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Morococha Operations Yauli Province, PeruTechnical Report

Resource Evaluation Inc. 1 February 2004

MOROCOCHA OPERATIONS

YAULI PROVINCE, PERU

TECHNICAL REPORT

February 2004

PREPARED BY:

Donald F. Earnest, P.Geol. - President

Resource Evaluation Inc.Tucson, Arizona

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Resource Evaluation Inc. i February 2004

TABLE OF CONTENTS

1. SUMMARY.............................................................................................................1

2. INTRODUCTION AND TERMS OF REFERENCE .........................................7

3. DISCLAIMER.........................................................................................................8

4. PROPERTY DESCRIPTION AND LOCATION................................................9

4.1. Mineral Tenure.............................................................................................94.2. Permits and Agreements..........................................................................26

4.2.1. Agreements.......................................................................................264.2.2. Permits and Licenses......................................................................26

4.3. Environmental Issues ...............................................................................295. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE

AND PHYSIOGRAPHY......................................................................................30

6. HISTORY .............................................................................................................31

7. GEOLOGIC SETTING .......................................................................................33

8. DEPOSIT TYPES ...............................................................................................36

9. MINERALIZATION..............................................................................................37

10. EXPLORATION...................................................................................................39

11. DRILLING.............................................................................................................40 12. SAMPLING METHOD AND APPROACH.......................................................41

13. SAMPLE PREPARATION, ANALYSIS AND SECURITY ............................43

14. DATA VERIFICATION .......................................................................................45

15. ADJACENT PROPERTIES ...............................................................................48

16. MINERAL PROCESSING AND METALLURGICAL TESTING ...................49

17. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES.............50

17.1. Mineral Reserve Estimation Methodology.............................................50

17.1.1. Block Volumes..................................................................................5017.1.2. Block Grades ....................................................................................52

17.1.3. Dilution...............................................................................................5417.1.4. Block Tonnes....................................................................................56

17.1.5.Adjustment Factors..........................................................................5617.2. Mineral Reserves and Resources ..........................................................57

17.2.1. Mineral Reserves .............................................................................57

17.2.2. Mineral Resources...........................................................................62

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Resource Evaluation Inc. ii February 2004

18. OTHER RELEVANT DATA AND INFORMATION ........................................65

19. REQUREMENTS FOR TECHNICAL REPORTS ON PRODUCTION ANDDEVELOPMENT PROPERTIES ......................................................................66

19.1.

Mining Operations .....................................................................................66

19.2. Recoverability ............................................................................................6819.3. Markets .......................................................................................................71

19.3.1. Trading of Peruvian Copper, Lead, and Zinc Concentrates......7119.3.2. Weighing, Sampling and Moisture Determination.......................72

19.4. Contracts ....................................................................................................7219.5. Environmental Considerations ................................................................7219.6. Taxes...........................................................................................................75 19.7. Capital and Operating Costs ...................................................................75

19.7.1. Capital Costs.....................................................................................75

19.7.2. Operating Costs ...............................................................................7819.8. Economic Analysis ....................................................................................80

19.8.1.Assumptions - General....................................................................80

19.8.2.Assumptions Specific...................................................................8119.8.3. Cashflow Forecast ...........................................................................82

19.8.4. Net Present Values ..........................................................................8219.8.5. Sensitivities.......................................................................................8319.8.6. Payback.............................................................................................83

19.9. Mine Life .....................................................................................................83

20. INTERPRETATION AND CONCLUSIONS ....................................................84

21. RECOMMENDATIONS......................................................................................85

22.

REFERENCES....................................................................................................87

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Resource Evaluation Inc. iii February 2004

LIST OF FIGURES

FIGURE 4-1 LAND MAP MODEL.....................................................................................24 FIGURE 4-2 MOROCOCHA MINE GENERALARRANGEMENT PLAN ..................................25FIGURE 7-1 REGIONAL GEOLOGY PLAN MAP................................................................34FIGURE 7-2 DISTRICT GEOLOGY MAP ..........................................................................35FIGURE 17-1 EXAMPLE RESERVE BLOCK CALCULATION ..................................................51

Error! No table of figures entries found. LIST OF TABLES

TABLE 4-1 UEA MINING CONCESSIONS .....................................................................11TABLE 4-2 MINING CONCESSIONS OUTSIDE OF UEAS ...............................................21

TABLE

6-1

HISTORICAL

MINERAL

RESERVES

..............................................................32

TABLE 6-2 HISTORICAL PLANT PRODUCTION ..............................................................32TABLE 12-1 LIST OF UNDERGROUND CHIP CHANNEL SAMPLE RESULTS .......................42TABLE 14-1 CHECKASSAY COMPARISON RECENT STOPE.........................................46TABLE 14-2 STOCKPILE CHECK SAMPLES ....................................................................47TABLE 17-1 SUMMARY OF CHECK CALCULATIONS OF CORONA DILUTED ORE RESERVE

BLOCK WIDTHS AND GRADES....................................................................53TABLE 17-2 SUMMARY OF CHECK CALCULATIONS ........................................................54TABLE 17-3 SUMMARY OF PROVEN/PROBABLE ECONOMIC ORE RESERVES BY VEIN ....59TABLE 17-4 NET RECOVERABLE VALUES .....................................................................61TABLE 17-5 METALLURGICAL RECOVERIES ..................................................................61TABLE 19-1 METALLURGICAL PROJECTIONS.................................................................69TABLE 19-2 OCTOBER 2003 SACRACANCHA PLANT METALLURGY ...............................70TABLE 19-3 BENCH SCALE METALLURGICAL TESTS .....................................................71TABLE 19-4 ENVIRONMENTAL LIABILITIES .....................................................................74TABLE 19-5 FINAL SITE CLOSURE COST ESTIMATE ......................................................74TABLE 19-6 MINE CAPITAL COST ESTIMATES ...............................................................76TABLE 19-7 PLANT CAPITAL COST ESTIMATES .............................................................77TABLE 19-8 ENVIRONMENTAL CAPITAL COST ESTIMATES .............................................77TABLE 19-9 FACILITY/INFRASTRUCTURE CAPITAL COST ESTIMATES .............................78TABLE 19-10 OPERATING COST ESTIMATE.....................................................................79TABLE 19-11 CASHFLOW FORECAST ..............................................................................82TABLE 19-12 NET PRESENT VALUES..............................................................................82TABLE 19-13 SENSITIVITIES ...........................................................................................83

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1. SUMMARY

Property Description and Location, Access, Infrastructure, and History

Resource Evaluation Inc. (REI) was retained by Pan American Silver Corporation (PAA)to provide an independent Qualified Persons review and Technical Report for theMorococha operations, located in Yauli Province, Junn Department, Peru, on the eastside of the continental divide just below Ticlio summit and only 5 km south of the pavedCentral Highway, approximately 137km east of the capital city of Lima. Regionaltransportation and power infrastructure are well developed, and a large local labor poolexists to service the mine operations.

The Morococha property is comprised of Economical-Administrative Units (UEA) andvarious concessions outside of the UEAs. The property includes 435 concessionsowned outright, 28 concessions held jointly, and 52 concessions leased from third partyinterests, altogether totalling 11,296.3 hectares. While the majority of the miningconcessions are contiguous, some of the concessions are fragmented. The

concessions have no expiration date provided they are maintained in good standing. Allknown mineralized zones in which the mine is currently working and reserves exist aresituated within these concessions. All permits are complete and in adequate standing topermit continued mining operations on the property.

Mining began in the region around Morococha before 1500, and since the late 1800sproduction has been continuous in the district. In the 1940s the Gubbins family beganoperating mines in the Morococha district, eventually consolidating its holdings intoSociedad Minera Corona. Current underground mining operations consist primarily oftypical overhand cut and fill, shrinkage, and mechanized room and pillar methods usingwaste rock for backfill where needed. The mine operates two eight hour shifts per day,six days a week. The Yauli, Maria and Central production shafts provide access down to

the Kingsmill drainage tunnel level at elevation 4,020m. The three shafts have acombined capacity to support production schedules in excess of 600,000 tonnes peryear. Because all mining currently takes place underground, climate has minimal effecton ore production. Several mine development waste disposal sites exist on the propertywhich are sufficient to meet the needs of the mining operation.

The two process plant facilities are approximately 5km apart, and are sufficient for allproposed operations. The Sacracancha plant was the primary milling facility for Coronauntil the acquisition of the Amistad plant. Both process plants are conventional selectiveflotation facilities capable of producing individual copper, lead, and zinc concentrates,which are then shipped to third party smelters for final refining. The tailings from bothplants are deposited sub-aqueously in the Huascacocha Lake to the north of the

Sacracancha plant. The facility contains capacity for at least the next 15 years. Thesub-aqueous tailings are geochemically and geotechnically stable. Water for processingis plentiful.

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Geologic Setting, Deposit Types, and Mineralization

A Paleozoic-Mesozoic sequence intruded by a series of Upper Tertiary igneous bodiesprovide the host rocks for the mineralization at Morococha. The structures whichaccount for the majority of vein mineralization in the Morococha district trendpredominantly northeast to east-northeast. Mineralization includes epi-mesothermal

silver-lead-copper-zinc veins and bedded silver-base metal replacements or mantos(which together account for the majority of the past and present economic mineralizationat the Morococha operations), intrusive-sediment contact skarns, and the quartzporphyry-hosted Toromocho disseminated copper system. The size and geometry ofindividual ore shoots in the veins can range up to 400 meters in length and more than 800meters down plunge. Undiluted district vein width averages are on the order of 1.2m.Replacement manto mineralization is generally restricted to receptive stratigraphichorizons where favorable lithologies are intersected by mineralized veins or are proximalto pre-mineral intrusives. Mantos can have a significant strike extent where the veins areclosely spaced, and can range from less that one meter in width up to seven meters.Intrusive contact related skarn bodies, while common locally, are generally small andirregular, with disseminated rather than massive sulfide mineralization.

