franke henricksen09 frankechile 43-101

8/9/2019 Franke Henricksen09 FrankeChile 43-101

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TECHNICAL R EPORT

ON THE

FRANKE AND PELUSA INTEGRATED PROJECT

ALTAMIRA DISTRICT, R EGION II, CHILE

National Instrument 43-101

Technical Report

Effective Date February 19, 2009

Prepared by:

Thomas A. Henricksen, Ph.D., P.Geo.

Rodrigo Mello, B.Sc. (Geology)

Walter Segsworth, P.Eng.


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Thomas A. Henricksen

5812 E. 25th Ave.Spokane, WA 99223

Telephone: 509-535-8170

E-mail: [email protected]

I, Thomas A. Henricksen, P. Geo. do hereby certify that:

1. I am a Consultant Geologist residing at 5812 E. 25th Ave., Spokane WA 99223.

2. I graduated with a Bachelor of Science degree Cum Laude in Geology from theUniversity of Wisconsin-Oshkosh in 1969 and received a PhD in Economic Geology

from Oregon State University in 1974.

3. I am a registered Professional Geologist in the State of Wyoming, license no. PG-3069.

4.

I have practiced my profession continuously since 1974.

5. I have read the definition of “qualified person” set out in National Instrument 43-101(“NI 43-101”) and certify that by reason of my education, affiliation with a professional

association (as defined in NI 43-101) and past relevant work experience, I fulfill the

requirements to be a “qualified person” for the purposes of NI 43-101. I have reviewedresource calculations for numerous projects, including the Constancia project in Peru, and

the Apoquindo copper oxide project in Chile.

6. I together with Rodrigo Mello B.Sc. (Geology)., and Walter Segsworth P.Eng., have

prepared the Report entitled “Technical Report on the Franke and Pelusa Integrated

Project Altamira District, Region II, Chile” (the “Technical Report”).

7. I am responsible geological and metallurgical sections (Sections 1.2, 1.3 and 4 to 18

(except for Section 17.3) of the Technical Report.

8. I have the visited the Franke property site several times between 2005 and 2008, and

most recently in February 2008. I have also reviewed numerous news releases andresource calculations for the Franke property and the adjacent Pelusa project.

9. I also audited work performed by Geovectra S.A. as part of the preparation of this

Technical Report.

10.

To the best of my knowledge, information and belief, the Technical Report contains allscientific and technical information that is required to be disclosed to make the Technical

Report not misleading.

11. I am independent of the issuer applying all of the tests in section 1.4 of National

Instrument 43-101.


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12. I have read National Instrument 43-101 and Form 43-101F1, and confirm that the

Technical Report has been prepared in compliance with National Instrument 43-101 andForm 43-101F1.

(signed and sealed)

Thomas A. Henricksen, B.S., Ph.D, P.Geol

Dated on this 19th day of February, 2009


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Alameda da Serra 500 – Cj 315 - Vale do Sereno - Nova Lima / BrasilF 55 31 32866126 FAX 55 31 3264 9545

General del Canto, 235 – Providencia – Santiago / CF 566 2 2357595 FAX 56 2 235 8891

I, Rodrigo Mello B.Sc. (Geology) do hereby certify that:

1. I am a consultant to, and carried out this assignment for, NCL Ingenieria yConstrucción S.A., General del Canto 235, Providencia, Santiago, Chile, Tel: 562-

2357595.

2. I graduated with a Bachelor of Science (Geology) from the Minas Gerais Universityin 1985, obtained a Specialization (Computing) from the Goiás Catholic University in

1999 and I am currently working on my M.Se (Mining Economics) fromWitwatersrand University which I began in 2000.

3. I am a registered Geologist with the Regional Council of Engineering and a memberin good standing of some other technical associations and societies, including the

Australasian Institute of Mining and Metallurgy (Membership nr: 209332).

4. I have worked as a geologist and project manager in the minerals industry for 23years.

5. I have read the definition of “qualified person” set out in National Instrument 43-101

(“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience,

I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. My

work experience includes 9 years as a mineral resource analyst working in the

evaluation of gold, copper, zinc, nickel and silver deposits, 3 years working in project

management of a gold open pit mine, dealing with all aspects of mine planning and

plant construction and 2 years as consultant to the mining industry.

6. I together with Thomas A. Henricksen, P. Geo. and Walter Segsworth P.Eng., have prepared the Report entitled “Technical Report on the Franke and Pelusa Integrated

Project Altamira District, Region II, Chile” (the “Technical Report”).

7. I served as the Qualified Person responsible for reviewing or supervising the preparation of the mining sections of the Technical Report (Sections 1.4, 1.5, 17.3,

19.1 and 19.11).

8. I visited the Franke property site on July 25 to 29, 2007.

9. To the best of my knowledge, information and belief, the Technical Report containsall scientific and technical information that is required to be disclosed to make the

Technical Report not misleading.


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Alameda da Serra 500 – Cj 315 - Vale do Sereno - Nova Lima / BrasilF 55 31 32866126 FAX 55 31 3264 9545

General del Canto, 235 – Providencia – Santiago / CF 566 2 2357595 FAX 56 2 235 8891

10. I am independent of the issuer applying all of the tests in section 1.4 of NationalInstrument 43-101.

11. I have read National Instrument 43-101 and Form 43-101F1, and confirm that theTechnical Report has been prepared in compliance with National Instrument 43-101

and Form 43-101F1.

(signed and sealed)

Rodrigo de Brito Mello B.Sc. (Geology)



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Walter Segsworth

5476 Maple PlaceWest Vancouver, British Columbia V7W 1R9

Tel: (604) 925-8606

Fax: (604) 925-8609

[email protected]

I, Walter Segsworth, P.Eng., do hereby certify that:

1. I am an Engineer residing at 5476 Maple Place, West Vancouver, British Columbia V7W

1R9.

2. I graduated with a Bachelor of Science Degree in Mining Engineering from MichiganTechnological University in 1971.

3.

I am a registered Professional Engineer in the Province of British Columbia.

4. I have practiced my profession since 1971.

5. I have read the definition of “qualified person” set out in National Instrument 43-101(“NI 43-101”) and certify that by reason of my education, affiliation with a professional

association (as defined in NI 43-101) and past relevant work experience, I fulfill the

requirements to be a “qualified person” for the purposes of NI 43-101. In 1997 I was theChief Executive Officer of Westmin Resources Limited when the Lomas Bayas copper

mine in Chile was built.

6.

I, together with Rodrigo Mello B.Sc. (Geology)., and Thomas A. Henricksen, B.S., Ph.D,P.Geol., have prepared the Report entitled “Technical Report on the Franke and Pelusa

Integrated Project Altamira District, Region II, Chile” (the “Technical Report”).

7. I am responsible for reviewing the economic evaluation completed by the management of

Centenario Copper Corporation (“Centenario”) (Sections 1.6 to 1.10, 19.2 to 19.10, 20

and 21) for the Technical Report.

8. I conducted a review of the cost and economic information available for the Franke

project with respect to the projected open pit and heap leach operation. I have beeninvolved with the engineering at the Franke project since 2004.

9. I have visited the Franke property site several times between 2004 and 2008, most

recently from January 6 to 8, 2009.

10. To the best of my knowledge, information and belief, the Technical Report contains all

scientific and technical information that is required to be disclosed to make the TechnicalReport not misleading.


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11. I am the chairman of the board of Centenario and am therefore not independent ofCentenario pursuant to section 1.4 of NI 43-101.

12. I have read NI 43-101 and Form 43-101F1, and confirm that the Technical Report has

been prepared in compliance with National Instrument 43-101 and Form 43-101F1.

(signed and sealed)

Walter Segsworth, P. Eng.



