approval and approached AIDEA this past fall to reengage in negotiations to expand the terminal, with a new investor and building contractor.

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2 Board Members February 20, 2014 Page 2 approval and approached AIDEA this past fall to reengage in negotiations to expand the terminal, with a new investor and building contractor. The Eagle project is a magnetite reclamation project that extracts magnetite from existing mine tailings at the Whitehorse Copper Mine in the Yukon Territory, Canada. Eagle intends on trucking the extracted magnetite from the Yukon Territory to Skagway, Alaska, via the Klondike Highway. The magnetite would be stockpiled at the Facility, loaded on to marine vessels, and shipped to markets elsewhere. Eagle's use of the Facility will require the expansion of the Facility to accommodate Eagle's delivery, stockpiling, loading and shipment of magnetite. Eagle anticipates shipping approximately 360,000 metric tons per year and will require the existing ore shed to be expanded approximately 260 feet to accommodate approximately 50,000 metric tons of storage space for the magnetite. The capital improvements to the Facility are estimated to be $6.5 million, consisting of: Expansion of existing ore storage building Additional truck unloading facilities Covered stockpile area Interface with existing ship loading conveyor system As part of Phase 3 - Deal Structuring and Due Diligence process, staff has reviewed and tested a number of business case scenarios related to quantity, quality and price of magnetite; examined the magnetite reclamation process at the Whitehorse location; confirmed through discussions with the Yukon Territory and the State of Alaska Department of Transportation (DOT) the viability of the road for shipment; reviewed and have concurrence from the community of Skagway that the expansion is welcomed and needed. From the results of this work, staff has prepared a financial plan ensuring AIDEA's investment is paid back; a Skagway Ore Terminal ("SOT") Term Sheet detailing responsibilities and a payment schedule with Eagle. This project is supported by the Municipality of Skagway and is seen as a major commitment to the use of the Facility as the long term "Gateway to the Yukon" and subsequently a key step in the community's "Gateway Project" a major revitalization of the ore dock. The Municipality of Skagway has prepared a resolution of support for this project (see attachment 2). The terminal is a contributor to economic activity in Skagway, creating additional jobs for the city of Skagway, including temporary construction jobs, new trucking jobs and approximately 3-5 permanent jobs at the Facility, as well as additional revenue through real property taxes. Ultimately, the expansion of the Facility can provide future opportunities for other mining projects in northwestern Canada and the eastern interior of Alaska for the shipment of mine products to market.

3 Board Members February 20, 2014 Page 3 Summary of Finance Plan AIDEA will fund the expansion of the ore terminal as a $6.5 million capital investment in the AIDEA-owned the Facility with costs to be paid from charges to Eagle for use of the Facility. Eagle will fund the Whitehorse Copper Tailings Project ( WTCP ) at approximately $6.0 to 6.5 million. Key elements of the financing structure are summarized below: $6.5 million capital investment in the ore terminal (a not to exceed amount based on construction estimates) funded from AIDEA revolving fund cash 5 year lease of the Facility with 1 one-year options to extend The Facility user shall pay Owner ground lease equal to $430,000 per year, with quarterly payments beginning with completion date of the building or buildings and installed equipment. The Facility user agreement, without extensions, would generate an annual rate of return in excess of 8.5% on AIDEA s investment. User shall show sufficient funds to provide two months of working capital. Proof of such available funds will be required before Owner disburses any funds. Because the average useful life of the improvements made for Eagle well exceeds 5 years, if another entity leases the Facility at the end of Eagle s lease, AIDEA would realize additional income from the Facility and would expect to reduce a portion of the balloon payment due from Eagle. The Finance Plan is secured by a lien on the storage building and the Product Purchase Contract with Dominion assigned to the Owner. There are a variety of risks and mitigations to be taken to ensure AIDEA s investment is secured. The greatest mitigation factor is that AIDEA owns the Facility and could recover its capital costs from potential future users of the Facility. AIDEA currently has an agreement to lease the Facility until 2023 but have a verbal agreement with the Municipality of Skagway to extend AIDEA leasehold to 2050 so that the Facility can be used by other clients and customers. Conditions Precedent to AIDEA Financing 1. Eagle securing a bank letter of credit or depositing in escrow the amount necessary to build the processing plant (the Processing Plant ), approximately $6.0 to 6.5 million and two months of working capital on terms acceptable to AIDEA 2. Confirmation that Eagle has secured all required project permits, regulatory approvals necessary to build out the Whitehorse operation, begin production and shipment of material to Skagway. 3. An executed contract with Dominion Grain S.A. for the purchase of the magnetite at a fixed price of at least $72 FOB per dry metric ton, a purchase assurance fund, and other terms acceptable to AIDEA.

4 Board Members February 20, 2014 Page 4 Summary The findings indicate that although the project s profitability can vary widely within any single year based on ore prices and mineral content, the project is expected to generate sufficient funds to meet its obligations to AIDEA. With Dominion s fixed price contract and the assignment of the purchase price contract the iron ore price risk is mitigated to some extent. Recommendation to Board AIDEA management recommends that the Board approve Resolution No. G13-05A (see attachment 3) directing AIDEA to execute all necessary agreements with Eagle Whitehorse, LLC including the execution of the operating agreement and perfecting of all conditions precedent, and that AIDEA proceed with full funding, under the Development Finance Program, of $6.5 million for the purpose of expanding the existing facility in Skagway. Attachments 1. Skagway Ore Terminal Due Diligence and Financing Plan 2. Municipality of Skagway Resolution of Support 3. AIDEA Resolution No. G13-05A

5 Due Diligence and Finance Plan Skagway Ore Terminal Expansion and Leasing Agreement with Eagle Whitehorse LLC 20 February 2014 Version 2

