Zambia - copper projects

Konkola North Copper Project – TEAL 100%

Overview

The Konkola North Copper Project is located within the greater Konkola area of the Zambian Copperbelt and consists of a single large scale mining licence covering an area of approximately 44 square kilometres. The development of this project is a high priority for the Company. In the opinion of RSG Global, the greater Konkola area represents one of the largest undeveloped copper resources in the world. Pursuant to a drilling program in excess of 47,000 metres, TEAL has identified inferred mineral resources of 78.8 million tonnes at 2.14% copper. This resource is contained within only the east and south limb areas of the project. Historic records and more recently drilled results relating to other areas of the project indicate a further inferred mineral resource of approximately 107 million tonnes at grades of 2.30% and 63 million tonnes at grades of 3.88% copper. See " – Mineral Resources". At the south limb, TEAL intends to focus initially on the development of a high-grade region of the deposit and re-equipping of the existing infrastructure, which includes a 423 metre vertical shaft, two ventilation shafts and three ore haulage levels. At the east limb, the Company is considering the sinking of a decline shaft to access the mineralization. The Konkola North Copper Project is adjacent to the existing Konkola Mine, owned by Konkola Copper Mines plc, which has existing operational mining infrastructure. The Konkola North Copper Project is subject to a buy-in right of up to 20% (including a 5% carried interest) by ZCCM-IH, a company controlled by the Zambian Government.

Property Description, Location and Ownership

The Konkola North Copper Project is located in Zambia in the northern part of the Copperbelt near the DRC border. The project consists of a large scale mining licence covering an area of approximately 44 square kilometres. The project is situated near the town of Chililabombwe adjacent to the Konkola Mine operated by KCM.

Figure 1

Konnoco (Zambia) Limited ("Konnoco"), a wholly-owned subsidiary of TEAL, holds the exclusive rights to the Konkola North Copper Project through large scale mining licence No. 20, that was issued on May 30, 1997 and expires on May 19, 2020. The licence provides for the exclusive right to mine for copper, cobalt, gold, silver, selenium, tellurium and sulphur.

Pursuant to an agreement dated March 6, 1997 among Zambia Consolidated Copper Mines Limited (now ZCCM-IH), ARM, Konnoco and the Government of Zambia, Konnoco acquired the Konkola North Copper Project in consideration of an initial payment on signing of $500,000, additional payments which have been made, totalling $500,000 upon the commencement of a feasibility study and the commitment to pay a further $7,500,000 upon the taking of a development decision after the completion of a final feasibility study. Konnoco undertook to spend certain amounts to complete a pre-feasibility study, which the Company has done, and produce a feasibility study within a further 24 to 28 months. On September 19, 2005, the parties agreed to extend the date on which Konnoco was required to produce a final feasibility study until the earlier of the date that is 24 months following the closing of the Offering and November 30, 2007.

Should a feasibility study be completed and a mine development decision be taken by Konnoco, then TEAL will be obligated to subscribe for that number of new Konnoco shares so as to equity finance one third of the total financing requirements for mine development and, as well, settle all inter-company loans between Konnoco and TEAL. Thereafter, ZCCM-IH has the right to a 15% or 20% equity interest in Konnoco, of which 5% shall be a free-carried interest. ZCCM-IH's residual 10% or 15%, respectively, "paying" equity interest will obligate ZCCM-IH to fund its share of equity to develop a mine, although ZCCM-IH may elect to be debt funded by TEAL at an interest rate of LIBOR plus 4.5% (should ZCCM-IH elect to have a 15% interest) or a fixed rate of 20% (should ZCCM-IH elect to have a 20% interest).

Surface rights leases to the Konkola North Copper Project are held by TEAL. Amounts in arrears owing in respect of the surface rights leases of the entire licence area on which the Konkola North Copper Project is situated total approximately $300,000. TEAL is engaged in ongoing discussions with the Zambian Government to relinquish those surface rights leases of the subject licence that do not directly pertain to the Konkola North Copper Project without being required to pay arrears in respect of any relinquished surface rights leases. TEAL expects that additional amounts for the required and applicable surface rights in respect of the area pertaining to the Konkola North Copper Project will be payable.

Information in respect of the Company's Konkola North Copper Project licence is as follows:

Licence Number	Area (km2)	Date of Original Grant	Expiry Date of Current Period
20	44	30/05/1997	29/05/2020

The annual fees required to maintain the licence in good standing are approximately $370.

