Heap Leaching Systems S.A. de C.V. International Cyanide Management Code Summary Audit Report

International Cyanide Management Code Operational Certification Audit of: HLS Warehouse and Supply Chain Management Pre-Operational Certification Audit of: HLS ISO Tank Loading Operation Submitted to: The International Cyanide Management Institute 1400 I Street, NW – Suite 550 Washington, DC 20005 USA 2015 Audit Cycle

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Table of Contents HLS Supply Chain Summary.......................................................................................................... 2 Company Summary .................................................................................................................... 2 Company Names & Contact Information ................................................................................... 2 Supply Chain Overview .............................................................................................................. 3 HLS Supply Chain Certification Audit – ........................................................................................ 5 Auditor’s finding and attestation .................................................................................................... 5 Auditor’s Finding ............................................................................................................................ 6 HLS Supply Chain Certification Audit Results .............................................................................. 7 1. OPERATIONS: Design, construct and operate cyanide production facilities to prevent release of cyanide. ....................................................................................................................... 7 2. WORKER SAFETY: Protect workers’ health and safety from exposure to cyanide.......... 10 3. MONITORING : Ensure that process controls are protective of the environment. ............ 13 4. TRAINING: Train workers and emergency response personnel to manage cyanide in a safe and environmentally protective manner.................................................................................... 14 5. EMERGENCY RESPONSE: Protect communities and the environment through the development of emergency response strategies and capabilities. ............................................. 15 HLS Consignor and Transporter Audit Results ............................................................................ 20 1. TRANSPORT: Transport cyanide in a manner that minimizes the potential for accidents and releases. .............................................................................................................................. 20 2. INTERIM STORAGE: Design, construct and operate cyanide trans-shipping depots and interim storage sites to prevent releases and exposures. ........................................................... 25 3. EMERGENCY RESPONSE: Protect communities and the environment through the development of emergency response strategies and capabilities .............................................. 26 Port of Guaymas Due Diligence Review Results. ........................................................................ 32

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 1 of 33

July 22, 2015 Date

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HLS Supply Chain Summary Company Summary Company Names & Contact Information Heap Leaching Systems S.A. de C.V. Name and location of Supply Camino a Estación Torres Km 3.5, Municipio de La Colorada, Sonora, Chain Consignor: Mexico

Name and contact Fatima Celaya information for General Manager HLS: Email: [email protected]

Name and Addresses of Transporter and Port included in this Supply Chain:

Names and contact information for Transporter and Port:

Transportes Suri S.A. de C.V. (Suri) Fracc. Las Batuecas S/N, Col. Termoelectrica Guaymas, Sonora 85430, Mexico Port of Guaymas Interior Recinto Portuario s/n Col. Punta Arena Guaymas, Sonora, C.P. 85430, Mexico Suri: Lic. Gaspar Arellano R. Unidad de Negocio Nogales - Division MRP Transportes Suri S.A. de C.V. Email: [email protected] Tel. + 52(622) 222.5530 & 224.1885 Port of Guaymas: Lc. Arturo E. Sandoval Soto Jefatura de Seguridad Y Ecologia Email: [email protected] Tel. (622) 225 2267

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 2 of 33

July 22, 2015 Date

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Supply Chain Overview The Heap Leaching Systems, S.A. de C.V. (HLS) company maintains a solid sodium cyanide supply chain that is compliant with the International Cyanide Management Code (ICMC). The HLS supply chain includes the following: 1. Receipt of cyanide at the Port of Guaymas 2. Truck transport of solid sodium cyanide to the HLS warehouse and to mine customers using an ICMC-certified truck transporter (Transportes Suri S.A. de C.V. – “Suri”) 3. The warehouse and distribution of solid sodium cyanide from the HLS warehouse 4. Pre-Operational State: Transloading of solid sodium cyanide from 1 ton boxes to ISO tanks (not operational yet at the time of the audit) **NOTE: All sections of this report that are specific to the pre-operational audit of the ISO tank loading operation appear in blue italic text. The HLS facility is located outside of Hermosillo, Sonora, Mexico. The facility consists of a building with cyanide warehouse, a box to ISO tank transfer area (pre-operational state at the time of this audit), bag wash area (pre-operational), and offices. The brick facility is built on a concrete slab. The sodium cyanide packaged in a 1-ton bag-in-box configuration is offloaded from trucks and is stored for transfer into ISO containers that are mounted on truck trailers (chassis) or for distribution to mines in boxes. At the time of the audit, HLS was shipping all cyanide with an ICMC-certified trucking company Transportes Suri S.A. de C.V. – “Suri”. Suri’s third-party ICMC certification was announced by the ICMI on its web-site on September 29, 2014. HLS maintains procedures to closely monitor all aspects of ICMC compliance of its transportation contractors. HLS also maintains a formally documented policy that only ICMC-certified Signatory transportation partners will be used for cyanide shipment. HLS receives its cyanide from the TaeKwang Industrial Company and the TongSuh Petrochemical Company in Ulsan, South Korea. The cyanide is transported to the Port of Guaymas using the Samsung C&T Corporation certified supply chain. HLS and Samsung jointly track shipments and plan for emergency response. Although the Port of Guaymas is included in the Samsung certified supply chain, HLS also performed a Due Diligence review of the Port of Guaymas as part of its supply chain. HLS built the warehouse facility in an existing secure building complex in 2014. All building areas are built on concrete. The floor of the warehouse and future transloading operation was completely re-poured to ensure that the containment within the building is ensured. HLS plans to maintain the ISO Tanks when this part of the operation is started. Suri (the certified trucking company) maintains tractors and trailers. Route risk assessments are performed by Suri. HLS maintains all necessary emergency response equipment in case there is an on-site or transport emergency situation.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 3 of 33

July 22, 2015 Date

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Audit Implementation and Conclusions The audit was conducted through a review of procedures and records, observations of warehouse material handling activities including the loading of boxes into trailers. Interviews were held with the HLS General Manager, Operations Manager, Logistics Manager, Marketing Manager, Warehouse Operators, Supervisors, Security Guards, and Suri Manager and Drivers. The auditors used the ICMI Cyanide Production and Transportation Protocols to evaluate International Cyanide Management Code (ICMC) compliance. The audit was based on a sampling of information and therefore deficiencies may exist which have not been identified. The on-site portion of the audit was conducted on May 12-14, 2015. The evaluation of the on-site due diligence evaluation of the Port of Guaymas was done following the audit. The Suri (Transportes Suri S.A. de C.V.) ICMC certification was announced on the ICMI web-site in September 2014. The HLS supply chain audit was performed by an independent third-party audit team who was pre-approved by the ICMI as Lead Auditor for all types of International Cyanide Management Code (ICMC) audits and as a technical experts for ICMC audits of cyanide transportation and production operations. All supply chain components noted above were included in this ICMC Certification Audit. Each organization noted in this report was found to be in FULL COMPLIANCE with ICMC requirements.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 4 of 33

July 22, 2015 Date

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HLS Supply Chain Certification Audit – Auditor’s finding and attestation Cyanide management practices for the HLS Supply Chain were evaluated for ICMC compliance using the ICMI Cyanide Production and Transportation Verification Protocol. HLS internal Standards, Policies, Practices, and Procedures regarding the management of the cyanide operations and overall Supply Chain management were reviewed. The results of the this certification audit indicate that HLS and all portions of its Supply Chain are in FULL COMPLIANCE with International Cyanide Management Code requirements.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 5 of 33

July 22, 2015 Date

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Auditor’s Finding All HLS cyanide supply chain management practices, HLS warehouse operations, and truck delivery operations using a certified trucking company (Suri) were found to be in FULL COMPLIANCE with the requirements of the International Cyanide Management Code according to the ICMI Cyanide Production and Transportation Verification Protocols. This audit was also used to evaluate the pre-operation state of the ISO loading operation. The ISO loading operation was also found to be in compliance with the pre-operational ICMI Production Protocol. All personnel were very well prepared for the audit. The audit team found that the overall level of preparedness and understanding of ICMC requirements was excellent. The HLS Sodium Cyanide Supply Chain is in full compliance with the ICMI International Cyanide Management Code.

