CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUMblackstonemine.com/Operations.pdfcopper, lead, silver, and gold as a byproduct of the zinc-to-hydrogen reaction. As of May, 2016, the Property’s

Development Plan

Blackstone Mine ProjectElmore County, Idaho

June 2016

Blackstone Mine Development Plan Page 1

CONTENTS Executive summary ..................................................................................................................................... 2 Project description

Overview ................................................................................................................................................ 3 Ore reserves ............................................................................................................................................ 3 Project highlights .................................................................................................................................... 4 Zinc-to-hydrogen conversion technology ............................................................................................... 4 Markets ................................................................................................................................................... 5

History of the property ............................................................................................................................... 5 Geology ........................................................................................................................................................ 6 Development of the property by prior lessees ......................................................................................... 8 Circa, Incorporated .................................................................................................................................. 8 Hambro Resources ................................................................................................................................... 8 Richwell Resources .................................................................................................................................. 9 Pilot plant operations ................................................................................................................................ 10 Zinc-to-hydrogen processing circuit ........................................................................................................ 11

Plant capacity vs. reaction time ............................................................................................................ 12 Economics of excess zinc oxide ........................................................................................................... 12 On-site power ....................................................................................................................................... 13 Environmental regulations.................................................................................................................... 13 Staffing ................................................................................................................................................. 13 Product shipping, security, and communications ................................................................................. 13

Management of the company ................................................................................................................... 14 Five-year consolidated statement of projected cash flows ..................................................................... 15 Notes to five-year consolidated statement of projected cash flows ....................................................... 16


EXECUTIVE SUMMARY

Blackstone Mining Company, Ltd. (“Company”) has developed a disruptive technology (Pat. Pend.) for converting zinc ore to hydrogen fuel (“Technology”). The company plans to install a solar- and hydrogen-powered pilot processing facility at its wholly owned mining property in southwestern Idaho (“Property”). The results will be used to further develop hydrogen fuel production on-site and at other locations throughout the United States and Canada. When used on-site, the Technology also recovers copper, lead, silver, and gold as a byproduct of the zinc-to-hydrogen reaction. As of May, 2016, the Property’s current and known hydrogen-compatible ore inventories total $415.5 million, excluding the value of hydrogen produced by the Technology:

• 30,000 tons of stockpiled ore ($49.5 million) • Proven ore reserves ($58.6 million) • Probable ore reserves ($307.3 million)

When fully deployed, the zinc-to-hydrogen conversion Technology is projected to extend the total reserve values to at least $1.3 billion. Project highlights

• Ore reserves capable of producing an estimated $1.3 billion in hydrogen and metals • Recovery of zinc, copper, lead, silver, and gold resulting from on-site hydrogen production • Easily accessible stockpile with no additional excavation required • Hydrogen-compatible ores are near the surface and can be stripped with little difficulty • Clean, inexpensive production of hydrogen from zinc ore, zinc oxide, and zinc powder • Environmentally friendly, emission-free production of hydrogen • Reusable zinc oxide byproduct for continuous production of hydrogen • Portable production technologies for using economical off-site hydrogen generators


PROJECT DESCRIPTION Overview Blackstone Mining Company, Ltd. (“Company”) has developed a disruptive technology (U.S. Pat. Pend. 62/391773) for converting zinc ore to hydrogen fuel and recycling the resulting zinc oxide to zinc powder (“Technology”). The Technology allows hydrogen to be produced anywhere as green energy fuel. The Company is the sole owner in fee simple title of the zinc-rich Blackstone Mine. The 100-acre complex is situated in the Bennett Mountains, approximately 80 miles southeast of Boise, Idaho in sections 13, 14, and 15, T.2 S., R.10 E., Boise Meridian. The Property is accessible from U.S. Highway 26 and Elmore County Road 68 at an elevation of about 5800 feet. The Company plans to deploy the Technology at the Property for manufacturing hydrogen and recovering commercial amounts of copper, gold, lead, and silver. The plan also anticipates installing up to four hydrolysis reactor/hydrogen storage units at remote sites using Blackstone zinc powder to produce hydrogen locally, avoiding the expense of shipping containerized gas. Ore reserves As of May, 2016, the Property’s current and known hydrogen-compatible ore inventories (“Reserves”) are valued at approximately $1,652 per ton, a total of $415.5 million, excluding the value of hydrogen produced by the Technology:

• 30,000 tons of stockpiled ore ($49.5 million) • Proven ore reserves ($58.6 million) • Probable ore reserves ($307.3 million)

When fully deployed, the sale of Technology-produced hydrogen is projected to increase total Reserve values threefold, to $1.3 billion. The Reserve valuations were verified in 1996 by Richard E. Kucera, PhD, FGAC, and subsequently reevaluated in 2015 by Andrew Egan, BSc. Dr. Kucera and other experts have estimated the Blackstone ore body extends at least 1.25 miles below the Reserves identified thus far. The Stockpile requires no additional excavation and near-surface Reserves can be easily removed with conventional open pit mining techniques. Table 1 shows both proven and probable Reserves developed through exploratory drilling by prior lessees. Ore values reflect prices as of June, 2016.

*Source: Kucera 1988, Egan 2015. Metals prices have been adjusted to June, 2016 averages.

