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BRZM Geological Report


http://www.brazilianmining.net/Report/GEOLOGICALREPORT.html



SL MINERADORA LTDA

BY: LUIS FERNANDO SANTANA DA SILVA – GEOLOGIST

Juína – Mato Grosso – Brazil






Final Exploration Report

3RD EDITION





DESCRIPTION OF THE AREA





2005








PROCESS: DNPM No 867.231/95

EXPLORATION LICENSE: No 2.651/98

REQUIRED MINERAL SUBSTANCE: DIAMOND AND GOLD

ECONOMICAL MINERAL SUBSTANCE: DIAMOND

LOCATION: SÃO LUIS RIVER BASIN

MUNICIPALITY: JUÍNA – MT









TECHNICIAN IN CHARGE:

GEOLOGIST / GEOPHYSICIST LUIZ FERNANDO S. S.





















CONTENTS


PART I: PRESENTATION OF REPORT


1 – PROCESS IDENTIFICATION



2 – HOLDER IDENTIFICATION



3 – LOCATION OF THE AREA



4 – DESCRIPTION OF THE AREA



PART II: REPORT CONTENTS


1 – GENERALITIES



2 – INFRASTRUCTURE



PART III: METHODOLOGY OF TECHNICAL WORK PERFORMED


1 – PLANNING



PART IV: RESULTS OF TECHNICAL WORK PERFORMED


1 – EXPLORATION MESH



2 – GEOLOGY OF THE AREA



3 – GEOTECHNICAL DRILLING OF LOW DEPTH



4 – GEOTECHNICAL DRILLING OF MEDIUM DEPTH



5 – VOLUMETRICAL EVALUATION



6 – CHARACTERIZATION OF THE DEPOSITS



7 – CHARACTERISTICS OF MINERALIZATION



8 – SAMPLES AND VOLUMETRICAL TREATMENTS



9 – OCURRENCE OF GOLD



10 – OTHER MINERAL GOODS



11 – NEXT WORK TO BE DONE



PART V: QUANTIFICATION OF THE SÃO LUIS DEPOSIT – 1


1 – CONTENTS



2 – METHODOLOGY OF CALCULATION OF RESERVES



3 – QUANTIFICATION OF THE DEPOSITS RESERVES



PART VI: ANALYSIS OF EXECUTABILITY


1 – EVALUATION OF THE GEOLOGICAL-GEOPHYSICAL-GEOMETRICAL PARAMETERS



2 – MINERAL EXPLORATION DATA INVENTORY



3 – GRADE FROM DRILL HOLES



PART VII: ECONOMICAL EVALUATION OF THE DEPOSIT


1 – ECONOMY



2 – MINE PLANNING



PART VIII: FINAL CONCLUSIONS


PART IX: BIBLIOGRAPHY



PART X: ATTACHED ITEMS



1 – MAPS



2 – DOCUMENTS





PART I: PRESENTATION OF THE PROCESS DATA


1 – PROCESS IDENTIFICATION



1.1 – Process nº - 867.231/1995

1.2 – Exploration license nº - 2.651/1998

1.3 – PUBLICATION DATE ON DOU – 11/11/1998

1.4 – PUBLICATION DATE OF THE DESCRIPTION OF THE AREA – 10/12/04

1.5 – REQUIRED MINERAL SUBSTANCE – Gold and Diamond

1.6 – EXPLORED MINERAL SUBSTANCE – Gold and Diamond

1.7 – MINERABLE MINERAL SUBSTANCE – Diamond



2 – HOLDER IDENTIFICATION



2.1 – HOLDER: SL Mineradora Ltda.



2.2 – ADDRESS

2.2.1 – Matrix .......

2.2.2 – Correspondence .......

2.2.3 – Enterprise.......



3 – LOCATION OF THE AREA



3.1 – TERMS OF THE AREA



São Luis River Basin. It is located at the 1st Phase of Juína Project, Juína – MT, and inserted in the important Mineral Diamondiferous Province, including the Drainage Basins of São Luis and Juininha Rivers as well as their tributaries of 3rd order.



3.2 – ACCESS



The access via road is by Federal Motorway BR-174 (Juína-MT to Vilhena-RO Motorway) until KM 30 turning right by Linha 03 until KM 10 and then through an extension to the right for 1 km until São Luis Farm, SW to the area in Sector 1. See maps SLML – 01 and SLML – 02 below.



3.3 – MUNICIPALITY: Juína



3.4 – STATE: Mato Grosso



3.5 – AREA IN HECTARES: 1,889.13.



4 – DESCRIPTION OF THE AREA



The area belonging to SL Mineradora LTDA in reference to DNPM-MT Process nº 867.231/95, according to the new adequacy published on D.O.U in 10/01/2005 is 1,889.13 hectares.



- Effectively exploration area: 1,889.13 hectares;

- Diamond mineral deposit limit area: 1,889.13 hectares



The area is delimited by a polygon with a vertex at 8,245 m (Vertex – 1) on the true direction of 33º20’ NW, at the reference point with geographical coordinates of:



.....South Latitude

.... West Longitude



The delimitating polygon of the area has 10 vertexes, which, from Vertex – 1, and covering – if clockwise – presents the following sides with lengths and true direction in Table – 01 below:



FROM VERTEX / TO VERTEX / LENGHTS / DIRECTIONS



PART II: REPORT CONTENTS


1 – GENERALITIES



1.1 – INTRODUCTION AND RECORDS



SLML – SL MINERADORA LTDA is the holding company of the area of 1,889.13 hectares covered by Exploration License nº 2.651/98 in reference to DNPM Process nº 867.231/95, according to records in Table – 02 below, qualified to explore diamond and gold in Aripuanã Province, Juína, Mato Grosso.



DNPM PROCESS Nº / EXPLORATION LICENSE Nº / FROM / PUBLICATION ON D.O.U / AREA (ha) / REGISTRED IN B-PG BOOK PG / IN


DNPM – MT INSPECTION TECHNICIANS / INSPECTION DATE / ADEQUACY DATE OF PUBLICATION ON D.O.U. / ADEQUATED AREA (ha)



This work corresponds to the 3rd Edition of the Final Exploration Report, containing the results of geological-geophysical exploration work performed by SLML until January/2005, fulfilling the DNPM requirements, after the publication of the Description of the Area on the D.O.U.



The procedure of new calculation of the area deposits reserves was mainly due to the following factors:



- Final resolution of divergence in limits of area which resulted in the publication of the Description of the Area, establishing the a surface of 1,889.13 hectares, which made the polygon of cubed area be altered;



- The resignment of the Approval Area of 40 hectares, given to the former owner (cancelation between SLML and Mr. Osvaldo Pires) which resulted in the addition of gravel areas – C mineralized with diamond;



- Discovery of new anomalous areas corresponding to the Prospect Basins with economically minerable medium grade, creating deposits with average grades of 1.26 ct/m3.



SLML restarted its systematic geological exploration work in Aripuanã Province in 2000, aiming at finding new mineralized areas in diamond and gold, specially in the basins of São Luis, Juininha and Cinta Larga rivers. Due to the heterogeneity of the mineralized geological environment (mineralized gravel levels in secondary environment) in São Luis basin area and proximities, the works continued until January/2005 with volumetric samples and improvement tests for calculation of reserves and real grades.



In November/2000, SLML performed a ground mag, covering specially Sectors 1 and 4, as part of an ample mineral exploration program in the region and area. This research became a basic and defining tool of the structural families which conserve mineralized horizons out of surface visual range. Aimed at specific targets, a radiometric intervention of total score to find hydrothermal transformations, radiogenic anomalies and auxiliate in mapping large geological units of the area was also performed. These geophysical data, in addition to the verified litology (mineralized gravel levels, pipes, dikes, sills and gaps), correlation of intrusions with structural events and anomalies of diamondiferous gravels verified in secondary environment of low and medium depth, allowed to conclude that the São Luis River Basin is a prospect of high economical perspective diamond, once it was proved it can be done.



From these conclusions, in January/2001, a phase of detailed volumetric sample in untouched secondary deposits in Sector 1 of the area was begun. The schedule planned to measure reserves and real grades, so improvement tests in geometrical panels supported by little investments in acquisition of machinery and equipments, improvement of Duplicated Fixed Ramps, Fixed and Mobile Ramps, technical training of operational workforce, improving not only the processing quality and quantity, but also its economic, maximizing production with low levels of loss as well as reducing cost with a better organizational control, system electrification and acquisition of a diamond recovering machine – Flow Sort – fundamental factors for the success of the project.



In December/2004, when the Description of the area was published (10 December 2004), which definitely confirmed the Area Polygonal, SLML performed with the recalculation of the secondary deposits reserves of colluvial terraces, transition areas, alluvions and paleocanals, old mineralized prospect basins, adequating the new area, the updated reserve of SL1 deposit.



