Amalfi Capital Corporation
TSX VENTURE : ALI.P

November 26, 2009 18:32 ET

Amalfi Capital Corporation Announces Transaction Update and the Completion of CDR Minerals Inc. National Instrument 43-101 Reports

CALGARY, ALBERTA--(Marketwire - Nov. 26, 2009) - Amalfi Capital Corporation (TSX VENTURE:ALI.P) ("Amalfi" or the "Corporation") is pleased to announce that CDR Minerals Inc. ("CDR") has completed its previously announced financing, its purchase of certain leases (the "Big Branch Project Assets") in connection with a mining project known as the Big Branch (the "Big Branch Mining Project"), and that it has received a technical report (the "Sid Report") dated June 26, 2009 with respect to the Sid mining project (the "Sid Mining Project") and a technical report (the "Big Branch Report") dated July 17, 2009 with respect to the Big Branch Mining Project. The technical reports were prepared by Phillip Lucas, P.E., P.L.S. of Summit Engineering, Inc. ("Summit") in accordance with National Instrument 43-101 ("NI 43-101").

As previously announced on June 9, 2009, Amalfi intends to complete an arm's length business combination (the "Business Combination") with CDR, which if completed, is expected to constitute Amalfi's qualifying transaction for purposes of Policy 2.4 of the TSX Venture Exchange Inc. ("TSX Venture") Corporate Finance Manual. The parties intend to complete the Business Combination by way of a three-cornered amalgamation (the "Amalgamation), wherein a wholly-owned subsidiary of Amalfi will amalgamate with CDR and continue as one company under the Business Corporations Act (Ontario). Prior to the Business Combination and subject to shareholder approval, Amalfi intends to consolidate its shares on the basis of one Amalfi Share for each three and one-half (3.5) presently outstanding Amalfi Shares, resulting in 3,314,286 post-consolidation Amalfi Shares outstanding prior to the completion of the Business Combination.

Pursuant to the Amalgamation, Amalfi will issue 53,142,371 post-consolidation Amalfi Shares at a deemed price of CDN$0.50 per share, to acquire a 100% interest in CDR. In addition, each of the current holders of the 7,735,407 existing warrants of CDR ("CDR Warrants"), 438,446 existing broker warrants of CDR (the "CDR Broker Warrants") and 7,225,000 stock options ("CDR Options") of CDR will receive an equal number of replacement share purchase warrants and stock options of Amalfi, which shall, subject to adjustment, be exercisable on the same terms and conditions as the CDR Warrants, CDR Broker Warrants and CDR Options, as applicable.

Pursuant to the Business Combination, Amalfi will also issue 1,657,143 share purchase warrants ("Amalfi Warrants") to shareholders of Amalfi, on the basis of one-half Amalfi Warrant for each post-consolidation Amalfi Share held immediately prior to the completion of the Business Combination. Each whole Amalfi Warrant shall entitle the holder to acquire one Amalfi Share at a price of US$0.50 for a period of two years from the closing of the Business Combination. Amalfi will also issue an aggregate of: (a) US$500,000 principal amount replacement convertible debentures, which debentures shall be convertible into Amalfi Shares at a conversion price of CDN$0.50 per share; (b) US$5,000,000 principal amount replacement convertible promissory notes, which notes shall be convertible into Amalfi Shares at a conversion price of US$0.50 per share; and (c) CDN$375,000 principal amount replacement convertible debentures, which debentures shall be convertible into Amalfi Shares at a conversion price of CDN$0.50 per share, which replacement debentures and promissory notes shall, subject to adjustment, be exercisable on the same terms and conditions as the currently outstanding CDR convertible debentures and promissory notes, not converted or repaid prior to the closing of the Business Combination.

About CDR

CDR is a privately held coal exploration and production company, incorporated pursuant to the Business Corporations Act (Ontario), headquartered in Toronto, Ontario, Canada with a regional office in Hazard, Kentucky, U.S.A. CDR is concentrating its efforts on developing producing surface coal mining operations in the Central Appalachian coal producing region of the United States, which includes parts of West Virginia, Virginia, Kentucky, Ohio, and Tennessee.

Financial Information of CDR

Based on unaudited management prepared financial statements of CDR for the six month financial period ended June 30, 3009, CDR had current assets of CDN$2,372,294, other assets including principally mineral property interests of CDN$6,229,855, total assets of CDN$8,988,382, current liabilities of CDN$2,243,732 and shareholders' equity of CDN$6,744,650.