Ore and gangue mineralogy is similar in veins and mantos but it varies considerably acrossthe property. Sphalerite, galena, and chalcopyrite are the most important primary mineralsfor zinc, lead and copper. Silver is generally present as freibergite (Ag-tetrahedrite) orargentiferous galena. Gangue generally consists of quartz, calcite, barite and rhodochrosite,the latter having a strong correlation with higher silver grades. The hydrothermal alterationpresent at Morococha is typical for central Peruvian zoned polymetallic deposits.

Exploration, Drilling, Sample Method and Approach

Corona has conducted only minimal exploration in the district since the late 1990s. However,

exploration potential is considered to be excellent throughout the district due to the significantvertical extent (over 800m) of economic veins and the prevalence of multiple carbonate unitsfavorable for replacement mineralization. To date, Corona has utilized surface andunderground diamond drilling only to test for potential ore-grade mineralization - assay datagenerated by drilling has seldom been used in block grade estimations for mineral reserves.

Almost all data used for the estimation of mineral reserves are derived from undergroundchip channel samples. All sample preparation, assays, and analyses are done on site,and the operation maintains chain of custody throughout sampling, sample preparation,and analysis. Although several inconsistent or inappropriate sample preparationprocedures were observed by REI, these issues, while deserving immediate correction,do not constitute a material concern relative to the integrity of the resulting assay data.

Sample Preparation, Analysis, Security, and Data Verification

The laboratory at the Sacracancha plant was closed in 2003. Currently, only the analyticallaboratory at the Amistad plant is in operation. Neither laboratory was ever certified, and toREIs knowledge, no quality assurance/quality control (QA/QC) programs were everestablished to monitor either facility. The total lack of QA/QC data makes it difficult to

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assess either the past or the ongoing laboratory performance. A recent independentsampling of ore stockpiles by PAA indicated a consistent low bias in the Amistad assays forall metals except zinc relative to the assay results from pulp duplicates sent to ALS Chemexin Lima. These results underscore the immediate need for a comprehensive and ongoingQA/QC program which should include regular submission of blind standard and blanksamples to the Amistad laboratory, as well as the submission of check samples to ALS

Chemex or other certified laboratory.

Mineral Resource and Mineral Reserve Estimates

Mineral reserves and mineral resources are reported separately for the Morocochaoperations. No mineral reserves are included in the tabulation of mineral resources.The proven and probable ore reserves for the Morococha operations as of June 30,2003, as reported by Corona, are as follows:

Proven: 1,161,414 Tonnes @ 268 g/mt Ag, 1.83% Pb, 0.51% Cu, 4.88% ZnProbable: 133,347 Tonnes @ 267 g/mt Ag, 1.94% Pb, 0.62% Cu, 5.40% ZnTotal: 1,294,761 Tonnes @ 268 g/mt Ag, 1.84% Pb, 0.52% Cu, 4.93% Zn

In accordance with NI 43-101 guidelines, to reflect the fact that Coronas statement ofmineral reserves is an estimate, the rounded total mineral reserves are:

Proven: 1,161,000 Tonnes @ 270 g/mt Ag, 1.8% Pb, 0.5% Cu, 4.9% ZnProbable: 133,000 Tonnes @ 270 g/mt Ag, 1.9% Pb, 0.6% Cu, 5.4% ZnTotal: 1,294,000 Tonnes @ 270 g/mt Ag, 1.9% Pb, 0.5% Cu, 4.9% Zn

In REIs opinion, there are no known environmental, permitting, legal, title, socio-economic, marketing, or political issues that could materially affect the above mineralreserves, and other than depletion of mineral reserves by normal mining (which shouldbe offset by ongoing new mineral reserve additions from exploration and delineationwork), there are no mining or metallurgical factors that could have a similar materialeffect. Access to the Yacumina mineral reserves (currently via workings that extendacross concessions covering the Toromocho deposit that are not controlled by Corona)should remain uninterrupted over the production life of the June 30, 2003 mineralreserves. REI believes that the Morococha reserves were, with several exceptions,generally estimated in accordance with the guidelines set forth in Canada NationalInstrument 43-101 and accepted North American mining industry practices. In REIsopinion, the overall reserve estimate can be considered conservative due to certainadjustment factors applied to individual mineral reserve blocks by the Morocochageology staff during reserve estimation. REI recommends that the use of these factorsbe closely reviewed, and a set of standard procedures developed to improve the qualityof future mineral reserve estimates.

No historical estimates for measured, indicated, and inferred mineral resources weredeveloped for Morococha. In order to provide PAA with a more comprehensive basis forits investment decisions relative to Morococha, REI completed a manual measured andindicated (M+ I) resource estimate based on data provided by Corona as of June 30,2003. This mineral resource is summarized as follows:

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Measured 119,000 Tonnes @ 340 g/mt Ag, 1.1% Pb, 0.5% Cu, 2.7% ZnIndicated 707,000 Tonnes @ 270 g/mt Ag, 1.6% Pb, 0.5% Cu, 4.6% ZnTotal M+I - 826,000 Tonnes @ 280 g/mt Ag, 1.6% Pb, 0.5% Cu, 4.3% Zn

In addition to the measured and indicated resources listed above, PAA developed anestimate of the known potential (equivalent to an inferred resource), which is as follows:

Inferred - 7,635,000 Tonnes @ 250 g/mt Ag, 2.0% Pb, 0.4% Cu, 4.4% Zn

Requirements for Production and Development Properties

In order to determine the life of the Morococha operation given the extent of the currentproven and probable mineral reserves and the mineral resources that might reasonablybe expected to be converted to mineral reserves with additional drifting, sampling, anddiamond drilling, PAA put together a long range mine plan and development program atthe end of 2003. The mine plan was sequenced using, in order or preference, proven

and probable reserves, measured and indicated resources, and finally, inferredresources. Thus, the earliest years of the mine plan can be considered as a short-termplan having a high degree of certainty.

The Amistad plant will become the primary processing facility for the current knownreserves at Morococha. In light of this, PAA completed a thorough evaluation of theelectrical and mechanical condition of the plant. Repair and improvement programswere developed to bring the plant up to conditions acceptable to PAA. Theseimprovements and upgrades are designed to bring the safety, health, and hygiene levelsto PAA standards as well as improve the plants metallurgical performance. Costestimates based on these programs are included in the financial model. The metallurgyof the Morococha ore is highly variable according to the mineral assemblage, and theCorona staff has developed individual metallurgical projections according to the differentmineral assemblages present in the deposit based on the many years of operatingexperience.

The single largest environmental liability identified at the Morococha operation is theMorococha share of the proposed Kingsmill tunnel water treatment plant. Coronasdefined share of this liability is 12.3%. In addition to the Kingsmill tunnel discharge,Corona also retains a 21.01% share of responsibility for mitigation of the HuascacochaLake tailings beach, where tailings have been discharged since 1960. An estimate ofthe mitigation costs of these liabilities has been included in the cashflow forecast.

The final site closure cost estimate is $3.31 million. Although there are someuncertainties in the new Peruvian environmental regulations, PAA has recognized anannual funding of final site reclamation costs in the cashflow forecast. This recognitionassumes a minimum 15-year mine life deposit having only proven and probable reservesfor a 3 year mine life.

Regarding taxes, the corporate tax rate on income in Peru is 30%. In addition, there isan 8% employee profit sharing tax, which is deductible from income for the purposes ofcalculating net income tax, thereby resulting in an effective tax rate on Morocochaincome is 35.6%. Reportedly, there are discussions in the Peruvian legislature

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regarding development of a royalty tax for mining operations. PAA has not including anypotential future royalty tax in the cashflow forecast.

Capital cost estimates for the mine, plant, infrastructure, environmental, and sustainingcapital total US$16.149 million and are included in the three-year cashflow estimate.These capital expenditures are necessary in order to achieve the overall planned

production rate of 48,000 metric tons per month, prepare the operation for sustainedproduction beyond the 3-year proven and probable reserve life, and achieve the financialresults indicated. The estimates are completed in 4th Qtr 2003 US dollars and areitemized according to area of expenditure and year required.

Operating costs for the three-year term of the cashflow estimate are US$18.126 million,US$18.769 million, and US$17.793 million for Year 1, Year 2, and Year 3, respectively.The operating costs assumptions were developed using source data provided byCorona. Historic production basis and accounting costs records for Morococha wereanalyzed and reconciled in order to obtain the most accurate present costs incurred inthe operations. Adjustments were made where it is known that costs under PAAadministration will differ from present costs. The primary data source for the operating

cost estimate was taken from actual costs incurred from January to October in 2003. Anincrease of 5% has been added to the contractors worker salaries which results in anincrease of 3.3% to the unit costs. Costs include provisions for Lima office expenses,annual mining concession payments, and insurance. Power supply costs are based ona review of the expected power consumption using a commercial available rate ofUS$0.05326 per kilowatt-hour. The PAA operating cost estimate also includes theimplementation of the Engineering & Planning and Accounting areas as well as costs fordiamond drilling.

A cash flow forecast was generated from the proven and probable reserves consideringthe June 30, 2003 and September 30, 2003 Corona estimates and a reasonableprojection of the December 31, 2003 proven and probable reserve base. The cash flow

forecast determines net after tax cash flows of the future production profile incorporatingestimates for production rates, metallurgical performance, mined ore grades, direct mineoperating costs, development costs, exploration drilling costs, general and administrationcosts, marketing costs, capital expenditures, and employee profit sharing and corporateincome taxes. The 3-year cash flow forecast totals US$9.305 million. At a 10 percentdiscount rate, the net present value of this cashflow estimate is US$7.407 million on a100% basis. On a PAA 86.5% acquired basis, the net present value of the cashflow atthe same discount rate is US$6.407 million. The cashflow forecast does not provide apayback for the acquisition investment based solely on the proven and probablereserves, as these only provide for a 3-year mine life. However, PAA is confident, andREI agrees, that sustained mining will continue beyond the life of the current proven andprobable reserves and has included development and sustaining cost provisions for this.

Metal price, grade, capital, and operating cost sensitivities were run to determine arange of cashflows for the Morococha proven and probable reserves. Included in thecashflow forecast is a significant increase to capital spending projections in the first twoyears in order to prepare and position the mine for a sustainable 15 year mine lifeinclusive of all identified upgrade projects, resource development work, and necessarysustaining capital. No sensitivities on currency risks have been completed given PAAsperception that the Peruvian currency generally tracks US dollars well within the lastseveral years.

