CNNC International Limited - Proxy Solicitation & Information Statement 2010

THE CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in CNNC International Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities.

CNNC INTERNATIONAL LIMITED 中核國際有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2302)

DISCLOSEABLE AND CONNECTED TRANSACTION — ACQUISITION OF 100% INTEREST IN IDEAL MINING LIMITED AND ISSUE OF CONVERTIBLE NOTES

Financial Adviser to CNNC International Limited

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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Capitalised terms used in this cover have the same meanings as those defined in the section headed ‘‘Definitions’’ in this circular.

A letter from the Independent Board Committee is set out on page 23 of this circular. A letter from Partners Capital, the independent financial adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 24 to 35 of this circular.

A notice convening the EGM to be held at Victoria Room 3, 3/F, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Friday, 19 March 2010 at 10: 00 a.m. is set out on pages 207 to 209 of this circular. Whether or not you are able to attend the meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible but in any event not later than 48 hours before the time appointed for the holding of such meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude you from subsequently attending and voting in person at the EGM or any adjourned meeting should you so wish.

For identification purpose only

4 March 2010

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Letter from Partners Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Appendix I — Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
Appendix II — Technical Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
Appendix III — Reports on forecasts underlying the valuation of the Sale Shares . . .	200
Appendix IV — General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	203
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	207

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

‘‘2008 Convertible the unsecured, three-year maturity 2% annual coupon Note’’ convertible note with a principal amount of HK$106,200,000 issued by the Company to the Vendor on 5 November 2008 (details of which are set out in the announcements of the Company dated 23 June 2008 and 5 November 2008 respectively)
‘‘Acquisition’’ the proposed acquisition of the Sale Shares by the Purchaser from the Vendor pursuant to the Sale and Purchase Agreement
‘‘Announcement’’ the announcement of the Company dated 23 January 2010 in relation to the Acquisition
‘‘associate(s)’’ has the meaning ascribed to it under the Listing Rules
‘‘Azelik Uranium Mine’’ an uranium mine located in the Agadez region of the Tchiroze´ rine department of Niger (details of which are set out in the sub-paragraph headed ‘‘The Azelik Uranium Mine’’ under the section headed ‘‘Letter from the Board’’ in this circular and in the Technical Report contained in Appendix II to this circular)
‘‘Board’’ the board of Directors
‘‘Business Day’’ a day, other than a Saturday and a Sunday, on which licensed banks in Hong Kong are open for business throughout their normal trading hours
‘‘CCBIC’’ CCB International Capital Limited, a licensed corporation under the SFO to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities and the financial adviser to the Company in respect of the Acquisition
‘‘Ceiling Price’’ US$100 per pound of U3O8
‘‘CNEIC’’ China Nuclear Energy Industry Corporation (中國原子能工業有限公司), a company established in the PRC and a wholly-owned subsidiary of CNNC
‘‘CNNC’’ China National Nuclear Corporation (中國核工業集團公司), a state-owned enterprise established in the PRC
‘‘Company’’ CNNC International Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange
‘‘Completion’’ completion of the Acquisition pursuant to the Sale and Purchase Agreement

– 1 –

DEFINITIONS

‘‘Consideration’’
consideration for the Sale Shares payable by the Company to the Vendor pursuant to the Sale and Purchase Agreement
‘‘Contract Price’’
price for the uranium ore concentrates of each Delivery calculated in accordance with the terms of the Long-term Sales Contract (details of which are set out in the sub-paragraph headed ‘‘The Long-term Sales Contract’’ under the section headed ‘‘Letter from the Board’’ in this circular)
‘‘Conversion Period’’ the period commencing on the date of issue of the Convertible Notes and expiring on the date which is seven Business Days preceding the Maturity Date
‘‘Conversion Price’’ HK$9.50 per Conversion Share, subject to adjustment (details of which are set out in the paragraph headed ‘‘Principal terms of the Convertible Notes’’ under the section headed ‘‘Letter from the Board’’ in this circular)
‘‘Conversion Shares’’ Shares to be allotted and issued upon exercise by the Noteholder(s) of the conversion right attached to the Convertible Notes
‘‘Convertible Notes’’ three-year maturity 2% annual coupon convertible notes with an aggregate principal amount of US$53,281,853 to be issued by the Company to the Vendor on Completion to satisfy the Consideration
‘‘CUC’’ China Uranium Corporation Limited (中國國核海外鈾業有限公司) (formerly known as ‘‘China Nuclear International Uranium Corporation (中國國核海外鈾資源開發公司)’’), a company established in the PRC and the direct holding company of the Vendor and a wholly-owned subsidiary of CNNC
‘‘Delivery’’ delivery of uranium ore concentrates by the Project Company to CNEIC in accordance with the terms of the Long-term Sales Contract
‘‘Director(s)’’ the director(s) of the Company
‘‘EGM’’
an extraordinary general meeting to be convened and held by the Company to consider and, if thought fit, to approve (i) the Sale and Purchase Agreement and the transactions contemplated thereunder; and (ii) the grant of a specific mandate for the issue and allotment of the Conversion Shares
‘‘Enlarged Group’’
the Group and the Target

– 2 –

DEFINITIONS

‘‘Final Valuation’’ the valuation of the Sale Shares as at the Valuation Date set out in the Valuation Report
‘‘Floor Price’’ US$60 per pound of U3O8
‘‘Group’’ the Company and its subsidiaries
‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong from time to time
‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC
‘‘Independent Board an independent board committee of the Board comprising the Committee’’ independent non-executive Directors, namely Mr. Cheong Ying Chew Henry, Mr. Cui Liguo and Mr. Zhang Lei
‘‘Independent Shareholder(s) other than the Vendor and its associates Shareholder(s)’’
‘‘JLL Sallmanns’’ Jones Lang LaSalle Sallmanns Limited, an independent valuer
‘‘Last Trading Day’’ 22 January 2010, being the last trading day of the Shares before the date of the Announcement
‘‘Latest Practicable 2 March 2010, being the latest practicable date prior to the Date’’ printing of this circular for ascertaining certain information contained herein
‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Long-term Sales the long-term sales contract entered into between the Project Contract’’ Company and CNEIC on 24 August 2009 for the purchase of uranium ore concentrates by CNEIC from the Project Company
‘‘Maturity Date’’ the third anniversary of the date of issue of the Convertible Notes
‘‘Niger’’ the Republic of Niger
‘‘Noteholder(s)’’ holder(s) of the Convertible Notes
‘‘Parties’’

parties to the Sale and Purchase Agreement

– 3 –

DEFINITIONS

‘‘Partners Capital’’ Partners Capital International Limited, a licensed corporation under the SFO to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition
‘‘PRC’’ the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
‘‘Preliminary the preliminary valuation of the Sale Shares of approximately Valuation’’ HK$464 million conducted by JLL Sallmanns
‘‘Project Company’’ Socie´ te´ des Mines d’Azelik S.A, a company incorporated in Niger with limited liability and owned as to 37.2% by the Target as at the Latest Practicable Date
‘‘Purchaser’’ China Nuclear International Corporation, a company incorporated in the British Virgin Islands with limited liability and a direct wholly-owned subsidiary of the Company
‘‘RMB’’ Renminbi, the lawful currency of the PRC
‘‘Sale and Purchase the sale and purchase agreement dated 23 January 2010 entered Agreement’’ into between the Purchaser and the Vendor in relation to the Acquisition
‘‘Sale Shares’’ 50,000 issued ordinary shares of US$1.00 each in the issued share capital of the Target, representing the entire issued share capital of the Target
‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Share(s)’’ ordinary share(s) of HK$0.01 each in the issued share capital of the Company
‘‘Shareholder(s)’’ holder(s) of the Share(s)
‘‘SRK Consulting’’ SRK Consulting (China) Limited, an independent technical consultant
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Target’’ Ideal Mining Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Vendor

– 4 –

DEFINITIONS

‘‘Target Group’’

the Target and the Project Company

‘‘Technical Report’’
the technical review of the Azelik Uranium Mine prepared by SRK Consulting, the text of which is set out in Appendix II to this circular
‘‘US$’’ United States dollars, the lawful currency of the United States of America
‘‘Valuation Date’’
31 December 2009, being the assessment date adopted by JLL Sallmanns in the Valuation Report
‘‘Valuation Report’’ the valuation report prepared by JLL Sallmanns in relation to the fair value of the Sale Shares as at the Valuation Date, the text of which is set out in Appendix I to this circular
‘‘Vendor’’ or ‘‘CNNC Overseas’’
CNNC Overseas Uranium Holding Limited, a company incorporated in Hong Kong and the controlling shareholder of the Company interested in approximately 62.07% of the issued share capital of the Company as at the Latest Practicable Date

‘‘%’’ per cent.

For reference purposes only and unless otherwise specified, RMB has been converted to HK$ at the rate of RMB1.00 = HK$1.14 and US$ has been converted to HK$ at the rate of US$1.00 = HK$7.77 in this circular. No representation is made that any amount in RMB or US$ has been, could have been or could be converted at the above rate or at any other rates or at all.

– 5 –

LETTER FROM THE BOARD

CNNC INTERNATIONAL LIMITED 中核國際有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2302)

Executive Directors: Mr. Han Ruiping Mr. Xu Hongchao

Non-executive Directors:

Mr. Qiu Jiangang (Chairman) Mr. Huang Mingang

Independent non-executive Directors: Mr. Cheong Ying Chew Henry Mr. Cui Liguo Mr. Zhang Lei

Registered office: P.O. Box 309GT Ugland House South Church Street Grand Cayman Cayman Islands

Head office and principal place of business: Unit 2809, 28/F China Resources Building 26 Harbour Road Wanchai Hong Kong

4 March 2010

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION — ACQUISITION OF 100% INTEREST IN IDEAL MINING LIMITED AND ISSUE OF CONVERTIBLE NOTES

INTRODUCTION

Reference is made to the announcement of the Company dated 23 January 2010 in relation to the Acquisition.

The Board announced that on 23 January 2010, the Purchaser, a direct wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement with the Vendor pursuant to which the Vendor agreed to sell and the Purchaser agreed to purchase the Sale Shares, representing the entire issued share capital of the Target, at a consideration of not

For identification purpose only

– 6 –

LETTER FROM THE BOARD

more than HK$414,000,000, which was determined after arm’s length negotiations between the Company and the Vendor by reference to, among other things, the Preliminary Valuation and was subject to downward adjustment as further disclosed in the subparagraph headed ‘‘Consideration’’ in this letter.

As the Final Valuation of HK$464,079,000 is equal to the Preliminary Valuation, no adjustment is made to the Consideration and the Consideration of HK$414,000,000 will be satisfied by the Company by issuing to the Vendor the Convertible Notes on Completion.

The Valuation Report is set out in Appendix I to this circular. The Technical Report is set out in Appendix II to this circular. The respective reports from Deloitte Touche Tohmatsu, the reporting accountant of the Company, and CCBIC, the financial adviser to the Company in respect of the Acquisition, on the forecasts underlying the valuation of the Sale Shares are set out in Appendix III to this circular.

The purpose of this circular is to provide you with, among other things, (i) further details of the Acquisition and the Target Group; (ii) a letter from the Independent Board Committee containing its advice and recommendation to the Independent Shareholders in respect of the Acquisition; (iii) a letter from Partners Capital to the Independent Board Committee and the Independent Shareholders containing its advice to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition; and (iv) a notice convening the EGM and the proxy form.

THE SALE AND PURCHASE AGREEMENT

Date

23 January 2010

Parties

Purchaser: China Nuclear International Corporation, a direct wholly-owned subsidiary of the Company

Vendor: CNNC Overseas Uranium Holding Limited

The Vendor is an investment holding company incorporated in Hong Kong and a direct wholly-owned subsidiary of CUC, which in turn is a wholly-owned subsidiary of CNNC, a large-scale state-owned enterprise established in the PRC and is principally engaged in the research and development of nuclear related products, nuclear electricity production, nuclear fuel and nuclear technology development and application, and the construction and operation of nuclear power plants.

The Vendor, which owns the entire issued share capital of the Target, is the controlling Shareholder interested in approximately 62.07% of the issued share capital of the Company, and is therefore a connected person of the Company within the meaning of the Listing Rules.

– 7 –

LETTER FROM THE BOARD

Assets to be acquired

Pursuant to the Sale and Purchase Agreement, the Vendor agreed to sell and the Purchaser agreed to purchase the Sale Shares, representing the entire issued share capital of the Target. The principal asset of the Target is a 37.2% interest in the issued share capital of the Project Company.

Consideration

As disclosed in the Announcement, the Consideration was initially determined to be HK$414,000,000 and was subject to the following adjustment pursuant to the Sale and Purchase Agreement:

(i) should the Final Valuation be less than the Preliminary Valuation, the Consideration, and accordingly, the aggregate principal amount of the Convertible Notes, will be adjusted downward and determined based on the following formula:

Adjusted Consideration = Final Valuation x 90%

(ii) should the Final Valuation be greater than or equal to the Preliminary Valuation, no adjustment will be made to the Consideration (and the aggregate principal amount of the Convertible Notes) and the Consideration will be HK$414,000,000.

Based on the Valuation Report (the text of which is set out in Appendix I to this circular), the Final Valuation of HK$464,079,000 is equal to the Preliminary Valuation, and therefore no adjustment to the Consideration under the Sale and Purchase Agreement is required. The Consideration of HK$414,000,000 will be satisfied by the Company by issuing to the Vendor the Convertible Notes on Completion. The principal terms of the Convertible Notes are set out in the paragraph headed ‘‘Principal terms of the Convertible Notes’’ in this letter.

The Consideration was determined after arm’s length negotiations between the Company and the Vendor with reference to the Final Valuation, which was prepared by JLL Sallmanns based on, among other things, the financial forecast of the Project Company prepared by the Directors after taking into account all relevant factors including, but not limited to, (i) the current and targeted capital structure of the Project Company; (ii) the prevailing and projected market price of uranium resources; (iii) the estimated level of uranium resources and the expected production capacity of the Azelik Uranium Mine; (iv) the estimated costs and expenses (including, but not limited to, production cost, management expense, sales expense and interest expense) of the Project Company; and (v) the stage of development of the Azelik Uranium Mine and the corresponding estimated capital expenditure requirements. The Directors (excluding the independent non-executive Directors whose opinions are set out in the letter from the Independent Board Committee contained in this circular) consider that the Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

– 8 –

LETTER FROM THE BOARD

Conditions precedent

Completion of the Acquisition is conditional upon the fulfilment or (as the case may be) waiver of the following conditions:

(i) the Purchaser having completed and satisfied with the results of the due diligence review of the Target Group and the Azelik Uranium Mine;
(ii) the Company having issued an announcement and despatched to the Shareholders a circular in respect of the Acquisition and convened the EGM to consider and, if thought fit, approve (a) the Sale and Purchase Agreement and the transactions contemplated thereunder; and (b) the grant of a specific mandate for the issue and allotment of the Conversion Shares in accordance with the Listing Rules;
(iii) the Independent Shareholders having passed at the EGM the ordinary resolution to approve (a) the Sale and Purchase Agreement and the transactions contemplated thereunder; and (b) the grant of a specific mandate for the issue and allotment of the Conversion Shares;
(iv) the Board having passed the resolution to approve (a) the Sale and Purchase Agreement and the transactions contemplated thereunder; and (b) the issue of the Convertible Notes and the issue and allotment of the Conversion Shares;
(v) the Listing Committee of the Stock Exchange having granted the listing of and permission to deal in the Conversion Shares;
(vi) the Purchaser having obtained a valuation report on the fair value of the Sale Shares prepared by an independent and qualified valuer in accordance with the international standards;
(vii) the Purchaser having obtained a technical report on the Azelik Uranium Mine prepared by an independent and qualified technical adviser in accordance with the international standards and to the satisfaction of the Purchaser;
(viii)the Vendor having complied with all necessary statutory and regulatory requirements in Hong Kong, the PRC, Niger and other jurisdictions (if applicable) and obtained all regulatory, government and third parties’ approvals, consents and/or waivers as necessary for the implementation of the terms of the Sale and Purchase Agreement;
(ix) the Purchaser having obtained a legal opinion to the satisfaction of the Purchaser and from a firm of lawyers qualified to practice in Niger in respect of the ownership, establishment and licence of the Project Company; and
(x) all warranties contained in the Sale and Purchase Agreement having remained true and accurate in all material respects at Completion as if repeated at Completion and at all times between the date of the Agreement and Completion.

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LETTER FROM THE BOARD

The Company may at its discretion at any time waive in writing, in whole or in part, conditionally or unconditionally, the condition (ix) above. As at the Latest Practicable Date, save and except for conditions (i), (ii), (iii), (v), (ix) and (x) above, all the other conditions precedent above have been fulfilled. In the event that any of the above conditions is not fulfilled or (as the case may be) waived on or before 30 April 2010 or such other date as the Parties may agree in writing, the Sale and Purchase Agreement and any rights and obligations of the Parties thereunder shall cease and determine save for any antecedent breaches of the terms thereof.

Completion

Completion shall take place on a date which is the third Business Day after the date on which all conditions precedent are satisfied or (as the case may be) waived or such other date as the Parties may agree in writing.

Upon Completion, the Purchaser will own the entire issued share capital of the Target and the accounts of the Target will be consolidated into the accounts of the Company.

PRINCIPAL TERMS OF THE CONVERTIBLE NOTES

Pursuant to the Sale and Purchase Agreement, the Company will issue to the Vendor the Convertible Notes, the terms of which have been negotiated between the Company and the Vendor on an arm’s length basis, in full settlement of the Consideration on Completion. Principal terms of the Convertible Notes are as follows:

Issuer: The Company Principal amount: US$53,281,853 (equivalent to approximately HK$414,000,000). Form and The Convertible Notes shall be issued in registered form in the denomination: denomination of US$10,000,000 each, save that if the outstanding amount of the Convertible Notes to be issued is less than US$10,000,000, the Convertible Notes may be issued in such amount. Interest: The Convertible Notes shall bear interest on the principal amount thereof from and including the date of issue of the Convertible Notes at a rate of 2% per annum. Maturity date: The third anniversary of the date of issue of the Convertible Notes. Redemption on the The Convertible Notes shall be redeemed by the Company on Maturity Date: the Maturity Date at the principal amount outstanding on the Maturity Date.

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LETTER FROM THE BOARD

Early redemption by the Noteholder:

Conversion price:

On and at any time after the occurrence of an event of default (as specified in the terms of the Convertible Notes) and pursuant to a resolution sanctioned by the Noteholder, the Noteholder may by notice to the Company demand that all the Convertible Notes be redeemed by the Company immediately.

HK$9.50 per Conversion Share, subject to adjustment.

The Conversion Price of HK$9.50 represents:

(i) a premium of approximately 20.9% over the closing price of HK$7.86 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 15.9% over the closing price of HK$8.20 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a premium of approximately 13.0% over the average closing price of approximately HK$8.410 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iv) a premium of approximately 10.7% over the average closing price of approximately HK$8.581 per Share as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day;
(v) a premium of approximately 365.2% over the unaudited consolidated net asset value attributable to equity holders of the Company as at 30 June 2009 (as adjusted for the net proceeds from the Top-up Placing (as defined below) of HK$427 million) per Share (based on 429,168,308 Shares in issue immediately following completion of the Top-up Placing) of approximately HK$2.042; and
(vi) a premium of approximately 667.0% over the audited consolidated net asset value attributable to equity holders of the Company per Share (based on 379,168,308 Shares in issue as at 31 December 2008) of approximately HK$1.239 as at 31 December 2008.

– 11 –

LETTER FROM THE BOARD

The Conversion Price is subject to adjustments upon the occurrence of (i) consolidation or subdivision; (ii) capitalisation of profits or reserves; (iii) capital distributions; and/or (iv) offer of new Shares for subscription by way of rights, grant of options, warrants or other rights to subscribe for or purchase Shares at a price less than 95% of the market price of the Shares, on and subject to the terms of the Convertible Notes.

Conversion period: The period commencing on the date of issue of the Convertible Notes and expiring on the date which is seven Business Days preceding the Maturity Date.

Conversion right: The Noteholder shall have the right to convert in an amount not less than a whole multiple of US$10,000,000, the outstanding principal amount of the Convertible Notes into Shares at any time during the Conversion Period, provided that no such conversion right may be exercised, to the extent that following such exercise (i) a Noteholder and parties acting in concert with it, taken together, will directly or indirectly, control or be interested in such percentage of the entire issued share capital of the Company as may from time to time be specified in the Hong Kong Code on Takeovers and Mergers as being the level for triggering a mandatory general offer; or (ii) the Company will be in breach of the minimum public float requirement under the Listing Rules.

The number of Conversion Shares to be issued on conversion will be determined by dividing the principal amount of the Convertible Notes to be converted (translated into Hong Kong dollars at a fixed rate of HK$7.77 to US$1.00) by the Conversion Price, or the conversion price as adjusted according to the terms and conditions of the Convertible Notes.

Transferability: The Convertible Notes shall be assignable or transferable at any time in whole multiples of US$10,000,000 to any third party provided that such transfer shall comply with the Listing Rules and/or requirements imposed by the Stock Exchange (if any).

Ranking: The payment obligations of the Company under the Convertible Notes shall, save for such exceptions as may be provided by applicable legislation, at all times rank at least equally with all other present and future unsecured and unsubordinated obligations of the Company.

– 12 –

LETTER FROM THE BOARD

The Conversion Shares issued upon conversion of the Convertible Notes shall in all respects rank pari passu with the Shares in issue on the date of such conversion.

Voting rights: The Convertible Notes do not confer any voting rights at any meetings of the Company.

Listing: The Convertible Notes will not be listed on the Stock Exchange. An application will be made to the Listing Committee for the listing of, and permission to deal in, the Conversion Shares.

Upon full conversion of the Convertible Notes, 43,578,947 Conversion Shares (based on the fixed exchange rate of HK$7.77 to US$1.00) will be issued and allotted by the Company to the Noteholder. The Conversion Shares are to be issued by the Company under a specific mandate to be sought from the Independent Shareholders at the EGM. Application will be made to the Stock Exchange for the listing of and permission to deal in the Conversion Shares.

When assessing the fairness and reasonableness of the annual interest rate of the Convertible Notes, the Directors have reviewed and have taken into account the annual interest rate of similar issues of convertible securities by other listed companies in Hong Kong and are of the view that the annual interest rate of the Convertible Notes is comparable to that of the market. The Directors (excluding the independent non-executive Directors whose opinions are set out in the letter from the Independent Board Committee contained in this circular) consider that the terms of the Convertible Notes, including the Conversion Price and the annual interest rate of the Convertible Notes, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

INFORMATION ON THE TARGET GROUP

The Target

The Target is an investment holding company incorporated in the British Virgin Islands on 16 June 2009 with limited liability and a direct wholly-owned subsidiary of the Vendor. The principal asset of the Target is a 37.2% interest in the issued share capital of the Project Company. CUC was one of the founding shareholders of the Project Company and contributed RMB3,067,900 as its share of capital contribution for the said 37.2% interest. On 20 December 2007, CUC transferred its entire holding of the 37.2% interest in the Project Company to the Vendor, its direct wholly-owned subsidiary, at nil consideration (the ‘‘First Transfer’’). On 20 August 2009, the 37.2% interest in the Project Company then held by the Vendor was again transferred to the Target (being a direct wholly-owned subsidiary of the Vendor) at nil consideration. The 37.2% interest in the Project Company has been accounted for as ‘‘investment in associate’’ in the management account of the Target with a book value of HK$3,276,000, which represents the original cost of investment by CUC of RMB3,067,900, translated into Hong Kong dollars at the prevailing rate at the time of the First Transfer.

– 13 –

LETTER FROM THE BOARD

Based on the management account of the Target, as at 30 September 2009, the Target did not have any liabilities and the unaudited consolidated total assets and net asset value of the Target were approximately HK$3,276,000. As the Project Company, being the principal asset of the Target, has not commenced commercial production as at the Latest Practicable Date, no profit or loss has been recorded by the Target.

The Project Company

The Project Company is a company incorporated in Niger on 5 June 2007 with limited liability and is owned as to 37.2% by the Target and the remaining 62.8% by third parties independent of the Company and its connected persons. The Project Company is principally engaged in the exploration, development and mining of uranium properties and is the registered holder of the mining license for the Azelik Uranium Mine granted by the government of Niger on 8 November 2007 for a period of 20 years covering a mining area of 220 square kilometers.

Based on the management account of the Project Company, as at 30 September 2009, the unaudited consolidated total assets and total liabilities of the Project Company were approximately RMB1,427,837,000 (equivalent to approximately HK$1,627,734,000) and RMB1,420,384,000 (equivalent to approximately HK$1,619,238,000) respectively. The unaudited consolidated net asset value of the Project Company was approximately RMB7,453,000 (equivalent to approximately HK$8,496,000) as at 30 September 2009. As the Project Company has not commenced commercial production as at the Latest Practicable Date, no profit or loss has been recorded by the Project Company.

Upon Completion, the Company, being the single largest shareholder of the Project Company, will appoint four directors to the board of the Project Company which comprises a total of nine directors. The representatives appointed by the Company, together with other directors and senior management of the Project Company, will be involved in and responsible for managing and overseeing the daily operation of the Project Company.

As disclosed in the annual report of the Company, all of the executive Directors, namely Mr. Han Ruiping and Mr. Xu Hongchao, have over 15 years of experience in the nuclear industry. In addition, Mr. Han Ruiping is also a director of CUC which holds interests in various mining companies and uranium properties located in different countries. The Directors consider that they have sufficient expertise in managing mining companies based on their knowledge and experiences in the nuclear and mining industry.

The Azelik Uranium Mine

The Azelik Uranium Mine is located in the Agadez region of the Tchiroze´ rine department of Niger. Based on the Technical Report, the Azelik Uranium Mine comprises three uranium deposits namely the IR deposit, G deposit and T deposit and has an estimated mine life of 17 years. Exploration work of the Azelik Uranium Mine was completed and it is expected that construction of the Azelik Uranium Mine will complete and production will commence in the second half of 2010 with an estimated annual production capacity of around 700 tonnes of uranium upon full operation. Utilizing a cutoff grade of 0.05% and 0.085%, it is estimated that the Azelik Uranium Mine contains

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LETTER FROM THE BOARD

resources of around 11,227 tonnes of uranium and 7,316 tonnes of uranium respectively. Details of the Azelik Uranium Mine are set out in the Technical Report, the text of which is set out in Appendix II to this circular.

Currently, the Azelik Uranium Mine sources coal from a coal mine owned by Socie´ te´ Nige´ rienne du Charbon (‘‘SONICHAR’’), a company established in Niger and majorityowned by the State of Niger, for power supply. Notwithstanding the sufficient estimated reserves to support the operation of the Azelik Uranium Mine, the coal mine was operating under a small scale, which may post a risk to the consistency and reliability of power supply upon full operation of the Azelik Uranium Mine. Accordingly, the Project Company has on 16 June 2007 entered into a supply contract (the ‘‘Coal Supply Contract’’) with SONICHAR under which SONICHAR agreed to supply to the Project Company 50,000 tonnes of coal per annum commencing on 1 January 2009 (which the Project Company considers to be sufficient for its mining operation). In return, the Project Company agreed to advance payment (the ‘‘Prepayment’’) of US$6 million for additional mining equipment and other enhancement works on the coal mine (the ‘‘Capacity Expansion’’) to enhance its scale of production. Pursuant to the Coal Supply Contract, the Prepayment will be applied to settle the purchase price for coal supplied to the Project Company. As advised by the Project Company, the Capacity Expansion has been completed as at the Latest Practicable Date.

As at the Latest Practicable Date, four groundwater wells have been constructed which should be sufficient in meeting the project’s current demand for water supply. In order to mitigate the risk associated with the consistency and reliability of water supply for the future development of the Azelik Uranium Mine (details of which are set out in the paragraph headed ‘‘Risk factors relating to the Acquisition’’ in this letter), it is planned that an additional 11 groundwater wells will be built to satisfy the future demand of the mining work.

To the best of the Directors’ knowledge after taken into account the legal opinion dated 22 January 2010 issued by the Company’s Niger legal adviser, the Azelik Uranium Mine has complied with all relevant rules and regulations for the operation of the Azelik Uranium Mine in Niger.

The Long-term Sales Contract

On 24 August 2009, the Project Company, as seller, and CNEIC, a wholly-owned subsidiary of CNNC, as purchaser, entered into the Long-term Sales Contract pursuant to which the Project Company agreed to sell and CNEIC agreed to purchase all uranium ore concentrates produced by the Project Company for a term ending on 31 December 2022. Pursuant to the Long-term Sales Contract, the Contract Price shall be determined based on the following formula:

C = 2.5998 x Q x P

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LETTER FROM THE BOARD

where:

C : Contract Price;
Q : quantity of uranium ore concentrates delivered (kilograms of uranium);
PT : arithmetic average of the long-term U3O8 price and spot U3O8 price published by Tradetech, Inc. over three consecutive months prior to the month in which Delivery takes place;
PU : arithmetic average of the long-term U3O8 price and spot U3O8 price published by The Ux Consulting Company, LLC over three consecutive months prior to the month in which Delivery takes place; and
P : price for one pound of U3O8 delivered, where (PT + PU)/2 is between the Floor Price and the Ceiling Price, P shall equal (PT + PU)/2; where (PT + PU)/2 is lower than the Floor Price, P shall equal the Floor Price; where (PT + PU)/2 is higher than the Ceiling Price, P shall equal the Ceiling Price.

Pursuant to the Long-term Sales Contract, the actual price payable by CNEIC to the Project Company for each Delivery will be adjusted to take account of the relevant conversion loss and charges, transportation costs and other services as may be provided.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The principal activities of the Group are production and trading of metal die-casting products with its principal production facility located in Dongguan, the PRC. As disclosed in the announcement of the Company dated 23 June 2008, following completion of the unconditional mandatory cash offer to acquire all the Shares by the Vendor, the Vendor might look into investment or business opportunities, particularly those relating to uranium leveraging on the background of its shareholders, to diversify the Group’s business for the purpose of broadening its income sources.

On 14 April 2009, the Company issued an announcement in respect of the offer by the Company to acquire all of the issued and outstanding shares and the subscription by the Company of 5,371,350 shares in Western Prospector Group Ltd., a company then listed on the Toronto Stock Exchange Venture Exchange with interests in various mineral properties including the Saddle Hills uranium project located in Mongolia. While the Group will, on the one hand, continue its existing business in production and trading of metal die-casting products, it will, at the same time, explore new business and/or investment opportunities in uranium projects globally. The Acquisition aligns with the Group’s strategy in entering into the uranium mining business and the development of its uranium resources-related business.

One major application of uranium is to fuel nuclear power plants for electricity generation. Pursuant to the Long-term Sales Contract entered into between the Project Company and CNEIC on 24 August 2009 (details of which are set out in the sub-paragraph

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LETTER FROM THE BOARD

headed ‘‘The Long-term Sales Contract’’ in this letter), CNEIC will purchase all uranium ore concentrates produced by the Project Company for onward supply to the nuclear power plants mainly in the PRC.

The spot-market uranium price had since 2003 increased by more than ten-folds until it reached a historical height of over US$135 per pound of U3O8 in mid 2007 and had since then reduced by more than 68% to US$42.50 per pound of U3O8 in January 2010. As the world’s economy gradually recovers from the global financial crisis, the Directors are of the view that the electricity consumption and thus global demand for energy resources including uranium are expected to rise. Based on the foregoing, the Directors believe that the world’s uranium industry will experience a resurgence of activity following a protracted downturn which shall support an upward trend on the uranium price in the long-run.

According to the World Nuclear Association, as of 1 February 2010, the PRC had 11 nuclear power reactors in commercial operation, 20 nuclear power reactors under construction and 37 nuclear power reactors being planned. Pursuant to the ‘‘Medium-toLong-Term Plan for Nuclear Power Development (2005–2020)’’ (核電中長期發展規劃（2005–2020年）) promulgated by the National Development and Reform Commission (國家發展和改革委員會) (‘‘NDRC’’) in October 2007, the NDRC has set target for the increase in nuclear power generating capacity from 16,968 megawatts (including capacity in operation and under construction) to 40,000 megawatts by 2020. In order to meet the targeted increase in nuclear power generating capacity, it is expected that additional nuclear power reactors will be built which in turn will drive up demand for uranium resources in the PRC. Having taken into account (i) the positive outlook on the demand for uranium in the PRC; (ii) that CNEIC is one of the few companies authorised to carry out import and export trade of uranium products in the PRC; (iii) sales of the uranium ore concentrates produced by the Project Company have already been secured by the Long-term Sales Contract with CNEIC; and (iv) construction of the Azelik Uranium Mine is now close to completion and production is expected to commence in the second half of 2010, the Directors are of the view that the Project Company will be able to contribute income to the Group soon and the Acquisition will help strengthen and broaden the Group’s income source.

The Directors (excluding the independent non-executive Directors whose opinions are set out in the letter from the Independent Board Committee contained in this circular) consider that the terms of the Sale and Purchase Agreement and the Convertible Notes are on normal commercial terms and are fair and reasonable and the entering into of the Sale and Purchase Agreement and the issue of the Convertible Notes are in the interests of the Company and the Shareholders as a whole.

MILITARY COUP IN NIGER

As reported by various international news agencies, on 18 February 2010, the government of President Mamadou Tandja of Niger was overthrown in a military coup and the constitution of Niger had been suspended and all state institutions dissolved. The junta

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LETTER FROM THE BOARD

which was named ‘‘The Supreme Council for the Restoration of Democracy’’ and took power of Niger on 18 February 2010 stated that a new constitution would be created and elections would be held in Niger (the ‘‘Change in Constitution’’).

Pursuant to the legal opinion issued by the Company’s Niger legal adviser on 2 March 2010, the legal and beneficial ownership of the Project Company and the mining rights under the mining license for the Azelik Uranium Mine granted to the Project Company on 8 November 2007 would not be impaired as a result of the Change in Constitution. As at the Latest Practicable Date, no interruptions to the operation of the Azelik Uranium Mine were resulted from the Change in Constitution and the Directors are of the view that the Change in Constitution would not have a material adverse impact on the operation of the Azelik Uranium Mine and the Acquisition.

RISK FACTORS RELATING TO THE ACQUISITION

Shareholders should be fully aware of the possible risks relating to the Acquisition. Possible risk factors which may be faced by the Project Company are as follows:

Cyclical nature of the uranium market and fluctuations in prices for uranium-related products

The business and results of operations of the Project Company may be affected by the market supply and demand for uranium. Fluctuations in the market supply and demand for uranium may be caused by numerous factors which are beyond the control of the Project Company. These factors include, without limitation, the global economic conditions and the change in number of nuclear power plants worldwide.

The uranium reserve data are estimates and may be inaccurate

The uranium reserve data set forth in the Technical Report are only estimates which were prepared by SRK Consulting applying its own methodology. Those reserve estimates may be inaccurate and may differ materially from the actual amount of reserves. There are inherent uncertainties in estimating mine reserves, including factors, assumptions and variables which are beyond the control of the Project Company. The actual amount of reserves, rate of production and resource characteristics of the Azelik Uranium Mine may be different from the estimates.

Laws and regulations relating to the uranium mining business

The uranium mining business is subject to the laws and regulations imposed by the government of Niger. There is no assurance that the government of Niger will not change the present laws and regulations or impose additional or more stringent laws and regulations on the uranium mining business. Failure in complying with the then relevant laws and regulations may adversely affect the Project Company.

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LETTER FROM THE BOARD

Concerns raised in the Technical Report

As disclosed in the Technical Report, while SRK Consulting considered the degree of exploration control and confidence level of resource estimates of the Azelik Uranium Mine to be high, it raised concerns over the construction progress of the accommodation facilities for workers, and the consistency and reliability of coal and water supply which are considered essential for the operation of the Azelik Uranium Mine.

EFFECTS ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

The following chart sets out the shareholding structure of the Company, (i) as at the Latest Practicable Date; (ii) immediately upon Completion assuming the Convertible Notes are converted in full into Shares; (iii) immediately upon Completion assuming the Convertible Notes and the 2008 Convertible Note are converted in full into Shares, assuming there being no other changes to the shareholding structure of the Company from the Latest Practicable Date:

The Vendor Public Shareholders Total number of issued Shares	As at the Latest Practicable Date Number of Shares Approximate shareholding percentage (%) 266,372,273 62.07 162,796,035 37.93 429,168,308 100.00	Immediately upon Completion assuming the Convertible Notes are converted in full into Shares Number of Shares Approximate shareholding percentage (%) 309,951,220 65.56 162,796,035 34.44 472,747,255 100.00	Immediately upon Completion assuming the Convertible Notes and the 2008 Convertible Note are converted in full into Shares Number of Shares Approximate shareholding percentage (%) 369,951,220 69.44 162,796,035 30.56 532,747,255 100.00	Immediately upon Completion assuming the Convertible Notes and the 2008 Convertible Note are converted in full into Shares Number of Shares Approximate shareholding percentage (%) 369,951,220 69.44 162,796,035 30.56 532,747,255 100.00
				100.00

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

On 8 July 2009, the Company announced the placing of 50,000,000 existing Shares and the subscription of 50,000,000 new Shares by the Vendor at a price of HK$8.78 per Share (collectively, the ‘‘Top-up Placing’’). The placing of existing Shares and the subscription of new Shares were completed on 9 July 2009 and 20 July 2009 respectively. The Company raised net proceeds of approximately HK$427 million in the Top-up Placing which were intended to be applied to the Group’s future business development and general working capital of the Group. The net proceeds from the Top-up Placing have not yet been utilized by the Company as at the Latest Practicable Date. As disclosed in the announcements of the Company dated 14 April 2009, 30 June 2009 and 15 August 2009 respectively, the Company acquired the entire issued share capital of Western Prospector Group Ltd. which holds interests in various mineral properties including the Saddle Hill uranium project located in Mongolia. As the exploration work of the Saddle Hills uranium project is now close to

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LETTER FROM THE BOARD

completion and its construction work is expected to commence soon, it is the intention of the Company to reserve the net proceeds from the Top-up Placing for the construction and development of the Saddle Hills uranium project.

Save as disclosed above, the Company has not conducted any fund raising activities in the past twelve months before the date of the Announcement.

LISTING RULES IMPLICATIONS

As the applicable percentage ratios (as set out in the Listing Rules) are more than 5% but less than 25%, the transactions under the Sale and Purchase Agreement constitute a discloseable transaction for the Company under the Listing Rules. The Vendor, which owns the entire issued share capital of the Target, is the controlling Shareholder interested in approximately 62.07% of the issued share capital of the Company as at the Latest Practicable Date, and is therefore a connected person of the Company within the meaning of the Listing Rules. Accordingly, the entering into of the Sale and Purchase Agreement constitutes a non-exempted connected transaction for the Company under the Listing Rules. As the applicable percentage ratios (as set out in the Listing Rules) exceed 2.5%, the Sale and Purchase Agreement is subject to the reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules.

The Vendor and its associates which control or are entitled to exercise control over the voting right in respect of 266,372,273 Shares (representing approximately 62.07% of the entire issued share capital of the Company as at the Latest Practicable Date), will abstain from voting at the EGM. Save as disclosed above, so far as the Directors are aware having made all reasonable enquiries, no other Shareholder has a material interest in the Acquisition and is required to abstain from voting at the EGM under the Listing Rules. The voting of the resolution by the Independent Shareholders in respect of the Acquisition will be taken by way of poll at the EGM.

EGM

The EGM will be held at Victoria Room 3, 3/F, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Friday, 19 March 2010 at 10: 00 a.m. to consider and, if thought fit, to approve (i) the Sale and Purchase Agreement and the transactions contemplated thereunder; and (ii) the grant of a specific mandate for the issue and allotment of the Conversion Shares.

A notice convening the EGM is set out on pages 207 to 209 of this circular. Whether or not you are able to attend the meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible but in any event not later than 48 hours before the time appointed for the holding of the EGM or any adjourned meeting. Completion and return of the form of proxy will not preclude you from subsequently attending and voting in person at the EGM or any adjourned meeting should you so wish.

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LETTER FROM THE BOARD

PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

Pursuant to article 76 of the articles of association of the Company, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by:

(i) the chairman of such meeting; or
(ii) at least five Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or
(iii) a Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all Shareholders having the right to attend and vote at the meeting; or
(iv) a Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to attend and vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right; or
(v) if required by the Listing Rules, by the chairman of such meeting, any Director or Directors who, individually or collectively, hold proxies in respect of Shares representing five percent (5%) or more of the total voting rights at such meeting.

A demand by a person as proxy for a Shareholder or in case of a Shareholder being a corporation by its duly authorised representative shall be deemed to be the same as a demand by a Shareholder.

Unless a poll be so demanded and not withdrawn, a declaration by the chairman of the meeting that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect made in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution.

RECOMMENDATION

The Board (excluding the independent non-executive Directors whose opinions are set out in the letter from the Independent Board Committee contained in this circular) considers that the terms of the Sale and Purchase Agreement and the Convertible Notes are on normal commercial terms and are fair and reasonable and the entering into of the Sale and Purchase Agreement and the issue of the Convertible Notes are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board (excluding the independent non-executive Directors whose opinions are set out in the letter from the

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LETTER FROM THE BOARD

Independent Board Committee contained in this circular) recommends the Independent Shareholders to vote in favour of the ordinary resolution as set out in the notice of the EGM.

Your attention is drawn to the letter from the Independent Board Committee, as set out on page 23 of this circular, and the letter from Partners Capital, as set out on pages 24 to 35 of this circular, containing their respective advices and recommendations to the Independent Shareholders.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

Yours faithfully, By order of the Board CNNC International Limited 中核國際有限公司[*] Li Philip Sau Yan Company Secretary

For identification purpose only

– 22 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

CNNC INTERNATIONAL LIMITED 中核國際有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2302)

4 March 2010

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION — ACQUISITION OF 100% INTEREST IN IDEAL MINING LIMITED AND ISSUE OF CONVERTIBLE NOTES

We refer to the circular (‘‘Circular’’) issued by the Company to its shareholders dated 4 March 2010 of which this letter forms part. Capitalised terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to advise you in respect of the terms of the Sale and Purchase Agreement and the Convertible Notes, details of which are set out in the letter from the Board contained in the Circular. Partners Capital has been appointed as an independent financial adviser to advise us and the Independent Shareholders in this respect.

We wish to draw your attention to the letter from the Board and the letter from Partners Capital set out in the Circular. Having considered the principal factors and reasons considered by Partners Capital and its conclusion and advice set out in its letter of advice contained in the Circular, we consider that the terms of the Sale and Purchase Agreement and the Convertible Notes are on normal commercial terms, and are fair and reasonable so far as the Independent Shareholders are concerned, and the entering into of the Sale and Purchase Agreement and the issue of the Convertible Notes are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve (i) the Sale and Purchase Agreement and the transactions contemplated thereunder; and (ii) the grant of a specific mandate for the issue and allotment of the Conversion Shares.

Yours faithfully,

For and on behalf of the Independent Board Committee Cheong Ying Chew Henry Cui Liguo Zhang Lei Independent Non-executive Independent Non-executive Independent Non-executive Director Director Director

For identification purpose only

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LETTER FROM PARTNERS CAPITAL

The following is the text of a letter prepared for the purpose of incorporation in this circular received from Partners Capital setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition.

==> picture [243 x 43] intentionally omitted <==

Partners Capital International Limited Unit 3906, 39/F, COSCO Tower 183 Queen’s Road Central Hong Kong

4 March 2010

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION

INTRODUCTION

We refer to our engagement to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement as to whether the terms of which are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole, particulars of which are set out in the circular (the ‘‘Circular’’) dated 4 March 2010, in which this letter is reproduced, which has been despatched by the Company to the Independent Shareholders. Unless the context requires otherwise, capitalised terms used in this letter shall have the same meanings as ascribed to them under the section headed ‘‘Definitions’’ in the Circular.

As set out in the letter from the Board (the ‘‘Letter from the Board’’), on 23 January 2010, the Purchaser, a wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement with the Vendor, pursuant to which the Vendor has agreed to sell and the Purchaser has agreed to purchase the Sale Shares. The Vendor is the controlling Shareholder interested in approximately 62.07% of the issued share capital of the Company, and is therefore a connected person of the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios for the Acquisition exceed 5% but less than 25%, the Acquisition constitutes a discloseable and connected transaction of the Company under Chapters 14 and 14A of the Listing Rules. As such, the Acquisition is subject to the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules.

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LETTER FROM PARTNERS CAPITAL

Partners Capital is not connected with the directors, chief executive and substantial shareholders of the Company or the Group or the Vendor or any of their respective subsidiaries or their respective associates and therefore is considered suitable to give independent advice to the Independent Board Committee and the Independent Shareholders. Apart from normal professional fees payable to us in connection with this appointment, no arrangement exists whereby Partners Capital will receive any fees or benefits from the Company or the directors, chief executive and substantial shareholders of the Company or any of its subsidiaries or their respective associates.

In formulating our opinion, we have relied on the accuracy of the information and representations contained in the Circular and have assumed that all information and representations made or referred to in the Circular as provided by the executive Directors and management of the Company were true at the time they were made and continue to be true as at the date of the Circular. We have also relied on our discussion with the executive Directors and management of the Company regarding the Group and the Sale and Purchase Agreement, the Target and the Project Company, including the information and representations contained in the Circular. We have also assumed that all statements of belief, opinion and intention made by the executive Directors and management of the Company in the Circular were reasonably made after due enquiry. We consider that we have reviewed sufficient information to reach an informed view, to justify our reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have no reason to suspect that any material facts have been omitted or withheld from the information contained or opinions expressed in the Circular nor to doubt the truth, accuracy and completeness of the information and representations provided to us by the executive Directors and management of the Company. We have not, however, conducted site visit to the Azelik Uranium Mine nor an independent in-depth investigation into the business and affairs of the Group, the Target and the Project Company, the Vendor and their respective associates, nor have we carried out any independent verification of the information supplied to us.