TABLE 1: HISTORICAL AND PROVEN ORE RESERVES

Stockpile and proven/probable hydrogen-compatible Reserve ore values Proven/probable leach-grade ore values

Metal Price Qty. Unit Stockpile High Grade* Metal Price Qty. Unit Leach Grade Probable*

Copper 2.08 96 Lbs $5,990,400 $44,229,120 Copper 2.08 4 lbs $5,824,000 $24,960,000

Lead 0.80 80 Lbs $1,920,000 $14,176,400 Lead 0.80 0 lbs $0 $0

Zinc oxide 5.00 170 Lbs $25,500,000 $188,275,000 Zinc oxide 5.00 10 lbs $35,000,000 $150,000,000

Silver 17.35 23.53 Ozs $12,247,365 $98,112,428 Silver 17.35 2.11 ozs $34,709,500 $148,755,000

Gold 1,271 0.106 Ozs $4,041,780 $29,841,809 Gold 1,271 0.078 ozs $69,396,600 $297,414,000

Tons 30,000 221,500 Tons 700,000 3,000,000

Total $49,699,545 $374,634,757 Total $144,930,100 $621,129,000


Part of the near-surface ore is exposed at outcrop level in a 110-foot-wide section, striking into a previous open pit mining area about 1,600 feet west of the existing workings. Based on 12 cubic feet per ton for the ore, there are an estimated 300,000 to 500,000 tons in the first 40 vertical feet between the exposed section and the workings, depending on the average width of the mining zone. The additional tonnage is expected to contain values similar to that of the ore described in the Kucera and Egan valuation reports. While the reported values of the hydrogen-compatible ore are economically compelling, factors such as overburden mixed with the ore, stripping ratios, and losses from crushing, sorting, and processing could materially affect the volume of the on-site ore inventory. Operators of the Property in the 1980s were focused on recovering silver, the primary reason much of the mined zinc-rich ore was left behind. Stockpiled ore will be sorted for its zinc content to ensure the processing feed meets the first year’s production goal of 350,000 pounds of zinc powder, which may reduce the recovery of the reported silver and gold values. Project highlights

• Ore reserves capable of producing an estimated $1.3 billion in hydrogen and metals

• Recovery of zinc, copper, lead, silver, and gold resulting from on-site hydrogen production

• Easily accessible stockpile with no additional excavation required

• Hydrogen-compatible ores are near the surface and can be stripped with little difficulty

• Clean, inexpensive production of hydrogen from zinc ore, zinc oxide, and zinc powder

• Environmentally friendly, emission-free production of hydrogen

• Reusable zinc oxide byproduct for continuous production of hydrogen

• Portable production technologies for using economical off-site hydrogen generators

Zinc-to-hydrogen conversion technology The Technology injects zinc vapors into superheated water to create hydrogen gas. The resulting zinc oxide is subsequently dissociated into zinc powder, which allows the reaction to be repeated multiple times. When used on-site, the Technology also recovers commercial amounts of copper, lead, silver, and gold matte bullion as a byproduct of the initial hydrogen production cycle. The Company believes that pilot processing will be profitable and validate the Technology. The Technology will eventually allow off-site localized commercial manufacturing of hydrogen worldwide. The Company will begin production by processing 10 tons per day of hydrogen-compatible Reserves on-site at the Blackstone. The first full processing year will produce an estimated 350,000 pounds of zinc powder from 2,000 tons of Blackstone ore, representing about .007% of Reserves. The success of the Technology will depend on the Company’s ability to:

(1) Efficiently dissociate the zinc oxide byproduct of hydrolysis into zinc powder; and (2) Repeat the hydrogen production cycle multiple times.

The more times the zinc oxide-to-hydrogen reaction is repeated, the greater the income from the ore. Repeating the hydrolysis reaction 10 times on a single ton of Blackstone ore increases the hydrogen gross value to about $4,500 per ton. Blackstone ore also contains commercial quantities of lead, copper, silver, and gold that are recovered as a byproduct of the zinc-to-hydrogen conversion process.


Zinc oxide dissociation to zinc powder occurs at temperatures above 1794o C with about 90 percent efficiency. A small portion of the zinc oxide remains unaltered but is not lost in the process. The frequency with which the resulting zinc powder can be reused may vary in actual practice although test results from the European Union’s SolZinc project suggest a reuse factor of at least 10 times is attainable. If the Company reaches its first full-year zinc powder production goal without reusing any zinc powder, income from the sales of hydrogen, zinc oxide, and matte bullion would be about $3.78 million. If zinc oxide can be successfully dissociated to zinc powder 10 times, income would rise to about $13 million. Markets Most hydrogen in the United States is produced in California, Louisiana, and Texas. The U.S. Department of Transportation limits highway shipments of hydrogen to 768 kilograms (1670 lbs.), which increases the delivered price. Blackstone zinc powder can be shipped in roughly 40,000-pound loads to off-site hydrolysis facilities in close proximity to end users. This reduces delivery distance and allows Blackstone to significantly undercut the market price of hydrogen. Markets for hydrogen include crude oil cracking plants where poor-quality crude is causing refineries to look for hydrogen from merchant sources set up on-site or adjacent to the refining facilities. Other target markets in the United States for hydrogen sales include:

• 137 oil refineries • 132 ammonia and fertilizer manufacturing plants • 169 industrial gas distributors • 30,000+ food processing facilities.

HISTORY OF THE PROPERTY The Blackstone Mine is one of the largest and most prominent properties in the Volcano Mining District. As early as 1870, prospectors in search of gold and silver discovered numerous strong mineral-bearing outcrops at the Blackstone.1 Since that time the Property has been the subject of intense professional interest.2 In 1903, the Property was acquired by former Idaho Governor James H. Hawley and his partner, Samuel Rich, who patented the claims in the name of Blackstone Mining Company, Ltd.3 The Property lies on the north flank of the Bennett Mountains at an average elevation of 5,850 feet. The surrounding terrain consists primarily of eroded hills cut by dry gullies. Vegetation is mainly sagebrush, mountain birch with light scrub, and alfalfa hay fields in the valleys. There is a small running creek and additional water can be obtained from wells drilled at the property or in the valley west of the main working. The Company has defined water rights singularly for its own use.