The strategic positioning of the area located in the central part of contact between two large stratigraphic units of the region, Craton Guaporé and Parecis Group Sediments, awards them particular importance to the level of creation of economical potentially reserves for diamond and other correlated mineral goods, a fact that has been taken into account in particular exploration programs and investments, being this positioning as important as the existing mineral resource itself.



Along with that, the expansion of researches are anticipated, now aimed at primary horizons and the development of mining activities for the next years involving initially sector 1 of the area which covers all geological-structural-magnetic systems of genetic importance of the blocked economical resource.



The volume of mineralized gravel with diamond were of 7,713,770 m3 with average grades of 1.6458 ct/m3 in the deposit and of 0.19 ct/m3 at the 1st level of the sedimentary package, outcome which created a mineral grade of 12,695,325.70 ct of diamonds with varied granulation, colors, purity, and physical-chemical classification.



Also in December/2004, a medium geotechnical probing depth test was initiated, with the objective of defining the real thickness of the area sedimentary package (1st and 2nd level) and the levels of gravels – C3 stored at the base part of this profile (after the +- 12m depth clayish “false bedrock”).



Considering the aims of its management office, from the investments performed in 2004, SLML defined for the next years, as prioritary goals, the sustainability of little investments in improvement of plants and treatment ramps, improving not only the quality of processing, but its economy and electrification as well, important aspects for the project feasibility in the first 10 years to come.



The present area’s holder is ready to initiate an open-air mining project guided by the Mining and Environmental Law in vigor, for it is elaborating the PAE – PLANO DE APROVEITAMENTO ECONÔMICO (ECONOMICAL UTILIZATION PLAN) and the PROJETO INTEGRADO DE MINERAÇÃO (UNIFIED MINING PROJECT) for the future phases of the project.



For the fullfilment of the present research program, the Specialized Department of Geology-Planning-Mining determined the command and technical responsibility to geologist/geophysicist Luiz Fernando S.S, working for this mining company since 20th August 2000.



The Situation (SLML – 01) and Details (SLML – 02) maps of the research area follow below.



2 – INFRASTRUCTURE



Area built for the Central Base Camp with approximately 1.50 hectares of area, containing: a LFA (X-ray Sorting House) with a Flow Sort recovering diamonds at a 100% level; dormitories, refectories, garage, storage room, infirmary, security lodge, etc. qualified technical and operational staff. 110 volts electrical energy availability 24 hours/day and specific generating groupscapable of generating energy from 220V to 380Volts for garage and LFA special needs, as well as water for housing supplying, LFA, garages, office, with semi artesian wells with capacity of 2500 m3/hour each well – (reservatories of 25,000 and 15,000 liters).



There is a telephoning system with DDD – 66 (Long distance call), connecting all mines to the office at the Central Camp in Sector-1, and vsp Internet provider.



PART III: METHODOLOGY OF TECHNICAL WORK PERFORMED


1 – PLANNING



The research methods were carefully chosen for diamond and gold, traditionally used in prospect researches, low and medium geotechnical probing depths, wells, trenches and volumetric tests, mainly aimed at:



a. Determination of thickness of sterile covering and levels of gravel – C, possibly mineralized at the 1st sedimentary level;

b. Determination of the gravel volume in each deposit and its corresponding sterile level;

c. Determination of typology of levels of gravel;

d. Correlate each type of gravel as regards to its grade of involved mining satellites and the present mining degree;

e. Reserves of studied mineralized deposits;

f. Elaboration of the Final Research Report.



1.1 – BIBLIOGRAPHIC SURVEY



The bibliographic surveys aimed at defining of economical prospects e elaboration of preliminary basic plants for field checking.



1.2 – INTERPRETATION OF LAND SAT IMAGE



Important auxiliary tool for delimitating regional and local structures, lined drainage, vegetation, among others.



1.3 – ELABORATION OF BASE PLANTS



Making of maps of land accesses and location of main drainages, preliminary grade, in adequate scale of 1:10,000.



1.4 – RECOGNITION OF ACCESSES AND CONTACT WITH LOCAL OWNERS



The verification of land accesses to the nearest points to the access roads and obtainment of authorization from local owners for the performance of the research work was made obligatory.



1.5 – RESEARCH MESH



Location at area field and establishing of the differential mesh starting point, with section breaks and specific holes for each sector, according to its geological-geophysical-structural-geometrical characteristics. After the new polygonal publication, adequacies at the N limits were made.



1.6 – TOPOGRAPHICAL COTES SURVEY



Together with the probing mesh magnetic surveys, the taking of cotes to level the studied geological environment was performed, and its dimension was included in the Geomorphological Map presented in the 1st version of the Final Exploration Report.



1.7 – GEOLOGICAL-STRUCTURAL MAPPING



The objective was to identify the large geological units, its typologies, the related deposits of primary and secondary degree, correlating them stratigraphically and temporally, and reproducing in adequate scale maps.



1.8 - LOW GEOTECHNICAL DEPTH PROBING



Program to define depths up to 12m, the shallow probing 1 mechanized auger MB 1/A, Yanmar, NG-147 model, 5 inches. The aim was the thicknesses of the studied geological environment, trying to define the vertical and horizontal continuities of levels of C mineralized with diamond, and with descriptions, measurements and packing of the probing proofs.



1.9 – MEDIUM GEOTECHNICAL DEPTH PROBING



A probing was specially programmed to reach depths of up to 30m. This probing was performed with a 3” reverse circulation rotative probe, with pole for collecting proofs of 1m depth. The aim was the definition of thickness of the studied environment sedimentary package, aiming at giving emphasis to the vertical and horizontal continuities of levels of C mineralized with diamond, specially to base levels containing mineralized thick clastics, with descriptions, stratigraphical measurements, litological and mineralogical analysis, and packing of C studied levels.



1.10 – TREATMENT TESTS



Over positive prospects of the trenches, the apertures of geometrical panels were placed, which measured 10x20m and 10x40m initially, for the calculation of volume and grade of the studied geological environment. The panels were sequentially opened in a parallel and longitudinal way to N, facilitating the dumping of rejects from the process of mineralized C levels.



Following the new panels operations, the removal of the overburden of sterile Level A1 is performed for one side, and sterile Levels B1, B2, B3, B4 and/or B5 for another side. On mineralized C levels, the dismantling of the contained mass forming a humid pulp was performed, in order to prepare for the start of extraction process by high pressure spouts/jets and 4” hosepipes, and processing in duplicated fixed plants – PF, fixed ramps – RF and mobile ramps – RM established near the dumping bowls.



PART IV: RESULTS OF TECHNICAL WORK PERFORMED


1 – RESEARCH MESH



SECTOR – 1 / SECTOR – 2 / SECTOR – 3 / SECTOR – 4



The importance of directions, intensity of structural-magnetic domains, influenced on the decision of the aperture of the differential mesh in the sectors, FIG. 01 above, for the pioneering surveys, according to Table – 03 below:

SECTOR / SECTIONS BREAKS / DIRECTION / MESH / LINEAR KM


2 – GEOLOGY OF THE AREA



The adequacy of data of the geological-structural mapping of the area, according to the new polygonal, ranged 56.60 linear km, covering 4 sectors, with 300 geological stations described and reproduced in SLML – 02A Map below. The geological units of the area suffered intense manifestations derived from events which created the structural-magnetic domains, from the following families of faults:



Family......



The positioning of mineralized C levels is strategic and lies in a zone which is tectonically near the contact of two large regional units, the Fanerozoic Sediments to S and the Meridional Portion of Craton Guaporé to N. Five different environmental compartiments of a structural-magnetic conotation are defined below:



2.1 – BASEMENT



Formed by rocks from the Xingu Complex, characterized by alkaline-feldsphatic granites, strongly intemperized, as well as migmatits, local gneiss, amphibolites and metasediments which constitute the local bedrocks. The granitic/gneissic land have slightly wavy morphology of Archean-Proterozoic evolution which intregrate the Craton Guaporé. There are evidences of altered basic-ultrabasic volcanic intrusions cutting the basement, and maintaining discordant overlapped contacts with the fluvial sediments from the Parecis Group.



2.2 – INTRUSIVES



They correspond to basic-ultrabasic volcanic rocks which form reliefs in an altered nuclear shape, dikes, sills, cutting rocks from the granitic/gneissic basement. Its soil is brownish red with slight yellow spots, strongly altered by intemperic physical-chemical and hydrothermal-mineralogical effects, forming zones which are rich in piroxenites, hornblende, chlorite and opals. In the interfaces it is found large quantities of thick clastics mineralized with diamond due to the formation of S2 structural traps, as minerable prospects. They are more expressive in W area of Sector –1, where there are the dikes, sills, porphyry dykes and kimberlitic-lamproitic nucleus, where olivine, piroxenites, magnetite, apatite, ilmenite, cyanite, piropo garnets and zircon are predominant.



