Red Back Mining Inc. - Chirano

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CHIRANO GOLD MINE

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Location

The Chirano Mine is situated in southwestern Ghana, 100 kilometres southwest of Kumasi, which is Ghana's second largest city. The township of Bibiani, the site of an existing large gold mine, lies 15 kilometres north-northeast of the project area (37 kilometres by road). Access to the mine from the capital Accra is via a sealed highway to Kumasi and then sealed highway running southwest towards Bibiani and onwards to Sefwi-Bekwai. The final approach is either by a 22 kilometre gravel road from Tanoso Junction (15 kilometres south of Bibiani) or by a 13 kilometre gravel road whose junction is approximately 9 kilometres beyond Sefwi-Bekwai. The project area is dominated by steep terrain and dense vegetation interspersed with small agricultural plots of palm oil, cassava and cocoa.

Ownership

The Chirano Mine and the mining lease on which it is based are owned 100% by CGML, a Ghanaian subsidiary of Red Back. CGML is currently 100% owned by Red Back through its intermediate subsidiary, Red Back Mining (Ghana) Limited. On April 8, 2004, CGML was issued a mining lease (PL2/56) in respect of the Chirano Project valid for a period of 15 years. The Government of Ghana retains the right to back-in to a 10% carried interest in the Chirano Project under Section 8 of the Ghana Mining Act, which interest may be increased to 30% by negotiation and arbitration. This 10% interest would represent a portion of CGM's 100% interest. The mining lease is exclusive to CGML, and is not subject to any option or joint venture arrangement. No back-in rights are held by any party other than the Government of Ghana.

A royalty is payable to the Government of Ghana equal to 3% of gross revenue. An additional royalty equal to 0.6% of gross revenue is payable in relation to minerals extracted from Ghana's productive forest reserves. Production from most of the Chirano Project is subject to this extra royalty. The Government of Ghana retains the right to take a 10% interest in the project under Section 8 of the Ghanaian Mining Act.

Geology

The Chirano Mine lies within the Proterozoic terrain of southwest Ghana. It occurs along the margin of the Sefwi Belt adjacent to the Kumasi Basin to the east. Both the Sefwi Belt and the Kumasi Basin comprise rocks of Birimian age, with the belt dominated by mafic volcanics and the basin typified by fine grained, deep water sediments. Both are intruded by granites.

The belt margin is characterized by regional scale, reactivated thrust faults which juxtapose the sedimentary basin and volcanic belt terrains and are known in the Chirano area as the Bibiani shear zone since the Bibiani deposit (+5Moz historic production and current resources) is inferred to be located along the same structure 18 km to the northeast. The Chirano deposits are hosted by the Chirano shear zone, a splay off the Bibiani shear. At Chirano, a small, faulted sliver of younger Tarkwaian shallow water sediments (dominantly arkose) separates the two structures.

The Chirano gold deposits are hosted by an elongate, altered tonalite intrusive, adjacent to or within 200m to the west of the Chirano shear. The deposits occur at regular intervals along a mineralised zone 9 kilometres long.

The geometry and shape of the deposits range from tabular (Obra), or pipe-like (Tano), to multiple parallel lodes (Paboase). The mineralised zone thickness ranges from a few metres to over 70 metres. Most deposits dip very steeply towards the west or southwest, and also plunge very steeply. Generally, the tenor of the gold mineralisation correlates with the intensity of alteration, veining and brecciation.

Development & Mining

The current mine plan calls for the exploitation of eleven gold deposits spread along a strike length of approximately nine kilometers by both open pit and underground mining methods. The nameplate capacity of the Chirano mill is 2.1 Mt per annum.The Chirano Plant is currently undergoing an expansion to a nominal throughput capacity of 3.5 mtpa.

The operation utilizes selective mining techniques to separate ore and waste and is carried out by a mining contractor. The mining fleet is a combination of 250 tonne hydraulic excavators with 14 cubic metre buckets loading 100 tonne trucks. Drilling and blasting is required for all primary material and the majority of oxide material.

