Hana Mining Ltd. - Ghanzi Copper Project

Botswana Ghanzi Overview Ghanzi Detail Project History Geology and Mineralization Mineral Resources Drilling Infrastructure and Water Technical Reports Photos

Ghanzi Project

Overview

Hana Mining Ltd. is exploring and developing the Ghanzi property, located in the Kalahari copper belt in north west Botswana, Africa.

Figure 1. Location of the Kuke Project

Key Project Specifics

Hana controls 100% of 5 prospecting licenses covering 2,169 square kilometres on the property, which is approximately 152 kilometres in length (Figure 1),
The property contains a sediment-hosted copper-silver mineralization that is repeatedly folded resulting in an estimated subsurface strike length of 600 kilometres,
The geologic model at the Ghanzi Project is similar to that of the world-class Kupferschiefer copper-silver deposits in Poland and Germany which account for approximately 2.7% of the global supply of copper and 5.5% of the global supply of silver,
Hana is drilling the property to an average depth of 150 metres (most of the drill holes were drilled to a depth of approximately 200 metres), with the intent of establishing a viable surface-mineable copper-silver resource for development,
Current (as of December 2010) 43-101 compliant Indicated resource estimate, at a cut-off grade of 0.30% copper, now contains 762.3 million pounds of copper and 16.1 million ounces of silver from the New Discovery, Northeast Fold and the South Limb areas of the Banana Zone. Copper grades exceed the 1.51% property average in certain areas and over significant intercept widths, suggesting starter pits are possible which could significantly advance early cash flows in development. There are also Inferred Resources, at a cut-off grade of 0.30%, of 5.6 billion pounds of copper and 85.4 million ounces of silver at the Banana, Chalcocite Zones and at Zones 5 and 6, and
Infrastructure is developing rapidly in the area (both transport and power) and is not expected to delay project development timing or scale.

Key Dates/Milestones

Drill program planned to continue through 2011, to both expand resource and in-fill existing areas to convert to Indicated,
Anticipate initial NI 43-101 PEA (Preliminary Economic Assessment) to be completed in early 2012,
Drill program in 2011 to expand resources and infill exiting areas to convert to the Indicated category
Anticipate second updated NI 43-101 Indicated and Inferred resource estimate in 2012, and
Completion of a feasibility study on the Banana Zone in mid 2012.

Property Details

Location. The Ghanzi property is located between the towns of Maun and Ghanzi, in the north western quadrant of Botswana. The property abuts the northwestern corner of the Central Kalahari Game Reserve, and terminates at its northern-most point approximately 29 kilometres from the paved trans-Kalahari highway (Figure 1). The area is serviced by regularly scheduled flights into Maun from Gaborone, Johannesburg and Windhoek.

Figure 1. Detailed location of the Ghanzi Project and the Banana Zone

Climate. The property lies at an altitude of approximately 1,000 metres in an area known as the central Kalahari sandveld, a gently undulating sand-covered plain, broken by hills and higher ground to the south and southwest. Rainfall concentrates in the summer months, with little or no winter precipitation, and annual accumulations of less than 500 millimetres. Vegetation is typical grassland interspersed with acacia, mopane, bloodwood and teak, and both large and small African wildlife species are abundant in the area.

License Ownership. The Ghanzi licenses consist of 5 license blocks, covering 2,169 square kilometres, roughly 152 kilometres in length and 30 kilometres in width. The prospecting licenses are directly held by Stellent (Proprietary) Limited, which secured the licenses from the government in 2006. Hana currently owns a 70% controlling interest (through shares and Board representation) in Stellent. The remaining 30% interest in Stellent is pledged to Hana in an exclusive purchase agreement, subject to certain fully defined payments and timing specified by project development milestones.

License Retention. Prospecting licenses in Botswana are granted for an initial three year term, after which they are subject to 50% size reduction. Two subsequent renewals of two years each are granted with each term subject to 50% reduction. Under certain conditions the government will waive the second reduction. Acreage reduction locations are at the discretion of the license holder, so Hana will be able to maintain control over mineralized areas until the prospecting licenses can be converted to mining licenses, at such time as commitments to mine are formalized. The government levies a 3% NSR (royalty on net-smelter returns) on base metals and a 5% NSR on precious metals, and retains a right to acquire up to a 15% working interest in mining developments, upon issuance of a mining license. This option has only been exercised with respect to diamond mining.