2.3 – SEDIMENTARY COVERS



It is constituted of irregular levels from Casa Branca Farm formation, which is at Parecis group from the Superior Cetracious Age (?) with great litological varieties and depositional environments containing levels of C gravels mineralized with diamond. These covers occur discordantly overlapped the basement rocks and due to faults over mafi-ultramafic intrusives of the region. Thus, elevated grades of thick clastics are concentrated on the serval structural-magnetic traps from Families S1, S2, S3 and S4 domains.



2.4 – LATERITIC-DETRITAL COVERS



These form a thick hardened lateritic crust of large linear extension which protect and hold thick levels of C gravels mineralized with diamond. They derive from unconsolidated sediments and/or elevation of the granitic basement.



2.5 – UNCONSOLIDATED SEDIMENTS



Originally from the strong distal fluvial gradient and imposed to structured environments of terraces, transition zones, modern alluvia, shallow and deep paleocanals. They frequently appear in the fillings of structures from S1, S2, S3 and S4 domains, forming expressive deposits mineralized with diamond, of average thickness of +- 4.30 m, with C level at +- 0.50 to +- 1.00 m. The contact relations of the alluvial sediments with the intrusives and Parecis group are temporally, litologically and erosively discordant.



2.6 - SÃO LUIS KIMBERLITES (SS1)



They occur in stable cratonized regions constituted of varieties of dikes and pipes relates to S2 Structural-Magneetic System, breccian-shaped, pipes whose extensions are controlled by deep fractures filled with transported sedimentary materials, where it is believed to reach asthenosphere. These intemperized materials, due to geophysical results suggest subvertical cylindric shapes of dimensions of not more than 200x100m. On surface they are brownish-purple intemperized masses catalogued at 10m average.



Kimberlites are alkaline peridotites which invaded the Xingu Complex and Parecis Group interlockings, and at the last one contaminating the base level of Casa Branca Farm Formation.



The indicating minerals are preferably cromo-magnesian ilmenite (pricoilmenite), titaniferous ilmenite, chromic (green) diopside, and chromic piropo garnet, possibly with a low Ca grade. The composition seems very changed, due to mineralogical-hydrothermal alterations in its ascension towards surface by acquiring mineral from different rocks crossed by the intrusion (xenolith). At the level of superficial occurence, they are sometimes considered as microgaps formed by peridotic paragenesis minerals, collected in different levels of the mantle and crust.



2.7 – SÃO LUIS LAMPROITES (SS2)



The dark green lamproitic masses which are saturated in silica, rich in magnesium and potassium and different from the potassic and leucite rocks. Its mineralogy indicates a strongly peralkaline original magma, also with a high grade of titanium (TiO2).



The lamproitic zones prove on the treatment tests to be the richest in diamonds than the kimberlitic gaps, varying from 3.0 to 13.0 ct/m3, to 1.0 to 5.0 ct/m3 in the gaps. Both zones are mineralized with diamond and must be exhaustively researched and entirely mined after the C1 C2 and C3 thick clastics as well as the base levels of Casa Branca Farm Formation.



2.8 – SÃO LUIS GAPS (SS3)



In the intemperized occurrence of Sector – 1, the kimberlites were initially regards as brownish green microgaps formed by fragments of various sizes and shapes and minerals from micaceous peridotitic nucleous collected in different level of the mantle and crust.



The mineralogy of these lamproitic masses indicates strongly peralkaline magma (defficient in sodium and aluminium) and possibly with high grade of titanium (TiO2), titaniferous phlogopite, amphibole, diopside microcrystals, titaniferous magnetite, ilmenite and anatase. The main indicators of these diamondiferous occurrences are prederite, wadeite (Zr2K4Si6O18), phlogopite rich in Ba and titaniferous chromites.



More specific studies of the origins of the diamonds in kimberlitic gaps and lamproitic zones were not sufficiently performed through the mining company prioritary planning which invested resources in order to immediately block immediate yield secondary reserves.



2.9 – STRUCTURAL ASPECTS



The area is marked by a group of structural families involving longitudinal linings of 1st and 2nd orders, subvertical faults, fractures, shear stains zones, abrupt contacts, discordances, dykes and sills.



GEOLOGICAL MAP: SLML –02A



3 – GEOTECHNICAL DRILLING OF LOW DEPTH



- Linear kilometers researched: 56.60;

- Number of holes performed: 257;

- Number of positive holes for diamond: 235;

- Number of negative holes: 22;

- Depth in meters researched: 995.6;

- Variation of thicknesses of C levels in meters: 0.10 – 2.35;

- Variation of thicknesses of sterile levels in meters: 1.00 – 5.00;

- Occurrence of gold: 00.



C levels proofs were analyzed for diamond, gold and satellite minerals, by wash through 4 differential granulometric sieves of +1.0 mm to 4.0 mm, and a five-liter bowl to verify gold. The granulometric results were: Pebble - Thick (SG): > 200 mm; Medium – Thick (MG): 120 – 200 mm; Medium – Medium (MM): 60 – 120 mm; Thin – Medium (FM): 40 – 60 mm; Thin – Thin (FF): 40 – 20 mm; Bowl concentrated (CB) < 20 mm.



4 – GEOTECHNICAL DRILLING OF MEDIUM DEPTH



This new phase introduced in November-December 2005, FIG. 02 below, was specially adopted to characterize the real thickness of the sedimentary cover of the area, which was discussed many times due to the occurrence of false bedrocks, common at +- 4.00 – 8.00 m depth, considering the constant interruption of traditional holes at this hardened clayish-sandy level without the textures and structures of the granitic-gneissic basement known in the region. Five holes level tests were performed in W of Sector – 1, with 89.00 m where the first three holes were performed at L21 next to central camp, whose typical profile revealed 3 levels of C gravels, 2 of them being at traditional depth level of 12.00 m, and a third one being at base level, at 1.00 to 20.00 m.



FIG 02: SCHEMATIC GEOLOGICAL SECTION

HOLES WITH ROTATIVE PROBE – MEDIUM DEPTH



ðTypical in situ profile of deposits from colluvial terraces in Sector – 1 =



· Level A1 = brown low thickness sterile organic layer (+- 0.50 m); Level B1 = reddish-yellow sandy-clayish medium thickness sterile layer of +- 1.00 m; Level C1 = limonitic-quartz aggregate with blocks and remnant lateritic nodes, mineralized with diamond; Level C2: reddish-white limonitic-quartz aggregate, gradually mineralized passing to level C3; Level C3: roselike-grey-smoked-white quartz gravel, involved in a mineralized fundamental mass which was whitened and sandy-clayish, sometimes reddened; Level D = corresponding to hardened granitic saprolite.



5 – VOLUMETRICAL EVALUATION



Until January 2005 the evaluation was made with panels with an apperture of 10x30m to 20x90m and +- 4.0 to +-10.0m depths.



The advances have been paralleled and with ascending inclination of +- 05% for water drainage from more elevated cotes.



The objective inside the panels was the dismantling of C levels producing a representative volumetric sample of the deposit, which were processed in primary and secondary jigs (Duplicated Fixed Plants – PF).



Approximately 32.54 hectares were tested, +- 1.82% of the surface of this Research License located in Sector – 1.



In 2004, the test allowed to determine an average grade of 1.53 ct/m3 in the deposits and 0.44 ct/m3 in the sedimentary package, whose average result in 2001-2004 was 2.55 ct/m3. The integrated grades between the researches and volumetric samples resulted in a final average grade of 1.6458 ct/m3 in the deposit and 0.19 ct/m3 in the sedimentary packages, which currently represents the real anomaly of São Luis deposit .

The possibility of adding the mineralized volume since the confirmation of the medium geotechnical probing results is real, because C3 gravel levels were detected at +- 20m depth, beyond the confirmation of primary deposits (saprolites from SS1, SS2 and SS3).



6 – CHARACTERIZATION OF THE DEPOSITS



6.1 – MORPHOLOGIES



Colluvial terraces, transition zones, alluvia, shallow and deep paleocanals, Paleozoic Formations which are slightly wavy as well as recent sediments, beyond primary environments of difficult visual reach.



6.2 – GENETIC MODEL



6.2.1 – Primary deposits: Kimberlites and lamproites are primary magma substances derived directly from the fusion of the base, which might have been generated by immiscibility from a silicated super magma or by fractionated crystalization. Studies of details on the evolution of pre-mining and mining phase will help to define the advent of economical reserves of this level.