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TABLE OF CONTENTS

1. SUMMARY ...................................................................................................................................................1

1.1 Executive Summary..........................................................................................................................1 1.2 Mineral Resources.............................................................................................................................2

1.3 Metallurgy.........................................................................................................................................2 1.4 Mineral Reserves ..............................................................................................................................2 1.5 New Mine Plan .................................................................................................................................3 1.6 Operating Costs.................................................................................................................................4 1.7 Capital Costs .....................................................................................................................................5 1.8 Permitting..........................................................................................................................................5 1.9 Economic Evaluation – Base Case $1.75/lb Copper Price.. ..............................................................5 1.10 Economic Evaluation – Copper Price Sensitivity Analysis ..............................................................6

2. INTRODUCTION AND TERMS OF REFERENCE ................................................................................7

2.1 Qualified Persons and Participating Personnel .................................................................................7 2.2 Terms and Definitions.......................................................................................................................8

2.3 Units..................................................................................................................................................8 3. RELIANCE ON OTHER EXPERTS ..........................................................................................................8

4. PROPERTY DESCRIPTION AND LOCATION......................................................................................8

4.1 Location ............................................................................................................................................8 4.2 Land Tenure ......................................................................................................................................9 4.3 Environmental Liabilities................................................................................................................12

5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE ANDPHYSIOGRAPHY ......................................................................................................................................12

5.1 Access.............................................................................................................................................12 5.2 Climate and Topography.................................................................................................................12

5.3 Local Resources and Infrastructure.................................................................................................12

6. HISTORY ....................................................................................................................................................13

6.1 Production History ..........................................................................................................................13

7. GEOLOGICAL SETTING ........................................................................................................................14

7.1 Regional Geology ...........................................................................................................................14 7.2 Altamira District Geology...............................................................................................................15 7.3 Local and Property Geology ...........................................................................................................18

8. DEPOSIT TYPES .......................................................................................................................................22

9. MINERALIZATION ..................................................................................................................................22

9.1 Mineralization.................................................................................................................................22 10. EXPLORATION .........................................................................................................................................23

10.1 Franke .............................................................................................................................................23 10.2 Pelusa..............................................................................................................................................25

11. DRILLING...................................................................................................................................................26

11.1 Franke .............................................................................................................................................26 11.2 Pelusa..............................................................................................................................................27


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12. SAMPLING METHOD AND APPROACH.............................................................................................33

12.1 RC Sampling...................................................................................................................................33 12.2 Diamond Drill Core Sampling ........................................................................................................34 12.3 Drillhole logging.............................................................................................................................34

13. SAMPLE PREPARATION, ANALYSES AND SECURITY..................................................................34

13.1 Franke Drilling Programs................................................................................................................34 13.2 China Drilling Programs .................................................................................................................35 13.3 Opinion on the Adequacy of Sample Preparation, Security and Analyses......................................38

14. DATA VERIFICATION.............................................................................................................................38

14.1 Drill Hole Database.........................................................................................................................38

15. ADJACENT PROPERTIES.......................................................................................................................39

16. MINERAL PROCESSING AND METALLURGICAL TESTING........................................................39

16.1 Introduction.....................................................................................................................................39 16.2 Historical Metallurgical Tests.........................................................................................................39 16.3 Recent Metallurgical Tests..............................................................................................................40 16.4 Ore Zone Definition - Sequential Assay .........................................................................................40 16.5 China Metallurgical Tests ...............................................................................................................41 16.6 Future Metallurgical Work..............................................................................................................48

17. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES...................................................49

17.1 Definitions.......................................................................................................................................49 17.2 Mineral Resource Model.................................................................................................................49 17.3 Mineral Reserves ............................................................................................................................81

18. OTHER RELEVANT DATA AND INFORMATION.............................................................................91

19. ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT ANDPRODUCTION PROPERTIES.................................................................................................................91

19.1 Mining.............................................................................................................................................91 19.2 Process and Recoverability .............................................................................................................94 19.3 Markets ...........................................................................................................................................95 19.4 Contracts .........................................................................................................................................95 19.5 Hedging...........................................................................................................................................96 19.6 Environmental Considerations ........................................................................................................96 19.7 Taxes and Royalties ........................................................................................................................97 19.8 Capital and Operating Cost Estimates.............................................................................................97 19.9 Economic Analysis .........................................................................................................................98 19.10 Economic Evaluation – Copper Price Sensitivity Analysis ..........................................................100 19.11 Mine Life ......................................................................................................................................100

20. INTERPRETATION AND CONCLUSIONS.........................................................................................100

21. RECOMMENDATIONS..........................................................................................................................101

22. REFERENCES..........................................................................................................................................102

23. DATE AND SIGNATURE PAGE ...........................................................................................................104


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UNITS OF MEASURE

Above mean sea level..................................................... a.m.s.l.

Centimetre...................................................................... cm

Cubic centimetre ............................................................ cm3

Cubic feet per second..................................................... ft

3

/s or cfsCubic foot....................................................................... ft3

Cubic inch ...................................................................... in3

Cubic metre.................................................................... m3

Day................................................................................. d

Days per week................................................................ d/wk

Days per year (annum) ................................................... d/a

Decibel........................................................................... dB

Degree............................................................................ °

Degrees Celsius.............................................................. °C

Dry metric ton ................................................................ dmt

Foot ................................................................................ ft

Gallon (US) ................................................................... gal

Gallons per minute (US) ................................................ gpm

Gram .............................................................................. g

Grams per litre ............................................................... g/L

Grams per tonne............................................................. g/t

Hectare (10,000 m2)....................................................... ha

Hour ............................................................................... h (not hr)

Hours per day................................................................. h/d

Hours per week .............................................................. h/wk

Hours per year................................................................ h/a

Kilo (thousand)............................................................... k

Kilogram........................................................................ kg

Kilograms per cubic metre............................................. kg/m3

Kilometre ....................................................................... km

Kilometres per hour........................................................ km/h

Kilovolt .......................................................................... kV

Kilovolt-ampere ............................................................. kVA

Kilowatt.......................................................................... kW

Kilowatt hour ................................................................. kWh

Litre................................................................................ L

Litres per minute ............................................................ L/mMegawatt........................................................................ MW

Metre.............................................................................. m

Metres above sea level .................................................. m.a.s.l.

Metres per minute .......................................................... m/min

Metres per second .......................................................... m/s

Metric ton (tonne) .......................................................... t

Milligram ....................................................................... mg


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Milligrams per litre ........................................................ mg/L

Millilitre ......................................................................... mL

Millimetre....................................................................... mm

Million............................................................................ M

Million tonnes ................................................................ Mt

Minute (plane angle) ...................................................... ‘Minute (time) ................................................................. min

Month............................................................................. mo

Ounce ............................................................................. oz

Parts per million............................................................. ppm

Percent............................................................................ %

Pound(s) ......................................................................... lb

Pounds per square inch................................................... psi

Revolutions per minute .................................................. rpm

Soluble Copper............................................................... SCu

Second (plane angle)...................................................... “

Short ton (2,000 lb) ........................................................ st

Specific gravity .............................................................. SG

Square kilometre ............................................................ km2

Square metre .................................................................. m2

Thousand tonnes............................................................. kt

Tonne (1,000 kg)............................................................ t

Tonnes per day............................................................... t/d

Tonnes per hour.............................................................. t/h

Tonnes per year.............................................................. t/a

Total Copper .................................................................. TCu

Wet metric ton................................................................ wmtYear (annum) ................................................................. a

Year (US)....................................................................... yr


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1. SUMMARY

Centenario Copper Chile S.C.M. is a Chilean subsidiary of Centenario Copper Corporation (collectively,“Centenario” or the “Company”), a Canadian mining company with a Chilean project execution team. Centenariohas the rights to the Franke and Pelusa deposits, located in the Altamira mining district, 65 km to the north of the

town of Diego de Almagro. The Altamira mining district is located in Region II, 12 km north of the border withRegion III in Chile.

1.1 Executive Summary

This NI 43-101 Technical Report (the “Integrated Technical Report”) incorporates a new mine planwhich integrates an oxide starter pit from the China deposit into the previous Franke mine plan. The China depositis located within the Pelusa property and is 6 km from the Franke processing plant. China ore will be trucked to theFranke plant for processing, with only minor modifications required to the existing plant. A copy of this report has been filed on SEDAR and on Centenario’s web site (www.centenariocopper.com).

The technical information contained herein reflects Centenario’s plans relating to the optimal miningsequence and other operational and capital considerations relating to the Franke project. The authors note that onFebruary 9, 2009 Centenario announced its intention to enter into a business combination (the “Transaction”) withQuadra Mining Ltd. (“Quadra). However, Quadra has not been involved in the preparation of this technical report.

Key highlights of the Integrated Technical Report include:

• New Mine Plan based on Franke and China Oxide Leachable Measured & Indicated Mineral Resources of48.6 million tonnes @ 0.77% CuT and excludes China Mixed and Secondary Sulphide Mineral Resourceof 17.1 million tonnes @ 0.53% CuT, which may be considered for inclusion in the mine plan followingfeasibility level metallurgical test work.

• Proven & Probable Mineral Reserves increase by 10.0 million tonnes to 41.7 million tonnes @ 0.75%CuT, from 31.7 million tonnes @ 0.83% CuT.

• Life-of-Mine copper cathode production increases by 93 million lbs (19%) from 501 million lbs to594 million lbs

• Pending timely environmental approvals, China oxide ore to be blended with Franke ore on a 75% China /25% Franke basis, starting in mid-2009 through to late 2010. Metallurgical test work confirms anticipatedrecoveries and significant reduction in overall acid consumption for 2009-2010, compared to 100% Frankescenario.

