DRC - copper-cobalt projects

Kalumines Copper-Cobalt Project - TEAL 60%

Overview

Situated in the DRC in close proximity to the city of Lubumbashi, the Kalumines Copper-Cobalt Project, a joint venture with Gécamines, comprises approximately 77 square kilometres. The project area hosts four near surface areas of copper mineralization that the Company believes may be exploitable using open-pit mining techniques. Drilling, trenching and pitting were undertaken by previous owners and copper and cobalt mineralization was identified over a strike length in excess of 3 kilometres. The Company has agreed with Gécamines to conduct a drilling program to define the resource and to complete a feasibility study on the project by May 2007. The nearby city of Lubumbashi and the historic Kipushi Mine have in place most necessary support infrastructure.

Property Description, Location and Ownership

The Kalumines Copper-Cobalt Project consists of one mining licence, or Permits d'Exploitation, No. 2590, held by TEAL's subsidiary, Kusonta - Lupoto Mines s.p.r.l. ("Kalumines"), that covers a surface area of approximately 77 square kilometres in the Katanga Province of the DRC.

Figure 9

Pursuant to an agreement made May 6, 2003 between AVCO, a wholly-owned subsidiary of the Company, and Gécamines, Gécamines agreed to contribute all of the mining rights to the area located within the Kasonta-Lupoto Polygon (an area now known as Permits d' Exploitation No. 2590) to Kalumines, a corporation owned 60% by AVCO and 40% by Gécamines. On August 18, 2005, Gécamines and AVCO agreed that AVCO would be given until May 2007 to complete a feasibility study, which is a condition to AVCO's right to maintain its interest in Kalumines. Thereafter, AVCO must arrange all financing for the development of a mine should a development decision be taken. Royalty payments of between 3% and 4.5% of gross

sales must be made upon the commencement of production. AVCO has the right to appoint a majority of members to the board of Kalumines and to any management committee established.

Exploitation permit 2590 was issued by Ministerial Decree on May 9, 2005 and is valid until April 4, 2009. The permit can be renewed several times for a period of 15 years each time and provides for the exclusive right to develop, mine and explore for copper, cobalt and associated minerals.

TEAL intends to use a portion of the net proceeds of the Offering to conduct a feasibility study on the Kalumines Copper-Cobalt Project. No permits are needed to conduct TEAL's current work program on the Kalumines Copper-Cobalt Project except for those required for compliance with the New Mining Code, which TEAL anticipates will be granted in the ordinary course upon the making of a proper application and the payment of any applicable fee.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Kalumines Copper-Cobalt Project is located approximately 23 kilometres northwest of Lubumbashi. Lubumbashi has an international airport and is approximately 180 kilometres to the southeast of the city of Kolwezi, which has a population of 385,000 and a regional airport. While paved roads connect Lubumbashi and Kolwezi to the Zambian Copperbelt, access to the Kalumines Copper-Cobalt Project must be made by way of a series of poorly maintained forest roads. Rail lines connect Zambia with the major centres in the DRC Copperbelt, including the cities of Lubumbashi and Kolwezi.

The area around the project forms part of the drainage basin of the Congo River, a large, low-lying plateau with an average elevation of approximately 300 metres. The lands which are the subject of the Company's licence are located on gently undulating topography with a mean elevation of 1,250 metres.

The climate of the region is tropical. The wet season is typically from April to October and the dry season is from December to February. In the southern parts of the DRC, the annual average rainfall is 1,000 to 1,500 millimetres. Between December and April, most fieldwork is restricted to areas served by good roads, effectively limiting exploration.

In Lubumbashi, local infrastructure and resources are relatively well established. High voltage lines capable of providing sufficient power for mine development are already in place within 20 kilometres of the project area. Water supplies sufficient for mine development are available from perennial streams and ground water within the project area.

The vegetation of the area surrounding the Kalumines Copper-Cobalt Project is comprised of the Miombo woodland. Suitable areas for mining-related infrastructure are readily available near the project.

