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[Page 470]

INTERNATIONAL CENTRE FOR THE SETTLEMENT OF

INVESTMENT DISPUTES

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VIDEOCONFERENCE:

HEARING ON THE MERITS AND JURISDICTION

Wednesday, September 30, 2020

The World Bank Group

The hearing in the above-entitled matter came on

at 8:00 a.m. before:

PROF. PIERRE TERCIER, President of the Tribunal

DR. HORACIO A. GRIGERA NAÓN, Co-Arbitrator

PROF. ZACHARY DOUGLAS, Co-Arbitrator

[Page 471]

Also Present:

MS. SARA MARZAL YETANO

Secretary to the Tribunal

MS. MARIA ATHANASIOU

Tribunal Assistant

Court Reporters:

MR. DAVID A. KASDAN

Registered Diplomate Reporters (RDR)

Certified Realtime Reporters (CRR)

B&B Reporters

529 14th Street, S.E.

Washington, D.C. 20003

United States of America

[email protected]

[Page 472]

APPEARANCES:

Attending on behalf of the Claimants:

MS. ABBY COHEN SMUTNY

MR. DARRYL LEW

MR. BRODY GREENWALD

MR. PETR POLÁŠEK

MR. HANSEL PHAM

MS. GABRIELA LOPEZ STAHL

MR. FRANCIS LEVESQUE

MS. DARA BROWN

White & Case, LLP

701 13th Street, N.W.

Washington, D.C. 20005

United States of America

Representing Gabriel Resources Ltd.:

MR. DRAGOS TANASE

MR. SIMON LUSTY

MR. RICHARD BROWN

MS. RUTH TEITELBAUM

Representing Roșia Montană Gold Corporation:

MS. CECILIA JAKAB

MS. ELENA LORINCZ

MR. MIHAI BOTEA

[Page 473]

APPEARANCES: (Continued)

Attending on behalf of the Respondent:

DR. VEIJO HEISKANEN

MR. MATTHIAS SCHERER

MS. NORADÈLE RADJAI

MS. LORRAINE de GERMINY

MR. CHRISTOPHE GUIBERT de BRUET

MR. DAVID BONIFACIO

MR. BAPTISTE RIGAUDEAU

MS. EMILIE MCCONAUGHEY

MS. VICTORIA LECLERC

MS. STELA NEGRAN

MR. GREGORY GAILLARD

MR. KEN KOTARSKI

Lalive

35, rue de la Mairi

CH - 1207 Geneva

Switzerland

DR. CRENGUTA LEAUA

DR. STEFAN DEACONU

MS. ANDREEA SIMULESCU

MS. LILIANA DEACONESCU

MS. ANDREEA PITURCA

LDDP IT team:

MS. IONELA MIHAILA

Leaua Damcali Deaconu Păunescu-LDDP

10 Zborului Street, sector 3

030595, Bucharest

Romania

[Page 474]

C O N T E N T S

PAGE

PRELIMINARY MATTERS ... 475

WITNESSES:

BERNARD J. GUARNERA and MARK K. JORGENSEN

Direct presentation ... 491

Cross-examination by Mr. Polašek ... 553

Redirect examination by Ms. de Germiny ... 675

Questions from the Tribunal ... 691

[Page 475]

P R O C E E D I N G S

PRESIDENT TERCIER: Please start.

DR. HEISKANEN: As you will remember, the

Tribunal indicated during the first day of the Hearing

that you will have questions to the Parties, at least

you indicated you would have questions to the

Claimants, and that you would revert during the

Hearing as to when you would raise the questions. We

would suggest that we would set aside some time

tonight, if that is agreeable to the Tribunal, to

discuss the questions that the Tribunal may have with

the Parties on the basis of the Opening Statements.

If they are left to a later date, for

instance, until the last day, which is one of the

options--

(Overlapping speakers.)

DR. HEISKANEN: --the Tribunal mentioned, it

will complicate things. At least on the Respondent's

side, we would very much appreciate getting a sense of

the issues that the Tribunal is interested in so that

we can develop our position for any post-hearing

proceedings which still need to be discussed on the

[Page 476]

last day. We would need to confer with our clients as

to what the Respondent's position will be for any

post-hearing proceedings.

So, the sooner we have a sense of the issues

that the Tribunal has in mind at this stage of the

proceedings based on the Opening Statements, the

better from our perspective. So, that would be our

suggestion, that we set aside some time tonight for

those questions.

