Audit of Resources of the
Serra Azul Iron Ore Mine
Minas Gerais, Brazil
Effective Date: April 10, 2013
Report Date: August 5, 2013
Report Prepared for
MMX Mineração e Metálicos S.A.
Avenida Prudente de Morais1250
Belo Horizonte, Minas Gerais
Brazil
Report Prepared by
SRK Consulting (U.S.), Inc.
7175 West Jefferson Avenue, Suite 3000
Lakewood, CO 80235
SRK Project Number: 162700.120
Contributors:
Leah Mach, M.Sc. Geology, CPG
Reviewed By:
Matthew Hastings, M.Sc. Geology
SRK Consulting (U.S.), Inc.
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Summary
SRK Consulting (U.S.), Inc., (SRK) was commissioned by MMX Mineração e Metálicos S.A. (MMX)
to audit resource estimation for the Serra Azul Mine (the Project). The Project is located in the Serra
Azul area in the state of Minas Gerais, Brazil near the town of Igarapé, located approximately 60 km
southwest of Belo Horizonte, the capital of Minas Gerais. The Project consists of two contiguous
open pit mines and two beneficiation plants for the production of lump and sinter feed. The Tico-Tico
Mine was acquired by MMX as part of the acquisition of AVG Mineração S.A. (AVG) in December
2007. The Ipê mine was acquired as part of the acquisition of Mineradora Minas Gerais Ltda
(Minerminas) in March 2008. The properties are operated by MMX Sudeste Mineração Ltda. (MMX
Sudeste), a 100% owned subsidiary of MMX. MMX has prepared a feasibility study to expand
production to 29 Mt of pellet feed per year. The expansion includes a new beneficiation plant, a
slurry pipeline to a new rail car loading area and a new tailings storage facility.
Property Description and Ownership
The Project is located approximately 60 km southwest of Belo Horizonte, and approximately 560 km
northwest of Rio de Janeiro in Minas Gerais State, Brazil. The Project consists of three contiguous
licenses in the Serra Azul Mountain Range, located near the city of Igarapé in the southwest part of
the Quadrilátero Ferrífero (Iron Quadrangle). The Project also includes five exploration licenses and
seven requests for exploration licenses. The licenses lie between 20°07’30”S and 20°06’30”S and
between 44°17’W and 44°19’W and within the municipalities of Brumadinho, Igarapé, Itatiaiuçu,
Mateus Leme and São Joaquim de Bicas.
Nature and Extent of Issuer’s Interest
MMX holds the mineral rights through leases and ownership. The holder of the three mining licenses
is Companhia de Mineração Serra da Farofa (CEFAR) and MMX has lease agreements with CEFAR
for each one. Brazilian Mining Law allows holders of Exploration or Mining Licenses to totally or
partially assign or transfer these claims to a third party, with Brazil’s National Department of Mineral
Production (DNPM) approval. The three mining licenses are part of Mining Group number 249
(DNPM Process 931.798/2011) covering 509.71 ha. The exploration licenses cover 880.81 ha and
areas requested for exploration cover 6,797.59 ha.
CEFAR owns the surface rights to the majority of the property covered by the mineral licenses.
AVG/Minerminas controlled the surface rights in the mine area through the lease agreements and
this lease has passed to MMX. AVG holds the surface rights to the Grota do Moinho do Messias
exploration area.
MMX is acquiring the surface rights for the proposed rail terminal and tailings area required for the
expansion. At the time of the report, about 40% had been acquired.
Geology and Mineralization
The Project area lies within the São Francisco Craton tectonic province of South America and is
located in the extreme west of the Serra do Curral homocline and in the north/northwest limit of the
Iron Quadrangle. This region has a complex tectonic-metamorphic history and is part of the
basement of the southern portion of the São Francisco Craton. Mineralization is hosted by the Minas
LEM/MLM
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Supergroup which is dominated by supracrustal metasedimentary and metavolcanic rocks. Intrusive
rocks are rarely found in the area but where present, are basic sills and dikes up to 1 m wide.
Regional metamorphism reached the greenschist facies during multiple episodes of deformation.
The Minas Supergroup is subdivided, from youngest to oldest, into three groups:


Piracicaba Group;
Itabira Group; and

Caraça Group.
Locally, the stratigraphic sequence is inverted, with the most recent quartzitic formations of the
Piracicaba Group overlain by the itabirites of the Cauê Formation, part of the Itabira Group, which, in
turn, is capped by the oldest phyllites and quartzites of the Caraça Group.
The dominant structure in the project area is an antiform overturned to the north. The upper limb has
been completely eroded, leaving only the inverted lower limb.
Within the pit area, the geology is dominated by four formations. From oldest to youngest, these are
the Batatal, Cauê, Gandarela and Cercadinho Formations. The Batatal Formation has been thrust
over the younger Cauê Formation, which has been thrust over the youngest Cercadinho Formation.
The deposit is crosscut by a northwest-trending, high-angle fault. The mineralization at the Project
consists of metamorphosed banded iron formation (BIF) with strong evidence of hydrothermal
syngenetic formation with areas of supergene enrichment from subsequent lateritic weathering. This
results in four major mineralization types, including:


Canga;
Friable and compact itabirite;

Friable and compact hematite; and

Dolomitic itabirite
MMX has further classified the mineralization types, based on content of Fe, Al2O3, Mn and mass
recovery in the lump ore fraction.
Exploration, Drilling and Sample Analysis
Exploration at the property consists of mapping and drilling. A total of 45,999 m have been drilled at
the Project in 376 core holes and 85 RC holes. Holes were drilled on a slightly irregular 100 m x
100 m grid. Table 1 lists the number of drillholes by program and company.
Table 1: Drilling at Serra Azul
Campaign
AVG
Total AVG
MMX Core*
MMX RC
Total MMX
Total
Number of
Drillholes
11
11
365
85
450
461
Period
2005
2005
2007-2012
2007-2012
2007-2012
Length
(m)
440
440
34,938
10,621
45,559
45,999
Number of
Samples*
46
46
6,572
2,059
8,631
8,677
*Number of samples analyzed during the time period
LEM/MLM
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Before MMX acquired the Serra Azul properties, sample preparation and analysis were performed at
the AVG laboratory on the AVG property. During the initial exploration phase and in 2009, MMX
used SGS Geosol Laboratórios, Ltda. (SGS) located in Belo Horizonte. For part of 2008, MMX used
the laboratory at Mine 63 operated by its subsidiary, MMX-Corumbá Mineração Ltda. (MMXCorumbá). In 2010, MMX used SGS and the Bureau Veritas laboratory in Belo Horizonte. In 2011
and 2012, MMX used only the SGS laboratory.
At the AVG laboratory, all samples were analyzed using titration methods. The sample is dried at
100ºC and then 0.5 g of material is analyzed for percentage of Al2O3, Ca, Fe, FeO, Loss on Ignition
(LOI), Mg, Mn, P, S, SiO2 and TiO2. At Mine 63, SGS and Bureau Veritas, all samples are analyzed
for Fe, Al2O3, SiO2, P, Mn, and TiO2 by X-Ray Fluorescence (XRF). LOI is analyzed by heating and
then weighing the residue.
MMX has a standard laboratory Quality Assurance/Quality Control (QA/QC) program in place and
regularly monitors the results.
Resource Estimate
The resource estimation for the Serra Azul Mine was prepared by Mr. Elvis Vargas and Mr. Rodrigo
Oliveira under the direction of Mr. Vandersoni Monteiro Vieira de Moraes, Manager of Geology and
Mineral Resources. MMX uses Geovia´s Surpac® software for resource estimation and Mintec’s
Minesight® software for mine planning. Leah Mach, Principal Resource Consultant with SRK,
audited the resource. The resource estimation procedures included the Pau de Vinho area, but only
the Serra Azul resources are reported in this document.
Geologic Model
Seventy vertical geologic cross-sections were constructed at intervals of 100 m or 50 m depending
on the drill spacing. The following lithotypes were modeled in the cross-sections:
LEM/MLM

Soil (SO);

Stock Pile (FS);


Waste Dump (AT):
Canga (CG);

Dentritic Canga (CD);

Lateritic Itabirite (IL);

Friable Itabirite (IF);


Compact Hematite (HC);
Friable Hematite (HF);

Powdery Itabirite (IPT);

Compact Itabirite (IC);


Aluminous Itabirite (IA);
Intrusive (IN);

Quartzite (QTZ); and

Phyllite (FL).
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Compositing
MMX composited the samples on 7.5 m intervals starting at the top of the drillhole with breaks at the
lithotype solid boundaries. The variables that were composited include Fe, SiO2, Al2O3, P, LOI, Mn,
CaO, MgO and mass recovery of lump ore fraction (MR1).
Variograms
MMX used the Serra Azul database for variogram studies. The study included directional and
downhole variograms for Fe, SiO2, Al2O3, Mn, P, LOI, CaO MgO, and MR1.
The variogram analysis included the IF, IAL (IA + IL), IC and IPT lithotypes. The nugget was
determined from downhole variograms. Variogram maps were produced to determine the search
ellipsoid orientation and the relationships between the axes.
Grade Estimation
A block model was created which covers both the Serra Azul and Pau de Vinho Projects. The block
size is 25 m by 25 m in plan view and 15 m high. The block model contains variables for:


Global Fe, SiO2, Al2O3, Mn, P, CaO, MgO, LOI and MR1;
Fe, SiO2, Al2O3, Mn, P, CaO, MgO, LOI and MR1 for each of the lithotypes in each block;

Percentage of each lithotype within the block;

Majority lithotype;

Percentage below topography;


Density, and
Estimation parameters – number of composites, number of drillholes, average distance of
composites used in estimation, and distance to closest composite for SiO2.
The block model was coded with the percentage of each lithotype within the block from the lithotype
wireframe solids. The percentage of the block below topography was assigned to the topography
percentage variable.
A neighborhood analysis on SiO2 was performed to determine the best estimation strategy for all
variables. SiO2 was used because it is the main contaminant in the concentration process, it has a
high correlation with Fe and the Fe and SiO2 variograms are similar.
Block grades were estimated by ordinary kriging for IF, IAL (IA + IL), IC and IPT. Inverse distance
squared (ID2) was used for CGG (CD + CG) and HM (HF + HC). Each block has an Fe variable for
each of the lithotypes. Easting 576550 was used as a soft boundary during the estimation in that
there are different search orientations but composites were not limited by position relative to easting
576550.
The final block lithology was determined by the majority lithotype. The final block grade was
determined as the weighted average of the percent of the lithotype, the density of the lithotype and
the grade of the lithotype. The final block density was calculated as a weighted average of the
percent of the lithotype and the density of the lithotype.
The block model was validated by the following methods:

LEM/MLM
Visual comparison of the block grades to the composite grades on cross-sections and
horizontal sections;
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
Estimation by the Nearest Neighbor (NN) methodology and comparison of histograms,
scatter plots and QQ plots of kriged and ID2 grades; and

Swath plots comparing kriged or ID2 grades with NN grades.
The resources were classified according to Canadian Institute of Mining, Metallurgy and Petroleum
(CIM) classification as Measured, Indicated, or Inferred. The IF, IPT, IAL (IA + IL), CGG (CG + CD)
and HM (HF + HC) classification was based on the pass in which the block was estimated. The
compact itabirite (IC) classification followed two steps: blocks were first classified according to the
estimation pass and then, because the drillholes are terminated in the IC at different elevations, a
surface was constructed using the base of the drillholes to limit classification as Measured.
Measured blocks are above the surface and the nearest sample used in estimation is less than 200
m from the block. Classification as Indicated required that the nearest composite was within 300 m
of the block, and in the western portion where the drilling is shallow, the blocks had to be above a
surface that was constructed about 80 m below the base of drilling surface. Blocks were classified
as Inferred if they did not meet the Measured or Indicated classification requirements or if estimated
in Step 5 of the estimation.
The Mineral Resources of the Serra Azul Mine as of April 10, 2013, on a wet tonnage basis are
presented in Table 2. The resources are limited by the DNPM mineral concession boundary and the
September 28, 2012 topography. The resources are stated at a cut-off grade of 15%.
LEM/MLM
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Table 2: Serra Azul Mineral Resource Statement, at April 10, 2013, Wet Tonnage Basis
Lithology
Friable
Canga
Powdery Itabirite
Compact Itabirite
Total
Resource
Tonnage (Mt)
Fe (%)
SiO2 (%)
Al2O3 (%)
Mn (%)
P (%)
LOI (%)
CaO (%)
MgO (%)
Measured
Indicated
M&I
Inferred
Measured
Indicated
M&I
Inferred
Measured
Indicated
M&I
Inferred
Measured
Indicated
M&I
Inferred
Measured
Indicated
M&I
Inferred
39.5
50.9
90.4
28.5
0.1
1.7
1.8
5.4
30.5
45.8
76.2
73.7
1025.4
621.7
1647.1
216.5
1095.5
720.0
1815.5
324.0
49.9
47.5
48.5
45.2
58.6
57.1
57.2
55.5
33.2
31.7
32.3
28.2
34.4
32.7
33.7
33.9
34.9
33.7
34.4
33.9
25.3
28.4
27.0
31.0
4.7
5.6
5.6
10.1
44.7
47.6
46.5
52.1
49.6
51.7
50.4
49.3
48.6
49.7
49.0
47.7
1.70
1.81
1.76
1.82
4.71
5.38
5.34
4.48
3.68
3.21
3.40
3.27
0.56
0.63
0.59
0.84
0.69
0.89
0.77
1.54
0.05
0.08
0.06
0.24
0.03
0.04
0.04
0.11
0.51
0.71
0.63
0.80
0.04
0.07
0.05
0.13
0.05
0.11
0.08
0.29
0.046
0.049
0.048
0.057
0.256
0.240
0.241
0.218
0.077
0.078
0.078
0.082
0.022
0.030
0.025
0.032
0.024
0.035
0.029
0.049
1.35
1.38
1.37
1.74
5.66
5.77
5.77
5.05
2.64
2.48
2.54
2.53
0.39
0.57
0.46
0.83
0.49
0.76
0.60
1.37
0.03
0.03
0.03
0.02
0.02
0.02
0.02
0.02
0.03
0.03
0.03
0.03
0.04
0.12
0.07
0.03
0.04
0.11
0.07
0.03
0.06
0.06
0.06
0.06
0.06
0.05
0.06
0.06
0.07
0.08
0.07
0.27
0.07
0.15
0.10
0.07
0.07
0.14
0.09
0.11
Cut-off Grade 15% Fe; tonnes on a wet basis; topography current at September 28, 2012
LEM/MLM
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The exploration target is that material estimated in the final pass or not classified as Measured,
Indicated or Inferred. The mineral potential ranges from 10,000 to 40,000 kt at Fe grades between
30% and 40% and includes material classified as canga, detrital canga, powdery itabirite and minor
amounts of compact and friable hematite.
Conclusions
Exploration




MMX has drilled the Serra Azul property on a grid of approximately 100 m x 100 m. The
deeper drilling in the compact itabirite is on a wider spaced grid, but is still sufficient for
resource estimation.
MMX has used internationally recognized laboratories for the bulk of the sample analysis.
Some of the early samples were analyzed at the AVG laboratory and at the Mine 63
laboratory. SRK has visited both of those laboratories and found that the Mine 63 laboratory
was operated in a professional manner and that the AVG laboratory was also operated
professionally although it lacked an XRF machine. In any case, the number of samples
analyzed at these laboratories is low in respect to the total number of samples.
MMX has a standard laboratory QA/QC program in place and reviews the results on a
regular basis.
It is SRK’s opinion that the drilling, sampling and analysis are conducted according to
industry best practices.
Mineral Resource Estimate

The mineral resource estimation was conducted by MMX and audited by SRK. It is SRK’s
opinion that the estimation has followed industry best practices.