Audit Company: Lead / Technical Auditors:

Date(s) of Audit:

MSS Code Certification Service www.mss-team.com Nicole Jurczyk E-mail: [email protected] Bruno Pizzorni E-mail: [email protected] May 12-14, 2015

I attest that I meet the criteria for knowledge, experience and conflict of interest for Code Certification Audit Team Leader, established by the International Cyanide Management Institute and that all members of the audit team meet the applicable criteria established by the International Cyanide Management Institute for Code Verification Auditors. I attest that the Audit Reports accurately describe the findings of the certification audit. I further attest that the certification audit was conducted in a professional manner in accordance with the International Cyanide Management Code Verification Protocol for Cyanide Production Operations and using standard and accepted practices for health, safety and environmental audits. HLS Supply Chain Name of Operation

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor

Signature of Lead Auditor Page 6 of 33

July 22, 2015 Date

July 22, 2015 Date

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HLS Supply Chain Certification Audit Results 1. OPERATIONS: Design, construct and operate cyanide production facilities to prevent release of cyanide. Production Practice 1.1: Design and construct cyanide production facilities consistent with sound, accepted engineering practices and quality control/quality assurance procedures. The operation is

in full compliance with Production Practice 1.1

Summarize the basis for this Finding: The HLS cyanide warehouse was renovated for cyanide storage and transloading purposes from an existing building using accepted engineering practices. QA/QC records from different parts of the building renovation were reviewed and were found to be acceptable. The overall suitability of the facility for cyanide warehouse and transloading purposes was evaluated by a professional engineer. The floor where cyanide is stored and transloading operations will be performed was newly constructed as part of the renovation of the existing structure. The auditors reviewed the Geotechnical Soil Study - Slab Design, and the concrete QA/QC testing, all tests were acceptable. Ceilings, ventilation systems, drainage, and secondary containment systems have been refurbished and/or installed. HLS had a professional structural engineer evaluate the suitability of the facility. The report, signed by a Professional Engineer, confirmed that the building is appropriate for transloading and storage of solid cyanide. The materials used in the construction and renovation of the warehouse are appropriate for the use of the facility. There are no solutions used in this operation, there is only solid sodium cyanide. The warehouse and transloading areas have concrete floors with epoxy sealed joints on both the ceilings and floors; the wash water collection system is made of PVC. The warehouse and transloading operations areas have a concrete slab reinforced with steel mesh built on top of the existing floor which is 10 cm thick as additional protection with curbing which provides a competent barrier to leakage. HLS is committed to developing procedures, operational controls, and/or installing level indicators to prevent overfilling of ISO tanks and/or wash water tanks prior to the start of ISO tank loading operations.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 7 of 33

July 22, 2015 Date

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Production Practice 1.2: Develop and implement plans and procedures to operate cyanide production facilities in a manner that prevents accidental releases. The operation is

in full compliance with Production Practice 1.2

Summarize the basis for this Finding: Extensive operational and emergency response procedures are maintained by HLS specifically for this operation. Procedures that address normal operations, upset conditions, and emergency events including conveyor failure are addressed in the Emergency Response Plan (ERP). All procedures reviewed were found to be comprehensive and appropriate for the operation. Operating procedures are formally maintained, reviewed at regular frequencies, and approved prior to use. The appropriate control of operating procedures and the management of change (MOC) procedure was fully implemented in 2015. At the time of the audit, there had been no changes processed using the formal MOC process. Preventive maintenance in the HLS supply chain is managed by HLS for the warehouse facility and by Suri for the maintenance of the tractors and trailers. Preventive maintenance for transportation equipment was evaluated during the Suri certification audit. HLS has formal procedures and checklists to inspect and maintain all concrete for cracks, clean out trenches and check sumps and sump pumps. Maintenance records were available for review and were acceptable. The only equipment requiring calibration is the personal HCN monitors used during warehouse, unloading, and loading operations. These are calibrated at manufacturer recommended frequencies. Records were available for review and were found to be acceptable. The procedure for the management of contaminated solids and water, is in place to prevent unauthorized/unregulated discharge to the environment of any cyanide-containing water. The procedure calls for the testing of the wash water tanks prior to discharge of the water into the environment. If there is any level of cyanide detected, then hypochlorite is added to neutralize the cyanide to acceptable levels. The facility has a procedure for the management of contaminated solids and water. The procedure details the decontamination and disposal procedures for all solids such as bags, boxes, Tyvek, etc. The material is stored in a covered storage area and is sent off with a certified hazardous waste service provider. Only one waste shipment had been made at the time of the audit. Records were available and were found to be acceptable. Solid cyanide in wooden boxes is stored in the warehouse with adequate ventilation provided by 3 large air ventilation units at the top of the wall. Additional vents, windows, and large roll-up doors are also available

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 8 of 33

July 22, 2015 Date

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for increased air flow. The cyanide storage warehouse has a concrete roof that was recently coated with a waterproof layer to ensure that the cyanide does not come in contact with water. The surfaces adjacent to the warehouse are graded away from the warehouse to prevent ponding of water near the walls. The facility is within a locked and fenced area with restricted access. Security guards are present 24 hours a day, 7 days a week. Gates are kept locked. Visitors must sign in upon entry. All boxes in storage at the time of the audit had labels in Spanish. A checklist is used to make sure that boxes are appropriately labeled when they are received into the warehouse. Records were complete and readily available.