TEAL's intention is to use a portion of the net proceeds of the Offering to conduct feasibility studies on the mineral project. No permits are needed to conduct TEAL's current work program on the Konkola North Copper Project except for those which TEAL anticipates will be granted in the ordinary course upon the making of a proper application and the payment of any applicable fee.

Konnoco completed a base line environmental study in 1997 and thereafter undertook an Environmental Project Brief as required by the Mining Act (Zambia) and the Mines and Minerals Environmental Regulations of 1997 (Zambia). Further environmental studies, reporting and procedures will be undertaken as part of the preparation by the Company of the final feasibility study on the project.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Konkola North Copper Project can be reached directly by a national road that is surfaced, in good condition and connects the town of Chililabombwe, about 11 kilometres south of the project, with the village of Konkola, which is adjacent to the project. Chililabombwe and Konkola have estimated populations of 50,000 and 4,000, respectively. The nearest railhead to the project is located in Chililabombwe which is situated about 75 kilometres north of Kitwe, a major town with a population of 373,000, having amenities including medical, dental, school, engineering and other services for the mining industry. Cellular and fixed line telecommunications are readily available on most of the Zambian Copperbelt.

Zambia has a sub-tropical climate. A high plateau with hills and mountains dominates the topography. The area subject to the Company's licence is located on a gently undulating topography with a mean elevation of 1,250 metres above sea level. The length of the rainy season varies but averages 190 days in the project vicinity with annual rainfall varying between 1,000 and 1,500 millimetres.

The village of Konkola is serviced with electricity connections and a 33 kilovolt substation is located next to the project. Potable water is pumped from the water reservoir at Chililabombwe to Konkola. In addition, a water treatment plant is also situated close to the project. The Konkola North Copper Project is located some 10 kilometres north of the operating Konkola Mines, which possess all necessary utilities to support a major mining operation.

The area surrounding the Konkola North Copper Project is gently undulating and comprised of Miombo woodland. The area is suitable for the construction of mining infrastructure.

History

A prospective outcrop at the Konkola North Copper Project was discovered in 1924. Extensive surface mapping, pitting and trenching continued until the 1930s. Between 1936 and 1938, 26 drill holes totalling 6,640 metres in length were completed by Bancroft Mines Limited, the first registered owner of the project. In 1953, Bancroft Mines Limited sank the No. 2 shaft to a depth of 423 metres and completed two ventilation shafts and three development levels into the south limb deposit. In 1959, the mine was put under care and maintenance due to the depressed copper market. Between 1967 and 1978, a further 10,900 metres were drilled by Anglo American and ZCCM-IH, principally in the central portion of the Konkola North Copper Project.

Starting in 1972, the mining industry in Zambia was progressively nationalized and ZCCM-IH acquired ownership of the Konkola North Copper Project from Anglo American.

Geophysical surveys were conducted in 1985 on the Konkola North Copper Project by the University of Zambia on behalf of ZCCM-IH. This work achieved limited depth penetration but was able to identify numerous north-east/south-west trending resistivity lows, interpreted as faults. The most important north-east/south-west trend is interpreted as the Lubengele Fault.

During the privatization of state-owned mining enterprises that began in the mid-1990s, the government of Zambia undertook to divide the greater Konkola deposit and surrounding area into two parts. The inferred position of the Lubengele Fault, coinciding with the local 40,000 metre North grid line, was then defined as the boundary between Konkola in the south, owned by KCM, and the Konkola North Copper Project. As part of the government's privatization effort, TEAL acquired the rights to the Konkola North Copper Project in 1997.

Geological Setting

Regional and Local Geology

The regional and local geological setting is described in detail under the heading ''Zambia – Exploration Areas – Copperbelt Joint Venture Exploration Area''.

Property Geology

The Konkola North Copper Project deposit is developed on a south-west trending dome/anticline controlled by basement topography a short distance to the north of the Konkola Mine. The general stratigraphy is comprised of thick successions of Lower Roan Formation clastic units comprising conglomerates, upward fining arenites and quartzites. Repeated upward fining cycles indicate unstable tectonic conditions triggering periodic influx of sediments into half-graben basins.