CDR Financing

CDR has recently completed a non-brokered private placement ("CDR Private Placement") of 4,354,445 Units of CDR ("Units") at a price of US$0.45 per Unit, for total gross proceeds of US$1,959,500. Each Unit is comprised of one common share of CDR (a "CDR Share") and one common share purchase warrant (a "CDR Warrant"), each CDR Warrant being exercisable for one CDR Share for a period of two years at a exercise price of US$0.50 per share. CDR paid an aggregate of US$183,620 in cash commission to certain agents ("Agents), all of which were at arm's length to each of CDR and Amalfi. CDR also issued CDR Broker Warrants as follows: (a) 29,167 CDR Broker Warrants were issued to Harp Capital Corp.; (b) 5,600 CDR Broker Warrants were issued to Wingate Investment Management; (c) 240,878 CDR Broker Warrants were issued to Transglobe Financial Advisors Inc.; and (d) 29,166 CDR Broker Warrants were issued to Max Capital Markets Ltd. Each CDR Broker Warrant entitles the holder to purchase one CDR Share at a price of US$0.50 for a period of two years from the date of issue.

Big Branch Acquisition

The Big Branch Mining Project is located proximate to Hazard, Kentucky and has the necessary permits for initial production. On September 30, 2009 (the "Closing Date"), CDR acquired the Big Branch Mining Project Assets for a purchase price of US$7,300,000, subject to reduction as described below. The purchase price for the Big Branch Mining Project Assets was payable as to US$2,300,000 in cash and as to US$5,000,000 through the issuance by CDR to the vendor of a convertible note (the "Convertible Note"), bearing an annual interest rate of 12%. Amounts outstanding under the Convertible Note may be converted, at the option of the holder, into CDR Shares at a Conversion Price of US$0.50 per share. Pursuant to the terms of the Convertible Note, if CDR pays the holder the sum of US$3,500,000 on or before the date that is 90 days from the Closing Date, the principal amount of the Convertible Note shall be reduced by US$1,500,000 to US$3,500,000 and shall be considered to be paid in full.

In order to finance its acquisition of the Big Branch Mining Project, CDR borrowed US$4,300,000 (the "Loan") from Juno Special Situations Corporation ("Juno"), a private company which owns approximately 22% of the outstanding CDR Shares. The Loan has a term of 18 months from the date of issue, which may be extended to 30 months at the option of Juno, with 18% interest payable annually plus: (a) a US$2 per ton royalty, which royalty is capped at US$4,300,000; and (b) a US$0.50 per ton royalty.

Sid Mining Project

CDR acquired the Sid Mining Project in October 2008 for a purchase price of US$1,700,000 in cash and a 2% override royalty from all sales of all coal mined from the property.

The Sid Mining Project covers approximately 850 acres and lies within the drainage areas of Cam Johnson Branch and Bowling Creek of the Middle Fork of the Kentucky River, lying in Perry and Breathitt Counties, Kentucky. The seams include the Fireclay (Hazard No. 4), Haddix, Hazard No. 5A, Hazard No. 7, Hazard No. 8, and Hindman (Hazard No. 9). The current permitted area of the Sid Mining Project is 330 acres, with a pending amendment (the "Lease Amendment") to the lease terms which may add 76.38 acres.

Currently all mining operations on the Sid Mining Project are idle. CDR concluded its drilling program after the drillhole PKM-09-05 was drilled in October 2008 and no further drilling activity was undertaken. Core drilling is, as of this date, not taking place on the Sid Mining Project.

Sid Report

The following is information extracted from the Sid Report. A full text version of the Sid Report has been filed on SEDAR and is available at www.sedar.com.

According to the Sid Report, the work done to prepare the two prior existing technical reports in respect of the Sid Mining Project area which were reviewed by Summit was not sufficient to classify the historical estimates as current mineral resources or reserves in accordance with NI 43-101. Summit has used the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Definition Standards on Mineral Resources and Reserves ("CIM Definitions") adopted by the CIM Council on December 11, 2005 during the classification, estimation and reporting of mineral resources and reserves for the Sid Mining Project.

According to the Sid Report, in calculating the in-place and recoverable tons for potential mine site areas on the Sid Mining Project, potential reserve areas were created by Summit in SurvCADD, which is a computer modeling program that utilizes three-dimensional analysis to estimate reserve volumes. In-place tons are calculated by the computer based modeling of applicable parameters (seam thickness and elevation). The model is interpolated, using mostly core data, by the inverse distance squared method. Coal density was assumed to be 80 lbs per cubic foot and rock density was assumed to be 160 lbs per cubic foot.