• Total project capital costs estimated at US$239 million, including US$13 million of pre-startup plant,work-in-progress working capital and China related capital.

• LOM cash cost of US$1.29/lb, using a Base Case flat copper price of US$1.75/lb.

•

LOM Base Case Unleveraged post-construction after-tax cash flow of US$315 million, includingcontribution from the Company’s existing copper hedge contracts which consist of 44.3 million lbs soldforward at an average price of $2.77/lb, for settlement in May 2009 to May 2010.

http://www.centenariocopper.com/http://www.centenariocopper.com/


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1.2 Mineral Resources

The following table sets out the Measured and Indicated Leachable Mineral Resources for the Franke andChina deposits:

Measured & Indicated Leachable Mineral Resource (0.3% CuT Cut-off) (a) (b)

Measured Indicated Measured & IndicatedCategory Tonnes CuT CuS Cu. CO3 Tonnes CuT CuS Cu. CO3 Tonnes CuT CuS Cu. CO3

mm mt % % mm lb % mm mt % % mm lb % mm mt % % mm lb % Franke In-situ 26.8 0.86% 0.59% 502 4.2% 9.0 0.76% 0.60% 151 4.3% 35.8 0.83% 0.60% 653 4.2%Franke Dumps 0.9 1 .00% 0.78% 19 3.9% 0.9 1.00% 0.78% 19 3.9% Total Franke 27.7 0.86% 0.60% 521 4.2% 9.0 0.76% 0.60% 151 4.3% 36.7 0.83% 0.60% 672 4.2%China Oxide 8.3 0.58% 0.50% 107 1.6% 3.6 0.52% 0.43% 41 2.1% 11.9 0.57% 0.48% 148 1.7%

Franke+China Ox 36.0 0.80% 0.58% 628 3.6% 12.6 0.69% 0.55% 192 3.7% 48.6 0.77% 0.57% 820 3.6%

China Mixed 7.0 0 .54% 0.31% 84 2.1% 0.9 0.56% 0.21% 11 3.1% 7.9 0.55% 0.30% 95 2.2%China Sec.Sulp. 7.4 0 .53% 0.07% 88 2.2% 1.8 0.44% 0.07% 17 2.8% 9.2 0.52% 0.07% 105 2.3%Other China 14.4 0.53% 0.19% 172 2.2% 2.7 0.48% 0.12% 28 2.9% 17.1 0.53% 0.18% 200 2.3%

Combined 50.4 0.72% 0.47% 800 3.2% 15.3 0.65% 0.47% 220 3.5% 65.7 0.71 % 0.47% 1,020 3.2%

(a) Excludes Inferred Mineral Resource of 3.3 m illion mt @ 0.89% CuT (Franke - 2.5 million m t @ 1.02% CuT; China - 0. 8 million mt @ 0.48% CuT)

(b) Excludes primary sulphide mineral resource: Measured & Indicated of 4.2 million mt @ 0.41% CuT; Inferred 1.8 million mt @ 0.46% CuT

The Measured and Indicated Mineral Resources have been developed at a 0.3% cut-off grade, consistentwith Centenario’s previous practice. The Mineral Resources are inclusive of the Mineral Reserves set out below.The table above excludes a total of 3.3 million tonnes @ 0.89% CuT of Inferred Leachable Mineral Resources and a primary sulphide Mineral Resource which includes a Measured and Indicated Mineral Resource of 4.2 milliontonnes @ 0.41% CuT and an Inferred Mineral Resource of 1.8 million tonnes @ 0.46% CuT.

1.3 Metallurgy

Centenario has conducted a number of bottle and column test programs on Franke material which have been reported in detail in previous technical reports (see Franke NI 43-101 Technical Report – March 31, 2008).

Centenario has conducted various bottle tests and 2 column programs on China oxide material. Based on

these tests, the Company has determined that China oxide ore could be processed using the same 3 stage crushingsize (to minus ½”) as previously selected for Franke ore.

Centenario has also completed 2 “blended” column programs of various proportions of China oxide andFranke ores, with a view to determining the optimal blend of material. Based on these tests, Centenario hasdetermined that combining various blends of China and Franke material deliver recoveries and acid consumptionthat are fairly consistent with that predicted by pro-rating the individual formulas, especially for blends of less than50% Franke material (or greater than 50% China material). Centenario has chosen to process the China material by blending it on a basis of 75% China / 25% Franke, which is also consistent with optimizing other operational parameters, including crushing capacity.

1.4 Mineral Reserves

The new Mineral Reserves include the Franke and China oxide portions of the Measured and IndicatedLeachable Mineral Resource and discrete recovery formulas have been applied to each deposit. Whittle pitevaluation was performed using a copper design price of $2.00/lb, with all ore blocks having a net profit cut-off ofgreater than zero. Whittle pit sensitivity analysis demonstrated that the Mineral Reserves are relatively insensitive tothe selected design price over the range of $1.75-$2.25/lb. Operational mine planning was performed to a feasibilitylevel of evaluation. The new Mineral Reserves are set out in the table below:


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Mineral Reserves: Franke + China Oxides (Net Profit Cut-off > 0) (a)Tonnes CuT CuS In Situ Cu CO3

k mt % % mm lb %Proven: Franke In Situ 24,982 0 .84% 0.60% 461 3.9%

Franke Dumps 361 0.88% 0.71% 7 2.5% China Oxide 7,106 0.55% 0.47% 87 0.9%

Total Proven 32,449 0.78% 0.57% 555 3.2%Probable:

Franke In Situ 6,715 0 .75% 0.61% 111 3.5% Franke Dumps -

China Oxide 2,543 0.49% 0.40% 28 1.1%Total Probable 9,258 0.68% 0.55% 139 2.9%

Proven & Probable: Franke In Situ 31,697 0 .82% 0.60% 572 3.8%

Franke Dumps 361 0.88% 0.71% 7 2.5% China Oxide 9,649 0 .54% 0.45% 114 0.9%Total Proven & Probable 41,707 0.75% 0.57% 694 3.1%

(a) Based on a copper price of US $2.00/lb.

Proven and Probable Mineral Reserves have increased from 31.7 million tonnes at an average 0.83% CuTto 41.7 million tonnes at an average 0.75% CuT. Total contained copper has increased by 115 million lbs from579 million lbs to 694 million lbs. The 0.08% decrease in the overall copper grade is due to the lower average totalcopper grade of the China oxide Mineral Reserve. A significant portion of the dumps have been conservativelyexcluded from the New Mineral Reserve, as it is believed that a considerable portion of the material will be difficultto recover in normal mining operations. Proven Mineral Reserves account for 78% of Proven and Probable MineralReserves compared to 81% in the March 31, 2008 Franke Technical Report.

In developing the Mineral Reserves, only the oxide portion of the China Measured & Indicated MineralResource (11.9 million tonnes @ 0.57% CuT) was considered, since it is the only part of the China deposit wheremetallurgical column test work has been included. To date, Centenario has undertaken bottle role and sequentialassay analysis on the mixed and secondary sulphide zones (17.1 million tonnes @ 0.53% CuT), but additionalcolumn based test work is required in order to consider this portion of the China Mineral Resource for MineralReserve evaluation purposes.

1.5 New Mine Plan

The New Mine Plan is set out below. The production profile is based on the assumption that ore processingis commenced on January 1, 2009. As of the date herein, the commencement of operations has yet to occur andaccordingly actual production in 2009 and subsequent years may vary from that set out in the table below:


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Franke & China Oxide Mine Plan2009 2010 2011 2012 2013 2014 2015 2016 2017 Total

Mining (k mt): Franke Ore (a) 2,441 1,815 4,018 4,218 4,818 4,518 4,818 4,818 594 32,057 Franke Waste 1,754 1,817 4,633 4,850 5,278 6,544 6,393 8,599 411 40,279 Franke Strip Ratio 0.7 1.0 1.2 1.1 1.1 1.4 1.3 1.8 0.7 1.3

China Ore 5,050 4,545 - - - - - - - 9,594

China Waste 6,056 2,020 - - - - - - - 8,077 China Strip Ratio 1.2 0.4 0.8 Total Ore 7,491 6,359 4,018 4,218 4,818 4,518 4,818 4,818 594 41,651

Total Waste 7,810 3,837 4,633 4,850 5,278 6,544 6,393 8,599 411 48,356 Total Strip Ratio 1.0 0.6 1.2 1.1 1.1 1.4 1.3 1.8 0.7 1.2

Ore to/(from) Stockpile: Franke 621 555 - - - - - - (1,175) 1

China 2,256 985 (800) (600) - (300) - - (1,541) (0) Ore to Plant (k mt):

