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SNC LAVALIN ENGINEERS & CONSTRUCTORS DYNATEC CORPORATION - AMBATOVY PROJECT MINE EROSION AND SEDIMENT CONTROL MEASURES

BASIC DESIGN SUMMARY REPORT (REF. NO. NB301-00116/3-4) EXECUTIVE SUMMARY This report presents the Basic Design for the Mine Erosion and Sediment Control Measures (ESCM) for the Ambatovy Project, which consists of the Ambatovy and Analamay orebodies. Through consultation with Dynatec, a concept to use Runoff Control Ponds (RCPs) was developed and a preliminary design was completed and presented in the document Feasibility Study Report - Mine Runoff Control and Water Supply Facilities (Ref. No. NB301-00116/2-2) November 18, 2004 (2004 Study). Since completing the 2004 Study, environmental impact analyses work being completed by Golder Associates for the Environmental Assessment has indicated that abstraction of all the water required for the Ore Preparation Plant supply from mine runoff may result in unsuitable impacts to the downstream environment. Based on the impact analyses results, it was decided that supplying all water from mine runoff was not preferred and that the main water supply for the Ore Preparation Plant would be from the Mangoro River. The main objective of the RCPs will therefore be for sediment control while the potential for supplementing the water supply to the Ore Preparation Plant from the RCPs will be secondary. The topography of the mining area is quite rugged and the hills have relatively steep slopes. In addition, the area receives a large amount of rainfall. Mining, which will be completed by open pit methods, will expose disturbed and undisturbed lateritic materials to rainfall and runoff and this will therefore generate sediment, which must be controlled as part of the overall mining process. By putting in place measures that control the surface runoff, both the amount of sediment generated from erosion and the amount requiring collection and possible treatment can be minimized. The ESCM include structures for the prevention of soil erosion (erosion control) as well as methods for removing sediments from surface water runoff prior to discharge (sediment control). The main components of the ESCM will include sediment traps, collection channels, RCPs and clarification ponds (CLPs). These measures are to be implemented during mining operations, including overburden stripping, ore extraction, waste stockpile placement, reclamation and infrastructure construction. Mine runoff will be collected at the RCPs and treated to remove sediment prior to discharge to the environment. The RCPs may also be used to supply process water to the Ore Preparation Plant. DATA REVIEW Soil testing results indicate a high erosion potential from disturbed areas due to the fine nature of the soil. The disturbed areas from mining activity are expected to produce 155 to 550 times the natural sediment yield per unit area. A review of available earthwork materials was conducted to Page i of ix
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determine the suitability of these materials for construction of the RCP and CLP embankments. Two materials will be available from the pit excavation; ferralite and ferricrete. It is also understood that a significant quantity of weathered gabbro may be available from excavating an area for the Ore Preparation Plant site. Sand and gravel will be required for filter material and rockfill required for riprap and gabion fill. Sand and gravel is available from small pits some 20 km west of the mine site, as reported by Geopractica. Rockfill (gneiss or dolerite) is expected to be available from newly developed quarry locations. Other potential sources of local fill may also exist for embankment construction, and will be identified through ongoing site investigations. DESIGN The design criteria for the ESCM are based on international standards for the design of such facilities. All aspects of the ESCM have been designed in compliance with Canadian Dam Association Dam Safety Guidelines (CDA 1999), US Environmental Protection Agency (EPA) regulations and Malagasy regulations. The RCPs in conjunction with the CLPs will need to be able to contain and treat discharged flows to below 50 mg/L suspended solids for the Environmental Design Storm (EDS) corresponding to the 1 in 10 year 24-hour event (231 mm). To meet the required discharge criteria, the collected runoff from the mine will need to be treated to remove suspended solids. It is expected that this will be achieved through natural settlement within the RCPs under normal flow conditions. However during more extreme wet periods (i.e. storage of storm events up to EDS), flows will be higher and flocculant will be added to enhance settlement of solids within the downstream CLPs. There is potential to supplement water supply to the Ore Preparation Plant from mine runoff particularly during wet periods. The amount of excess water that could be abstracted from the mine runoff for supplying the Ore Preparation Plant will depend on environmental and economic considerations. EMBANKMENTS Several embankments are required to provide mine runoff control. The RCP and CLP embankments are designed as zoned earthfill embankments. Over its length, each embankment will possess a central low permeability core (Weathered Gabbro) designed to reduce seepage and pore pressures through the embankment. Filter blankets and chimney drains (clean, fine to medium grained sand) will collect seepage through the embankment and shell materials (local fill) will provide the support for stability. Approximately 3 million m3 of material may be required for embankment construction. Riprap will be applied to the upstream slopes for erosion protection as required. The majority of the embankments will have side inlet overflow spillways. However, for the embankments which have been designed as overflow structures, the crests and downstream slopes will be armoured with concrete covered stepped gabion mats or baskets. Seepage and stability modelling was conducted for the proposed embankment design. Stability analyses indicate that the embankments as

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designed will be stable. This is to be confirmed during detailed design based on more detailed geotechnical evaluations of the embankment sites. WATER MANAGEMENT Water management facilities required for the RCPs and CLPs will include decant systems to release normal flows and overflow spillways to release flows in excess of the EDS. Floating decant intakes with outlet pipes will be used to decant water from the RCPs to the CLPs and from the CLPs to the environment. STOCKPILE FACILITIES In order to minimize disturbance to existing conditions, preparation measures will be undertaken prior to stockpile placement. This will include construction of underdrainage measures to minimize disturbance to existing surface flows and groundwater discharge in the proposed stockpile areas. Construction of the underdrain systems will also aid in water management for placement of waste materials. In addition to the underdrain systems, collection channels will also be constructed at various phases of stockpile development. Review of the stockpile stability and construction methodology is to be undertaken as part of the detailed design. RECLAMATION A progressive reclamation program will be implemented during the life of the operation by rehabilitating mining areas that become inactive. Progressive reclamation of these areas will help stabilize surfaces and greatly reduce sediment loading to the downstream RCPs. In general, reclamation of the pit areas will include regrading and installation of adequate drainage measures followed by topsoil placement and revegetation. Final closure of the site will occur once all surfaces are fully revegetated and stabilized. A post-closure monitoring program will be conducted following cessation of operations to monitor the effectiveness of rehabilitation measures. Once all surfaces are fully revegetated and runoff water quality is of acceptable quality, it may be possible to breach the RCP and CLP embankments to return the drainage paths to pre-mining conditions. SCHEDULE AND COST ESTIMATE The schedule for the Ambatovy Project is to start mining operations in September 2007 for pre-production development. A preliminary cost estimate for capital construction has been determined based on unit rates applied to the materials and estimated quantities. The total costs are summarized as follows: Pre-production: Year 5: $28.3 million $39.8 million

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These costs do not include annual operation and maintenance requirements. The costs are in 2006 US dollars and are exclusive of all applicable taxes. Costs for access roads and water supply systems (to the Ore Preparation Plant) are not included. This work is being done by others. The cost estimate that is provided is based on the Basic Design and various assumptions for material sources and unit rates. The Basic Design has been completed with detailed topographical mapping from the Lidar survey and a more detailed approach than that taken for the Updated Feasibility Study (UFS). The accuracy of the estimate is judged to be +/- 10 percent for Pre-production and +/- 15 percent for Year 5 provided assumptions for material sources and unit rates are correct. In order to confirm unit rates, material sources will need to be finalized and a review of local unit rates for earthworks is recommended.

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SNC LAVALIN ENGINEERS & CONSTRUCTORS DYNATEC CORPORATION - AMBATOVY PROJECT MINE EROSION AND SEDIMENT CONTROL MEASURES BASIC DESIGN SUMMARY REPORT (REF. NO. NB301-00116/3-4) TABLE OF CONTENTS PAGE EXECUTIVE SUMMARY...................................................................................................................i SECTION 1.0 - INTRODUCTION.....................................................................................................1 1.1 PROJECT DESCRIPTION.........................................................................1 1.2 BACKGROUND..........................................................................................2 1.3 EROSION AND SEDIMENT CONTROL MEASURES (ESCM).................2 1.4 SCOPE OF REPORT.................................................................................3 SECTION 2.0 - SITE CHARACTERISTICS .....................................................................................4 2.1 LOCATION AND TOPOGRAPHY..............................................................4 2.2 PRECIPITATION AND CLIMATE ..............................................................4 2.3 HYDROLOGY ............................................................................................6 2.4 GEOLOGY .................................................................................................6 2.5 SOIL CHARACTERISTICS ........................................................................6 2.6 VEGETATION ............................................................................................7 SECTION 3.0 - MINE EROSION AND SEDIMENT CONTROL PLAN ............................................8 3.1 MINE DEVELOPMENT ..............................................................................8 3.2 MINE EROSION AND SEDIMENT CONTROL..........................................8 3.2.1 General..........................................................................................8 3.2.2 Design Approach...........................................................................9 3.2.3 Types of ESCM .............................................................................9 3.2.4 Conceptual ESCM Layout...........................................................10 3.2.5 Main Components .......................................................................11 3.3 POTENTIAL WATER SUPPLY ................................................................12 SECTION 4.0 - DESIGN CRITERIA...............................................................................................13 4.1 FACILITY HAZARD CLASSIFICATION ...................................................13 4.2 SEISMIC DESIGN CRITERIA..................................................................13 4.3 HYDROLOGY DESIGN CRITERIA..........................................................14 4.4 DISCHARGE WATER QUALITY .............................................................15 4.5 DISCHARGE WATER QUANTITY...........................................................15 4.6 SOIL CHARACTERISTICS ......................................................................16 4.7 EROSION POTENTIAL............................................................................17 4.8 GEOTECHNICAL CONDITIONS .............................................................18 Page v of ix
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4.8.1 4.8.2

Residual Gabbro Gneiss/Migmatites...........................................18 Residual Soil from Ore Preparation Plant ...................................18

SECTION 5.0 - BASIC DESIGN.....................................................................................................20 5.1 GENERAL ................................................................................................20 5.2 ESCM MAIN COMPONENT DESIGN......................................................20 5.2.1 General........................................................................................20 5.2.2 Design Rainfall Events ................................................................21 5.2.3 Erosion Potential Factors ............................................................21 5.2.4 Runoff Factors.............................................................................22 5.2.5 Hydrology Inputs and Routing Conditions...................................22 5.2.6 Establishment of Required Components ....................................23 5.2.7 Selection of Operating Levels .....................................................24 5.2.7.1 RCP Normal Operating Levels................................24 5.2.7.2 CLP Normal Operating Levels ................................25 5.2.7.3 Emergency Overflow Spillway Levels .....................25 5.2.8 Results ........................................................................................25 5.3 WATER BALANCE ANALYSES ..............................................................27 5.3.1 General........................................................................................27 5.3.2 Methodology................................................................................27 5.3.3 Water Management Constraints .................................................27 5.3.3.1 Runoff Coefficients ..................................................28 5.3.3.2 Hydrogeological Data..............................................28 5.3.3.3 Results ....................................................................29 5.4 EMBANKMENT DESIGN .........................................................................29 5.4.1 General........................................................................................29 5.4.2 Earthworks ..................................................................................29 5.4.2.1 General....................................................................29 5.4.2.2 Residual Soils..........................................................30 5.4.2.3 Quarried Gneiss and Dolerite..................................30 5.4.2.4 Filter and Drain Material..........................................30 5.4.3 Basin and Foundation Preparation..............................................31 5.4.3.1 Clearing ...................................................................31 5.4.3.2 Topsoil Removal (Stripping and Grubbing).............31 5.4.3.3 Foundation Excavation............................................31 5.4.4 Embankments .............................................................................32 5.4.4.1 Embankment Cross Sections..................................32 5.4.4.2 Embankment Seepage Analyses ............................33 5.4.4.3 Embankment Stability .............................................34 5.4.4.4 Embankment Construction......................................35 5.5 WATER MANAGEMENT FACILITIES .....................................................35 5.5.1 Floating Decant Systems ............................................................35 5.5.2 Emergency Overflow Spillways...................................................36 5.6 RUNOFF TREATMENT FACILITIES .......................................................36 5.6.1 General........................................................................................36 Page vi of ix
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5.6.2 5.6.3 5.6.4 5.6.5

Background and Design Basis ....................................................36 Flocculant Addition and Mixing System and Flocculant Product ........................................................................................37 Flocculant Alternatives ................................................................37 Testing Program for Flocculants .................................................38

SECTION 6.0 - STOCKPILE FACILITIES......................................................................................40 6.1 STOCKPILE AREA PREPARATION .......................................................40 6.2 STOCKPILE CONSTRUCTION ...............................................................40 SECTION 7.0 - BASIC DESIGN LAYOUTS...................................................................................41 7.1 GENERAL ................................................................................................41 7.2 SEDIMENT TRAPS AND COLLECTION CHANNELS ............................41 7.3 BASIC DESIGN LAYOUTS......................................................................42 7.3.1 Ambatovy Mining Areas ..............................................................42 7.3.2 Analamay ESCM Basic Design Layout.......................................43 SECTION 8.0 - RECLAMATION PLAN..........................................................................................44 SECTION 9.0 - SCHEDULE...........................................................................................................48 SECTION 10.0 - COST ESTIMATE ...............................................................................................50 10.1 GENERAL ................................................................................................50 10.2 CAPITAL COST BASIS............................................................................50 10.3 REHABILITATION AND CLOSURE COST BASIS..................................50 SECTION 11.0 - OPPORTUNITIES ...............................................................................................52 SECTION 12.0 - REFERENCES....................................................................................................53 SECTION 13.0 - CERTIFICATION.................................................................................................55

TABLES Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 5.1 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Summary of Rainfall Stations in the Project Area Local Precipitation and Evaporation Rates Summary of Precipitation Data Estimated for the Mine Site Summary of Geological Units Consequence Classification of Dams Usual Minimum Criteria for Maximum Design Earthquake Usual Minimum Criteria for Inflow Design Floods Ferralite Index Testing Summary from Geopractica Saprolite Index Testing Summary from Geopractica Comparison of Design Basis and Methodology for the Updated Feasibility Study and for Basic Design Page vii of ix
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Table 5.2 Table 5.3 Table 5.4 Table 5.5 Table 5.6 Table 5.7 Table 10.1 Table 10.2 Table 10.3 Table 10.4

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Summary of Sedimentology Parameters Used in SEDCAD Analysis SEDCAD Results - Ambatovy North Mining Area Embankment Summary Estimated Sediment Loadings from Various Storms SEDCAD Results Due to Environmental Design Storm Summary of Floating Decant Systems Summary of Materials and Unit Rates Capital Cost Estimate Summary Rehabilitation Cost Estimate Summary Capital and Rehabilitation Cost Estimate Summary