6 A. EXECUTIVE SUMMARY 2 PROPOSED PROJECT SKAGWAY ORE TERMINAL/EAGLE WHITEHORSE PROJECT 2 ECONOMIC BASE & BUSINESS PLAN 3 FINANCE PLAN 3 ECONOMIC DEVELOPMENT IMPACT / AIDEA MISSION SUITABILITY 4 PRELIMINARY PRO FORMA FINANCIALS 4 PROJECT SPONSOR 5 RISKS & RISK MITIGATION 5 AIDEA TIMELINE 6 SUMMARY 6 B. PROPOSED PROJECT 7 PROJECT DESCRIPTION 7 PROJECT COST SUMMARY & DEVELOPMENT PLAN 11 C. ECONOMIC BASE & BUSINESS PLAN 14 ECONOMIC BASE & BUSINESS MODEL 14 AIDEA 3RD PARTY REVIEW OF PRODUCT/OPERATIONS/RECLAMATION 14 AIDEA 3 RD PARTY REVIEW OF PRICING 15 D. FINANCE PLAN 16 OVERALL PLAN OF FINANCE 16 FINANCING STRUCTURE 16 SOURCES AND USES 17 LEASE PAYMENT SCHEDULE 18 PRELIMINARY PRO FORMA FINANCIALS 18 E. ECONOMIC DEVELOPMENT IMPACT & AIDEA SUITABILITY 19 AIDEA MISSION SUITABILITY / ESTIMATED ECONOMIC DEVELOPMENT IMPACT 19 AIDEA PORTFOLIO PLAN 19 F. PROJECT SPONSOR INFORMATION 19 EAGLE WHITEHORSE LLC 19 DOMINION GRAIN SA 20 G. RISKS & RISK MITIGATION 24 RISK & MITIGATION SUMMARY 20 H. AIDEA TIMELINE 21 I. ATTACHMENTS LIST 22 Page 1 of 23

7 A. EXECUTIVE SUMMARY Proposed Project Skagway Ore Terminal/Eagle Whitehorse Project Alaska Industrial Development and Export Authority ( AIDEA ) owns the Skagway Ore Terminal ( Facility ) located at Skagway, Alaska, which is situated on lands of the Municipality of Skagway that AIDEA is subleasing. AIDEA currently leases space to Minto Explorations Ltd., for the purpose of stockpiling and shipping copper concentrates from its mine to market. On July 25, 2013, the Board approved Resolution No. G13-13, authorizing AIDEA to proceed with the expansion of the Skagway Ore Terminal to accommodate Eagle Whitehorse LLC s magnetite project, subject to the satisfaction of various conditions. The approval was based on the premise that AIDEA would expend a maximum of $7.5 million for the proposed expansion of the terminal. Eagle lost its primary investor shortly after Board approval and has approached AIDEA this past fall to reengage in negotiations to expand the terminal, with a new investor and building contractor. The capital improvements to the Facility are estimated to be $6.5 million consisting of: o o o o Expansion of existing ore storage building Additional truck unloading facilities Covered stockpile area Interface with existing ship loading conveyor system The business plan for the project is now based on a fixed price contract with Dominion Grain S.A. which will pay $72 per ton. The Eagle project is a magnetite reclamation project that extracts magnetite from existing mine tailings at the Whitehorse Copper Mine in the Yukon Territory, Canada. Eagle intends on trucking the extracted magnetite from the Yukon Territory to Skagway, Alaska, via the Klondike Highway. The magnetite would be stockpiled at the Facility, loaded on to marine vessels and shipped to markets elsewhere. Eagle s use of the Facility will require the expansion of the Facility to accommodate Eagle s delivery, stockpiling, loading and shipment of magnetite. Eagle anticipates shipping approximately a total of 1,500,000 metric tons and will require the existing ore shed to be expanded approximately 240 feet to accommodate approximately 50,000 metric tons of storage space for the magnetite. In order to develop this short term project as a bridge to the expected twenty-plus year projects, the facility will be constructed in such a way as to allow for future users. The finance plan is based on pricing at a ten (10) year amortization schedule with principle guarantees. In the event of a subsequent user, at the end of the Eagle Whitehorse project, the new user will pay a portion of the capital improvements to the Facility. As part of its Phase 3 Deal Structuring and Due Diligence process, staff has reviewed and tested a number of business case scenarios related to quantity, quality and price of magnetite; examined the magnetite reclamation process at the Whitehorse location; confirmed through discussions with the Yukon Territory and the State of Alaska DOT the viability of the road for shipment; reviewed and have concurrence from the community of Skagway that the expansion is welcomed and needed. From the results of this work, staff has prepared a financial plan ensuring AIDEA s investment is paid back; a Skagway Ore Terminal ( SOT ) Term Sheet detailing Page 2 of 23