According to the Sid Report, Summit did not conduct any field work for the preparation of the report and relied on the results of exploration documented in various public and company reports, including drillhole database, mapping, and other information. Of the general sources of information used in the Sid Report, Summit reviewed on-going core drilling data, previous coal reserve studies, mine permit data, economic analyses, and coal quality information provided to CDR by Sid and provided to Summit by CDR.

The author of the Sid Report conducted two site visits to the Sid Mining Project and reviewed the previous mining which had been conducted on the mineral property, the proposed mine plan, the proposed backfill plan, site access roads, and reviewed the current excess spoil storage areas.

According to the Sid Report, the core samples collected and submitted for analysis were handled using methods that are standard for the coal industry. The standard method of coal core handling is for the drillers, once the cores are retrieved to the surface, to place the cores in core boxes designed to accept core of the diameter being drilled. Samples are then trucked from the field to independent laboratories for sample testing.

The sample data received by Summit from CDR originated from the Acculab Coal, Water and Soil Testing Laboratory. Certain date verification procedures were typically employed in order to derive a level of confidence with respect to the integrity of these samples, including, the use of sample labels, sample seals and chain-of-custody recording of the samples.

Resource And Reserve Classification

Potential reserves were classified by Summit as surface mineable (area, point removal and contour mineable), highwall mineable, or auger mineable reserve. Summit based its Sid Mining Project calculations on coal seam thickness instead of total seam (coal plus rock) thickness. Therefore when estimating the recoverable tons, a mining recovery factor was used, and no plant loss was taken into consideration. The mining recovery factor for area, point removal and contour mineable reserves were calculated as 85% of in-place tons for all seams. Reserves classified as highwall mineable had a mining recovery factor of 45% of in-place tons for all seams, and reserves classified as auger mineable were given a mining recovery factor of 30% of in-place tons for all seams.

According to the Sid Report, exploration data on the Sid Mining Project currently under lease allows for all reserves to be classified as either proven or probable reserves. According to Summit, lease negotiations may add potential inferred resources to the property. Potential inferred resources are reported as an in place tonnage and not adjusted for mining losses or recovery. Minimum mineable seam thickness and maximum removable parting thickness are considered; coal intervals not meeting these criteria are not included. Resource tons are estimated by the average thickness times area method. The area is calculated by Summit from the SurvCADD generated coal seam outcrop and by potential lease lines, and the average thickness is assumed to be approximately equal to the average thickness generated for measured and indicated reserves.

The following table details the results of Summit's reserve and resource estimation based on data obtained up to September 30, 2008.



SID MINING PROJECT
ESTIMATED RESERVES & RESOURCES

----------------------------------------------------------------------------
MINERAL RESOURCE TONS MINERAL RESERVE TONS
----------------------------------------------------------------------------
MINING
SEAM TYPE MEASURED INDICATED INFERRED PROVEN PROBABLE
----------------------------------------------------------------------------
Fireclay Contour 234,000 841,000 0 199,000 715,000
----------------------------------------------------------------------------
Auger 223,000 747,000 0 67,000 224,000
----------------------------------------------------------------------------
Haddix Point
Removal 54,000 0 0 46,000 0
----------------------------------------------------------------------------
Contour 260,000 529,000 0 221,000 450,000
----------------------------------------------------------------------------
Auger 150,000 177,000 0 45,000 53,000
----------------------------------------------------------------------------
Hazard Point
No. 5A Removal 71,000 0 0 60,000 0
----------------------------------------------------------------------------
Contour 388,000 172,000 0 330,000 146,000
----------------------------------------------------------------------------
High-wall 756,000 196,000 0 340,000 88,000
Miner
----------------------------------------------------------------------------
Hazard N/A 0 0 0 0 0
No. 7
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Hazard Point 20,000 0 0 17,000 0
No. 8 Removal
----------------------------------------------------------------------------
Area 198,000 0 0 168,000 0
----------------------------------------------------------------------------
Hazard Point 9,000 0 0 8,000 0
No. 9 Removal
----------------------------------------------------------------------------
Area 104,000 0 0 88,000 0
----------------------------------------------------------------------------
Total Surface: 1,338,000 1,542,000 0 1,137,000 1,311,000
----------------------------------------------------------------------------
Total Auger/HW
Mining: 1,129,000 1,120,000 0 452,000 365,000
----------------------------------------------------------------------------
Sub Total: 2,467,000 2,662,000 0 1,589,000 1,676,000
----------------------------------------------------------------------------
Total Measured and Indicated Mineral Resource: 5,129,000 tons.
----------------------------------------------------------------------------
Total Proven and Probable Mineral Reserve: 3,265,000 tons.
----------------------------------------------------------------------------


According to the Sid Report, ongoing lease negotiations may add approximately 13,500,000 tons of inferred resource tons to the existing property. These additional potential inferred resource tons are located south of Bowling Creek and north of Route 28. If these leases are obtained, additional exploration will be required to classify these resource tons as reserve tons.

