Average Grade:

The average grade is the nickel or copper grade (or the nickel or copper equivalent grade)
of reserve, zone, stope or any block of mineral, obtained through the application of a
specified cut-off grade. The average grade must be sufficient to recover development
costs, capital, interest and profit. The applicable cut-off grade may change with changes in
costs, metal prices or mining plan.

Dilution:

Sudbury Mines Mill Business Unit Mineral Reserves take into account anticipated
percentages of dilution, in order to obtain the most realistic reserve grades. Dilution is
defined as mined material below cut-off grade, which reduces the mill feed grade. Dilution
is applied to all Proven and Probable Mineral Reserves.

Dilution does not include internal waste blocks and fragments of any size within the limits
of the insitu reserve, or zones or areas of waste or low-grade material between zones of ore
grade mineralization. Because of distribution and geometric characteristics, this material
constitutes and is calculated as, an integral part of the mineral reserve.

Dilution from material external to the insitu reserve, or external dilution, is classified as
either planned dilution (PD), or waste dilution (WD).

Planned Dilution (PD) Includes all external material below the cut-off grade that
must be removed with the ore; and, is included in a stope-mining plan. The amount of this
material is dependent on mining method, the attitude of the ore-wallrock contacts, size,
shape and the width of the zone. In order to extract all the ore in a stope, whether by
blasthole or cut and fill mining methods, experience indicates that it is necessary to include
an amount of the wallrock adjacent to the ore, as planned dilution. Planned dilution is
added to the tonnage of each ore block or stope at appropriate wallrock grades.

Waste Dilution (WD) Dilution caused by failed wallrocks resulting from poor
ground conditions, and/or additional waste from improper mining practices, and/or tailings
fill mixed with the ore. All waste dilution is added at nil grades.

Total dilution has the effect of reducing the average mineral reserve grade of the zone,
block or stope. All dilution is calculated by actual tonnes of dilution material and is
expressed as a percentage of the ore tonnes.

Formulae for Calculating Dilution:

% Planned Dilution (PD) = Tonnes Planned Dilution * 100

Tonnes Mineral Resource

% Waste Dilution (WD)1 = Tonnes Waste Dilution * 100

Tonnes Mineral Resource

% Total Dilution (TD) = (Tonnes Planned Dilution + Tonnes Waste Dilution) * 100
Tonnes Mineral Resource
 1
For Fraser Cu the formula for %WD = Tonnes Waste Dilution*100/(Tonnes Mineral
Resource+Tonnes Planned Dilution)

Mineral Reserve Mining Recoveries:

All Proven and Probable Mineral Reserves within existing mines infrastructure are
adjusted to reflect planned ore recoveries. The recoveries of the individual stopes vary
from 100% in narrow cut and fill stopes to 60% in some sill pillar blasthole panels.
Planned recovery values are estimated based on past actual recoveries, anticipated ground
conditions, wall rock competence and mining method. All presently mined stopes have
projected recoveries based on actual recoveries at the time the Mineral Reserves are
estimated.

Metallurgical Recoveries:

The metal recoveries assumed in the cutoff grades and NSR’s used to convert
Mineral Resources to Reserves are based on a mill model that is linked to the
economic evaluation program (MPEP).

Mineral Resources and Reserves – Category Definitions1

The Mineral Reserves at Xstrata Nickel’s Sudbury Operations are a combination of the Proven
and Probable categories, which are present in a number of separate and geologically distinct
deposits. There are major differences in geometry, continuity, mineral content and geological
character between the deposits, which influence the level of confidence placed on the reserves.
On an individual mine basis, the parameters used in defining the mineral resources and
reserves are considered to be valid for that deposit, but there may be slight differences when
comparisons are made between the mines. The definitions of mineral resources and reserves
categories listed below, are the accepted standard for The Sudbury Mines Mill Business Unit
as a whole. They comply with the CIM Standards on Mineral Resources and Reserves –
Definitions and Guidelines.

Mineral Resource:
A Mineral Resource is a concentration or occurrence of diamonds, natural, solid inorganic
material, or natural solid fossilized organic material including base and precious metals, coal,
and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade
or quality that it has reasonable prospects for economic extraction. The location, quantity,
grade, geological characteristics and continuity of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge.
Inferred Mineral Resource:
An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated
Mineral Resource.

1
Reference: CIM Standards on Mineral Resources and Reserves – Definitions and Guidelines
October 2000, as updated Nov. 22, 2005.
An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade
or quality can be estimated on the basis of geological evidence and limited sampling and
reasonably assumed, but not verified, geological and grade continuity. The estimate is based
on limited information and sampling gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes.

Indicated Mineral Resource:

An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral
Resource but has a lower level of confidence than a Measured Mineral Resource.
An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape and physical characteristics, can be estimated with a level of
confidence sufficient to allow the appropriate application of technical and economic
parameters, to support mine planning and evaluation of the economic viability of the deposit.
The estimate is based on detailed and reliable exploration and testing information gathered
through appropriate techniques from locations such as outcrops, trenches, pits, workings and
drill holes that are spaced closely enough for geological and grade continuity to be reasonably
assumed.