8 responsibilities and payment schedule with Eagle and a Guaranty Agreement by Eagle and/or Charles Eaton. This project is supported by the Municipality of Skagway and is seen as a major commitment to the use of the Facility as the long term Gateway to the Yukon and subsequently a key step in the community s Gateway Project a major revitalization of the ore dock. The Municipality of Skagway has prepared a resolution of support for this project (attachment 1). The terminal is a contributor to economic activity in Skagway, creating additional jobs for the city of Skagway, including temporary construction jobs, new trucking jobs and approximately 3-5 permanent jobs at the Facility, as well as additional revenue through real property taxes and a commodities surcharge. Ultimately the expansion of the Facility can provide future opportunities for other mining projects in northwestern Canada and the eastern interior of Alaska for the shipment of mine products to market. Economic Base & Business Plan Eagle s business plan is based on the extraction of iron ore from the Whitehorse copper mine tailings and the sale of the iron ore to Dominion Grain S.A. ( Dominion ), which will take delivery of the magnetite at the Facility and sell it to steel producers. To test the business case and evaluate the economic basis of the project, AIDEA retained third party consultants to review Eagle s business plan including operations, product volume, reclamation plan, capital costs and operational costs. The recovery of the magnetite is fixed, currently estimated at 1.5 to 1.6 million dry metric tons of ore to be shipped to market over a 5 year period. The project is profitable. The project pro-formas, using adjustments provided by third party consultants and a mid-range price forecast scenario, as well as the Dominion fixed price, show profitable operations across a variety of pricing and operational conditions. However, project profitability is very sensitive to iron ore prices and risks across the term of the Facility user agreement. To mitigate the risks of lower iron ore prices, Eagle will enter into an agreement with Dominion wherein Dominion agrees to purchase 100% of Eagle s ore production at a fixed price of $72 FOB per dry metric ton. As additional security, Dominion will set aside a portion of its excess profit, up to $3 million, in a Purchase Assurance Fund to provide assurance that Dominion will continue to purchase Eagle s products even if iron ore prices declined. Finance Plan AIDEA to finance and own the Facility improvements Whitehorse Copper Tailings Reprocessing & Reclamation Project ( WCTP ); $6.0 to $6.5 million approximate capital cost at the mine in Whitehorse, Yukon, Canada, to be financed by Eagle along with proof of sufficient funds to provide two months of working capital Notional structure: o $6.5 million (not to exceed) capital investment in the ore terminal o Five year lease of the Facility with option to extend for one additional year o The Facility user shall pay Owner ground lease equal to $430,000 per year, with quarterly payments beginning with completion date of the building or buildings and Page 3 of 23

9 o o o installed equipment. The Facility user agreement, without extensions, would generate an annual rate of return in excess of 8.5% on AIDEA s investment. User shall show sufficient funds to provide 2 months of working capital. Proof of such available funds will be required before Owner disburses any funds. Secured by Ownership of the Storage Building The Product Purchase Contract ( PPC ) with Dominion assigned to Owner Conditions precedent to AIDEA financing: Eagle securing a bank letter of credit or depositing in escrow the amount necessary to build the processing plant ( Processing Plant ), approximately $6.0 to $6.5 million and two months of working capital on terms acceptable to AIDEA Confirmation that Eagle has secured all required project permits, regulatory approvals necessary to build out the Whitehorse operation, begin production and shipment of material to Skagway. An executed contract with Dominion for the purchase of the magnetite at a fixed price of at least $72 FOB per dry metric ton, a purchase assurance fund, and other terms acceptable to AIDEA. Economic Development Impact / AIDEA Mission Suitability The project expands the capability of Skagway Ore Terminal port facilities and demonstrates a commitment to the local community s Gateway Project The project will provide construction jobs during the expansion, permanent jobs for the duration of the Facility user agreement and, through a best effort clause in the contract, the location of approximately 15 driving jobs in Skagway The project has the support of the community of Skagway, the State of Alaska and the Yukon Government Expansion of the Facility would provide the opportunity for other potential mining projects in northwestern Canada and the eastern interior of Alaska to use Skagway for future mineral shipping Preliminary Pro Forma Financials AIDEA engaged Western Financial Group (WFG) to review the financial feasibility of the project. The result shows that, if the assumptions used are realized, the project would generate sufficient funds to enable Eagle to pay AIDEA $10.8 million and satisfy its obligations under the Facility user agreement. However, because the Facility is a permanent structure with useful life well beyond the expected 5-year Project duration, AIDEA has amortized the financing over a 10- year period, with a $3.9 million balloon payment at the end of the 5-year lease. Eagle is responsible for paying the balloon payment unless another party leases the Facility. AIDEA is requiring a $3.3 million to be set aside from project revenues into a reserve to be used toward the final year s $1.38 million lease payment plus the balloon payment, leaving potentially $1.6 million that would need to be paid from Eagle s own funds. Page 4 of 23

10 Project Sponsor The project sponsor is Eagle, a limited liability company established in 2010 to develop this project. The current sole member of Eagle is Eagle Industrial Mineral Corp (EIMC) which is wholly owned by Charles E. Eaton. Eagle will enter into an agreement with Dominion where Dominion will provide a $6.5 million loan to Eagle. Dominion will have the right and the obligation to purchase all the iron ore produced by the project at a fixed price of $72 FOB per dry metric ton. However, due to the limited financial resources of Dominion, the value of the fixed price contract is limited. Risks & Risk Mitigation There are a variety of risks and mitigations to be taken to ensure AIDEA s investment is secured. The greatest mitigation factor is that AIDEA owns the Facility and could recover its capital costs from potential future users of the Facility. AIDEA and the Municipality of Skagway have reached an agreement to extend AIDEA s leasehold to December 31, Page 5 of 23

11 Potential Risks Project unprofitable Eagle financial capacity Mitigation Condition precedent: signed contract with Dominion Grain S.A.; due diligence conducted by AIDEA Condition precedent: Proof of funds on hand sufficient for WCTP and working capital Eagle unable to make final payment Funding of a $3.3 million reserve from project revenues to pay toward final payment. A guaranty agreement from Eagle and/or Chuck Eaton. Potential of leasing Facility to another party after Eagle leaves. Purchase Assurance Fund Dominion Grain S.A. financial capacity Product price Signed contract with Dominion to purchase 100% of product at a price no less than $72 FOB per dry metric ton and a purchase assurance fund Product quality Construction risk Environmental risk AIDEA Timeline Additional analysis of individual wet drum concentrates to determine chemical composition; analysis taken at Whitehorse daily and at the Facility prior to shipment AIDEA conditions precedent; proven design and experienced local contractors Conditions precedent: environmental permits and insurance Reimbursement Agreement April 5, 2013 Board Resolution and approval February 20, 2014 Closing / funding March 2014 Commence Construction Early Spring 2014 Project Completion August 2014 Initial revenues from Project Fall 2014 Summary The findings indicate that although the project s profitability can vary widely within any single year based on ore prices and mineral content, the project is expected to generate sufficient funds to meet its obligations to AIDEA. Without a fixed price contract for the product, net revenues would be highest in year one and decline each year thereafter due to projected decline in prices and in iron ore produced in the final year. However, Dominion s fixed price contract and the assignment of that purchase price contract would help mitigate the iron ore price risk to some extent. Page 6 of 23

