APOGEE MINERALS LTD.

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1 APOGEE MINERALS LTD. TECHNICAL REPORT ON THE PRELIMINARY ASSESSMENT OF THE PULACAYO PROJECT, PULACAYO TOWNSHIP, POTOSÍ DISTRICT, QUIJARRO PROVINCE, BOLIVIA June 25th, 2010 R. Pressacco, M.Sc.(A), P.Geo. G. Harris, CEng, MIMMM M. Godard, P.Eng. C. Jacobs CEng, MIMMM SUITE BAY STREET, TORONTO ONTARIO, CANADA M5H 2Y2 Telephone (1) (416) Fax (1) (416)

2 TABLE OF CONTENTS Page 1.0 SUMMARY INTRODUCTION AND TERMS OF REFERENCE RELIANCE ON OTHER EXPERTS PROPERTY DESCRIPTION AND LOCATION LOCATION PROPERTY STATUS Overview of Bolivian Mining Law Project Ownership ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ACCESS CLIMATE AND PHYSIOGRAPHY LOCAL RESOURCES AND INFRASTRUCTURE HISTORY GEOLOGICAL SETTING REGIONAL GEOLOGY DISTRICT GEOLOGY LOCAL GEOLOGY Structural Geology Hydrothermal Alteration DEPOSIT TYPES MINERALIZATION EXPLORATION TOPOGRAPHIC SURVEY GEOLOGICAL MAPPING AND SAMPLING GEOPHYSICAL SURVEY DRILLING ASC BOLIVIA LDC ( ) APOGEE (JAN 2006 MAY 2008) APOGEE (JUN 2008 SEP 2009) SAMPLING METHOD AND APPROACH SAMPLE PREPARATION, ANALYSES AND SECURITY ii

3 14.0 DATA VERIFICATION ADJACENT PROPERTIES SAN CRISTOBAL SAN VINCENTE MINERAL PROCESSING AND METALLURGICAL TESTING METALLURGICAL TESTWORK RDi Preliminary Metallurgical Results, March UTO Metallurgical Testwork, August MINERAL PROCESSING MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES INTRODUCTION DESCRIPTION OF THE DATABASE TOPOGRAPHIC SURFACE HISTORICAL MINE WORKINGS METAL PRICE SELECTION DOMAIN MODELING TREND ANALYSIS GRADE CAPPING COMPOSITING METHODS BULK DENSITY VARIOGRAPHY BLOCK MODEL CONSTRUCTION BLOCK MODEL VALIDATION MINERAL RESOURCE CLASSIFICATION CRITERIA RESPONSIBILITY FOR THE ESTIMATE MINERAL RESOURCE ESTIMATE OTHER RELEVANT DATA AND INFORMATION MINING Mining Method and Design Mine Development and Production Schedule Mining Equipment PROCESSING Pulacayo Process Plant Option Toll Milling Option INFRASTRUCTURE Power Supply Water Supply Ancillary Buildings Roads ENVIRONMENTAL AND SOCIAL ASPECTS Environmental Conditions Social Conditions iii

4 Impact Assessment, Mitigation, and Management Permitting Process International Financing Consultation Environmental and Social Capital and Operating Costs PROJECT ECONOMICS Macro-economic Assumptions Production Schedules Revenue Capital Costs Operating Costs Project Schedule Cash Flow Forecast Sensitivity Studies INTERPRETATION AND CONCLUSIONS RECOMMENDATIONS REFERENCES SIGNATURES CERTIFICATES APPENDICES iv

