technical report on the nechalacho deposit, thor lake project ...

Operating Cost Exclusions
The operating costs do not include:
• Any provision for inflation
• Any provision for changes in exchange rates
• GST/HST
• Preproduction period expenditures
• Corporate administration and head office costs in Delta and Toronto
• Site exploration costs or infill drilling or development for conversion of additional
resources to mineral reserves.
OPERATING COST ESTIMATE DETAILS
The operating costs are in Q1 2010 Canadian dollars. Annual budgets were prepared on a
monthly basis to reflect the seasonal fuel use on mine air heating and the summer freight lift and
concentrate shipping. Other operating activities have not been adjusted for seasonal impacts.
The initial project scheduling projected the start of operations in the fall of a given year and
hence the budgets run from October to September.
The key changes between the operating cost estimate for the 1,000 tpd and 2,000 tpd cases is
the increased “variable” costs. There are only minor increases projected in the administration
and management costs at Thor Lake and Pine Point. The hydrometallurgical plant costs
increase by a small percentage as the plant was largely designed to accommodate the higher
tonnage from the start.
Salary and Labour Rates
Salary and wage rates were generated by Avalon and are based on an analysis of wage and
salary surveys followed by the selection of specific rates for the project.. Miner’s rates include
incentive allowances and there are allowances for salaried bonuses as well. The rates include
the annual employer maximum contribution for EI, WCB and CPP. There is provision for a
company paid contribution of 3.75% of annual base salary to an RRSP and an allowance of
C$4,000 per person per year for supplemental benefits.
There is an allowance for an incentive bonus scheme with the bonus ranging from 3% to 50% of
the base salary with an average payment of 75% of the maximum bonus.
Overtime is included in the wages costs based on no overtime for staff (salaried personnel) and
16% overtime for hourly paid employees.
Technical Report 43-101 – March 13, 2011 Page 18-118
Prepared by Avalon Rare Metals Inc.