12 B. PROPOSED PROJECT Project Description AIDEA has a sublease hold interest in the ore terminal located in Skagway. The ore terminal is located on land owned by the Municipality of Skagway. AIDEA began reactivation of the Facility in AIDEA has a contract with Minto Explorations Ltd. and its parent company, Capstone Mining Corporation, to use the Facility to transship free-flowing bulk mine products. The portion of the Facility Minto/Capstone uses is constructed on the foundations and slab that were part of the original storage shed build in AIDEA is presently in negotiations with a potential second user of the Facility. The second user would be Eagle Whitehorse LLC. This new user is developing a project to extract magnetite from the existing mine tailings of the old Whitehorse Copper Mine located near Whitehorse, Yukon Territory. The magnetite would be transported to the Facility by truck to be stockpiled and then shipped out over the ore dock by marine vessel. The magnetite project is expected to have a relatively short life of no more than five years. Nevertheless, AIDEA is working on plans to expand the ore terminal storage building to accommodate this new user and in doing so provide a bridge project to future longer term contracts with other mining entities in northwestern Canada and the eastern interior of Alaska. AIDEA s total capital cost of the expansion would not exceed $6.5million. Construction should commence in early spring 2014 providing construction jobs in the Skagway off season. AIDEA would undertake these terminal improvements at the Facility: o o o o Expansion of existing ore storage building Additional truck unloading facilities Covered stockpile area Interface with existing ship-loading conveyor system The new shed is an extension of the existing shed currently used by Minto/Capstone with an additional 15 feet added to the height. It will be a pre-engineered metal building on shallow spread footings. The total coverage of the new building, including the concentrate storage building ( CSB ), canopy over the trucking lane and the conveyor shed will be approximately 47,000 square feet constructed on the existing concrete slab. o AIDEA will recover its costs via a series of lease payments over the term of the 5 year lease. Lease payments consist of a ground lease and a capital charge payable to AIDEA quarterly. Operating costs will be paid directly to the existing Facility operator. Eagle will be responsible for any and all property taxes. AIDEA s fire and hazard insurance on the Facility will be charged to both users of the Facility on a prorated basis. Page 7 of 23

13 The orientation of the ore terminal showing the expansion that will be constructed for initial use by Eagle Whitehorse and the building design are shown below. Figure 1: Skagway Ore Terminal Expansion Project Overview Page 8 of 23

14 Figure 2: Skagway Ore Terminal Expansion Project Figure 3: CSB Sections and End Wall Elevations The WCTP will entail setting up the Processing Plant at the old Whitehorse Copper Mine, south of downtown Whitehorse, Yukon, Canada. The Processing Plant will reprocess the tailings at the site to remove magnetite to be sold as iron ore. Eagle is proposing to process 12,000 tons of tailings per day, for 9 months of snow free conditions, producing between 300,000 and 360,000 dry metric tons per year of magnetite ore. Part of the reclamation will occur as part of the extraction process, and other reclamation activities including grading and capping of stacked tailing sand breaching of dams once the ore has been removed. The reclamation will convert a large portion of the area to industrial land, increase green space and generally improve the environment at the site. Page 9 of 23

15 Whitehorse Copper Tailings Reprocessing and Reclamation Project Location Figure 4: Project Location 1 The iron ore will be hauled by truck approximately 105 miles to the Facility, where it will be stockpiled and loaded onto ocean-going vessels for shipment to steel makers. Mineral concentrates will arrive in side-dump semis pulling full trailers. Canvas covers over the trailers reduce dust and environmental hazards. Thirty trucks per day are anticipated on the road from Whitehorse to Skagway to deliver magnetite to the Facility. The project is expected to operate 24 hours per day, seven days per week for approximately nine months out of the year. Approximately 1,500 tons a day would be shipped to Skagway at a rate of about 30 truckloads per day during the production season. Production is expected to take place beginning the last quarter of Per discussions with the State of Alaska Department of Transportation ( DOT ) on load capacity of the Klondike Highway, DOT has indicated (attachment 2) the current ore trucks should not be a problem for the highway leading into Skagway as long as vehicles obey the posted load restriction and axle weights. All trucks are subject to the adjustment of fees and regulations (17 1 Figure obtained by ARCADIS from Eagle s Water Use Application IN12-048, Figure 2 YWR Rec d Page 10 of 23

16 AAC 35) and posted speed limits. Eagle intends to use the same vehicle design Minto/Capstone s hauler of copper concentrates (Lynden Transport) to Skagway. The Municipality of Skagway has indicated that shipment of up to 650,000 tons per year poses no problems as it relates to traffic in the community. Figure 5: Area Roadways and Rails Project Cost Summary & Development Plan Cost Summary- Facility Improvements Eagle has engaged Siefken Construction for the project using the R&M 35% design from last year. Siefken believes that the construction schedule is 4-6 months from start to finish. R&M s design and estimated expansion to the Facility match the existing portion of the terminal. The estimate from Siefken is significantly less than the AIDEA estimates. Based on two cost reviews contracted by AIDEA, the construction and building material cost are estimated to be between $6.0 and $6.5 million. The difference in cost pricing can be explained by the difference in a one- Page 11 of 23