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LETTER FROM PARTNERS CAPITAL

PRINCIPAL FACTORS AND REASON CONSIDERED

In arriving at our opinion regarding the terms of the Sale and Purchase Agreement, we have considered the following principal factors and reasons:

1. The background of and reasons for entering into the Sale and Purchase Agreement

Brief overview of uranium and nuclear energy market

Uranium can be used for generating nuclear energy and electricity. Pursuant to the World Nuclear Association, the global capacity of reactors as at 1 February 2010 was 372,693 megawatt. Details of the reactors capacity in the following countries are as below:

==> picture [312 x 230] intentionally omitted <==

==> picture [53 x 58] intentionally omitted <==

Source: the World Nuclear Association

In addition, we note from the statistics published by the World Nuclear Association that as at 1 February 2010, 44 countries were operating 436 nuclear reactors for electricity generation and 53 new nuclear plants were under construction in 13 countries.

一 Pursuant to 2009年全國電力工業統計快報覽表 (‘‘List of the National Electric Power Industry Statistic Express 2009’’) published on 7 January 2010 by 中國電力企業聯合會 (‘‘China Electricity Council’’), an organization comprising PRC’s power enterprises and institutes, the total installed power capacities in the PRC was 87,407 megawatt in 2009, of which only approximately 1% was generated by nuclear power. Pursuant to 核電中長期發展計劃 (2005–2020) (‘‘the Medium to Long Term Plan for the Nuclear Power Development (2005–2020)’’) promulgated in October 2007 by the National Development and Reform Commission (‘‘NDRC’’), NDRC had set target for the total nuclear power capacities of 40,000 megawatt in 2020. According to the

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LETTER FROM PARTNERS CAPITAL

updated statistics as at February 2010 published by the World Nuclear Association, there are a total of (i) 11 reactors in operation, (ii) 20 reactor projects under construction and (iii) 37 planned reactor projects in the PRC. We therefore concur with the Directors that the uranium business is promising in the future given (i) the number of new nuclear plants being planned and under construction and (ii) the long term development of nuclear energy in the PRC leading to increasing demand for uranium.

The Group and the Target Group

The Group is principally engaged in the production and trading of metal diecasting products with its principal production facilities located in Dongguan, the PRC and has also invested in mineral property interests consisting of various uranium and coal properties located in Mongolia. The Group is an indirect owned subsidiary of CNNC, a state-owned enterprise principally engaged in the research and development of nuclear related products, nuclear electricity production, nuclear fuel and nuclear technology development and application, and the construction and operation of nuclear power plant, through the Vendor. The audited revenue and operating loss after tax of the Group for the year ended 31 December 2008 amounted to approximately HK$209.1 million and HK$19.7 million respectively whilst the unaudited revenue and operating loss after tax of the Group for the six months ended 30 June 2009 amounted to approximately HK$56.8 million and HK$20.2 million respectively. All the revenue of the Group was generated from die-casting business. The Group’s operating losses were mainly due to the financial crisis in the second half of 2008, leading to the decrease in demand for die casting products which substantially impacted on the Group’s revenue.

Incorporated in the British Virgin Islands in June 2009, the Target, a whollyowned subsidiary of the Vendor, is an investment holding company and its principally asset is a 37.2% interest in the Project Company. We note from the management account of the Target Company that the unaudited total assets of the Target Company as at 30 September 2009 was HK$3,276,000, representing the amount of original capital contribution in the Project Company for the said 37.2% interest.

Incorporated in Niger in June 2007, the Project Company is principally engaged in the exploration, development and mining of uranium properties and is the registered holder of the mining license of the Azelik Uranium Mine granted by the government of Niger in November 2007 for a period of 20 years covering a mining area of 220 square kilometers. Pursuant to the Technical Report, the Azelik Uranium Mine contains three uranium deposits (one underground and two open pits developments) with a total estimated reserve of approximately 11,227 tons and approximately 7,316 tons of uranium resources by using a cut off grade of 0.05% and 0.085%, respectively, and an expected mine life of 17 years. Exploration work of the Azelik Uranium Mine was completed and the construction of which is expected to complete and commence production in the second half of 2010 with an expected annual production capacity of approximately 700 tons upon full operation.

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LETTER FROM PARTNERS CAPITAL

We note from the management account of the Project Company that its unaudited total assets and total liabilities as at 30 September 2009 was RMB1,427,837,000 (equivalent to approximately HK$1,627,734,000) and RMB1,420,384,000 (equivalent to approximately HK$1,619,238,000) respectively. As advised by the Company, major assets of the Project Company include accommodation facilities for workers, landuse right of the Azelik Uranium Mine, processing plant and power plant which are currently under construction. Given that the Project Company has yet to commence production, no revenue has been recorded.

As disclosed in the Letter from the Board, four directors will be nominated by the Company to the board of the Project Company. Representatives from the Company will be responsible for the daily operation and management of the Project Company.

Reasons for entering into the Sale and Purchase Agreement

As disclosed in the Letter from the Board, the Company is positive towards the development of the uranium industry given the number of new nuclear plants being planned and under construction globally, in particular, the PRC.

Pursuant to the Company’s 2008 annual report, metal die-casting products of the automotive and construction industries were historically accounted for a substantial amount of the Company’s revenue. The Company strived to further diversify its business investments and business opportunities, particularly those relating to uranium. In this regards, the Directors consider that through the Acquisition, the Company could further develop its business into uranium related business and broaden the Group’s income source which is generally in line with the Group’s business plan.

Having considered that (i) the uranium/nuclear energy industry is with growth potential and positive future prospects; (ii) the Acquisition further diversifies the Group’s business and income into uranium business from die casting business; and (iii) the Acquisition is generally in line with the Group’s business plan, we concur with the Board that the Acquisition is commercially justifiable.

2. Terms of the Sale and Purchase Agreement

The Consideration

Pursuant to the Sale and Purchase Agreement and the Final Valuation, the Purchaser has agreed to purchase and the Vendor has agreed to sell the Sale Shares at the consideration of HK$414,000,000.

We have reviewed the Valuation Report and noted that JJL Sallmanns has valued the fair value of the Sale Shares under income approach technique which is also known as the ‘‘discounted cash flow method’’. As set out in the Valuation Report, according to the International Valuation Standards issued by International Valuation Standards Committee, the valuation procedures employed include review of physical and economic conditions of the business, an assessment of key assumptions, estimates, and representations made by the proprietor or the operator of the business. As part of

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LETTER FROM PARTNERS CAPITAL

our due diligence, we have discussed with JJL Sallmanns regarding, inter alias, (i) the major assumptions behind the Valuation Report, including but not limited to (a) the current and targeted capital structure of the Project Company; (b) the prevailing and projected market price of uranium resources; (c) the estimated level of uranium resources and expected production capacity of the Azelik Uranium Mine; (d) the estimated costs and expenses of the Project Company and (e) the stage of development of the Azelik Uranium Mine; (ii) the methodology behind the Valuation Report; and (iii) the basis of calculation of the discount rate.

We noted that (a) the discount rate behind the Final Valuation has taken into consideration of the targeted capital structure of the Project Company, as well as a specific country risk for Niger; (b) the Final Valuation was made reference to the Floor Price of US$60 per pound of U3O8 as agreed in the Long Term Sales Contract; (c) the Final Valuation has adopted the estimated level of uranium resources of the Azelik Uranium Mine of 11,227 tons with cut off grade of 0.05% which is in line with the Technical Report; (d) certain estimated costs and expenses are made reference to the 尼 — 日爾阿澤里克鈾礦冶工程初步設計總概算與財務評價 (‘‘Preliminary Design of Financial Assessment on the Azelik Uranium Mine’’) prepared by 核工第四研究設計院 (‘‘The Fourth Institute of Engineering of China National Nuclear Corporation’’) in August 2008 and (e) the commercial operation of the Azelik Uranium Mine is in line with the Directors’ expectation, i.e. in the second half of 2010. We are, therefore, of the view that (i) the Valuation Report is reasonably prepared and normal in nature; and (ii) the major assumptions and the basis of the Final Valuation are fair and reasonable. As such, we consider the Final Valuation is a good reference for Independent Shareholders to assess the fairness and reasonableness of the consideration of the Acquisition.

Based on the fact that the Consideration of HK$414,000,000 represents a discount of approximately 10.8% to the Final Valuation of the Target Group of approximately HK$464,079,000, we consider the Consideration is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

The Convertible Notes

The Consideration will be fully settled by way of issuing of the Convertible Notes to the Vendor. Key terms of the Convertible Notes are referred to in the Letter from the Board in the Circular.

The Conversion Price of HK$9.5 per Conversion Share represents:

(i) a premium of approximately 20.9% over the closing price of HK$7.86 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 15.9% over the closing price of HK$8.20 per Share as quoted on the Stock Exchange on the Last Trading Day;

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LETTER FROM PARTNERS CAPITAL

(iii) a premium of approximately 13.0% over the average closing price of approximately HK$8.410 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iv) a premium of approximately 10.7% over the average closing price of approximately HK$8.581 per Share as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day;
(v) a premium of approximately 365.2% over the unaudited consolidated net asset value attributable to equity holders of the Company as at 30 June 2009 (as adjusted for the net proceeds from the Top-up Placing (as defined below) of HK$427 million) per Share (based on 429,168,308 Shares in issue immediately following completion of the Top-up Placing) of approximately HK$2.042; and
(vi) a premium of approximately 667.0% over the audited consolidated net asset value attributable to equity holders of the Company per Share (based on 379,168,308 Shares in issue as at 31 December 2008) of approximately HK$1.239 as at 31 December 2008.

In order to assess the fairness and reasonableness of the terms of the Convertible Notes, we have identified and reviewed, on a best effort basis, the transactions involving issues of convertible securities for acquisition purpose by companies listed on the Stock Exchange (the ‘‘CN Comparables’’) from 1 October 2009 to 23 January 2010, being the date of the Sale and Purchase Agreement. In selecting the CN Comparables, we consider their terms, which are in general inter-correlated among each others, were determined under similar market condition and sentiments as the Convertible Notes, we believe that the CN Comparables, which were announced after 1 October 2009, may reflect the recent trend of the terms of the convertible securities in the market, and consider the CN Comparables are fair and representative samples. Details of the CN Comparables are summarized below:

					Premium over/
					(discount) to
				Annual	closing price
		Principal		interest	prior to
Date	Name (Stock code)	amount	Maturity	rate	announcement
		(HK$	(years)	(%)	(%)
		million)
13-1-2010	Asia Resource Holdings Limited (899)	560.0	3	nil	(3.9)
8-1-2010	Jackin International Holdings Limited	387.5	10	nil	0.0
	(630)
29-12-2009	Ming Hing Waterworks Holdings	954.1	5	nil	(69.9)
	Limited (402)
28-12-2009	China Outdoor Media Group Limited	1,228.9	5	nil	(38.4)
	(254)
9-12-2009	Global Green Tech Group Limited	895.2	3	nil	(19.2)
	(274)
1-12-2009	Aptus Holdings Limited (8212)	1,500.0	6	nil	(36.7)
30-11-2009	Continental Holdings Limited (513)	325.0	3	1.5	(5.0)

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LETTER FROM PARTNERS CAPITAL

					Premium over/
					(discount) to
				Annual	closing price
		Principal		interest	prior to
Date	Name (Stock code)	amount	Maturity	rate	announcement
		(HK$	(years)	(%)	(%)
		million)
30-11-2009	Solartech International Holdings	1,432.0	3	nil	7.1
	Limited (1166)
27-11-2009	Kwong Hing International Holdings	360.0	10	nil	66.7
	(Bermuda) Limited (1131)
25-11-2009	Siberian Mining Group Company	249.6	5	nil	140.0
	Limited (1142)
23-11-2009	Xian Yuen Titanium Resources	140.4	10	nil	(31.6)
	Holdings Limited (353)
20-11-2009	Hong Kong Energy (Holdings)	83.1	3	nil	16.3
	Limited (987)
18-11-2009	Ching Hing Holdings Limited (692)	1,680.0	3	2	4.8
18-11-2009	Loudong General Nice Resources	250.0	3	nil	25.0
	(China) Holdings Limited (988)
13-11-2009	Grandtop International Holdings	909.1	10	nil	2.1
	Limited (2309)
12-11-2009	Honbridge Holdings Limited (8137)	400.0	5	nil	17.7
22-10-2009	Xian Yuen Titanium Resources	1,053.8	5	nil	(37.0)
	Holdings Limited (353)
21-10-2009	Vision Tech International Holdings	1,190.0	10	nil	29.6
	Limited (922)
15-10-2009	China Digital Licensing (Group)	26.9	5	nil	(27.7)
	Limited (8175)
13-10-2009	Berjaya Holdings (HK) Limited (288)	2,190.0	10	3.5	(73.0)
				(Note)
11-10-2009	Asia Coal Limited (835)	2,334.0	5	nil	(43.7)
1-10-2009	RBI Holdings Limited (566)	3,815.0	4	nil	1.2
		Mean	5.7	2.3	(3.4)
		Median	5	2	(1.9)
		Max	10	3.5	140.0
		Min	3	nil	(73.0)
23-Jan-2010	The Company	414.5	3	2	15.9

Note: The convertible loan securities will bear an interest rate of 1% per annum for the first two years and 3.5% for the remaining eight years.

The CN Comparables have a maturity ranging from 3 years to 10 years, with an average maturity of about 5.7 years. As the maturity of the Convertible Notes is 3 years which falls within the range for the CN Comparables, we consider the maturity of the Convertible Notes is in line with market practice.

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LETTER FROM PARTNERS CAPITAL

The Convertible Notes will bear interest rate of 2% per annum which lies in the range of the interest rate of the CN Comparables from nil to 3.5% per annum with the median of 2%. We therefore consider the interest rate of the Convertible Notes is comparable to market rates and is acceptable to the Company so far as the Independent Shareholders are concerned.

As illustrated above, the premium/discount of conversion price over/to closing price prior to announcement ranged from a discount of approximately 73.0% to a premium of approximately 140.0% with the median of a discount of 1.9%. The premium of approximately 15.9% as represented by the Conversion Price over the closing price of the Share prior to the Announcement falls within the range of and lies above the median of the CB Comparables. We therefore consider the Conversion Price is acceptable to the Company so far as the Independent Shareholders are concerned.

Furthermore, we note that it is not uncommon in the market to settle consideration of acquisitions by listed companies on the Stock Exchange involving issue of convertible instruments. Having regard to the fact that the settlement of the Consideration by issue of Convertible Notes would not generate (i) immediate cash outflow to the Group and (ii) immediate dilution to the Independent Shareholders whilst the potential dilution effect to the Independent Shareholders, as to be detailed below, is considered not material, we consider that the mode of settlement of the Consideration by issuing the Convertible Notes is fair and reasonable so far as the Independent Shareholders are concerned.

3. Potential dilution effect on the shareholdings of the Independent Shareholders

As at the Latest Practicable Date, the Independent Shareholders were interested in approximately 37.93% of the issued share capital of the Company. If the Acquisition is approved and becomes unconditional, the Company will issue the Convertible Notes to the Vendor. If the Convertible Notes are fully converted immediately following Completion, the aggregate shareholding interests of the Independent Shareholders in the Company will be reduced to approximately 34.44%, representing a slight dilution of approximately 3.49% from their existing shareholdings of approximately 37.93%.

Having considered (i) the Acquisition represents an opportunity for the Company to further diversify into the uranium mining business, the prospects of which appears to be promising; and (ii) the Conversion Price is fair and reasonable having taken into account the current market price of the Share, we are of the view that a slight dilution of 3.49% on the shareholding interests of the Independent Shareholders in the Company as a result of the issue of the Conversion Shares is acceptable.

4. Financial effects

Upon Completion, the Group will own the entire interest in the Target which, in turn, holds a 37.2% interest in the Project Company. The financials results of the Project Company will therefore be accounted for as ‘‘investment in associate’’ under the equity method by the Group upon Completion.

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LETTER FROM PARTNERS CAPITAL

Earnings

As set out in the Letter from the Board, the Azelik Uranium Mine is expected to commence production in the second half of 2010. The Group will share the postacquisition, post-tax results and impairment loss of the Project Company upon Completion. Assuming the Acquisition was completed in the year ended 31 December 2009 and no impairment loss relating to the Target Group is recognized, the Acquisition would not have any financial effect or immediate contribution to the financial performance of the Group for the year ended 31 December 2009.

Net Asset Value

According to its interim report, the unaudited net asset of the Group as at 30 June 2009 was approximately HK$512.5 million. As disclosed in the Letter from the Board, the unaudited net asset values of the Target and the Project Company as at 30 September 2009 was approximately HK$3,276,000 and approximately HK$8,496,000 respectively. Under the equity method, the Group’s investment cost of the Project Company of HK$414,000,000 is to be initially recorded and adjusted thereafter for the post acquisition change in the Group’s share of net assets and impairment loss relating to the Project Company.

In accordance with the accounting policies of the Company, the Convertible Notes to be issued by the Company will be accounted for in two separate components on the Company’s balance sheet, namely a liability component and an equity component, on initial recognition. The net assets of the Group would be increased by the equity component of the Convertible Notes and the amount of which will be determined with reference to prevailing market interest of similar instrument, i.e. in terms of credit rating and risks that can only be ascertained at the time of issue of the Convertible Notes. As such, the effect on the increase of net asset value of the Group subsequent to completion of the issue of the Convertible Notes cannot be ascertained at this stage.

Cashflow and gearing ratio

No cashflow effect will be impacted on the Group as the Consideration is to be fully settled by the issue of the Convertible Notes.

According to the Company’s interim report for the six-month period ended 30 June 2009, the gearing ratio of the Group was approximately 15.6%, as derived by dividing the interest-bearing liabilities of the Group of approximately HK$103.0 million (including the 2008 Convertible Note of HK$86,958,000 and an unsecured bank loan of HK$16,000,000) by the total asset of the Group of approximately HK$659.6 million. On 20 July 2009, the Company raised net proceeds of approximately HK$427 million by issue of 50,000,000 new Shares. Assuming the Completion took place on 20 July 2009 and having considered the Convertible Notes of approximately HK$414 million and the proceeds from the new Shares, the total asset and interest-bearing liabilities of the Group will be increased.

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LETTER FROM PARTNERS CAPITAL

The liabilities of the Group upon completion of the issue of the Convertible Notes would be increased by the liability component of the Convertible Notes, and the amount of which will be determined with reference to prevailing market rate of interest for a similar instrument, i.e. in terms of credit rating and risks that can only be ascertained at the time of issue of the Convertible Notes. As such, the effect on the gearing ratio of the Group subsequent to completion of the issue of the Convertible Notes cannot be ascertained at this stage.

Based on the above, the Acquisition is not expected to have any impact on the Group’s earnings and cashflow. Notwithstanding the gearing ratio and net asset value of the Group are uncertain at this stage, we are of the view that the Acquisition, on balance, is in the interests of the Company and the Shareholders as a whole after taking into account the reasons and possible benefits arising from the Acquisition.

Independent Shareholders should be noted that the aforesaid financial analyses are for illustrative purpose only and do not represent what the financial position of the Group will be upon Completion.

5. Risk Factors of the Acquisition

As disclosed in the Letter from the Board, risk factors which may be faced by the Project Company are summarised as follows:

a) Cyclical nature of the uranium market and fluctuations in prices for uraniumrelated products;
b) The uranium reserve data are estimates and may be inaccurate;
c) Laws and regulations relating to the uranium mining business; and
d) Concerns raised in the Technical Report.

The Board has identified possible solutions in respect of the concerns raised in the Technical Report, i.e. the consistency and reliability of coal and water supply to the Azelik Uranium Mine. Please refer to the Letter from the Board for more details.

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LETTER FROM PARTNERS CAPITAL

RECOMMENDATION

We consider the ultimate merits of the Acquisition should hinge on the business fundamental of the Project Company and its potential contribution for the benefit of the Group. Having considered the above principal factors and risk factors, we are of the view that, on balance, the terms of the Sale and Purchase Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned and the entering into of the Sale and Purchase Agreement is in the ordinary and usual course of the business of the Group and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to, and we recommend the Independent Shareholders to, vote in favour of the ordinary resolutions to approve the Sale and Purchase Agreement at the EGM.

Yours faithfully, For and on behalf of Partners Capital International Limited Alan Fung

Managing Director

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APPENDIX I

VALUATION REPORT

The following is the text of a letter prepared for the purpose of incorporation in this circular received from JLL Sallmanns, an independent valuer, in connection with its valuation of the Sale Shares as at the Valuation Date.

==> picture [140 x 45] intentionally omitted <==

4 March 2010

The Board of Directors CNNC International Limited Unit 09, 28/F China Resources Building 26 Harbour Road Wanchai Hong Kong

Dear Sirs,

In accordance with the instructions from CNNC International Limited (‘‘the Company’’ or ‘‘CNNC Intl’’), we have undertaken an exercise to express an independent opinion of the fair value of 100% equity interest in Ideal Mining Limited (the ‘‘Target’’) as at 31 December 2009 (the ‘‘Valuation Date’’). This letter summarizes the principal conclusions stated in our valuation report dated 27 January 2010.

Our valuation was carried out on a fair value basis. Fair value is defined as ‘‘the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction’’.

BASIS OF OPINION

We have conducted our valuation in accordance with the International Valuation Standards issued by International Valuation Standards Committee. The valuation procedures employed include the review of physical and economic conditions of the business, an assessment of key assumptions, estimates, and representations made by the proprietor or the operator of the business and the directors of the Company. All matters essential to the proper understanding of the valuation will be disclosed in the valuation report.

The following factors form an integral part of our basis of opinion:

. Assumptions on the market conditions and the business that are considered to be fair and reasonable;
. Financial performance that shows a consistent trend of the operation;

– 36 –

APPENDIX I

VALUATION REPORT

. Consideration and analysis on the micro and macro economy affecting the business;
. Analysis on tactical planning, management standard and synergy of the business;
. Analytical review of the business; and
. Assessment of the leverage and liquidity of the business.

We planned and performed our valuation so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to express our opinion on the Target.

BACKGROUND

Socie´ te´ des Mines d’Azelik SA (the ‘‘Project Company’’) is a joint venture established in June 2007 with equity of 37.2% owned by China Uranium Corporation Limited (‘‘CUC’’), 33% by Niger government, 24.8% by ZXJOY Invest (Chinese) and 5% by Trendfield Holdings Ltd. All shares of the Project Company owned by CUC were transferred to CNNC Overseas Uranium Holdings Limited (the ‘‘Vendor’’ or ‘‘CNNC Overseas’’) by an agreement dated 20 December 2007 and from CNNC Overseas to the Target by an agreement dated 20 August 2009. All shares of the Project Company owned by Niger government were transferred to Socie´ te´ du Patrimoine des Mines du Niger by an agreement dated 17 August 2008. All shares of the Project Company owned by Trendfield Holdings Ltd. were transferred to Sarisbury Limited by an agreement dated 29 September 2009. The registered capital of the Project Company is 500,000,000 CFA francs.

The Project Company has business in all countries, particularly in the Republic of Niger. With strict compliance with laws and regulations of Niger, the business of the Project Company includes:

. Mineral exploration and mining;
. Research, design and implementation of mining projects;
. Import, manufacture, trading and export of equipment, tools, goods, products and materials needed by the Project Company;
. Acquisition of mining and exploration rights;
. The profits of the Project Company are derived from investments, mergers, equity participation, alienation, and all other legal forms in Nigerian or foreign firms (or to be founded firms).

The Project Company is currently developing uranium mines in the Agadez region of Niger. The Project Company has started the construction in second half of 2008. The Project Company plans to start the operation of mines in second half of 2010. The planned mining and processing of ore is around 600,000 tons per year.

– 37 –

APPENDIX I

VALUATION REPORT

VALUATION APPROACH AND METHODOLOGY

In arriving at the fair value of the Target as at the Valuation Date, we have considered three generally accepted approaches, namely market approach, cost approach and income approach. In our opinion, the market approach and cost approach are inappropriate for valuing the Target. Firstly, the market approach requires market transactions of directly comparable assets as an indication of value. However, we have not identified any current market transactions which are directly comparable. Secondly, the cost approach does not directly incorporate information about the economic benefits contributed by the Target. We have therefore relied solely on the income approach in determining our opinion of value.

In this valuation exercise, the fair value of the Project Company was developed through the application of the income approach technique known as the discounted cash flow method. This method eliminates the discrepancy in the time value of money by using a discount rate to reflect all business risks including intrinsic and extrinsic uncertainties in relation to the operation. After calculating the fair value of the Project Company, the fair value of the Target was then derived by multiplying the fair value of the Project Company by 37.2%.

SOURCE OF INFORMATION

In conducting our valuation of the fair value of the Target, we have reviewed information from several sources, including, but not limited to:

. Background/Operational
- Description of the operating businesses;
SRK Consulting, Technical Review of Azelik Uranium Mines, January 2010 (‘‘Technical Review’’);
The Fourth Institute of Engineering of China National Nuclear Corporation, Preliminary Design of Financial Assessment on the Azalik Uranium Mine, August 2008 (‘‘Financial Assessment’’);
Other background and research materials, including but not limited to: World Nuclear Association, World Uranium Mining, November 2009 and The Fourth Institute of Engineering of CNNC, Feasibility Study on the Azalik Uranium Mine in Niger, October 2006.
. Financials
Financial statements of the Project Company for the fiscal year of 2007 and 2008;

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APPENDIX I

VALUATION REPORT

Other operations and market information in relation to the business, including but not limited to: data obtained from Bloomberg in relation to the risk free rate, market return and beta, and *
http://pages.stern.nyu.edu/ adamodar/New_Home_Page/datafile/ctryprem.html for country risk premium (CRP);
Financial forecasts covering a period of 13.5 years from the Company prepared by the directors with reference to Technical Review and Financial Assessment and other information.

We conducted interviews and held discussions with the management of the Project Company and directors of the Company and have relied to a considerable extent on the information provided by the parties in arriving at our opinion of value.

ASSUMPTIONS

General Assumptions

. In order to realise the growth potential of the business and maintain a competitive edge, additional manpower, equipment and facilities are necessary to be employed. For the valuation exercise, we have assumed that all proposed facilities and systems will work properly and will be sufficient for future expansion.
. We have been provided with copies of the operating licences and incorporating documents. We have assumed such information to be reliable and legitimate. We have relied to a considerable extent on such information in arriving at our opinion of value.
. We have assumed that there will be no material change in the existing political, legal, technological, fiscal or economic condition which may adversely affect the business.
. Operational and contractual terms bound by the contracts and agreements entered into by the Project Company and the Target will be honoured.
. Its competitive advantages and disadvantages do not change significantly during the period under consideration.
. Production is conducted until the end of each mine life.
. A cut-off grade of 0.05% is adopted in this valuation. When assessing the reasonableness of adopting a cut-off grade of 0.05%, we have reviewed and taken into account the cut-off grades adopted by other uranium mines in Africa and noted that a cut-off grade of 0.05% is comparable to that of the other uranium mines in Africa.

– 39 –

APPENDIX I

VALUATION REPORT

DISCOUNT RATE

In determining the discount rate for the Project Company, we have taken into account a number of factors including the current market condition and the underlying risks inherent in the business, such as liquidity risk. These risk factors have been considered in determining the appropriate discount rate for the valuation.

When evaluating the appropriate discount rate for the Project Company, we have used the equity discount rate. We have used Capital Assets Pricing Model (the ‘‘CAPM’’) to estimate the required return on equity capital. In this valuation, we have referenced to the Canada risk free rate of 4.00%, the Canada market return of 9.62%, a relevered beta of 1.29 and a CRP 3.8%. Other than CNNC International Limited, no listed company in Hong Kong with uranium exploration or mining operation was identified. Companies with uranium exploration or mining operation listed in Canada, which is the largest uranium producing country in 2008 according to World Uranium Mining, were selected as comparable companies. In order to match with the betas of comparable companies in discount rate calculation, the Canada risk free rate and market return have been applied. As for the CRP, since the CRP for Niger was not available, CRP for Egypt which is the highest available CRP among the African countries was used as a proxy. The resulting CAPM cost of equity is 15.0%.

SENSITIVITY ANALYSIS

A sensitivity analysis was prepared to project the results based on the change of discount rate. The following table summarizes the resulting values of 100% equity interest in the Target.

Discount Rate Sensitivity

Discount		Results
	(HKD	thousand)
14.0%		477,060
15.0%*		464,079
16.0%		451,950

Such rate or scenario is adopted for the valuation.

VALUATION COMMENTS

The valuation of an interest in the Target requires consideration of all relevant factors affecting the operation of the business and its ability to generate future investment returns. The factors considered in the valuation included, but were not limited to, the following:

. the nature of the business;
. the financial condition of the business and the economic outlook in general;

– 40 –

APPENDIX I

VALUATION REPORT

. the operational contracts and agreements in relation to the business;
. the projected operating results, and;
. the financial and business risk of the mining operation including the continuity of income and the projected future results.

The conclusion of value is based on accepted valuation procedures and practices promulgated in the International Valuation Standards that rely substantially on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. Further, the assumptions and consideration of such matters are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Project Company, the Company and Jones Lang LaSalle Sallmanns.

OPINION OF VALUE

Based on the results of investigation and analysis outlined in this report, it is our opinion that the fair value of 100% equity interest in the Target as at the Valuation Date is reasonably stated at HKD464,079,000 (HONG KONG DOLLARS FOUR HUNDRED SIXTY FOUR MILLION SEVENTY NINE THOUSAND).

For and on behalf of

Jones Lang LaSalle Sallmanns Limited

– 41 –

APPENDIX II

TECHNICAL REPORT

The following is the text of the Technical Report prepared for the purpose of incorporation in this circular received from SRK Consulting, an independent technical consultant.

EXECUTIVE SUMMARY

On 17 July 2006, the government of Niger officially granted permits to three Chinese companies, allowing them to carry out uranium mine exploration and mining work in the two uranium metallogenetic belts respectively in Madaouela and Teguidda in the desert region of Agadez Province in northern Niger. China Nuclear International Uranium Corporation (now known as ‘‘China Uranium Corporation Limited’’) and Zxjoy Invest Limited plan to register a Jinxing Miniere S.A. in Niger in order to jointly invest and develop the uranium resourced in this two mine areas.

According to the Decree N8 2007-505/PRN/MM/E issued by Ministry of Mine and Energy of the Republic of Niger and dated of November 08, 2007 granted to Socie´ te´ des Mines d’Azelik (‘‘SOMINA’’) a mining license with a duration of 20 years for the Azelik uranium deposit was granted to SOMINA which was formed on June 5, 2007, by the state of Niger and its Chinese partners.

Azelik Mines (one underground and two open pits developments along with processing plant and power plant under construction) are situated in the uranium metallogenetic belt of Teguidda. Previously in this area, a Japanese company ONAREM-IRSA carried out a full-scale uranium exploration including drilling reconnaissance between 1975 and 1988, which covered an area of 120 square kilometres. These activities resulted with three uranium deposits outlined, namely: deposits ‘‘T’’, ‘‘G’’ and ‘‘IR’’, with metal resource estimate of 11,227.88 tonnes of uranium (cut-off 0.050%).

From April 2006 to the present date, through cooperation, China Nuclear International Uranium Corporation and Zxjoy Invest Limited have assigned the professional work teams to visit Niger for a number of times, review all geological information available, carry out field investigation, and also re-assessed the uranium resources/reserves of Azelik deposits according to Chinese uranium mine exploration code. This feasibility report provides a fairly objective and comprehensive study of the feasibility of the mining and hydrometallurgical processes and technologies for Azelik Uranium Mining and Metallurgy Project as well as the cost-effectiveness of the deposit development on the basis of the re-assessed resources and by making reference to the exploration report issued by IRSA, Japan.

CNNC International Ltd (‘‘CNNC’’) commissioned SRK Consulting (China) Limited (‘‘SRK’’) to review the Azelik Mine (‘‘Azelik’’) operations located near Azelik town, Agadez Province in northern Niger. SRK was required to provide an Independent Expert Report (the ‘‘Report’’) for potential equity investors and possible future shareholders so that they could review the Azelik project.

– 42 –

APPENDIX II

TECHNICAL REPORT

SUMMARY OF PRINCIPAL OBJECTIVES

The purpose of this Report is to provide potential equity investors and potential shareholders of Azelik Uranium Mine and the Stock Exchange of Hong Kong Limited (‘‘HKSE’’) with an Independent Expert Report. CNNC International Ltd will include this Report with documents it plans to submit to the HKSE in relation to a proposed acquisition of Azelik in Niger, covering ownership of Azelik Mines facilities.

OUTLINE OF WORK PROGRAM

The work program involved two phases:

. Phase 1: review information provided, site visit to the Azelik Mines near Azelik town, Agadez Province of Niger, discussions with staff of Azelik Mine, collection and review of documents; and
. Phase 2: analysis of the provided data, writing a draft report, review of additional data and finalisation the report.

RESULTS

Overall

On November 8, 2007, the government of Niger granted Socie´ te´ des Mines d’Azelik (‘‘SOMINA’’) a mining license for the Azelik uranium deposit. SOMINA was formed on June 5, 2007, by the state of Niger and its Chinese partners. On June 19, 2007, the company applied for a mining license for the Azelik uranium deposit. The application was accompanied by an environmental impact study which was approved in July 2007, and a technical-economical feasibility study. The license was granted, after the latter study had been modified, as requested by the authorities.

The SOMINA is a Joint Venture of following Chinese and Nigerien companies:

. China Nuclear International Uranium Corporation (Sino U) — 37.2%
. Zxjoy Invest Limited (China) — 24.8%
. Niger Mine Ltd (SOPAMIN) — 33%
. Trendfield Holding SA (Niger, Private) — 5%

Geology

The Nigerien sandstone type uranium deposits are generally located in the Agadez Basin, to the northeast of which outcrops Air Massif, which forms the crystalline basement of Agadez Basin. The overlaying strata has been developed discontinuously beginning from Cambrian-Ordovician Period up to the recent time. The strata occur as flat and gentle, generally dipping toward southwest subsequently becoming younger from northeast to southwest. In the basin substratum, the predominant tectonic framework is mostly NW-SE

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APPENDIX II

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orientated and comprises the large scale fractures. The overburden tectonics is relatively simple, with four main groups of fractures developed, of which the Arlit fracture of N-S striking is relatively large. Strata sequences of different ages are distributed in blocks of different structures and different ore-bearing horizons of different lithologies are hosting the uranium mineralization.

The crystalline basement can be divided into the lower Precambrian Suggarien rock series and the middle Precambrian Pharusien rock series. The lower Precambrian series (Suggarien) are composed of gneisses, schists and early granite; the middle Precambrian series (Pharusien) which unconformably cover the Suggarien, are typically represented by continental molasses facies with occurring flat with gentle dips and showing only week regional metamorphism. The landform of basement outcropping areas in the east of the basin is characterized by gentle undulation with relative heights not exceeding range of meters and only 100 meters above the basin area. The area of crystalline substratum dominated by earliest uranium-enriched granite is characterized by a high radioactivity.

The basin overburden has been discontinuously deposited beginning from the Cambrian-Ordovician Period up to the recent time, and the outcropping strata in the Arlit uranium mineralized area were deposited during to the Lower to Upper Carbonaceous epoch.

The rock sequences of overburden are represented from the bottom to top by Carbonaceous, Permian, Triassic-Jurassic and Lower Cretaceous periods, and host seven ore-bearing horizons, including the main strata such the Guezouman and Tarat Formations of the Lower Carbonaceous, the Tchirezrine Formation of the Jurassic as well as the Lower Cretaceous Irhazer Formation.

Azelik deposits are a sandstone type uranium deposit situated in Teguidda belt covering an area of 1,953 square kilometres with vertices coordinated between 6835’00’’ and 7800’00’’ east longitudes and 17816’00’’ and 17840’00’’ of north latitude. Controlled by secondary northeast oriented fractured zone as well as the Irhazer sandstone formation, the form and location of the orebodies is basically conformable with the rock formations and mostly occur as stratiform, lenticular and irregular thin orebodies. Three uranium deposits were distinguished within Azelik project area, namely:

. Deposit IR is 2,000 m long and 1,000 m wide; a total of 10 orebodies are delineated, each of which is generally 500–600 m long and 200 m wide, with an average thickness of 2.07 m, an average grade of 0.149%, a burial depth of 190– 8
200 m and a dip angle of *1 , mainly appearing in stratiform and lentiform. The main orebody is 332IR-1, with a strike 1,150 m long and 950 m wide with an average thickness of 2.08 m and an average grade of 0.160%, controlling 4,240t of metal uranium reserve, accounting for 63% of the total reserve of Deposit IR.
. Deposit G is 2,500 m long and 1,000 m wide. The deposit has an average thickness of 2.95 m and a burial depth of 70 m with a dip angle of 48, for which a total of 31 orebodies are delineated. The main orebody is 332G-4, which is 400 m long with a

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TECHNICAL REPORT

strike width of 850 m, an average thickness of 3.08 m and an average grade of 0.148%, controlling a reserve of 1,891t, accounting for 58.9% of the total reserve of Deposit G.

. Deposit T is 3,000 m long and 1,000 m wide. The deposit has an average thickness of 1.96 m and an average grade of 0.131%, appearing in stratiform and stratoid form. The burial depth ranges from the ground surface to 155 m at a dip angle of 48*58. A total of 74 orebodies are delineated. There is no main orebody, and there is 7 orebodies each hosting 135t of reserve, accounting for 43.7% of the total reserve of Deposit T.

Azelik mine area includes 8 mineralization horizons, named A1–A8 from the bottom to top. The A1 is the most important horizon followed by A3 and A5 in importance. The thickness of largest mineralization horizon is 8.3 m, generally varying between 3 and 6 m.

This deposit is hosted within Gelili sandstone of the Dala rock series of the Cretaceous Irhazer Formation. The Gelili sandstone is 0–20 m thick. The ore-bearing rock mainly includes conglomerate and tuff — quart sandstone, with calcium, analcite (same with ‘‘analcime’’) and iron oxides cement. In the cement, the calcium is more than analcite. The Gelili sandstone is a overlayed by thick layer of red mudstone. The uranium minerals mainly include pitchblende, uraninite, metatyuyamunite, uranophane, carnotite, meta-uranocircite, boltwoodite, etc.; gangue minerals mainly include quartz, feldspar, analicite, calcite, dolomite, barite, hornblende, gypsum, limonite, smectite, black mica, tourmaline, etc.; metallic minerals mainly include cuprite, malachite and chalcocite.

The carbonate are represented by calcite and dolomite (their contents are: Ca: 3%– 12%, averaging 7–8%; CO2 : 6%–12%, maximum 15.5%), as well as enriched light rare earth with rare earth element of 145 x 10[-6] –338 x 10[-6] (ppm), averaging 225 x 10[-6] (ppm); Cu: 600 x 10[-6] *2,700 x 10[-6] (ppm), up to 11,700 x 10[-6] (ppm), thus, reaching the degree of comprehensive use. The copper mineralization occurs at the depths from 193 m–196 m.

Genetically Azelik deposits are classified as typical sandstone deposits represented by irregular, elongate lenticular bodies parallel to the depositional trend.

Mineral Resources

This mine area consists of three deposits, namely; IR, T and G. The deposits were delineated by drilling exploration using a grid of 100 m x 100 m. For the open-pit part of deposits T and G, the grid was narrowed to 50 m x 50 m, with partial in fill 25 m x 25 m, consequently the degree of exploration control and confidence level of resource estimate can be considered high.

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TECHNICAL REPORT

Thickness and grade of the uranoferrous horizons were determined through g-ray (Gamma-ray) logging in boreholes and following proper interpretation as well as through comparison with the chemical analysis results of a small number of samples taken from drill holes. Each drill hole was a subject to grade and thickness interpretation based on different counting rates.

Boundaries of orebodies were extrapolated, thickness-grade values of orebody was calculated, thickness-grade isolith map was developed according to different counting rates, which are used for delineating the plane range of the orebody; the extrapolated distance of the orebody boundary is generally 1/2 of the drilling distance and thinned out naturally.

Two indexes were implied in the resources estimation. One is for Cut-off grade at 0.050% of uranium metal, with minimum recoverable thickness at 0.7 m and meter by percentage at boundary: 0.035 m%. The other is adopted from Nigerien system with a cut off grade at 0.085% of uranium element.

According to the original data, drawings and other information supplied by the Nigerien side, a Chinese geological department has re-compiled an assessment report on the geological detailed exploration basic reserves and resources, in which the basic reserves and resources are calculated through geological block method to assess the estimated results. Results of resources and basic reserves estimated based on cut-off grades at 0.050% and 0.085% for Azelik Uranium Mine area are as follows:

			Resource	Average			Average	Metal		Total
Deposit	ID	Cut-off	Category	Thickness	Ore Tonnage		Grade	Resource		Resource
		(U %)		(m)	(t)		(U %)	(t)	%	(t)
IR		50.050	332	1.54	2,771,472	4,520,103	0.129	3,575.2	64.7	5,526.1
			333	1.56	1,748,631		0.112	1,950.9	35.3
		50.085	332	2.17	1,859,095	2,996,048	0.153	2,847.7	66.8	4,260.1
			333	1.36	1,136,953		0.124	1,412.4	33.2
G		50.050	331	1.90	171,596	2,413,726	0.114	195.2	7.5	2,615.3
			332	2.65	2,039,610		0.108	2,202.8	84.2
			333	1.70	202,520		0.107	217.3	8.3
		50.085	331	1.77	85,835	856,452	0.155	132.7	9.9	1,345.6
			332	2.37	490,781		0.171	838.3	62.3
			333	2.31	279,836		0.134	374.6	27.8
T		50.050	331	1.90	1,060,227	2,866,222	0.122	1,297.6	42.0	3,086.4
			332	2.39	1,418,822		0.101	1,428.8	46.3
			333	1.82	387,173		0.093	360.0	11.7
		50.085	331	2.19	464,171	1,201,626	0.155	721.6	42.2	1,710.7
			332	2.19	377,554		0.133	503.1	29.4
			333	1.84	359,901		0.135	486.0	28.4

*Note: the numbers of ore tonnage are rounded

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TECHNICAL REPORT

	Category	Category	Metal	Resource (t)		Total
		Orebody	331	332	333	Resource
						(t)
Low	Cut-off	IR		3,575.2	1,950.9	5,526.1
		G	195.2	2,202.8	217.3	2,615.3
		T	1,297.6	1,428.8	360.0	3,086.4
		Total	1,492.8	7,206.8	2,528.2	11,227.8
High	Cut-off	IR		2,847.7	1,412.4	4,260.1
		G	132.7	838.3	374.6	1,345.6
		T	721.6	503.1	486.0	1,710.7
		Total	854.3	4,189.1	2,273.0	7,316.4

Total low cut-off (0.050%) resources of three deposits are estimated at 11,227.8 tonnes, and that of high cut-off (0.085%) are 7,316.4 tonnes; the difference between both is 3,911.4 tonnes. The resources of G and IR deposits of both low and high cut-offs are classified to categories 332 and 333 whereas T deposit is mainly class 332 and 331. For IR deposit, there is no 331 resource defined or estimated.

The resources estimates shown in the assessment report compiled by the Chinese geological department (on which the results of resources and basic reserves as set out in the above table were based) are reported under the Chinese resources classification scheme and are not JORC Code-compliant and the results of resources and basic reserves as set out in the above table are therefore not reported under the JORC Code. SRK notes that the Chinese resources classification scheme is different from the JORC Code. In general, categories 331, 332 and 333 under the Chinese resources classification scheme may respectively refer to measured resources, indicated resources and inferred resources under the JORC Code. A broad comparison guide between the Chinese classification scheme and the JORC Code is presented in Appendix 1.

SRK considers the current estimates reliable and represent a reasonable global estimate of the relevant mineral resources although they are not in compliance with JORC code standard.

Exploration

The starting point of uranium history in Niger can be set in year 1957, with the discovery of uranium showings at Azelik by the Bureau Minier de la France d’Outre-mer. The French Commissariat a l’Energie Atomique almost immediately started a detailed study of the showings and lunched an airborne and field survey

Azelik Uranium Deposit was discovered in 1959, and a Japanese company — ONAREM-IRSA, obtained the exploration permit for this mine area in 1975, and conducted a full-scale uranium mineral exploration including drilling programs from 1975 to 1988, covering area of 120 square kilometres. All these activities have been completed according to planned schedule and as a result three uranium deposits were delineated,

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namely: T, G and IR. Deposit IR is situated about 8 km to the north of deposits G and T. According to the exploration results, ISRA performed a prefeasibility study of the Azelik Mine area.

Azelik Mine was explored by ISRA Company of Japan between 1964 and 1988 mainly by means of drilling, during which a total of 3,516 boreholes were made, with a total borehole length of 115,800 m. Of these boreholes, some 3,293 holes were made in Deposits G and T, and 223 in Deposit IR. The exploratory grids were as such: 100 x 100 m for Deposit IR, and 100 x 100 m for Deposits G and T, however, the exploratory grid in shallow depth of Deposits G and T was 50 x 50 m, partially 25 x 25 m. The exploration area was 9.6 km[2] for Deposit G, 17.3 km[2] for Deposit T and 4 km[2] for Deposit IR.

In addition, 129 boundary drill holes were completed by the Japanese company in the Tin-Gegourant block to the south of exploration area, of which 18 drill holes returned logging intensity higher than 1,000c/s, with highest 33,600c/s. The mineralized horizon thickness reached up to 8.4 m, indicating a good exploration prospect.

Exploration grid of the exploration area was 100 m x 100 m for deposit IR, 100 m x 100 m for deposits T and G, follow up in fill 50 m x 50 m on the open-pit zone.

From April 2006 China Nuclear International Uranium Corporation and Zxjoy Invest Limited have assigned the professional work teams to visit Niger for a number of times, review all geological information available, carry out field investigation, and also reassessed the uranium resources/reserves of Azelik deposits according to Chinese uranium mine exploration code.

In July 2006 The Ministry of Mines and Energy of Niger has granted exploration permit of Teguidda area (about 1,953 km[2] ) to CNNC and Zxjoy Invest Limited.

On November 8, 2007, the government of Niger granted Socie´ te´ des Mines d’Azelik (‘‘SOMINA’’) a mining license for the Azelik uranium deposit (see Appendix 3). SOMINA was formed on June 5, 2007, by the state of Niger and its Chinese partners. On June 19, 2007, the company applied for a mining license for the Azelik uranium deposit. The application was accompanied by an environmental impact study which was approved in July 2007, and a technical-economical feasibility study. The license was granted, after the latter study had been modified, as requested by the authorities.