Measured Resource:
A Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape, and physical characteristics can be estimated with confidence
sufficient to allow the appropriate application of technical and economic parameters, to
support production planning and evaluation of the economic viability of the deposit. The
estimate is based on detailed and reliable exploration, sampling and testing information
gathered through appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely enough to confirm both geological and grade
continuity.
Mineral Reserve:
Mineral Reserves are sub-divided in order of increasing confidence into Probable Mineral
Reserves and Proven Mineral Reserves.
A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral
Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include
adequate information on mining, processing, metallurgical, economic, and other relevant
factors that demonstrate, at the time of reporting, that economic extraction can be justified. A
Mineral Reserve includes diluting materials and allowances for losses that may occur when the
material is mined.
Probable Mineral Reserve:
A Probable Mineral Reserve has a lower level of confidence than a Proven Reserve.
A Probable Mineral Reserve is the economically mineable part of an Indicated, and in some
circumstances Measured, Mineral Resource demonstrated by at least a Preliminary Feasibility
Study. This study must include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of reporting, that economic
extraction can be justified.

Proven Mineral Reserve:

 Application of the category of a Proven Mineral Reserve implies the highest degree of
confidence in the estimate with the consequent expectations in the minds of readers of the
report. These expectations should also be borne in mind when categorizing a Mineral Resource
as Measured.
A Proven Mineral Reserve is the economically mineable part of a Measured Mineral Resource
demonstrated by at least a Preliminary Feasibility Study. This study must include adequate
information on mining, processing, metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction is justified.

Mineral Resources and Reserves – Estimations

Mineral Resource and Reserve estimations, are documented for each mine, by the Mine
Geologist. Applicable cut-off grades vary with the estimated economics of mining and are
supplied to the Mine Geologist by the Mine Engineer. Most mines and project areas have
converted to a block model estimation. Some Mineral Reserves and Resources are calculated
by the cross-sectional method, however occasionally other methods are used when the
sectional method is not practical. Other methods may be whole block or plan polygonal
depending on the individual situation.
Percentage dilution factors utilized are based on ore widths, geometric shape of the ore zones,
mining method to be employed and anticipated ground conditions. The specific gravity of the
ore directly correlates with the content of sulphide mineralization and hence with the grade.
Specific gravity formulae for Mineral Reserves have been prepared for all deposits by
regression analysis. In The Sudbury Mines Mill Business Unit, Mineral Resources and
Reserves estimations based on block models, use Datamine software. Sectional and other
estimations are performed using the CAMP2 system.
Basic Parameters for Sectional Polygonal Estimations:
1. The calculation of the average grades of diamond drill hole intersections is the weighted
average of sample lengths * specific gravity * grade.
2. On cross sections, polygons are created based on geology and grade of each individual ore
intersection and are generally taken halfway between drill holes. Linear tonnes are
calculated applying specific gravity values using the average grade for the polygon.
3. The average grade for each individual cross section is determined by the weighted average
of polygon linear tonnes and grades.
4. Linear tonnes represented by adjacent sections are averaged using the frustum of a
pyramid formula to get total tonnes between sections:

2
Computer Aided Mine Planning; an in-house developed computer program for resource and reserves
estimations and mine planning.
 D(A+B+AB)
3

Where A and B are the areas of the respective cross sections and D is the perpendicular
distance between the sections. Grades are averaged based on the linear tonnes on each
section.

5. End of zones sections are created at minimum mining width and at cut-off grade in a
position determined on the basis of geological information from the last ore section and
the waste section outside the ore zone.

6. The tonnes for each ore block or stope is the sum of the tonnes between each pair of
sections and the average grade of the ore block is the weighted average grade of the tonnes
of each pair of sections.
7. The planned dilution (PD) is added to the linear tonnage of each section as a % of the total
ore, or calculated as part of a blasthole stope and the percentage determined by the
planned dilution formula. Waste dilution is added to the total stope or block as a final step
in determining total available mineable material.
8. Recovery factors reflecting anticipated losses in mining are applied to the total stope
calculation. This step results in final recoverable mineable tonnes and grades for the
individual zone, block or stope.
9. The formula to calculate the percent Ni in Ni-bearing sulphides is:

% Ni/Sd = % Ni * 100
(0.417 * % Ni + 2.55 * % S – 2.59 * % Cu )

This formula is helpful in determining Ni metal recovery in the mill and visual production
Ni grade estimates.
10. The formulae used to calculate Ni or Cu equivalents required for cut-off grade purposes is
as follows:

%NiEq = %Ni + (PCu*%Cu)/PNi + (PCo*%Co)/PNi + (PAu*AAu)/PNi*685.7 +

(PPt*APt)/PNi*685.7 + ((PPd*APd)/PNi*685.7 + (PAg*AAg)/PNi*685.7

%NiCu = %Cu + (PNi*%Ni)/PCu + (PCo*%Co)/PCu + (PAu*AAu)/PCu*685.7 +

(PPt*APt)/PCu*685.7 + ((PPd*APd)/PCu*685.7 + (PAg*AAg)/PCu*685.7

PNi, PCu and PCo are the prices of nickel, copper and cobalt per pound respectively, and
PAu, PPt, PPd and PAg are the prices of gold, platinum, palladium and silver per troy oz.
AAu, APt, APd, AAg are the assay values of Au, Pt, Pd and Ag in ppm or grams per tonne.
Ni, Cu and Co assays are in percent.
Block Model Methods and Procedures

The block model estimations were completed using the following process.