FIGURES Figure 1.1 Figure 1.2 Figure 1.3 Figure 1.4 Figure 2.1 Figure 2.2 Figure 2.3 Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4 Figure 3.5 Figure 5.1 Figure 5.2 Figure 5.3 Figure 5.4 Figure 5.5 Figure 5.6 Figure 5.7 Figure 5.8 Figure 5.9 Figure 5.10 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Rev. 0 Project Site Location Mine Site Area - Regional Plan Tailings Facility and Process Plant Site - Regional Plan Preliminary Material Flowsheet Mine Site Base Plan - Watershed Areas Mine Site Area - Geological Plan Correlation of Vegetation Class with Topography and Substrate Ambatovy and Analamay Mining Areas - Pre-production Ambatovy and Analamay Mining Areas - Year 1 Ambatovy and Analamay Mining Areas - Year 4 Ambatovy and Analamay Mining Areas - Year 20 Mine Erosion and Sediment Control Measures - Conceptual General Arrangement SEDCAD Outputs - Inflow/Outflow Hydrograph and Sedimentgraph Ambatovy North Mine Runoff Collection Pond SEDCAD Outputs - Inflow/Outflow Hydrograph and Sedimentgraph Ambatovy North Mine Clarification Pond Deterministic Water Balance Analysis Flowsheet - Average Precipitation Deterministic Water Balance Analysis Flowsheet - 1 in 20 Year Wet Precipitation Deterministic Water Balance Analysis Flowsheet - 1 in 20 Year Dry Precipitation Mine Runoff Collection and Clarification Pond Embankments - Plan Mine Runoff Collection and Clarification Pond Embankments - Typical Sections Embankment Fill Specifications Seepage Analyses - Geometry, Material Properties and Results Remoulded Shear Strength Samples - Undrained Shear Strength vs. Liquidity Index - Gabbro Gneiss/Migmatite

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Figure 5.11 Figure 5.12 Figure 5.13 Figure 5.14 Figure 5.15 Figure 5.16 Figure 6.1 Figure 6.2 Figure 7.1 Figure 7.2 Figure 8.1 Figure 9.1

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Remoulded Shear Strength Samples - Undrained Shear Strength vs. Moisture Content - Gabbro Gneiss/Migmatite Ore Preparation Plant Remoulded Shear Strength Samples Undrained Shear Strength vs. Liquidity Index Ore Preparation Plant Remoulded Shear Strength Samples Undrained Shear Strength vs. Moisture Content Slope Stability Analyses - Geometry, Material Properties and Results Floating Decant Weir and Access Systems - Plan, Sections and Details Overflow Spillway - Typical Sections and Details Stockpile and Waste Dump Underdrain - Typical Plan and Section Constructed Stockpile Slopes - Typical Section Ambatovy Mining Areas - Basic Design Layout Analamay Mining Areas - Basic Design Layout Ambatovy and Analamay Mining Areas - Year 28 - Closure Design and Construction Schedule

APPENDICES Appendix A Baseline Report Appendices by Golder Associates A1 - Climate and Air Quality Baseline A2 - Hydrology Baseline Typical Erosion and Sediment Control Measures Rainfall Simulation Memo SEDCAD Outputs D1 - Ambatovy North Mining Area - 4 Cases D2 - All Areas - Various Storm Events GCS Hydrogeological Investigation Report Water Balance Calculation Sheets F1 - Average Precipitation F2 - 1 in 20 Year Wet Precipitation F3 - 1 in 20 Year Dry Precipitation Seepage Analyses Results Slope Stability Analyses Results Product Information Testing Program for Flocculants Costing Information K1 - Cost Tables K2 - Engineering Cost Breakdown

Appendix B Appendix C Appendix D

Appendix E Appendix F

Appendix G Appendix H Appendix I Appendix J Appendix K

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SNC LAVALIN ENGINEERS & CONSTRUCTORS DYNATEC CORPORATION - AMBATOVY PROJECT MINE EROSION AND SEDIMENT CONTROL MEASURES BASIC DESIGN SUMMARY REPORT (REF. NO. NB301-00116/3-4) SECTION 1.0 - INTRODUCTION 1.1 PROJECT DESCRIPTION

Dynatec Corporation (Dynatec) has established a Joint Venture (JV) with Sumitomo Corporation (Sumitomo) to develop the Ambatovy Project, a nickel laterite deposit in Madagascar. The Ambatovy Project is located in the central east portion of Madagascar, about 130 km east of the capital Antananarivo, as shown on the project site location map on Figure 1.1. The Ambatovy Project includes the Ambatovy and Analamay orebodies. The orebodies comprise a near surface horizontal laterite deposit with an average thickness of approximately 40 m. The reserves for the orebodies are estimated at 125 million tonnes of ore containing nickel and cobalt. This is sufficient for a mine life of 20.5 years at the planned throughput rate to produce approximately 60,000 tonnes of nickel and 5,000 tonnes of cobalt annually. In addition, low grade ore stockpiled during mining operations can be processed to extend the plant life to 27 years. A brief summary of the main components of the Ambatovy Project is presented below. Ore will be extracted using open pit mining methods and slurried at an Ore Preparation Plant near the orebody A series of mine runoff collection ponds (RCPs) will be constructed around the mine in order to minimize environmental impacts Fresh water for the Ore Preparation Plant will be supplied from the Mangoro River with potential to supplement the required water from the RCPs The slurry will be pumped via a 195 km long Ore Delivery Pipeline to the Process Plant Site located on the east coast of Madagascar, near the town of Tamatave Fresh water for the Process Plant Site will be supplied from the Ivondro River A sulphide concentrate will be produced at the Process Plant Site which will be either refined on site or sent offshore The existing Port Site at Tamatave will be expanded for receiving bulk materials such as limestone, coal and sulphur Tailings will be deposited within a valley impoundment area 4 km west of the Process Plant Site Excess water from the Tailings Facility will be returned to the process plant site for treatment, as required, before discharge to the ocean

The general layout of the mine site area is shown on Figure 1.2. A layout of the process plant site area near Tamatave is shown on Figure 1.3. A preliminary material flowsheet is shown on Figure 1.4. Page 1 of 55
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1.2

BACKGROUND

In July 2003, Dynatec retained Knight Pisold Ltd. (KPL) to complete certain aspects of work related to the evaluation of existing documentation and development of a new Bankable Feasibility Study for the Ambatovy Project. KPL has completed the following work on the project to date: Develop a scope of work for Tailings Disposal, Water Management, Environmental Management and Closure and Reclamation Due diligence review of work previously completed by others for the initial feasibility study including the Phelps Dodge Corporation (Phelps Dodge) Environmental Assessment (EA) document Provide assistance with scoping studies for tailings sites near two potential plant site areas (Brickaville and Tamatave) Dynatec selected the Tamatave plant site location and retained KPL in February 2004 to complete preliminary design for the Tailings Facility and Erosion and Sediment Control Measures for the mine Through consultation with Dynatec, a concept to use Mine RCPs for mine water supply was developed and a preliminary design was completed and is summarized in the document Feasibility Study Report Mine Runoff Control and Water Supply Facilities (Ref. No. NB301-00116/2-2, Rev. 1) November 18, 2004 (2004 Study) An Updated Feasibility Study (UFS) for the Mine Runoff Control and Water Supply Facilities was issued on October 11, 2005 (Ref. No. NB301-00116/3-2). For the updated study, it was assumed that mine water supply would be from the Mangoro River. Initial cost estimates for the Mine Erosion and Sediment Control Measures (ESCM) (formerly referred to as Mine Runoff Control and Water Supply Facilities) were issued under three separate letters with capital cost estimates for the ESCM for the Ambatovy Mining Areas and Analamay Mining Areas provided in the first two letters (Ref. Nos. NB06-00151 and NB06-00179) and progressive rehabilitation and final closure costs for both areas provided in the third letter (Ref. No. NB06-00238) Reports and cost estimates related to other aspects of the project are reported elsewhere EROSION AND SEDIMENT CONTROL MEASURES (ESCM)

1.3

The incorporation of Erosion and Sediment Control Measures (ESCM) during mining can substantially reduce the volume of eroded sediment produced and transported to the downstream environment. Properly implemented, these measures will not only prevent and/or minimize adverse impacts to water quality and quantity downstream of the mine areas, but also to lower maintenance costs (i.e. prevention of sedimentation or washout of drainage ditches, roads, culverts, etc.) as well as reduced capital and maintenance costs for reclamation of mined out areas (i.e. prevention of slope erosion, sedimentation or washout of surface water diversion and control structures, etc.). By integrating the ESCM with the mine planning and operations, production efficiency can be maintained and costs for the construction of the ESCM can be minimized.

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1.4

SCOPE OF REPORT

This report summarizes the Basic Design of the Mine ESCM, which has been based on more current available information, and provides an update to the design and cost estimate presented in the UFS. The main components of the ESCM included under the Basic Design and their corresponding functions are summarized as follows: Sediment Traps for collecting runoff at the edge of disturbed areas and sedimentation of coarser particles Collection Channels for collecting runoff from undisturbed and disturbed areas and routing it to downstream ESCM with minimal erosion Runoff Collection Ponds (RCPs) for collecting runoff from disturbed and undisturbed areas and temporarily storing it to maintain downstream water quality and water flow requirements Clarification Ponds (CLPs) for final clarification of water released from each RCP Progressive and Final Reclamation Measures

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SECTION 2.0 - SITE CHARACTERISTICS 2.1 LOCATION AND TOPOGRAPHY

The island of Madagascar is located in the Southwest Indian Basin, between approximately 12 and 26 south latitude. The island is located across the Mozambique Channel, approximately 500 km off the southeast coast of Africa. Madagascar is the worlds fourth largest island covering 587,000 km2. Madagascar is dominated by a central mountainous plateau, which reaches a maximum elevation of approximately 2,800 m. The land slopes steeply to a narrow lowland bordering the Indian Ocean in the east and to a somewhat wider coastal plain along the Mozambique Channel in the west. The Ambatovy Project is located on the west rim of the Ankay Range at an elevation of about 1,150 m. This location is approximately 85 km inland of the Indian Ocean and 90 km east of the capital Antananarivo, at about 18 45 south latitude. The topography of the mine area is hilly with relatively steep slopes. The mine site is close to the Mangoro River, a major north-south drainage for the region. Two ranges, Ankay to the east and LAngavo to the west, flank the Mangoro River. The Ankay Range appears to have an important influence on the precipitation pattern of the region. Stations located near the Ankay Ridge experience more rain than stations located in the sheltered valley to the west. 2.2 PRECIPITATION AND CLIMATE

The eastern part of the island receives considerable precipitation, all in the form of rainfall, which is brought onshore by southwest trade winds. Mean annual precipitation at some locations along the eastern coast exceeds 3,000 mm. However, considerably less rainfall occurs in the central plateau. Much of Madagascar is exposed to cyclonic activity, although the east coast is most prone to severe storms. The island of Reunion, located 800 km east of Madagascar Island at the same latitude, holds several world rainfall records that are due mainly to cyclonic activity. The coastal regions are generally hot throughout the year, while the central plateau has a temperate climate, with warm summers and cool winters. Based on historical rainfall data from 8 nearby stations, the annual precipitation in the region of the mine site varies from 1,200 mm to 1,900 mm. A summary of the stations is provided on Table 2.1. The rain gauge stations are shown on Figure 1.2. Meteorological data have been recorded at the mine site since 1997. Due to limited information at the mine site, meteorological data recorded at Moramanga (>30 years of record) has been used to estimate conditions at the mine site by Golder Associates (Golder). Moramanga is located approximately 13 km southeast of the mine site at a similar elevation and with similar exposure to topographic features that influence the local climate. Based on a review of the available precipitation data for Moramanga and the mine site by Golder, an annual precipitation distribution for the mine site has been developed as shown on Table 2.2. A copy of the information provided by Golder, which summarizes the data review, is included in Appendix A.

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As shown on Table 2.2, the wet season occurs from December through March with average monthly rainfall values ranging from 226 mm to 338 mm. The remainder of the year is much drier, experiencing monthly average rainfall values ranging from 36 mm to 138 mm. Long-term values of pan evaporation are not available for Moramanga. Data from nearby Perinet, which is located at a similar elevation, were adopted as representative of mine site conditions. The annual and monthly average values for Perinet are shown on Table 2.2. An estimate of pond evaporation based on suitable correction factors is also provided on Table 2.2 and is approximately 750 mm per year. Comparison of this value with the 1,700 mm annual precipitation indicates that there is a significant water surplus in the mine site area. A summary of annual rainfall variability for various return periods is shown on Table 2.3. The monthly values were estimated by applying the same monthly distribution as that used for average precipitation conditions at the mine site. The cyclone season for Madagascar typically extends from November to April, with about 70% of the cyclones occurring from January to March. It is estimated that one major cyclone will pass over the mine area every 5 years (Klohn Crippen, 1998). Severe cyclones have impacted the mine site area in the past. For instance, Geraldo crossed the mine area between February 1 and 3, 1994, and Analamazaotra, a station 15 km from the mine site on the Ankara Ridge divide, registered 394 mm of rainfall on February 2, 1994. The maximum daily rainfall recorded at the mine site was 174.2 mm in March 2000 as shown on Table 2.2 of the 2004 Study. The maximum 24-hour rainfall values recorded for Moramanga and Perinet are 280 mm and 259.2 mm, respectively (Chaperon, et al, 1993). Data from the Analamazaotra station was used to carry out a 24-hour rainfall frequency analysis using the Extreme Values Type 1 frequency distribution by Klohn Crippen (1998). A summary of the results of this frequency analysis is presented below. Return Period (years) Rainfall (mm) 2 132 10 248 50 349 100 392 500 491

The results indicate that, for example, during the 1 in 10 year 24-hour storm, which is normally adopted for sediment control design, 248 mm of rainfall could be expected in the mine site area. A more recent analysis conducted by Golder (see Appendix A) for the Dynatec Corporation Environmental Assessment (EA) resulted in the following rainfall amounts, which compare well with the values determined by Klohn Crippen: Return Period (years) Rainfall (mm) 2 122 10 231 50 374 100 453 500 NA

In addition to the return periods listed above, KPL has estimated a rainfall amount of 320 mm for the 1 in 25 year 24-hour storm.

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2.3

HYDROLOGY

The mine site is located along the surface water divide between the Mangoro and Vohitra Rivers and contains the headwaters of six watersheds as shown on Figure 2.1. The watersheds include the Sahaviara, Antsahalava, and Ankajathat that drain west towards the Mangoro River, and the Sahamarinana, Torotorofotsy, and Sakalava that drain east towards the Vohitra River. Portions of the area consist of a high plateau underlain by hard ferricrete substrate. The slopes around the plateau consist of weathered granular ferricrete (pisolitic ferricrete). Based on studies conducted by Golder in 2004 and 2005, a general hydrologic balance for the project area was estimated as follows: Precipitation Evapotranspiration Groundwater Flow Surface Runoff 1,700 mm 750 mm 100 mm 500 mm to 600 mm

This data suggests a gross runoff coefficient in the order of 30% (no groundwater) to 40% (with groundwater). Golder also reviewed data for river discharges in the vicinity of the project site and reported annual watershed runoff yields of 277 to 625 mm for watershed areas (see Appendix A). Mine site flow data are currently being collected and will provide a more specific estimate of runoff from the mine area. 2.4 GEOLOGY

The regional geology of the mine site area consists of the Ambatovy massif. The massif area is composed dominantly of gabbros of the Vohibory System with syenite underlying the areas to the northwest and gabbro gneiss and migmatites underlying areas to the south as shown on Figure 2.2. Geology of the Ambatovy and Analamay ore bodies consists of ferricrete and ferralite overlying peridotite and pyroxenite bedrock. 2.5 SOIL CHARACTERISTICS

Soils in the mine area have developed on old, geomorphically stable terrain and retain almost no vestige of the original rock structure. The soils are generally known as laterites, characteristic of tropical areas. They are typically low in nutrients due to high rainfall promoting vertical and lateral leaching of cations and colloidal elements through the soil profile. The soils form irreversible hardpan crusts when exposed to cycles of wetting and drying (Golder, 1999). The crust consisting of ferricrete is nominally 1 m to 2 m thick, while the underlying ferralite is typically 30 m to 60 m thick. Surface soils at the mine site area generally consist of a thin layer of Topsoil and/or Hillwash overlying Alluvium, Colluvium and Residual Soils. A layer of alluvium is generally observed across the valley floors with colluvium occurring at intermittent slopes and slope bases along the valley

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slopes. Residual soils derived from the underlying bedrock are found across the mine site area. The residual soils generally grade from Clayey Silt and Sand to Completely Weathered Bedrock consisting of Gravelly Sand and Corestones to Slightly Weathered Bedrock. Bedrock has been intersected at depths ranging from 3.6 m to 48.0 m across the mine site area. A summary of the geological units intersected across the mine site area is given on Table 2.4. A review of available data for the ferralite, the primary soil being disturbed by mining activities, was conducted. According to the Geopractica (2004) and the Klohn Crippen (1998) pit slope reports, the material in the pit areas will be mainly ferralite with a +/- 3 m to 15 m thick layer of saprolite at the base of the pit. In this ferralite, all the primary minerals, except quartz, are weathered by hydrolysis and much of the silica and bases are removed in solution. Usually there is an excess of alumina which forms gibbsite as noted in the Klohn Crippen report, but the ferralite is primarily made up of limonite or hydrated iron oxide. Depending on the balance between the iron and aluminum oxides, ferrralitic soils may be divided into ferrites (in which iron oxides predominate) and allites (in which aluminum oxides predominate in the form of gibbsite). The Klohn Crippen report states that the material is primarily iron oxides and so can be classified as a ferrite. 2.6 VEGETATION

The dominant vegetation in the mine area comprises zonal (typical of elevation zone and climate) and azonal (atypical) natural forests consisting primarily of mid-altitude dense humid forests with variable canopy height. Figure 2.3 shows a correlation of vegetation class with the topography and substrate or underlying soil conditions. As shown, azonal forest occurs on the plateau due to the ferricrete substrate. The headwater forests function as an important buffer for water quantity, releasing water even during times of drought (Golder, 1999). The forests within the mine area are relatively pristine compared to other parts of Madagascar. However until a regional policy for sustainable use can be developed and implemented, uncontrolled degradation of the natural forests within the mine area is likely.