Mining

Since April 2006, China Nuclear International Uranium Corporation has cooperated with Beijing Zhongxing Joy Investment Co., Ltd., have undertaken exploration within the Azelik region in Niger. They verified the resources by sampling through supplemental drilling. They verified the natural uranium amount of IR, G and T Deposits through processing of base data of general survey report left by IRSA Company and evaluating the uranium resource extent of Azelik property in accordance with specifications for uranium mineral exploration of China. In addition, SOMINA at the same time verified that the resource of this property is reliable.

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TECHNICAL REPORT

The Fourth Research and Design Institute of Nuclear Industry completed Feasibility Report for Uranium Mining and Metallurgy Project in Azelik, Niger in October 2006. This report received expert evaluation by the China National Nuclear Corporation and the Expert Evaluation Committee of Niger Department of Energy. The Fourth Research and Design Institute of Nuclear Industry completed the Preliminary Design for Uranium Mining and Metallurgy Project in Azelik, Niger in January 2008, including mine, hydrometallurgical plant, power plant and civil engineering. Mine construction commenced in June 2008. The company stated that open pit mines of T and G are expected to be in production in June 2010 and IR underground mine is expected to be in production in June 2011.

In the preliminary design of the Azelik mine, the IR, G and T mineral deposits in the tenement are planed and designed. Mining capacity of the property is 600 ktpa and the service life of the property is 17 years (including 1 year of construction period). Because IR mineral deposit is deeply buried, underground mining is adopted. Decline and room-andpillar stoping are adopted for exploitation according to the occurrence condition of orebody and annual mining capacity is 300 ktpa; Open pit mining is adopted for exploitation on the upper part of G mineral deposit and T mineral deposits, and the annual mining capacity is 150 ktpa respectively. After 8 years of open pit mining, operations will change to underground mining until the completion of mining. Because the orebody is decentralized, the G mineral deposit is divided into three open-pits, and the T mineral deposit is divided into six open-pits. After transferring to underground mining, the decline and room-and-pillar stoping will be adopted for exploitation according to the occurrence condition.

The overall recovery rate at IR mine is expected to be about 90% and the overall recovery rates at G and T mine are both expected to be around 95%.

Processing

The ore of the Azelik Uranium Project has been described as a hard sandstone type uranium deposit, with a high content of calcium carbonate. Under previous owners it was concluded through bench scale tests that the ore was amenable to processing via atmospheric pressure alkali leaching at elevated temperature. This was confirmed by China National Nuclear Corporation Beijing Research Institute of Chemical Engineering and Metallurgy in a programme of pilot plant tests completed in 2008. One concern is that the criteria for pilot plant sample selection, the exact location of sample extraction, subsequent sample preparation and a view on sample representivity of the deposits were not described in the test report and need to be confirmed.

On the basis of the combined test programmes the process design has been finalised to include crushing, milling, atmospheric pressure alkali leaching at elevated temperature, filtration and ion exchange ahead of precipitation, filtration and drying of the final product, sodium diuranate. There are many alternative equipment selections that could have been considered in the final plant design, some of which may have been better than those selected. Notwithstanding this it is considered that the selected process route and equipment is appropriate for the anticipated ore types as described.

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TECHNICAL REPORT

The processing facility will have a design capacity of 600 kt/a in order to match the projected mined tonnage of 150 kt/a from Deposit G, 150 kt/a from Deposit T plus 300 kt/a from Deposit IR. A key design criterion is that the plant will operate for 300 days per year. Internationally it is common practice to assume plant operation for 365 days per year but with an allowance for maintenance downtime which will vary according to equipment type and duty. This latter approach should result in optimal utilisation of equipment and hence optimal utilisation of capital. The approach adopted is clearly more conservative.

An overall recovery of 87% is predicted on a head grade of approximately 0.14%U. It is considered that the predicted recovery is supported by testwork findings.

Process operating costs are estimated at approximately RMB105/lbU. This estimate was zero based but it appears that no allowance has been made for maintenance stores or miscellaneous expenditure. It is considered that the operating cost estimates are generally reasonable although they may be slightly understated for the reasons outlined.

Infrastructure

SRK consider that the captive power plant under construction will be essential for the mine production; however, SRK has concerns with the consistency and reliability of the coal supply, as the project depends on only a single small scale coal mine. If there are issues with the coal supply from this mine, the company will need to buy coal from an area significantly further away, which will substantially increase the cost.

SRK Inspected the water bores at the WP-2 area. SRK found that the hydrogeological exploration was at low level and the water pumping testing data is incomplete. Therefore, SRK cannot verify that water supply will be consistently enough for the production. SRK suggests complete and systematic hydrogeological explorations.

SRK noted that the construction of the accommodation facilities in the mine is progressing; however, they are still lagging behind the development of the mine. SRK believes that it is very important to provide good accommodation facilities to the workers in such a harsh and remote working environment, to keep them in good mental and physical conditions.

Environmental

Two Environmental Impact Assessment (EIA) reports have been produced for the Azelik Uranium Project. The first EIA report (Main EIA) was produced by Office of Study Group Art & Engineering (BP224, Niamey — Niger, no production date), and covered the main project facilities (i.e. excluding the project access road, accommodation facilities and power station). This Main EIA received the Certificate on Environmental Compliance (No. 000010) from the Niger Ministry of Environment on 17 August 2007. This certified that the Azelik Uranium Project ‘complies with Environmental Protection Requirements’ and that ‘SOMINA (Azelik Mining Company Limited) is granted the right to develop this project’. A condition of this Main EIA approval was to produce a second EIA report (Complementary EIA) to cover the project access road, accommodation facilities and the power station. The

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APPENDIX II

Complementary EIA was also produced by Office of Study Group Art & Engineering (BP224, Niamey — Niger), in September 2008, and was approved by the Niger Ministry of Environment on 25 September 2008.

The Azelik Uranium Project Certificate on Environmental Compliance, No.000010 (17th August 2007) certifies that the project is in compliance with the Environmental Law of the Republic of Niger (Environmental Code — Law 98-56). However, SRK notes that this compliance certificate states that the ‘project development must be conducted in compliance with the Environmental Management Plan and the Environmental Protection Implement Specification; otherwise this permit will be withdrawn’. SOMINA has stated that the development of the Azelik Uranium Project is being conducted in compliance with the Environmental Management Plan and Environmental Implementation Specification. In satisfaction of the conditions of the Certificate on Environmental Compliance, SOMINA has prepared the following two documents in accordance with the requirements under the Environmental Management Plan and the Environmental Implementation Specification which have been sighted by SRK:

. SOMINA and Republic of Niger Ministry of Environmental Protection and AntiDesertification, Environmental Assessments and Environmental Impact Research Agency (BEEEI), Azelik Uranium Project Environmental Management Implementation Agreement, 2008 — this document provides the agreed framework and specifications for the implementation of the project’s Environmental Management Plan.
. SOMINA and Republic of Niger Ministry of Environmental Protection and AntiDesertification, Environmental Assessments and Environmental Impact Research Agency (BEEEI), Azelik Uranium Project Environmental Management Implementation Plan, 2009 — this document provides the objectives and schedule for the project’s environmental monitoring and management for 2009.

Based on a review of the provided technical information and the observations made at the time of the site visit (December 2009), it is the opinion of SRK that the development of the Azelik Uranium Project is being conducted in compliance with the Azelik Uranium Project Environmental Management Implementation Agreement (2008) and the Azelik Uranium Project Environmental Management Implementation Plan (2009).

SRK has sighted the ‘Journal on the Permit of Mining to SOMINA No. 2007-505’ which was produced by the Niger Ministry of Mining on 8 November 2007. The company has provided a legal opinion on the compliance situation with project based on the ‘Journal on the Permit of Mining to SOMINA No. 2007-505’. This opinion states that the company is in compliance with the ‘Mining Law of the Republic of Niger (Mining Code — Law No. 200626).

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TECHNICAL REPORT

In May 2008 the BEEEI carried out an environmental inspection of the Azelik Uranium Project. The subsequent Environmental Inspection Report was presented to SOMINA on the 25 June 2008. The key recommendation from this was this was for SOMINA to the complete the Complementary EIA. Other environmental management recommendations from this inspection are:

. Develop a radiation monitoring and management plan — completed in May 2009 (copy provide to SRK).
. Install a weather station — completed at the time of the site inspection.
. Submit water and soil monitoring results to the relevant government departments — completed as part of the Azelik Uranium Project, Mining On-Site Background Values, and Radiation Risk — Environmental Action Plan (May 2009).
. Construct groundwater wells for the project’s water supply — completed at the time of the site inspection.

The most significant environmental risks for the Azelik Uranium Project are:

. Waste rock management.
. Tailings management — TSF design, construction and operation (including tailings transfer).
. Water management (mainly groundwater extraction and quality impacts).
. Wastewater management (mine water, process wastewater and surface water discharges).
. Radiation management.
. Dust management.
. Land disturbance, rehabilitation and site closure.
. Land contamination.

These environmental risks can be effectively managed through compliance with the Niger project environmental approval requirements and the adoption of relevant recognised international industry practices.

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TECHNICAL REPORT

SRK makes the following observations in respect to the conformance of the proposed environmental management measures of the Azelik Uranium Project, with recognised international guidelines and practices:

. Groundwater resources/supply — There has been no detailed hydrogeological assessment undertaken as part of the current project development assessment and design (i.e. the design of project’s water supply and management is based on historical hydrogeological assessments).
. Tailings management:
- SOMINA has stated that a detailed design for the proposed TSF has yet to be completed.
There is no flood/stormwater collection and holding capacity within the Tailings Storage Facility (TSF) once the stockpiled tailings have reached the dam wall height (i.e. 5 m). Stormwater falling on the stockpiled tailings will be directly discharged from the TSF via drainage trenches.
TSF will not be clay lined. The PPD states that this proposed clay lining is not required due mainly to the dry tailings method and the dry/high evaporative climatic conditions, combined with the proposed seepage collection system.
The depth of the final clay cover for the TSF is not specified (i.e. the recognised international practice is for a clay cover of about 2 m).
The proposed dust management measures for the tailings belt conveyor are not specified (i.e. such as covering the conveyor, uses of water sprays, belt cleaning).
. The proposed evaporation ponds (for the collection of mining and process wastewater) will likely contain materials that are high in metals and radiation. The project development documentation does not provide any proposed specific management strategies for this potential environmental risk.
. There are no stated provisions within the project development documentation for reusing the collected mine water in the ore processing.
. The project development documentation does not state whether the drainage water from the Waste Rock Dumps (WRD’s) will contain radioactive material and does not address the management/collection of surface water drainage from the WRD’s.
. The project development documentation does not state whether all hazardous materials storage and handling facilities will have secondary containment in accordance with recognised international industry practices.

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TECHNICAL REPORT

SRK suggests that SOMINA should consider these observations and provide confirmation on the status with these environmental management items.

Social

The Azelik Uranium Project is located approximately 11 km northeast of the Teguidda In Tessoum Village and 6 km to the west of Azelik Village (nearest residential area). The Azelik Uranium Project is situated within the Azelik Town, which is approximately 163 km north west of Agadez City/Province. The main administrative body for the project is the Agadez Provincial Government, with oversight by the Niger National Government. SOMINA has stated that the relationship with the Agadez Provincial Government and Niger National Government is positive, and that there have been no notices of breach of environmental conditions in relation to the development of the Azelik Uranium Project.

The predominant land use for the project area surrounds is livestock/agriculture along with supporting small individual workshops. However, the Feasibility Study states that the main industry of the Agadez Province is uranium mining and processing.

The Main EIA states that the population of the Teguidda In Tessoum Village is estimated at 1,500 people (2007 population survey figures). The project will potentially contribute approximately 400 additional residents to the area. These are to be housed in a purpose built accommodation area adjacent to and west of the Azelik Village. The existing local population mainly comprises the Touareg cultural group. The Feasibility Study states that there are no significant cultural heritage sites within or surrounding the project area.

SRK notes that no documented records of public consultation in relation the development and approval of the project EIA reports have been sighted as part of this review.

CONCLUSIONS AND RECOMMENDATIONS

Geology and Mineral Resources

Azelik Uranium Mine is situated in the hanging wall of Arlit Rift Valley in Agadez Basin, belonging to sandstone type uranium deposit. The mine area includes three uranium deposits, namely Deposits IR, G and T. Deposit G is located on the west wing of the Geleli Brachy Anticline in the basin, Deposit T is on the north wing, and Deposit IR is 8 km north of Deposit T. Deposit G and Deposit T is 2 km apart. Substratum of the basin is the Early Precambrian formation, and cover of the basin is Cambrian-Ordovician formation. Structure of the mine area is well developed. The orebodies mainly occur in the sandstone at the bottom of Irhazer group on a surface of unconformity, and the pay rocks are mudstone and sandstone. The ore beds are basically identical to pay rock formations in shape.

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TECHNICAL REPORT

1,150 m long and 950 m wide with an average thickness of 2.08 m and an average grade of 0.160%, controlling 4,240t of metal uranium reserve, accounting for 63% of the total reserve of Deposit IR.

Deposit G is 2,500 m long and 1,000 m wide. The deposit has an average thickness of 2.95 m and a burial depth of 70 m with a dip angle of 48, for which a total of 31 orebodies are delineated. The main orebody is 332G-4, which is 400 m long with a strike width of 850 m, an average thickness of 3.08 m and an average grade of 0.148%, controlling a reserve of 1,891t, accounting for 58.9% of the total reserve of Deposit G.

Deposit T is 3,000 m long and 1,000 m wide. The deposit has an average thickness of 1.96 m and an average grade of 0.131%, appearing in stratiform and form. The burial depth ranges from the ground surface to 155 m at a dip angle of 48–58. A total of 74 orebodies are delineated. There is no main orebody, and there is 7 orebodies each hosting 135t of reserve, accounting for 43.7% of the total reserve of Deposit T.

A complete set of original drilling logging data were left behind for Niger by ISRA, Japan as a result of their exploration of these deposits, but, they have not left behind a complete set of reserve calculation sheets and geological reports. Furthermore, since the Japanese company did not put enough efforts in hydrogeology in the mine area, and there is a lack of relevant data, the impact of hydrogeology and engineering geology on the deposit extraction is unclear. And it is difficult to make a judgment about the complexity of the hydrogeology.

Therefore, SOCIETE DES MINES D’AZELIK S.A. (SOMINA) made some 31 additional reserve verification boreholes in Deposits IR, G and T as well as on the boundaries of the mine area between 2006 and 2008, of which 16 boreholes were made in Deposit IR, and 15 boreholes in Deposits G and T, amounting to a borehole length of more than 5,000 m.

Furthermore, it also made 10 additional engineering and hydrogeological exploratory boreholes, with 6 in Deposit IR and 2 each in Deposit G and Deposit T, with the total length of engineering and hydrogeological boreholes amounting to more than 2,000 m. In total, some 41 additional boreholes were made. This work has played an important role in assessment of the reliability of deposit reserves of this project as well as the assessment of the impact of underground inflow of water and ore rock stability on the production and construction; and also provided the latest data and information as how to further understand the geology and reserve development prospect of this mine area.

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TECHNICAL REPORT

The reserve verification proves that difference between the result of this verification and the result achieved from the Japanese data is within 20% for all of the three deposits, which are basically consistent, which, on the other hand, proves that the relevant exploratory information submitted by the Japanese company is basically accurate.

The all three deposits are currently developed; at IR-Deposit two declines are under construction however G and T deposit which are already partially exposed to the surface by stripping overburden. The production of ore is expected to get started in the middle of this year.

Exploration

Analysed from IR deposit drilling distribution map, the ore discovered bores of many margin works have not closed, it has the potential to expand the south, southeast, and northwest of orebed, and its value should be further researched.

Mining

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APPENDIX II

TECHNICAL REPORT

deposit is divided into six open-pits. After transferring to underground mining, the decline and room-and-pillar stoping will be adopted for exploitation according to the occurrence condition.

Processing

An overall recovery of 87% is predicted on a head grade of approximately 0.14%U. It is considered that the predicted recovery is supported by testwork findings.

Environmental

. Establish an annual process to survey and record all areas of land disturbance for the Azelik Uranium Project to allow for effective site rehabilitation planning.
. Collect drainage water from the WRD’s within evaporation ponds in line with the proposed mine water management.

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. Undertake an independent geotechnical review of the detailed design for the proposed TSF (i.e. when the TSF design is completed).
. Develop initiatives to quantify Greenhouse Gas emissions and assess possible emission reduction strategies for the Azelik Uranium Project. Construct storage and handling facilities for all hazardous materials/wastes (i.e. chemicals, hydrocarbons and radioactive materials) with secondary containment in accordance with recognised international industry practices.
. Develop an operational contaminated sites assessment and management process for the Azelik Uranium Project in line with recognised international practice.
. As the project moves from construction to commissioning/operations, update the ESMS or develop an operational EPMP, which is in line with recognised international industry practices and incorporates the actual site operating conditions.
. As the project moves from construction to commissioning/operations, update the proposed emergency response measures and incorporated these within an operational ERP that is line with recognised international industry practices, and reflects the actual site operating conditions.
. As the project moves from construction to commissioning/operations, continue to develop and implement an operational site closure planning process that is in line with recognised international industry practices. This closure planning process should be documented within an operational site rehabilitation and closure plan, which should be regularly updated to reflect current operating conditions.

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			Page
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			42
Disclaimer		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	65
List	of Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		66
1	Introduction and Scope of Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		68
2	Program Objectives and Work Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		68
	2.1	Program Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	68
	2.2	Purpose of the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	68
	2.3	Reporting Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	68
	2.4	Work Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	69
	2.5	Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	69
	2.6	Statement of SRK Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
	2.7	Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
	2.8	Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
	2.9	Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	72
	2.10	SRK Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	72
	2.11	Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73
3	Location, Access, Climate and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		73
	3.1	Location and Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73
	3.2	Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	76
	3.3	Population and Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	77
	3.4	Exploration History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	79
		3.4.1 Previous Exploration Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	79
		3.4.2 Overview of the Latest Resources Estimation . . . . . . . . . . . . . . . .	80
	3.5	Mining History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	82
4	Geological and Mineral Inventory Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		83
	4.1	Regional Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	83
		4.1.1 Regional Structural Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	85
		4.1.2 Stratigraphy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
		4.1.3 Regional Tectonics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	90
		4.1.4 Mineral Deposits — Uranium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	91
	4.2	Mine Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	91
		4.2.1 Stratigraphy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	92
		4.2.2 Tectonics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	93
		4.2.3 Distribution of Uranium Anomalies . . . . . . . . . . . . . . . . . . . . . . . . .	94
	4.3	Deposit Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98
		4.3.1 Characteristics of the Ore Body . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98
		4.3.2 Ore Mineralogy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	102
	4.4	Mineralogical Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	103
		4.4.1 Ore Type and Grade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	103
		4.4.2 Host Rock and Waste Rock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	103
	4.5	Deposits Genetic Implication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	104

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				Page
	4.6	Sampling, Assay and Quality Control and Assurance (QA/QC) . . . . . . . .		105
		4.6.1 Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	105
		4.6.2 Sampling and Sample Processing . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	105
		4.6.3 Quality Assurance and Quality Control . . . . .	. . . . . . . . . . . . . . . . .	107
		4.6.4 Data Verification . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	107
5	Resources Estimation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . .	107
	5.1	Geophysical Survey and Quality . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	107
	5.2	Determination of Industrial Indexes . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	108
	5.3	Resources Estimation Method — Selection and Basis	. . . . . . . . . . . . . . . . .	108
	5.4	Determination of Orebody Parameters . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	108
		5.4.1 The Average Thickness . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	109
		5.4.2 Orebody Average Thickness . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	109
		5.4.3 The Average Grade of Orebody . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	109
		5.4.4 The Area and Volume of Orebodies (Blocks)	. . . . . . . . . . . . . . . .	110
		5.4.5 Ultra-High Sample . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	110
		5.4.6 Ore Density . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	110
	5.5	Principles for orebody Delineation, Connection and Extrapolation . . . .		112
		5.5.1 Principle for Delineation of Orebody . . . . . . .	. . . . . . . . . . . . . . . . .	112
		5.5.2 Principle of Orebody Connection . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	113
		5.5.3 Orebody Extrapolation and Block Division .	. . . . . . . . . . . . . . . . .	113
	5.6	Categorization and Reliability of Resources . . . . . . . . . .	. . . . . . . . . . . . . . . . .	116
		5.6.1 Categorization of Resources . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	116
		5.6.2 Reliability of Resource . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	116
	5.7	Resources Estimation Results . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	118
	5.8	Conclusions and Recommendations on Geology and Resources . . . . . . .		119
6	Mining	Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	120
	6.1	Mining Rights Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	120
	6.2	Mine Constructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	121
	6.3	Mining Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	121
		6.3.1 Mining Geography and Climate . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	121
		6.3.2 Orebody Occurrence . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	122
		6.3.3 Engineering Geologic Condition of the Property . . . . . . . . . . . . .		123
		6.3.4 Hydrogeologic Condition of the Property . . .	. . . . . . . . . . . . . . . . .	124
	6.4	Mining Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	125
		6.4.1 Exploitation Mode and Range . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	125
		6.4.2 Development of Mineral Deposit . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	126
		6.4.3 Boundary Optimization of Open Pit Mining	. . . . . . . . . . . . . . . . .	128
		6.4.4 Mining Method and Stripping Technology . .	. . . . . . . . . . . . . . . . .	132
	6.5	Ventilation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	139
	6.6	Conclusion and Suggestions . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	140
7	Metallurgical and Processing Assessment . . . . . . . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . .	140
	7.1	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	140
	7.2	Ore Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	141
	7.3	Mineralogy and Ore Types . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	141

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				Page
	7.4	Metallurgical Testwork . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	141
		7.4.1 Previous Bench Scale Test Results . . . . . . . . . . . . . . . . . . . . . . . . . . .		141
		7.4.2 Pilot Plant Test Results .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	142
	7.5	Processing Facility . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	148
		7.5.1 Process Route Selection	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	148
		7.5.2 Process Description and Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . .		149
		7.5.3 Plant Location . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	152
	7.6	Production Schedule . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	152
	7.7	Conclusions and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		153
		7.7.1 Metallurgical Testwork .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	153
		7.7.2 Processing Facility . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	154
		7.7.3 Operating Costs . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	155
8	Capital	and Operating Costs . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	155
	8.1	Capital Costs . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	155
		8.1.1 Mining . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	155
		8.1.2 Processing . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	157
	8.2	Operating Costs . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	157
		8.2.1 Mining . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	157
		8.2.2 Processing . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	157
9	Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	160
	9.1	Electricity Supply . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	160
	9.2	Water Supply . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	161
	9.3	Accommodation . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	161
10	Organisation Chart, Workforce and Major		Contracts . . . . . . . . . . . . . . . . . . . . . . . . . .	162
	10.1	Organisation Chart . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	162
	10.2	Planned Total Employee Numbers	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	163
	10.3	Workforce . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	163
	10.4	Major Contracts . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	163
11	Environmental Assessment . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	163
	11.1	Environmental Review Objective .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	163
	11.2	Environmental Review Process, Scope and Standards . . . . . . . . . . . . . . . . .		164
	11.3	Environmental Legislative Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		164
		11.3.1 Niger Mining Law — Environmental and Social Provisions . .		164
		11.3.2 Niger National Environmental Assessment
		Legislative Framework	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	165
	11.4	Status of Environmental Approvals and Permits . . . . . . . . . . . . . . . . . . . . . .		166
	11.5	Environmental Compliance and Conformance . . . . . . . . . . . . . . . . . . . . . . . . .		167
	11.6	Land Disturbance . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	169
	11.7	Flora and Fauna . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	170

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					Page
	11.8	Waste Rock and Tailings Management . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . . .	170
		11.8.1 Waste Rock Management .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	170
		11.8.2 Tailings Management . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	171
		11.8.3 Fly Ash Management . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	173
	11.9	Water Aspects and Impacts . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	173
	11.10	Air Emissions . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	175
		11.10.1 Dust Emissions . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	175
		11.10.2 Gas Emissions . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	176
		11.10.3 Greenhouse Gas Emissions	. . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	176
	11.11	Noise Emissions . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	176
	11.12	Hazardous Materials Management .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	177
	11.13	Waste Management . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	178
		11.13.1 Waste Oil . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	178
		11.13.2 Solid Wastes . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	179
		11.13.3 Sewage and Oily Waste Water . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . . .	179
	11.14	Contaminated Sites Assessment . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	180
	11.15	Radiation Management Plan . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	181
	11.16	Environmental Protection and Management Plan . . . .		. . . . . . . . . . . . . . . . . .	181
	11.17	Emergency Response Plan . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	182
	11.18	Site Closure Planning and Rehabilitation . . . . . . . . . . . .		. . . . . . . . . . . . . . . . . .	182
	11.19	Evaluation of Environmental Risks	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	183
	11.20	Recommendations on Environmental	Compliance and	Management . . .	184
12	Social	Assessment . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	185
	12.1	Social and Community Interaction .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	185
	12.2	Relationship with Local Government	. . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	185
13	References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	186
List	of Tables
Table 2-1:		SRK Consultants, Title and Responsibility . . . . . . . . . . .		. . . . . . . . . . . . . . . . . .	69
Table 2-2:		Recent Reports to HKSE by SRK . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	73
Table 4-1:		Stratigraphy in Azelik Area . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	92
Table 4-2:		Ore-Bearing Strata Column with Geological and Radioactive Marks . . .			94
Table 4-3:		T-Deposit C50.085%; M-C50.043 m% Main Block Parameters . . . . . .			101
Table 4-4:		T-Deposit C50.050%; M-C50.035 m% Main Block Parameters . . . . . .			102
Table 5-1:		Industrial Indexes of Three Orebodies: IR, G, and T .		. . . . . . . . . . . . . . . . . .	108
Table 5-2:		Summary of Characteristic Values of Three Deposits		. . . . . . . . . . . . . . . . . .	109
Table 5-3:		IR-Orebody Composite Sample Density Measurements
		(Results from Niger) . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	111
Table 5-4:		Resource Control Intervals of Orebodies . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . . .	114
Table 5-5:		Resource Estimation Verified Results	for Different Methods . . . . . . . . . . .		116
Table 5-6:		Summary of IR, G, and T Deposit Resource Estimation Results . . . . . . .			118
Table 5-7:		Classification of Resources . . . . . . . . . .	. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	118

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Page

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	Page
Figure 5-1: Projection of Orebody 332-IR-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	115
Figure 5-2: Projection of Orebody 332-G-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	115
Figure 6-1: View of the Construction Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	121
Figure 6-2: IR Mine Development System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	127
Figure 6-3: A view of the Main Decline of the IR Mine . . . . . . . . . . . . . . . . . . . . . . . . . . .	128
Figure 6-4: Room and Pillar Mining Method in IR Mine . . . . . . . . . . . . . . . . . . . . . . . . .	133
Figure 6-5: Typical Room and Pillar Mining Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	135
Figure 6-6: View of Open Pit T3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	136
Figure 7-1: Pilot Plant Flowsheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	143
Figure 7-2: Pilot Plant Leach Extraction versus Head Grade . . . . . . . . . . . . . . . . . . . . . .	145
Figure 7-3: Pilot Plant Leach Extraction versus Leach Time . . . . . . . . . . . . . . . . . . . . . .	146
Figure 9-1: Captive Power Plant Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	160
Figure 9-2: WP-2 Water Bore Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	161
Figure 9-3: View of Village One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	162
Figure 10-1: Organisation Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	162
List of Appendices
Appendix 1: Resource and Reserve Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	188
Appendix 2: World Bank/International Finance Corporation (IFC)
Environmental Standards and Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . .	191
Appendix 3: Document for Mining License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	195
Appendix 4: Lawyer Letter for Mining License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	197

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DISCLAIMER

The opinions expressed in this Report have been based on the information supplied to SRK Consulting (China) Limited (SRK) by CNNC International Ltd (‘‘CNNC’’). The opinions in this Report are provided in response to a specific request from CNNC to do so. SRK has exercised all due care in reviewing the supplied information. Whilst SRK has compared key supplied data with expected values, the accuracy of the results and conclusions from the review are entirely reliant on the accuracy and completeness of the supplied data. SRK does not accept responsibility for any errors or omissions in the supplied information and does not accept any consequential liability arising from commercial decisions or actions resulting from them.

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LIST OF ABBREVIATIONS

Abbreviation	Meaning
ARD	Acid Rock Drainage
ASL	above sea level
AusIMM	Australasian Institute	of Mining and Metallurgy
bcm	bank cubic metre
BD	bulk density
8C	degrees Celsius
CAPEX	capital expenditure
dB	decibel
deposit	Earth material of any type, either consolidated or unconsolidated,
	that has accumulated by some natural process				or agent
E	east
EIA	Environmental Impact	Assessment
EPMP	Environmental Protection		and Management Plan
ERP	Emergency Response Plan
g	grams
HKSE	Stock Exchange of Hong Kong Limited
IER	Independent Expert Report
IFC	International Finance	Corporation
IPO	Initial Public Offering
ITR	Independent Technical Review
JORC Code	Australasian Code for Reporting of Exploration Results, Mineral
	Resources and Ore Reserves prepared			by the Joint Ore Reserves
	Committee of the Australasian Institute			of Mining and		Metallurgy,
	Australian Institute	of	Geoscientists	and	Minerals	Council	of
	Australia (JORC), December 2004
JV	joint venture
k	kilo
kg	kilogram
km	kilometre
km2	square kilometre
kV	kilovolt
kW	kilowatt
L	litre
m	metre
M	million
m RL	metres reduced level
m3	cubic metre
Mt	million tonnes
Mtpa	million tonnes per annum
MW	megawatt
N	north
NPV	net present value
OHS	occupational health and safety

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Abbreviation	Meaning
OPEX	operating expenditure
PPE	personal protective equipment
PRC	People’s Republic of China
QA/QC	quality assurance/quality control
RMB	Renminbi
ROM	run of mine
S	south
SRK	SRK Consulting (China) Limited
t	tonne
tpa	tonnes per annum, same as t/a
tpd	tonnes per day
TSF	tailings storage facility
U	the chemical symbol of uranium
USD	United States dollars
Valmin Code	Code for the Technical Assessment and Valuation of Mineral and
	Petroleum Assets and Securities for Independent Expert Reports
W	west
WRD	waste rock dump
WSCP	Water and Soil Conservation Plan
5	greater or equal than
4	less or equal than
>	greater than
<	less than
%	percent

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1 INTRODUCTION AND SCOPE OF REPORT

The CNNC International Limited (‘‘CNNC’’) commissioned SRK Consulting (China) Limited (SRK) to review operations of Azelik Uranium Mines (‘‘the Project’’) located near the city of Argil, Agadez Province of Niger and to provide an Independent Expert Report (‘‘IER’’). The operations are owned and operated by Socie´ te´ des Mines d’Azelik S.A. (‘‘SOMINA’’), the joint venture (‘‘JV’’) of CNNC and Niger State.

2 PROGRAM OBJECTIVES AND WORK PROGRAM

2.1 Program Objectives

Objectives of the program were to review available data, participate in a site visit and provide CNNC with both verbal feedback and a written report.

2.2 Purpose of the Report

The purpose of this Report is to provide an independent technical assessment for inclusion in a prospectus to be issued by CNNC to support the proposed listing on the Hong Kong Stock Exchange (HKSE).

The purpose of the report was to provide potential shareholders and the Hong Kong Stock Exchange Limited (HKSE) with an Independent Technical Review (‘‘ITR’’) Report suitable for inclusion in documents that CNNC plans to submit to HKSE in relation to a proposed listing of Azelik Mine operations.

2.3 Reporting Standard

This report has been prepared to the standard of and is considered by SRK to be, a Technical Assessment Report under the guidelines of the Valmin Code. The Valmin Code is the code adopted by the Australasian Institute of Mining and Metallurgy (AusIMM) and the standard is binding upon all AusIMM members.

This report is not a Valuation Report and does not express an opinion as to the value of mineral assets. Aspects reviewed in this report do include product prices, socio-political issues and environmental considerations. However SRK does not express an opinion regarding the specific value of the assets and tenements involved.

In this Report, identified mineral resources and mineable uranium Reserves are quoted using categorization in accordance with the Chinese Resource and Reserve Standards. This system is derived from the United Nations Framework Classification proposed for international use. However, it should not be assumed that these resources and reserves are necessarily compliant with Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Resources (the ‘‘JORC Code’’) at least until further documentation can be obtained on the estimates and they have been formally endorsed by a ‘competent person’ in accordance with the JORC Code.

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2.4 Work Program

The work program which included the following items:

. Desktop review of data provided by CNNC and planning for site visit.
. Travel to Azelik Uranium Mines to inspect the Project and discuss technical aspects with staffs of SOMINA.
. Review of the data, detailed analysis of available data and Independent Report editing by SRK as required.
. Completion of a technical report which is in line with the requirements of the HKSE.

2.5 Project Team

A summary of the SRK Consulting project personnel that will be allocated to the project is given in Table 2-1. A brief introduction to the project team is given in this section.

Table 2-1: SRK Consultants, Title and Responsibility

Consultant	Title and Responsibility
Richard Kosacz P.Geo.	Principal Geologist — Team Leader; geology, exploration
	and resource estimates
Pengfei Xiao	Geologist, assisting geological data collection and
	compilation
Qiuji Huang	Senior Mining Engineer, mining review
Victor Hills	Principal Processing Engineer, ore processing review
Peter Smith	Principal Environmental Engineer, review on environmental
	and social aspects
Charlie Liu	Associate Project Manager, technical interpretation and
	project coordinate
Dr Yonglian Sun	Principal Consultant, peer review and quality control

Richard Kosacz, M.Sc.Eng, P.Geo, MAuIMM, MPGS Principal Consultant, Geology possesses thirty years of geological experience which includes mine geological services, scientific researches and international geological consulting for different mineral deposits for planning, managing and conducting of regional as well target-scale mineral exploration from the grass-root stage to the definition drillings. His portfolio of geological researches and services includes precious (Au-Ag, Pt-Pd), base (Cu, Zn, Pb) as well as other nonferrous metal deposits in different geological environments in Europe, Africa, South and North America, Asia and Australia. He also has extensive experience in the field of management of field data (geological and geochemical) as well high level skills of their interpretation and geological modelling. Richard is the project manager and responsible for the geology and resource review.

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Pengfei Xiao, M.Sc. (Geophysics) of Chinese Academy of Sciences, graduated from Institute of Geology and Geophysics Chinese Academy of Science, is a geologist of SRK Consulting China. In the past years, Pengfei has joined a number of training on Petrology, Tectonics, and Geophysical exploration; also he has taken part in geological mapping. As a main participant, he has worked on Geophysical exploration and Geological survey in some metal minerals and coal projects, including a key project sponsored by National Nature Science Foundation of China. Pengfei is responsible for assisting Richard of geology and resource review.

Qiuji Huang, B.Eng., Senior Mining Engineer, graduated from Central South University of Mining and Metallurgy in 1982. He used be mining directors for a few gold mines in the southwest region of China. After that he joined the Gold Administration Bureau of Guangxi province in charge of the supervision and direction of mine construction mine planing and mining technology developing. Mr Huang is an expert on mine construction, mining technology, mine production and mine planning. Qiuji is responsible for the mining and CAPX/OPEX review.

Victor Hills (Metallurgical Processing) is an Associate Principal Consultant with SRK, specializing in all mineral processing aspects of technical studies, due diligence, project commissioning and construction management and has over 30 years experience in the precious metals mining industry. In his pre-consulting roles, he developed from metallurgical superintendent to consulting metallurgist for a precious metals mining company. Since joining SRK as an Associate in 1997, he has been directly involved in numerous technical reviews, feasibility studies and due diligence exercises for project finance and equity transactions. He has also been appointed as an independent engineer in the monitoring role and is a signatory of numerous Competent Persons’ Reports. Victor is responsible for the ore processing review.

Peter Smith, BSc, MAusIMM is a Principal Consultant (Environmental) with SRK Consulting China. He is an environmental scientist with over 17 years experience in environmental management for the mining and mineral processing industries. This experience has been gained mainly from within Australia and China. He has also undertaken environmental due diligence reviews for projects in Mongolia, Uruguay and Serbia. He has been involved in all aspects associated with exploration, mining and processing and has particular expertise in environmental due diligence reviews, environmental auditing, environmental impact assessment, project approvals and permitting, environmental management systems, rehabilitation and closure planning, and environmental risk assessment. Mr. Smith is responsible for the review on environmental issues.

Charlie Liu is an associate project manager in SRK China. He graduated from University of International Relations and worked in SRK since 2007. He has been involved in dozens of due diligence projects in China, Mongolia, Indonesia and Africa. Charlie assists the project manger on the execution of the project and provides supporting on translation and logistics.

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Dr. Yonglian Sun, BEng, PhD, FAusIMM, MIEAust, CPEng, is a Principal Consultant and the managing director of SRK China with over 20 years experience in geotechnical engineering, rock mechanics and mining engineering in five countries across four continents. He has extensive international mining experience with an emphasis in site investigation, analysis and modelling of geotechnical issues in open pits, underground mines, tunnels. He also has considerable experience in project management and project evaluation in assisting the mines for the project finance and overseas stock listing. Recently, Yonglian has coordinated and worked on a number of due diligence projects like Lingbao Gold, China Coal, and Yueda Holding’s Pb-Zn, Xinjiang Xinxin Cu-Ni projects. All has been successfully listed in the Stock Exchange of Hong Kong Ltd. Dr Sun is responsible for the peer review and quality control.

2.6 Statement of SRK Independence

Neither SRK nor any of the authors of this Report have any material present or contingent interest in the outcome of this Report, nor do they have any pecuniary or other interest that could be reasonably regarded as being capable of affecting their independence or that of SRK.

SRK has no prior association with CNNC in regard to the mineral assets that are the subject of this Report. SRK has no beneficial interest in the outcome of the technical assessment being capable of affecting its independence.

SRK’s fee for completing this Report is based on its normal professional daily rates plus reimbursement of incidental expenses. The payment of that professional fee is not contingent upon the outcome of the Report.

2.7 Warranties

CNNC has represented in writing to SRK that full disclosure has been made of all material information and that, to the best of its knowledge and understanding, such information is complete, accurate and true.

2.8 Indemnities

As recommended by the VALMIN Code, CNNC International Ltd has provided SRK with an indemnity under which SRK is to be compensated for any liability and/or any additional work or expenditure resulting from any additional work required:

. which results from SRK’s reliance on information provided by CNNC International Ltd or to CNNC International Ltd not providing material information; or
. which relates to any consequential extension workload through queries, questions or public hearings arising from this Report.

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2.9 Consents

SRK consents to this Report being included, in full, in the CNNC International Ltd prospectus, in the form and context in which the technical assessment is provided, and not for any other purpose.

SRK provides this consent on the basis that the technical assessments expressed in the Summary and in the individual sections of this Report are considered with, and not independently of, the information set out in the complete Report and the Cover Letter.

2.10 SRK Experience

SRK Consulting (‘‘SRK’’) is an independent, international consulting group providing focused advice and problem solving. SRK is a one-stop consultancy offering specialist services to mining and exploration companies for the entire life cycle of a mining project, from exploration through to mine closure. Among SRK’s more than 1,500 clients are most of the world’s major and medium-sized metal and industrial mineral mining houses, exploration companies, banks, petroleum exploration companies, agribusiness companies, construction firms and government departments.

SRK China has an office in Beijing also in Nanchang. SRK has considerable experience in providing Independent Expert Reports for companies listed on stock exchanges in Australia, Britain, Canada, Hong Kong, South Africa and the US. In China, SRK has provided Independent Expert Reports for companies as shown in Table 2-2.

Formed in Johannesburg, South Africa, in 1974 SRK now employs more than 900 professionals internationally in 36 permanent offices on six continents. A broad range of internationally recognised associate consultants complements the core staff.

SRK Consulting employs leading specialists in each field of science and engineering. Its seamless integration of services, and global base, has made the company a world’s leading practice in due diligence, feasibility studies and confidential internal reviews.

The SRK Group’s independence is ensured by the fact that it holds no equity in any project and that its ownership rests solely with its staff. This permits the SRK Group to provide its clients with conflict-free and objective recommendations on crucial judgement issues.

SRK Consulting China Ltd and SRK Consulting (Hong Kong) Ltd were established in 2005 and 2006, respectively, and are mainly working on Chinese mining projects independently or together with SRK’s other offices, mainly SRK Australasia. SRK has prepared dozens of independent technical reports on mining projects for various companies who acquired Chinese projects or completed public listings on stock exchanges, some of which are listed as Table 2-2.

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Table 2-2: Recent Reports to HKSE by SRK

Company Year Nature of Transaction Yanzhou Coal Limited (listed 2000 Sale of Jining III coal mine by parent in HKSE) company to the listed operating company Chalco (Aluminium 2001 Listing on HKSE and New York Stock Corporation of China) Exchange Fujian Zijin Gold Mining 2004 Listing on HKSE Company Lingbao Gold Limited 2005 Listing on HKSE Yue Da Holdings Limited 2006 Acquisition of shareholding in mining (listed in HKSE) projects in Yunnan China China Coal Energy Company 2006 Listing on HKSE Limited (China Coal) Sino Gold Mining Limited 2007 Dual listing on HKSE Xinjiang Xinxin Mining 2007 Listing on the HKSE Industry Company Limited Kiu Hung International 2008 Acquisition of shareholding in coal Holdings Limited projects in Inner Mongolia, China China Shenzhou Mining and 2008 Listed (SHZ) on the American Stock Resources Inc Exchange

2.11 Forward-Looking Statements

Estimates of mineral resources, uranium reserves and mine production are inherently forward-looking statements, which being projections of future performance will necessarily differ from the actual performance. The errors in such projections result from the inherent uncertainties in the interpretation of geologic data, in variations in the execution of mining and processing plans, in the ability to meet construction and production schedules due to many factors including weather, availability of necessary equipment and supplies, fluctuating prices and changes in regulations.

The possible sources of error in the forward-looking statements are addressed in more detail in the appropriate sections of this report. Also provided in the report are comments on the areas of concern inherent in the different areas of the mining and processing operations.

3 LOCATION, ACCESS, CLIMATE AND HISTORY

3.1 Location and Access

Azelik small town and mine site is situated about 150 km northwest of Agadez City, Capital of Agadez Province in central Niger, between 6839’ and 6849’ east latitude and 17827’ and 17838’ north longitude, covering an area of 120 km[2] . The three deposits are located about 100 km southwest of the mining city Arlit, belonging to Teguidda Block. This block is located between 6835’ and 7800’ east latitude and 17806’ and 17840’ north longitude, covering an area of 1,953 km (see Figure 3-1 and Figure 3-2).

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==> picture [418 x 299] intentionally omitted <==

Figure 3-1: Location Map of Azelik in Niger

The Republic of Niger only has highways for ground transportation, and the city of Agadez is the largest city near the mine area. There are two roads to access the mine area from the city of Agadez:

The first road is the south route, beginning from the city of Agadez via Ingall Town to arrive at Teguidda In Tessoum Village near the mine, which is about 265.6 km long, of which, the section between the city of Agadez and Ingall Town is a state trunk highway (with bitumen pavement) with a length of 148.9 km, while from Ingall City to Teguidda In Tessoum Village is a gravel seasonal desert road recently significantly improved. This section of the road is 116.7 km long.

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==> picture [448 x 551] intentionally omitted <==

----- Start of picture text -----

Azelik
----- End of picture text -----

Figure 3-2: Detailed Location and Road Map of Azelik Mine Site

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The second road is the east route, which is about 162.9 km long from the city of Agadez via Takaradeyt of Toulouk town to Azelik Village, of which the section between the city of Agadez and Takaradeyt of Toulouk City is a state trunk highway (with bitumen pavement) with a length of 24.1 km, while from Takaradeyt of Toulouk City to Azelik Village is a dirt seasonal road. This section of the road is 138.8 km. The east route is near Irhazer River, therefore, it is more difficult to access the mine area during rainy season.

Starting out from the city of Agadez, the city of Arlit in the north can be reached via a state trunk highway (bitumen pavement), which is 226 km away; and the capital city Niamey can be reached via Tahoua by taking a state trunk highway with a distance of some 974 km. For the transportation position of the mine area, please refer to Fig.3-2.

The Republic of Niger is a landlocked country, and the nearest port is Port Cotono in the Republic of Benin, where the Republic of Niger has its own dock and warehouse at this port. Niger and Benin are both in the West Africa Commonwealth, and they are politically friendly and have close economic ties.

Combined sea-land transportation route: from Port Cotono in the Republic of Benin to the city of Parakou in the Republic of Benin, there is a railway with a mileage of 430 km; from Parakou of the Republic of Benin to Agadez, the distance is 1,290 km, in between them, trunk highway transportation is available. And the distance is 1,290 km (see Fig.3-1 for details).

The local combination of sea-land transportation is often undertaken by two French transportation companies namely MAERSK and S.D.V. These two forwarders have set up their respective representative offices in Tianjin Port and Shanghai Port in China, which can provide relevant services.

Both Agadez City and Arlit City have civilian airport, but domestic flights to the capital city Niamey are currently suspended.

There is no wired telephone network in the Azelik area however recently one of JV partner the Chinese company has assured wireless mobile telecommunication via satellite, also this part of Niger is covered by Libyan wireless network.

3.2 Climate

Azelik Region belongs to desert plain region where the landform is fairly flat. The local ground surface altitude ranges between 360 and 400 m ASL, with a relative height difference of no more than 40 m. The landform features minor fluctuations with some gullies in recessed areas. Some desert seasonal streams are often developed from higher elevation to lower elevation, and desert also seasonal muddy swamps are formed in some depressions. These rivers and wetlands are formed during the rainy season, causing often difficulties for the traffic and transportation.