History

The south-eastern portion of the DRC, including the Kalumines Copper-Cobalt Project area, was first prospected on a systematic basis by Tanganyika Concessions Limited in the 1890s. Early reports mention the Lupoto, Kasonta, Niamumenda, Karavia and Kasombo prospects, all of which showed some evidence of previous exploitation by indigenous peoples. In 1906, Union Minière du Haut Katanga ("UMHK") undertook more detailed exploration work on the Kasonta and Lupoto deposits. This comprised mainly regional soil geochemistry work and mapping of the area.

Beginning in 1921, exploration (mainly surface exploration and mapping, but including some "electric prospecting" and underground exploration at Lupoto and Karavia) was carried out by UMHK, but it was not until 1930 that the Kasonta C1 Polygon (now referred to as the Kasonta-Lupoto Polygon) was established and detailed geological investigations were initiated. UMHK had the exclusive rights to the Kalumines Copper-Cobalt Project until its nationalisation in 1967 and, thereafter, Gécamines had exclusive rights.

From 1923 until 1967, UMHK undertook intermittent exploration work, including drilling on the Lupoto and Karavia prospects. Gécamines undertook intermittent drilling up to 1977 and the Lupoto resource was defined. During this period, no drilling is known to have been undertaken on the Kasonta prospect. The high-grade Karavia prospect was mined between 1959 and 1963 by UMHK.

Lupoto has been the subject of a number of drilling programs by UMHK and Gécamines. A total of 73 diamond drill holes, totalling over 9,100 metres in length, form part of the database. Only 127 metres of this early drilling campaign core has been preserved. Drill fences were completed at 100 metre intervals aligned predominantly east-west and this orientation was maintained despite changes in strike around the southern limb. Most drilling was focused on the south-eastern portion of the project where the surface mineralization is best developed. The majority of drill holes intersected oxide mineralization. A few deep holes intersected sulphide mineralization at depths of greater than 300 metres.

Historical mineral resources were reported for the four known deposits within the Kalumines Copper-Cobalt Project. This work was based upon drilling carried out by UMHK and Gécamines before 1985. The historical estimates for the four deposits at the Kalumines Copper-Cobalt Project are shown below:

Kalumines Copper-Cobalt Project Inferred Mineral Resource (Historical) Estimates
Area	Tonnes (000)	Copper Grade (%)	Diamond Drill Holes
Lupoto(1)	6,700	3.13	73
Kasonta(1)	1,500	5.18	none
Karavia(1)	550	3.92	none
Niamumenda(1).	40	5.38	none

Note:

(1)

Historical estimates pre-dating National Instrument 43-101. The source of these estimates is Gécamines. RSG Global concurs with the Company that these historical estimates are relevant. These estimates are not verifiable and, as such, have been downgraded. RSG Global concurs with the Company treating these estimates as inferred mineral resources. The original classification was made based on a classification scheme internal to Gécamines.

TEAL believes that these estimates indicate the potential for open-pittable copper-cobalt mineralization within the Kalumines Copper-Cobalt Project and that the data supports a classification of the mineral resources as inferred.

Geological Setting

Regional Geology

Given the continuity of the mineralization style between the Copperbelts of Zambia and the DRC, reference should be made to the section entitled "Copperbelt Joint Venture Exploration Area - Geological Setting".

Local Geology

The Lupoto-Kasonta-Kasombo area is underlain by a northwest oriented zone of "mega breccia" that contains large rafts of Series des Mines (Lower Roan Formation), Katanga Sequence stratigraphy. The rafts are often structurally complex, being tightly folded and exhibiting variable strikes and dips both within individual rafts and between neighbouring rafts.

Property Geology

Six main stratigraphic units are identified in the area of the Kalumines Copper-Cobalt Project with mineralization hosted by the SD, RSC and RSF units.

RSC is more resistant than the adjacent stratigraphy and the "mega breccia". As a result, the RSC forms outcrops and low ridges that are prominent in the otherwise flat terrain. The "mega breccia" is composed of brecciated stratigraphy derived from various Katanga Sequence units. Clasts within the breccia range from microscopic size to large rafts within which coherent stratigraphy is preserved. The breccia is easily weathered, accentuating the positive topography created by the RSC. A thrust fault separates the "mega breccia" zone and allochthonous Lower Roan Formation klippe from structurally underlying, but stratigraphically higher, Upper Roan Formation units.