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SECTION 3.0 - MINE EROSION AND SEDIMENT CONTROL PLAN 3.1 MINE DEVELOPMENT

The current mine plan envisages ore production at a rate of approximately 23,000 dry tonnes per day for 20 years. Low grade ore stockpiles will be removed and processed to extend the process plant life to 27 years. Approximately 125 million tonnes of ore will be extracted under this scenario. The planned excavations will also require the removal of approximately 150 million tonnes of associated low grade material or waste overburden to stockpile locations. The Ambatovy orebody will be mined initially with production starting on the Analamay orebody in Year 6. Where possible, waste materials will be placed back within mined out areas. Preliminary mine plan layouts for Pre-production, Year 1, Year 4 and Year 20 are shown on Figures 3.1 through 3.4. Mining will be completed by open pit methods using conventional mining equipment including dump trucks, hydraulic excavators and dozers. The hydraulic excavators will excavate progressively lower benches, proceeding in approximately 6 m high increments. The resulting overall slope is anticipated to be 20 degrees. The excavation will reach maximum depths of over 50 m below the existing terrain at certain locations and the mining area will have a relative elevation difference in the order of 150 m from the highest to lowest points. The total aerial extent to be disturbed over the proposed mine life is approximately 1,290 ha. This averages about 65 ha per year. Ore will be slurried at the Ore Preparation Plant located in between the two orebodies. The slurry will be pumped from the Ore Preparation Plant to the process plant located at the Tamatave area. 3.2 3.2.1 MINE EROSION AND SEDIMENT CONTROL General The topography of the mining area is quite rugged and the hills have relatively steep slopes. In addition, the area receives relatively heavy rainfall. The planned open pit mining will expose disturbed and undisturbed lateritic materials susceptible to erosion from rainfall and this will generate sediment, which must be controlled as part of the overall mining process. The soil testing results confirm that there is high erosion potential from disturbed areas due to the fine nature of the soil. Golder (1999) indicated that the areas disturbed by mining activity are expected to produce 155 to 550 times the natural sediment yield per unit area. Based on estimates of 500 tonnes to 1,200 tonnes per km2 for natural sediment yields (Golder, 1999), disturbance of the mining area could lead to sediment loads of as high as 660,000 tonnes per km2 without any mitigative measures. ESCM will be implemented to mitigate the potential negative impacts of sedimentation from mining activities. The ESCM have been based upon Best Management Practices (BMPs) developed worldwide (US EPA 1976, Ontario MNR 1988, Ontario MNR 1989, Ontario MTO 1982, and IEAust 1996). Due to the intense rainfall events, the steep slopes and the

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lateritic soils that characterize the mining area, the ESCM focus primarily upon the management and control of surface water runoff. By putting in place measures that control the surface runoff, both the amount of sediment generated from erosion and the amount requiring collection can be minimized. The ESCM include structures for the prevention of soil erosion (erosion control) as well as methods for removing sediments from surface runoff prior to discharge (sediment control). These measures are to be implemented during mining operations, including overburden stripping, ore extraction, waste stockpile placement, reclamation, and infrastructure construction. The objectives of the ESCM are as follows: Minimize sediment loading to the downstream environment by implementing practical and cost-effective solutions for erosion and sediment control Fully integrate the erosion and sediment control measures with the mining operations to maintain production efficiency Reduce maintenance costs on the mine infrastructure by controlling erosion Establish fully stabilized and protected final reclaimed surfaces that require minimal or no maintenance

3.2.2

Design Approach ESCM are typically designed to accommodate peak runoff flows generated by extreme rainfall events of reasonable return periods. Erosion and sediment control methods for short-term measures are typically designed using the 1 in 5 year 24-hour rainfall event. Such short-term measures generally include those associated with the overburden stripping and ore recovery operations, which are expected to occur over periods of 6 to 12 months in any particular mining area. Long-term measures for sediment control will be designed using the 1 in 10 year 24-hour rainfall event (EDS). Long-term measures generally include final sedimentation ponds (RCPs and CLPs) and channels that will be in operation longer than 12 months and that are required to be functional until reclamation activities, including vegetation of past mining areas, are complete.

3.2.3

Types of ESCM Although this report focuses on sediment ponds (sediment traps, RCPs and CLPs) and channels (collection channels), the types of ESCM that may be implemented for the stripping, mining and reclamation stages are listed below.

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Temporary Use Only Mulching Surface Roughening Chemical Surface Stabilizers Temporary Watercourse Crossings Brushwood Barriers Erosion (Straw) Bales Sediment Fences Rock Filter Dams Construction Exits Sediment Ponds

Temporary or Permanent Use Erosion Control Mats Revegetation Soil-cement Treatment Catch Drains and Perimeter Banks Diversion Channels Diversion Berms Grassed Channels Reinforced Grassed Channels Geosynthetic-lined Channels Rock-lined Channels Rock Mattress Channels Chutes and Flumes Drop Pipes Check Dams Level Spreaders Buffer Zones Sediment Weirs Sediment Basins

Illustrations and brief descriptions, including the purpose, suitability and limitations, of each of the ESCM components (IEAust, 1996) are presented in Appendix B. Design details of these components for each specific area and location will be based on actual field requirements and selected design criteria. Components that make use of locally available construction materials will be favoured over those requiring imported materials. A conceptual layout incorporating some of the components listed is described below. 3.2.4 Conceptual ESCM Layout Suitable ESCM will be designed for each mining area prior to stripping of that area. The ESCM will be constructed progressively and maintained as required until reclamation of the mined out area is successfully completed. A typical general arrangement of the proposed ESCM is provided on Figure 3.5 to illustrate how the components may be integrated into the mine plan. Prior to commencing stripping operations, long-term sedimentation pond(s) or RCPs and CLPs will be constructed at suitable location(s) to receive all runoff from the disturbed mining areas. In addition, collection channels will be constructed to direct runoff from areas above the active mining area into the RCPs. In areas where slopes are steep, small rockfill check dams, temporary drop pipes or armouring may be incorporated into the channels to prevent channel erosion. As stripping and mining operations proceed, various shorter-term measures will be employed. These will include grading of exposed surfaces to prevent gullying and to Page 10 of 55
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promote drainage to the collection channels, which will likely be constructed along the edges of the mining areas. Care and attention to site grading will minimize infiltration into exposed surfaces which will ensure that the surfaces remain firm and accessible by equipment. The channels above the mine will be extended to receive runoff from the mining areas and direct it downstream to the RCPs. Short-term sediment traps or in-pit ponds will also be excavated at selected locations within the mining areas or along the channels to help remove sediment and reduce loadings to the RCPs. Following the completion of mining in any one area, waste overburden from another area will be placed back into the mine. It is proposed that the waste overburden will be placed in benches up to 3 m high and with perimeter slopes at 3.3H:1V or flatter. The benches will be graded into the slope and configured longitudinally to direct runoff to a lined channel or drop pipe where the flow can be discharged in a stable manner down the slope. The final reclamation surfaces will be roughened and then vegetated as soon as possible, to provide further stabilization and erosion control for the longer term. The implementation of the ESCM for each mining phase will be undertaken in the field by the supervising engineer using design charts, typical arrangements and specifications. The design charts and typical arrangements are expected to include: Calibration procedures and charts for determining the time of concentration and peak runoff flows reporting to the point of interest for the design rainfall event Design charts for determining peak velocities within collection channels Design charts for sizing sediment traps, channels and spillways, etc. Design charts for determining channel lining requirements Drawings illustrating typical arrangement and design details for channels, spillways, sediment traps, ponds, linings, check dams, etc.

3.2.5

Main Components The Basic Design focussed on the following main components of the ESCM: Sediment Traps Collection Channels Runoff Collection Ponds Clarification Ponds Reclamation

The RCPs and CLPs will be constructed for the collection and temporary storage of runoff and will be in place at least for the duration of the mine. This will allow natural clarification or attenuation of peak flows so that treatment of flows with flocculant can be achieved to promote adequate clarification. A RCP will be constructed downstream of disturbed mining areas in each of the impacted watersheds. Each RCP will discharge into a CLP, which will be equipped with a flocculant addition and mixing system, installed at the discharge from the RCP. Based on the proposed mine plan, three RCPs will initially be required (for the Page 11 of 55
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Ambatovy orebody) as shown on Figures 3.1 and 3.2. By Year 6, three RCPs will be required for the Analamay orebody. By Year 15, one additional smaller RCP will be required due to backfilling of the Ambatovy Southeast Pit. 3.3 POTENTIAL WATER SUPPLY

Runoff water from the mining areas may be utilized to provide water supply for the Ore Preparation Plant. The water supply may be provided from all RCPs except the Analamay South Mine RCP (Analamay SMRCP), which will continue to drain to the Torotorofotsy wetland, and the Ambatovy Southeast Backfill RCP (ASERCP), which has a small watershed. Water would be pumped either from the in-pit sumps or from each of the RCPs to the Ore Preparation Plant. The potential for supplementing water supply from the RCPs to the Ore Preparation Plant is based on excess water being available beyond minimum downstream flow requirements.

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SECTION 4.0 - DESIGN CRITERIA 4.1 FACILITY HAZARD CLASSIFICATION

The Canadian Dam Association (CDA, 1999) dam hazard classification selection criteria were used to determine the overall hazard potential (consequence rating) for the proposed RCP and CLP embankments. Under this system, a dam is classified in accordance with the severity of hazard resulting from failure of the dam or its associated structures and the perceived risk of occurrence. This hazard classification forms the basis for the design requirements and ongoing surveillance activities. Dam classification considers the potential consequences of failure, which includes potential loss of life, economic damages and social and environmental impacts. A dam failure of any of the RCP or CLP structures would lead to a large release of water and sediment that would flow down valley from the dam site causing a flash flood condition and erosion and sedimentation. There are no heavily populated areas directly downstream of the mine area, however local farmers do live in the valley bottoms where their rice paddies are located. Therefore, a dam failure could lead to some fatalities. Environmental and socioeconomic damage would be large, but not considered extreme due to the chemical inertness of the water and sediment. The financial impacts would be large due to clean-up costs and compensation for the impacted population, but not extreme. Therefore, the RCP and CLP embankments are classified in the High consequence category (see Table 4.1). For seismic design for the High consequence category, a MDE is taken as either a probabilistic event with a return period of 1 in 1000 to 1 in 10,000 years or the deterministically derived MCE (see Table 4.2). The MDE has been selected as equal to the 1 in 10,000 year event. For the High consequence category, an Inflow Design Flood (IDF) between the 1 in 1,000 year event and the Probable Maximum Flood (PMF) is specified (see Table 4.3). The PMF was adopted for the Basic Design. The PMF is the flood resulting from the Probable Maximum Precipitation (PMP) event. 4.2 SEISMIC DESIGN CRITERIA

A review of the regional seismicity for Madagascar has been carried out and detailed analyses completed to determine appropriate seismic design parameters for the Ambatovy project. The seismic design parameters are applicable to facilities at the mine site and those facilities at or near the east coast (including the Tailings Facility, Process Plant site and port facilities). Seismic ground motion parameters (including maximum acceleration and earthquake magnitude) were determined from probabilistic and deterministic seismic risk analyses. Using the results of the analyses, together with a seismic hazard classification for the RCPs and CLPs, appropriate design earthquakes and seismic design parameters have been selected for Basic Design. Consistent with current design philosophy for geotechnical structures such as dams, two levels of design earthquake have been considered: the Operating Basis Earthquake (OBE) for normal operations; and the Maximum Design Earthquake (MDE) for extreme conditions. Values of

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maximum ground acceleration and design earthquake magnitude have been determined for both the OBE and MDE. The OBE is typically determined using the probabilistic seismic hazard analysis to select an acceptable hazard level, based on the probability of exceedance over the design life of the embankments. This is often chosen as the earthquake that has a 10 percent probability of exceedance in 50 years, corresponding to a return period of 475 years. For an operating life of about 30 years the probability of exceedance for the OBE event is 6 percent. The maximum acceleration for the 1 in 475 year earthquake is 0.02g. A conservative design earthquake Magnitude of 6.0 has been adopted for the 1 in 475 year event, based on the review of historical seismicity and regional tectonics. The RCP and CLP embankments would be expected to function in a normal manner after the OBE. An appropriate Maximum Design Earthquake (MDE) for the RCPs and CLPs has been determined based on a hazard classification of the embankments, with consideration of the consequences of failure. The RCP and CLP embankments are classified in the High consequence category based on the criteria given by the CDAs Dam Safety Guidelines (1999). The MDE for the RCPs and CLPs is selected based on the consequence category and the criteria for design earthquakes presented in Table 4.3. For a HIGH consequence category, a MDE is taken as either a probabilistic event with a return period of 1 in 1000 to 1 in 10,000 years or 50% to 100% of the deterministically derived MCE. The MDE has been selected as equal to the 1 in 10,000 year event with a design Magnitude of 6.5 and a maximum acceleration of 0.11g. Limited deformation of the RCP and CLP embankments is acceptable under seismic loading from the MDE, provided that the overall stability and integrity of the embankments is maintained and that there is no release of stored sediment or water. The maximum accelerations of 0.02g and 0.11g for the OBE and MDE events respectively are for ground motions in soft rock or very dense ground through which ground amplification effects are negligible. Maximum accelerations within the RCP and CLP embankments may be higher due to amplification of ground motion beneath the embankments. Typically, ground accelerations may amplify by a factor of about two. The ability of the embankment fill materials to transmit high seismic motions is dependent on their dynamic stiffness and damping characteristics. Dynamic site response analyses may be carried out to determine the amplification of ground motions as seismic waves propagate through the embankments. 4.3 HYDROLOGY DESIGN CRITERIA