According to the Sid Report, as of June 30, 2008, the Kentucky Office of Mine Safety and Licensing ("Kentucky OMSL") listed 38 licensed mining operations in Perry County, Kentucky. The counties surrounding and adjacent to the Sid Mining Project in Perry County include Knott, Breathitt, Owsley and Leslie Counties. Another 63 mines are licensed in these counties making a total of over 100 mines licensed in the area. The most recent production records from the state of Kentucky are through the end of 2006, which indicate that a total of over 27 million tons of coal were produced from the five county region near and adjacent to the Sid Mining Project.

Economic Analysis

According to the Sid Report, a cursory project economic review was done by Summit to address the adequacy of financial projections, operating costs, manpower, proposed capital expenditures, and production forecasts for the project. The review was based on a mine plan and proforma financial projections that were provided by Sid. According to Summit, the projected production tonnages are reasonable based on the reserves associated with the property. Annual mine production is forecasted to be 360,000 tons for the first year. The Sid Mining Project mine plan assumes that full production will be around 480,000 tons per year at an estimated selling cost of $70 per ton delivered in 2009, which, according to Summit, is based on the spot coal prices at the time of the preparation of the Sid Report. According to Summit, the estimates of required capital, manpower, and equipment for the surface mine operations are realistic.

The "start of production" net present value ("NPV") was calculated to be US$19.8 million. This NPV, in current dollars applies to the project once production has commenced and the CDR forecast coal sale rate and selling price are achieved. The forecast coal sales rate ranges from 32,000 tons to about 39,600 tons of coal sold per month except for the first five months of production build-up. A cash flow forecast was proposed for a "base case" using coal price variations provided by CDR for 2009, 2010 and 2011. To assess the impact of price on project economics, the sensitivity cases sent out in the table below were prepared which considers the effect of discount rate variation with changes in the selling price on the start-up NPV.



----------------------------------------------------------------------------
SID MINING PROJECT
COAL PRICE, DISCOUNT RATE, PRODUCTION
AND CAPITAL COSTS
SENSITIVITY ANALYSIS ($US)
----------------------------------------------------------------------------
Base Case
----------------------------------------------------------------------------
NPV $ 19,813,179
----------------------------------------------------------------------------
IRR 414%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Coal Price + 10%
----------------------------------------------------------------------------
NPV $ 29,690,761
----------------------------------------------------------------------------
IRR 574%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Coal Price - 10%
----------------------------------------------------------------------------
NPV $ 11,038,398.75
----------------------------------------------------------------------------
IRR 264%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Discount Rate: 15%
----------------------------------------------------------------------------
NPV $ 22,327,716
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Discount Rate: 25%
----------------------------------------------------------------------------
NPV $ 17,662,654
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Production: + 10%
----------------------------------------------------------------------------
NPV $ 24,195,392
----------------------------------------------------------------------------
IRR 545%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Production: - 10%
----------------------------------------------------------------------------
NPV $ 15,430,966
----------------------------------------------------------------------------
IRR 309%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Capital Costs: + 10%
----------------------------------------------------------------------------
NPV $ 19,467,798
----------------------------------------------------------------------------
IRR 376%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Capital Costs: - 10%
----------------------------------------------------------------------------
NPV $ 20,158,560
----------------------------------------------------------------------------
IRR 461%
----------------------------------------------------------------------------


Proposed Exploration and Mining Program

The Sid Mining Project is located approximately two miles northeast of Buckhorn Lake and is approximately one mile south of Crockettsville, at approximately Latitude (North) 37-22-24 and Longitude (West) 83-27-16, in northern Perry and southern Breathitt Counties.

According to the Sid Report, production will begin on the area covered by the Kentucky Department for Surface Mining Reclamation and Enforcement ("DSMRE") Permit 813-0313 ("Sid Permit") issued in respect of the Sid Mining Project with a point removal on the east side due to the availability of spoil storage on an existing strip bench and haul road off of Cam Johnson Branch. While mining the point removal, Sid will begin work on the first cut-through. The beginning months will see production in the Hazard No. 5A and Haddix seams.