Multiple Mineralized Zones. A number of mineralized zones have been identified on the licenses. Four of these (Banana, Chalcocite, Zone 5 and Zone 6) have been explored to the extent that they have a NI 43-101 resource estimate, as of December 2010.

Banana Zone Specifics. The Banana Zone (including the adjacent Chalcocite Zone) contains almost 90 percent of the total resource estimate tonnage, and has been the focus of the Company's drilling and development efforts since mid-2009. This zone sits in the southwest end of the license area, and is approximately 32 kilometres in length. It comprises two parallel limbs that join in fold noses at the northern and the southern ends, creating about 64 kilometres of potential strike length. The December 2010 NI 43-101 resource estimate contained the entire 64 kilometres of mineralized strike length of the Banana and Chalcocite Zones.

Staff and Local Resources. Hana has approximately on average 40 staff and direct-paid contractors on-site, doing surveying, soil sampling, geology work, logging core and managing drill samples in support of drill programs. Hana also has a 10 staff at its head office which is located in Vancouver, Canada. The company maintains a camp for all geological personnel, laborers and visitors.

The diagram below illustrates Banana Zone drill status as of the end of December 2010 (Figure 2).

Figure 2. Drilling completed at the Banana Zone

Project History-Overview

The first documented reconnaissance and grass roots exploration on the property was conducted in the early 1960's, on both the Ghanzi Property and the neighboring leases now held by Discovery Metals Ltd. which is listed on the Australian and London (AIM) Stock Exchanges under the symbol DML.

By the late 1960s, US Steel took an active interest in the properties, and over the next +30 years a succession of explorers drilled the area, looking for a major copper deposit.While more was learned about the copper mineralization, low copper prices and limited infrastructure kept development economics unattractive.

A detailed history on the Ghanzi area is listed below:

In 1967, Angloval, in JV with De Beers, US Steel, and the Tsumb Corporation, drilled certain areas within and around the Ghanzi Project and is credited with early discovery of Discovery Metals' Zeta deposit.
By 1970, US Steel continued on alone with exploration, and conducted drilling and an economic scoping study over the next 10 years. US Steel focused on Zeta, but low copper prices and lack of infrastructure and local labour discouraged continuation.
In 1989, Anglo American took over the properties, and also conducted a multi-disciplinary exploration program, focused on Zeta and the north fold of the Banana Zone as the most prospective areas for large scale mineralization. Anglo drilled 142 holes (core and RC) in Banana Zone, 12 of which were ultimately used in the current NI 43-101 resource estimate.
In 1996, Delta Gold acquired rights to explore the properties, in joint-venture with Kalahari Gold & Copper (Pty) Ltd. and Gencor/BHP Billiton, who at the time held the licenses through a subsidiary. Gencor did resource modeling based on prior data, most of which was not sufficiently reliable for deposit modeling. Delta followed up with 27 RC holes in Banana Zone (3,300 metres), 25 of which were used in the current NI 43-101 resource estimate. Low copper prices in 2000 forced the Delta Gold JV to drop the properties.
In 2002, the Ghanzi licenses were acquired by Stellent (Pty) Ltd. and later in August 2007, Hana took control of the property in a purchase arrangement with Stellent that assures Hana's 100% ownership.

Hana took control of the Ghanzi property through an option agreement which was later renegotiated as a purchase agreement with the prospecting license owner (Stellent (Proprietary) Limited) in 2007.

Hana's geology and exploration team recognized the copper-silver mineralization at Ghanzi to be a sediment-hosted style, much like that found in the copper deposits within the Central African Copper Belt and the world-class Kupferschiefer copper-silver deposits in Poland and Germany which account for approximately 2.7% of the global supply of copper and 5.5% of the global supply of silver. Folding and subsequent erosion exposed long mineralized strike lengths in the subcrop over many kilometers. By modeling the style of mineralization, and then focusing on a drill program that follows strike length over relatively significant distances, Hana has been able to grow the copper-silver resource estimate to a level that was not achieved by prior owners.

Improved copper and silver prices, plus better infrastructure-both in place, and planned, have also improved the economics for potential development considerably.

