🕐13.09.11 - 15:54 Uhr

APELLA RESOURCES INC. - INTERVIEW WITH ENGINEERING & MINING JOURNAL



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Special Report on the BC ("The Worlds Mining Province" - "Vancouver - Centre of Exploration Excellence") &Yukon ("An Unexplored Golden Nugget") Mining Industry: Engineering & Mining Journal, 2011 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Transcript from the Interview with Adrian Bakker, Vice President Corporate Communications, Apella Resources Could you give us a brief introduction to Apella Resources Projects; its current stage of development and milestones for the coming year? Apella Resources has completed four drill programs on the Iron-T Project.

Based on the first three programs, we have 14.38 million inferred tonnes of economic and mine-able grades of vanadium, titanium and iron.

The vanadium average is 0.5%, iron grades average about 35% and titanium grades around 6%.

These figures, added to the fact that the Iron-T is an igneous-layered intrusion type deposit, make Iron-T very similar to the Lac Dore and Bushveld complexes, currently two of largest vanadium sources in the world.

Apella was awarded 95% of the renowned 102 million tonne Lac Dore Deposit, the second largest in the world, and is now incorporating it into its development plan. Apella enjoys a major competitive advantage over standalone vanadium deposits as both its Lac Dore and Iron-T deposits contain mineable grades of not just vanadium, as well very large quantities of titanium and iron.

These types of "triple metal play" deposits are an anomaly in the North American mining sector given the fact that all three metals they provide will be close to equal in value to one another. These deposits types are a challenge for the market to attach accurate values to; as the only comparable deposits currently in production are situated in South Africa, Russia and China where accurate production data is not really forthcoming and available. One marked difference in Chinas vanadiumiferous-magnetite is typically Chinas much lower grades, as opposed to Apellas two world class high-grade deposits ideally located in Quebec, Canada.

Apella Resources has targeted attaining Bankable Feasibility on 250 Million tonnes based on the previous non NI 43-101 geophysical airborne survey estimate completed by Abitibi Geophysics over the Iron-T.

Establishing this tonnage would effectively make the Iron-T the largest such deposit in the world of that grade and available infrastructure.

As with the Lac Dore, the Iron T is a vertical structure, which gives it a significant advantage over the Bushveld complex; the ability to utilize open pit mining. The main advantages for Apella are both deposits are large scale, contain three metals of minable grade, are open pit-able, have all the required infrastructure and workforce and are located in Quebec one of the best places in the world to mine.

The new NI 43-101 resource upgrade on the Iron-T with its favourable metallurgy reinforces the economic viability of Apellas deposits as both are virtually identical in grade and type of mineralization. Vanadium is a metal not particularly well understood by the investment community. Where would Apella Resources major markets be? Ten years ago, the Quebec government conducted their own comprehensive studies and metallurgy on what is now Apella Resources Lac Dore Project.

At the time, there simply was not the demand for Vanadium to see their efforts through to completion. As Apella is aggressively developing the Lac Dore Deposit and the Iron T Deposit a projected increase in demand for all three metals is expected to be significant. Apella, at the production stage, will be looking at complete separation of all the metals within two years.

This would result in production of ferrovanadium, ferrotitanium, titanium dioxide, iron oxide, and vanadium pentoxide, which would also allow us to supply both the metal alloy and vanadium redox battery markets. Vanadium will remain a key and strategic metal into the future, as Apella targets what is promising to be the largest combined supply in the world.

Apella aims to be the first large scale primary producer of Vanadium in North America.

Currently and historically, vanadium demand has been primarily influenced by the steel market in the area of high strength steels.

The recent earthquakes in China and Japan have initiated new global mandates for earthquake-safe steel, which specifically uses vanadium.

Today, however, we are also seeing a significant shift towards Vanadium battery technology around the world.

In the USA, for example, the Department of Energy was successfully lobbied to install smart grid technology in Ohio, which will utilize vanadium redox batteries.

Two of the worlds largest vanadium battery companies signed deals with major firms in California at the beginning of this year. Both from a commercial and political perspective there is a push for vanadium-based technology.

I have been tracking what I would describe as the most significant global shift towards vanadium battery since its invention by Maria Skyllas Kazacos.

Maria became a strategic member of the Apella team earlier this year. What level of capital expenditure is Apella Resources looking at to get the Iron-T or Lac Dore Project into production and how much of a challenge is it to attract this finance? To get the Iron-T or Lac Dore projects into the first stages of production, the capital expenditures by Apella Resources will be $100 million to $120 million, at a rough estimate.

To achieve the highest level of production, where we will be able to completely separate the metals, we are predicting a capital expenditure of between $400 million and $500 million per deposit.