17 time estimate vs. an estimating average. While it is likely that the actual cost is less than the estimates AIDEA received, for the sake of prudence, AIDEA will bid the project economics on the higher cost. Siefkin provided the following estimated cost breakdown for the Facility construction and improvements. Skagway Ore Terminal Improvements Land Preparation $ 10,000 Building 1,082,800 Truck Dump 300,943 Reclaim conveyor shed 25,000 Electrical 150,000 Dust control 65,000 Conveyors 315,000 Freight Engineering 175,000 Overhead 118,181 Contingency 25% 537,186 Other loan items 159,582 Total Cost as of May 2013 $US $ 3,138,692 In order to accommodate future tenants, AIDEA is considering requiring an additional fifteen feet added to the storage building height. Adding the additional 15 feet to the building height will increase the total cost approximately $150,000. Cost Summary- Processing Plant Denton Civil and Mineral ( DCM ), a third-party consultant to AIDEA, has reviewed and found the projected capital cost of the Processing Plant reasonable. The table below provides a summary of key capital cost components. The capital cost includes significant used equipment, which is appropriate for a project such as this, with a relatively short life span. Whitehorse Processing Plant Component Cost Remarks Equipment $ 3,700,000 Includes used pumps, motors etc. (where available) Engineering/Mgt 300,000 Primary production equipment rented Permitting 500,000 Site development 500,000 Includes pit lake water treatment Bond 600,000 Initial reclamation bond Contingency 800,000 Mostly associated with process plant Total $6,400,000 Page 12 of 23

18 Regulatory Requirements ARCADIS-US. Inc. ( ARCADIS ) was retained by AIDEA to review the building plans and permits required by Eagle to conduct the project. ARCADIS was tasked with reviewing relevant local, territorial and federal regulations applicable to the mine site activities and to provide confirmation that all required permits were obtained by Eagle. The regulatory and permit review task did not include activities associated with the transportation of ore from Whitehorse to Skagway, nor any permits required for storage or shipping activities once the ore was in Skagway. ARCADIS review of federal, Territorial and City of Whitehorse regulations concluded the following: Eagle has obtained all necessary Territorial permits from the Yukon Government. Eagle will be required to obtain a Section 73 permit from Environment Canada. This permit is in association with the Species at Risk Act ( SARA ), which requires the minister to enter into an agreement or issue a permit authorizing a person/entity to engage in an activity affecting a listed wildlife species, any part of its critical habitat or its residences. There are currently 3 species (woodland caribou, grizzly bears and wolverines) as identified by the Committee on the Status of Endangered Wildlife in Canada (COSEWIC) 2, within the project area that are listed on the SARA list of extirpated, endangered, threatened or special concern species. Eagle will be required to obtain additional City of Whitehorse Building and Development permits. Both permits derive their authority from city bylaws and are required to be obtained before operations commence. ARCADIS believes it is unlikely that permitting would create a critical path schedule problem. On January 6, 2014, Eagle requested an amendment to the current Water License to allow the project to use a high-density thickener to de-water the barren tailings instead of, or along with, the hydro cyclones described in the current Water License. This amendment will not change the source, impoundment or discharge of water, quality of water discharged from the site, quantity or quality of waste deposited or structural integrity or functions of structures described in the original operations plan. This license is not required but will allow flexibility in how Eagle operates the processing plant. Eagle will proceed with the project during the Water Board deliberations of this amendment. 2 The COSEWIC is an independent body of experts responsible for identifying and assessing wildlife species considered to be at risk. Page 13 of 23

19 C. ECONOMIC BASE & BUSINESS PLAN Economic Base & Business Model Eagle s business plan is based on extracting iron ore from the Whitehorse copper mine tailings and selling the iron ore to Dominion Grain S.A.. Eagle will enter into a contract with Dominion wherein Dominion has the right and obligation to buy 100% of the iron ore Eagle expects to produce at a fixed price of $72 per dry metric ton, assuming the product meets specific requirements. Dominion will transport and sell the product overseas. Eagle will enter into an agreement with Dominion where Dominion will lend Eagle $6.5 million to complete the Processing Plant. Interest of this debt is 6% per year, with interest paid on the date of each shipload payment. Principal will be repaid in full upon permanent cessation of iron ore production. The debt will be secured by liens on: the ownership interest of Eagle, Eagle s land lease, plant and equipment, iron ore product, existing tailings on project site and a personal guaranty from Charles Eaton. In addition, Eagle will enter into an agreement with Dominion wherein Dominion agrees to purchase 100% of Eagle s ore production at a fixed price of $72 FOB per dry metric ton. As additional security, Dominion will set aside a portion of its excess profit, up to $3 million, in a Purchase Assurance Fund to provide assurance that Dominion will continue to purchase Eagle s products even if iron ore prices declined. AIDEA 3rd Party Review of Product/Operations/Reclamation ARCADIS engaged DCM as sub-contractor to review the reasonableness of some elements of Eagle s business plan. DCM s conclusions are: The appropriate production volume estimate is 1.46 million wet metric ton vs. Eagle s estimated 1.6 million dry metric tons. It is the opinion of DCM that the proposed operation is technically feasible, the operating plan is reasonable and that estimated costs are achievable. DCM stated that data provided by Eagle was minimal in two key areas necessary for evaluation of the FOB Price: concentrate chemical composition and concentrate size distribution. DCM s opinion is that additional analysis of individual wet drum concentrates should be performed otherwise, the current level of trace element/mineral content leaves a significant amount of pricing and market risk unanswered. DCM also reviewed Eagle s proposed reclamation plan and believes it to be reasonable. The tentative reclamation plan has been approved by the Yukon government pending approval of the final reclamation plan. However, the Yukon government has approved Page 14 of 23