Franke 1,820 1,260 4,018 4,218 4,818 4,518 4,818 4,818 1,770 32,057 China 2,794 3,560 800 600 - 300 - - 1,541 9,594 Total Ore to Plant 4,614 4,819 4,818 4,818 4,818 4,818 4,818 4,818 3,310 41,652 CuT (%) 0.80% 0.73% 0.76% 0.82% 0.77% 0.75% 0.76% 0.79% 0.54% 0.75% CuS (%) 0.69% 0.61% 0.58% 0.57% 0.60% 0.63% 0.63% 0.44% 0.27% 0.57% Recovery (%) (b) 82.0% 86.5% 87.0% 85.7% 87.5% 88.9% 88.7% 82.6% 79.8% 85.6%

Average CO3 1.9% 1.9% 3.5% 3.4% 3.8% 3.3% 4.0% 3.8% 2.5% 3.1%(a) Includes processing of ore from old dumps which ha been previously reclaimed and stockpiled

(b) Franke recovery formula = 92.7*(CuS/CuT) + 70*(1-CuS/CuT) and net profit > $0

China recovery formula = 92.2*(CuS/CuT)+48.5*(1-CuS/CuT) and net profit > $0

Year 1 Recoveries factored ta 93.5% of formulas by CCT management to reflect learning curve

The New Mine Plan incorporates a total of 41.7 million tonnes of ore and 48.4 million tonnes of waste, fora LOM average strip ratio of 1.2:1. In 2009, initial production will be from the Franke pit, until the China pit becomes available, which is expected to occur in mid-2009, subject to timely receipt of environmental approval andrelated permits. The Franke pit and China oxide pit are then mined concurrently over the remainder of 2009 and2010, with only the Franke pit being operational thereafter. China ore is transported approximately 7 km by haulageroad to the Franke processing plant, and blended with Franke at an average ratio of 75% China ore / 25% Franke oreuntil the end of 2010. In order to increase the grade of processed material in the early years, a portion of ore fromeach pit is stockpiled during 2009 and 2010, for processing in later years.

Initial crushing capacity has been assumed at 11,100 tonnes per day, increasing to 13,200 tonnes per dayapproximately four months after initial startup, resulting in the crushing of 4.6 million tonnes of ore in 2009 and4.8 million tonnes a year thereafter. Average head grades remain fairly constant over the majority of the mine life,falling off in the final year of production as residual stockpile material is consumed. All ore is placed on an on-off pad, with spent ore being removed and transported to the Franke waste dump. Overall recoveries are projected toaverage around 86% over the life-of-mine, with lower recoveries assumed in 2009 based on an expected learningcurve.

1.6 Operating Costs

Centenario has entered into a number of contracts and letters of intent relating to the operation of theFranke property, many of which are priced in Chilean Pesos in whole or in part. For translating the costs of these

services, Centenario has developed a formula that correlates the US$/peso exchange rate with the copper price. The base US$/peso exchange rate has been set at 650, at a reference copper price of $1.00/lb, with the exchange ratedeclining by 25 pesos for each $0.50/lb increase in the copper price. Approximately 1/3 of total cash operating costsare denominated in Chilean Pesos, with the balance in US$. Centenario has also developed an algorithm in whichthe diesel price varies with the price of copper. The base diesel price has been set at $0.43/litre, at a copper price of$1.00/lb, with the diesel price increasing by $0.10/litre with each $0.50/lb increase in the copper price.

Centenario has entered into various contracts for the long-term supply of sulphuric acid. The largestcontract is for the provision of 150,000 tonnes per year for a period of 14 years, with a pricing formula based on the


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copper price. Pricing under other contacts is based on market conditions. Based on contracts already in place,Centenario believes that has already secured access for all of its anticipated acid requirements for 2009 and 2010and the majority of its requirements thereafter.

As a result of the assumed or actual correlation between the copper price and the cost of various inputs, theoverall cash operating cost will vary with the copper price. At a copper price of $1.75/lb, the average life-of-minecash cost is projected at $1.29/lb. For each $0.25/lb movement in the copper price, the operating cost is assumed tovary up or down by approximately $0.05/lb.

1.7 Capital Costs

The Franke project is being developed as a conventional SX-EW cathode project, capable of producing inexcess of 30,000 tonnes of cathode copper per annum. The final projected capital cost for the project isUS$239 million, including US$212 million in direct and indirect capital costs, US$14 million in Owner Costs andUS$13 million in pre-startup and work-in-progress working capital.

As of the date hereof, the construction of the plant is essentially complete, with final pre-commissioningactivities remaining in the wet (SX-EW) area, balance of plant and certain non critical capital items. Preparationsare ongoing to initiate operations although the startup phase has yet to commence due to ongoing fundinguncertainties with Centenario’s lenders. Upon commencement of ore placement on the leach pads, it is anticipatedthat cathode production will commence approximately 49 days thereafter.

1.8 Permitting

An Environmental Impact Study relating to the development of the Franke processing plant and Franke pitwas approved by CONAMA, the Chilean environmental review agency, in June 2007. Subsequently,Environmental Impact Declarations were filed and approved relating to certain modifications to the project,including changes to the spent ore disposal, a change in the water line routing and the approval of the power line.

An Environmental Impact Declaration was filed in relation to the development of the China pit inSeptember, 2008. The review process is still underway, but Centenario anticipates a positive decision in February2009, following which various permits will be required prior to the commencement of mining.

1.9 Economic Evaluation – Base Case $1.75/lb Copper Price

Set out below is a summary financial model, at a flat Base Case copper price of $1.75/lb. It assumes a production start-up date of the beginning of 2009 but the actual production in any given year will be dependent onthe actual startup date of the Franke plant. The financial model is presented on an unleveraged basis (excluding project debt). For simplicity, the financial model has also been reflected on a basis that all capital costs and prestartup working capital is occurred in year -1 (the “Construction year”).


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Summary Financial Model Constr'n 2009 2010 2011 2012 2013 2014 2015 2016 2017 Tota(Unleveraged - Reformatted)

Production (mm lb Cu.) 57.9 66.8 70.4 74.4 72.0 71.1 71.9 69.5 40.3 594 Cu Price - Unhedged (US$/lb) 1.75$ 1.75$ 1.75$ 1.75$ 1.75$ 1.75$ 1.75$ 1.75$ 1.75$ 1.$Cu. Price - Realized (US$/lb) 2.23$ 2.05$ 1.77$ 1.77$ 1.77$ 1.77$ 1.77$ 1.77$ 1.77$ 1.$

US$/Peso FX Rate 613 613 613 613 613 613 613 613 613 6Power Price (US$/kwh) 0.109$ 0.106$ 0.106$ 0.092$ 0.078$ 0.078$ 0.078$ 0.078$ 0.078$ 0.0$

Diesel Price (US$/litre) 0.58$ 0.58$ 0.58$ 0.58$ 0.58$ 0.58$ 0.58$ 0.58$ 0.58$ 0.$Blended Acid Price (US$/mt) 94$ 81$ 78$ 78$ 79$ 78$ 79$ 79$ 67$ $ Acid Consumption (k mt) 223 241 377 374 410 370 421 409 205 3,0 Acid cost (US$mm) 21$ 20$ 29$ 29$ 32$ 29$ 33$ 32$ 14$ 2$Cash Cost - Acid (US$/lb) 0.36$ 0.29$ 0.42$ 0.39$ 0.45$ 0.40$ 0.46$ 0.46$ 0.34$ 0.$

Cash Cost - Other (US$/lb) 0.99$ 0.95$ 0.89$ 0.83$ 0.82$ 0.86$ 0.84$ 0.92$ 0.95$ 0.$Cu. Cash Cost (US$/lb) 1.35$ 1.24$ 1.31$ 1.22$ 1.27$ 1.26$ 1.31$ 1.38$ 1.29$ 1.$

Operating Margin (US$/lb) 0.88$ 0.81$ 0.46$ 0.55$ 0.50$ 0.51$ 0.46$ 0.39$ 0.48$ 0.$ Acid % Total Opcost 27% 24% 32% 32% 35% 32% 35% 34% 26% 3

Revenues -$ 129$ 137$ 125$ 132$ 127$ 126$ 127$ 123$ 71$ 1,0$

EBITDA 49$ 54$ 32$ 41$ 36$ 36$ 33$ 27$ 19$ 3$

Royalties & Taxes (1)$ (1)$ (1)$ (1)$ (1)$ (4)$ (6)$ (5)$ (4)$ ($Net Cash Income -$ 48$ 53$ 32$ 41$ 35$ 32$ 27$ 22$ 16$ 3$

Working Capital (13)$ (2)$ (1)$ 1$ 1$ 0$ 0$ 0$ 0$ 13$ -$Capex / Property Pmts. (228)$ (1)$ -$ -$ -$ -$ -$ -$ -$ (3)$ (2$

Net Project Cashflow (241)$ 45$ 52$ 33$ 41$ 35$ 33$ 27$ 22$ 26$ $Cum. Cashflow post start-up 45$ 97$ 130$ 172$ 207$ 240$ 267$ 289$ 315$

The realized copper price includes a projected cathode premium over the LME copper price of $0.02/lb,assuming production of LME Grade A or Standard product. The realized copper price also includes Centenario’soutstanding copper forward sales contracts, which includes 25.5 million pounds of copper for settlement in May toDecember 2009 at an average price of $2.80/lb, and 18.8 million pounds of copper for settlement in January to May2010 at an average price of $2.74/lb. 2009 cathode production is projected at 26.2 thousand tonnes (57.9 millionlbs), with approximately 4.1 thousand tonnes of copper building up in solution, which is recovered at the end of themine life. Thereafter, average annual cathode production is projected at around 32 thousand tonnes (71 million lbs)a year until the final year of production in 2017. In total, life-of-mine production is projected at 594 million lbs ofcopper.

