Tertiary Minerals

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) which is an essential raw material in the chemical, steel and aluminium industries. Tertiary controls an estimated four million tonnes of fluorspar across its two Scandinavian projects (Storuman in Sweden and Lassedalen in Norway).

MINERAL RESOURCE ESTIMATE

In March 2011 the maiden JORC compliant Mineral Resource was estimated for the Storuman Fluorspar Project. Further details may be found in the RNS dated 31st March 2011

Table 1 - JORC Mineral Resource Estimate effective 25th March 2011

The Mineral Resource Estimate is based on the results from 56 diamond drill holes completed by the Company in 2008 and 2010. All tonnage in the estimate falls within a Whittle optimised open-pit with low waste overburden strip ratio (0.8 tonnes of overburden per tonne of mineralisation).

By definition, a JORC compliant Mineral Resource must have reasonable prospects for eventual economic extraction and portions of a mineral deposit that do not have such prospects must be excluded from the estimate.

To determine the Mineral Resource Statement, a Whittle pit optimisation exercise is used to determine the proportion of the material that has a reasonable prospect of economic extraction. The ore tonnage and grade generated by the pit optimisation process is the Mineral Resource Estimate. It is classified as either “Inferred” or “Indicated”. The Minerals Resource at Storuman is 90% in the higher “Indicated Mineral Resource” category which means that confidence in the estimate is sufficient to allow the application of technical and economic parameters, and to enable an evaluation of economic viability.

Whittle Parameters

To generate the optimised ore tonnage and grade the Whittle optimisation requires the input of reasonable processing and mining cost parameters in addition to appropriate pit slope angles and processing recoveries. The table below shows the assumptions applied in the Whittle optimisation

It is common practice during resource estimation to use optimistic commodity pricing in order to allow for “eventual economic extraction” at prices that at some stage in the future will cycle to prices higher than prevailing prices. However, in this case SRK agreed with the Company’s request to use a fluorspar price that was conservative at the time. The fluorspar price used for the Mineral Resource Estimate, US$303/tonne fluorspar at the mine gate, was estimated during the 2010 Scoping Study to be equivalent to a price of US$357 delivered into Rotterdam (CIF basis). The CIF Rotterdam price is a recognised pricing basis and in March 2011 the CIF Rotterdam price for Chinese fluorspar was reported to be US$460/tonne.

Comparison with 2010 Scoping Study

The 2010 Scoping Study delivered a base-case project NPV of US$33 million, and an Internal Rate of Return (IRR) of 24% at a US$303/tonne mine gate fluorspar selling price and a capital pay-back of less than 3 years. The Company notes that if using the March 2011 fluorspar price of US$460/tonne (CIF Rotterdam) the Company’s Scoping Study base-case financial model generates a NPV of US$123 million (at a comparable discount rate of 8%), an IRR of 50% and a 1.7 year payback. Although the grade-tonnage data on which the Scoping Study financial model is based is no longer current the Company believes it serves to illustrate the positive effects of the rising fluorspar price.

Scoping Study Highlights

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 ice-free 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 is 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 3.6 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 95 drill holes; 39 completed by Gränges International Mining in the 1970s; 10 by Tertiary Minerals in 2008 and 46 by Tertiary Minerals in 2010.

Mining

A conventional open pit strip mining operation of 1.0 million tonnes per annum (Mtpa) is envisaged for the Project, with a life of mine exceeding 20 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 and shale overburden. Mining is envisaged to be undertaken by a mining contractor to reduce pre-production capital expenditure.

Based on a preliminary Whittle pit optimisation carried out by SRK in March 2011, a total mineable tonnage of 27.8 Mt grading 10.2% CaF2 and producing 2.3 Mt of concentrate can be economically extracted using the Scoping Study metallurgical recovery of 81.9%. The average stripping ratio is 0.8 for the life of mine which equates to 22.2 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.

Further metallurgical testwork is planned for 2011 to refine and optimise the conceptual process flowsheet developed in 2010

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. In March 2011 FOB prices for Chinese acid-spar of US$400-420/tonne were reported and US$460/t on a CIF Rotterdam basis.

The Storuman project is a large fluorspar deposit containing 2.3 million tonnes of recoverable, 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.