Once the point removal is completed, mining of the Hazard No. 5A seam will begin at the cut-through in the Bowling Creek Area. Sid will contour mine the No. 5A seam and the Haddix seam in the area of Hollow Fill No. 4. Contour mining will continue in the Hazard No. 5A seam towards the second cut-through. The second cut-through will complete the mine plan for the first year.

According to the Sid Report, a U.S. Army Corps. of Engineers, 404 Permit (the "404 Permit") will be sought in this time, and the majority of the second year of mining will occur in the Fireclay Seam in the Bowling Creek Area. At the end of year two, mining will be conducted in the Hazard No. 5A seam using excess spoil from the Hazard No. 5A seam to complete the backfill of the Fireclay Seam.

In year three, mining will continue in the Fireclay Seam placing spoil in the hollow fills then the mining the Hazard No. 5A seam with excess spoil backfilling the Fireclay Seam. Contour mining of the Haddix and Fireclay Seams will consist of auger mining those seams. Contour mining of the Hazard No. 5A will consist of high-wall mining of the Hazard No. 5A seam.

According to the Sid Report, the extent of drilling within the project area has been defined of seven coreholes within the project area. Three of these coreholes (PB-01-92, PB-02-92 and PB-03-92) were drilled for another company in 1992. Core holes PKM-09-02, PKM-09-03, PKM-09-04, and PKM-09-05 were drilled by Sid in 2008, and Sid currently intends have plans to drill two more holes (PKM-09-01 and PKM-09-06). According to Sid, the additional coreholes will allow for more distinct classification of the reserve and for expanding the reserve base in the future.

The costs associated with completing the drilling of the coreholes is estimated to be US$12,000 per corehole. In order to resume mining on the Sid Mining Project, in accordance with the mine plan discussed above, the anticipated costs associated are disclosed in the following table derived from the Sid Report. The drilling costs, including the use of equipment and footage charges, consumables and the costs of labour and materials, are based on information provided to Summit by Sid. In addition, other support activities including site preparation, water and power supply, the safe removal and disposal of effluent and a survey control site may be required. The costs for these activities have been generated internally by CDR.



Road Building and Site Preparation US$5,000
Drilling Rig Usage US$5,000
Labour and Materials US$2,000
------------
US$12,000


It is anticipated that the proposed program will be commenced in early 2010, and completed by the end of Q2 2010.

Recommendations of the Sid Report

According to Summit, the information it reviewed indicated that there exists a coal resource on the Sid Mining Project worthy of additional exploration and further development.

Upon review of existing site conditions, according to Summit, adding the additional lease space disclosed in the Sid Report, which includes a haul road for property access, will be of benefit. The mine plan should be enhanced by the existing mine benches which may be utilized for excess spoil storage. The existing and proposed permitting appears to be adequate for the existing reserves. Additional permitting will be required to expand the operation. According to Summit, the pursuit of the issuance of the 404 Permit for the site is extremely important for the project success. The planned drilling of coreholes PKM-09-06 and PKM-09-01 should be continued within the next six to twelve months after the commencement of mining activity to further define the coal reserve, along with additional drilling as adjacent properties are leased.

While estimates of required capital, manpower, and equipment for the surface mine operations are realistic, a regional shortage of qualified labor will have to be addressed upon the project start up and future expansion.

The completion to the present date of any aspects of the feasibility study work that may require time-dependent revision should be addressed. According to Summit, the selling price for the coal has most likely changed since the feasibility work was most recently done.

Summit further recommended that the orderly extraction of the coal reserve in this area should proceed as planned.

The Big Branch Mining Project

The Big Branch Mining Project covers approximately 2,750 acres in the Eastern Kentucky Coalfields, and is bounded to the north by Troublesome Creek, to the south by the town of Amburgey near Elklick Fork of Lotts Creek, to the east by Kentucky Route 1231, and to the west by Clear Creek and Walter's Branch. The project area is located within Knott County, Kentucky. The coal seams include the Hazard No. 5A, Hazard No. 7, Hazard No. 8, Hindman (Hazard No. 9), Skyline (Hazard No. 10), and the Hazard No. 11 seams.

On September 30, 2009 CDR completed the acquisition of the Big Branch Mining Project, being certain coal and surface leases in addition to being named operator under surface mining DSMRE permit 860-0393 (the "Big Branch Permit") on the terms as disclosed above.

According to the Big Branch Report, the Big Branch Permit is an active permit within the property area, but as of the date of the Big Branch Report, only reclamation and mining related to reclamation activities were taking place on the permit area. At least 14 drillholes, including 13 geological logging systems digital logs, have been bored in the property area. Core drilling is not currently taking place on the property.