The Nchanga Formation commences with the OS 1 Member (Ore Shale) (also known as the 'Ore Shale'), which indicates the first major marine transgression of the area. The Nchanga Formation on the Konkola North Copper Project comprises six sedimentary upward-fining cycles of which the siltstone/shale units comprise the top of each cycle and are termed the OS 1-6 Members.

The Upper Roan Formation unconformably overlies the Nchanga Formation. This unconformity is marked by the Konkola Conglomerate Member, followed by interbedded siltstones, arkose, grit and dolomite units. The lower most dolomite unit, locally known as the Chingola Dolomite, is the main aquifer in this area.

The Mwashia Formation unconformably overlies the Nchanga Formation and comprises dolomitic siltstones, carbonaceous shale, intercalated limestones and dolomitic units.

Exploration

The Konkola North Copper Project has been extensively explored and TEAL has re-logged the previously drilled borehole core, re-assayed where possible, and incorporated this data into its digital database. TEAL completed a regional high resolution airborne magnetic program over the region, the results of which were used in the interpretation of the regional stratigraphy and the definition of linear and other structures. The good quality of the data allowed the Company to make significant advances in the geological understanding of the area. The survey was flown by Geodass Exploration Geophysical Services (Pty) Limited.

TEAL completed a limited two-dimensional seismic survey on four profiles across the project. The aim of this survey was to map the structure of the deposit. Although the results were inconclusive, they contributed to the understanding of the regional geology. The survey was undertaken and completed by Geoplan Limited.

TEAL further defined the deposit by way of a diamond drilling campaign where a total of 47,689 metres of core was drilled. The drilling results provided the basis for the current inferred resource base and intersected further copper mineralization throughout the Konkola North Copper Project. Boart Longyear Canada Inc. carried out all the drilling on the project.

A borehole locality plan and section across the Konkola North Copper Project is shown below in Figures 2 and 3.

Figure 2

Figure 3

Deposit Type and Mineralization

The mines on the Zambian Copperbelt are generally hosted within and immediately adjacent to the OS 1 Member (Ore Shale). Copper mineralization hosted in the OS 1 Member (Ore Shale) occurs at the Konkola North Copper Project, as well as at several nearby mines in Zambia. RSG Global has confirmed in the Technical Reports that resources at certain of these mines are in excess of 100 million tonnes.

The mineralized portion of the OS 1 Member (Ore Shale) is usually between 15 and 20 metres thick and, at individual mines, may have a strike length of over 10 kilometres. A complex paragenesis of copper oxides and sulphides is present. Copper also occasionally occurs in its native form. The OS 1 Member (Ore Shale) is the lowest well-defined and continuous shale/siltstone/schist unit of the Katanga Sequence and has been interpreted as a reducing impervious trap and depositional site for mineralizing fluids.

The inferred resources at the Konkola North Copper Project are situated in the east and south limb deposits. The mineralization of the east limb deposit comprises chalcocite (63% by volume), acid-soluble copper minerals (27%) and minor other copper sulphide minerals. The sulphide mineralogy of the south limb deposit comprises chalcopyrite (74% volume), chalcocite (17%), acid-soluble copper minerals (7%) and minor other copper sulphides.

Drilling

In 1997 and 1998, 78 diamond drill holes, totalling 47,689 metres in length, were completed at the Konkola North Copper Project. This drilling was conducted for exploration and resource estimation purposes. The results and their interpretation have led to the inferred mineral resource estimation of the east and south limb deposits.

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

TEAL has established an inferred mineral resource at the northern sector, parts of which TEAL believes to be accessible from the project's existing No. 2 shaft and related underground development, which were used until operations were curtailed in 1959 due to depressed copper prices. A re-evaluation and re-definition of this resource base is currently being undertaken with the intention of upgrading the resource category. The mineral resources reported by TEAL for the Konkola North Copper Project have not been adjusted for the limited production from No. 2 shaft. Additional inferred resources have been defined at the east limb with the potential for access through the development of a decline system.

Area 'A' and the Area 'A' extension, which lie to the south of these zones, also contain mineral resources defined historically.