5 LIST OF TABLES Page Table 1.1 Summary of Mineral Resources, Pulacayo Deposit...2 Table 1.2 LOM Production Forecast at a Cut off Value of 200 g/t Ag Eq....3 Table 1.3 Concentrate Grades and Recovery at Forecast Average Head Grade...3 Table 1.4 Summary of Base Case Capital Expenditure...5 Table 1.5 Summary of Base Case Operating Costs...5 Table 1.6 Project Base Case - LOM Cash Flow Summary...6 Table 1.7 Toll-Milling Option - LOM Cash Flow Summary...9 Table 6.1 List of Significant Intersections (ASC, 2002)...27 Table 10.1 Summary Table of Rock Chip Sampling Completed by Apogee...45 Table 14.1 Comparison of Micon Check-Assay Results from Drill-hole PUD Table 16.1 Head Assays of the Pulacayo Metallurgical Composites...63 Table 16.2 High/High Grade Locked-Cycle Flotation Tests...65 Table 16.3 Locked-Cycle Flotation Tests Assay Results...67 Table 16.4 Locked Cycle Test Results-No Desliming Prior to Flotation...68 Table 16.5 Metallurgical Balance, Deslimed Prior to Float, Medium Grade Test Table 16.6 Locked Cycle Test Results - Desliming Prior to Flotation...71 Table 16.7 Concentrate Grades and Recovery at Forecast Average Head Grade...73 Table 17.1 Summary of the Pulacayo Drill Hole Database as at October 14, Table 17.2 Summary of the Input Values and NSR Factors, Pulacayo Project...80 Table 17.3 Table 17.4 Table 17.5 Summary Statistics for Raw Samples Contained within the Mineralized Domain Model...86 Summary Statistics for 1.0 m Composite Samples Contained within the Mineralized Domain Model...89 Summary of Variographic Parameters for 1.0 m Composite Samples, Pulacayo Project...91 Table 17.6 Summary of Block Model Parameters, Pulacayo Project...92 Table 17.7 Block Model Validation Results, Pulacayo Project...94 Table 17.8 Summary of Mineral Resources, Pulacayo Deposit...96 Table 17.9 Comparison of Capped vs Uncapped Grades, Pulacayo Deposit...96 Table 18.1 Mineral Resources above Silver Equivalent Cut off Values of 125 to 275 g/t Ag Eq v

6 Table 18.2 Base Case LOM Production at a Cut off Value of 200 g/t Ag Eq Table 18.3 Base Case LOM Production Schedule Table 18.4 Mobile Mine Equipment List Table 18.5 Pulacayo Process Design Criteria Table 18.6 Pulacayo Bond Work Index (kwh/st) Table 18.7 Base Case LOM Processing Schedule Table 18.8 NSR Parameters Table 18.9 Summary of Base Case Capital Expenditure Table Mining Capital Costs Table Process Capital Expenditure Table Toll Milling-Pulacayo Site Capital Expenditure Table General and Administrative Capital Expenditure Table Tailings Storage Facilities-Capital Expenses (from EPCM Report) Table Average Unit Operating Costs for Mining ($/t mined) Table Process Plant Labour Costs (from EPCM Report) Table Process Plant Cash Operating Costs Table Processing Costs - Toll Milling at Don Diego Mill Table General and Administrative Costs Table Environmental and Social Operating Costs Table Project Base Case - LOM Cash Flow Summary Table Project Base Case Production and Cash Flow Projection Table Toll-Milling Option - LOM Cash Flow Summary Table Toll Milling Option Production and Cash Flow Projection (275 g/t Ag Eq cut off) Table 19.1 Summary of Mineral Resources, Pulacayo Deposit vi