1 Frank E. Johnesse, “Report on the Revenue Group of lode mining claims in the Volcano Mining District, Elmore County, Idaho,” Boise, Idaho: Unpublished manuscript, January 3, 1932. Johnesse was manager of the Lark Mining Company in the Wood River Mining District and a candidate for Idaho Inspector of Mines in 1920. 2 See Robert N. Bell, “Another Butte in southern Idaho?” Northwest Mining Truth (November 20, 1930): 5–6.; Rhesa M. Allen, Geology and ore deposits of the Volcano district, Elmore County, Idaho, Moscow, Idaho: University of Idaho, un-published M.S. thesis (1940); Rhesa M. Allen, “Geology and mineralization of the Volcano District, Elmore County, Idaho,” Economic Geology, 47, 8 (1952): 815–821; Richard F. DeLong, Geology of the Hall Gulch plutonic complex, Elmore and Camas counties, Idaho, Moscow, Idaho: University of Idaho, unpublished M.S. thesis (1986); Earl H. Bennett, The geology and mineral deposits of part of the western half of the Hailey 1º×2º Quadrangle, Idaho, Washington, D.C.: U.S. Geological Survey Bulletin 2064-W, prepared in cooperation with the Idaho Geological Survey, Idaho State University, and the University of Idaho (2001). 3 The Company, Blackstone Mining Company, Ltd., was formed as an Idaho corporation in 1987 and is the successor-in-interest to the corporation formed by Hawley and Rich in 1903.


In the early 1900s, the original Blackstone Mining Company began development by driving an approximate 60-foot crosscut tunnel. According to historical reports, this work is reported to have cut a six-foot wide vein from which three carloads (about 50 tons) of ore were shipped. The reported assay value was 15 percent copper and zinc, 30 ozs. silver, and .04 ozs. gold per ton.4 The initial shipment would be valued at about $94,000 at current prices. In 1936, the Volcano Mining Company operated the Property under lease and shipped at least 54 tons of so-called “mine float” (ore left on the surface of the Property from prior mining) to the United States Smelter at Salt Lake City, Utah. Table 2 shows the returns from the smelter as shown in the Company’s records. Known primary metals are copper, gold, lead, manganese, silver, and zinc. Small amounts of nickel, rare earth elements, and traces of palladium have been reported in some fire assays and atomic absorption spectrophotometer analysis.

GEOLOGY In 1984, University of Idaho Geologist Richard F. DeLong mapped about 11 square miles of the Bennett Mountain area, including the Property. The southern part of DeLong’s map consists mainly of granodiorite intrusive of tertiary age in contact to the north and east with tertiary and quaternary volcanic magmas. The main mass of tertiary intrusive has several windows exposing older (cretaceous) intrusive consisting mainly of granodiorite and related rocks that form the main body of the Idaho Batholith. The tertiary intrusive is also cut by a number of east-west striking dikes and quartz veins of tertiary or later origin. Mineralization exposed by exploration and development is confined to an east-west striking zone of structural weakness in the cretaceous intrusive, which lies mainly in section 13, 14 and 15 which is the location of the Blackstone Mine. Principal minerals present are chalcopyrite, galena, sphalerite, malachite, and magnetite associated with quartz monzonite, and carrying varying silver, copper, zinc, and gold values. Surface mineralization is highly oxidized but some chalcopyrite has been noted in the pit about 40 feet below the original surface. Another large exposure of the cretaceous intrusive occurs mainly in sections 13 and 18, to the southeast of the known mineral zone, although this area has not been sampled in detail. DeLong considered it favorable for similar mineral deposition to the known zone at the Property.5 Surface development through 1987 consisted primarily of a 100 x 600 foot open pit located near the eastern end of the five-patented-claim block. The open pit is developed on two east-west trending structures. Quartz veins and stockwork are developed along these structures. The adjacent rock is intensely altered. At the surface, the southern structure hosts a stockwork that contains sulfides and intense alteration. The sulfides consist of pyrite, chalcopyrite, sphalerite, and galena as the major phases. In thin section, bornite

4 George I. Vasilhoff, M.M.E., P.E., “Preliminary report on the Blackstone Mine Property,” Boise, Idaho: Unpublished manuscript, October 1984. 5 Vasilhoff 1984; DeLong 1986.

TABLE 2: VOLCANO MINING COMPANY SHIPMENTS (1936)

Tons Shipped Copper (%) Silver (oz./ton) Gold (oz./ton)