This magma which is mineral and its mineral phases will be able to generate secondary economic value among them: anatase, apatite, pyrochlore, monazite, which are minerals crystalized during the kimberlites and lamproites genesis, and remain disseminated in the magma that collected diamonds formed at the base and transported them until the surface and/or near it where they were exposed to the intemperic processes, eroded enriched the conjugated flood plains, also contaminating the interlocks (e.g. Casa Branca Farm Formation base level from Parecis Group) by mineralized magma injection through clefts, dykes and sills.



In these explosive contact gaps (SS3) were created and tested with success by the treatment tests, and revealed to be rich in olivine, pyroxene, prico-ilmenite, piropo garnet, zircon, magnetite and apatite.



6.2.2 – Secondary deposit – Two subsystems were defined:



Ø Continental Sedimentary – Diamondiferous C gravels deposits were formed in continental sedimentary environments, without sea water;



Ø Hydathogenic Sedimentary by Mineral Substitution - Diamondiferous C gravels deposits were formed in sedimentary environments as consequence of circulation of non magmatic water in terrace environments, transition zones, alluvions and paleocanals.



The mineralization of the area is known thick clastics deposits which were defined as C1, C2, C3 and C4, according to the nature of its litological components. They are extended, irregular, sub-plain levels of varied thicknesses, which enriched the local environments.



These deposits were supplied with pipes erosion, dykes, sills, kimberlite-lamproites and gaps from Aripuanã Province, which has already produced approximately 3 million carats of diamonds.



6.3 – PARAGENESIS



The frequent mineral of the area and that will be able to become an economic source are titanium ones: anatase (TiO2) and ilmenite (Fe, Mg, Mn) TiO3.



Other minerals of genetic importance are: piropo garnet, cyanite, chalcedony, zircon, hematite, magnetite, turmalinite, roselike-saccharoidal-smoked-opaque- hyaline-white quartz, amethyst quartz, silex, agate, carbonate, limonite, goethite and oxides in general.



6.4 – LITOLOGIES



Sedimentary covers, laterite-detritic covers, unconsolidated sediments.



6.5 – STRUCTURAL ASPECTS



They are stratiphormical bodies formed inside of layers or paleocanals of porous litologies (arenites and conglomerates), confined by impermeable (argillites) or semi-impermeable (silts). They are noted crossed stratifications, uncontinued structures, horizontal-subhorizontal lamination, convoluted beds, subvertical structural-magnetic linings, ( S1, S2, S3 and S4), fractures, dykes and sills.



The most observed transformations indicate hydrothermal-mineralogical alterations, specially in the proximities of the structures convergence (sometimes denoting breccian aspects), provenient from hydrostatic and/or liostatic pressures of the involving pivots.



6.6 – AGE



By the identified characteristics, secondary hydathogenic deposits are, in the vast majority, post-diagenetic from the Mesoproterozoic (1.700-1400 MY) and from Cambrian (530-300 MY).



6.7 – STRUCTURATION OF TERRACE TYPICAL PROFILE AND TRANSITION ZONE



SCALE



FORMATION CLIMATE

Humid tropical and Dry tropical



ARGILMINERALS OF PREDOMINANT SATELLITES

Kaulinite, Fe and Al hydratated oxides, anatase

Ilmenite, rare smectites

Limonite and neoformed goethite, hematite

Little magnetite



DESCRIPTION OF HORIZON

AR/AG, rich in organic material

AG/AR, VE/AM with noddles

AG/AR credit to goethite mottled zone AM-LAR/VE

Limonite-goethite/quartz aggregate with diamonds of 0 > 4.0 mm (80%)

Quartz limonite-goethite aggregate with diamonds of 0 > 4.0 mm (70%)

Freatic Surface (SF1)

AG, little AR, AM with oxidized spots (False Bedrock)

AR, VE, easily breakable, rusting front, whose cover is incorporated to the duricrust (?)

Fragmented level of F/M, BR/CZ/CREME gravel

SF2

Granitic saprolite with structures from the preserved healthy rock, overlapped to the freatic with alkaline PH and neutral and reducing Eh

Hard granitic rock



TABLE – 04: TERRACE TYPICAL PROFILE AND TRANSITION ZONE





7 – CHARACTERISITICS OF MINERALIZATION



7.1 – PRIMARY DEPOSITS



Ø Kimberlites SS1 – Strongly intemperized nucleuses of +- 200m X+- 150m dimensions, covered by in situ thick layer of sediments (+- 10m) and/or rejects

from former prospects with minerable grades. The superficial treatment test at the SS1 cover revealed surprisingly result of grade of 1.50 ct/m3, as well as a very expressive grade of piropo garnet, ilmenite, anatase, zircon, turmalinite. The white spots are associated feldspar and kaulinite.



Ø Lamproites SS2 – Nucleuses morphologically covered by thick sediment layer (+- 5.0 m) and/or rejects from former prospects with minerable grades, with dimensions of +- 150m X +- 100m. They generated semi-hardened green soils with whitened semi-circular, centimetric, feldsphatic, ball clays spots, containing expressive grade of piropo-almandine garnets, zircon, ilmenite, anatase and chalcedony. The volumetric tests over the greenish masses which were rich in garnets and titanium revealed a +- 2.50 m thickness from where approximately 4,000.00 ct of diamonds were extracted, with grades varying from 0.80 to 13.00 ct/m3.



Ø Gaps SS3 – Lined expression bodies inside S2 families of structures, with expressive effect in N of Sector – 1, with narrow dimensions of +- 20m X 80m, and average depth of 8.00m. It possesses xenolith in the sedimentary interlocks and the centimetrical dimensions basement, being associated to these strong grades of satellites and diamonds. The prospect tests observed in 2000 provisioned an average grade of 1.00 ct/m3. The superior formations of thick clastics tested by SLML showed grades of up to 3.85 ct/m3, inclusively in the sandy sediments of Parecis base in contact with the ones in SS3. Due to SS3 freatic flow and depth as well as the winter time of work, the advances of the detail researches were postponed to 2005/2006, which is expected to happen during the initial phase of the mining.



7.2 – SECONDARY DEPOSITS



Ø Colluvial Terraces and Transition Zones – They are responsible for more than 60% of the area. Its morphology is slightly wavy following the basement topography. It was investigated at the semi-detail and detail level with differential meshes at the 1st Level (+-10m) and some holes at deeper 2nd Level (+-21m). The average sterile cover is of about 3.20 – 4.50m since the surface, and the level of C mineralized with diamond varies its thickness from 0.10 to +- 2.35m.



Ø Alluvions and Shallow and Deep Paleocanals – They integrate the alluvial plains and open paleocanals of São Luis and Juininha rives and their main tributaries, accommodated in Sectors – 1, 3 and 4. The level of investigation was the detail one using systematic samples of fixed volumes prospection, volumetric samples of wells and treatment tests. In Sector – 1, more than 40% of the corresponding area is integrated with Repeat Basins with C4 levels = quartz/limonite – goethite/quartz aggregate, with economically minerable grades. In Sector – 4, only 10% corresponds to this kind of deposit. The sterile cover in the in situ alluvions is of 2.0m, 3.5m in the shallow paleocanals and 6.0m in the deep paleocanals. The mineralized level in the alluvions is C3, of average thickness of +- 0.50m. The grades, historically variable, oscilate since 0.60 ct/m3 until 2.80 ct/m3 in C3 levels, amount obtained in processing of Duplicated Fixed Plants of in situ volume of 30 m3/day.



7.3 – PHYSICAL-CHEMICAL CHARACTERISTICS



7.3.1 – Granulometry > 4.0 mm:

· Colluvial Terraces and Transition Zones = ........

· Alluvions and Paleocanals = ........

7.3.2 – Colour, according to GIA:

· Colluvial Terraces and Transition Zones = ........

· Alluvions and Paleocanals = ........

7.3.2 – Purity:

· Colluvial Terraces and Transition Zones = ........

· Alluvions and Paleocanals = ........

7.3.4 – Physical-Chemical Classification (CFQ):

· Iia = 60%; Ib = 20%; Ia = 10%; Iib = 10%.

7.3.5 – Density (D): Crossed tests of weights, volumes of humid and dry samples, humidity factors, among others, resulted in an average density for C levels mineralized with diamond of 2.95 ct/m3.

8 – SAMPLES AND VOLUMETRICAL TREATMENTS



The average granulometry of mineralized gravels and its satellite percentuals are of:



Ø Thick-Thick (GG) - > 200mm, < 20% of satellites;

Ø Medium-Thick (MG) – 120mm to 200mm, 20-30% of satellites;

Ø Medium-Medium (MM) – 60mm to 120mm, 30-40% of satellites;

Ø Thin-Medium (FM) – 40mm to 60mm, 40% of satellites;

Ø Thin-Thin (FF) – 20mm to 40mm, 50-80% of satellites;

Ø Bowl concentrated - <20mm, > 80% of satellites.