7 LIST OF FIGURES Page Figure 1.1 Base Case Cash Flow Summary...7 Figure 1.2 Base Case Sensitivity Chart (NPV After tax)...7 Figure 1.3 NPV versus Cut-Off Grade for On-Site Milling...8 Figure 1.4 Toll-Milling Option Annual Cash Flow Summary...9 Figure 4.1 Location Map, Pulacayo Project...16 Figure 4.2 Outline of Mineral Concessions, Pulacayo Project...20 Figure 4.3 Drill-hole Locations Relative to the Property Outline, Pulacayo Project Figure 6.1 Huanchaca Mining Company of Bolivia, circa Figure 6.2 Schematic Longitudinal Projection of the Silver Grades, Veta Tajo...26 Figure 7.1 Regional Geology of Bolivia...28 Figure 7.2 General Geology of the Pulacayo Area, Potosí District, Bolivia...29 Figure 7.3 Local Geology of the Pulacayo-Paca Area, Potosí District, Bolivia...31 Figure 7.4 Detail Geology of the Pulacayo Area, Potosí District, Bolivia...33 Figure 8.1 Epithermal Mineral Deposit Model...36 Figure 8.2 Alteration Mineral Distribution in a Low Sulphidation System...37 Figure 9.1 Drusy Vein Containing Sphalerite, Galena and Pyrite...39 Figure 9.2 Example of a Massive Sulphide-Filled Vein, Pulacayo Deposit...40 Figure 9.3 Example of Veinlet and Disseminated Mineralization...40 Figure 9.4 Example of a Quartz-Galena-Sphalerite-Filled Vein, Pulacayo Deposit...41 Figure 9.5 Longitudinal View of the Stratigraphic Sequence, Pulacayo Deposit...42 Figure 10.1 Topographic Survey Crew, Pulacayo Project...44 Figure 10.2 Induced Polarization Survey Coverage Area, Pulacayo Project...45 Figure 10.3 Induced Polarization Chargeability Results, Pulacayo Project...46 Figure 12.1 Bulk Density Determinations, Pulacayo Project, Bolivia...52 Figure 13.1 Sample Preparation Flowsheet, Pulacayo Project, Bolivia...53 Figure 13.2 Particle Size Analyses of Exploration Samples, Pulacayo Project...54 Figure 14.1 General View of the Diamond Drilling Operation, Pulacayo Project...56 Figure 14.2 Comparison of Silver Check-Assay Results, Pulacayo Project...59 Figure 14.3 Comparison of Zinc Check-Assay Results, Pulacayo Project...60 Figure 14.4 Comparison of Lead Check-Assay Results, Pulacayo Project...60 vii

8 Figure 15.1 Location of the San Cristobal property...61 Figure 15.2 Schematic diagram showing San Vicente property...62 Figure 16.1 Sample Preparation at Pulacayo Core Shack...65 Figure 16.2 Bench Flotation Cells at Universidad Técnica de Oruro...66 Figure 16.3 Open Circuit Float Test Parameters - Desliming Prior to Float -Test Figure 16.4 Silver Grade vs % Recovery without Desliming prior to Flotation...72 Figure 16.5 Silver Grade vs % Recovery when 75% Silver Recovered from Deslimed Clays...72 Figure 17.1 Vertical Longitudinal Projection of the Mined Out Areas as at 1945, Pulacayo Project...77 Figure 17.2 Selected Views of Digital Models of Historical Workings, Pulacayo Project...78 Figure 17.3 Plan and Longitudinal Views of the Nominal $40/t NSR Solid...81 Figure 17.4 Figure 17.5 Figure 17.6 Figure 17.7 Figure 17.8 Figure 17.9 Figure Figure Figure Figure Figure Cross Section E Showing the Outline of the Nominal $40/t NSR Domain Model...82 Contoured Silver Values for the Nominal $40/t NSR Domain Model, Pulacayo Project...83 Contoured Zinc Values for the Nominal $40/t NSR Domain Model, Pulacayo Project...84 Contoured Lead Values for the $40/t NSR Domain Model, Pulacayo Project...84 Contoured NSR Values for the Nominal $40/t NSR Domain Model, Pulacayo Project...85 Silver Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project...86 Zinc Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project...87 Lead Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project...87 Copper Frequency Histogram for Samples within the Mineralized Domain, Pulacayo Project...88 Sample Length Histogram for Samples within the Mineralized Domain, Pulacayo Project...89 Specific Gravity Histogram for Samples Within the Mineralized Domain, Pulacayo Project...90 viii