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In summary, although the Morococha operation has failed to meet certain NI 43-101technical guidelines and general North American mining industry operating practices inseveral areas, in REIs opinion, these failures do not constitute serious material issues,either individually or collectively. The major risk to PAA in acquiring the Morocochaoperations, in REIs opinion, will be its ability to upgrade inferred mineral resources to

proven and probable mineral reserves in a timely and systematic manner. However,given the demonstrated geologic potential of the district and Coronas past record ofmineral reserve replacement, this trend can reasonably be expected to continue for the15-year period in PAAs long range plan. In consideration of these issues and theidentified risks, REI believes that the acquisition of the Morococha operations presents areasonable opportunity for PAA.

To address the issues identified and minimize future operating risks, the following itemsare recommended for action:

Routinely sample hangingwall and footwall waste adjacent to veins andmantos;

Discontinue or remedy inconsistent or inappropriate sample preparationprocedures;

Establish a comprehensive and ongoing analytical laboratory QA/QCprogram as soon as possible;

Continue estimation of measured, indicated, and inferred mineral resourceson an annual basis;

Implement a set of rigid procedures for mineral resource block grade andtonnage estimation to provide consistency among the geologists responsible

for the mineral resource and mineral reserve estimations;

Examine and revise the current mining extraction (mining recovery) factorsused to discount mineral reserve block volumes;

Implement changes and/or studies required to confirm the assumptionsmade in the PAA mine plan and schedule;

Implement the planned repairs/upgrades to the Amistad processing plantfacilities.

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2. INTRODUCTION AND TERMS OF REFERENCE

Resource Evaluation Inc. (REI) was retained by Pan American Silver Corporation (PAA)to provide an independent Qualified Persons review and Technical Report for theMorococha operations, located in Yauli Province, Junin Department, Peru. REIs work

included a review of the June 30, 2003 mineral reserves for the property as stated bySociedad Minera Corona, S.A. (Corona), an independent third party estimate of mineralresources, and preparation of this Technical Report as defined in Canada NationalInstrument NI 43-101 and in compliance with Form 43-101F1. Mr. Donald Earnest,P.Geol. and President of REI, served as the Qualified Person responsible for preparingthis Technical Report. Mr. Graham Speirs, P.Eng and General Manager, GestionMinera, S.A. (GEMIN), provided Qualified Person assistance for mine operationsaspects. Mr. Earnest and Mr. Speirs visited the Morococha operations site during thesecond and third week of November, 2003.

Data, reports, and other information used for the compilation of this report were obtainedfrom personnel in the PAA offices in Vancouver, British Columbia, and Lima, Peru, and

from Corona personnel at the Morococha operations site. These documents are listed inSection 22.

All tonnages stated in this report are dry metric tonnes (dmt) unless otherwise specified.Ounces pertaining to silver metal content are expressed in troy ounces. Precious metalgrades are reported in grams per metric tonne.

All references in this Technical Report to REIs opinion, belief, recommendation orsimilar phrase specifically includes the opinion, belief, recommendation or similarphrase of Donald F. Earnest, P. Geol., the author of this Technical Report, in hisprofessional capacity and as a Qualify Person.

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3. DISCLAIMER

The various reports and other documents listed in Section 22. that were used during thereview of the Morococha operations and the preparation of this Technical Report werefound to be generally well organized and presented, and where applicable, the

conclusions reached are judged to be reasonable. It is assumed that these reports anddocuments were prepared by technically qualified, competent persons. It is alsoassumed that the information and explanations given verbally to REI and the assistingQualified Persons by the employees of Sociedad Minera Corona S.A. at the time of thesite visits were essentially complete and correct to the best of each employeesknowledge, and that no information was intentionally withheld.

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4. PROPERTY DESCRIPTION AND LOCATION

The Morococha mine operations are located in the Morococha district, Yauli Province,Junn Department, Peru, on the east side of the continental divide just below Ticliosummit, approximately 38km west of the city of La Oroya. The districts general co-

ordinates are latitude 11 36S and longitude 76 10 W.

4.1. MINERAL TENURE

In accordance with the provisions set forth in Article 122 of the Political Constitution ofthe Republic of Peru, a mining concession mandates its development. This obligationconsists of investing in the production of mineral substances, in accordance with thefollowing requirements:

Production of metallic substances shall be no less than the equivalent, in localcurrency, of US$ 100.00 per year per hectare granted.

The target production must be attained by no later than the end of the sixth year,computed from the year in which the concession was filed.

If by the first half of the seventh year, calculated from the year in which the initialclaim for the mining concession was filed, a concessionaire has not complied withthe target production, a penalty must be paid, equivalent to US$ 6.00 in localcurrency, per year per hectare, until the year when the minimum annual productionis met.

As from the year the application is filed, the mining concessionaire will be obligedto pay the Mining Good Standing Fee (Derecho de Vigencia, for its name inSpanish). This fee is equivalent, in local currency, to US$ 3.00 per year per

hectare granted or requested. The Mining Good Standing Fee corresponding tothe year in which the mining concession application is filed shall be paid, andevidence of payment shall be provided at the time of filing the correspondingapplication. The Fee payable for the second year, counted from January 1 of theyear following the one in which the mining concession application is filed, shall bepaid until June 30 of the second year. The same rule shall apply to subsequentyears. The mining concessions have no expiration date provided they aremaintained in good standing.

The Morococha property is comprised of 3 Economical-Administrative Units (UEA), oneof which contains 155 mining concessions owned outright, 4 concessions held jointlyand 1 leased concession (El Proletario), which together total 3,152.71 hectares, and

one of which contains 219 mining concessions owned outright, 5 concessions ownedjointly, 11 concessions leased from Silver Lead Mining Company, and 35 concessionsleased from Corporacin Minera Sacracancha S.A., altogether totalling 2,571.18hectares. In addition, there are 19 mining concessions outside of the two UEAs whichtogether total 2,129.57 hectares. These include:

8 mining concessions assigned to Compaa Minera Volcan S.A.A; 4 mining concessions owned jointly with Compaa Minera Volcan S.A.A; 5 mining concessions leased from third parties;

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Table 4-1 UEA Mining Concessions

No. Title No. Concession Name Area (Hectares)1 08021979X01 ACAYA-S.R. 6.00

2 08002033Y01 ADELANTE 1.103 08001038Y01 ADRIANA 1.41

4 08000614Y01 AGATA 2.825 08003388Y01 AGATA SEGUNDA 0.026 08001049Y01 AJUSTADA 2.827 08002558X01 ALBERTO 0.668 08001290Y01 ALERTA 10.009 08001036Y01 ALIANZA 6.00

10 08001466Y01 AMPHITRITE 1.8511 08002303Y01 AMPLIACION 2A 2.0012 08001053Y01 ANGELICA 0.1413 08021959X01 ARAPA S.R. 30.0014 08001482Y01 ATLANTE 3.9915 08001212Y01 AURORA 4.23

16 08010041X01 AURORA 0.2317 08021210X01 BARBAS 4 836.7518 08021211X01 BARBAS 5 0.9119 0821211AX01 BARBAS 5A (FRACCIONADO) 548.7920 08010456X01 BARRANCO VEINTE Y SIETE 0.9321 08003421Y01 BARRANCO N 26 2.0022 08010762X01 BARRANCO NUMERO TREINTA 6.0023 08010760X01 BARRANCO NUMERO TREINTA Y UNO 6.0024 08002555X01 BERNARDO 1.2725 08001959Y01 BOER 4.2326 08002554X01 BRILLANTINA 2.7327 08002306Y01 BRUJULITA 0.5928 08001407Y01 BRUNHILDE 4.23

29 08003203X01 CANDADO 0.1330 08001044Y01 CARMENCITA 1.4131 08002109Y01 CATINCA 1.7232 08002734Y01 CHAPANA 0.2633 08003207X01 CHAVETA 0.1234 08003133Y01 CHIARA 1.9235 08021091X01 CIPRIANA 14.0036 08003203Y01 CLARA 4.0037 08001040Y01 CLARISA 2.8138 08002304Y01 CLAVITO 0.4939 08001573Y01 CLEO 1.3340 08021960X01 CLOTILDE S.R. 3.99

41 08001043Y01 COLORADA 2.8242 08001034Y01 CONCORDIA 1.4143 08001472Y01 CONTINUACION DE SAN MIGUEL 2.0044 08003202X01 CRISTINA 0.0645 08001953Y01 CYBELE 1.0946 08001428X01 DANTON 0.5547 08021920X01 DEMASIA ELVIRA 4.7348 08001312Y01 DESDEMONA 1.4149 08000970X01 DIANA 1.50

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50 08002961X01 DIOS DA 1.0051 08001961Y01 DON CARLOS 7.4152 08001960Y01 DON RICARDO 4.2353 08003400Y01 EDELMIRA DOS 0.0654 08001285Y01 EDUARDO 8.0055 08001839Y01 EL CONDOR 0.88

56 08001469Y01 EL DORADITO 1.5857 08001291Y01 EL DORADO 1.6858 08001604Y01 EL GUARDIAN 3.6259 08001295Y01 EL PERNO 1.7060 08010036X01 EL TRIANGULO 1.0061 08020855X01 ELECTRA 11 2.3062 08020851X01 ELECTRA 14 2.2063 08020853X01 ELECTRA 15 1.4864 08004185Y01 ELECTRA N 1 1.4165 08020740X01 ELECTRA N 10 2.0066 08020852X01 ELECTRA N 12 1.3067 08020854X01 ELECTRA N 13 0.3268 08021275X01 ELECTRA N 17 2.0069 08021276X01 ELECTRA N 18 0.9070 0821276AX02 ELECTRA N 18-A (FRACCIONADO) 5.4971 08021274X01 ELECTRA N 19 5.0072 08020713X01 ELECTRA N 2 4.0073 08020714X01 ELECTRA N 3 5.7074 08020715X01 ELECTRA N 4 1.8275 08020716X01 ELECTRA N 5 3.1576 08020718X01 ELECTRA N 7 3.4077 08020719X01 ELECTRA N 8 4.2078 08021961X01 ELIAS-S.R. 18.0079 08002288Y01 ELISA 2.0080 08021092X01 ELVIRA 2.00

