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FORTUNE MINERALS LIMITED
TECHNICAL REPORT ON THE FEASIBILITY STUDY FOR THE NICO GOLD-COBALT-BISMUTH-COPPER PROJECT NORTHWEST TERRITORIES, CANADA
Effective date : April 2, 2014 Signing date : May 5, 2014
Harry Burgess, P.Eng. Richard M. Gowans, P.Eng. B. Terrence Hennessey, P.Geo. Christopher R. Lattanzi, P.Eng.
Eugene Puritch, P.Eng.
SUITE 900 - 390 BAY STREET, TORONTO ONTARIO, CANADA M5H 2Y2 Telephone (1) (416) 362-5135 Fax (1) (416) 362 5763

Table of Contents

Page

1.0 SUMMARY ...................................................................................................................1 1.1 INTRODUCTION ......................................................................................................1 1.2 PROJECT OVERVIEW .............................................................................................1 1.3 PROJECT DEVELOPMENT .....................................................................................3 1.4 SUMMARY OF FINANCIAL EVALUATION ........................................................4 1.5 TECHNICAL DATA..................................................................................................5 1.5.1 Geological Setting...............................................................................................5 1.5.2 Mineral Resource Estimate .................................................................................5 1.5.3 Open Pit Mining..................................................................................................6 1.5.4 Underground Mining ..........................................................................................7 1.5.5 Mineral Reserves ................................................................................................7 1.5.6 Metallurgical Testwork .......................................................................................9 1.5.7 Process Plant at the Project Site........................................................................10 1.5.8 Co-disposal Facility ..........................................................................................10 1.5.9 Hydrometallurgical Processing Plant................................................................13 1.5.10 Infrastructure.....................................................................................................16 1.6 ENVIRONMENTAL, SOCIO-ECONOMIC AND PERMITTING CONSIDERATIONS ................................................................................................ 17 1.6.1 Project Site in the NWT....................................................................................17 1.6.2 The SMPP .........................................................................................................18 1.7 ECONOMIC DATA .................................................................................................19 1.7.1 Marketing and Metal Prices ..............................................................................19 1.7.2 Cost Structure....................................................................................................20 1.7.3 Financial Evaluation .........................................................................................23 1.8 CONCLUSIONS AND RECOMMENDATIONS ...................................................25

2.0 2.1 2.2 2.3 2.4

INTRODUCTION....................................................................................................... 27 TERMS OF REFERENCE .......................................................................................27 QUALIFIED PERSONS...........................................................................................29 LEGAL FRAMEWORK ..........................................................................................29 UNITS, CURRENCY AND ABBREVIATIONS ....................................................29

3.0 RELIANCE ON OTHER EXPERTS........................................................................34

4.0 PROPERTY DESCRIPTION AND LOCATION ...................................................35 4.1 LOCATION ..............................................................................................................35 4.2 CLAIMS AND TENURE.........................................................................................37

5.0
5.1 5.2

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY......................................................39
CLIMATE AND PHYSIOGRAPHY .......................................................................39 ACCESS AND EXISTING INFRASTRUCTURE..................................................39

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6.0 HISTORY ....................................................................................................................41

7.0 7.1 7.2 7.3

GEOLOGICAL SETTING AND MINERALIZATION.........................................44 REGIONAL GEOLOGY..........................................................................................44 LOCAL AND PROPERTY GEOLOGY..................................................................46 MINERALIZATION ................................................................................................48

8.0 DEPOSIT TYPES .......................................................................................................51

9.0 EXPLORATION.........................................................................................................53

10.0 DRILLING ..................................................................................................................54 10.1 2003 DRILLING CAMPAIGN ................................................................................54 10.2 2006 DRILLING CAMPAIGN ................................................................................54 10.3 2010 DRILLING CAMPAIGN ................................................................................54 10.4 DRILLING PROCEDURES.....................................................................................57

11.0 SAMPLE PREPARATION, ANALYSES AND SECURITY.................................58 11.1 CORE LOGGING.....................................................................................................58 11.2 CORE SAMPLING ..................................................................................................59 11.3 SAMPLE PREPARATION ......................................................................................59 11.4 ANALYSIS...............................................................................................................60 11.4.1 Method Au-AA23/AU-AA24 ...........................................................................60 11.4.2 Method Au-GRA21/Au-GRA21.......................................................................60 11.4.3 Method ME-AA46 (includes As-AA46 and Bi-AA46)....................................61 11.4.4 Method ME-AA62 (includes Cu-AA62a and Co-AA62).................................61 11.4.5 Other Methods ..................................................................................................62 11.4.6 Specific Gravity Measurements........................................................................62

