REVIEW OF THE TAIVALJÄRVI MINE PLANNING

The review work was done by Pekka Lovén, MSc(Mining), MAusIMM(CP) of Outotec (Finland) Oy, a Competent Person as defined by Joint Ore Reserves Committee (JORC, 2004).
 

The Reviewed Mineral Reserves of Taivaljärvi Silver Mine :

The Mineral Reserves is derived from the stope by stope mining plan taking into account the mining recovery of 90% (95% , open pit) and waste rock dilution of 10% (5%, open pit). The diluting grade has been defined from block model; Ag 31.3, Au 0.078, Zn 3600 and Pb 1300 ppm. This diluting grade represents average mineralized rock outside planned stopes.

The mining plan assumes the longitudinal bench-and-fill mining method with a combination of cemented rock fill and uncemented waste fill. The sublevel interval is 20 m, which is  suitable for longitudinal mining. There are  areas in the ore body where the thickness exceeds 25m and sublevel open stoping with delayed backfilling will be utilized. According to the mining schedule the production starts from the open pit and from the 140 level in the underground mine simultaneously. The geometry of the ore body is such that
the need for a sill pillar is quite small.

Below: Draft Mining Plan

Taivaljärvi - Resource Estimate

JORC Compliant Mineral Resource Estimate

Sotkamo Silver has during 2011 received the latest independent estimate of mineral resources for Taivaljärvi's Ag-Zn-Pb-Au-deposit.  The updated Mineral-Resources are based on the 2011 completed core-drilling program and have been estimated in accordance with the guidelines of the JORC Code (2004).

Resources estimated and reported herein are based on the Resource model conducted by Dr. Parkkinen, but the resource estimation have been audited and reviewed by Wardell Armstrong International (WAI) in the fourth quarter of 2011 and takes into account material extracted at the Taivaljärvi deposit up until 14 December 2011.

Total Mineral Resources as of 14 December 2011 for the Taivaljärvi Silver Mine are shown in the table below at a 50g/t Ageq cut-off grade (COG).

Total Mineral Resources as of 14 December 2011 for the Taivaljärvi Silver Mine are shown in the table below at a 80g/t Ageq cut-off grade.

Modelling of the mineralisation has been carried out based on a silver metal equivalent (Ageq). The parameters used to derive the Ageq are shown in the table below with the equivalent factors derived using the formula:

eq Factor= (metal unit price*(metal recovery/100))/(Ag unit price*(Ag recovery/100))

The actual Ageq values were calculated into the drill hole database and the subsequent block model based on the formula:

 Ageq=Ag+(Au*Au factor)+(Pb*Pb factor)+(Zn*Zn factor)

Note:

The information in the report to which this statement is attached that relates to Mineral Resources is based on information compiled by Mark Owen, who is a European Geologist and a Chartered Geologist with the Geological Society of London which is a ‘Recognised Overseas Professional Organisation’(ROPO) included in a list promulgated by the ASX. Mark Owen is employed full time by Wardell Armstrong International. Mark Owen has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mark Owen consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Exploration mineral resource estimation

Dr Parkkinen has also presented an NI 43-101 compliant inferred mineral resource estimation which is called "exploration mineral resource estimation". This estimation describes the total amount of the mineralisation, which includes the above presented estimation with higher silver grade and cut-off.

Below Exploration solids (magenta), research tunnel (light brown), holes and soil surface, looking towards NE. Inferred 13 million tonne. (Dr. Jyrki Parkkinen 2010).