The Big Branch Report

The following is information extracted from the Big Branch Report. A full text version of the Big Branch Report has been filed on SEDAR and is available on www.sedar.com.

According to the Big Branch Report, Summit was aware of no previous reserve estimates for the subject property. However, in February of 2008 an exploration map was prepared by Big Branch for the unpermitted area to the north of the Big Branch Permit. The Big Branch Permit showed prospect holes CRCC-07-18 through CRCC-07-24 within the northern area. Summit incorporated these logs within the results shown in the Big Branch Report. Summit used the CIM Definitions during the classification, estimation and reporting of reserves for the Big Branch Mining Project.

In calculating the in-place and recoverable tons for potential mine site areas, potential reserve areas were created by Summit in SurvCADD. Coal density was assumed to be 80 lbs per cubic foot and rock density was assumed to be 160 lbs per cubic foot.

According to the Big Branch Report, Summit did not conduct any field work, other than site reconnaissance, for the preparation of the report and relied on the results of exploration documented in various public and company reports, including drillhole database, mapping, and other information. The general sources of information used in the Big Branch Report which Summit reviewed include recent core drilling data, mine permit data, and coal quality information provided to CDR by Big Branch, which information was provided to Summit by CDR.

The author of the Big Branch Report conducted a site visit to the property and reviewed the previous mining which had been conducted on the Big Branch Permit area within the property, the proposed mine plan, the site access roads, and the proposed backfill plan.

According to the Big Branch Report, the core samples collected and submitted for analysis were handled using methods that are standard for the coal industry. The standard method of coal core handling is for the drillers, once the cores are retrieved to the surface, to place the cores in core boxes designed to accept core of the diameter being drilled. Samples are then trucked from the field to independent laboratories for sample testing. The sample date received by Summit from CDR originated from Big Branch and SGS North America, Inc. Certain data verification procedures were typically employed in order to derive a level of confidence with respect to the sample integrity, including the use of sample labels, sample seals and chain-of-custody recording for the samples.

Reserve Classification

According to the Big Branch Report, potential reserves were classified as surface mineable (area, point removal and contour mineable), highwall mineable, or auger mineable reserve. Summit based its Big Branch Report calculations on coal seam thickness instead of total seam (coal plus rock) thickness. Therefore when estimating the recoverable tons, a mining recovery factor was used, and no plant loss was taken into consideration. The mining recovery factor for area, point removal and contour mineable reserves were calculated as 85% of in-place tons for all seams. Reserves classified as highwall mineable had a mining recovery factor of 45% of in-place tons for all seams, and reserves classified as auger mineable were given a mining recovery factor of 30% of in-place tons for all seams.

According to the Big Branch Report, exploration data on the Big Branch Mining Project currently under lease allows for all reserves to be classified as either proven or probable reserves. According to the Big Branch Report, on-going lease negotiations may add potential inferred resources to the property. Potential inferred resources are reported as an in place tonnage and not adjusted for mining losses or recovery. Minimum mineable seam thickness and maximum removable parting thickness are considered; coal intervals not meeting these criteria are not included. Resource tons are estimated by the average thickness times area method. The area is calculated by Summit from the SurvCADD generated coal seam outcrop and by potential lease lines and the average thickness is assumed to be approximately equal to the average thickness generated for measured and indicated reserves.

According to the Big Branch Report, as of June 30, 2008, the Kentucky OMSL listed 30 licensed mining operations in Knott County, Kentucky. The counties surrounding and adjacent to the Big Branch Mining Project in Knott County include Perry, Letcher, Magoffin, Breathitt, Floyd and Pike Counties. Another 326 mines are licensed in these counties making a total of over 350 mines licensed in the area.

The most recent production records from the state of Kentucky are through the end of 2006, which indicate that a total of over 67 million tons of coal was produced from the seven county region near and adjacent to the Big Branch Mining Project.

According to the Big Branch Report, Big Branch began operating the surface mine on May 19, 2004. As of the date of the Big Branch Report, only reclamation and incidental mining in the Hazard No. 9 seam related to reclamation activities (totaling approximately 15,000 tons since February of 2009) had taken place on this permit area. The Big Branch surface mine has produced about 765,000 tons since 2004.