12.0 DATA VERIFICATION ............................................................................................63 12.1 SITE VISITS AND INDEPENDENT SAMPLING.................................................63 12.1.1 Micon Site Visit, 2003 ......................................................................................63 12.1.2 P&E Site Visits, 2004 and 2011 .......................................................................64 12.2 QUALITY ASSURANCE/QUALITY CONTROL .................................................66 12.2.1 Fortune Au-Co Standards .................................................................................66 12.2.2 Fortune Blanks ..................................................................................................66 12.2.3 CDN Resources Laboratories LTD. Au-Cu Standard (CDN-CGS20) ..................................................................................................................... 66 12.2.4 CDN Laboratories Blank ..................................................................................66 12.2.5 Conclusion ........................................................................................................67

13.0 MINERAL PROCESSING AND METALLURGICAL TESTING ......................68 13.1 MINERALOGY........................................................................................................68 13.1.1 Cobalt................................................................................................................69 13.1.2 Bismuth .............................................................................................................70 13.1.3 Gold...................................................................................................................70

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13.2 CONCENTRATOR METALLURGICAL TESTWORK ........................................71 13.2.1 Metallurgical Testwork – 1997 to 2005............................................................72 13.2.2 2007 Pilot Plant.................................................................................................75 13.2.3 Kinetics and FLEET Modelling (2009) ............................................................78 13.2.4 Flow Property Tests. .........................................................................................81 13.2.5 Ore Hardness Variability Testing (2008)..........................................................81 13.2.6 2010 Pilot Plant Testwork.................................................................................81 13.2.7 Compressive Strength Tests..............................................................................83
13.3 CONCENTRATOR CIRCUIT SELECTION AND ESTIMATED PLANT PERFORMANCE .......................................................................................84
13.4 HYDROMETALLURGICAL CIRCUIT TESTWORK ..........................................85 13.4.1 SMPP Concentrate Feed Characteristics ..........................................................85 13.4.2 Bismuth Flotation..............................................................................................86 13.4.3 Cobalt Hydrometallurgical Circuit ...................................................................86 13.4.4 Bismuth Circuit.................................................................................................90 13.4.5 Gold Circuit ......................................................................................................93 13.4.6 Cyanide Destruction..........................................................................................94 13.4.7 Pressure Oxidation Autoclave Corrosion..........................................................94
13.5 HYDROMETALLURGICAL CIRCUIT SELECTION AND ESTIMATED PLANT PERFORMANCE ...............................................................95
14.0 MINERAL RESOURCE ESTIMATES....................................................................98 14.1 INTRODUCTION ....................................................................................................98 14.2 PREVIOUS MINERAL RESOURCE ESTIMATE .................................................98 14.3 SAMPLE DATABASE ............................................................................................99 14.4 DOMAIN MODELLING .........................................................................................99 14.5 COMPOSITING .....................................................................................................100 14.6 TREATMENT OF EXTREME VALUES .............................................................100 14.7 CONTINUITY ANALYSIS ...................................................................................101 14.8 BLOCK MODELS .................................................................................................102 14.9 ESTIMATION AND CLASSIFICATION .............................................................102 14.10 MINERAL RESOURCE ESTIMATE....................................................................103 14.11 MINERAL RESOURCE VALIDATION ..............................................................104 14.12 CONCLUSIONS ....................................................................................................105 14.12.1 Block Model Checks.......................................................................................105 14.12.2 Summary .........................................................................................................106
15.0 MINERAL RESERVE ESTIMATES.....................................................................107 15.1 MINERAL RESERVE CRITERIA ........................................................................107 15.2 NET SMELTER RETURN (NSR) .........................................................................107 15.3 UNDERGROUND RESERVES.............................................................................108 15.4 OPEN PIT RESERVES ..........................................................................................108 15.5 TOTAL MINERAL RESERVES ...........................................................................109
16.0 MINING METHODS ...............................................................................................110 16.1 OVERVIEW ...........................................................................................................110
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16.2 GEOTECHNICAL CONSIDERATIONS ..............................................................111 16.3 OPEN PIT OPERATIONS .....................................................................................114