Production Practice 1.3: Inspect cyanide production facilities to ensure their integrity and prevent accidental releases. The operation is

in full compliance with Production Practice 1.3

Summarize the basis for this Finding: Periodic inspections of the warehouse are performed and records are maintained. HLS performs inspections on an established frequency sufficient to assure and document that they are functioning within desired parameters. These include weekly inspections of emergency response equipment and materials, monthly reviews of extinguishers, pre-operational inspections before operations involving cyanide handling, and inspections of the documentation, boxes and transportation equipment. Sufficient inspection records and examples of completed forms and spreadsheets from 2015 were available for review to confirm that HLS conducts the inspections on a regular basis. Inspections are documented, contain the name of the inspector, and the date of the inspection. The forms call for deficiencies observed during the inspection to be documented. No deficiencies had been noted on the inspection forms that were available for review. Interviews demonstrated awareness that corrective actions need to be documented. Records are retained in hard copy and were acceptable.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 9 of 33

July 22, 2015 Date

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2. WORKER SAFETY: Protect workers’ health and safety from exposure to cyanide. Production Practice 2.1: Develop and implement procedures to protect plant personnel from exposure to cyanide. The operation is

in full compliance with Production Practice 2.1

Summarize the basis for this Finding: For normal operations, the facility has procedures for inventory control, dry box, and ISO container loading, forklift operating, contamination administration, cyanide detector calibration, change management, hazardous waste management and cyanide sampling procedure. Worker exposure to cyanide is minimized during unloading and loading operations through the use of Tyvek® chemical suits, gloves, boots, goggles, and hard hats. Portable HCN monitors are used at all times. HLS is committed to expanding its procedures for the protection of worker safety prior to the start of ISO tank loading operations. One such additional procedure will be the addition of the dust collector filter change-out procedure. Procedures exist for normal and abnormal operations. Emergency scenarios are addressed in the ERP. All procedures reviewed were found to be comprehensive and appropriate for the operation. The ERP describes the procedures to follow in case of upset conditions during cyanide transport or storage of sodium cyanide for the following emergency scenarios: sodium cyanide spills, power and equipment failure, spills with fire or explosion and HCN generation. The preventive maintenance program at the facility is primarily comprised of inspections of the facility and equipment. HLS is committed to developing and implementing preventive maintenance programs and document maintenance activities for ISO loading equipment and ISO tanks prior to the start of ISO tank loading operations. Three such additional procedures will be: 1) the dust collector filter change-out procedure, 2) the conveyor equipment preventive maintenance procedure, and 3) the ISO tank preventive maintenance procedure. The facility has the procedure Change Management to review proposed operational changes. The procedure was fully implemented in May 2015. At the time of the audit, there had not been any changes that needed to be processed using the formal MOC procedure. Documentation changes, physical changes, and operational changes are intended to be processed using this procedure.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 10 of 33

July 22, 2015 Date

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Operators participate in the development and roll-out of procedures. Interviews were held and indicated that the operational and safety procedures were developed together with operators and supervisors. Employee participation in the development and maintenance of safety practices was found to be acceptable. The facility uses personal monitoring devices when working in unloading and loading activities to confirm that safe working conditions exist and that cyanide levels are below 4.7 ppm. Operators demonstrated good awareness of the control set points and indicated that they would leave the area if HCN monitors were alerting them to unsafe work conditions. HLS maintains a procedure for the calibration of HCN personal monitors. Monitors are scheduled to be calibrated every 3 months according to manufacturer's specification. Three people at HLS were trained to perform the calibration by the calibration equipment company. The Safety Supervisor is responsible for ensuring that calibrations are done properly and according to schedule. Calibration records for 2015 were available for review and were acceptable. No activities have been identified as having elevated HCN or cyanide dust levels. HLS does, however, require that operators wear personal protective equipment such as HCN monitors, chemical suits, boots, gloves, and goggles at all times. Operator interviews indicated that there are no activities where the HCN monitors show re-occurring unsafe working conditions. Procedures require that at least two people work in the operation at all times. In practice, operators reported that three people work at the facility together at all times. Additionally, security guards are present at all times to manage any urgent or emergency situations. Operators have a medical exam when they are hired and then at least annually thereafter. The exam includes checks of: blood pressure, heart function, vision and a general fitness for duty. Medical exam records for all operators and supervisors were current for 2015. Operators have full chemical suits, boots, hard hat, goggles, and gloves that are removed prior to leaving the warehouse area. They remove any clothing that has potentially been in contact with cyanide after cargo handling operations. Visitors are escorted at all times. Operations are stopped if visitors are in the area. Visitors are not allowed to go into areas where they could be in contact with cyanide. Visitors must follow the same shoe decontamination procedures as employees. A hypochlorite bath is available at the exit and must be used each time. This practice was observed during the audit. Appropriate cyanide signs and PPE signs are present in all operational areas. Warning signs and PPE requirement signs were observed in several locations. Signage was considered to be acceptable by the audit team. Eating, drinking, smoking, open flames are prohibited where there is a potential for cyanide contamination. Employees showed very good awareness of the restrictions and of the potential dangers of not following the rules. Signs that explain these prohibited activities are at the entrance to the cyanide warehouse and the unloading areas.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 11 of 33

July 22, 2015 Date

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Production Practice 2.2: Develop and implement plans and procedures for rapid and effective response to cyanide exposure. The operation is

in full compliance with Production Practice 2.2

Summarize the basis for this Finding: HLS maintains a comprehensive ERP and procedures for rapid and effective response to cyanide exposure. The ERP covers the process that is to be followed in the event that cyanide is ingested, skin or eye contact made, and/or inhaled. The cyanide antidote procedure is also detailed. The medical response procedure is available for a medical emergency responder and the antidote response kit was properly stored. There is an adequate water supply, if required, for cyanide decontamination. Showers and eyewash stations are located inside and outside the warehouse. Water is supplied by the city network. The eye wash and emergency showers are tested daily. Inspection and testing records were reviewed and were found to be complete. The facility has water, a cyanide emergency kit, an oxygen tank, antidote and a means of communication readily available at the facility. Emergency equipment is inspected on a weekly basis. The emergency equipment was available during the audit. The cyanide emergency kit has the necessary equipment to respond in the event of a worker’s exposure to cyanide. HLS appropriately maintains the emergency response equipment and the antidote to ensure their availability during an emergency. Antidote is stored in locations that are temperature controlled. The medicine is stored in a manner that protects it from moisture and from light, as recommended by the manufacturer. Emergency response equipment is stored and tested according to manufacturer’s recommendations. Safety Data Sheets and first aid procedures are available to workers in operational areas in local language, Spanish. This supply chain does not include cyanide solution. No solutions or process tanks are in the operation. Wash water that is potentially contaminated with cyanide is appropriately labelled, tested, and treated to ensure destruction of the cyanide. Cyanide safety training is given annually and employees and supervisors demonstrated a good understanding of the decontamination policy and the need for safety precautions. The safety training and procedures of the facility were found to be acceptable.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 12 of 33

July 22, 2015 Date

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The Operations Supervisor is a trained Emergency Medical Technician (EMT) and holds a university degree in health and safety. Medical treatment beyond first aid would be done by a licensed physician. Cyanide training and a cyanide emergency kit with antidote was delivered to the local clinic in April 2015 (Centro Medico Del Noroeste S.A. de C.V.). The hospital confirmed receipt. The ERP covers transfer of exposed victims to a medical center. Trained medical emergency response personnel are readily available to transport an exposure victim to a qualified medical facility. There is no need for additional procedures to be developed by the facility. The training records from the training with medical staff from the local clinic were on file. Emergency response drills are conducted annually by HLS. Spill and exposure scenarios tested were deemed to be appropriate for the operations. The most recent emergency response drill that evaluated HLS’ readiness to respond to a cyanide exposure emergency was held in April 2015. Records were available and were complete. HLS has implemented the procedure Reporting and Incident Investigation. This procedure is used if there is a safety or environmental incident. According to interviews, procedures and practices would be extensively reviewed in the event of an incident to determine the need for revision.