PRESIDENT TERCIER: Okay. Thank you for

this. We are already, in fact, on the Transcript. I

have not opened the--it doesn't matter. It's okay.

Mrs. Cohen, your comment?

MS. COHEN SMUTNY: Claimants would be happy

to hear the Tribunal's questions whenever the Tribunal

is ready to ask them.

PRESIDENT TERCIER: Okay.

MS. COHEN SMUTNY: And so, no particular

comment at this time on Respondent's comments, except

I would point out that the--well, no further comment

at this time.

As a matter of housekeeping, just to come

[Page 477]

back on the request for Transcripts from Canada, just

to confirm, Claimants have no objection to Canada

obtaining copies of the Transcripts. Claimants would

only ask that Canada specifically be directed to

Procedural Order No. 3 and the requirements set forth

in that procedure--in that Procedural Order.

Thank you.

PRESIDENT TERCIER: Thank you very much. In

fact, you have already taken some point that I would

like to discuss earlier.

I formally open the Hearing, but I would

like to make sure, Sara, that we have everybody

on-line, active speakers. It's fine?

SECRETARY MARZAL YETANO: Yes.

My only question is whether we will be able

to see the Experts.

PRESIDENT TERCIER: Okay.

SECRETARY MARZAL YETANO: I'm trying to

connect.

PRESIDENT TERCIER: In a few moments.

Okay. Well, now coming back, good morning,

good afternoon, ladies and gentlemen. It is my honor

[Page 478]

to open the third day of the final hearings in the

ICSID Arbitration Case 15/31 between Gabriel

Resources, Limited, and Gabriel Resources (Jersey),

Limited versus Romania. I hope you had a good rest,

and I hope also that we will have a good discussion,

quite a debate, if any.

We have heard that there are no new

participants, so the group is the same.

The second point, I would like to thank

again Mr. Kasdan for the Transcript that we have

received, and I recall you on the decision that he

gave in yesterday's letter.

Third point, you have received the written

confirmation by Sara, by our Secretary, of the time

that has been already used and is left to the Parties.

I wanted first to ask Claimant whether they

had objection to the transmission of the Transcript to

the Canadian Government. We have now the answers,

with the reservation made in connection with PO3.

Dr. Heiskanen, you had already given your

agreement yesterday that the reservation of PO3 raised

a problem for you. I assume not?

[Page 479]

DR. HEISKANEN: No. As we confirmed

yesterday, the Respondent's position is that, under

the BIT, the Canadian Government is entitled to full

access to the Transcript and any other documents filed

in the arbitration.

PRESIDENT TERCIER: Fine.

The next point is the position that we have

asked to the Parties, more precisely to Claimant,

concerning the question of the relevant dates and

possible impact on the valuation. We have received a

few minutes ago the position taken by the Claimant. I

will recall that now Respondent is invited to make its

own comment/answers by tomorrow, beginning of the

Hearing.

Good. The next point is today's program.

First, we will hear the Respondent's experts in a

moment, if everything is fine, and I would like to

make two points:

The first point is, indeed, I will discuss

with my co-Arbitrators during the break whether we

will already ask questions today, and I fully

understand the position of the counsel in order to

[Page 480]

avoid that there could be surprise and that they can

be prepared sufficiently to answer that. I will

discuss it with my co-Arbitrators and inform you

during the course of today's Hearing.

The second point, I don't know, but in case

the examination of our experts does not cover all the

time we had envisaged, the question could raise

whether we would not start already with Claimants'

quantum witness, Mr. Cooper.

May I ask Claimant whether Mr. Cooper could

be available?

MR. POLASEK: Mr. President, at this point,

we would need to confer to find out. We will do so

now, and we will let you know as soon as we know.

PRESIDENT TERCIER: Okay. But, of course,

it is just to let him know that it is possible and

then we will, in case, depending on the development of

the examination, we will see whether this will be the

case yes or no. Okay?

MR. POLASEK: Yes, yes, of course. We will

do that. Thank you.

DR. HEISKANEN: As on that, Mr. President,

[Page 481]

we would be happy to start with Mr. Cooper today. The

Respondent is confident that we can complete the

examination of both Mr. Cooper and Mr. Jeannes

tomorrow.

PRESIDENT TERCIER: Good. Okay.

Next point and last point before going to

the examination of the Experts: Have you on your side

requested a special comment or a request? Mrs. Cohen.

MS. COHEN SMUTNY: I'm sorry, I didn't

understand the question, Mr. President.