81 08001288Y01 ESCARAMUZA 2.0082 08000841Y01 ESPERANZA 1.4183 08000865Y01 ESPERANZA 2.8284 08001047Y01 ESTRELLA 2.8285 08013810X01 EUGENIO 2.0086 08005649X01 EUGENITA 1.1487 08022780X01 EXALTACION S.R. 1.3688 0822780AX01 EXALTACION SR-A (FRACCIONADO) 3.8889 08001050Y01 FEDERICO 1.4190 08001297Y01 FRINE 2.0091 08002646X01 FRIOLERA 12.0092 08002733Y01 GORIZIA 2.6493 0822776AX01 GRACIELA M.S.R. 0.6894 08021982X01 GRACIELA S.R. 30.7295 08001708Y02 GRAN SAN MIGUEL DE PLATA 24.0096 08000840Y01 GRIMALDA 1.4197 08023125X01 GUILLERMO III J.C. 10.0098 08001118Y01 GRICELA 2.7199 08001497Y01 GRIMHILDE 2.58100 08003379Y01 GRIMHILDE SEGUNDA 0.02101 08001294Y01 GUILLERMO TELL 3.50

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154 08001048Y01 NELLY 1.41155 08001917Y01 NELLY PRIMERA 0.42156 08022575X01 NERON-1105 1.02157 08022574X01 NERON-3365 1.62158 08001993Y01 NEW YORK 2.00159 08001615Y01 NUEVO PESAR 3.50

160 08001885Y01 NUEVO TARTUFFO 2.37161 08021972X01 NUMERO 200 S.R. 6.98162 08021949X01 NUMERO 220 S.R. 10.22163 08022492X01 NUMERO 220-S.R.I. 11.20164 08001628Y01 OLIVIA 14.00165 08001250X01 OSIRIS 0.14166 08001550X01 OSMIN 0.43167 08001328Y01 PACHITEA 2.15168 08002347Y01 PACHITEA 3RA 0.66169 08001591Y01 PANCHITA 2.38170 08003204X01 PEDRITO 0.92171 08001283Y01 PEKIN 1.37172 08021956X01 PERPETUO SOCORRO S.R. 0.14173 08001707Y01 PROSERPINA 0.47174 08001042Y01 PURGATORIO 4.23175 08001311Y01 RAUL 2.82176 08003194X01 REMACHE 0.19177 08001445X01 REYNA 2.00178 08001667Y01 RICARDO 2.00179 08002522Y01 RICHI-RACHI 2.00180 08005923X01 ROMA 2.00181 08001605Y01 ROSA LUCRECIA 2.00182 08001477X01 ROSALVINA 4.00183 08001037Y01 SACRACANCHA 2.82184 010247999 SACRACANCHA MC 200.00

185 08022796X01 SACRAGRANDE 3.01186 08001025Y01 SALVADORA 2.62187 08001045Y01 SAN ANTONIO O IGNACIA 1.41188 08001113Y01 SAN ESTEBAN 2.82189 08001700Y01 SAN FRANCISCO 2.00190 08003215X01 SAN LORENZO 2.45191 08001623Y01 SAN MIGUEL 2.00192 08001092Y01 SANTA CATALINA 5.64193 08001286Y01 SANTA CATALINA 2DA 4.00194 08000145X01 SANTA CATALINA 3 0.85195 08001114Y01 SANTA MARIA 1.59196 08002320Y01 SARA 0.15197 08001462Y01 SATELITE 0.52198 08001541X01 SATURNO 2.99199 08000876Y01 SEGUNDO MANTO 5.64200 08003148Y01 SEGURIDAD 0.87201 08003464X01 SOCAVON AUXILIAR 2.00202 08011471X01 SUSANA 0.04203 08005751X01 TESORUCCIO 5.22204 08002305Y01 TORNILLO 0.25205 08001035Y01 TRINIDAD 4.23

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248 08003534Y01 GORDITA 4.00249 08002765X01 JULIO 2.00250 08003815X01 KUPFERBERG 2.00251 08001609Y01 LA INVESTIGADA 2.48252 08001403Y01 LA MAR 2.00253 08001650Y01 LA TUERCA 2.00

254 08002922X01 LUISITO 0.62255 08001401Y01 MANSITA 2.82256 08012055X01 MANUELITO 6.00257 08001398Y01 MERCEDES 4.23258 08001395Y01 MILAGRO 1.41259 08001397Y01 MILAGRO 2.82260 08001402Y01 MIRAFLORES 2.00261 08001404X01 MONJITA 1.00262 08001674Y01 PELOTARIS 2.00263 08001400Y01 REVANCHA 2.00264 08000991X01 ROLANDO 4.00265 08001405Y01 SACRACANCHA CHICO 1.41266 08001396Y01 SAN FRANCISCO 1.41267 08003634Y01 SAN FRANCISCO SEGUNDO 1.41268 08001399Y01 SAN MIGUEL 2.00269 08006817X01 TERESITA 2.00270 08002263Y01 TRIUNFO 2 4.00

81.13

TOTAL 2,571.18 Hc.

N Title Number Concession Name Area (Hectares)1 08012129X01 10 DE JULIO 10.002 08014142X01 ALEJANDRO 1.31

3 08022468X01 ANA LUISA S.R. 585.184 08022463X01 ANA MARIA S.R. 656.825 08000685X01 ANIMAS 4.236 08001551X01 BAJAZET 1.047 08013916X01 BARBARITA 4.008 08003420Y01 BARRANCO 0.029 08010538X01 BARRANCO 32 4.33

10 08002277Y01 BULA 2.1311 08019778X01 CAJA DE AHORROS 2.0012 08012181X01 CARMEN ADELA 52.0013 08013449X01 CAROLINE 4.0014 08003467Y01 CATALINA 2.2915 08021810X01 CLAUDIA 2.00

16 08001690Y01 CODICIADA 1A 1.8817 08001608Y01 CODICIADA 2A 2.0018 08020929X01 CONFLAGRACION 4.8119 08004156Y01 COSMOPOLITA 1.4120 010091400 CUA M.C. 4.1921 08021948X01 DANUBIO S.R. 0.9722 08021919X01 DEMASIA DIANA 0.6923 08021921X01 DEMASIA LIMA 1.1924 08021925X01 DEMASIA LUCILITA 0.40

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25 08021922X01 DEMASIA MARIANITA 1.7026 08021924X01 DEMASIA MARTHA 3.8127 08021928X01 DEMASIA PATY 0.7928 08021957X01 DEMASIA REYNALDO 1.6029 08021926X01 DEMASIA SANTA BARBARA 0.1030 08021918X01 DEMASIA SUSANITA 0.95

31 08021622X01 DIANA 1980 6.0032 08000861Y01 DINA 5.6433 08021957X02 DON LUNES-S.R. 3.7434 08021965X01 DON MIERCOLES S.R. 1.0635 010191799 EDELMIRA AM 2.6236 08002402Y01 EL LOQUITO 0.1337 08012293X01 EL MILAGRO 6.0038 08002276Y01 EL SEOR QUE SUDA 4.0039 08021983X01 ENREDO 4.7940 08022278X01 ENREDO-I 3.9441 08002267Y01 ESTHERITA 6.0042 08012290X01 FELICIDAD 20.0043 08022738X01 GALERA SEGUNDA M.H.I. 0.9144 08022580X01 GALERA SEGUNDA-M.H. 0.9745 08022514X01 GALERA-M.H 13.7046 08023173X01 GENOVA M.G. 5.0247 08022621X01 GENOVA-A-N 1 23.9648 08022645X01 GENOVA-A-N 2 20.0049 08014172X01 GERMAN 2.4950 08001549Y01 HERNANI 2.0051 08002722Y01 HUAIRURO 4.0052 08021970X01 HURACAN S.R. 0.3853 08001620Y01 ISABEL 1.1354 08021977X01 ISABEL-S.R 1.3455 08001391Y01 ITALIA 1.89

56 08021757X01 JAIME 2.9457 08013522X01 JAVIER 3.8358 08013479X01 JEANNE 20.0059 08001569Y01 JULIA 2.4260 08001268Y01 LA CAPITANA 4.0061 08000859Y01 LA CODICIADA 8.4762 08012137X01 LA INNOVACIO N 4.0063 08020930X01 LA MADAMA 2.0064 08021879X01 LA PICA 3.6865 08020629X01 LA UNICA 6.0066 08022462X01 LEO 10.2067 08002325Y01 LIMA 12.0068 08012817X01 LONDRES 2.4769 08003481Y01 LUCILA 6.0070 08013975X01 LUCILITA 2.0071 08011019X01 LUISITA 4.0072 08010522X01 LUZMILA 4.0073 08000862Y01 MARGARITA 1.5874 08006629X01 MARIA ELENA 6.0075 08020939X01 MARIA ROSA 4.3076 08013448X01 MARIANITA 16.00

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77 08021620X01 MARTHA S.R. 4.0078 08003195X01 MERCEDES 0.0879 08022527X01 MIGUEL N 1 7.9480 08022528X01 MIGUEL N 2 6.0081 08022529X01 MIGUEL N 3 5.9782 08022530X01 MIGUEL N 4 3.87

83 08022531X01 MIGUEL N 5 2.0084 08022532X01 MIGUEL N 6 2.1685 08022533X01 MIGUEL N 7 2.3086 08002430Y01 MOLTKE 4.0087 08022544X01 NORMA-M.H. 100.0088 08022564X01 NORMA-M.H. -I 76.3889 08001782Y01 NUDO GORDIANO 1.0390 08012608X01 NUMERO 121 2.0091 08001971Y01 NUMERO CUARENTICINCO 2.0092 08012312X01 OLGA MERCEDES 4.0093 08021621X01 PACHI 9.0094 08020928X01 PITINA 2.0095 08001552X01 PLINIO 0.3996 08021978X01 POLONIA-S.R. 2.8297 0821947AX01 PRETORIA S.R. A FRACCIONADO 30.5498 08021947X01 PRETORIA-S.R. 0.0799 08012311X01 RAULADAS 30.00100 08021474X01 REY 6.50101 08013447X01 REYNALDO 8.00102 08001688Y01 RUPERTO 1.93103 08012818X01 RUSIA 2.66104 08020583X01 SALOMON QUINTO 23.71105 08021967X01 SAN ENRIQUE S.R. 1.56106 08000630Y01 SAN FRANCISCO DE GALERA 4.00107 08012128X01 SAN JUAN DE AMANCAES 30.00