The detail work during the last 6 months allowed to attribute more precise grades of C gravels mineralized with diamond, stablished in December/2004, correspondent to each deposit:



Ø Measured Colluvial Terraces and Transition Zones: ......

Ø Measured Alluvions and Paleocanals: ......

Ø Indicated Colluvial Terraces and Transition Zones: ......

Ø INFERRED Prospect Repeat Basins: ........

Ø Medium Grade of the Area: ........





9 – OCURRENCE OF GOLD



The geochemical studies of the prospection campaigns and the recent treatment tests demonstrated that the area does not contain economic deposits of gold.





10 – OTHER MINERAL GOODS



The recent treatment tests data identified an elevated level of mineral associations, either disseminated and/or filling microbasins, or circulating other minerals, where ilmenite, limonite, titanite, piropo garnets, olivine, turmaline, zircon, cyanite, quartz-ametiste, chalcedony, agate, carbonates and oxides in general are predominant.





11 – NEXT WORK TO BE DONE

11.1 – AREA OF EXPLORATION OF PRIMARY BODIES



Ø Geotechnical Probing – The aim will be of depths of up to 40m, ranging the primary environments to dimension the saprolite masses of the pipes, dykes, gaps and sills as well as the start of healthy rock;

Ø Geotechnical and Environmental Studies – The primary aspects of the impact in the mineralogy of primary bodies mineralized with diamond will be parallely prioritized.



11.2 – AREA OF EXPLORATION OF SECONDARY ENVIRONMENTS



Ø Geotechnical Probing – Projected to reach the saprolite cover in secondary environments, at approximately 20-30m from surface, to research the economic potential of levels of C3 gravels identified on the first two holes of Sector – 1.



11.3 – SECONDARY DEPOSIT PRE-MINING AREA



Ø Mining – Institute the project of conjugated panels geometrically distributed in the mineralized environments;

Ø Environmental Reordering – Siltation phases, topographic leveling, organic recuperation of the soil and pasture planting will be verified, initially from Sector – 1;

Ø PAE – Elaboration of the Area Economical Utilization Plan aiming at the open-air mining phase.





PART V: QUANTIFICATION OF THE SÃO LUIS DEPOSIT – 1


1 – GRADES



Considering the heterogeneity of the deposits and economical concept of the area, the grades of the in situ deposits and of repeat of prospect basins mineralized in diamond were defined by the phases of volumetric tests with wells, trenches and treatment tests, as quantified below:



1.1 – AVERAGE GRADE OF MEASURED RESERVE:



1.1.1 – In Situ Colluvial Terraces Deposits (TM = 1,76 ct/m3):



T1 to T6 = 3.16 ct/m3;

T7 = 2.50 ct/m3;

Well-13 to Well-20 = 0.18 ct/m3

EB/221 – 2004 = 2.55 ct/m3.



TM = .....



1.1.2 - In Situ Alluvions and Paleocanals Deposits (AM = 1.33 ct/m3):



TG (Osvaldo Pires) = 1.70 ct/m3;

TG (Romeo) = 1.80 ct/m3;

Well-14 = 0.50 ct/m3.



AM = .....



The grades below the average grades (ROM) identified above, will not be able to be discartled during the advances of future mining, because they are part of deposits heterogeneity and are included in the adopted economical concepts of mineralogy, due to that its permanence in the reserve, for being absolutely impossible, they must be incorporated to the industrial extraction of mineralized C levels.



The mathematical rigor must not only be considered, but the tipology of the deposits and the numerical amount of the sterile thicknesses and C gravels deposits as well, which will elect the best geometrical line of the mining.



1.2 – AVERAGE GRADE OF THE IDICATED RESERVE:



1.2.1 - In Situ Colluvial Terraces Deposits (TI = 1.29 ct/m3):



TM = 1.76 ct/m3;

TG (Geraldo) = 0.95 ct/m3;

TG (Romeu) 1.80 ct/m3;



TI = ......



1.3 – AVERAGE GRADE OF THE INFERRED RESERVE:



1.3.1 – Deposits of Basins of Mineralized Prospect Repeat (R = 1.26 ct/m3):

EB/2003 = 3.03 ct/m3;

EB/2004 = 1.53 ct/m3;

TG (Romeu) = 0.70 ct/m3;

TG (Osvaldo Pires) = 0.80 ct/m3.

TG (Cido) = 1.00 ct/m3;

Well-14 = 0.50 ct/m3.



R = .......





2 – METHODOLOGY OF CALCULATION OF RESERVES



The technical parameters used to quantify the reserves of mineralized C gravels in the area were:



2.1 – GEOMETRICAL MODEL



The standards of omnipresent structures in the area correspond to the discontinuity of 3 (three) geostructural-magnetic domains of preferential attitudes referred as domains which formed families of faults of +- perpendicular attitudes.



Ø West Domain = It is localized in the W area of Sector –1, containing the family linings:



· S1 = N40º - 60ºE = pivots of more subparallel strains, possibly the first control of São Luis River, ranging an area of extensions varying from +- 1.50 km to +- 4.20 km;

· S2 = N50º - 70ºW = intermediate pivots of high subparallel dips, instability zone which perpendicularly crosses the other families of structures, with extensions which varied from +- 0.56 km to 1.76 km, whose base is related to some bodies of kimberlitic gaps nature and ultramafic dykes;

· S3 = S60º - 80ºE = intermediate pivot of low angle with S1 and approximately perpendicular to S2 and S4, of extensions of +- 2.20 km, where the biggest greenish alterations of hydrothermal-mineralogical nature, tacking the mafic-ultramafic occurrences and lamproites from extreme NW area of Sector - 1;



Ø Central Domain = It ranges the extreme limits of Sectors 2 and 3 of the area, which are formed by faults of the families. It is localized in the W area of Sector 1, containing the linings of S1 (W) and S3 (E) families which delineate traces that configurate a geometrical board of arched structures that would indicate a large assymetrical isoclinal fold of pivots of 0º to < 10º and axial plan of 0º to < 10º.



Ø East Domain = Localized in the E area of Sector – 4, in which are S1, S2, S3 and S4 families:



S4 = N10º - 20ºE = subparallel pivot of bigger curtailment, crossing S1 and S2 families, occurring only in East Domain, deriving from progressive deformation b block movement and/or layers of plasticine masses, characteristics of structural zoning of the heads of Juininha river.



2.2 – KINEMATIC MODEL



The tendency of the arched structure of Central Domain related to the oblique cavalcade in W-SW side is the limits of terraces with the Transition Zones in Sector-1. Such process of deformation might have occurred in a precocious stage, since the lining of regional strain is not inclined. In brief, the evidenced ruptile regime, mainly in Sector-1, was constituted of families of faults with occasional and discreet dislocations of blocks (small faults). The geostructural relations formerly referred between the 4 (four) groups of families must not be casual, for to explain them, it is possible to consider changes of position on the tension pivots, at the binary unloading time, S1 in Sector-1 to S3 in Sector-4.



2.3 – MESHES DIMENSIONING



Differential meshes were elaborated for the low depth geotechnical drills, following the geomagnetic and litostratigraphical orientations, parameters of considerable importance to stablish an ample cover of the deposits to be investigated.



2.4 – AREAS OF LATERAL AND LONGITUDINAL INFLUENCES



They were defined by a geometrical arrangement according to which the thicknesses of each hole prevail in all points nearer this hole than any other one, or whose average points of distance between the nearest holes to the considered one, along the geotechnical probing section and semi-distances between the consecutive probing sections.



2.5 – PROBING SECTIONS



In these ones, the biggest possible continuity of stretches with C gravels was observed, and when negatives occupying minimal spaces of 1 or maximum 2 holes inside the biggest continuity in the section.



2.6 – PRINCIPLES OF INTERPRETATION



2.6.1 – Influence Zone Principle – It was considered the half distance between two probing sections, thee direct influence of one or another section;

2.6.2 – Generalization Principle – According to the geological-geophysical-structural criteria of continuity of C levels in each section, it was stablished the average value of sterile and mineralized thicknesses as well as the area of lateral and longitudinal influence, according to FIG. 4 below:



F8 – Technical Probing Hole

LM – Master Line

L4 – Technical Probing Section

AI – Influence Area

Sterile Thickness

Deposit Thickness

FIG. 4 – SCHEMATIC GRAPHIC OF CALCULATION MODEL OF RESERVE BY SECTIONS



In Table-5 below, the reserve model in Sector-2 is exemplified, stablish in the in situ colluvial terrace.



