotation is pumped to the primary cleaner circuit (the Polishing mill #1

discharge pump box), while the tailings are pumped to the secondary grinding circuit (the

ball mill discharge pump box).

The SAG mill will use five-inch steel grinding balls. Lime will be added to the mill as pH

modifier. The flotation reagents are kerosene as collector and MIBC as frother.

Coarse flotation is a modified flash flotation and is done to maximize the recovery of

large graphite flakes.

17.2.3 Secondary Grinding and Rougher Flotation

The ball mill operates in closed circuit with a screen having screen apertures of 0.50 mm.

The oversize returns to the ball mill for grinding, while the undersize is pumped to the

rougher flotation cells. The rougher concentrate is pumped to the same location as the

coarse concentrate to the primary cleaner circuit (the Polishing mill #1 discharge pump

box). The rougher tailings are the main part of the final tailings and are pumped to the

tailings pond.

The ball mill will use three-inch steel grinding balls. The ball mill ground product has a

P80 = 185 microns and is pumped to the rougher flotation circuit.

17.2.4 Primary Cleaning Flotation circuit

The upgrading process consists of staged polishing, sorting and column flotation. The

concentrate from coarse flotation and the rougher concentrates combined in the polishing

mill #1 pump box and then are pumped to the polishing mill#1 cyclone cluster. The

cyclone underflow feeds polishing mill #1. The cycloning step controls the desired pulp

density at the polishing mill. The polishing discharge is re-combined with the polishing

mill #1 cyclone overflow and is pumped to the first primary cleaner column. The first


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cleaner concentrate is pumped to the second primary cleaner column. The second primary

cleaner column concentrate is pumped to the secondary cleaning circuit. The tailings

from both primary cleaning columns are pumped to the primary cleaner scavenger

flotation cells for scavenging unrecovered graphite from the cleaner columns. The cleaner

scavenger concentrates are pumped back to the polishing mill #1 cyclone feed pump box,

while the primary cleaner scavenger tailings join the rougher tailings to be pumped to the

tailings pond.

Polishing mills will use a one half-inch ceramic media which scour the surfaces of the

minerals with minimal size reduction.

17.2.5 Secondary Cleaning Flotation Circuit

The second primary cleaner column concentrate is sorted for separate upgrading in the

secondary cleaning flotation circuit. The concentrate is pumped to a screen with 50 mesh

(300 microns) screen openings. The screen oversize, +50 mesh, is part of the final

product and is pumped to the final graphite concentrate holding tank, while the undersize,

–50 mesh, will get upgraded in two separated size fractions. Therefore the undersize

feeds a second screen with 80 mesh (180 microns) apertures.

The second screen oversize, +80 mesh, is sent to the polishing mill #2, while the

undersize (–80 mesh) is pumped to polishing mill #3 cyclone feed pump box. The

polishing mill #2 discharge is cleaned in a single-stage cleaning step using a flotation

column. The concentrate from the +80 mesh column is final product and is pumped to the

graphite concentrate thickener. The +80 mesh column tailings are reprocessed using +80

mesh secondary cleaner scavenger flotation cells. The +80 mesh scavenger concentrate

return to polishing mill #2, while the tailings are pumped to the polishing mill #3 cyclone

feed pump box.

The second screen undersize, –80 mesh, flows into the polishing mill #3 cyclone pump

box. The cyclone feed pump box feeds the polishing mill #3 cyclone cluster. The cyclone

underflow enters polishing mill #3 and will be scoured, while the overflows by-passes

polishing mill #3 and is combined with the polishing mill discharge. This combined

discharge is pumped to two-stage cleaning process using two (2) secondary cleaner

flotation columns operating in series. The –80 mesh column concentrate is pumped to the

concentrate thickener. The tailings from both cleaner columns are sent to –80 mesh

secondary cleaner scavenger flotation cells. The –80 mesh scavenger concentrate is sent

back to the polishing mill #3 for more scouring. The –80 mesh cleaner scavenger tailings

are pumped to the rougher tailings pump box before being pumped to the tailings pond.

17.2.6 Dewatering (Thickening, Filtration and Drying)

Graphite concentrates, from both +80 mesh cleaner column and –80 mesh second cleaner

column, are pumped to the concentrate thickener. The thickened underflow pulp is

pumped to the final graphite concentrate holding tank, where it is combined with the


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coarser +50 mesh concentrate. The thickener overflow is sent to the process water tank

for water recycling.

The holding tank feeds the pressure filter for further moisture reduction. The filtered

concentrate is fed to a flash dryer for reducing the moisture to 0.1%. The dried

concentrates are stored in a bulk graphite concentrate holding bin prior to screening into

different sized products.

17.2.7 Dry Screening or Product Sorting

Graphite will be sold in four (4) size fractions, +50 mesh, +80 mesh, +150 mesh and –

150 mesh. Therefore dried graphite concentrates are sorted in three (3) stages. Stage 1

uses a vibrating screen with 50 mesh openings. The +50 mesh product is stored in a

graphite flake bin while the –50 mesh product is further screened on vibrating screen 80

mesh openings. Now the +80 mesh product is stored in coarse graphite bin while the –80

mesh product is screened on a vibrating screen with 150 mesh openings. The +150 mesh

product is stored in intermediate graphite bin, while the –150 mesh product is stored in

fine graphite bins.

The graphite flake (+50 mesh), the coarse graphite (–50 mesh +80 mesh) and the

intermediate graphite (–80 mesh +150 mesh) products contain more than 96% carbon.

The fine graphite (–150 mesh) contains 91.7% carbon. The overall graphite recovery is

over 96.6%.

17.2.8 Final Product Packaging

Graphite concentrate bagging circuit is required for preparing the concentrates for

shipping. Concentrates are bagged in two (2) customised bags, the 1-tonne super sack and

the 25-kg bags prior to shipping to the clients. The bagging system will have two (2)

1-tonne super sack packaging units and one (1) 25-kg bagging unit. All bags will be

weighed and stretch wrapping will be available when required.

17.2.9 The Final Tailings

The final tailings are pumped to the tailings pond approximately 3.5 km from the

processing plant. Seventy percent of the water in tailings slurry is returned to the process

water tank via polishing pond and reclaim water pumps.

17.3 Utilities

17.3.1 Concentrator Water Services

The water consumption is based on concentrator plant average water consumption per

day.

a) Fresh Water

Lac Galette will be the main water source of fresh water for the camp, office

building and as make-up water for the concentrator. Fresh water flow rate to the

concentrator will be 265 m3/d.


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b) Process Water

There are three (3) sources contributing to the process water; concentrate thickener

overflow, reclaim water from the polishing pond and fresh water make-up from Lac

Galette. The total process water is approximately 1,128 m3/d, of which about

242 m3/d is thickener overflow, about 631 m

3/d reclaim water is recycled from the

polishing pond and the remainder, approximately 265 m3/d, comes from fresh

water.

c) Gland Water

The gland water system has a separate 3.0 m diameter by 3.6 m high gland water

tank. The gland water will be distributed using high pressure horizontal water

pumps.

17.3.2 Concentrator Compressed Air

Air systems will support the air requirement for the process plant. High pressure air will

be required for plant air, flotation columns and pressure filter. Medium and low pressure

air will be required for flotation.

17.4 Plant Layout

The crusher building is located to the northeast of the process plant. The jaw crusher is

installed in a concrete and steel structure building, approximately 18 m long by 12 m

wide.

The crusher discharge conveyor is inclined at an angle of 15° to reach the crushed

material bin and process plant.

The concentrator building is conventional and is divided into three (3) main areas:

• Grinding and classification area;

• Flotation, Thickening and Filtration area;

• Concentrate Drying, Graphite Screening, Bagging and Load Out area.

The main building is L shaped, with the Grinding/Flotation area about 73 m long by 34 m

wide and the Drying / Screening / Bagging area of approximately 49 m long by 28 m

wide.

The plant laboratory, offices, dry and lunch room are located in the concentrator, adjacent

to the flotation area. The size of this area is approximately 56 m long x 10 m wide and is

three (3) stories high.

Provision has been made in the design to isolate the dried graphite concentrate area in

order to ensure effective graphite dust control and venting.


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18.0 PROJECT INFRASTRUCTURE

This section summarizes infrastructure, buildings, other facilities and services that are

required to complement the processing of graphite mineralization required to produce

50,000 tonnes per year of graphite concentrate.

All topographic information for the location of infrastructure was gathered from readily

available data from Government of Canada and 5 m contours were used. It is understood

that a more detailed topographic map will be required for the Feasibility Study phase of

the project.

There have been no geotechnical investigations for surface infrastructure performed to

date. It is understood that appropriate field geotechnical investigations will be required

for the Feasibility Study phase of the project.

An overall general site layout and access is provided on Drawing A1-2012-021-0101-L

and Figure 18.1 below. General layouts of the processing plant are provided in the

May 2013 Preliminary Economic Assessment Report.

18.1 Main Access Road

Main access to Lac Guéret property is from the paved all-weather Highway 389 from

Baie-Comeau (Quebec). At km 200.5, South of Manicouagan 5 Dam, a main-haul gravel

logging road turns Northwest from the paved road. The property is located about 95 km

North-Northwest on the main-haul gravel road towards the Southwest shore of the

Reservoir Manicouagan. The Lac Guéret property is located off the main-haul gravel

road in a system of logging roads.

Provision has been made to upgrade part of the gravel access road.

18.2 Power

Lac Guéret Project is located about 90 km from the closest Hydro-Québec infrastructure.

The Project power requirements will be met by diesel generators located on site.

18.3 Camp Site Accommodations

The Camp will be located on the East shore of Lac Galette approximately 2 km from the

plant site (see Figure 18.1 and Drawing A1-2012-021 0101-L). Permanent housing will

be built to accommodate 65 persons in the camp. It will include accommodations for

managing and office staff as well as employees on rotation, staff for support services and

some additional rooms for subcontractors and visitors.


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Figure 18.1 – General Site Layout


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Personnel transportation by bus from the Baie-Comeau area will be contracted out. A 15

passenger minivan will be used for transportation between camp and plant / mine area.

18.4 Site Roads

Site and service roads will be 10 m wide, except for the mine roads. They will take

advantage of existing forest road network whenever possible and will provide access to:

• Process facility from the existing gravel road network towards Highway 389;

• Permanent camp and fresh water pumping station;

• Tailings storage facility;

• Explosive depot;

• Mine roads to crusher, waste rock stockpiling area and maintenance facility.

18.5 Tailings Storage Facility

18.5.1 General

A PEA level assessment of tailings disposal requirements to store and manage the tailings

and process water for the life of mine of the Lac Guéret project was performed by

Journeaux & Associates.

The scope of work for the study was the estimation of the quantities of materials required

for the construction of confinement dykes for the proposed tailings impoundment and

polishing pond. A continuous operation of 22 years is projected for the proposed mine

and a total of 2.8 M tonnes of tailings will be pumped to the tailings park during mine

life. The scheme of operation proposes the transfer of free water from the tailings pond to

a polishing pond to allow for sedimentation of fine particles and other minerals. Water

will be then transferred from the polishing pond to the plant to be used in processing.