Due to the blending of China material, 2009 and 2010 acid consumption has been reduced considerablyfrom the mine plan in the March 31, 2008 Franke Technical Report. This is due mainly to the lower averagecarbonate (CO3) of the China ore.

At a flat copper price of $1.75/lb, Centenario projects a life-of-mine cash operating cost of $1.29/lb, withthe cost modestly higher in 2009 due to the initial ramp-up and higher than average power cost. Life-of-mineEBITDA is $329 million and Net Cash Income (EBITDA less royalties and taxes) is $306 million. Taxes include anincome tax of 17% and royalties reflect a Chilean government royalty of approximately 0.8% of operating profit anda 0.75% NSR on production from China, which is capped at US$1.5 million. The net project cash flow is$74 million, including all capital costs and property payments, or $315 million, excluding capital costs and pre-startup property payments. The net project cash flows exclude Centenario’s $140 million equity contribution tothe project development cost. The pre-production capital cost includes property payments to the Franke vendor of$1.9 million in 2007 and 2008, with a final $1.0 million payment due in December 2009.

1.10 Economic Evaluation – Copper Price Sensitivity Analysis

A sensitivity analysis of project returns at various copper prices is set out below. Flat copper prices of$1.00/lb to $2.50/lb are included, as well as a sample “broker” price scenario in which the copper price is $1.50/lb in2009, $2.00/lb in 2010, $2.50/lb in 2011, $2.25/lb in 2012 and $2.00/lb thereafter.


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2.2 Terms and Definitions

Centenario refers to Centenario Copper Corporation. Centenario refers to Centenario Copper Chile S.C.M.AMEC refers to AMEC Americas Limited, AMEC International (Chile) S.A. and its representatives. The FrankeProject refers also to the Frankenstein Project or Asarco’s Centenario copper deposit. Asarco refers to AmericanSmelting and Refining Company. Geovectra S.A. is a Santiago-based consulting firm which specializes in the provision of geologic services. NCL Ingenieria y Construccion S.A. (NCL) is a South American-based consultingfirm which specializes in the provision of resource estimation and mine engineering services. Pincock, Allen &Holt, Inc. (“PAH”) is an international resource estimation and mine consulting and engineering firm. The CIMMlaboratory refers to the Centro de Investigacion Minera y Metalurgica laboratory.

The total copper and soluble copper grade values are referenced as TCu and SCu respectively, unlessotherwise noted.

2.3 Units

Unless otherwise specified, all units of measurement in this report are metric. Grades are described interms of percent (%) with tonnages stated in metric tons. Saleable base metals are described in terms of metric tonsor pounds (lb).

The base currency used to prepare the cost estimate was the United States dollar (US $). All costs weredenominated in this currency; therefore, the local costs (Chilean pesos or CLP) and those of products imported fromother countries where the currency is not the United States dollar were converted by using the exchange ratesindicated.

3. RELIANCE ON OTHER EXPERTS

The authors have relied on a legal opinion and updated advice of Centenario’s external legal counsel toverify that Centenario is the owner in good standing for the mineral concessions on the Franke property and thePelusa property.

The authors have worked closely with Centenario personnel in the preparation of this report, but haveindependently audited work performed by Centenario personnel consultants to Centenario where necessary.

4. PROPERTY DESCRIPTION AND LOCATION

4.1 Location

The Franke and Pelusa deposits are located in the Altamira mining district, 65 km to the north of the townof Diego de Almagro. The Altamira mining district is located in Region II, 12 km north of the border withRegion III in Chile. It is also located approximately 235 km to the southeast of the city of Antofagasta. Elevationsrange from about 1,500 m.a.s.l. to slightly over 1,700 m.a.s.l. within the project areas. The project area is easilyaccessed by road from the cities of Copiapó or Antofagasta. Access to the project from the west is available via a56 km dirt road between the Pan-American Highway and the project. A general location map is shown inFigure 4-1.


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Figure 4-1: General Location Map

Source: Modified from Flores, 2007

4.2 Land Tenure

The Franke property consists of 649.22 hectares and the Pelusa property consists of 3,831 hectares. Theconcessions that comprise the properties are listed in Table 4-1 and shown in Figure 4-2.

Table 4-1: Mining Concessions

Claim ParcelsArea

(ha)

Rights of Way

(ha)

Franke

Frankenstein 1-3 15 8.93

Tres Marias 1-5 25

San Guillermo 1-64 320 43.97

Viviana 1-36 166 28.82

San Carlos 1-4 20 9.50

Año Nuevo Dos 1-12 12

Pelusa

Pelusa 1-656 3,063Chinita 1-8 40

Japonesita 1 5

Anitas 1-10 50

Ana 1-5 25

Chiquitina 1-7 35

Chita 1-3 15

Catalina 1 5


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Claim ParcelsArea

(ha)

Rights of Way

(ha)

Candelaria Uno 1 5

Candelaria Dos 1 5

Candelaria Tres 1 5

Eureka 1 5

Zenit 1 5

Altamira 1-2 10

Total 91.22

Note: Right of ways are small not staked areas (windows) located between two or more mining

properties. These windows belong by law to the older company (they belong to Centenario in this case).

Figure 4-2: Mineral Concessions

Source: SERNAGEOMIN-CENTENARIO, 2008

Centenario acquired the Franke mining concessions in January 2004 pursuant to an option agreement withthe former owner. Centenario exercised the option and acquired title to these concessions April 28, 2006. The titles


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4.3 Environmental Liabilities

The Franke Project is subject to an Environmental Impact Assessment (EIA) process, as set forth in ChileanLaw 19,300 “Ley de Bases del Medio Ambiente”, and related regulations. Centenario commenced the assessment process in October 2006 with the formal presentation of the EIA to the Chilean Comision Nacional del MedioAmbiente (CONAMA) authorities. Final approval was obtained in June 2007.

In addition to the EIA, Centenario has applied for and received all applicable environmental andnon-environmental related permits that are required in order to develop the Franke project.

Also, Centenario has filed an EID (Environmental Impact Declaration) for exploitation of the China depositat Pelusa, and expects to receive its approval during first quarter 2009.

More detailed permitting information is presented in Section 19.6.

5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE ANDPHYSIOGRAPHY

5.1 Access

The Franke and Pelusa properties are located in the Altamira district, near the southern limit of theAntofagasta Region (Region II) of Chile. The area is easily accessed from Km 1075 of the Pan-American Highway,and about 60 km of dirt road heading eastwards. Km 1075 is located 40 km south of Taltal and 270 km north ofCopiapó.

Two other improved dirt roads may be used to access the property. A 70 km road provides access from thesouth from the community of Diego de Almagro. The city of Chañaral may be accessed to the southwest by meansof 60 km of improved dirt road plus 36 km of highway.

5.2 Climate and Topography

The Franke and Pelusa properties are located in a plateau between the coast and mountains of Chile, in theAtacama desert. The Atacama desert is considered to be one of the most arid deserts on earth. Local physiographyconsists of low hills and extended plains between 1,500 and 1,700 m.a.s.l., with local elevations of 1,800 m.a.s.l.The climate is arid with no rainfall in normal years. The average annual precipitation is usually less than one or twomillimetres. Summer temperatures range from about 18 to 32°C, while in winter, temperatures fall around 0°C.Overcast skies and some snow flurries are common in winter. Weather presents no severe conditions and work can be conducted year round.

Vegetation is minimal, supporting only desert scrub and sparse cactus. There are no perennial streams inthe area.