A review of all available information regarding the hydrometeorology of the Ambatovy Project mine site has been conducted. This included recent data provided by Golder (Appendix A) and information in the Phelps Dodge EA and Feasibility Study. PMP - Extreme precipitation information is provided by Klohn Crippen and Golder as summarized in Sub-section 2.2. The 24-hour precipitation values are based on data for a station at Analamazaotra, which is located approximately 15 km southeast of the mine site on the Ankara ridge divide. The number of years of record these statistics represent is unknown but it has

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been assumed that this data is reasonably representative of long-term patterns. By analyzing the Klohn Crippen results, the 24-hour precipitation data is estimated to have a mean of 145 mm and a standard deviation of 79 mm. Using these statistics and assuming an Extreme Value Type I distribution (as did Klohn Crippen), the 1 in 1,000 year 24-hour precipitation is calculated to be 535 mm. Furthermore, using these statistics with a PMP frequency factor equation presented in the Rainfall Frequency Atlas for Canada (which, though not likely directly relevant to Madagascar, is reasonable as it is applicable to the East Coast of Canada and does consider cyclone events), the PMP (24-hour) was calculated to be 1,250 mm. This value seems to be reasonable for an area that is exposed to cyclone events. It is less than the 1,300 mm in 12 hours value used for the tailings area at the coast as would be expected for an inland location. A PMP value of 1,500 mm has been adopted for the Basic Design of the spillways at the mine site. Monthly Meteorological Data - The mean monthly precipitation values have been obtained from the Golder information as described in Sub-section 2.2. Monthly evaporation values are based on pan evaporation for Perinet as discussed in Sub-section 2.2. 4.4 DISCHARGE WATER QUALITY

The main objective of the ESCM is to prevent and/or minimize adverse impacts to water quality and quantity downstream of the mine areas. This will be accomplished by providing suitable ESCM in disturbed areas due to mining activities. In particular, the ESCM will need to maintain a specified water quality for a specific storm event. At this stage, the EA has been based on meeting US Environmental Protection Agency (EPA) (1976) requirements to maintain less than 50 mg/L Total Suspended Solids (TSS) for up to the 1 in 10 year 24-hour storm event. This event is referred to as the Environmental Design Storm (EDS). Due to the lack of baseline data on natural surface water quality during such storm events, a clause has been put in the EA that indicates that the ESCM will meet EPA requirements or maintain water quality similar to baseline conditions for the 1 in 10 year 24-hour storm event. 4.5 DISCHARGE WATER QUANTITY

With respect to water quantity, the main consideration is to ensure that the range and distribution of discharge flows from the mine drainage areas are generally similar to baseline conditions. At this stage of the project no definite design flow distributions have been specified. Dynatec has indicated that monitoring of pre-development and post-development flows will generally be conducted to ensure impacts are acceptable. Based on studies conducted to date, it has been shown that the pre-development or natural conditions at Ambatovy provide attenuation of rainfall through vegetation uptake and groundwater infiltration into the ferricrete. During the wet season the ferricrete layer takes up groundwater, temporarily stores it, and then discharges it in the dry season. Once mining commences, this natural flow attenuation mechanism will be affected by removal of the ferricrete and vegetation. Hydrology analyses indicate that with the removal of vegetation and ferricrete, the distribution of discharge will include more extreme wet and dry periods. In order to simulate the attenuation of the pre-development case, the ESCM will need to have provision to temporarily store water from the wet season to maintain flows during the dry season. Therefore, a certain amount of live storage will be required within each RCP.

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Loss of vegetation will also result in post-development flows being higher than pre-development. This could be addressed by routing excess water to the Ore Preparation Plant for use in the process. At this stage there is no commitment within the EA to do this nor has it been treated as a requirement for design. The basis at this stage is to route all water for discharge from the ESCM to the environment with the diversion of excess water to the Ore Preparation Plant being accounted for in the design as a possibility. This will be accomplished by providing an estimate of how much extra water can be diverted to the Ore Preparation Plant while maintaining normal baseflows to the downstream. 4.6 SOIL CHARACTERISTICS

Key areas of erosion and therefore potential generation of sediment will be the mine pit areas, waste and low grade stockpiles, and backfilled areas, prior to these areas being reclaimed. One of the most significant variables governing soil erosion and the selected measures for successful sediment control is the particle size distribution of the eroded soils. An assessment completed by Klohn Crippen (1998) is provided below. Specific soil erosion testing programs, such as in-situ trial plots, have not been undertaken as part of the feasibility study. Instead, a series of particle size distributions have been compiled from soil samples taken at different locations and depths. These tests are summarized in the Ambatovy Soil Testing Report issued November 1997, by Soiltech of South Africa. The soil gradation tests were performed with and without the use of dispersing agents. The tests without dispersing agents were carried out using a double hydrometer methodology. The results show that without dispersing agent, the soils were classifying as predominantly silts, however, when dispersing agent were used, the soils gradations indicate significant clay content. Clearly, the constitutive nature of the lateritic soils consist of clay-sized materials with appreciable plasticity and agglomeration characteristics. This nature is typical of lateritic soil profiles worldwide. The available grain-size distributions do not extend below 2m when using dispersing agent or below 5m for the double hydrometer. The particle size distributions of interest for sediment control are the ones performed without using dispersing agent and it is the constituent material content, i.e. the clays, in this case, that are of most importance. The lack of definition of particle sizes less than 5m precludes an accurate evaluation of the settling ponds trap efficiencies and, therefore, in their dimensions. The table below presents the gradation adopted as being representative for eroded soils in disturbed mining areas. Percent Finer Diameter (mm) 100 19 90 0.43 80 0.05 35 0.02 6 0.005 0 0.0001

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In 2004 Geopractica completed index testing on several samples of both the ferralite and saprolite soils. The results of these tests are summarized on Tables 4.4 and 4.5 with further details provided in their report entitled Preliminary Stability Analysis - Mine Pit Slopes, Ambatovy Nickel Project. Based on their testing and the Unified Soil Classification System (USCS), Geopractica classified the ferralite primarily as MH with some samples classified as ML or SC. Geopractica classified the saprolite as MH, with a few samples classified as ML. In general, both soil types are similar and can be described as sandy silt, trace clay and gravel. This compares well with Klohn Crippens results which can be described as silt, some sand, trace clay and gravel. Investigations conducted by Knight Pisold in 2005 and 2006 further confirmed past studies and showed that residual soils encountered at the Ore Preparation Plant site consist predominantly of silt and range from silt and sand to silt and clay. Several samples also contained gravel, ranging from trace gravel to gravel. The stratum is of variable density, ranging from firm to hard. The colour ranged from light yellowish orange to dark reddish brown with mottled white/black/green patches. Nine moisture content determinations made on this unit produced results ranging from 30.5 to 51.1 percent. The average moisture content is 43.7 percent. Sixty-two Atterberg Limits tests yielded ranges in Liquid Limits from 41 to 96 percent and Plastic Limits from 26 to 47 percent. Plasticity Indices for the samples ranged from 12 to 54 percent and Shrinkage Limits ranged from 4.5 to 18 percent. The average Plastic Limit, Liquid Limit, Plasticity Index and Shrinkage Limit for the samples tested were 36, 59, 23 and 10 percent, respectively. Sixty-two grain size determinations indicate that the residual soil is silt with trace to 48 percent clay and trace to 42 percent sand. Seven samples also contained gravel ranging from 5 to 59 percent. Based on these results and the USCS, the material can generally be classified from ML, or inorganic silt to silty or clayey fine sand with slight plasticity, to MH, or inorganic silt of high plasticity. Additional sampling and testing of the mine pit materials has been proposed as part of the current exploration drilling program. At the time of writing this report, this work has not yet been initiated. Upon review of additional data from Geopractica (2004) and soils data from the KPL 2005 Ore Preparation Plant site investigation, the grain size distribution provided by Klohn Crippen (1998) has been used for Basic Design. Further sampling and testing of samples from the exploration drilling program is recommended to further refine the soil characterization data base for detailed design. 4.7 EROSION POTENTIAL

In order to investigate erosion potential, some limited testing was completed at site in 2005. This testing includes some rainfall simulation tests. The testing includes sprinkling of simulated rainfall on an exposed slope area (i.e. no vegetation) and collection of the runoff for determination of TSS. Based on two tests performed, the TSS for collected runoff varied from 2,100 mg/L to 12,780 mg/L which confirms that the soils at the mine site have a relatively high erosion potential. A field report describing the test is provided in Appendix C.

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4.8

GEOTECHNICAL CONDITIONS

Certain soils were determined as possible construction material. The residual Gabbro Gneiss/Migmatites are found locally, whereas the Ore Preparation Plant residual soil will need to be transported. 4.8.1 Residual Gabbro Gneiss/Migmatites Residual soil derived from Gabbro Gneiss/Migmatite bedrock was encountered in 6 drillholes and 10 test pits excavated at the mine site. The soil consists predominantly of clay with trace weathered ferricrete gravel and is of very stiff variable density. Several samples also contained gravel, ranging from trace gravel to gravel. The stratum is of variable density ranging from loose/soft to dense/stiff with depth. The colour was generally light brown with section speckled orange, white and pink and some spotted black. This unit was encountered at depths ranging from 0.2 to 13.2 m and extended to depths ranging from 0.2 to 48 m. Based on SPT N values of 5 to 65 and (N1)60 values of 5 to 63, the unit has a firm to hard relative density. The average N and (N1)60 values for the material were 17 and 14, respectively, based on 41 tests completed. Nineteen moisture content determinations made on this unit produced results ranging from 8.4 to 64.6 percent. The average moisture content was 27.8 percent. Thirty-five Atterberg Limits tests yielded ranges in Liquid Limits from 23 to 68 percent and Plastic Limits from 21 and 49 percent. Plasticity Indices for the samples ranged from 2 to 27 percent and Shrinkage Limits ranged from 0 and 10 percent. The average Plastic Limit, Liquid Limit, Plasticity Index and Shrinkage Limit for the samples tested were 32, 48, 16 and 5.5 percent respectively. Thirty-five grain size determinations indicate that the residual soil is silty sand with none to 56 percent clay and none to 78 percent gravel. Based on these results and the USCS, the material can generally be classified from ML, or inorganic silt to silty or clayey fine sand with slight plasticity, to MH, or inorganic silt of high plasticity. Further information on this soil can be found in Knight Pisold report entitled Mine Runoff Control and Stockpile Facilities 2005 Site Investigation Report (Ref. No. NB301-00116/3-6). 4.8.2 Residual Soil from Ore Preparation Plant Residual Soil occurs near surface across the entire Ore Preparation Plant area and was encountered in all of the drillholes advanced in that area. The Residual Soil consists predominantly of silt and ranges from silt and sand to silt and clay. Several samples also contained gravel, ranging from trace gravel to gravel. The stratum is of variable density, ranging from firm to hard. The colour ranged from light yellowish orange to dark reddish brown, mottled white/black/green patches. This unit was encountered at depths ranging from 0.5 to 3.2 m and extended to depths ranging from 6.0 to 46.5 m.

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Based on SPT N values of 9 to 51 and (N1)60 values of 9 to 77, the unit has a firm to hard relative density. The average N and (N1)60 values for the material were 27 and 17, respectively, based on 154 tests completed. Nine moisture content determinations made on this unit produced results ranging from 30.5 to 51.1 percent. The average moisture content was 43.7 percent. Sixty-two Atterberg Limits tests yielded ranges in Liquid Limits from 41 to 96 percent and Plastic Limits from 26 and 47 percent. Plasticity Indices for the samples ranged from 12 to 54 percent and Shrinkage Limits ranged from 4.5 and 18 percent. The average Plastic Limit, Liquid Limit, Plasticity Index and Shrinkage Limit for the samples tested were 36, 59, 23 and 10 percent, respectively. Sixty-two grain size determinations indicated that the Residual Soil is silt with trace to 48 percent clay and trace to 42 percent sand. Seven samples also contained gravel ranging from 5 to 59 percent. Based on these results and the USCS, the material can generally be classified from ML, or inorganic silt to silty or clayey fine sand with slight plasticity, to MH, or inorganic silt of high plasticity. Additional information is provided on this soil in the Knight Pisold report entitled Ore Preparation Plant Site Foundation - 2005 Site Investigation Report (Ref. No. NB301-00116/5-3).

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SECTION 5.0 - BASIC DESIGN 5.1 GENERAL

The design methodology for the RCPs and CLPs has been updated and improved since the UFS. In general, the overall design of key ESCM components has changed as a result of more available information on topography, local soils, updated hydrology data, more sophisticated modelling methods and more defined operating parameters. In particular the main differences and impacts to the ESCM to date resulting from Basic Design are summarized as follows: 1. The volume of earthworks is greater as a result of the updated Lidar survey and increased embankment heights to satisfy operational concerns. 2. The amount of spillway construction is greater due to the higher embankments. 3. Decant systems have been added for the CLPs to provide operating flexibility and attenuation of flows. 4. Collection channels have been added to provide direction of runoff around stockpiles. A comparison of the design basis and methodology for the UFS compared to Basic Design is provided on Table 5.1. Both monthly water balance analyses and extreme event modelling were completed to determine design flows and water availability for the RCPs and CLPs. Extreme event modelling was also completed to estimate sediment loadings from disturbed areas, and to size collection channels and sediment traps. In addition to hydrology and sedimentology analyses, slope stability and seepage analyses on several or all of the RCP and CLP embankments and some preliminary design of a flocculant addition and mixing system have been completed. The following sub-sections provide a summary of the analyses completed and the results. 5.2 5.2.1 ESCM MAIN COMPONENT DESIGN General For the purposes of Basic Design, the layout for the potential worst case year of operations in terms of areas of disturbance, runoff amounts and sediment loadings for each of the mining areas was used. This approach is expected to provide a somewhat conservative estimate of the amount of runoff and sediment reporting to the ESCM. The year of operations considered for each area were as follows: Ambatovy North Mining Area Ambatovy South Mining Area Ambatovy Waste Stockpile Area Ambatovy Southeast Backfill Area Year 20 Year 10 Year 4 Year 15

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Analamay Northwest Mining Area Analamay Northeast Mining Area Analamay South Mining Area

Year 20 Year 20 Year 20

The computer software program SEDCAD was used for the Basic Design of the ESCM. SEDCAD provides an estimate of peak flows and peak TSS concentrations based on user input data and parameters. 5.2.2 Design Rainfall Events The EDS and the PMP were applied to the respective sub-catchments within the Ambatovy and Analamay areas (undisturbed, pond, mining, waste dump, stockpile and other disturbed areas (i.e. roads) and reclaimed areas) by distributing the precipitation over time using the SCS (Soil Conservation Service) Type III distribution. SCS Type III distributions are typically applied to areas exposed to cyclonic activity. The EDS was applied in order to design the sediment traps and collection channels and to assist in estimating the invert of the overflow spillways. The PMP was applied in order to design the overflow spillways and to estimate the ultimate embankment crest. As stated above the EDS is equivalent to the 1 in 10 year 24-hour rainfall event which is 231 mm in 24 hours, while the 24-hour PMP selected for Basic Design at this stage is 1,500 mm. 5.2.3 Erosion Potential Factors In terms of sedimentology, inputs into the models include land flow condition, erodibility factor, C factor, P factor and grain size distribution. The parameters used for the selected land flow conditions were as follows: Erodibility Factor (K) is the erosion susceptibility of the soil type and is determined by estimating the resistance of the soil type to rainfall and overland flow. A high K factor indicates high erosion susceptibility (such as loose sand), while a low K indicates a soil with low erosion susceptibility, such as undisturbed, stiff laterite. The K factors for the mining and stockpile areas were slightly higher than natural or undisturbed areas as it is deemed that the soils in these areas are disturbed and more susceptible to erosion. The C Factor is the influence of cover material, located on or just beneath the soil surface, on reducing the amount of soil disturbance. A high C value indicates little influence, or exposed soil, while a low C value indicates more influence, such as leaf matting on top of the soil. Therefore, the mining and stockpile areas were assigned a high value and the undisturbed areas were assigned a much lower value. The reclaimed areas were assigned a higher value than undisturbed to model conditions where vegetation has not been totally re-established. The P Factor accounts for specific support practices such as contouring and terracing, as well as sediment control barriers such as grass buffer strips, straw bales, gravel or filter barriers, and stiff-grass hedges. A P value of 1 was assigned for this analysis Page 21 of 55
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since it was assumed that no measures would be in place upstream of the sediment traps and RCPs. The grain size distribution(s) of the soil(s) prone to erosion is input to help estimate the performance of sediment control structures such as sediment traps. The coarser the soil, the more readily particles may settle out in the sediment traps as opposed to in the RCPs. The grain size distribution used for Basic Design was discussed previously in Sub-section 4.6.