PRESIDENT TERCIER: It's a very neutral

question, whether you have a request, another request

or another comment before we start the beginning of

the--

(Overlapping speakers.)

MS. COHEN SMUTNY: No. Oh, I'm sorry. No,

we do not.

PRESIDENT TERCIER: Okay.

Dr. Heiskanen?

DR. HEISKANEN: Nothing from us,

Mr. President.

PRESIDENT TERCIER: Okay, good.

[Page 482]

In that case, we may start with the

examination of the Experts.

BERNARD J. GUARNERA and MARK K. JORGENSEN, RESPONDENT'S

WITNESSES, CALLED

PRESIDENT TERCIER: They are with us.

Good morning, Mr. Guarnera; good morning,

Mr. Jorgensen.

You will be heard in this procedure as

experts for the examination of the reports that you

have prepared. As experts--

(Pause.)

VOICE: We can, yes.

PRESIDENT TERCIER: Do you hear me?

Mr. Guarnera, do you hear me?

VOICE: We can hear you. Just one moment.

We'll be--

(Pause.)

PRESIDENT TERCIER: Do you have a problem in

hearing me?

VOICE: Are you able to hear us,

Mr. President?

PRESIDENT TERCIER: Thank you very much.

[Page 483]

So, we start and I start again. You will be

heard this morning for you as experts; and, as such,

you have first to read the Declaration. Have you the

text of the Declaration?

VOICE: We have it, sir.

PRESIDENT TERCIER: Okay. Mr. Guarnera,

please.

THE WITNESS: (Mr. Guarnera) I solemnly

declare upon my honor and conscience that my statement

will be in accordance--

(Pause.)

THE WITNESS: (Mr. Guarnera): Okay. Okay.

We'll get IT. Excuse me.

(Pause.)

PRESIDENT TERCIER: Thank you very much,

indeed.

So, we now come back on the Declaration.

May I invite you, Mr. Guarnera, to read aloud the

Declaration.

THE WITNESS: (Mr. Guarnera) I solemnly

declare upon my honor and conscience that my statement

will be in accordance with my sincere belief.

[Page 484]

I will not receive or provide communications

of any sort during the course of my examination.

PRESIDENT TERCIER: Thank you.

And, Mr. Jorgensen, please.

THE WITNESS: (Mr. Jorgensen) I solemnly

declare upon my honor and conscience that my statement

will be in accordance with my sincere belief.

PRESIDENT TERCIER: Sorry.

THE WITNESS: (Mr. Jorgensen) I will not

receive or provide communications of any sort during

the course of my examination.

PRESIDENT TERCIER: Thank you very much.

Sorry for interrupting you.

Now, I would like to recall you because it

is a virtual hearing that, according to PO 33, the

Protocol, there are a few rules that should be

applied. I'll recall them shortly.

First, no person shall be present in the

room with the testifying Witness or Experts.

Two, any communication by or with the

Witness or Expert during their examination are

prohibited. Each witness and Expert shall affirm at

[Page 485]

the start of the examination that he or she will not

receive or provide communication of any sort during

the course of his or her examination.

The Witness or Expert shall remain visible

at all times during the examination, and the Witness

and Expert shall not use a virtual background or in

any way prevent or limit the recording of the remote

venue from which he or she is testifying.

Could you confirm that you have heard this

recommendation? Mr. Guarnera?

THE WITNESS: (Mr. Guarnera) I confirm that,

sir.

PRESIDENT TERCIER: Mr. Jorgensen?

THE WITNESS: (Mr. Jorgensen) Yes.

PRESIDENT TERCIER: Good.

You have prepared or Behre Dolbear have

prepared for this proceeding three reports. The First

Report is called "Assessment of Technical Viability of

Roșia Montană Gulf Project Transylvania, Romania." It

is dated 10th of February 2018, and it has been

prepared by you, Mr. Guarnera, Mr. Jorgensen, and

Dr. Cameron.

[Page 486]

The Second Report is a report called

"Rebuttal Report of Behre Dolbear and Company (USA),

Inc., and it was dated 20th of May 2019, and it has

also been prepared by Mr. Guarnera, Mr. Jorgensen and

Dr. Cameron.

The Third Report is a report called

"Supplemental Expert Report--Habitability or Roșia

Montană During Construction and Operation of the

Project," dated 9th April 2020, but this one has been

prepared by Mr. Michael McLoughlin. I assume you will

speak about the two first reports that you have

co-authored.

