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New Caledonia - Mineral Sands

Background

Several members of Geovic’s senior management team prospected for chromite deposits in the mineral-rich sands along the coast of New Caledonia while employed by Unocal during the 1980s, providing the foundation for focused exploration by Geovic Mining Corp. today.

Reconnaissance was conducted throughout 2009, consummating with the formation of Geovic New Caledonia SAS (GNC) and the issuance of a prospect license (APM) in October 2009 by the New Caledonia Department of Industry, Mines, and Energy (DIMENC). The APM applied to 60 square kilometers at each of the two provinces, (North and South), totaling 120 square kilometers. Following analysis and interpretation of the sample results collected during APM prospecting, exploration license applications for both the North and South Provinces were submitted in March through May 2010 for 100 square kilometers. These applications include 19 licenses comprising 60 square kilometers in the South Province and 12 licenses comprising 40 square kilometers in the North.

Project Setting- History

The 250-by-30 mile island seamount is the third largest island in the South Pacific after New Zealand and Papua New Guinea, rising to over 5,000 feet (1,500 meters) above sea level. Two-thirds of the island’s population of about 250,000 live near the capital city of Noumea in the South Province. Much of the landmass, called Grande Terre, is composed of various Eocene ultramafic intrusive rock suites. These serve as the source rock for economic nickel and cobalt ore bodies occurring as oxides within near-surface saprolite, along with elevated chromite.

New Caledonia contains about 25% of the world’s known nickel reserves, and given its small size, is one of the most active mining provinces on earth. Open-cast nickel production from several producers accounts for more than 90% of exports and 10% of the island’s $10 billion annual gross domestic product (GDP), having a history of production of more than 100 years. Consequently, New Caledonia ranks among the top per capita GDP in Oceana. New nickel development is underway at the major Goro (Vale) and Koniambo (Xstrata) projects. Sociéte le Nickel (SLN) has been long established in the country, and recently upgraded its arc furnace smelter near the capital city of Noumea.

A core drilling program conducted by Unocal during the 1980s in southwest New Caledonia led to the discovery of a significant mineral sand resource grading 5% chromite. The work consisted of a core-hole drilling program with holes spaced 250 meters apart, sampling the top 10-15 meters of (dredge-accessible) sediment. Close-spaced confirmation drilling, along with metallurgical testing, will be required to transform this historic, non-Canadian National Instrument 43-101-compliant geologic resource into a reserve. Results of this early work prompted the re-evaluation of New Caledonia’s chromite occurrences, in light of the many technical improvements in recovery and mineral separation processes made over the past 25 years.

Project Description - Status

The chromite prospects of interest to Geovic occur in unconsolidated coastal sand deposits, some very remote, where chromite has been separated from ultramafic host rock, concentrated and winnowed with other heavy minerals (HM) by river and wave action. This has resulted in well-sorted deposits occurring as dark bands of HM sand up to one meter thick near the mouths of large river systems and along nearby beaches and back-beach deposits.

Following extensive aerial reconnaissance, Geovic personnel collected several hundred near-surface samples from over 200 locations following the issuance of the prospect license in late 2009. Prospects were ranked, and select bulk samples were collected at locations exhibiting higher grades and tonnage potential so as to evaluate potential chromite products and establish a preliminary mineral separation process.

Results of this initial round of shallow (<0.5meter) sampling yielded multiple sites with exceptionally high chromite grades, many exceeding 50%. Further analysis of bulk samples from select sites provided initial process flow-sheet design and product characterization parameters.

Follow-on test work, including electrostatic and low and high intensity magnetic separation tests, indicate that chromite can be easily separated from the rest of the HM sand and high percent recoveries have been obtained. A larger size (183kg) bulk sample was recently collected to conduct spiral and wet high intensity magnetic separation (WHIMS) tests to further refine the process flow-sheet.

Based on this initial work, Geovic submitted exploration license applications for areas deemed most prospective. GNC was granted 31 exploration licenses in the North and South Provinces in early 2011 following the government technical and provincial regulatory review process.

Geovic Exploration Licenses

General Process Summary

Mineral sand processing and recovery is very mature and one of the simplest and least costly mineral recovery processes in the mining industry. Recent advances and technical process improvements have further improved the ease of mineral separation. As a rule, process chemicals are not used and are limited primarily to water washing and water transport. The onshore mineral-bearing sediments are either surface excavated using conventional equipment or, if offshore, siphoned up by a dredge with a rotating cutter head. This is followed by simple gravity separation by wet gravity spirals and wet cyclones to remove clays, followed by trammel-washing to remove oversized wood, gravel, and related material. Once a crude concentrate is produced, and nearly 90% of the sand and sediments returned to the bays from which they came, the concentrated heavy minerals are usually barged or pumped to shore, where they are dried by heating prior to using magnetic and electrostatic separation methods. Other methods may include attritioning to clean grain surfaces, roasting to magnetize and remove iron minerals, and, rarely, flotation. Roasting is expected at New Caledonia, but not flotation. The flotation circuit, if used, is designed to separate most of the last remaining iron-oxide minerals from chromite. The dry chromite final product is typically then bagged for shipment to chromite users. Production facilities are typically modular, mobile, and require relatively low capital with short construction periods due to the uncomplicated nature of the mineral separation process requirements.