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This region is characterized by hot and very hot weather, belonging to tropical desert climate with a maximum temperatures often exceeding 308C. The months of May and June are the hottest season in a year. In Agadez, the monthly maximum temperature averages 41.68C in May and 41.78C in June for the last 20 years. It is cool in December and January. The minimum temperature in January averages 12.38C and maximum temperature in January averages 25.98C for the last 20 years. Rainfalls of a year concentrate on July to September. The rainy season is short and the precipitation is low. According to the statistics of the last 20 years, the annual average rainfall in Agadez and Arlit is respectively 136.6 mm and 63.4 mm. According to relevant statistical data for the last 20 years, the average rainfall in July and August is 47.9 mm and 58.3 mm respectively in Agadez, and 18.5 mm and 27.3 mm respectively in Arlit. The annual evaporation is very high. For the last 10 years, the average evaporation in Agadez was 6,099.8 mm, which is about 44 times the yearly rainfall. The air is very dry. In August, the maximum humidity averages 75%, and in March, the minimum is 7.6%. January brings the highest average wind power at 6.04 m/s. According to statistics for the last 20 years, the longest average sunlight duration occurs in April, which is 9.15h.

Vegetations are rare in the region, with alhagi sparsifolia visible only in some areas, which form small forests in depression areas and are generally 1–5 m high. Grasslands can be seen occasionally in wetland areas.

3.3 Population and Infrastructure

The region is scarcely populated. People generally of Tuareg ethnical origin lead nomadic life style (see Figure 3-3). However due to mine development the small nomadic settlement, Azelik is developing quickly into village or small town (see Figure 3-4). The mines, processing plant and power plant will employ in near future several hundred people and appropriate campgrounds are already under construction assuring accommodation of high standard and security (see Figure 3-5). The mine and plants construction is managed by Chinese specialist supported heavily with the local manpower.

Future production and domestic water will mainly rely on ground water pumped from six already sunk waterholes. It is known from the hydrogeological study that ground water resources in this region are abundant.

The coal power plant presently under construction will provide electricity to all mine facilities as well to the nearby village. The coal can be supply from Sonichar open pit mine located near Thirozerine town which is main supplier of coal for the power station of the same name.

Although there is a certain development prospect for the petroleum in the north, like other many African petroleum producers, Niger also exports petroleum and imports fuel oils. The fuel oil supply nationwide is basically monopolized by Total, France, whose gasoline stations are widely distributed across this region.

However there is no wired telephone network in the area of interest but one of JV partner the Chinese telecommunication company assures mobile communication via satellite, also this area is covered by Libyan mobile telecommunication network.

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TECHNICAL REPORT

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Figure 3-3: Typical Landscape of Azelik Area with Occasional Nomadic Settlements

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Figure 3-4: Azelik Village; Main Street and Brick Fabrication Area

Clay, sand, broken gravel and rock block, etc. can be obtained locally; there is no brick plant in Niger, and sun-dried mud bricks are mostly used for building civilian houses, with cement bricks used for buildings of a higher standard (common size 20 cm x 20 cm x 40 cm), which are all made on site.

The Republic of Niger only has one cement plant with a daily output of 2005, as well as 1 rotary kiln, which are basically self sufficient.

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TECHNICAL REPORT

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Figure 3-5: The Main Azelik Mine Campground under Construction

There is no iron and steel plant in the entire Central Africa and West Africa regions, and the required steel products are all dependent on imports.

The cement as well iron and still all along other materials and machinery necessary for mine facilities construction are presently imported from China. Also all chemical materials and blasting supplies, all others are dependent on imports mainly from China.

3.4 Exploration History

3.4.1 Previous Exploration Work

Azelik Region is where uranium was first noticed in Niger in 1957 by the French Bureau de Recherches Geologiques at Miniere (BRGM) while looking for copper. They discovered important uranium mineralization in the sandstone of Lower Cretaceous Azawa formation in the lower part of Azelik structure. The French Atomic Energy Commission (CEA) initiated studies and new discoveries in sandstones followed including Abokurum (1959, Madaouela (1963), Arllete, Ariege, Artois and Tassa/Taza(1965), Imouraren (1966) and Akouta (1967). In the midst of this, Niger became independent of France in 1960.

In 1964, a Japanese company PNC conducted exploration work in this region, which defined the industrial value of these deposits. The company carried out a preliminary feasibility study to Azelik deposits between 1979 and 1988. In 2002, the Japanese company transferred the mineral property to ONAREM of Niger, and presented a portion of the geological information to the Nigerien side. Then, ONAREM Company estimated the mining cost of these deposits.

On July 17, 2006, the government of Niger officially granted permits to three Chinese companies, allowing them to carry out uranium mine exploration and mining work in the two uranium metallogenetic belts respectively in Madaouela and Teguidda in the desert region of Agadez Province in northern Niger. China Nuclear

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TECHNICAL REPORT

International Uranium Corporation and Zxjoy Invest Limited plan to register a Jinxing Miniere S.A. in Niger in order to jointly invest and develop the uranium resourced in this two mine areas.

MINES D’AZELIK S.A.(SOMINA) made some 31 additional reserve verification boreholes in Deposits IR, G and T as well as on the boundaries of the mine area between 2006 and 2008, of which 16 boreholes were made in Deposit IR, and 15 boreholes in Deposits G and T, amounting to a borehole length of more than 5,000 m. Furthermore, it also made 10 additional engineering and hydrogeological exploratory boreholes, with 6 in Deposit IR and 2 each in Deposit G and Deposit T, with the total length of engineering and hydrogeological boreholes amounting to more than 2,000 m. In total, some 41 additional boreholes were made. This work has played an important role in assessment of the reliability of deposit reserves of this project as well as the assessment of the impact of underground inflow of water and ore rock stability on the production and construction; and also provided the latest data and information as how to further understand the geology and reserve development prospect of this mine area. The reserve verification proves that difference between the result of this verification and the result achieved from the Japanese data is within 20% for all of the three deposits, which are basically consistent, which, on the other hand, proves that the relevant exploratory information submitted by the Japanese company is basically accurate.

3.4.2 Overview of the Latest Resources Estimation

The latest resources estimation performed by CNNC specialist in 2006 has been carried out on the basis of previous geological data, and their accuracy and reliability have not been verified, therefore they was not in position to assume any liability. The resources estimation was conducted by steps according to the procedure, and each of the steps is accompanied by responsible and rigorous self double check, mutual check and a third-party check, so as to ensure the work quality. Firstly, they counted and reorganized the original data for the subject region, and concluded the results as follow:

. no large-scale topographic nor geological maps and borehole location map was found for the entire region;

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APPENDIX II

. barely any original Gamma-ray logging data, interpretation result and borehole collar coordinates among other parameters, some of boreholes having no collar elevation;
. the borehole location grid having no coordinates, borehole identification being incomplete and needed to look up and compile them together;
. the original borehole Gamma-ray logging data book indicating no segment sample grade and thickness but only meter percentage and thickness of the ore bed;
. orebodies in some boreholes showed thick barren intervals that have not been eliminated; some marginal sample segments are only 500cps, which are also incorporated into the estimation.

All these problems were clearly identified; consequently the team have formulated an estimation principle and scheme according to the regulatory requirements especially to deal with those problems. For the resources estimation, the project team completed the original data logging for Deposits G and T as well as the surrounding 3,293 boreholes; uranium content section-by-section interpretation according to the 134 borehole Gamma logging curve for Deposit IR; formulated a 1: 250,000 regional geological map for Arlit Region, a 1: 25,000 geological map for Deposits G and T; completed 4 borehole distribution maps for Deposits G and T; completed 2 borehole distribution maps for Deposit IR; completed geological sections for 201 exploration lines on the three deposits; completed longitudinal profiles for 6 lines for the three deposits; completed 6 horizontal projection drawings for orebodies of different industrial parameters for the three deposits; and completed a large number of forms relevant to the resources estimation within a short period of time by overcoming many difficulties. Sections along exploration lines and horizontal orebody projection drawings were developed for Deposit IR based on 0.085% and normal Chinese industrial indexes (cut-off 0.03%, industrial 0.05%) and for Deposits G and T according to different industrial indexes 0.085% and 0.050%, based on which resources were estimated by deposits and by grades, which resulted in nearly 1/3 more drawing and calculation work quantities, exceeding the tasks specified in the original contract; the project team also completed the resources estimation for the three deposits in Azelik Region and finished the compilation of the estimation handbook as well as the digital version. After the task of resources estimation was completed, the project team has sorted out and reorganized the peripheral data of the deposits, and duplicated useful information, laying a solid foundation for future work.

The resource estimate performed by CNNC team is described and disused in details in Resource section of this Report.

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TECHNICAL REPORT

3.5 Mining History

There was no reported major mining in the area of interest. During the Japanese exploration activities several small pits were excavated in the purpose to obtain bulk samples for metallurgical tests (Figure 3-6).

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Figure 3-6: The Historical Pit for Metallurgical Testing — Deposit T

Presently SOMINA has started mining of uranium ores using one underground mine (two declines) at deposit IR and two open pit mines (striping overburden) at deposits T and G (Figure 3-7 and Figure 3-8) and for details see Mining Section of this Report.

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Figure 3-7: Deposit IR — Underground Mine in Construction

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TECHNICAL REPORT

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Figure 3-8: Open Pit in Construction, Stripping Overburden; Deposit T (left) Deposit G (right)

4 GEOLOGICAL AND MINERAL INVENTORY ASSESSMENT

4.1 Regional Geology

As shown in the simplified geological map of Niger in Figure 4-1, Azelik Region is situated in Agadez Basin which is to the northeast of Iullemmeden Basin, east side of West Africa Craton, where the landform is flat, partially with some low hills and steep cliffs due to flexing and rupture occurred in the cover.

==> picture [404 x 275] intentionally omitted <==

Figure 4-1: Simplified Geological Map of Niger

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TECHNICAL REPORT

The geological map for the project region is shown in Figure 4-2.

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----- Start of picture text -----

8°
21° 21° CRETACE INFERIEUR
Grés du Tegama
In A za wa
7° Argilites de l' Irhazer
TRIAS - JURASSIQUE
Groupe d' Agadez
20° 20° PERMIEN
6° Série d' Izegwandan
CARBONIFERE
In Guezzam
Série de Tagora ( Tarat,
Guezouman )
Série de Terada ( Talak ,
Farazekat )
In Tadreft
19° 19°
DEVONIEN
ARLIT ORDOVICIEN SUP.
- SILURIEN
2
Anou
Makaren CAMBRO - ORDOVICIEN
SOCLE ( AÏR )
IMOURAREN
18° ( U + Cu ) 18°
In Kakane Centre d' exploitation
( Uranium )
AZELIK 1 SOMAÏR ( ARLIT )
( U + Cu ) 2 COMINAK ( AKOUTA )
Teguida Autres gîtes d' URANIUM
in Tessoum
0 50 100 km
17° 17°
Agadez
6° 7° 8° 9°
ALGERIE
NIGER
BASSIN DU TIM MERSOÏ
LINEAMENT D' IN AZAWA
----- End of picture text -----

Figure 4-2: The Geological Map of Agadez-Arlit Region

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TECHNICAL REPORT

4.1.1 Regional Structural Framework

The Aı¨ r Massif, the Hoggar and the Adrar des Iforas form the Touareg Shield, which along with the Benin-Nigerien Shield, is part of the Central African mobile belt, deformed by the Pan-african orogeny about 600 million years ago. The crystalline basement of the Aı¨ r is composed of a central, highly metamorphosed core intruded by Pan-african granitoids. The crystalline core is separated from only slightly metamorphosed terrain by the important overthrust sheets of Tafadek to the west and Aouzegeur to the east.

The molasse formations of the ‘‘Proche-Tenere’’ are supposedly Infracambrian in age. They are sub-horizontal, only slightly metamorphosed and lie discordant on the Suggarian basement.

Subvolcanic ring complexes of Palaeozoic age, intruding through the Suggarian basement, constitute the northern extremity of the younger granites that extends into neighbouring Nigeria. The Aı¨ r Massif structure is an anticlinorium with kilometric isoclinal folds dipping to the east.

The north-south thrusts, characterize a Pan-african collision between the West African Craton and the Central African Mobile Zone after an oceanic enclosure. The Iullemmeden Basin (hosting the Tim Mersoı¨ Basin), to the west of the Aı¨ r Massif, is a vast structural depression of about 360,000 km covering virtually all of western Niger and with extensions in Algeria, Mali, Benin and Nigeria. It is filled with 1,500 to 2,000 m of Cambrian to Pleistocene sediments of alternating marine and continental origin.

The Palaeozoic formations outcrop in the Tim Mersoı¨ Basin near the TamesnaTalak area, along the western margin of the Aı¨ r Massif. Upper Carboniferous units, especially the Guezouman, the Tarat and the Madaouela sandstones host uranium occurrences. Carboniferous units also host coal deposits in the Anou Araren area.

A thick sequence of Permian to Lower Cretaceous age sandstones and shales form what is known as the Middle Continental series, or ‘‘Continental intercalaire,’’ which outcrops mainly in the Tamesna, Irhazer and Tegama areas. These formations host uranium- and copper rich horizons as well as saline-rich horizons.

The Upper Cretaceous and the Lower Tertiary were marine in origin, composed of a succession of argillite, marls, and fossiliferous limestone with silty, sandy and gravel horizons. These formations outcrop essentially in the Ader Douchi and the Damergou areas.

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TECHNICAL REPORT

4.1.2 Stratigraphy

4.1.2.1 Basement

From oldest to youngest basement is represented by Aı¨ er Block, Lower Precambrian Sugalian Rock Series and median upper Precambrian Faluxin Rock Series.

The Lower Precambrian system is composed a metamorphic rock system and ancient granite. The metamorphic rock system includes biotite gneissic rock, hornblende gneiss, mica schist, amphibolite, quartzite and marble, etc. The ancient granite can be divided into three categories: Category 1 is uranium-rich unconformity granite distributed in the west part of the Ayer Block. Light colour, potassium rich, iron and magnesium poor, often featuring pegmatitic structure and big microcline porphyritic crystals, it can be divided into two-mica facies, black mica facies and orthorhombic pyroxene-hornblende rock facies. Category 2 granite belongs to the cal-alkaline series, widely distributed and occurring in the form of batholith north-south, including gneissic black-mica granite, granodiorite, porphyritic black-mica granite, median-grained light colour granite and two-mica granite, etc. Category 3 is corse-grained black-mica alkaline granite distributed on the north of Ayer Block.

The Middle — Upper Precambrian System is covering the Lower Precambrian System with an unconformity and is a typical continental molasse formation with the bottom conglomerate as thick as 400 m and the maximum erratic boulder of 1 m. The upper part is composed of feldspathic sandstone as thick as 1,000 m, the sand grains being feldspar and quartz, appearing in secondary edge form. This rock system has a flat and gentle occurrence (dipping toward east at a small angle), once subjected to slight metamorphism.

Ayer Block features a gently fluctuating landform, with the height difference normally fewer than tens of meters, and is only 100 m higher than the basin. The uranium content in the granite is (8.4–9.7) x 10[-6] (ppm), and the thorium content in the granite is (46–74) x 10[-6] (samples were analysed by Beijing Uranium Mine Geological Research Institute). From Lower Carboniferous (Visean) Period, this block was exposed to the surface and undergone intensive denudation, and was the supplier for the sandstones which host uranium ore in the basin area.

4.1.2.2 Basin Cover

Sedimentation took place from Cambrian-Ordovician Period to the modern times. There exists only pseudo-unconformity or eroded unconformity and no high-angle unconformity between sedimentary rocks of the various periods is present. In time the strata of basin cover gradually overlapped southward. In Arlit region, the Carboniferous System unconformably overlies basement. The main outcropped strata include the Lower Carboniferous Series and the Lower Cretaceous Series (Figure 4-3).

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TECHNICAL REPORT

4.1.2.3 Lower-Middle Carboniferous Series

From top to bottom are represented by Tarada group and Tagora group. Being Telag (same as ‘‘Taragh’’ in some other references) sandstone in particular, it is the sandstone cemented by kaolinite and mud lying on the granite substratum, thick stratiform, transition to fine-grained conglomerate on the top and partially with intercalations of silty stone lenticles, 10–25 m thick. Bottom conglomerate appearance, indicates that the sedimentary rock system is overlaps the Ayer crystalline substratum.

The Talak (same as ‘‘Talach’’ in some other references) sandstone, marine facies are divided into two parts, namely the upper part and lower part. The lower part is represented by mottled mudstone (with inclusions of thin gypsum layer) and marlite containing brachiopod fossils and 25–100 m thick. The upper part is composed of argillaceous sandstone, calcareous sandstone and silty sandstone with ripple marks, with gypsum-bearing mottled mudstone at the bottom.

The Guezouman sandstone, 30 m thick, hosts uranium horizons. The Dalaflak phosphate cemented conglomerates lay at the bottom, upwardly passing into equigranular sandstone with abundant plant fragments (especially at the bottom).

The cement becomes calcareous and argillaceous near the top. The grains of the sandstone are equigranular and fine, lacking of feldspar, having little or no cement, and probably have been formed as a result of sedimentation in the river delta environment after the original sandstone become weathered and eroded.

Chliezo (same as ‘‘Tchinezogue’’ in some other references) mudstone is 25 m thick with light colour unequigranular sandy mudstone at the bottom, and occasionally fine conglomerate. From the bottom upward are interlayers of marlite and green mudstone, solid and hardened due to calcareous cementation.

Tarat sandstone of thickness 25 m, is the uranium hosted horizon. The sandstones are mainly composed of unequigranular quartz sand. The coarse grains reach centimetre level (conglomerate) with rare cements. Show oblique stratification, and very probably represent quick coarse clastic sediments formed in the river delta environment.

Madavila (same as ‘‘Madaouela’’ in some other references) mudstone is about 1 meter thick, which is presented as an interlayer of silty green mudstone and marlite, or an interlayer of fine sandstone with limonite mottles and rock layer with ripple marks of several dozens of centimetre thick. The thickness of Madavila mudstone has an obvious difference between the east and west sides of Arlit Fault, where there is some missing parts on the east side while it could reach 180–200 m in thickness on the west side.

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TECHNICAL REPORT

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Figure 4-3: Strata Histogram of Azelik Region

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TECHNICAL REPORT

4.1.2.4 Permian System

Permian System in the region is composed of four red rock layers of Izegwandan Group (two layers of sandstone and two layers of muddy sandstone), which are as follows from top to bottom:

. Izegwandan feldspar sandstone (in some other references, named as ‘‘Izegouande’’), 110 m thick, red gravel bearing feldspar coarse sandstone debris particulate semi-angular quartz and feldspar, composes of fine broken sandy calcite and adglutinate, belongs to a sedimentary rock deposited rapidly under continental deposit environment.
. Tegia (same as ‘‘Tejia’’ in some other references) argillaceous sandstone sandstone, about 10 m thick. Mainly red sandy mudstone, sometimes shortage.
. Tarrma (same as ‘‘Tamamait’’ in some other references) sandstone, 40 m thick. Red uniform medium size feldspar sandstone, shaly cemented, its upward finer, calcareous cement, a kind of residual lake basin deposit.
. Morhadi (same as ‘‘Moradi’’ in some other references) argillaceous sandstone, 50 m thick. Red sandy mudstone, laminated with river sandstone lenticulr bodies etc.

4.1.2.5 Jurassic-Triassic System

Consists of Agadez group, from upper to lower, Telua (same as ‘‘Teloua’’ in some other references) sandstone and is 60 m thick. The bottom conglomerate (0.5 m thick) was formed by desert gravel (ventifact) and then cemented sandy phosphate. Its upper part is light yellow equigranular quartzose sandstone and medium size sandstone, and upper part is composed of fine sandstone, gravel bearing coarse sandstone and coarse sandstone.

Chlezlin (same as ‘‘Tchirezrine’’ in some other references sandstone is a set of feldspar-bearing unequigranular sandstone, which may be transitional into ferruginous and phosphate-bearing type, usually shortage of cementation, sometimes having the sericite cement. Some places are enriched with abundant fossil wood, cross-bedding and is 60 m thick. Its lower part is Chlezlin1 (TCH1) sandstone, its middle is Abegy (same as ‘‘Abinky’’ in some other references) analcite (‘‘analcime’’, ‘‘analcimolith’’ or ‘‘analcimite’’), with the presence of analcite as its characteristic, two end-member rock: including analcite sandstone, feldspar, analcite in small ball, usually with haematization; analcite, dense clumpy shape, small analcite bass may be up to F2*4 mm. Its upmost part is interlaminated with analcite sandstone and analcite (called Chlezlin2 (TCH2)), belongs to uranium-bearing horizon.

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TECHNICAL REPORT

4.1.2.6 Lower Cretaceous

Lower Cretaceous is represented by Irhazer group, built of red dense mudstone, silty sandstone, fine sandstone, 200 m thick, which bottom is sandstone, 7 m thick. Partially bottom sandstone belongs to Azawa (same as ‘‘Assaouas’’ in some other references) group that hosts copper mineralization, in less that 15 m thick, the ore bearing layer.

Azawa formation is covered by Tegama formation, which is represented by sandstone and argillite, 300 m thick.

According to formation lithology variation, the local lower Palaeozoic could be formed under cold weather conditions, Lower Carboniferous under warm and humid weather and all sedimentary facies are gray facies. The lower Permian was formed under dry and hot weather condition and the sediments are red facies. During Triassic-Jurassic periods the weather slowly changed to warm and humid, forms the light sediments. The lower Cretaceous had dry and hot weather and the red sediments were formed.

4.1.3 Regional Tectonics

Most of fault structure in Ayer block is NW-SE and many faults are 100 km long. This series of faults is generated before the Talawady granite (407 Ma) positioned. In the north part of Ayer block there are some S-N and NNE orientated faults, as the block is vertical to fold stress, so it shall be formed in stress relaxation period. Moreover, both the south and north parts of Ayer still have a NEE fault zone grown, filled with calcium fluoride and barite, formed in upper Cretaceous period.

The structure occurred in the basic cover is developed on the basis of old blocks (basement), while it is simpler than the structure of old blocks.

In the basin cap formation (cover of the basin) there are seldom NW-SE striking faults whereas they developed well in the basement. However the SN orientated faults in the cover and basement (Ayer Block) show the continuous activities in the direction. For example, At the time Permian Izegwandan Group started sedimentation, Ayer block (Longitude E 8–98) and Dawua block (Longitude about E 58), the two long striplike blocks began to uplift in N-S direction, appearing as two piano keys.

Arlit Fault, a westward inclined fault with large size and more than 100 km long in approximately N-S direction, controls the uranium-bearing formations, which has significant relation to the deposit., This fault has suffered tectonic activities of many times. Arlit Fault began to move during the Carboniferous period when Madavila mudstone started sedimentation, which caused the considerable difference of the sedimentation between east and west sides of the fault. After Cretaceous, there was another reverse fault motion.

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APPENDIX II

In additional, in the NEE direction there are several faults (such as Azelik Fault ), and in NE direction there is Madavila fault, which also began to move in the lower Carboniferous. This type of earlier movement and later overlapping faults are usually the results of bending mechanics. The formations at both sides also became steep considerably, which is tightly related to the uranium mineralization.

4.1.4 Mineral Deposits — Uranium

Niger uranium mineral deposits are centrally distributed at Arlit area of Agadez province, located at Arlit fault footwall (east plate), within 20 km range from fault, from north to south, distributed with six uranium deposits such as Arlit (Tarat sandstone), Anyer (Tarat sandstone), Akuta (Guezouman sandstone), Madavila (Guezouman sandstone), Seafastur (Guezouman sandstone), Yimlalun (Chlezlin sandstone) etc. The hanging wall (west plate) of the fault is within 60 km range from the fault, distributed with IR, G, and T deposits (orebodies) (Irhazer sandstone and mudstone) in Azelik area.

The local uranium resources has the following features: closely grouped; buried shallowly, some only about 35 m, the maximum depth is about 200 m, some orebodies can be open-pit mined; big resources/reserves, apart from individual orebody, most of single orebody reserve is more than 10,000 tons, the maximum may reach up to more than 100,000 tons, the controlled resource reserve is up to more than 300,000 tons; higher grade, most of the uranium average grades of orebodies are above 0.3%; large thickness, most of uranium orebody thickness up to several meters to tens of meters, and usually the orebodies are closely grouped; with several horizons mineralized, apart from middle and lower Carboniferous Guezouman, Tarat sandstone, the Jurassic Chlezlin sandstone, lower Cretaceous Irhazer sandstone and mudstone host also the uranium mineralization; besides several orebodies, the ore generally has good metallurgical and processing characteristics.

Apart from the surveyed seven deposits, there are many potential areas and uranium mineralized points around already know orebodies and if these zones are properly investigated the probability of finding new orebodies is high.

4.2 Mine Geology

Azelik area is located within Agadez basin at the hanging wall (west side) of Arlit major fault. It comprise three uranium orebodies namely; IR, G, and T. G-Orebody is located at the west limb of Geleli short axial anticline, T-Orebody is located at the north limb of this short axial anticline. IR orebody is located about 8 km away to the north. Three orebodies are hosted in the same geological environment and both mineralization enrichment horizon, and control factors are basically the same.

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TECHNICAL REPORT

4.2.1 Stratigraphy

Shown in Table 4-1, from the oldest to newest, the local geological formations include Permian Izegwandan group, Jurassic-Triassic Telua group (Agadez), lower Cretaceous Azawa group sandstone (Irhazer bottom sandstone lower sandstone), Irhazer group mudstone and sandstone, Tegama group sandstone. In which, Irhazer group is widely emerged, others have sparse outcrops.

Table 4-1: Stratigraphy in Azelik Area

System	Formation	Part	Section	Lithology	Thickness
Lower Cretaceous	Tegama			Sandstone
	Irhazer	Upper		Mudstone	100–200 m
		Middle
		Lower	IV	Mudstone and	0–80 m
				Sandstone
			III
			II
		Azawa	I
Jurassic-Triassic	Agadez	Upper		Analcite Sandstone	not clear
		Lower		Quartz Sandstone	0–50 m
Permian	Izegwandan	Upper		Interbed of Sandstone	0–50 m
				and Mudstone
		Lower		Feldspar Sandstone	not clear

Permian Izegwandan group: mainly distributed at the deep part of the whole area and gradually thickening from west to east; it outcrops only at Geleli short axial anticline at the south of mine area which is 11 km long, 3 km wide and covers about 33 km[2] . It consists of lower and upper layer of which the upper layer is divided into three sub-layers. The lithologies comprise medium-coarse feldspar sandstone interlaminated with brown mudstone, with poorly sorted and mostly of the mudstone. The sandstone consists of quartz, less feldspar, and feldspar sand particle, with poor sorting; the cement consists of argillaceous, calcite, and analcite. 8 The anticline limbs are dipping from the centre to all sides at angle 0–5 . The contact with overlaying Jurassic-Triassic Telua group is an unconformable contact.

Jurassic-Triassic, Jurassic-Triassic Telua group: is equivalent to Agadez lower rock formation and distributed at the north and east of anticline core, the east side is relatively wide, and the maximum width is up to 50 m. Its western part locally outcrops in lenticular form 2 m wide, occasionally also found at southern side. It consists of upper and lower layer, a set of coarse and fine-grained sandstone, with formation occurrence tilted from centre to all sides. The upper formation comprises the interlaminated mudstone and sandstone of analcite, only distributed at the east part. At IR-deposit Agadez sandstone was found at the borehole bottom and is overlie with Lower Cretaceous Azawa group and Irhazer group with unconformable contact.

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APPENDIX II

The Lower Cretaceous Azawa Formation is distributed around the core of anticline, the outcrop width is about 40 m at its north side, about 100 m at its west side and about 20 m at its east side. Its south side is discontinuously distributed, in lenticular form, about 10 m wide. The lithology is mainly sandstone. Its formation occurrence is tilted from centre to all sides. This group is equivalent to the bottom sandstone of IR orebody.

Irhazer group outcrops at the large area, apart from IR orebody widely distributed, both G, and T orebodies are mainly emerged around the core of anticline. Its lithology comprises sandstone and mudstone. The bottom sandstone is the main local ore-bearing rock. This group may be divided into three layers: upper, middle and lower formations: the lower formation composes of bottom sandstone, brown mudstone and sandstone lenticular bodies.

The middle formation is composed of brown mudstone, thin sandstone, and finegrained sandstone, the upper formation red mudstone, thin sandstone, and fine conglomerate. In this rock formation, the regular occurrence of purple argillaceous tuff may be also found, as four marker layers to indicate its formation continuity, from lower to upper, respectively V0, V1, V2, and V4. This lower formation has four different sub-layers, respectively equivalent to I–IV horizons. IR orebody is plunging westward at dip angle <18. The wings decline towards all sides, with gentle dip angle (3–48) and are over lied with Tegama sandstone.

Tegama Group is distributed at the south wing of anticline and is represented by a hematite -bearing brown red sandstone with occasional conglomerate.

4.2.2 Tectonics

In IR block, Irhazer group is a monocline structure, striking NNW-SSE and dipping westward at the dip angle <18.

G, T blocks are short-axle anticline, its core formation is Izegwandan group and Telua group. Its occurrence tilts towards all sides. Irhazer group upper layer outcrops 8 on the surface, also declines from the centre of anticline to all sides at dip angle 3–4 .

North-eastern (60–708) regional fault is cutting the deposits; at the south side of fault the rubble Tegama sandstone outcrop is usually found with the same long axial as that of structure strike. Both south and north sides of G and T block anticline core have been grown with two NE (608) striking parallel faults of large size, more than 20 km long. It was inferred that the northern fault is dipping northward, but southern fault southward, both with steep dip angle. The middle block (footwall of the two faults) uplifted and both sides (hanging walls of the two faults) dropped. Moreover, within the wing (Irhazer Group) there are secondary faults with striking approximately EW to NW 3108 and NE 608 intersected, which are about 3–5 km long. The faults are usually with sharp dip angle, and the fault displacements are not too large.

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TECHNICAL REPORT

4.2.3 Distribution of Uranium Anomalies

In IR-deposit, uranium mineralization is hosted at the upper part of bottom sandstone above an unconformable contact between the bottom of Irhazer group and Izegwandan group (marking symbol U). The bottom sandstone is divided into upper, middle and lower facies. The part above its bottom sandstone (top) is indicated as S1. About 1 m above the bottom sandstone, a 3–4 m thick green-light green mudstone is found. Due to continuity of formation, this facial division is also applicable for G and T deposits.

Table 4-2: Ore-Bearing Strata Column with Geological and Radioactive Marks

				Geo-		Radio-
System	Formation	Part	Section	Mark	Lithology	Mark
Lower Cretaceous	Tegama				Sandstone	A9
	Irhazer	Upper			Mudstone	A8
		Middle		V3		A7–A5
		Lower	IV	V4	Mudstone and	A4
					Sandstone
			III	V2		A3
			II	S1		A2
		Azawa	I	U		A1
						(R1,R2)
Jurassic-Triassic	Agadez	Upper			Analcite Sandstone
		Lower			Quartz Sandstone
Permian	Izegwandan	Upper		D1	Interbed of
					Sandstone and
					Mudstone
		Lower			Feldspar Sandstone

The bottom sandstone and overlaying green, light green mudstone and quartz, calcareous cement silty sandstone are commonly called A1 and are equivalent to Irhazer group lower formation II horizon. This layer has the maximum distribution, and highest uranium content, mainly composes of bottom sandstone and mudstone, the main ore bearing layers of IR and G, T deposits. The V1, V2, V3 and V4 are the marker layers of Irhazer group lower formation, and its lithology comprises purple argillaceous tuff. The V8 is the marker layer of Irhazer group middle formation; its lithology is also the purple argillaceous tuff.

Moreover, it still has eight uranium anomaly layers, from lower to upper, respectively are:

. A2 is a sandstone lenticular body, below V1 marker layer, equal to Irhazer group lower formation II horizon, only existing in IR orebody.
. A3 is a very thin sandstone lenticular body, equivalent to Irhazer group lower formation III horizon. The maximum radioactive anomaly is not more than 6,000 cps.

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TECHNICAL REPORT

. A4 is the V2 marker layer of Irhazer group lower formation.
. A5 is the fine-grained sandstone and silty sandstone, located at the lower sub-layer of Irhazer group middle formation, about 8–10 m below V4 layer, distributed at all areas. Its maximum radioactive anomaly is not more than 3,000 cps.
. A6 is green silty sandstone, located at the lower sub-layer of Irhazer group middle formation.
. A7 is mudstone and silty sandy mudstone, in Irhazer group middle formation.
. A8 is green mudstone, located at upper sub-layer of Irhazer group upper formation, below the unconformable contact face of Tegama group.
. A9 is conglomerate, located at the bottom of Quaternary alluvial deposit.

In A2–A9 radioactive anomalous layers, only A3 and A5 may occasionally contain the uranium mineralization (cps>1,000) sparsely distributed, and usually do not represent the industrial level orebody. According to statistics from 202 bores, A1 layer was intersected by 124 boreholes with >100 cps anomaly, A3 layer two bores and A5 layer 32 bores. Moreover, usually the A5 layer has the radioactive anomaly, but A1 layer has no anomaly or low anomaly.

In A1 anomalous layer, the roof of cps>100 radioactive anomalous layer is called R1. R2 is the floor of cps>100 radioactive anomaly in A1.

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TECHNICAL REPORT

==> picture [362 x 538] intentionally omitted <==

----- Start of picture text -----

Deposit IR
Deposit T
Deposit G
----- End of picture text -----

Figure 4-4: The Sketchy Map of Azelik IR, T and G Deposit Location

M1 represents the roof of cps>500 uranium mineralization layer in A1. M2 represents the floor of cps>500 uranium mineralization layer in A1.

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TECHNICAL REPORT

Because the movement of short axial anticline close to axial wing uplift of G, T orebody, the formation has gentle inclination towards all sides, moreover, both NEE and NNW strikes had the tectonic activities, letting the Irhazer group mineralized bottom sandstone uplift to surface or near surface beside the structure, which provide an important clue for finding the ore, and also provide the geologic basis for orebody exposure.

IR orebody enriched mineralization block usually locates at the palaeogeographical environment transition zone, between a small oblique slope and flat surface.

4.2.3.1 Vertical Distribution of Uranium Anomalies

At both east and west parts of IR orebody, the radioactive anomalies are located not more than 1 m above S1 horizon, but in the middle of orebody, the uranium anomaly is located at the at least 1 m below S1. The lower limit of anomaly is placed within the middle facies of bottom sandstone, 3–4 m lower than S1 horizon, but no any radioactive anomalies found in the lower facies of bottom sandstone, moreover, the lower limit of anomalous layer is very stable just the same as that of upper limit, with infrequent differences found. Also, the radioactive anomaly at both ends of orebody may be also found between greenlight green mudstone layers.

At the east and west of IR deposit, the radioactive anomalous zone may be up to about 5 m wide (maximum 7 m), but in the middle part varies between 3–5 m.

4.2.3.2 Longitudinal Distribution of Uranium Anomalies along Section

In A1 mineralization layer, all uranium anomalous horizons are located 2 m above the roof of bottom sandstone and 3.5 m below the roof of bottom sandstone. The anomalous value above S1 horizon (roof of bottom sandstone) is usually very low, with the maximum value only about 1,800 cps. The weak anomalous mineralized lithology above S1 horizon usually the green-light green mudstone formation; the anomaly below S1 facie belongs to higher mineralization type. All are hosted within fine-grained sandstone cemented by calcite in bottom sandstone upper facies; for the anomaly 1.5 m–3.5 m below S1 face, the uranium mineralized lithology is coarse quartzose sandstone, belongs to the middle facies of bottom sandstone, its bottom is the green sandstone; the radioactive anomaly of lower facies in bottom sandstone is very low.

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TECHNICAL REPORT

4.3 Deposit Geology

4.3.1 Characteristics of the Ore Body

The uranium mineralization mainly is hosted in the bottom sandstone above the unconformable surface of Irhazer group. The mineralized lithology comprises mudstone and sandstone. In general there is only one mineralized layer, and the orebody is well controlled by wall rocks.

4.3.1.1 Deposit IR

The deposit is located at the depth 190–200 m from the surface and is almost horizontal, striking to NNW and dipping slightly to west at the angle <18. Total seven (7) orebodies were delineated within boundary grade 0.085%, and meter percent value 50.043 m%. Two of them are main orebodies; first 332IR-2 controlled with 24 borehole intersections is a large scale, about 650 m along the strike, and about 750 m along dip with grade 0.160% (1,600 ppm) and thickness 1.93 m. Estimated resources are about 40.0% of the total deposit resource. The second 332IR-1, controlled by 20 boreholes is also large scale, striking 550 m long and dipping 750 m. The average grade is 0.137%, thickness 2.3 m; estimated resource makes about 26.5% of the IR deposit resource. The other five (5) orebodies three of them are controlled by 2–7 boreholes; two were discovered by single drillhole. The deposit average grade is 0.142%, and average thickness 1.59 m.

Total 10 orebodies (blocks) were delineated with ‘‘III, IV’’ industrial parameters. The main orebody is 332IR-1, controlled with 58 boreholes is a large scale, extending about 1,150 m along strike long and about 950 m along dip with grades averaging at 0.131% and thickness 2.08 m. The estimated resources are 63% of the total IR-deposit resource. For other 9 orebodies five are controlled by 2–7 drillholes, four by single orebody discovery. The ore beds average thickness is 1.56 m and average grade 0.122%.

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TECHNICAL REPORT

APPENDIX II

==> picture [417 x 193] intentionally omitted <==

----- Start of picture text -----

NEE
LS76 LM37 LS52 LM6 LS40 LM7 LM2 LM8 LS41 LM9 LS59
K1
V8
K1
V4
K1
0. 0953. 35 VVSU211 0. 1083. 00 202. 80m0. 1532. 23332 I R- 1 0. 1752. 35 0. 1102. 15 J- PKK11 333I R- 2 0. 0850. 2291. 500. 95 332I R199. 50m- 2 0. 2803. 70 0. 1552. 05
215. 00m 215. 00m 208. 30m 215. 30m 208. 90m 211. 00m 210. 20m 210. 00m
230. 00m
----- End of picture text -----

Figure 4-5: Typical Cross-section through IR-Deposit

4.3.1.2 Deposit G

The deposit is outcropping partially on surface and gradually dipping to SW 2528 at the angle 48 to the depth of 7 m. The orebody is laminar and semi-laminar. In few profiles significant dislocation of ore beds are observed in adjacent boreholes which can suggest the fault presence. Total 26 orebodies were delineated in boundary grade 0.085%, and meter percent value 0.043 m%. The main orebody is 332G-2, controlled with 7 boreholes with dimensions along the strike about 225 m, and along dip about 550 m wide, average grade 0.167% and thickness 2.89 m. The estimated resource is about 46.9% of the whole deposit, other 26 orebodies (blocks) have been controlled with multiple bores or single bore, usually 30–150 m long, 150–30 m wide, in which, 12 were controlled by single bore. The average thickness of ore bed is 2.21 m, and average grade 0.157%.

Total 31 orebodies delineated in boundary grade 0.050%, and meter percent value 0.035 m%. The main orebody is 332G-7, was controlled with 36 drillholes, extending along the strike about 400 m, and along dip about 850 m, with average grade 0.121%, and thickness 3.08 m. The estimated resource is about 58.9% of the whole G-deposit. Other 13 orebodies have been controlled with single discovery borehole, 17 were controlled by 2–7 boreholes. Both strike, and dip sizes are very small. The average grade of these ore beds is 0.108%, and average thickness 1.96 m.

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TECHNICAL REPORT

==> picture [416 x 154] intentionally omitted <==

Figure 4-6: Typical Cross-section through G-Deposit

==> picture [404 x 304] intentionally omitted <==

Figure 4-7: Exposed Roof of G-Deposit

4.3.1.3 Deposit T

The deposit outcrops partially on the surface dipping gradually to NW3428 at the angle 4–58 reaching depth of 155 m. The deposit is same-laminar, lenticular. The several small scale faults slightly disturb continuity of deposit.

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TECHNICAL REPORT

The orebodies delineated in boundary grade 0.085%, and meter percent value 0.043 m% are widely distributed, and total 67 orebodies of small to medium scale were defined. There are 15 orebodies controlled by several boreholes (3 and above) and 52 controlled by a single discovery. The deposit has no main orebodies; there are four orebodies with the uranium resource >100t. See Table 4-1 for these four orebodies (blocks) parameters. The above mentioned orebodies have the strike extension 175–180 m and the sizes along dip vary from 120 to 230 m. The uranium resource of 4 orebodies make only 31.6% of total T-Deposit resource, the remain 68.4% resource come from 63 small orebodies with resources varying from several tons to several ten tons. The deposit average grade is 0.142%, and average thickness 1.91 m.

Table 4-3: T-Deposit C50.085%; M-C50.043 m% Main Block Parameters

										PCT in
			Number of						Metal	total
Orebody	(block)	ID.	Intersection	L	W	Grade	Thickness	Area	Tonnage	resource
				(m)	(m)	(%)	(m)	(m2)	(t)
331T-5			9.00	180.00	230.00	0.20	2.14	14,531.00	150.80	8.80
331T-11			8.00	175.00	120.00	0.14	3.16	12,346.00	134.80	7.90
332T-1			4.00	280.00	152.00	0.12	1.91	24,375.00	134.10	7.80
332T-2			6.00	220.00	100.00	0.17	1.70	17,889.00	121.90	7.10

There are 74 orebodies with parameters C50.050%, M-C50.035 m% widely distributed and of small to medium size. Twenty eight (28) orebodies are controlled by several boreholes (3 and more), however forty six 46 orebodies were discovered with two or one drillhole. There is no main orebody or orebodies; seven made the resources more than 135t, about 43.7% of total T-deposit resources (see Table 4-2 for these seven orebodies parameters). The sizes of above mentioned orebodies usually vary from 175 to 450 m along the strike and 150 to 420 m along the dip. The scale of other orebodies is very small. The orebody average grade is 0.108% and average thickness 2.0 m.

==> picture [428 x 52] intentionally omitted <==

Figure 4-8: Deposit T — Exposed Top of Deposit T

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TECHNICAL REPORT

==> picture [363 x 168] intentionally omitted <==

----- Start of picture text -----

162°
AM22 AM1239 AM14 AM1006 AM8 AM1034 AM4 AM1033 AM116 AM1205 AM108 AM1199 AM105
382. 52 382. 32 383. 31 382. 89 383. 70 383. 35 384. 33 384. 19 384. 56 384. 82 385. 06 385. 39 385. 45
(m)350 VVV1 2 4 331K T1K- 51K1 0. 166 38. 85m 0. 359 3313. 00 T- 533. 58m 26. 26m 23. 63m 25. 95m 20. 30m0. 2323311. 05 T- 918. 23m0. 1852. 10 15. 00m 14. 65m
47. 00m S156. 80m0. 2780. 85 56. 40m0. 1762. 00 51. 18m1. 50
K1、 J- P
300
250
Y 258. 0
----- End of picture text -----

Figure 4-9: The Cross-section of Line 25 through Orebody T

Table 4-4: T-Deposit C50.050%; M-C50.035 m% Main Block Parameters

											PCT in
			Number of							Metal	total
Orebody	(blocks)	ID	intersection		L	W	Grade	Thickness	Area	tonnage	resource
					(m)	(m)	(%)	(m)	(m2)	(t)
331T-5				28	380	420	0.139	1.98	51,094	337.5	10.9
331T-10				12	175	270	0.127	2.24	19,688	134.4	4.4
331T-11				15	225	270	0.111	2.2	132,824	147.4	4.8
331T-14				9	170	240	0.136	3.13	14,844	151.7	4.9
332T-1				8	320	350	0.094	1.71	55,313	213.4	6.9
332T-2				7	450	150	0.078	2.67	41,875	209.3	6.8
332T-12				1	120	100	0.278	2.9	7,969	154.2	5

4.3.2 Ore Mineralogy

The uranium ore is characterized by compact, lumpy structure. The uranium occur in uranium minerals and also is incorporated with other minerals. The uranium minerals are distributed in sandstone cement or on the surface of quartz particles. The uranium minerals and secondary uranium minerals include nasturan, coffinite, tyuyamunite (alum/vitriol-Ca-U), uranophane (Si-Ca-U), sodium-silicon-potassium uranium (Na-Si-K-U), arcanite uranium (K-alum/vitriol-U) copper-barium uranium (vitriol-Cu-Ba-U) etc. The gangue minerals include feldspar, quartz, analcite, montmorillonite, dolomite, chlorite, barite, zirconite, mica, fluoro-apatite, rutile, garnet, nepheline, hornblende, and tourmaline etc. The metallic minerals include native copper, cuprite, chalcocite, malachite, brochantite, limonite, pyrite, and goethite and others. The analysis of mineral components demonstrated the features of sedimentary uranium deposit.

In IR-deposit the SiO2 has high content, mostly over 60%, with highest content up to 82.3%, indicates that the ore has much more quartz sand grains and siliceous cement; the CO2 content is also high, usually varying from 2.5% to 8.0% with the

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TECHNICAL REPORT

highest CO2 content 9.73%. The U3O8 content is up to 0.544%, which indicates that the ore cement has much carbonate, and also the possible later carbonate vein injection. The calcium carbonate content has close relationship with uranium mineralization. The calcium carbonate is a high acid consumption mineral, which may be very unfavourable for hydrometallurgy processing of ore.

The light rare earth element La, Ce, Nd, Sm etc are strongly correlated with uranium content; higher the uranium content, higher the content of these elements.

4.4 Mineralogical Characteristics

4.4.1 Ore Type and Grade

Most of boreholes drilled on three deposits were non core drilling, and only selected drillholes were properly sampled, consequently the ore data for mineralogical study were also limited. In this case it was hard to distinguish zonation accurately i.e. the oxidation zone, redox (oxidation-reduction) zone, reducing zone and their distribution extension, as well as the ore types such as natural type or industrial type. However, according to relevant data, some epigenetic variations of orebody could be basically recognised.

The layers near to surface of G, and T-deposits have large amount of secondary uranium minerals, secondary copper minerals and brochantite (Cu4(SO4)(OH)6) In deeper parts of deposits primary uranium minerals occur mainly nasturan and coffinite. This zonation indicates that uranium sediments were oxidized after uplifted to near surface through fold and fault motion and formed the secondary (epiclastic) minerals. For IR-orebody which is deeply located, with no considerable tectonic movements, only the primary minerals of uranium are found.