22.82 2.6 11.1 0.07

31.17 2.3 5.5 0.04

Source: Volcano Mining Company records


or digenite rims can be seen around most of the chalcopyrite. Surrounding the stockwork are three distinct zones of alteration with mineralization. The zones from the stockwork outward are: a sulfide-epidote zone, a sulfide-sericite zone, and a sericite-manganese oxide zone. The alteration in the sulfide-epidote zone is pervasive and extensive, with all original textures being destroyed. Alteration minerals include epidote, chlorite, and sericite. This alteration forms a ten foot (3 meters) wide zone around the stockwork. Silicification within this zone is relatively minor, but there are veins of quartz and epidote, with relict sphene. The mineralogy and style of alteration is similar to that of the fragments in the stockwork. The epidote ranges in size from 25 microns up to 1 millimeter. The finer-grained epidote is spatially associated with the veinlets. Sericite occurs as a fine-grained felty mass evenly distributed through the rock, and ranges in size from less than 2 to 200 microns. Chlorite also occurs as fine-grained patches throughout the rock. Apatite is present in this zone of alteration and is associated with the quartz veinlets. Calcite is present in this zone and is associated with the epidote and iron oxides. Iron oxides are most abundant near the outer edge of this zone where they comprise as much as 35 percent of the rock. The sulfides are most likely pyrite, chalcopyrite, and galena. The sulfide-sericite zone of alteration has an elongate, elliptical shape that varies in width from 10 to 42 feet. Alteration is both selectively pervasive and veinlet-controlled. Alteration minerals include fine-grained patches that are up to two millimeters in diameter. The sericite is well developed and occurs as fine-grained masses in the rock. The grains are 1 to 40 microns in size. Some of the sericite is associated with the quartz stringers. Sericite also replaces epidote in this zone. The sulfides are primarily pyrite and chalcopyrite. The sericite-manganese oxide zone is the most widespread alteration associated with the deposit. The zone encloses other zones of alteration, but is not uniform in width. The alteration is both selectively pervasive and veinlet-controlled. The former is dominant near the stockwork. Sericite is 1 to 500 microns in size and is an alteration product of the plagioclase and potassium feldspar. Manganese oxide occurs as disseminated grains throughout the zone. The manganese oxide is a soft, sooty material that does not have a distinctive X-ray diffraction pattern. Electron microprobe analysis indicates a significant amount of zinc associated with the manganese. The biotite occurs as fine grain aggregates associated with the iron oxides. This type of alteration also forms a linear zone north of the main structure. Nine of the ten reverse circulation holes drilled by Hambro Resources intersected at least one of the two known mineral structures. Other minor, parallel mineral structures were intersected in several of the holes. The south structure, which is exposed in the pit, hosts multiple well developed fifteen foot quartz veins at depth. Sericite-pyrite alteration forms halos around the veins. Several minor zones of sulfide-epidote were intersected in some of the Hambro drill holes. The geologic target for silver mineralization appears to be the quartz veins and adjacent altered host rock. Cross-sections and plan views of the deposit show a series of at least 10 east-west trending structures, most of which have a significant amount of fault gouge. The quartz veins occurring along these structures have a pinch and swell structure. The veins generally have a greater vertical than horizontal extent forming shoots and pods. The structures and quartz veins strike in an east-west direction and dip north between 50º and 70º. At the surface, the southern structure is about 70 feet wide and the northern structure is about 40 feet wide. At depth, the two structures converge with a well-developed zone of altered rock between them.


The combined thickness of the structures is 90 feet to 130 feet. Horizontal extent of the body is about 600' in the drilling area. Faults and altered host rock are exposed at the surface, 200 feet to 300 feet west of the current development. The vertical extent of the structures is at least 300 feet to 400 feet, down dip, as indicated by the drill holes. The last exploratory drilling in 2002 was a small series of vertical holes from the outcrop’s apex that yielded low metallic values of copper and zinc with heavy alteration, indicating the bulk of the ore structures dip to the north of the outcrops towards the Camas Prairie. Geological data suggests the Blackstone ore body is an intrusion from the Idaho Batholith, meaning the Property could have commercial ore values as deep as 6,000 feet below the outcrop. Exploratory drilling has been confined to the vadose (dry) zone of the Property, intercepting mostly oxidized ore. Atomic absorption spectrophotometer analysis and smelting tests on Blackstone ore samples have yielded small amounts of nickel and traces of palladium in addition to minor concentrations of rare earth elements. It remains to be seen whether the presence of these metals is an anomaly, or if their recovery will develop into meaningful quantities at depth.

DEVELOPMENT OF THE PROPERTY BY PRIOR LESSEES Circa, Incorporated (1982-1984) In 1982, Circa Incorporated (“Circa”), a Utah mining company, leased the Property and began initial development of the Blackstone pit. Circa submitted a series of samples to Kennecott Copper’s smelter in McGill, Nevada to determine if the ore contained sufficient silica and metallic values to warrant smelting without prior concentration. The pyrometallurgical tests resulted in a 92 percent recovery of the metals in the ore and an agreement to accept “mine-run” ore directly from the Property. Prior to commencing ore deliveries, a worldwide oversupply of copper sent prices plummeting and the Blackstone ore consignments were put on hold. In the spring of 1983, Kennecott closed its McGill facility and the ore purchase contract was cancelled. With the closure of the McGill smelter, there were no custom ore processing facilities close enough to the Property for economically feasible shipping. Facing soft metals-market prices, Circa turned to hydrometallurgical ore processing as an alternative for recovering the metallic values from the Blackstone ore. In 1984, Circa shipped about 4,000 tons of Blackstone ore containing about 25 ounces of silver, 60 pounds of copper, nearly 100 pounds of zinc, 30 pounds of lead, and .10 ounce of gold per ton to a small hydrometallurgy mill in Mountain Home, Idaho. The mill utilized a dilute sulfuric acid leach introduced to a finely ground ore slurry in series of agitation tanks. Unfortunately, this process left a high percentage of both the base and precious metals in the tailings as the values in the ore feed were not soluble. Hambro Resources, Inc. (1984-1985) In the fall of 1984, George Vasilhoff, MME, PE, a consulting engineer, compiled an initial engineering report on the Property for Hambro Resources, Inc., a Canadian resources company (“Hambro”). Vasilhoff examined the pit area previously developed by Circa, as well as the surface showings to the east of the pit. He reported the pit was an east-west striking trench about 600 feet long and an average of 100 feet wide about 25 feet below the original surface. About 180 feet at the east end of the pit had been cleaned sufficiently to permit sampling of the mineralization. Vasilhoff cut six 20-pound channel samples from the floor of the pit in widths varying between 40 and 110 feet. The samples were crushed, split to about five pounds each, and submitted to Chemex Laboratories in Reno, Nevada. The results are shown in Table 3.