The first NI 43-101 resource estimate was completed on the project in June 2009, and filed on SEDAR. Subsequently, a second resource estimate was released and posted on SEDAR in May 2010.
An updated NI 43-101 resource estimate, for the Banana and Chalcocite Zones, was released in December 2010.
Another updated NI 43-101 resource estimate for the Banana Zone is expected to be completed and released to the public in early 2012.
A preliminary economic assessment study on the Banana and Chalcocite Zones is expected to be completed in early 2012.

Ghanzi Project Geology and Mineralization

Geology. The Ghanzi Project is located within the Ghanzi-Chobe Fold and Thrust Belt, a 140 kilometre wide zone of deformed metavolcanics and metasediments. This belt, also referred to as the Kalahari Copper Belt, forms part of the late Proterozoic, Pan African Mobile Belt that runs for over 1,000 kilometres across Botswana, southwest into Namibia, and hosts numerous copper-silver mineralized provinces (Figure 1). The Kalahari Copperbelt represents a major emerging copper-silver district of untapped potential in southern Africa.

Figure 1. Copper provinces of southern Africa

The host rocks for the copper mineralization in the project area are part of the Ghanzi Group. This Group, from oldest to youngest, is represented by the Ngwako Pan, D'Kar and Mamuno Formations (Figure 2).

The Ngwako Pan Formation is composed of oxidized arkoses and sandstones, and forms the footwall to the mineralized horizon. These sediments are interpreted to be deposited in a fluvial to ebb-tidal marine facies environment.
The D'Kar Formation overlies the Ngwako Pan, and consists of clastic sediments of varying composition and grain size. These sediments are composed of finely laminated and chemically reduced mudstones and siltstones. Limestone beds are also present, intercalated with siltstones and thin shale laminae. The contact between the Ngwako Pan and D'Kar Formations is a regional-scale redox front that has localized the precipitation of copper and silver. Most of the copper mineralization is found along this horizon.
The Mamuno Formation is not commonly found in the project area, and where present it forms localized erosional remnants of sandstone and arkose outcrop.

These host rocks are unconformably overlain by unconsolidated Tertiary-age Kalahari Group sands and calcrete. This overburden material ranges in thickness from 2 metres to 60 metres, with the thicker sections typically located toward the northern end of the substantial 2,169 square kilometre Ghanzi Project area.

Figure 2. Local geology at the Ghanzi Project

Mineralization. Mineralization of variable grade and width occurs immediately above and along the contact between Ngwako Pan Formation and the D'Kar Formation. Folding and thrusting along northeast trends has structurally repeated the mineralized stratigraphy numerous times, resulting in over 600 kilometres of cumulative prospective strike length within the license area. The contact between the oxidized footwall sandstone and the reduced hanging wall siltstone is a distinctive target horizon that always contains copper-silver mineralization.

Exploration drilling by Hana Mining Ltd has shown that copper-silver mineralization in the Ghanzi Project occurs as two main ore styles:

Disseminated sulphides, particularly within permeable host rocks (sandstones and siltstones).
Hydrothermal quartz-calcite veins hosting coarse grained and massive sulphides. Vein networks contain individual veins that are parallel to bedding, as well as crosscutting bedding at variable angles.

The characteristic mineralogy of the Ghanzi Project is summarized as:

Near surface oxide zone, containing chrysocolla, chalcocite, malachite, with trace azurite and native copper. The base of the oxide zone generally occurs between 40 to 50 metres vertical depth.
A thin transition zone ranging from 3 to 10 metres in thickness separates the base of the oxide zone from the underlying sulphide zone. The transition zone contains both oxide and sulphide copper minerals.
At depth, copper occurs in the sulphide zone as bornite, chalcocite chalcopyrite and minor native copper (in order of abundance).
Silver is an important ore constituent, occurring as microscopic intergrowths (solid solution) within copper sulphides, with grades ranging from 5 to >50g/t Ag (averaging 10.9g/t). Silver is present in the oxide, transition, and sulphide zones, however it has a higher concentration in the sulphide zone, being positively correlated with increasing copper grade.
Minor molybdenum and the transition metal rhenium are associated with quartz-calcite veins and hydrothermally altered host rocks.
The dominant alteration assemblage is chlorite-epidote-quartz-calcite-muscovite-hematite.