Seeing from IR-orebodies ore chemical analysis there is a higher CO2 and CaO content which indicates that minerals such as calcite and dolomite are abundant therefore ore industrial type was determine to be carbonate-enriched uranium bearing clastic ore.

IR-deposit boundary grade is 0.085%, meter percent value 0.043 m% and estimated resource according to Chinese industrial indexes, the resources for both G, and T deposits were respectively estimated with boundary grade 0.085%, meter percent value 0.043 m% and boundary grade 0.050%, meter percent 0.035 m%. For both deposits resource estimation results, their average grades are higher than 0.100% and are classified to the medium grade.

4.4.2 Host Rock and Waste Rock

The orebody side-bed is represented Irhazer Group bottom sandstone, composed of the sand grains which includes quartz, feldspar, and rock fragments (less than F1 mm), sub-angular to semi-round. The sandstone cement consists of calcite, silica, particle of analcite, and green-white mudstone.

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APPENDIX II

TECHNICAL REPORT

The host rocks and nearby side-bed of argillite (about several centimetres above and below sandstone) adjacent to Irhazer group bottom sandstone represent light white-green sandstone with clay cement. The clay in Irhazer group argillite usually found in contact with calcite is also light white-green. In bottom sandstone, the radioactive anomaly increased value is higher than the increased value of bottom sandstone upper light white-green clay. The upper facies of mineralized bottom sandstone usually has excess of calcite. The cement in middle and upper facies of sandstone in bottom sandstone usually composes of light white-green clay. For all mentioned above, the uranium mineralization intensity is closely related with orebody and nearby side-bed alteration intensity, more the calcite content and thicker the light white-green clay layer, higher is the uranium content. In alteration zone, the clay is altered from brown into green colours.

4.5 Deposits Genetic Implication

The Aı¨ er Precambrian granite uranium enriched crystal basement, from beginning Carboniferous period was emerged and exposed on surface suffering the exfoliation erosion. The granite with average uranium content (8.4–9.7) x 10[-6] was elevated about 100–200 m above the uranium basin and strongly weathered on the surface to uneven sized ball weathered mass bodies, with considerable quasi-plain landform and it provide the adequate materials source for forming the basin sediments, also considerable uranium sources for forming uranium orebody in basin. Moreover, under watering, Izegwandan group sandstone and Agadzi formation sandstone could also be leached of uranium, which indicates that the local uranium sources were widely distributed and adequate.

With relatively stable platform sedimentary basin environment, the sedimentation in basin was slow and stable during 0.5 billion years, forming about 2,000 m thick sedimentary rock series, which also was favourable for sedimentation of different facies and sedimentary enrichment of uranium under reducing conditions.

From Carboniferous to Cretaceous, there were two periodic weather varying from warm and humid to dry and hot, formed both heavy sedimentary cycles from the Carboniferous gray rock formation to Permian red rock formation, Jurassic Triassic gray rock formation to Cretaceous red rock formation, and among all four rock formations, there are unconformities formed by sedimentary gaps. These paleo-climate variations were very favourable for uranium migration in oxidation condition and re-enrichment in sediments.

With favourable sedimentary environment, Azelik area is up to 110 km away from the edge of basin, filled with siliceous, carbonate cemented sandstone, silty sandstone and mudstone, and occasional marl, thin limestone and glauconite-bearing mudstone, which reflects a lagoonal seawater facies sedimentary environment with occasional fluvial facies of fine debris.

For long-term actions the basin was cut by Arlit regional fault and associated secondary faults cutting. These fault zones divided the basin into a series of wedged graben or horst blocks. This formation occurrence is generally gentle and flat; only the places adjacent to the faults demonstrate local steeper slopes. This fault-block architecture may

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TECHNICAL REPORT

give important influences to the circulation of underground water, favourable for interconnecting the hydraulic linkage of uranium and oxygen bearing surface water and underground water, thus favourable for epigenetic reform and overlapping re-enrichment of horizons. Gently inclined west side of Arlit allow intruding of the seawater and forming the estuaries and lagoons with locally intruded river delta facies debris.

The volcanic gases also affected mineralization of this region. In Agadez basin, the Lower Carboniferous mineralized conglomerate at the bottom of Guezouman sandstone may contain rhyolite gravel and the sandstone clastic quartz particle has the leucite inclusions. The mineralized sandstone at the roof of Jurassic contains the analcite feldspar sandstone; its floor comprises analcite rock, which indicates that the mineralized sandstone is enriched of volcanic matters. The Azelik lower Cretaceous contains V0, V1, V2, and V4 purple red argillaceous tuff, but the volcanic gases and liquid action caused the mineralized brown mudstone to be altered into green mudstone enriched with hydrous mica, and with fine calcite veins. The local mineralization has a specified relationship with volcanism; provide the uranium source also steam and heat for uranium mineralization.

As mentioned above it is clear, that the local uranium mineralization has enough uranium sources, favourable for epigenetic modification conditions such as mineralization horizon and lithology rock facies conditions. The uranium orebodies are distributed at both sides of Arlit regional fault. The orebody genesis represents both syngenetic sediments, and epigenetic uranium mineralization overprinting.

4.6 Sampling, Assay and Quality Control and Assurance (QA/QC)

4.6.1 Drilling

4.6.2 Sampling and Sample Processing

All drillholes were logged using Gama-ray geophysics and only limited samples were collected for chemical analysis. SRK had opportunity to check several sealed collars of Japanese boreholes also some verification holes have been observed during the site visit. (see Figure 4-10).

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APPENDIX II

TECHNICAL REPORT

==> picture [312 x 234] intentionally omitted <==

Figure 4-10: The Original Japanese Borehole Collar and Verification Hole Collar Seals

Presently SOMINA is collecting the sample for metallurgical testing. The ore grades are determined using Gama-ray scintilator and small semi industrial laboratory serves for metallurgical testing (see Figure 4-11). Obtained concentrate is analysed using traditional titration analytical method.

==> picture [325 x 245] intentionally omitted <==

Figure 4-11: Semi-industrial Concentration Plant

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APPENDIX II

TECHNICAL REPORT

4.6.3 Quality Assurance and Quality Control

No data regarding Quality Assurance and Quality Control was available for reviewing during SRK visit.

4.6.4 Data Verification

Historical data (ISRA Company exploration results) reportedly were verified during CNNC team and based on the result appropriate feasibility study including resource/reserve estimation were performed. SRK has opportunity to review several of these documents and this report is mostly based on them.

5 RESOURCES ESTIMATION

5.1 Geophysical Survey and Quality

The geophysical works which lead to the resource estimate of Azelik deposits have been conducted by CNNC team in three phases. During the first phase they collected collect all relevant data i.e. relevant reports, forms, drawings and original logging curves. These data include the gamma ray logging conversion coefficient of Azelik IR, G, and T orebodies, IR orebody sandstone and mudstone orebody radioactive balancing form, T orebody thorium content and IR orebody potassium content analysis results. They also collected gamma ray logging curves for accumulated logging depth 28,135.25 m of IR orebody 134 holes and accumulated logging depth 21,286.64 m of G orebody 303 holes (including 139 ore discovery holes) and accumulated logging depth 19,842.88 m of T orebody 312 holes (including 187 ore discovery holes). These data made a good basic for Azelik area resource estimation. During the second phase, CNNC team interpreted of the IR orebody gamma ray logging curve with average intensity method, the interpreted gamma ray logging curve accumulated 28,135.25 m, interpreted different grade block thickness 271.92 m. carried out the systematic check for gamma ray logging curves of collected G, and T orebody 615 holes, and performed reverse convolution layered interpretation and verification for gamma ray logging curves of 42 boreholes, taken from the layered interpretation. The compared holes make up 12.9% of the collected 326 ore discovered boreholes of both G, and T orebodies, in which: the collected logging ore discovered holes of G orebody is 139, layered interpretation verified holes 16, 11.5%; the collected logging ore discovered bores of T orebody is 187, with layered interpretation verified bores 26, 13.9%. During the third phase, the all data were compiled into relevant results form, results diagram and report.

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APPENDIX II

TECHNICAL REPORT

5.2 Determination of Industrial Indexes

According to three orebodies of IR, G, and T, specified the different industrial indexes, see Table 5-1 for details.

Table 5-1: Industrial Indexes of Three Orebodies: IR, G, and T

							Minimum
			Minimum	Maximum		Boundary	Industrial
		Boundary	Industrial	Waste Rock	Boundary	Meter/	Meter/
Orebody	ID	Grade	Grade	Thickness	Thickness	Percent	Percent
		(%)	(%)	(m)	(m)	(m %)	(m %)
IR		0.03	0.05	0.7	0.7	0.021	0.035
		0.085			0.5	0.043
G		①0.050			①0.70	①0.035
		②0.085			②0.50	②0.043
T		(0.1U3O8)				(0.1U3O8)

IR orebody has the complete gamma ray logging curve data, according to Chinese generally used industrial indexes, that is, ‘‘III, IV’’ indexes (brief name of the first row of indexes in the table above) were used for re-interpret the logging curve. In order to maximize the utilization of resources, through approval of relevant leaders, the IR orebody was carried out the resource reserve estimation with ‘‘III, IV’’ indexes. For the same purposes, both G, and T orebodies were also carried out the resource reserve estimation with 0.050% boundary grade and 0.70 m boundary thickness, and 0.035 m% boundary meter percent. Meanwhile, according to relevant protocols, the former industrial indexes from Niger, boundary grade 0.100% (U3O8), that is 0.085% (U), boundary thickness 0.50 m, boundary meter percent 0.050 m% (U3O8) or (0.043 m%U) were used for resource estimation.

5.3 Resources Estimation Method — Selection and Basis

According to IR, G, and T deposits low dip angle (only several degree) there are basically regarded as horizontal with mineralization considerably controlled by horizons; moreover the orebodies are simple laminar and lenticular occurring at shallow depth. Orebodies are controlled with considerable number of regularly distributed vertical drillholes, and showing very uniform grades, very stable thickness. These features allows a simple, accurate and unified estimation method where both drawings and estimation steps may be carry out with simple geologic block method.

5.4 Determination of Orebody Parameters

All control point of IR, G, and T deposit used for their resource estimation are drilling boreholes; consequently all the following relevant parameters are drilling data.

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APPENDIX II

TECHNICAL REPORT

5.4.1 The Average Thickness

All orebody thicknesses in drillholes have been interpreted after gamma ray logging curve.

Because all orebodies have a gentle, almost horizontal dip angle, all interceptions are straight vertical, therefore the apparent thickness of ore discovered is considered to be a truth thickness of orebody.

In the estimation of IR orebody, the average thickness of deposit is the combined thickness, or thickness of ore layer without block combination. That is, the average thickness. When resource reserve estimated with industrial index of C = 0.085%, M – C = 0.043 m%, its average thickness of single cut is the ore discovered thickness.

A summary of characteristic values of the three deposits are shown as Table 5-2.

Table 5-2: Summary of Characteristic Values of Three Deposits

							Grade
					Thickness	Grade	Thickness
			Average	Average	Varying	Varying	Correlative
Orebody	ID	Cut-off	Thickness	Grade	Coefficient	Coefficient	Coefficient g
		U%	(m)	(%)	(Vm%)	(Vc(%))
IR		50.050	1.18	0.166	68.6	97.6	-0.266
		50.085	1.29	0.239	65.7	77.8	-0.47
G		50.050	2.47	0.136	69.6	104.4	-0.266
		50.085	2.28	0.174	71.9	90.6	-0.319
T		50.050	2.02	0.126	43.6	141.3	-0.199
		50.085	2.03	0.173	45.6	131.8	-0.267

The thickness of three orebodies are stable or relatively stable, controlled orebodies distribution are uniform, so the average thickness of orebodies can be considered as tan arithmetic average value of ore interception points in orebodies (blocks).

5.4.2 Orebody Average Thickness

The average thickness of all three of IR, G, and T orebodies shall be accepted as arithmetic average value of orebodies (blocks) thickness.

5.4.3 The Average Grade of Orebody

For the unequal length of gamma ray logging curve interpreted, the average grade of its single drillhole was obtained by weighting average of control intercept length. When single index of boundary grade 0.085% was used for resource estimation, its drillholes average grade was the grade after block was combined.

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The average grade of U element in exploration workings (engineering i.e. drilling) is estimated from the content in U3O8; according to the original data.

According to calculation results of orebody characteristics and correlativity tests, the orebody thickness of the three deposits (IR, G and T) has close negative correlativity with grade. In this case the average grade of orebodies (blocks) may be calculated using the average numbers of average grades in exploration engineering.

The average grade of U element for each deposit (IR, G and T) was estimated by ratio between total metals and total ores of all orebodies (blocks) within deposit.

5.4.4 The Area and Volume of Orebodies (Blocks)

The orebodies (blocks) area was measured with AUTOCAD input flex point coordinates on 1: 2,000 orebody horizontal perspective view, and measured and verified twice by different persons.

The horizontal projection area of orebodies (blocks) is also the horizontal orebody area multiplied with average thickness of orebodies (blocks), that is, the volume of orebodies (blocks).

5.4.5 Ultra-High Sample

Both indexes of IR orebody grade varying coefficients are respectively 97.6%, and 77.8%, according to relevant Chinese standards; eight times of orebody average grade is specified as the lower limit of ultra-high sample. One block of IR orebody LS36 bore is 1.131%, 0.30 m, and orebody average grade respectively 0.166%, and 0.239%, its 8 times are respectively 1.328%, and 1.912%, so the above mentioned blocks may be not the ultra-high, not required for processing.

Both G, and T orebodies respectively include AF46 bore orebody parameters of 1.300% (1.533%U3O8), 0.15 m and orebody parameters of AM1335 bore 2.637% (3.110%U3O8), 0.10 m, according to grade varying coefficients of both orebodies, specified eight times of average grade for balancing to specify as ultra-high, but for all thickness less than 0.20 m, so, no processing required.

5.4.6 Ore Density

The ore density of IR orebody is 2.57 t/m[3] , which is the arithmetic average of measurement result of 19 composite samples from original data from 7 boreholes and 48 samples, (measuring method unknown), see Table 5-3 for details.

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Table 5-3: IR-Orebody Composite Sample Density Measurements (Results from Niger)

			Number of
			Single
Composite	Sample	Sampling	Composite	Sample	Measured	Uranium
No.		Working	Samples	No.	Value	Content
					(t/m3)	U3O8 (%)
1		LM3	3	E28,29,30	2.52	0.028
2		LM3	2	E19,20	2.61	0.049
3		LM6	2	F31,32	2.59	0.078
4		LM6	2	F05,06	2.71	0.014
5		LM6	2	F12,13	2.58	0.547
6		LM15	2	G32,33	2.52	0.084
7		LM15	2	G16,17	2.57	0.402
8		LM15	2	G22,23	2.6	0.05
9		LM16	3	D44,45,46	2.59	0.033
10		LM16	3	D25,26,27	2.55	0.262
11		LM17	3	C21,22,23	2.55	0.008
12		LM17	2	C05,06	2.55	0.007
13		LM17	3	C10,12,13	2.65	0.027
14		LM18	3	B41,42,43	2.56	0.016
15		LM18	2	B08,14	2.46	0.018
16		LM18	3	B24,25,26	2.58	0.544
17		LM22	3	A47,48,49	2.51	0.017
18		LM22	3	A16,17,18	2.46	0.021
19		LM22	3	A26,27,28	2.64	0.154

Seen from Table 5-3, 11 of 19 samples with content <0.050% make up 58% the total composite samples. If calculated as <0.085%, then there are 14 sets of samples, 73.7% the total composite samples, in fact, sampled from side-bed, no sampled in grades in orebody, but through relevant analysis of density and grade, its correlativity coefficient g=9.3%, belongs to non-correlativity. Moreover, the ore type is carbonateenriched uranium clastic rock, very simple, although not sampled according to ore types, but gave no influences to density value. So, for IR orebody, its density is representative from sample distribution, quantity and measuring value etc, the measured density value is basically credible. However, for high indexes, only 5 sets of samples are more than boundary grade, although its density is unconcerned with content, but the samples in orebody were less, gave influences to its representative.

For density of both G, and T orebodies, due to no detailed sampling methods, quantity, and measuring method etc, only 2.40 t/m[3] from Niger party was used as density value of both G, and T orebodies for this resource reserve estimation.

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5.5 Principles for orebody Delineation, Connection and Extrapolation

5.5.1 Principle for Delineation of Orebody

According to geologic features of orebodies, and respective industrial indexes, the orebody may be delineated. During delineation, a single ore layer is usually specified for delineation, IR orebody has a few boreholes with both ore discovered layers, its orebody is also respectively delineated. All three orebodies were calculated in straight thickness (true thickness).

For IR orebody, ‘‘III, IV’’ indexes were used for orebody delineation, during delineation of orebody, the margin of orebody (one side or both sides) has several continuous samples up to boundary grade, then only delineated one sample up to boundary grade, not more than 1 m long, after orebody delineated, its average grade shall be not less than industrial grade.

When delineated orebodies (blocks) of IR orebody, the average grade and meter/ percent for marginal and internal holes must reach the minimum industrial grade and minimum industrial meter/percent standard.

In delineated orebodies (blocks) of IR orebody, and the waste material or mineralization block thickness <0.70 m; if the average grade and average thickness of orebody calculated cannot reach the industrial grade, then should be estimated accordingly to non-industrial block (apart from the industrial orebody individually delineated).

For non-minerals holes in orebodies (blocks), eliminating principle: the ore discovered borehole with basic engineering interval is 1/2 the non-mineral borehole interval, delineated along dip and cancelled.

The bores with mineralization body industrial index at the margin of IR orebody ‘‘III, IV’’ index orebodies (blocks) may be only used for preparing, no used for resource reserve estimation.

When the IR orebody estimated with industrial indexes of 0.085%, and 0.043 m%, strictly delineate the orebody with the above mentioned boundary grade and boundary meter percent.

For G, and T orebodies, both industrial indexes shall be used respectively for delineating the orebody; the delineated both orebodies shall be separately estimate their resource. The ore at the same layer on profile may be firstly ensuring high index preparing and delineation; the others may be connected and delineated according to orebody of low indexes.

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Delineation of orebodies (blocks) on horizontal perspective view; in general, the strike extrapolated point is connected to the strike extrapolated point, the dip extrapolated point is connected to dip extrapolated point, seldom the strike extrapolated point may be also connected to dip extrapolated point or orediscovered point.

For all same orebody, when the block to be delineated according to different types for different control levels may adopt the combination of unified delineation and respective delineation methods, but must be based on the principle of no twice extrapolations.

5.5.2 Principle of Orebody Connection

The orebody surface of three orebodies shall be connected with straight line for both ore discovered points and unidirectional extrapolated point, and connected smoothly on profile according to the geologic conditions.

The basic drilling interval of three orebodies is 100 x 100 m, so the preparing interval shall be doubly widened, that is, the interval 4200 m may be prepared.

During preparing, firstly consider the orebody connection and its trend according to geologic conditions; mainly refer to the lower Cretaceous Irhazer group bottom sandstone roof interface form. On profile map, the orebody shall be prepared and extrapolated according to its natural pinch out features, combined with estimation method of extrapolation drawing and translation calculation.

For IR orebody, preparing principle for two layers of ore discovered: according to geologic conditions, adopted the preparing principle of upper to upper and lower to lower connection mode, for three layers of ore discovered, prepared as necessary.

When IR orebody is carried out the resource reserve estimation with ‘‘III, IV’’ indexes, the orebody and mineralization body may be prepared.

5.5.3 Orebody Extrapolation and Block Division

When IR orebody is estimated with ‘‘III, IV’’ indexes, the orebody and mineralization body may be translated to 1/2 the basic grid, but the mineralization body is not used for resource reserve estimation. When the others extrapolated and estimated the resource reserve with 0.085%, the extrapolated principles are just the same as that for both G, and T orebodies.

Both G, and T orebodies may be compacted with ring bores, that is, 100 x 100 m engineering interval added with one bore, partial blocks may adopt 50 x 50 m and 25 x 25 m density engineering intervals. So the principle for orebody extrapolation: the orebody extrapolated distance on profile is half the basic engineering interval (100 x 100 m), if less than basic engineering interval, then extrapolated according to half the actual distance, however, on horizontal perspective view of orebodies (blocks), translated 1/4 the basic engineering interval. However, all 25 x 25 m engineering

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interval may be translated according to 1/2 on profile map, extrapolated to ore-barren boreholes. For exceeding the basic engineering interval or unlimited extrapolation, doubly widen the basic engineering interval to extrapolate 100 m on profile map, and translated 50 m on plan view. For all blocks with different control level in orebody, firstly ensure the delineation of high grade blocks, others belong to low grade blocks.

Division of orebodies (blocks); because both G, and T orebodies are the same one ore layer, and basically no structure influences, or less influences of individuals, so, all with the same control level of continuous cut-through point with the same one industrial index may be delineated into the same one orebodies (blocks). For IR orebody with two orebody layers, respectively delineate the blocks according upper and lower orebody. For both G, and T orebodies, the block with lower industrial index may include that with high industrial index, but must be delineated and estimated respectively. Refer Table 5-4 for orebodies (blocks) division of orebody.

Table 5-4: Resource Control Intervals of Orebodies

				510 Interceptions	510 Interceptions			2–9 Interceptions	2–9 Interceptions		Single Interception	Single Interception	Single Interception
			Number of				Number of				Number of
			Oebodies				Orebodies				Orebodies
Orebody	ID	Cut-off	(Blocks)		Resource		(Blocks)		Resource		(Blocks)		Resource
		%	(pcs)	%	(t)	%	(pcs)	%	(t)	%	(pcs)	%	(t)	%
IR		50.050	1	10	3,476.7	62.9	7	70	1,996.3	36.1	2	20	53.1	1
		50.085	2	28.6	2,847.7	66.9	3	42.8	1,403.4	32.9	2	28.6	9	0.2
G		50.050	1	3.2	1,551.7	59.3	17	54.8	1,011.6	38.7	13	41.9	52	2
		50.085					14	53.8	1,245.6	92.6	12	46.2	100	7.4
T		50.050	5	6.8	827.6	26.8	40	54	1,757.3	56.9	29	39.2	501.4	16.2
		50.085					30	45.5	1,295.5	75.7	36	54.5	416.6	24.3

Seen from Table 5-4, both IR, and G deposits have the main orebodies, which accounts large amount in total resources. There are not too many orebodies (blocks) with more than 10 engineering workings (i.e. drilling) controlled, however, they occupies 59%–62% the total resources. Generally there are few ore blocks controlled by single working, which accounts less than 10% of the total resources. The orebodies of T deposit are scattered, not centralized as that of both IR, and G deposits. The typical projection maps for IR and G deposits are shown in Figure 5-1 and Figure 5-2.

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==> picture [294 x 315] intentionally omitted <==

----- Start of picture text -----

LS380. 0753. 25 LS710. 1432. 00 LS78 LS79 0. 1301. 70
LS730. 1620. 70 LS74 0. 2032. 00 LM35 0. 0862. 20 LS50 0. 0420. 55 LS390. 1041. 75 LS510. 0522. 80
LS8 1 0. 1662. 85 LM3 6 0. 1543. 00 LS55 0. 1972. 75 LM 3 0. 0682. 05 LS560. 0730. 75 LM4 0. 1951. 05 LS570. 0771. 35 LM5 LS58
LS76 LM3 7 0. 0953. 35 LS520. 1083. 00 LM 6 0. 1532. 23 LS40 0. 1752. 35 LM7 0. 1102. 15 LM 2 0. 0560. 95 LM8 0. 2291. 50 LS 4 1 0. 2803. 70 LM 9 0. 1552. 05
LM380. 0951. 45 LS60 0. 1152. 15 LM10 0. 1403. 65 LM110. 0603. 05 LM1 2 0. 0412. 32 LM1 3 0. 0751. 75 LS36 0. 2742. 80 LM1 4 0. 1472. 95 LM15 0. 1572. 64 LS61 0. 0631. 40
LS53 0. 0582. 80 LM1 6 0. 1022. 57 LS42 0. 1443. 10 LM17 LM1 0. 1002. 90 LM1 8 0. 1453. 00 LS26 0. 0642. 10 LM19 0. 1012. 15 LS62 0. 1840. 40
LS63 0. 0811. 90 LM2 0 0. 0702. 25 LS64 LM2 1 0. 1561. 55 LS65 0. 1443. 00 LM2 2 0. 0911. 43 LS66 0. 1392. 95 LM39 0. 1310. 50
LS67 0. 0700. 70 LS44 0. 0661. 15 LM2 3 0. 0620. 60 LS68 0. 0591. 15 LM2 4 0. 2092. 00 LS45 0. 1710. 60
2. 10 0. 129 499375
332 I R- 1 2. 57 2695127 3476.7 LM2 5 0. 3540. 35 LM2 6 0. 2002. 63 LM2 7 0. 1271. 83 LM42 LM4 3 0. 1102. 20
LM2 8 0. 0803. 20 LS46 0. 1282. 65 LM2 9 0. 1262. 30 LM4 4 0. 0401. 55 LM3 0 0. 1113. 90
LS48 LM31 0. 0583. 70 LM32 0. 0711. 50 LM460. 0853. 05
LS54 0. 0621. 80
----- End of picture text -----

Figure 5-1: Projection of Orebody 332-IR-1

==> picture [437 x 258] intentionally omitted <==

Figure 5-2: Projection of Orebody 332-G-2

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5.6 Categorization and Reliability of Resources

5.6.1 Categorization of Resources

For all three deposits were not been carried out the feasibility study, technical and economic assessment. According to orebodies survey type, the classification of resource for 25 x 25 m, 50 x 50 m, 100 x 100 m drilling rid can be classified as proven intrinsic economic resources -331 (measured according JORC categorization); 100 x 100 m engineering interval specified as controlled intrinsic economic resource -332 (Indicated Resources) and grid >100 x 100 m, 1–2 cuts delineated ‘‘shoulder limit orebody’’, that is, both unidirectional borehole or spot bore shall be specified as inferred intrinsic economic resource -333 (inferred).

5.6.2 Reliability of Resource

5.6.2.1 Verifying of Three Deposits Resource Estimation Method

In three deposits, the main orebodies (blocks) adopted the single cut uniform area influence method and single cut non-uniform area influence method, for verifying this resource reserve estimation method — geologic block method, see Table 5-5 for verifying results.

Table 5-5: Resource Estimation Verified Results for Different Methods

			Resource
			Estimated	Resource
			through	estimated
			Geologic	through
	Deposit	Verified	Block	Verifying	Relative
Cut-off	ID	Orebody ID	Method	Method	Error	Verifying Method
(U %)			(t)	(t)	(%)
50.050	IR	332IR-1	3,476.7	3,478.2	(-)0.04	Single cut uniform
						area influence
	G	332G-4	1,551.7	1,751.6	(-)12.9	Single cut non-
						uniform area
						influence
	T	331T-5	337.5	337.7	(-)0.06
		331T-9	20.9	21.5	(-)2.87
		331T-10	135	128.3	5
		331T-11	147.4	146.4	0.68
		Subtotal	640.8	633.9	1.08

*(-) indicates higher verification method values

Table 5-5 shows that relative errors vary from 0.04% to 12.9% and for both IR, and T deposits are lower than 10%; only G orebody 332G-4 error is higher, but is not caused by unreasonable delineation of blocks. Because some single interceptions of this block with large thickness and high grade are closely adjacent to both 331G-2, and 331G-4 orebodies (blocks), which cause its influenced area too large, and uneasy to eliminate during verifying, consequently increase the error

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range. Is reasonable to assume that the geological block method is consistent with the actual orebodies geology and survey methods and the total resource reserve estimation results are reliable.

5.6.2.2 Reliability of Resource Estimate

All three deposits were basically controlled by 100 x 100 m exploration grid and G deposit drillings also basically reached 100 x 100 m engineering interval and added another borehole in the middle of the grid. According to its orebody type is admitted that it belongs to detailed survey stage. The T deposit has been also drilled by 100 x 100 m or 100 x 50 m – 25 x 25 m grid intervals, therefore seeing from the point of survey level of the orebodies the detailed survey had been completed the level of ‘‘general exploration’’ and transiting to ‘‘detailed exploration’’ level. Accordingly to the survey level, orebodies geological appearances, and the adopted estimation methods it can be regarded as to be completely applicable. The estimated resource must basically reflect the actual resources/reserves. However, due to this resource reserve estimation was carried out with original data not complete, for example, the spatial location of IR orebodies unknown, that is, the absolute location of orebody unknown, only the relative location of holes marked out, but gave no influences to estimation. Although the resource reserve for both G, and T deposits were estimated with both sets of industrial indexes, but its results may respectively reflect the delineated resources. It is pointed out that due to partial orebody in original data depleted into non-orebody, which cause partial resource reserve of both orebodies lost, for example the borehole C162 of G deposit, the former data parameter is 4.6 m, 0.089% U3O8, for former indexes from Nigerien party, not form the orebody, through re-interpret with reverse convolution method, the above mentioned 4.6 m thick mineralization layer still has 2.7 m, 0.121%(U3O8) industrial orebody, up to the former boundary grade, boundary thickness specified by Niger party. During this estimation, the partial resource reserve may be lost, moreover, due to shortage of data, the absorption coefficient of flushing liquid for gamma ray logging was not corrected, which may give partial influences to resource reserve. In general, if the original data from Nigerien party are accurate, then this resource reserve estimation may reach our country’s relevant standards, and their results have high confidence level.

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5.7 Resources Estimation Results

Table 5-6 and 5-7 summarize resource estimation results for three of IR, G, and T deposits.

Table 5-6: Summary of IR, G, and T Deposit Resource Estimation Results

			Resource	Average			Average	Metal		Total
Deposit	ID	Cut-off	Category	Thickness	Ore Tonnage		Grade	Resource	%	Resource
		(U %)		(m)	(t)		(U %)	(t)		(t)
IR		50.05	332	1.54	2,771,472	4,520,103	0.129	3,575.2	64.7	5,526.1
			333	1.56	1,748,631		0.112	1,950.9	35.3
		50.085	332	2.17	1,859,095	2,996,048	0.153	2,847.7	66.8	4,260.1
			333	1.36	1,136,953		0.124	1,412.4	33.2
G		50.050	331	1.90	171,596	2,413,726	0.114	195.2	7.5	2,615.3
			332	2.65	2,039,610		0.108	2,202.8	84.2
			333	1.70	202,520		0.107	217.3	8.3
		50.085	331	1.77	85,835	856,452	0.155	132.7	9.9	1,345.6
			332	2.37	490,781		0.171	838.3	62.3
			333	2.31	279,836		0.134	374.6	27.8
T		50.050	331	1.90	1,060,227	2,866,222	0.122	1,297.6	42.0	3,086.4
			332	2.39	1,418,822		0.101	1,428.8	46.3
			333	1.82	387,173		0.093	360.0	11.7
		50.08	331	2.19	464,171	1,201,626	0.155	721.6	42.2	1,710.7
			332	2.19	377,554		0.133	503.1	29.4
			333	1.84	359,901		0.135	486.0	28.4

Table 5-7: Classification of Resources

			Metal	Resource (t)		Total
	Category		331	332	333	Resource
		Orebody				(t)
Low	Cut-off	IR		3,575.2	1,950.9	5,526.1
		G	195.2	2,202.8	217.3	2,615.3
		T	1,297.6	1,428.8	360.0	3,086.4
		Subtotal	1,492.8	7,206.8	2,528.2	11,227.8
High	Cut-off	IR		2,847.7	1,412.4	4,260.1
		G	132.7	838.3	374.6	1,345.6
		T	721.6	503.1	486.0	1,710.7
		Subtotal	854.3	4,189.1	2,273.0	7,316.4

Total low cut-off (cut-off grade 0.050%) resources of three deposits are estimated at 11,227.8 tonnes, and that of high cut-off (cut-off grade 0.085%) are 7,316.4 tonnes; the difference between both is 3,911.4 tonnes. The resources of G and IR deposits of both low

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and high cut-offs are classified to categories 332 and 333 but T deposit is mainly class 332 and 331and the classification of high index resource reserve has the same features as that of low. There is no resource of 331 Category defined (or estimated) for IR deposit.

5.8 Conclusions and Recommendations on Geology and Resources

Deposit IR is 2,000 m long and 1,000 m wide; a total of 10 orebodies are delineated, each of which is generally 500–600 m long and 200 m wide, with an average thickness of 2.07 m, an average grade of 0.149%, a burial depth of 190–200 m and a dip angle of 18 or so, mainly appearing in stratiform and lentiform. The main orebody is 332IR-1, with a strike 1,150 m long and 950 m wide with an average thickness of 2.08 m and an average grade of 0.160%, controlling 4,240 t of metal uranium reserve, accounting for 63% of the total reserve of Deposit IR.

Deposit G is 2,500 m long and 1,000 m wide. The deposit has an average thickness of 2.95 m and a burial depth of 70 m with a dip angle of 48, for which a total of 31 orebodies are delineated. The main orebody is 332G-4, which is 400 m long with a strike width of 850 m, an average thickness of 3.08 m and an average grade of 0.148%, controlling a reserve of 1,891 t, accounting for 58.9% of the total reserve of Deposit G.

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Japanese company did not put enough efforts in hydrogeology in the mine area, and there is a lack of relevant data, the impact of hydrogeology and engineering geology on the deposit extraction is unclear. And it is difficult to make a judgment about the complexity of the hydrogeology.

Therefore, SOCIETE DES MINES D’AZELIK S.A.(SOMINA) made some 31 additional reserve verification boreholes in Deposits IR, G and T as well as on the boundaries of the mine area between 2006 and 2008, of which 16 boreholes were made in Deposit IR, and 15 boreholes in Deposits G and T, amounting to a borehole length of more than 5,000 m.

6 MINING ASSESSMENT

6.1 Mining Rights Area

According to the introduction of administrative officers of SOMINA to SRK, the Company has a mining rights certificate for 220 km[2] and an exploration rights certificate for 1,952 km[2] currently. These two certificates are issued by Nigerien Government after formal signing of transfer of mining rights with Nigerien Government on 14 July 2006. However, the original mining or exploration right certificate is not available for SRK to review and SRK has only a copy of this license on a government journal presented by the company but was assured by local lawyer of full validity of this document. (see Appendix 4).

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6.2 Mine Constructions

The construction of Azelik project was commenced in June 2008. China SINOHYDRO Group is the general contractor for the engineering construction, and China Sihai Construction Supervision Co., Ltd. is the supervisor of engineering. At present, the access road from Ingle city to the property has been constructed and worker villages I and II have been constructed and are in use. The decline exploitation of IR deposit, construction and stripping of T3 strip mine, hydrometallurgical mill and power plant has commenced. It is estimated that construction of the mine will be completed in June 2010, and will be put into test production in July 2010. SRK believes, after the field investigation, that nearly all equipment and materials will need to be transported from China, so it is surprising that construction has been constructed so rapidly within more than one year, considering the long transportation distance and very poor construction conditions. This shows that SOMINA has very high engineering management level and ability of organization and coordination. Figure 6-1 shows the current construction site.

==> picture [321 x 241] intentionally omitted <==

Figure 6-1: View of the Construction Site

6.3 Mining Conditions

6.3.1 Mining Geography and Climate

The Azelik property is situated in the tropical desert climate, with the annual average temperature of more than 308C. While hot all year round the highest temperatures occur from May to July, with the temperatures of higher than 418C. It is mainly divided into rainy season and dry season for a year, of which rainy season is from July to September. Rainy season is short, and is characterized by frequent thunder storms with low rainfall. The mean annual precipitation is 137 mm, with annual sunshine hours of 3,242h and the mean annual evaporation of 6,099 mm.

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Therefore, the property belongs to droughty, hot and dry tropical desert where dust storms may occur for a short periods per day. It is very hot, with large diurnal amplitude, especially in the rainy season, making influences and difficulties for production, living and other works.

The Azelik property is located near Azelik Village, Tchiroze´ rine District, Region of Agadez, and the Republic of Niger in West Africa. According to Sino-Niger Agreement, permissible exploitation area (including mining right area) is from EL 6835’00’’ and NL 17816’00’’ to EL 7800’00’’ and NL 17840’00’’, with area of 1,953 km[2] .

The region of Agadez is located in the northernmost part of The Republic of Niger, bordered upon Mali, Algeria, Libya and Chad. The Capital, Agadez is 1,009 km away from Niamey, connecting with the asphalt road equal to the third class road in China. Niger is a land-locked country without sea ports.

The Mine is located 163 km away from the northwest of Agadez, the capital of Agadez. There are three villages near the property, including Azelik Village, Geleli Village, and Teguidda in Tessoum Village, and one settlement, with the population of about 1,500 persons. Of which, Teguidda in Tessoum Village has larger scale than others. Generally, these villages are 5*7 km away from the property.

6.3.2 Orebody Occurrence

The Azelik property belongs to desert plain landform, with monotonic land surface undulation. Ground elevation is between 360 and 408 m. Relative height difference is only within 48 m. Overall trend is high in the east and south and low in the west and north.

At present, three mineral deposits have been discovered in Azelik property, the IR, G and T mineral deposits. The ground elevation of the T and G mineral deposits is 367380 m where the land surface is mainly covered with sand gravels, some ephemeral streams are developed from high to low, and seasonal bog ground is formed at the low-lying site. It belongs to the Desert — Gobi landform. The IR mineral deposit is located about 8 km to the north of the T mineral deposit, under the IRHAZER intermittent river shoal, with the ground elevation of 366367. Here, the land surface is made up of diluvial clay, mainly appearing in chap land, belonging to argillaceous desert landform.

10 orebodies (plots) have been blocked out in IR mineral deposit in different areas, which are distributed in the area range of 1 km wide and 2 km long, and the buried depth is various from 190 to 200 m. Orebody is in sill-like shape and lenticular 8 shape, with the obliquity a <1 , and thickness of 0.34.3 m. It has been proved up that the geological ore reserve is 4,520,000t, metal reserve is 6,739t, and average grade is 0.149%. Totally 105 orebodies (plots) have been blocked out in T and G mineral deposits in different areas, which are distributed in the area range of 1 km wide and 6 km long, and the buried depth is various from 0 to 160 mm. The orebody here is in silllike shape, bedded shape and lenticular shape, with the obliquity of 485 and the thickness of 0.15*8.05 m. It has been proved up that G mineral deposit has the

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geological ore reserve of 2,410,000t, metal reserve of 3,189t and average grade of 0.132%; T mineral deposit has the geological ore reserve of 2,860,000t, metal reserve of 3,764t and average grade of 0.131%.

6.3.3 Engineering Geologic Condition of the Property

The IRSA Company has not completed detailed assessments for engineering geology and hydrogeology. SOMINA has carried out supplementary exploration on engineering geology and hydrogeology of the property once when it was established in 2007, to obtain the data of engineering geology and hydrogeology which was used as the reference for mine design.

The adjoining rock of IR mineral deposit and T and G mineral deposit is a set of grey mudstone, of calcic cementation, developed in bedding and fissure. According to the core condition, quality index of rock (RQD) is within 7585. This indicates that the completeness of rock is good, but the softening factor of rock is between 0.540.71. Thus, the rock belongs to soft rock. In consideration of the expansibility and contractibility of mudstone, and the characteristic of expansion to disintegration for attaching water, it is determined that engineering geological condition of mineral deposit is complicated and unstable.

16 groups of core samples have been taken for physical mechanics indicator tests during gradual supplement exploration on Azelik uranium deposit. Table 6-1 indicates the rock mechanic factors of the mine.

Table 6-1: Physical Mechanics Indicators of Rocks of Azelik Uranium Mineral Deposit

	Uniaxial
	Compressive	Elastic	Poisson	Triaxial Shear
Lithology	Strength	Modulus	Ratio	Strength		Remark
	(MPa)	(GPa)		c(MPa)	F(8)
Gray sandstone	66.06	25.62	0.269	13.55	47.07
Rufous mudstone	36.01	4.3	0.182	9.76	35.1
Brown siltstone	47.8	8.38	0.226	14.24	27.96
Pink fine sandstone	72.09	18.18	0.248
Grey mudstone	63.64	7.83	0.182
Brown fine sandstone	14.6	1.56	0.355
Purple pelitic siltstone	31.5					IR deposit
Purple pelitic siltstone	16.7
Medium fine sandstone	43.6
Pebbled sandstone	15.8
	9
Fine sandstone	15.7
Fine sandstone	22.1
Claret pelitic siltstone	16.1					G deposit
Pebbled medium
coarse sandstone	22.5
Pebbled medium
coarse sandstone	12.1

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SRK has sighted the complexity of engineering geology in the property through field investigation, upon which, SRK believes the works on engineering geology of the property are not complete, especially for the important sections of facilities, and the investigation of engineering geology has not meet the design requirements. Thus, during the geological exploration in the future, it is very necessary to intensify the exploration of engineering geology.

It can be seen from the table above that compressive strength of wall rock in mineral deposit is not high, and range of variation is large, and coefficient of hardness is between 1*7. Thus, supporting measures shall be intensified during underground mining of mineral deposit.

The engineering geologic condition of Azelik uranium deposit is known as: engineering geologic condition of IR mineral deposit belongs to complicated type, that of open-pit in T and G mineral deposits belongs to simple type, and that of underground stope belongs to complicated type.

Specific gravity of ore: Specific gravity of ore in IR mineral deposit is 2.57 t/m[3] ; Specific gravity of ore in G and T mineral deposit is 2.4 t/m[3] .

Hardness coefficient of rock is f = 56, and loose coefficient of ore and rock is 1.51.6.

6.3.4 Hydrogeologic Condition of the Property

The Azelik uranium property is located in desert area, where the climate is droughty and lack of rain, with the mean annual precipitation of 139 mm and mean annual evaporation of 6,099 mm. There is an ephemeral stream at IR mine where the rainy seasons are distributed in July, August and September. Water is limous and river is wide and shallow, so it is difficult for water catchments. In other seasons, there is no water. Thus, it cannot be used as the water source of the property.

Only one layer of aquifer is disclosed in T mineral deposit. The other two layers (introduced in raw data) are as deeper as under the producing formation and were not disclosed during the supplement hydrogeologic works. Groundwater is recharged regionally. No details are provided for lacking of regional geologic information. Groundwater in T mineral deposit belongs to confined water, and the buried depth of aquifer is 68.8 m. Confined level is 11.7 m under the earth’s surface.

The G mineral deposit has similar characteristics with T mineral deposit engineering geology and their hydrogeologies are basically the same, belonging to regional recharging. Groundwater belongs to confined water, buried depth of aquifer is 5.6 m, and confined level is higher than the surface.

The IR mineral deposit has two aquifers totally. One is loose aquifer of the Quaternary System, belonging to phreatic aquifer, and the other is sandstone aquifer of Cretaceous System, belonging to confined aquifer. Loose pore phreatic water of Quaternary System is made up by atmospheric precipitation, and the water flow

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changes with the seasonal variation. The groundwater flow increases in the rainy season and decreases in the dry season. The confined aquifer belongs to the regional recharging environment. The groundwater in the mineral deposits belongs to phreatic water and confined water. Buried depth of phreatic layer is 12*15 m, and that of confined aquifer is 81.2 m. The confined level is 40.6 m under the earth’s surface.

As there is no detailed hydrogeological assessment for the property and the hydrogeological data is currently not complete, the only available values of water flow for underground mining stope and open-pit are those estimated by The Fourth Institute of Nuclear Engineering. Table 6-2 provides these mine water flow estimates. These estimated values will be different from those in the actual production. SRK believes it is very important and critical to do completed a derailed hydrogeological assessment for the mine project, due to the project being situated in the droughty and unwatered desert belt. Moreover, it is of vital importance to ensure the normal water supply for mine production.

Table 6-2: Forecasted Statement of Water Flow in Azelik Uranium Property

Name of Mineral Deposit	Average Water Flow	Maximum Water Flow
	(m3/h)	(m3/h)
IR mineral deposit	85–145	130–220
T mineral deposit (open)	0–32	0–51
T mineral deposit (underground)	33–45	49–68
G mineral deposit (earlier stage)	25	30
G mineral deposit (middle stage)	50	60
G mineral deposit (late stage)	65	90

6.4 Mining Design

6.4.1 Exploitation Mode and Range

It has been defined at present that there are three mineral deposits in Azelik property, the G, T and IR three mineral deposits. These are distributed within an area of 12 km x 7 km and belong to medium and low grade. It is determined to establish the hydrometallurgical plant together for the three mineral deposits, in order to develop the three mineral deposits effectively in the mode of exploitation respectively, so as to realize the economic benefit of scale.

Mining by stages and in orders should be adopted for G and T mineral deposits; in order to manage and control the investment of capital construction. Open pit mining of T deposit should be done firstly and then open pit mining of G mineral deposit. The underground mining in the late stage also should be done to the underground part of T mineral deposit and G mineral deposit in turns.

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The reserve of IR mineral deposit is large. The IR mineral deposit is distributed centralized and is exploited independently in one well field. Because the buried depth of orebody is deep, underground mining is adopted, in the same with the opening parts of G and T mineral deposits.

Totally 10 orebodies (plots) have been blocked out in IR mineral deposit. It takes no account of exploitation of the four orebodies (333IR-4, 333IR-5, 333IR-7 and 333IR-8) as they are far way from the main orebody, with less thickness, low grade and single-borehole controlled. It will be determined for exploitation after the supplement exploration and updating of reserves. Therefore, for IR mine, 6 orebodies (plots) are to be exploited, including 333IR-1, 333IR-2, 333IR-3, 333IR-6, 332IR-1 and 332IR-2.

Totally 31 orebodies (plots) have been have been blocked out in G mineral deposit, of which 17 orebodies are single-borehole controlled with low control degree. It is determined that the exploitation should be carried out in the 14 orebodies (plots) with higher control degree, in order to reduce the risk of exploitation.

Totally 74 orebodies (plots) have been have been blocked out in T mineral deposit, of which 36 of them are single-borehole or double-borehole controlled. 332T18 plot is far way from main orebody, and its control degree is low. It is determined in the design that exploitation should be carried out in the 37 orebodies (plots) with higher control degree, in order to reduce the risk of exploitation.