Consideration was made in the design for the acid generating potential of the tailings.

18.5.2 Tailings Storage Options

Various areas within a radius of 4 km from the processing plant and inside mining claims

were examined in order to optimize the location of the tailings park (minimize the height

of the various dykes and hence material quantities and costs) considering within others

the distance from the processing plant and environmental conditions such as water bodies

and watersheds. The site located north of the plant, on a plateau was eventually selected

for having less impact on streams with potential fish habitat (see Figure 18.2). The pond

locations and construction scenarios examined were based on topographic information

made available for the project.

18.5.3 Selected Tailings Storage Facility

The fill plan was developed for 1.77 M m3 of tailings over a 22 year operation period

(based on a production of 128,500 tonnes of tailings production per year at about 28% by

weight of solids with 330,600 m3 of water pumped to the tailings pond yearly). A tailings

deposition final dry density of 1.60 t/m3 was assumed in the estimates based on


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information available on particle size distribution of the tailings and a specific gravity of

the tailings solids of 3.02. The polishing pond was sized for a maximum capacity of

49,000 m3 of water corresponding to about one (1) month including precipitation. The

tailings retention dams were designed with an impervious core to retain the fine tailings.

A freeboard of 1.4 meters was allowed for the tailings pond to account for extreme

precipitation events (water or snow) or waves due to high winds or icing during the

winter. An additional 0.6 m was allowed for emergency spillways. Analysis of

temperature, precipitation and wind data indicate that the freeboard assigned to the

various dykes is sufficient for extreme event situations.

The geometry of the dyke construction material layers permits downstream construction

using the method of raised embankments where a dyke is constructed in phases over the

lifetime of the mine plan.


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Figure 18.2 – Selected Tailings Storage Facility


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18.5.4 Water Volumes Estimate

Based on water balance estimates made available by Met-Chem, the water volume

pumped into the tailings ponds is expected to be 906 m3 per day at 28% solids. It is

estimated that tailings will retain about 11.5% of the pumped water while 88.5% will be

released, i.e. 802 m3 per day will be available.

A net precipitation of 0.476 m per year or 1.3 mm per day was considered for the project.

Considering an average net daily precipitation over the total area of the tailings pond

evaluated at 511 m3 per day, the daily average available volume of water will be in the

order or 1,313 m3 per day. This quantity will be reduced during the winter months due to

freezing.

More detailed water balance estimates will be prepared during Feasibility Study. They

will be calculated on a per month basis accounting for variations of average monthly

precipitation, evaporation and/or freezing of the pond surface water in the winter for a

normal, dry and a wet year, with the worst condition being that of a dry year. This will

assist in the determination of water availability for process and volume of water to be

released to environment following testing and treatment if required.

18.6 Buildings

In addition to the concentrator building which will house, besides the processing

equipment, the change house and laboratory, the site will include the following:

• An administration building (complete with offices, nursing station, conference

room and lunch room) located adjacent to the concentrator;

• A mine equipment maintenance facility;

• A lightweight dome type structure cold warehouse.

18.7 Site Power and Communication

The power requirement of the Lac Guéret Project was developed based on a preliminary

single line diagram and power demand. Power will be supplied by five (5) Diesel

Generators (DG) units. Each DG unit will be 1360 kWe / PF=0.8 / 4.16kV and is

installed in its own walk-in shelter.

The DG configuration will be four (4) DG in operation (5.44 MW for total operating

power) and one (1) DG standby (6.8 MW as total installed power). Provision to connect

an emergency rented generator in case of major failure of a diesel generator is included.

The total power demand is estimated at 4.0 MW with 2.5 MW for the process. The

remaining 1.5 MW are necessary to cover requirements for electric rooms, lighting &

heating for concentrator and related buildings as well as for as losses in transformers and

feeders.

A detailed Power Demand requirement, by areas, as well as a general single line diagram

of the plant were included in the May 2013 Preliminary Economic Assessment Report.


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Provision is made for two (2) electrical rooms to feed the crusher and process areas. The

power demand of the plant facilities will be fed at 4.16 kV from the main switchgear

installed in the concentrator electrical room.

Pole lines will feed the administration building, garage, diesel storage and pumping

station, reclaim water pumping station, fuelling station, permanent camp, communication

tower, mine open pit and the fresh water pumping station.

No additional emergency diesel generator is provided in this design. Provision is however

made to include at the Camp a Manual Transfer Switch to connect a mobile Emergency

Diesel Generator (600V) that can be rented from outside in case of emergency.

Provisions were also made to include a connection to the Main LV Switchgear to

connect a mobile Emergency Diesel Generator (600V) that can be rented from outside in

case of emergency.

18.8 Site Services

Provision has been made in the project for the following site services:

• Mine dewatering system and provision for pumping system towards plant if further

treatment with lime is required;

• Lined waste rock pad with collection ditch system and provision for pumping

towards plant if further treatment with lime is required;

• Fresh water intake system from Lac Galette for the mill fresh water and fire

protection water tank;

• Reclaim water system from the tailings polishing pond to the process plant;

• Water treatment system in sustaining capital for tailings excess water discharge;

• Potable water treatment;

• Sewage waste treatment;

• Fuel storage and fuelling station;

• Allowances for plant mobile equipment (15 passengers minivan, an IT14G type

loader, two (2) fork lifts, a HDPE pipe fusion machine and a multipurpose rescue

truck);

• Mine explosive storage.


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19.0 MARKET STUDIES AND CONTRACTS

An independent market study is expected to be carried out as the project will proceed to

Feasibility Studies. However, no independent analysis of the market for graphite

concentrate or price survey have been conducted to date for the Lac Guéret Graphite

Project. Similarly, no sales contract has been secured at this early stage of the project.

A summary of market information that was provided with the “NI 43-101 Technical

Report on the Lac Guéret Graphite Project”, submitted by Roche Ltd. on July 3, 2012, is

given in section 19.1. The price forecast that was developed for the PEA is given in

section 19.2.

19.1 Market Information

This market information was, at the time, derived from several sources, including the

Industrial Minerals website. The Industrial Minerals magazine is the reference journal for

the global industrial minerals sector. General market information may not necessarily

reflect the actual conditions of the project and it is the reason why an independent market

study is required.

Natural graphite is used in various industrial applications due to its unique combinations

of physical properties such as its light weight, resistance to chemicals, high melting point

as well as electrical and thermal conductivity.

Global consumption of natural graphite has doubled between 2000 and 2011 from

600,000 to 1,200,000 metric tons, showing a growth rate of over 6% for that period.

Natural graphite comprises several different products that are sold based on purity, size,

shape, etc. Principal end uses for graphite are:

• Steel Manufacturing: Crucibles, electrodes, foundry additives and refractories;

• Carbon brushes: Electrical contacts;

• Batteries and Expanded graphite: Battery material, foil, heat sinks;

• Castings and powder metallurgy;

• Brakes;

• Lubricants and Catalysts: Carbon additives, fibers, nuclear reactors;

• Material Technology: Clothes, paints, plastic and resins.

Flake graphite can be subdivided in 3 categories: fine, medium and large. Steady growth

of hybrid and electric cars and mobile electronics is fueling the demand for natural flake

graphite with forecast growth rate of approximately 15% annually, rising from 125,000 to

500,000 metric tons. For the 2020 horizon, global demand for natural graphite is expected

to reach 2,000,000 metric tons per year.

Graphite production is highly segmented with numerous small producers, with China

controlling roughly 75% of global supply in 2011. Amorphous graphite still accounts for

60% of total production and flake graphite for essentially the remaining 40%. Due to its


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Coarse +80, 94-97 C Medium 80x100, 94-97 C Fine M100, 94-97 C

USD/t, CIF EU port USD/t, CIF EU port USD/t, CIF EU port

Month min AVG max min AVG max min AVG max

2011-01 1,450 1,725 2,000 1,350 1,625 1,900 1,250 1,475 1,700

2011-02 1,750 2,025 2,300 1,500 1,750 2,000 1,400 1,625 1,850

2011-03 1,800 2,150 2,500 1,600 1,800 2,000 1,500 1,675 1,850

2011-04 2,000 2,250 2,500 1,800 2,050 2,300 1,750 1,950 2,150

2011-05 2,275 2,638 3,000 2,075 2,238 2,400 1,800 2,000 2,200

2011-06 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2011-07 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2011-08 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2011-09 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2011-10 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2011-11 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2011-12 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2012-01 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2012-02 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2012-03 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2012-04 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2012-05 2,500 2,750 3,000 2,200 2,350 2,500 2,000 2,200 2,400

2012-06 2,200 2,450 2,700 1,875 2,038 2,200 1,900 2,100 2,300

2012-07 2,200 2,450 2,700 1,875 2,038 2,200 1,900 2,100 2,300

2012-08 1,800 2,000 2,200 1,300 1,600 1,900 1,200 1,500 1,800

2012-09 1,800 2,000 2,200 1,600 1,750 1,900 1,200 1,350 1,500

2012-10 1,300 1,550 1,800 1,100 1,400 1,700 1,150 1,300 1,450

2012-11 1,400 1,600 1,800 1,050 1,225 1,400 900 1,050 1,200

2012-12 1,400 1,600 1,800 1,050 1,225 1,400 900 1,050 1,200

2013-01 1,400 1,600 1,800 1,050 1,225 1,400 900 1,050 1,200

2013-02 1,400 1,600 1,800 1,050 1,225 1,400 900 1,050 1,200

2013-03 1,400 1,600 1,800 1,050 1,225 1,400 900 1,050 1,200

2013-04 1,400 1,450 1,500 1,100 1,200 1,300 900 1,050 1,200

Average 24 months 2,082 2,314 2,546 1,774 1,941 2,108 1,606 1,794 1,981

numerous and wide applications, flake graphite is usually commanding premiums for its

large flake products. By 2020, increasing global consumption is projected to require an

additional 800,000 metric tons of supply, 200,000 metric tons coming from expanded

production of existing mines and 600,000 metric tons from new mines.

Graphite is not an openly traded commodity. Prices are negotiated between end users and

producers for annual and some multi-year contracts. Prices do vary according to different

parameters such as carbon content (purity), size (flake and fines), impurities and shape.

Before 2006, prices were flat, with amorphous graphite sold at an average of 150 $ per

metric ton and at an average of $600 for flake. After 2006, prices rose steadily after

China experienced supply constraints (export tariffs, environmental regulations, etc.) and

demand shifted towards high end uses and products.

19.2 Price Forecast

Table 19.1 gives, for each month of the last two (2) years, the minimum, maximum and

average prices for coarse, medium and fine crystalline graphite. As indicated in this table,

after reaching a record high for the most part of 2011 and 2012, graphite prices have been

decreasing in recent months. A 24-month average has been calculated and is presented at

the bottom of Table 19.1.

Table 19.1 – Monthly Prices for Crystalline Graphite as published in Industrial Minerals

and 24 months average (between April 2011 and April 2013)


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Based on this information, a price forecast was developed with Mason Graphite for the

economic analysis. It is indicated in Table 19.2 below for Lac Guéret Graphite

Concentrate.