The sedimentology inputs for the SEDCAD models are shown on Table 5.2. 5.2.4 Runoff Factors In terms of hydrology, the SCS method of analysis determines the time of concentration (tc) for each sub-catchment based on the soil cover, average land slope and hydraulic length for each area. The time of concentration is the time required for runoff to arrive at the outlet of the sub-catchment from its most remote point. The soil cover is categorized using CN numbers based on SCS runoff curve numbers ranging from 1 to 100. Additional inputs into the models included pond storage characteristics and spillway geometry. The runoff curve number reflects the expected runoff from a given area during a storm event and is based on soil type and ground cover. High curve numbers indicate complete runoff with little retention and low numbers indicate high retention due to the soils capacity to store water and the vegetations ability to intercept rainfall and return it to the air through evapotranspiration. A higher curve number was assigned for the mining, stockpile and other disturbed areas, while a lower curve number was given to the undisturbed and reclaimed areas. The selection of runoff curve numbers used for the analyses was based on specific knowledge of the site and experience. Runoff curve numbers for undisturbed, disturbed and reclaimed areas are based on experience with similar projects and have been reviewed by Golder. The affected drainage areas were divided into six main types and runoff curve numbers applied to the various area types are summarized as follows: Type of Area Undisturbed Areas Active Mining Areas Active Waste Dump and Stockpile Areas Other Disturbed Areas Reclaimed Areas Flooded Areas 5.2.5 Hydrology Inputs and Routing Conditions The sediment traps and collection channels have been designed to pass the EDS while the RCPs and CLPs have been designed to temporarily hold the EDS and then release it over Page 22 of 55
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Runoff Curve Number 73 91 91 93 79 100

a period of approximately 10 days. Prior to routing the EDS, the starting pond elevations were set at the maximum normal operating levels for the RCPs and at the minimum operating levels for the CLPs and the ASERCP. For passing the PMP, the majority of the embankments were designed with side inlet emergency overflow spillways. The others were designed to overtop over a portion of their crest (i.e. armouring required on downstream slope). The stormwater modelling for design of the emergency overflow spillways involved estimating the height of flow and peak flows for the IDF to be routed over the embankments. Prior to routing the PMP, the starting pond elevations were set at the overflow spillway invert for each pond. 5.2.6 Establishment of Required Components In order to complete the Basic Design, an initial SEDCAD model was developed for the Ambatovy North Mining area. The EDS was applied to this initial model and, after running this initial case, a series of modifications were made to the model to refine the design until acceptable results were attained. The conditions for this and three additional cases are summarized as follows: Case 1: This case represents conditions prior to mine development just following completion of the RCP and CLP for each drainage area. For Case 1, the entire watershed is treated as undisturbed. This case was used to calibrate the model to approximate baseline conditions. Parameters for soil erodibility (K factor) and type of soil cover (C factor) were modified until the TSS from the CLP was very low or approaching zero. Case 2: This case represents the year of highest disturbance during the mine life and represents the Updated Feasibility Layout with the RCP, CLP and stockpile revised to account for the Lidar Survey and with collection channels, but does not include flocculant addition or sediment traps. Case 3: This case is the same as Case 2 except that the CLP is 10 times larger to account for flocculant addition. As SEDCAD does not have the capability to account for flocculant addition, the CLP surface area was increased by 10 times as testing completed in 2004 indicates that flocculant addition increases settlement time for fine particles by up to 12 times. Case 4: This case is the same as Case 3 except that sediment traps have been added at downstream limits of disturbed areas to remove coarser sediment from runoff prior to entering the RCP.

Results of the SEDCAD analyses for the Ambatovy North area for Cases 1 through 4 are summarized on Table 5.3 and SEDCAD outputs are provided in Appendix D. The following summary is provided on the basis of these results: The peak TSS estimated for Case 1 for discharge from the CLP is 7 mg/L or reasonably low and can be assumed to reflect the baseline condition with little disturbance. Page 23 of 55
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For Case 2, the peak flow is almost 5 times higher into the RCP due to higher and quicker runoff from disturbed active mine areas. The peak outflow from the RCP is similar to the pre-development case due to attenuation provided by the RCP. The peak TSS is extremely high entering the RCP and still significantly higher than the 50 mg/L limit for discharge from the CLP. For Case 3, increasing the CLP surface area by 10 times to account for flocculant addition greatly reduces the peak TSS estimated for discharge from the CLP to several hundred mg/L from more than 9,000 mg/L in Case 2. Inclusion of sediment traps for Case 4 significantly lowers the estimated peak TSS value for inflow to the RCP and results in an estimated peak TSS of 48 mg/L for discharge from the CLP.

On the basis of these results it was concluded that Case 4 was the preferred configuration, with sediment traps, collection channels and the CLP surface areas set 10 times larger to account for flocculant addition. Once this initial analysis was completed for the Ambatovy North mining area, the other areas were modelled using a similar configuration for the ESCM. 5.2.7 Selection of Operating Levels For the UFS, minimum and maximum operating levels were assumed based on limited information (i.e. no detailed topography) and without taking into account any specific requirements for water flow distribution. With the availability of accurate topography from the Lidar Survey and the use of more sophisticated modelling for Basic Design, the selection of operating levels has been updated. The basic requirements for selecting operating levels are discussed in the following sections while Table 5.4 summarizes the operating levels. 5.2.7.1 RCP Normal Operating Levels Minimum normal operating levels for the RCPs were based on maintaining enough dead storage to account for sediment deposition over a defined period. In the case of the RCPs the optimal design would be to have enough dead storage to never have to dredge them out due to difficult access. However, this is likely impractical as the dead storage volume could be quite high. Approximately 5 to 10 years of sediment storage has been used for the Basic Design. This will allow adequate time to monitor actual sedimentation rates during initial operations so that any dredging can be planned and incorporated within operations as required. Annual sediment yields were estimated from SEDCAD and using the Modified Universal Soil Loss Equation (MUSLE). In addition, sediment yields from various storm events were estimated for comparison to annual sediment load estimates. The total disturbed area reporting to each collection pond versus total watershed area reporting to each collection pond was also considered. Since each area has similar soil conditions and topography, it is reasonable to assume that sediment loadings will be similar per unit area in each Page 24 of 55

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watershed. The minimum operating level for each RCP is based on the estimates of annual sediment loads and comparison of each area and was set 1 m above the proposed dead storage volume shown on Table 5.4 to prevent re-suspension of sediment. For the UFS, the maximum normal operating level in each RCP was simply set at 1 m above the corresponding minimum operating level. For Basic Design the requirement for operating storage (live storage) is related to having enough storage available in each pond to be able to store approximately 6 months worth of dry season base flow requirements. 5.2.7.2 CLP Normal Operating Levels The minimum operating levels for the CLPs and the Ambatovy Southeast Backfill RCP were estimated in a similar manner to that for the other RCPs but with some extra storage added in for operating flexibility and downstream flow attenuation. Maximum normal operating levels were set at the same level as the emergency overflow spillway discussed below. 5.2.7.3 Emergency Overflow Spillway Levels In order to be able to handle flows in excess of the EDS, an emergency overflow spillway system will be constructed to pass the PMP from each RCP to the corresponding CLP and then to the environment. The overflow spillways will consist of riprap and gabion lined channels to prevent scouring and potential breach of the embankments. The required level of the overflow spillway was based on being able to contain the 1 in 10 year 24 hour storm (EDS) above the maximum normal operating level for the RCPs and above the minimum operating level for the CLPs and the ASERCP. This will allow for the design storm to be temporarily stored and released at a relatively slow rate so that adequate clarification can be provided prior to discharge from the CLP. SEDCAD was used to verify the overflow spillway inverts and to estimate the peak flow through each of the spillways. 5.2.8 Results The sedimentology inputs for the SEDCAD models are shown on Table 5.2. In addition to running the EDS and the PMP, the 1 in 2 year, 1 in 25 year, 1 in 50 year and 1 in 100 year 24-hour storm events were run in order to estimate sediment loadings in each of the RCPs and CLPs. A summary of the extreme event analyses is shown on Tables 5.5 and 5.6 with examples of typical hydrographs and sedimentographs presented on Figures 5.1 and 5.2. SEDCAD structure summary output sheets are presented in Appendix D. Based on the analysis, the PMP will result in peak flows from the RCPs and CLPs that range from approximately 30 m3/s to 640 m3/s (see Table 5.4). Based on these predicted

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flows, spillway inlets between 50 and 60 m wide will allow the flows to be passed from the RCPs and CLPs with peak depths of up to 5 m. The following conclusions can be made based on the SEDCAD analyses: The requirement for flocculant addition has been confirmed through more sophisticated computer analyses using SEDCAD. In order to prevent the RCPs and CLPs from filling with sediment prematurely, sediment traps are required to intercept coarser sediment from disturbed areas prior to being routed to the CLPs. In addition, the sediment traps will provide further assurance that the limit of 50 mg/L can be achieved for the 1 in 10 year 24 hour design storm (EDS). The sediment traps will consist of a low area or sump with adequate surface area where runoff discharges from stockpile and pit areas. The proposal is that the sediment trap areas be incorporated within the mine plan and maintained throughout operations. Therefore, no capital cost is anticipated for the sediment traps as they will be simply a geometrical modification to stockpile or open pit development. Even with the sediment traps, sediment will accumulate within the RCPs and CLPs. Sediment storage capacity for approximately 5 to 10 years based on estimated sediment loadings has been incorporated into the RCPs and CLPs as dead storage to account for this. The minimum operating level of the RCPs and CLPs has been set at 1 m above the dead storage level to prevent re-suspension of sediment. For the UFS, a one metre allowance was assumed for the operating range in the RCPs. In order to provide adequate attenuation of flows during mine development, a reasonable amount of normal operating range (live storage) has been incorporated within each RCP to ensure that a discharge distribution similar to pre-development conditions can be maintained. The requirement for operating storage (live storage) is related to having enough storage available in each pond to be able to store approximately 6 months worth of dry season base flow requirements. The normal maximum operating level has been selected corresponding to the sum of dead storage and live storage. For the CLPs, the normal operating range is smaller than that for the RCPs but will still allow for adequate operating flexibility. Capacity for the EDS in the RCPs has been maintained above the maximum normal operating level. The overflow spillway level has been selected based on the sum of dead storage plus live storage plus the EDS volume. There is potential to supplement water supply to the Ore Preparation Plant from mine runoff particularly during wet periods. The amount of excess water that could be abstracted from the mine runoff for supplying the Ore Preparation Plant will depend on environmental and economic considerations.

The estimated peak flows and TSS values for each area resulting from the EDS are summarized on Table 5.6.

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5.3 5.3.1

WATER BALANCE ANALYSES General Monthly water balance analyses were completed for the entire life of the mine to determine the effect of various precipitation conditions on the overall water storage and runoff management requirements. Average, 1 in 20 year wet and 1 in 20 year dry precipitation conditions were considered. The water balance model includes pre-development, operations and closure periods. The basis for the model is to maintain flows downstream of the RCPs and CLPs as close to pre-development conditions as possible. Excess water that is available beyond maintaining pre-development flow requirements is assumed to be discharged to the environment as well but could be used for supplementing the Ore Preparation Plant water supply.

5.3.2

Methodology The water balance analyses were completed using a spreadsheet approach. The model considers each RCP and CLP separately, with each watershed subdivided into various components or areas of similar hydrologic characteristics. The model calculates the outflows from each subdivided area on a monthly basis and adds them together to give the total monthly volumes of runoff reporting to each pond area. The model also adds the individual monthly volumes together to give annual totals. The water balance spreadsheet model also incorporates elevation versus capacity data for each of the RCPs and CLPs so that water storage requirements can be estimated for the pond areas on a monthly basis. The elevation versus capacity relationship allows the required operating levels for individual pond areas to be estimated for the life of the mine. The water balance will become a key tool for determination of operational strategies prior to and during operations. Average monthly precipitation and evaporation values and 1 in 20 year wet and dry precipitation values used for the water balance calculations are summarized on Tables 2.2 and 2.3. Background information for these values is discussed in Sub-section 2.2.

5.3.3

Water Management Constraints Various water management constraints were incorporated into the spreadsheet model. The water management constraints include storage allowances and flow capacity rates that will determine the amount of water that can be stored within the RCPs and CLPs and transferred to the Ore Preparation Plant or discharged to the environment. The water management constraints are summarized as follows: Dead Storage - The amount of storage required for approximately 5 to 10 years of annual sediment loadings reporting to the RCPs and CLPs.

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Operational Storage - This is the difference between the minimum and maximum operating pond volumes for each RCP. This constraint is required to meet the variability in pond volumes due to monthly variability throughout the normal annual cycle of precipitation. For this study it has been assumed that approximately 6 months worth of dry season base flow requirements will be suitable for operational storage. Environmental Design Storm - This is the amount of storage above the maximum operating pond level in the RCPs and above the minimum pond level in the CLPs and the ASERCP to pass the 1 in 10 year 24-hour storm event.