SECTION / EXTENSION (m) / INFLUENCE AREA / THICKNESS / DEPOSIT VOLUME / DEPOSIT GRADE / PACKAGE GRADE / MINIMUM GRADE





3 – QUANTIFICATION OF THE DEPOSITS RESERVES



3.1 – PRIMARY DEPOSITS



They correspond to the integrated resources due to the saprolitic deposits of the pipes, dykes and gaps SS1, SS2 and SS3, kimberlitic and lamproitic covered by thick sedimentary layer and/or basins of mineralized prospect repeat. The tests performed were not considered enough to present a reserve of economical minable dimensions. Based on that, a final estimate of these deposits with the number of available data and its complex continuity and depth is premature at this moment. These bodies are the reason of deep studies in the evolution of the mining expected for 2005.



The updated values of the tests performed on these strongly intemperized primary covers were performed with Simples fixed Plants where the loss rate are much above 40%, an enterprise realized in an area of 80 x 80 x 1.50m, which produced:



Ø Deposit general volume = 0.600,00 m3 of strongly blueish – green altered masses;

Ø Production = 4,215.50 ct of diamond;

ØAverage grade of mineralized saprolite = 0.44 ct/m3.



Historical and punctual grades reached 6.50 to 13.81 ct/m3 in the NW area of Sector-1.



3.2 – SECONDARY DEPOSITS



The reserves consolidated in the present adequation reconfirmed the economical viability of the 1,889.13 hectares, whose diamond deposit at this moment represents the 1st level of the sedimentary deposit, the most superficial and notably minable with low financial resources, and that will support the determination of executability of the covered primary bodies. This reserve is the sum of the correspondent reserve of the colluvial terraces environments, transition zones, alluvions, shallow and deep paleocanals, including measured, indicated and inferred reserves, all of them with proved executability for diamond, according to attached tables, whose final summary is described below:



Ø General volume of the sterile covering = 58,883,380.00 m3;

Ø General volume of the deposits = 7,713,770.00 m3;

Ø Medium grade of the deposit = 1,6458 ct/m3;

Ø Medium grade of the package = 0.19 ct/m3;

Ø Grade of Mineral = 12,695,325.70 ct.



The geometrical and econometrical arrangement of the deposit is already being elaborated and constitutes part of the future PAE (Economical Utilization Plan) to be presented to DNPM soon. It includes resources for the operation of an operational set of: 2 fixed ramps, 1 mobile ramp and 5 duplicated fixed ramps. The availabled production will be initially commercialized with TRAVEN & RODRIGUES LTDA company, acquisitor since the treatment tests phase.





PART VI: ANALYSIS OF EXECUTABILITY


The necessity of adequation of the DNPM – MT nº 867.231 / 95 area to the New Descriptive Memorial of the Area, whose polygonal suffered alteration in relation to the 1st Edition of the Final Report presented, and until its publication, other research data were determined in this area. The reserves now consolidated were added old economically minerable values of C gravels mineralized with diamond, whose volume was recalculated for the 1,889.13 hectares of the area, which resulted in 7,713,770.00 m3 with a average grade of 1.6458 ct/m3 in the package of C gravels and 0.19 ct/m3 in the sedimentary profile.



1 – EVALUATION OF THE GEOLOGICAL-GEOPHYSICAL-GEOMETRICAL PARAMETERS



1.1 – OBJECTIVE OF THE CALCULATION OF RESERVES



The fundamental objective was of obtaining the estimate of volume in the deposits containing the mineral body (C gravel horizons), which served for all studies of posterior technical and economical viability, that made the determination of parameters of annual production possible, probable productive life of the mine, plough method, treatment and investment method (equipments, workforce, facilities, material, logistics, etc).



1.2 – LOGICAL SEQUENCE OF THE CALCULATION OF RESERVES



The research basic surveys of mineral deposits aimed at the geological knowledge, the geometrical configuration and variables distribution standard, which were evaluated by the geological model of the deposits of C gravels. The procedure of new calculation of reserves was constituted of many sequential phases including: geological evaluations, geophysical evaluations, evaluations of the research and sample method; evaluations of the shallow probing, wells, trenches and volumetric tests data for the extraction of grades; definition of mineralized bodies; selection of an adequate method for the calculation of reserves.



1.3 – GEOLOGICAL EVALUATIONS



The objective was the determination of limits of C gravels bodies. The main geological controls utilized were: Structural - faults, fractures, flaps, shear stains, etc; Mineralogical – types of satellite minerals, mineralogical alterations; Litological – types of rocks, degrees of alterations, fracturing, discordances, etc.). The estimates of volumes, masses and grades of the deposits were based on systematic observations and interpretations of the geology (litology and structure) and of mineralization (mineralogies, satellites, controls, distribution and continuities).



The degree of continuity of C (C1, C2 and C3) horizons played an important role and strongly influenced on the choice of interpolation parameter utilized. The high continuity and distances of drill holes did not recommend the refinement of the parameters. In the experimental test of treatment, the responses of diamond recuperation processes were frequently related to the associated litological and mineralogical variations.



1.4 – EVALUATION OF THE RESEARCH DATA



Ø Density of Samples = it was enough to guarantee the continuity of mineralization of diamondiferous C horizons, whose probing mesh were compatible with the dimension and nature of secondary deposits being studied, although there is anisotropy of contents common in these type of environments.

Ø Accuracy of Location of Holes, Wells and Trenches = The use of UTM coordinates allowed the articulation of the research position with an accuracy that made a dependable calculation of reserve possible (90 – 95%), the other remaining 50 – 10% were common uncertainties in these type of deposits. The exact location of the holes in the deposits allowed the definition of geometry of the reserves blocks (conventional methods) and consequently of the reserves of diamondiferous gravels obtained.

Ø Geophysical Evaluation = Integrating part of an extensive research program. This phase was constituded of indirect, magnetic and terrestrial radiometric investigation techniques, to identify structural-magnetic patterns, precision of intensity of radiations and definition of geological contacts and zones of hydrothermal effects and also mineralogical transformations of the geotectonic event that formed the structural skeleton of the area.

Ø Recuperation of the Proof of Mineralized Zone = It was considered good, with an average of 80%, because the masses containing C horizons are of friable (C1 and C3) or breakable (C1) nature.

Ø Aparent Density or Tonnage Factor = Difficult data in the research, specially because of the friable character of the mineralized mass. In spite of the importance of this parameter to the evaluation of the reserves, it is not systematically determined during the basic research phases, but in chosen points in the treatment tests. It is customary to observe the values of aparent densitites which vary a lot in the deposits of high natural variability in grades, e.g. São Luis Mine – 1.

Ø Quality of the Field and Laboratorial Analysis = The results have demonstrated medium precision and they were provably observed on the recuperation of beneficed summaries and by the investigation of this material in the X-ray Sorting House (LFA – Flow Sort with an opening of +2 –19) installed in Sector-1 of this research area.



1.5 – DELINEATION OF MINERAL BODY



The limits of C levels were stablished by marked litology, settling, structures and secondary limits related to the irregular limits of C levels, contours, gradual variations in diamond grades. It is worst emphasizing that the delineation of C horizons, independently from the method of calculation of reserves, was performed manually, from plants and geological probing sections. The geometry of mineralized horizons was classified according to the following morphological types:



Ø Tabular = included horizons with a short dimension and longer ones, where C layer is included;

Ø Elongated = included horizons with dimensions longer than the other two as, for instance, in layers C1 and C3.





2 – MINERAL RESEARCH DATA INVENTORY



The organization of the information was put in Base Plant of 1: 20,000 Scale and constituted the requirements for the calculation of reserves where they were manipulated:



2.1 – GEOLOGICAL INFORMATION



The rare occurrences, layers with well defined litologies and structures were put in an integrated 1: 20.000 Scale Base and delineation of reference units of mineralized horizons.



2.2 – The holes data were inventoried as disposition below: Coordinates of hole opening; Cotes of hole opening; direction and inclination of hole; Maximum depth; Proof and analytical results (analyzed break of C horizons, litologies and observations as to fractures, hydrothermal-mineralogical alterations, mineralization, etc.); Information of wells and shallow trenches for the calculation of reference grade; Volumetric delimitation (width, extension and thickness) of C horizons; Technological characterization of C horizons aiming phases of treatment for the refinement of average grades of mineralized deposits; Open-air treatment tests in geometrical panels for the dimensioning of possible recuperation factors in plants and grades of the deposits.



3 – COMPOSITION OF THE PROBING GRADES



The interval of the probing holes at the phase of evaluation of reserves were according to differentiated intervals according to the nature of deposits and their dimensions, with localized tests of 50m x 50 m specially in Sector – 1. The grouping of these intervals produced integrated data, with greater easiness of interpretation. The evaluated deposit, based on the number of drill holes corresponded to the first phase of treatment tests, specially in Sector-1 where units of treatment in research scale currently operate, in phase of DNPM nº 011 / 04 12º DS Utilization Guide.