20 initial commencement of operations upon posting of a $600,000 reclamation bond, which Eagle has included in its latest economic analysis. AIDEA 3 rd Party Review of Pricing Because the price of iron ore is a critical variable affecting project profitability, the financial due diligence has emphasized on evaluation and sensitivity analysis of iron ore prices. The table below shows historical prices of iron ore and its volatility. Platts Iron Ore Fines 62% Fe CFR North China - Historical Price U.S. Dollars per metric ton January February March April May June July August September October November December Monthly Average AIDEA also contracted with Northern Economics, Inc. ( NEI ) to review the existing and potential market for magnetite and to provide AIDEA with a basis of evaluation regarding the validity of the commodity prices used in Eagle s pro formas for its proposed Whitehorse mining operations. NEI reviewed forecasts from Metal Expert Consultants ( MEC ) and the steel producer OAO Severstal. The two forecasts vary in methodologies. MEC used a Consensus forecast derived from leading investment bank forecasts, while OAO Severstal s method uses three different approaches: one using a marginal-costs method and two others using incentive pricing. NEI concludes that ".all forecasts indicate a long term iron ore price between $93 per tonne (metric ton) and $105 per tonne (metric ton). China s red hot growth will slow but remain positive, and India appears to be the next economy that will see a substantial increase in demand for iron ore. However, it is unlikely that India will demand as much iron ore as China. Worldwide supply is increasing, led by Australia, and longterm supply is expected to expand faster than demand, driving prices down near $100 per tonne (metric ton). Page 15 of 23

21 The table below summarizes the iron ore price forecast provided by NEI. Global Iron Ore Nominal Price Forecast, and Long-term Compared with December 2013 Actual and with Dominion Fixed Price Equivalent Longterm Forecast U.S. Dollars per dry metric ton Maximum forecast Iron ore fines (62 percent Fe, CFR China) $ 129 $ 157 $ 158 $ 135 $ 150 Consensus forecast Iron ore fines (62 percent Fe, CFR China) $ 129 $ 132 $ 120 $ 109 $ 93 Minimum forecast Iron ore fines (62 percent Fe, CFR China) $ 129 $ 119 $ 100 $ 90 $ 80 December 2013 actual Iron ore fines (62 percent Fe, CFR China) $ 135 Dominion Fixed Price (equivalent) Iron ore fines (62 percent Fe, CFR China) $ 102 $ 102 $ 102 Source: Maximum, Consensus and Minimum forecasts: Northern Economics Magnetite Market Analysis, dated May 31, As of December 2013, CFR iron ore price was $135 per dry metric ton. Note that the Project will be selling its ore to Dominion at $73 FOB per dry metric ton or approximately CFR $102, which is below current market price, in exchange for a guaranteed fixed price for the duration of the project. D. FINANCE PLAN Overall Plan of Finance AIDEA has developed an initial plan of finance for the project. AIDEA will participate in financing up to $6.5 million in improvements to the Facility and Eagle will fund the cost of the processing plant as well as two months of working capital. Financing Structure AIDEA is preparing to participate in the financing of the project as follows: 1. AIDEA will fund the expansion of the ore terminal as a $6.5 million capital investment in the AIDEA-owned the Facility with costs to be paid from charges to Eagle for use of the Facility. 2. Eagle will fund the WCTP at approximately $6.0 to 6.5 million. Key elements of the financing structure are summarized below: AIDEA to finance and own the Facility improvements Whitehorse Copper Tailings Reprocessing & Reclamation Project ( WCTP ); $6.0 to 6.5 million approximate capital cost at the mine in Whitehorse, Yukon, Canada, to be financed by Dominion S.A.. Notional structure: o $6.5 million (not to exceed) capital investment in the ore terminal o Five year lease of the Facility with option to extend for one additional year o The Facility user shall pay Owner ground lease equal to $430,000 per year, with quarterly payments beginning with completion date of the building or buildings and Page 16 of 23

22 o o o installed equipment. The Facility user agreement, without extensions, would generate an annual rate of return in excess of 8.5% on AIDEA s investment. User shall show sufficient funds to provide 2 months of working capital. Proof of such available funds will be required before Owner disburses any funds. Secured by Ownership of the Storage Building The Product Purchase Contract ( PPC ) with Dominion assigned to Owner Conditions precedent to AIDEA financing: Eagle securing a bank letter of credit or depositing in escrow the amount necessary to build the processing plant (the Processing Plant ), approximately $6.0 to 6.5 million and two months of working capital on terms acceptable to AIDEA Confirmation that Eagle has secured all required project permits, regulatory approvals necessary to build out the Whitehorse operation, begin production and shipment of material to Skagway. An executed contract with Dominion Grain S.A. for the purchase of the magnetite at a fixed price of at least $72 FOB per dry metric ton, a purchase assurance fund, and other terms acceptable to AIDEA. Sources and Uses The table below shows the estimated Sources and Uses for the project. AIDEA will provide up to $6.5 million to fund the Skagway Ore Terminal Improvements. Eagle will provide funds for improvements at the Whitehorse site and two months of working capital. EAGLE WHITEHOSRE/SOTI SOURCES AND USES SOURCES OF FUNDS Skagway Ore Terminal Improvements Whitehorse Copper Tailings Project Total AIDEA Project Financing $ 6,500,000 $ 6,500,000 Eagle Equity $ 6,500,000 $ 6,500,000 TOTAL - SOURCES OF FUNDS $ 6,500,000 $ 6,500,000 $ 13,000,000 USES OF FUNDS $ - Skagway Ore Terminal Improvements & Misc. $ 6,500,000 $ 6,500,000 Whitehorse Copper Tailings Project $ 6,500,000 $ 6,500,000 TOTAL - USES OF FUNDS $ 6,500,000 $ 6,500,000 $ 13,000,000 Page 17 of 23