The storage volumes used for each of the water management constraints are summarized on Table 5.4 with further details provided in Sub-section 5.2. 5.3.3.1 Runoff Coefficients The selection of runoff coefficients used for the analyses was based on specific knowledge of the site and experience. Runoff coefficients for undisturbed areas are based on baseline studies conducted by Golder for the EA. Runoff coefficients for disturbed and reclaimed areas are based on experience with similar projects. The affected drainage areas were divided into six main types and runoff coefficients applied to the various area types are summarized as follows: Type of Area Undisturbed Areas Active Mining Areas Active Waste Dump and Stockpile Areas Other Disturbed Areas Reclaimed Areas Flooded Areas 5.3.3.2 Hydrogeological Data Other data used in the water balance model include mine pit inflows and seepage values. Both sets of data were estimated by Groundwater Consulting Services (GCS) in their report entitled Ambatovy Nickel Project Updated Feasibility Study - Hydrogeological Investigation - Mine Site issued in April 2006, a copy of which is provided in Appendix E. GCS estimated mine pit inflow rates on a daily basis for each stage of mining for various mining areas. The pit inflow rates depend on the size of the pit, depth of the pit bottom below groundwater level and the position of the pit in relation to the dewatered aquifers. The range of values is expected to be between 180 and 2,100 m3/day. Seepage values were estimated by GCS on a monthly and daily basis for each RCP and CLP embankment for various pond levels. The volumes of seepage from the ponds will vary and are dependant on the water depth and basin area covered by water. At minimum operating levels, the seepage rates will range from 2 m3/day to approximately 260 m3/day Page 28 of 55
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Runoff Coefficient (%) 40 90 65 65 50 100

while at maximum operating levels, the rates will range from 40 m3/day to approximately 490 m3/day. 5.3.3.3 Results The detailed water balance output sheets for specific years are included in Appendix F. In general, under average precipitation conditions, pre-development baseflows will be met in all areas except the Ambatovy Waste Stockpile and Analamay Northeast Mining areas. Baseflows may not be met in these areas because the total watershed area for each is greatly reduced over the life of the mine. This could be remedied by modifying the mine plan. Figure 5.3 provides a schematic diagram outlining the mean annual flow rates and mean hourly flow rates resulting from the average precipitation case for specific points of time during the mine life. Figures 5.4 and 5.5 provide similar schematic diagrams for 1 in 20 year wet and dry precipitation cases, respectively. As shown on these figures, there is the opportunity to supplement the water supply to the Ore Preparation Plant with excess water from the RCPs, especially during wet periods. 5.4 5.4.1 EMBANKMENT DESIGN General Several embankments will need to be constructed around the mine area to provide mine runoff control. These embankments will consist of six RCP embankments with corresponding CLP embankments for the Ambatovy North, Waste Stockpile and South areas and the Analamay Northwest, Northeast and South areas. The Ambatovy Southeast Backfill area will require a RCP only. In addition, the Analamay South mining area will also require a small embankment located at the upstream end of the RCP to keep runoff from flowing back into the pit once it has been routed to the RCP. As this embankment will be a short-term structure largely dependant on the mining plan, no cost has been included at this time. The embankment locations are shown on Figures 3.1 through 3.4. It is proposed to construct these embankments from local fill materials. The following sub-sections summarize the proposed embankment design including discussions on slope stability and seepage analyses. 5.4.2 Earthworks

5.4.2.1 General The embankments will be zoned earthfill structures. Construction of the embankments and access roads will require borrow material sourced predominantly from the immediate area. Other material (such as the core and filter material) may be borrowed from other locations, such as the Ore Preparation Plant, and transported to the embankment construction sites.

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The main local borrow materials proposed for earthworks construction include the following: Residual Soils (clayey silt and sandy silt fill) for core and shell zones Quarried Gneiss and Dolerite for rockfill, gabion fill, riprap and road surfacing Sand for filter and drain materials

5.4.2.2 Residual Soils Residual (weathered) soils required for shell zones for each embankment will be obtained from its respective spillway excavation and construction. If additional material is required, additional borrow areas may be created on the top of the hills within the RCP areas. Generally, this material is required to be composed of the coarser material. A more detailed borrow sourcing plan will be developed as part of the detailed design phase of the project. The residual soil proposed to be used as the shell material is the Gabbro Gneiss/Migmatite bedrock. The characteristics of this soil are summarized in Sub-section 4.8.1. The material that is to be used for the construction of the embankment core needs to be finer grained than the local residual soils. It will be obtained from the excavation required at the Ore Preparation Plant site and will be transported to the RCP and CLP construction sites. It may also be possible to use select local residual soils. The residual soil proposed to be used as the core zone material is the Gabbro based soils from the Ore Preparation Plant area which are summarized in Sub-section 4.8.2. 5.4.2.3 Quarried Gneiss and Dolerite Locally quarried gneiss and dolerite rock will be necessary for the construction of access roads, gabion fill, and embankment riprap. Therefore, it will be necessary to develop quarries during the pre-production construction stage. A more detailed assessment of potential quarry locations for sources of rockfill and granular materials will be used to finalize sources during the detailed design phase of the project. 5.4.2.4 Filter and Drain Material Sand for embankment filter and drain zones will be sourced from the mine site. Filter design dictates that it may be necessary to use two filter materials within the dam. The design classification of the core filter indicates that the sand should be in the Impervious Group 1 (85% passing 75 micron) and therefore the D15F of the sand should be less than or equal to 0.4 mm, whereas the design classification of the blanket drain filter indicates that the sand should be in the Impervious Group 2 (40% to 85% passing 75 micron) and therefore the D15F of the sand should be less than or equal to 0.7 mm. A more detailed

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assessment of specific sand borrow sources will be undertaken as part of the site investigations for the detailed design phase of the project. 5.4.3 Basin and Foundation Preparation Prior to fill placement various basin and foundation preparation activities will need to be completed including: Clearing Topsoil removal (stripping and grubbing) Foundation excavation

5.4.3.1 Clearing The embankment foundation footprints and upstream basins will be cleared in advance of the construction. Clearing operations will likely include the removal of any trees of suitable size to justify handling. This may be accomplished through the use of local labour or mechanized means. Any timber of value could be provided to local people for their use or sold commercially as appropriate. Material of no value (small trees or bushes) will be disposed of by means such as burning or chipping, as required, and stockpiling for use in future reclamation activities. 5.4.3.2 Topsoil Removal (Stripping and Grubbing) Topsoil and organics (small vegetation) will be removed from the embankment foundation areas and from the select areas within the upstream basins (i.e. borrow areas) and stockpiled for use in future reclamation activities. The stockpiles will be graded and temporarily stabilized with vegetation. All stockpiles will be located within the facility boundaries and therefore any sediment will be contained. 5.4.3.3 Foundation Excavation After removing the topsoil and organic layer, some excavation of materials will be required to key in the upstream embankment zones to suitable foundation materials. Due to the potential of the alluvium to act as a weak layer that could impact stability, it is expected that the alluvium layer will be removed, where practical, from the entire footprint of the embankments in the valley bottoms. Similarly, colluvium along the valley sides may need to be removed. Excavation across saturated areas, such as the valley bottoms, will require diversion of existing streams and dewatering during foundation excavation and preparation activities. Consolidation of the foundation soils within the valley bottoms may be a factor and the use of geosynthetic materials for reinforcement at the base of the embankments will need to be considered based on site specific requirements. Further investigations and testing will need to be completed in the valley bottoms to determine site specific excavation requirements and foundation consolidation characteristics during the detailed design phase of the project. Excavated materials may be used as fill in the embankment if deemed

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suitable. The excavated materials will be stockpiled with the topsoil if they are not suitable for embankment construction. 5.4.4 Embankments Embankments will be constructed in the locations shown on Figures 3.1 through 3.4. The embankments will be zoned earthfill structures. Approximately 3 million m3 of material may be required for embankment construction. 5.4.4.1 Embankment Cross Sections The RCP and CLP embankments are designed as zoned earthfill embankments. Over its length, each embankment will possess a central low permeability core designed to reduce seepage and pore pressures through the embankment; filter blankets and chimney drains will collect seepage through the embankment, and shell materials will provide the support for stability. Figure 5.6 shows a typical plan view of a RCP embankment and a CLP embankment, including approximate emergency overflow spillways locations, while Figure 5.7 shows typical embankment sections. As shown on Figure 5.7, the upstream slope of the embankment will be 2.5H:1V and the overall downstream slope will be 3H:1V. Benches will be incorporated into the downstream slopes to aid the control of runoff and erosion. The phreatic surface within the embankment and foundation would be controlled with engineered filters and drains. Two systems would be in place in each embankment: one behind the core zone (as described below) and one over a portion of the prepared foundation of the downstream shell. These systems would collect and control any small amounts of seepage that pass through the core and protect the finer particles from the core or foundation soils from migrating with the seepage flows. The flows from the filter and drains would be conveyed beneath the shell zone of the embankment to the downstream toe of the embankment. The filter behind the core zone would be comprised of a layer of suitably graded sand. The filter would prevent soil particles from being carried into the drain. The drain under the embankment would prevent any pore pressures from developing in the structural fill of the downstream shell zone. Finger drains would be located within the blanket, on selected alignments, to remove the flows downstream. The finger drains would be extended to the toe for discharge into a downstream collection system. The embankment section shown on Figure 5.7 will comprise the following general earthfill zones:

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Core Zone - This zone would be constructed using a low permeability zone of select silty clay fill (Ore Preparation Plant Residual Gabbro) and possibly other suitable local soils. The zone would have a crest width of 6 m. The upstream and downstream faces of the core zone would be at 1H:1V. Internal Filter/Drainage Zone - This filter/drainage zone would be constructed on the downstream face of the core zone (chimney drain and filter) and then along the prepared foundation to the downstream toe of the embankment (blanket drain) using clean, fine to medium grained sand. The filter would have a width of 2 m over its entire length. The chimney drain would collect any seepage through the upstream zone, while ensuring that internal stability is maintained by preventing the migration of particles to the downstream zone. The filter would be graded to ensure sufficient permeability to drain the downstream face of the core zone and would also enhance embankment stability by ensuring that the phreatic surface is maintained at low levels within the downstream embankment zone. Shell Zones - Locally borrowed random fill would be required for the upstream and downstream shell zones of the embankment. The local random fill would consist of residual gabbro, but may also include coarser less weathered material. Upstream Protective Layer - The upstream embankment slopes would be protected from erosion by a riprap layer, consisting of a 1 m wide zone of suitably sized and graded (+100 mm) rock placed on upstream face of the embankment. Downstream Protective Layer - The downstream slopes of the embankments would generally be revegetated immediately following construction. However, for the embankments which have been designed as overflow structures, the crests and downstream slopes would be armoured with concrete covered stepped gabion mats or baskets. All embankment crests would be capped with suitable road surfacing materials.

Fill material specifications for each of the embankment zones are provided on Figure 5.8. 5.4.4.2 Embankment Seepage Analyses Preliminary finite element seepage analyses have been carried out for select embankment sections. The models were completed using the computer program SEEP/W. The primary purpose of the seepage analyses was to estimate the magnitude and general pattern of the seepage flows through the embankments. The seepage analyses were also used to confirm the ability of the filters and drains to maintain a fully drained condition in the zones of the embankment downstream of the core zone. The phreatic surface through the embankment resulting from the seepage analyses was then used during the stability analyses discussed in the following sub-sections. Schematic diagrams of the modelled cross-sections are shown on Figure 5.9 and the program output plots are provided in Page 33 of 55
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Appendix G. The hydraulic conductivities for the embankment materials (included on Figure 5.9) were selected based on typical values corresponding to the general characteristics for each material and available test results. Seepage analyses completed by GCS for the complete embankments are discussed in Sub-section 5.3.3 with details provided in Appendix E. 5.4.4.3 Embankment Stability A stability review was also completed on the embankments to evaluate their overall stability and determine the Factor of Safety (FoS) for various cases. The stability analyses were completed using the computer program SLOPE/W, which is a limited equilibrium computer software program. The phreatic surface from the seepage model was used to represent pore pressure conditions in the stability model. The strength parameters were selected based on test results completed for the potential borrow materials and typical values for similar materials. Plots showing remoulded shear strength versus moisture content and liquidity index (Figures 5.10 to 5.13) were used to develop the strength parameters for the various embankment fills based on the anticipated moisture and liquidity index at the time of construction. A summary of these values are included on Figure 5.14. Note that undrained strength parameters were used for the stability assessment of the short-term case (immediately after construction). Both static (no earthquake loading) and pseudo-static (with earthquake loading) analyses were completed for the embankments, however only static analyses were completed for the short-term cases. Circular and block failures were analyzed to determine the critical failure mode. For the pseudo-static analyses completed on the embankments, a horizontal ground acceleration of 0.11 g was used, corresponding to the Maximum Design Earthquake (MDE) for this area, as determined by the seismic risk assessment described in Section 4.2. The results of these analyses are included on Figure 5.14, including the section configuration, resulting failure surface and the corresponding FoS. The model output plots are provided in Appendix H. For all cases analyzed, the circular slip surfaces were the critical modes of failure. The required FoS for the long-term static case, as recommended by the CDA, is 1.5 while the generally accepted standard for pseudo static stability is a minimum FoS of 1.0. The resultant FoS values for the drained (long-term) static cases were greater than the required value of 1.5 while the pseudo-static cases were all greater than 1.0. The required FoS for the short-term period following construction of the embankments (when high pore pressures may exist within the embankment fill) as recommended by the CDA, is 1.3. This case considered the undrained strength of the fill. All sections analyzed met this minimum requirement.

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Further site specific stability analyses should be completed as part of the detailed design based on more detailed geotechnical evaluation of the embankment sites. 5.4.4.4 Embankment Construction Initial preparation activities will be critical to successful construction of the embankments. Initial preparation work will include access road construction (to embankments, borrow areas and stockpile areas) and clearing. Suitable erosion and sediment control measures will need to be put in place prior to disturbing areas (i.e. stripping and grubbing). After the initial preparation of the embankment footprints, foundation excavation, including dewatering, will be completed. The final excavated surfaces will be prepared and inspected to confirm acceptable ground conditions for initial fill placement. Regular QA/QC inspection and testing will be completed throughout construction to ensure that the technical specifications are being met. The fill placement specifications and procedures will need to take into account the wet nature of the climate and available fill materials. 5.5 WATER MANAGEMENT FACILITIES

Water management facilities required for the RCPs and CLPs will include floating decant systems to release normal flows, including passing runoff resulting from the EDS over approximately 10 days, and overflow spillways to pass flows in excess of the EDS. Basic Design for the decant systems and overflow spillways is summarized below. 5.5.1 Floating Decant Systems Large reinforced concrete decant channels proposed in the UFS have been replaced by floating decant systems for operational simplicity and economical reasons. A floating decant intake with an outlet pipe will be used to pass normal flows and flows up to the EDS from the RCPs to the CLPs and from the CLPs to the environment. Each floating decant system will consist of a floating circular weir connected to a flexible HDPE pipe which in turn is connected to a rigid concrete encased HDPE pipe located through each embankment. The decant system will discharge onto the downstream slope of the embankment, onto a series of gabion steps complete with a concrete cover to prevent infiltration of decanted flows into the gabion amour. In order to control flow through the pipe for maintenance purposes or in case of an emergency, a knife gate valve/slide gate will be installed on the upstream end of the pipe, immediately upstream of the embankment. The downstream end of the pipe will either flow into a flocculant addition and mixing system prior to discharging into the CLP (in the case of the RCPs) or will discharge to the environment (for the CLPs and the ASERCP). Each floating decant intake level will vary between the minimum normal operating level and the overflow spillway invert. In order to allow access to the intake, the intake will be installed within a floating platform. The platform will be attached to each embankment crest

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by a floating ramp that will be anchored to the embankment but will be able rise and lower with the fluctuating water levels. Table 5.7 provides a summary of the design flows and pipe sizes recommended for the floating decant systems while Figure 5.15 shows a typical plan, sections and details of the floating decant systems. 5.5.2 Emergency Overflow Spillways Rather than routing overflow spillway channels over the embankments as proposed in the UFS, it is now proposed to construct spillways into abutments to reduce risk to the embankments and minimize hydraulic lining requirements. The exception to this change is the Ambatovy North CLP and the Analamay Northwest Mining Clarification Pond (Analamay NWMCLP) which will remain as embankment overflow spillways due to the low height and suitable geometry. The overflow spillways will include a broad-crested weir inlet section transitioning into a rockfilled gabion basket lined channel system downstream. In general, the spillway channels will be constructed with steps to dissipate energy from extreme flows. A stilling pool may be required at some channel outlets in order to slow down the flow to an appropriate velocity prior to entering the CLP or the environment. A typical plan and sections for the overflow spillways are shown on Figures 5.7 and 5.16. A preliminary stability analysis was completed on the gabion basket walls was analysed and results showed that the structure will be stable. 5.6 5.6.1 RUNOFF TREATMENT FACILITIES General As discussed above, the collected runoff from the mine will need to be treated to remove suspended solids in order to meet the discharge criteria of 50 mg/L. It is expected that this will be achieved through natural settlement within the RCPs under most normal flow conditions. However during more extreme wet periods (i.e. storage of storm events up to EDS), flows will be higher (as shown on Table 5.7) and flocculant will be added to enhance the settlement of solids within the downstream CLPs. 5.6.2 Background and Design Basis Chemical coagulation and flocculation is used for a wide range of applications including sand and gravel operations, mine drainage sites, runoff from stockyards and docks, drainage from construction sites, coal mines, gold mines, and vehicle maintenance operations. For example, operations with high amounts of clay or silt can be expected to require a cationic coagulant followed by an anionic polymeric flocculant (Klohn Crippen, 1998). Test work is used to determine product selection and dosages.