Because the iron formation is dipping at about 50⁰ to the southeast, the drillholes in the
compact itabirite have not been terminated at a uniform depth or elevation. To limit the
classification of Measured and Indicated resources below drillholes, surfaces were
constructed at the base of drilling and used in the classification. It is SRK’s opinion that the
classification meets CIM guidelines.
Recommendations
SRK recommends that MMX continue to drill deeper holes into the compact itabirite to decrease the
sample spacing and increase confidence in the resource. This work could be performed as mining
progresses and drilling depth decreases accordingly.
LEM/MLM
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Table of Contents
1.1 Introduction ......................................................................................................................................... 1 1.2 Terms of Reference and Purpose of the Report ................................................................................. 1 1.3 Qualifications of Consultants (SRK).................................................................................................... 1 1.3.1 Details of Inspection ................................................................................................................ 1 1.4 Reliance on Other Experts (Item 3) .................................................................................................... 2 1.5 Effective Date ...................................................................................................................................... 2 1.6 Units of Measure ................................................................................................................................. 2 2 Property Description and Location ............................................................................ 3 2.1 Property Description and Location ...................................................................................................... 3 2.2 Mineral Titles ....................................................................................................................................... 5 2.2.1 Nature and Extent of Issuer’s Interest ..................................................................................... 6 2.3 Royalties, Agreements and Encumbrances ........................................................................................ 7 2.4 Environmental Liabilities and Permitting ............................................................................................. 7 2.4.1 Environmental Liabilities.......................................................................................................... 7 2.4.2 Required Permits and Status .................................................................................................. 8 3 Accessibility, Climate, Local Resources, Infrastructure and Physiography ........ 10 3.1 Topography, Elevation and Vegetation ............................................................................................. 10 3.2 Climate and Length of Operating Season ......................................................................................... 11 3.3 Sufficiency of Surface Rights ............................................................................................................ 11 3.4 Accessibility and Transportation to the Property .............................................................................. 11 3.5 Infrastructure Availability and Sources.............................................................................................. 12 4 History......................................................................................................................... 13 4.1 Prior Ownership and Ownership Changes........................................................................................ 13 4.2 Previous Exploration and Development Results ............................................................................... 13 4.3 Historic Mineral Resource and Reserve Estimates .......................................................................... 14 4.4 Historic Production ............................................................................................................................ 14 5 Geological Setting and Mineralization ..................................................................... 16 5.1 Regional Geology.............................................................................................................................. 16 5.1.1 Regional Structure................................................................................................................. 16 5.2 Local Geology ................................................................................................................................... 21 5.2.1 Local Lithology ...................................................................................................................... 23 5.2.2 Alteration ............................................................................................................................... 23 5.2.3 Structure ................................................................................................................................ 23 5.2.4 Metamorphism ....................................................................................................................... 24 5.3 Property Geology .............................................................................................................................. 24 LEM/MLM
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5.4 Significant Mineralized Zones ........................................................................................................... 27 5.4.1 Relevant Geological Controls ................................................................................................ 28 6 Deposit Type .............................................................................................................. 30 6.1 Mineral Deposit ................................................................................................................................. 30 7 Exploration ................................................................................................................. 31 7.1 Relevant Exploration Work ............................................................................................................... 31 7.1.1 Surveys and Investigations ................................................................................................... 31 8 Drilling......................................................................................................................... 32 8.1 Type and Extent ................................................................................................................................ 33 8.2 Procedures ........................................................................................................................................ 33 8.2.1 Core Drilling ........................................................................................................................... 34 8.2.2 RC Drilling ............................................................................................................................. 34 8.2.3 Factors Impacting Accuracy of Results ................................................................................. 35 8.3 Interpretation and Relevant Results .................................................................................................. 35 9 Sample Preparation, Analysis and Security ............................................................ 36 9.1 Sample Preparation .......................................................................................................................... 36 9.1.1 AVG Laboratory ..................................................................................................................... 36 9.1.2 MMX-Corumbá Laboratory .................................................................................................... 36 9.1.3 SGS Laboratory ..................................................................................................................... 37 9.1.4 Bureau Veritas ....................................................................................................................... 37 9.2 Sample Analysis................................................................................................................................ 38 9.2.1 AVG Laboratory ..................................................................................................................... 38 9.2.2 MMX-Corumbá Laboratory .................................................................................................... 38 9.2.3 SGS Laboratory ..................................................................................................................... 39 9.2.4 Bureau Veritas Laboratory .................................................................................................... 39 9.3 MMX Quality Controls and Quality Assurance .................................................................................. 40 9.4 Interpretation ..................................................................................................................................... 41 10 Data Verification ......................................................................................................... 42 10.1 Quality Control Measures and Procedures ....................................................................................... 42 10.2 Limitations ......................................................................................................................................... 42 11 Mineral Resource Estimate ....................................................................................... 43 11.1 Drillhole Database ............................................................................................................................. 43 11.2 Geology ............................................................................................................................................. 43 11.3 Compositing ...................................................................................................................................... 47 11.4 Density .............................................................................................................................................. 49 11.5 Variogram Analysis and Modeling .................................................................................................... 50 LEM/MLM
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11.6 Grade Estimation .............................................................................................................................. 53 11.7 Model Validation................................................................................................................................ 56 11.8 Resource Classification..................................................................................................................... 60 11.9 Mineral Resource Statement ............................................................................................................ 61 11.10 Mineral Resource Sensitivity ............................................................................................................. 63 11.11 Exploration Target ............................................................................................................................. 65 12 Adjacent Properties ................................................................................................... 66 13 Interpretation and Conclusions ................................................................................ 67 13.1.1 Exploration............................................................................................................................. 67 13.1.2 Mineral Resource Estimate ................................................................................................... 67 14 Recommendations ..................................................................................................... 68 14.1 Recommended Work Programs ........................................................................................................ 68 15 References .................................................................................................................. 69 16 Glossary...................................................................................................................... 71 16.1 Mineral Resources ............................................................................................................................ 71 16.2 Mineral Reserves .............................................................................................................................. 71 16.3 Definition of Terms ............................................................................................................................ 72 16.4 Abbreviations .................................................................................................................................... 73 17 Date and Signature Page ........................................................................................... 75 List of Tables
Table 1: Drilling at Serra Azul ........................................................................................................................... iii Table 2: Serra Azul Mineral Resource Statement, at April 10, 2013, Wet Tonnage Basis ............................. vii Table 2.2.1.1: Serra Azul Land Tenure ............................................................................................................. 7 Table 2.4.2.1: Expansion Processes ................................................................................................................. 8 Table 2.4.2.2: Processes for Current Operation ................................................................................................ 9 Table 4.4.1: Historic Production for the Tico-Tico Plant .................................................................................. 14 Table 4.4.2: Historic Production for the Ipê Plant ............................................................................................ 14 Table 5.4.1.1: Mineralization Types ................................................................................................................. 28 Table 8.1: Drilling at Serra Azul ....................................................................................................................... 32 Table 8.1.1: Comparison of Twin RC and Core Drillholes............................................................................... 33 Table 9.2.2.1: Detection Limits of MMX-Corumba Laboratory Iron Ore Analysis ........................................... 38 Table 9.2.3.1: Detection Limits of SGS Laboratory Iron Ore Analysis ............................................................ 39 Table 9.2.4.1: Bureau Veritas Detection Limits ............................................................................................... 40 Table 11.1.1: Basic Statistics of All Analyzed Intervals ................................................................................... 43 Table 11.3.1: Statistics of Assays and Composites in the Serra Azul Database (1/2) .................................... 47 LEM/MLM
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Table 11.3.1: Statistics of Assays and Composites in the Serra Azul Database (2/2) .................................... 48 Table 11.3.2: Correlation Table for Composites .............................................................................................. 49 Table 11.4.1: Density of Lithotypes, on a Wet Basis ....................................................................................... 49 Table 11.5.1: Variogram Parameters .............................................................................................................. 51 Table 11.6.1: Block Model Dimensions and Origin ......................................................................................... 53 Table 11.6.2: Estimation Parameters (1/2) ...................................................................................................... 54 Table 11.6.2: Estimation Parameters (2/2) ...................................................................................................... 55 Table 11.9.1: Serra Azul Mineral Resource Statement, April 10, 2013, Wet Tonnage Basis ......................... 62 Table 11.10.1: Grade Tonnage Data for Fe and SiO2 ..................................................................................... 63 Table 25.3.1: Definition of Terms .................................................................................................................... 72 Table 25.4.1: Abbreviations ............................................................................................................................. 73 List of Figures
Figure 2.1.1: General Location Map of the Serra Azul Mine ............................................................................. 3 Figure 2.1.2: Site Location Map of the Serra Azul Mine .................................................................................... 4 Figure 2.1.3: Mineral Licenses of the Serra Azul Mine...................................................................................... 5 Figure 3.1: Surface Rights of the Serra Azul Mine Area ................................................................................. 10 Figure 5.1.1.1: Project Location within the São Francisco Craton .................................................................. 17 Figure 5.1.1.2: Location of Large Structures in the Iron Quadrangle .............................................................. 17 Figure 5.1.1.3: Geological Sections Proposed for the Region of the Serra do Curral..................................... 20 Figure 5.2.1: Stratigraphic Column. ................................................................................................................. 22 Figure 5.3.1: Geological Map of the Serra Azul Mine Area, at December 16, 2012 ....................................... 25 Figure 5.3.2: North-South Cross-sections through the Serra Azul Mine ......................................................... 26 Figure 8.1: Drillhole Location Map with Mining Concessions .......................................................................... 32 Figure 11.2.1: Decision Tree Defining Lithotypes ........................................................................................... 44 Figure 11.2.2: Cross-sections in Oblique View................................................................................................ 45 Figure 11.2.3: Longitudinal Sections in Oblique View ..................................................................................... 45 Figure 11.2.4: Cross-Sections with Geology and Drilling, Looking East ......................................................... 46 Figure 11.6.1: Cross-Sections with Geology, Block Model and Drilling Looking East .................................... 56 Figure 11.7.1: Histogram of Block Fe (upper left), Nearest Neighbor Fe (upper right), QQ plot (center) and
scatter plot (lower) of Fe in Compact Itabirite ...................................................................................... 57 Figure 11.7.2: Swath Plots of Fe in Compact Itabirite by Easting and Elevation ............................................ 59 Figure 11.8.1: Cross-sections with Geology, Block Model Classification and Drilling..................................... 60 Figure 11.10.1: Grade Tonnage Curves, Iron.................................................................................................. 64 LEM/MLM
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1.1
Page 1
Introduction
SRK Consulting (U.S.), Inc., (SRK) was commissioned by MMX Mineração e Metálicos S.A. (MMX)
to audit resource estimation for the Serra Azul Mine (the Project). The Project is located in the Serra
Azul area in the state of Minas Gerais, Brazil near the town of Igarapé, located approximately 60 km
southwest of Belo Horizonte, the capital of Minas Gerais. The Project consists of two contiguous
open pit mines and two beneficiation plants for the production of lump and sinter feed. The Tico-Tico
Mine was acquired by MMX as part of the acquisition of AVG Mineração S.A. (AVG) in December
2007. The Ipê mine was acquired as part of the acquisition of Mineradora Minas Gerais Ltda
(Minerminas) in March 2008. The properties are operated by MMX Sudeste Mineração Ltda. (MMX
Sudeste), a 100% owned subsidiary of MMX. MMX has prepared a feasibility study to expand
production to 24 to 29 Mt of pellet feed per year The expansion includes a new beneficiation plant, a
slurry pipeline to a new rail car loading area and a new tailings storage facility.
1.2
Terms of Reference and Purpose of the Report
The quality of information, conclusions, and estimates contained herein is consistent with the level of
effort involved in SRK’s services, based on: i) information available at the time of preparation, ii) data
supplied by outside sources, and iii) the assumptions, conditions, and qualifications set forth in this
report. This report is intended for use by MMX subject to the terms and conditions of its contract with
SRK and relevant securities legislation
This report provides mineral resource estimates, and a classification of resources in accordance with
the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and
Reserves: Definitions and Guidelines, December 2005 (CIM).
1.3
Qualifications of Consultants (SRK)
The Consultants preparing this technical report are specialists in the fields of geology, exploration,
mineral resource and mineral reserve estimation and classification, underground mining,
geotechnical, environmental, permitting, metallurgical testing, mineral processing, processing design,
capital and operating cost estimation, and mineral economics.
None of the Consultants or any associates employed in the preparation of this report has any
beneficial interest in MMX. The Consultants are not insiders, associates, or affiliates of MMX. The
results of this Technical Report are not dependent upon any prior agreements concerning the
conclusions to be reached, nor are there any undisclosed understandings concerning any future
business dealings between MMX and the Consultants. The Consultants are being paid a fee for
their work in accordance with normal professional consulting practice. Leah Mach, Principal
Resource Geologist, is responsible for all sections in the report.
1.3.1 Details of Inspection
Leah Mach made site visits to the Project on June 27 and October 7, 2007; February 13, 2009; and
June 30, 2010. The site visits consisted of reviewing the drill core and logging procedures, visiting
the open pit and observing the operations and product types, visiting the beneficiation plant, and
touring the property to see the tailings facility and waste dumps.
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Page 2
Reliance on Other Experts (Item 3)
The Consultant’s opinion contained herein is based on information provided to the Consultants by
MMX throughout the course of the investigations. SRK has relied upon the work of other consultants
in the Project areas in support of this Technical Report. The sources of information include data and
reports supplied by MMX personnel as well as documents referenced in Section 15.
The Consultants used their experience to determine if the information from previous reports was
suitable for inclusion in this technical report and adjusted information that required amending. This
report includes technical information, which required subsequent calculations to derive subtotals,
totals and weighted averages. Such calculations inherently involve a degree of rounding and
consequently introduce a margin of error. Where these occur, the Consultants do not consider them
to be material.
1.5
Effective Date
The effective date of the resource estimation is April 10, 2013; the effective date of the report is
August 5, 2013.
1.6
Units of Measure
The metric system has been used throughout this report. Tonnes are metric of 1,000 kg, or 2,204.6
lb. Currency is stated in United States Dollars (US$) and the Brazilian Real (R$) as indicated.
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Property Description and Location
2.1
Property Description and Location
Page 3
The Project is located approximately 60 km southwest of Belo Horizonte, and approximately 560 km
northwest of Rio de Janeiro in Minas Gerais State, Brazil (Figures 2.1.1 and 2.1.2). The Project
consists of three contiguous licenses in the Serra Azul Mountain Range, located near the city of
Igarapé in the southwest part of the Quadrilátero Ferrífero (Iron Quadrangle). The Project also
includes five exploration claims surrounding the licenses. The licenses lie between 20°07’30”S and
20°06’30S and between 44°17’W and 44°19’W (Figure 2.1.3). The Project lies within the
municipalities of Brumadinho, Igarapé, Itatiaiuçu, Mateus Leme and São Joaquim de Bicas.
Source: MMX, 2013
Figure 2.1.1: General Location Map of the Serra Azul Mine
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Source: MMX, 2010
Figure 2.1.2: Site Location Map of the Serra Azul Mine
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Source: MMX, 2013
Figure 2.1.3: Mineral Licenses of the Serra Azul Mine
2.2
Mineral Titles
Mining Rights
Mining rights in Brazil are governed by Mining Code Decree 227 dated February 27, 1967 and
further rules enacted by Brazil’s National Department of Mineral Production (DNPM), which is the
governmental agency controlling mining activities in Brazil.
Each application for exploration or mining is represented by a claim submitted to the DNPM.
Brazilian Mining legislation allows that mining rights, both Exploration Permits and Mining
Concessions may be, with the DNPM’s approval, totally or partially, assigned or transferred to others
by its holder. The administrative process for both is similar, even though there are specific
conditions for each. In both cases the interested party must file a specific administrative process at
the DNPM, according to the provisions set forth in the Ordinance # 199, July 14, 2006 enacted by
the DNPM.
Once granted, an Exploration Permit is valid for three years, with the possibility to be extended for
three more years. After that the holder must present the Final Exploration Report about all technical
activities performed at the project in order to define a mineral deposit and prove that this particular
project is feasible. Also, at the holder’s discretion this report may be presented before the expiration
date. One of the main points is the presentation of the resources (Measured, Indicated and
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Inferred), which at the Mining Concession step will be the tonnages/volumes which the mining
company will be allowed to exploit. If during the Life of Mine (LoM), more exploration is conducted
and the reserves are expanded, then these can be added to the allowed quantities to be mined,
provided the DNPM approves this work. Even if the project does not demonstrate feasibility, the
Final Exploration Report is mandatory.
At this point it should be mentioned that the DNPM considers the Measured, Indicated and Inferred
tonnages/volumes as reserves, and not, as in other countries as resources. This wording/conceptual
difference sometimes leads to misunderstandings.
During the validity of an Exploration Permit, the holder pays a tax referred to as the Annual Tax per
Hectare. The value is R$2.02/ha for the first three years, and R$3.06/ha when the Exploration
Permit has been extended.
Exploration Permits are granted to Brazilian citizens and/or mining companies established in Brazil.
Mining Concessions are only granted to mining companies. When the application is filed at a DNPM
office, the application receives a number which is used during the whole validity of its life, either as
Exploration Permit or Mining Concession. For example, the DNPM number 834.189/2006 means
that the first filing for an Exploration Permit was made in 2006.
If the Final Exploration Report is approved by the DNPM, the holder has one year to present a Plano
de Aproveitamento Econômico (PAE), or Economic Exploitation Plan, among other documents of
minor importance. The PAE may be seen as a Feasibility Study. Construction and mining activities
may start after the PAE is approved.
Other than several corporate taxes paid by companies in Brazil, mining companies also pay a tax for
mineral exploitation called Financial Compensation for the Exploitation of Mineral Resources
(CFEM), which is levied on the sale of raw or improved mineral. For iron ore the rate is 2%. The
company must pay an amount equal to 50% of the CFEM to the landowner.
2.2.1 Nature and Extent of Issuer’s Interest
MMX holds the mineral rights through leases and ownership. Table 2.2.1.1 presents the mining and
exploration licenses and requests for exploration licenses controlled by MMX in the Serra Azul area.
The holder of the three mining licenses is Companhia de Mineração Serra da Farofa (CEFAR) and
MMX has lease agreements with CEFAR for each one. Brazilian Mining Law allows holders of
Exploration or Mining Licenses to totally or partially assign or transfer these claims to a third party,
with DNPM’s approval. The three mining licenses are part of Mining Group number 249 (DNPM
Process 931.798/2011) covering 509.71 ha. The five exploration licenses cover 1,074.31 ha and the
seven areas requested for exploration cover 4,885.09 ha.
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Table 2.2.1.1: Serra Azul Land Tenure
Claim
801.908/68
805.374/71
005.182/58
Holder
Cia. de
Mineração
Serra da Farofa –
CEFAR
Cia. de
Mineração
Serra da Farofa –
CEFAR
Cia. de
Mineração
Serra da Farofa
- CEFAR
Area
(ha)
Permit
Validity
Term
Iron
351.64
Mining
Dec 31, 2021
Brumadinho and Igarapé
Iron
83.37
Mining
May 21,
2021
Brumadinho
Iron
74.70
Mining
Dec 31, 2021
Exploration
License
Exploration
License
Exploration
License
Exploration
License
Exploration
License
Exploration
Request
Exploration
Request
June 11,
2016
Location*
Mineral
Igarapé, Brumadinho and São
Joaquim de Bicas
833.379/2004
MMX Sudeste
Igarapé, Itatiaiuçu, Mateus
Leme
Iron
259.79
832.182/2006
MMX Sudeste
Itatiaiuçu, Mateus Leme
Iron
102.25
830.632/2006
MMX Sudeste
Brumadinho, Igarapé
Iron
107.32
832.183/2006
MMX Sudeste
Brumadinho, S. Joaquim
Iron
193.50
831.977/2005
BRASROMA
Brumadinho, Igarapé
Iron
411.45
830.633/2006
MMX Sudeste
Brumadinho, Igarapé, Itatiaiuçu
Iron
1,881.25
831.243/2006
MMX Sudeste
Mateus Leme
Iron
960.00
Iron
7.97
Brumadinho, S. Joaquim
MMX Sudeste
831.713/2010
MMX Sudeste
Brumadinho
Iron
12.01
832.607/2010
MMX Sudeste
Brumadinho
Iron
261.47
834.356/2010
MMX Sudeste
Iron
1,358.18
Exploration
Request
830.088/2011
MMX Sudeste
Iron
404.21
Exploration
Request
Brumadinho, S. Joaquim
2.3
de Bicas
Brumadinho, S. Joaquim de
Bicas
Jul 29,2016
Apr 6, 2014
6-Apr-14
Exploration
Request
830.826/2010
de Bicas
Nov 13, 2016
Exploration
Request
Exploration
Request
Royalties, Agreements and Encumbrances
MMX holds the three mining leases through a lease with CEFAR. The lease was originally with the
DNPM through 2021, for mining rights related to processes DNPM 801.908/1968, 805.374/1971 and
005.182/1958. In 2013, MMX and CEFAR signed an extension of the agreement through December
31, 2034. In the renewal of the lease agreement, CEFAR was granted an 11% royalty until
December 31, 2018. From January 1, 2019 until December 31, 2021 the royalty will be 11.5%. After
January 1, 2022, the royalty will be 12.5%. Royalties are applied on gross revenues after exclusion
of logistics costs. The agreement also authorizes free access on the leased area of its property.
2.4
Environmental Liabilities and Permitting
2.4.1 Environmental Liabilities
MMX has 22 legal proceedings initiated by the regulatory environmental agency between 2010 and
2013. These are being addressed by their by their attorneys.
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On August 26, 2011 MMX committed to a Behavior Adjustment Term (TAC) so that the safety,
stability and environmental quality of the tailings dam, water supply, and sediment containment are
assured.
2.4.2 Required Permits and Status
The Serra Azul expansion project is being licensed in three stages:
1. Plant to process friable and compact itabirites, conveyor belt, transmission lines and other
facilities such as water pipes. This licensing process is ongoing.
2. New tailings dam and tailings pumping system. The licensing process began in February
2012 and is in technical analysis.
3. Pit expansion and waste piles. The licensing process began in December 2012 and is in
technical analysis. A public hearing was held in June 2013.
Tables 2.4.2.1 and 2.4.2.2 present the processes which are under analysis.
Table 2.4.2.1: Expansion Processes
Process number
00866/2003/018/2010
00886/2003/022/2011
00886/2003/023/2011
00886/2003/025/2012
00886/2003/027/2012
14968/2012/001/2012
14968/2012/003/2013
00886/2003/029/2013
149468/2012/004/2013
14968/2012/002/2012
LEM/MLM
Description
LP
LI
LI + LP
(ADME and Main
Access)
LP Dam tailings
9B
LP + LI
(Pit expansion
and stack
storage)
LP + LI
(Concrete Plant)
LO (Concrete
Plant)
LOP (Geological
Survey)
LP (Gas Station)
LP + LI
(ADME 2)
Municipalities
São Joaquim de
Bicas
São Joaquim de
Bicas
São Joaquim de
Bicas
Status
License granted with conditions
Itatiaiuçu, Itaúna,
Mateus Leme,
Igarapé e São
Joaquim de Bicas
Brumadinho,
Igarapé e São
Joaquim de Bicas
Under analysis by the Environmental
Authority
São Joaquim de
Bicas
São Joaquim de
Bicas
Brumadinho
License granted with conditions
São Joaquim de
Bicas
São Joaquim de
Bicas
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Under analysis by the Environmental
Authority
License granted with conditions
Under analysis by the Environmental
Authority
Under analysis by the Environmental
Authority
Under analysis by the Environmental
Authority
License granted with conditions
Process filed
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Table 2.4.2.2: Processes for Current Operation
Process number
00049/1984/020/2011
00886/2003/017/2010
00886/2003/024/2011
00049/1984/017/2011
00049/1984/023/2012
02194/2004/011/2012
00886/2003/030/2013
00049/1984/26/2013
00886/2003/026/2012
00886/2003/021/2011
00049/1984/024/2012
02194/2004/012/2012
LEM/MLM
Description
LOC for tailings disposal from
Ipê mine.
LP + LI Stock Pile Grota das Cobras,
Phase 1 Preliminary
Environmental Authorization
for the new mechanical workshop
at Tico-Tico Mine
LOC B1A Ipê mine dam raising
Municipalities
Brumadinho
Brumadinho
Ipê Mine B1 dam raising.
Brumadinho
LOC Recovery of Fines
Brumadinho
LP + LI (B1 Auxiliary Dam Raising)
Igarapé
LP + LI (Dam Raising B1A Emicon 25m)
Revalidation Operating License for
Tailings Dam. B1 Tico Tico
Required on 20/07/2011
Revalidation of LO 069, LO 314, LO
773 (Expansion of production,
expansion and modification of mining
UTM)
Required on 20/07/2011
Revalidation of LO 226 Operating
License for Treatment Unit
- UTM.
Required on 22/08/2011
Revalidation of LO 185 Lavra, Open
With or without treatment Treatment
Dry.
Required on 20/07/2011
Brumadinho
Igarapé
Igarapé
Igarapé
Status
License granted with
conditions
License granted with
conditions
Environmental
Authority granted
License granted with
conditions
Under analysis by the
Environmental Authority
License granted with
conditions
Under analysis by the
Environmental Authority
Under analysis by the
Environmental Authority
Under analysis by the
Environmental Authority
Igarapé
Under analysis by the
Environmental Authority
Igarapé
Under analysis by the
Environmental Authority
Igarapé
Under analysis by the
Environmental Authority
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Accessibility, Climate, Local Resources,
Infrastructure and Physiography
The Project is located in the state of Minas Gerais within the city limits of Igarapé, Brumadinho,
Itatiaiuçu, Mateus Leme and São Joaquim de Bicas. Access to the complex is by way of Fernão
Dias highway, which crosses the Project near Igarapé. The Serra Azul Mine is approximately 60 km
from Belo Horizonte, the capital of Minas Gerais state. Figure 3.1 shows an aerial view of the site
layout.
Source: MMX, 2013
Figure 3.1: Surface Rights of the Serra Azul Mine Area
3.1
Topography, Elevation and Vegetation
The Project is located in the southeast extension of the Serra Azul range that terminates at the Serra
de Itatiauçú. The area has high relief with elevations between 1,000 m and 1,400 m (amsl). Serra
Azul forms the watershed of the Ribeirão São Joaquim (north slope) and Rio Manso (south slope)
hydrographic sub-basins and the Rio Paraopeba hydrographic basin. The Project area is drained by
two streams, the Córrego Olaria and the Córrego Grande, which are part of the Ribeirão São
Joaquim sub-basin. Serra da Farofa has a prominent east-west ridgeline, composed of resistant
banded iron formation (BIF). The ridge elevation varies from 1,050 m to 1,310 m.
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The Project is located in the Central Brazil Complex, which is the transition zone between the
Scrublands and Atlantic Forest Biomes. According to Rizzini (1979), vegetation from both biomes
can be found in the Complex. These include vegetation of the Atlantic Forest, Seasonal Forest, the
Cerradão (Sclerophyll Forest), hygrophila communities, and areas covered by treeless fields or
rupestrian fields. The Project is located in a steep, mountainous terrain where forest and campestral
vegetation have been identified. The first occupy the slopes, climbing up the mountains along the
ravines in the form of hillside thickets or narrow bands of gallery forest. The campestral vegetation is
found in the valleys and on peaks. Vegetation corresponds to the ecological succession from
submontane and semi-deciduous to seasonal or pluvial forest. Natural reforestation of the cleared
land has resulted in an irregular distribution of the forest and open fields of native grasses or scrub
growth.
3.2
Climate and Length of Operating Season
According to the Köppen classification system, the regional climate is of the Cwa type characterized
as humid subtropical. This area has hot, wet summers and dry winters including months without
measureable precipitation. The average local temperatures range from 25ºC in January during the
summer to 18ºC in August during the winter. The maximum rainfall occurs in December and
January and varies between 240 and 320 mm per month. May and June are the months with the
minimum amount of rainfall. During these months, precipitation is less than 60 mm per month. Total
annual rainfall exceeds 1,000 mm. Operations are not affected by the climate and the Project
operates year round.
3.3
Sufficiency of Surface Rights
CEFAR owns the surface rights to the majority of the property covered by the mineral licenses
(Figure 3.1). MMX controls the surface rights in the mine area through the lease agreements and
acquisition of land. MMX is acquiring the surface rights for the proposed rail terminal, tailings and
other areas required for the expansion. At the time of the report, about 73.26% had been acquired.
3.4
Accessibility and Transportation to the Property
The Project is situated in the Serra da Farofa area of the Serra Azul Mountain Range, in the
northwestern part of the Iron Quadrangle. The nearest major city to the project area is Belo
Horizonte. Belo Horizonte has two airports: The Tancredo Neves International Airport (Confins) in
Belo Horizonte provides direct access to Brazil’s principal cities and other South American capitals
and the Pampulha Airport offers flights to other cities in the state of Minas Gerais.
In addition to airport access, several major highways connect Belo Horizonte with other major
Brazilian capitals including São Paulo (584 km), Rio de Janeiro (444 km), Salvador (1,372 km),
Brasília (716 km) and Vitória (524 km).
From Belo Horizonte, the Mine is accessed via federal highway BR-381 which is also known as the
Fernão Dias Expressway connecting Belo Horizonte to São Paulo. The mine access road is located
60 km southwest of Belo Horizonte on BR-381 and the mine administrative buildings are located just
west of BR-381.
The Serra Azul Mine is close to two railway terminals. The closest is located 18 km from the site in
Brumadinho. The other is in the town of Sarzedo, 35 km away. Both of these are located in the Belo
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Horizonte metropolitan area. MMX is currently constructing its own rail terminal about 6.7 km from
the mine. These railways provide easy access to the iron ore transport route, the coastal ports of
Porto de Sepetiba and Tubarão as well as Porto Sudeste, currently being developed by MMX.
3.5
Infrastructure Availability and Sources
The Project is located in the Iron Ore Quadrangle, a significant global iron ore source. All
infrastructure necessary to mine and process significant commercial quantities of iron ore exist at the
current time. Infrastructure items include high voltage electrical supplies, water sources, paved
roads and highways, railroads for transporting run-of-mine (RoM) ore, port facilities that connect to
global markets and towns where employees live. Local and State infrastructure also includes
hospitals, schools, airports, equipment suppliers, fuel suppliers, commercial laboratories and
communication systems. Additional infrastructure is required for the planned expansion of the Serra
Azul Mine.
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History
4.1
Prior Ownership and Ownership Changes
Page 13
CEFAR is the holder of the three licenses comprising the Project. On January 1, 2011, MMX
incorporated AVG and became the only lessee of the mineral rights of the three mining concessions
(249/2012 Mining Group). Prior to ownership by AVG and Minerminas, the area covered by Mining
License 801.908/68 was developed by Santa Mariana Participações e Administração Ltda (Santa
Mariana), which operated under a 10-year lease agreement initiated on May 23, 1986. In 1987,
Santa Mariana sub-leased this license to Mineração Serra das Farofas Ltda, the predecessor of
AVG. Eight years later, Santa Mariana assigned its rights in the lease agreement to AVG through a
“Contract of Assignment of Lease Right”, approved by DNPM on July 19, 1996. At same time,
CEFAR extended the 10-year lease agreement for an additional two years, until June 2, 1998. A
new lease agreement between CEFAR and AVG was initiated on May 19, 1998 and on May 3, 2003,
this lease agreement was extended until 2021. Minerminas started operations at the area on July
01, 2003 through a lease agreement with CEFAR, with AVG’s approval. This agreement assigned
Minerminas the right to mine the western part of Mining License 801.908/68 covering approximately
57% of the area.
The first work on Mining License 805.374/71 was conducted by Mineradora Rio Bravo Ltda, under a
10-year lease agreement with CEFAR. This contract was initiated on June 4, 1986 and had an
option to extend the term for an additional 10 years. In 1998, CEFAR signed a 5-year lease
agreement with Mineração Serra das Farofas Ltda, which was initiated on December 11, 1998 and
completed on June 23, 1999. Minerminas started mining activities on this mining license in March
1999 under a 22-year lease agreement, which is still in effect. Minerminas was incorporated into
AVG in 2010.
The lease on Mining License 005.182/1958 was assigned to AVG on October 24, 2010.
4.2
Previous Exploration and Development Results
Iron mining in the Iron Quadrangle began in the nineteenth century with many small-scale producers.
Deposits of itabirite were developed at the Pau de Vinho mine and hematite in the area of Mineração
Esperança. Both of these areas are located near the Minerminas and AVG deposits and are
currently not in operation.
The first geologic mapping in the area was part of a joint mapping program between the Brazil’s
DNPM and the United States Geological Survey (USGS). The resulting paper by Dorr et al (1961)
was published in both Portuguese and English and has been used extensively in the Iron
Quadrangle for background on iron deposits. The economic potential of the Serra Azul area was reevaluated by Sociedade Mineração da Trindade (Samitri) during the same year (1961), through an
agreement with the DNPM and the USGS.
There are no records of past exploration conducted by the predecessor companies that operated in
the Project area. Like most private iron mine operators in Brazil, Minerminas and AVG did not
conduct exploration programs on their properties. From 1981 until recently, the area has been the
target of intermittent geological research, always showing encouraging qualitative results without,
however, providing conclusive evidence for the development of a large-scale mining project
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compatible with the size of the deposit. Mining was based on the empirical knowledge of the
technical team operating at the mine. The mine was not optimized and lacked a life of mine (LoM)
plan.
After the purchase of the mineral rights by MMX, AVG and Minerminas were combined into
AVG/Minerminas which is now referred to as Serra Azul. Since then, MMX has implemented an
aggressive exploration and development program including drilling, mapping, sampling, resource
estimation, pit optimization, mine planning, and process evaluation using best industry practices.
4.3
Historic Mineral Resource and Reserve Estimates
There have been no historic mineral resources or reserves at the Serra Azul property until 2008,
when MMX commissioned SRK to produce a NI 43-101 Technical Report for the AVG property.
Since then MMX has produced its own resource estimates which have been audited by SRK.
4.4
Historic Production
The AVG plant, now referred to as the Tico-Tico Plant, began magnetic separation in May 2006 so
spiral rejects could be recovered.
Since MMX gained control of the AVG Mine in December 2007, the Minerminas mine in March 2008,
and completed its first year of production in 2008, there have been plant upgrades and production
improvements through the plant.
In 2008, the Minerminas plant, now referred to as the Ipê Plant, had a crusher refurbishment and
addition of a magnetic separator to aid in recovery of the fines.
Tables 4.4.1 and Table 4.4.2 present the production from each unit
Table 4.4.1: Historic Production for the Tico-Tico Plant
Description
RoM (Mt)
Fines (Mt)
Total Plant Feed (Mt)
Lump (Mt)
Coarse Sinter Feed (Mt)
Sinter Feed Spirals(Mt)
Pellet Feed (Mt)
Total Production (Mt)
Recovery (%)
2005
2.2
2.1
0.5
0.6
0.4
1.6
73.3
2006
2.4
2.4
0.4
0.7
0.5
1.6
69.3
2007
2.3
0.8
3.0
0.4
1.0
0.9
2.3
75.7
2008
2.7
1.1
3.8
0.6
1.3
0.6
0.3
2.8
74.0
2009
2.2
1.9
4.0
0.6
1.4
0.6
0.3
2.9
71.48
2010
3.0
1.5
4.5
0.7
1.4
0.8
0.4
3.5
74.34
2008
1.0
0.1
1.1
0.3
0.2
0.1
0.0
0.6
53.4
2009
1.4
0.9
2.2
0.4
0.5
0.0
0.4
1.2
54.99
2010
2.6
1.3
3.8
0.6
1.1
0
0.7
2.4
62.68
2011
2.6
1.7
4.2
0.9
1.9
0.5
0.3
3.6
67.51
2012
2.3
1.1
3.4
1.0
1.8
0.4
0.1
3.6
73.93
Table 4.4.2: Historic Production for the Ipê Plant
Description
RoM (t)
Fines (t)
Total Plant Feed (t)
Lump (t)
Coarse Sinter Feed (t)
Sinter Feed Spirals(t)
Pellet Feed (t)
Total Production (t)
Recovery (%)
LEM/MLM
2005
1.2
1.2
0.4
0.1
0.5
41.7
2006
1.3
1.3
0.5
0.2
0.1
0.7
54.4
2007
1.5
1.5
0.6
0.3
0.1
0.9
61.6
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2011
2.3
1.4
3.8
0.5
0.5
0.9
0.6
2.5
65.29
2012
2.5
1.5
4.1
0.5
0.8
0.4
0.6
2.3
55.88
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Geological Setting and Mineralization
This section is summarized from MMX (2009) and personal communications with MMX geologists
during site visits and meetings between SRK and MMX.
5.1
Regional Geology
The Project area is situated in the western portion of the Iron Quadrangle near Belo Horizonte, Minas
Gerais, in the Serra do Curral homocline. Mineralization is hosted by the Minas Supergroup which is
dominated by supracrustal metasedimentary and metavolcanic rocks. Intrusive rocks are rarely
found in the area but, where present, are basic sills and dikes up to 1 m wide. Regional
metamorphism reached the greenschist facies during multiple episodes of deformation.
5.1.1 Regional Structure
The Project area lies within the São Francisco Craton tectonic province of South America shown in
Figure 5.1.1.1. The Project is located in the extreme west of the Serra do Curral homocline and in
the north/northwest limit of the Iron Quadrangle. This region has a complex tectonic-metamorphic
history and is part of the basement of the southern portion of the São Francisco Craton. The São
Francisco Craton (Almeida et al 1981) tectonic province was not affected by the Brazilian
deformation but is bordered by Brazilian fold belts that developed during orogenesis culminating in
the formation of Gondwana approximately 650 Ma. The basement of the craton was subjected to the
Jequié/Rio das Velhas and Transamazonic tectonic-metamorphic events that preceded the Brazilian
deformation. There are various evolutionary models proposed for the Iron Quadrangle region, and
this area is still extensively studied.
Among the large-scale structures in the Iron Quadrangle are the:


Serra do Curral homocline;
Serra da Moeda syncline; and

Dom Bosco Syncline.
The Serra do Curral homocline is located in the north and has a NE-SW strike and dips SE. The
Serra Moeda syncline is located in the west part of the Iron Quadrangle and is the west limb of a
syncline which has an N-S axis and dips to the south. The Dom Bosco syncline is in the south and
has an E-W axis and is connected to the Serra Moeda syncline on the west side. There is also the
Falha do Engenho zone of trans-current shearing, the Mariana anticline to the southeast and the
Santa Rita syncline to the east. According to Dorr (1969), the Santa Rita syncline corresponds to the
major and most complex folding of the region. Finally, the Gandarela isoclinal syncline is located to
the northeast with SE dipping limbs and the Fundão-Cambotas fault system that extends for almost
the entire length of the east border. Figure 5.1.1.2 shows the homocline, synclines and anticlines in
the region.
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Source: Marshak & Alkmim 1989 and Alkmim & Marshak 1998
Figure 5.1.1.1: Project Location within the São Francisco Craton
Source: Modified from Alkmim & Noce 2006 after Dorr (1969) and Romano (1989)
Figure 5.1.1.2: Location of Large Structures in the Iron Quadrangle
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Serra do Curral Homocline
There have been five different interpretations for the formation of the Serra do Curral homocline as
listed below:

The homocline is a section of the Serra dos Três Irmãos region (Eichler, 1964);

The homocline is the south limb of the Piedade syncline (Dorr, 1969);


Pires (1979) interpreted the homocline as related to an anticline;
Alkmim and Marshak (1998) interpret the structure as the inverted flank of a regional
anticline; and

Oliveira et al. (2005) interpret the homocline as the overturned limb of a recumbent
allochthonous megafold, referred to as the Curral Nappe.
Figure 5.1.1.3 shows schematic sections showing each author’s interpretation, which are discussed
in detail below.
The first interpretation was proposed by Eichler (1964) and is shown in Figure 5.1.1.3 schematic
section (a). Eichler (1964) interprets the homocline as a section of the Serra dos Três Irmãos region
transported by north-directed thrust faults.
According to Simmons (1968), the Serra do Curral homocline is the south limb of the Piedade
syncline, as suggested by Dorr (1969). This is shown in schematic section (b) in Figure 5.1.1.3.
This structure is well characterized at the NE limit of the Serra do Curral (Serra da Piedade), where
the two limbs of the syncline are recognized, a fact that leads Simmons (1968) to believe that the
homocline represents one of the limbs of this megastructure. The Serra do Curral homocline,
dipping to the SE, is characterized by secondary folding with axial planes oblique to the direction of
the mountain ridge. Small reverse faults parallel to the syncline with displacement to the southeast
and high-angled normal faults cut the megastructure.
Pires (1979) was the first author to propose that the regional folding is related to an anticline.
Through work that was done at the junction of the Serra do Curral homocline with the Moeda
syncline, Pires (1979) proposed the schematic section shown in Figure 5.1.1.3 (c). In this section,
Pires (1979) shows an anticline, the north limb of which would represent the Serra do Curral
homocline. This structure is limited at the base by the Curral Thrust Fault and at the north by schists
of the Rio das Velhas Supergroup.
Romano (1989) determined the petrographic and textural characteristics of the metavolcanic rocks of
the Mateus Leme to Esmeraldas and Pará de Minas to the Pitangui regions. According to the
author, these rocks represent the continuity of the Rio das Velhas Supergroup in the Occidental
Serra do Curral. In this region, Romano (1989) identified thrust faults and other deformational
features cutting the Rio das Velhas Supergroupes. The structures are attributed to two phases of
regional deformation (Dn and D1). The first deformation affected only the Rio das Velhas
Supergroup and the second extended to the Minas Supergroup in the western portion of the Serra
do Curral homocline. The second regional deformation was of a progressive compressional
character.
Marshak et al. (1992) and Jordt-Evangelista et al. (1992) identified a zone of normal shearing in the
contact between the Sabará Group and the Belo Horizonte Metamorphic Complex in the region of
Ibirité, southwest of the city of Belo Horizonte, and described three zones of contact metamorphism.
They are, from northwest to southeast, cordierite-sillimanite, staurolite-andalusite-cordierite and
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biotite. These zones exemplify the metamorphic aureoles that occur in the contact zones of the
supercrustal rocks with the basement metamorphic complexes in response to the formation of
domes and synclines.
Endo and Machado (1997) interpret the Serra do Curral homocline as part of a syncline
characterized by the absence of a northern limb at the western limit of the structure. Endo and
Machado (1997) observed that on the southern limb, the rocks of the Minas Supergroup are in
normal stratigraphic sequence with inclinations that vary from moderate to high while on the northern
limb, the stratigraphic sequence is inverted. According to Endo and Machado (1997), the Zone of
Normal Shearing (the Moeda-Bonfim zone) in contact between the Bonfim Metamorphic Complex
and the supracrustal rocks along the Serra da Moeda extends to the Serra do Curral homocline.
Here, the zone of normal shearing is identified by the Souza Nochese Zone of Shearing. Thus, the
principal structural features are:

Sub-orthogonal between the Moeda and Curral synforms;

Breaking and absence of north limb of the syncline;


Normal ductile shearing between the metasediments and the Bonfim Complex; and
Stratigraphic inversions in the south rim/limb of the synform.
Based on these structures, Endo and Machado (1997) propose eight events of deformation for the
region: four in the Neo-Archean and four in the Proterozoic, all of co-axial character.
Alkmim & Marshak (1998) observed parasitic asymmetric folding and mesoscopic faults trending to
the northwest at the western limit of the Serra do Curral homocline. This observation led to the
interpretation that the Serra do Curral homocline may be the inverted flank of a regional anticline with
polarity to the northwest. According to Alkmim & Marshak (1998), the Curral anticline is refolded at
the Curral-Moeda junction with the Moeda syncline. The development of the mega-anticline would
be related to a compressive event during the Transamazonic period and older than the extension
that resulted in doming and syncline formation. Alkmim and Marshak’s (1998) interpretation is
shown in Figure 5.1.1.3 section (d).
Finally, the relations proposed by Oliveira et al. (2005) for the region of Itatiaiuçu, is shown in Figure
5.1.1.3 (e). According to the Oliveira et al. (2005), the schistocity observed in the rocks of the Minas
Supergroup and Rio das Velhas in the entire Serra do Curral region, is the same that predominates
in the sedimentary layering and schistocity in the mesoscopic folds with overturned limbs. According
to the authors, the Serra do Curral homocline is the overturned limb of a allochthonous recumbent
megafold, trending to the north-northeast, and referred to by Oliveira et al (2005) as the Curral
Nappe.
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Sources:
a) Schematic section proposed by Eichler (1964) in the region of the Serra dos Três Irmãos;
b) Section proposed by Dorr (1969), section NW-SE in the Quadrilátero Ferrífero;
c) Section proposed by Pires (1979) for the region of junction of the Serra do Curral with the Moeda syncline;
d) Section proposed by Alkmim & Marshak (1998) for the region west of the homocline of the Serra do Curral;
e) Schematic section proposed by Endo et al (2005) for the region of Itatiaiuçu (Section Itatiaiuçu).
(Fm. Formation, Gr. Group, Sgp. Supergroup, ST Topographic Surface).
Figure 5.1.1.3: Geological Sections Proposed for the Region of the Serra do Curral
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Local Geology
In the Project area, the Serra das Farofas is composed of rocks from the Minas Supergroup that are
underlain by the Rio das Velhas Supergroup in an unconformity. The Minas Supergroup is
subdivided, from youngest to oldest, into three groups:

Piracicaba Group;

Itabira Group; and

Caraça Group.
A stratigraphic column is shown in Figure 5.2.1. Locally, the stratigraphic sequence is inverted, with
the most recent quartzitic formations of the Piracicaba Group overlain by the itabirites of the Cauê
Formation, part of the Itabira Group, which, in turn, is capped by the oldest phyllites and quartzites of
the Caraça Group. This stratigraphic inversion, as discussed in Section 5.1.1, characterizes the
mountain ridge and is most likely the limb of a recumbent fold.
Structural elements which show three deformation phases (D1, D2 and D3) can be observed in the
Project area. The closed, isoclinal folds of the bedding are related to the D1 deformation phase. In
addition to the thickening of the axial lines and thinning of the limbs, there is an axial plane cleavage
associated with L1 mineral lineations. The folds show that the D2 deformation phase are re-folds of
the first phase, are generally kink folds with angular axial lines and straight limbs verging to the NW
where crenulation lineations are developed. The development of dilational structures filled with
quartz veins is common. The D3 deformation phase is represented by open folds verging to the
south. They are symmetrical with a sinusoidal profile and re-fold the D1 and D2 structures.
Reverse faults are observed at different scales and are associated with the strong deformational
shortening of the iron formations. They are associated with the D2 deformation phase and may be
manifested as brittle shearing zones which affect the original bedding, deforming the first D1 phase.
Narrow fault breccia marks the nuclei of the faults and the rotation of the fragments indicate sinistral
kinematic movement.
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Source: MMX, 2013
Figure 5.2.1: Stratigraphic Column.
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5.2.1 Local Lithology
The Caraça Group is subdivided into the Moeda (lower) and Batatal (upper) Formations. The Moeda
Formation is composed, principally, of coarse quartzites, metaconglomerates, and phyllites.
According to Renger et al. (1994), the Moeda Formation has a maximum age of 2.65 Ga, and was
deposited in a fluvial environment. Over time, this depositional environment evolved into a marineplatform represented by the Batatal Formation. The Batatal Formation is composed predominantly
of phyllites and graphitic phyllites. Its maximum age of deposition is 2.5 Ga (Renger et. al. 1994)
and the Batatal Formation has a gradational contact with the Itabira Group.
The Itabira Group is essentially composed of chemical sediments, a characteristic that separates it
from the Caraça Group. It is of great economic importance, as it hosts world class deposits of iron
and manganese, associated with gold and bauxite. It is divided, from base to top, into the Cauê and
Gandarela Formations. The Cauê Formation is composed of itabirites, dolomitic itabirites,
amphibolitic itabirites, carbonate itabirites and lenses of marl and phyllites. Due to their resistance to
weathering, the itabirites form the principal ridges of the region with extensive escarpments, such as
the Serra do Curral. The Cauê Formation represents the principal target of research work. Since
the Gandarela Formation does not occur in the area, the Cauê Formation is in direct contact with the
Piracicaba Group.
The Piracicaba Group is divided, from base to top, into the Cercadinho, Fecho do Funil, Taboões
and Barreiro Formations. The Cercadinho Formation is the only one of this group that is identified in
the Project area, and is composed of quartzites and graphitic phyllites, that occurs in the northern
part of the area. According to Renger et al. (1994), this group represents a period of tectonic
movement in the Minas Basin initiated around 2.4 Ga.
The rocks show a general east-west strike direction with dips varying between 45º and 50º to the
south with some local variations caused by secondary asymmetric folding and transverse faulting of
the structure.
5.2.2 Alteration
Alteration in the area is described by MMX geologists as intense silicification of compact itabirite
resulting from hydrothermal activity.
5.2.3 Structure
The dominant structure in the project area is an antiform overturned to the north. The upper limb has
been completely eroded, leaving only the inverted lower limb.
As a result of the numerous deformational episodes, bedding is rarely observed and then only in the
quartzite and phyllite of the Cercadinho Formation. However, the principal foliation, Sn is well
developed in all of the local lithologies. The Sn foliation dips approximately 30º to 40° south in the
northern part of the project and increases to about 70° south in the southern part of the area. This
suggests that the Project is located on the inverted limb of an isoclinal anticline with vergence to the
north. Small scale, asymmetric folds with amplitudes from centimeter to meter scale are observed at
the Project where cataclasite has also been observed. These folds are typically tight with east-west
axes. Intense folding is seen in the iron formation, often obliterating the primary structures.
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The contacts between formations show tectonic textures and are interpreted to be thrust faults.
Normal faults are also observed in the project area.
5.2.4 Metamorphism
The metamorphism identified in the Project area is related to continental collision during the
Transamazonian Orogeny. Metamorphic grade in the Iron Quadrangle increases from west to east
as described by Dorr (1969). The rocks of the western and central portions reached greenschist
facies whereas those in the east reached the almandine-amphibolite facies. In the Serra do Curral,
metamorphism of greenschist facies predominates.
Itabirite is a highly deformed rock with a composition derived by tectonic and metamorphic
processes. Small preserved nuclei of magnetite in the interior of hematite crystals suggest that the
greater part of these rocks were oxidized by hydrothermal solutions during the deformational
processes. The most common minerals, other than quartz, are siderite, ankerite, ferroan dolomite,
magnetite, martite and, locally, chlorite. Martite is a product of altered magnetite and ankerite and is
often a secondary mineral.
5.3
Property Geology
Within the pit area, the geology is dominated by four formations. From oldest to youngest, these are
the Batatal, Cauê, Gandarela and Cercadinho Formations. The pit geology is shown in Figure 5.3.1
and typical cross-sections are shown in Figure 5.3.2. The Batatal Formation has been thrust over
the younger Cauê Formation, which has been thrust over the youngest Cercadinho Formation. The
deposit is crosscut by a northwest-trending, high-angle brittle fault that appears to be offset by
younger northeast trending faults.
The dominant structural features consist of Sn foliation, fracture planes and minor fold axes.
Foliation is the most conspicuous planar element within the pit and is preferentially developed in the
enriched itabirite. The Sn foliation strikes northwest-southeast and dips both northeast and
southwest suggesting the presence of a larger fold. Parasitic fold axes typically trend 150º to 200º.
Well-defined fracture planes are found in both the friable itabirite and compact itabirite. It is typically
more prominent in the compact itabirite. The fracture planes have two predominant orientations.
One strikes northwest and dips northeast the other strikes north-northeast and dips southeast.
These fabrics often host breccia zones with areas of significantly enriched iron.
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Source: MMX, 2013
Figure 5.3.1: Geological Map of the Serra Azul Mine Area, at December 16, 2012
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Source: MMX 2013
Figure 5.3.2: North-South Cross-sections through the Serra Azul Mine
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Significant Mineralized Zones
The mineralization at the Project consists of metamorphosed banded iron formation (BIF) with strong
evidence of hydrothermal syngenetic formation with areas of supergene enrichment from subsequent
weathering. This results in four major mineralization types, including:

Canga;

Friable and compact itabirite;