Based on the results of the preliminary samples, Vasilhoff ordered 10 more channel samples cut across the pit floor over a strike length of 180 feet with each sample being 45 to 60 feet in width. These samples were crushed and split in the same manner as the previous samples, with a split of each being submitted to Chemex Laboratories. The results are shown in Table 4. Based on Vasilhoff’s analysis, Hambro optioned the Property lease from Circa. Hambro drilled nine reverse-circulation exploratory holes in the pit region to determine the possibility of expanding pit development. The drill results confirmed Vasilhoff’s analysis and Hambro began exploring financing options to further develop the Property. Richwell Resources, Ltd. (1986-1988) In 1986, Richwell Resources assumed Hambro’s lease of the property, conducting an extensive diamond-core drilling program resulting in the calculation of proven and indicated Reserves at the Property. Richwell further developed the pit by mining and stockpiling about 35,000 tons of ore reported by the company’s chief consulting geologist to contain in excess of 4 percent copper, 12 percent zinc, 20 ozs. silver per ton, and .04 percent gold per ton.6 About 4,000 tons from the Stockpile were shipped to Richwell’s hydrometallurgical mill in Gooding, Idaho. The mill used an ammonium thiosulfate leach with a dilute hydrochloric acid bath to separate the silver. The results were similar to those obtained by Circa, leaving most of the metals in the tailings. Richwell then switched to a dilute ph2 sulfuric acid pond leach of minus 3/4-inch crushed ore. The leach dissolved enough copper to produce commercial amounts of agricultural grade copper sulfate (Cu2SO4) and electrolytic zinc, though a high percentage of the base metals values and nearly all of the precious metal remained in the tailings.

6Richard E. Kucera, PhD, FGAC, “Gross value of proven ore reserves at the Blackstone Mine, Elmore County, Idaho,”

Vancouver, B.C.: Unpublished manuscript (May 16, 1996).

TABLE 3: PRELIMINARY SAMPLES

Sample Copper (%) Lead (%) Zinc (%) Silver (oz./ton) Gold (oz./ton) Location

7751 1.48 0.24 0.36 12.00 0.003 W pit, 44' N-S channel

7753 0.64 4.24 3.01 3.90 0.003 E pit, 35' N-S channel

7754 0.4 0.13 0.27 2.80 0.003 E end, 90' W 37' N. channel

7755 0.51 0.1 0.17 3.90 0.003 E end, 90' W 16' N. S. channel

7756 0.76 0.18 0.11 5.07 0.006 E end+ 120' W, 30' N-S channel

7757 0.4 1.78 2.17 4.94 0.003 Grab discovery pit 1

7758 0.02 0.05 0.06 0.17 0.003 Grab discovery pit 2


PILOT PLANT OPERATIONS Previous mine operators have demonstrated that hydrometallurgy is an ineffective method for processing ore from the Property. Conversely, tests on the lower-grade values in the granodiorite zone surrounding the pit indicate the ore is amenable to common leaching techniques; hence the designation of “leach- grade” ore zones to describe the proven and indicated ore Reserve calculations for the Property. Building a high-capacity smelter or concentration plant is cost prohibitive without much larger proven reserves. Nonetheless, we believe the Stockpile presents a unique opportunity to:

• Earn significant profits; • Produce various grades of zinc oxide that can be marketed at prices well above metallic zinc; • Expand development of the Property from the on-site pilot processing circuit results; • Develop a commercial process for the production of hydrogen gas directly from the zinc content

in Blackstone ore; • Store solar energy in zinc-air batteries using both zinc and other metals in the Blackstone ore as

alloys for the batteries’ anodes and cathodes; and • Develop off-site localized hydrogen production facilities using a combination of Blackstone-

produced zinc powder, and solar energy.

The reported success of the Kennecott smelting tests in recovering 92 percent of the values in the Blackstone ore suggests a solution for treating ores at the Property. Copper smelting dates back to 5000 BC, and the underlying chemistry has not substantially changed. Technological improvements allow us to install a small-scale, automated, single-step pyrometallurgical processing circuit to recover most of the values in the Stockpile while simultaneously producing (1) hydrogen fuel for self-sustained operations, and (2) zinc powder for off-site hydrolysis without the use of fossil fuels. With regard to hydrogen production as an alternative fuel, the Company seeks to create a process for dissociating zinc oxide to zinc powder with zero emissions and without the need for fossil fuels. The facility will be energy self-sufficient by creating hydrogen from the closed circuit vaporization of the zinc in the ore to power the plant and zinc oxide as a byproduct of the hydrolysis reaction. Introducing water into the zinc vapor stream will produce hydrogen and non-toxic zinc oxide, some of which will be dissociated into zinc powder using a combination solar-hydrogen reactor. The patent pending process7 is expected to evolve into off-site hydrogen generation systems, ultimately helping to meet a worldwide demand of over 60 million metric tons. While the daily processing volume of the proposed pilot facility is small we believe the operation will return a sizable profit in the marketing of hydrogen and lead, silver, copper, gold matte bullion. The Blackstone is rich in zinc affording an abundant supply of near-surface in-situ H2 compatible ore in addition to the Stockpile for the production of hydrogen, and zinc powder as the primary products of the pilot facility. The recovery of the lead, silver, copper and gold as a by-product is a bonus. We believe results from the pilot operations will be profitable and allow the Company to expand its zinc-to-hydrogen fuel process for off-site hydrogen production as an environmentally friendly processing method with zero emissions.