5.3 Local Resources and Infrastructure

Labour force in the neighbouring towns of Taltal (100 km), Chañaral (116 km) and Diego de Almagro(70 km) is abundant and experienced in mining, since several small-sized copper, iron and gold mines are operating

in the region. Centenario has established strong relationships with these communities. Some dirt portions of theaccess roads would require minor improvement and maintenance. The commute time is approximately one houreach way to any of these three towns.

The availability of water is critical, as there is little to no rainfall in the area. The water in the area isgenerally collected from the Andes snowpack, approximately 100 km east of the Franke deposit. However,Centenario has signed a water supply agreement for 50 L/s with Codelco (Salvador Division) located 70 km fromthe site. This contract secures the water supply for the entire mine life of the Franke project.


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The high acid consumption of the Franke ore is caused by carbonates and will result in the cost of sulphuricacid being a very significant component of the overall processing cost. As such, securing an acid supply for the project has been one of Centenario’s key objectives. To that end, Centenario has a signed contract with a localsmelter for a supply of 150,000 tons per year of sulphuric acid, which represents approximately 45% of thelife-of-mine average annual consumption (47% of the first two years). The remaining 55% will be obtained fromthe open acid market, though Centenario has entered into acid supply contracts with other parties for terms of up tofive years at prevailing market prices to obtain most of the additional acid requirements.

A fully operational rail track is located less than 3 km to the east of the area. The regular railroad operationstopped three decades ago, but the track has now been rehabilitated and is currently in use between the Franke plantand the town of Diego de Almagro. A rail spur to the plant area has been installed, which will be mainly used forshipping acid from the Potrerillos smelter and for general supplies.

The electrical supply to the Project has been provided by a 110 kV high voltage line has been constructed between the Franke site and a substation in the town of Diego de Almagro. A power supply agreement has beenentered into with Pacific Hydro.

6. HISTORY

This area of Chile, rich in copper minerals, has been commercially mined since the 1920s by local“pirquinero” miners. Many thousands of tones of stockpiles have been accumulated since those times in the hill.

The earliest geological studies on Franke were reportedly performed by ENAMI as free technical support tothe small scale mining community (1971). The discovery in 1983 of the neighbouring Altamira deposit byCODELCO (now owned by Minera Las Cenizas) triggered some interest on the Franke Hill and four holes weredrilled by RTZ Chile in 1984, reaching a maximum vertical depth of about 150 m. One of the holes intersectedoxide mineralization, but RTZ abandoned activities since no sulphide intersections were encountered.

ASARCO began exploration in the district in early 1997 with field reconnaissance work, identifying the potential for leachable copper ores in the Franke area. An initial reconnaissance drill program of 13 holes wascompleted by June 1997. Due to the encouraging results of this campaign at Franke, a new drill program was startedin September 1997 that confirmed the presence of a significant copper oxide deposit at the site. A third program ofinfill/definition drilling totaling 213 holes began in November 1997 and consisted of a mix of diamond and reverse

circulation holes.

The activity on the project ceased in February 1999 and ASARCO returned the property to the originalowners. ASARCO spent about US $3,000,000 on the project in the 1997-99 period.

Centenario signed an option agreement in January 2004 and acquired titles of the property by purchase-salemade to Compañía Minera Piedra Verde in April 28, 2006.

6.1 Production History

The Franke deposit has been mined since the mid-1960s under contract with the claim holder. At that timeseveral groups of pirquineros (pick and shovel miners) were working in small underground stopes and caves, sellinghigh grade ores to the ENAMI buying agency located at the Altamira railroad station. After 1973, small mining

activities were reduced and the agency closed. Small mining activities restarted during the 1980s and the ore wassold in Taltal, either to ENAMI or to other private mills. Notice to the contractors was given by the claim owner inJanuary 2006 to stop mining operations in three months according their contract and they vacated the property inMarch 2006.

No accurate historical production records exist for the Franke project. Recent production wasapproximately 150 – 200 t/d ore from the shafts. After hand sorting, roughly 50 tons of high grade ore grading 4%Cu and about 100 to 180 grams per ton silver was sent by truck daily to Taltal. Leaching of the oxides orconcentration of the sulphide ores were carried out in Taltal.


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The mining contractors only shipped high grade ores so the lower grade material was left scattered indumps and stockpiles throughout the Franke area. Geovectra surveyed the reject stockpiles in 2005 and estimatedthe volume to be 416,994 m³. At an approximate density of 1.9 tons per cubic metre, Geovectra estimated that thedumps contained approximately 800,000 tons of material. In 2007, Geovectra re-estimated a stockpile tonnage of874,000 tons considering an approximate density of 1.79 t/m3.

7. GEOLOGICAL SETTING

7.1 Regional Geology

The Franke and Pelusa copper deposits are part of the Altamira district, located in the western edge ofCentral Valley, in a stretch of land bounded by a N-S trending cretaceous granodioritc batholith to the West and thetertiary volcanics to the East. Two main geologic formations are recognized around and within the Altamira district.Both the Jurassic La Negra Formation and the overlying Cretaceous Aeropuerto (Cerros Florida) Formation aresequences of andesitic volcanic rocks with subordinate intercalated sedimentary rocks. The Aeropuerto Formationis the host of the Altamira district deposits.

The Jurassic La Negra formation is older and more widespread than the overlying Aeropuerto Formation.It occurs along the Coastal Range Mountains and varies in thickness from less than 3,000 m to greater than 5,000 m.It primarily consists of andesitic-basaltic flows, volcanic flow breccias, dacitic tuffs, and calcareous sandstones andconglomerates. This formation is thought to be sub-aerial, but localized pillow lava structures have been reported incoastal areas.

The base of the overlying Aeropuerto Formation is characterized by a series of intercalated andesitic andsedimentary units, which represent the downward transition into the La Negra volcanic rocks. This transition has been mapped on Sierra Altamira, several kilometres North of the Altamira district, where it appears to beconformable and transitional. Above this, there are approximately 250 m of andesite and flow breccias thatcomprise the lower base of the Aeropuerto Formation.

The upward transition into the middle portion of the Aeropuerto Formation is the interpreted host unit forthe Franke deposit. This part of the formation displays a pronounced porphyritic series of flows and flow breccias,locally large volumes of ocoitic sills and minor andesitic dikes. The flows exhibit amygdaloidal flow tops and bottoms. There are minor interbedded sedimentary rocks consisting of a mixture of volcaniclastic sandstones,

siltstones and impure limestones that appear to be lacustrine and fluvial in origin.

Although some deposits in the Altamira District and its vicinity share some features with Fe-Cu-Au typedeposits (IOCG), they are not part of the Cretaceous Iron Belt (CIB) metallogenic province, emplaced along thetrace of the Atacama Fault Zone (AFZ), located 40 km to the west. A large NW trending regional structure, whichmight be a related structure to the AFZ, governs the structural style of the area (see Figure 7-1).


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Figure 7-1: Map Showing Location of Atacama Fault (Source: Flores, 2006)

7.2 Altamira District Geology

7.2.1 Stratigraphic Summary

The main stratigraphic feature of the Aeropuerto Formation in the Altamira district is an upward transitionfrom extrusive to volcanosedimentary units.

The stratigraphically deeper extrusive units crop out in the central and south parts of the districts, due toanticlinal folding controlled by regional NW structures. These rocks are composed of aphanitic andesites (south)and porphyritic, commonly amygdaloidal andesites, flow breccias, and intercalated volcanosedimentary layers

(central).

Clastic intercalations become more abundant near the top of the extrusive unit, transitioning into a volcanicsandstone unit that crop out East and West of the district, and a massive agglomerate unit, cropping out in the North.

Younger volcanic rocks of the Cerrillos Formation crop out East (Cerro Guanaco), in a roughly paraconformable contact with the underlying Aeropuerto Formation A radiometric age from Cerro Guanaco yields a59 Ma age for the Cerrillos Formation (Naranjo et al., 1984).


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Fig. 7-2. Franke Geologic Map (from Asarco, 1999).

7.2.2 Intrusive rocks

These units are intruded by traquitic, syenitic, dacitic and granodioritic dikes, sills and stocks. Dioritic

porphyries characterized by large (1-3 cm) and abundant (>30%) plagioclase fenocrists (Ocoites) are locallyabundant, particularly in the Franke and China Sur areas.

Although in other districts ocoites have been commonly interpreted as lava flows, there is clear evidencethat some, if not all, ocoitic bodies are in fact hypabissal dikes and sills. This style of intrusive emplacementsuggests magma ascent under a compressive stress regime, possibly related to the increase in subduction rates at theChilean margin during the lower cretaceous.