9 Figure Figure 18.1 Figure 18.2 Figure 18.3 Longitudinal and Isometric Views of the Mineral Resources, Pulacayo Project...97 Plan View of the Existing Development Working and the Planned Mine Infrastructure Isometric View Looking North and Showing the Resource Model the Planned Development and the Mined Out Areas Grade-tonnage Curve for Mineral Resource vs Silver Equivalent Cut-off Grade Figure 18.4 Town of Pulacayo as Viewed From the Mill Site Figure 18.5 Pulacayo Flowsheet (from EPCM report) Figure 18.6 Diagramatic location of Tailings Storage Facility (NTS) Figure 18.7 Starter Dam Design (from EPCM report) Figure 18.8 Conceptual Plan View of the Tailings Storage Facility Figure 18.9 Don Diego Mill, Crushing and Fine Ore Bin Figure Don Diego Plant Flowsheet Figure NSR Value of Payable Metals Figure Base Case Cash Flow Summary Figure Base Case Sensitivity Chart (NPV After tax) Figure NPV versus Cut-Off Grade for On-Site Milling Figure Toll-Milling Option - Cash Flow Summary Figure Toll-Milling Option - Sensitivity Figure On-Site Milling versus Toll-Milling Option ix

10 LIST OF ABBREVIATIONS Item Apogee Minerals Limited Apogee Minerals Bolivia S.A. ASC Bolivia LDC Apex Silver Mines Corporation Corporación Minera de Bolivia Golden Minerals Company Micon International Limited EPCM Consoltores S.R.L. Resource Development Inc. Universidad Técnica de Oruro Abbreviation AML Apogee ASC ASMC COMIBOL GMC Micon EPCM RDi UTO United States Dollar $ or US$ Bolivian Bolivianos BOB Canadian Institute of Mining, Metallurgy and Petroleum CIM Canadian National Instrument NI Atomic Absorption Spectroscopy AAS centimetre(s) cm Degrees, Celsius o, C gram(s), kilograms, milligrams g, kg, mg grams per metric tonne g/t hectare(s) ha hour h Internal Rate of Return IRR litre(s) L Life of mine LOM metre(s), centimetre, millimetre, kilometre m, cm, mm, km Net Present Value (discounted at rate %/y) NPV rate Net Smelter Return NSR Not available/applicable n.a. Ordinary Kriging OK Ounce (troy) oz Parts per million, part per billion ppm, ppb Parts per ppm Percent(age) % Pound (avoirdupois) lb Programmable Logic Controler PLC Quality Assurance/Quality Control QA/QC Reduced Level RL Second (time) s Silver Equivalent grade Ag Eq Specific Gravity SG Sub-level open stoping SLOS Système International d Unités SI Tailings storage facility TSF Tonne (metric), thousands, millions t, t 000, Mt tonne per day, tonne per year t/d, t/y Universal Transverse Mercator UTM Year(s) y x