Banana Zone also exhibits a consistent vertical zonation of copper mineral species with increasing depth, being pyrite, sphalerite (trace), galena (trace), chalcopyrite, bornite, with basal chalcocite proximal to the Footwall sandstone contact.

Genetic Models. The Ghanzi Project shares similarities with other large-scale sediment hosted base metal deposits, such as the Permo-Triassic Kupferschiefer of central Europe (Poland and Germany):

copper silver mineralization is associated with a redox front between the oxidized Footwall sandstones and chemically reduced Hanging Wall siltstones and pyritic, organic shales (Figure 3).
stratabound polymetallic mineralization occurs between terrestrial redbeds and overlying dominantly marine sediments.
host sediments are shallow continental shelf facies containing reduced shales and mudstones.
ore textures suggest diagenetic replacement of early pyrite with chalcopyrite and chalcocite.
rare compaction textures are preserved around disseminated copper sulphides.
copper metal source is from underlying bimodal volcanics (tholeiitic basalts and rhyolites).
dominant copper sulphide systems are Cu-S (chalcocite) and Cu-Fe-S (chalcopyrite, bornite), with trace gold and PGE, and more distal galena and sphalerite in Hanging Wall rocks.
mineralization associated with ascending oxidizing fluids and associated hematite alteration.

Deposits of the Kupferschiefer were discovered 120 years ago and are still being mined today, accounting for approximately 2.7% of the global supply of copper and 5.5% of the global supply of silver. The Kupferschiefer copper-silver mineralisation occurs over narrow widths (a few metres) but extends laterally along strike for considerable distances (100s to 1,000s of kilometres). Unlike the mineralization at Ghanzi, which is found at comparatively shallow depths, the Kupferschiefer deposits are currently being mined at depths of approximately 1,200 metres.

Figure 3. Basic genetic model for copper-silver mineralization at the Ghanzi Project

At the Ghanzi Project, the genesis of the mineralization is considered to be a combination of early diagenetic and later epigenetic processes. Large volumes of oxidized calcareous and siliceous fluids were introduced into the oxidized Ngwako Pan Formation sediments and penetrated upwards into the reducing overlying siltstones, via a network of fractures, basin controlling faults, and rock permeability contrasts. Early, diagenetic mineralization is formed by this fluid movement, which is dependent on permeability, chemical buffering and the speed with which the fluids migrate through the rock. The slower these diagenetic fluids moved, the greater the time afforded to the precipitation of copper and silver.

However, mineralization at the Ghanzi Project also shares similarities with large-scale hydrothermal copper systems. These similarities suggest that a later stage epigenetic phase of mineralzation occurred throughout the Ghanzi Project. The following similarities with hydrothermal copper systems are currently being investigated and interpreted:

hydrothermal quartz-calcite vein networks hosting high grade copper mineralization.
vein textures show repeated episodes of overpressured fluid flow and mineralization.
copper species within veins is the same as disseminated copper species in surrounding rock.
thorium, molybdenum (and rhenium) are geochemically associated with high grade mineralization. Molybdenum and rhenium are typically found within hydrothermal copper systems.

Exploration Potential

The Ghanzi licenses have an overall length of 152 kilometres and trend in a northeast direction. The mineralized target horizon, which occurs at the contact between the Footwall (FW) sandstones and the overlying reduced Hanging Wall (HW) siltstones has been (i) folded about a NE trending axis (F1 folds) and (ii) re-folded about a NW trending axis (F2 folds). This superposed folding produces shallowly plunging fold noses, which result in a shallow dip favorable for mining for deposits such as Chalcocite Zone and North East Fold. The following graphic illustrates the folded strata prior to erosion:

Figure 4. Folding of mineralized horizons at the Ghanzi Project

After erosion of the folded strata, the resultant subsurface consists of exposed limbs dipping in opposite directions as illustrated below (Figure 5):

Figure 5: Exposed mineralized limbs at the Ghanzi Project

The main tool for delineating these mineralized sedimentary horizons is government aeromagnetic survey data supplemented by Hana's soil geochemistry data. Hana recently completed a high-definition 75 metre line spacing helicopter-borne aeromagnetic survey on the Ghanzi Project. This data has been reprocessed and interpreted, resulting in the identification of high quality drilling targets. The data also confirms there is a combined potential mineralized strike length of 600 kilometres across the entire Ghanzi property license area. Of the estimated total 600 kilometre strike length at the Ghanzi property, only 68.5 kilometres has been delineated by drilling. The Ghanzi Project Indicated resource stands at 37.4 million tonnes at 0.93% copper and 13.4 g/t silver whereas the Inferred resource stands at 423.9 million tonnes grading 0.60% copper and 6.27 g/t silver (NI43-101 compliant, December 2010), this from exploring 11% of the project's 600 kilometre cumulative strike length. Therefore, there is still considerable exploration upside at the project, as mineralization remains open in all directions and with depth.