108 08001276Y01 SAN PEDRO 5.59109 08020931X01 SAN VICENTE 79 4.00110 08013521X01 SANTA BARBARA 4.00111 08014144X01 SANTA BARBARA 3 1.00112 08014145X01 SANTA BARBARA 4 1.00113 08022277X01 SANTA BARBARA SEGUNDA S.R. 3.27114 08021305X01 SANTA CRUZ 1.19115 08013934X01 SANTA RITA 1.67116 08021950X01 SEGUNDA ESPARTA S.R. 20.00117 08003146Y01 SLOGA 3.41118 08013470X01 STILSON 5.36119 08012891X01 SYLVIA 8.78120 08013480X01 SYLVITA 2.00121 08000857Y01 TASHIMAN 8.47122 08013157X01 TASHIMAN N 1 4.00123 08013158X01 TASHIMAN N 2 4.00124 08013159X01 TASHIMAN N 3 4.00125 08013219X01 TASHMAN N 4 14.00126 08013220X01 TASHMAN N 5 6.00127 08013221X01 TASHMAN N 6 14.00128 08013222X01 TASHMAN N 7 6.00

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129 08011018X01 TERESITA 8.00130 11024789X01 TICLIO S.R. 71.72131 11025083X01 TICLIO S.R.-II 1.90132 11025666X01 TICLIO SEGUNDO 0.25133 11025084X01 TICLIO-S.R.-III 3.63134 11025082X01 TICLIO-SR-I 34.50

135 08001559Y01 UNION 12.00136 08003468Y01 VENUS 20.00137 08021976X01 VIENA S.R. 1.59138 08012819X01 VIOLETA 1.54139 08022482X01 VISCAS-S.R. 736.98140 0804352AY01 CONDENADO 1 42.33141 0804352BY01 CONDENADO 2 15.22142 0804352CY01 CONDENADO 3 4.64143 0804352DY01 CONDENADO 4 5.81144 0804352EY01 CONDENADO 5 6.45145 0804352FY01 CONDENADO 6 8.10146 0804352GY01 CONDENADO 7 4.13147 0804354IY01 CONDENADO 8 0.11148 0804355EY01 CONDENADO 9 0.19149 0804355FY01 CONDENADO 10 1.28150 0804357AY01 CONDENADO 11 0.99151 0804357BY01 CONDENADO 12 0.71152 0804357CY01 CONDENADO 13 0.91153 0804357DY01 CONDENADO 14 1.17154 0804357EY01 CONDENADO 15 3.04155 0804357FY01 CONDENADO 16 3.56

Total 3,114.84 Hc

Mining Concessions Held Jointly156 08001332Y01 EL MAJADERO 8.47

157 08001331Y01 GRAVINA 4.00158 08005076X01 MONEDA 10.00159 08001318Y01 NELSON 1.41

Total 23.88

Mining Concessions Assigned160 08019143X01 EL PROLETARIO 14.00

Total 14.00 Hc

TOTAL 3,152.71 Hc

NAME CODE Hectares

1 Morococha 1 (**) 08004352Y01 416.15982 Morococha 1-A 0804352HY01 65.94983 Morococha 1-B 0804352IY01 7.40944 Morococha 1-C 0804352JY01 5.20865 Morococha 1-D 0804352KY01 3.52496 Morococha 1-E 0804352LY01 3.99287 Morococha 1-F (**) 0804352MY01 5.5493

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NAME CODE Hectares8 Morococha 1-G 0804352NY01 0.21309 Morococha 1-H 0804352OY01 1.8914

10 Morococha 1-I 0804352PY01 1.884611 Morococha 1-J (**) 0804352QY01 5.360912 Morococha 2 (**) 08004353Y01 378.005

13 Morococha 2-A 0804353AY01 0.498914 Morococha 3 (**) 08004354Y01 270.778215 Morococha 3-A 0804354JY01 20.646816 Morococha 3-B 0804354KY01 0.089617 Morococha 3-E (*) (**) 4354 163.377518 Morococha 3-F (*) 4354 11.131519 Morococha 4-A 0804355 IY01 0.083720 Morococha 4-B 0804355JY01 2.297521 Morococha 4-C 0804355KY01 1.903722 Morococha 4-D 0804355LY01 2.155223 Morococha 4-E 0804355MY01 0.305324 Morococha 4-F 0804355NY01 1.3743

25 Morococha 4-G 0804355OY01 0.864526 Morococha 4-H 0804355PY01 1.628727 Morococha 4-I 0804355QY01 6.99128 Morococha 4-J 0804355RY01 1.063129 Morococha 4 (**) 08004355Y01 41.3330 Morococha 5 (**) 08004356Y01 99.075731 Morococha 5-A 0804356DY01 63.633432 Morococha 5-B 0804356EY01 24.637833 Morococha 5-C 0804356FY01 41.284634 Morococha 5-D (**) 0804356GY01 16.369535 Morococha 5-E 0804356HY01 9.381436 Morococha 5-F 0804356IY01 5.304

37 Morococha 5-G 0804356JY01 1.028438 Morococha 5-H 0804356KY01 0.159339 Morococha 5-I 0804356LY01 2.394740 Morococha 5-J 0804356MY01 1.423641 Morococha 5-K 0804356NY01 0.29642 Morococha 5-L 0804356Y01 0.286443 Morococha 5-M 0804356OY01 844 Morococha 5-N 0804356PY01 0.119645 Morococha 5- 0804356QY01 0.171646 Morococha 5-O 0804356RY01 30.453247 Morococha 6 08004357Y01 500.3448 Morococha 6-A (**) 0804357GY01 5.748149 Morococha 6-B 0804357HY01 1.04850 Morococha 6-E 0804357KY01 0.147351 Morococha 7-B 0804358DY01 0.525752 Morococha 7 08004358Y01 193.566253 Morococha 9 10270497 30054 Muchcapata 1 (**) 0804356AY01 1.997855 Muchcapata 2 (**) 0804356BY01 3.040156 Muchcapata 3 (**) 0804356CY01 14.579457 Muchcapata 6 (**) 0804355GY01 116.1359

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NAME CODE Hectares58 Muchcapata 7 0804355HY01 18.294359 Ao Nuevo 0823079AX01 21.900760 Centromn 20 10169295 50061 Dcima 08001976Y01 0.975

Total Hectares 3403.9867

(*) Division pr ocedure technically approved by INACC. Final Resolution p endi ng.

(**) Material conc essions (also in Material Concessions Lis t)

PROCESSING CONCESSION

NAME CODE62 Amistad P0800383

Table 4-2 Mining Concessions Outside of UEAs

Mining Concessions Assigned to Cia. Min. Volcan S.A.A. Title No. Concession Name Area (Hectares)

1 08009725X01 AVELLA 2.002 08013117X01 CAROLITA 17.973 08003044Y01 EL MEK 5.994 08003192Y01 GENOVA A 5.995 08013108X01 GENOVEVA 11.986 08003409Y01 JUPITER CUATRO 1.297 08003394Y01 JUPITER TRES 2.358 08013128X01 LUCILA 2.00

Total 49.57 Hc

Mining Concessions Held Jointly with Cia. Min. Volcan S.A.A.Title No. Concession Name Area (Hectares)

1 08003172Y01 ANDAYCHAGUA No. UNO 9.982 08003153Y01 ANDAYCHAGUA No. DOS 9.983 08003164Y01 ANDAYCHAGUA No. TRES 9.984 08010177Y01 ANDAYCHAGUA No.

CUATRO9.98

Total 39.92 Hc

Mining Concessions assigned by Third PartiesTitle No. Concession Name Area (Hectares)

1 08010426X01 AO 1934 2.002 08022647X01 EXPLORAR N 3-M.H. 400.003 08022981X01 EXPLORAR N 3-M.H.-I 38.084 010045896 MARIA ELENA S. R. 500.005 08023077X01 ZENAIDA 89 100.00

1,040.08

New claims (2003)Title No. Concession Name Area (Hectares)

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1 01-01442-03 CORONA 1 2003 100.002 01-01445-03 CORONA 2 2003 300.003 01-01444-03 CORONA 3 2003 300.004 01-01443-03 CORONA IV 2003 200.005 01-02833-03 CORONA VIEJA 100.00

1,000.00

Title No. Concession Name Area (Hectares)1 08016663X01 LA PERLA 87 1.79

1.79

TOTAL OUTSIDE OF UEAS 2,129.57 Hc

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PARTICIPATION IN CONDOMINIUM CONCESSIONS

Cerro de Pasco Corporation (CPC), former owner (before Centromin Peru) denouncedthe area along with related persons in order to secure all of the area. After the area wasissued to all of them, CPC didnt make these people transfer their percentage to CPC.Some mining concessions have been assigned to Ca. Minera Yauli.

NAME CODE HECTARES %CENTROMIN

63 Aurora 08002289Y01 6.0000 50.0064 Carmen 08001026Y01 2.0000 50.0065 El Majadero 08001332Y01 6.0000 50.0066 Gravia 08001331Y01 4.0000 42.8467 Laura 08001139Y01 1.4100 50.0068 Llapita 08001503Y01 3.2078 50.0069 Nelson 08001318Y01 1.4100 50.0070 San Luis 08000819Y01 2.0000 50.0071 San Nicols 08001108Y01 2.0000 98.75

72 Salchicha 08002273Y01 2.0000 90.00Total Hectares 30.0278

PARTICIPATION IN LEGAL SOCIETY

NAME CODE HECTARES %CENTROMIN

73 Begonia 08001344Y01 0.8291 50.0074 Catn 08015429X01 4.0000 1.0375 La Huaca 25 08019129X01 2.0908 4.0076 Nern 1 08018694X01 1.0000 5.26377 Nern 2 08018695X01 0.9025 5.263

Total Hectares 8.8224

All known mineralized zones in which mining operations are currently conducted and inwhich reserves exist are set out within the claims above. Plants, roads, shafts, drifts,tunnels, tailings and other support infrastructure do not necessarily lie on the claimsabove, but in many cases are located on Centromin Peru property.