PART VII: ECONOMICAL EVALUATION OF THE DEPOSIT


1 – DEPOSIT ECONOMY



The evaluation of São Luis Mineral deposit – 1 can be extended as a dynamic and interactive process of identification of the economical viability which involves the investments (capital) and process of decision making. The investments although discreet are currently growing in phases according to priorities, where the resources are limited and with planning, prioritizing the improvement of processing units (plants), central base camp, storage room and complementation of the Investigation Physical Laboratory (LFA). The characteristics of investments can be synthetized as follows:



1.1 – NON RENEWABLE RESOURCE



SLML operates with finite resource, whose life is related to the dimension of mineralized deposits and its annual extraction rate. The investments that will be realized then will aim at assuring an adequate yield before the reserves in each sector exhaust, and so stimulate the discovery of new deposits, either secondary or primary. Another impact is the financial gains obtained in limited portions of the indispensable patrimony of the project, in other words, the diamond deposit.



1.2 – INTENSITY OF CAPITAL



In the last 5 years medium-sized investments were made aiming at the improvement and enlargement of the mining. It is estimated today that the investments performed are of R$ 1.800.000,00 (one million eight hundred thousand reais), dissolved with the experimental technological productions. The enlargement of the next investments will depend on the dimensions of short-time financial yield, discovery of new primary and secondary deposits, maximization of operational expenses, qualification of workforce and also reach a level near total quality.



1.3 - PERIODS OF MATURATION



In the last two years, period of reconfirmation of the deposits and characterization of the respective economical grades, SLML believes that the area is ready for production of diamond in continuous bases and with defined technical and economical parameters and useful for investments decisions.



1.4 – RISK



The risks, although not much expressive due to the history of the area and region where they are inserted, is related to some peculiarities of São Luis Diamondiferous Mine Deposit – 1 (SL1), such as: locational rigidness; exhaustion; distribution of grades; contractual agreements with local owners; mineral market – floatation of commercial prices in international scale; etc. The studies of economical evaluation of the SL1 secondary deposits of diamonds constitute a permanent activity developed by SLML, that has an organised management system of diamondiferous patrimony as well as stable rules, which confer monetary value to the secondary diamond deposit in question.



During the period of 2000 / 2004, it was elected in the researches and volumetric details, the average variations of capability of monthly production and sale price, economically viable, according to Table-6 below:



HIGHEST AVERAGE / LOWEST AVERAGE / CENTRED AVERAGE



The estimate of average value R$ / ct consider all physical, chemical and commercial values, in practice in the international market, so it is possible to dimension an amount for its utilization in current days of approximately R$ 35.00 / ct.



2 – MINE PLANNING



The implantation of the Project of Treatment Tests in January / 2001 was the beginning of a program of technical improvement aiming at adequate processing and treatment methods and investigation of high operational rate and of utilization of diamonds in the area. Since 2005, in a new phase, the methodology will include improved stages of: topographical demarcation and delimitation of geometrical panels to be mined, starting from dimensions of 80 x 80 m; removal of the overburden of in situ sterile organic covering to one of the sides, making use of a D65E bulldozer; removal of the overburden of in situ sterile sandy-clayish covering to the opposite side, using the same D65E bulldozer and / or auxiliated by a CAT – 320 CL excavator; dismantle, disaggregation of mineralized mass containing C levels, using a CAT – 320 CL excavator; extraction and loading mineralized mass containing C levels, using a CAT – 320 CL excavator and 25 ton Volvo trucks, until the ramp and/or processing plants; silting of geometrical panels and recuperation of the soil with the aid of a D65E bulldozer.



The panels will be preferably contiguous, making the mining handling and the integration of the package to be mined possible, as well as solving the problem of deposit of the sterile and rejects from the processing units. As there are exhausted degraded areas, the beginning of the mining of one panel will be facilitated, for there is an empty panel ready to receive sterile dumps from the previous panel.



The hardened substract from level D1 = False Bedrock will facilitate the extraction and traffic of heavy machinery in its interior, so there must be special care with the “canoes” and “pans”, depressions with the storage of mineralized gravels, due to the soft waviness of the base plot which provide these entrapments with anomalous concentrations.



On the flooding plain the mining will have a reduced dimension of panels (20 x 60), due to the humid plot and safety factor. Well succeeded experiences with the volumetrical tests, including during the rainy season confirm that operational need. The freatic level almost always at the levels of mineralized C horizons will make the panels not suffer with the lack of water during the dry season. In the cases of water saturation in winter seasons, the exceeding volume will be extracted through water drain pumps, returning to the reservatory for reutilization.



2.2 – PRODUCTION



Initially, the mining will have to operate with 1 diary shift of 18 hours (6:00 am to 0:00), with the objective of progressively reach the following values: Extraction of sterile covering = 1,735,500.00 m3 in situ; Extraction and transport of mineralized C horizon = 495,000.00 m3 / year.



2.3 – MACHINERY AND EQUIPMENTS



Ø RF1 Fixed Ramp, consisting of 2 trapezoidal jigs and 1 Yuba jig, 1 vibratory sieve = 1;

Ø RF2 Fixed Ramp, 2 primary jigs, 1 secondary jig and 1 vibratory sieve = 1;

Ø RM1 Mobile Ramp, 2 primary jigs, 2 secondary jigs and 1 vibratory sieve = 1;

Ø PF1-5 Double Fixed Plant, primary and secondary jigs = 5

Ø Fixed Pilot Plant – grades Research = 1;

Ø D65E bulldozer = 1 ; CAT – 320 CL excavators = 2; Frontloader = 1;

Ø 25 ton Volvo trucks = 2; Munck truck = 1;

Ø 150 kva Generator Groups = 3; Cummins 4 cylinder diesel generator group = 1; 16.50 hp Tobata engines = 5;

Ø 24 hp engines = 1; 38 hp engines = 1; 64.5 hp engines = 1;

Ø High pressure pump, compressors, policorte, welding machines, drills, emery, and others tools.



2.4 – PROCESSING AND TREATMENT



Fixed and mobile ramps, jigging fixed duplicated plants of dense nature will be utilized. SLML has given emphasis to careful experiences whose studies that determined the best method of the process, treatment and investigation of diamonds of its deposits, obtaining success in the recent results of recuperation which was superior to 95% at LFA and above 90% at the plants and ramps processing. To reach this, simulating diamonds have been added on the processed masses together with the lines, whose results have presented rates of 1005 recuperation of these test-diamonds. The expected processing scale will be 495,000 m3 / year, distributed as follows:



2.4.1 – Mobile Ramp – 1 = 99,000 m3/y

2.4.2 – Fixed Ramp – 1 = 148,500 m3/y

2.4.3 – Fixed Ramp – 2 = 198,000 m3/y

2.4.4 – Fixed Plant – 5 = 49,500 m3/y



The slimes (0.1 – 1.0 mm) will go to the slimes dam after separation on mineralized C levels. The rest of the tailings, 98% of processed mass, return to the previously exhausted panel, +- 0.2% corresponds to the total mass of concentrated recuperated for treatment and recuperation of diamonds at the LFA (X –Ray sorting house).



2.5 – ASSORTING



The concentrate resumed in the processing units, RF, RM and PF, are now conditioned in 250 liter BIG BAG each, and transported by a Munck truck to the LFA storage courtyard, where it will wait for its final investigation and separation of diamonds in it. The investigation is processed in a Investigation Physical Laboratory which contains: 1 diamond recuperation machine – Flow Sort XR2 / 19DW, capable of investigate granulometries of +2 to –19 mm, operated in a single 24 hour shift by 2 groups alternating every 24 hours; 1 dry magnetic separator, where the +, –, and non magnetic (fluorescent) fractions are separated, in the last one where the diamonds to be extracted are found.



The concentrate resumed in the processing units ready for investigation at the LFA, of each 200 liters that enters Flow Sort is investigated, only +- 0,5 to 1,0% is the volume that contains the diamonds to recuperated. These diamonds are carefully weighed, counted and sealed for its commercialization in the end of each 30-38 operational days.



2.6 – INFRASTRUCTURE

A central base camp was built with an area of approximately 1.50 hectares, today more than 60% has been concluded, a LFA with a Flow Sort executes the 100% recuperation of resumed diamonds, measures that accredites SLML as a strong competitor of production and commercialization of diamonds in Mato Grosso and Brazil. The use of mining and concentration equipments, heavy machines of its own have already been amortized during the phases of treatment tests. The availability of qualified technical and operational staff is working since the previous phases. Today there is an availability of 24 hour/day 110V electrical energy, and specific generating groups for the special needs of the garage and LFA, to generate energy of 220V and 380V as well as water for housing supplying, LFA, garages and offices with semi artesian wells with capacity of 2500 m3/hour each well – (reservatories of 25,000 and 15,000 liters).