Seven steps, including the classification and reporting step, are followed with a peer review at the
end of each. The peer review involves those closely involved with the zone/deposit and ensures
complete data and understanding is incorporated in the final estimation.
1. Set-up.
Diamond drill hole data is exported from the central database in .csv format. Files are exported
for collar location, major and minor geology, assays, RQDs3 and downhole surveys.
Project settings, which are multipliers used to generate nickel equivalents and density formula
from analytical data read into Datamine, are derived from appropriate metal prices and specific
gravity regressions. The data undergoes a final validation during the read into Datamine and a

3
RQD = Rock Quality Description.
 three-dimensional hole-all file is created. This file can then be visually viewed and reviewed
within the program for accuracy and completeness.
2. Geology.
A list of the diamond drill holes, in the hole-all file, is output from Datamine for reference and
review.
Points are snapped to diamond drill holes at the dark norite breccia/late granite breccia and the
late granite breccia/felsic gneiss contacts. From these points a wireframe .dtm surface is
created for the hangingwall and footwall. Strings, snapped to diamond drill hole intersections,
are drawn on cross-sections using the initial .dtm surface as a template for accommodating
irregularities removed from the plane of the string.
A similar process is used for constructing the mineralized envelope (mintr/pt). Strings are
drawn on cross-section, and snapped to drill holes, around mineralization which is meaningful
with respect to the cut-off grades supplied. Intersections that are believed to have a reasonable
prospect of falling within a mine design are included provided the resulting wireframe is
geologically and geometrically credible.
3. Data and Statistics.
A list of the diamond drill holes with segments inside the mineralized envelope (minhol.dm),
and a list of the corresponding sample numbers, is output from Datamine for reference and
review. Any holes which may have fallen within the mineralized envelope, but have been
excluded for whatever reason, are also output for reference.
Analytical data from the minhol.dm file is output to Excel®. Descriptive statistics and
histograms, using the analysis tools within Excel®, are completed on the reportable metals and
the nickel in nickel bearing sulphides (NiSd). As well, correlation coefficients and scatter plots
assist in understanding the analytical data available.
Descriptive statistics and histograms are completed on the captured sample lengths, to assist in
identifying an appropriate composite length. The mean, mode, and 95 th percentile are viewed
with the histogram of sample lengths, to bring analytical data to a common support that does
not significantly alter the variance in grades. A Q-Q plot is created showing the before and
after composited grade(s) to provide insight into the degree of smoothing and distortion of
distribution.
A final set of descriptive statistics and histograms is completed on the primary metal (usually
nickel and/or copper) using the composited sample file (mincmp.dm). This is done for
comparison to the regularized model during the verification step. As well, residuals are
assessed and the need for and level to which top-cutting may be required, is completed at this
point in the modeling process.
4. Geostatistics.
Variograms are created for all reportable metals. If subordinate metals (cobalt, precious
metals) show reasonable correlation with nickel, copper or sulphur and do not exhibit a
meaningful variogram, the variogram from the primary metal may be used. Lacking any well-
behaved variography, a directionless variogram is created and modified within Datamine to
accommodate historical experience/understanding. A wireframe of the variogram ellipse is
constructed in all cases, to ensure the variogram selected can be reconciled with the geology
model.
 The search ellipse is constructed from an empirically derived formula, such that search volume
1 plus search volume 2 approaches two-thirds of the range from the variogram ellipse. Again,
a wireframe of the search ellipse is created to prevent construction errors.
An appropriate block size is identified, via an iterative process, utilizing a kriging
neighbourhood analysis. A range of potential block dimensions is selected and estimations run
with the slope and kriging efficiency plotted for each potential block.
5. Estimation
Ordinary kriging is the base case estimator. Inverse distance and nearest neighbour
interpolations are completed to highlight major errors. The tonnes and grade for each method
are plotted for visual comparison.
The model volume is compared to the mineralized wireframe volume, with a variance of less
then two percent considered acceptable.
6. Verification.
The graded block model is reviewed, on cross-section, longitudinal section and plan views,
with the diamond drill holes used to generate the model, to ensure honouring of original data
and geological interpretation.
Histograms and Q-Q plots of composited drill hole data and the regularized model are
superimposed for the primary metal (usually nickel and/or copper) to assess grade distributions
and/or distortions.
7. Classification and Reporting.
CIM Best Practices Guidelines are used for classification and reporting.
8. Final Group Peer Review.
A final peer review, involving department head(s) and/or various levels of management, is
completed before release of estimates.