Inferred and Historical Mineral Resources for the Konkola North Copper Project
Area	Tonnes (000)	Total Copper (%)	Acid Soluble Copper (%)
Northern Sector – Inferred Mineral Resources
East limb(1)	29,430	2.52	0.48
South limb(1)	49,400	1.92	0.41
Total	78,830	2.14	0.44
Southern Sector – Inferred Mineral Resources (Historical)
Area 'A'(2)	107,157	2.30
Area 'A' extension(2)	63,245	3.88
Total	170,402	2.89

Notes:
(1)	Although calculated at a 1% total copper cut-off, the boundaries of the mineralized zones were extended by 1 metre.
(2)	Historical estimates pre-dating National Instrument 43-101. The source of these estimates is ARM. RSG Global concurs with the Company that these historical estimates are relevant and RSG Global equates these estimates with an inferred mineral resource category.

RSG Global considers that if the estimation were to be re-estimated using revised estimation parameters, portions of the mineral resource at the Konkola North Copper Project could be upgraded to higher confidence categories.

Metallurgy and Mining Plan

The Konkola North deposits are characterized by essentially two different types of deposits. Chalcocite (63% by volume) is the dominant copper-bearing mineral in the east limb deposit. Chalcopyrite (74% by volume) is the dominant copper-bearing mineral in the south limb deposit.

Extensive metallurgical laboratory testing has confirmed that the mineral composition of the east limb deposit and the shallow part of the south limb deposit are similar and suggests that these deposits are conducive to an acid leach or bio-leach extraction process. This differs from the mineralization of the deeper part of the south limb deposit, which is more conducive to sulphide concentration.

Flotation work done on the east and south limb deposits indicated that the overall average copper recoveries were in the 70% range at a concentrate grade of 35% copper, mainly because of the relatively high proportion of oxide copper present in the mineralized zone. The overall copper recovery was increased to 80% (grade 26%) with the use of sodium hydrogen sulphide as a sulphidising agent. The overall copper recovery results increased further to 90% when acid leaching of the flotation tails was employed. Flotation of south limb samples was more complex and challenging. This was largely associated with the variable and generally finer liberation characteristics of this deposit.

Heap leach tests were conducted at Oretest Laboratories, Perth, Australia. The results indicated that the concentrate leached well with a modest acid consumption. Indications were that +90% recovery of the leachable copper is achievable.

Billiton Process Research in Johannesburg, South Africa conducted test work in order to determine the amenability of the concentrate from the Konkola North Copper Project to bio-leach treatment. Bio-leaching of east limb concentrate with the thermophilic culture achieved a copper dissolution of 98% after a 22 day treatment period, indicating an improved rate and extent of copper dissolution compared to mesophilic bio-leaching. The mesophillic leach of the south limb concentrate resulted in an average copper dissolution of 87%. The estimated chalcopyrite dissolution attained in the test was 59%. Pacific Ore Technologies has tested its own chalcopyrite bacteria on the concentrates from the project. A concentrate sample was oxidized very rapidly and over 90% copper dissolution was obtained within nine days of batch leaching. The extraction rate translates to a continuous bacterial leach operation with less than two days of retention time.

No. 2 shaft is a rectangular and concrete lined shaft with dimensions of 7.1 x 4.3 metres to a depth of 423 metres. The shaft has a concrete headframe about 40 metres high. Two ventilation shafts were sunk. Ventilation shaft VS 2A was sunk to a 100 metre level and then inclined to the 170 metre level. Ventilation shaft VS 2B was sunk in Lower Roan Formation rocks close to the east limb to a depth of 120 metres. VS 2B is not connected to other workings. Both ventilation shafts are 3.6 metre diameter circular shafts.

Cross-cuts to load and footwall haulages were established on 100, 170 and 250 metre levels. Main level development dimensions are 3.7 metres by 3.5 metres and sub-level dimensions are 2.0 by 2.0 metres. Previous mining comprised sub-level open stoping with 15.2 metre strike length stopes and 6.1 metre pillars.

Figure 4

Various mining studies were undertaken between 1999 and 2001. The south limb was planned to be mined by sublevel open stoping with backfill. An extraction of 70% to 75% was targeted with the remaining deposit in pillars and factoring for a 10% grade dilution. Mining dilution was expected to be low (5%) and extraction variable depending on the geometry of the deposit. A steady state mining rate of one million tonnes per annum was planned for the ten year life of the south limb deposit. The east limb deposit was planned to be accessed by a twin decline system from surface.