The results of the reserve study for the Big Branch Mining Project are summarized in the table below:



----------------------------------------------------------------------------
BIG BRANCH MINING PROJECT
ESTIMATED RESERVES AND RESOURCES
----------------------------------------------------------------------------
Mineral Resource Tons Mineral Reserve Tons
----------------------------------------------------------------------------
Seam Measured Indicated Inferred Proven Probable
----------------------------------------------------------------------------
5 Top 477,767 182,881 0 406,102 155,449
----------------------------------------------------------------------------
5 Middle 928,788 325,328 0 789,470 276,529
----------------------------------------------------------------------------
5 Bottom 1,351,884 306,816 0 1,149,101 260,794
----------------------------------------------------------------------------
7 1,492,389 64,913 0 1,268,531 55,176
----------------------------------------------------------------------------
8 Top 294,674 0 0 250,473 0
----------------------------------------------------------------------------
8 Middle 505,454 0 0 429,636 0
----------------------------------------------------------------------------
8 Bottom 398,992 0 0 339,143 0
----------------------------------------------------------------------------
Sub Total: 5,449,948 879,939 0 4,632,456 747,948
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Totals: 6,329,887 Mineral Resource Tons 5,380,404 Mineral Resource Tons
----------------------------------------------------------------------------


According to the Big Branch Report, an economic analysis of mineral resources for the property was done by Summit to address the adequacy of financial projections, operating costs, manpower, proposed capital expenditures and production forecasts for the project. According to Summit, the projected production tonnages are reasonable based on the reserves associated with the property. Annual mine production as forecasted to be approximately 1,200,000 tons when full production is achieved. The estimated sales price used is US$60 per ton delivered in 2009, which, according to Summit, may be slightly high based on the spot coal prices as of the date of the Big Branch Report.

Approximately 5,450,000 Measured Resource tons are within the property, of which about 4,630,000 Proven Reserve tons exist. Approximately 880,000 Indicated Resource tons are within the property, of which nearly 750,000 Probable Reserve tons exist. Therefore, the portions of the mineral resources that are not reserves (about 950,000 tons) do not have demonstrated economic viability.

The "start of production" NPV was calculated to be approximately US$82.4 million. This NPV, in current dollars applies to the project once production has commenced and CDR forecast coal sale rate and selling price are achieved. The forecast coal sales rate range from 60,000 tons to about 100,000 tons of coal sold per month except for the first few months of production build-up. A cash flow forecast was proposed for a "base case" using coal price variations, provided by CDR for 2009, 2010 and 2011. To assess the impact of price on project economics, the following sensitivity cases set out in the table below were prepared which considers the effect of discount rate variation with changes in the selling price and capital cost on the start-up NPV.



----------------------------------------------------------------------------
BIG BRANCH MINING PROJECT
COAL PRICE, DISCOUNT RATE, PRODUCTION
AND CAPITAL COSTS
SENSITIVITY ANALYSIS
----------------------------------------------------------------------------
Sensitivity Analysis 0
----------------------------------------------------------------------------
Base Case
----------------------------------------------------------------------------
NPV $ 82,410,467
----------------------------------------------------------------------------
IRR 582%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Coal Price + 10%
----------------------------------------------------------------------------
NPV $ 103,347,811
----------------------------------------------------------------------------
IRR 777%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Coal Price - 10%
----------------------------------------------------------------------------
NPV $ 63,865,504
----------------------------------------------------------------------------
IRR 399%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Discount Rate: 15%
----------------------------------------------------------------------------
NPV $ 95,829,140
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Discount Rate: 25%
----------------------------------------------------------------------------
NPV $ 71,471,796
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Production: + 10%
----------------------------------------------------------------------------
NPV $ 90,887,686
----------------------------------------------------------------------------
IRR 739%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Production: - 10%
----------------------------------------------------------------------------
NPV $ 73,933,247
----------------------------------------------------------------------------
IRR 453%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Capital Costs: + 10%
----------------------------------------------------------------------------
NPV $ 81,763,658
----------------------------------------------------------------------------
IRR 522%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Capital Costs: - 10%
----------------------------------------------------------------------------
NPV $ 83,057,275
----------------------------------------------------------------------------
IRR 658%
----------------------------------------------------------------------------


Proposed Exploration and Mining Program

The primary coal seams that have been historically mined in close proximity to the project area are, in a stratigraphic ascending order, the Hazard No. 5A, Hazard No. 7, Hazard No. 8, Hindman (Hazard No. 9), Skyline (Hazard No. 10), and the Hazard No. 11 seams.

According to the Big Branch Report, CDR is projected to begin production on the Big Branch Permit in 2009. The operation will utilize two spreads of equipment, with the first spread starting production in the first month and the second spread starting production in the third month. A partial third spread of equipment may be necessary in order to ramp up and maintain production at 100,000 tons per month. However, for the purposes of the preliminary mine plan there are only two spreads of equipment. The seams being mined are the Hazard No. 5, Hazard No. 7, and Hazard No. 8 seams.