A quarterly payment of US$60,000 (adjusted annually for inflation) will be made toCentromin for right-of-use and easements of certain surface areas needed for theMorococha operation.

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Figure 4-1 Land Map Model

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Figure 4-2 Morococha Mine General Arrangement Plan

MINERAL RESERVES AND MINING AREAS

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4.2. PERMITS AND AGREEMENTS

4.2.1. Agreements

4.2.1.1. General Mining Office

All of the requirements of Articles 8 to 16 and 38 to 43 of the Single Revised Text of theGeneral Mining Law have been complied with, including the payment of duties andcarrying out annual work commitments.

4.2.1.2. Ministry of Labour-ESSALUD (National Health Service)

All requirements established by the Ministry of Labour, regarding Risk Work Insuranceand Social Security, among others, have been complied with by Morococha.

4.2.1.3. Judicial Labour Lawsuits

There are certain lawsuits pending by former Morococha employees regardingdisagreements with Social Benefit payments made or calculated at the time of thetermination of the employees, as well as other issues such as professional diseaseindemnification.

4.2.1.4. Real Estate

Except with respect to a formal agreement with Centromin pursuant to which Morocochahas the right to use certain limited surface lands, Morococha does not own any surfacelands in the area covered by its mining concessions. Although these surface rightsbelong to Centromin Peru, the specific use by Morococha of these lands has beenexercised for decades with Centromins acknowledgement. Thus, no actions byCentromin to claim the use of these lands are anticipated.

4.2.1.5. SUNAT (National Superintendence of Taxation Administration)

All filings with respect to income and sales taxes have been made on time and asprescribed by law.

4.2.2. Permits and Licens es

4.2.2.1. First UEA

4.2.2.1.1. Sacracancha Plant Operation AuthorizationDirectorial Resolution N 209-2003-MEM-DGM/PDM issued on October 28, 2003,granting the operation of the Sacracancha Plant to an extended capacity of 1,170 MT/d.

4.2.2.1.2. Hydrocarbons-Registry as Fuel Direct ConsumerRegistry N 960790 as Liquid Fuel Direct Consumer issued by the GeneralHydrocarbons Direction of the Mining and Energy Ministry. In force.

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4.2.2.1.3. Powder Magazine LicenseDirectorial Resolution N 1547/2000-SDEX issued on August 29, 2000, which authorizesthe renewal of the Powder Magazine, granted by DICSCAMEC for a 5 year period.

4.2.2.1.4. Supervised Chemical SubstancesVerification Act of Supervised Chemical Substances issued on June 24, 2003 and in

force until June 24, 2004.

4.2.2.1.5. ExplosivesDirectorial Resolution N 01833/2003-IN-1703-2 issued on July 14, 2003 granting aGlobal Explosives Authorization for 2003 and Mining Operations Certificate issued bythe General Mining Direction on December 31, 2002.

4.2.2.1.6. Sanitary Pouring AuthorizationDirectorial Resolution N 926-2003 issued on August 20, 2003 by the Health Ministry *.

4.2.2.1.7. Environmental Adjustment and Management Program (PAMA)This program is discussed in Section 19.5.

4.2.2.1.8. Quarterly Reports of Discharge and Emission Samples of MiningActivities

The Morococha operation has fulfilled this legal requirement.

4.2.2.1.9. Water Use License

Water FountainWater Volume

(l/s)Use Licenses Resolution Date of Issuance

Huascacocha Lagoon 50 Mining R.D. 130-89-AG-DGAS 02/11/1989

4.2.2.2. Second UEA

4.2.2.2.1. Hydrocarbons-Registry as Fuel Direct ConsumerRegistry N 963553 as Liquid Fuel Direct Consumer issued by the GeneralHydrocarbons Direction of the Mining and Energy Ministry -In force.

4.2.2.2.2. Powder Magazine LicenseDirectorial Resolution N 1547/2000-SDEX issued on August 29, 2000, which authorisesthe renewal of the Powder Magazine, granted by DICSCAMEC for a 5 year period *.

4.2.2.2.3. Supervised Chemical SubstancesVerification Act of Supervised Chemical Substances issued by June 24, 2003 and in

force until June 24, 2004.*

*Some Resolutions have been issued for both UEAs jointly.

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4.2.2.2.4. ExplosivesDirectorial Resolution N 01835/2003-IN-1703-2 issued on July 14, 2003 granting aGlobal Explosives Authorization for 2003 and Mining Operations Certificate issued bythe General Mining Direction on December 31, 2002.

4.2.2.2.5. Environmental Adjustment and Management Program (PAMA)

This program is discussed in Section 19.5.



4.2.2.3. Third UEA

4.2.2.3.1. Powder Magazine LicenseDirectorial Resolution N 000420/2001-SDEX issued on March 14, 2001, whichauthorises the renewal of the Powder Magazine, granted by DICSCAMEC for a 5 yearperiod.

4.2.2.3.2. Supervised Chemical SubstancesIdentification Code N 15010500605 issued by the Industrial Procedures and ChemicalSubstances and Products Direction on October 18, 1993.

Verification Act of Supervised Chemical Substances issued by December 2002 and inforce until December 17, 2003. A renewal of this Verification Act has already beensubmitted for its approval which is still pending.

4.2.2.3.3. Hydrocarbons- Registry as Fuel Direct ConsumerRegistry N 959424 as Liquid Fuel Direct Consumer issued by the General

Hydrocarbons Direction of the Mining and Energy Ministry.4.2.2.3.4. ExplosivesDirectorial Resolution N 347/2003-IN-1703-2 issued on February 13, 2003 granting aGlobal Explosives Authorization for 2003 and Mining Operations Certificate issued bythe General Mining Direction on December 17, 2002.

4.2.2.3.5. Environmental Adjustment and Management Program (PAMA)This program is discussed in Section 19.5.

4.2.2.3.6. Sanitary Pouring AuthorizationDirectorial Resolution N 0606/2003/DIGESA/SA issued on May 27, 2003 by the Health

Ministry.

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4.2.2.3.7. Water Use License

Water FountainWater Volume

(l/s)Use Licenses Resolution

Date ofIssuance

BuenaventuraLagoon

10 Mining R.A. 096-2002- INRENA-DGAS-ATDRM

25/10/2002

HuacracochaLagoon

110 Industrial R.A. 095-2002- INRENA-DGAS-ATDRM

25/10/2002

Socavn CobrizaVulcano

40 Mining R.A. 097-2002- INRENA-DGAS-ATDRM

25/10/2002



Based on the information provided, in REIs opinion, the permits are complete and inadequate standing to permit future mining operations on the property.

4.3. ENVIRONMENTAL ISSUES

Environmental issues are discussed in Section 19.5.

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5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES,INFRASTRUCTURE AND PHYSIOGRAPHY

The Morococha operations are accessible via the paved Carretera Central (CentralHighway), approximately 137km east of the capital city of Lima, then 5km south via apublic, all weather gravel road. Rail service from Lima is also available via a national railline that passes adjacent to the operations.

The topography of the mine operating area is characterized by steep, rugged ridges andpeaks ranging in elevation from 4,400m to 4,900m above sea level. Vegetation issparse, and wildlife is limited to mostly birds and small mammals, amphibians, andreptiles.

The climate of the operations area is typical of the Andean Cordillera in Peru, with twodistinct seasons. The average annual precipitation is estimated to be around 800 mm,with most occurring as rain in the wetter summer months (November through March).Rainfall ranges from gentle drizzle to torrential downpours, with occasional minor snow.

The winter months (April through October) are dry and colder, and seasonal transitionsare typically abrupt. Winter nighttime temperatures often dip below 0C, but rarely lowenough to affect surface operations (milling, ore and concentrate hauling). Because allmining currently takes place underground, climate has minimal effect on ore production.

Mining has taken place at Morococha and nearby areas (Casapalca, Cerro de Pasco) formore than 100 years, resulting in a well developed regional transportation and powerinfrastructure and a large local labor pool. Water for processing is plentiful, and tailingsdisposal areas are adequate. Several mine development waste disposal sites exist onthe property and these are sufficient to meet the needs of the mining operation. Theexisting processing plant sites are sufficient for all proposed operations.