Table 19.2 – Graphite Price Forecasts

Product Classification Proportion (%) Average Grade (%Cgr) Price (CAD/t)

+50 mesh 18.4% 96.30% 2,200

-50 mesh +80 mesh 12.2% 96.40% 2,000

-80 mesh +150 mesh 14.3% 95.60% 1,500

-150 mesh 55.1% 91.70% 1,200

Average 100% 93.70% 1,525


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20.0 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY

IMPACT

20.1 Environmental Baseline Study (EBS)

Environmental baseline studies have been carried out in summer 2012. The following

environmental components have been characterized/described:

• Climatology;

• Soil quality;

• Surface water quality;

• Sediment quality;

• Groundwater quality;

• Vegetation and wetlands;

• Fish and fish habitats;

• Herpetofauna;

• Archaelogical potential;

• Social and economic aspects.

Large and small mammal surveys have been carried out in winter 2013 and avifauna

surveys will be carried out in spring and summer 2013.

Surface waters are neutral to weakly acidic and have low hardness characterized. Most

metals showed concentrations below aquatic life protection criteria, except for iron,

aluminum, copper and lead in some samples. High levels of metals are often reported for

water and sediments in mineralized areas. Groundwater were weakly acidic with

moderate hardness and low conductivity. All measured metals were below analytical

detection limit, except for iron and manganese.

Metals contents in soils were lower than background level for Grenville geological

Province, except for one sample showing higher content for chromium, manganese and

arsenic.

The flora is dominated by evergreen forests (93 %, including 71 % of balsam fir with

black spruce forest type). Important forest fire in 1996 and important forest harvesting

between 2000 and 2004 have resulted in regeneration forests in 67 % of the study area.

Many small wetlands are present in the study area. They show low species richness and

no rare or endangered species were observed.

Concerning herpetofauna, the low proportion of deciduous forests, the high altitude and

the degradation of the original forest can explain the absence of species.

The large mammal species present in the study area are the Black bear, the Moose and

the Woodland caribou. The woodland caribou is considered a threatened species by


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Canada’s Species at Risk Act (S.C. 2002, c. 29) and a vulnerable species by Québec’s

Act respecting threatened or vulnerable species (E-12.01). According to the winter track

survey, habitats present in the property (mostly cutover and regenerating habitats)

particularly favour moose. In fact, moose density is relatively high for this northern

region (15 moose/100 km²). In the study area covered for the caribou aerial survey (a

20 m radius circle centered on the property), a total of 45 woodland caribou were

observed or a density of 4,1 caribou/100 km². This value is comparable to previous

surveys completed in this area by the MSDEFP. The habitats present in the property are

of low potential for caribou but caribou groups are located nearby and mitigation and

follow-up measures for this protected species should be put in place as part of the ESIA.

The most abundant small mammal species found on the Lac Guéret property, according

to the winter track survey, is the American hare, the red squirrel and ptarmigans. Riparian

and closed forest habitats presented a higher abundance and diversity species in

comparison to cutover and regenerating habitats.

Four lakes (8 stations) and 13 streams (15 stations) were characterized for fishes and fish

habitats potential. A total of 468 fishes were caught from four species: Brook trout, Pearl

dace, White sucker and Longnose sucker. All lakes and ten streams showed fish habitats

potential. No rare or endangered species were caught. Arsenic, lead and selenium

contents measured in flesh samples were below analytical detection limit. Some studied

fishes showed mercury level in flesh higher than the Canadian Food Inspection Agency.

Up to now, no archaeological survey has been done for the area. Preliminary

archeological study has identified 25 potential archaeological sites based on availability

of chert and quartzite as well as land use of the territory by the Innus. Field surveys must

be carried out after issuance of the final project lay-out and before construction activities

as well as before major exploration activities. Guidelines for archaeological chance find

management is to be produced in due time.

20.2 Mineralization, Waste and Tailings Characterization

An environmental characterization of mineralization, waste (and if possible tailings)

should be carried out in summer 2013. This is particularly important for the Lac Guéret

project since sulphides are present in the mineralization and possibly the waste rocks.

The following tests must be performed:

• Elements content by partial acid digestion (aqua regia);

• Acid Generation Potential (Modified Acid Base Accounting) ;

• Static leaching tests (TCLP-USEPA1311, SPLP-USEPA1312, Environment

Canada CTEU-9) and characterization of leachates.

Kinetic tests could be necessary to confirm the results of the static tests.


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20.3 Regulatory Framework

20.3.1 Provincial Government (Quebec)

This section presents the environmental laws and regulations that could apply to the Lac

Guéret Project. Although the project is only at a preliminary stage of design, the

components that may trigger an environmental review procedure requiring specific

environmental authorizations or permits, or subject to norms, criteria or guidelines have

been identified and are presented in the current section.

a) Regulation falling under the responsibility of the Ministry of Sustainable

Development, Environment, Fauna and Parks (MSDEFP)

Environmental impact assessment and review procedure (BAPE procedure)

In the Province of Quebec, the environmental requirements are defined in the

Environment Quality Act (Q-2), which is under the responsibility of the Ministry of

Sustainable Development, Environment and Parks (Ministère du Développement

durable, de l’Environnement, de la Faune et des Parcs, MDDEFP). The major

sections of the Environment Quality Act relevant to the obtainment of certificates of

authorization or environmental authorizations are sections 22 (general case), 31.1

(Environmental impact study), 32 (sewage treatment and waterworks), 48

(atmospheric emission) and 54 (solid waste management system).

Section 2 of the Regulation respecting environmental impact assessment and

review (Q-2, r.9) list the types of projects that are subjected to the environmental

impact assessment and review procedure (BAPE procedure) in order to obtain an

authorization issued by the government in accordance with section 31.5 of the Act.

The list of relevant projects includes the followings:

(n.8) The construction of an ore processing plant for:

– Metalliferous ore or asbestos ore, where the processing capacity of the

plant is 7,000 metric tons or more per day;

– Any other ore, where the processing capacity of the plant is 500 metric

tons or more per day;

(p) The opening and operation of:

– A metals mine or an asbestos mine that has a production capacity of

7,000 metric tons or more per day;

– Any other mine that has a production capacity of 500 metric tons or

more per day.

Graphite production falls into the ‘’other ore’’ classification. Therefore, if

production rate is higher than 500 metric tons or more per day, the Environmental

and Social Impact Assessment and review procedure (BAPE) will apply to the Lac


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Guéret project in accordance with Section 31.1 of the Environment Quality Act

(EQA).

The main steps in the Environmental and Social Impact Assessment procedure are:

1 Tabling of project notification;

2 Issue of the directive (MSDEFP);

3 Completion of the Environmental and Social Impact Assessment

(ESIA);

4 Tabling of impact assessment;

5 Receipt of notice of acceptability of content of ESIA;

6 Public consultation of the ESIA;

7 Public hearings ;

8 Report of the Bureau d’audiences publiques sur l’environnement

(BAPE)

9 Government decision.

The Project has a 15 month deadline set by these regulations. However, MSDEFP

aims to utilise only 12 months instead of the 15, which is set by the regulation

respecting environmental impact assessment and review (RREIAR). This includes

public hearings, if applicable, but does not include the time that the proponent

requires to prepare the impact assessment and to provide additional information as

per the environmental department requests. By experience, a period of

approximately 24 months is expected between commencing to prepare the Project

notice and obtaining government permission.

Following positive issuance of the Government’s decision, a Certificate of

Authorisation, in accordance with Section 22 of the EQA, must be obtained from

the Regional Office of the MSDEFP. The application for authorization must

include plans and project specifications, precise location, and the quantity or

concentration of contaminants expected to be emitted, deposited, issued or

discharged into the environment.

The average processing rate is 176,000 t/y or 482 t/d. Throughout the mine life

there will be days when the processing rate exceeds 500 t/d because of the variation

of the feed grade. As a result of this production rate, an application for a ESIA and

review procedure is required. However, if the mine plan is maintained below 500

t/d during the subsequent Feasibility Study, only an application for a certificate of

authorization under Section 22 of the Environment Quality Act (EQA) would be

necessary.


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Other specific Certificates of Authorisation must be obtained according to Section

32 (sewage treatment and waterworks), Section 48 (equipment to control

atmospheric emissions) and Section 54 (solid waste management system).

b) Regulations Falling Under the Responsibility of the MNR

A rehabilitation plan must be provided before the beginning of operation to

conform to the Mining Act requirements. The rehabilitation plan must include a

description of the financial guarantee that will serve to ensure completion of the

work required by the plan. The amount of the financial guarantee corresponds to

70% of the cost estimate for the rehabilitation work on the accumulation areas (i.e.

tailings, waste dumps, and overburden dumps). This amount is accumulated over

several years following a defined schedule.

Condemnation studies must also be carried out to ensure that no mineral resource

will be negatively affected by the presence of a mill, overburden dumps, waste

dumps and tailings area. A condemnation study must be produced for each of these

mining infrastructures in accordance with the Mining Act and the Regulation

respecting Mineral Substances other than Petroleum, Natural Gas and Brine. To

operate the mine, Mason Graphite must also obtain a mining lease.

Further, in accordance with the Forest Act, a Forest Intervention Permit issued by

the MNR is required for Crown forests, prior to any forest development activity,

which implies wood or tree cutting. Forest development includes, among other

activities, cutting and harvesting work and the implementation and maintenance of

infrastructures.

20.3.2 Federal Government

Canadian Environmental Assessment Act

Since August 19th 2012, the Canadian Environmental Assessment Act, 2012 (CEAA

2012) and its accompanying regulations provide a new legislative framework for federal

environmental assessment. Environmental assessments under the CEAA 2012 are

conducted on proposed projects that are “designated,” either through regulation or by the

Minister of the Environment. The Regulations Designating Physical Activities prescribe

the physical activities that constitute a “designated project” which may require an

environmental assessment under the CEAA 2012.

A schedule to the Regulations sets out the physical activities associated with the carrying

out of projects. Each item in the schedule includes a description and in most cases a

corresponding threshold (often production capacity). With regards to a graphite mine, the

threshold is 1,500 tpd.

At the federal level, the actual mining rate considered (500 t/d) does not trigger the

existing CEAA 2012 process. However, following the Regulations Designating Physical

Activities, if it was determined that, as part of mine operation, it was required to pump


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more than 200,000 m³/y of groundwater for keeping dry the open pit and for freshwater

needs at the processing plant, the CEAA 2012 process would be triggered since such

groundwater extraction is also a designated physical activity.

However, on April 20th 2013, the federal government issued the Regulations modifying

the Regulations Designating Physical Activities. Among modifications are exclusions of

groundwater extraction activities and industrial mineral mines, including graphite.

Consequently, and considering that the adoption of those amendments is much likely to

be done rapidly (public consultation will be terminated on May 20th 2013), it is highly

probable that the CEAA 2012 process would not be triggered and that therefore no

federal permitting would be required other than an Authorization to Alter Fish Habitat

under Section 35 of the Fisheries Act.

