Overview - Rio Tinto acquired the La Granja project through a public bidding process in late January 2006 carried out by the Peruvian government. The company is currently completing a feasibility study on the viability of mining in the central portion of the concession defined by previous drilling. The company is also exploring peripheral zones in an attempt to increase the projects resource base.

Keywords   Peru   copper   new project

The terms of the agreement state that Rio Tinto pay the Peruvian government US$22 million, nearly US$11 million of which will go towards the La Granja Social Trust Fund, created by the Peruvian Government to undertake sustainable development projects in the district of Querocoto. The company must also invest US$60 million in exploration and feasibility studies between 2006 and 2009. They have the option to extend this term to 2011. At the end of this period, if the project is economically viable, the company will file a feasibility study that contains a minimum investment of US$700 million or the construction of a 35,000 tonnes per day treatment plant. If after the exploration phase the company decides not to proceed with the project, it would implement a proper social and environmental closure program.

Ownership Summary  Name: Rio Tinto    Interest: 100%    Note: public Reference: 31 Mar 2007

The project is currently undergoing a US$95 million prefeasibility study. Instead of looking at La Granja as a conventional milling operation producing concentrates for export, the prefeasibility study is seeking to demonstrate recovery of copper metal using sulphide bioleaching with the aid of bacteria, followed by electrowinning. First production is at least seven years away.

The La Granja project is technically challenging and has modest copper grades. However, the deposit contains significant mineralisation of more than two billion tonnes.

Location - The La Granja copper project is located in the district of Querocoto, province of Chota, region of Cajamarca. The project was named after the community closest to the exploration camp, La Granja, which is 25 km from the city of Querocoto. The camp is situated at 2,000 meters above sea level.

Location Summary Nearest Landmark: Cutervo Distance from Landmark: 34km Direction from Landmark: WEST Latitude: 6 deg 21 min S Longitude: 79 deg 7 min W Satellite Image: <click to view>

There are 4 communities in the area of influence within the concession, La Granja, La Pampa, La Iraca and Paraguay. Together they have a population of nearly 1,900 people, many of which will become workers at the mine when it is completed.

The nearest ports are Salaverry and Paita, located 440 and 541 Km from the project, with facilities to receive ships with a capacity of up to 30,000 tons. The mine site is located 40 Km from the Carhuaquero Hydroelectric Plant, with access to the National Power Grid.

Property - The La Granja property covers an area of 3,900 hectares containing the La Granja porphyry copper deposit. It has an estimated target mineralization of about 3,500 Mt at an average copper grade of 0.55%. The deposit is a highly altered intrussive formation of late Tertiary age and is comprised of two zones. The primary zone, contains the copper mineral chalcopyrite. The secondary zone contains copper sulfide minerals.

Deposit Summary Deposit Type: porphyry Primary Commodity: copper

Reserves Summary Name: La Granja Commodity: copper Class: Proven + Probable Tonnage: 3,500 Mtonnes Grade: 0.55 % Note: Not JORC or NI43-101 compliant. Reference: 31 Mar 2007

Operation - (to be announced)

Process - Rio Tinto is currently undertaking a feasibility to aimed at demonstrating a sulphide bioleach capability with recovery of copper metal using bioleaching and electricity (electrowinning). Initial test work has been encouraging.

Bioleaching is the deliberate use of common strains of bacteria to speed the chemical release of metals from ores. By adding bacteria charged solutions of dilute sulphuric acid and ferric sulphate and blowing air through heaps of broken ore the bacteria are encouraged to multiply. They flourish and decompose the sulphides, thereby assisting chemical reactions that dissolve copper out of the ore. The method of metal extraction contributes to sustainable development by producing copper from previously uneconomic resources.

Environment and Community - Rio Tinto - La Granja is committed to developing the project in a manner that maximizes local development possibilities, focusing primarily on sustainable improvements in health and education, as well as the strengthening of the skills and capabilities of the local population.

The company also vors to promote local participation in environmental protection efforts. An Environmental Committee is currently being created, which will work together with the communities to monitor water quality and properly manage waste, among other activities.