The new treatment plant flowsheet is based on tertiary stage crushing, three ball mills, pre-leach thickening, a single stage of leaching and an eight stage CIL circuit. Gold is recovered by an elution circuit with electrowinning of the gold onto stainless steel cathodes. The gold will be removed from the cathodes with high pressure water sprays and smelted to a final bullion product. The plant commissioning is expected to commence during the first quarter of 2009.

Akwaaba Deeps Development

Akwaaba Deeps will be mined using a Sub-level Caving ("SLC") mining method. The bulk tonnage mining study estimates approximately 8.8 million tonnes will be mined at a grade of 3.7 g/t containing 1.0 million ounces.

The capital cost to construct Akwaaba Deeps is estimated to be US $67m inclusive of owners costs and contingency. Life of the mine operating costs to deliver underground ore to Chirano mill have been estimated to be approximately $25 per tonne (inclusive of contingency).

The underground development of Akwaaba Deeps is well underway. In order to support the new Akwaaba Deeps underground development, the Company is expanding the Chirano processing facility to a nominal throughput of 3.5 mtpa. In addition to increasing capacity, the expansion also addresses the rock hardness issue identified in 2007. A new crushing facility will reduce ore to 80% passing 12.5mm, optimizing milling efficiencies with the addition of a third mill and the conversion of the SAG mill to a ball mill.
Chirano Resources

The revised open pit and underground resources at Chirano as at December 31, 2009 are as follows:

Resource Estimate December 2009
Resource Category	Sector	Cut Off (g/t)	Tonnes (Mt)	Au (g/t)	Ounces (Moz)
Measured	Open Pits	1.0	16.1	1.88	0.98
	Akwaaba UG	1.5	0.7	4.32	0.10
Indicated	Open Pits	1.0	11.6	1.69	0.63
	Akwaaba UG	1.5	7.0	5.23	1.18
	Paboase UG*	1.5	7.7	4.19	1.04
	Stockpiles		3.4	1.23	0.14
Total Measured and Indicated			46.6	2.71	4.07
Inferred	Open Pits	1.0	5.6	1.7	0.3
	Akwaaba UG	1.5	0.8	2.7	0.1
	Paboase UG*	1.5	1.2	4.4	0.2
	Suraw UG	2.0	2.0	3.9	0.3
Total Inferred			9.6	2.7	0.8

*May 2010

Numbers may not add exactly due to rounding

Open pit Mineral Resources are reported above a 1g/t cut off inclusive of ROM/low grade stockpiles. Gold grades for the reported open pit resource have been determined using Multiple Indicator Kriging (MIK) based on block dimensions of 12.5m (east) x 25m (north) x 6m (elevation) and using a selective mining unit of 2m (east) by 5m (north) by 2.5m (elevation). Gold estimation and model blocks were constrained within geologically derived wireframes. Due to the homogenous nature of the data no top cut has been applied to the resource data prior to estimation. It is observed that higher values in the dataset have little influence on the grade of the deposit.

Akwaaba Underground Resources are reported above a 1.5 g/t cut off and below the 2212mRL which is the base of the Akwaaba open pit. Gold grades for the reported underground resource model have been determined using Ordinary Kriging (OK) with grades interpolated into parent blocks with dimensions of 5m (east) by 25m (north) by 10m (elevation). Gold estimation and model blocks were constrained within geologically derived wireframes.

Paboase Underground Mineral Resources are reported above a 1.5g/t cut off and below the 2235m elevation, approximately and above the elevation of 1525m. Gold grades for the reported underground resource model have been determined using Ordinary Kriging (OK) with grades interpolated into parent blocks with dimensions of 2m (east) by 10m (north) by 25m (elevation). Gold estimation and model blocks were constrained within geologically derived wireframes.

Suraw Underground Resource is reported above a 2.0g/t cut off and below 2224m elevation which is the base of current open pit design. Gold grades for the reported underground resource model have been determined using Ordinary Kriging (OK) with grades interpolated into parent blocks with dimensions of 2m (east) by 25m (north) by 25m (elevation). Gold estimation and model blocks were constrained within geologically derived wireframes.