3. MONITORING: Ensure that process controls are protective of the environment. Production Practice 3.1: Conduct environmental monitoring to confirm that planned or unplanned releases of cyanide do not result in adverse impacts. The operation is

in full compliance with Production Practice 3.1

Summarize the basis for this Finding: The facility does not discharge directly or indirectly to surface water. There have been no known spills or releases of cyanide since the beginning of operations at this site or in this supply chain. This facility only stores and distributes solid cyanide. There are no known emissions of hydrogen cyanide gas from this site or in this supply chain. There is no cyanide processing at this site. It is only used to store and distribute solid cyanide. No spills have occurred at this site or in this supply chain and there are no discharges to air, water, or groundwater. The 3.1 ICMC protocol sections were found to be “Not Applicable” to this facility or supply chain.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 13 of 33

July 22, 2015 Date

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4. TRAINING: Train workers and emergency response personnel to manage cyanide in a safe and environmentally protective manner. Production Practice 4.1:

The operation is

Train employees to operate the plant in a manner that minimizes the potential for cyanide exposures and releases. in full compliance with Production Practice 4.1

Summarize the basis for this Finding: HLS has formal training programs that include cyanide awareness training, and periodic refresher training on all procedures. The training procedure includes a checklist of the topics, and defines the training requirements for administrative, operations and security personal. Interviews with site personnel confirmed they had completed hazard awareness training. The auditors found that all the warehouse workers have been trained on cyanide safe management practices. The records include the names of the employee and the trainer, the date, topics covered, and tests demonstrating understanding. Records are retained throughout an individual’s employment documenting the training they receive. The facility training program includes training courses in the operational procedures, in the use of personal protective equipment (PPE) and the meaning of warning signs posted in the work areas. Each operational procedure includes the PPE required to perform the job. Auditors found all personnel were trained on the operational procedures, including the use of PPE. Employees are trained to perform operational tasks to minimize risks to personal safety and the environment. Through interviews, employees showed good awareness of procedural requirements for both normal and upset operating conditions. The facility uses the work procedures as training materials. All necessary job requirements are included in the procedures, and therefore the training. A Training Plan was available for review. The Training Plan identifies all job-specific training needs. The training is provided internally by the Operations Supervisor who is also an Emergency Medical Technician (EMT) and has a Bachelor's degree in Health & Safety. He has mining experience, experience working with cyanide, and was deemed to be qualified to provide the safety and operational training. All personnel are trained internally on cyanide awareness prior to working in the facility. Procedural training is also completed prior to working with cyanide.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 14 of 33

July 22, 2015 Date

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Training effectiveness is evaluated through testing and through observation of on-the-job performance by the Operations Supervisor. Test records were reviewed and were found to be complete. Production Practice 4.2: Train employees to respond to cyanide exposures and releases. The operation is

in full compliance with Production Practice 4.2

Summarize the basis for this Finding: HLS trains all personnel on the emergency response procedures stated in the ERP, as part of the regular safety training and emergency response training. Interviews with personnel showed acceptable awareness of the ERP procedures. Drills are conducted annually to test general response capability for chemical emergencies, including cyanide exposure. Records were available to show that an emergency response drill was held in April 2015. The drill included a human exposure scenario and a spill scenario. Employees from HLS and the transportation company (Suri) participated in the drill. The drill was evaluated and improvement opportunities were processed. The ERP is revised annually, after an emergency, and/or when necessary following a mock drill. The training records include the names of the employee and the trainer, the date, topics covered, and tests demonstrating understanding. Records are retained throughout an individual’s employment documenting the training they receive. 5. EMERGENCY RESPONSE: Protect communities and the environment through the development of emergency response strategies and capabilities. Production Practice 5.1: Prepare detailed emergency response plans for potential cyanide releases. The operation is

in full compliance with Production Practice 5.1

Summarize the basis for this Finding: HLS maintains a comprehensive ERP that was last revised in March 2015. The ERP includes procedures for rapid and effective response to cyanide exposure and/or cyanide spills. The ERP covers the process to be followed in the event of cyanide exposure and/or spills. The Plan also includes information on the coordination of emergency response for different scenarios.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 15 of 33

July 22, 2015 Date

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Information includes communication flowcharts, responsibilities, response team structures, training requirements, and procedures for conducting mock drills. The emergency response procedures addressed plausible scenarios of cyanide release and were found to be appropriate for managing the foreseeable emergency situations due to cyanide release during loading and unloading operations, and releases during fires and explosions. The ERP includes emergency procedures due to power outages and equipment failures. There is no cyanide solution in this supply chain. The Plan describes specific response actions such as risk evaluation and evacuating site personnel. The nearest community is very far from the warehouse. The auditors concluded that it is highly unlikely that anyone outside of the operation would be impacted in the event of an emergency. The ERP also considers cases of emergencies for natural disasters, transportation and warehouse emergencies. The transportation scenarios in the ERP do address the possible need to block the area and evacuate people who are very close to the accident. The ERP describes the procedures for using cyanide antidote and for first aid measures for cyanide exposures. The Plan considers control of releases at their source for transport, unloading/loading and warehouse, and states that if possible to contain the spill without risk of harm, the release must be controlled at its source. For each of the scenarios described above, the ERP describes the necessary actions to take for spill prevention, assessment, containment, and mitigation. Production Practice 5.2:

Involve site personnel and stakeholders in the planning process.

The operation is

in full compliance with Production Practice 5.2

Summarize the basis for this Finding: The facility has involved its workforce and stakeholders in the emergency response planning process. The nearest community to the facility is the city of Hermosillo which is about 15 km away. In April 2015 the operation had a meeting with the Hermosillo fire fighters to inform them about the HLS emergency response procedures and to discuss emergency planning topics. Also in April 2015, the operation held a training session regarding cyanide emergencies with the personnel of the local clinic in Hermosillo. HLS was able to demonstrate through interviews and through communication records that they are in regular contact with local authorities and external emergency responders. The HLS warehouse has current authorization of COFOPRIS and SERMANAT (Mexican government agencies) to manage cyanide. HLS reviews its ERP and emergency response procedures at least annually. At the time of the audit, the ERP had just recently been released and local stakeholders were engaged. The facility

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 16 of 33

July 22, 2015 Date

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communicated the ERP and response procedures to the local firefighters and clinic in Hermosillo during the meetings held on April 2015. HLS plans to maintain communications with stakeholders on a regular basis. Production Practice 5.3: Designate appropriate personnel and commit necessary equipment and resources for emergency response. The operation is

in full compliance with Production Practice 5.3

Summarize the basis for this Finding: The ERP designates the Operations Supervisor is the primary response coordinator and the Safety Supervisor is the alternate emergency response coordinator. The emergency response team is also identified in the ERP. The responsibility, authority, and duties for managing an emergency situation are clearly described. The training needs for the emergency responders, the call-out procedures, 24-hour contact information for the emergency response team, and outside responder telephone numbers are included in the ERP. The ERP lists the emergency response equipment that should be available at all times. The emergency response kit includes PPE, containment and neutralization materials, and collection equipment for waste generated during the emergency. The ERP includes the requirement for weekly inspections of emergency materials and equipment to ensure its availability and suitability. Completed checklists were reviewed. Interviews during the audit also confirmed this practice. The roles of firefighters, mine emergency response brigades, hospitals, police and civil protection are detailed for emergencies that may occur in the warehouse (including loading area) or during transportation. Coordination was done with local fire fighters and they are aware of the ERP. The fire fighters are invited to participate in the drills. The medical center Clinica del Noroeste is also aware of the ERP. Production Practice 5.4: notification and reporting.