In fact, the overall geological exploration degree of the property is low. IRSA Company was relatively conservative in blocking out the orebodies. Cut-off grade selected exceeds the standard in China currently. Therefore, many continuous orebodies are divided into small decentralized orebodies. Relevant economic and technical evaluation should be carried out for determining a reasonable and economic cut-off grade. SOMINA has carried out some supplement geological explorations after taking over the property. The opinions have been proved through the results of exploration. Thus, exploration range of the three mineral deposits may change greatly. SRK suggests intensifying the geological exploration on the property, to make it clear the interrelationship between orebodies, while in considering the using of low grade ore, and making full use of available resources with the same total investment, so as to promote return on investment and overall economic benefit.

6.4.2 Development of Mineral Deposit

Through technical and economic comparison for the development of IR mine, it has been determined that main and auxiliary declines are adopted to reclaim the mineral deposit. The maximum gradient of the decline is 20% and the section of the decline is determined according to the 6t scraper. The main decline is provided with a rubber belt conveyor to transport ores, while the auxiliary decline underground trucks are used to transport personnel, equipment and materials. The decline is opened from the southeast of the mineral deposit, digging in from the southeast to the northwest. After the decline reaches the level of the orebody, the southeast-northwest rock drift is dug from the southwest edge of the orebody. After digging for certain distance, the southwest-northeast district is dug every 192 m so that the district can be divided

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according to the standard haulage way. The ore mined on the work surface is loaded on underground trucks by a scraper and transported to the ground via the decline. Figure 6-2 and Figure 6-3 indicate the IR mine development system.

==> picture [433 x 421] intentionally omitted <==

Figure 6-2: IR Mine Development System

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TECHNICAL REPORT

==> picture [407 x 306] intentionally omitted <==

Figure 6-3: A view of the Main Decline of the IR Mine

At the early stage of G and T mineral deposits, the open pit mining is adopted. Because the landform of the G and T mineral deposits is smooth, the ore occurrence is plentiful and scattered and the orebody is thin with slow angle of inclination, the separate mining and transportation are required. For the open mining, the depth is small and the service age is short, so that highway haulage development, which is flexible, adaptive and convenient for mining by areas, is adopted for opening mining of G and T mineral deposits.

SRK believes that it is reasonable for the development type selected for the open mining of G and T mineral deposits. There are several development types for IR mineral deposit, but main — auxiliary declines selected after technical and economic arguments are substantially reasonable as well. Because the quantity of mining is only 1,000t/day, the decline development or rail decline combined development may be more reasonable from the aspect of reducing investment.

6.4.3 Boundary Optimization of Open Pit Mining

The open pit mining method is adopted for the upper parts of G and T mineral deposits. The Fourth Research and Design Institute of Nuclear Industry has optimized the open pit boundaries of two mineral deposits and decided the final mining boundaries. Table 6-3 shows the calculated parameters related to the final reasonable economic stripping ratio.

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Table 6-3: T and G Economic Estimation Indices

Calculation parameter	Unit	G deposit	T deposit
Ore bulk density	t/m3	2.4	2.4
Waste bulk density	t/m3	2.4	2.4
Stripping cost (including haulage)	RMB/t	16.05	15.57
Product price	RMB/t	900,000	900,000
Apparent recovery rate of open mined ores	%	97	97
Yield factor of unit raw ore from open pit
mining (content of natural uranium
calculated up to metallurgy)	%	0.1113	0.115
Apparent recovery rate of underground
mined ores	%	95	95
Yield factor of unit raw ore from
underground mining (content of natural
uranium calculated up to metallurgy)	%	0.1059	0.1089
Calculated selling cost of unit crude ore
from underground mining	RMB/t	390.1	390.1
Calculated selling cost of unit crude ore
from open mining (excluding stripping)	RMB/t	53.44	51.56
Grade of raw ore from open pit mining	%	0.125	0.129
Grade of raw ore from underground
mining	%	0.119	0.122
Gross recovery of hydrometallurgy	%	89	89

It is estimated from the above table that the reasonable economic stripping ratio of the G mineral deposit is 23.95 m[3] /m[3] , and that of T mineral deposit is 25.24 m[3] /m[3] .

Ultimate pit of Mineral deposit G

According to parameters set in above table, totally 3 open pits are blocked out for deposit G, i.e. Open Pit G1, G2 and G3; wherein, Open Pit G1 is mainly for the exploitation of section 332G-4 and several small orebodies around it; Open Pit G2 is generally for the mining of exposed orebodies 331G-7 and 332G-7; Open Pit G3 is primarily for the exploration of ore bodies 331G-6 and 332G-6 with relatively shallow burial. Table 6-4 shows the parameters for each pit.

Gross amount of material to be stripped within the ambit of open pit is 11,767,806 m[3] ; wherein, the amount of rock and ore is 11,185,976 m[3] and 581,830 m[3] (1,396,393 t) respectively. The ore enjoys an average grade of 0.139% and an overall stripping ratio of 19.23 m[3] /m[3] . Table 6-5 shows the amount of waste and rock, extracted grade, extracted metal content and stripping ratio for each pit.

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Table 6-4: Parameters of Each Pit

Item	Unit	Open Pit G1	Open Pit G2	Open Pit G3
Highest elevation of pit	m	376	381	379
Lowest elevation of pit	m	299	377	368
Dimension of bottom surface
(length x width)	m	949 x 290	150 x 75
Dimension of the largest
ambit (length x width)	m	1,045 x 444	150 x 75	230 x 82
Bench angle		658	908	658
Bench height	m	10
Width of the safety platform	m	7
Width of the cleaning
platform	m	7
Maximum height of side
slope	m	74	2	10
Ultimate side slope angle		428*488		658

Table 6-5: Ore and Waste from the Open Pit Mining

		Total
		Material	Waste	Ore	Ore	Average	Metal	Stripping
Pit	Bench Elevation	Stripped	Volume	Volume	Tonnage	Grade	Content	Ratio
		m3	m3	m3	t	%	t	m3/m3
G1	Ground*360 m	4,684,226	4,662,523	21,703	52,086	0.14	73.016	214.84
	360*350 m	2,475,194	2,389,219	85,975	206,339	0.148	304.488	27.79
	350*340 m	1,890,228	1,795,829	94,399	226,558	0.146	331.23	19.02
	340*330 m	1,346,322	1,246,778	99,544	238,905	0.14	334.904	12.52
	330*320 m	839,115	727,756	111,359	267,261	0.14	374.655	6.54
	320*310 m	400,986	317,569	83,417	200,201	0.14	280.647	3.81
	310*299 m	78,826	20,623	58,203	139,687	0.132	184.336	0.35
	Total	11,714,896	11,160,297	554,599	1,331,037	0.141	1,883.276	20.12
G2		12,116	4,944	7,173	17,214	0.115	19.755	0.69
G3	378*368	40,793	20,734	20,059	48,142	0.088	42.373	1.03
	Total	11,767,806	11,185,975	581,831	1,396,393	0.139	1,945.404	19.23

Ultimate pit of deposit T

Totally 6 open pits are blocked out for deposit T, i.e. T1, T2, T3, T4, T5 and T6; wherein, Open Pit T1, T5 and T6 are mainly for the exploration of several small orebodies exposed or buried superficially; Open Pit T2, T3 and T4 are provided with relatively great scale, serving as main open pits for Mineral deposit T. Table 6-6 shows the parameters of each pit in T Mine.

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Table 6-6: Parameters of Each Pit in T Mine

		Open	Open	Open	Open	Open	Open
Name of element	Unit	Pit T1	Pit T2	Pit T3	Pit T4	Pit T5	Pit T6
Highest elevation of pit	m	385	384	383	382	386	386
Lowest elevation of pit	m	364	331	340	340	384	366
Dimension of bottom
(length x width)	m	75 x 75	238 x 175				125 x 85
Dimension of the ultimate pit
(length x width)	m	102 x 102	335 x 293	560 x 380	714 x 215	125 x 75	150 x 100
Bench slope angle		658	658	658	658		658
Bench height	m	10	10	10	10		10
Width of the safety platform	m	4	4	5	5		4
Width of the cleaning platform	m		10
Maximum height of side slope	m	21	53	42	40	2.3	20
Ultimate side slope angle		558	498	528	50.58		558

Gross amount of material to be stripped within the ambit of open mining is 8,048,802 m[3] ; wherein, the amount of rock and ore is 7,630,507 m[3] and 408,295 m[3] (979,910 t) respectively. The ore enjoys an average grade of 0.149% and an overall stripping ratio of 18.69 m[3] /m[3] . Table 6-7 shows the waste and ore, extracted metal content and stripping ratio for each pit.

Table 6-7: Ore and Waste Stripped from Each pit in Mine T

	Bench							Stripping
Pit	Elevations	Material	Waste	Ore	Tonnage	Grade	Metal	Ratio
		m3	m3	m3	t	%	t	m3/m3
T1	385–374 m	84,961	84,961
	374–364 m	15,497	7,533	7,964	19,114	0.243	46.503	0.95
	Subtotal	100,458	92,495	7,964	19,114	0.243	46.503	11.61
T2	382.5 m–375 m	531,104	531,104
	375–365 m	601,650	601,650
	365–355 m	449,835	449,835
	355–345 m	361,242	361,242
	345–331 m	213,273	138,368	74,905	179,772	0.161	289.54	1.85
	Subtotal	2,157,103	2,082,198	74,905	179,772	0.161	289.54	27.8
T3	382–370 m	1,539,042	1,521,190	17,852	42,846	0.131	56.29	85.21
	370–360 m	862,290	811,254	51,036	122,486	0.139	170.406	15.9
	360–350 m	413,653	414,994	45,589	109,413	0.121	132.211	9.1
		46,930
	350–340 m	102,233	26,584	75,649	181,558	0.191	3,446.79	0.35
	Subtotal	2,964,148	2,774,022	190,126	456,303	0.155	708.141	14.59
T4	381.5–370	1,360,434	1,360,434
	370–360	844,669	833,651	11,018	26,443	0.07	18.511	75.66
	360–350	393,629	328,680	54,949	131,878	0.126	166.097	5.98
	350–340	79,203	29,798	49,405	118,572	0.13	154.634	0.6
	Subtotal	2,677,935	2,552,563	115,372	276,893	0.123	339.723	22.12
T5		8,264	1,817	6,447	15,472	0.291	44.98	0.28
T6	386–376	112,424	112,424
	376–366	28,469	14,988	13,481	32,354	0.096	31.111	1.11
	Subtotal	140,892	127,411	13,481	32,354	0.096	31.111	9.45
	Total	8,048,802	7,630,507	408,295	979,910	0.149	1,457.07	18.69

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TECHNICAL REPORT

There is a design reserve of 852.8 kt outside the ambit of open pit mining for deposits G and that for deposit T is 1,438 kt. Underground mining is used for the exploration of design reserve beyond ambit.

Through the field investigation and the communication with technicians from SOMINA, SRK holds the opinion that there is relatively great difference between the ambit of open mining determined at present and the occurrence condition as well as the geologic resource of orebody, falling short of the purpose of pit optimization. At the minimum Open Pit T5 which has finished preliminary stripping, SRK sees that there are no relatively great variation for orebody after the stripping is done as per the designed ultimate ambit, the grade of ore is higher than that given in geologic data, and the charge of ore is predicted to be increased to more than 30,000t. It is conservatively estimated that the orebody will not disappear even being pushed outwards for 30–40 m and it is much likely to be connected with Pits T4 and T3. Due to the inadequate geological exploration level, many orebodies are controlled with single drill hole, resulting in the uncertainty of distribution regularity and occurrence condition of the orebody, thus to bring about the error in the design of the pit. SRK considers that corresponding complementary geologic exploration is necessary for further finding out the distribution regularity and occurrence condition of orebody.

6.4.4 Mining Method and Stripping Technology

. Mining method for IR mine

The Fourth Research and Design Institute of Nuclear Industry specially designed the underground mining of IR mine. Orebody of Mineral deposit IR belongs to horizontal thin orebody. Mean thickness of the orebody within the range of mining is 2.19 m, f=5*6. Ore and wall rock belong to stable and medium stable type and the ore is provided with medium geologic grade (0.151%). According to the experience on the exploration of similar mineral deposit throughout the world, the favourable mining method is room-and-pillar stoping. Room-and-pillar stoping is provided with the advantages of flexible room layout, simple mining technology, the availability of flexible power-operated trackless equipment, small ore depletion ratio and great production efficiency. In order to prevent the large-scale ground pressure induced by the oversized exposure area of goaf and to eliminate hidden safety danger, the ore pillar has to be mined as per certain steps, the roof wall rock has to be timely blasted down and the goaf has to be filled for releasing ground pressure while mining through the method of roomand-pillar stoping. This method is characterized in low production cost, small loss rate and great safety level.

The mining operation of the overall ore district is carried out at two mining areas simultaneously. The primary mining section is arranged at the middle of mineral deposit, followed by the withdrawal towards both wings. In order to bring into play the efficiency of trackless equipment, each mining area marks out several panels, within which the parallel operation of multiple working faces can be

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realized. The productivity of each mining area is determined as 150 kt/a according to the comprehensive consideration over the productive capacity of facilities equipped for each mining area.

. Panels

Taking the rational load distance of scraper into consideration, size of the panel is set as 96 m x 96 m and panels are separated by prospecting (mining) access with the width of 6 m. Within each panel, 5 rooms, of which the length is 90 m and the width is 6 m, and 5 pillars, of which the length is 90 m and the width is 12 m, are vertically and alternatively arranged along the prospecting (mining) access. Figure 6-4 shows the room and pillar mining method in the IR mine.

==> picture [398 x 397] intentionally omitted <==

Figure 6-4: Room and Pillar Mining Method in IR Mine

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Exploiting and mining of the panel include the development roadway for the mining area, the crosscut for the withdrawal of ore and the roadway for prospecting and mining. According to the technological demand of mining method, two parallel development roadways are arranged for each mining area with one end communicated with rock drift and the other connected with return air shaft, forming the system of exploitation, transportation and ventilation for mining area. Roadway for prospecting and mining is cut along the transportation road of the mining area with a space of 96 m for marking out panels.

Progressive mining is used for room and retrusive mining is used for pillar. During mining, the pillar is required to be divided into mining units with the dimension of 12 m x 9 m. Within each mining unit, the mining access with the width of 6 m is excavated normal to pillar at first, leaving small pillars with the dimension of 12 m x 3 m, and then, the crosscut with the width of 6 m is excavated at the middle of small pillar, leaving two remnant pillars with the dimension of 3 m x 3 m. After that, down-hole drill is used for drilling deep hole on roof, getting ready for roof caving. Remnant pillars should be blasted down and the ore from remnant pillar should be recalled so far as possible according to the safety condition on site prior to the pressurization and caving of roof. The remnant pillars can be subject to forced caving after recovery.

The Rocket Boomer S1 L short type drill jumbo is used for drilling with the depth of 3.4 m, average blast hole depth of 3.0 m and hole diameter of 43*45 mm. The charging can be carried out manually or via charging machine. In order to guarantee the trim circumference for the access, smooth blasting is used. Ventilation should be carried out after blasting for exhausting blasting fume. ST600LP short type scraper with the shovel size of 2.7 m[3] is selected for the withdrawal of ore. Ore is transported by the scraper to the crosscut for the withdrawal of ore within the panel, and then loaded onto the 10t truck for shipping out from the mining area. After the withdrawal, Boltec SL short type rock bolting jumbo is used for supporting the roof with the bolt length of 1.8 m and supporting space of 1.0 m x 1.2 m. Reinforcing rod net canopy guard should be installed if necessary.

When the orebody is thinner than 1.5 m, ore and rock should be mined and transported separately, so as to decrease impoverishment. When orebody is thicker than 3.5 m, the exploitation should be carried out in two layers, for which the lower ore should be mined after the exploitation of upper ore followed by the supporting of roof.

Average mining loss rate is 10% and depletion ratio is 10%.

The mine works 300 days per year, 3 shifts per day and 8 hours per shift.

SRK considers that the mining method selected by IR ore is rational and feasible. However, during practical application, the recovery proportion of pillar is small with a view to safety factors. If the ore is provided with relatively high

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grade, the roof should be supported by laying mullock or cement. Similarly, further study should be given to the size of pillar. Figure 6-5 indicates the 3D room and pillar mining method.

==> picture [326 x 239] intentionally omitted <==

Figure 6-5: Typical Room and Pillar Mining Method

. Stripping technology of mine G and T

Totally 3 open pits are blocked out for deposit G, among which the Pit G1 is the largest one and Pits G2 and G3 are small.

Totally 6 open pits are blocked out for deposit T, among which Pits T2, T3 and T4 are larger and Pits T1, T5 and T6 are smaller.

For G and T mineral deposit is provided with smooth landform, the ground gradient of 18 or so, the orebody obliquity of about 48*58 and a few amount of exposed orebody, the capping on the orebody has to be stripped at first.

The capping on deposits G and T is weathered bulky mudstone and sandstone, of which the uniaxial compressive strength P is less than 30 MPa and the softening coefficient is smaller than 0.75. It belongs to softrock, of which most rock can be directly stripped by machinery. Considering the level of engineering geology study is relatively low and the amount of geologic influencing factor in future is great, 80% of rock is designed to be stripped in the mode of blasting and the rest 20% (mainly is surface soil layer) is stripped mechanically.

For the depth of the Pits G2, G3 and T5 is less than 10 m, bulldozer or hydraulic excavator can be directly used for stripping.

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The pits T1 and T6 are subject to the maximum mining depth of 20 m, for which whether bulldozer or hydraulic excavator can be directly used for stripping can be determined according to the practical exposure condition.

For the maximum mining depth of Pits G1, T2, T3 and T4 is 40*70 m, bulldozer can be used to strip the surface soil layer at first, and then, the method of bulldozer — hydraulic excavator combined stripping and the blasting method is considered according to the condition of the exposed rock stratum. Figure 6-6 shows the Open Pit T3 under stripping.

==> picture [393 x 294] intentionally omitted <==

Figure 6-6: View of Open Pit T3

The rock within the Mineral deposits G and T is soft. Rotary drill is selected for stripping and drilling basing upon relevant experiences on soft stratum exploitation. When drilling in crumbly rock, rotary drill is provided with the advantages of fast speed, low production cost, simple and portable equipment and low price comparing with down-hole drill and roller drill. Model KX-150B rotary drill with the aperture of 150 mm is selected, of which the perforated mesh is arranged as 5.7 m x 4.9 m. Straight holes with the depth of 10.511 m and exceeding depth of 0.51 m are used for bench blasting and are laid in rectangle or quincunx. The technique of multi-row hole short delay blasting and nonconductive blasting system are used for initiation. For dry hole, ammonium nitrate fuel oil mixture can be charged while for water hole, emulsion explosive

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can be filled. Both ammonium nitrate fuel oil mixture and emulsion explosive are charged on site through Model BCZH-8 explosive mixed loading vehicle, being able to meet the demand of production.

For orebody that is thin, Model ROC-D5 drill jumbo is selected for drilling during ore mining, so as to decrease the loss due to impoverishment. The drill is provided with the aperture of 3843 mm and the perforated mesh is arranged as 1.7 m x 1.6 m. Depth of the hole is 0.20.3 m through orebody and holes are laid in rectangle or quincunx. The technique of multi-row hole short delay blasting and non-conductive blasting system are used for initiation. For dry hole, ammonium nitrate fuel oil mixture roll is used with manual charging; for water hole, charging machine is used for charging emulsion explosive.

The maximum lumpiness of rock is 0.8 m and the lump rate is 3%. The method of shallow hole blasting is used for secondary crushing after the centralization of chunk. The aperture is 36*42 mm and corresponding mobile compressor is equipped.

According to the occurrence condition of the orebody and the stripping method and equipment selected and referring to the practical production index of similar mine, the loss rate and depletion ratio of ore are determined as 3% and 5% respectively.

For fluffy rock, Model CE460-6 (2 m[3] backhoe) hydraulic excavator is used for excavating, shoveling and loading. For hardish rock, Model CE460-6 (3 m[3] face shovel) hydraulic excavator is adopted for shoveling and loading after being loosened through blasting.

For the protective rock layer on orebody with the thickness of about 1 m, Model ZL50G (2.5 m[3] ) loader is used for shoveling and loading after being peeled off the raking site through bulldozer.

For ore, Model ZL50G (2.5 m[3] ) loader is used for shovelling and loading after being loosened through blasting.

Ore and rock are respectively transported to hydrometallurgical mill and waste rock pile by Model TR35 (32t) dump truck, of which the average haulage distance for rock and ore is 1.4 km and 7.5 km respectively.

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Table 6-8 shows the equipment inventory for mines T and G.

Table 6-8: Equipment Inventory of Mines T and G

	Specification
Name	and Model	Operation	Standby	Total
Rotary drill	KX-150B	2		2
Drill jumbo	ROC-D5	1	1	2
Explosive mixed loading	BCZH-8	1		1
vehicle
Hydraulic excavator	CE460-6(3 m3)	2		2
(face shovel)
Hydraulic excavator	CE460-6(2 m3)		1	1
(back hoe)
Mini-type loader	ZL50G(2.5 m3)	1	1	2
Dump truck (for rock)	TR35(32t)	16		16
Dump truck (for ore)	TR35(32t)	2		2
Bulldozer	TMY220 (desert	3	1	4
	type)
Hand-held drill	QJ15	2	2	4
Water wagon (5t)	7.5 m3	1		1
4.5t oil tanker	Dongfeng EQ140	1		1
	tank truck
	(diesel oil)
Vehicle for management	Beijing jeep	1		1
Hydraulic excavator (has	PC220-7	1		1
been purchased by the
Owner)
Total		34	6	40

SRK agrees to the stripping technology for mines G and T and considers that the selection of relevant technological parameters is rational. The average stripping ratio is 18.69, which is lower than the economical and rational stripping ratio. However, the layout of equipment, such as hydraulic excavator, is strained and short of margin. For Azelik property, the mine with extremely poor conditions, the maintenance of mining equipment is crucial. For the production scale of mine is not great and orebodies are dispersed, large-volume and large-tonnage equipment is unable to be brought into play, and to the contrary, the durability, easy maintenance and flexibility of equipment are extremely significant.

SRK finds out on site that the great causes for stripping ratio is: a great amount of ore with the grade of 0.06–0.09% is discarded to waste rock pile. This is a kind of great waste. For there is a great amount of open space can be used for heap leaching at the location of property, SRK considers that the cost on the heap leaching of ore with low grade is greatly lower than the expense for hydro

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metallurgy. SOMINA is carrying out heap leaching test on ore with low grade on site; however, there are still no specific measures and proposals about how to treat the ore with low grade. SRK recommends that the ore with low grade can be separately piled rather than being discarded to waste rock pile with waste rock prior to the presentation of specific proposal.

6.5 Ventilation

Since IR deposit is mined by underground mining, the ventilation underground is very important. According to the type of occurrence and determined exploiting plan of orebody, mine designed by the design institute adopts draw-out type ventilation and sectorization ventilation systems for convenient production management.

There are inlet air shaft and return air shaft set in each mining area, and in order to avoid inlet air pollution, main decline for ore delivery will not intake air in principle, auxiliary decline and each mining area inlet air shaft are the main inlet air ducts, return air shaft in mining area is the main air return duct, and ventilation motor underground chamber where the main air blower is installed is set at the bottom of the return air shaft in respective mining area. Fresh airflow enters into the down hole via assistant slope ramp and mining area inlet air shaft, and then, it passes through the rock drift and mining area development roadway to the mining working plane. After cleaning the working plane, bad air will be exhausted to the ground surface through the return air shaft in mining area.

The underground mining working plane mainly depends on the total blast pressure ventilation of the coal mine, and in the hard ventilation area, portable blower is adopted to assist the ventilation, and portable blower adopts eight JK58-1N04.5 energy-saving portable blowers (including two spare ones), with power of the electric motor being 11 kW.

In order to improve the effective air quantity ratio of ventilation, air control measures are taken at essential points in the down-hole to break, direct and control the airflow, to ensure that the airflow reaches to the air-needed place for production, for example, obstructing the abandoned workings in time, closing the hanging air brattice which won’t be used for the occasion, air deflector or adjusting air window shall be adopted to control the airflow for airflow interjunction points.

One dust control water curtain shall be placed every 100 m in the assistant slope ramp, and water curtain is required to spray water auto-inductive to lean the airflow when vehicles passing by, and dust control water curtain shall be also set at the places where dust is easily created, such as the ore dumping chamber at the transfer station.

Since the exploiting systems of IR mine haven’t been formed, the concrete ventilation effectiveness cannot be verified, by viewing the designed ventilation modes and ventilation systems, SRK takes that it shall be reasonable. However, the ventilation systems of subsections requires a lot for production management, after placing on production, to enhance the management of the ventilation system is very important, otherwise, the ventilation systems will be deranged, and affects the regular production.

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6.6 Conclusion and Suggestions

The mining design of Azelik property is relatively systematic and comprehensive. The Fourth Institute of Nuclear Engineering of CNNC mining design enjoys great reputation and level in the field of uranium mine design in China. For the geological exploration level of IR, G and T mineral deposits of Azelik property is relatively low, orebodies are dispersed and occurrence conditions are various, the design of mining is difficult. SRK considers that the ideology and principle of design is correct and the design parameters selected are basically rational. Due to the great differences between the location of Azelik property and China, attentions should be paid to following specific problems:

The low level of geological exploration impacted the accuracy of the mine design. Site inspection indicated that the orebody is more continuous and complete than what are expected from the mine design. It will be more apparent if the cut-off grade can be lowered by a little bit.
IR mine has been developed in compliance with the design; however, the wall rock encountered is much weaker than what is expected from the mine design. This situation generates difficulty for the tunnel development and for the pillar recovery. SRK noted that it would be very important to update the mining method proposed by the design through proper mining method testing.
SRK noted that pit boundaries of deposit G and T may be updated as the progressing of mining. SRK believed the mining sequence proposed by the design to be reasonable which is to use the waste rock from underground mining backfill the open pit developed in the first stage of mining. The approach can not only save cost but also provide support to the underground mining.
SRK suggests updating the estimation for equipments and cost, as machineries will not last that longer in such an environment of heavy sand storm and high temperature.
SRK believes that exploration will be very important for the mine and can be a key input for mine development and production. SRK suggests the mine’s allocation of capital and personals to form a exploration team to give support to the mine exploitation.
SRK noted that nearly all raw materials and equipments need to be bought from overseas and now the mine bought everything in China; however, it will be an option to purchase materials with high transportation add-on in nearby countries.

7 METALLURGICAL AND PROCESSING ASSESSMENT

7.1 Introduction

Between 1975 and 1988 a Japanese company ONAREM-IRSA carried out a drilling campaign and uranium mineral reconnaissance of the Azelik Uranium Project situated in northern Niger, which culminated in the publication of a Pre-Feasibility Study (‘‘PFS’’)

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report. During 2006, China Nuclear International Uranium Corporation and Zxjoy Invest Limited re-assessed the IRSA report. They also completed a Feasibility Study (‘‘FS’’) of the mining and hydrometallurgical processing of the Azelik uranium deposits.

This section of the report considers the metallurgical and mineral processing aspects of the Azelik Uranium Project as included in the FS and subsequent design reports.

7.2 Ore Sources

The Azelik Uranium Project includes three deposits, namely G, T and IR. Given the depth of Deposit IR at about 200 m, underground mining is considered for this orebody. About a half of the reserves in Deposits T and G are located between 50 and 70 m below surface making this ore amenable to open pit mining. Underground mining is proposed for the deeper ore.

The mining capacity will be 600 kt/a, of which 300 kt/a will be from Deposit IR, 150 kt/a from Deposit G and 150 kt/a from Deposit T. It is proposed that the three deposits be extracted at the same time.

7.3 Mineralogy and Ore Types

The Azelik Uranium Project is situated in the uranium metallogenetic belt of Teguidda in the desert region of northern Niger. The ore belongs to a hard sandstone type uranium deposit. The content of calcium carbonate in the ore is higher than 10%, thereby constituting an alkaline ore.

The uranium minerals mainly include uraninite, coffinite, metatyuyamunite, uranophanite, carnotite, metauranocircite, potassium boltwoodite while gangue minerals mainly include quartz, feldspar, analicime, calcite, dolomite, barite, hornblende, gypsum, limonite, smectite, montmorillonite, biotite, tourmaline and other. Metallic minerals include cuprite, malachite and chalcocite.

The carbonate is mainly composed of calcite and dolomite.

7.4 Metallurgical Testwork

7.4.1 Previous Bench Scale Test Results

Test programmes were reportedly conducted by Colorado School of Mines, USA as assigned by IRSA Japan during the earlier PFS for the purpose of optimizing the hydrometallurgical process and the leaching conditions. Certain results from these investigations are included in the FS but unfortunately the associated test reports were not available for review.

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7.4.1.1 Comminution

The Protodrakonov hardness coefficient of the rock was reported as f=5*8. This 20-point hardness scale is a relative index which reflects the mean uniaxial compressive strength of a group of rock types, not individual varieties. SRK is not familiar with this coefficient, its interpretation or its use in sizing comminution equipment.

7.4.1.2 Leaching

The test work undertaken by the Colorado School of Mines reportedly found that both alkaline and acid dissolution are applicable for the Azelik ore. At the same leaching rate however, sulphuric acid consumption for ore leaching was about 15 times that of the sodium carbonate/bicarbonate consumption. On this basis, the ISRA PFS report recommended atmospheric pressure alkaline leaching for the Azelik Project. This process flow was also accepted for the FS and final design following internal discussion.

7.4.1.3 Downstream Processing

The FS included no details on downstream processing testwork although this was included in the pilot plant investigation.

7.4.2 Pilot Plant Test Results

In February 2008, China National Nuclear Corporation Beijing Research Institute of Chemical Engineering and Metallurgy issued a report on pilot test work undertaken on site from December 2007 to January 2008. SRK reviewed the pilot plant test report, key findings of which are summarised here.

7.4.2.1 Samples

The pilot plant test report indicates that large scale testing was conducted on 30 t of ore from Deposit G and Deposit T blended in the ratio 1: 1. Subsequent communication advised that the large scale pilot test was conducted on samples from Deposit T collected from one pit and one drill hole. Deposit G was not included as it was deemed to be similar to Deposit T. Smaller scale tests were conducted on a 50 kg sample from Deposit IR collected from four drill holes.

The criteria for sample selection and the exact location of samples included in the pilot plant feed were not described in the test report. It is understood however that the samples were collected by project geologists on the basis of gamma meter readings and degree of oxidation. The criteria for sample selection, the exact location of sample extraction, subsequent sample preparation and a view on sample representivity of the deposits needs to be confirmed.

The grade of the Deposit T sample was 0.114%U whilst that of the Deposit IR sample was 0.086%U.

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7.4.2.2 Process Flowsheet and Operation

The unit processes included in the pilot plant were as follows:

. Primary jaw crushing in open circuit
. Secondary cone crushing in open circuit
. Ball milling in closed circuit with spiral classifier
. Pre-leach thickening
. Sodium carbonate/bicarbonate atmospheric alkaline leaching
. Pressure filtration and washing
. Resin absorption
. Resin elution
. Resin regeneration
. Sodium Diuranate precipitation
. Sodium Diuranate filtration and drying

The flowsheet used for the various pilot runs is shown in Figure 7-1.

==> picture [409 x 183] intentionally omitted <==

----- Start of picture text -----

Feed Crushing Resin
Absorption
Sodium Carbonate
Sodium Bicarbonate
Potassium Permanganate Ball Reagent Resin Sodium Bicarbonate
Milling Adjustment Regeneration Waste Water Treatment
Coarse u/f Spiral Resin
Classification Elution Sodium Chloride
Fine o/f Sodium Carbonate
Thickening o/f StorageTank StorageTank Precipitation
u/f
Steam/Air Leaching Mother FiltrationPressure Caustic Soda
Liquid
PressureFiltration Filtrate Drying Sodium DiuranateProduct
Water Washing Solid Tailings
----- End of picture text -----

Figure 7-1: Pilot Plant Flowsheet

It was intended to include a third stage of crushing closed by screening. Unfortunately this could not be installed before commencement of the tests. A consequence of this was that whilst the design mill feed was -12 mm, actual mill

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feed for the pilot plant was -35 mm. It was however still possible to achieve the required mill product size of -65 mesh with the installed mill. One concern noted in the pilot plant report however, is that due to manual rather than automatic feeding of the mill, the mill product size was not consistent at -65 mesh. This is likely to have impacted on the leach results.

Thickeners are difficult to source for pilot scale throughput and for this reason thickening was achieved by settlement in steel tank.

Atmospheric leaching and pressure leaching were both conducted in the same autoclaves but under different pressure regimes. For the large scale tests, a 2.37 m[3] autoclave was used whilst an 80 litre autoclave was used for the smaller scale tests.

It is important to note that filtrate after leaching is returned to the milling circuit. This results in leaching commencing in the milling circuit and material arriving in the autoclave is consequently partially leached. Extracting a head sample from the autoclave is thus not totally representative of the test conditions. For this reason only the first four leach tests were used to determine the head grade that was then assumed to be the same for the remaining tests. In fact the second leach test value was not used due to damage during its preparation.

Solid liquid separation of leached pulp was achieved in a membrane filter press.

The process design calls for filter press filtrate to be returned to grinding and the first and second wash to be forwarded to absorption. A strong base anionic resin was used for absorption in three 200 mm diameter by 2,000 mm high columns arranged in a fixed bed cascade arrangement. Elution was conducted in similar columns once the resin was loaded to capacity. These were also arranged in a fixed bed cascade arrangement.

Sodium diuranate was precipitated manually with caustic soda in a stirred bucket. Product filtering was achieved laboratory vacuum filters and drying parameters were determined at an operating uranium mine on an industrial double blade spiral drier.

7.4.2.3 Comminution

The pilot plant test report does not include any milling results in terms of throughput, feed size, product size or energy consumption. It is not clear on what basis the industrial plant ball mills were sized.

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7.4.2.4 Atmospheric Pressure Leaching

Twenty atmospheric leach tests were undertaken in the large autoclave. Leach extraction versus head grade results are summarized in Figure 7-2. Results for the first two tests have been excluded because their operating conditions were far from optimised. Also shown in Figure 7-2 is the leach extraction assumed for the project.

==> picture [362 x 218] intentionally omitted <==

Figure 7-2: Pilot Plant Leach Extraction versus Head Grade

The following observations are apparent in terms of the leach extraction versus head grade results:

. The head grade for fourteen of the eighteen leach tests shown averaged 0.221%U, whilst the head grade of four samples averaged 0.114%U. The grade of the 14 samples is considerably higher than the reported head grade of the Deposit T sample of 0.114%U. No explanation for this is offered in the report and this needs to be addressed as it could have inflated the percentage recovery.
. The results indicate a leach extraction of just below 90% for ore with a head grade of 0.114%U and a leach extraction of around 92% for ore with a head grade of 0.221%U.
. The assumed project leach extraction of 90% on a head grade of 0.14% U is in line with test results.

Leach extraction versus leach time results are summarized in Figure 7-3. Results for the first two tests have been excluded because their operating conditions were far from optimised. Also shown in Figure 7-3 is the leach extraction assumed for the project.

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==> picture [362 x 218] intentionally omitted <==

Figure 7-3: Pilot Plant Leach Extraction versus Leach Time

The following observations are apparent in terms of the leach extraction versus leach time results:

. There is no obvious benefit in leaching beyond twenty four hours.
. The assumed project leach extraction of 90% for a leach time of 30 hours is in line with testwork findings.

The tailings material from two leach tests were screened and analysed for uranium. It was concluded that it will be important for the proportion of +65 mesh material to be less than 2% and the proportion of -200 mesh material to be at least 70%.

A further important observation was that the leach performance of the bulk sample was generally worse than that observed on drill core samples under the same conditions. This was thought to be due to the presence of organic matter. In order to address this situation it was recommended that more aggressive leach conditions be employed, namely finer grind, longer leach time, higher reagent concentration and higher leach temperature.

A single leach test on IR material showed that a leach extraction of almost 90% could be achieved on material with a head grade below 0.1%U.

It was noted that equilibrium balances could not be generated for mass and metal content of solids and solution streams due to poor field conditions, mismatched equipment, incorrectly installed equipment losses of solution and solids from the process during the testing. This is unfortunate but at least this honest admission allows the results to be viewed with circumspection.

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TECHNICAL REPORT

Notwithstanding the above concerns, optimum leach conditions were identified as follows:

. Ore size <65 mesh (70% -200 mesh)
. Sodium carbonate concentration 50–55 g/l
. Sodium bicarbonate concentration 10–15 g/l
. Temperature 90–958C
. Leach duration 30h

7.4.2.5 Elevated Pressure Leaching

Two tests conducted at a total pressure of 0.5–0.6 MPa showed no advantages over atmospheric leaching and this approach was accordingly not pursued.

7.4.2.6 Downstream Processing

Cooling tests, solid-liquid separation tests, absorption tests, elution tests, precipitation tests and drying tests allowed design parameters for heat exchangers, thickeners and filters to be derived.

X-Ray Fluoresence results of the final product are shown in Table 7-1.

Table 7-1: X-Ray Fluoresence Results of Final Product

Chemical	Component	Analysis
U3O8		85.6
Na2O		10.8
V2O5		0.55
MgO		0.45
Rb2O		0.39
SiO2		0.26
As2O3		0.18
K2O		0.15
CaO		0.10
Fe2O3		0.10
Al2O3		0.07
TiO2		0.05
PuO2		0.03
P2O5		0.02
CuO		0.02
SrO		0.02
NiO		0.01

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TECHNICAL REPORT

It is recommended that the required product specifications be confirmed to ensure that the anticipated product quality conforms with those found in pilot testing.

7.5 Processing Facility

7.5.1 Process Route Selection

Alkaline leaching at atmospheric pressure has been selected as the basic process for the Azelik Uranium Project. The process flowsheet includes the following unit processes:

. Three stage crushing
. Single stage ball milling in closed circuit with spiral classification
. Pre-leach thickening
. Sodium carbonate/bicarbonate leaching
. Solid liquid separation using chamber type diaphragm filter press
. Storage of tailings solids
. Absorption of dissolved uranium onto resin using fixed bed ion exchange
. Elution of uranium from resin using sodium carbonate and sodium chloride solution
. Precipitation of uranium as sodium diuranate using sodium hydroxide
. Filtering, drying and packaging of sodium diuranate product

Alkaline leaching at atmospheric pressure was recommended in the previous Japanese PFS report. Following discussion by internal experts of the current owners, it was agreed to use the same basic flowsheet for the current Azelik project. However, in line with operating practice at two local French hydrometallurgical plants as well as experience accumulated in similar Chinese operations, certain adjustments were incorporated into the final process design:

. Use of a screw classifier instead of a high frequency vibrating screen to classify the mill product.
. Incorporation of a dewatering thickener on the classified product ahead of leaching.
. Use of a chamber type diaphragm filter press for solid liquid separation after leaching.

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. Selection of a Chinese strong base anionic resin for absorption.
. Use of sodium carbonate and sodium chloride for elution and sodium bicarbonate for resin regeneration.
. Recycle of absorption wash water to the milling circuit to reduce water consumption and maximise the recycle of alkali reagent.
. Increase product particle size during precipitation via seeding process.

There are clearly many equipment selection options that could have been considered in the final plant design such as hydrocyclones instead of spiral classifiers and belt filters or continuous counter current decantation instead of filter presses. Not withstanding this SRK considers that the selected process route and equipment is appropriate for the anticipated ore types as described.

7.5.2 Process Description and Capacity

The processing capacity will be 600 kt/a, of which 300 kt/a will be from Deposit IR, 150 kt/a from Deposit G and 150 kt/a from Deposit T. This matches the mining schedule.

A key design criterion is that the plant will operate for 300 days per year. Internationally it is common practice to assume plant operation for 365 days per year but with an allowance for maintenance downtime which will vary according to equipment type and duty. This latter approach should result in optimal utilisation of equipment and hence optimal utilisation of capital. The approach adopted is clearly more conservative.

7.5.2.1 Ore Receipt and Crushing

The ore from Deposit G and Deposit T, at a maximum size of 500 mm, is trucked to the run of mine (ROM) stockpile before being fed to the ROM ore bin by front end loader. The ore is then withdrawn from the ROM ore bin by apron feeder onto the conveyor feeding the primary jaw crusher.

The ore from Deposit IR, at a maximum size of 200 mm, is trucked to the run of mine (ROM) stockpile. This ore is then blended with primary crushed ore from Deposit G and T in the ratio 1: 1 before being conveyed to the standard cone crusher for secondary crushing ahead of the tertiary short-head cone crusher. Tertiary crushed ore is screened with oversize being recycled to the tertiary crusher and undersize at -12 mm reporting to the crushed ore storage bins.

A review of the primary crusher specifications indicates that the recommended top feed size is 750 mm. This should be adequate to handle the anticipated top feed size of 500 mm but SRK considers it likely that the open pit ore will exceed this at times. It may therefore be necessary to retrofit a grizzley screen and rock breaker in order to protect the primary crusher from damage.

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TECHNICAL REPORT

The primary jaw crusher has been selected on the basis of treating 300 kt/a ore from Deposit G and Deposit T whilst operating for two seven hour shifts for 300 days per year. The selected jaw crusher has an estimated processing capacity of 99 t/h versus a throughput requirement of 71 t/h. This should allow adequate catch up capacity. In addition, the design running time equates to 58% utilisation of the 300 days available or 48% of total annual hours available. On this basis equipment has been conservatively sized.

The secondary and tertiary crushers have been selected on the basis of treating 600 kt/a ore from the three deposits whilst operating for two seven hour shifts for 300 days per year. The selected secondary cone crusher has an estimated processing capacity of 282 t/h versus a 143 t/h throughput requirement. The selected tertiary cone crusher has an estimated processing capacity of 211 t/h versus a 151 t/h throughput requirement. In both cases this should allow adequate catch up capacity. In addition, the design running time equates to 58% utilisation of the 300 days available or 48% of the annual hours available, also representing conservative sizing assumptions.

7.5.2.2 Milling

Crushed ore is withdrawn from the storage bins via electromagnetic vibrating feeders onto the ball mill feed conveyors. Three 2.7 m diameter by 3.6 m long ball mills with a grate discharge have been selected. The mills will be trunnion mounted and fitted with a 400 kW motor. The milled pulp flows to a submerged screw classifier for size classification. Coarse sand is returned to the ball mill and the fine overflow at 65% passing 200 mesh (75 micron) is pumped to the thickener.

The ball mills have been selected on the basis of treating 600 kt/a ore from the three deposits whilst operating for three eight hour shifts for 300 days per year. The selected mills have an estimated processing capacity of 111 t/h versus a throughput requirement of 83 t/h. This should allow adequate catch up capacity. The design running time however, assumes 100% utilisation of the 300 days available. This is not realistic and it is likely that more operating days will be required to achieve target throughput. Fortunately such time is available as design running hours are only 82% of total annual hours.

The mills have not been sized on the basis of measured ore characteristics and fundamental calculations but rather on scale up from typical field data. This approach is reasonable as long as the assumed field data is typical of the ore. In this case the source of the field data is uncertain as it is not reflected in the pilot plant test report. A further limitation of this approach is that it is not comparable with international equivalents. SRK has conducted an independent mill calculation using broad assumptions and concluded that the selected mill size will be adequate as long as the ore is of medium hardness or softer (Bond Work

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Index around 12 kWh/t or less). Should the ore be harder than this, the target throughput may not be achievable within 300 operating days per year. In such event the opportunity of course exists to extend the mill running time.

7.5.2.3 Leaching and Solid-Liquid Separation

The overflow slurry from the classifier reports to two high rate thickeners. Flocculent is separately prepared in an adjacent facility. Thickener overflow is recycled to the milling circuit water system. Thickener underflow is pumped to two spiral plate steam heat exchangers where it is heated to approximately 908C. Hot pulp enters four lines of seven stage atmospheric pressure agitation leach. The volume of the leach vessels is 200 m[3] with each tank being fitted with a 75 kW motor. This is a very conservative design. Leached pulp is cooled via four spiral plate water heat exchanger on leaving the agitation leach train. The cooled slurry and is then delivered to a bank of 12 chamber-type diaphragm filter presses for filtering and washing. The filtrate returns to the circulating water tank in the milling section whilst the first and second wash solution is forwarded to the absorption section. Filter residue is conveyed to the tailings storage facility.

Key design criteria in this area include thickening and filtration fluxes, specific heat of slurry and leach residence time among others. The design documentation does not clarify the source of these design criteria but on review of the pilot plant results SRK considers them to be reasonable assumptions. Key equipment in this area includes the slurry heating and cooling heat exchangers. These are double pipe heat exchangers but no reference is given to installed industry equivalents. The performance and reliability of such equipment is difficult to predict and there is a risk that they will not meet design specifications. In mitigation of such risk, 100% and 50% standby capacity has been provided on the heating and cooling heat exchangers respectively.

7.5.2.4 Absorption and Elution

The uranium bearing filter wash solution is pumped to the ion exchange section. This section comprises two streams each including 3 fixed bed absorption towers, 3 fixed bed elution towers, 2 resin regeneration towers, 1 resin detoxification tower and space for a tenth spare tower. In a counter current cascade arrangement, dissolved uranium is absorbed onto strong base anionic resin in the absorption towers. Loaded resin from the lead tank is periodically transferred to the elution towers, also operating in a counter current cascade arrangement. Here the uranium is chemically desorbed from the resin through the addition of sodium carbonate and sodium chloride solution. Uranium bearing eluant is pumped to the precipitation circuit. The eluted resin is reactivated by the addition of sodium bicarbonate solution in the regeneration towers before being returned to the absorption cycle. Part of the absorption tail solution is recycled to prepare the leach agent, part is returned to the milling and filtration washing sections whilst the balance is pumped to evaporation ponds.

This unit process is fairly standard and well proven in uranium processing.

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7.5.2.5 Precipitation and Product Packaging

Uranium bearing eluant is pumped into the precipitation tank where the uranium is precipitated as sodium diuranate by controlled increase of the pH with sodium hydroxide solution. The precipitated slurry is pumped to a chamber-type diaphragm filter press after which the cake is washed and compressed. Filtrate and wash water are sent to evaporation. The filter cake reports to a twin screw conduction drier. The dried product is automatically weighed, bagged and drummed before being placed in the product store ahead of despatch. The product store has capacity for storing six months production.