11 1.0 SUMMARY Introduction At the request of Mr. Joaquin Merino-Marquez, Exploration Manager of the wholly-owned subsidiary of Apogee Minerals Ltd. (AML), Apogee Minerals Bolivia S.A. (Apogee), Micon International Limited (Micon) has been engaged to perform a preliminary assessment of the Pulacayo project and prepare a Technical Report in compliance with the requirements set out in Canadian National Instrument (NI) Previously, Micon prepared technical reports for AML dated March, 2007 and December, 2008 and describing its resource estimates on the Paca and Pulacayo properties, respectively. Micon understands that: Apogee, under an agreement dated March 8, 2006, acquired the right to earn a sixty percent (60%) interest in both the Paca and Pulacayo properties from ASC Bolivia LDC (ASC), a subsidiary of Apex Silver Mines Corporation (ASMC) which had previously conducted exploration on the properties; effective March 24, 2009, Golden Minerals Company (GMC) became the successor to the assets of ASMC (renamed Golden Service Company). On January 26, 2010, AML announced that it had entered into a non-binding term sheet (the "Term Sheet") with GMC to acquire the Pulacayo Deposit. Upon completion of the proposed transaction, AML will be able to acquire a 100% interest in the property. Pursuant to the Term Sheet, the Company would acquire all of the issued and outstanding shares of a Cayman based company that is a wholly-owned subsidiary of GMC, which indirectly holds a 100% interest in the Pulacayo deposit. In consideration, AML would issue 5,000,000 common shares in AML upon closing of the transaction and an additional 3,000,000 common shares in AML plus a cash fee in the amount of $500,000 eighteen (18) months following closing of the transaction. Completion of the acquisition is subject to negotiation and execution of a definitive agreement, necessary board approvals and receipt of all required regulatory and securities approvals, including the approval of the TSX Venture Exchange, along with other customary closing conditions. Geology & Resources The Pulacayo epithermal deposit is hosted by sedimentary and igneous rocks of Silurian and Neogene age. The sedimentary rocks are composed of diamictites, sandstone and shale. The Neogene-aged rocks are mostly of volcanic-sedimentary origin and are composed of conglomerate, sandstones, reddish conglomerates, reddish-brown clay, whitish rhyolite tuff, andesite lava flows, dacitic-rhyolite domes and andesite porphyry. The principal mineralized structure at Pulacayo is known as Veta Tajo, which was historically the main silver producer in the Pulacayo mine. The Veta Tajo is part of a larger structural system that is oriented approximately east-west and dips 75 to 90 south. The 1

12 width of this vein varies from less than 1 metre to several metres. The structure is filled with quartz, barite, pyrite, sphalerite, galena and silver sulpho-salts. Apogee has carried out detail geological mapping and sampling at surface and in the old underground workings, followed up by a topographic survey, geophysical survey, and diamond drilling. Between January, 2006 and September, 2009, four phases of drilling were carried out. A simple, upright, whole-block model with the long axis of the blocks measuring 10 m (strike) x 10 m (height) x 2 m (width) and oriented along an azimuth 100 was constructed using the Gemcom-Surpac version mine planning software package. Micon then carried out a geostatistical analysis of the deposit using the results of this drilling. Taking account of the topographic mapping, plans and sections pertaining to the extent of previous mine workings, trend analysis, metal prices and potential metallurgical recoveries, Micon then prepared an estimate of the mineral resource. Mineral resources reported from within the mineralized domain are given in Table 1.1. The effective date of this estimate is October 14, Table 1.1 Summary of Mineral Resources, Pulacayo Deposit Classification Tonnes Ag (g/t) Pb (%) Zn (%) Indicated 4,892, Inferred 6,026, (1) Tonnages have been rounded to the nearest 1,000 tonnes. Average grades may not sum due to rounding. (2) Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. (3) The quantity and grade of reported inferred resources in this estimation are conceptual in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured mineral resource. And it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category. Mining Sub-level open stoping (SLOS) with backfill is the mining method which Micon considers most suitable for underground mining at Pulacayo. The average value of the resource justifies the use of backfill as opposed to leaving pillars in-situ. SLOS mining with backfill also gives a reduced risk of surface subsidence. SLOS is a more productive method, even in relatively narrow stopes, when compared to cut and fill mining. The mine is accessible through the San Leon Adit (4,130 m RL), which has a nominal arched profile of 2.2 m (high) by 2.0 m (wide). It is Micon s opinion that the most efficient method of access and ore haulage is through the adit. Two new inclined ramps and two decline ramps are planned. They will access the ore above and below the 4130 m level, respectively. The inclined ramps will be developed from the 2