My question to you is whether you confirm

the content of these two reports or whether you wish

to make amendments, corrections, or make any comment

to that.

Please, Mr. Guarnera.

THE WITNESS: (Mr. Guarnera) I do believe

that some small corrections were submitted previously,

sir.

PRESIDENT TERCIER: All right, yes. And

they have been--you're right; there have been.

[Page 487]

Otherwise, you can confirm the content of

these two reports?

THE WITNESS: (Mr. Guarnera) I do.

PRESIDENT TERCIER: Okay. And I assume this

is also the case for Mr. Jorgensen.

THE WITNESS: (Mr. Jorgensen) Yes.

PRESIDENT TERCIER: Now, we have special

rules concerning the examination of reports of experts

that have co-authored the report; that is your case,

and here you have the special rule that I read for

you. The Parties--sorry. Once a question is posed by

the cross-examiner, and unless that question relates

to the expertise of a particular expert or to a

specific part in the Report prepared only by one

author, either expert will be able to answer, but only

one of them will be allowed to answer to each

question. And to the extent that there are clear and

justifiable grounds to do so, this rule will be

applied with flexibility.

So, my first question to you is whether

there are some parts of the Report that only one of

you had authored.

[Page 488]

Who will answer? Mr. Guarnera?

THE WITNESS: (Mr. Guarnera) Yes, sir. I

have been responsible for the overall preparation of

the Report, as has Mr. Jorgensen. The Report, as you

saw with SRK, was a multiple person effort, but we

were the two principals that compiled it.

Mr. Jorgensen's expertise focuses on processing and

infrastructure, as well as on cash-flow management,

and capital and operating costs. My expertise focuses

on the other aspects of the document, sir.

PRESIDENT TERCIER: Okay. Could you tell us

what is the role of Dr. Cameron?

THE WITNESS: (Mr. Guarnera) Dr. Cameron was

essential in that he was very helpful on the review of

the Mineral Resources and Reserves, and he was relied

upon for that, and I worked with him to prepare the

report on that section.

PRESIDENT TERCIER: Very good. That means

that the question may cover every aspect covered by

the two experts; am I right?

THE WITNESS: (Mr. Guarnera) Of those two

reports, that is absolutely correct, sir.

[Page 489]

PRESIDENT TERCIER: Okay. Good. So, I

think we have now the rule is clear.

I should start, according to the classical

view, in inviting you to introduce yourselves first.

In fact, we have your résumés also on the document

that we have received. Would you like to add to

anything to that, Mr. Guarnera?

THE WITNESS: (Mr. Guarnera) Well, what I

would say, sir, since you have that document, you can

see that I have well over 50 years of experience.

More than forty of those years has been spent in the

review of technical and economic aspects of the

mineral projects to determine their viability as well

as the valuation, what is that project worth. And I

have extensive global experience, have worked on every

continent and have visited hundreds of mining

operations.

PRESIDENT TERCIER: Thank you very much.

Mr. Jorgensen, do you want to add something

to the résumé that we have?

THE WITNESS: (Mr. Jorgensen) Yes, sir.

Thank you, Mr. President.

[Page 490]

I also have over 40 years of experience in the mining industry. My experience is both in engineering and in operations. I've worked for several major engineering companies as well as several major mining companies, in that I've had the opportunity, as Mr. Guarnera has had, to travel worldwide. I have been able to see many operations.

I have also been able to design and construct these operations. I have been able to operate these--actually, hands-on experience.

So, I feel that, you know, I have a very broad-based knowledge of the mining industry and especially the processing part.

Thank you.

PRESIDENT TERCIER: Thank you very much.

Now, concerning the way this examination will take place. You know the rules. You have made your Report. First, you will have an opportunity--you have an opportunity to make a short oral presentation. It must not be over one hour. You have prepared a PowerPoint, and I thank the counsel for having to find a way to communicate the printed version to me and, I

[Page 491]

think, to my co-Arbitrator, too, so we have this document. Normally, this would be--instead of the direct, I don't know if on Respondent's side you will have other questions on direct, but it should normally not be the case. It will then be the cross-examination and then the redirect. I recall that the Arbitral Tribunal--Members of the Tribunal have the right to ask questions whenever they feel it could be necessary or interesting.

Is it clear to you, Mr. Guarnera?

THE WITNESS: (Mr. Guarnera) Yes, Mr. President. It is, thank you.

PRESIDENT TERCIER: And, Mr. Jorgensen?

