The McWatters mine is planned to produce 106,988 tonnes in 2008, 422,305

tonnes in 2009 and 67,505 tonnes in 2010. A detailed ore production schedule

is tabulated in Table 25.2.The nickel price used for the McWatters project was

$12.50 US. For the purpose of this study $1CDN:$0.98US was assumed and

remains constant for the life of mine. Table 1-2 shows the estimated pre-tax

cash flow for the McWatters projectLiberty Mines Inc

Tonnes of ore produced 596,797

Tonnes of Ni sold (mill recovered) 5232.15

Total Revenue $107,165,695

Operating Costs

Mining Cost $21,875,842

Surface Transportation $2,088,793

Closure $1,640,600

Consulting $60,000

Milling Cost $8,653,570

G & A $2,564,049

Net Operating Profit $78,282,841

Capital Costs $16,354,592

Pre Tax Cash Flow $53,928,248

Internal Rate of Return (IRR) 385%

Net Present Value (NPV) at 5% discount rate $46,121,200

An indicated mineral resource estimate of 714,870 tonnes grading an average

0.93% Ni (calculated based on a 0.5% Ni cut-off grade) was indentified. The

resultant block model was used by SRK engineers to formulate a viable mine

plan and schedule that incorporates methodology and rates appropriate to the

deposit size, geometry, and geographic location.

The McWatters ore body consists of a sub-vertical, larger zone of disseminated

nickel sulphides over-lying a sub-horizontal massive sulphide basal layer. The

two zones present distinct sizes and geometry and are, therefore, conducive to

two distinct underground mining techniques: longhole stope mining and

conventional panel stope mining. The former of the two methods is scheduled

to produce 83% of the ore, and is therefore the most important mining method

to be employed. Stopes are to be accessed via an underground ramp from

surface. This same ramp will also serve as a haulage route utilized to

transport ore to surface using underground haulage trucks. Ore is then

transported by a series of all weather gravel roads to Liberty’s operating

Redstone processing plant 9 kilometers away.

Based on a 0.6% cut-off grade a probable mineral reserve of 596,800 tonnes at

an average grade of 0.93% Ni was identified. Where appropriate, selective

portions of the deposit are mined at a reduced 0.5% cut-off grade. The

resultant financial analysis was positive, and indicated a pre-tax cash flow of

$53,930,000, based on $12.5 per pound of nickel. Financial results are

positive down to a break-even price of $5.50 per pound of nickel. Based on

current and predicted market conditions, and given the relatively short 2 year

life of mine, the results are considered highly positive.