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Table 6-1 Historical Mineral Reserves

Year Tonnes Ag (g/mt) Pb (%) Cu (%) Zn (%)1988 3,564,08

212 1.6 1.0 3.9

1989 6,160,33

173 1.2 0.9 5.51990 3,782,15

212 1.6 0.9 5.8

1991 3,726,22

197 1.6 0.8 6.21992 3,036,88

256 1.8 0.8 7.2

1993 3,173,48

250 1.7 0.9 7.21994 4,262,04

224 1.5 1.0 5.9

1995 4,053,11

240 1.5 1.0 5.01996 5,421,52

226 1.6 1.0 4.6

1997 4,589,08

228 1.7 0.9 5.11998 3,311,53

241 1.8 0.8 5.3

1999 2,169,24 276 1.9 0.9 5.82000 2,473,61

270 1.9 0.8 5.02001 2,813,11

260 1.7 0.9 4.9

2002 2,206,04 284 1.8 0.9 5.0

HISTORICAL MINERAL RESERVES

Table 6-2 Historical Plant Production

Year Tonnes Ag (g/mt) Pb (%) Cu (%) Zn (%) Tonnes/Month1988 448,051 168 1.3 0.4 3.0 37,3381989 466,543 189 1.3 0.4 3.2 38,8791990 461,342 166 1.3 0.5 3.6 38,4451991 454,960 184 1.6 0.4 4.5 37,9131992 458,257 202 2.0 0.4 5.8 38,1881993 494,033 194 1.9 0.6 5.5 41,1691994 503,160 227 1.5 0.5 4.9 41,9301995 531,542 232 1.5 0.6 4.0 44,2951996 534,148 237 1.5 0.5 3.8 44,5121997 511,584 250 1.7 0.5 4.1 42,6321998 538,008 251 2.1 0.4 4.9 44,8341999 590,570 250 2.2 0.4 5.7 49,2142000 656,318 215 2.1 0.4 5.2 54,6932001 606,980 236 1.8 0.4 5.0 50,5822002 550,075 274 1.7 0.5 4.4 45,840

HISTORICAL PLANT PRODUCTION

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7. GEOLOGIC SETTING

The stratigraphic sequence present in the area around the Morococha operationincludes a 2,000m thick Paleozoic-Mesozoic sequence of schists, volcanic rocks andpredominantly carbonate sediments (see Figure 7-1). The oldest unit is the Devonian

Excelsior Group consisting of phyllites and schists. This is overlain unconformably bythe Permian Mitu Group, which consists locally of a 300+ meter thick sequence ofdacitic-andesitic flows and pyroclastics. A thin sequence of red continental sediments withcarbonate breccias concordantly overlies the volcanics. The next youngest unit is the Jurassicage Pucar group of which only the upper unit, the Condorsinga Formation, is present atMorococha. Locally it is estimated at 500m in thickness and has been divided into 13 sub-units,the most important of which as hosts for mineralization are two dolomitic limestones (Upper andLower Laura dolomites) and two marker horizons consisting of a trachite flow and a porphyriticbasalt sill. The Pucar is overlain concordantly by the lower Cretaceous Goyllarisquizga Group,which consists locally of over 400m of quartzites and siltstones. The upper Cretaceous MachayGroup concordantly overlies the quartzites, consisting locally of the carbonaceous limestones ofthe Pariatambo Formation and the Jumasha limestone.

A series of upper Tertiary intrusions cuts the Paleozoic-Mesozoic sediments. The first isthe Anticona diorite, which underlies much of the western part of the Morococha District.Its contact with the sediments has a moderate westerly dip and deep workings on theSanta Catalina and Transversal San Gregorio veins, which indicate that it has alaccolithic form with the carbonates of the Machay Group underlying it at relativelyshallow depths. Four coarse-grained quartz monzonite stocks in the central part of thedistrict represent the next intrusive phase. These are irregular bodies with numerousporphyritic dikes that cut the sedimentary sequence and the Anticona diorite. The latestintrusive phase is a small quartz porphyry stock, which appears to be most closelyrelated to the Toromocho copper mineralization (see Section 9.).

The structural setting of the Morococha area is dominated by shallowly NW-plungingfolds, the most important of which is the anticlinal feature referred to as the Yauli Dome,which trends north-northwest and divides the district roughly in half. Limb dips rangefrom 20-30 on the east to 30-40 on the west. The Mitu volcanics outcrop in the core ofthe dome, with Pucar limestones on the east and the full sequence of Jurassic-Cretaceous sediments exposed on the west limb. Continued compression apparentlygave rise to early NW trending shears, and the uplifting effect of the intrusion of thequartz monzonite stocks produced an arching of the Yauli Dome and an associatedphase of tensional faulting more or less perpendicular to the anticlinal axis (NE-SW).This latter set is the most heavily mineralized set of fractures and accounts for themajority of fault-vein mineralization in the Morococha District.

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Figure 7-1 Regional Geology Plan Map

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Figure 7-2 District Geology Map

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8. DEPOSIT TYPES

The geologic setting of the Morococha District provides for a wide range of documenteddeposit types. There are four principal types of economic mineralization in theMorococha district: epi-mesothermal silver-lead-copper-zinc veins, bedded silver-base

metal replacements (mantos), intrusive-sediment contact skarns and mantos and thequartz porphyry-hosted Toromocho disseminated copper system. The first two typesaccount for the great majority of economic mineralization on the Corona properties andare the primary types that have been and will be mined under the current operating plan.

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9. MINERALIZATION

Vein mineralization formed along the dominant system of NE-trending tensional faults.With the exception of an agglomerate unit in the upper Mitu Group and the sedimentarybreccias in the upper and lower Pucar, the Mitu volcanics, Anticona diorite and much of

the sedimentary sequence are good vein hosts. Mineralization associated with the veinsis mostly fracture filling in nature except in some carbonate hosts where irregularreplacement can take place in the wall rocks. The size and geometry of individual oreshoots in the veins are lithology and structure dependent. For example, the plunge ofore shoots in the Buenaventura vein plunge parallel to the dip of the Cretaceouslimestone hosts, but shoots in the Mitu volcanics are steeper and may be moredependent on structural controls. Shoots range up to 400 meters in length with sometraced up to 800 meters down plunge. Economic widths in the veins range from 0.5meters to more than six meters, as demonstrated in a cymoid loop in the Cua vein.Undiluted district vein width averages are on the order of 1.2 meters.

Replacement manto mineralization is generally restricted to receptive stratigraphic

horizons where favorable lithologies are intersected by mineralized veins or are proximalto pre-mineral intrusives. Five favorable stratigraphic horizons are known in the Pucarsection and at least two more in the Jumasha Formation, below the Anticona dioritecontact. Some of the mantos are less stratabound in character, occurring as structurallycontrolled irregular chimneys within generally favorable stratigraphic horizons. Mantoscan have a significant strike extent in areas such as Codiciada, where the veins areclosely spaced. Mineable mantos range from less that one meter in width to the largest,Manto Italia, which averages seven meters wide.

Intrusive contact related skarn bodies are common in the favorable portions of thePucar, generally in areas of pre-mineral, contact-related silicification and/or calc-silicatealteration. For the most part, these skarns are generally small and irregular, with

disseminated rather than massive sulfide mineralization. A notable exception is onelarge occurrence in the northeast portion of the main Toromocho block, where a body ofmassive pyrite-chalcopyrite skarn that measures 70m by 400m is developed inlimestones adjacent to a quartz monzonite stock.

Disseminated copper mineralization is present in the central part of the district in theToromocho deposit. This porphyry/breccia pipe deposit is hosted by quartz monzoniteand Pucar limestones. The upper levels of the deposit contain enargite-chalcocite thattransitions into a mid-level zone dominated by sulfides and a second, deeper zone ofchalcocite. Its ultimate size is unknown.

Ore and gangue mineralogy is similar in veins and mantos but varies considerably

across the property. Sphalerite, galena, and chalcopyrite are the most important primaryminerals for zinc, lead and copper. Silver is generally present as freibergite (Ag-tetrahedrite) or argentiferous galena. Gangue generally consists of quartz, calcite, bariteand rhodochrosite, the latter having a strong correlation with higher silver grades.

As with most of the large Peruvian polymetallic deposits, Morococha exhibits a distinctlateral and vertical metal zonation. A central copper zone centered on the Toromochodeposit grades outward through a lead-zinc-minor silver zone and then into an outermostzone that is richer in silver but still retaining significant lead-zinc contents. There is also

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a distinct trend for higher silver grades at higher elevations on the west side of theCorona properties. Individual silver assays of +2,200 g/mt are not uncommon above4800 meters in the San Florencio and Huacracocha areas, and +300 g/mt silver oregrades also are common in the outer silver-lead-zinc zone above the 4400 meterelevation in the Buenaventura vein at Yacumina and to the east in Alpamina. In veinsthat have been mined over significant vertical extents (such as those in Manuelita), silver

grades tend to decrease as lead-zinc grades increase with depth. However, several ofthe major veins currently being mined on the 4,020m Kingsmill Tunnel level still containsilver grades in the 200 g/mt to 250 g/mt range. Although historically very few sampleshave been analyzed for gold, there appears to be a significant increase in gold contentto the east in the Alpamina area.

The hydrothermal alteration present at Morococha is typical for central Peruvian zonedpolymetallic deposits. Where veins are hosted by intrusive rocks, wallrock alterationconsists of moderate silicification and sericite-kaolinite alteration for up to several metersoutward from the vein. Carbonate sediments show a pre-mineral silicification and/orweak calc-silicate alteration near intrusive bodies and veins are generally betterdeveloped in these areas. Where veins cut unaltered carbonates, the wall rocks

generally have a bleached appearance and weak to moderate silicification.Toromocho exhibits normal porphyry copper zonation, with an inner zone of potassicalteration grading outward through phyllic and propylitic assemblages.

The depth of oxidation in and adjacent to the veins and mantos is variable, but it tends toextend deeper where veins are hosted by carbonates. At Codiciada-San Antonio-Alapampa, veins are generally at least partially oxidized down to 100m below surface,and one manto (Ombla) had partial oxidation to a depth of 300m. Ore mined from theseareas has historically experienced poorer metallurgical recoveries due to the increasedamount of oxidized material.

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10. EXPLORATION

Corona has conducted only minimal exploration in the district since the late 1990s.However, exploration potential is considered to be excellent throughout the district dueto the significant vertical extent (over 800m) of economic veins and the prevalence of

multiple carbonate units favorable for replacement mineralization. Additionally, of thevery few drill holes (less than 10) that tested depth extensions of known veins or mantos(Buenaventura, Cua, Manto 3) below developed ore, all intersected potentiallyeconomic material. The top priority areas for exploration are the Buenaventura vein, theAlpamina zone on the far east side of the Morococha property near CoronasSacracancha mill, the Yacumina area and the San Florencio and Huacracocha areas onthe far west side of the property. All of these areas contain higher than average silvergrades.

The potential for down-dip extensions to veins in the Manuelita, Sulfurosa, Codiciada,and San Antonio areas to the 4,020m elevation of the Kingsmill tunnel is also excellentbecause of the extensive vertical mining history at Morococha and at adjacent districts.