Program of Work

The Company's proposed two year budget for the Konkola North Copper Project is $7.5 million. The Company plans to:

• Re-evaluate the resource readily accessible from the existing mine development (No. 2 shaft);
• Conduct work to re-define and categorize the current resource base;
• Complete feasibility studies, in priority, on (i) the No. 2 shaft high grade, shallow, copper resource; (ii) the remaining south limb resource at No. 2 shaft; and (iii) the east limb resource; and
• Complete studies to evaluate the possibility of a stand-alone mine exploiting the Area 'A' mineralization.

Mwambashi Copper Project – TEAL 70%

Overview

The Mwambashi Copper Project is located within TEAL's Copperbelt Joint Venture Exploration Area, a joint venture with KZC. The project represents TEAL's nearest to production prospect as small-scale mining operations are anticipated to commence within 12 months. An indicated mineral resource of approximately 8.6 million tonnes at 2.43% copper and 0.07% cobalt has been identified. The Company is currently conducting a feasibility study that it expects to complete within six months. With a positive outcome, TEAL would pursue an open-pit development, which TEAL anticipates would have low capital requirements primarily due to the likely availability of nearby processing facilities.

Property Description, Location and Ownership

The Mwambashi Copper Project is located on the Zambian Copperbelt. Pursuant to an agreement dated June 10, 1996 between ARM Zambia Limited and KZC, KZC was granted a 30% participating interest in the Mwambashi Copper Project as well as the Copperbelt Joint Venture Area, in consideration of the then current value of 30% of all of the Company's historic costs in respect of the properties subject to the agreement.

The parties agreed to fund jointly all future funding requirements for the joint venture area in proportion to their respective interests. Funding is mandatory for both parties, except with respect to declared project areas set aside for specific evaluation and development, in which case either party may withdraw or dilute its interest by failing to fund. To date, no areas have been set aside as declared "project areas".

The joint venture is governed by a management committee consisting of three appointees, two of which are appointed by the Company with the other being appointed by KZC. Votes on the management committee are proportional to a party's participating interest. The Company was appointed manager under the joint venture agreement, which it is entitled to hold so long as it maintains at least a 20% interest in the joint venture area or any project areas, as the case may be.

The Mwambashi Copper Project is situated within a large scale prospecting licence No. 72, which forms part of TEAL's Copperbelt Joint Venture Area licence holdings. See "Zambia – Exploration Areas – Copperbelt Joint Venture Exploration Area" and Figure 1.

Licence No. 72 is held by TEAL's wholly-owned subsidiary, ARM (Zambia) Limited. The licence, issued by the Ministry of Mines for an initial term of two years, was renewed by the Company until March 8, 2007, provides for the exclusive right to explore for uranium, selenium, sulphur, cadmium, copper, gold, silver, cobalt, lead, zinc and nickel, and may be renewed in the form of a retention licence for an initial period of three years, with the potential for a further three year renewal. Such licence also confers upon the holder an option to apply for a mining licence.

Information in respect of the Company's licence within which the Mwambashi Copper Project is located, is as follows:

Licence Number	Area (km2)	Date of Original Grant	Expiry Date of Current Period
72	529	19/10/1999	09/02/2007

TEAL intends to use a portion of the net proceeds of the Offering to complete a feasibility study on the project within six months. No permits are needed to conduct such a study except for those required for compliance with the Mines and Minerals Act, 1995 (Zambia), which TEAL anticipates will be granted in the ordinary course upon the making of a proper application and the payment of any applicable fee. All required environmental reporting and procedures will be undertaken by the Company as part of the preparation of the feasibility study.

Surface rights for the Mwambashi Copper Project may be held by local farmers and squatters. TEAL intends to acquire the appropriate surface rights once a mining licence for the project has been obtained.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Mwambashi Copper Project is accessed by a secondary road, 12 kilometres from the paved road, which is in good condition and connects the towns of Kitwe and Chingola. The project is also situated 10 kilometres from the nearest railhead located at the Chambishi Mine. The town of Kitwe, situated about 35 kilometres from the project, has a population of approximately 370,000 and possesses most modern amenities expected of a regional town serving the mines of the Zambian Copperbelt. Available amenities in Kitwe include medical, dental, schools, engineering and other services. In addition, cellular and fixed line telecommunications are readily available throughout most of the Zambian Copperbelt.

For a description of climate, see "Zambia – Exploration Areas – Copperbelt Joint Venture Exploration Area".