7.5.2.6 Reagent Storage

Reagents are received in a variety of packaging and are made up to the required strength on site in dedicated equipment. The reagent store has capacity of six months consumption.

7.5.3 Plant Location

The uranium hydrometallurgical facility was sited to minimise ore transport costs and to be above the 371 m flood line. Ultimately it was located about 2.0 km from Deposit T is 2.0 km and 5.2 km from Deposit G, which is very close to the geographic centre of the mine area formed by deposits G,T and IR.

7.6 Production Schedule

The proposed LoM production schedule included in the Feasibility Study is summarised in Table 7-2.

Table 7-2: Process Production Schedule

		Year	Year	Year	Year	Year	Year	Year	Year
		1	2–7	8	9–10	11	12–15	16	17	Total
Deposit G
Ore Tonnage	kt	100	150	150	150	150	150	81		2,281
Ore Grade	%	0.139	0.139	0.139	0.139	0.119	0.091	0.092		0.123
Recovery	%	87.0	87.0	87.0	87.0	87.0	87.0	87.0		87.0
Recovered Metal	t	121	181	181	181	155	119	65		2,449
Deposit T
Ore Tonnage	kt	100	150	150	150	150	150	150	94	2,444
Ore Grade	%	0.148	0.148	0.135	0.107	0.107	0.107	0.107	0.110	0.126
Recovery	%	87.0	87.0	87.0	87.0	87.0	87.0	87.0	87.0	87.0
Recovered Metal	t	129	193	176	140	140	140	140	90	2,671
Deposit IR
Ore Tonnage	kt	160	300	300	300	300	300	257		4,617
Ore Grade	%	0.136	0.136	0.136	0.136	0.136	0.136	0.136		0.136
Recovery	%	87.0	87.0	87.0	87.0	87.0	87.0	87.0		87.0
Recovered Metal	t	189	355	355	355	355	355	304		5,463
TOTAL
Ore Tonnage	kt	360	600	600	600	600	600	488	94	9,343
Ore Grade	%	0.140	0.140	0.137	0.130	0.125	0.118	0.120	0.110	0.130
Recovery	%	87.0	87.0	87.0	87.0	87.0	87.0	87.0	87.0	87.0
Recovered Metal	t	439	729	713	676	650	613	509	90	10,583

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7.7 Conclusions and Recommendations

7.7.1 Metallurgical Testwork

The criteria for pilot plant sample selection, the exact location of sample extraction, subsequent sample preparation and a view on sample representivity of the deposits were not described in the test report and need to be confirmed.

Generally the pilot plant flowsheet closely reflected the full scale design flowsheet. There were however a few limitations:

. It was intended to include a third stage of crushing closed by screening but this was not installed before commencement of the pilot tests. A consequence the pilot mill feed was a lot coarser than required. It was however still possible to achieve the required mill product size but due to manual rather than automatic feeding of the mill, this could not be achieved consistently. This is likely to have impacted on the leach results.
. The pilot plant test report does not include any milling results in terms of throughput, feed size, product size or energy consumption. It is not clear on what basis the industrial plant ball mills were sized.
. The head grade for most of the leach tests was considerably higher than the reported head grade of the Deposit T sample. No explanation for this was offered in the report and this needs to be addressed as it could have inflated the percentage recovery.
. It was noted that equilibrium balances could not be generated for mass and metal content of solids and solution streams due to poor field conditions, mismatched equipment, incorrectly installed equipment losses of solution and solids from the process during the testing. This is unfortunate but at least this honest admission allows the results to be viewed with circumspection.

A number of key findings were observed in the pilot plant tests:

. The results indicate a leach extraction of just below 90% for ore with a head grade of 0.114%U and a leach extraction of around 92% for ore with a head grade of 0.221%U.
. The assumed project leach extraction of 90% on a head grade of 0.14%U is in line with test results.
. The assumed project leach extraction of 90% for a leach time of 30 hours is in line with testwork findings.
. Optimum leach conditions were identified as follows:
. Ore size 565 mesh (70% -200 mesh)

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. Sodium carbonate concentration 50–55 g/l
. Sodium bicarbonate concentration 10–15 g/l
. Temperature 90–958C
. Leach duration 30h
. The projected overall recovery of 87% makes adequate allowance for losses downstream of leaching.
. It is recommended that the required product specifications be confirmed to ensure that the anticipated product quality conforms with those found in pilot testing

7.7.2 Processing Facility

There are many equipment selection options that could have been considered in the final plant design some of which may have been better than those selected. Notwithstanding this SRK considers that the selected process route and equipment is appropriate for the anticipated ore types as described.

The mills have not been sized on the basis of measured ore characteristics and fundamental calculations but rather on scale up from typical field data. This approach is reasonable as long as the assumed field data is typical of the ore. In this case the source of the field data is not clear as it is not reflected in the pilot plant test report. A further limitation of this approach is that it is not comparable with international equivalents. SRK has conducted an independent mill calculation using broad assumptions and concluded that the selected mill size will be adequate as long as the ore is of medium hardness or softer. Should the ore be harder, the target throughput may not be achievable within 300 operating days per year. In such event the opportunity of course exists to extend the mill running time.

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Key equipment in the leach area includes the slurry heating and cooling heat exchangers. These are double pipe heat exchangers but no reference is given to installed industry equivalents. The performance and reliability of such equipment is difficult to predict and there is a risk that they will not meet design specifications. In mitigation of such risk, 100% and 50% standby capacity has been provided on the heating and cooling heat exchangers respectively.

The main ore processing circuits comprise 3 mills, 2 pre-leach thickeners, 4 preleach heat exchangers, 4 lines of leach tanks, 4 post leach heat exchangers and 12 filter presses. In SRK’s view selection of 2 larger ball mills and 2 lines of larger leach tanks and 2 CCD trains would have resulted in a more elegant arrangement of equipment tying in well with the two resin adsorption/elution/regeneration circuits. It is also likely to have resulted in a lower capital cost.

The pilot programme recommended process parameters for each unit process. These have largely been incorporated into the final process design.

7.7.3 Operating Costs

The process operating costs were estimated from first principles.

It is noted that no allowance was made for maintenance personnel other than instrumentation technicians. This appears to be a significant oversight.

There is no indication that expatriate personnel will be progressively replaced by local personnel, which is often a requirement in Africa.

No allowance has been made for maintenance stores. SRK would recommend that an allowance for maintenance stores equivalent to 5% of the installed cost of equipment be made.

No allowance has been made for miscellaneous expenditure. It is recommended that an allowance be made to cover items such as laboratory consumables, vehicle running costs, travel, training and consultant costs.

8 CAPITAL AND OPERATING COSTS

8.1 Capital Costs

8.1.1 Mining

Table 8-1 summarises the capital expenditure forecasted by the Preliminary Design of Financial Assessment.

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Table 8-1: Capital Expenditure Estimated by the Preliminary Design

	Budget	Total
	(RMB Million)	(%)
Mining	561	23.73%
IR Mine	376	15.92%
T Mine	149	6.32%
Transportation	35	1.48%
Metallurgy plant	248	10.50%
Tailings Storage Facility (TSF)	8	0.36%
Storage	48	2.02%
Gas station	5	0.23%
Explosive library	12	0.50%
Water borefield	3	0.11%
Living and office	60	2.54%
Water supply	3	0.14%
General pipelines	20	0.83%
Transportation	68	2.89%
Office and transfer station	1	0.04%
Captive power plant	134	5.67%
Hardware and furniture	4	0.19%
Other construction	196	8.28%
Sub-total of engineering and construction	1,371	58.00%
Contingency 10%	137	5.80%
Mining rights	856	36.21%
Total	2,364	100.00%

The preliminary design forecasted a total capital cost of RMB2,364 million before the commission of production where the company has contracted Sino-Hydro Corporation for the project procurement and construction (P-C) which covers all the project engineering and construction. The contract value is USD162,879,053, which is equivalent to about RMB1,113 million at 2009 exchange rate range. It is within the forecasted budget by the preliminary design. The mining rights fee of about RMB856 million had been fully paid to the Niger government. SOMINA has stated that detailed capital expenditure to date is not available for SRK to review.

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8.1.2 Processing

The estimated capital cost of the processing facility is summarised in Table 8-2.

Table 8-2: Estimated Capital Cost of Processing Facility

Item	Construction	Equipment	Installation	Total	Total
	(RMB10k)	(RMB10k)	(RMB10k)	(RMB10k)	(USDk)
Crushing	485	1,083	611	2,179	3,192
Milling	918	1,240	676	2,834	4,152
Leaching & Filtration	1,728	6,911	1,775	10,414	15,254
Absorption & Elution	1,420	1,447	424	3,291	4,820
Precipitation & Packaging	911	632	311	1,854	2,715
Product Storage	720	18	11	750	1,098
Material Storage	1,701	17	27	1,745	2,556
Laboratory	686	86	62	834	1,222
Water Recycle &
Evaporation	377	105	44	525	770
Ancilliary Facilities	322	67	10	398	583
Total Plant	9,269	11,605	3,950	24,824	36,363

8.2 Operating Costs

8.2.1 Mining

The Preliminary Design of Financial Assessment (August 2008) estimated the operating costs of the project. Estimated operating costs are provided for the IR Mine, and the T Mine underground and open pit operations (RMB per tonne ore mined), and for the processing plant (RMB per tonne ore processed). These estimated operating costs are listed in Table 8-3.

Table 8-3: Operational Cost Estimated by the Preliminary Design

Item	RMB/tonne ore mined/processed
IR Mine	437.66
T Mine underground	394.95
T Mine open pit	244.47
Processing plant	390.10

8.2.2 Processing

The basis of the estimated process operating costs for the FS was as follows:

. Ore treated 600 kt/a . Uranium production 678.6 t/a . Base date December 2008 . Project exchange rate USD1.00 = RMB6.827

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The estimated process operating costs are summarized in Table 8-4.

Table 8-4: Process Operating Costs (Excluding Depreciation, Amortization and Finance Charges)

	Overall Annual Cost	Overall Annual Cost	Overall Annual Cost		Unit	Cost
	Fixed	Variable	Total	ROM	U	ROM	U
	(RMB10k)	(RMB10k)	(RMB10k)	(RMB/t)	(RMB/lb)	(USD/t)	(USD/lb)
Feed Tonnage (t/a)				600,000
Uranium
Production (t/a)				678.60
Labour	1,027		1,027	17.12	6.86	2.51	1.01
Power		3,461	3,461	57.69	23.14	8.45	3.39
Reagents		9,526	9,526	158.77	63.67	23.26	9.33
Maintenance
Materials			0	0.00	0.00	0.00	0.00
Consumables		1,008	1,008	16.80	6.74	2.46	0.99
Miscellaneous	802		802	13.36	5.36	1.96	0.78
Contingency
TOTAL	1,829	13,996	15,824	263.74	105.77	38.63	15.49

The process operating costs were estimated from first principles:

. The process labour complement comprising 44 persons was detailed by department, position and category:
. Management — 2 (Director (Cat 10) and Chief Engineer (Cat 8))
. Plant Superintendent — 4 (Cat 7)
. Crushing & Milling Operator — 7 (Cat 2)
. Leach, Absorption, Precipitation Operator — 18 (Cat 4)
. Packaging Operator — 1 (Cat 1)
. Automation Technician — 4 (Cat 5)
. Instrument Operator — 3 (Cat 5)
. Tailings Operator — 1 (Cat 2)
. Laboratory Analyst — 4 (Cat 5)

It is noted that the process labour complement allows for three shifts per day. No allowance is made for a swing shift presumably because the plant only operates for 300 days per year. Importantly it is noted that no allowance is made for maintenance personnel other than instrumentation technicians. This appears to be a significant oversight. Equally there seems to be no allowance for a day crew to make up reagents.

The FS states that the General Manager, senior management personnel, department managers or senior technical personnel as well as middle-level technical personnel shall be appointed from China. Junior management personnel, general

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technical personnel, craftsman, skilled worker, labor and others are assumed to be local Nigeriens. There is no indication that expatriate personnel will be progressively replaced by local personnel, which is often a requirement in Africa.

Rates of remuneration included in the FS are summarised in Table 8-5.

Table 8-5: Rates of Remuneration

Category	Salary	&	Welfare	Contribution
				(Yuan/a)
1				20,000
2				55,000
3				70,000
4				75,000
5				120,000
6				220,000
7				250,000
8				330,000
9				120,000
10				450,000
11				550,000

These have been confirmed as being current and competitive in the region.

. The total installed capacity of the process plant electrical equipment is reported to be 7,250 kW, the effective power is estimated at 6,020 kW, the calculated active power is 4,370 kW, the reactive power is 2,420 kvar and the apparent power is 4,995 kVA. Details of these estimates and those for the total project are not included in the FS. It is understood however, that they were drawn from detailed motor listings and should therefore be reasonable. It is assumed that power for the total project including the process plant will be provided by burning local coal in a thermal power station.
. The unit consumptions of all reagents and operating consumables were separately estimated on the basis of metallurgical test results and mass balance calculations. Almost all reagents will be imported. It has been confirmed that assumed unit prices include transport costs.
. No allowance has been made for maintenance stores. SRK would recommend that an allowance for maintenance stores equivalent to 5% of the installed cost of equipment be made.
. No allowance has been made for miscellaneous expenditure. It is recommended that an allowance be made to cover items such as laboratory consumables, vehicle running costs, travel, training and consultant costs.
. ROM ore will be fed into the plant via front end loader. It is reported that associated fuel costs have been allowed.

SRK considers the operating cost estimates to generally be reasonable although they may be slightly understated for the reasons outlined above.

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9 INFRASTRUCTURE

9.1 Electricity Supply

There is only one small scale power plant in Agadaz in Niger, which cannot provide any electricity to the mine. Therefore, the mine has designed and is now constructing a captive power plant in the mine to supply electricity for production and living. It is a thermal plant which will source coal from the SONICHAR coal mine 250 km away. This coal mine has an annual production of 300 ktpa. The plant will consume annually 61,245 tonne of coal and the coal will be hauled to the mine by trucks.

The power plant is designed by the Fourth Design Institute of China Nuclear Industry. Figure 9-1 shows the power plant construction.

==> picture [318 x 239] intentionally omitted <==

Figure 9-1: Captive Power Plant Construction

The power plant will supply 6 kV electricity to the IR, T and G mines and the processing plant. Substations will be build at the mines and at the processing plant to transform the electricity to 220/380 V. Only the ball mill will be 6 kV. The whole mine installed power will be 14,778 kW and working power will be 12,813 kW.

SRK believes that the captive power plant will be essential for the mine production; however, SRK has concerns with the consistency and reliability of the coal supply, as the project depends on only a single small scale coal mine. If there are issues with the coal supply from this mine, the company will need to buy coal from an area significantly further away, which will substantially increase the cost.

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9.2 Water Supply

Data from the Japanese company ISRA indicates that water can be taken from two aquifers which are representatively the upper and bottom of Teloua and the bottom of Izegouandane. The first aquifer is 0 to 200 m deep and the second aquifer is 100 to 350 m deep.

ISRA conducted at three places of different geological structures three water bores; the three areas are respectively named as WP-1, WP-2 and WP-3. Through analysis, it is determined to use the second aquifer of WP-2 for production water and first aquifer of WP-3 as domestic water. The mine living and production water consumption is estimated to be around 5,000 m[3] per day. The mine plans to develop 15 water bores and each bore is claimed by the mine to have water production of 360 m[3] per day and in total there will be just over 5,000 m[3] . Figure 9-2 shows the WP-2 water bore area.

==> picture [321 x 213] intentionally omitted <==

Figure 9-2: WP-2 Water Bore Area

9.3 Accommodation

The mine has now built two accommodation compounds which are called Village One and Village Two. Village One has capacity to accommodate 200 workers, while Village Two can accommodate 400 workers. Both villages have been constructed and have been in use since November 2009. The two villages are supported with all necessary facilities such as toilets, bath rooms, clinics, recreation clubs, internet and telecommunications. Village one accommodates the Chinese workers and village two accommodates the local workers. Figure 9-3 shows a design view of village one.

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==> picture [416 x 183] intentionally omitted <==

Figure 9-3: View of Village One

The other auxiliary facilities are such as offices in the mines and in the processing plant, gas station, working station, warehouses, explosive magazine, offices in Agadaz and in Niamey and transfer station in Benin.

10 ORGANISATION CHART, WORKFORCE AND MAJOR CONTRACTS

10.1 Organisation Chart

Figure 10-1 shows the organisational management structure for the SOMINA mine.

==> picture [423 x 129] intentionally omitted <==

Figure 10-1: Organisation Chart

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10.2 Planned Total Employee Numbers

The workforce requirement for 600ktpa of production is forecasted by the preliminary design as shown in Table 10-1.

Table 10-1: Workforce Numbers

	Total needed for Production/person
IR Mine	141
T/G Mine	82
Metallurgical plant	79
Power plant	58
Transportation	95
Maintenance	46
Management and others	103
Total Personnel	604

10.3 Workforce

SOMINA has provided training and experience to the Nigerien workforce and meets all local laws and employment policies as required when operating in Nigerien. SOMINA reports that the proportions of Nigerien workers will be over 60% of the total workforce during production.

10.4 Major Contracts

The most significant contract for the project at this stage is the procurement and construction agreement between Sino-Hydro Corporation and SOMINA. Under this contract, Sino-Hydro will conduct project equipment purchasing and construction including T mine, IR mine, processing plant, power plant, TSF and other auxiliary facilities with contract value of $162,879,053. Sino-Hydro will do all these works in compliance with the project’s preliminary design.

11 ENVIRONMENTAL ASSESSMENT

11.1 Environmental Review Objective

The objective of this environmental due diligence review is to identify potential environmental liabilities and risks, and assess any associated proposed remediation measures for the Niger Azelik Uranium Mining and Metallurgy Project (Azelik Uranium Project).

The Azelik Uranium Project comprises the proposed open pit and underground mining and processing of 600,000tpa of uranium ore, producing 1,192tpa of Sodium Diuranate (Yellowcake). The Azelik Uranium Project is located in the Teguidda In Tessoum Village, Azelik Town, approximately 163 km north west of Agadez City/Province and 1,000 km north east of Niamey, Republic of Niger.

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The uranium ore will be mined simultaneously over the following three deposits:

. Deposit IR — 300,000tpa, 16 year mine life, underground mining (to a depth of approximately 200 m).
. Deposit G — 150,000tpa, 16 year mine life, initially open pit mining (to a depth of approximately 50–70 m, 10 years) and then underground mining (6 years).
. Deposit T — 150,000tpa, 17 year mine life, initially open pit mining (to a depth of approximately 50–70 m, 7 years) and then underground mining (10 years).

The current project development documentation only considers open pit mining for Deposits G and T (no underground mining) and underground mining for Deposit IR.

The Azelik Uranium Project is owned and being developed by Azelik Mining Company Limited (SOMINA).

11.2 Environmental Review Process, Scope and Standards

The process for the verification of the environmental compliance and conformance for the Azelik Uranium Project comprised a review and inspection of the project’s environmental management performance against:

. Niger national environmental regulatory requirements.
. World Bank/International Finance Corporation (IFC) environmental standards and guidelines (Appendix 2).
. Internationally recognised environmental management practices.

11.3 Environmental Legislative Background

11.3.1 Niger Mining Law — Environmental and Social Provisions

The Mining Law of the Republic of Niger (Mining Code — Law No. 2006-26) was enacted on the 9 August, 2006. The law has three levels of mining titles — Prospecting Licence, Exploration Licence and Mining Licence, which can be renewed, transferred and abandoned. The Mining Law stipulates that a positive feasibility study (including an environmental impact assessment) is required to be completed for the issuing of a Mining Licence. An issued Mining Licence is valid for 10 years, for large scale projects, or 5 years for small scale projects.

An issued Mining Licence also requires that companies:

. Develop and maintain local infrastructure (such as roads).
. Contribute to the development of local municipalities (including contributing to the funding of local infrastructure).

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. Protection of local infrastructure and environment, and the rehabilitation of mines sites.
In addition, Mining Law Ordinance No. 97-001 (10 January 1997) refers to:
. ‘Any new deposits shall be subject to environmental impact studies’;
. Mining companies must ‘commit to take the necessary steps to protect the environment while conducting mining operations’; and
. ‘Such measures taken must conform to requirements stipulated in the environmental legislation in force, or failing that, comply with generally accepted’ (environmental standards).

11.3.2 Niger National Environmental Assessment Legislative Framework

The Environmental Law of the Republic of Niger (Environmental Code — Law 98-56) was enacted on 29 December, 1998. Article 31 of this law requires that an Environmental Impact Assessment (EIA) is completed for ‘all development projects, programmes or activities likely to affect the human and social environment’.

The Niger Ministry of the Environment is the overriding national environmental policy and regulatory body. The Niger government environmental policies are designed to complement the World Bank/IFC environmental and social safeguard policies. The Bureau of Environmental Assessment and Impact Studies (BEEEI) is part of the Ministry of the Environment and is the main administration agency for environmental impact assessment in Niger.

To complement the National EIA process, the National Council for the Environment and for Sustainable Development (CNEDD) develops and applies the Niger National Environmental Plan for Sustainable Development (i.e. based on and complementary to the World Bank environmental and social safeguard policies).

In 2000, Niger established a procedure for project environmental assessment. In summary the project environmental assessment comprises the following stages:

. Project Referral — a project brief/development plan is prepared by the proponent and submitted to BEEEI.
. Initial Project Review — BEEEI reviews the project brief/development plan and makes a recommendation to the Minister for Environment.
. Terms of Reference (ToR) — the Minister for Environment authorises the BEEEI to prepare terms of reference for the project EIA in consultation with the affected local community.
. Project EIA — the Minister for Environment approves the ToR and the proponent produces the Project EIA.

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. Analysis of the Project EIA — in consultation with the local affected community, the BEEEI will complete the analysis of the Project EIA.
. Recommendations/advice — the BEEEI will provide recommendations/ advice to the Minister for Environment. The Minister for Environment will ratify the BEEEI project advice which then becomes the ‘Final Decisions on the Project’.
. Monitoring and surveillance — the BEEEI will then monitor the project implementation.

Niger has also subscribed to and ratified several international and regional environmental agreements, conventions and treaties, such as:

. Wetlands of International Importance (Ramsar Convention, 1975).
. Convention on Biological Diversity [CBD (2002)].
. United Nations Framework Convention on Climate Change (UNFCCC)/ Kyoto Protocol (1992).
. United Nations Convention to Combat Desertification (1996).
. Convention on Migratory Species (1979).
. Convention on International Trade in Endangered Species of Wild Fauna and Flora [CITES (1973)].
. African Convention on the Conservation of Nature and Natural Resources (1968).
. Convention on Biological Diversity, environmental impact research methods for projects, plans and policies were adopted under Clause 14 (1a, b).

11.4 Status of Environmental Approvals and Permits

Two EIA reports have been produced for the Azelik Uranium Project. The first EIA report (Main EIA) was produced by Office of Study Group Art & Engineering (BP224, Niamey — Niger, no report production date), and covered the main project facilities (i.e. excluding the project access road, accommodation facilities and power station). This Main EIA received the Certificate on Environmental Compliance (No. 000010) from the Niger Ministry of Environment on 17 August 2007. This certified that the Azelik Uranium Project ‘complies with Environmental Protection Requirements’ and that ‘SOMINA is granted the right to develop this project’. A condition of this Main EIA approval was to produce a

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second EIA report (Complementary EIA) to cover the project access road, accommodation facilities and the power station. The Complementary EIA was also produced by Office of Study Group Art & Engineering (BP224, Niamey — Niger), in September 2008, and was approved by the Niger Ministry of Environment on 25 September 2008.

11.5 Environmental Compliance and Conformance

SRK has completed a technical assessment of the project’s potential level of environmental compliance based on observations during the site visit and review of the provided technical information.

. SOMINA and Republic of Niger Ministry of Environmental Protection and AntiDesertification, Environmental Assessments and Environmental Impact Research Agency (BEEEI), Azelik Uranium Project Environmental Management Implementation Agreement, 2008 — this document provides the agreed framework and specifications for the implementation of the project’s Environmental Management Plan.
. SOMINA and Republic of Niger Ministry of Environmental Protection and AntiDesertification, Environmental Assessments and Environmental Impact Research Agency (BEEEI), Azelik Uranium Project Environmental Management Implementation Plan, 2009 — this document provides the objectives and schedule for the project’s environmental monitoring and management for 2009.

The legal opinion provided on the compliance situation with project (see Appendix 4) states that the company is in compliance with the ‘Mining Law of the Republic of Niger (Mining Code — Law No. 2006-26). SRK has not sighted any statements in respect to the compliance status for the project with other relevant Niger rules and regulations (i.e. excluding the Certificate on Environmental Compliance). SRK recommends that SOMINA

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seek a legal opinion on the compliance status for the project with other relevant Niger rules and regulations (i.e. as per the legal opinion provided for the compliance with the Mining Law).

In May 2008 the BEEEI carried out an environmental inspection of the Azelik Uranium Project. The subsequent Environmental Inspection Report was presented to SOMINA on the 25 June 2008. The key recommendation from this was this was for SOMINA to the complete the Complementary EIA (covering the project access road, accommodation facilities and the power station). This Complementary EIA has been completed and approved. Other environmental management recommendations from this inspection are:

. Develop a radiation monitoring and management plan — completed in May 2009 (copy provide to SRK).
. Install a weather station — completed at the time of the site inspection.
. Submit water and soil monitoring results to the relevant government departments — completed as part of the Azelik Uranium Project, Mining On-Site Background Values, and Radiation Risk — Environmental Action Plan (May 2009).
. Construct groundwater wells for the project’s water supply — completed at the time of the site inspection.

SRK has been provided with a copy of the Environmental Safety Management System (ESMS — Azelik Mining Company Limited, May 2009), which outlines the project’s proposed environmental and safety management.

. Groundwater resources/supply — There has been no detailed hydrogeological assessment undertaken as part of the current project development assessment and design (i.e. the design of project’s water supply and management is based on historical hydrogeological assessments).
. Tailings management:
SOMINA has stated that a detailed design for the proposed TSF has yet to be completed.

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There is no flood/stormwater collection and holding capacity within the Tailings Storage Facility (TSF) once the stockpiled tailings have reached the dam wall height (i.e. 5 m). Stormwater falling on the stockpiled tailings will be directly discharged from the TSF via drainage trenches.
TSF will not be clay lined. The PPD states that this proposed clay lining is not required due mainly to the dry tailings method and the dry/high evaporative climatic conditions, combined with the proposed seepage collection system.
The depth of the final clay cover for the TSF is not specified (i.e. the recognised international practice is for a clay cover of about 2 m).
The proposed dust management measures for the tailings belt conveyor are not specified (i.e. such as covering the conveyor, uses of water sprays, belt cleaning).
. The proposed evaporation ponds (for the collection of mining and process wastewater) will likely contain materials that are high in metals and radiation. The project development documentation does not provide any proposed specific management strategies for this potential environmental risk.
. There are no stated provisions within the project development documentation for reusing the collected mine water in the ore processing.
. The project development documentation does not state whether the drainage water from the WRD’s will contain radioactive material and does not address the management/collection of surface water drainage from the WRD’s.
. The project development documentation does not state whether all hazardous materials storage and handling facilities will have secondary containment in accordance with recognised international industry practices.

SRK suggests that SOMINA should consider these observations and provide confirmation on the status with these environmental management items. SRK has also provided further detail on these items and recommendations for proposed environmental management measures in the following sections.

11.6 Land Disturbance

The ‘Preliminary Design Metallurgical Plant and Ancillary Facilities, Niger Uranium Mining and Metallurgical Engineering Azelik’ (PPD) was produced by the Chinese National 4th Nuclear Industry Research and Design Institute in June 2008. The PPD estimates that the total project area is 441.01ha. This estimate is further broken down into the following operational areas:

. Mining area (open pits, waste rock areas and associated components) — 286.74ha.

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. Tailings Storage Facility (TSF) and tailings transport — 41.76ha (including 36.6ha for TSF).
. Industrial/plant area — 89.76ha (including 38.41ha for the process plant and 34.58ha for wastewater evaporation ponds).

SRK notes that the above combined area for the above breakdown estimates is 418.26ha (i.e. not 441.10ha). The PPD does not state what the remaining 22.75ha will comprise.

SRK recommends that SOMINA establish an annual process to survey and record all areas of land disturbance for the Azelik Uranium Project to allow for effective site rehabilitation planning.

11.7 Flora and Fauna

The EIA reports and PPD state that the project area is arid/desert grasslands, characterised by gravel and sandy soils, with gravelly/rocky upland areas and the sandy valleys. The EIA and PPD state that the flora and fauna for the project area is representative of the regional arid/desert grasslands (i.e. there are no recorded site specific significant flora and fauna species found within the project area). The EIA reports and PPD do not provide any statements in respect to the project area and surrounds containing or being near to any natural reserve areas.

11.8 Waste Rock and Tailings Management

11.8.1 Waste Rock Management

The ‘Preliminary Mine Design, Niger Uranium Mining and Metallurgical Engineering Azelik Mine’ (PMD) was produced by the Chinese National 4th Nuclear Industry Research and Design Institute in January 2008. The PMD estimates that the project will generate approximately 6.72 Mtpa (3.61 Mm[3] per year) of waste rock. This waste rock will predominantly be generated from the open pit mining at the Deposits T and G, however, the PMD also states that there will be approximately 42,000tpa of waste rock from the underground mining at the Deposit IR. The total estimated waste rock generation, based on a 16–17 year mine life, is approximately 110.88 Mt. SRK notes that the PMD only considers open pit mining for Deposits G and T (10 year and 7 year mine life) and the underground mining for Deposit IR (17 mine life). The estimated total waste rock generation for this first phase of the project is 45.17 Mt (26.85 Mt from Deposit G and 18.32 Mt from Deposit T).

The PMD states that the waste rock will be disposed of through stockpiling in a Waste Rock Dump (WRD) and complemented with backfilling of mined out areas (when they become available). The main WRD will stockpile the open pit mining waste rock and will be located between Deposits T and G. The underground mining waste rock will be stockpiled in a secondary WRD located near the eastern side of Deposit

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IR. The PMD estimates that the main WRD will have a storage capacity of 45.83 Mt (25.46 Mm[3] ) and the secondary WRD will have a storage capacity of 0.61 Mt (0.34 Mm[3] ). No final designs for these WRD’s have been sighted.

The ‘Feasibility study on Azelik Uranium Mining and Processing’ (Feasibility Study), was produced by the 4th Nuclear Industry Research and Design Institute in October 2006. The Feasibility Study states that ‘Ore in Azelik Uranium Mine belongs to hard sandstone type uranium deposit. The content of calcium carbonate in the ore is higher than 10%, belonging to alkaline ore’. While no detailed geochemical and Acid Rock Drainage (ARD) analysis of the waste rock has been sighted, the alkaline nature of the ore suggests that the waste rock will have a low potential for generating ARD and subsequent acid leaching impacts.

PMD states that there is potential for the mine water (underground and open pits) to contain radioactive material and, as such, the mine water will not be discharged but will be collected in evaporation ponds. SRK notes that the PMD and Main EIA do not state whether the drainage water from the WRD’s will contain radioactive material and do not address the management/collection of surface water drainage from the WRD’s. SRK recommends that drainage water from the WRD’s is collected and directed to evaporation ponds in line with the proposed mine water management.

11.8.2Tailings Management

The PPD states that the proposed atmospheric pressure alkaline leaching process will generate dry tailings with a moisture content of approximately 20% (i.e. tailings water will be recovered within the process plant through thickening and then filtration). An estimated 0.75 Mtpa (0.5 Mm[3] per year) of dry tailings will be generated (total of approximately 12 Mt or 8 Mm[3] ). The dry tailings will be conveyed to a Tailings Storage Facility (TSF) to be located approximately 500 m northwest of the process plant. The PPD states this location has taken into account ‘radiation protection requirements’ such as:

. Predominant SE wind direction (i.e. TSF is sited downwind of other facilities and residential areas).
. TSF site is 3.5 km from the project accommodation living area and 5 km from the nearest residential settlement.

SRK notes that the PPD does not state whether the referred to ‘radiation protection requirements’ are sourced from Niger regulatory requirements, Chinese national standards and or international industry radiation management guidelines.

SOMINA has stated that a detailed design for the proposed TSF has yet to be completed. However, the Feasibility Study and PPD state the following in respect to the TSF design parameters:

. Surface area 36.6ha (a square shape approximately 600 m by 600 m).

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. Situated on flat ground with the dam wall being constructed around the perimeter, with dry tailings to be deposited in the middle.
. The TSF dam wall will be constructed with material taken from inside the TSF.
. The TSF dam wall will be 5 m high, with a top width of 2 m and inside/ outside slopes of 1: 2. The initial storage capacity is about 1.25 Mm[3] , providing 2.5 to 3 years storage. The outside dam wall slope will be rock armoured.
. Tailings will be stockpiled in two phases, Phase 1 will have a tailings stockpile height of 45 m (with three 15 m high berms) and will provide about 8–10 years storage. Phase 2 will have a tailings stockpile height of 55 m, a slope of 1: 4 and a top stockpile surface area of 2.25ha. As an alternative to the Phase 2, tailings may also be backfilled into mined out open pit areas.
. TSF service life of 16–17 years (i.e. in line with the proposed mine life), and a total design storage capacity of 8.39 Mm[3] (12.52 Mt).
. Initial flood/stormwater design capacity is based on 24hr, 100 year recurrence storm event. During initial operation period of the TSF (when the tailings height has not exceeded the initial dam height), the floodwater will be contained in the TSF and be evaporated. After tailings have reached the dam wall, floodwater will be discharged from the TSF via the dam wall drainage trenches.
. There potential for flooding of the TSF site from the Irhazer River is assessed as being minimal. The TSF site is approximately 6 km from the Irhazer River, with a site elevation 371–373 m RL. The estimated flood level elevation for the Irhazer River is 366–369 m RL.
. Seepage water will be collected via rock drains at the toe of the dam wall which will flow into four separate collection ponds. The collected seepage water will then be pumped from these four collection ponds to an evaporation pond.
. Upon closure, the TSF surface will be covered clay to reduce potential radiation emissions.

SRK following comments in respect to the above proposed TSF design parameters:

. There is no flood/stormwater collection and holding capacity within the TSF once the stockpiled tailings have reached the dam wall height (i.e. 5 m). Stormwater falling on the stockpiled tailings (i.e. 40 m height above the dam wall) will be directly discharged from the TSF via drainage trenches.

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. TSF will not be clay lined. The Feasibility Study states that the TSF will be lined with a ‘clayey anti-seepage course’. While the PPD states that this proposed clay lining is not required due mainly to the dry tailings method and the dry/high evaporative climatic conditions, combined with the proposed seepage collection system.
. The depth of the final clay cover for the TSF is not specified (i.e. the recognised international practice is for a clay cover of about 2 m).

SRK recommends that an independent geotechnical review is undertaken of the detailed design for this proposed TSF (i.e. when the TSF design is completed).

The PPD states that the operational fugitive dust emissions ‘may cause radioactive contamination’ and as such, the will be suppressed through a sprinkler system.

The PPD also states that the TSF seepage ‘will contain harmful elements, random emissions can cause radioactive contamination’, and as such, seepage will be collected and evaporated within ponds (two will be constructed initially, with more if required). SRK notes that these evaporation ponds are likely to contain materials that are high in metals and radiation, and that project development documentation does not provide any proposed specific management strategies for this potential environmental risk.

The ESMS summarises the proposed safety and environmental measures for the operational TSF. These proposed measures comprise the control of tailings placement/ stockpiling, inspection of dam wall stability (including after rainfall events), monitoring of the seepage collection/return water system and the maintaining of inspection/monitoring records.

11.8.3 Fly Ash Management

The PPD estimates that the proposed power plant will generate approximately 60,000tpa of fly ash. This fly ash will initially be stockpiled within a central designated storage facility (with a storage capacity of approximately 280,000t), and then be disposed of to mined out open pits as they become available.

11.9 Water Aspects and Impacts

The Feasibility Study and EIS reports state that there are no significant surface water resources within the project area. The main surface feature in the general area is the seasonal Irhazer River is situated approximately 7 km to the north of the mine area. The Main EIA report further states that the project activities will have a ’relatively small impact on the area’s intermittent rivers’.

The Feasibility Study states that groundwater is the main water resource for the regional area and that the ‘area is abundant in groundwater resources, and the fresh water reserves can meet the needs of this project’. The Feasibility Study, PMD and PPD also state

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that no detailed hydrogeological assessment undertaken as part of the current project development assessment and design, and that relevant (hydrogeological) sections of the Japanese feasibility study (completed in 1988) will be utilised for the mine design.

The PPD estimates that the total combined processing plant and mining water use will be 4,981.29 m[3] /d (1.644 Mm[3] per year), comprising 4,349.18 m[3] /d for production water (including 2,499.55 m[3] /d for the power plant) and 632.11 m[3] /d for domestic water. This total water use estimate also includes an additional 20% contingency for the production water and a 15% contingency for the domestic water.

The PPD states that there will be two groundwater supply sources, the Azelik Village water source (supplying 2,000 m[3] /d) and the WP-2 water source (located approximately 3 km from the process plant and supplying 2,900 m[3] /d). The PPD also states that, based on the previous/historical hydrogeological assessment, these two water sources will be able to meet the project’s water usage requirements. The PPD and Main EIA report also refer to the establishment of a groundwater extraction/flow monitoring and modelling system. SRK has not sighted any groundwater extraction monitoring and or modelling data.

The Feasibility Study and PMD estimate that mine water (underground and the open pits) will be generated from at rates from 90 m[3] /hr (early stage) to 245 m[3] /hr (later stage). PMD states that there is potential for the mine water to contain radioactive material and, as such, the mine water will not be discharged but will be collected for either reuse as mining production water or evaporated within ponds. SRK notes that there are no stated provisions within the project development documentation for reusing this collected mine water in the ore processing.

The Feasibility Study estimates that the project’s wastewater discharge (i.e. mining and processing wastewater discharge volumes after recycling) will be approximately 1 Mm[3] per year. The Main EIA report identifies that wastewater, surface runoff and seepage (TSF) from the project’s activities and facilities, has the potential to impact the quality of the groundwater resources. The proposed management for this comprises the use of lined settling and containment/evaporation ponds for wastewater and surface runoff, and the associated groundwater quality monitoring. The Feasibility Study states that area’s low annual rainfall (139 mm) and high annual evaporation (6,099 mm) makes the proposed wastewater evaporation treatment viable. SRK notes that the proposed evaporation ponds will likely contain materials that are high in metals and radiation. The project development documentation does not provide any proposed specific management strategies for this potential environmental risk. SRK has also not sighted a documented operational groundwater quality monitoring plan and associated monitoring results for the Azelik Uranium Project.

The Feasibility Study and PMD state that the main flood risk for the general area is from the seasonal Irhazer River. The general topography of the area of the project site and the Irhazer River is stated as ‘flat and open’. The estimated flood level elevation for the Irhazer River is 366–369 m RL. The project has adopted a elevation of 317 mRL as the design maximum flood level. The Feasibility Study and PMD state that the potential for flooding from the Irhazer River to significantly impact the project is low. Due to the project

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site being situated approximately 6–7 km from the Irhazer River and the project facilities are all situated above the elevation of 371 mRL. To address the potential localised site flooding impacts, flood diversion channels will be constructed upstream of the mining areas and the processing facilities.

11.10 Air Emissions

11.10.1Dust Emissions

The potential fugitive dust emissions sources for the project are from stockpiles, open areas, blasting, ore handling/processing and the general movement of vehicles and mobile equipment. The Feasibility Study states that the project site is located approximately 11 km northeast of Teguidda In Tessoum Village and 6 km to the west of Azelik Village, and that the potential for significant residential dust impacts is low.

The proposed operational dust management measures for the project are:

. Wet drilling will be undertaken.
. Return to the operating sites after a necessary waiting following blasting as required.
. Water sprays will used on the wastes in the mine area, excavation equipment transfer roadway and general mining activity areas.
. Mining belt conveyor will be covered and have water sprays.
. Enclosure of ore handling facilities.
. Use of dust collection and filter systems.
. Systematic washdown of work places and equipment.
. Training of the operators so that they would pay close attention to the dust and radiation hazards.
. Tailings transport/handling — the drop distance for the tailings stockpiling (i.e. the distance form the conveyor discharge pint to the stockpile surface), will be minimised. The PMD also states that the tailings ‘belt conveyor shall take the necessary measures for dust’.
. TSF — water sprays will be used on the tailings stockpile.
. Undertake site dust/radiation monitoring.

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SRK makes the following comments in relation to the above proposed dust management measures:

. The proposed dust management measures for the tailings belt conveyor are not specified (i.e. such as covering the conveyor, uses of water sprays, belt cleaning).
. SRK has not sighted a documented operational dust monitoring plan and associated monitoring results.

11.10.2Gas Emissions

The Feasibility Study states that the proposed coal fired power station will generate gas emissions from three boilers. The ESMS states that pollutants in these gas emissions will be Sulphur Dioxide (SO2), Nitrogen Oxides (NOX) and particulates. The ESMS also states that the power station will use low sulphur coal as fuel. The Complementary EIA report states that ‘dust collection and gas filtration devices will be provided for the power plant so as to minimize the emission of hazardous gas’. No other detail on the monitoring and management of these gas emissions is provided in the Feasibility Study, PMD and Complementary EIA.

11.10.3Greenhouse Gas Emissions

There is no Niger National legislative requirement for the project to estimate its Greenhouse Gas emissions or to implement any emissions reductions. As such none of the project development and environmental assessment documentation reviewed addresses the issue of Greenhouse Gas emissions. However, energy efficiency and the reduction of Greenhouse Gas emissions are components of IFC environmental requirements and are considered as internationally recognised environmental management practices. Therefore, SRK recommends that consideration be given to developing initiatives to quantify Greenhouse Gas emissions and assess possible emission reduction strategies for the Azelik Uranium Project.

11.11 Noise Emissions

The potential noise emissions sources for the project are from blasting, ore handling/ processing equipment, air compressors, ventilation fans/blowers, turbines, pumps and the general movement of vehicles and mobile equipment. The Main EIA and PMD state that the potential for the project to have significant residential noise impacts is low, due to the remote location of the site in relation the nearest residence (approximately 11 km northeast of Teguidda In Tessoum Village and 6 km to the west of Azelik Village).

The Main EIA report states ‘main abatement and protective measures against hazardous noises are isolation and absorption’. SRK notes that this proposed noise management strategy is for potential occupational noise exposure.

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The PPD proposes the following operational noise management measures:

. Use of low-noise equipment (where possible).
. Enclose and insulate high noise sources (such as crushing plant, fans, pumps, turbines and air compressors).

11.12 Hazardous Materials Management

The hazardous materials for the project mainly comprise explosives, process reagents and hydrocarbons. The management of radioactive materials is addressed in Section 11.16 (Radiation Management Plan) and the management of radioactive wastes is addressed in Section 11.13.2 (Solid Wastes).

The Feasibility Study states that the proposed explosives magazine will store the following explosive materials:

. Nitrolite (Class A2) — 60t
. Ammonium nitrate (Class D) — 240t
. Non-electric detonator (Class A2) — 200,000 pieces
. Plain fuse detonators (Class A2) — 60,000 pieces
. Detonating cord (Class D) — 800,000 m
. Blasting fuse (Class D) — 120,000 m

The proposed explosives magazine will also include an internal primer processing room (Class B).

The proposed explosives magazine will be sited within an area remote from the industrial, administrative and accommodation areas. The proposed location is approximately 2.5 km southeast of the Deposit IR (2.0 km from the industrial area and 4.7 km from the accommodation area). SRK notes that the proposed location for the explosives magazine is in accordance with recognised international industry practices.

The Feasibility Study and Main EIA provide the following list of process reagents and the proposed annual consumption rates:

. Sodium hydroxide — 1,041tpa
. Sodium chloride — 2,186tpa
. Resin — 40tpa
. Sodium carbonate — 4,258tpa

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. Sodium bicarbonate — 4,761tpa

The Feasibility Study and Main EIA report refers to a ‘storage and warehousing facility’ but do provide details for the any storage and handling of the above process reagents.

The PPD provides the following list of process reagents and the proposed annual consumption rates:

. Sodium hydroxide — 1,696tpa
. Sodium — 6,000tpa
. Sodium chloride — 3,053tpa
. Resin — 10tpa
. Sodium bicarbonate — 6,000tpa
. Permanganate — 1,500tpa
. Polyacrylamide — 15tpa

The PPD refers to a ‘chemical raw material warehouse’ for the storage of sodium carbonate, sodium bicarbonate, sodium hydroxide, sodium chloride and resin. It also refers to ‘sodium chloride warehouse and mixing/dissolving area’ and a ‘potassium permanganate warehouse’. The stated storage capacity for these facilities is six months. The PPD does not provide any further details for the storage and handling of the above process reagents.

The Feasibility Study and Main EIA report estimates that 1,690tpa of diesel and 127t of oil will be consumed annually for the project. The PPD estimates that 2,400t of diesel will be consumed annually for the project, of which 144t will be consumed in the process plant. The proposed hydrocarbon storage facility is described as an ‘oil depot and oil filling facility, which will be constructed within the mine area. The stated storage capacity for this facility is three months.

SRK recommends that all hazardous materials storage and handling facilities have secondary containment in accordance with recognised international industry practices.

11.13 Waste Management

11.13.1Waste Oil

The Feasibility Study states that the maintenance of mobile equipment will be undertaken on site and that a ‘machinery repair and automobile repair facility’ will be constructed. As such, the project will generate waste oil from these maintenance activities. The Main EIA report refers to oil being generated from machinery/

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equipment and proposes that mitigation measures include ‘oil reclamation, pollutant elimination and incineration’. The project development documentation does not provide further details regarding the project’s proposed management of waste oil.

SRK recommends that all waste oil storage and handling facilities have secondary containment in accordance with recognised international industry practices.