16.3.1 Geotechnical Parameters.................................................................................115 16.3.2 Blasthole Drilling and Blasting.......................................................................116 16.3.3 Loading and Haulage ......................................................................................117 16.3.4 Open Pit Mine Infrastructure ..........................................................................118 16.4 UNDERGROUND OPERATIONS........................................................................118 16.4.1 Underground Mine Design and Stope Layout ................................................122 16.5 UNDERGROUND DEVELOPMENT AND PRODUCTION...............................125 16.5.1 Mine Development..........................................................................................125 16.5.2 Stope Development.........................................................................................125 16.5.3 Stoping ............................................................................................................125 16.6 UNDERGROUND MINE VENTILATION ..........................................................125 16.7 UNDERGROUND MINE HYDROLOGY ............................................................127 16.8 UNDERGROUND OPERATIONS AND MAINTENANCE
PERSONNEL .........................................................................................................127 16.9 UNDERGROUND EQUIPMENT .........................................................................127 16.10 ELECTRICAL POWER .........................................................................................128
17.0 RECOVERY METHODS ........................................................................................130 17.1 PROCESSING PLANT AT THE PROJECT SITE................................................130 17.1.1 Aker Solutions (Jacobs) FEED Study.............................................................130 17.1.2 Process Description.........................................................................................131 17.1.3 Plant Utilities ..................................................................................................137 17.1.4 Process Design Criteria...................................................................................138 17.1.5 Piping and Instrument Diagrams (P&IDs) and General Arrangement Drawings ..................................................................................140 17.1.6 Mass and Water Balances ...............................................................................140 17.1.7 Process Plant Production Schedule.................................................................142 17.1.8 Tailings and Waste Rock Storage ...................................................................142 17.2 SASKATCHEWAN METALS PROCESSING PLANT .......................................149 17.2.1 Aker Solutions (Jacobs) FEED Study.............................................................149 17.2.2 Process Overview............................................................................................150 17.2.3 Process Description.........................................................................................150 17.2.4 Residue Disposal.............................................................................................159 17.2.5 Reagents..........................................................................................................160 17.2.6 Process Design Criteria, Drawings and Diagrams ..........................................162 17.2.7 Hydrometallurgical Plant Production Schedule..............................................162
18.0 PROJECT INFRASTRUCTURE............................................................................164 18.1 NICO PROJECT SITE ...........................................................................................164 18.1.1 Permanent Road Access..................................................................................164 18.1.2 Site Layout and Roads ....................................................................................166 18.1.3 Power and Energy Systems.............................................................................167 18.1.4 Building Heating System ................................................................................167 18.1.5 Fuel Storage and Distribution .........................................................................167
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18.1.6 Fresh Water Supply.........................................................................................167 18.1.7 Solid Waste Disposal Facilities ......................................................................168 18.1.8 Communications and Information Management Systems ..............................170 18.1.9 Hospital and Medical Facilities ......................................................................171 18.1.10 General Site Mobile Equipment......................................................................171 18.1.11 Permanent Camp Complex .............................................................................171 18.1.12 Railroads and Port Facilities ...........................................................................172 18.2 SASKATCHEWAN METALLURGICAL PROCESSING PLANT .....................172 18.2.1 Plant Site and Facility .....................................................................................172 18.2.2 Process Facility ...............................................................................................172 18.2.3 Administrative, Laboratory and Warehouse Building ....................................174 18.2.4 Access Road....................................................................................................174 18.2.5 Railway Access...............................................................................................174 18.2.6 Oxygen Plant...................................................................................................174 18.2.7 Electrical .........................................................................................................176 18.2.8 Communication...............................................................................................176 18.2.9 Natural Gas .....................................................................................................176 18.2.10 Water...............................................................................................................177 18.2.11 Sewage ............................................................................................................178 18.2.12 Site Drainage...................................................................................................178