13 enlarged San Leon adit, starting from the FW to the south of the ore body. The decline ramps will be developed from the enlarged San Leon adit. Ventilation air will be exhausted through multiple vent raises to surface. Main fans will be located on the surface end of each raise. Intake air will be drawn in through the north and south ends of the San Leon adit. This will ensure that both the primary and emergency means of egress are situated in intake air. For mine planning purposes, a silver-equivalent cut-off grade of 200 g/t Ag Eq. was selected. Silver equivalent grades were calculated using metal prices $14.66/oz for silver, $0.98/lb for lead and $1.05/lb for zinc. The mineable portion of the mineral resources considered in this preliminary assessment are as given in Table 1.2, and have been modified to account for estimated mining losses and mining dilution. Table 1.2 LOM Production Forecast at a Cut off Value of 200 g/t Ag Eq. Class Resource Ag Pb Zn Ag Metal Pb Metal Zn Metal t 000 g/t % % kg t 000 t 000 Indicated 1, , Inferred 2, , Mineral resources which are not mineral reserves do not have demonstrated economic viability. Processing The metallurgical testwork shows that a lead and zinc concentrate can be produced using a conventional flotation flowsheet. The base case for this preliminary assessment considers a milling capacity averaging 1,800 t/d over 360 d/y. Concentrate grades and recovery at the forecast headgrade are shown in Table 1.3 Metallurgical testwork at the UTO laboratory was completed in February, 2010, testing low medium and high grade composite samples. The medium grade assayed 181g/t silver, 0.69% lead, and 2.45% zinc, approximating the average mill head grade forecast of g/t silver. Table 1.3 Concentrate Grades and Recovery at Forecast Average Head Grade Mass Grade Percent Recovery (%) Product Yield dmt/d Ag g/t %Pb %Zn Ag Pb Zn Mill Feed Lead concentrate Zinc concentrate Tailings There is a significant amount of clay generating rock in the material that negatively affects concentrate grades and recoveries, and that could negatively affect reclaim water clarity and 3

14 deposition density in the Tailings Storage Facility. Further metallurgical tests for the clay fraction are recommended for later stages of project development, to guide refinements to the process flowsheet and equipment selection. There are four deleterious elements in the Pulacayo material that will affect the lead concentrate net smelter returns and so should be recalculated in future models. In the medium grade lead concentrate, the concentration of these elements were arsenic (3,940 g/t), copper (2.80%), antimony (3.44%), and zinc (4.19%). The toll-milling option considered as an alternative scenario in the study was based on processing of the Pulacayo material off site at the Don Diego lead/zinc mill located 40 km east of Potosi. Although toll milling scenarios using higher cut-off grades were found to be economic, the results were found to be inferior to the base case (with on-site milling) at all cut-offs tested in the study up to 275 g/t Ag equivalent. The results suggest that toll milling could be regarded as a potential fall-back position should on-site milling not be possible for any reason. Infrastructure For the base case, a new Tailing Storage Facility (TSF) will be required at Pulacayo. A capital cost estimate for this has been prepared on the basis of a conceptual layout. No design has yet been prepared for the TSF. Existing power supply is inadequate and will require upgrading. The option selected is to tie into the San Cristobal-Punutuma 220 kv transmission line, the closest point to which is 10 km from Pulacayo. The base case assumes that the current water supply pipeline serving Pulacayo town will remain operational and can be used to supply the mine. Thus, the estimated cost of replacing this line (US$ 1.41 million) has not been included in the base case. Environment and Social The project area is affected by historical mine workings that are causing acidic drainage and metal contamination to enter the surrounding air and water. Project development needs to take these into consideration. New development must consider whether operations can be isolated from historical contaminants, be integrated with historical works to clean up some of the contamination, or historical contaminants can be remediated prior to new development. Regardless, definition and documentation of historical contamination is important so that the company can manage its risks. Potential social effects on Pulacayo include increased income from direct employment, increased demand for local services and suppliers, and an influx of workers. Potential adverse social effects and pressures on housing and infrastructure will need to be effectively managed. A community development plan should be developed in concert with the 4