Friable and compact hematite; and

Dolomitic itabirite
Canga is the product of chemical weathering of all the types of friable ore. It generally has more
elevated grades of aluminum, phosphorous, and greater loss on ignition (LOI). It occurs in three
stratigraphic locations: at the top of the BIF, in the base of the southern Serra das Farofas and over
the schists of the Batatal Formation. In the Batatal Formation, canga is formed in the iron ore
colluvium. In some areas, it has elevated iron grades, due to the nature of the source rock. The
presence of visible hematite clasts is common and goethite and limonite commonly occur with
secondary minerals, increasing the hardness.
The friable itabirite is confined to the proximities of compact itabirite or of zones of silicification. The
principal characteristics of this type of ore are silica grades that vary from 6% to 10% and in
granulometry that is above 19 mm. The bands are composed of friable hematite intercalated with
bands of recrystallized quartz.
Compact itabirites occurs at the base of the friable itabirites and as small elongated bodies
preferentially oriented west-northwest/east-southeast within the friable itabirite. These last are
protoliths of proto-ore that remain after intense weathering and/or hydrothermal alteration along
certain preferential directions such as the axis of folds.
The carbonate itabirite is characterized by intercalations of clay bands alternating with bands of
friable and compact hematite. The bands of clay are generally light rose colored but locally may be
white in color. Where these bands are white, kaolinite is often present. The texture is banded, with
bands up to 40 to 50 cm in width. Where kaolinite is common in the clay-rich bands, internal breccia
texture are observed. The clay bands of clay also contain isolated crystals of euhedral quartz and
specularite, both of which are coarse to very coarse in grain size. The euhedral quartz and the
specularite are the product of secondary alteration, growing over the original texture of these rocks.
The hematite bands are fine and even occur as films intercalated with clay minerals. Friable
hematite also occurs disseminated within the clay bands.
MMX has further classified the mineralization types, based on content of Fe, Al2O3, Mn and mass
recovery in the lump ore fraction (MR1). The mineralization types that are included in the geologic
model are listed in Table 5.4.1.1.
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Table 5.4.1.1: Mineralization Types
Al2O3%
MR1%
Mn%
Fe%
Type
25 to 62
IF
Friable Itabirite
> 62
HF
Friable Hematite
25 to 62
IC
Compact Itabirite
> 62
> 35
HC
Compact Hematite
CG, CD
< 55
IL
Lateritic Itabirite
> 55
IA
Aluminous Itabirite
> 0.1
25 to 45
IPT
Powdery Itabirite
NA
< 25
QF
Ferruginous Quartzite
< 45
< 1.6
NA
> 45
> 1.6
NA
NA
NA
NA
Description
Canga
5.4.1 Relevant Geological Controls
The mineralization at the Serra Azul Mine shows strong evidence for both structural and lithological
controls. There is also evidence for hydrothermal origin for the iron formation, with later supergene
modification that probably caused major enrichment in addition to “softening” of the ore. The
hypogene phase is associated with D1 folding during which, hydrothermal fluids ascended to the
surface as a result of decompression. This would also permit meteoric fluids to descend along the
normal faults causing mixing resulting in oxidizing conditions and the formation of magnetite and
carbonates, as described by Rosière et al. (2008). In this model, Fe-rich hydrothermal dolomite
could be formed during the tight folding. Later, oxidization of the Fe-rich dolomite caused leaching of
Mg, Ca and CO2, resulting in the formation of hematite. Subsequent weathering has resulted in
supergene enrichment and “softening” of the ore. These same normal faults would be the preferred
routes for the meteoric fluids to circulate to deeper parts of the system. At the Project, this faulting
could be represented by the high-angle brittle faults observed in the pit.
The genesis of the friable carbonate itabirite with hypogene characteristics could be controlled by D1
folding, that channelized mineralizing hydrothermal fluids parallel to the layering or compositional
banding. Higher-grade ore is concentrated in these folded areas. In the locations where the
fluid/rock ratio was higher, bands of compact hematite were generated, possibly by leaching or
complete substitution of the pre-existent carbonates. Nearby, where the fluid/rock ratio was less, the
leaching/substitution of the carbonates was not complete. Some carbonate remained that was
subsequently leached during supergene alteration and generated the contaminated friable ore. This
high-grade ore is generally porous and almost always contains remnants of weathered carbonate,
observed as the orange to ochre colored interstitial material.
Another observation at the Serra Azul Mine is the close relationship between breccias and/or veined
areas with the high-grade friable ore and the rich itabirite. It has been observed that in areas with
the greatest amount of breccias with carbonate veins and veinlets, it is likely that friable ore or rich
itabirite will be present. This is also characteristic of areas only affected by carbonate veins and
veinlets. The carbonate veins can be parallel to or may crosscut itabirite banding. Portions of
compact itabirite are common in the middle of friable ore.
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The contacts between friable and compact ores may be sharp or transitional. Where there are
carbonate veins/veinlets there is a tendency for the intensity of friability to be greater than the areas
without carbonate veining.
Iron remobilization most likely occurred as an association with hydrothermal fluids, resulting in the
formation of concordant and discordant hematite veins. These veins are often breccia zones filled by
hematite. Some of the remobilized material is composed of magnetite. The process of quartz
remobilization was very intense in some areas, resulting in breccia formation and silicification of the
itabirite. Quartz remobilization often results in high compactness to the itabirite (hard itabirite). In
places, the orientation of these silicified zones appears, to be controlled by the hinges of D1 folds,
where it is parallel to the banding. However, in other areas the pattern is rather complex.
The iron formation extends across the Serra Azul ridge including the entire license block of Serra
Azul which is approximately 4000 m long and 800 m wide. The formation dips steeply to the south at
the west end of the mine and at about 35⁰ to the south in the center and east. The true thickness of
the formation varies, but averages about 300 m. The itabirite continues to depth in the steeply
dipping areas. The friable itabarite varies in thickness, but averages about 50 m in thickness below
the surface. The compact itabirite varies between 200 and 400 m in true thickness.
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Deposit Type
6.1
Mineral Deposit
Page 30
Iron mineralization in the Iron Quadrangle, as in other world locations, is controversial. Various
models are proposed, but the currently accepted models are hydrothermal syngenetic and/or
supergene enrichment. According to Guild (1957), ferruginous sediments of the Minas Supergroup
are chemical precipitates, deposited when iron-bearing river waters mixed with marine waters in a
shallow, low energy basin. This basin was isolated from the Proterozoic ocean by a volcanic arc and
it is suggested that volcanic ash interacting with saline basin waters lowered the pH of the water,
resulting in iron precipitation. In addition, petrologic observations indicate that this basin received
limited clastic material. The ferruginous sediments consist predominantly of iron oxide and colloidal
silica with limited carbonate minerals. Carbonate mineral deposition was limited by the low pH of the
receiving basin waters.
The deposits within the Minas Supergroup are characterized by fine, alternating layers of iron and
silica minerals. The iron minerals typically are hematite or magnetite and the silica minerals are
chert or quartz. Many of these formations have iron content deemed too low for profitable
exploitation. However, during intensive weathering, silica is leached from the rock resulting in
material enriched in iron and creating a deposit of potentially economic iron mineralization.
Occurrences of leached BIF’s account for the world’s main source of iron. The BIF’s in the Iron
Quadrangle are locally called itabirite named for Pico do Itabirito, the type locale for itabirite. The
itabirites in the Iron Quadrangle are composed of hematite and fine-grained quartz.
Extreme lateritic weathering has produced zones nearly devoid of silica locally referred to as canga
caps. Below the canga caps, itabirites with enriched iron grade and hematite-magnetite are found.
The itabirites are typically characterized by the degree of leaching. Three common varieties are
friable itabirite, semi-compact itabirite and compact itabirites. Each of these are characterized by a
relative decrease in the amount of leaching. Itabirites require processing to liberate the hematite
from the quartz and are very amenable to treatment. Consequently, itabirites and powdery hematite
are processed into iron product concentrates, or iron product fines. Fines are preferably sold as
sinter feed, but product that contains a significant fraction of particles smaller than 1 mm cannot be
fed directly into the sintering machine. This finer product is sold as feed for pelletizing plants, or
pellet feed.
Pure hematite contains a maximum of 69.94% iron compared to pure magnetite, which contains
72.36% iron. Despite the higher iron content of magnetite, hematite is more valued by the steel
industry due to its higher reduction rate. During the steel-making process, hematite (Fe2O3) is
progressively reduced to magnetite (Fe3O4), then wüstite (FeO), and is finally refined into iron (Fe).
Hematite and magnetite have different crystal lattice structures; hematite has a hexagonal lattice,
whereas magnetite has a simple cubic lattice. This difference in atomic arrangement accounts for a
volume increase during the loss of oxygen atoms. Consequently, hematite in a blast furnace
undergoes a much higher volume increase during the reduction process than the equivalent iron
amount as magnetite. The increased porosity resulting from the volume change causes a marked
increase in the overall reduction rate, more than offsetting the effect of the lower iron content of
hematite.
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Exploration
The first geologic mapping in the area was part of a joint program between the Brazil’s DNPM and
the United States Geological Survey (USGS). The resulting paper by Dorr et al (1961) was
published in both Portuguese and English, forming the basis of geologic understanding in the Iron
Quadrangle. The economic potential of the Serra Azul area was reevaluated by Samitri during the
same year (1961), through an agreement with the DNPM and the USGS.
Like most private iron mine operators in Brazil, AVG, Minerminas and operators prior to AVG and
Minerminas have not had extensive and detailed exploration programs. There has been minimal
exploration drilling prior to MMX’s involvement in the Project. Limited channel samples were
collected in the pit area.
7.1
Relevant Exploration Work
7.1.1 Surveys and Investigations
Channel samples have been excavated and sampled by MMX in the mine area. All channels are
vertical and are 2 m in length. Channels were collected on an irregular grid. The resource
estimation database does not include the channel samples.
The earliest local mapping was done by Senior Engenharia Ltda as part of the exploration report
prepared by Minerminas at the end of 1990’s. More recently, the local mapping was contracted by
MMX and carried out by Vórtice Consultoria Ltda in March 2008 at 1:5,000 scale.
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Drilling
Core drilling in the Project area by MMX was performed by Vórtice Sondagens e Serviços de
Mineração, Ltda. (Vórtice) and Geológica e Sondagens Ltda. (Geosol), both based in Belo
Horizonte. MMX also conducted reverse circulation (RC) drilling contracted to Geosol Geosedna
Perfurações and Especiais S.A. (Geosedna), also based in Belo Horizonte.
A total of 45,999 m have been drilled at the Project in 461 holes. Holes were drilled on a slightly
irregular 100 m x 100 m grid. Table 8.1 lists the number of drillholes by program and company and
Figure 8.1 shows the locations of the drillholes within the mining concessions.
Table 8.1: Drilling at Serra Azul
Campaign
AVG
Total AVG
MMX Core*
MMX RC
Total MMX
Total
Number of
Drillholes
11
11
365
85
450
461
Period
2005
2005
2007-2012
2007-2012
2007-2012
Length
(m)
440
440
34,938
10,621
45,559
45,999
Number of
Samples*
46
46
6,572
2,059
8,631
8,677
*Includes 4 geotechnical holes, not sampled
Figure 8.1: Drillhole Location Map with Mining Concessions
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Type and Extent
Core
All core holes are HW sized core (77.8 mm) and were drilled using a conventional drill rig. About a
third of the holes (144) were drilled at an inclination between -55° and -75° to the north and the
remainder are vertical. The minimum depth of the drillholes is 8.7 m and the maximum is 672.65 m;
the average hole depth is 94 m, with 87% of the holes being less than 200 m in depth.
RC Drilling
The RC holes were drilled with a hammer or tricone depending on the hardness of the rock. The
diameter of the hole drilled by hammer is 5 inches and the diameter of the hole drilled by tricone is
4 inches. Nine holes were drilled vertically and the remainder were drilled at an inclination of 70° to
the north. The average depth of the holes is 125 m, with a minimum of 35 m and a maximum of
280 m.
The technique of RC drilling was new to the Serra Azul project in 2009. In order to assess the
results of RC drilling, two twin holes were drilled for comparison. Table 8.1.1 presents the twin
drillholes and the results for the matching intervals. RPSF15 and SEFDSF08 are not true twins as
one is vertical and the other angled at -70 to the north; however, the results for the friable and
compact itabirite are quite similar. The holes were collared on the fines stockpile, so the initial
interval would not necessarily be expected to be similar. The twins, FSAVGB05 and RPSF16, show
similar grades in the canga, but the RC hole has higher grades in the friable itabirite.
Table 8.1.1: Comparison of Twin RC and Core Drillholes
Drillhole
Orientation From
To
RPSF15
Vertical
SEFDSF08
North,-70
0
17
0
16.9
0
12.7
0
12
12
51
11.3
52.6
8.2
39.9
5
37
FSAVGSB05 Vertical
RPSF16
Vertical
Drilled
Vertical
Lith.
Interval Thickness
12
12 FS
34
34 IF,IC
11.3
10.6 FS
35.7
33.5 IF,IC
8.2
8.2 CG
27.2
27.1 IF,IC
5
5 CG
25
25 IF
Fe
49.1
50.87
44.4
52.02
63.79
47.91
60.2
56.84
SiO2 Al2O3
24.95
26.11
31.7
24.2
2.42
29.67
12
16.72
2.43
0.47
1.6
0.52
2.57
0.56
1.47
1.02
P
0.072
0.014
0.052
0.011
0.057
0.014
0.02
0.012
Mn LOI
0.01
0.01
0.01
0.02
0.03
0.02
0.01
0.01
2.42
0.27
1.38
0.17
3.51
1.06
0.86
0.71
SRK also reviewed the drillholes in cross-section and did not detect a noticeable difference in grades
between the RC and core holes.
8.2
Procedures
The drillhole locations are first determined by the supervising geologist. Drill access is provided by
clearing drill pads with the use of a bulldozer. For inclined holes, a line is drawn between two stakes
in the azimuth direction and the drill rig is aligned with it. The inclination of the drill rig is set by a
MMX technician using the inclinometer of a Brunton compass. Upon completion of the drillhole, the
final collar location is surveyed by Prisma Produtos e Serviços Ltda. ME (Prisma) using a Topcon
Total Station, 239W, 3003W or 3005W. Prisma then generates a Microsoft Excel spreadsheet
and/or a certified report in PDF format.
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The drilling at the Project has focused on the pit area. With the 2010 to 2013 drilling, the drilling grid
is roughly 100 m by 100 m. All holes on this grid do not extend to depth into the compact itabirite.
Core recovery is typically in excess of 90%.
8.2.1 Core Drilling
At the drill rig, the drill core is placed in wooden boxes and washed of all foreign material. A
technician delivers the boxes to the logging area where they are placed either in the sun or under a
roof until they are completely air-dried. The drill core is photographed before and after sampling to
record geological descriptions and sampling intervals. Geologic logging and identification of sample
intervals are carried out by the project geologist. This process identifies the different lithologic types,
geological contacts, zones of fault or fracture, ferruginous zones and internal waste.
MMX personnel supervise all sample security. The drill core is collected from drill sites, logged and
sampled under the direction and control of MMX. The core storage facility is located within the
secure area. SRK is of the opinion that there has been no tampering with the samples.
Logging and Sampling
The HW-sized drill core is first photographed, and then logged by a geologist onto a standardized
paper form. Data from the geological log is entered into an acQuire® database, the geological
database management system developed by acQuire® Technology Solutions Pty Ltd. During core
logging, the geologist marks the beginning and end of each sample interval on the box. Sample
breaks are at changes in lithology and friability with some consideration placed on visual estimations
of Fe percentage. Sampling is conducted only within the ferruginous zones. Sample intervals have
a minimum length of 1 m and a maximum length of 5 m. The preferred sample interval ranges
between 3 and 5 m (80% of samples). Zones of internal waste within mineralized intervals are
sampled and material outside the ferruginous zone is not sampled.
Samples are collected by a trained sampler under the supervision of a technician or a geologist
following a sampling plan produced by acQuire®. The sampling plan contains the identification of
primary and check samples according to MMX’s QA/QC policy (see Section 9.3). The core is split
lengthwise using a diamond core saw in the competent zones and with a specially designed scoop in
the highly weathered zones. The sample is placed in a plastic bag with a sample tag. The plastic
sample bag is further marked in two places on the outside with the sample identification. The
sample bags are then sealed and sent to the laboratory for physical and chemical analysis. The
remaining core is archived for future reference.
8.2.2 RC Drilling
The RC drilling is conducted dry, without injecting water. The sample is discharged from the center
tube return through a hose to a cyclone. The entire sample is collected over 1 m intervals in plastic
bags. The bags were marked with the drillhole number and interval from and to information. The
bags were weighed by Geosedna personnel and the weights recorded on a form for MMX. A small
sample was collected for logging and stored in wooden boxes with 30 compartments and a hinged
cover.
MMX personnel supervise all sample security. The samples were collected from drill sites, logged
and sampled under the direction and control of MMX. SRK is of the opinion that there has been no
tampering with the samples.
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Logging and Sampling
The RC chips are logged by the geologist at the core facility and data from the geological log is
entered into an acQuire® database. The 1 m samples are grouped into 5 m intervals with breaks at
lithological changes and the sample intervals are entered on a sampling form.
Samples are sent to the SGS Geosol Laboratórios, Ltda. (SGS) laboratory in Belo Horizonte where
they are composited into the sample intervals indicated by the geologist. The compositing procedure
is described in Section 11.3.
8.2.3 Factors Impacting Accuracy of Results
The compact and friable itabirites have varying hardness and will have varying drill recoveries. The
varying hardness of the mineralized material forces the sampler to use two techniques for core
sample collection, which can make it difficult to collect a representative sample. MMX uses a saw for
compact material and a trowel for friable material, which is industry standard. Because MMX uses
lithological controls for sample intervals that are based on friability versus compactness, the different
material hardness does not present a problem within a single sample. In addition, the core recovery
is good to excellent, averaging over 90%. RC drilling may also encounter problems at changes in
rock hardness or void spaces. SRK saw no evidence that there is a sampling problem or sample
bias introduced at the Project due to varying hardness.
MMX is conducting the sampling according to industry best practices for iron deposits.
8.3
Interpretation and Relevant Results
The compact and friable itabirites have varying hardness, which may result in different drill
recoveries and possible loss of material in friable zones. Core recovery averages more than 90% for
all zones and RC recovery was generally greater than 70%. SRK did not observe problems with loss
of material in friable intervals. A comparison of twin RC and core holes and visual examination of
RC holes by cross-section did not detect a bias between the two drilling methods. MMX is using
industry best practices for exploration drilling programs at the Project.
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Sample Preparation, Analysis and Security
Before MMX acquired the Serra Azul properties, sample preparation and analysis were performed at
the AVG laboratory on the AVG property. During the initial exploration phase and in 2009, MMX
used SGS located in Belo Horizonte. For part of 2008, MMX used the laboratory at Mine 63
operated by its subsidiary, MMX-Corumbá Mineração Ltda. (MMX-Corumbá). In 2010, MMX used
SGS and the Bureau Veritas laboratory in Belo Horizonte and in 2011 to 2012, MMX used only the
SGS laboratory. Bureau Veritas and SGS have ISO 9001 and ISO 14001 certification. Neither of
the labs have ISO 170025 certification for procedures used in iron ore analysis; both are international
labs with good reputations.
9.1
Sample Preparation
9.1.1 AVG Laboratory
Sample preparation begins with sample identification and assessing the conditions of sample
preservation. The sample preparation process consists of:

Drying in a furnace at 105ºC for one to two hours;

Jaw crushing until 90% passes through a 2 mm sieve;


The crushed fraction is homogenized and split with a Jones splitter to reduce it to 250 to 300
g;
The split is pulverized until 95% passes through a #150 mesh sieve;

A splitter is used to separate a 25 g sample for analysis; and

The remaining coarse reject and pulp are archived for future use.
Samples were analyzed using a titration method.
9.1.2 MMX-Corumbá Laboratory
At the MMX laboratory, the sample is initially checked for sample identification and preservation
conditions. The sample preparation process consists of:
LEM/MLM

Weighing;

Drying in a furnace at 105ºC over twenty hours;

Jaw crushing until 100% of the sample passes through a 38.1 mm sieve;

Reducing the sample to 25% of its initial mass in a rotary sampler. The remaining 75% is
stored for future use;

Jaw crushing the sample to 8 mm;


Reducing the sample size, using a rotary sampler, to obtain an aliquot of 3kg;
Roll crushing the sample to 2 mm;

Reducing the sample, using a mini-rotary sampler, to obtain an aliquot of 200 g.
remaining sample is archived;


Pulverizing until 95% of the sample passes through a 0.106 mm sieve;
Splitting the sample and taking half of the pulverized material for analysis, and taking a
replicate sample for laboratory QA/QC from the same aliquot; and

Archiving the remaining pulp, from which duplicate samples are made.
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All pulps are analyzed for Fe, Al2O3, SiO2, P, Mn, and TiO2 by X-Ray Fluorescence (XRF).
9.1.3 SGS Laboratory
Samples arriving at SGS from MMX vary in size and material. The sample is initially checked for
sample identification and preservation conditions upon receipt. The core sample preparation
process consists of:


Drying in a kiln at 105ºC until the sample is completely dry;
Crushing the whole sample until 90% of the sample passes through a 2 mm sieve;


Reducing the volume by homogenization and quartering in Jones splitter to reduce sample
to 250 to 300 g.
Pulverizing the split until 95% passes a 150 mesh sieve;

Quartering in a Jones splitter to a sampling weighing approximately 125 g for analysis;

Archiving the remaining coarse reject and pulp; and

Record screening tests performed during sample crushing and grinding.
The RC samples are received at the laboratory as the 1 m samples originally collected at the drill.
The sampling intervals, as noted by the geologist, are sent to the lab with the sample batch. The
sample preparation consists of the following steps:

Drying in a kiln at 105ºC until the sample is completely dry;

Jaw crushing until 95% of the sample passes through a 6.3 mm sieve;

Compositing samples according to the sample interval plan; and

Splitting in a riffle splitter and dividing the sample into two halves, one for analysis and one
retained for additional metallurgical or other testwork.
9.1.4 Bureau Veritas
Samples arriving at Bureau Veritas from MMX vary in size and material. The sample is initially
checked for sample identification and preservation conditions upon receipt. The core sample
preparation process consists of:

Drying in a kiln at 105ºC until the sample is completely dry;


Crushing the whole sample until 95% of the sample passes through a 2 mm sieve;
Reducing the volume by homogenization and quartering in a rotary splitter to reduce sample
to 300 to 600 g;


Pulverizing the split until 95% passes a 150 mesh sieve;
Quartering in a rotary splitter to a sampling weighing between 25 and 50 g for analysis;

Archiving the remaining coarse reject and pulp; and

Record screening tests performed during sample crushing and grinding.
The RC samples are received at the laboratory as the 1 m samples originally collected at the drill.
The sampling intervals, as noted by the geologist, are sent to the lab with the sample batch. The
sample preparation consists of the following steps:
LEM/MLM


Drying in a kiln at 105ºC until the sample is completely dry;
Jaw crushing until 100% of the sample passes through a 6.3 mm sieve;

Compositing samples according to the sample interval plan; and
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
9.2
Page 38
Splitting in a riffle splitter and dividing the sample into two halves, one for analysis and one
retained for additional metallurgical or other testwork.
Sample Analysis
9.2.1 AVG Laboratory
At the AVG laboratory, all samples were analyzed using titration methods. The sample is dried at
100ºC and then 0.5 g of material is analyzed for percentage of Al2O3, Ca, Fe, FeO, LOI, Mg, Mn, P,
S, SiO2 and TiO2. The analysis data is recorded in the Information and Management System of the
Laboratory (LIMS). Original, signed assay certificates and Microsoft Excel data files are both are
provided to MMX.
9.2.2 MMX-Corumbá Laboratory
All pulps are analyzed for Fe, Al2O3, SiO2, P, Mn, and TiO2 by XRF. The analyses are performed on
small disks formed by fusing a homogenized mixture of 1 g of sample and 9 g of a solvent containing
lithium tetraborate and metaborate.
The steps in the analytic procedure for LOI consist of:

Drying the sample in an oven at about 110ºC for at least one hour;

Weighing the empty container (CV);


Placing 1 g of the dried sample in the container and weighing again (C+A);
Placing the container with the sample in a previously heated oven and waiting until the
temperature reaches 1000±50ºC and letting it calcine for more than one hour;


Removing the container from the oven, resting it on the refractory plate until it loses
incandescence, and then putting it in a closed dryer until the container and sample cool;
Weighing and recording the final weight; and

Calculating LOI using the following formula:
%FW 
(C  A)  (Final Weight)
x100
(C  A)  (CV)
Data are entered into Microsoft Excel worksheets by a lab technician. Original, signed assay
certificates and worksheets are provided to MMX. The detection limits for analysis are shown in
Table 9.2.2.1
Table 9.2.2.1: Detection Limits of MMX-Corumba Laboratory Iron Ore Analysis
Analysis
Fe
SiO2
Al2O3
MnO
P
TiO2
LOI
LEM/MLM
Lower Detection Limit (%)
0.01
0.10
0.01
0.01
0.01
0.01
0.10
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9.2.3 SGS Laboratory
At the SGS laboratory, all samples are analyzed using the XRF technique. The typical sample size
is 2 g and is analyzed for percentage of Fe, Al2O3, SiO2, P, Mn, TiO2, Ca, Mg and LOI.
The steps in the analytic procedure for LOI consist of:

Drying the sample in an oven at around 110ºC for at least one hour;

Weighing the empty container (CV);


Placing 1.5 to 2 g of the dried sample in the container and weighing again (C+A);
Placing the container with the sample in a previously heated oven and waiting until the
temperature reaches 1000±50ºC and letting it calcine for more than 1 hour;

Removing the container from the oven, resting it on the refractory plate until it loses
incandescence, and then put it in a closed dryer until the container and sample cool; and

Weighing and record the final weight. LOI is calculated using the following formula:
%FW 
(C  A)  (Final Weight)
x100
(C  A)  (CV)
The detection limits are shown in Table 9.2.3.1. Data is recorded in the LIMS database.
Table 9.2.3.1: Detection Limits of SGS Laboratory Iron Ore Analysis
Analysis
Fe
SiO2
Al2O3
Mn
P
TiO2
LOI
Lower Detection Limit (%)
0.007
0.10
0.01
0.008
0.005
0.01
-45
9.2.4 Bureau Veritas Laboratory
At the Bureau Veritas laboratory, all samples are analyzed with an XRF instrument. The typical
sample size is 2 g and is analyzed for percentage of Fe, Al2O3, SiO2, P, Mn, TiO2, CaO, MgO, K2O,
Na2O and LOI.
The steps in the analytic procedure for LOI consist of:


Drying the sample in an oven at around 110ºC for at least one hour;
Weighing the empty container (CV);

Placing 1.5 to 2 g of the dried sample in the container and weighing again (C+A);

Placing the container with the sample in a previously heated oven and waiting until the
temperature reaches 1,000 ± 50ºC and letting it calcine for more than 1 hour;
Removing the container from the oven, resting it on the refractory plate until it loses
incandescence, and then put it in a closed dryer until the container and sample cool; and


Weighing and record the final weight. LOI is calculated using the following formula:
%FW 
LEM/MLM
(C  A)  (Final Weight)
x100
(C  A)  (CV)
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The detection limits are shown in Table 9.2.4.1.
Table 9.2.4.1: Bureau Veritas Detection Limits
Analysis
Fe2O3
SiO2
Al2O3
P2O5
MnO
TiO2
CaO
MgO
Na2O
K2O
9.3
Lower Detection Limit (%)
0.01
0.10
0.10
0.01
0.01
0.01
0.01
0.10
0.10
0.01
MMX Quality Controls and Quality Assurance
Prior to MMX acquiring the Project, AVG performed all analytical work at its onsite laboratory. To
verify the analytical results obtained by the AVG laboratory, MMX sent 60 samples from eleven
drillholes for re-analysis at SGS. The results showed good correlation between the two labs with the
analyses by SGS having slightly higher Fe values.
Currently, MMX has the following QA/QC program:

The insertion of Certified Reference material samples (CRM’s);

Blind duplicates;

Assayed versus calculated global grade comparisons; and

Stoichiometric (chemical) closure calculations.
MMX has used acQuire® at its properties as a database management tool since December 2007.
AcQuire® includes QA/QC protocols within the sample numbering procedure. In the sampling plan,
the system inserts two different standards and one pulp duplicate for each 20 samples at random
positions. The standard batch size is 40 samples, with 34 primary samples, 2 pulp duplicates and 4
company standards. For each 50 samples, one coarse duplicate is also inserted into the batch at a
random position, reducing the primary samples to 33. If the batch is less than 20, the system
assures that at least two different standards and one pulp duplicate sample will be inserted in each
batch.
Comparison of Assayed and Calculated Global Grades
MMX calculates a global grade of iron and other major elements by determining a weighted average
based on analysis of different sample of different grain size, and compares this to the analytical
results from the global sample.
Stoichiometric Closure
MMX calculates stoichiometric closure for analyses at Bureau Veritas from Fe2O3, SiO2, Al2O3, P2O5,
MnO, TiO2, CaO, MgO, K2O, Na2O and LOI. This is basically a mass balance calculations and
stoichiometric closure is calculated by MMX using the following equation:
S.C.=1.4298*(Fe- 0.7773*FeO)+SiO2+Al2O3+2.2915*P+1.2912*Mn+TiO2+CaO+MgO+Na2O+K2O+(LOI+0.1114*FeO)+FeO
Stoichiometric closure is considered acceptable if it falls between 98% and 102%.
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Certified Reference Material
The CRM’s used by MMX in the past were OREAS 40P, produced by Ore Research and Exploration
Pty Ltd., APHP (Amapá High Phosphorous), made with iron ore from MMX Amapá Mineração Ltda,
a MMX subsidiary and owner of the Amapa Mine, and CRB1, produced by Geomatek from material
from the Corumbá Mine. APHP and CRB1 were certified by Dr. Dominique François-Bongarçon of
Agoratek International (Agoratek). In 2009, Agoratek, performed a review and evaluation of the
Project QA/QC for the 2007 and 2008 drilling programs. Although this was done after the completion
of the drilling programs, the purpose of this study was to identify residual errors and to guide QA/QC
programs at the Project during future exploration programs. Agoratek (2009) evaluated the
performance of the two standards, OREAS 40 and APHP, over time and found that there were
“strong accuracy problems.” OREAS 40 was found to have many analytical errors and Agoratek
(2009) suggested that it was due to faulty certification. It was their recommendation that this
standard be replaced.
MMX has since developed its own CRM’s from material at the Serra Azul Mine with the assistance of
Agoratek and SGS. The CRM’s are:

SAH – Serra Azul Hematite;


SACL – Serra Azul Canga Laterite; and
SAIC – Serra Azul Compact Itabirite (still in preparation).
MMX sent 20 of each samples to SGS in Belo Horizonte, Perth and Ontario, ALS Chemex in Lima
and Perth, Intertek, Genalysis, Bureau Veritas, Ultratrace, Amdel and ACTLabs for analysis of Fe, P,
SiO2, Al2O3, CaO, TiO2, MgO, K2O, Na2O, FeO and Mn. MMX then performed various statistical
tests on the results to arrive at the accepted mean and standard deviation for each element or oxide.
Duplicate Samples
MMX requests the laboratories to prepare coarse and pulp duplicates.
Monitoring Program
MMX monitors the results of the QA/QC samples on a regular basis and produces charts and tables
to assess the lab performance. The laboratory is requested to re-assay samples if the CRM fails.
SRK has reviewed the data and the QA/QC reports and considers the laboratories to be performing
well.
9.4
Interpretation
The samples from Serra Azul are submitted with QA/QC samples, including standards and duplicate
samples with standard samples appropriate to the Project. MMX has developed new standards from
Serra Azul material. These samples have been sent to several laboratories in a round robin to
produce analyses used to calculate an expected mean and standard deviation.
SRK has reviewed the analyses of MMX’s QA/QC samples and finds that the results are acceptable.
QA/QC sample failures are handled appropriately and are reviewed and investigated to determine
the reason for the error. The sampling preparation and analyses follow industry guidelines and the
results from the QA/QC samples indicate that the analyses are suitable for a resource database.
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10 Data Verification
10.1 Quality Control Measures and Procedures
MMX directly imports data received from the laboratories into its database. SRK has compared
assay certificates of 10% of the database and found no errors. The laboratory QA/QC measures are
described in the proceeding section.
MMX is monitoring core recovery and is eliminating intervals with low recovery from the resource
estimation database.
MMX personnel check topographic updates to be sure that data is correct and check drillhole collars
against topography.
10.2 Limitations
SRK considers the data to be suitably verified and acceptable for resource estimation.
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11 Mineral Resource Estimate
This section provides details in terms of key assumptions, parameters and methods used to estimate
the mineral resources together with SRK’s opinion as to their merits and possible limitations. The
resource estimation for the Serra Azul Mine was prepared by Mr. Elvis Vargas and Mr. Rodrigo
Oliveira under the direction of Mr. Vandersoni Monteiro Vieira de Moraes, Manager of Geology and
Mineral Resources. MMX uses Geovia´s Surpac® for resource estimation and Mintec’s Minesight®
software for mine planning. Leah Mach, Principal Resource Consultant with SRK, audited the
resource.
Samples from Serra Azul and the adjoining Pau de Vinho property were used in the estimation.
However, only resources from Serra Azul are stated in this report.
11.1 Drillhole Database
The Serra Azul drillhole database was compiled by MMX and verified by SRK and is determined to
be of high quality and suitable for resource estimation. The database consists of assays for 461
holes drilled by AVG, Minerminas, and MMX. The average depth is about 100 m and the total
meterage is 45,999 m. About a half of the holes are vertical and the remainder were drilled at
approximately 65⁰ to 70° to the north.
SRK received the drillhole database as five comma separated variable (csv) files consisting of:

Collar: Drillhole ID, easting, northing, elevation, and total depth;


Survey: Depth, azimuth, inclination;
Geology: From, to, and; and

Assay: From, to, Fe, SiO2, Al2O3, P, Mn, LOI, TiO2, CaO, MgO, K2O, Na2O and FeO.
Table 11.1.1 contains basic statistics for the assay interval and metal variables of all analyzed
intervals.
Table 11.1.1: Basic Statistics of All Analyzed Intervals
Variable Number Minimum Maximum Average
Interval
Fe
SiO2
Al2O3
P
Mn
LOI
8677
8677
8677
8677
8677
8664
8677
0.80
2.86
0.70
0.02
0.002
0.001
-1.95
16.20
69.30
94.78
29.90
1.440
21.53
37.29
4.44
39.94
39.91
1.37
0.037
0.08
1.02
st
rd
1
3 Standard Coefficient
Median
Quartile
Quartile Deviation of Variation
3.80
5.00
5.00
1.06
0.24
32.00
37.00
48.40
12.08
0.30
27.23
45.21
52.50
17.97
0.45
0.17
0.49
1.73
2.23
1.63
0.010
0.020
0.046
0.054
1.43
0.01
0.01
0.02
0.51
6.21
0.05
0.31
1.27
1.93
1.89
11.2 Geology
Seventy vertical geologic cross-sections were constructed at intervals of 100 m or 50 m depending
on the drill spacing. Information from the project geologists and structural data from the geological
mapping were used along with the drillhole data to construct the sections. MMX first defined
lithotypes based on Fe, Al2O3 and Mn content and mass recovery of the lump ore fraction according
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to the decision tree shown in Figure 11.2.1. After that the result was compared with the vertical
sections and changed if necessary, giving a final lithotype definition.
Source: MMX, 2013
Figure 11.2.1: Decision Tree Defining Lithotypes
The following lithotypes were modeled in the cross-sections:

Soil (SO);

Stock Pile (FS);

Waste Dump (AT);

Canga (CG);


Dentritic Canga (CD);
Lateritic Itabirite (IL);

Friable Itabirite (IF);

Compact Hematite (HC);

Friable Hematite (HF);


Powdery Itabirite (IPT);
Compact Itabirite (IC);

Aluminous Itabirite (IA);

Intrusive (IN);