Develop procedures for internal and external emergency

The operation is

in full compliance with Production Practice 5.4

Summarize the basis for this Finding: The ERP, has emergency contact phone numbers for notifying the company management, regulatory agencies and outside responders. The ERP details the treatment procedures for cases of cyanide exposure, and addresses the procedure for a patient`s transfer to the medical center at

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 17 of 33

July 22, 2015 Date

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Hermosillo. The ERP describes the procedures for responding to different emergencies scenarios in the warehouse, transportation and unloading: cyanide releases, fire and explosions, power outages, cyanide theft, HCN generation and rollovers. The ERP includes the emergency procedures to be used in case of natural disasters such as intense raining and floods. The ERP includes procedures and contact information to notify Hermosillo`s Civil Protection authorities and federal police and addresses that only the designated “authorized person” by HLS would communicate with the media.

Production Practice 5.5: Incorporate into response plans and remediation measures monitoring elements that account for the additional hazards of using cyanide treatment chemicals. The operation is

in full compliance with Production Practice 5.5

Summarize the basis for this Finding: The ERP describes the specific response actions to recover cyanide spills during unloading and transfer operations at the warehouse and cyanide releases to soil and water bodies during transportation. The procedures in the ERP describe how to decontaminate soils and manage the final disposal of the clean-up debris. All drinking water at the facility is brought in to the site and there are no water bodies nearby. No cyanide solution is used or transported in this supply chain. The auditors concluded that impact to a water supply at the warehouse is highly unlikely. The ERP prohibits the use of sodium hypochlorite, ferrous sulfate or hydrogen peroxide to neutralize sodium cyanide that has been spilled to a body of water. Interviews with HLS personnel showed a high level of awareness of this prohibition. The ERP calls for environmental monitoring in the event that there is a cyanide release into a water body during transpoortation. The procedure calls for measurements to be taken every 50 meters downstream in streams or rivers, and to safeguard the affected area until the sodium cyanide is degraded and the readings show less than 0.5 ppm CN WAD. According to the procedure, the measurements are to be made by certified laboratories.

Production Practice 5.6: Periodically evaluate response procedures and capabilities and revise them as needed. The operation is

HLS Supply Chain Name of Supply Chain

in full compliance with Production Practice 5.6

Signature of Lead Auditor Page 18 of 33

July 22, 2015 Date

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Summarize the basis for this Finding: The ERP is reviewed and updated at least once a year, and as necessary, after a drill or emergency event to keep it updated and to confirm that the plan continues to be appropriate for the facility and transportation operations. The ERP also states that during the review process, HLS must engage local agencies and partner companies such as Suri. HLS performed an emergency mock drill in April 2015 as part of the annual drill program. The ERP states that an annual drill that includes both sodium cyanide exposure and spill scenarios is to be performed. In addition, HLS performs evacuation and/or fire drills to improve their response capabilities and as a tool to improve the ERP. The auditors reviewed the 2015 mock drill critique, where the response times, the emergency response equipment suitability, and the personnel performance were evaluated. Improvement opportunities were identified and addressed. At the time of the audit, no incidents had occurred.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 19 of 33

July 22, 2015 Date

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HLS Consignor and Transporter Audit Results Transporter audit results in this section are also in the MSS ICMC audit reports that supported the Transportes Suri S.A. de C.V. (Suri) certification in 2014.

1. TRANSPORT: Transport cyanide in a manner that minimizes the potential for accidents and releases. Transport Practice 1.1:

The operation is

Select cyanide transport routes to minimize the potential for accidents and releases. in full compliance with in substantial compliance with not in compliance with

Transport Practice 1.1

Summarize the basis for this Finding: HLS - Consignor HLS maintains a policy to only utilize ICMC certified signatory transporters for the truck transport of cyanide. HLS collaborates closely with its transporter, Suri, to ensure that all new routes are formally evaluated for risk against ICMC risk criteria before delivery to a mine can commence. HLS maintains formal documentation and contracts with its transportation partner to ensure that roles and responsibilities are clearly defined and agreed upon by both parties. HLS and Suri management members were interviewed and route risk assessment information for HLS shipments was reviewed. Confirmation was made that risks are discussed, documented, and appropriately managed. Confirmation was made that feedback regarding routes is discussed between HLS and Suri. When feedback from a driver suggests that a route needs to be revised, HLS contacts Suri management, Suri then revises the routes and communicates new information to drivers. Records showing that all HLS shipping routes are maintained up-to-date with current information were reviewed during the audit. HLS and Suri management members were interviewed and confirmation was made that community and governmental feedback is considered during the route planning process and that external advisors, medical facilities, and communities have been advised of their roles in emergency response.

Confirmation was also made that the need for additional safety or security measures is reviewed. No special security or safety concerns exist with the HLS routes.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 20 of 33

July 22, 2015 Date

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Suri - Transporter Suri uses a formally documented procedure to determine routes. Suri personnel were available during the HLS and were interviewed. Route evaluations for the HLS transportation routes were complete and records were available for review. Each route segment is evaluated for risks associated with population density, infrastructure, pitch & grade, proximity to water bodies, and likelihood of encountering poor driving conditions. Routes are also evaluated for security issues and for cell phone coverage. Only those routes deemed to be safe are approved. Routing considerations and all aspects of Suri operations were found to be compliant with ICMC Transport Practice 1.1 during the 2014 Suri certification audit performed by MSS. Suri does not use subcontractors for any portion of its cyanide transportation operations. Transport Practice 1.2: Ensure that personnel operating cyanide handling and transport equipment can perform their jobs with minimum risk to communities and the environment.

The operation is

in full compliance with in substantial compliance with not in compliance with

Transport Practice 1.2

Summarize the basis for this Finding: HLS - Consignor HLS maintains a policy to only utilize ICMC certified signatory transporters for the truck transport of cyanide. HLS collaborates closely with its transporter, Suri, to ensure that all drivers are qualified and trained in the operation of cyanide transport equipment, cyanide safety, and emergency response procedures. HLS maintains a formal training program for all of its employees that ensures that all relevant procedures on cyanide safety, cyanide loading, cyanide unloading, and emergency response is completed prior to working with cyanide. Training is refreshed at least annually and testing is performed to confirm competency. HLS offers cyanide training to transporters and confirms that its transporters train their drivers to perform their jobs in a manner that minimizes the potential for cyanide releases and exposures. Records were available to show that Suri drivers had received cyanide safety and operations training.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 21 of 33

July 22, 2015 Date

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Suri - Transporter Suri maintains a formal training procedure and program and uses only trained, qualified and licensed drivers. Confirmation was made that drivers have driver’s licenses that permit the transport of hazardous materials. Drivers are trained on cyanide safety and all procedures prior to being dispatched for the first time. Training is refreshed annually and testing is performed to confirm competency. Records were reviewed and interviews were held to confirm that all personnel operating cyanide transport equipment are qualified and have been trained sufficiently to enable them to perform their jobs safely and appropriately. Suri operations were found to be compliant with all aspects of ICMC Transport Practice 1.2 during the 2014 Suri certification audit performed by MSS.