15 community to help ensure economic benefits are realized in the community. Social and health effects should be considered for any small-scale miners who are still active in the Pulacayo area. Economics The economics of the Pulacayo project have been assessed under two scenarios: In the first scenario, which forms the base case for this report, a processing facility is built on-site to treat the material mined from underground, and concentrates of zinc and lead are produced for shipment to port. Silver credits are obtained for both products. Alternatively, no processing facility is constructed and, instead, the mine ships ROM material to the Don Diego process plant, where it is toll treated. This scenario is treated as a sensitivity case, the cash flow from which is then compared to the base case. In each case, production rates and all other assumptions are kept the same to allow the relative value of each scenario to be determined. Table 1.4 shows a summary of the capital required for the base case. Table 1.4 Summary of Base Case Capital Expenditure Capital Cost Summary Initial US$ (M) Sustaining US$ (M) Mining Processing Tailings Infrastructure & indirect Environmental & Social Contingency Total Base case cash operating costs are given in Table 1.5. Table 1.5 Summary of Base Case Operating Costs Operating Cost Summary US$/t Mining Processing General & Administrative 2.33 Total

16 Table 1.6 presents the project base case LOM cash flow summary, and Figure 1.1 provides a summary of the main components of the annual cash flow for the base case. Table 1.6 Project Base Case - LOM Cash Flow Summary LOM ($ 000) $/t treated $/oz Ag NPV 8 (2010) NSR Silver only 178, ,503 NSR Co-products 203, ,665 NSR value 382, ,168 less Royalty 15, , , ,281 Operating Costs Mining costs 96, ,500 Processing costs 54, ,115 General & Administrative costs 9, ,396 Total cash operating cost 160, ,011 Net Operating Margin 206, ,270 Capital Expenditure 97, ,268 Pre-tax Cash Flow 109, ,002 Taxation 29, ,013 Net Cash Flow After Tax 80, ,988 This preliminary assessment is preliminary in nature; it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary assessment will be realized. On a pre-tax basis, at a discount rate of 8 %/y, the base case cash flow evaluates to a net present value (NPV 8 ) of $50.0 million, and has in internal rate of return (IRR) of 24.0%. After tax, the NPV and IRR are estimated to be $33.0 million and 19.6%, respectively. Payback on the undiscounted cash flow after tax occurs in Year 3 and, over the life-of-mine (LOM) period, the net cash flows before and after tax are $109.5 and $80.5 million, respectively. On an annual basis, the estimate of maximum funding required before positive cash flow is $89.5 million. 6

17 Figure 1.1 Base Case Cash Flow Summary 80 USD million (20) (40) (60) (80) Net Cash Flow Royalty Taxation Working Capital Capital Opcosts Net Revenue Cum DCF Cum C/Flow Yr 3 Yr 2 Yr 1 Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 The sensitivity of the base case cash flow after tax to changes in product pricing, operating costs and capital expenditure is shown in Figure 1.2. Figure 1.2 Base Case Sensitivity Chart (NPV After tax) NPV (8%) USD million (20) Product Price (21.4 (12.1 (2.9) Opcosts Capex

