Pre-feasibility Study

The pre-feasibility study commenced February 2011 and will consider a centralized process plant using flotation for the recovery of the base metals and will study various mining options over a forecast life of mine of between 10 and 14 years. The study will further investigate process options for the development of a gold recovery plant to process gold mineralized material from the "gold cap" at the Emba Derho deposit, the nearby Gupo gold deposit and other possible nearby surface zones of gold mineralization to enhance economics of the deposits. The completion of this report is expected in March 2012.

Preliminary Economic Assessment Study (completed June 2009)

An independent Preliminary Economic Assessment ("PEA") Study on the large Emba Derho copper-zinc-gold volcanogenic massive sulphide (VMS) deposit was completed in June 2009 by Wardrop, a Tetra Tech Company ("Wardrop"). Highlights of the study include:

• Pre-tax NPV is estimated at US$203.9 million at 10 % discount rate
• Base case open pit mining at 4 million tonnes per year for 10.4 years (42 Mt out of 62 Mt) - potential mine life extension
• Produce 200,000 t of Cu & Zn concentrates annually containing 55,000 t Zn, 25,000 t Cu, 20,000 oz Au & 0.6 m oz Ag
• Cu -- 90% recovery, 30% product; Zn -- 95% recovery, 55% product
• Base case IRR is 21.6% with 4 yrs payback on initial estimated capital costs of US$331.8 million, sustaining capital US$67.3 million
• Total op costs are estimated to be US$21.19/tonne milled
• Wardrop recommends Pre-Feasibility Study

In addition, Wardrop cites many opportunities for improvement and cost saving for Emba Derho that will be considered in future feasibility studies, including:

• Possible mining of the NW zone consisting of 17.3 m tonnes averaging 0.96% Cu, 1.26% Zn, 0.18 g/t Au & 8.84 g/t Ag
• Base PEA does not include oxide gold zone which contains 94,000 ozs Au. (3.51 m tonnes grading 0.84 g/t Au)
• Upgrade ore by removing unmineralized dykes and dumping in the pits
• Mining Emba Derho in conjunction with other nearby deposits
• Possible use of railway, sharing port costs with Nevsun, study of local power options and using part of open pit for waste disposition

NI 43-101 Resource

An updated independent resource estimate at Emba Derho was completed by Wardrop Engineering Wardrop in October 2008. The deposit now hosts an indicated NI430-101 resource of approximately 62.5 m/tonnes containing 990 m lbs Cu, 1.9 billion lbs Zn, 580,000 ozs Au & 20.8 m/ozs Ag.