Electricity is supplied in Zambia by the Zambia Electricity Supply Commission, a public utility, and the Copperbelt Energy Corporation, a private supplier to the mining industry. Water for mining operations and domestic consumption is readily available on the Zambian Copperbelt. Substantial mining infrastructure, including concentrators, smelters and refineries, exists in the surrounding area.

History

During the 1960s, systematic auger drilling of the Lower Roan strata of the Western Chambishi Basin resulted in the recognition of copper deposits such as Mwambashi.

Drilling in the Mwambashi area started in 1951 when three holes were drilled by Rhodesia Selection Trust. Between 1967 and 1970, 37 holes were drilled, defining two zones of mineralization. A further two holes were drilled in 1971 and 1972 by Roan Consolidated Mines. Airborne geophysical surveys were carried out before drilling recommenced between 1972 and 1973, and an evaluation study was completed. At this time, the property was relinquished due to the perceived high stripping ratio and other technical issues. Following the start of the nationalization of existing operating mines in the country in 1972, Noranda and state-owned Mindeco Limited re-evaluated the deposit between 1974 and 1975, including the drilling of three new holes and the undertaking of additional metallurgical test work.

TEAL initially acquired rights to the Mwambashi Copper Project in 1995.

Geological Setting

Regional and Local Geology

The regional and local geological setting is described in detail in the section entitled "Zambia – Exploration Areas – Copperbelt Joint Venture Project Exploration Area".

Property Geology

The Mwambashi Copper Project depends upon exploitation of 'footwall type' mineralization. The project lies on the western edge of the Chambishi basin to the west of the Kafue Anticline. The Lower Roan Formation lies unconformably upon the granite basement in this area, dipping approximately 35° towards the northeast in the vicinity of the mineralized bodies.

The mineralization occurs at the base of the succession where the Kafufya Member pinches out against basement 'highs' to the north and at depth to the east. These unconformities define the edges of the mineralized zones. The topography of the basement 'highs' was modified by syn-sedimentary growth-faults, and the host rocks are sheared and faulted.

Exploration

Since 1995, TEAL has conducted drilling, soil geochemistry, induced polarization, ground magnetics, detailed grid based and road based gravity surveys, an aerial electromagnetic survey, and machine auger soil sampling on the Mwambashi Copper Project. The results of the geophysical surveys have been used by the Company to map the stratigraphy and structure of the area. The OS 1 Member (Ore Shale) forms an important marker horizon. Detailed geophysics have been used to delineate the growth fault structures that are thought to control the mineralization.

Due to sub-tropical weathering and the lack of surface expressions, pitting and auguring programs were used to collect samples for geochemical analysis. This has enabled TEAL to successfully map the area geologically and to gain an understanding of the soil processes and the dispersive behaviour of metals in the prevalent sub-tropical soil environment. Soil geochemistry has successfully outlined the mineralized zones associated with the Mwambashi Copper Project and is expected to be used in future evaluation and exploration of the wider area.

Deposit Type and Mineralization

Copper mineralization is hosted by arenaceous sediments in the 'footwall' of the OS 1 Member (Ore Shale) at the Mwambashi Copper Project, as in the case of the Chibuluma, Fitula and Mimbula mines. The host units are located in fault-bounded sub-basins to which the overlying shale has acted as an impermeable barrier and reductant for mineralized fluids. It is assumed that hydrocarbons trapped in the arenaceous footwall sediments may also have acted as reductants that have controlled precipitation of sulphide minerals from mineralized fluids.

The copper mineralization is wedge-shaped and varies from 30 metres thick in the shallower portions to less than 1 metre thick at depth. It has a strike extent of 500 metres and continues down dip for approximately 250 metres. The average thickness is 15 metres. Most of the copper mineralization occurs as medium to coarse grained, stratiform disseminated mineralization in argillaceous quartzites and conglomerates of the Kafufya Member. A minor component of the mineralization is hosted by veinlets that fill fractures at the base of the deposit. The upper portions of the deposit have undergone weathering with the result that copper sulphide minerals have been oxidized to form copper oxides, carbonates and silicates. A vertical mineral zonation occurs from entirely leached, through refractory, oxide, mixed supergene/oxide, supergene to sulphide mineralization. Primary sulphides (chalcopyrite, bornite, carrollite) are often rimmed by a 0.2 to 1 metre secondary zone of chalcocite at the upper and lower surfaces of the copper mineralization. Supergene enrichment processes are pronounced.