The Metal Mining Effluent Regulations does not apply to graphite mine. Therefore, it is

not possible to ask for inclusion in Appendix 2 of the Regulations for disposal of mining

waste in a fish habitat.

20.4 Territorial Claims and Regional Relations

The Project is located on the traditional territory of the Innu Nation. The Innu traditional

territory is the Boreal Forest, which covers all of the administrative regions of the

Saguenay – Lac-Saint- Jean and North Shore (Côte-Nord), and overlaps part of Northern

Quebec (Nord-du-Québec) and the National Capital (Capitale-Nationale) regions. The

Innu mainly live within nine communities, located primarily along the Saint Lawrence

River coastline with the exception of the communities of Mashteuiatsh (Lac-Saint-Jean)

and Matimekush-Lac John (Schefferville in Northern Quebec, near the Labrador border).

A people of hunters and gatherers, the Innu, formerly known as the Montagnais, are

nomads who have been forced to settle. The Innu spend most of the year deep in the

interior of Quebec and Labrador, where until recently, they lived as nomadic hunters,

only visiting coastal trading posts for brief periods.

The Lac Guéret project is located on the ancestral territory of the Nitassinan of Pessamit.

On their traditional territory (Nitassinan), the Innu claim Uashaunnuat Indian title:

aboriginal and treaty rights to the land and all its natural resources. The property is

located inside the limits of two traplines (P-23 and P-33).

This project is located inside the area of the Manicouagan-Uapishka World Biosphere

Reserve (RMBMU) where sustainable development and dialogue hold top priority.

Important negotiations involving both the federal and provincial governments are

currently underway with some of the Innu communities of Quebec, which follows the

signature of an Agreement-In-Principle (AIP), which was entered into March 31, 2004.

At this time, the Innu of Pessamit (west of Baie-Comeau), Uashat mak Mani-Utenam

(Sept-Îles) and Matimekush-Lac John (near Schefferville) are not part of any agreement,

as they intend to settle their own land claims directly with both levels of government. The

communities of Uashat mak Mani-Utenam and Matimekosh-Lac-John are part of the


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Ashuanipi Corporation, which has represented them in the comprehensive territorial

negotiations since 2006.

Furthermore, in 2008, Ekuanitshit, Matimekush-Lac John, Pessamit, Uashat mak Mani-

Utenam and Unamen Shipu founded the Alliance stratégique Innue (Innu Strategic

Alliance), which consists of an Innu population of approximately 12,000 and represents

70% of the total members of the Innu Nation living in Quebec. The mandate of the

alliance is to enable the parties to defend their rights, common interests, and to conduct

joint initiatives to achieve political, economic and judicial results in a cooperative

manner.

Mason Graphite will have to conduct consulting session, directly with the local Innu First

Nation to establish sustainable relationships with all local and regional stakeholders.

20.5 Mine Closure and Rehabilitation

20.5.1 Introduction

As stipulated in the current Mining Act, a rehabilitation plan will have to be prepared.

The rehabilitation and restoration plant will have to be developed in compliance with the

provincial Guidelines1 for preparing a mining site rehabilitation plan and general mining

site rehabilitation requirements (MNR, 1997).

Provisions were made in the economic analysis of the Project for the disbursement of

100% of the estimated cost of rehabilitation. The disbursement schedule used, reflects the

requirements of the Mining Act and the timelife of the project. For a project with a

timelife exceeding 15 years, no money has to be put in the financial guarantee before

Year 4 and the last payment is in Year 14.

The closure plan, that will require approval before the onset of the operations, will

address the following items:

• Securing the mining area;

• Dismantling the infrastructures;

• Reclamation of waste rock disposal areas;

• Reclamation of tailings management facility;

• Contaminated waste characterisation and disposal;

• Waste water management;

• Emergency plan and monitoring.

20.5.2 Closure Costs

The preliminary cost estimate of the rehabilitation and closure plan is based on the re-

sloping and re-vegetation of the tailings storage facility and the re-vegetation of the top

1 Guidelines for preparing a mining site rehabilitation plan and general mining site rehabilitation requirements”

published by the Québec Ministry of Natural Resources in collaboration with the Ministry of Environment


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and berms of the waste rock dump, which usually represents the largest proportion of

rehabilitation costs.

Once the Lac Guéret pit is depleted, it is expected that it will fill with water through

underground seepage until it eventually reaches the water table level. Whenever possible,

diverted streams (if any) will recover their original flow paths.

At this time, revegetation of the berms and top of the waste rock dumps was considered

while a multi-layer cover system was considered for the tailings storage facility

rehabilitation. Considering that sulfides tailings are expected and there could be a

potential to generate acid rock drainage, a multi-layer cover system can act as a barrier to

limit contact with water and oxygen.

Based on the accumulation areas identified in Table 20.1, the total cost for the

rehabilitation of the tailings storage facility and waste rock dumps has been estimated at

CAD 4.5 M. This will need to be re-evaluated as the project advances through the

environmental assessment and permitting process.

Table 20.1 –Accumulation Areas for Waste Rock Dump and Tailings Storage Facility

Accumulation Areas Unit Area

Tailings Storage Facility (Years 1 to 22) m2 392,000

Waste Rock Dump Area m2 85,000


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21.0 CAPITAL AND OPERATING COSTS

21.1 Capital Cost

This capital cost estimate covers the Project for an annual production capacity of 50,000

tonnes of natural graphite. Location of the facilities is in a greenfield area located about

300 km North of Baie Comeau in the Province of Québec, Canada. The site is accessible

by all-weather Highway 389 and existing forest roads. A 600 m new road will complete

access to site.

The capital cost estimate includes the material, equipment, labour and freight required for

the mine pre-development, mine services and facilities, mine equipment, processing

facilities, tailings storage and management, as well as infrastructure and services

necessary to support the operation.

The estimate is based on Met-Chem’s standard methods applicable for a Preliminary

Economic Assessment study to achieve the accuracy level of ± 35%.

21.1.1 Summary of the Estimate

All amounts are expressed in Canadian dollars (CAD) unless otherwise noted.

The initial capital cost for the scope of work is estimated as $129,689,000 including

$89,935,000 for direct costs, $21,768,000 for indirect costs and $17,987,000 for

contingency.

The total life of mine capital cost is estimated at $140,464,000 of which $129,689,000 is

initial capital and $10,775,000 is sustaining capital. The sustaining capital cost includes

$4,493,000 for closure and rehabilitation of the site and $6,281,000 to cover for

replacement of mine fleet equipment, expansion of tailings storage and waste rock

stockpiling area and for the provision of a wastewater treatment plant.

The capital cost is summarized in Table 21.1.


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Table 21.1 – Summary of Life of Mine Costs Estimate (50,000 tpy Concentrate)

Item Description

Initial

Capital

Total

Rounded

($)

Sustaining

Capital

Total

Rounded

($)

Direct Cost

Open Pit Mine

Mine Development 2,468,000

Mine Services and Facilities 1,921,000 1,050,000

Mining Equipment 3,637,000 769,000

Open Pit Mine Total 8,026,000 1,819,000

Process

ROM Stockpile & Crusher 7,573,000

Concentrator 47,691,000

Process Total 55,264,000

Tailings and Water Management

Tailings Storage Facilities 3,013,000 4,228,000

Tailings Pipeline and Spigot 171,000

Effluent Treatment Station (sustaining capital) 235,000

Reclaim Water Pumping and Pipeline 1,088,000

Tailings and Water Management Total 4,271,000 4,463,000

Infrastructure Mine Site

Industrial Site Prep. And Drainage, Site Roads 4,835,000

Main Road 1,000,000

Ancillary Buildings 440,000

Permanent Camp 4,205,000

Office Complex 1,235,000

Mine Vehicles Maintenance Building 2,278,000

General Services Mine Site 2,486,000

Infrastructure Mine Site Total 16,478,000

Power and Communication

Main Power 5,165,000

Communication 135,000

Power and Communication Total 5,300,000

Service Vehicles

Light Vehicles 60,000

Earthwork Vehicles 150,000


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Item Description

Initial

Capital

Total

Rounded

($)

Sustaining

Capital

Total

Rounded

($)

Material Handling Vehicles 134,000

Service Equipment 50,000

Emergency Rescue Truck 200,000

Service Vehicles Total 595,000

Total Direct Cost 89,935,000

Indirect Costs 21,768,000

Closure and Rehabilitation 4,493,000

Contingency 17,987,000

Total Capital Cost 129,689,000 10,775,000

21.1.2 Basis of Estimate – General

a) Base Date, Currency, Escalation

The base date for the cost estimate is the first quarter of 2013. The estimate is

expressed in CAD dollars. The exchange rate used is $1.00 USD/$1.00 CAD when

quotations were received in US dollars. No allowance for currency fluctuation is

included.

b) Labour, Installation

Most of the installation costs are included in the unit rates or were estimated by

factor. However, some installation costs are estimated by man hours (from in-house

database or from construction estimating standards), productivity loss factor and

labour rate.

The labour productivity loss for the Project was established at 1.15 considering

impact of major criteria only such as working calendar, availability of skilled

labour and supervision, as well as remote site conditions. The labour rate was

established as an all-inclusive, mixed crew, average hourly cost to the owner of $

130, based on Commission de la Construction du Québec (CCQ) schedule of labour

cost and the hourly rates published by the Association de la Construction du

Québec (ACQ). The working calendar is assumed 7 days per week, 10 hours per

day, and 4 weeks in, 1 week out turnaround.

c) Basis of Estimate – Mining

The mine development costs were estimated using the unit rates developed for the

production and the quantities for the pre-development of the open pit mine were

taken from the mine schedule for the project.


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The haul road construction cost was estimated based on typical rate for road

construction and preparation from similar projects.

Mine services and facilities include the waste rock disposal, the explosives storage

and power line to the mine area. Mine change house facility is included in the

concentrator.

The waste rock disposal area will be lined with a geomembrane. The estimation

was based on the area from the layout and unit rates from recent similar projects.

Explosives will be transported to site by the supplier. Provision is included in the

estimate for site preparation and fencing of the explosive magazines. The

estimation was based on similar projects.

Provisions were also made for electrical power supply to the mining area.

Preliminary requirements were established and estimation was based on in-house

database.

Preliminary requirements for major mining equipment, support and service

equipment were established based on the mining plan. Estimation was based on

budget proposals from qualified suppliers and an in-house database from recent

similar projects.

d) Basis of Estimate – Processing Areas

• Process Buildings

Process buildings include the crusher building and the concentrator building.

The process and mine employees change house and laboratory are located in

the concentrator.

Preliminary layouts were established and estimation was based on unit area

from recent similar projects. Site preparation and ancillary buildings are

included in the infrastructure section below.

• Process Equipment

The process equipment list was derived from the flow sheets and equipment

sizing was based on the design criteria. More than 65% of the process

equipment value is based on single source budget proposals obtained from

qualified suppliers for major equipment. The remaining equipment was

estimated from recent in-house databases of similar projects.