Transport Practice 1.3:

Ensure that transport equipment is suitable for the cyanide shipment.

The operation is

in full compliance with in substantial compliance with not in compliance with

Transport Practice 1.3

Summarize the basis for this Finding: HLS - Consignor HLS works closely with its transporter, Suri, to ensure that all transport equipment is suitable for the transport of cyanide. Suri equipment was available for the audit and was found to be in excellent operating condition. HLS uses trailer loading checklists to ensure that trailers are suitable for transportation prior to loading cyanide. HLS loads the trailers and uses formal procedures and checklists to ensure that loads are evenly loaded as well as blocked and braced. HLS has standard amounts of cyanide with known weights that it loads into trailers. Loading instructions with loading diagrams are maintained by HLS. HLS trains its operators to inspect the trailers prior to loading to ensure that the equipment is suitable for the load it must bear. Pre-trip inspections of the truck are formally performed by Suri as part of its contractual agreement with HLS. The transporter, Suri, maintains the tractors, chassis, and trailers used to transport the cyanide. Pre-Operational Comments: HLS is committed to maintaining procedures and performing maintenance and inspections on ISO tanks that will be used in the future. Suri - Transporter

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 22 of 33

July 22, 2015 Date

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A sample of Suri tractors and trailers was evaluated during the Suri audit in 2014. One Suri tractor and one trailer were available for observation during the loading process at the HLS facility. The equipment was in excellent working condition and Suri had all necessary paperwork to support the audit and demonstrate ICMC compliance. Fleet specification files were available for review during the Suri audit. The tractors and trailers were found to be mechanically sound and capable of carrying the loads for which they were being used. Tractor and loaded trailer weights are carefully monitored to ensure that trucks are not overweight. Suri has a formal preventive maintenance program to ensure that its tractors and trailers are safe for transport. Suri operations were found to be compliant with all aspects of ICMC Transport Practice 1.3 during the 2014 Suri certification audit performed by MSS.

Transport Practice 1.4: Develop and implement a safety program for transport of cyanide.

The operation is

in full compliance with in substantial compliance with not in compliance with

Transport Practice 1.4

Summarize the basis for this Finding: HLS - Consignor As a Consignor, HLS maintains a formal safety program for the receipt, load, transport, and unloading of solid cyanide. HLS blocks and braces the load together with the Suri driver prior to closing and sealing the door. In this way HLS ensures that the packaging is as secure as possible during transport. Trucks observed during the audit had placards on all four sides of the vehicle. Correct placarding was available for all shipments. Procedures and formal checklists were available demonstrate that HLS manages Transport Practice 1.4.3 a), 1.4.3 d), 1.4.3 f), and 1.4.3g) requirements in addition to these requirements being met by Suri. Formal procedures and contracts are in place to ensure that all 1.4 Transport Practice requirements, including sub-sections 1.4.3a) through 1.4.3g) are fulfilled. Roles and responsibilities between HLS and its transporter Suri are clearly defined contractually. Confirmation was made during the audit that HLS performs pre-trip inspections to ensure that trailers are secured and that placards are on all four sides of the trailers. HLS maintains a drug and alcohol abuse prevention policy that was reviewed during the audit. HLS security guards were observed during the audit as they performed alcohol testing on all employees and visitors to the site upon entry. This alcohol testing includes testing of the Suri Drivers.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 23 of 33

July 22, 2015 Date

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Suri - Transporter Suri operations were found to be compliant with all aspects of ICMC Transport Practice 1.4 during the 2014 Suri certification audit performed by MSS. Transport Practice 1.5: Follow international standards for transportation of cyanide by sea and air.

The operation is

in full compliance with in substantial compliance with not in compliance with

Transport Practice 1.5

Summarize the basis for this Finding: The HLS Supply Chain includes the receipt of ocean shipments at the Port of Guaymas. HLS does not ship cyanide out via ocean. There are no air shipments in this supply chain. Due Diligence Review comments regarding ocean shipments are included in the Port of Guaymas section of this report. Ocean transport to the Port of Guaymas is the responsibility of the Distributor, Samsung, a certified ICMC Signatory company.

Transport Practice 1.6: Track cyanide shipments to prevent losses during transport.

The operation is

in full compliance with in substantial compliance with not in compliance with

Transport Practice 1.6

Summarize the basis for this Finding: HLS - Consignor Suri maintains the primary responsibility in this supply chain for all 1.6 ICMC requirements, including the tracking of shipments. HLS, however, also tracks its truck deliveries. Blackout areas are identified as part of the route planning process carried out by HLS together with Suri. Chain of custody paperwork from the port to the warehouse and to the mine customer is filled out and signed by Suri, port, and mine customers. HLS maintains appropriate records of chain of custody of the cyanide. Records for shipments from the warehouse were reviewed and were found to be complete. Chain of Custody paperwork was also reviewed for shipments picked up at the Port of Guaymas. All records were complete and acceptable.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 24 of 33

July 22, 2015 Date

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All necessary information is included on the HLS shipping paperwork. HLS ensures that the billing paperwork is correct as part of its administrative processes. Safety Data Sheets are available in the trucks at all times. Suri – Transporter Suri uses a number of methods to ensure that trucks are continuously tracked. Real-time GPS information is tracked by Suri personnel continuously. Drivers reported that they have several methods of communications available during transport to enable communication with the company transportation dispatcher, the destination mine, the cyanide producer, and emergency responders, as necessary. The proper functioning of equipment is checked during the driver pre-trip inspections. Black-out areas are identified during the initial route evaluation process and drivers are held accountable for following the black-out documented procedure. The information is also refreshed through driver feedback and the periodic re-review of routes. Suri's approach to managing its communication and shipment tracking needs was found to be acceptable by the auditors. Suri operations were found to be compliant with all aspects of ICMC Transport Practice 1.6 during the 2014 Suri certification audit performed by MSS.