11.13.2Solid Wastes

The Main EIA report refers to ‘solid wastes in plant area’ proposes that mitigation measures include ‘pollutant elimination and burial’. The ESMS describes some proposed operational waste management measures, with the being mainly on the management of waste rock and process wastes, and also radioactive wastes. The ESMS and Main EIA report propose the following radioactive waste management measures:

. All wastes are to be sorted at a place immediately next to the source of wastes.
. The sorted wastes should be limited according to the number of stock yards designated for such wastes.
. Reclaiming and processing of wastes.
. Mixing of wastes of different categories is not allowed and wastes with weak radioactivity should be subject to separate management.
. Weak radioactive wastes (contaminated used parts and scrap metal) — should either be buried in the waste slag pit affiliated to the plant or transferred to a third party after approved by the relevant administrations following pollution elimination and radiological test.
. Qualitative and quantitative records should be maintained for wastes transferred to the elimination areas.

SRK has not sighted any further information on the proposed management of the project’s radioactive solid wastes and general (non-radioactive) industrial and domestic solid waste.

11.13.3Sewage and Oily Waste Water

The PPD estimates that the project will generate approximately 245 m[3] /d of domestic sewage. This sewage will be treated via a centralised treatment plant (capacity of 350 m[3] /d), that utilises anaerobic acidification followed by oxidation ponds. It is proposed to reuse the treated sewage water for TSF dust suppression, site greening and local farm irrigation. The PPD also states that the project’s oily waste water will be treated initially through grease traps and then through the sewage treatment plant.

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11.14 Contaminated Sites Assessment

The assessment, recording and management of contaminated sites within mining or mineral processing operations, is a recognised international industry practice (i.e. forms part of the IFC Guidelines) and in some cases a National regulatory requirement (e.g. an Australian environmental regulatory requirement). The purpose of this process is to minimise the level of site contamination that may be generated throughout a project’s operation while also minimising the level and extent of site contamination that will need to be addressed at site closure.

A contaminated site or area can be defined as:

‘‘An area that has substances present at above background concentrations that presents or has the potential to present a risk of harm to human health, the environment or any environmental value’’.

Contamination may be present in soil, surface water or groundwater and also may affect air quality through releases of vapours or dust.

Examples of typical contaminated areas within a mining/mineral processing project are spillages to soil/water of hydrocarbons and chemicals, and uncontained storage and spillages to soil/water of ores and concentrates.

The process to assess and record the level of contamination basically involves a combination of visual (i.e. suspected contamination observed from spillages/releases) and soil/water/air sampling and testing (i.e. to confirm contaminant levels). Once the level of contamination is defined, the area’s location and contamination details are then recorded within a site register.

Remediation/clean up of contamination areas involves the collection and removal of the contaminated materials for treatment and appropriate disposal, or in some cases the in-situ treatment of the contaminated (e.g. use of bioremediation absorbents on hydrocarbon spillage). The other key component to the management of contaminated areas is to also remove or remedy the source of the contamination (e.g. place hydrocarbon storage and handling within secondary containment).

The Main EIA and ESMS refer to the dumping and accidental spills of hazardous substances (including radioactive materials) and chemical reagents, as the main potential site contamination risk. The proposed remedial management measures for these contamination incidents are stated in the Main EIA as ‘the product (substance) shall be recycled and the relevant areas should be washed, de-contaminated and rehabilitated’. SRK has not sighted any other documented process to assess and remediate any areas of suspected contamination. SRK recommends that SOMINA develop an operational contaminated sites assessment and management process for the Azelik Uranium Project in line with recognised international practice.

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11.15 Radiation Management Plan

A recommendation from the BEEEI environmental inspection of the Azelik Uranium Project carried out in May 2008 was that SOMINA develop a radiation monitoring and management plan. In accordance with this recommendation, SOMINA produced the ‘Azelik Uranium Project, Mining On-Site Background Values, and Radiation Risk — Environmental Action Plan’ in May 2009. The key radiation monitoring and management elements of this plan are:

. Assess and define the background/baseline radiation conditions within the project area.
. Assess and define the project’s operational radiation risks.
. Define the scope of the project’s radiation monitoring program.
. Outline the project’s radiation risk management strategies.

The proposed environmental radiation monitoring outlined in the radiation management plan, comprises the monitoring of dust (suspended particulates and weather conditions with the residential areas), groundwater, soil, local food supplies (diary products, fruits and vegetables) and natural vegetation. Weather conditions will be monitored continuously; however, SRK notes that the method and frequency for the dust sampling and analysis is not specified. Potable water will be sampled and analysed quarterly. Groundwater well will be monitored weekly for radio-nuclides with a full elemental analysis undertaken every six months. Soils and local food supplies will be sampled and analysed annually. The composition of the local vegetation will be assessed annually.

The proposed environmental radiation management measures comprise the fugitive dust management measures (outlined in Section 11.10.1), setting barriers around radiation sources proper disposal/management of industrial wastes (i.e. to ensure no residential exposure to weak radioactive sources).

11.16 Environmental Protection and Management Plan

The purpose of an operational Environmental Protection and Management Plan (EPMP) is to direct and coordinate the management of the project’s environmental risks. The EPMP documents the establishment, resourcing and implementation of the project’s environmental management programs. The site environmental performance is monitored and feedback from this monitoring is then utilised to revise and streamline the implementation of the EPMP.

The ESMS and Main EIA outline the project’s proposed environmental monitoring and management measures. SRK recommends that, as the project moves from construction to commissioning/operations update the ESMS or develop an operational EPMP, which is in line with recognised international industry practices and incorporates the actual site operating conditions.

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11.17 Emergency Response Plan

The IFC describes an emergency as ‘an unplanned event when a project operation loses control, or could lose control, of a situation that may result in risks to human health, property, or the environment, either within the facility or in the local community’. Emergencies are of a scale that have operational wide impacts, and do not include small scale localised incidents that are covered under operational area specific management measures. Examples of an emergency for a mining/mineral processing project are events such as pit wall collapse, underground mine explosion, the failure of a TSF or a large scale spillage/discharge of hydrocarbons or chemicals.

The recognised international industry practice for managing emergencies is for a project to develop and implement an Emergency Response Plan (ERP). The general elements of an ERP are:

. Administration — policy, purpose, distribution, definitions of potential site emergencies and organisational resources (including setting of roles and responsibilities).
. Emergency response areas — command centres, medical stations, muster and evacuation points.
. Communication systems — both internal and external communications.
. Emergency response procedures — work area specific procedures (including area specific training).
. Checking and updating — prepare checklists (role and action list and equipment checklist) and undertake regular reviews of the plan.
. Business continuity and contingency — options and processes for business recovery from an emergency.

The ESMS and Main EIA outline the project’s proposed emergency response measures which are in line with the general elements of a recognised international ERP (including a specific ERP addressing radiation emergencies). SRK recommends that, as the project moves from construction to commissioning/operations update the proposed emergency response measures and incorporated these within an operational ERP that is line with recognised international industry practices, and reflects the actual site operating conditions.

11.18 Site Closure Planning and Rehabilitation

The recognised international industry practice for managing site closure is to develop and implement an operational site closure planning process and document this through an operational Closure Plan. This operational closure planning process should include the following components:

. Identify all site closure stakeholders (e.g. government, employees, community etc.).

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. Undertake stakeholder consultation to develop agreed site closure criteria and post operational land use.
. Maintain records of stakeholder consultation.
. Establish a site rehabilitation objective in line with the agreed post operational land use.
. Describe/define the site closure liabilities (i.e. determined against agreed closure criteria).
. Establish site closure management strategies and cost estimates (i.e. to address/ reduce site closure liabilities).
. Establish a cost estimate and financial accrual process for site closure.
. Describe the post site closure monitoring activities/program (i.e. to demonstrate compliance with the rehabilitation objective/closure criteria).

The project development documentation outlines the project’s rehabilitation obligations and proposed site rehabilitation measures. SRK notes that these rehabilitation obligations and proposed measures outlined in the site rehabilitation plan are generally in line with recognised international industry practice. In particular, the Main EIA states that SOMINA will be required to establish a site rehabilitation financial accrual process (i.e. open a special ‘‘Environment and Rehabilitation’’ account). Financial accrual will occur on annual basis and the amount is to be ‘equivalent to the site remedial and rehabilitation costs’, which will be defined through consultation between the Ministry of Environment, Ministry of Mines and SOMINA.

SRK recommends that as the project moves from construction to commissioning/ operations continue to develop and implement an operational site closure planning process that is in line with recognised international industry practices. This closure planning process should be documented within an operational site rehabilitation and closure plan, which should be regularly updated to reflect current operating conditions.

11.19 Evaluation of Environmental Risks

The sources of inherent environmental risk are project activities that may result in potential environmental impacts. These project activities have been previously described within this report.

The most significant environmental risks for the Azelik Uranium Project are:

. Waste rock management.
. Tailings management — TSF design, construction and operation (including tailings transfer).
. Water management (mainly groundwater extraction and quality impacts).

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. Wastewater management (mine water, process wastewater and surface water discharges).
. Radiation management.
. Dust management.
. Land disturbance, rehabilitation and site closure.
. Land contamination.

11.20 Recommendations on Environmental Compliance and Management

. SOMINA seek a legal opinion on the compliance status for the project with other relevant Niger rules and regulations (i.e. as per the legal opinion provided for the compliance with the Mining Law).
. Establish an annual process to survey and record all areas of land disturbance for the Azelik Uranium Project to allow for effective site rehabilitation planning.
. Collect drainage water from the WRD’s within evaporation ponds in line with the proposed mine water management.
. Undertake an independent geotechnical review of the detailed design for the proposed TSF (i.e. when the TSF design is completed).
. Develop initiatives to quantify Greenhouse Gas emissions and assess possible emission reduction strategies for the Azelik Uranium Project. Construct storage and handling facilities for all hazardous materials/wastes (i.e. chemicals, hydrocarbons and radioactive materials) with secondary containment in accordance with recognised international industry practices.
. Develop an operational contaminated sites assessment and management process for the Azelik Uranium Project in line with recognised international practice.
. As the project moves from construction to commissioning/operations, update the ESMS or develop an operational EPMP, which is in line with recognised international industry practices and incorporates the actual site operating conditions.
. As the project moves from construction to commissioning/operations, update the proposed emergency response measures and incorporated these within an operational ERP that is line with recognised international industry practices, and reflects the actual site operating conditions.

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. As the project moves from construction to commissioning/operations, continue to develop and implement an operational site closure planning process that is in line with recognised international industry practices. This closure planning process should be documented within an operational site rehabilitation and closure plan, which should be regularly updated to reflect current operating conditions.

12 SOCIAL ASSESSMENT

12.1 Social and Community Interaction

The Azelik Uranium Project is located approximately 11 km northeast of the Teguidda In Tessoum Village and 6 km to the west of Azelik Village (nearest residential area). The Azelik Uranium Project is situated within the Azelik Town, which is approximately 163 km north west of Agadez City/Province and 1,000 km north east of Niamey, Republic of Niger. The predominant land use for the project area surrounds is livestock/agriculture along with supporting small individual workshops. However, the Feasibility Study states that the main industry of the Agadez Province is uranium mining and processing.

The Main EIA states that the population of the Teguidda in Tessoum Village is estimated at 1,500 people (2007 population survey figures). The project will potentially contribute approximately 400 additional residents to the area. These are to be housed in a purpose built accommodation area adjacent to and west of the Azelik Village. The existing local population mainly comprises the Touareg cultural group. The Feasibility Study states that there are no significant cultural heritage sites within or surrounding the project area.

SRK notes that no documented records of public consultation in relation the development and approval of the project EIA reports have been sighted as part of this review.

12.2 Relationship with Local Government

The main administrative body for the project is the Agadez Provincial Government, with oversight by the Niger National Government. SOMINA has stated that the relationship with the Agadez Provincial Government and Niger National Government is positive, and that there have been no notices of breach of environmental conditions in relation to the development of the Azelik Uranium Project.

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13 REFERENCES

Jiangxi Nuclear Geological Bureau, Resources Estimation Report of Deposit IR G and T in Azalik Mine Niger, 29th September 2006
The Fourth Institute of Engineering of CNNC, Feasibility Study on the Azalik Uranium Mine in Niger, October 2006
Kaiwen Li, Assessment Report on the Azalik Uranium Mining and Processing Project, 10th September 2008
The Fourth Institute of Engineering of CNNC, Preliminary Design of Mining on the Azalik Uranium Mine, January 2008
The Fourth Institute of Engineering of CNNC, Preliminary Design of Processing on the Azalik Uranium Mine, June 2008
The Fourth Institute of Engineering of CNNC, Preliminary Design of Financial Assessment on the Azalik Uranium Mine, August 2008
Handan Huabei Metallurgical Construction Institute, Preliminary Design of Power Plant on the Azalik Uranium Mine, July 2008
Beijing Research Institute of Chemical Engineering and Metallurgy, CNNC (BRICEM), Enlarged Pilot Testing Report on Azelik Uranium Metallurgy Project, February 2008
Group of Art and Engineering, Environmental Assessment Report on the Teguida Uranium Project
Group of Art and Engineering, Environmental Assessment Report on the Teguida Uranium Project Complement, September 2008
Ministry of Environment Niger, Certificate on Environmental Compliance, No.000010, 17th August 2007
Ministry of Environment Niger, Approval on the Environmental Assessment Report on the Teguida Uranium Project Complement, 25th September 2008
Ministry of Mine Niger, Exploration Permit to China National Uranium Corporation, No.000070, 24th July 2006
Ministry of Mine Niger, Journal on the Permit of Mining to SOMINA, No.2007-505, 08 November 2007
SOMINA, Safety and Environmental Regulation Report, May 2009
4th Nuclear Industry Research and Design Institute, Feasibility Study on Azelik Uranium Mining and Processing, October 2006

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4th Nuclear Industry Research and Design Institute, Preliminary Mine Design, Niger Uranium Mining and Metallurgical Engineering Azelik Mine, January 2008
4th Nuclear Industry Research and Design Institute, Preliminary Design Metallurgical Plant and Ancillary Facilities, Niger Uranium Mining and Metallurgical Engineering Azelik Mine, June 2008
Office of Study Group Art & Engineering (BP224, Niamey — Niger) EIA Main project — no production date
Office of Study Group Art & Engineering (BP224, Niamey — Niger), Environmental Impact Assessment — Complementary of Exploitation of Uranium in Teguida Area, September 2008
Ministry of Environment Niger, Certificate on Environmental Compliance, No.000010, 17th August 2007
Republic of Niger Ministry of Environmental Protection and Anti-Desertification, Environmental Assessments and Environmental Impact Research Agency (BEEEI), Azelik Mining Company (SOMINA) Environmental Inspection Investigation Report, 25 June, 2008
Ministry of Environment Niger, Approval on the Environmental Assessment Report on the Teguida Uranium Project Complement, 25th September 2008
Ministry of Mine Niger, Exploration Permit to China National Uranium Corporation, No.000070, 24th July 2006
Ministry of Mine Niger, Journal on the Permit of Mining to SOMINA, No.2007-505, 08 November 2007
Azelik Mining Company Limited, Environmental Safety Management System, May 2009
Azelik Mining AG (SOMINA), Azelik Uranium Project, Mining On-Site Background Values, and Radiation Risk — Environmental Action Plan, May 2009
SOMINA and Republic of Niger Ministry of Environmental Protection and AntiDesertification, Environmental Assessments and Environmental Impact Research Agency (BEEEI), Azelik Uranium Project Environmental Management Implementation Agreement, 2008.
SOMINA and Republic of Niger Ministry of Environmental Protection and AntiDesertification, Environmental Assessments and Environmental Impact Research Agency (BEEEI), Azelik Uranium Project Environmental Management Implementation Plan, 2009.

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APPENDICES

APPENDIX 1: RESOURCE AND RESERVE STANDARDS

Categorisation of Mineral Resources and Ore Reserves

The system for categorisation of mineral resources and ore reserves in China is in a period of transition which commenced in 1999. The traditional system, which is derived from the former Soviet system, uses five categories based on decreasing levels of geological confidence — Categories A, B, C, D and E. The new system (Rule 66) promulgated by the Ministry of Land and Resources (MLR) in 1999 uses three dimensional matrices, based on economic, feasibility/mine design and geological degrees of confidence. These are categorised by a three number code of the form ‘‘123’’. This new system is derived from the UN Framework Classification proposed for international use. All new projects in China must comply with the new system, however, estimates and feasibility studies carried out before 1999 will have used the old system.

Wherever possible, the Chinese Resource and Reserve estimates have been reassigned by SRK to categories similar to those used by the JORC Code to standardise categorisation. Although similar terms have been used, SRK does not mean to imply that in their present format they are necessarily classified as ‘Mineral Resources’ as defined by the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘‘JORC Code’’).

A broad comparison guide between the Chinese classification scheme and the JORC Code is presented in the following table.

JORC Code Resource Category	Chinese Resource Category	Chinese Resource Category
	Previous system	Current system
Measured	A, B	111, 111b, 121, 121b, 2M11, 2M21, 2S11, 2S21, 331
Indicated	C	122, 122b, 2M22, 2S22, 332
Inferred	D	333
Non-equivalent	E	334

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APPENDIX II

Definition of the New Chinese Resource and Reserve Category Scheme

Category	Denoted	Comments
Economic	1	Full feasibility study considering economic factors has been conducted
	2	Pre feasibility to scoping study which generally considers economic factors has been conducted
	3	No pre feasibility or scoping study conducted to consider economic analysis
Feasibility	1	Further analysis of data collected in ‘‘2’’ by an external technical department
	2	More detailed feasibility work including more trenches, tunnels, drilling, detailed mapping
	3	Preliminary evaluation of feasibility with some mapping and trenches
Geologically controlled	1	Strong geological control
	2	Moderate geological control via closely-spaced data points (e.g. small scale mapping)
	3	Minor work which is projected throughout the area
	4	Review stage

Relationship between JORC Code and the Chinese Reserves System

In China, the methods used to estimate the resources and reserves are generally prescribed by the relevant government authority, and are based on the level of knowledge for that particular geological style of deposit. The parameters and computational methods prescribed by the relevant authority include cut-off grades, minimum thickness of mineralisation, maximum thickness of internal waste, and average minimum ‘industrial’ or ‘economic’ grades required. The resource classification categories are assigned largely on the basis of the spacing of sampling, trenching, underground tunnels and drill holes.

In the pre 1999 system, Category A generally included the highest level of detail possible, such as grade control information. However, the content of categories B, C and D may vary from deposit to deposit in China, and therefore must be carefully reviewed before assigning to an equivalent ‘‘JORC Code type’’ category. The traditional Categories B, C and D are broadly equivalent to the ‘Measured’, ‘Indicated’, and ‘Inferred’ categories that are provided by the JORC Code and USBM/USGS systems used widely elsewhere in the world. In the JORC Code system the ‘Measured Resource’ category has the most confidence and the ‘Inferred’ category has the least confidence, based on increasing levels of geological knowledge and continuity of mineralisation.

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APPENDIX II

Chinese Classification Scheme Comparison to JORC

Old Chinese Classification	Old Chinese Classification	A & B	A & B	C	C	C	D	E & F
New Chinese Classification
‘‘E’’ Economic Evaluation (100)	Designed mining loss accounted	Recoverable Reserve (111)	Probable Recoverable Reserve (121)		Probable Recoverable Reserve (122)
	Designed mining loss not accounted (b)	Basic Reserve (111b)	Basic Reserve (121b)		Basic Reserve (122b)
Marginal Economic (2M00)		Basic Reserve (2M11)	Basic Reserve (2M21)		Basic Reserve (2M22)
Sub-Economic (2S00)		Resource (2S11)	Resource (2S21)		Resource (2S22)
Intrinsically		—	—	Resource (331)		Resource (332)	Resource (333)	Resource (334)
Economic (300)
‘‘F’’ Feasibility Evaluation		Feasibility (010)	Pre- Feasibility (020)	Scoping (030)	Pre- Feasibility (020)	Scoping (030)	Scoping (030)	Scoping (030)
‘‘G’’ Geological Evaluation		Measured			Indicated		Inferred (003)	Predicted (004)
		(001)			(002)
JORC							Unclassified or
							Exploration Potential
					Inferred
			Probable Reserve or Indicated Resource
		Proved/Probable Reserve or Measured Resource

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APPENDIX 2: WORLD BANK/INTERNATIONAL FINANCE CORPORATION (IFC) ENVIRONMENTAL STANDARDS AND GUIDELINES

In seeking to obtain project financing or to list on a stock exchange, these institutions themselves require the proponent to comply with such documents as the Equator Principles and the IFC Performance Standards and Guidelines. This is exemplified by the following preamble from the Equator Principles (July 2006):

Project financing, a method of funding in which the lender looks primarily to the revenues generated by a single project both as the source of repayment and as security for the exposure, plays an important role in financing development throughout the world. Project financiers may encounter social and environmental issues that are both complex and challenging, particularly with respect to projects in the emerging markets.

The Equator Principles Financial Institutions (EPFIs) have consequently adopted these Principles in order to ensure that the projects we finance are developed in a manner that is socially responsible and reflect sound environmental management practices. By doing so, negative impacts on project-affected ecosystems and communities should be avoided where possible, and if these impacts are unavoidable, they should be reduced, mitigated and/or compensated for appropriately. We believe that adoption of and adherence to these Principles offers significant benefits to ourselves, our borrowers and local stakeholders through our borrowers’ engagement with locally affected communities. We therefore recognise that our role as financiers affords us opportunities to promote responsible environmental stewardship and socially responsible development. As such, EPFIs will consider reviewing these Principles from time-to-time based on implementation experience, and in order to reflect ongoing learning and emerging good practice.

These Principles are intended to serve as a common baseline and framework for the implementation by each EPFI of its own internal social and environmental policies, procedures and standards related to its project financing activities. We will not provide loans to projects where the borrower will not or is unable to comply with our respective social and environmental policies and procedures that implement the Equator Principles.

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The following Tables provide a brief summary of the Equator Principles and the IFC Performance Standards respectively. These documents are used by the EPFI’s and stock exchanges in their review of the social and environmental performance of proponent companies.

Table A4-1: Equator Principles

Equator Principles	Title	Key Aspects (Summary)
1	Review and Categorisation	Categorise such project based on the magnitude of its potential impacts and risks.
2	Social and Environmental Assessment	Conduct a Social and Environmental Assessment (‘‘Assessment’’). The Assessment should also propose mitigation and management measures appropriate to the nature and scale of the proposed project.
3	Applicable Social and Environmental Standards	The Assessment will refer to the applicable IFC Performance Standards, and applicable Industry Specific EHS Guidelines (‘‘EHS Guidelines’’) and overall compliance with same.
4	Action Plan and Management System	Prepare an Action Plan (AP) which addresses the relevant findings of the Assessment. The AP will describe and prioritise the actions, mitigation measures, corrective actions and monitoring to manage the impacts and risks identified in the Assessment. Maintain a Social and Environmental Management System that addresses the management of these impacts, risks, and corrective actions required to comply with host country laws and regulations, and requirements of the applicable Standards and Guidelines, as defined in the AP.
5	Consultation and Disclosure	Consult with project affected communities. Adequately incorporate affected communities’ concerns.
6	Grievance Mechanism	Establish a grievance mechanism as part of the management system. To receive and resolve concerns about the project by individuals or groups from among project-affected communities. Inform the affected communities about the grievance mechanism in the course of the community engagement process and ensure that the mechanism addresses concerns promptly and transparently, and is readily accessible to all segments of the affected communities.

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Equator Principles	Title	Key Aspects (Summary)
7	Independent Review	Independent social or environmental expert will review the Assessment, AP and consultation process to assess Equator Principles compliance.
8	Covenants	Covenant in financing documentation: a) to comply with all relevant host country social and environmental laws, regulations and permits;
		b) to comply with the AP during the construction and operation of the project;
		c) to provide periodic reports not less than annually, prepared by in-house staff or third party experts, that (i) document compliance with the AP, and (ii) provide compliance with relevant local, state and host country social and environmental laws, regulations and permits; and
		d) to decommission the facilities, where applicable and appropriate, in accordance with an agreed decommissioning plan.
9	Independent Monitoring and Reporting	Appoint an independent environmental and/or social expert, or require that the borrower retain qualified and experienced external experts to verify its monitoring information.
10	EPFI Reporting	Each EPFI adopting the Equator Principles commits to report publicly at least annually about its Equator Principles implementation processes and experience, taking into account appropriate confidentiality considerations.

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Table A4-2: IFC Performance Standards

IFC Performance Standard	Title	Objective (Summary)	Key Aspects (Summary)
1	Social and Environmental Assessment and Management Systems	Social and EIA and improved performance through use of management systems.	Social & Environmental Management System (S&EMS). Social & Environmental Impact Assessment (S&EIA). Risks and impacts. Management Plans. Monitoring. Reporting. Training. Community Consultation.
2	Labour and Working Conditions	EEO. Safety and Health.	Implement through the S&EMS. HR policy. Working condition. EEO. Forced & child labour. OH&S.
3	Pollution Prevention and Abatement	Avoid pollution. Reduce Emissions.	Prevent pollution. Conserve resources. Energy efficiency. Reduce waste. Hazardous materials. EPR. Greenhouse Gases.
4	Community Health, Safety and Security	Avoid or minimise risks to community.	Implement through the S&EMS. Do risk assessment. Hazardous materials safety. Community exposure. ERP.
5	Land Acquisition and Involuntary Resettlement	Avoid or minimise resettlement. Mitigate adverse social impacts.	Implement through the S&EMS. Consultation. Compensation. Resettlement planning. Economic displacement.
6	Biodiversity Conservation and Sustainable Natural Resource Management	Protect and conserve biodiversity.	Implement through the S&EMS. Assessment. Habitat. Protected areas. Invasive species.
7	Indigenous Peoples	Respect. Avoid and minimise impacts. Foster good faith.	Avoid adverse impacts. Consultation. Development benefits. Impacts to traditional land use. Relocation.
8	Cultural Heritage	Protect cultural heritage.	Heritage Survey. Site avoidances. Consultation.

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APPENDIX 3: DOCUMENT FOR MINING LICENSE

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APPENDIX 4: LAWYER LETTER FOR MINING LICENSE

Set out below is a copy of the letter dated 22 January 2010 issued by M. Aissatou Zada, the Niger legal adviser of CNNC International Ltd, to CNNC International Ltd and for the attention of Mr. Philip Li, the company secretary of CNNC International Ltd.

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SRK REPORT DISTRIBUTION RECORD

Ref: SHK085 Copy No: Electronic Date: date Name/Title Company Copy # Client name company name No.

Approval Signature:

This document is protected by copyright vested in SRK. It may not be reproduced or transmitted in any form or by any means whatsoever to any person without the written permission of the copyright holder, SRK.

SRK REVISION RECORD

Rev No.	Date	Revised By	Revision Details
0115verA	Jan 15	RK/QH/VH/PS/CL/PX	Initial report — put all sections
			together
0118verB	Jan 18	Pengfei Xiao	Revised the geological resources

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APPENDIX III

REPORTS ON FORECASTS UNDERLYING THE VALUATION OF THE SALE SHARES

Set out below are texts of the reports from Deloitte Touche Tohmatsu and CCBIC in connection with the cash flow forecasts underlying the valuation of the Sales Shares as at the Valuation Date and are prepared for the purpose of inclusion in this circular.

(I) REPORT FROM DELOITTE TOUCHE TOHMATSU

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ACCOUNTANTS’ REPORT ON CALCULATIONS OF DISCOUNTED FUTURE ESTIMATED CASH FLOWS IN CONNECTION WITH THE VALUATION OF EQUITY INTEREST IN IDEAL MINING LIMITED

TO THE DIRECTORS OF CNNC INTERNATIONAL LIMITED

We have examined the calculations of the discounted future estimated cash flows on which the valuation, prepared by Jones Lang LaSalle Sallmanns Limited dated 27th January 2010, of 100% equity interest in Ideal Mining Limited (‘‘Ideal Mining’’) as at 31st December 2009 (the ‘‘Valuation’’) is based. The principal asset of Ideal Mining is a 37.2% equity interest in Socie´ te´ des Mines d’Azelik S.A. which is the registered holder of the mining license for a uranium mine located in the Agadez region of the Tchiroze´ rine department of Republic of Niger. The Valuation based on the discounted future estimated cash flows is regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and will be included in a circular dated 4 March 2010 to be issued by CNNC International Limited (the ‘‘Company’’) in connection with the acquisition of 100% equity interest in Ideal Mining (the ‘‘Circular’’).

Directors’ responsibility for the future estimated cash flows

The directors of the Company are responsible for the preparation of the future estimated cash flows in accordance with the bases and assumptions determined by the directors and set out in Appendix I to the Circular (the ‘‘Assumptions’’). This responsibility includes carrying out appropriate procedures relevant to the preparation of the future estimated cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

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APPENDIX III

REPORTS ON FORECASTS UNDERLYING THE VALUATION OF THE SALE SHARES

Reporting accountants’ responsibility

It is our responsibility to form an opinion on the arithmetical accuracy of the calculations of the discounted future estimated cash flows on which the Valuation is based and to report solely to you, as a body, as required by Rule 14.62(2) of the Listing Rules, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Our engagement was conducted in accordance with Hong Kong Standard on Assurance Engagements 3000 ‘‘Assurance Engagements Other Than Audits or Reviews of Historical Financial Information’’ issued by the Hong Kong Institute of Certified Public Accountants. This standard requires that we comply with ethical requirements and plan and perform the assurance engagement to obtain reasonable assurance on whether the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled in accordance with the Assumptions. Our work does not constitute any valuation of Ideal Mining.

Because the Valuation relates to discounted future estimated cash flows, no accounting policies of the Company have been adopted in its preparation. The Assumptions include hypothetical assumptions about future events and management actions which cannot be confirmed and verified in the same way as past results and these may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Valuation and the variation may be material. Accordingly, we have not reviewed, considered or conducted any work on the reasonableness and the validity of the Assumptions and do not express any opinion whatsoever thereon.

Opinion

Based on the foregoing, in our opinion, the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled, in all material respects, in accordance with the Assumptions.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

4 March 2010

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REPORTS ON FORECASTS UNDERLYING THE VALUATION OF THE SALE SHARES

(II) REPORT FROM CCBIC

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34/F., Two Pacific Place 88 Queensway Admiralty Hong Kong

4 March 2010

The Board of Directors CNNC International Limited Unit 2809, 28/F China Resources Building 26 Harbour Road Wanchai Hong Kong

Dear Sirs,

We refer to the discounted cash flow forecasts underlying the valuation (the ‘‘Valuation’’) prepared by Jones Lang LaSalle Sallmanns Limited (‘‘JLL Sallmanns’’) in relation to the appraisal of the fair value of 100% equity interest in Ideal Mining Limited as at 31 December 2009 as set out in Appendix I to the circular (the ‘‘Circular’’) of the Company dated 4 March 2010. Capitalised terms used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

We have reviewed the forecasts upon which the Valuation has been made for which you as the Directors are solely responsible, and have discussed with you and JLL Sallmanns the information and documents provided by you which formed part of the bases and assumptions upon which the forecasts have been prepared. We have also considered the letter from Deloitte Touche Tohmatsu dated 4 March 2010 addressed to yourselves as set out in Appendix III to the Circular regarding the calculations upon which the forecasts have been made.

On the basis of the foregoing, we are of the opinion that the forecasts upon which the Valuation has been made, for which you as the Directors are solely responsible, have been made after due and careful enquiry by you.

Yours faithfully, For and on behalf of CCB International Capital Limited Stanley Shih

Executive Director

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APPENDIX IV

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENTS

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date were as follows:

Authorised:
1,000,000,000
Shares
Issued and to be issued, fully paid up or credited as fully paid up:
429,168,308
Shares in issue as at the Latest Practicable Date
43,578,947
Shares to be allotted and issued upon exercise
of the conversion right attached to the Convertible
Notes in full
60,000,000
Shares to be allotted and issued upon exercise
of the conversion right attached to the 2008
Convertible Note in full
532,747,255
Shares

HK$ 10,000,000.00

HK$ 4,291,683.08
435,789.47
600,000.00

5,327,472.55

3. DISCLOSURE OF INTERESTS OF DIRECTORS AND CHIEF EXECUTIVES OF THE COMPANY

As at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required: (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

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APPENDIX IV

GENERAL INFORMATION

4. COMMON DIRECTORS

The following is a list of the Directors who, as at the Latest Practicable Date, were also a director of the companies which have interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

				Percentage of
				the issued share
			Number of	capital of the
			issued Shares/	Company as at
Name of		Capacity of the	underlying	the Latest
common director	Name of Shareholder	Shareholder	Shares held	Practicable Date
				(%)
Mr. Han Ruiping	CNNC Overseas Uranium	Beneficial owner	326,372,273	76.05%
Mr. Xu	Holding Limited (Note)
Hongchao
Mr. Han Ruiping	China Uranium	Interest in a	326,372,273	76.05%
	Corporation Limited	controlled
	(中國國核海外鈾業有限公司)	corporation
	(Note)
Mr. Qiu Jiangang	China National Nuclear	Interest in a	326,372,273	76.05%
	Corporation	controlled
	(中國核工業集團公司)	corporation
	(Note)

Note: As at the Latest Practicable Date, CNNC Overseas beneficially held a long position of 326,372,273 Shares (comprising 266,372,273 Shares beneficially held by CNNC Overseas and 60,000,000 Shares to be issued to CNNC Overseas upon exercise in full of the 2008 Convertible Note). CNNC was deemed to be interested in the 326,372,273 Shares held by CNNC Overseas through a wholly-owned subsidiary, CUC, which in turn owned 100% interest in CNNC Overseas.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors was a director or an employee of a company which has an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Company or any member of the Enlarged Group which is not terminable by the Company within one year without payment of compensation (other than statutory compensation).

6. COMPETING INTEREST

As at the Latest Practicable Date, so far as is known to the Directors, none of the Directors or their respective associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

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APPENDIX IV

GENERAL INFORMATION

7. EXPERTS’ STATEMENTS

Each of the following experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and/or report and/or reference to its name in the form and context in which they respectively appear:

Name Qualification Partners Capital A licensed corporation under the SFO to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities JLL Sallmanns Independent valuer SRK Consulting Independent technical consultant Deloitte Touche Certified Public Accountants Tohmatsu CCBIC A licensed corporation under the SFO to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities

As at the Latest Practicable Date, CCB International Asset Management Limited (‘‘CCBIAM’’) was directly and indirectly interested in 14,090,000 Shares. CCBIAM and CCBIC are fellow subsidiaries indirectly wholly-owned by CCB International (Holdings) Limited which in turn is indirectly wholly-owned by China Construction Bank Corporation.

As at the Latest Practicable Date, save as disclosed above, none of the above experts was beneficially interested in the share capital of any member of the Group nor did they have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group or any interest, either direct or indirect, in any assets which have been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by or leased to, any member of the Enlarged Group, since 31 December 2008, being the date up to which the latest published audited financial statements of the Company were made up.

8. NO MATERIAL INTERESTS

As at the Latest Practicable Date, none of the Directors had any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, none of the Directors had any interest, either direct or indirect, in any assets which have been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by or leased to, any member of the Enlarged Group, since 31 December 2008, being the date up to which the latest published audited financial statements of the Company were made up.

– 205 –

APPENDIX IV

GENERAL INFORMATION

None of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which was significant in relation to the business of the Enlarged Group.

9. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2008, being the date up to which the latest audited financial statements of the Company were made up.

10. MISCELLANEOUS

The English language text of this circular shall prevail over the Chinese language text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the Company’s head office in Hong Kong at Unit 2809, 28/F., China Resources Building, 26 Harbour Road, Wanchai, Hong Kong for a period of 14 days (except Saturdays, Sundays and public holidays) from the date of this circular:

(i) the Sale and Purchase Agreement;
(ii) the Long-term Sales Contract; and
(iii) the Coal Supply Contract.

– 206 –

NOTICE OF EGM

CNNC INTERNATIONAL LIMITED 中核國際有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2302)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of CNNC International Limited (the ‘‘Company’’) will be held at Victoria Room 3, 3/F, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Friday, 19 March 2010 at 10: 00 a.m. for the purpose of considering and, if thought fit, passing the following resolution, with or without amendments, as ordinary resolution of the Company:

‘‘THAT

(a) the sale and purchase agreement (the ‘‘Agreement’’) (a copy of which has been produced to the meeting marked ‘‘A’’ and signed by the chairman of the meeting for the purpose of identification) dated 23 January 2010 entered into between CNNC Overseas Uranium Holding Limited as vendor and China Nuclear International Corporation, a direct wholly-owned subsidiary of the Company, as purchaser relating to the acquisition of 50,000 issued ordinary shares of US$1.00 each in the capital of Ideal Mining Limited, representing its entire issued share capital, at the consideration of HK$414,000,000 which will be fully settled by the Convertible Notes (copy of which has been produced to the meeting marked ‘‘B’’ and signed by the chairman of the meeting for the purpose of identification) by the Company as set out in the circular (the ‘‘Circular’’) of the Company dated 4 March 2010 and the transactions contemplated thereunder, be and hereby approved, confirmed and ratified;
(b) the creation and issue of the Convertible Notes (as defined in the Circular), on and subject to the terms of the Agreement, be and is hereby approved;
(c) the directors of the Company be and are hereby authorised to allot and issue the Conversion Shares (as defined in the Circular); and
For identification purpose only

– 207 –

NOTICE OF EGM

(d) the directors of the Company be and are hereby authorised to do all such further acts and things and execute such further documents which in their opinion may be necessary or expedient to give effect to the terms of the Agreement, the issue of the Convertible Notes, the allotment and issue of the Conversion Shares or any of the transactions contemplated under the Agreement.’’

By order of the Board CNNC International Limited 中核國際有限公司[*] Li Philip Sau Yan Company Secretary

Hong Kong, 4 March 2010

Notes:

The instrument appointing proxy shall be in writing under the hand of the appointor or of his attorney duly authorized in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer, attorney or other person duly authorised to sign the same. In the case of an instrument of proxy purporting to be signed on behalf of a corporation by an officer hereof if shall be assumed, unless the contrary appears, that such officer was duly authorised to sign such instrument of proxy on behalf of the corporation without further evidence of the fact.
Any member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxies to attend and, in the event of a poll, vote in his stead. A proxy need not be a registered shareholder of the Company. In addition, a proxy or proxies representing either a member of the Company who is an individual or a member of the Company which is a corporation is entitled to exercise the same powers on behalf of the member of the Company which he or they represent as such member of the Company could exercise.
To be valid, the instrument appointing proxy and (if required by the Board) the power of attorney or other authority, (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be delivered at the office of the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 138 Queen’s Road East, Wanchai, Hong Kong not later than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof at which the person named in the instrument proposes to vote and in default the instrument of proxy shall not be treated as valid.
Completion and return of the instrument appointing proxy will not preclude a member of the Company from attending and voting in person at the meeting or at any adjourned meeting (as the case may be) should the member so desires, and in such event, the instrument appointing proxy shall be deemed to be revoked.
For identification purpose only

– 208 –

NOTICE OF EGM

Where there are joint holders of any share in the Company, any one of such joint holders may vote, either in person or by proxy, in respect of such shares as if he were solely entitled thereto, but if more than one of such joint holders be present at the meeting, the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

– 209 –

Table 6-1: Physical Mechanics Indicators of Rocks of
Azelik Uranium Mineral Deposit . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	123
Table 6-2: Forecasted Statement of Water Flow in Azelik Uranium Property . . . . .		125
Table 6-3: T and G Economic Estimation Indices . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	129
Table 6-4: Parameters of Each Pit . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	130
Table 6-5: Ore and Waste from the Open Pit Mining . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	130
Table 6-6: Parameters of Each Pit in T Mine . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	131
Table 6-7: Ore and Waste Stripped from Each pit in Mine T .	. . . . . . . . . . . . . . . . . . . . .	131
Table 6-8: Equipment Inventory of Mines T and G . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	138
Table 7-1: X-Ray Fluoresence Results of Final Product . . . . . .	. . . . . . . . . . . . . . . . . . . . .	147
Table 7-2: Process Production Schedule . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	152
Table 8-1: Capital Expenditure Estimated by the Preliminary Design . . . . . . . . . . . . . .		156
Table 8-2: Estimated Capital Cost of Processing Facility . . . . .	. . . . . . . . . . . . . . . . . . . . .	157
Table 8-3: Operational Cost Estimated by the Preliminary Design . . . . . . . . . . . . . . . . .		157
Table 8-4: Process Operating Costs (Excluding Depreciation,
Amortization and Finance Charges) . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	158
Table 8-5: Rates of Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	159
Table 10-1: Workforce Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	163
List of Figures
Figure 3-1: Location Map of Azelik in Niger . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	74
Figure 3-2: Detailed Location and Road Map of Azelik Mine Site . . . . . . . . . . . . . . . .		75
Figure 3-3: Typical Landscape of Azelik Area with Occasional
Nomadic Settlements . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	78
Figure 3-4: Azelik Village; Main Street and Brick Fabrication	Area . . . . . . . . . . . . . . .	78
Figure 3-5: The Main Azelik Mine Campground under Construction . . . . . . . . . . . . . .		79
Figure 3-6: The Historical Pit for Metallurgical Testing — Deposit T . . . . . . . . . . . . .		82
Figure 3-7: Deposit IR — Underground Mine in Construction	. . . . . . . . . . . . . . . . . . . .	82
Figure 3-8: Open Pit in Construction, Stripping Overburden;
Deposit T (left) Deposit G (right) . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	83
Figure 4-1: Simplified Geological Map of Niger . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	83
Figure 4-2: The Geological Map of Agadez-Arlit Region . . . . .	. . . . . . . . . . . . . . . . . . . . .	84
Figure 4-3: Strata Histogram of Azelik Region . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	88
Figure 4-4: The Sketchy Map of Azelik IR, T and G Deposit Location . . . . . . . . . . .		96
Figure 4-5: Typical Cross-section through IR-Deposit . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	99
Figure 4-6: Typical Cross-section through G-Deposit . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	100
Figure 4-7: Exposed Roof of G-Deposit . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	100
Figure 4-8: Deposit T — Exposed Top of Deposit T . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	101
Figure 4-9: The Cross-section of Line 25 through Orebody T	. . . . . . . . . . . . . . . . . . . . .	102
Figure 4-10: The Original Japanese Borehole Collar and
Verification Hole Collar Seals . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	106
Figure 4-11: Semi-industrial Concentration Plant . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	106

AI assistant

CNNC International Limited — Proxy Solicitation & Information Statement 2010

50507_rns_2010-03-03_0b1b546b-c3de-4fe1-beb2-2af0590b11a2.pdf

CNNC INTERNATIONAL LIMITED 中 核 國 際 有 限 公 司[*]

DISCLOSEABLE AND CONNECTED TRANSACTION — ACQUISITION OF 100% INTEREST IN IDEAL MINING LIMITED AND ISSUE OF CONVERTIBLE NOTES

CONTENTS

DEFINITIONS

DEFINITIONS

CNNC INTERNATIONAL LIMITED 中 核 國 際 有 限 公 司[*]

DISCLOSEABLE AND CONNECTED TRANSACTION — ACQUISITION OF 100% INTEREST IN IDEAL MINING LIMITED AND ISSUE OF CONVERTIBLE NOTES

INTRODUCTION

THE SALE AND PURCHASE AGREEMENT

Date

Parties

Assets to be acquired

Consideration

Conditions precedent

LETTER FROM THE BOARD

Completion

PRINCIPAL TERMS OF THE CONVERTIBLE NOTES

LETTER FROM THE BOARD

LETTER FROM THE BOARD

INFORMATION ON THE TARGET GROUP

The Target

LETTER FROM THE BOARD

The Project Company

The Azelik Uranium Mine

LETTER FROM THE BOARD

The Long-term Sales Contract

REASONS FOR AND BENEFITS OF THE ACQUISITION

LETTER FROM THE BOARD

MILITARY COUP IN NIGER

LETTER FROM THE BOARD

RISK FACTORS RELATING TO THE ACQUISITION

Cyclical nature of the uranium market and fluctuations in prices for uranium-related products

The uranium reserve data are estimates and may be inaccurate

Laws and regulations relating to the uranium mining business

Concerns raised in the Technical Report

EFFECTS ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

LISTING RULES IMPLICATIONS

EGM

PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

CNNC INTERNATIONAL LIMITED 中 核 國 際 有 限 公 司[*]

DISCLOSEABLE AND CONNECTED TRANSACTION — ACQUISITION OF 100% INTEREST IN IDEAL MINING LIMITED AND ISSUE OF CONVERTIBLE NOTES

Yours faithfully,

DISCLOSEABLE AND CONNECTED TRANSACTION

INTRODUCTION

LETTER FROM PARTNERS CAPITAL

PRINCIPAL FACTORS AND REASON CONSIDERED

1. The background of and reasons for entering into the Sale and Purchase Agreement

LETTER FROM PARTNERS CAPITAL

The Group and the Target Group

Reasons for entering into the Sale and Purchase Agreement

2. Terms of the Sale and Purchase Agreement

The Consideration

LETTER FROM PARTNERS CAPITAL

The Convertible Notes

LETTER FROM PARTNERS CAPITAL

3. Potential dilution effect on the shareholdings of the Independent Shareholders

4. Financial effects

Earnings

Net Asset Value

Cashflow and gearing ratio

5. Risk Factors of the Acquisition

RECOMMENDATION

Yours faithfully, For and on behalf of Partners Capital International Limited Alan Fung

BASIS OF OPINION

BACKGROUND

VALUATION APPROACH AND METHODOLOGY

SOURCE OF INFORMATION

ASSUMPTIONS

General Assumptions

DISCOUNT RATE

SENSITIVITY ANALYSIS

Discount Rate Sensitivity

VALUATION COMMENTS

CNNC International Limited Proxy Solicitation & Information Statement 2010

CNNC INTERNATIONAL LIMITED 中核國際有限公司[*]

CNNC INTERNATIONAL LIMITED 中核國際有限公司[*]

CNNC INTERNATIONAL LIMITED 中核國際有限公司[*]