Quartzite (QTZ); and

Phyllite (FL).
After the construction of the north-south vertical sections, three east-west cross sections were
generated to check the geology on the North-south sections. An intermediate stage consisted of
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using Surpac‘s “stringmorphing” tool to generate intermediate vertical sections every 25 m between
the primary sections. This methodology provided smoother transition between the sections.
The cross-sections were used to prepare wireframes solids for the mineralization types. The
transition between Serra Azul and Pau de Vinho wireframes occurs at Easting 576550. The geology
was coded into the block model based on the wireframes.
Figure 11.2.2 shows all the cross-sections in oblique view; Figure 11.2.3 shows the three longitudinal
sections and Figure 11.2.4 shows two typical cross-sections through Serra Azul.
Source: MMX, 2013
Figure 11.2.2: Cross-sections in Oblique View
Source: MMX, 2013
Figure 11.2.3: Longitudinal Sections in Oblique View
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Source: MMX, 2013
Figure 11.2.4: Cross-Sections with Geology and Drilling, Looking East
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11.3 Compositing
The average length of the samples used in grade estimation is 4.44 m with a range from 0.8 to 15 m.
MMX composited the samples on 7.5 m intervals starting at the top of the drillhole with breaks at the
lithotype solid boundaries. The variables that were composited include Fe, SiO2, Al2O3, P, LOI, Mn,
CaO, MgO and MR1. Table 11.3.1 presents basic statistics of the assays and composites in the
Serra Azul database.
Table 11.3.1: Statistics of Assays and Composites in the Serra Azul Database (1/2)
Lithology
Element
Fe (%)
CGG
SiO2 (%)
Al2O3 (%)
Fe (%)
HM
SiO2 (%)
Al2O3 (%)
Fe (%)
IAL
SiO2 (%)
Al2O3 (%)
Fe (%)
IC
SiO2 (%)
LEM/MLM
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
109
57.69
46.95
6.85
109
6.80
67.35
8.21
109
4.74
9.30
3.05
128
62.48
58.03
7.62
128
8.49
119.54
10.93
128
0.98
0.30
0.54
852
53.40
101.72
10.09
852
18.63
230.46
15.18
852
2.62
4.81
2.19
4910
35.37
57.84
7.61
4910
Composites
7.5 m
64
58.16
35.68
5.97
64
6.20
54.54
7.39
64
4.54
6.16
2.48
82
62.32
63.61
7.98
82
8.74
132.62
11.52
82
1.02
0.21
0.46
494
53.89
85.05
9.22
494
17.83
190.74
13.81
494
2.67
3.95
1.99
2966
35.22
47.87
6.92
2966
Mean
Variance
Std Deviation
48.35
123.67
11.12
48.61
101.85
10.09
Variable
Samples
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Table 11.3.1: Statistics of Assays and Composites in the Serra Azul Database (2/2)
Lithology
IC
Element
Al2O3 (%)
Fe (%)
ICA
SiO2 (%)
Al2O3 (%)
Fe (%)
IDOL
SiO2 (%)
Al2O3 (%)
Fe (%)
IF
SiO2 (%)
Al2O3 (%)
Fe (%)
IPT
SiO2 (%)
Al2O3 (%)
Variable
Samples
N Sample
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
N Sample
Mean
Variance
Std Deviation
4910
4910
0.49
0.80
0.89
25
27.48
15.90
3.99
25
36.40
22.14
4.71
25
0.08
0.00
0.06
25
23.44
55.36
7.44
25
30.56
99.42
9.97
25
0.21
0.05
0.23
1456
48.35
99.32
9.97
1456
28.13
222.01
14.90
1456
1.29
2.21
1.49
713
32.38
126.16
11.23
713
46.11
260.72
16.15
713
3.72
6.98
2.64
Composites
7.5 m
2966
2966
0.46
0.54
0.73
16
27.59
13.41
3.66
16
36.52
15.30
3.91
16
0.08
0.00
0.05
16
23.95
49.02
7.00
16
31.45
75.88
8.71
16
0.18
0.03
0.17
849
48.82
80.26
8.96
849
27.48
179.51
13.40
849
1.28
1.81
1.34
398
32.11
98.08
9.90
398
46.47
211.47
14.54
398
3.74
5.32
2.31
Source: MMX, 2013
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MMX generated histograms, probability plots and box plots for the composite data as well as the
correlation table shown in Table 11.3.2.
Table 11.3.2: Correlation Table for Composites
Element
Fe
Fe
SiO2
Al2O3
Mn
P
LOI
CaO
MgO
1.00
SiO2
-0.99
1.00
Al2O3
0.06
-0.18
1.00
-0.13
0.07
0.23
1.00
0.04
-0.10
0.42
0.17
1.00
LOI
0.10
-0.16
0.56
0.28
0.36
1.00
CaO
-0.05
-0.04
-0.02
0.06
0.10
0.64
1.00
MgO
-0.04
-0.05
-0.01
0.08
0.04
0.64
0.94
1.00
MR1
-0.40
0.45
-0.49
-0.11
-0.21
-0.47
0.07
-0.06
Mn
P
MR1
1.00
Source: MMX, 2013
11.4 Density
Prior to 2010, MMX conducted three programs of density measurements at the project. The first and
second programs were performed by Prominas under contract to MMX. The first program was done
at AVG and the second was at Minerminas. The third was done at both AVG and Minerminas by
Libaneo e Libaneo Ltda (Libaneo). The sand flask method was used for the friable lithotypes and
the water displacement method was used for the competent lithotypes. Average values were
calculated with and without outlier values by lithotype. The average values without outliers were
used in the resource estimation. Table 11.4.1 presents the densities by lithotype.
Table 11.4.1: Density of Lithotypes, on a Wet Basis
Code
1
2, 31
32
33
3
4
34
35
5
10
11
12
13
14
Abbreviation
IF
CG, CD
HC
HF
IPT
IC
IA
IL
IN
QTZ
FL
SO
WD
FS
Description
Friable Itabirite
Mineralized Canga
Compact Hematite
Friable Hematite
Friable Carbonate Itabirite
Compact Itabirite
Aluminous Itabirite
Lateritic Itabirite
Intrusive
Quartzite
Phyllite
Soil
Waste Dump
Fine stockpile
Density (t/m3)
2.78
2.74
4.81
3.07
2.62
3.34
2.78
2.78
2.18
2.62
2.16
2.00
2.50
2.88
Type
Ore
Ore
Ore
Ore
Ore
Ore
Ore
Ore
Waste
Waste
Waste
Waste
Waste
Waste
Source: MMX, 2013
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11.5 Variogram Analysis and Modeling
MMX used the Serra Azul database for variogram studies. The study included directional and
downhole variograms for Fe, SiO2, Al2O3, Mn, P, LOI, CaO MgO, and MR1 (mass recovery of lump
ore fraction).
The variogram analysis included the IF, IAL (IA + IL), IC and IPT lithotypes. The nugget was
determined from downhole variograms. Variogram maps were produced to determine the search
ellipsoid orientation and the relationships between the axes. The variogram parameters used in the
resource estimation are presented in Table 11.5.1.
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Table 11.5.1: Variogram Parameters
Lith
Nugget
Sill 1
Range 1
Sill 2
Range 2
Bearing
Plunge
Dip
M/SM (1)
M/m (2)
Fe
3.50
28.50
130.00
17.00
650
270
0
60
1.25
2.00
SiO2
7.50
63.00
130.00
35.50
650
270
0
60
1.25
2.00
Al2O3
0.10
0.28
130.00
0.12
650
270
0
60
1.40
1.60
0.00002
0.00009
160.00
0.00008
800
270
0
60
1.75
2.00
0.000025
0.00011
60.00
0.00013
300
270
0
60
1.25
3.00
0.02
0.10
110.00
0.05
550
270
0
60
1.10
2.50
Variable
Mn
IC
P
LOI
CaO
0.0002
0.00045
70.00
0.0004
350
270
0
60
2.00
4.00
MgO
0.00005
0.00025
50.00
0.00032
250
270
0
60
1.20
3.00
MR1
170.00
121.00
130.00
128.00
650
270
0
60
3.50
5.00
Fe
1.00
9.25
30.00
70.75
120
270
0
30
1.25
3.00
SiO2
5.00
40.00
30.00
135.00
120
270
0
30
1.25
3.00
Al2O3
0.04
0.46
55.00
1.30
110
270
0
30
1.00
2.50
0.00045
0.0038
100.00
0.0015
200
270
0
30
1.00
1.00
0.000025
0.00045
37.50
0.0009
75
270
0
30
1.00
1.25
Mn
IF
P
LOI
0.025
0.31
60.00
0.64
120
270
0
30
1.00
2.00
CaO
0.00003
0.0004
45.00
0.00022
90
270
0
30
1.40
2.00
MgO
0.00002
0.00041
45.00
0.00022
90
270
0
30
1.00
1.40
MR1
25.00
92.80
40.00
33.30
120
270
0
30
1.00
2.00
Fe
1.22
37.49
100.00
46.17
200
270
0
30
1.25
6.00
SiO2
1.22
97.52
100.00
99.70
200
270
0
30
1.25
6.00
Al2O3
0.10
0.80
90.00
2.20
180
270
0
30
1.00
6.00
0.00005
0.00025
200.00
0.0008
400
270
0
30
1.00
10.00
0.0001
0.001
90.00
0.0015
180
270
0
30
1.00
6.00
0.15
0.99
45.00
1.19
90
270
0
30
1.20
2.40
CaO
0.00002
0.0001
70.00
0.00041
140
270
0
30
1.00
3.00
MgO
0.000008
0.000009
40.00
0.00016
80
270
0
30
1.00
1.75
MR1
10.00
150.00
75.00
23.00
225
270
0
30
1.00
5.00
Mn
IAL
P
LOI
LEM/MLM
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Lith
IPT
Page 52
Nugget
Sill 1
Range 1
Sill 2
Range 2
Bearing
Plunge
Dip
M/SM (1)
M/m (2)
Fe
8.38
12.30
125.00
95.60
250
260
0
60
2.50
3.00
SiO2
5.89
77.49
125.00
129.55
250
260
0
60
2.50
3.00
Al2O3
0.12
2.05
90.00
0.55
180
260
0
60
1.30
2.00
Mn
0.01
0.03
125.00
0.40
250
260
0
60
1.10
3.75
0.0002
0.0009
125.00
0.001
250
260
0
60
2.00
4.00
Variable
P
LOI
0.12
1.23
125.00
1.15
250
260
0
60
3.00
6.00
CaO
0.000034
0.000166
125.00
0.000081
250
260
0
60
1.00
2.50
MgO
0.00006
0.00021
125.00
0.0023
250
260
0
60
1.50
4.50
MR1
27.00
73.50
100.00
147.90
200
260
0
60
1.00
1.00
(1) Ratio of Major to Semi-major axis
(2) Ratio of Major to Minor axis
Source: MMX, 2013
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11.6 Grade Estimation
A block model was created with limits and dimensions as shown in Table 11.6.1.
Table 11.6.1: Block Model Dimensions and Origin
Direction
X (East)
Y (North)
Z (Elevation)
Minimum
571,800
7,773,350
745
Maximum
579,500
7,776,400
1,405
Block Size
25
25
15
The block model contains variables for:

Global Fe, SiO2, Al2O3, Mn, P, CaO, MgO, LOI and MR1;

Fe, SiO2, Al2O3, Mn, P, CaO, MgO, LOI and MR1 for each of the lithotypes in each block;


Percentage of each lithotype within the block;
Majority lithotype;

Percentage below topography;

Density, and

Estimation parameters – number of composites, number of drillholes, average distance of
composites used in estimation, and distance to closest composite for SiO2.
The block model was coded with the percentage of each lithotype within the block from the lithotype
wireframe solids. The percentage of the block below topography was assigned to the topography
percentage variable.
A neighborhood analysis on SiO2 was performed to determine the best estimation strategy for all
variables. SiO2 was used because it is the main contaminant in the concentration process, it has a
high correlation with Fe and the Fe and SiO2 variograms are similar.
Block grades were estimated by ordinary kriging for IF, IAL (IA + IL), IC and IPT. Inverse distance
squared (ID2) was used for CGG (CD + CG) and HM (HF + HC). Each block has an Fe variable for
each of the lithtypes. The parameters for each pass are given in Table 11.6.2. Easting 576550 was
used as a soft boundary during the estimation in that there are different search orientations but
composites were not limited by position relative to easting 576550. Composites of length less than
3.75 were not used in the estimation.
The final block lithology was determined by the majority lithotype. The final block grade was
determined as the weighted average of the percent of the lithotype, the density of the lithotype and
the grade of the lithotype. The final block density was calculated as a weighted average of the
percent of the lithotype and the density of the lithotype.
Figure 11.6.1 presents cross-sections through the Serra Azul property with block grades and
drillholes.
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Table 11.6.2: Estimation Parameters (1/2)
Group
IC
Group
IF
Group
IAL (IA
+ IL)
LEM/MLM
Step
Resource
1
Measured
2
Measured
3
Measured
4
Indicated
5
Inferred
6
Potential
Ellipsoid:
Bearing
270
Plunge
0
Dip
60
Step
Resource
1
Measured
2
Measured
3
Measured
4
Indicated
5
Inferred
Ellipsoid:
Bearing
270
Plunge
0
Dip
30
Step
Resource
1
Measured
2
Measured
3
Indicated
4
Inferred
5
Potential
Ellipsoid:
Bearing
270
Plunge
0
Dip
30
Ordinary Kriging - Fe (%), SiO2 (%), Al2O3 (%), Mn (%), P (%), LOI (%), CaO (%), MgO (%), MR1 (%)
Search Radius
Samples
Search
Major/SemiMajor/Minor Observation
Max. per
Method
Major
Max. Vertical Min. Max.
DH
Octant
130
130
8
24
3
1.25
2
First Variogram Range
Octant
325
325
8
24
3
1.25
2
50% Total Variogram Range
Ellipsoid
325
325
4
24
3
1.25
2
50% Total Variogram Range
Ellipsoid
650
650
4
24
3
1.25
2
Total Variogram Range
Ellipsoid
1300
1300
3
24
3
1.25
2
Double Total Variogram Range
Ellipsoid
2500
2500
1
24
3
1.25
2
To estimate remaining blocks
Search
Method
Octant
Ellipsoid
Ellipsoid
Ellipsoid
Ellipsoid
Search
Method
Octant
Ellipsoid
Ellipsoid
Ellipsoid
Ellipsoid
Search Radius
Max.
Vertical
Min.
60
60
120
240
2500
60
60
120
240
2500
8
4
4
3
1
Search Radius
Max.
Vertical
Min.
100
100
200
400
2500
100
100
200
400
2500
8
4
4
3
1
Samples
Max. per
Max.
DH
24
3
24
3
24
3
24
3
24
3
Samples
Max. per
Max.
DH
24
3
24
3
24
3
24
3
24
3
Serra Azul_Audit on Resource_162700.12_005_SH
Major/SemiMajor
Major/Minor
1.25
1.25
1.25
1.25
1.25
3
3
3
3
3
Major/SemiMajor
Major/Minor
1.25
1.25
1.25
1.25
1.25
6
6
6
6
6
Observation
50% Total Variogram Range
50% Total Variogram Range
Total Variogram Range
Double Total Variogram Range
Only to estimate all blocks
Observation
First Variogram Range
First Variogram Range
Total Variogram Range
Double Total Variogram Range
Only to estimate all blocks
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Page 55
Table 11.6.2: Estimation Parameters (2/2)
Group
IPT
Group
CGG
(CG +
CD)
Group
HM
(HF +
HC)
Step
Resource
1
Measured
2
Measured
3
Indicated
4
Inferred
5
Potential
Ellipsoid:
Bearing
260
Plunge
0
Dip
60
Step
Resource
1
Measured
2
Measured
3
Indicated
4
Inferred
5
Potential
Ellipsoid:
Bearing
260
Plunge
0
Dip
60
Step
Resource
1
Measured
2
Measured
3
Indicated
4
Inferred
5
Potential
Ellipsoid:
Bearing
270
Plunge
0
Dip
30
Search
Method
Octant
Ellipsoid
Ellipsoid
Ellipsoid
Ellipsoid
Search
Method
Octant
Ellipsoid
Ellipsoid
Ellipsoid
Ellipsoid
Search
Method
Octant
Ellipsoid
Ellipsoid
Ellipsoid
Ellipsoid
Search Radius
Max.
Vertical
Min.
125
125
250
500
2500
125
125
250
500
2500
8
4
4
3
1
Search Radius
Max.
Vertical
Min.
100
100
200
400
2500
100
100
200
400
2500
8
4
4
3
1
Search Radius
Max.
Vertical
Min.
60
60
120
240
2500
60
60
120
240
2500
8
4
4
3
1
Samples
Max. per
Max.
DH
24
3
24
3
24
3
24
3
24
3
Samples
Max. per
Max.
DH
24
3
24
3
24
3
24
3
24
3
Samples
Max. per
Max.
DH
24
3
24
3
24
3
24
3
24
3
Major/SemiMajor
Major/Minor
2.5
2.5
2.5
2.5
2.5
3
3
3
3
3
Major/SemiMajor
Major/Minor
1.25
1.25
1.25
1.25
1.25
6
6
6
6
6
Major/SemiMajor
Major/Minor
1.25
1.25
1.25
1.25
1.25
3
3
3
3
3
Observation
First Variogram Range
First Variogram Range
Total Variogram Range
Double Total Variogram Range
Only to estimate all blocks
Observation
First Variogram Range
First Variogram Range
Total Variogram Range
Double Total Variogram Range
Only to estimate all blocks
Observation
50% Total Variogram Range
50% Total Variogram Range
Total Variogram Range
Double Total Variogram Range
Only to estimate all blocks
Source: MMX, 2013
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Figure 11.6.1: Cross-Sections with Geology, Block Model and Drilling Looking East
11.7 Model Validation
The block model was validated by the following methods:

Visual comparison of the block grades to the composite grades on cross-sections and
horizontal sections;

Estimation by the Nearest Neighbor methodology and comparison of histograms, scatter
plots and QQ plots of kriged and ID2 grades; and