Recent exploration by Volcan to the west on the Santa Catalina vein has reportedlyintersected significant new ore below the 4,500 meter level, which indicates a minimumknown economic range of 800m. Further support for projecting the potential in theManuelita, Sulfurosa, and Codiciada areas to the 4,020m elevation is provided by thegeologically very similar Casapalca district just to the west of Morococha, whereeconomic mineralization extends from the 5,000m elevation down to at least the 3,500melevation. The Excelsior schists that underlie the host Mitu volcanics in these areas(exposed in the Kingsmill tunnel in the core of the Yauli Dome) are known to be excellentvein hosts in the San Cristobal (Mahr Tunnel) District just to the southeast of Morococha.

The sources of the information regarding the adjacent properties of the Santa Catalina,Casapalca and San Cristobal are described in Section 15.

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11. DRILLING

Prior to the PAA purchase of the Morococha operations, Corona utilized surface andunderground diamond drilling only to test for potential ore-grade mineralization in thevarious veins, replacement mantos, and skarn bodies. Once the results of drilling

determined the presence of ore grade mineralization, the vein or manto was accessedby underground crosscutting and drifting for further exploration and delineation ofmineral reserves. Thus, assay data generated by drilling have seldom been used inblock grade estimations for mineral reserves at Morococha.

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12. SAMPLING METHOD AND APPROACH

The data used for the estimation of mineral reserves at Morococha consist almost totallyof underground chip channel samples taken from the backs of drifts, the ribs ofcrosscuts, the backs of stopes, and the ribs of raises. In drifts and raises, the samples

are cut every 1.0 meters along strike or up and down-dip across the veins or mantos,normal to the vein/manto walls. During production, stopes are sampled at least once amonth on 2.0-meter centers along strike. However, before estimating mineral reservesat the end of each quarter, each active stope is sampled on 1.0-meter centers to providethe close spacing required for the definition of block boundaries and estimation of blockgrades. These samples are taken from all active mining areas.

Samplers are organized into teams, and each team is assigned to specific majorsections of the mine (Santa Rita, Sulfurosa, Codiciada, etc.) Each sample collectedranges in weight from one to two kilograms. Only veins or manto mineralization issampled vein and manto wallrocks (which contribute external dilution during mining)are not sampled (see discussion in Section 17.3). Sample recovery (often an issue

where drilling methods are used to provide samples for mineral reserve estimation) isnot a concern at Morococha. In REIs opinion, while the physical size of some of thesamples taken is sometimes small relative to samples normally taken in North Americanunderground mines for mineral reserve estimation, the samples do provide acceptableand representative assay data for the estimation of mineral reserve block grades.

Table 12-1 is a list of the individual samples used for the estimation of a typical mineralreserve block at Morococha.

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Table 12-1 List of Underground Chip Channel Sample Results

Location: Sub Level 14 SW Location: Raise 13

Sample No. Width (m) Ag (g/mt) Pb (%) Cu (%) Zn (%) Sample No. Width (m) Ag (g/mt) Pb (%) Cu (%) Zn (%)1 0.25 290 3.62 0.93 6.00 1 0.60 790 2.76 1.40 8.032 0.60 500 1.18 1.18 2.10 2 0.60 510 0.80 0.73 9.633 0.90 380 1.16 1.94 1.43 3 1.40 770 3.01 1.08 9.854 0.60 170 1.04 0.44 1.85 4 0.70 1310 1.01 0.96 6.255 0.70 1125 1.96 4.01 2.55 5 0.85 870 2.56 1.53 12.336 0.80 210 0.72 0.39 1.23 6 0.40 1706 4.56 2.48 22.107 0.70 740 2.33 4.60 2.63 7 0.90 820 3.34 1.97 8.288 0.85 1115 1.79 4.43 4.15 8 0.80 610 2.83 0.75 3.209 0.70 320 1.36 1.31 3.65 9 1.00 700 2.22 2.24 6.50

10 0.65 390 1.85 1.28 4.30 10 0.80 780 3.31 2.59 5.7011 0.75 1540 2.93 3.38 4.75

Location:Raise 15

Sample No Width (m) Ag (g/mt) Pb (%) Cu (%) Zn (%)1 0.30 950 1.49 1.79 2.582 0.80 390 2.04 0.68 2.553 0.80 1115 3.49 3.32 5.604 0.70 950 3.14 3.80 4.585 1.80 310 1.27 1.04 2.486 1.80 400 3.63 1.08 2.457 1.70 310 1.48 0.60 2.788 1.60 470 2.35 1.12 3.239 1.20 410 1.22 1.18 2.0010 1.20 320 0.86 0.73 1.3311 1.20 690 2.76 1.32 3.2812 1.40 830 2.77 2.10 3.8013 1.60 985 1.60 1.75 1.9814 1.60 340 0.78 0.27 1.4515 1.80 270 0.71 0.31 3.38

Note: Widths listed are as measured (to nearest 0.05m) normal to vein strike and generally normal to vein dip across sampled back of working;Block true widths subsequently determined before estimating block volumes.

List of Underground Chip Channel Sample ResultsManuelita Area

Vein 3B - Level -450Block 067

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13. SAMPLE PREPARATION, ANALYSIS AND SECURITY

At the time of REIs site visit in November 2003, preparation of the underground samplesat Morococha was a two-stage process. The first stage took place immediately after thesampling teams cut the samples from the individual working areas. Before being

brought to the surface, the samples were reduced in size underground by the samplers.This reduction involved dumping each sample individually onto a flat rock or othersurface and breaking the larger rock fragments with a hand sledge. The sample wasthen transferred from the rock onto a small (1.5-square) rubberized canvas tarp section.If the volume of the sample was judged by the sampler to be too large, the sample wasthen rolled on the tarp, split to 50% of its original volume and returned to the samplesack. The reject 50% was discarded. If the sample was considered to be too small tosplit, the entire sample was placed back in the sack and sent to the assay laboratory.

According to the Morococha geology staff, this pre-laboratory preparation procedure hasbeen used only recently because of a general doubt about the consistency of the samplepreparation procedures in its only operating laboratory. In particular, the larger sample

fragments were broken to prevent the laboratory staff from discarding the larger piecesrather than breaking them manually prior to crushing. In REIs opinion, while theunacceptable laboratory procedures were a valid cause for concern, the pre-laboratorysample preparation by the samplers fails to meet accepted North American industrysampling practices. During the site visit, REI was able to observe the pre-laboratoryprocedure, and noted problems with the process that included some loss of sampleduring breaking of the large fragments, loss of sample during transfer of the sample tothe sample tarp, sample homogenization, and transfer of the split retained for assayback into the sample sack. Most important, this practice does not allow for adequatereduction of sample particle size prior to homogenization and splitting.

The second stage of sample preparation took place in the Amistad laboratory and

followed more standard procedures. Samples were first oven-dried at temperatures thatrange from 110C to 205 C, then crushed in conventional jaw crushers to minus-.After primary crushing the samples were passed through rotating plate pulverizers thatreduced the samples to 85% passing -200 mesh, and then 200-gram pulps were split forassay.

REI examined the sample preparation area of the laboratory and found the generalhousekeeping to be poor. Ventilation for the jaw crushers was restricted to 10-12diameter holes cut in the wall behind each crusher in which fans were mounted thatexhaust into ductwork attached to the outside of the wall. Although separate pulverizersfor mine and mill samples were found situated in well-enclosed, well ventilated hoods,REI observed dust and sample fragments scattered all around the crushers and

pulverizers, and noted that the compressed air lines plumbed into the area around eachpulverizer had no connecters for nozzles to allow cleaning of either pulverizer. Cleaningof the pulverizers appeared to be limited to manual brushing of the plates. In REIs view,a thorough cleaning of the sample preparation area followed by establishment of morerigid preparation procedures and cleaning/maintenance practices is needed.

In summary, although several inconsistent or inappropriate sample preparationprocedures were observed by REI or noted by Morococha personnel, in REIs opinion,these issues, while deserving immediate correction, do not constitute a material concern

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relative to the integrity of the resulting recent assay data. Check samples collected byPAA during due diligence indicate that the recent assays produced by the Amistadlaboratory may be biased low (see Section 14.). Thus, any ore/waste classificationerrors resulting from this bias have likely resulted in the loss of low grade ore rather thanthe inadvertent milling of waste. To the best of REIs knowledge, no aspect of the samplepreparation procedure was conducted by an officer, director, or associate of PAA.

All samples from both the mine and mill are first run for silver, lead, copper, and zincusing an atomic absorption (AA) unit. Samples with initial AA analyses for silver greaterthan 25 oz/st are rerun by fire assay, using assay charges that vary in size from 10 to15g depending on the grade of the initial AA assay (the larger the AA assay value, thelarger the fire assay charge). Wet chemical analysis for lead and zinc is reserved forconcentrate samples. Although the AA unit is equipped with a direct link to the mill fordownloading process sample assays, analytical results for mine samples are manuallyrecorded on paper laboratory reports. While REI has no significant concerns relative tothe current analytical procedures, in REIs opinion, standardization of fire assay chargesto at least 15g in size would be appropriate.

The analytical portion of the laboratory was found to be spacious and generally in goodorder. With the exception of the balance room (where housekeeping fell short of thespotless conditions typically found at North American mine assay laboratories), thecondition of the analytical section was acceptable.

Sample security (chain of custody) is not an issue at Morococha. All samplepreparation, assays, and analyses are done on site, and samples never pass outof the control of Morococha employees.

The laboratories at Morococha are not certified laboratories.

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14. DATA VERIFICATION

Initially all assays and analyses were generated by the Corona laboratory at theSacracancha millsite. Subsequently, Corona transferred assay and analyses of minesamples to the analytical laboratory located at the Amistad concentrator facility. During

the site visit, REI was told that laboratory reports from the Corona Sacracanchalaboratory were no longer available, which made verification of the assays recorded onreserve block calculation sheets impossible.

To REIs knowledge, no quality assurance/quality control (QA/QC) program was everestablished for the analysis of mine samples at the Sacracancha laboratory, nor is onecurrently in place at the Amistad laboratory. This total lack of QA/QC data makes itdifficult to assess the performance and reliability of either laboratory, making itnecessary to rely on comparisons between past production forecasts, mine production,and mill production.

An examination of the reconciliations between mine production and reported mill

throughput over the past 7 years from the Manuelita and Codiciada zones indicate thatconsistently higher grades were reported by the mine compared to the mill fo

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