18 Micon evaluated the base case (on site milling) using a series of cut-off grades to determine the optimum grade/tonnage combination for the project. The results (Figure 1.3) show that project NPV and IRR are maximized when applying a cut-off grade of 200 g/t Ag Eq. Micon therefore selected this value of the cut-off grade for its base case economic assessment of the project in this study. Figure 1.3 NPV versus Cut-Off Grade for On-Site Milling % NPV ($ million) Minng Cost ($/t) % 25.0% 20.0% 15.0% 10.0% 5.0% IRR (%) Cut off grade (g/t Ag Eq) NPV Mining $/t IRR(%) 0.0% The study also considered an alternative to the on-site milling of material mined at Pulacayo. For this purpose, it was assumed that crushed material was taken by road to Uyuni and thence by rail to the Don Diego mill for toll treatment. Savings in the process plant and tailings dam construction costs result in a reduction of approximately $33.1 million in capital invested before positive cash flow, with $56.4 million required for toll-milling compared to $89.5 million in the base case. Nevertheless, Table 1.7 and Figure 1.4 show that, although payback on the undiscounted cash flow occurs in Year 4, the LOM net cash flow after tax of $43.1 million is $37.4 million less than is forecast in the base case ($80.5 million). Moreover, the toll-milling option does not appear to maximize project value since, at a cutoff of 200 g/t Ag Eq, its NPV 8 of $14.5 million is $15.5 million less than the base case ($33.0 million). Even at a cut-off of 275 g/t Ag Eq, the after-tax NPV 8 of $16.4 million for the toll milling option is $1.2 million less than for the base case ($17.6 million) at that cut-off. Nevertheless, because of the reduction of capital, at cut-off grades above 250 g/t Ag Eq, toll milling appears to offer an improved internal rate of return, with IRR of 19.4% and 20.7% after tax at 250 g/t and 275 g/t respectively, compared to rates of 18.6% and 17.6% respectively in the base case. 8

19 Table 1.7 Toll-Milling Option - LOM Cash Flow Summary Using 200 g/t Ag Eq Cutoff LOM ($ 000) $/t treated $/oz Ag NPV 8 (2010) ($ 000) NSR Silver only 178, ,503 NSR Co-products 203, ,665 NSR value 382, ,168 less Royalty 15, , , ,281 Operating Costs Mining costs 96, ,500 Processing costs 145, ,121 General & Administrative costs 9, ,396 Total cash operating cost 251, ,017 Net Operating Margin 115, ,264 Capital Expenditure 56, ,396 Pre-tax Cash Flow 58, ,868 Taxation 15, ,339 Net Cash Flow After Tax 43, ,529 Figure 1.4 Toll-Milling Option Annual Cash Flow Summary 80 Net Cash Flow 60 Royalty 40 Taxation USD million 20 0 (20) (40) (60) (80) Yr 3 Yr 2 Yr 1 Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Working Capital Capital Opcosts Net Revenue Cum DCF Cum C/Flow 9

20 Interpretation and Conclusions The project base case comprises the development of an underground mine connecting to existing workings though a new adit portal, extraction using a sub-level open-stoping method with backfill, feeding 1,800 t/d to a new milling and flotation plant on site, for the production and sale of lead and zinc concentrates containing economically important silver values, and storage of flotation tailings in a new, purpose-built facility adjacent to the new plant. The preliminary assessment of this base case shows it to be economic, with an IRR of 24% and NPV 8 of $50.0 million before tax. Payback is in Year 3, leaving one further year of full production. An alternative scenario, with toll-milling of the underground mine production at the Don Diego mill, is also shown to be potentially economic, albeit at higher cut-off grades. This option has a reduced capital requirement, resulting in an improved IRR before tax of 27.5%, although the NPV 8 is lower ($16.4 million after tax). Recommendations A complete list of recommendations is given is Section 20. Micon recommends, inter alia: Analysis of duplicate samples as part of the Quality Control program should be carried out at a laboratory that is a separate corporate entity from the laboratory that conducted the primary analyses. Detailed modeling of the narrow higher grade vein structures, should a local estimate of the amount of material amenable to underground mining be needed. In support of this local estimate, additional information in the form of in-fill drilling should be obtained. The position, shape and content of the mined out stopes, and the position and geometry of the existing development should be determined by appropriate methods to an appropriate degree of accuracy as project development advances. In consideration of the range of specific gravities observed in the sample data, Micon recommends that should the project proceed to a more advanced state, additional density measurements should be taken from samples chipped from the walls of the existing mine workings to assist in filling in the gaps in the spacing of the information. The density of each block in the model should be estimated so as to provide a more accurate local estimate of tonnage. Care will need to be taken in order to obtain an accurate specific gravity measurement for samples that are porous. A program of geotechnical characterization of the wall rocks should be carried out in support of mine design. 10