23 Lease Payment Schedule The table below shows the estimated lease payments from the project under the original 5-year term, assuming no extension. These amounts are preliminary and the final lease payment schedule will be determined based on the final amount of AIDEA s investment and costs. Eagle Whitehorse Pro-forma Lease Payment Schedule Year Date Ground Rent Capital Charge Total Lease Payments 1 12/1/2014 $ 107,500 $ 237,612 $ 345,112 3/1/ , , ,112 6/1/ , , ,112 9/1/ , , , /1/ , , ,112 3/1/ , , ,112 6/1/ , , ,112 9/1/ , , , /1/ , , ,112 3/1/ , , ,112 6/1/ , , ,112 9/1/ , , , /1/ , , ,112 3/1/ , , ,112 6/1/ , , ,112 9/1/ , , , /1/ , , ,112 3/1/ , , ,112 6/1/ , , ,112 9/1/ , , ,112 Subtotal $ 2,150,000 $ 4,752,247 $ 6,902,247 Balloon Payment* 9/1/ $ 3,885,303 3,885,303 Total $ 2,150,000 $ 8,637,550 $ 10,787,550 * Balloon payment represents the outstanding principal amount. It is anticipated that Eagle will be able to prepay the lease with a premium. Preliminary Pro Forma Financials AIDEA engaged WFG to review the financial feasibility of the project. WFG s generated proformas for the project using the production volume, operating costs, overhead and shipping Page 18 of 23

24 costs recommended by DCM and the FOB Price per the contract between Dominion and Eagle. The result is shown below: FOB Price Calendar Year Production (wet metric ton) (dry metric ton) Production Costs (including Yukon royalty) Add'l Capital Cost Terminal Costs (Operator & Dockage only) Rev available to pay AIDEA and Eagle Reserve Account Deposit/ (Withdrawl) AIDEA Lease Payments Cumulative funds received by AIDEA Truck To Net Rev to Revenue Skagway Total Costs Eagle , ,624,000 1,869,440 2,400, ,000 4,942,440 1,681, ,112 1,336, , , ,496,000 7,477,760 9,600,000 2,692,000 19,769,760 6,726,240 1,380,449 1,380,449 3,965,341 3,106, , ,496,000 7,477, ,000 9,600,000 2,692,000 20,269,760 6,226, ,449 1,380,449 3,895,341 5,436, , ,496,000 7,477,760 9,600,000 2,692,000 19,769,760 6,726, ,449 1,380,449 4,395,341 7,767, , ,598,400 2,991,104 3,840,000 1,076,800 7,907,904 2,690,496-1,380,449 1,310,047 9,148, (3,281,348) 4,920,640 (1,639,291) 10,787,550 Total 1,460,000 96,710,400 27,293, ,000 35,040,000 9,825,800 72,659,624 24,050,776-10,787,550 13,263,226 Note: In 2019, Eagle will need to contribute $1.6 million to pay the Lease Payment. If AIDEA is able to lease the Facility to another use at the end of the lease with Eagle, the amount due would be reduced. This shows that, assuming assumptions used are realized, the project would generate sufficient funds to enable Eagle to pay AIDEA $10.8 million and satisfy its obligations under the Facility user agreement. However, because the Facility is a permanent structure with useful life well beyond the expected 5-year Project duration, AIDEA has amortized the financing over a 10-year period, with a $3.9 million balloon payment at the end of the 5-year lease. Eagle is responsible for paying the balloon payment unless another party leases the Facility. AIDEA is requiring a $3.3 million to be set aside from project revenues into a reserve to be used toward the final year s $1.38 million lease payment plus the balloon payment, leaving potentially $1.6 million that would need to be paid from Eagle s own funds. E. ECONOMIC DEVELOPMENT IMPACT & AIDEA SUITABILITY AIDEA Mission Suitability / Estimated Economic Development Impact AIDEA s Suitability Committee reviewed Eagle s business plan in March of 2013 and determined the program is suitable for AIDEA s Development Finance program. The project will expand the capability of Facility port facilities and will result in an economic benefit to Skagway, AIDEA, the State of Alaska and our northern neighbors in the Yukon Territory. Not only will the project retire the debt with facilities that are economical to build, operate and maintain but this expansion will provide the opportunity for other potential mining projects in Northwestern Canada and the eastern interior of Alaska to use Skagway for future mineral shipping. The project will be environmentally sound and minimizes environmental impacts. AIDEA Portfolio Plan AIDEA s plan of finance will provide that the Facility improvements will be financed from the AIDEA Revolving Fund. AIDEA will own the improvements during and after completion of Eagle operations. Page 19 of 23