Exploration

In 1999, TEAL commenced an investigation into the mineral potential of the Katanga Region. All available information was compiled, interpreted and evaluated. Field visits to most prospects were undertaken. From the results of these investigations, TEAL identified an area northwest of Lubumbashi as representing an unencumbered area of potentially significant economic mineral potential. This area contained the partially drilled Lupoto deposit with numerous untested extensions to this mineralization and is now the subject of the Company's licence at the Kalumines Copper-Cobalt Project.

Since the Company acquired its interest in the project, only limited reconnaissance fieldwork has been carried out. The fieldwork included reconnaissance diamond drilling, re-logging and sampling of pits, mapping, soil sampling and digitizing of data. The Company had intended to complete four diamond drill holes. However, due to equipment problems with the drilling contractors, very poor core recoveries were achieved, and the Company curtailed the drilling program.

Figure 11 shows the simplified geological map of the Lupoto deposit and two sections through the mineralization.

Figure 11

Deposit Type and Mineralization

In the DRC, although mineralization is broadly similar to that of the Zambian Copperbelt, the facies development in the northern portion of the Lufilian Arc is dominated by limestones and argillaceous rocks, rather than arenaceous and argillaceous rocks as seen in the Zambian Copperbelt. The rocks form a thick succession of shallow-water shales, dolomitic shales and reef dolomites, and the mineralized sediments display remarkable lateral continuity in thickness and metal content.

The two sedimentary units that host the mineralization each vary between 5 to 15 metres in thickness, and are developed on, below and above a resistant, siliceous dolomite bed. Within the weathered zone, the principal mineralization is malachite with subordinate pseudomalachite and chrysocolla, whereas the main cobalt minerals are heterogenite, spherocobaltite and erythrite. Oxidation generally extends to approximately 100 metres below the surface in the region. In the mixed zone, oxide minerals progressively give way to sulphides with increasing depth. Supergene enrichment is common in parts of the oxide zone. Chalcocite, with associated digenite, is the major copper mineral in the mixed zone, where it is also associated with an increase in the dolomite content. The principal copper minerals within the sulphide zone are chalcocite and digenite with subordinate bornite and chalcopyrite. Carrollite is the principal cobalt sulphide mineral.

Drilling

A preliminary drilling program was undertaken by the Company at Lupoto towards the end of 2003. This program was designed to test possible extensions to known mineralization, confirm previous drilling and provide data on the mineralization styles. Triple tube NQ diamond drilling was undertaken, but all mineralized intersections were returned with below standard recovery, mainly due to unsuitable drilling equipment and lack of experience on the part of the contractors.

Similarly, a preliminary drilling program was attempted on behalf of the Company at Kasonta. The holes were drilled as fences across the prospect, but no drill hole attained acceptable recoveries. A significant portion of the highly weathered

material close to surface was not recovered. The weathered zone contains significant copper mineralization. The drilling contractors used were KGHM Congo s.p.r.l, a subsidiary of the Polish company KGHM based in Lubumbashi, and Mission Sondage, the Gécamines drilling division.

Grades in the top 20 metres of the hole are affected by supergene enrichment processes. Artisanal workers sieve the weathered material and produce a ‘concentrate' that has a grade of above 20% copper. However, due to poor drilling recoveries, this material was lost.

Sampling and Analysis

A detailed description of sampling, analysis and sample security is provided under the heading entitled "Sample Preparation and Analysis - Central African Projects".

Mineral Resources

Historical mineral resources have been established on a number of deposits within the Kalumines Copper-Cobalt Project. See "History".

Program of Work

The Company's proposed two year budget for the Kalumines Copper-Cobalt Project is $4.5 million. The Company has agreed with Gécamines to conduct a drilling program to define the resource and to complete a feasibility study on the project by May 2007. The Company plans to pursue the following program of work on the project within the next two years:

• Evaluate the Lupoto deposit through infill, twinning and extension drilling.
  
• Drill and establish a categorized resource estimate of the Kasonta and Lupoto deposits.
  
• Undertake a feasibility study of the Kasonta and Lupoto deposits.
  
• Drill test other prospects in the area.