7 USPTO file no. 62/391773, filed May 10, 2016.


ZINC-TO-HYDROGEN PROCESSING CIRCUIT Under the Company’s proposed processing circuit, hydrogen-compatible ore from the Stockpile will be crushed to -¾ inch in a hydraulic crusher bucket attached to a track-type backhoe/loader that is powered by hydrogen. The equipment configuration eliminates the need to install a primary crushing circuit at the Stockpile. The crushed ore will be loaded into a hydrogen-powered dump truck as it is crushed and hauled to a receiving hopper at the processing facility. The Stockpile will be graded at the crushing site with a hand-held XRF spectrograph to ensure a zinc rich ore feed to the processing plant for hydrogen fuel self-sufficiency and zinc powder for off-site hydrogen production. XRF technology uses a unique set of characteristic X-rays for each metal, creating a metallic “fingerprint” and allowing the operator to calculate the concentrations of specific metals in the ore shipments to the processing plant. No special training is required to operate the device. At the plant, the ore will be dry-ground to -200 mesh and heated to temperatures above 400°C to convert the ore’s sulfide component to an oxide. The sulfur is evacuated to a scrubber containing calcium oxide (lime) to convert the sulfur to calcium sulfate fertilizer. Blackstone zinc occurs primarily as the mineral sphalerite (ZnS) and the balanced equation for the roasting is: 2 ZnS + 3 O2 → 2 ZnO + 2 SO2. The gaseous product of the sulfide roasting, sulfur dioxide (SO2) can also be used to produce sulfuric acid. Following roasting, the ore is fired in a two-stage, graphite-lined electric kiln at temperatures above 1,000°C. The temperature vaporizes the zinc content (zinc boils at 907°C) in a process similar to the zinc fuming methodology patented in 1910 by Edward Dedolph. Zinc vapors react with water which precipitates zinc oxide and releases hydrogen (known as water splitting) without the use of fossil fuels. During the zinc vaporization phase, a collection vessel (hydrolysis reactor) collects the hydrogen liberated from the zinc vapor/water reaction while a pneumatic filtering system inside the reactor removes the zinc oxide byproduct. Periodic bursts of air to pneumatic-powered filter cartridges release the collected zinc oxide while the hydrogen is stored in a minimum 350 bar (5000 psi) pressurized tank. A vacuum pump removes the zinc oxide into a separate storage vessel as it collects in the base of the hydrolysis reactor. When the hydrogen process is complete the remaining ore (calcine) is mixed with soda ash and borax glass and the kiln temperatures is raised above 1200°C. The molten metals are tapped from the bottom of the kiln into molds as an agglomeration of metallic lead, silver, gold, and copper matte bullion which is sent to a refiner such as Johnson-Matthey for final separation. Zinc powder is produced by dissociating zinc oxide using a solar-hydrogen powered graphite-lined reactor designed to produce temperatures in excess of 1800°C. Adding an inert gas atmosphere or bio-mass to the dissociation reactor allows the dissociation reaction to complete at temperatures between 1300°C and 1500°C. The dissociation reaction typically completes to above 92%. The pilot processing facility is an end-to-end process for producing hydrogen, and dissociating zinc oxide to zinc powder, including the recovery of lead, silver, gold, and copper matte bullion from the Stockpile and near-surface ores. The facility’s electric kilns, solar-hydrogen reactor, valves, tapping spigots, pumps, conveyors, reagent feeders, metering devices, temperatures, and sensors will be computer operated using proprietary software authored by the Company. The pilot circuit offers a number of advantages:

• Cost-efficient hydrogen production • Energy self-sufficiency • Zero emissions • Clean energy


• Lower greenhouse gasses • Reduced carbon footprint • Off-site hydrogen production • Viable alternative to fossil fuels • Potable water exhaust • Zinc oxide solar power storage • Calcium sulfate fertilizer production • Nanoparticulate reagent manufacturing

Plant capacity vs. reaction time The pyrometallurgical processing circuit involves more than just melting the metal out of the ore. Blackstone ores are a mixture of metallic oxides, sulfides, and carbonates. To extract the metals, the ore has to undergo a series of chemical reactions. Based on laboratory tests, zinc fuming and metallic matte recovery is expected to take between two to four hours per one-ton kiln, including downtime for loading, tapping, and resuming processing temperatures. Time affects processing capacity. The longer it takes to complete a processing cycle, the lower the plant capacity. If a four-hour processing cycle proves sufficient, dual kilns should yield several tons of excess capacity per day. Economics of excess zinc oxide With the exception of cadmium, zinc has the lowest boiling point of the metals in the Stockpile. Although the ore contains trace amounts of cadmium, we expect to produce and market a high-quality zinc powder for manufacturing hydrogen and zinc oxide not dissociated to zinc powder. Prices for residual zinc oxide, depending on purity and particle size, range between $5 to as much as $190 per pound for reagent and pharmaceutical grades. Zinc recovered as an oxide or powder is expected to significantly increase the value of the Stockpile.8 Zinc oxide is an inorganic powder that is insoluble in water and is widely used as an additive in rubber, plastics, ceramics, glass, cement, lubricants, paints, ointments, adhesives, sealants, pigments, foods, batteries, ferrites, fire retardants, first-aid tapes, and more. The basis for Blackstone zinc oxide recovery was developed in France in 1844 and is commonly known as the French process. Worldwide consumption of zinc oxide is over 1.4 million tons per year; rubber manufacturers consume about 60 percent of the supply; electronics, ceramics, chemical, pharmaceutical, pigmentation, and agricultural industries use the remaining 40 percent. The dominant supplier is China. On-site power Electricity for the processing circuit will be generated on-site from solar and hydrogen powered in-line generators. The generator capacity is sufficient to power two 35Kw electric kilns and the materials-handling equipment at the pilot facility. An additional 60 Kw hydrogen-powered generator will provide power for plant lighting, utilities, laboratory, crew quarters, and appliances. In addition to the electrical generators there will be a 100Kw stand-by solar-power array using zinc-air battery storage. The Stockpile and hydrogen-compatible Reserves should provide sufficient feed to operate the pilot plant for at least 25 years if the throughput were increased to 40-tons-per-day from the planned 10-tons-per-day.

8 As of April 2016, Amazon sold zinc oxide powder at $13.48/lb.; Sigma-Aldrich marketed reagent-grade zinc oxide at $43.50/lb.; Standards Ceramics marketed 100-pound lots of zinc oxide for $730.