25 F. PROJECT SPONSOR INFORMATION Eagle Whitehorse LLC Eagle Whitehorse LLC, a limited liability company, was formed in 2010 to develop this project. The sole member of Eagle is Eagle Industrial Minerals Corp ( EIMC ), which is wholly owned by Charles E. Eaton. EIMC s website indicates that it has been in existence since 2003 and the three projects EIMC are involved in are in magnetite production and sale. All three projects are still in the planning stages. Dominion Grain S.A. As discussed earlier in this report, Eagle will enter into an agreement with Dominion where Dominion will provide a $6.5 million loan to Eagle. Dominion will have the right and the obligation to purchase all the iron ore produced by the project at a fixed price of $72 FOB per dry metric ton. The most recent available financials from Dominion shows that it has limited resources. Dominion s profit was $2.1 million in At end of 2012, Dominion s net current assets (i.e., current assets minus current liabilities) were US$4.3 million. Due to the limited financial resources of Dominion, the value of the fixed price contract is limited. G. RISKS & RISK MITIGATION There are a variety of risks and mitigations to be taken to ensure AIDEA s investment is secured. The greatest mitigation factor is that AIDEA owns the Facility and could recover its capital costs from potential future users of the Facility. Risk & Mitigation Summary Potential Risks Description & Analysis Mitigation Project unprofitable Project may be unprofitable due to inability to extract magnetite as planned, decline in iron ore price, or environmental issues. AIDEA could have spent $6.5 million and Eagle cannot start production. Eagle financial capacity Dominion Grain S.A. financial capacity Eagle has limited resources and lacks liquidity and cannot deal with construction cost overruns; 2 months of working capital would not be adequate if there are operational delays. Dominion is providing $6.5 million of funds to finance the Processing Plant. Condition precedent: signed contract with Dominion Grain S.A. Due diligence conducted by AIDEA Condition precedent: Proof of funds on hand or bank letter of credit sufficient for WCTP and working capital. Condition precedent: executed agreement between Eagle and Page 20 of 23

26 Product price Product quality Construction issues Environmental risk Dominion will commit to purchasing all of Eagle s production at a fixed price of $72 FOB per dry metric ton. The value of the fixed price contract is limited due to Dominion s limited financial resources. Project profitability is sensitive to product price. Forecast of iron ore price predicts lower future prices. Probability analysis shows wide variability in projected profit and declining profit over time. Lower quality will result in lower FOB sale price The Facility and Processing Plant improvements could entail some construction risk, including cost overruns Final reclamation plan has not been approved Dominion. Proof of funds on hand or bank letter of credit in the amount of $6.5 million Purchase Assurance Fund. Signed contract with Dominion to purchase 100% of product at a price no lower than $72 FOB, and a Purchase Assurance Fund. Additional analysis of individual wet drum concentrates to determine chemical composition; analysis taken at Whitehorse daily and at the Facility prior to shipment The nature of the civil construction is based on proven designs and will be executed by experienced local contractors AIDEA will have a condition precedent or condition subsequent requiring AIDEA approval of construction plans AIDEA will have conditions precedent requiring necessary permit received. AIDEA to have conditions subsequent requiring AIDEA approval of environmental plans, contingencies, etc. H. AIDEA TIMELINE Reimbursement Agreement April 5, 2013 Board Resolution and Approval February Closing / funding March 2014 Commence Construction Early Spring 2014 Project Completion August 2014 Initial revenues from Project Fall 2014 Page 21 of 23

27 DEFINITIONS Every effort was made to use the term ton consistently throughout this report. However, the term ton varies depending on how it is used and in what context. For informational purposes, below are several definitions of ton. Ton = long ton, short ton, metric ton, 100 cubic feet, 35 cubic feet. Long ton = tonne (before 1960) = 2,240 pounds Metric ton = 2, pounds Short ton = 2,000 pounds ATTACHMENTS 1. Municipality of Skagway Resolution of Support 2. Letter from Department of Transportation 813 West Northern Lights Blvd. Anchorage, Alaska Phone: (907) Fax (907) Toll Free (Alaska Only) Investing in Alaskans Page 22 of 23

28 Proposed by: Administration Vote: 6 Aye 0 Nay 0 Absent MUNICIPALITY OF SKAGWAY, ALASKA RESOLUTION NO R A RESOLUTION OF THE MUNICIPALITY OF SKAGWAY, ALASKA, SUPPORTING THE ALASKA INDUSTRIAL DEVELOPMENT & EXPORT AUTHORITY S PROPOSED EXPANSION OF THE SKAGWAY ORE TERMINAL STORAGE BUILDING; AND SUPPORTING THE INSTALLATION OF A NEW USER AT THE SKAGWAY ORE TERMINAL. WHEREAS, the Alaska Industrial Development & Export Authority (AIDEA) has a leasehold interest in the Skagway Ore Terminal, located on land owned by the Municipality of Skagway; and WHEREAS, AIDEA currently has a contract with Minto Explorations Ltd. and its parent company, Capstone Mining Corporation, to use the facility to transship free-flowing bulk mine products; and WHEREAS, AIDEA is negotiating an agreement with a new user of the Ore Terminal, Eagle Whitehorse LLC, which would transport magnetite from the Yukon Territory to the Skagway Ore Terminal by truck to be subsequently shipped from the Ore Dock; and WHEREAS, per AS , AIDEA must solicit the review and advice of the Municipality of Skagway regarding the new user of the ore terminal and the proposed expansion of the storage building; and WHEREAS, on October 7, 2010, the Municipality of Skagway adopted Resolution No R, which resolves that the Skagway Assembly supports the expansion and use of the Skagway Ore Terminal for the shipment of various bulk material and will work cooperatively with users and potential shippers of the Skagway Port; and WHEREAS, the expansion of the ore terminal and subsequent utilization by additional users has the potential to create jobs within Skagway, improve the quality of life of Skagway s residents, and is in line with the intent of the Skagway Assembly to support use of the Skagway Ore Terminal and Port of Skagway; NOW, THEREFORE, BE IT RESOLVED by the Borough Assembly of the Municipality of Skagway that the Municipality of Skagway continues to support the expansion of the Skagway Ore Terminal; BE IT FURTHER RESOLVED that the Municipality of Skagway supports AIDEA s negotiation with and installation of additional users at the Skagway Ore Terminal.