Introduction

Tertiary Minerals holds an exploration licence covering a major deposit of fluorspar near Storuman in the Västerbottens district of Northern Sweden. Fluorspar is the commercial name for the industrial mineral fluorite (calcium fluoride - chemical formula CaF2).

In July 2010 the project was advanced by the completion of a technical and economic Scoping Study.

Scoping Study Highlights

Scoping Study highlights ($ = US dollars, all Pre-Tax)

Location

The deposit is located in an area with well established infrastructure. It is located adjacent to a sealed highway and only 25 km from the regional town of Storuman which is connected by rail and a sealed highway to the city and port of Umeå on the Gulf of Bothnia. The sealed highway continues in the opposite direction to the port town of Mo-I-Rana in Norway. There are also sealed highway routes to the major regional port of Skellefteå. Each of these three named ports are roughly 250km from the project site.

Mineralisation

The basis for the Storuman Project is a large area of flat lying, sandstone hosted fluorspar mineralisation that extends over an area of at least 2 km by 1.2 km where the mineralised horizon is typically 3-10 m thick. The mineralisation has been defined (but not closed off) by 49 drill holes; 39 completed by Gränges International Mining in the 1970s; and 10 by Tertiary Minerals in 2008.

A computer block model of the mineralisation which occurs in two distinct closely-spaced horizons was prepared by Scott Wilson Ltd and this formed the basis of a Competent Persons Report (“CPR”) containing a tonnage and grade estimate of 28 to 31 million tonnes grading 11.2-12.3% CaF2 at a cut-off grade of 8% CaF2, which is overlain by glacial till of thickness between 4 m and 14 m.

Mining

A conventional open pit strip mining operation of 1.0 Mtpa is envisaged for the Project, with a life of mine of 18 years. Waste rock material generated from the stripping operations will be used to construct the tailings storage facility and excess waste material will be directly backfilled into the open pit during operations, effectively progressing pit closure during mining operations.

The primary mining operations will consist of drilling, blasting, loading and hauling of ore and waste materials with free digging envisaged for the glacial till overburden. Mining is to be undertaken by a mining contractor to reduce pre-production capital expenditure and Scott Wilson has prepared the cost estimate of the Study on this basis.

Based on a preliminary Whittle pit optimisation carried out by Scott Wilson, a total mineable tonnage estimate of 18.0 Mt grading 12.3% CaF2 and producing 1.9 Mt of concentrate can be economically extracted. The average stripping ratio is 2.2 for the life of mine which equates to 39.9 Mt of waste produced.

Mineral Processing

A 1.0 Mtpa flotation process plant is envisaged for the Project with three stages of crushing, primary ball mill and two regrind stages. Ore will be delivered to a run of mine (ROM) pad and fed to the plant via a front end loader. The final concentrate product will be transported to a Swedish port for export.

Metallurgical testwork conducted by SGS Minerals Services (Canada) during 2008-2010 was directed and reviewed by Malcolm Crawford of Delta Minerals Limited, a recognised fluorspar processing specialist based in England. This testwork formed the basis of the conceptual process flowsheet used in the Scoping Study and shown below.

The concentrate produced by the process flow sheet results in a fluorspar concentrate that meets concentrate product specifications for sulphur, silica and calcium carbonate with a process recovery of 81.9%. As a result of the need for fine grinding the process flow sheet results in a fluorspar concentrate that is finer grained than traditionally supplied to the market. However, the Company’s recent marketing enquiries have not met resistance to a finer grained concentrate with a number of consumers interested to test Storuman fluorspar through their acid-plants.

Fluorspar Market

Fluorspar is the essential raw material for fluorine products but is generally unseen in everyday life. From refrigerants, to pharmaceuticals, to materials in our kitchen fluorine is present, and demand for fluorspar is strongly linked to economic activity. Future projected demand for fluorspar is expected to be driven in particular by rising demand for refrigerators, air conditioners, and motor cars in China, India, Russia and Brazil, as well as overall global growth.

Global production and trade in fluorspar has risen from less than 4.0 million tonnes (Mt) per year in 1994 to 5.7Mt in 2007 and is projected to rise by 24% (1.3Mt) to 7.0 million tonnes by 2030. Placing this projected rise in perspective, it is the equivalent of thirteen (13) new fluorspar mines of the size proposed for Storuman.

Fluorspar concentrates are traded in three different grades. Storuman is targeting the high-grade, high price, Acid-spar market. Acid-spar accounted for 69% of fluorspar production in 2007 and is used in the manufacture of hydrofluoric acid (HF) and aluminium fluoride (AlF3).

Traded globally, pricing for fluorspar reflects its relative demand and supply but also the surplus quantity available for export from countries with domestic production and demand. As the world’s dominant producer, consumer and exporter of fluorspar the Chinese export price for Acid-spar is a common benchmark price published on a regular basis. In 2000 the price for Acid-spar from China was US$100/tonne (FOB) and increased to US$428 in 2009 before the global economic crisis. After a fall in price during the global economic crisis there was a period of price stability and in April 2010 prices began to rise.

The Storuman project is a large fluorspar deposit containing 1.8 million tonnes of open-pit mineable fluorspar. The markets in Europe and North America, which are the closest, currently import a significant portion of their 1.5 million tonnes of imported Acid-spar from China, Mexico, South Africa and Mongolia representing a significant additional shipping distance compared to deliveries from Storuman.

With a conceptual Acid-spar output of 100,000 tonnes per year Storuman would be a medium-scale producer, and the largest in Europe. The relative proximity of Storuman to Europe and North America is seen as an advantage, and local deep-water ports will allow product to be delivered to any international market assuming price and suitability is acceptable. It is also anticipated that Sweden’s low political risk; excellent regional infrastructure; and long history of mining may offer strategic advantages over some traditional sources

Fluorspar consumers, several of which are based in Europe, are facing strategic supply decisions as traditional supplies from China are diverted to meet growing Chinese domestic demand. On 17th June 2010 the European Commission published its review on mineral supply and the impact on the economy of Europe stating that fluorspar is one of 14 raw mineral materials that are critical to the European Union having high supply risk and high economic importance. See EU MEMO/10/263 at: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/752&format=HT

At present, China accounts for half of world fluorspar production but exports only 25% of its output. Export tonnages have fallen by more than half since the year 2000 and this trend is predicted to continue.

Project Risks

The completion of the Scoping Study on the Storuman Fluorspar Project by Scott Wilson Limited is an important milestone in the evaluation of this project and provides the Board of Tertiary Minerals with an important document for decision making on the merits of further investment in the Project.

Scott Wilson further comments that the Scoping Study and its economic analysis (which included cost accuracies are in the region +/- 35% based on 2nd quarter 2010 estimates):

• is not based on a classified mineral resource,
• should be considered preliminary in nature,
• used capital and operating costs that are preliminary and may vary once further metallurgical testwork is undertaken and quotations from Swedish mining contractors are received.

As such Scott Wilson caution that, although in their opinion the available geological information at this stage of the project does not fully reflect the potential of the Storuman fluorite deposit, there is no certainty that the economic forecast will be realised.