19.0 MARKET STUDIES AND CONTRACTS.............................................................179 19.1 PRODUCT REVENUES........................................................................................179 19.2 PRODUCT SPECIFICATIONS .............................................................................180 19.3 SUPPLY AND DEMAND FORECASTS..............................................................180 19.3.1 Gold.................................................................................................................180 19.3.2 Cobalt..............................................................................................................182 19.3.3 Bismuth ...........................................................................................................189 19.3.4 Copper.............................................................................................................194 19.4 PRICING STRATEGY AND BASIS.....................................................................195 19.4.1 Gold.................................................................................................................195 19.4.2 Cobalt..............................................................................................................196 19.4.3 Bismuth ...........................................................................................................198 19.4.4 Copper.............................................................................................................200 19.5 RECOVERY OF METALS....................................................................................200 19.6 MARKETING RESOURCES AND ORGANIZATION .......................................200 19.7 TREATMENT CHARGES.....................................................................................201 19.7.1 Gold Refining..................................................................................................201 19.7.2 Refining of Copper Cement ............................................................................201
20.0 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT.........................................................................................202
20.1 PROJECT SITE ......................................................................................................202 20.1.1 Environmental Studies and Issues ..................................................................202 20.1.2 Environmental Assessment.............................................................................204 20.1.3 Socio-economic Impact Assessment...............................................................209
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20.1.4 Environmental Management...........................................................................210 20.1.5 Permitting Requirements ................................................................................213 20.1.6 Social and Community Aspects, Stakeholder Consultation ...........................215 20.1.7 Social Management.........................................................................................219 20.1.8 Reclamation and Mine Closure Requirements ...............................................220 20.2 SASKATCHEWAN METALS PROCESSING PLANT .......................................223 20.2.1 Environmental Studies ....................................................................................223 20.2.2 Environmental Assessment.............................................................................227 20.2.3 Socio-economic Impact Assessment...............................................................235 20.2.4 Environmental Management...........................................................................236 20.2.5 Permitting Requirements ................................................................................245 20.2.6 Social and Community Aspects, Stakeholder Consultation ...........................245 20.2.7 Social Management.........................................................................................247 20.2.8 Reclamation and Plant Decommissioning ......................................................247
21.0 CAPITAL AND OPERATING COSTS .................................................................250 21.1 CAPITAL EXPENDITURES.................................................................................250 21.1.1 NICO Project Site, NWT ................................................................................250 21.1.2 Saskatchewan Metals Processing Plant ..........................................................262 21.1.3 Adjustments to Capital Expenditure Estimates...............................................265 21.2 OPERATING COSTS ............................................................................................266 21.2.1 NICO Project Site, NWT ................................................................................266 21.2.2 Processing Concentrate at the SMPP..............................................................278
22.0 ECONOMIC ANALYSIS ........................................................................................283 22.1 METHODOLOGY .................................................................................................283 22.2 SUMMARY OF RESULTS ...................................................................................283 22.3 REVENUE..............................................................................................................284 22.4 TRANSPORTATION, TREATMENT AND MARKETING CHARGES .............................................................................................................. 286 22.5 CAPITAL EXPENDITURES AND OPERATING COSTS ..................................286 22.5.1 Capital Expenditures.......................................................................................286 22.5.2 Operating Costs...............................................................................................288 22.6 ROYALTIES AND INCOME TAXES ..................................................................288 22.7 PROJECT FINANCING.........................................................................................290 22.8 SENSITIVITY ANALYSIS ...................................................................................290
23.0 ADJACENT PROPERTIES ....................................................................................292
24.0 OTHER RELEVANT DATA AND INFORMATION ..........................................293 24.1 PROJECT IMPLEMENTATION...........................................................................293 24.1.1 Project Site in the NWT..................................................................................293 24.1.2 The SMPP .......................................................................................................303 24.1.3 Monitoring and Control ..................................................................................307 24.2 RISK MANAGEMENT .........................................................................................308 24.2.1 Business Risks ................................................................................................310
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24.2.2 24.2.3 24.2.4