Drilling

TEAL began drilling the Mwambashi Copper Project in 1995 and continued to do so intermittently until 2001, during which time a total of 73 diamond and reverse circulation drill holes were drilled. Drilling contractors, Stanley Mining Services and Drill Africa (Pty), Limited, have conducted all drilling on TEAL's behalf on the project. A significant result of the latest drilling campaign by TEAL was the addition of shallow oxide copper resources not identified by previous explorers. The results of this recent drill program, together with the data from previous drilling, form the basis of the mineral resource estimate at the project.

Sampling and Analysis

A detailed description of sampling, analysis and sample security is provided in the section entitled "– Mineral Projects and Exploration Areas – Sample Preparation and Analysis – Central African Projects".

Mineral Resources

RSG Global reviewed a mineral resource calculation performed by TEAL in 2005. The boundaries of the mineralized zone (1% copper cut-off) were extended 1 metre (generally described as the 'soft grade boundary approach'). The mineral resource estimate made in 2005 has been classified as an indicated mineral resource, which is supported by RSG Global based on the drill spacing and model variogram parameters.

Indicated Mineral Resource Estimate for the Mwambashi Copper Project
Tonnes (000)	Total Copper (%)	Acid Soluble Copper (%)	Total Cobalt (%)
8,614	2.43	1.11	0.066

Metallurgy and Mining Plan

Due to the deep weathering and the variable nature of the deposit from the surface downwards to fresh sulphides at depth and the consequently variable mineralogical character of the deposit, four different mineralization zones were identified on which metallurgical test work was commissioned. Anglovaal Research Laboratories ("AVRL") in Johannesburg, South Africa undertook this test work. Figure 5 shows the distribution of mineralization zones and grade for the indicated resource at the Mwambashi Copper Project:

Figure 5

The following table summarizes the composites on which test work was undertaken:

Mwambashi Copper Project Metallurgical Composite Samples
Composite Deposit Type	Total Copper(%)	Acid Soluble Copper(%)
Primary sulphide material	4.64	0.56
Chalcocite dominant material	13.66	0.85
Mixed sulphide material	2.38	1.24
Oxide material	2.06	1.75
0.5% cut off copper material	0.82	0.49

TEAL currently expects that the Mwambashi Copper Project could be initially exploited by way of open-pit mining with a 50,000 tonne per month operation.

Based on the test work results achieved by AVRL, Metallurgical Design and Management ("MDM") was commissioned in 2001 to carry out a scoping study of the possible metallurgical processes and to provide both capital and operating cost estimates.

MDM considered the following process options:

• Option 1: Crushing, milling, differential sulphide/oxide flotation, tailings leach and copper cementation.
• Option 2: A variation of Option 1 with sulphide flotation, tailings reporting to leach vessels, and solvent extraction and electrowinning ("SX-EW").
• Option 3: Crush, agglomerate, heap leach, SX-EW.

While a stand-alone development remains the focus of TEAL’s attention, discussions with other local operators have highlighted spare capacity at neighbouring operations. Initial test work has indicated the suitability of Mwambashi material to processing at these plants. The following process route is proposed:

• Sulphide material: Crush, mill, flotation, concentrate to smelter.
• Mixed material: Crush, mill, flotation, tails to leach plant, SX-EW, concentrate to smelter.
• Oxide material: Crush, mill, leach plant, SX-EW.

Project Economics

A 2005 scoping study completed by the Company assuming a copper price of $1.00 per pound, found the net present value of the project to be in the order of $19 million (TEAL’s 70% share, $13 million) at a discount rate of 8%. This analysis included only the six year open-pittable portion of the mineral resource and assumed toll treatment and contract mining. At a copper price of $1.10 per pound, the net present value of the project rose to $25 million while at a copper price of $0.90 per pound, the net present value of the project was reduced to $12 million. Initial capital costs for this small-scale mine were estimated to be $1.6 million. RSG Global reports that the Company used conservative assumptions.

Program of Work

The Company’s proposed two year budget for the Mwambashi Copper Project, including the above-mentioned estimated capital costs of $1.6 million, is $3.0 million. The Company plans to pursue the following work program on the project within the next six months:

• Undertake a feasibility report, which may involve the performance of limited verification drilling and delineation drilling as well as performing additional drilling to provide further representative metallurgical sampling.
• Re-evaluate the mineral resource model in order to improve the confidence of the mineral resource.