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Dynatec conducted preliminary testing of the benefits of adding flocculant to enhance the settlement of solids. The following procedure was used: A pail of representative ore blend was agitated. 1. After a short period of settlement a stock supply of simulated mine runoff with 1,500 mg/L to 2,000 mg/L suspended solids was collected. 2. The stock supply was transferred to 2,000 mL cylinders and flocculant was mixed with a perforated plunger. 3. Samples (100 mL) were taken at specified time intervals and filtered through 0.45 m Millipore paper, dried and weighed to determine solids content as mg/L. Results of the flocculant addition tests indicate that the time of settlement to achieve 50 mg/L could be greatly reduced with flocculant (120 minutes with no flocculant versus 10 minutes with flocculant). The type of flocculant used in this case was Magnafloc 156 anionic flocculant at an application rate of 1.25 mg/L. More detailed testing will need to be conducted at the next phase of design for ensuring correct flocculant selection and adequate performance under field conditions. Based on the preliminary results, suspended solids should settle up to 12 times faster with flocculant addition. For CLP sizing, a factor of 10 was selected for the current design as being slightly conservative. Additional test work has been initiated and will be completed as part of detailed design to test and refine flocculant selection and addition methods. 5.6.3 Flocculant Addition and Mixing System and Flocculant Product Through discussions with various suppliers an initial design for a flocculant addition and mixing system has been developed. Each system will be a self contained unit complete with its own diesel power supply, flocculant storage (10 days at maximum design flow) and mixing facilities. Details are provided in Appendix I. 5.6.4 Flocculant Alternatives At this stage three polymer flocculants have been selected as potential candidates for a testing program. They are Enviro A03, Alken Solutions A3040L and Accepta 2047. Enviro A03 Enviro A03 meets the EN 1407:1998 standard (International Organization for Standardization, 1998). Enviro A03 is an easy mixing, water soluble, reduced charge anionic polymer. It can be used as a flocculant to assist the separation of drilled solids in tunneling applications or as a swell inhibitor in semi reactive soils. Enviro A03 can also be used within a bentonite/non-bentonite system. Due to strict manufacturing process controls this product is classified as suitable for potable water clarification.

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Characteristics: Potable water grade product Works well with drilling detergents to keep terminal equipment clean Disperses easily through a standard venturi mixing system Flocculates semi-reactive solids in reserve pit Increases cyclone efficiency, reducing disposal volumes Environmentally friendly

Alken Solutions A3040L Alken Solutions A3040L is a white water-oil emulsion, anionic polyacrylamide, of high molecular weight and medium density charge. Alken Solutions A3040L draws pin floc into a more stable floc for easier filtration. The product performs best in a pH range of 7.0 - 9.0, although performance is possible within the range of 6 - 13. This product is especially suitable for applications in paper mill, textile and refinery waste water treatment plants. This product has also proven effective as a flocculant for planktonic algae in certain lakes and ponds. Advantages: Effective in municipal and industrial clarification and coagulation processes Highly concentrated so small doses save on freight bills More environmentally friendly than aluminum salts Aids solids reduction in centrifugation process Aids in dewatering sludge

The product is not currently certified for use in drinking water plants. Accepta 2047 Accepta 2047 is an anionic high molecular weight latex emulsion polyacrylamide copolymer. It is designed to flocculate suspended solids in particularly for non-potable raw water clarification, primary and secondary effluent clarification, oily waste water clarification and filtration. It can be used to replace Magnafloc 110L/115 or 3127, for example. Human health hazards are acute and there is no chronic toxicity data available for this product. 5.6.5 Testing Program for Flocculants A generic testing procedure has been developed to determine the type of flocculant, as well as the dilution ratio and/or dosage rate for that flocculant, which would most effectively facilitate the removal of suspended particles from mine runoff. The testing procedure is provided in Appendix J. This testing program will need to be completed as part of the detailed design process.

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It should be noted that the design of the flocculant addition and mixing system and the choosing of a flocculant product cannot be finalized until more on site testing is completed on the local soils and on the flocculants which have been proposed for this project.

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SECTION 6.0 - STOCKPILE FACILITIES 6.1 STOCKPILE AREA PREPARATION

In order to minimize disturbance to existing conditions, preparation measures must be undertaken prior to stockpile placement. This will include construction of underdrainage measures to minimize disturbance to and reduction of existing surface flows and groundwater discharge in the proposed stockpile areas. Construction of the underdrain measures will also aid in water management for placement of waste materials. There are three areas in particular that need to be considered - the Ambatovy Waste Stockpile, Analamay Waste Stockpile and Low Grade Stockpile areas. Figure 6.1 shows a typical underdrain arrangement that would be constructed to maintain existing natural flows in the valleys along the bottom of each stockpile and then downstream. The underdrain materials may also be extended up the valley side slopes to capture any significant groundwater seeps or flows from these areas. The select rockfill and filter sand materials will come from the sources discussed above for embankment construction. 6.2 STOCKPILE CONSTRUCTION

Construction of the waste and low grade ore stockpiles will be done in a planned manner from the bottom up. Review of testing results for ferralite and saprolite within pit excavation areas (Geopractica, 2004) indicates that there is material with high moisture content. Placement of these materials will need to take into account the potential for high moisture content material from some areas of the mine. In general though, select waste material will need to be placed towards the outer slopes of the piles which is of suitable moisture content for proper compaction and strength. Wetter, more loose material will need to be placed further from the face of the stockpile to maintain stability. A proposed stockpile slope arrangement is shown on Figure 6.2. The effective slope is 3.3H:1V with benches at 3 m intervals to catch runoff and divert it off the face of the slope to the collection channels. Stockpile layouts for the Ambatovy Waste and Low Grade Stockpiles have been re-configured, based on the slope configuration on Figure 6.2, to match the Lidar topography and to incorporate drainage measures. The Analamay Waste Stockpile has not yet been reconfigured as it already closely matches the Lidar topography and should be relatively simpler to construct than the other two. Additional sampling and testing of mine waste and ore materials has been proposed as part of the current exploration program, but has not yet been started. This program will be essential for the detailed design of the stockpiles.

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SECTION 7.0 - BASIC DESIGN LAYOUTS 7.1 GENERAL

Figures 7.1 and 7.2 show the Basic Design layouts for the Ambatovy and Analamay mining areas, respectively. Each plan shows proposed locations for RCP and CLP embankments, sediment traps and collection channels as well as revised stockpiles for the Ambatovy North and Waste Stockpile areas. Further details are provided in the following sections. 7.2 SEDIMENT TRAPS AND COLLECTION CHANNELS

In addition to the RCPs and CLPs discussed in previous sections, other major components of the ESCM include the following: Sediment Traps In order to prevent the RCPs and CLPs from filling with sediment prematurely, sediment traps are required to intercept coarser sediment being transported in runoff originating from disturbed areas prior to that runoff being routed to the collection ponds. The sediment traps will consist of a low area or sump with adequate surface area where runoff discharges from stockpile and pit areas. It is proposed that the sediment trap areas be incorporated within the mine plan and maintained throughout operations. Therefore, no capital cost is anticipated for the sediment traps as it is proposed that they will simply be a geometrical modification to stockpile or open pit development. Approximate locations and estimated surface areas of sediment traps for Year 20 of operations are provided on Figures 7.1 and 7.2 for the Ambatovy and Analamay areas, respectively. The sediment traps were sized, using SEDCAD, to handle flows and sediment loadings resulting from the 1 in 10 year 24-hour storm (EDS). Collection Channels In conjunction with sediment traps, which will be required throughout operations, collection channels have been included around stockpile and mine pit areas to collect runoff and direct it to RCPs while minimizing erosion. The details of these channels may be updated once the final mine plan has been established. Approximate channel alignments are shown for Year 20 on Figures 7.1 and 7.2, along with estimated flow depths and proposed lining materials for each. The collection channels were also sized and lining material requirements estimated using SEDCAD by applying the EDS.

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7.3 7.3.1

BASIC DESIGN LAYOUTS Ambatovy Mining Areas The updated layout for the Ambatovy mining areas is shown on Figure 7.1. The layout shown is based on Lidar topography, updated embankment locations and design levels as discussed above. A summary of each area is provided as follows: Ambatovy North This area will include the Low Grade Ore Stockpile which has been re-configured to match the Lidar topography and maintain drainage towards the south. The toe of the stockpile has also been moved upstream by placing more material at a higher elevation. The updated stockpile includes sediment traps at key locations and all benches will be sloped to allow runoff to be routed to the edge of the stockpile rather than down the face to minimize erosion. The Ore Preparation Plant area will also drain to this area and a sediment trap is proposed downstream of this area. Collection channels have been incorporated to route runoff from undisturbed areas around the stockpile and route concentrated flows of runoff from disturbed areas to the RCP. The RCP and CLP embankments have been moved slightly to take advantage of the topography. Ambatovy South Collection channels have been incorporated to route runoff from undisturbed areas around the stockpile and route concentrated flows of runoff from disturbed areas to the RCP. The RCP embankment has been moved downstream to take advantage of the topography while the CLP has remained in the same position. Ambatovy Waste Stockpile The Waste Stockpile has been re-configured to match the Lidar topography and maintain drainage towards the south. The top of the stockpile has been split into two areas to allow runoff from west of the pit to drain to the east. The updated stockpile includes sediment traps at key locations and all benches will be sloped to allow runoff to be routed to the edges of the stockpile rather than down the faces to minimize erosion. Collection channels have been incorporated to route runoff from undisturbed areas around the stockpile and route concentrated flows of runoff from disturbed areas to the RCP. The RCP embankment has been moved slightly to take advantage of the topography while the CLP has been moved upstream to reduce the watershed and avoid an area with active slope failures to the west.

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Ambatovy Southeast The Ambatovy Southeast RCP does not have a CLP downstream. This is because it is a very small watershed and the RCP will not be required until the waste stockpile is placed within the pit. In order to ensure that water quality is acceptable from this area, some additional storage has been included to preclude the need for a downstream CLP. 7.3.2 Analamay ESCM Basic Design Layout The updated layout for the Analamay ESCM is shown on Figure 7.2. The layout shown is based on Lidar topography, updated embankment locations and design levels as discussed above. A summary of each area is provided as follows: Analamay Northwest It will include the Analamay Waste Stockpile which has been re-configured slightly to match the Lidar topography. The updated stockpile includes sediment traps at key locations and all benches will be sloped to allow runoff to be routed to the edge of the stockpile rather than down the face to minimize erosion. Sediment traps have been incorporated to settle out coarser materials in runoff from the mining areas. Collection channels have been incorporated to route runoff from undisturbed areas around the stockpile and route concentrated flows of runoff from disturbed areas to the RCP. The RCP embankment has been moved to take advantage of the topography and to eliminate the need for pumping from the northern portion of the Analamay West Pit. The CLP embankment has been moved downstream accordingly. Analamay Northeast Sediment traps have been incorporated to settle out coarser materials in runoff from the mining areas. Collection channels have been incorporated to route runoff from undisturbed areas around the Analamay East Pit and route concentrated flows of runoff from disturbed areas to the RCP. The RCP and CLP embankments have been moved downstream to take advantage of the topography and to provide more storage capacity. Analamay South Sediment traps have been incorporated to settle out coarser materials in runoff from the mining areas. Collection channels have been incorporated to route runoff from undisturbed areas around the backfill and Analamay South Pit and route concentrated flows of runoff from disturbed areas to the RCP. The RCP and CLP embankments have remained in the same position. A small embankment will also be required at the upstream end of the RCP to keep runoff from flowing back into the pit once it has been routed to the RCP. Page 43 of 55

