New Foundland

NEWFOUNDLAND-WORLD CLASS BASE METAL POTENTIAL
Why is Celtic Minerals exploring in Newfoundland?

Celtic has established a large land position of prospective base metal terrain in Canada’s eastern-most province for several reasons.

Newfoundland has demonstrated “World class base metal potential”

a) The Voisey’s Bay mine is located in northern Labrador and is owned and operated by CVRD Inco. It is one of a select group of deposits that can truly be classified as world class. Production began at the Ni-Cu-Co deposit known as the Ovoid in November 2005 and mining is projected to continue for at least 20 years. The Ovoid contains ore reserves of 31.7 million tonnes with an average grade of 2.83% Nickel, 1.68% Copper and 0.12% Cobalt. Besides the Ovoid, the immediate Voisey’s Bay area contains deposits known as the Eastern Deeps and Reid Brook. Prospects known as Ashley, Luk, and Plugger Hill each exhibit some of the promise that is held for expanding mining in future years. Noting that districts worldwide which contain large Ni-Cu-Co deposits commonly host a cluster of such deposits and that regional exploration beyond the known Voisey’s Bay deposits remains limited, the residual prospects for new discoveries remains quite high.

b) The Buchans Mine, located in central Newfoundland, was owned and operated by Asarco Ltd. between 1929 and 1984. During this time the mine produced 16.2 million tonnes of ore with an average mill head grade of 14,51% zinc, 7.56% lead, 1.33% copper, 126 g/t silver, and 1.37 g/t gold, making it one of the highest grade and most profitable base metal deposit in the world. In September 2007 dollars, that would equate to a gross metal value of US$13.39 billion.

The Newfoundland base metal belt is under-explored.

a) Lack of competitive exploration – Newfoundland’s historical significance as a mining camp has been overshadowed by the region’s lack of competitive exploration. New Brunswick hosts similar base metal geology as Newfoundland, but has historically had much more competitive exploration than its counterpart. Historically, a large package of land in Newfoundland was held by one company from 1929 to 1984, effectively stymieing competitive exploration. Indeed, the economic incentive to commit new exploration dollars to hold lands and advance projects simply did not exist. Only in recent years has this long-held land been relinquished and come open for staking. Celtic Minerals was one of the leaders among new exploration companies and successfully established a large land position at low cost. Today, companies are committed to spending exploration dollars to hold their lands and advance their projects while the ability for new companies to enter the region keeps competitive pressure on the industry. As a result, the competitive exploration environment continues to result in more discoveries.

b) Lack of exploration funds – Historically, Newfoundland has not had periods of sustained investment capital directed towards exploration as have other proven base metal camps. Base metal expenditures by province for the period 1975 to 1995 played testament to the fact that Newfoundland ranked at the bottom of the list, despite the proven potential for world class discoveries. A large influx of funds starting in 1995 occurred as a result of the Voisey’s Bay nickel-copper-cobalt discovery in Labrador. The bulk of these funds were accordingly expended in Labrador. Issues concerning the development of Voisey’s Bay negatively impacted continued exploration funds, but as the Newfoundland provincial government established the framework for developing the Voisey’s Bay deposits a renewed confidence returned to investing in Newfoundland and Labrador’s mineral exploration sector. Combined with recent commodity appreciation, these factors have precipitated a new wave of resource investment in the province. One final note of interest evolves for Newfoundland when comparing the historical investments in the two regions with the gross metal value produced, on a dollar per tonne basis. Specifically, it is notable that the exploration costs in Newfoundland have historically been only 1/3 the costs in Labrador.

Favorable Regulatory and Investment Environment

a) The Newfoundland government strongly encourages exploration activities and mine development as part of its strategy to build its local economy. To this end, the government maintains a favourable tax structure, an established permitting regime and offers various economic incentives to encourage activity.

b) Newfoundland holds a strategic advantage thanks to its highly skilled workforce and its continuing evolution as a mining destination. In addition to its experienced local talent, Newfoundland is in close proximity to populations with similarly advanced skill sets and mining expertise. As well, beyond the abundance of crown lands, the regional infrastructure continues to boast competitive energy costs via hydro rates, no water taxes, and a network of well-maintained logging roads that support accessibility.

c) Exploration and mining activities can continue year round, despite occasionally adverse
weather conditions.

d) Companies operate within a politically stable environment and in a jurisdiction
governed by British common law where property rights are well respected.

Leading the transformation of central Newfoundland has been Aur Resources’ $92 million capital investment into Duck Pond, bringing the long-known prospect into production. Now owned by Teck Cominco (TCK:TSX) , the project’s infrastructure continues to improve the economics for regional exploration. Also strengthening interest has been the successful discovery and expansion of volcanic massive sulfide (VMS) systems known as the Boomerang-Domino prospects by Messina Minerals (MMI:TSXV). Within this region, Celtic holds five base and precious metal properties demonstrating VMS mineralization. Since the winter and spring of 2006-2007, Celtic has actively advanced exploration efforts to develop new drill targets on four of these projects, namely Great Burnt Lake, Victoria Mine, Hungry Hill and Sutherlands Pond. A final aspect pertaining to infrastructure is the fact that development of hydro resources has continued to increase accessibility to remote areas while improving the economics for resource development.

A final factor improving the economics of returning to Newfoundland is the valuation of mineral deposits. Today’s healthy commodity prices have continued to buoy investment in the Newfoundland mineral sector, as it has in other jurisdictions. Valuations of both base and precious metals remain such that even the economics of smaller resources hold value to operators with the capacity to control their costs, but given the region’s capacity to generate new massive sulphide projects, companies like Celtic Minerals continue to invest their exploration capital to advance a new generation of discovery.