Environmental and Regulatory Risks .............................................................311 Project Management Risks .............................................................................313 Path Forward...................................................................................................313

25.0 INTERPRETATION AND CONCLUSIONS ........................................................315

26.0 RECOMMENDATIONS..........................................................................................317

27.0 DATE AND SIGNATURE PAGE...........................................................................318

28.0 REFERENCES..........................................................................................................319

29.0 CERTIFICATES.......................................................................................................325

Appendix I: Appendix II:

Process Flow Diagrams for the Processing Plant at the Project Site
Process Flow Diagrams for the SMPP

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Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 Table 1.7 Table 1.8 Table 1.9 Table 1.10 Table 1.11 Table 1.12 Table 1.13 Table 1.14 Table 1.15 Table 1.16 Table 2.1 Table 2.2 Table 4.1 Table 10.1 Table 10.2 Table 11.1 Table 11.2 Table 11.3 Table 11.4 Table 12.1 Table 12.2 Table 13.1 Table 13.2 Table 13.3

List of Tables

Page

Summary of Base Case Financial Analysis .......................................................4 NICO Estimated Mineral Resources ..................................................................6 NICO Project – Mine Production Schedule .......................................................8 NICO Project – Mineral Reserves......................................................................9 NICO Project – Process Plant Production Schedule ........................................12 Hydrometallurgical Plant Production Schedule ...............................................15 Base Case Metal Prices ....................................................................................20 Summary of NICO Project Estimated Pre-Production Capital Costs ..............21 Summary of SMPP Estimated Pre-Production Capital Cost ...........................21 Total Estimated Capital Expenditures..............................................................22 Summary of Project Site Operating Cost Estimate ..........................................22 Summary of SMPP Operating Cost Estimate ..................................................22 Unit Cost of Metal Equivalents and Net of By-Product Credits ......................23 NICO Project Cash Flow .................................................................................24 Sensitivity Analyses .........................................................................................25 Cyclical Metal Prices .......................................................................................25 Feasibility Study Contributors and Areas of Responsibility............................28 List of Abbreviations........................................................................................30 NICO Project - Status of Mining Leases .........................................................37 Highlights of Drill Intercepts from 2010 Drill Program ..................................55 Summary of Analysis of Hole Deviation .........................................................57 ALS Chemex Method AU-AA23/AU-AA24 Summary ..................................60 ALS Chemex Method AU-GRA21/AU-GR22 Summary ...............................61 ALS Chemex Method ME-AA46 Summary....................................................61 ALS Chemex Method ME-AA62 Summary....................................................62 Micon Duplicate Sample Descriptions.............................................................63 Micon Duplicate Sample Assay Results ..........................................................64 Mineral Resource and Reserve Grades ............................................................68 Mineralogy of the Two 2007 Pilot Plant Composite Feed Samples ................69 2004 Comminution Test Results ......................................................................73

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Table 13.4 Table 13.5
Table 13.6
Table 13.7 Table 13.8 Table 13.9 Table 13.10 Table 13.11 Table 13.12 Table 13.13 Table 13.14 Table 13.15 Table 13.16
Table 13.17 Table 13.18 Table 14.1 Table 14.2 Table 14.3 Table 14.4 Table 14.5 Table 14.6 Table 14.7 Table 14.8 Table 14.9 Table 14.10 Table 14.11 Table 15.1 Table 15.2 Table 15.3 Table 15.4

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2007 Pilot Plant Grinding Test Results ............................................................76 Summary of Average Head Grades and Circuit Performance of Composite P-1..................................................................................................77 Summary of Average Head Grades and Circuit Performance of Composite P-2..................................................................................................77 Solid/Liquid Design Criteria from Pocock Thickener Testwork .....................78 Fleet Flowsheet Options 4 and 6 Input Parameters..........................................79 FLEET Flowsheet Option 4 Stage Recoveries.................................................80 FLEET Flowsheet Option 6 Stage Recoveries.................................................80 Summary of Results from the Ore Hardness Variability Tests (2008) ............81 Flowsheet Options 4 and 6 Pilot Plant Results for Composite P-3..................83 Flowsheet Options 4 and 6 Pilot Plant Results for Composite P-5..................83 Concentrator FEED Study Plant Recoveries....................................................84 FEED Design Feed and Concentrate Grades ...................................................84 Summary and Comparison of Crushing, Grinding and Flotation Design Parameters ...........................................................................................84 FEED Design SMPP Bulk Concentrate Feed Grades ......................................85 Hydrometallurgical FEED Study Plant Recoveries .........................................97 Previous Mineral Resources Estimate Dated November, 2004 .......................98 NICO Drilling Database Records ....................................................................99 Bulk Density Measurments ............................................................................100 NICO Uncapped Composite Statistics by Domain ........................................101 NICO Capping and Threshold Values ...........................................................101 NICO Experimental Semi-Variograms ..........................................................102 NICO Block Model Setup ..............................................................................102 Economic Parameters.....................................................................................103 NSR Metal Unit Values .................................................................................104 NICO Estimated Mineral Resources ..............................................................104 Validation Statistics for Capped Composites and Block Estimates...............105 Resource to Reserve Conversion Parameters.................................................107 Underground Reserves ...................................................................................108 Open Pit Reserve............................................................................................108 NICO Project – Total Reserves......................................................................109

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