Owner: KGHM International Inc.

KGHMI has 100% ownership of the Morrison Deposit/Levack Mine. The Levack Mine accesses both the Morrison Deposit and Levack Contact Nickel Deposits. It is adjacent to the east side of the McCreedy West Mine.

 

Production from the No. 1 shaft at the Levack Mine commenced in 1915. Following a fire in 1929, the mine was reopened in 1937 operated continuously until 1999. In 2004 KGHMI initiated the rehabilitation of the Levack Mine infrastructure and re-started the operation in 2006. In the first quarter of 2004, an underground and surface drilling program at Levack was initiated and the Morrison Deposit was discovered in February, 2005.

 

Commercial production from contact nickel ores at the Levack Mine was declared as of January 1, 2007 and a total of 419,000 tonnes of nickel ore was produced from the end of 2006 to 2008. Contact nickel production from Levack Mine was suspended in late 2008. Initial production from the upper part of the Morrison footwall Deposit (formerly the Rob’s Deposit) commenced in the second quarter of 2008 and com¬mercial production was achieved on September 1, 2010. In 2011 KGHMI entered into an Access Arrangement with Xstrata Nickel which allows the Company to utilize the Craig mine shaft (located adjacent to the Morrison Deposit) and related underground infrastructure to further develop and operate the Levack mine, including the Morrison Deposit.

 

All of the Company's Sudbury operations are at or near the basal contact of the Sudbury Igneous Complex (SIC) and the defining geological feature of the Sudbury region. The Sudbury structure is interpreted to represent a deformed remnant of a 1.85 billion year old meteorite impact crater which straddles the boundary between the gneissic rock of the Superior Province and the metavolcanic and metasedimentary strata and related granitic rocks of the Huronian Supergroup.

 

Sulfides in the area occur within many geologic environments related to the structure, including embayments at the contact of the Sudbury Igneous Complex with the footwall rocks, in the Offset Dikes, and in the footwall Sudbury Breccia units. Typically the sulfides are more Ni-rich at the contact (i.e., forming Contact Nickel style deposits), but become increasingly Cu and PGE -rich in the footwall environments (i.e., forming Footwall style copper deposits). (Diagram 1: Sudbury Igneous Complex & Location Map)

 

The Morrison Deposit, which is located in the lower part of the Levack Mine, is characterized as a Footwall style copper deposit where copper mineralization occurs in multiple sharp walled, high grade copper-nickel-precious metal veins within a larger mineralized envelope. The veins vary from approximately 12 meters to <0.3 meters (i.e., 40 feet to less than <1 feet) in width and contain massive sulphides dominated by the copper mineral chalcopyrite and the nickel minerals pendlandite and millerite. The deposit also includes significant precious metals including platinum, palladium and gold.

 

Individual veins have an average grade ranging between 20-30% copper, 1-5% nickel and 5-40g/t in platinum, palladium and gold. The known extent of the Morrison orebody currently measures approximately 800 meters (i.e., 2,600 feet) in the dip direction and tens to 400 meters (1,200 feet) along strike and ranges from less than 30 meters (i.e., 100 feet) to more than 90 meters (300 feet) in width. The deposit remains open at depth and exploration will continue as the underground ramp system advances at depth.

 

Currently the Contact Nickel deposits of interest at Levack Mine include the Main; No. 1 & 2; No. 7 and the No. 7 Extension; and the 1300 Deposits. The Main, No. 1 and No. 2 orebodies located in the upper levels (above 1600 Level) of Levack yielded the bulk of the historic production tonnage. When commercial mining recommenced at Levack in 2007, the Contact Nickel deposits were of primary economic interest, with initial production and development commencing from the No. 7 orebody.

 

The Morrison Deposit was historically accessed via the Levack #2 shaft which was connected to the Morrison Deposit via an internal ramp. During 2010 and 2011 KGHMI had been rehabilitating the bottom of the Levack # 2 shaft (from the 2900 to the 3600 Level) and developing a second decline on the 3600 Level which would have allowed for ore to be trucked across to the # 2 shaft and skipped to surface.

 

In late 2011 KGHMI announced that it had entered into an Access Arrangement with Xstrata Nickel which allows KGHMI to utilize the Craig mine shaft (located adjacent to the Morrison Deposit) and related underground infrastructure to further develop and operate the Levack mine, including the Morrison Deposit. Full transition to the Craig Mine infrastructure was completed early in Q2 2012, with commissioning of the ore hoisting system completed in early May. (Diagram 2: Infrastructure & Craig Access)

 

In addition to the immediate cost savings related to the cessation of ongoing rehabilitation work on the existing Levack #2 shaft, from an operating perspective the key benefits of the Access Arrangement include:

• The expansion of hoisting and haulage capacity at the Morrison Deposit allowing the potential for higher throughput and production going forward

• Improved operating flexibility, underground infrastructure, ventilation and power distribution to the lower parts of the Morrison Deposit

• Accelerated underground access, development of definition drilling platforms and mine development in the lower portion of the Morrison Deposit

 

The Access Agreement also allows for development of additional drilling platforms which is expected to significantly improve drill access, which will facilitate mineral resource delineation (for future conversion to reserves) in the lower portion of the Morrison Deposit. Diamond drilling to improve definition of the lower portion of Morrison commenced in July 2012. Development of additional drilling platforms as well as lower access to the deposit continues.