2. INTERIM STORAGE: Design, construct and operate cyanide trans-shipping depots and interim storage sites to prevent releases and exposures. Transport Practice 2.1:

The operation is

Store cyanide in a manner that minimizes the potential for accidental releases. in full compliance with in substantial compliance with not in compliance with

Transport Practice 2.1

Summarize the basis for this Finding: The HLS Supply Chain includes the HLS warehouse, which demonstrated compliance to the ICMC Production Protocol. Interim Storage, as defined by ICMI, occurs only at the Port of Guaymas. Information regarding the ICMC compliance of the Port of Guaymas is in the Due Diligence Review section of this report.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 25 of 33

July 22, 2015 Date

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3. EMERGENCY RESPONSE: Protect communities and the environment through the development of emergency response strategies and capabilities Transport Practice 3.1:

The operation is

Prepare detailed emergency response plans for potential cyanide releases. in full compliance with in substantial compliance with not in compliance with

Transport Practice 3.1

Summarize the basis for this Finding: HLS - Consignor HLS maintains an emergency response plan to respond to potential releases of cyanide at the warehouse facility and during transport. In addition, Suri maintains its own detailed emergency response plans. The HLS emergency response plan is appropriate for the HLS transportation supply chain and considers truck transport, the design of the equipment, and the solid form of cyanide, the only form transported as part of this supply chain. The HLS emergency response plan considers all parts of the transportation infrastructures including the conditions of the roads (mine road versus highway), and port areas. The emergency response procedures address plausible scenarios and were found to be appropriate for the supply chain including transload and transport operations. The emergency response plan and detailed support procedures for managing emergency situations fulfill all ICMC Emergency Response Plan requirements. The emergency response procedures were reviewed with HLS personnel. The warehouse facility is located in an industrial area. Only sodium cyanide in the solid form is transported in this supply chain. Specific response actions such as risk evaluation and careful containment and remediation steps are detailed in the emergency plans. Part of the evaluation procedure is to identify the source of the spill, and control the release of material at the source. Evaluations are done following the deployment of the emergency procedures to determine what may have caused the spill. Information learned from the event is used to facilitate the implementation of corrective measures to prevent future releases. The HLS emergency response plan details the roles of outside responders, medical facilities and communities. Section 11 of the ERP details the role of the outside responders for warehouse and transportation emergencies. The roles of firefighters, mines emergency response brigades, hospitals, police and civil protection are included. According to the emergency response plans and interviews, the cyanide antidote can only be administered by a trained doctor, who is on-call at all times. HLS maintains records that show that

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 26 of 33

July 22, 2015 Date

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the local clinic has been appropriately informed and involved in emergency planning for the supply chain. Suri – Transporter Suri has an extensive emergency response plan that was last revised in January 2015. The plan is appropriate for all transportation incidents. Suri emergency plans were found to be compliant with all aspects of ICMC Transport Practice 3.1 during the 2014 Suri certification audit performed by MSS. Transport Practice 3.2: Designate appropriate response personnel and commit necessary resources for emergency response.

The operation is

in full compliance with in substantial compliance with not in compliance with

Transport Practice 3.2

Summarize the basis for this Finding: HLS - Consignor Emergency Response Teams are identified in the emergency procedures for HLS and Suri. The emergency response plan clearly designates full responsibility, authority, and duties for managing an emergency situation to coordinators and team members. Call-out procedures including 24-hour contact information for coordinators and response team members are included in the emergency planning documentation. Training for emergency responders was found to be appropriate. HLS co-manages emergency response drills with Suri to ensure that drivers are appropriately trained in emergency response procedures at least annually. Coordination of roles and responsibilities between HLS and Suri personnel was evaluated during this audit. Awareness of roles and responsibilities was very good. Lists of necessary emergency response equipment are contained within the emergency planning documentation. HLS maintains a supply of emergency response equipment that can be deployed to a customer site or to the scene of a transport accident. The equipment is regularly maintained and inspected. Frequencies for equipment inspections are defined and records showed that all equipment identified as necessary for cyanide spill response was available and had been inspected at regular intervals. Checklists showing each piece of emergency response equipment are used to perform the inspections. The processes for maintaining emergency equipment is also addressed in the HLS emergency response plan. Emergency equipment is checked at least monthly. Records and interviews during the HLS certification audit confirmed this practice. HLS ensures that its transporter maintains compliance with ICMC requirements, including having all necessary equipment available during transport.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 27 of 33

July 22, 2015 Date

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Suri – Transporter The roles and responsibilities of relevant internal and external personnel are clearly described in the emergency response information and the Suri procedures. Suri ensures that its personnel are trained in relevant emergency response procedures. Suri participated in the HLS 2015 emergency response drill. Records were reviewed and were found to be complete. Suri was found to be compliant with all aspects of ICMC Transport Practice 3.2 during the 2014 Suri certification audit performed by MSS. Transport Practice 3.3:

The operation is

Develop procedures for internal and external emergency notification and reporting. in full compliance with in substantial compliance with not in compliance with

Transport Practice 3.3

Summarize the basis for this Finding: HLS - Consignor The notification procedures, including internal and external telephone numbers, are described in the emergency response procedures for both HLS and Suri. Notification numbers are checked at least annually. For on-site emergencies at HLS, notifications are made to Suri emergency responders and to personnel within HLS. The HLS emergency response plans were last updated in 2015. Additionally, HLS maintains emergency planning documentation that details steps to be taken for any incident, including contact with the media.

Suri – Transporter The notification procedures, including telephone numbers, are described in the Emergency Response Procedure. In the case of an emergency, drivers are instructed to contact the Suri Supervisor. The plan also calls for the notification of the shipper, the insurance company that coordinates emergency response services, and local authorities, as appropriate. Notifications in the event of an emergency during HLS shipments would be made by Suri Supervisor / Dispatcher who is on call at all times when cyanide is being transported. Interviews during this audit confirmed the practice. Suri was found to be compliant with all aspects of ICMC Transport Practice 3.3 during the 2014 Suri certification audit performed by MSS.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 28 of 33

July 22, 2015 Date

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Transport Practice 3.4:

The operation is

Develop procedures for remediation of releases that recognize the additional hazards of cyanide treatment chemicals. in full compliance with in substantial compliance with not in compliance with

Transport Practice 3.4

Summarize the basis for this Finding:

HLS - Consignor HLS maintains procedures for the testing of potentially contaminated solids, the decontamination of solids, and the disposal of any waste following the remediation of a spill. Additionally, HLS maintains procedures for the neutralization and decontamination of solids and contaminated debris. Additional details regarding the remediation, neutralization, decontamination, and disposal of clean-up debris are contained within the HLS Emergency Response Procedures. Descriptions of necessary action steps depending on the incident scenario are clearly outlined in the procedures. Interviews with HLS and Suri personnel showed a high level of awareness that the use of treatment chemicals is prohibited if cyanide spills into surface waters. HLS personnel noted that the use of any chemical treatment methods for spills into the waterways is strictly prohibited. The HLS emergency response plan prohibits the use of treatment chemicals such as sodium hypochlorite, ferrous sulfate and hydrogen peroxide if cyanide spills into surface waters. Suri – Transporter Suri emergency response procedures ban the use of cyanide treatment chemicals in surface water. Suri was found to be compliant with all aspects of ICMC Transport Practice 3.4 during the 2014 Suri certification audit performed by MSS.

Transport Practice 3.5:

The operation is

HLS Supply Chain Name of Supply Chain

Periodically evaluate response procedures capabilities and revise them as needed. in full compliance with in substantial compliance with not in compliance with

Signature of Lead Auditor Page 29 of 33

and

Transport Practice 3.5

July 22, 2015 Date

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Summarize the basis for this Finding: HLS - Consignor The HLS emergency procedures are reviewed at least annually to keep the plans up-to-date and confirm that the plans continue to be appropriate for the operation. Records were available to show that an emergency response drill was held in 2015. HLS performs emergency drills on an annual basis and emergency tests with external responders at least every three years. Incident investigations are conducted by HLS in the event that an actual emergency occurs. At the time of the audit, no incidents had occurred.