Equipment installation was estimated by factor based on recent similar

projects. An allowance of 4% of the material and equipment value was also

provided for special lifts, sub-contracts and construction material. Freight was

established at 12% of the material and equipment value.

• Process Piping

Process piping cost was estimated by factor based on recent similar projects.


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• Electrical

Preliminary electrical power demand and single line diagram were developed.

Estimation was based on broad assessment of requirements and database from

recent similar projects.

• Automation and Instrumentation

Automation and instrumentation for the process were estimated by factors

based on recent similar projects.

• Buildings Services and Supplies

Buildings services include mainly HVAC and dust collecting ducting, local

fire protection as well as plant air and water services distribution. Buildings

supplies include mainly living quarter’s furniture, equipment and supplies,

small shops tools and storage equipment, safety and security systems as well

as special coatings, if required.

Buildings services and supplies for the process were estimated by factors


An allowance was provided in the concentrator for laboratory finishes and

facilities as well as supplies and lab equipment.

e) Basis of Estimate – Tailings Management

Preliminary requirements were established for the tailings storage facility.

Consideration was given to environmental constraints. A geomembrane core was

considered for the impermeable dykes design. Preliminary quantities were

calculated and cost estimation was done with unit rates based on recent similar

projects.

Tailings pipeline and water reclaim pipeline were sized with preliminary data and

quantities were derived from the site plans. The cost was estimated with unit rates

from construction estimating standards.

Preliminary requirements were established for the water treatment and the cost

estimation was based on quotations received for recent similar projects. The cost

for the water treatment is included in sustaining capital.

f) Basis of Estimate – Concentrator Infrastructure and Services

• Industrial Site Preparation and Roads

Preliminary requirements were established for site preparation based on

available topography maps from the government. The costs were estimated


Site roads will be required from existing main road to the concentrator and

also to tailings storage facility, to the explosive magazines and to the camp.


June 2013

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Lengths of site roads were derived from layouts and estimation was based on


A general allowance was provided for improvement work on the main access

road.

• Anciliary Buildings and Facilities

Provision was made for a cold warehouse storage facility for spare and

maintenance parts, consumables as well as general storage needs. Preliminary

requirements were established and estimation was based on unit area from


No specific warehousing facility is provided for graphite concentrate bags.

The bags will be stretch wrapped for protection against weather and stored

outside.

Preliminary requirements were established for the permanent camp facilities

including potable water and sanitary treatment as well as fire protection.

Estimation was based on allowances and unit cost from recent similar

projects. The construction camp cost is considered to be included in the

indirect costs.

Preliminary requirements for office complex were established including

services as well as equipment, supplies and furniture. The cost was estimated

based on unit area and rates from recent similar projects.

Preliminary requirements were established for the mine vehicles maintenance

building including services, equipment and supplies such as tire handler,

overhead crane, washing facilities and also tools and storage equipment. The

cost was estimated based on recent similar projects and coordinated with the

maintenance requirements of the mining equipment of this project.

• General Services

The industrial site general services include fuel storage for 14 days and fuel

distribution facilities, fresh water supply from Lac Galette, sanitary and waste

management as well as fire protection general systems such as pumps and

detection & alarm systems. Preliminary requirements were established and

the costs were established based on recent similar projects.

g) Basis of Estimate – Power and Communication

Preliminary requirements were established for electrical power based on power

demand and single line diagram. Process equipment as well as mine, services and

general power needs was considered. Power supply includes five (5) diesel

generators (4 in operation and 1 stand by unit). Power distribution includes

electrical and control material and hardware as well as pole lines to each facility.


June 2013

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Allowances were made for the graphite concentrate drying and bagging area to

comply with requirements of the Canadian Electrical Code (Section 18 Hazardous

Location).

Budgetary proposals were obtained for the diesel generators. Preliminary quantities

were derived from the single line diagrams for the electrical material, equipment

and accessories and estimations were done based on recent similar projects.

Provision was made for communication to include a main tower. Estimation was


h) Basis of Estimate - Service Vehicles and Equipment

Preliminary requirements were established for service vehicles and equipment and

the costs were estimated based on budgetary quotes from recent similar projects

and in-house database.

Service vehicles include a 15 passenger minivan, an IT14G type loader, 2 fork lifts,

an HDPE pipe fusion machine and a rescue truck. Other service vehicles and

equipment are included in the mining equipment such as track dozer, road grader,

boom truck, pick-up trucks, and lighting plants. Maintenance of the main access

road will be sub-contracted.

i) Basis of Estimate – Indirect Costs

The provisions for indirect costs and contingency were established by factors

applied to direct cost.

Indirect costs typically cover for the following major items: project development

(permitting, exploration and drilling, feasibility studies, metallurgical testing, pre-

production operation group, etc.), project implementation (EPCM, capital spares,

first fills, commissioning, construction indirect costs such as construction camp,

room & board and transportation of workers, etc.) and financial costs (insurances).

Taxes and duties, escalation and interests incurred during construction are excluded

from the capital cost. Working capital is also excluded from the capital costs but

provision for 3 months of operation cost is considered in the economic analysis.

The provision for contingency was established in consideration of the engineering

development level, the available technical information required for design and the

estimation methods of the project.

j) Closure Costs

Provisions are made for closure and rehabilitation costs in the sustaining capital. It

is assumed that the equipment and facilities salvage value will cover rehabilitation

costs related to dismantling of process building and infrastructure. For the waste

rock dump and the tailings storage facility, quantities were derived from the layouts


June 2013

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and estimation was based on current legislation with unit rates from recent similar

projects. Details are provided in Section 20.5 of the Report.

21.2 Operating Cost

21.2.1 Introduction

This section provides information on the estimated operating costs of the Project and

covers Mining, Processing, Tailings Management, Site Services and Administration.

The sources of information used to develop the operating costs include in-house

databases and outside sources particularly for materials, services and consumables. All

amounts are in Canadian dollars (CAD), unless specified otherwise.

21.2.2 Summary Operating Costs

The life of mine average operating cost estimate is summarised in Table 21.2.

Table 21.2 – Summary of Life of Mine Average Operating Cost Estimate

Area Average Operating Cost

($/tonne of concentrate)

Mining 35.74

Processing 221.21

Tailings Management Included in Processing Costs

Plant Administration, Infrastructure & Tech. Serv. 132.66

Total Average Operating Costs 389.61

21.2.3 Summary of Personnel Requirements

Table 21.3 presents the estimated personnel requirements for the Project. This workforce

is comprised of staff as well as hourly employees. The mine workforce as well as the

administration employees will work on a 4 days per week basis. The hourly workforce at

the plant will provide 24 hour per day coverage, 7 days per week, and will work on a

2 weeks on, 2 weeks off rotation.

Table 21.3 – Total Personnel Requirement

Area Number

Mine 11

Processing 52

Management, Administration and Technical

Services 17

Total Manpower 80

Total annual costs for the above manpower including base salary, bonus and fringe

benefits have been estimated at $ 6.7 M.


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The above manpower costs are detailed in the following sections.

21.2.4 Mining

The mine operating cost was estimated for each period of the mine plan. This cost is

based on operating the equipment, the manpower associated with operating the mine, the

cost for explosives as well as dewatering, road maintenance and other activities.

In order to determine the operating cost, the following assumptions were used:

• Diesel Fuel Price: $ 1.00 / L;

• Explosives Cost: $ 0.66 / t (based on supplier pricing).

The mine operating cost was estimated to average $ 6.00 / t mined for the life of the open

pit mine. This cost is divided into $ 3.66 / t for mineralization, $ 0.06 / t for overburden,

$ 2.11 / t for waste and $ 0.16 / t for rehandling (see Table 21.4).

Table 21.4 – Summary of Estimated Mine Operating Costs by Type of Material

Type of material

Average

Annual Cost

($)

Total

($/t mined)

Total

($/t concentrate)

Total

(%)

Overburden 397,5592 0.06 0.36 1%

ROM 1,085,489 3.66 21.84 61%

Waste 625,349 2.11 12.58 35%

Rehandling 47,938 0.16 0.96 3%

Total 2,156,335 6.00 35.74 100%

21.2.5 Processing

For a typical year at design processing rate, the operating costs for the process plant,

which includes the crushers, are summarized in Table 21.5, which show the breakdown

for the four (4) major components of labour cost, electrical power, consumables &

reagents and maintenance supplies. These costs were derived from supplier information,

Met-Chem’s database or factored from similar operations. The unit cost of on-site

generated electricity was established at $ 0.25/kWh.

Table 21.5 – Summary of Average Annual Process Plant Operating Costs

Description

Total

Annual Cost

(CAD)

Unit Cost

(CAD/tonne

milled)

Unit Cost

(CAD/tonne

concentrate)

% of Total

Costs

Manpower 3,772,964 21.32 75.43 34.1%

Electrical Power 4,061,116 22.94 81.18 36.7%

Grinding Media, Reagent & Dryer

Fuel Consumption 1,523,216 8.61 30.53 13.8%

2 In Year 3


June 2013

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Description

Total

Annual Cost

(CAD)

Unit Cost

(CAD/tonne

milled)

Unit Cost

(CAD/tonne

concentrate)

% of Total

Costs

Bagging System 1,274,781 7.20 25.44 11.5%

Consumables Consumption 177,004 1.00 3.54 1.6%

Spare Parts and Miscellaneous 268,783 1.52 5.31 2.4%

Total 11,077,865 62.59 221.21 100.0%

21.2.6 Plant Administration and Technical Services Costs

This section regroups the manpower costs for Management, Administration &

Accounting, Purchasing & Stores and Human Resources as well as costs related to

technical services, environment, laboratory, and infrastructure. The operating cost

summary is given in Table 21.6.

Table 21.6 – Summary of Annual Plant Administration and Services Costs

Description

Total annual

Cost

(CAD/year)

Unit cost

(CAD/tonne

of

concentrate)

General Administration -Manpower

Administration - Manpower (Lac Guéret) 1,827,000 36.54

Administration - Material & Services

Administration - Material & Services 2,645,975 52.92

Infrastructure

Access road maintenance & miscellaneous 435,000 8.70

Power for heating and general services 1,725,000 34.50

Total 6,632,975 132.66


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22.0 ECONOMIC ANALYSIS

It is to be noted that the following includes results of a Preliminary Economic

Assessment study that uses mineral resources that are not mineral reserves and therefore

have not demonstrated economic viability.

Therefore, the following economic analysis is limited to the potential viability of the

Project and will serve as a decision tool to proceed or not with additional field work and

studies on the Project.

22.1 General

An economic analysis of the Project, for a concentrate production rate of 50,000 tonnes

per year (FOB site), has been carried out using a cash flow model prepared in Microsoft

Excel. The model is constructed using annual cash flows in constant money terms (first

quarter 2013). No provision is made for the effects of inflation. As required in the

financial assessment of investment projects, the evaluation is carried out on a so-called

“100% equity” basis, i.e. the debt and equity sources of capital funds are ignored. Results

are presented before and after taxation.

The model reflects the base case macro-economic and technical assumptions given in this

report on the basis that the owner will own and operate the mining equipment.

