Definitive Feasibility Study

At the end of November 2010, Richmond Mining commissioned GR Engineering Services (GRES) to prepare a Definitive Feasibility Study (“DFS”) for the development of the Buena Vista magnetite ore deposit . The development concept involves an open pit, producing on average some 6 million tonnes per annum of ore along with a similar tonnage of waste per year.  Following crushing and grinding the ore is to be concentrated by conventional wet low intensity magnetic separation (Wet LIMS) to produce a high grade concentrate assaying 66-69% total iron (Fe) at an annual production rate of between 1.6 and 1.8 million tonnes. Plant tailings will be discharged to a tailings storage facility (TSF) adjacent to the plant site.

In addition to GRES, RHM selected a Nevada based engineering group, TEC Engineering (TEC); located in Reno to conduct investigations and prepare capital and operating costs for the supply of local services in particular water, power, and general civil construction requirements for the Project.  In addition TEC assisted in obtaining local costs for construction materials along with general civil engineering supplies.

In May 2011 the DFS was completed.

The DFS confirmed that the Buena Vista Iron Project is an economically robust, long-life iron ore project which will generate substantial returns for the Company and deliver significant benefits to the local Churchill Pershing and Counties and the State of Nevada.

Key DFS Outcomes

• Using a conservative 10 year average FOB concentrate price of US$110/t the Project NPV_7.5% after tax and capital expenditure is US$160 million and the IRR is 41%.
• Free cash flow after tax from the initial 10 years of operation is US$476 million.
• Indicated Resources defined to JORC standard of 65 Mt that include a JORC Probable Ore Reserve of 59 Mt, which is sufficient to underpin the initial 10 year production profile.
• Completion of initial mine planning and detailed mine design confirmed a very favourable waste to ore ratio of 1.14 to 1.

Key Project Metrics – Initial 10 Years of Production

• Ore mined: 59 Mt (5.9 Mtpa).
• Waste to ore stripping ratio of 1.14: 1.
• Average concentrate production of 1.75 million wet metric tonnes per annum.
• Average concentrate grade of 67.5% Fe.

The DFS is based solely on accessing ore from the West deposit to produce on average 1.75 Mtpa (million tonnes per annum) of wet concentrate for an initial 10 years. The concentrate will be sent via a 40 km slurry pipeline to the rail siding located at Colado Junction, 10 km northeast of Lovelock, for dewatering and then transported by rail to a Port in the San Francisco Bay/Delta Region of California.

Iron ore concentrates assaying 66-69% Fe; 1.5-4.5% SiO₂; <1% Al₂O₃; 0.003% P; and 0.003% S will be produced at a rate of 1.75 million wet tonnes per annum and contain 7-7.5% moisture for shipping to Asia.

The existing JORC resources and known exploration targets have the potential to significantly expand the Project’s life past the initial 10 years.  This potential is expected to underpin a long-life operation at Buena Vista.

Capital Cost Estimates (US$)

Capital cost estimates were prepared by GR Engineering Services Limited, in conjunction with TEC Civil Engineering Consultants in the USA and other consultants. The estimated capital cost breakdown for the Project piping option is as follows:

Two options, namely trucking and piping, were considered for the delivery of the concentrate from the mine site to the Colado rail siding. The concentrate piping alternative, while increasing the capital cost, delivers a number of advantages over trucking, namely:

• Elimination of safety hazards associated with a high level of truck movements;
• Environmentally more acceptable;
• Significantly lowering the operating cost over the life of the Project; and
• Eliminates the risk of down time due to potentially inclement winter weather.

Operating Cost Estimates (US$)

The total operating cost estimates for the Project (piping option) for the initial 10 years of operation are as follows:

Financial Evaluation (US$)

Extensive financial modelling has been undertaken for the concentrate operations of the Project. The cash flow model includes revenue, operating costs and capital costs for six monthly periods for the initial 10 years of mine life.  As the Buena Vista concentrate would be classified as a high quality pellet feed, the most appropriate benchmarks to use for revenue forecasts are based on either the Vale Standard Sinter Feed price or the Vale Carajas Sinter Feed price.

Iron revenue prices used in the DFS are on an FOB basis, with the base price for 2012 being US$134/t and an average 10 year price of US$110/t.

Capital cost estimates are based on sourcing quality second hand equipment for the major items, such as mills and crushers, with all other equipment based on new prices. A summary of the financial analysis and model outcomes is as follows:

All numbers presented above are for 100% of the Project.

Sensitivity to FOB Price

The DFS has been completed using FOB prices that result in an average FOB price of US$110/t for the initial 10 year Project life. The following table sets out the different NPV’s and IRR’s that would result if FOB prices were increased and that same price was used for each of the Project’s 10 years (all other parameters remain unchanged):

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