This is an assessment from a qualified third party report on the operational costs of the 777 mine in Flin Flon, Manitoba.
The original report provided reference to diagrams which could not be added. The statisical information and report write up is what we are providing in this post.

TERMS OF REFERENCE:

The purpose of this report is to make a preliminary assessment of the probable cost of operations at the 777 Mine in Manitoba by Hudson Bay Minerals Inc.

The cost of operations assessed in this report include those from the 777 Mine, the Flin Flon Concentrator, and from the cost of subsequent smelting and refining at Hudson Bay's Copper Smelter and Zinc Plant. The cost of operations at the White Pine Copper Refinery and the Zochem zinc oxide plant are excluded from this analysis.

SUMMARY OF FINDINGS:

In the absence of a detailed investigation, but based on analysis of public information and financial reports obtained from Hudson Bay's website, and this author's experience in the

mining industry, it appears that the operating costs reported for the 777 Mine at approximately C$40/tonne processed, and for the Flin Flon Concentrator at approximately C$9.50/tonne processed, could be reasonable given the apparent scope and style of operations plus the effects of recent cost escalation prevalent within the mining industry. With reference to Figure 2, the 777 Mine appears to be a modern high-tonnage (nominal 4000 tpd) mining operation that should enjoy a high degree of economy of scale. This is also reflected in the unit operating costs of the Flin Flon Concentrator.

The unit operating costs of the copper smelter and zinc plant could also be reasonable, but this author does not have the benefit of having performed benchmarking exercises on similar plants. Nevertheless, the combined effects of the smelting and refining costs on top of the mining and concentrating costs bring the total cost of operations to over $90/tonne processed, again, not unreasonable given the escalating costs in the mining industry today.

Regarding amortization of capital costs, it appears that this could be running at between C$24 and C$26 per tonne processed; however, information regarding the exact capital attributable to 777 production is incomplete, and this author chose to err on the high side (allocating the full C$M435 capex from the "777 Project" spent in the years prior to 2004).

BACKGROUND INFORMATION: ,

(ref. http://www.aCloracom.com/i rICa Iii na n/messaCles/659327)

Callinan Mines Ltd. was formed in 1927 under a National Charter as a mining exploration company. The status changed to a degree, in 1988, when the Callinan Mine went into production in an 80/20 joint venture agreement with the Hudson Bay Mining and Smelting Co. Subsequently, this arrangement was changed to the current status of $.25 / per ton mined plus a 6 2/3% Net Profits Royalty Interest, subject to the accumulative positive cash flow. The agreement covers the bulk of the Flin Flon Manitoba, claims camp.

A second mine, the 777 Mine was put into production in 2003. It is part of the joint venture claims and has become the jewel and most profitable asset in HudBay's portfolio of mines. Incidentally, Callinan owns the contiguous War Baby claims which, based upon Callinan's diamond drilling results, appear to contain the down dip extension of the 777 ore body.

In early 2007 Callinan launched a lawsuit, currently in its early stages, to require HudBay to disclose the financial details of the mines covered by the joint venture agreement with Callinan. Callinan is claiming unpaid Royalty Interest plus undisclosed damages. The basic claim is predicated on the HudBay having mined $2Billion in revenue from the 777 and Callinan Mine but have managed to expense the 'operation to zero'.

On Nov. 8, 2007 Callinan began a new phase in its transition from an exploration to a production company:

1. The company received, for the FIRST TIME, a cheque from HudBay's 2007 third quarter, for a portion of 6 2/3% (NPI).

2. Based on current metal prices, Callinan should receive $3-5 million from HudBay, payable Jan 30, 2008 and then $5-7 million every quarter for the next 10-15 years.

3. Callinan anticipates that HudBay will mine the 777 to depth in 2008. At such time, it will be advantageous to both companies to enter into a joint venture agreement on Callinan's claims. An estimated 3 million tons could be mined at a profit, based upon current metal prices, of $1 Billion.

(ref.: http://www.callinan.com/s/Greenstone... Title=Flin-Flon­Greenstone-Belt)

Where it All Began

Callinan Mines owns a 6 2/3% net profits interest and $0.25 per tonne royalty in a block of 81 mining leases in the town of Flin Flon, Manitoba. This block of leases includes the world class 777 mine and the formerly producing Callinan mine. The War Baby claim, in which The Company holds a 100% interest, is adjacent to the 777 mine.

Producing Mines

The Callinan and 777 mines are both located in Flin Flon Manitoba and subject to Callinan's aforementioned Net Profits and Royalty interests.

Callinan's net profits and royalty interests cover 81 mineral claims and leases surrounding the 777 and Callinan Mines. The area is famous for its high grade VMS deposits which are notably rich and easy to mine.

The War Baby

The War Baby Claim sits adjacent to the 777 mine (refer to Figure 1) and is owned entirely by Callinan Mines (subject to a 10% back-in right by the vendor).

REFERENCES:

· Annual and quarterly reports obtained from Hudson Bay website .