22.2 Assumptions

22.2.1 Price

The sales price that was used for the economic analysis is based on the average of the last

24 months graphite concentrate price as published in Industrial Minerals. More details are

provided in Section 19 of the Report.

Based on this information, Mason Graphite has provided the price forecasts given in

Table 22.1 below for Lac Guéret Graphite Concentrate.

Table 22.1 – Graphite Price Forecasts

Product Classification Proportion (%) Average Grade (%Cgr) Price ($/t)

+50 mesh 18.4% 96.30% 2,200

-50 mesh +80 mesh 12.2% 96.40% 2,000

-80 mesh +150 mesh 14.3% 95.60% 1,500

-150 mesh 55.1% 91.70% 1,200

Average 100% 93.70% 1,525

22.2.2 Macro-Economic Assumptions

The main macro-economic assumptions used in the base case are given in Table 21.2.


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Table 22.2 – Macro-Economic Assumptions

Item Unit Base Case Value

Average Graphite Concentrate Price CAD/tonne 1525

Exchange Rate CAD/USD 1.00

Life of Mine years 22



The current Canadian tax system applicable to mining income is used to assess the

Project’s annual tax liabilities. This consists of federal and provincial corporate taxes as

well as provincial mining taxes (revised in the 2010 budget). The revisions announced in

the March 21st 2013 federal budget speech concerning the reclassification of mine

development expenses from Canadian Exploration Expenses (CEE) to Canadian

Development Expenses (CDE), and the elimination of the provision for accelerated

depreciation for class 41A assets have been accounted for. These changes will be made

progressively over periods of several years. It is assumed that Quebec will follow suit

with the same changes in the provincial corporate tax rules. The federal and provincial

corporate tax rates currently applicable over the project’s operating life are 15.0 % and

11.9 % of taxable income, respectively. The rate applicable for the purpose of assessing

Quebec mining taxes is 16 % of taxable income. The discount rate variants used to

determine the net present value of the project are assumed to represent the weighted-

average cost of capital.

22.2.3 Mineral Royalties

No provision for mineral royalties is included in the present cash flow analysis.

22.2.4 Technical Assumptions

The main technical assumptions used in the base case are given in Table 22.3.

Table 22.3 – Technical Assumptions

Total Mineral Resources Mined (Life Of Mine) M tonnes 3.87

Average Mineral Resources Mined per Year tonnes per year 176,000

Processing Design Rate tonnes/day 500

Average ROM Grade to Mill % Cgr 27.4

Average Concentrate Grade % Cgr 93.7

Average Process Recovery over Mine Life % 96.6

Average Tonnes of Concentrate Produced per year tonnes per year 50,000

Total Tonnes of Concentrate Produced over Mine Life M tonnes 1.09

Average Mining Operating Cost ($ / tonne mined) 6.00

Average Mining Operating Cost ($ / tonne concentrate) 35.74


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Average Process Operating Cost ($ / tonne milled) 62.59

Average Process Operating Cost ($ / tonne concentrate) 221.21

Average General & Administration Cost ($ / tonne concentrate) 132.66

On average, 176,000 tonnes of run of mine will be supplied per year to the process plant

when full production is reached. The amount of concentrate produced is a function of

head grade, process recovery and concentrate grade, and is on average 50,000 tonnes per

year.

22.3 Financial Model and Results

The cash flow statement for the base case is given in Figure 22.1.

A summary of the base case cash flow results is given in Table 22.4.

This summary indicates that the total pre-production capital expenditure was evaluated at

CAD 129.7 M and the sustaining capital requirement was evaluated at CAD 6.3 M for a

total project capital expenditure over the project life of CAD 136.0 M.

For taxation purposes, all contingencies as well as owner’s and contractor’s indirects

were redistributed by area in the cash flow statement of Figure 22.1. The cash flow

statement shows a capital cost breakdown by area and provides a preliminary capital

spending schedule over a 2-year pre-production period.


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Figure 22.1 – Cash Flow Statement

Years -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Total

Run of Mine (t) 4,900 164,261 182,522 183,982 186,595 187,765 192,191 192,191 192,191 192,191 192,191 167,690 167,690 167,690 167,690 167,690 165,875 165,875 165,875 165,875 165,875 165,875 170,775 3,870,553

Overburden (t) 218,667 109,086 327,753

Waste (t) 75,100 212,235 146,500 93,503 244,210 203,426 138,507 138,507 138,507 138,507 138,507 103,490 103,490 103,490 103,490 103,490 62,010 62,010 62,010 62,010 62,010 62,010 62,010 2,619,031

Total Waste (t) 293,767 212,235 146,500 202,589 244,210 203,426 138,507 138,507 138,507 138,507 138,507 103,490 103,490 103,490 103,490 103,490 62,010 62,010 62,010 62,010 62,010 62,010 62,010 2,946,784

293,000

Stripping ratio (w : o) 1.292 0.803 1.101 1.309 1.083 0.721 0.721 0.721 0.721 0.721 0.617 0.617 0.617 0.617 0.617 0.374 0.374 0.374 0.374 0.374 0.374 0.363 0.761

Graphite Concentrate Average Sale Price ($/tonne) 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525

Grade Cgr (%) 26.4 26.4 26.3 26.2 25.8 25.8 25.2 25.2 25.2 25.2 25.2 28.9 28.9 28.9 28.9 28.9 29.2 29.2 29.2 29.2 29.2 29.2 29.2 27.4

Process Recovery (%) 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6% 96.6%

Price Ex-works (F.O.B. Site)

+50 mesh 18.4% 2,200 18,101,762 20,062,733 20,137,916 20,101,708 20,211,355 20,251,491 20,251,491 20,251,491 20,251,491 20,251,491 20,254,502 20,254,502 20,254,502 20,254,502 20,254,502 20,223,797 20,223,797 20,223,797 20,223,797 20,223,797 20,223,797 20,821,215 443,309,440

50x80 mesh 12.2% 2,000 10,911,141 12,093,149 12,138,467 12,116,642 12,182,734 12,206,926 12,206,926 12,206,926 12,206,926 12,206,926 12,208,741 12,208,741 12,208,741 12,208,741 12,208,741 12,190,234 12,190,234 12,190,234 12,190,234 12,190,234 12,190,234 12,550,337 267,212,212

80x150 mesh 14.3% 1,500 9,591,966 10,631,068 10,670,907 10,651,720 10,709,821 10,731,089 10,731,089 10,731,089 10,731,089 10,731,089 10,732,685 10,732,685 10,732,685 10,732,685 10,732,685 10,716,414 10,716,414 10,716,414 10,716,414 10,716,414 10,716,414 11,032,981 234,905,818

M150 mesh (fines) 55.1% 1,200 29,567,403 32,770,452 32,893,257 32,834,114 33,013,211 33,078,770 33,078,770 33,078,770 33,078,770 33,078,770 33,083,688 33,083,688 33,083,688 33,083,688 33,083,688 33,033,535 33,033,535 33,033,535 33,033,535 33,033,535 33,033,535 34,009,357 724,101,290

Concentrate Production (t) 93.7% 44,718 49,562 49,748 49,658 49,929 50,028 50,028 50,028 50,028 50,028 50,036 50,036 50,036 50,036 50,036 49,960 49,960 49,960 49,960 49,960 49,960 51,436 1,095,132

Total Graphite Revenue ($) 68,172,273 75,557,403 75,840,548 75,704,185 76,117,121 76,268,276 76,268,276 76,268,276 76,268,276 76,268,276 76,279,616 76,279,616 76,279,616 76,279,616 76,279,616 76,163,980 76,163,980 76,163,980 76,163,980 76,163,980 76,163,980 78,413,891 1,669,528,760

Total Revenue ($) 68,172,273 75,557,403 75,840,548 75,704,185 76,117,121 76,268,276 76,268,276 76,268,276 76,268,276 76,268,276 76,279,616 76,279,616 76,279,616 76,279,616 76,279,616 76,163,980 76,163,980 76,163,980 76,163,980 76,163,980 76,163,980 78,413,891 1,669,528,760

Mine Operating Cost Overburden ($) 397,559 397,559

Mine Operating Cost Overburden ($/t) 3.64 3.64 3.64

Mine Operating Cost Waste ($) 1,038,887 807,127 491,152 1,076,016 966,503 735,082 735,082 735,082 735,082 735,082 649,539 649,539 649,539 649,539 649,539 350,699 350,699 350,699 350,699 350,699 350,699 350,699 13,757,679

Mine Operating Cost Waste ($/t) 5.41 4.89 5.51 5.25 4.41 4.75 5.31 5.31 5.31 5.31 5.31 6.28 6.28 6.28 6.28 6.28 5.66 5.66 5.66 5.66 5.66 5.66 5.66 5.41

Mine Operating Cost ROM ($) (rehandling included) 890,438 1,062,074 973,073 943,305 996,199 1,253,419 1,253,419 1,253,419 1,253,419 1,253,419 1,242,928 1,242,928 1,242,928 1,242,928 1,242,928 1,084,083 1,084,083 1,084,083 1,084,083 1,084,083 1,084,083 1,084,083 24,935,403

Mine Operating Cost ROM ($/t) (rehandling included) 6.45 5.42 5.82 5.29 5.06 5.31 6.52 6.52 6.52 6.52 6.52 7.41 7.41 7.41 7.41 7.41 6.54 6.54 6.54 6.54 6.54 6.54 6.35 6.45

Process Operating Cost ($/t ROM) 62.59 10,281,080 11,424,056 11,515,450 11,678,977 11,752,215 12,029,206 12,029,206 12,029,206 12,029,206 12,029,206 10,495,739 10,495,739 10,495,739 10,495,739 10,495,739 10,382,104 10,382,104 10,382,104 10,382,104 10,382,104 10,382,104 10,688,795 242,257,920

Concentrate Transportation Cost ($)

Concentrate Transportation Cost ($/t)

General & Administration Cost ($) 132.66 5,932,262 6,574,907 6,599,545 6,587,679 6,623,613 6,636,766 6,636,766 6,636,766 6,636,766 6,636,766 6,637,753 6,637,753 6,637,753 6,637,753 6,637,753 6,627,690 6,627,690 6,627,690 6,627,690 6,627,690 6,627,690 6,823,474 145,280,213

Average Mine Operating Cost ($/t mined) 5.12 5.68 4.82 4.69 5.02 6.01 6.01 6.01 6.01 6.01 6.98 6.98 6.98 6.98 6.98 6.30 6.30 6.30 6.30 6.30 6.30 6.16 6.00

Total Operating Costs ($) 18,142,666 19,868,164 19,976,778 20,285,977 20,338,529 20,654,472 20,654,472 20,654,472 20,654,472 20,654,472 19,025,959 19,025,959 19,025,959 19,025,959 19,025,959 18,444,576 18,444,576 18,444,576 18,444,576 18,444,576 18,444,576 18,947,051 426,628,774

Total Operating Costs ($) 18,142,666 19,868,164 19,976,778 20,285,977 20,338,529 20,654,472 20,654,472 20,654,472 20,654,472 20,654,472 19,025,959 19,025,959 19,025,959 19,025,959 19,025,959 18,444,576 18,444,576 18,444,576 18,444,576 18,444,576 18,444,576 18,947,051 426,628,774

