Ann: Metallurgical Test Work Results for Project Block 103, page-4

The previous owners already tested the metallurgy. It is a valuable resource. Logistics put a damper on this and the neighbours. Firstly the rail has to be paid for year round. The ore freezes in the railcars during winter and cannot be emptied until it thaws out. usually 2-3 days sitting at sea level. Another cost.This left a 8 month transport window while paying for a 12 month rail slot. Fortunately this can be overcome by drying product during the summer and then blending it with the winter product to be below the moisture content threshold. Secondly DSO is one thing, Magnetite is another. Magnetite has to have some processing to be viable. This processing needs higher volumes to justify the CAPEX. The rail system is only 18Mtpa and you are sharing this capacity. The second leg of the rail is only 50Mtpa but you are sharing with the producers around Labrador City. To get the rail capacity needed there will need to be an upgrade or a new dedicated line. Get the neighbouring lease and we have a party happening. The 7B tonne resource becomes a 2.33B resource. The product has to be concentrated. 100Mtpa gives only a 23 year mine life. The rail would have to recouped over this tonnage.