According to the Big Branch Report, production for the first spread is estimated to begin in the first month and will begin in Area A, working south-east from the current pit operations in the Hazard No. 5 seam. Operations in this area are projected to end during the ninth month of operation. The first spread will then move to a second area for another month, and then to the western side of the lease area, where it will begin contour, point removal and area operations until the end of the twenty-first month.

Production for the second spread is estimated to begin in the third month and is projected to remove this point until the eighth month, where operations will then continue with another area until the eighteenth month. The second spread will then move to where it will begin contour, point removal and area operations until the end of the twenty-first month.

According to the Big Branch Report, the extent of known drilling within the project area has been characterized by the drilling of 14 known coreholes (including digital logs) within the project area. Additional coal sections were taken by Big Branch. According to the Big Branch Report, no additional corehole drilling is planned at this time. However, additional coreholes will allow for more distinct classification of the reserve, in both the northern area of the property and in possible remaining 11 seam reserves, and for expanding the reserve base in the future.

The anticipated start-up capital expenditures associated with the Big Branch Project are noted below. The costs for these activities have been generated internally by CDR.



Insurance US$124,128
Ancillary Equipment US$199,775
Cat Equipment - Lease Prepayment US$414,656
Working Capital US$2,429,441
Undercarriage Replacements US$250,000
Other Development US$282,000
---------------
US$3,700,000


Recommendations of the Big Branch Report

According to Summit, the information it reviewed indicated that there exists a coal resource on the Big Branch Mining Project worthy of additional exploration and further development.

Upon review of the existing site conditions, Summit indicated that acquiring the Big Branch Permit will be of benefit to mining operations. Most of the reserve left in this area lies in the Hazard No. 5A, Hazard No. 7 and Hazard No. 8 seams. However, one small knob may contain reserves in the Hazard No. 11 seam. Also, the existing mountaintop removal areas located within this permit could enhance the overall mine plan by providing additional areas to place excess spoil. The planned drilling of additional coreholes should commence as adjacent properties are leased.

Existing and proposed permitting appears to be adequate for the existing reserves. Additional permitting will be required to expand the operation. Summit recommended that the issuance of the USACE 404 Permit for the Big Branch Project should be diligently pursued.

Estimates of required capital, manpower, and equipment for the surface mine operations are realistic. A regional shortage of qualified labor will have to be addressed upon the project start up and future expansion.

The completion to the present date of any aspects of the feasibility study work that may require time-dependent revision is recommended. According to Summit, the selling price for the coal has most likely changed since the feasibility work was most recently done.

Summit further recommended that the orderly extraction of the coal reserve in this area should proceed as planned.

Qualified Person

Phillip Lucas, P.E., P.L.S., of Summit Engineering, Inc., a Professional Engineer in the State of Kentucky, West Virginia, Virginia and Arkansas, a member of the Society of Mining Engineers of Kentucky, is the author of the Sid Report and an independent Qualified Person in accordance with the requirements of NI 43-101. He has reviewed and approved the technical disclosure in this news release.

Conditions Precedent to Closing the Business Combination

The completion of the Business Combination is subject to the approval of TSX Venture and all other necessary regulatory approval. The completion of the Business Combination is also subject to additional conditions precedent, satisfactory completion of due diligence reviews by the parties, board of directors approval of Amalfi and CDR, the entering into of a formal agreement, the entering into of employment and non-competition agreements with certain senior officers of CDR, and certain other usual conditions.

Trading of the Amalfi Shares will remain halted pending receipt of certain documentation by the TSX Venture.

As indicated above, completion of the Business Combination is subject to a number of conditions, including but not limited to, TSX Venture acceptance and shareholder approval. The Business Combination cannot close until the required shareholder approval is obtained. There can be no assurance that the Business Combination will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Information Circular of the Corporation to be prepared in connection with the Business Combination, any information released or received with respect to the Business Combination may not be accurate or complete and should not be relied upon. Trading in the securities of the Corporation should be considered highly speculative.

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Neither Amalfi nor CDR will update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by Amalfi and CDR.

The securities of Amalfi being offered have not been, nor will be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements. This release does not constitute an offer for sale of securities in the United States.

Neither TSX Venture nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Amalfi Capital Corporation
    Raymond Ludwig
    President
    (403) 585-0450
    or
    CDR Minerals Inc.
    James Hannah
    President
    (416) 861-8775