Operating Profit ($) 50,029,606 55,689,238 55,863,769 55,418,207 55,778,592 55,613,804 55,613,804 55,613,804 55,613,804 55,613,804 57,253,658 57,253,658 57,253,658 57,253,658 57,253,658 57,719,404 57,719,404 57,719,404 57,719,404 57,719,404 57,719,404 59,466,840 1,242,899,986

Pre-production Capital Expenditure (includes

Indirects and Contingencies)

MINE DEVELOPMENT – Pre-stripping 3,493,935 3,493,935

OPEN PIT MINE 4,873,983 3,147,373 8,021,356

PROCESS 48,462,721 31,294,789 79,757,511

TAILINGS AND WATER MANAGEMENT FACILITIES 6,046,434 6,046,434

INFRASTRUCTURE – MINE SITE 14,450,071 9,331,129 23,781,200

POWER AND COMMUNICATIONS 7,746,225 7,746,225

SERVICE VEHICLES AND EQUIPMENT 842,339 842,339

Total 75,533,000 54,156,000 129,689,000

Indexed for Sensitivity 75,533,000 54,156,000 129,689,000

Working Capital

W.C. (includes Spare Parts) 3.00 4,535,667 431,375 27,154 77,300 13,138 78,986 -407,128 -145,346 125,619 -4,736,763

Sustaining Capital Expenditure

Tailings 1,004,090 955,944 1,074,166 1,193,874 4,228,074

Concentrator 600,000 235,000 450,000 1,285,000

Mine 768,500 768,500

Total 600,000 1,239,090 450,000 955,944 768,500 1,074,166 1,193,874 6,281,574

Indexed for Sensitivity 600,000 1,239,090 450,000 955,944 768,500 1,074,166 1,193,874 6,281,574

Total Capital Expenditure ($) 75,533,000 58,691,667 431,375 27,154 677,300 1,252,228 528,986 955,944 -407,128 768,500 1,074,166 -145,346 1,193,874 125,619 -4,736,763 135,970,574

Mine Closure and Rehabilitation Payments ($) 35,947 112,335 184,230 260,618 332,513 408,901 480,795 557,183 633,571 705,466 781,854 4,493,414

Federal Corporate Income Tax 35,085 3,888,823 6,893,810 7,201,777 7,185,330 7,146,333 7,087,710 7,072,218 7,059,057 7,231,583 7,226,823 7,188,824 7,191,013 7,190,197 7,354,288 7,323,447 7,336,190 7,345,965 7,353,450 7,359,171 7,583,243 141,254,338

Provincial Corporate Income Tax 27,834 3,085,133 5,469,089 5,713,410 5,700,362 5,669,424 5,622,917 5,610,626 5,600,186 5,737,056 5,733,279 5,703,134 5,704,870 5,704,223 5,834,402 5,809,935 5,820,044 5,827,799 5,833,737 5,838,275 6,016,039 112,061,774

Quebec Mining Tax 1,070,626 3,853,971 5,160,755 5,953,524 6,648,860 7,082,078 7,400,692 7,573,666 7,737,686 7,848,330 8,148,337 8,207,386 8,193,493 8,232,381 8,255,432 8,479,579 8,439,557 8,468,847 8,489,351 8,503,703 8,513,750 8,803,505 161,065,506

Total Corporate Income and Mining Taxes ($) 1,070,626 3,916,889 12,134,711 18,316,424 19,564,046 19,967,769 20,216,449 20,284,293 20,420,530 20,507,573 21,116,976 21,167,488 21,085,451 21,128,264 21,149,853 21,668,268 21,572,939 21,625,081 21,663,115 21,690,890 21,711,196 22,402,787 414,381,618

BEFORE-TAX CASH FLOW -75,533,000 -58,691,667 49,598,232 55,662,085 55,186,469 54,130,032 55,137,271 55,429,574 55,353,186 54,325,347 55,204,903 55,540,137 55,927,974 56,620,086 55,474,026 56,471,804 57,399,003 57,719,404 56,525,530 57,719,404 57,719,404 57,719,404 57,593,785 64,203,602 1,102,435,997

Cumulative B-T CF -75,533,000 -134,224,667 -84,626,435 -28,964,350 26,222,120 80,352,151 135,489,422 190,918,996 246,272,182 300,597,529 355,802,432 411,342,569 467,270,543 523,890,630 579,364,655 635,836,459 693,235,462 750,954,866 807,480,397 865,199,801 922,919,205 980,638,609 1,038,232,395 1,102,435,997

Payback period work area 1.00 1.00 1.00 0.52

AFTER-TAX CASH FLOW -75,533,000 -58,691,667 48,527,606 51,745,195 43,051,758 35,813,608 35,573,224 35,461,805 35,136,737 34,041,054 34,784,373 35,032,564 34,810,998 35,452,599 34,388,575 35,343,539 36,249,150 36,051,136 34,952,591 36,094,323 36,056,289 36,028,514 35,882,590 41,800,816 688,054,379

Cumulative A-T CF -75,533,000 -134,224,667 -85,697,060 -33,951,865 9,099,894 44,913,501 80,486,726 115,948,530 151,085,267 185,126,321 219,910,694 254,943,259 289,754,257 325,206,855 359,595,430 394,938,969 431,188,120 467,239,256 502,191,847 538,286,170 574,342,459 610,370,974 646,253,563 688,054,379

Payback period work area 1.00 1.00 1.00 0.79

F.O.B. SITE

FINANCIAL INDICATORS

Before Tax

Payback Period (years) 2.52

NPV @ ... ($) 8.0% 363,672,772

NPV @ ... ($) 10.0% 282,629,651

Internal Rate of Return 33.7%

After Tax


NPV @ 8% ($) 8.0% 217,442,189

NPV @ 10% ($) 10.0% 165,384,529

Internal Rate of Return 27.0%


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A working capital equivalent of 3 months of total annual operating costs is maintained

throughout the production period.

A total of CAD 4.5 M is added for mine closure reclamation purposes. The total

operating cost was estimated at CAD 426.6 M for the life of the mine or $ 110 / tonne

milled or $ 390 / tonne of concentrate.

The financial results indicate positive before-tax Net Present Values (NPV) of

CAD 363.7 M and CAD 282.6 M at discount rates of 8 % and 10 %, respectively. The

before-tax Internal Rate of Return (IRR) is 33.7 % and the payback period is 2.5 years.

The after-tax Net Present Values are CAD 217.4 M and CAD 165.4 M at discount rates

of 8% and 10%, respectively. The after-tax Internal Rate of Return is 27.0% and the

payback period is 2.8 years.

Table 22.4 – Project Evaluation Summary

50,000 tonnes of concentrate per year (million CAD)

Initial Capital Cost 129.7

Sustaining Capital Cost 6.3

Total Direct Capital Cost 136.0

Mine Closure and Rehabilitation 4.5

Total Mining Operating Cost (LOM) 39.1

Total Process Operating Cost (LOM) 242.3

Total General & Administration Operating Cost (LOM) 145.3

Total Operating Cost (LOM) 426.6

BEFORE TAX

Total Cash Flow 1,102.4

NPV@ 8% 363.7

NPV @ 10% 282.6

IRR (%) 33.7


AFTER TAX

Total Cash Flow 688.1

NPV@ 8% 217.4

NPV @ 10% 165.4

IRR (%) 27.0



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22.4 Sensitivity Analysis

A sensitivity analysis has been carried out, with the base case described above as a

starting point, to assess the impact of changes in graphite concentrate price (all four (4)

price categories are varied together), total pre-production capital costs and operating costs

on the project’s NPV (@ 8% and 10%) and IRR. Each variable is examined one-at-a-

time. An interval of 30% with increments of 10% was used for all three (3) variables.

The before-tax results of the sensitivity analysis, as shown in Figure 22.2 to Figure 22.4,

indicate that the Project’s before-tax viability is not significantly vulnerable to the under-

estimation of capital and operating costs, when taken one at-a-time. The net present value

is marginally more sensitive to variations in operating costs than it is to capital costs, as

shown by the steeper curves. As expected, the net present value is most sensitive to

variations in price. In contrast with Figure 22.2 and Figure 22.3 which show linear

variations in net present value for the three (3) variables studied, variations associated

with internal rate of return shown in Figure 22.4 are not linear. The internal rate of return

is more sensitive to variations in capital costs than it is to operating costs, and as in the

case of net present value, it is most sensitive to variations in price.

Figure 22.2 – Before-Tax NPV8%: Sensitivity to Capital Expenditure,

Operating Cost and Price

0

100

200

300

400

500

600

-30 -20 -10 0 10 20 30

B-T

NP

V @

8%

($

mil.

)

RELATIVE VARIATION (%)

CAPEX OPEX PRICE


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Figure 22.3 – Before-Tax NPV10%: Sensitivity to Capital Expenditure,


Figure 22.4 – Before-Tax IRR: Sensitivity to Capital Expenditure,


0

100

200

300

400

500

-30 -20 -10 0 10 20 30

B-T

NP

V @

10

% (

$ m

il.)


CAPEX OPEX PRICE

20.0

25.0

30.0

35.0

40.0

45.0

50.0

-30 -20 -10 0 10 20 30

B-T

IR

R (

%)


CAPEX OPEX PRICE


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The after-tax results of the sensitivity analysis are shown in Figure 22.5 to Figure 22.7.

The same conclusions as those made for the before-tax case concerning the sensitivity of

NPV and IRR to variations in capital costs, operating costs and price can be drawn here.

Figure 22.5 – After-Tax NPV8%: Sensitivity to Capital Expenditure,


0

100

200

300

400

-30 -20 -10 0 10 20 30

A-T

NP

V @

8%

($

mil.

)


CAPEX OPEX PRICE


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Figure 22.6 – After-Tax NPV10%: Sensitivity to Capital Expenditure,


Figure 22.7 – After-Tax IRR: Sensitivity to Capital Expenditure,


0

100

200

300

-30 -20 -10 0 10 20 30

A-T

NP

V @

10

% (

$ m

il.)


CAPEX OPEX PRICE

10.0

15.0

20.0

25.0

30.0

35.0

40.0

-30 -20 -10 0 10 20 30

A-T

IR

R (

%)


CAPEX OPEX PRICE


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22.5 Important Caution Regarding the Economic Analysis

The economic analysis contained in this report is preliminary in nature. It incorporates

inferred mineral resources that are considered too geologically speculative to have the

economic considerations applied to them that would enable them to be categorized as

mineral reserves. It should not be considered a prefeasibility or feasibility study. There

can be no certainty that the estimates contained in this report will be realized. In addition,

mineral resources that are not mineral reserves do not have demonstrated economic

viability.

The results of the economic analysis are forward-looking information that is subject to a

number of known and unknown risks, uncertainties and other factors that may cause

actual results to differ materially from those presented here.

These risks will be subject to further definition and mitigation in the next phase of the

project to eliminate or minimize their potential impact on the Lac Guéret Project.


