Test Report

Flowsheet Development for Recovery and Concentration of Iron Sands: Phase II

Prepared for:

Outotec Laboratory Test Report

Contact: Peter Dunn, Martin Nevens Project #: 5393-2 Reference #: 25520

Shoreline Minerals Ltd.

Australia

Prepared By: R.A.Beale and M. Nevens

Outotec (USA) Inc.

Minerals Processing, Physical Separation

April 25, 2009 Revision 0

The information contained in this communication is confidential and is the property of Outotec. This information, in total or in part, may not be copied or provided to others without the expressed permission of the author or Outotec.

PHASE II Shoreline Minerals Ltd April 25, 2009 2 (11)

Executive Summary
Outotec USA Inc. has completed Phase II of the test program for the Aguas Claras iron sands deposit described in the Heads of Agreement document established with Shoreline Minerals. Phase II builds upon the results from Phase I to provide the findings reported here. The purpose of the Phase II test program was to determine: The preliminary conceptual process flowsheet required to sucessfully treat the Aguas Claras ore (builds upon the Phase I results). The mass, mineral, and water balance for this preliminary flowsheet An estimate of the grinding power to adequately liberate the valuable minerals Provide a bulk sample suitable for downstream metallurgical tests (reduction and smelting).

The desired minimum target quality for the concentrate was 50% Fe, with 15% TiO2, and a maximum of 5% gangue content (TiO2/gangue ratio of 3). Outotec was able to produce a concentrate of the following quality: Fe 55.4% TiO2 17.7% SiO2 1.2% V2O5 0.5% Al2O3 1.2% Other Gangue 2.8% TiO2/Gangue Ratio 3.1 P80 53 m

The mass yield was 6.2%. For every 100 tph of iron sands feed, 6.2 tph of concentrate can be produced at the above quality. This quality is suitable for the production of pig iron. The ability to produce a titanium slag of minimum quality of 75% TiO2 is questionable. Circosmelt testwork at Outotecs facilities in Europe would be required to confirm the suitability of the concentrate for downstream metallurgical processing. The client should review these results to determine the next course of action. Of note, further evaluation revealed the Aguas Claras material must be ground to a P80 = 53 m to reach sufficient liberation of the valuble iron and TiO2 minerals for successful beneficiation to desired quality. Grindability tests were performed indicating that 28.6 kWh/t are required in the plant to grind to P80 = 53 m. If a lesser quality can be accepted, grind size can be coarsened and reduce the required power. The tests in phase II are based upon the preferred flowsheet option identified in phase I as it minimizes the amount of material to grind. It is reiterated here that both flowsheets identified during phase I should be reviewed as part of future pre-feasibility study work.

Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com

PHASE II Shoreline Minerals Ltd April 25, 2009 3 (11)

1.

Introduction Outotec (USA) Inc. received approximately 5 tons of iron sand ore from Shoreline Minerals Ltd., Australia. The sample originated from a deposit located in Chile referred to as the Aguas Claras deposit. Outotec and Shoreline have agreed to conduct a test program in two phases. The first phase was carried out on a smaller sub-sample and focused on the conceptual process method required to produce a heavy magnetic concentrate with acceptable quality for reduction and smelting. The second phase builds upon the preliminary process concept identified in phase I and processes the remaining bulk sample material to determine a mass, mineral, and water balance for the preliminary flowsheet, estimate the grinding energy required to adequately liberate the minerals, and process the remaining bulk sample to provide a sample suitable for further downstream test work. Procedure Outotec received a bulk sample contained in 28 barrels, each barrel weighing approximately 180 kg. Four of the barrels were used for phase I testing. The remaining 24 barrels were used to perform the phase II testing. The contents of the 24 barrels were combined and homogenized to provide the bulk feed sample for the phase II tests. A sample was taken to determine the chemistry, size distribution and slimes content of the homogenized material. The bulk sample was treated following the process developed in phase I. Regular sampling is done at each unit process within the flowsheet to determine the mass, mineral, and water balance for the overall process flowsheet. As in phase I, the bulk sample was screened to remove any trash and was then attrition scrubbed to liberate slimes. The scrubbed material was introduced to a Floatex Density Separator to remove slimes and prepare the material for spiral concentrator testing. The Floatex product was run on an Outotec MC7000 spiral concentrator with the heavy concentrate subsequently processed by wet LIMS (Low Intensity Magnetic Separator) to recover the highly magnetic minerals. The LIMS magnetic concentrate was sent to the Minerals Research Laboratory at North Carolina State University for grinding and liberation studies plus final grinding of the bulk material. The milled material was returned to Outotec to continue the separation and characterization studies using further gravity and magnetic separation to produce a final concentrate. The ground sample was run another stage of magnetic separation to reject the non-magnetic minerals liberated during grinding. The LIMS magnetic product was then sent to a final Floatex Density Separator to clean the concentrate of weakly magnetic middlings and produce the final concentrate.

2.

Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com

PHASE II Shoreline Minerals Ltd April 25, 2009 3. Results The results of the study are found in the following subsections: Section 3.1 Process Flowsheet Section 3.2 Alternate Flowsheet Section 3.3 Feed Preparation and Bulk Sample Processing Section 3.4 Grinding Section 3.5 Product Quality Section 3.6 Yield Summary Section 3.7 Mass, Mineral, and Water Balance 4 (11)

Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com

PHASE II Shoreline Minerals Ltd April 25, 2009 5 (11)

3.1.

Phase I Flowsheet The flowsheet shown here was identified as the preferred option for the test program. This flowsheet minimizes the amount of grinding capacity required albeit at the expense of overall mass yield. An alternate flowsheet is shown in the following section (3.2), but it was not evaluated during the course of the study so as to maintain focus on the purpose of the test programs which were to determine if a concentrate of required quality for pig iron and titanium slag production could be achieved and identify a basic flowsheet that could accomplish this. Should the Aguas Claras project proceed to pre-feasibility stage, both of these flowsheets would need to be studied in comparison at that time.

Feed

Attrition Scrubbing

De-sliming (Floatex) Gravity Separation (MC7000 Spirals)

Grinding

Magnetic Separation Secondary LIMS: 1000 gauss Gravity Separation (Floatex) Concentrate
Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com

Tailings

Magnetic Separation Primary LIMS: 1300 Gauss

PHASE II Shoreline Minerals Ltd April 25, 2009 3.2. Alternate Flowsheet Feed 6 (11)

Attrition Scrubbing

De -sliming

Magnetic Separation (Primary 1300 gauss)

Tailings

Grinding

Magnetic Separation (Secondary - 1200 Gauss)

Magnetic Separation (Finisher - 1000 Gauss)

Concentrate

This flowsheet is presented to provide an alternative to the one that is the focus of the Phase I study. It will require significantly more grinding capacity but should produce a higher yield. Should the project proceed to the prefeasibility stage, this flowsheet should be studied and compared to the preliminary Phase I flowsheet to identify which flowsheet presents the best value for the project.

Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com

PHASE II Shoreline Minerals Ltd April 25, 2009 7 (11)

3.3.

Feed Preparation and Bulk Sample Processing The bulk sample was homogenized and then screened at 6 mesh to remove any large trash particles. The resulting sample was then processed according to the preferred flowsheet identified in the phase I study and shown in section 3.1 of this report. The results of the processing of the bulk sample are provided in sections 3.6 Yield Summary and 3.7 Mass, Mineral, and Water Balance.

3.4.

Grinding Study The bulk sample of the primary LIMS magnetic product was sent to North Carolina State University Minerals Research Laboratory in Asheville, North Carolina. The sample was ground using a pilot scale ball mill. The energy required to grind the material was determined using the Bond Work Index method and a plant, or actual, Work Index was inferred from the Bond result. The report from the Grinding study is provided as appendix A in this report. The results are summarized here. The Bond Work Index (Wi) results are provided here: P1 = 149 um F80 = 436.1 um P80 = 127.1 um Gbp = 1.80 Wi = 23.46 kWh/t Wi (dry) = 30.50 kWh/t From this data the plant or estimated actual work index (W) are determined. P80 m 175 m 127 m 106 m 75 m 53 m W kWh/t 7.5 12.5 16.4 18.6 28.6

Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com

PHASE II Shoreline Minerals Ltd April 25, 2009 8 (11)

3.5.

Product Quality Following the grinding stage, the material is further processed using a magnetic separator to reject the liberated non-magnetic gangue. This provides a near finished quality concentrate. The magnetic separator still recovers some complex particles that contain a trace of magnetic material and serve to reduce the grade of the final concentrate. These particles can be removed by using a Floatex Density separator as was done in the test program or, in an industrial setting, by an upward current classifier common to taconite operations called a hydroseparator. The quality of the final product is shown in the following table relative to the grind size achieved. We can see the improvement in TiO2/Gangue ratio and the projected TiO2 content of a smelter slag as the P80 of the grind size decreases. P80 m 175 m 127 m 106 m 75 m 53 m Fe %wt 51.9 51.7 52.9 54.7 55.4 TiO2 %wt 17.9 18.4 18.3 18.2 17.7 Total Gangue TiO2/Gangue %wt Ratio 10.4 1.7 10.2 1.8 8.9 2.1 8.3 2.2 5.7 3.1 Projected Slag TiO2 63.3% 64.2% 68.2% 68.9% 75.5%