Environmental regulations While the planned processing circuit is confined solely to private property, we will still be required to obtain permits from the Idaho Department of Environmental Quality for fugitive dust and particulate emissions. By design, the pilot plant will be closed circuit for the recovery of zinc as an oxide; therefore, emissions from operations should be negligible and well within those defined as permissible. Based on the use of hydrogen as the primary energy source, it is anticipated the pilot plant will have zero or near-zero emissions Other than the receiving hopper and the ore crushing at the Stockpile, the processing circuit will be contained completely within a steel building of about 4,000 square feet. Final design and installation of the processing circuit we will be under the direction of a professional engineering firm familiar with state environmental regulations and meeting the requirements of the permitting process. Engineering firms in Boise such as Forsgren Associates, Hildebrand & Associates, or Brown & Caldwell are fully qualified to oversee the permitting process and will be retained subject to commencing site preparation at the Blackstone property. Staffing The automated materials handling and electric kiln operation are not labor intensive. The processing circuit can be operated with a four-person daytime staff, plus a manager and three additional workers for reloading the kilns on the night shift. There are a number of communities within a 15- to 80-mile radius of the mine, including Boise, Idaho (metro population 700,000) that have sufficient skilled labor pools. A professional chemist with extensive experience in thermochemical reactions will manage production. Executive management will manage the Company’s finances and administrative duties, negotiate and administer sales of hydrogen and precious metals, and provide on-site oversight of hydrogen production. The pilot plant is expected to operate 22 days per month. During downtime, the circuit will be idled for maintenance, inspections, and repairs. The initial operating season is expected to last from mid-March through the end of November, and extended to the entire year thereafter. Although Elmore County does not maintain the access road in the winter, the Company is authorized to plow the road at its own expense. Product shipping, security, and communications The pilot plant is anticipated to produce up to 35 tons of copper/silver/gold matte monthly, which will be shipped weekly to a refinery, most likely in Salt Lake City, Utah, on a Company-operated truck. Salt Lake City is about a five hour drive from the mine, primarily on Interstate highways. The facility will also produce about 40 tons of zinc oxide each month, most of which will be converted to zinc powder. Both products will be staged in Boise for shipment by common carrier for off-site hydrogen manufacturing or sale. In addition to zinc powder for off-site hydrogen production, the Company believes it is also positioned to produce reagent grade zinc oxide at prices above $20 per pound. Company-operated vehicles used to ship product will be GPS monitored for location, mileage, and speed. Broadband satellite will be the primary communications link, although cellular telephone service is available in certain spots on the Property. The pilot plant and surrounding area will be under 24-hour closed circuit television surveillance and digital video recording. Live and recorded video will be accessible by local monitors in the plant and over the Internet. Entrance to the processing plant, reagent and product storage areas, laboratory, and overhead roll-up doors will be controlled by touch-pad locks.


MANAGEMENT OF THE COMPANY

James Hawley, President & Director Mr. Hawley is extremely knowledgeable about the Blackstone, having served as an officer and director of the publicly traded entity that operated the Property under lease from 1984 to 1988. During his tenure he structured two public offerings that provided over $3.5 million for drilling and pit development. He also managed the lessee’s securities aftermarket from its beginnings as a penny stock to market highs in the $3.00 range.

His business experience includes positions as an executive officer and director of two publicly traded corporations, director of operations in the restructuring of two international insurance companies, CEO of a real estate development company specializing in the construction of planned unit developments, and CEO of a privately held high-speed Internet distribution enterprise. Mr. Hawley is also an experienced senior computer technology executive skilled in the design, development, and distribution of nationwide IPTv digital video networks and software for the hospitality and multi-family housing industries including establishing initial digital encoding and secure distribution standards for feature length films in association with the Motion Picture Association of America. Mr. Hawley attended Seattle University for four years, with an additional year at Boise State University, majoring in political science and journalism. He studied French at Cité Internationale Universitaire de Paris, and metallurgical science at the U.S. Bureau of Mines Laboratory on the University of Utah campus.

Marilyn Green, Secretary/Treasurer & Director Ms. Green is highly knowledgeable about the Property, having served as an officer and director with Mr. Hawley for the previous lessee. She has extensive experience in the securities industry and in risk management assessment, working with Mr. Hawley to reorganize two international insurers writing reinsurance, specialized risks, and surplus lines coverage. As an NASD-licensed Financial Principal, Ms. Green served as managing executive for Royal Alliance, a SunAmerica Company and member of the New York

Stock Exchange. She held previous brokerage positions with The William J. Green Company and Paulson Investment Company.

Kaili Anne Hawley, Director Ms. Hawley has a strong background in professional services marketing, with experience as marketing manager for Cal-Med in Newport Beach, California; clinical informatics specialist with Saint Alphonsus Health System in Boise, Idaho; Kareo Health Systems; and as a consultant for Medicare Services Meaningful Use implementation for hospitals and clinics in southern California. She holds a B.A. in communications and an M.A. in organizational management and international business from Antioch University.

Christopher Hawley, Director Mr. Hawley is the principal of Hawley + Associates, a marketing practice he founded in 1984. His major clients have included Oregon Steel, Ore-Idaho Foods, J.R. Simplot, and Boise Cascade, as well as numerous small and professional service businesses. Prior to launching his consulting practice, he was an instructor in communication and political science at Boise State University and the University of Idaho.