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SECTION 8.0 - RECLAMATION PLAN Reclamation and closure of the mine site will be based on the following general objectives: 1. Reclamation goals and objectives will be considered during design and planning of construction and operations. 2. Progressive reclamation will be implemented where possible. 3. Upon cessation of operations, the area will be decommissioned and rehabilitated to restore the site to forested habitat consistent with the surrounding zonal forest. 4. The reclamation and closure design will ensure that long-term physical and chemical stability is provided. The preliminary reclamation and closure plan is a living document that will be updated throughout the project life to reflect changing conditions and the input of local authorities and stakeholders. The plan was issued by Knight Pisold in November 2005 (Ref. No. NB301-00116/4-4). In addition, revegetation research and implementation as part of progressive reclamation will also guide in the refinement of concepts for final closure. The Ambatovy-Analamay mine site is within a contiguous natural near-primary forest matrix at the edge of the Zahamena-Mantadia-Andasibe forest conservation planning area. Thus the primary goal of reclamation at the mine site will be to maintain biological integrity in terms of landscapes, ecosystems, communities, habitats, and plant and wildlife populations, species and genes. Forest protection on the mining lease will be planned, implemented and enforced by means of a forest management agreement being developed by Dynatec and the Malagasy Forestry Service. The open pits will be developed using hydraulic excavators to excavate progressively lower benches, reaching depths of up to 50 m below the existing terrain at certain locations. Following the completion of mining in any one area, waste overburden from another area will be placed in benches back into the mine. The benches will be graded into the slope and configured longitudinally to direct runoff to a lined channel or drop structure where the flow can be discharged in a stable manner down the slope. Slope angles proposed in the current mine plan have been determined to be stable for mining, but additional investigations are required to determine if such slopes will be stable in the long term considering the climate and nature of the material. At the end of mining, the open pits will each be partially but not completely backfilled with waste overburden. A number of low lying areas will form ponds once dewatering ceases as shown on Figure 8.1. GCS (2005) predicted that the ferricrete groundwater aquifer will fully recharge in 5 to 20 years and the underlying ferralite aquifer will recover to pre-mining conditions only between approximately 5 and 75 years after closure, depending on the location. However, rainfall and runoff into the reclaimed open pit areas will fill and form ponds much quicker. The currently planned closure measures for the reclaimed open pit areas include conversion of the ponds formed by mining into fish habitat. This could potentially include linking the ponds with first order streams in the area. All slopes will be re-graded and contoured to stable slopes considering the nature of the material, to ensure long-term stability. The open pit slopes and floor will be laterite Page 44 of 55
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soils without any organic content, and as with other portions of the site, will require amendments such as mulch to aid in the development of sustainable vegetation. Geochemical work completed on the mined materials indicates that there is no realistic potential that they could be acid-generating. The studies identified, however, that both the ferralite and the saprolite have the potential to leach chromium in excess of effluent guidelines during operation at the Analamay deposits. During operation, runoff from active mining areas will be monitored. Should chromium levels be of concern, impacted runoff from active mining areas will be diverted to the Ore Preparation Plant or other control measures implemented so that chromium in mine runoff does not exceed guidelines. In addition, the total mining area will not be active at any given time due to staging of the mining operations and implementation of progressive reclamation. This will provide additional mitigation to address the possibility of chromium exceeding guideline criteria throughout operations. Experience gained from monitoring and progressive reclamation during operations will be used at final closure to ensure suitable water quality is maintained. Two waste overburden stockpiles located outside of the open pit areas (Ambatovy Waste Stockpile and Analamay Waste Stockpile) will remain at closure. In addition, a small ferricrete stockpile will also remain. The stockpiles will be developed early in mine development, consisting of the first waste material excavated from the open pits. The stockpiles will have a maximum height of 100 m. The stockpiles will be developed with stable slopes for long-term physical stability and will be progressively reclaimed by revegetation as the stockpiles are developed, meeting both interim stabilization requirements for sediment and erosion control and long-term closure requirements. RCPs and CLPs located downstream of the stockpiles will remain in place throughout the operations phase and into closure until sediment monitoring indicates that revegetation measures are providing adequate protection to minimize erosion and sedimentation. Ponds will be reclaimed by draining, floating decant systems will be removed, and the embankments will be breached to restore natural drainage. Disturbed areas (such as the breached embankments and emergency overflow spillways) will be revegetated. Buildings at the mine site, most notably the Ore Preparation Plant as well as any ancillary buildings, will be dismantled and removed from site. Equipment and materials will be salvaged for reuse to the maximum extent possible. Any equipment and materials without salvage value will be placed in the on-site landfill. Provided no other users are identified, all buildings will be removed from site. Any concrete structures will be demolished to 0.5 m below surface grade and the areas will be covered with overburden prior to revegetation. Provided other users do not want to continue to use the transmission lines, the poles will be removed and the vacated holes reclaimed. The poles will be salvaged for reuse. Unused chemicals will be removed from site to be either sold/reused elsewhere or will be disposed of with other hazardous wastes as per the operations phase of the Project. An on-site landfill will be used over the life of the mine for the disposal of non-hazardous waste. At closure, uncapped portions of the landfill will be capped to minimize infiltration into the waste. Page 45 of 55
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Any areas of known or suspected soil contamination, such as fuel storage and transfer areas, will be assessed for contamination. Petroleum hydrocarbon contamination will be remediated on site within a soil land farm, unless other alternatives are identified. Pipelines and pumping systems drawing water from the RCPs for use in the process at the Ore Preparation Plant will predominantly be above grade. Above-grade portions of pipelines, as well as pumping systems, will be removed at closure, and salvaged for use by others within the region. Buried sections of pipelines, if any, will be left in place as their removal would cause unnecessary disturbance. It is expected that transportation corridors will remain in place for a post-closure period to facilitate site access for monitoring. Other users in the region may have become dependent on the access the transportation corridors provide. Failing long-term continued use for monitoring and/or by others the roads will be reclaimed. Any aggregate within the road base may be salvaged for use by others, the road surfaces will be scarified and recontoured to blend in with the surroundings followed by revegetation. Temporary erosion control measures will be implemented as necessary until surfaces have sufficiently stabilized. Considerable experience in reclaiming old exploration roads has been gained on the project to date and will contribute to the methodology of road reclamation following mine closure. Once revegetation is well established across the site, mine runoff collection facilities will be decommissioned by removing the floating decant systems and breaching the embankments to re-establish natural drainage. Considerable opportunity for progressive reclamation exists throughout the 20 year mine life, as well as the subsequent 7 years when the low grade ore stockpile will be processed. Final closure will involve an active closure period starting in Year 28, in which the bulk of the physical rehabilitation work will occur, followed by a post-closure monitoring period. For planning purposes it is assumed that the active closure period will be 5 years, followed by a post-closure monitoring period of 10 years (15 years total). Post-closure monitoring will involve physical stability monitoring to identify evidence and/or early indications of erosion and stability issues and/or safety hazards, as well as a continuation of chemical stability monitoring for the same parameters as the operations phase, albeit at a reduced frequency if and when appropriate. If operations at the mine should be suspended, either temporarily or long term, continued operation of water management facilities as well as ongoing monitoring will be necessary. If the facility is closed prematurely, the closure objectives would not change but additional reclamation efforts may be necessary to ensure stable pit slopes that would otherwise be backfilled as part of operations, and to revegetate the low grade ore stockpile that would have been processed in Year 20.5 to Year 27.

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Figure 8.1 presents a proposed layout for the mine area at about Year 28 once the reclamation has been well established. As shown, various areas of the pits will be flooded and the low grade ore stockpile will have been removed for processing.

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SECTION 9.0 - SCHEDULE Current plans indicate that the mining operations will start in September 2007 for pre-production development. Assuming a positive result of the feasibility study, additional investigations, detailed design, tendering and construction will have to be completed. The design and construction schedule is provided on Figure 9.1. A summary of this schedule is presented below. Geotechnical Investigations - Investigations have been completed to support Basic Design. Additional or fill-in investigations will be required to support detailed design. Detailed Design - Following completion of Basic Design, the detailed design of all Phase 1 components, including access roads, embankments, spillways, and stockpiles will be initiated in the second quarter of 2006. Tender Documentation - The tendering process will be initiated at the start of the EPCM phase to be initiated in the third quarter of 2006. Construction - Construction activities will commence following award of the contract. Construction is scheduled to last from March 2007 through August 2009 to ensure that the measures are in place prior to the commencement of pre-production in September 2007. Due to potential for heavy rainfalls during the wet season from December to March, limited activities are planned during these months. Planned construction activities are summarized as follows: Mobilization - including equipment and crew and construction of laydown areas and temporary access roads; April 2007 Preparation Activities - During the dry period in 2007 or until November 2007, preparation activities including installation of erosion control measures, access construction, clearing and borrow source development are planned RCP and CLP Embankments - including stripping and stripping, foundation preparation, embankment and spillway construction and instrumentation installation; It has been assumed that Ambatovy North and Waste Stockpile RCP and CLP embankments, and other ESCM as required, will be constructed in 2007 while Ambatovy South ESCM may be delayed until 2008. Stockpile Area Preparations - including access development, foundation preparation (underdrains), surface diversions - during the dry period in 2007 or until November 2007

The schedule assumes that all permitting will be in place when required. Comments on some of the key items that could impact the schedule most significantly are presented below: Mobilization of Equipment and Crew - The work will require a relatively large skilled work force and a significant amount of large civil construction equipment. It is assumed that much of the equipment and skilled labour would come from offshore and the importation and transportation of all items must be carefully planned.

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Temporary Erosion and Sediment Control for Construction - Currently Dynatec personnel at the mine site have extensive expertise in stabilizing surfaces for erosion and sediment control for drilling access roads. This expertise should be developed and expanded for implementation during construction. Embankment Construction - The area receives a large amount of rainfall and the bulk of the fill materials are fine grained. As a result, there is the potential for rainfall to make borrow materials too wet to use for fill. The technical specifications will be carefully developed such that the embankment requirements can be met while incorporating as much suitable material as possible. In addition, bulk fill placement should occur over drier periods to the greatest degree possible.

One of the key components to ensuring a successful implementation of the project will be provision of skilled and experienced logistics and project management personnel with an integrated structure so that conflicts can be prevented and to ensure that materials coming from offshore are procured in a timely fashion. In addition, the earthworks contractor must schedule the work to take advantage of suitable weather conditions as much as possible.

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SECTION 10.0 - COST ESTIMATE 10.1 GENERAL

An initial cost estimate for capital construction and progressive rehabilitation and final closure costs has been completed based on unit rates applied to the materials and estimated quantities. A summary of the materials and unit rates applied to each material, and the basis for each unit rate, is provided on Table 10.1 while cost estimate summaries are provided on Tables 10.2 through 10.4. A breakdown of the costs along with the estimated quantities is provided in Appendix K. 10.2 CAPITAL COST BASIS

The capital cost estimate developed from the Basic Design presented herein is based on improved mapping and a more detailed approach than that completed for the UFS. The Basic Design has been completed on the basis of the new Lidar detailed mapping, completed site investigations and testing. The following summarizes areas of recommended investigation that would help further confirm costs: 1. Due to movement of some embankment locations for Ambatovy during the Basic Design process, additional drillholes and test pits will be required to confirm actual foundation conditions. For the purpose of this cost estimate it has been assumed that conditions will be similar to nearby areas already investigated. 2. No drillholes were completed for the Analamay embankments, only some regional test pitting. It has been assumed, based on test pitting, that foundation conditions and embankment construction requirements will be similar to the Ambatovy embankments. 3. Sources of borrow materials may change. Locations of sources for rockfill and sand and gravel have not yet been finalized, but general locations have been identified. 4. Some current budget quotations have been provided for materials such as gabions, pipeworks and flocculant addition systems. Earthworks unit rates for the project need to be reviewed in context with the proposed approach (i.e. contract or owner build?) and local conditions. The accuracy of the estimate is judged to be at feasibility study level or +/- 10 percent for Pre-production and +/- 15 percent for Year 5 based on the approach and level of design. The costs do not include annual operation and maintenance. The costs are in 2006 US dollars and are exclusive of all applicable taxes. It should also be noted that costs for access roads and water supply systems to the Ore Preparation Plant are not included as these are being done by others. 10.3 REHABILITATION AND CLOSURE COST BASIS

The rehabilitation and closure costs are based on estimated quantities for various items as discussed below and typical unit rates for this type of work based on experience on similar projects. The following items have been accounted for in this cost estimate: Grading and contouring of surfaces including stockpile areas, open pit areas throughout operations and at closure. This includes for grading to satisfy drainage requirements and

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minimize erosion potential. An estimate is also included for final site grading and contouring following decommissioning and removal of infrastructure at the end of the mine life. Topsoil and/or mulch placement on graded surfaces will include establishment of organic matter to support revegetation efforts. At this stage, the source of organic matter is assumed to be from local mulching efforts similar to the small scale operation at the mine site for rehabilitating the exploration access roads. Revegetation of prepared surfaces will include for supply and placement of required seed and fertilizer to establish initial vegetation for erosion protection. Breaching of the embankments has been proposed to remove standing water from the RCPs and CLPs once runoff from the mine site is acceptable for direct discharge to the environment. An approximate quantity of the required excavation and disposal placement volume for embankment fill has been estimated.

Items that have not been included within the cost estimate at this stage include: Long-term re-forestation as this still needs to be defined Dismantling of mine infrastructure as it is assumed the salvage value will cover this Post closure maintenance and monitoring

The rehabilitation and closure costs do not include operation and maintenance costs, such as long-term monitoring costs. The costs are in 2006 US dollars and are exclusive of all applicable taxes. A breakdown of engineering costs was provided previously in a memo dated February 27, 2006 (Ref. No. NB06-00206). A copy of this memo is included in Appendix K.

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SECTION 11.0 - OPPORTUNITIES During completion of Basic Design, some areas have been identified as opportunities that should be reviewed to determine if there are any potential cost savings. These opportunities were not fully followed up during Basic Design due to schedule limitations. The following items are recommended prior to or during detailed engineering. Additional testing of soils for erosion potential and application of flocculant Review operating levels in more detail in conjunction with downstream flow requirements using a risk based approach to see if embankment heights can be lowered Review of spillway design and refinement to minimize earthworks and lining requirements for further optimization Incorporation of updated mine plan that is consistent with detailed Lidar topography

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SECTION 12.0 - REFERENCES 1. Applied Microcomputer Systems. HydroCAD. Applied Microcomputer Systems 2001. Version 6.00. Chocorua, New Hamshire:

2. Campbell, K.W. (1997), Empirical Near-Source Attenuation Relationships for Horizontal and Vertical Components of Peak Ground Acceleration, Peak Ground Velocity, and Pseudo-Absolute Acceleration Response Spectra, Seismological Research Letters, Vol. 68, No.1, p.154-179. 3. Canadian Dam Association (CDA), 1999. Dam Safety Guidelines. January 1999. 4. Chaperon, Pierre, Danloux, Joel, and Ferry, Luc, 1993. Fleuves et rivieres de Madagascar, Monographie hydrologique 10. Paris: Editions de lORSTOM, 1993. 5. Civil Software Design. SEDCAD. Version 4. Ames, Iowa. Civil Software Design, 2004. 6. Environmental Protection Agency (EPA). 1976, Erosion and Sediment Control - Surface Mining in the Eastern U.S. 1976. 7. Geopractica, 2004. Preliminary Stability Analysis - Mine Pit Slopes Ambatovy Nickel Project, Report No. 03477.3. July 2004. 8. Geo-Slope International Ltd., 2004. SEEP/W, version 6.11. Calgary, 2004. 9. Geo-Slope International Ltd., 2004. SLOPE/W, version 6.11. Calgary, 2004. 10. Golder Associates, 1999. Phelps Dodge Madagascar Ambatovy & Analamay Project, Environmental Assessment, Volumes 1, 2 and 3. January 1999. 11. Groundwater Consulting Services (Pty) Ltd., 2005. Ambatovy & Analamay Mining Project Madagascar Update of Numerical Model May 2005. GSC Report 04.01-110/2. May 17, 2005. 12. International Commission on Large Dams (ICOLD), 1995. Tailings Dams and Seismicity Review and Recommendations. 1995. 13. International Organization for Standardization (ISO), 1998. Standard No. EN1407:1998 Chemicals used for treatment of water intended for human consumption. Anionic and non-ionic polyarcrylamides. September 15, 1998. 14. Institution of Engineers, Australia (IEAust), 1996. Soil Erosion and Sediment Control Engineering Guidelines for Queensland Construction Sites. 1996. 15. Klohn Crippen, 1998. Phelps Dodge Ambatovy Project, Simons Feasibility Study. March 1998.

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16. Knight Pisold, 2004. Dynatec Corporation - Ambatovy Project - Feasibility Study Report Mine Runoff Control and Water Supply Facility. Ref. No. NB301-00116/2-2, Rev. 1. November 18, 2004. 17. Knight Pisold, 2005. Dynatec Corporation - Ambatovy Project - Updated Feasibility Study Report - Mine Runoff Control and Stockpile Facilities. Ref. No. NB301-00116/3-2, Rev. 0. October 11, 2005. 18. Knight Pisold Limited, 2006. Dynatec Corporation - Ambatovy Project - Mine Runoff Control and Stockpile Facilities 2006 Site Investigation Report. Ref. No. NB301-00116/3-6, April 2006. 19. Knight Pisold Limited, 2006. Dynatec Corporation - Ambatovy Project - Ore Preparation Plant Site Investigation Report. Ref. No. NB301-00116/5-3. February 2006. 20. Knight Pisold. Letter to Wayne Palmer, SNC Lavalin Engineers and Constructors. Re: Basic Design Status and Initial Cost Estimate for ESCM for Ambatovy Mining Areas. Ref. No. NB06-00151, February 13, 2006. North Bay: Knight Pisold, 2006. 21. Knight Pisold. Letter to Wayne Palmer, SNC Lavalin Engineers and Constructors. Re: Feasibility Cost Estimate for ESCM for Ambatovy and Analamay Mining Areas. Ref. No. NB06-00179, February 21, 2006. North Bay: Knight Pisold, 2006. 22. Knight Pisold. Letter to Wayne Palmer, SNC Lavalin Engineers and Constructors. Re: Feasibility Rehabilitation Cost Estimate for Ambatovy and Analamay Mining Areas. Ref. No. NB06-00238, March 6, 2006. North Bay: Knight Pisold, 2006. 23. Ontario Ministry of Natural Resources (MNR), 1988. Environmental Guidelines for Access Roads and Water Crossings. 1988. 24. Ontario Ministry of Natural Resources (MNR), 1989. Sediment Control. 1989. Technical Guidelines - Erosion and

25. Ontario Ministry of Transportation (MTO), 1982. MTO Drainage Manual Vol. 2 Chapter F Erosion and Sediment Control. 1982.

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