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23.0 ADJACENT PROPERTIES

With the current interest in graphite, the Lac Guéret Property is completely surrounded

by new claim-holders since early 2012. The principal ones are: Focus Metals Inc. to the

north and west; Global Graphite Inc. to the southeast; the Griesbach-Ashto-9248-7792

Québec Inc. (25%-25%-50%) to the east and south are the principal neighbours.

Figure 23.1 – Adjacent Claims to Lac Guéret Property


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24.0 OTHER RELEVANT DATA AND INFORMATION

No other relevant information.


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25.0 INTERPRETATION AND CONCLUSIONS

The processing plant is designed to process 500 t/d of run of mine to produce

approximately 50,000 tonnes per year of graphite concentrate grading at about 93.7% Cgr

based on a concentrate recovery of 96.6%. A suitable process flowsheet includes

crushing, grinding, flotation, regrind and concentrate thickening, filtering and drying.

Mining equipment, tailings storage facility, concentrate transportation and load-out

facilities as well as infrastructure and services have been added to complete the

investment cost of the project.

The total capital cost for the project life, at an accuracy level of ± 35%, is estimated at

CAD 136.0 M where the pre-production initial capital cost is evaluated at CAD 129.7 M

while the sustaining capital requirement is CAD 6.3 M.

The life of mine average operating cost estimate is evaluated at 390 $/tonne of

concentrate.

Mine closure and rehabilitation cost have been estimated at CAD 4.5 M.

The economic analysis of the project has demonstrated the potential viability of the

project with recommendations to proceed to next level of Feasibility studies. At an

average sale price of graphite concentrate of $1,525/tonne, the financial results indicate a

before-tax Net Present Values (NPV) of CAD 363.7 M and CAD 282.6 M at discount

rates of 8% and 10%, respectively. The before-tax Internal Rate of Return is 33.7% with

a payback period of 2.5 years. The after-tax Net Present Values are CAD 217.4 M and

CAD 165.4 M at discount rates of 8% and 10% respectively. The after-tax Internal Rate

of Return is 27.0% and the payback period is 2.8 years.


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26.0 RECOMMENDATIONS

Considering the positive results of the PEA, Met-Chem recommends that the project

continues to the next phase of development, the Feasibility Study.

Met-Chem recommends a series of additional studies and tests to advance to the next

phase and minimize risks. The main recommendations include:

• Obtain detailed topography contour to improve design and location of infrastructure

and tailings storage facility and in order to reach Feasibility Study level of cost

estimate.

• Perform rock mechanics as well as hydrogeological studies to further confirm rock

slopes, rock permeability, ground and underground water flows and water balance

in order to validate the open pit mining technical parameters.

• Complete metallurgical testing to bring the project to a Feasibility Study level. The

next phase will include pilot plant test work to verify the robustness of the flow

sheet. The production of a coarser graphite concentrate will be looked into. Settling

and filtration testing will be done on pilot plant concentrate. The sulphide removal

from mill tailings will be looked into again.

• Perform geotechnical field work for the Feasibility Study to confirm assumptions

used for the tailings storage facility design and waste piles in this PEA report. A

series of boreholes and test pits will be required for determination of soil and

bedrock horizons and mechanical properties beneath the tailings pond dykes to

permit study of the short and long term stability of the dykes and permeability of

underlying soils and rocks as well as determine the soil types and their permeability

below the deposited tailings. All test pits and boreholes shall be surveyed for

northing, easting and ground elevation. Standpipes or piezometers shall be installed

to record the ground water table in the proposed tailings pond area.

• Perform laboratory analysis of the samples retrieved in tailings storage area such as

grain size analysis, water content and soil identification according to the Unified

Soil Classification System (USCS). If soil samples are cohesive (clay) additional

testing shall include Atterberg limits and consolidation tests. Unconfined

compression tests shall be done on selected bedrock cores.

• Perform field investigation to locate borrow banks for suitable materials for

construction of the various dykes, pads and roads as well as concrete aggregates

during the Feasibility Study to determine quantities available and distance from the

various facilities.

• Perform condemnation drilling for Lac Guéret mine site and infrastructure location

such as the tailings storage facility, waste rock stockpile, primary crusher, process

plant, buildings, etc.

• Carry out soil geotechnics fieldwork and testing in order to provide foundations

design parameters as the project will advance to feasibility studies.


June 2013

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• Carry out thorough environmental characterisation of overburden, run of mine,

waste rock material as per Guideline 019;

• Carry out testing of the tailings and waste rock lithology for geochemical properties

such as ABA (acid base accounting), humidity cell or kinetic tests (coarse and fine

fractions), fresh and aged supernatant analysis (coarse and fine fractions) and

physical/mechanical properties such as size distribution, specific gravity, Atterberg

limits, proctor maximum dry density and optimum water content, maximum density

by vibrator and by drying, minimum density, settling, low and overburden stress

consolidation settlement.

• Conduct consulting sessions with local Innu First Nation.

• Carry out a detailed market study on the graphite product situation by a specialized

firm as the project advances to Feasibility Study. With this market study, the

analysis of the future price trend of graphite concentrate should be addressed;

The estimated cost for the next study phase has been estimated and is provided in Table

26.1.

Table 26.1 – Estimated Cost for Next Study Phase

Study Phase Cost Estimate

($ M)

Other Geological Work 1.2

Feasibility Study 2.0

Metallurgical Testwork 1.0

Other Site Studies 0.8

Environmental Studies 1.0

Total 6.0


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27.0 REFERENCES

27.1 Geology

Clark, T, 1994. Géologie et gîtes de l’Orogène du Nouveau-Québec et de son arrière-pays

in: Géologie du Québec, Gouvernment de Québec, MM 94-10, p. 47-65.

Clark, T. and R. Wares, 2004. Lithotectonic synthesis and metallogeny of the New

Québec Orogeny (Labrador Trough), MRNFP, MM 2005-01, 180 p.

Clarke, P.J., 1977. Région de Gagnon, MRN-Geol Expln Serv. Rept RG-178, 89p.

Currie, K.L., 1972. Geology and petrology of the Manicouagan Resurgent Caldera,

Québec, Geol. Surv. Can., Bull. 198.

Daigneault, R, 2004. Projet Lac Guéret – Sommaire des observations structurales, priv

rept. SOQUEM Inc & Quinto Technology Inc., internal rept., 6 p.

Davidson, A., 1996. Geological Compilation of the Grenville Province, Geol. Surv. Can.,

Open File Rept. 3346.

Emslie, R. F. and P.A. Hunt, 1989. The Grenville event: magmatism and high grade

metamorphism: in Current Research, Part C, Geol. Surv. Can., Paper 89-1C, p.11-17.

Ferreira, E.C., 1962a. Report on Geological, Drilling and Dip Needle Survey, Area 24A,

Echo Lake, Québec: unpubl. rept. for Québec Cartier Mining Co., 7 p. plus maps, Min.

Nat. Res. Que., Assessment Report No. 12609.

Ferreira, E.C., 1962b. Report on Geological, Drilling and Dip Needle Survey, Area 24B,

Echo Lake, Québec: unpubl. rept. for Québec Cartier Mining Co., 11 p. plus maps, Min.

Nat. Res. Que., Assessment Report No. 13176.

Geotech Ltd., 2003. Report on helicopter-borne time domain electromagnetic geophysical

survey: Blocks A & B Reservoir Manicouagan Area, Québec, unpubl rept for SOQUEM

Inc.

Grieve, R.A.F., 1983. The Manicouagan Impact Structure: an analysis of its original

dimensions and form, Jour. Geophys. Res., B Suppl. (2), p. A807-A818. (Proc. of the

17th Lunar and Planetary Science Conf., Pt. 2, Mar. 15-19, 1982).

GSC, 1968b. Lac Tétépisca, Geol. Surv. Can., Geophysical Series Maps 4945G.

GSC, 1968a. Lac Manicouagan, Geol. Surv. Can., Geophysical Series Maps 4980G.

Hoqc, M., 1994. Introduction and La Province de Grenville in: Géologie du Québec,

Gouvernment de Québec, MM 94-10, p. 1-6 and p. 75-94.

Leventhal, J.S. and T.H. Giordano, 2000. The nature and roles of organic matter

associated with ores and ore-forming systems: an introduction in Rev Econ Geol, v 9, Ch

1, p1-26.


June 2013

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Lyons, E.M., 2002. NI43-101Technical Report: Phase 1 – Geology & Sampling on the

Lac Guéret Property, Manicouagan, Region Côte-Nord, Québec, (NTS 22N/3) for Quinto

Technology Inc., 33 p., Oct 2002, SEDAR Company Filings (www.sedar.com).

Lyons, E.M., 2004a. NI43-101 Technical Report: Exploration Phase 2 Geology and

Sampling & Phase 3 Diamond Drilling on the Lac Guéret Property, Manicouagan,

Region Côte-Nord, Québec, (NTS 22N/3) for Quinto Technology Inc., 57 p., Feb 2004

SEDAR Company Filings (www.sedar.com).

Lyons, E.M., 2004b. NI43-101 Technical Report: Exploration Phase 4 Geology,

Stripping & Sampling on the Lac Guéret Property, Manicouagan, Region Côte-Nord,

Québec, (NTS 22N/3) for Quinto Technology Inc., 50 p., Dec 2004 SEDAR Company

Filings (www.sedar.com).

Marcoux, P. and L. Avramtchev, 1990. Feuille Reservoir Manicouagan – 22N (scale

1:250,000), Gîtes mineraux du Québec, Region de la Fosse du Labrador, carte no. M-390

de DV84-01.

Marshall, B., F.M. Vokes, and A.C.L. Laroque, 2000. Regional metamorphism

remobilization: upgrading and formation of ore deposits in Rev Econ Geol, v 11, Ch 2,

p19-38.

Rioux, G., 2008. Contrôle stratigraphique et qualitié minéralurgique des gîtes de graphite

des Lac Guéret et Guinecourt, Terrane de Gagnon, Province de Grenville (Québec),

M.Sc. thesis, no. 10248,UQAM, Montréal, QC, 125 p.

27.2 Process

Met-Chem Canada Inc., Preliminary Economic Assessment of the Lac Guéret Graphite

Project, Québec, Canada, May 31st 2013.

Ministère du Développement durable, de l’Environnement et des Parcs (MDDEP),

Directive 019 sur l’industrie minière, Avril 2005.

Ministry of Natural Resources in collaboration with the Ministry of Environment,

Guidelines for preparing a mining site rehabilitation plan and general mining site

rehabilitation requirements, 1997.

Process Research Associates Ltd., Graphite Recovery from Composite Samples Lac

Guéret Deposit, February 8, 2005.

Roche Ltd. Consulting Group, NI 43-101 Report Technical Report on the Lac Guéret

Graphite Project, July 3, 2012.

SGS Mineral Services, An Investigation into the Flowsheet Development for a Sample

from the Lac Guéret Deposit prepared for Mason Graphite Project 13838-001 Final

Report, May 21, 2013.

http://www.sedar.com)/

http://www.sedar.com)/

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