Equigranular intrusive rocks predominate west of a NS lineament visible 1000 m west of China, wherelarger stocks intrude volcanosedimentary units. The age of the Early Cretaceous magmatism is assumed to bearound 115 Ma, based on radiometric age from one of these granodioritic stocks (Cerro La Picota, Naranjo et al.,1984).

7.2.3 Structures

In the study area, there are three main sets of faults that have controlled thick-skinned deformation of thevolcano-sedimentary sequence:

• ~N40-70W/70N: Centenario’s Pelusa Projects and Codelco´s Casualidad Properties are located along thetrace of a major fault, belonging to this set, that cross-cut the area of study. The steep angle suggests that itwas originally a normal fault, and that it has undergone several stages of normal and inverse displacement.Movement along this fault is related to anticlinal folding between the Franke and China deposits. The main


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mineralization trends in both Franke and China appear controlled by related N30W/75N and N75W/60Nstructural sets. Fluids were conducted through this feeder structures and injected into favorable permeablehorizons. Most of the copper/gold veins in the district have this orientation and it is interpreted they aredistension faults related to the AFZ regional movements.

• ~N15W/80W: A major fault belonging to this roughly N-S structural set is located approximately 1000 m

to the West of the China deposit, and marks a divide between the volcanic dominated central area of theAltamira district and the lower-lying western flat area dominated by sedimentary rocks and leucocraticstocks. Although it is not clear if this set was used as conduct for mineralizing fluids, younger movements produced that the N-S structures act as boundaries in China (setting the western limit of the main oxidezone), and Franke.

• ~N10-30E/80N: This subvertical trend represents the last mid-upper tertiary events. It is responsible for thedown drop of the Altamira deposit block with respect to Franke.

• ~N30-50E/90: These structures are not common in the district and are also a secondary answer to the AFZregional movements. This fault system is recognized in the north part of the Pelusa property and it is alsocontrolling the copper-gold mineralization at the Chita project, located just to the west of the China deposit.

Figure 7-3: Geological map of Altamira District


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Figure 7-4: Geological cross sections of the Altamira district (see Fig. 7-2 for location)

7.3 Local and Property Geology

7.3.1 Franke

The Franke deposit is emplaced in a shallowly dipping anticline fold striking N20-40°W (see Figure 7-5),slightly steeper on the southwest flank (up to 20°) than on the northeast flank (5-15°). Bedding along the axis of theanticline is an almost horizontal crest zone about 100-200 m wide, as observed in the underground workings duginto this area. This anticline also plunges to the NNW and SSE, defining a gently dipping structural dome.

Flanking the sub-horizontal crest zone of the anticline, several steeply dipping N25-35°W/70-80°E faultsare apparently one of the main mineralization controls for the emplacement of high grade copper in the Frankedeposit. The other control is given by the segments of the N60-70°W structural trend.


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2.) Emplacement of ocoitic intrusions as sills from structural feeders into the volcano – sedimentary unit.3.) Hypogene alteration (chlorite – calcite) and mineralization (chalcocite) in stockworks of the ocoite andneighboring rocks, especially vesicular andesitic horizons. 4.) Post-mineral faulting, exhumation and developmentof today’s oxidation profile (section N2900).

The geometry of the ore zones in the Franke deposit is closely related with the structural arrangement:while the mineralization at the flanks of the anticline is typically formed by one or more ore horizons of limitedthicknesses (1 to 5 m), the mineralization within and near the structural corridors located near the anticline crest,tends to be thicker and higher in grade, forming 10-30 m thick mineralized blocks separated by relatively thin barrenhorizons.

There appears to be a crude outward zonation of alteration centered roughly on the top of the Frankedeposit but it is distorted by the several vein-stockwork zones that similarly exhibit more intensive alteration and primary mineralization. The central and most intensive alteration includes moderate to strong carbonatization ascalcite in dissemination and veinlets and alteration of plagioclase phenocrysts to sericite and clays, plus totalconversion of magnetite to specularite; a strong chlorite-epidote to weak sericitic assemblage. Outward from thiscentral area the alteration generally decreases in intensity until finally grading with the regional green schistassemblage.

7.3.2 Pelusa

Drilling at Pelusa has been focused to date on the copper oxide potential in the southern part of the property, with a strong lithological control (see Fig. 7-5 and Fig. 7-6). Much of the northern part of the property ischaracterized by thin quartz gold veins trending to the northwest and dipping to the north. However, the NWFranke-Casualidad structural pattern crosses the Pelusa Gold area, giving it an encouraging potential as explorationtarget, particularly for copper and/or gold sulphide mineralization. The Casaulidad copper project owned byCodelco is located near the north-western boundary of the Pelusa property.

Porphyritic and aphanitic andesites from the Medium Member of the Aeropuerto Formation andsubvolcanic ocoites are outcropping in South Pelusa (see Fig. 7-3, 7-4 and 7-5), characterizing the typicallithological control for the copper-iron mineralization found in the property. The Upper Member of the formation,normally without copper mineralization non ocoite intrusions, is outcropping just to the north and west of the areaswith the copper mineralization discoveries (see China, China Sur, India, Japan, Malaysia, Taiwan and Thailand in

Fig. 7-7).


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Fig. 7-7. Drill holes at the Pelusa property and areas of interest with copper oxide mineralization.

Pelusa Copper

Most of the exploration activity carried out during last 2 years has been centered at the Pelusa Copper areato define additional leachable resources for the nearby Franke Project. The principal drilling targets have beenChina, Japan, India and China Sur. Most of the resource definition drilling in these deposits is in a 50 m by 50 mgrid spacing given both the structural association and the short continuity of the oxide and sulphide mineralization.

The copper deposits found in the Pelusa property are a variant of the Iron Oxide Copper-Gold (“IOCG”)deposit type with specular hematite (specularite)/chalcopyrite-bornite/calcite/K feldspar typical mineral association.Structurally controlled hydrothermal breccias cutting the volcano sequence host the higher grade Fe - Cumineralization. These breccias have been heavily oxidized to varying depths (50m to 200m), resulting in verticalzonation from oxide, mixed, secondary sulphide to primary sulphide in the deposit. Mineralization is present asdisseminations, veinlets and matrix filling of copper oxides and sulphides, with associated specularite and variablecarbonate.

The higher grade zones are structurally bounded by a breccia and specularite stockwork zone. The size ofthe main bodies discovered in the Pelusa Copper area is varying from 200m by 200 m in India to around 1,000m by150 m in China Sur. The structural trends they have is also variable, with China trending to west-northwest and

dipping north, China Sur to nor-northwest dipping vertical and Japan-Thailand to northwest dipping northeast. Indiais more a sub-horizontal/superficial “manto-type” deposit with North-South trend and gently dipping to the west anddimensions not bigger than 200 m by 200 m. Superficial extensions in the main direction have been outlined overmore than 500m.

Pelusa Gold

No exploration activity has been done at the Pelusa Gold area during the last year.


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8. DEPOSIT TYPES

Andesite hosted hydrothermal stockwork deposits are relatively common in the Coastal Belt of northernChile. Most of them are related to the Upper-Jurassic island arc volcanism of the La Negra Formation and generallythe stratabound fraction has been fed by hydrothermal breccias surrounding dioritic intrusive necks of age similar tothe volcanic piles.

The Altamira district deposits share several features with those of La Negra Formation, but are slightlyyounger, are clearly related to sub aerial volcanism (lenticular and irregular flows intercalated with sedimentary beds) and their feeders are fault-veins of limited size instead of hydrothermal breccias.

The Franke deposit is a hydrothermal copper (± silver) andesite hosted stockwork sulphide deposits thathave been partially oxidized. The injected hydrothermal materials were rich in copper but poor in iron and sulphur,consequently the resulting primary mineralization is largely chalcocite (minor covellite and bornite and traces ofchalcopyrite). Due to the lack of pyrite in the primary assemblages, no sulphuric acid was generated during theoxidation process and therefore, the conversion of the primary sulphides into secondary assemblages (copper oxideminerals and minor secondary sulphides) took place largely “in situ”, with limited displacement of themineralization from its original location.

The China deposit is composed of hydrothermal Iron Oxide-Cu-Calcite veins, stockwork and structurallycontrolled breccias. Primary mineralization consists primarily of Chalcopyrite and minor Bornite, with Pyrite,Specular hematite and subordinated Magnetite. Secondary ore minerals include Chalcocite, Covellite, Cu Oxidesand Native Copper. It differs from Franke in that hydrothermal circulation is more structurally controlled, althoughmineralized “mantos” are important at the supergene level. Additionally, iron and sulfur abundances are higher, andHm (specularite)+Cpy-Bo is the most common primary association.