For the mining, the system absorbs exceeding water from the saturation of the first freatic level (+- 4.0m), completed by pumping drainages near the operation panel which is controlled and recircled, because is frequently worked with recirculation of water with reutilization of approximately 80% of the water from the 1st process.



The telecommunication means are already installed, a telephoning system with DDD – 66 (Long distance call), connecting all mines to the office at the Central Camp in Sector-1, and vsp Internet provider.



2.7 – EXPECTED BUDGET FOR 2005 / 2007



Ø Research = R$ 129,600.00;

Ø Enlargement and Improvement of the Mining = R$ 150,000.00;

Ø Housing Infrastructure = R$ 200,000.00;

Ø Renovation of Light Vehicles Fleet = R$ 135,000.00;

Ø Environmental Recovery = R$ 50,000.00.



- Research

- Enlargement

- Infrastructure

- Renovation of Fleet

- Environmental Recovery


FIG. 3: HISTOGRAM OF DISTRIBUTION OF INVESTMENTS 2005 / 2007

2.8 – FUTURE OF SÃO LUIS DEPOSIT



The future of São Luis deposit was dimensioned upon the updated reserves after publication of the New Descriptive Memorial of the Area, which considers:



Ø Measured Reserves = TM1,TM2, TM4, AM1, AM2, AM4;

Ø Indicated Reserve = TI3;

Ø Inferred Reserve = R1.



The integration of the cubbed values created a number of reserve without blistering of 7,713,000.00 m3 of C gravels mineralized with diamond, enough to stand an initial industrial processing enterprise of 495,000.00 m3/year. Considering the parameters below, the Deposit Average Life (VMJ) will be of approximately:



Ø RF1 (Fixed Ramp) = .........

Ø RF2 (Fixed Ramp) = ........

Ø RM1 (Mobile Ramp) = .......

Ø PF (Fixed Plant) = ......

Ø Total = 495,000 m3/year



VMJ = ....... = 15.58 years



To maintain the cycle of discoveries of economical deposits and creation of diamondiferous deposits, SLML disposes of a singular prospects stock, of important strategic geological value inserted in its almost 32,000 hectares of areas for mineral research, very superior to the available capital for exploration.



It is important to mention that the values mentioned above refer only to the blocked reserves of the secondary deposits on the first levels of sedimentary environments (+- 12m).



Deepened studies related to primary deposits and second sedimentary levels (levels of mineralized gravels after 15m – recently found) will be intensified during the next two years, results which evidently will be incorporated to the cubbed volume of this report. It is about a strategic reserve that will imply an enlargement of the average life of the deposit.



2.9 – ENVIRONMENTAL CONSIDERATIONS

Ø Silting of exhausted panels;

Ø Embankment of exhausted geometrical panels;

Ø Compaction of exhausted panels;

Ø Preparation of land with correctives of organic enrichment;

Ø Plantation of typical vegetation previous to works;

Ø Restructuration of old barrages and construction of inclined ramps;

Ø Preparation of new basins of reject suppresion;

Ø Elaboration of DNPM Integrated Plan and Environmental Control nº 867.231/95.



PART VIII: FINAL CONCLUSIONS


All qualitative and quantitative observations made at DNPM nº 867.231/95 area (area, volume, grade, and mineral content), geochemical, geophysical or sedimentological were geographically considered of expressive extension in the area and formulated the geological-geophysical-structural properties of the secondary and primary deposits presented here. The future mine is composed of relatively flat areas, what will facilitate the mining projects of SLML.



The structural nature of great range which modeled the deposits of the area was identified by the indirect method of terrestrial magnetometry of total field, which defined since the starting point to determine the influence and occurrence zone, as well as the recognizing of the economical potential of the area, according to data of Isothicknesses of Mineralized C gravels on SLML Map – 03.



In this evolution, 5 types of minerable economically deposit were identified (colluvial terraces, transition zones, alluvions, shallow and deep paleocanals), 1 secondary deposit at the 2 level of sedimentary package and 3 primary deposits (Saprolites SS1, SS2, SS3), all with high future perspectives of economical and minerable mineralizations.



The secondary cubbed deposits are heterogenical and with great variation of diamond grades, the fact that motivated an updating of methodology of exploration and extraction, elaborating more extensive panels, contiguous, sub-parallel, including all the C levels containing diamonds.



The secondary environments were literally researched through volumetrical tests which aimed at determining the average grade which was closer to reality and compatible with the mining programs, despite the high individual grades of the basic trenches and some selected places of treatment tests 2001/2003, values that superdimensioned the reserves then. The new works, following real parameters and the improvement of control and investigation as well, resulting in the obtention of outcomes closer to reality and economically viable.



We can affirm that the executability of the 1,889.13 hectares is strongly supported by the rates of recuperation of diamonds in the investigation of LFA – Flow Sort and 100% operations of RF, RM and PF, since the marked diamonds were fully recuperated when recuperation tests were required, methodology at every 48 hours, which guaranteed the operational efficiency of the process units.



The reserve of the reserves of the area involving the 1st level of sedimentary deposits accounted approximately 7,713,770.00 m3 of C gravels mineralized with diamonds in 1,889.13 hectares, with average grade of the deposit of 1.6458 ct/m3 and 0,19 ct/m3 dissolved in the sedimentary package of the 1st level, resulting in an mineral grade of 12,695,325.70 cts of diamonds.



The research results the quantification of data of economical evaluation of São Luis deposit – 1 are enough to affirm that it is about a dynamic and interactive process of identification and calculation of economical viability of other deposits, either in sedimentary depths or saprolites and healthy rocks. In this favorable opening, the existence of new deposits will allow SLML to maximize the mineral richness contempled in its areas along is explorations and extractions, for this the financial resources will be available to execute the necessary work for this event.



The new organizational concept created efficiency gains whose objective was the improvement of quality in the last 3 months. Positive effects caused by this organizational transformation, technical and operational improvements of equipments and processes as well as specialized training of the operational technical staff were felt in the last management balance of the first two months of 2005. The substancial reduction of general expenses of SL1 deposit was verified, parallely to low rates of losses in its process units and high recuperation of diamonds (99%) at LFA – Flow Sort, allowed the reduction of risks, all confirming the economical viability of the area and accredites it for the new phase of the mining.



The new investments of R$ 664.600,00 (six hundred sixty-four thousand six hundred reais) in the exploration and mining area are being determined due to the operational expenses, risks and investments yield in the technological area for the next phase of decisions of new investments. In this path, all phases of process allowed to convert the different values of cash flow in an uniform, equivalent series, creating a distribution of values initially similar during the VJM. At this stage an investment of R% 150.000,00 (one hundred fifty thousand reais) is planned, strategic amount that will allow, at least, to maintain the current levels of efficiency and production.



SLML foresees that the investments will soon be minimized by the cycle of creation of economically minerable deposits in its areas – DNPM, conjugated or not, whose stock of prospects exceed the current 25.000 hectares, and it is very superior to the capital expected for the mining of this area.



The present enterprise that culminated with this expressive reserve of diamondiferous C gravels, has in its conjuncture diamonds of weights, colors, purities and qualities variable, which stablish the SLML mineral patrimonial value, with degree of expectancy of average productive life operationally economic of 15,58 years, at minimal price at current market of R$ 35,00 / ct (thirty five reais / ct), without considering rocks of high gemological quality, which give different prices.



By so an entirely national efficient company model is consolidated, that produced excellent outcomes in the geological research and mine creation. SLML – SL MINERADORA LTDA know-how in diamond research and plough, together with intrinsic conditions of the mineral deposits researched allow to conclude the executability of the 1.889,13 hectares of the area in this process. Thus, it is about a deposit whose reserves will be part of the set of reserves already dimensioned from other areas in the same mineral province.



The economical evaluation of the DNPM 867.231/95 area and the short-term perspectives of the mining project allowed SLML addresses through this work to the DNPM – 12th DS Director to ratify its request of evaluation and approval of the present FINAL EXPLORATION REPORT, in its 3rd edition, now not only presenting the new board of reserves of diamondiferous gravels, recalculated by factors already described in the history of item 1.1 of PART-II, but also fullfilling the DNPM requirements after publication of the Description of the area which resulted on this new edition. Thus, the executability of the 1.889,13 hectares, literally involved in the Mining Project and incorporated in the PAE, which is being elaborated, allows SLML to request the DNPM – 12th Director the approval of this work.



Juina – MT....



_____________________________ ____________________________

Luiz Fernando S. S. Wagner Lopes Gheler

Geologist – Geophysicist Environmental Geologist







PART IX: BIBLIOGRAPHY







PART X: ATTACHED ITEMS



1 – MAPS



2 – DOCUMENTS

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1 hectare = 2.47105381 acres