The following map, which superimposes the license area onto a map of England and specifically the city of London, gives a dramatic sense of scale to the overall license size and area controlled by Hana.

Figure 6. Comparison of the size of the Ghanzi property to that of London, England

Hana has delineated, through systematic reverse circulation (RC) and diamond core drilling, the entire 64 kilometre mineralized strike length at the Banana and Chalcocite Zones. This drilled strike length total represents approximately 11.4% of the total potential mineralized strike length at the Ghanzi Project.

In December 2010, Hana released the third NI 43-101 compliant resource estimate for the Ghanzi Project. The latest resource estimate is based on additional drilling carried out at the Banana and Chalcocite Zones in which the total Inferred resources at both zones increased to 423.9 million tonnes (compared to 233.8 million tonnes in the April 2010 resource estimate) containing approximately 5.6 billion pounds of copper (compared to 4.5 billion pounds of copper the December 2010 resource estimate). Also, for the first time, Hana delineated Indicated resources at the Banana Zone comprising 37.4 million tonnes containing 762.3 million pounds of copper and 16.1 million ounces of silver. The latest compliant resource estimate at the Banana and Chalcocite Zones is based on a strike length of approximately 64 kilometres. More Infill drilling and deep extensional drilling will be carried out in 2011. Mineral Resources

On December 20, 2010 Hana announced the results of its third NI 43-101 resource estimate for the Ghanzi project.

Resource Results Summary (Figures 1 to 4):

Indicated mineral resource (at a 0.30% Cu cut-off) of 37.4 million tonnes averaging 0.93% Cu and 13.39 g/t Ag, containing in-situ 762 million pounds Cu and 16.1 million ounces Ag, from the Banana Zone.
Inferred mineral resource (at a 0.30% cu cut-off) of 423.9 million tonnes averaging 0.60% Cu and 6.27 g/t Ag, containing in-situ 5.6 billion pounds Cu and 85.4 million oz Ag, from the Banana Zone, Chalcocite Zone and Zones 5 and 6.
The total Inferred resources, 423.9 million tonnes, at the Ghanzi project increased by 81%, from 233.8 million tonnes previously (May 2010), with all of the increase in resources coming from the Banana and Chalcocite Zones.
At the Banana and Chalcocite Zones, the latest resource estimate is based on a defined strike length of approximately 64 kilometres. The previous resource estimate for Banana and Chalcocite Zones was based on a strike length of approximately 31 kilometres.

Drilling

The total drilling meterage through December 2010 is summarized as follows (Figure 1, Note that drilling at the Banana Zone and the Chalcocite Zone are combined):

Figure 1. Total drilling at the Ghanzi Project

This continuing drill program has three objectives:

To begin infill drilling in the Banana Zone to move the inferred tonnage to measured & indicated status, during 2010 and 2011; and,
To carry out exploration at Zone 3, Zone 5, Zone 6 and other potential targets; and,
To test for and delineate water resources for the project.

Total drilling during 2010 was approximately 68,513 metres, most of which was carried out at the Banana and Chalcocite Zones. Other zone drilling campaigns have recently been completed at Zone 3, Zone 5 and Zone 6.

The following drill results were included in the most recent NI 43-101 resource estimate, completed and filed on SEDAR in December of 2010:

Figure 2. Drilling included in December 2010 resource estimate

These 870 drill holes totaled 109,169 metres. Infrastructure in Botswana - Overview

While the Ghanzi Project is located in a sparsely populated, predominantly ranching area, it will benefit significantly from the existing and developing infrastructure network (Figure 1).