It is important to recognize that at this highest level of production each separated product will most likely have almost equal value to our initial vanadium value.

The ore valuation, therefore, will be greatly multiplied. We are starting to see the global acceptance of, and push for, Vanadium-based technologies spill over into the investment community.

There is an ever growing interest in vanadium and with that comes increased ease in attracting investment for Vanadium projects in general.

However, Vanadium investment is still very much in its infancy.

In North America specifically, people do not yet know what criteria they should use to distinguish between different companies in the market and the differences in the projects they are developing.

With Apella Resources we know we have the drilling results, metallurgy, tonnage and results from historic feasibility reinforcing confidence towards production. We still find however that we have to educate potential investors to a degree that we would not have to with a gold or copper project for example.

Projects and mines for certain precious and base metals are abundant.

There is more familiarity with how to evaluate them respectively.

We are currently in discussions with strategic investors regarding the development of both projects to bankable feasibility and production. Apella Resources Lac Dore claims have been the subject of some dispute in the past. Could you clarify the situation here? There are 21 claims covering the Lac Dore Vanadium Deposit known as the second largest Vanadium deposit in the world at a said 102 Million tonnes.

The Quebec government owned this world class deposit for over 40 years, of those claims Apella Resources now owns 18 claims of them, believed to cover 95% of the historical deposit.

What occurred in 2007 is quite compelling.

Instead of inexpensively renewing claims previously subject to a positive feasibility study, the claims were left to expire.

Apella learned of this expiration and organized a professional team of stakers to ground stake the deposit.

On the day of staking Apellas team quickly learned they had competition, the Quebec crown corporation known as SOQUEM a previous owner.

SOQUEMs team was ill equipped to compete with Apellas well-organized team yet filed their application for staking and thus put the claims in conflict status.

The process of inspection, partial awards and appeal took close to 4 years tocomplete.

In March of 2011, Apella won a landmark victory in Quebec, over Quebecs crown corporation SOQUEM, and the courts awarded Apella 100% ownership of 18 of 21 claims said to cover the world renowned Lac Dore deposit.

Surrounding territory, said to contain a large amount of lower grade mineralization was sold to the Chinese over the course of this same 4 year time period.

The neighbouring development is being fast-tracked to production by 2012 and speaks volumes for the appetite of the Chinese for Canadas raw resources.

The target of this company is shipping all the ore to China and is the opposite of Apella, which aims to keep the majority of processing and sales in the hands of North American workers and companies.

A neighbouring mine however would provide additional infrastructure and thus significant cost savings for the development of the premier mineralization in the region held by Apella. We are now set to launch a large scale drill program on the Lac Dore Project with the objective of making the historic resource NI43-101 compliant.

This program will also entail expanding the original deposit by drilling heavily mineralized areas contiguous to existing historic tonnage that remain untested to this day.

In addition to these 18 claims, Apella expects there is additional tonnage lying to the north of the original deposit.

The northern extension which had not been subject to the dispute is owned 100% by Apella Resources.

Early exploration work by Apella has revealed a heavily mineralized zone at surface and at depth along a three and a half kilometer strike length.

The resulting grades, which Apella obtained from trench sampling and diamond drilling, are consistent with the historic results of the nearby Lac Dore deposit.

This, combined with Apellas completed geophysics has indicated a target of between 30 million to 50 million tonnes that we hope to add to the historic102 Million tonne Lac Dore deposit. Where do you see Apella Resources in five years time? With regards to both the Iron-T Project and the Lac Dore Project, our production target is three-four years.

This is assuming full funding, something we are working very hard at achieving at the moment.

We have dealt primarily with retail investors throughout the years and are now seeking a better balance with institutional investors. We have gained significant exposure through listing on the OTCQX.

We are continuing to meet with funds and institutions with a corporate strategy to take both of Apellas deposits all the way to production.

In five years time we anticipate the creation of new markets within the steel, aerospace and battery industries.

The battery sector seems to be turning to Vanadium for its vastly superior storage attributes both in large scale batteries for wind and solar energy and to compliment Lithium for applications like electric vehicles. We are very interested to see what the future brings and what opportunities we encounter and will certainly be tenacious in gaining as much exposure as possible.

We have a very unique opportunity and world-class assets.

There is a robust and growing demand for our products; all that is needed now is increased awareness. For more information contact: W.

Adrian Bakker Vice President of Corporate Communications Apella Resources Inc.

APA-TSX-V 1600-543 Granville St. Vancouver, BC, Canada V6C 1X8 Ph.604.683.8990 Direct.604.641.4474 Toll Free:1-800-663-8990 EM: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Apella slideshow Video of the Iron-T Vanadium Deposit Subscribe to Apellas Video Channel Interview With W.

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