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

Scott Wilson RPA added the NWT payroll tax, a 2% tax on all wages and bonuses as a line item
in the operating costs estimates. Based upon the interpretation of the 2% payroll tax, the tax is
estimated as a 1.8% tax on the loaded wage and salary costs.
For the Pine Point site the wages have been multiplied by a factor of 0.9 reflecting a projected
reduction in labour costs related to the nature of the work and the location. Avalon considers
that the attraction of the non fly in – fly out (FIFO) operation will allow it to recruit employees
without the perceived “premium” applied to FIFO operations such as Thor Lake. Scott Wilson
RPA considered this to be a cost risk as Scott Wilson RPA expected that it will be difficult to
attract skilled operators, maintenance and <strong>technical</strong> personnel to live in Hay River and commute
daily to a job in Pine Point.
Fuel Price and Fuel Taxes
The operating costs are based upon a diesel fuel price of C$0.85/l FOB site (C$0.80/l fob
Edmonton plus C$0.05/l freight to north. Freight costs from Hay River to Thor Lake are included
in the summer freight costs.
The NWT has a fuel tax on diesel used for mobile equipment and for power generation. Scott
Wilson RPA has included the fuel tax allowance of 9.1 c/l for mobile equipment and C$0.031/l
for diesel used in power generation. Appropriate record keeping will need to be set up and
maintained to substantiate apportioning of the diesel consumed at the site.
Propane has been included at a cost of C$0.43 per litre. Scott Wilson RPA considers this to be
a cost risk as propane prices vary over a wide range. Avalon will benefit from purchasing it’s
annual supply of propane in the summer months when propane demand is lower.
Mine
The mine costs are based on a combination of quotations for certain mine supplies, and
experience from similar operations for the estimate of mine manpower and maintenance
required for the mobile equipment fleet. Mine costs include all of the underground mining costs
except for crusher operation which is included in the mill operating costs estimate. In the initial
years there is no long hole mining, no paste fill placement and minimal waste development after
the preproduction development. The costs are summarized in Table 18-40. After the expansion
to 2,000 tpd there is provision for cemented paste fill as well long hole stoping.
Technical Report 43-101 – March 13, 2011 Page 18-119
Prepared by Avalon Rare Metals Inc.