9. MINERALIZATION

9.1 Mineralization

The mineralization at both the Franke and China areas appears spatially associated to the transitionalcontact between the andesitic lavas and the overlying volcanosedimentary sequence. This contact zone favored theintrusion of ocoitic sills that may have provided heat and mineralizing fluids to the system. At Franke, most of the

mineralization is emplaced in a porphyritic andesite lava sequence profusely intruded by ocoitic dikes sills. Lowergrade stratabound orebodies predomimate, in comparison to high grade feeder veins. Ocoitic intrusions also predominate at most the ore deposits in the Pelusa Copper area (China, China Sur, Japan, India, Taiwan, Thailand),where most of the mineralization is structurally controlled. The China deposit, in turn, is interpreted to bestratigraphically in the same level of Franke, and most of the mineralization is emplaced in volcanoclastic andextrusive rocks.

In the Franke deposit near-surface mineralization is composed of Cu Oxides (CuOx) +/- Calcite (Cal) andMagnetite (no Specularite). Most of the lava-hosted mineralization in the district (except the Franke deposit)consists of Cal + Esp + CuOx veins, some with surface extensions of more than 1 km. In several workings in thedistrict, and particularly in China, veins are observed to be associated with stratabound mineralization of volcanicand volcanosedimentary rocks.

The mineralization in the Pelusa Gold area is hosted predominantly by agglomerates and volcanicsandstones. These veins differ from the lava-hosted mineralization in that quartz is by far the dominant species,whereas calcite, specularite and Cu oxides are present in the walls, in the volcanosedimentary rock. Small ocoitic bodies are also present in this area probably of later occurrence to those found in the Franke and Pelusa Copperareas, although not as abundant as in the volcanic sequence.

The stratigraphic location of the Pelusa Gold veins suggests that Qtz (+Au) veins may be related to Cumineralization as a near-surface expression of the same hydrothermal system related to a volcanic center andshallow intrusions. The structural location of Pelusa Gold is in the regional NW structural system controlling the


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copper mineralization in Franke and Casualidad deposits. Also, the Pelusa Gold area is located in an area where themain NW structural system crosses two other structural systems: a N-S system controlling mineralization in PelusaCopper and a NE system (Fig. 9-1).

Fig. 9-1. Structural systems at the Franke-Pelusa district.

A small number of Barite veins are recognized in the entire district. Main locations seem to be in thetransition zone between the interpreted shallow and deeper levels and in the Franke area.

The high grade portion of the Franke deposit is formed by a large number of stratabound pods of differentsizes, each one connected to one or more faults striking NW, WNW or N. These faults are now sealed by

hydrothermal material and were used by the hydrothermal fluids to pervade into the favorable horizons(i.e., vesicular flows, contacts, micro fractures and stockworks). The horizontal size of these pods varies from a fewmetres to tens of metres from the feeders and the fading of the mineralization pinches at the borders and occurswithin a very short distance, even if the favorable horizon persists.

The oxidation profile at Franke is rather complex, lacking clear definitive surfaces defining the top of thesulphides and the bottom of the oxides. The upper 20 m of the stratabound mineralization is largely, but notcompletely oxidized. Between 20 and 60 m depth, the mixed ores are the most common assemblages while atdeeper levels the sulphides start to predominate. Inversions of this sequence are very common and oxidizedhorizons may reappear under sulphide ore zones.

10. EXPLORATION

Centenario has organized formal exploration activities on the Franke property since early 2004 and on thePelusa property since late 2006.

10.1 Franke

In early 2004, Centenario contracted South American Management S.A. (SAMSA) to organize theavailable data on the project, take metallurgical samples (Shaft #4 at San Guillermo) and conduct an reversecirculation (RC) drilling campaign at the Franke (50 holes) and San Guillermo (56 holes) deposits. The explorationwork was conducted during the first half of 2004, including the examination of existing diamond drill cores andelimination of the samples when the identification was in doubt. Upon completion of the exploratory work, SAMSA


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was contracted to construct a geologic model for the Franke and San Guillermo deposits, while NCL Ingeniería yConstrucción (NCL) was contracted to develop a resource block model and conduct pit optimizations and preliminary mine plans.

Pincock, Allen and Holt (“PAH”) was engaged by Centenario in December 2004 to prepare a NI 43-101compliant technical report for the Franke project. PAH delivered the results of their review in January 2005,reporting several shortcomings mainly related to weakness in the geologic understanding, and the availability andreliability of the geologic information. Consequently, in March 2005, Centenario contracted Geovectra S.A. inorder to repair these deficiencies and prepare a new resource estimate jointly with NCL.

In September 2005, Geovectra issued a report summarizing its work which included the following: corere-logging, topographic update, underground mapping, assay checks, data interpretation and remodeling of theFranke deposit. Geovectra also selected 2,739 pulps (all selections had total copper grade greater than 0.3%) forre-assay in order to validate copper assays from the 1997 to 2004 campaigns. 1,083 of these pulps were unavailable, but the remainder were assayed at CIMM laboratories. Geovectra reported good correlation for total copper, butlower correlation for soluble copper. The drill hole database was updated with these new assays.

In December 2005, NCL completed a mine planning study for the Franke deposit which incorporated theupdated resource model, acid consumption information and market conditions. PAH completed a 43-101 technicalreport on March 16, 2006. This report included analysis of data, results and interpretations of these studies. PAHupdated the technical report on May 4, 2006 to include modifications.

In 2006, an RC drill campaign was completed. A total of 129 RC infill and extension holes were drilled inthe Franke area, totalling 10,450 m. Of these holes, 100 drill holes were used to increase the drill density in theFranke area while 29 holes tested the deposit limits. Results indicated that barren rock exists to the north and westof Franke, but mineralization extends to the southeast towards the San Guillermo deposit.

Geovectra and NCL were retained by Centenario in 2006 to jointly perform work required to update theFranke resource model by August 2006. The work included a new drilling campaign, the generation of an improvedgeological model, a new geostatistical resource estimation of in-situ resources, and a resource estimation of thereject stockpiles present in the area.

A total of 100 evenly distributed sampling sites were excavated on the Franke reject stockpiles in order to

obtain sample information which could be used to estimate the stockpile Mineral Resources. Approximately 16 tonsof rock material were extracted from each site by an excavator and separately transported by truck to a crushing plant in El Salado. After crushing, 12 litre samples were collected for Cu assay from the conveyor discharge stream.On average, 10 samples were collected for every sampling site. The volume of the reject stockpiles had beenmeasured and reported in Geovectra et al. 2006. An average density of 1.79 t/m3 was used for the tonnagecalculation, measured by weighing the loaded truck in a truck weighing station. The reject stockpile resourcesestimation yielded 746,000 tons at 1.01% TCu Total copper), 0.78% SCu (soluble copper), and 4.06% CO3(carbonate). During 2007, the estimation of the stockpile yielded 874,000 tons at 1.0% TCu, 0.78% SCu and3.9% CO3.

NCL incorporated the August 2006 resource model in a Preliminary Feasibility level mine planning studyof the Franke deposit which it delivered to Centenario in October 2006. The mine plan developed for this study was based upon production of 30,000 tons of copper cathode per year.

On February 12, 2007, PAH submitted to Centenario a report entitled “NI 43-101 Technical Report,Preliminary Feasibility for the Franke Project”.

In May 2007, NCL delivered to Centenario a report entitled “Feasibility - Mining Discipline, FrankeProject, Final Report, Rev 0”.

In January 2008, NCL delivered to Centenario a report entitled “Mine Plan Update, Franke Project,Rev. A”.


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In February 2009 NCL delivered to Centenario a report entitled “Integrated Mine Plan Update, Franke –China Project, Final Report, Rev. 2”.

10.2 Pelusa

Surface sampling and reconnaissance and geologic mapping was commenced on the Pelusa property in

2005. Approximately 60 veins were mapped by Centenario personnel. The veins range from 100 m to 1,500 mlong, although the average length is around 300 to 500 m. Vein widths are narrow, ranging from 0.1 to 1 m andaveraging 0.4 m. Centenario also completed a total of 85.4 line-km of ground magnetic surveying in two phases.This work identified seven targets containing Cu-Fe mineralization in parallel vein systems (China, China Sur,Chita, Japan, Southwest Japan, Korea and Taiwan).

In 2006, a trenching program was undertaken on the China, China Sur, Korea, Chita, Southwest Japan andKorea targets. Overall, 25 trenches were dug in a 35-day period, totalling 6,128 m. The trenches were mapped andsampled; assays included total Cu (TCu), soluble Cu (SCu) and total carbon (CO3). In early 2007, roads were cut tothe Taiwan, Thailand and Malaysia anomalies and chip samples were taken along the road-cut exposures. A total of2,715 m of road-cut exposure was sampled.

Ce

franke henricksen09 frankechile 43-101

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