Open Pit and Akwaaba Deeps Mineral Resources are inclusive of Ore Reserves

The independent Resource estimate reported was undertaken by Nic Johnson (Member of the Australian Institute of Geoscientists) of Hellman and Schofield Pty Ltd with more than five years experience in the use of geostatistics for estimation of recoverable resources in gold deposits. For the purpose of reporting under National Instrument 43-101 Mr. Johnson is regarded as a Qualified Person.

Chirano Reserves

Reserve Estimate December 2009
Area	Proven			Probable			Total
	Tonnes (MT)	Au (g/t)	Ounces (Moz)	Tonnes (MT)	Au (g/t)	Ounces (Moz)	Tonnes (MT)	Au (g/t)	Ounces (Moz)
Open Pits	16.4	1.55	0.82	4.7	1.34	0.20	21.2	1.50	1.02
Akwaaba	-	-	-	8.9	3.91	1.11	8.9	3.91	1.11
Paboase*	-	-	-	7.9	3.64	0.92	7.9	3.64	0.92
Stockpile	3.4	1.24	0.14	-	-	-	3.4	1.24	0.14
Total	19.8	1.50	0.96	21.5	3.24	2.23	41.3	2.40	3.19

Numbers may not add correctly due to rounding

Open Pits

The Mineral Reserve estimate was made using a gold price of US$800
Various cut-off grades were used to estimate the Open pit inventories and form the Mineral Reserve depending on material type and location with an average breakeven cut-off drade in the range of 0.60g/t and 0.65 g/t.

Akwaaba

The Underground Mineral Reserve is based on SLC design and comprises development and production (stope) ore. Development ore includes only the Indicated Resources that are intersected by the development headings.
For the SLC Stopes only Indicated Resource was included in the stoping shapes for production levels 2175mRL to 1775mRL
All unclassified material (zero grade) lying within the above SLC Stopes was included as planned dilution essential for the mineable SLC shape. Similarly a small portion of Inferred resource (and its grade) required to define the SLC Stoping shapes was included as planned dilution with modeled grade. The total quantity included amounts to 1.08% of the SLC Stoping tonnes.
A minimal quantity of inferred resource lying within the ore development was also included as planned dilution with modeled grade. The total quantity included amounts to less than 0.24% of the ore development ounces. All Inferred resource & unclassified material lying at the extremes of the ore body was excluded from the mine design and SLC Stoping shapes.
The reserve estimate is based upon a cutoff grade of 2.2g/t and a gold price of US$800/oz.

Paboase

The Underground Ore Reserve is based on SLC design and comprises development and production (stope) ore.
The development and SLC Stope design shapes are based on Indicated Resources.
All Inferred Resource material to be mined within the above SLC Stopes was considered dilution at zero grade. All Inferred Resource & unclassified material lying at the extremes of the ore body was excluded from the mine design and SLC Stoping shapes.
Where an appropriate level of confidence exists for low grade mineralization within planned waste and dilution, this has been included in the reserve. This mineralization makes up 3% of the Au content in the reserve.
The reserve estimates are based upon a cut off grade of 1.7g/t, and a gold price of US$800/oz.

The independent Surface Mineral Reserve estimate reported was undertaken under the supervision of Bruce Gregory (Member of the Australasian Institute of Mining and Metallurgy), Principal Mining Engineer of AMC Consultants Pty Ltd with more than five years experience in Ore Reserve estimation. For the purpose of reporting under National Instrument 43-101 Bruce Gregory is regarded as a Qualified Person.

The independent Akwaaba Deeps Undergound Mineral Reserve estimate reported was undertaken by Tony Silveira (Member of the Australasian Institute of Mining and Metallurgy), Senior Mining Engineer of AMC Consultants Pty Ltd with more than five years experience in Ore Reserve estimation. For the purpose of reporting under National Instrument 43-101 Tony Silveira is regarded as a Qualified Person

The independent Underground Ore Reserve estimate reported herein was undertaken by Herbert Smith B.Sc., P.Eng. (Member of the Association of Professional Engineers and Geoscientists of B.C.) of AMC Mining Consultants (Canada) Ltd with more than five years experience in Ore Reserve estimation for the purpose of reporting under National Instrument 43-101 Mr Smith is regarded as a Qualified Person.

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