Copper Creek

Redhawk’s Copper Creek Property is located 75 road miles northeast of Tucson and 15 miles northeast of San Manuel, in an area well situated in regard to existing general and copper mining infrastructure. The original 7 square mile property was increased in 2011-2012 by the addition of a further 22 square miles of contiguous property. The property is in the prolific southwest porphyry copper belt at the projected intersection of a major northwest belt of porphyry copper deposits (Ray, Miami/Globe, Superior/Resolution, Johnson Camp) and a major east-northeast belt of porphyry deposits (San Manuel/Kalamazoo, Silver Bell, Lakeshore, Safford, Morenci). The property is within sight of the former BHP Kalamazoo copper smelter and mine and within 30 miles of an existing operating copper mill and smelter. The area is a mining friendly and politically secure location with excellent and readily accessible infrastructure.

Copper Creek hosts multiple Breccia and Porphyry Copper Deposits. Both deposit types include current copper/molybdenum resources prepared in accordance with CIM standards. Molybdenum is present in varying amounts in the Breccia and Porphyry Copper deposits and is expected to provide substantial credits to both deposit types. Gold and silver are also present in both deposit types and are expected to provide credits during mining.

The Copper Creek property has had a substantial amount of exploration conducted on it, with 480 drill holes and 656,341 feet (200,055 metres) of drilling to date, and there is significant potential for additional discoveries on this large claim block. Development to date on the property has been confined to the original 7 square miles highlighted by the inset block in Figure 1. There are over 400 known breccia deposits on the 5,100+ acre original Copper Creek property, of which only about 35 have had drilling on or near them and only 8 are included in the resource and have been adequately drill tested. A multitude of other high-potential target exploration areas have been identified in this prolific area of breccia outcrops with more than 80% of the original property and all of the new 22 square mile addition still open to further exploration.

Redhawk engaged Tucson, Arizona based Independent Mining Consultants (“IMC”) on multiple occasions to calculate, in accordance with CIM standards, Mineral Resource tons and grade for the porphyry and breccia deposits. The most recent resource calculation was completed in December, 2012. Full details of the resource calculations and the complete Technical Reports are available under the tab “Mineral Resource Estimate” on this website.

Redhawk believes that a combination of the higher-grade breccia deposits and the much larger porphyry deposit represented by the Keel and American Eagle deposits offer an opportunity for developing a large low cost, long life mining operation. Redhawk, through its consultants, completed the ground water monitoring, waste rock characterization studies, environmental and cultural studies required to submit an Aquifer Protection Permit (APP) with the Arizona Department of Environmental Quality to allow an exploration and development decline to be driven into the Breccia Resource area. That permit application was approved in 2009 and is the key permit to allow underground access at Copper Creek.

Redhawk’s consultants completed a Scoping Study in 2009 which was subsequently updated in 2010. The Scoping Study was based on the 2008 resource report and was based on the best information available about the deposit at that time. It was developed around a very conservative smaller scale underground mine achieving a maximum throughput of 10,000 tons per day. Even at the smaller scale the operation achieved a NPV of US$350m at a 7.5% discount rate pretax. The complete Scoping Study is available in the website under the tab “Properties-Copper Creek — 2010 Scoping Study”.

During 2011 and 2012 Redhawk completed a number of initiatives designed to provide sufficient information to commence a new Preliminary Economic Analysis (PEA) in late 2012. This included a 30,000 meter drill program; oriented core and additional geo-tech work; hydrology studies; advanced metallurgical studies; and the completion of the environmental studies to cover the entire original 7 square mile property. The initial part of the study will be to review different surface and underground mining approaches and determine the best mining technique for Copper Creek. Following this trade off review the PEA continued with the selected underground mining approach.

An amended PEA was completed in October 2013 and was developed around a 25,000 short tons per day (tpd) underground room and pillar/post pillar primary operation in the porphyry deposit, room and pillar/post pillar and cut and fill mining in the breccia resources, and open pit mining of the Old Reliable breccia resource.  Processing is a conventional copper flotation concentrator with a molybdenum separation circuit.  The project produces a US$488m NPV at a 7.5% discount pretax and a 16% IRR at US$3.30 copper price.  Copper production is estimated at 121 million pounds (55,200 metric tonnes) per year at a cost of US$1.74 per pound of copper net of byproducts.

The cash flow analysis in the PEA is pre-tax. If the project is profitable, Redhawk would be subject to tax in the State of Arizona. For financial planning and budgeting purposes, combined federal and state corporate income taxes have been estimated at 39.53 percent.

The PEA is preliminary in nature and it includes inferred resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.  There is no certainty that the PEA will be realized.