Roads. The center of the Ghanzi property is two hours minutes by car (250 kilometres) from Maun to the north, 12 hours from Gaborone (450 kilometres) to the south, and at the northern property boundary only 29 kilometres from the trans-Kahalari highway.
Air. Maun has the closest airport to the Ghanzi property, with commercial air service (Air Botswana and Air Namibia) to Gaborone, Windhoek and Johannesburg. The Maun airport is currently undergoing an expansion to accommodate larger commercial passenger jets. The expansion is expected to be completed in 2012.
Rail. Closest railhead to the property is at Gobabis in Namibia, which runs west to the deep water port at Walvis Bay. Considerable plans are underway to connect Botswana by rail to Atlantic and Indian Ocean ports.
Electric Power. There is an existing 132 kV line to Maun, capable of delivering 20 MW to the local community. Botswana Power Corporation has commenced construction of first 150 MW unit, which is expected to be operational in 2012, at the Morupule power plant. Eventually, Botswana Power wants to increase power generation capacity at Morupule by 600 MW.
Workforce. There are significant population bases in Maun (44,000), Ghanzi and the villages in the surrounding area to support mining operations. Literacy rate nationally is 81%.

Infrastructure in Botswana - Detail

Roads. The major paved highway system connecting all major towns and district capitals forms a national 'ring road' around the country. The northern portion of this ring road is the all-weather trans-Kalahari Highway (A3), which connects the country to Walvis Bay in Namibia (west) and South Africa (south east). Currently, the Ghanzi Project is served by the A3, which passes within 15 kilometres of the northern property boundary.

Rail. Existing rail service runs through the eastern side of the country, north to south, connecting Francistown to Gaborone, and offering access into both Zimbabwe and South Africa. There is no current rail service east to west from this existing network, so the western portion of the country is only serviced by roads and air. This situation is temporary; Botswana recognizes it is in the unique geographical position to create a rail hub for itself and its neighbors in south-central Africa. Such a rail hub would substantially expand the regional and international trading opportunities for both Botswana and neighboring countries, and could offer connection to deep water bulk cargo ports on both the Atlantic and Indian Oceans. A pre-feasibility study is expected to be completed soon (funded by the World Bank and the governments of Botswana and Namibia) on the construction of a rail connection between existing Botswana rail facilities and the Namibian port of Walvis Bay, on the Atlantic coast, via a trans-Kahalari rail link. Today, the closest existing railhead (to port) is at Gobabis, in Namibia, approximately 550 km from the Ghanzi property.

On July 16, 2010, the governments of Botswana and Mozambique signed a memorandum of understanding to develop a deep water port at Techobanine, Mozambique which is to be supported by a 1,000 km railway line linking Botswana to Techobanine via Zimbabwe. The arranging of financing for the development of the project, which is estimated to cost approximately seven billion dollars (U.S.), is expected to be completed by the end of 2011 with the first phase of construction commencing between 2012 and 2015.

Electric Grid. Electric power is in short supply in southern Africa. Currently, Botswana imports substantial (+50%) portions of its power from South Africa, although the country has significant coal resources and existing coal-fired power facilities from which to expand production. A planned 600 MW expansion of the government-owned 132 MW Moropule Power Plant continues to advance, with US$825 million project funding secured in May 2009, and key supply contracts awarded.

The country is undertaking a rural electrification programme and a 15 year planning programme is being developed to cater for the expected increase in supply of electricity across the Botswana grid. Diesel generators are used in many local applications. Solar applications are also routinely considered, based on favorable climate conditions, low population density and rural demand with limited distribution.

Figure 1. Infrastructure near the Ghanzi Project

Communications. In addition to the government-owned newspaper and national radio network, there is an active, independent press (one daily and seven weekly newspapers). There are 22 commercial Internet service providers, and three cellular phone providers cover most of the country.

Water Resources - Summary
Results of a regional groundwater investigation, commissioned by the Company and conducted by Wellfield Consulting Services, in proximity to the Company's Ghanzi copper-silver project, concluded that the region exhibits favourable geology to host large aquifers.

The investigation included:

Comprehensive review of published groundwater investigation reports pertaining to the general area,
Review of borehole yield data and water quality information provided by the Botswana national groundwater database, and
Review of the Company's resource drilling boreholes

From this initial investigation we now have multiple prospective targets for more concentrated investigation and borehole drilling, which will drive the next phase of our water program with the objective of securing a sustainable water source to support future mining operations. Drilling of these targets has already commenced and initial results are expected to be released in the Preliminary Economic Assessment.