Suri – Transporter The emergency plan is reviewed annually and tested periodically. Records from a drill run together with HLS and Suri personnel in April 2015 were available for review. Suri was found to be compliant with all aspects of ICMC Transport Practice 3.5 during the 2014 Suri certification audit performed by MSS.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 30 of 33

July 22, 2015 Date

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Port of Guaymas Due Diligence Review Results This Supply Chain includes cyanide handling and interim storage activities at the Port of Guaymas. The Port of Guaymas is located at the southern end of the Mexican State of Sonora. Sonora is on the Northwest Coast of Mexico, approximately 117 km south of Hermosillo, Sonora. Solid sodium cyanide is received at the Port of Guaymas in sea containers, stored for a short time (no more than three days), and is picked up by Suri. An on-site assessment of the Port of Guaymas was done prior to the audit of HLS. The Port of Guaymas has been in operation for hundreds of years and has been in commercial use since the 1800s. The Port of Guaymas is considered to be a medium sized full-service seaport with a sheltered harbor. The port has been included in ICMI Cyanide Code certified supply chains since 2012. All aspects of ICMI Cyanide Code compliance were evaluated as part of this Due Diligence evaluation. Port of Guaymas – The Due Diligence Assessment results were very positive and confirmation was made that the Port of Guaymas is suitable for the receipt and dispatch of solid sodium cyanide transported in sea containers. The port is authorized to receive Dangerous Goods. Equipment, security, and safety practices were found to be very well aligned with ICMI Code requirements. Personnel were very aware of safe handling and operational practices such as the need to segregate incompatible materials and the need to carefully manage chain of custody paperwork and truck dispatch. The port maintains a management system that conforms to ISO 14001, ISO 9001, and ICMI Cyanide Code requirements. The port’s current ISO 14001 certificate that is valid until 2017 was reviewed as part of this Due Diligence Assessment. The Port is also certified to the International Ship and Port Facility Security (ISPS) Code. The current ISPS certificate, issued in October 2014, was available for review by the audit team. The International Ship and Port Facility Security (ISPS) Code was enacted in 2004 through an amendment process under the Safety of Life at Sea Convention in 2002. The concept of the ISPS Code is to provide layered and redundant defenses against smuggling, terrorism, piracy, stowaways, etc. The ISPS Code requires ships and port facilities engaged in international trade to establish and maintain strict security procedures as specified in ship and port specific Port Facility Security Plans. The road infrastructure to and from the port was found to be acceptable. One road leaves the port through the town of Guaymas and another road by-passes the town. The route planning for this Supply Chain calls for shipments to be routed along the by-pass road. Port personnel have experience with handling sodium cyanide and this cargo is currently handled at the port. The Port initially implements an ICMI Cyanide Code-conformant management system in 2012 as part of another Supply Chain certification process.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 31 of 33

July 22, 2015 Date

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The sea containers are not opened and no specialized personal protective equipment is necessary at this location. The port is fenced and manned at all times. The designated outdoor cyanide storage area is separated from other areas to ensure that the cyanide is not stored next to incompatible materials. The solid sodium cyanide is packed in multiple layers of packaging within sealed sea containers. No additional secondary containment systems were deemed to be necessary by the auditor for this operation. The auditor found the Port of Guaymas' cyanide interim storage policy and storage area to be compliant. Port of Guaymas - Detailed Assessment Findings The results of this Due Diligence Assessment are arranged by topic: Port Security, Safety & Training, Material Handling & Storage (including environmental considerations), and Emergency Response.

Topic

Port Security

Safety & Training

Assessment Results • The port is completely surrounded with a fence and access to the port is strictly controlled. Security of the port was found to be consistent with ICMI Code requirements. • Confirmation was made that the following practices are in place: 24/7 manned security; complete fence line; no public access; sealed (locked storage containers); security cameras. International Ship and Port Security certificate was verified. • Sea Containers remain sealed and they are not opened while at the port. • Truck Driver credentials are checked and the driver's authority to receive cargo is confirmed prior to dispatch of the cargo. Material chain of custody records are maintained. The port uses a checklist and a defined process to dispatch cargo. Records were available for review and were found to be acceptable. • The port currently handles sodium cyanide. • Personnel receive Dangerous Goods training on a recurring basis. Testing is done after the training to confirm understanding. IMDG (International Maritime Dangerous Goods) training is given to all operations personnel who handle hazardous cargo. • Forklift Drivers and Crane Operators are trained each year to ensure safe equipment operations. Testing and refresher training are a part of the program. Records are maintained. • The port maintains a strict Drug and Alcohol Policy. This is communicated to all personnel and random drug / alcohol testing is conducted regularly. • Confirmation was made during the audit that no eating, smoking, or open flames are allowed in areas where cargo is handled and stored. • Material handling equipment and handling practices were found to be excellent. Equipment appeared to be well-maintained. • Forklifts and cranes are rated for weights in excess of the typical cyanide containers. Confirmation was made using data plates on the equipment versus shipping paperwork showing sea container weights.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 32 of 33

July 22, 2015 Date

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Topic Material Handling & Storage

Material Handling & Storage

Emergency Response

Assessment Results • Equipment is regularly maintained with a defined preventive maintenance program. Preventive maintenance is performed according to manufacturer's specifications. • All sea containers observed had appropriate UN labeling and cautionary markings. No cyanide containers were observed in the port at the time of the audit. • The port is allowed to temporarily store dangerous goods, such as Cyanide, for a maximum of three days before the cargo needs to be removed. Records showed that cargo is sent out of the Port within the necessary time limits. • Dangerous Goods cargo is stored using standard chemical compatibility management practices. • Port personnel ensure that the Truck Driver inspects the truck prior to dispatch; port personnel check to make sure the container is securely loaded onto the trailer and that the container is sealed. Customs paperwork and a port checklist are used as part of the dispatch process. • A written Emergency Response Plan (ERP) was available for the audit. It is reviewed and revised at defined frequencies. The ERP was last revised in 2014 and is under formal document control. • The roles and responsibilities of the Emergency Response Team are defined in the ERP. The ERP addresses actions to be taken in response to a number of different emergencies including spill, fire, and medical incidents. Contact information is kept up-to-date and revised as necessary. Emergency contact information is included for the Emergency Response Team members, local hospitals, and the local fire department. The information in the ERP was found to be acceptable. • The port has a clinic that is open 24 hours a day, 7 days per week. Cyanide antidote is maintained at the port and clinic personnel have been trained in its use. The antidote is maintained according to manufacturer's specifications and was within its expiration date. • Emergency Responders are trained at defined frequencies. Emergency drills are conducted regularly with all necessary personnel (all people who would be expected to respond to the emergency). • Appropriate emergency response equipment was available at the port.

HLS Supply Chain Name of Supply Chain

Signature of Lead Auditor Page 33 of 33

July 22, 2015 Date