Blackstone Mining Company, Ltd. Five-year Consolidated Cash Flow Projections

Year 1 Year 2 Year 3 Year 4 Year 5

ASSUMPTIONS1 Operating days per year2a 0 192 192 192 192

Tons processed per day2b, 2c 0 10 20 30 40 Tons processed per year2b, 2c 0 1,920 3,840 5,760 7,680 Gross value per ton (precious metals)2d - 580 580 580 580 Gross value per ton (hydrogen) - 1,050 1,200 1,680 2,400

OPERATIONS Cash received Gross sales of matte bullion - 1,113,600 2,227,200 3,340,800 4,454,400

Less processing losses3 - (111,360) (222,720) (334,080) (445,440) Net sales of matte bullion - 1,002,240 2,004,480 3,006,720 4,008,960

Less refinery charges4 - (120,269) (240,538) (360,806) (481,075) Net smelter return - 881,971 1,763,942 2,645,914 3,527,885

Sales of hydrogen - 2,016,000 4,608,000 9,676,800 18,432,000 Total net sales of metals & hydrogen - 2,897,971 6,371,942 12,322,714 21,959,885

Cash used Plant operating costs5 - (700,000) (728,000) (757,120) (787,405)

Remote hydrolysis/storage build-outs6 (1,000,000) (1,000,000) - - - Marketing and advertising7 (500,000) (500,000) (446,036) (862,590) (1,537,192) Contingency8 (225,000) (330,000) (176,105) (242,956) (348,690)

Total cash (used) (1,725,000) (2,530,000) (1,350,141) (1,862,666) (2,673,286)

Net cash received (used) (1,725,000) 367,971 5,021,801 10,460,047 19,286,599

FINANCING9 Cash received Proceeds from debt or equity offering - - - - -

Total cash received - - - - - Cash used

Offering fees, commissions, and expenses - - - - - Principal paid on loans - - - - - Interest paid on loans - - - - -

Total cash used - - - - - Net cash received (used) - - - - -

INVESTMENTS

Cash received Total cash received - - - - -

Cash used Plant build-out and equipment10 (1,166,700) (200,000) (250,000) (400,000) (400,000)

Total cash used (1,166,700) (200,000) (250,000) (400,000) (400,000)

Net cash received (used) (1,166,700) (200,000) (250,000) (400,000) (400,000)

Net increase (decrease) in cash (2,891,700) 167,971 4,771,801 10,060,047 18,886,599

Cash at beginning of period - (2,891,700) (2,723,729) 2,048,072 12,108,119 Cash at end of period (2,891,700) (2,723,729) 2,048,072 12,108,119 30,994,718

The accompanying notes are an integral part of these financial projections.


Notes to Blackstone Mining Company Ltd. Five-Year Consolidated Cash Flow Projections

(1) Forward-looking statements. Financial projections are “forward-looking statements” as defined under federal securities law. As such, they are subject to risks and uncertainties.

(2) Assumptions. The following assumptions have been used in calculating these projections:

a. Operating season: The initial operating season is expected to last from mid-March through the end of November, and extended to the entire year thereafter. Although Elmore County does not maintain the access road in the winter, the Company is authorized to plow the road at its own expense if it chooses to do so.

b. Tons processed: 10 tons per day in the second year; increasing by 10 tons per day each year thereafter.

c. Plant build-out: Projections assume build-out will be completed in the first year and production will commence in the second year.

d. Gross processed value per ton: Gross processed value per ton (excluding hydrogen) has been calculated using the values shown in the following table.

Gross processed value per ton (excluding hydrogen) Metal Unit Price per unit Amount/ton Value per ton

Copper Pounds 2.08 96.0 199.68 Gold Ounces 1,280.00 0.106 135.68 Lead Pounds 0.80 80.0 64.00 Silver Ounces 17.15 23.50 403.03 Zinc (as zinc oxide) Pounds 5.00 170.0 850.00

(3) Processing losses. Losses due to processing are estimated at 10 percent of gross sales. (4) Refinery charges. Charges for refining the polymetallic matte into pure bullion are estimated at 12

percent of net sales. (5) Plant operating costs: Plant operating costs have been calculated as shown in the following table.

An annual allowance of 4 percent has been included to account for inflation and cost increases.

Processing costs Expense Per month Months/year Annual

Salaries & benefits Management & administration $ 12,000 12 144,000 Plant labor 17,300 8 138,400 Professional, technical & contract 14,500 8 116,000 FICA 2,100 12 30,000 Workers’ compensation 500 12 6,000 Plant travel stipends 450 8 4,800

Total salaries & benefits $ 439,200 Operations

Insurance 600 12 7,200 Plant fuel 14,300 8 114,400 Reagents & lab supplies 12,900 8 103,200 Contingencies 3,000 12 36,000

Total operations expense 260,800 Total annual operating costs $ 700,000


(6) Remote hydrolysis/hydrogen storage units. The company plans to construct up to four remote hydrolysis reactors/hydrogen storage units in the first two years at an estimated cost of $500,000 per installation. Costs will ultimately be recouped from the end user, but will require an initial outlay of capital.

(7) Marketing and advertising. Per SBA recommendations, an allowance of 7 percent of net sales has been set aside to cover marketing and advertising expenses, with a floor limit of $500,000 in the first two years of operations.

(8) Contingency. An allowance equal to 15 percent of operating expenses has been set aside for contingencies.

(9) Financing. Financing terms are subject to negotiation and have been excluded from these projections.

(10) Plant build-out and equipment. First-year plant build-out costs are capitalized under investment activities as follows.

First-year plant build-out costs

Expense (First year) Per month Months/year Annual Salaries & benefits

Management & administration $ 14,000 12 168,000 Construction labor 19,500 8 156,000 Professional, technical & contract 15,800 8 126,400 FICA 2,500 12 30,000 Workers’ compensation 750 12 9,000 Plant travel stipends 650 8 5,200

Total salaries & benefits $ 494,600 Equipment

Crushing, grinding, & conveying 75,000 Rolling stock 191,000 Steel building 150,000 Fixtures 140,000 Analytical equipment 40,000 Contingencies 76,100

Total capital equipment $ 672,100 Total build-out costs $ 1,166,700

The Company plans to expand plant capacity in the five years covered by these projections and has earmarked $1.25 million for that purpose.

Documents

CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUMblackstonemine.com/Operations.pdfcopper, lead, silver, and gold as a byproduct of the zinc-to-hydrogen reaction. As of May, 2016, the Property’s