Uses and Production/Demand

There are three main types of chromite in nature: high-chromium chromite, high-iron chromite and high-aluminum chromite; all of which are used as refractory minerals. The application of chromite products is now more interchangeable than in the past with improved processing technologies. At one time only raw “lump” chromite was used in smelters to produce ferro-chrome for stainless steel production. With the reduction of lump chromite quality, fine grained chromite is being processed (agglomerated and pelletized, or directly reduced in plasma arc furnaces) to produce higher quality ferrochrome.

The production of stainless steel and similar specialty steel products is not possible without the use of the mineral chromite, the world’s principal source of chromium metal. Chrome content in stainless steel ranges from about 13-20%. The world chromite market consumes approximately 22 million tonnes of chromite per year (2008), 90% of which is consumed as ferro-chrome dedicated to stainless steel production. By 2013 world chromite consumption is expected to increase to about 22.3 million tonnes per annum, following the recent global recession. Since 2000, chromite consumption has grown at a rate of about 5.4% per year until 2007. This growth was driven principally by Chinese consumption, accounting for almost one-third of world demand. Chromite demand is expected to continue to rise for stainless steel and for high quality specialty products. The production of ferro-chrome requires about 2.4-2.5 tonnes of chromite per tonne of ferrochrome, and the production of standard grade stainless steel requires about 0.66 tonnes of chromite per tonne of stainless steel.

Chemical grade chromite has high chromium content, typically greater than 45% chromium oxide, Cr2O3, and low concentrations of adverse trace elements. Ferro-chrome production is energy intensive, requiring between 3200- 4500 kilowatt hours of electricity per tonne of ferro-chrome, resulting from smelting chromite ore at 1200 to 1600 degrees centigrade. This represents nearly one-third (1/3) of the cost of producing ferro-chrome. Several grades of ferrochrome are produced depending on the chromium and carbon content. High-carbon ferrochrome contains about 60% chromium, while charge-chrome contains 50-55% chrome and more carbon.

Minor chromite production/consumption is dedicated to the refractory and foundry chromite markets (4%) and the chemical chromium business (2-3%). The demand for refractory grade chromite has continued to decrease since 1970 with the introduction of new smelting methods and the health concern over hexavalent chromium. Foundry grade chromite consumption has steadily increased with its replacement of radioactive zircon and the demand for high quality metal castings. No hexavalent chromium occurs in, or is generated by, the non-chemical, physical mineral separation process used to produce foundry grade chromite. The use of chemical grade chromium continues to grow steadily with its use in leather tanning and electroplating. World consumption of these three chromite products totals less than 1.2 million tonnes per year.

According to Roskill, seventy percent (70%) of the world’s chromite is produced in four countries: South Africa (40%), Kazakhstan, Zimbabwe and India. The best quality chromite occurs in Kazakhstan. The quality of chromite is measured primarily on the contained chromium content and the chromium-to-iron ratio of the oxide spinel mineral. Most chromite is mined underground by room and pillar method. The ore is brought to the surface and processed by crushing, screening, flotation and gravity processes prior to smelting or refining into appropriate end uses. Around 70% of global chromite production is consumed domestically in ferro-chrome production in the country of origin. Although most production is in South Africa, due to recent power limitations production ceilings have been reached. By 2021 South Africa is expected to produce 44% of the world’s ferrochrome, while China is expected to produce about 18%. World production of ferrochrome is at about 72% of overall production capacity. Most of Kazakhstan’s production is dedicated to high-carbon ferrochrome delivered to China. Russia is currently increasing capacity of ferrochrome, as is India. Most production of chromite in India is dedicated to domestic production of ferrochrome.

Potential future producers include Canada (James Bay Ontario deposit); China (remote Tibetan deposits), Turkey, and Zimbabwe (10% of world resource). The principal importers of chromite include China (77%) and Russia (5%). Most of South Africa’s exports go to China; Kazakhstan’s’ exports go mainly to China (76%) and Russia (24%); and Turkey’s production goes to China (59%) and Russia (21%).

Foundry grade chromium products

Foundry grade chromite must pass a number of physical and chemical requirements in order to meet the tight specifications required by metal foundries.

World consumption of foundry grade chromite (FGR) totaled about 600,000 tonnes in 2007, most of which was sourced from South Africa. Chromite is preferred over silica sand and other foundry products due to the quality of castings, its non-radioactive composition and the fact that no hexavalent chromium is present. Besides stringent chemical compositional character, the size, shape and acid consumption rate are critical for this type of premium chromite product. Typically foundry grade sand must have a chemical composition exceeding 44% chromium oxide, no more than 27% iron and less than 4% silica. Ninety percent of the chromite sand must range from 0.39 to 0.70 millimeters in size. The product must have low magnesium and aluminum contents and an AFS number (American Foundrymen Society) average grain size distribution number not less than AFS-GFN # 51. Typically, less than 60% of chromite mined and processed is recovered as foundry grade chromite (67% of spiral product). In South Africa the cost of producing foundry grade chromite is considerably greater than the cost of producing sintered metallurgical grade chromite, due to its quality and underground setting. High quality chromite foundry sand is used to replace/substitute for zircon (priced ~ $1,000/tonne). Some of the New Caledonia chromite deposits appear to meet foundry grade chromite specifications.

During peak chromite pricing in early 2008, foundry grade sand sold for several times the peak price of metallurgical grade chromite (MGR). Due to the increasing demand for chromite as a preferred replacement for zircon foundry product, current market pricing of this specialty product remains strong, in excess of US$600 per tonne. Annual production of about 700,000 tonnes of foundry grade chromite is required for the pouring and production of 6.4 million tonnes of metal castings.