Based on the results of the grinding and liberation required to achieve a product quality of with a TiO2:gangue ratio of 3.0, the bulk sample was ground to a P80 of 53 m. The assays of the product from the bulk sample show a TiO2: gangue ratio of 3.1 could be achieved which would translate to a calculated smelter slag with a quality of 75.3% TiO2 content. This is just at the target of 75% TiO2. It is possible that with some additional grinding with a P80 of 45 m that the quality could be improved. The material was not further ground to finer than P80 = 53 m as it would have delayed the project schedule. 3.5.1. Suitability for downstream metallurgical tests: reduction and smelting In terms of iron content, the concentrate is suitable for the production of pig iron in Outotecs Circosmelt process. The particle size is finer than desired for reduction but past evaluations have been done with similar particle size distributions with successful results. Testwork is required to confirm the suitability of the concentrate for the reduction and other downstream metallurgical processes. The ability to produce a valuable TiO2 rich smelter slag as a by-product is questionable. Based upon mathematical exercise, a slag content of 75% TiO2 is indicated. However, based upon empirical data and experience, the use of coal based reducing process (such as Outotecs Circofer process) would dilute the slag quality to less than 50% TiO2 content. This is caused by the ash and other products from the reacting coal reporting to the slag. The only practical
Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com

PHASE II Shoreline Minerals Ltd April 25, 2009 9 (11)

method to improve this quality is to use a gas based reduction process (such as Outotecs Circored process that uses natural gas). Even with a gas based process it is questionable that a slag quality with minimum 75% TiO2 content can be achieved. The tests would need to be performed to determine this. However, It is for Shoreline Minerals to determine if a gas based process is acceptable to them or if they can accept a slag with less than 75% TiO2. Shoreline can then decide whether or not to proceed with further metallurgical testing of the samples to provide the conclusive results. 3.6. Yield Summary A brief summary of the mass yield of the conceptual process is provided below: Feed Screen Undersize (Floatex Feed) Deslimed Spiral Feed (Floatex UF) Spiral Concentrate Primary LIMS Concentrate Secondary LIMS Concentrate Floatex Concentrate (Final) 100.0% 98.0% 77.4% 16.8% 9.8% 6.3% 6.2%

The overall mass yield is 6.2%. Thus for every 100 tph of feed, 6.2 tph of final concentrate can be produced.

Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com

PHASE II Shoreline Minerals Ltd April 25, 2009 10 (11)

3.7.

Mass, Mineral and Water Balance The overall performance of the beneficiation process of the Aguas Claras iron sand ore is summarized here: Final concentrate grade is 55.4% Fe, 17.7% TiO2, and 5.7% total gangue content The mass yield for the process is 6.2% The iron recovery of the process is 53.8% The TiO2 recovery of the process is 74.4%

The mass, mineral, and water balance for the preliminary conceptual process flowsheet is provided as appendix B. A detailed process flowsheet is provided as appendix C. Where dewatering steps are shown, 100% recovery of the solids to the concentrated solids streams was assumed for simplicity. These process steps would need to be confirmed during the pre-feasibility and design stages should the project proceed.

Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com

PHASE II Shoreline Minerals Ltd April 25, 2009 11 (11)

4.

Summary Outotec was able to demonstrate that a concentrate with the following characteristics can be produced from the Shoreline Aguas Claras deposit. Fe 55.4% TiO2 17.7% SiO2 1.2% V2O5 0.5% Al2O3 1.2% Other Gangue 2.8% P80 53 m

Overall yield for the flowsheet presented is 6.2%. An alternate flowsheet has also been presented that focuses on additional magnetic separation in place of the gravity concentration to improve overall circuit yield. This flowsheet has not been studied at this time but should be investigated if the Aguas Claras project should proceed to prefeasibility stage of development. The Aguas Claras material must be ground to a P80 = 53 m to achieve sufficient liberation for a TiO2 to Gangue ratio of 3.0. Iron content of minimum 50% can be achieved with a P80 of 175 m. The concentrate is suitable for reduction and smelting to produce pig iron. The fine particle size is a concern for reduction but successful trials have been performed in the past with particles of similar size. However, if a coal based reduction process is used, the by-products from the coal reactions will report to the slag during smelting. This will make it difficult to produce a TiO2 rich slag with greater than 50% TiO2 content. Such a slag would have a low market value. As an alternative, a gas based reduction process can be utilized instead of the coal based. Outotecs Circored reduction process uses natural gas as the reductant. The reduced products from the Circored process would be of an improved quality than from the coal based one. It is still questionable that even with a gas based reduction process that a slag with 75% TiO2 content would be achieved. Performing the tests would lead to the conclusive results showing whether or not this is possible. Based on the results of this test program, Shoreline Minerals must decide if it is appropriate to proceed with a downstream metallurgical test program to further evaluate the Aguas Claras ore. Shoreline should consider the following, among other things, when making the decision to proceed: Would coal or natural gas be available for the industrial reduction process? What is the minimum acceptable quality required for the concentrate? Is a lower TiO2 content acceptable in the slag? If yes, then the grinding requirements can be relaxed. Is the project economically viable based upon the iron content of the concentrate and the ability to produce pig iron and not also a titania rich slag?

Considering these points should help to determine if a project involving the beneficiation of the Aguas Claras deposit and possible downstream processing of the concentrates is financially viable.
Outotec (USA) Inc. Minerals Processing, Physical Separation 6100 Philips Highway Jacksonville, FL 32216 USA Tel. +1 904 353 3681, Fax +1 904 353 8705 www.outotec.com