Swath plots comparing kriged or ID2 grades with NN grades.
The visual examination of the block grades to the composite grades was in general quite good as
shown in Figure 11.6.1.
Figure 11.7.1 shows histograms of the kriged and nearest neighbor estimates, a scatter plot and a
QQ plot of kriged and nearest neighbor Fe grades in the compact itabirite.
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Source: MMX, 2013
Figure 11.7.1: Histogram of Block Fe (upper left), Nearest Neighbor Fe (upper right), QQ plot
(center) and scatter plot (lower) of Fe in Compact Itabirite
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Swath plots were prepared as north-south and east-west bands 100 m in width and by elevation by
15 m bands and a comparison made to the nearest neighbor grades. The swath plots for iron
indicate that the kriged and composites track quite well except, at depth, the kriged grades are
higher than the NN grades in the compact itabirite (Figure 11.7.1).
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Source: MMX, 2013
Figure 11.7.2: Swath Plots of Fe in Compact Itabirite by Easting and Elevation
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SRK has also conducted a resource estimation using similar parameters as MMX and has
reproduced their results within 2%, which is acceptable. SRK considers that MMX has used good
practices in its resource estimation.
11.8 Resource Classification
The resources were classified according to CIM classification as Measured, Indicated, or Inferred.
The IF, IPT, IAL (IA + IL), CGG (CG + CD) and HM (HF + HC) classification was based on the pass
in which the block was estimated as shown in Table 11.6.1. The IC classification followed two steps:
blocks were first classified according to the estimation pass and then, because the drillholes are
terminated in the compact itabirite (IC) at different elevations, a surface was constructed using the
base of the drillholes to limit classification as Measured. Measured blocks are above the surface and
the nearest sample used in estimation is less than 200 m from the block. Classification as Indicated
required that the nearest composite was within 300 m of the block, and in the western portion where
the drilling is shallow, the blocks had to be above a surface that was constructed about 80 m below
the base of drilling surface. Blocks were classified as Inferred if they did not meet the Measured or
Indicated classification requirements or if estimated in Step 5. Figure 11.8.1 shows cross-sections
with classified blocks and the classification surfaces.
Figure 11.8.1: Cross-sections with Geology, Block Model Classification and Drilling
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11.9 Mineral Resource Statement
The Mineral Resources of the Serra Azul Mine as of April 10, 2013, on a wet tonnage basis are
presented in Table 11.9.1. The resources are limited by the DNPM mineral concession boundary
and the September 28, 2012 topography. The resources are stated at a cut-off grade of 15%.
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Table 11.9.1: Serra Azul Mineral Resource Statement, April 10, 2013, Wet Tonnage Basis
Lithology
Friable
Canga
Powdery Itabirite
Compact Itabirite
Total
Resource
Tonnage (Mt)
Fe (%)
SiO2 (%)
Al2O3 (%)
Mn (%)
P (%)
LOI (%)
CaO (%)
MgO (%)
Measured
Indicated
M&I
Inferred
Measured
Indicated
M&I
Inferred
Measured
Indicated
M&I
Inferred
Measured
Indicated
M&I
Inferred
Measured
Indicated
M&I
Inferred
39.5
50.9
90.4
28.5
0.1
1.7
1.8
5.4
30.5
45.8
76.2
73.7
1025.4
621.7
1647.1
216.5
1095.5
720.0
1815.5
324.0
49.9
47.5
48.5
45.2
58.6
57.1
57.2
55.5
33.2
31.7
32.3
28.2
34.4
32.7
33.7
33.9
34.9
33.7
34.4
33.9
25.3
28.4
27.0
31.0
4.7
5.6
5.6
10.1
44.7
47.6
46.5
52.1
49.6
51.7
50.4
49.3
48.6
49.7
49.0
47.7
1.70
1.81
1.76
1.82
4.71
5.38
5.34
4.48
3.68
3.21
3.40
3.27
0.56
0.63
0.59
0.84
0.69
0.89
0.77
1.54
0.05
0.08
0.06
0.24
0.03
0.04
0.04
0.11
0.51
0.71
0.63
0.80
0.04
0.07
0.05
0.13
0.05
0.11
0.08
0.29
0.046
0.049
0.048
0.057
0.256
0.240
0.241
0.218
0.077
0.078
0.078
0.082
0.022
0.030
0.025
0.032
0.024
0.035
0.029
0.049
1.35
1.38
1.37
1.74
5.66
5.77
5.77
5.05
2.64
2.48
2.54
2.53
0.39
0.57
0.46
0.83
0.49
0.76
0.60
1.37
0.03
0.03
0.03
0.02
0.02
0.02
0.02
0.02
0.03
0.03
0.03
0.03
0.04
0.12
0.07
0.03
0.04
0.11
0.07
0.03
0.06
0.06
0.06
0.06
0.06
0.05
0.06
0.06
0.07
0.08
0.07
0.27
0.07
0.15
0.10
0.07
0.07
0.14
0.09
0.11
Cut-off Grade 15% Fe; tonnes on a wet basis; topography current at September 28, 2012
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11.10 Mineral Resource Sensitivity
Grade tonnage data for Fe and SiO2 are presented in Table 11.10.1 and Figure 11.10.1.
Table 11.10.1: Grade Tonnage Data for Fe and SiO2
Resource
Measured + Indicated
Inferred
LEM/MLM
Cut-off Fe (%)
Mt
Fe (%)
SiO2 (%)
15
20
22
24
26
28
30
32
34
36
38
40
42
44
46
48
50
52
54
56
58
60
15
20
22
24
26
28
30
32
34
36
38
40
42
44
46
48
50
52
54
56
58
60
1815.5
1811.4
1806.4
1792.2
1750.4
1682.4
1542.8
1253.2
892.3
517.2
291.2
189.1
132.1
95.5
70.9
54.4
42.1
32.5
25.0
17.2
10.6
5.5
324.0
323.4
321.8
308.9
298.3
283.9
249.3
206.0
146.5
81.0
42.2
28.5
24.3
21.8
19.6
17.5
15.5
13.3
9.1
4.6
2.8
1.8
34.4
34.5
34.5
34.6
34.8
35.1
35.7
36.7
38.3
40.6
43.6
46.1
48.3
50.4
52.3
53.9
55.3
56.6
57.7
59.0
60.3
61.6
33.9
34.0
34.0
34.5
34.8
35.2
36.1
37.1
38.8
41.8
46.5
50.1
51.7
52.7
53.6
54.4
55.1
55.7
57.0
59.1
60.6
61.6
49.0
49.0
48.9
48.8
48.5
48.1
47.4
45.9
43.6
39.9
35.2
31.3
27.7
24.5
21.6
19.0
16.6
14.4
12.6
10.6
8.7
7.4
47.7
47.6
47.5
47.1
46.8
46.3
45.2
43.8
41.3
36.5
28.8
22.9
20.3
18.7
17.1
15.7
14.3
13.2
11.9
9.4
8.2
6.8
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2000
65
1750
60
1500
55
1250
50
1000
45
750
40
500
35
250
30
0
25
Fe %
Tonnes (Millions)
Fe Grade Tonnage ‐ Measured and Indicated
15 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60
Mt
Fe (%)
Cut‐off % Fe
Fe Grade Tonnage ‐ Inferred
65
350
60
300
55
50
200
45
150
40
Fe %
Tonnes (Millions)
250
35
100
30
50
25
0
20
15 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60
Mt
Fe (%)
Cut‐off % Fe
Figure 11.10.1: Grade Tonnage Curves, Iron
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11.11 Exploration Target
The exploration target is that material estimated in the final pass or not classified as Measured,
Indicated or Inferred. The mineral potential ranges from 10,000 to 40,000 kt at Fe grades between
30% and 40% and includes material classified as canga, detrital canga, powdery itabirite and minor
amounts of compact and friable hematite.
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12 Adjacent Properties
MMX has a contract with Usiminas for production from Pau de Vinho. MMX has performed due
diligence on the property and has included data from that property in its resource estimation. SRK
has visited the Pau de Vinho property, reviewed the core, discussed geology and mineralization with
Usiminas personnel, reviewed drill logs and assay certificates and is of the opinion that the drilling,
logging and sample analysis meet industry standards and that it is appropriate to use the data in the
resource estimation. SRK further notes that the influence of the Pau de Vinho drilling is limited to the
eastern portion of Serra Azul and to within the search distance used in the resource estimation.
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13 Interpretation and Conclusions
13.1.1 Exploration
MMX has drilled the Serra Azul property on a grid of approximately 100 m x 100 m. The deeper
drilling in the compact itabirite is on a wider spaced grid, but is sufficient for resource estimation.
MMX has used internationally recognized laboratories for the bulk of the sample analysis. Some of
the early samples were analyzed at the AVG laboratory and at the Mine 63 laboratory. SRK has
visited both of those laboratories and found that the Mine 63 laboratory was operated in a
professional manner and that the AVG laboratory was also operated professionally although it lacked
an XRF machine. In any case, the number of samples analyzed at these laboratories is low in
respect to the total number of samples.
MMX has a standard laboratory QA/QC program in place and reviews the results on a regular basis.
It is SRK’s opinion that the drilling, sampling and analysis are conducted according to industry best
practices.
13.1.2 Mineral Resource Estimate
The mineral resource estimation was conducted by MMX and audited by SRK. It is SRK’s opinion
that the estimation has followed industry best practices.
Because the iron formation is dipping at about 50⁰ to the southeast, the drillholes in the compact
itabirite have not been terminated at a uniform depth or elevation. To limit the classification of
Measured and Indicated resources below drillholes, surfaces were constructed at the base of drilling
and used in the classification. It is SRK’s opinion that the classification meets CIM guidelines.
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14 Recommendations
14.1 Recommended Work Programs
SRK recommends that MMX continue to drill deeper holes into the compact itabirite to decrease the
sample spacing and increase confidence in the resource. This work could be performed as mining
progresses and drilling depth decreases accordingly.
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15 References
Alkmim F.F., Marshak S (1998). Transamazonian orogeny in the southern São Francisco Craton
Region, Minas Gerais, Brazil: evidence for paleoproterozoic collision and collapse in the
Quadrilátero Ferrífero. Precambrian Res 90:29–58.
Alkmim, F. F.; Chemale JR, F.; Endo, I. (1996). A deformação das coberturas proterozóicas do
Cráton do São Francisco. Rem: Revista Escola de Minas, Ouro Preto, v. 48, n. 1, p. 14-31.
Alkmim, F.F. and Noce, C.M. (eds.) 2006. The Paleoproterozoic Record of the São Francisco
Craton. IGCP 509 Field workshop, Bahia and Minas Gerais, Brazil. Field Guide & Abstracts,
114 p.
Almeida, F. F. M., Brito Neves, B. B. & Fuck, R. A. (1981). Brasilian structural province: an
introduction. Earth. Sci. Rev., 17: 1-29.
Dorr, J.V.N.II, Herz. N., Barbosa, A.L.M. and Simmons, G.C., (1961).Outline of the Geology of the
Quadrilátero Ferrífero, Minas Gerais, Brazil. Brasil, Departamento Nacional da Produção
Mineral. Publicação Especial 1, 120p. Rio de Janeiro
Dorr, J.V.N. (1969). Physiographic, Stratigraphic and Structural Development of the Quadrilatero
Ferrifero, Minas Gerais, Brazil: US Geol Survey Professional Paper 641A
Eichler, J. (1964). Die eisenerzlargerstatte Córrego do Feijão, Minas Gerais, Brasillian, 46 p.
Endo, I.; Machado, R. (1997). Regimes Tectônicos no Segmento Meridional do Cráton do São
Francisco: Quadrilátero Ferrífero e Áreas Adjacentes, Minas Gerais. In: Simpósio de
Geologia de Minas Gerais, 1997, Ouro preto. Anais do IX Simpósio de Geologia de Minas
Gerais. Belo Horizonte: SBG/NÚCLEO Minas Gerais, 1997. p. 58-59.
Endo, I., Oliveira, A.H., and Peres, G.G. (2005). Estratigraía e Arcabouḉo Estrutural da região da
junḉão serra do Curral – synclinal Modea, Quadrilatero Ferrifero, MG, 58p; relatorio interno.
Guild P.W. (1957). Geology and mineral resources of the Congonhas do Campo District, Minas
Gerais, Brazil. US Geol Surv Prof Paper, 90p.
Jordt-Evangelista, H.; Alkmim, F. F.; Marshak, S. (1992). Metamorfismo Progressivo e a Ocorrencia
dos Tres Polimorfos de Al2Sio5 (Cianita, Andaluzita e Silimanita) na Formação Sabara em
Ibirite, Quadrilatero Ferrifero, MG. REM - revista da escola de minas, Ouro Preto, v. 45, n. 12, p. 157-160.
Libaneo & Libaneo Ltda. (2011). Relatório Da Campanha 2010/2011 De Ensaios De Densidade
Aparente Das Minas Ipê E Tico-Tico Da Mmx-Mineração E Metálicos S.A., 31 p.
Marshak S. & Alkmim F.F. (1989). Proterozoic contraction/extension tectonics of the southern São
Francisco region, Minas Gerais, Brazil. Tectonics, 8:555-571.
Marshak S., Alkmim F.F. and Jordt-Evangelista, H. 1992. Proterozoic Crustal Extension and the
Generation of Dome-and-Keel Structure in an Archean Granite-Green-stone Terrane. Nature
357: 491-493.
MMX (2009), Geology and Geological Modeling of the Serra Azul Complex, March 2009,
Unpublished internal report.
LEM/MLM
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MMX, (2010), Various documents for resource audit.
MMX (2013). Resource SA 2042013_V1.ppt., April 10, 2013, 142 p.
Oliveira, N. V. de; Endo, I. ; Oliveira, L. G. S. de (2005). Geomteria do Sinclinal Gandarela Baseada
na Deconvolução Euler 2D E 3D - Quadrilátero Ferrifero (MG). Revista Brasileira de
Geofísica, v. 23, p. 221-232.
Pires, F. R. M. (1979). Tectonic Regimes Of The Quadrilatero Ferrifero, Mg. In: I Simp. Geol. do
Craton S. Francisco e suas Faixas Marginais. p. 0-0.
Renger F.E., Noce C.M., Romano A.W., Machado N. (1994). Evolução sedimentar do Supergrupo
Minas: 500 Ma de registro geológico no Quadrilátero Ferrífero, Minas Gerais, Brasil.
Geonomos, 2:1-11.
Rizzini, C.T. (1979). Tratado de fitogeografia do Brasil. Vol. 2. São Paulo: Edusp.
Romano, A. W. (1989). Evolution Tectonique de la Region nord-ouest du Quadrilatere Ferrifere Minas Gerais - Bresil (Geocronologie du Socle - Aspects Geochimiques et Petrographiques
des Supergroupes Rio das Velhas et Minas). U.E.R. Geosciences et Materiaux, Universite
de Nancy I, França, Tese de Doutoramento, 259p.
Rosiere, C. A., Siemes, H. Quade, H., Brokmeier, H.., Jansen, E. (2001). Microstructures, textures
and deformation mechanisms in hematite. Journal of Structural Geology, Amsterdam, v. 23,
n. 8, p. 1429-1440.
Rosiere, C. A., Spier, C.A., Rios, F.J. and Suckau, V. E. (2008). The itabirite from the Quadrilátero
Ferrífero and related high-grade ores: an overview. Reviews in Economic Geology, v. 15, p.
223-254.
Simmons,G. C. (1968). Geology and Iron Deposits of the Western Serra do Curral, Minas Gerais,
Brazil. USGS/DNPM Professional Paper, 341 (G):1-53.
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16 Glossary
16.1 Mineral Resources
The mineral resources and mineral reserves have been classified according to the “CIM Standards
on Mineral Resources and Reserves: Definitions and Guidelines” (November 27, 2010).
Accordingly, the Resources have been classified as Measured, Indicated or Inferred, the Reserves
have been classified as Proven, and Probable based on the Measured and Indicated Resources as
defined below.
A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic
material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has
reasonable prospects for economic extraction.
The location, quantity, grade, geological
characteristics and continuity of a Mineral Resource are known, estimated or interpreted from
specific geological evidence and knowledge.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or
quality can be estimated on the basis of geological evidence and limited sampling and reasonably
assumed, but not verified, geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drillholes.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape and physical characteristics can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and economic parameters, to support mine
planning and evaluation of the economic viability of the deposit. The estimate is based on detailed
and reliable exploration and testing information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough for
geological and grade continuity to be reasonably assumed.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape, physical characteristics are so well established that they can be estimated
with confidence sufficient to allow the appropriate application of technical and economic parameters,
to support production planning and evaluation of the economic viability of the deposit. The estimate
is based on detailed and reliable exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that
are spaced closely enough to confirm both geological and grade continuity.
16.2 Mineral Reserves
A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource
demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve
includes diluting materials and allowances for losses that may occur when the material is mined.
A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some
circumstances a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility
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Study. This Study must include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of reporting, that economic
extraction can be justified.
A ‘Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource
demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction is justified.
16.3 Definition of Terms
The following general mining terms may be used in this report.
Table 25.3.1: Definition of Terms
Term
Assay
Capital Expenditure
Composite
Concentrate
Crushing
Cut-off Grade (CoG)
Dilution
Dip
Fault
Footwall
Gangue
Grade
Hanging wall
Haulage
Hydrocyclone
Igneous
Kriging
Level
Lithological
LoM Plans
LRP
Material Properties
Milling
Mineral/Mining Lease
Mining Assets
Ongoing Capital
Ore Reserve
Pillar
RoM
Sedimentary
Shaft
LEM/MLM
Definition
The chemical analysis of mineral samples to determine the metal content.
All other expenditures not classified as operating costs.
Combining more than one sample result to give an average result over a larger
distance.
A metal-rich product resulting from a mineral enrichment process such as gravity
concentration or flotation, in which most of the desired mineral has been separated
from the waste material in the ore.
Initial process of reducing ore particle size to render it more amenable for further
processing.
The grade of mineralized rock, which determines as to whether or not it is economic
to recover its gold content by further concentration.
Waste, which is unavoidably mined with ore.
Angle of inclination of a geological feature/rock from the horizontal.
The surface of a fracture along which movement has occurred.
The underlying side of an orebody or stope.
Non-valuable components of the ore.
The measure of concentration of gold within mineralized rock.
The overlying side of an orebody or slope.
A horizontal underground excavation which is used to transport mined ore.
A process whereby material is graded according to size by exploiting centrifugal
forces of particulate materials.
Primary crystalline rock formed by the solidification of magma.
An interpolation method of assigning values from samples to blocks that minimizes
the estimation error.
Horizontal tunnel the primary purpose is the transportation of personnel and
materials.
Geological description pertaining to different rock types.
Life-of-Mine plans.
Long Range Plan.
Mine properties.
A general term used to describe the process in which the ore is crushed and ground
and subjected to physical or chemical treatment to extract the valuable metals to a
concentrate or finished product.
A lease area for which mineral rights are held.
The Material Properties and Significant Exploration Properties.
Capital estimates of a routine nature, which is necessary for sustaining operations.
See Mineral Reserve.
Rock left behind to help support the excavations in an underground mine.
Run-of-Mine.
Pertaining to rocks formed by the accumulation of sediments, formed by the erosion
of other rocks.
An opening cut downwards from the surface for transporting personnel, equipment,
supplies, ore and waste.
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Term
Sill
Smelting
Stope
Stratigraphy
Strike
Sulfide
Tailings
Thickening
Total Expenditure
Variogram
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Definition
A thin, tabular, horizontal to sub-horizontal body of igneous rock formed by the
injection of magma into planar zones of weakness.
A high temperature pyrometallurgical operation conducted in a furnace, in which the
valuable metal is collected to a molten matte or doré phase and separated from the
gangue components that accumulate in a less dense molten slag phase.
Underground void created by mining.
The study of stratified rocks in terms of time and space.
Direction of line formed by the intersection of strata surfaces with the horizontal
plane, always perpendicular to the dip direction.
A sulfur bearing mineral.
Finely ground waste rock from which valuable minerals or metals have been
extracted.
The process of concentrating solid particles in suspension.
All expenditures including those of an operating and capital nature.
A statistical representation of the characteristics (usually grade).
16.4 Abbreviations
The following abbreviations may be used in this report.
Table 25.4.1: Abbreviations
Abbreviation
%
°
°C
A
AA
Al2O3
BIF
CoG
cm
cm2
cm3
dia.
DNPM
Fe
g
ha
IC
ID2
ID3
kg
km
km2
kt
L
LOI
LoM
m
m2
m3
masl
mm
mm2
mm3
Mn
LEM/MLM
Unit or Term
percent
degree (degrees)
degrees Centigrade
ampere
atomic absorption
alumina
banded iron formation
cut-off grade
centimeter
square centimeter
cubic centimeter
diameter
Brazil’s National Department of Mineral Production
iron
gram
hectares
compact itabirite
inverse-distance squared
inverse-distance cubed
kilograms
kilometer
square kilometer
thousand tonnes
liter
Loss On Ignition
Life-of-Mine
meter
square meter
cubic meter
meters above sea level
millimeter
square millimeter
cubic millimeter
manganese
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Abbreviation
MR1
Mt
m.y.
NI 43-101
NN
P
PAE
ppb
ppm
QA/QC
RC
RoM
RQD
sec
SG
SiO2
t
USGS
µm
XRF
y
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Unit or Term
mass recovery of lump ore fraction
million tonnes
million years
Canadian National Instrument 43-101
Nearest neighbor
phosphorous
Plano de Aproveitamento Econômico or Economic Exploitation Plan
parts per billion
parts per million
Quality Assurance/Quality Control
rotary circulation drilling
Run-of-Mine
Rock Quality Description
second
specific gravity
silica
tonne (metric ton) (2,204.6 pounds)
United States Geological Survey
micron or microns
x-ray fluorescense
year
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17 Date and Signature Page
Signed on this 5th day of August, 2012
Leah Mach, M.Sc. Geology, CPG
Reviewed by
This signature was scanned for the exclusive use in this document with the author’s approval; any other use is not authorized. Matthew Hastings, M.Sc. Geology
All data used as source material plus the text, tables, figures, and attachments of this document
have been reviewed and prepared in accordance with generally accepted industry practices.
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