THE WITNESS: (Mr. Jorgensen) Yes, thank you.

PRESIDENT TERCIER: Good. If my co-Arbitrators have no comment or requests or anything, we may proceed, so you have the floor for your presentation.

Please.

DIRECT PRESENTATION

THE WITNESS: (Mr. Guarnera) We're ready to

[Page 492]

share the screen now.

(Pause.)

I believe, Mr. President, that I need to get our technical person in to share the screen.

(Pause.)

There we go. Okay. Looks like we're up and ready. Thank you.

Can you hear us, Mr. President?

PRESIDENT TERCIER: Yep.

THE WITNESS: (Mr. Guarnera) Okay. Thank you.

PRESIDENT TERCIER: Sorry, I'm also mixing things with the screen, so it's okay, I'm ready.

THE WITNESS: (Mr. Guarnera) I share the same type of fear of technology right now.

We've already introduced ourselves. We will provide you with the instructions that we received from the Respondent, the methodology that we used in our exercise, provide an overall summary of our findings, and some discussion of our findings and then some concluding remarks.

Next slide, please. Next slide, please.

[Page 493]

Next slide, please.

Thank you.

Our instructions were to assess the accuracy of the Mineral Resources and Mineral Reserves estimated for the Project. We also were asked to determine if the Project was technically viable. We were asked to assess the accuracy of the capital and operating costs that had been projected for the Project. And, lastly, to determine, based upon the various technical and economic factors to be assessed, when RMGC could have begun operations at the Project, assuming that the Environmental Permit and other administrative acts necessary for the Project to proceed had not been challenged in court, and assuming as well that RMGC obtained the Building Permit in April of 2018.

Next slide, please.

So, the methodology that we had is that we visited the site of the mining site in November of 2017. It was a several-day visit. We visited the site. We visited various areas around the site. We saw some of the antiquities. We visited areas where

[Page 494]

cyanide might be delivered. And it was quite a complete exercise.

Upon our return, we examined project-specific management reports dating back to 1998. We also then issued a report on the technical viability of the Project, a Rebuttal Report, and a Supplemental Report on the effects of blasting on the Roșia Montană Historical Center. As you can see and as you noted previously, sir, the First Report was in 10 February of '18. Our Second Report was a rebuttal report in 20 May of '19.

One of the things I think it's important to understand is that our First Report was done in a very short period of time. For some reason or other, we were engaged at a late date and, therefore, did not have the normal time that we would take to complete the first document.

There was also, as you noted, a Supplemental Expert Report on the habitability of the Roșia Montană town site and other important places, and that was done by Mr. Michael McLoughlin. He really is out of Behre Dolbear's London office and not out of the U.S.

[Page 495]

office as we were.

Next slide, please.

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[Page 496]

Next slide, please.

There's some real technical issues in that 2012 SRK Report that is--challenged the technical viability of the Project. Specifically, RMGC has yet to complete the studies for underground workings in historic archaeological sites at Cârnic and Orlea, yet SRK declares Mineral Reserves are present at these two pits.

The Chance Finding of underground workings and archaeological sites still exists elsewhere, even within the existing surveys. Now, this is critically important, sir, in the sense that, if you come across one of these underground workings that you didn't know existed, it is a major challenge because you can lose equipment and you can even lose lives. Personal experience I have at a mine in the United States where previous underground mining had occurred, and we did radar and sonar surveys, and we were sure we had found all the tunnels, that was the case until our truck hit one we didn't know, and a 150-ton truck was almost lost.

MR. POLASEK: Mr. President, I am very sorry

[Page 497]

to interrupt at this point. Under the Procedural Rules that we have in place, direct presentation is supposed to be a summary of the written reports. That's one permissible scope of a direct presentation, or the permitted rebuttal, not nothing more.

And, in this particular instance, I think we would need to know where in Behre Dolbear's Report we have the information about this mine in the United States and the experience that Mr. Guarnera had there. If this cannot be traced to the Report, it needs to be struck from the record.

Thank you.

THE WITNESS: (Mr. Guarnera) Apologies. That will not occur again. RMGC--

MR. POLASEK: Pardon me. So just to make sure that we understand this part of the direct presentation will be stricken from the Transcript. Are we proceeding on that basis?

PRESIDENT TERCIER: Can Respondent's side comment to that?

MS. de GERMINY: Sorry. Mr. President, the experts are simply providing context for certain

[Page 498]

conclusions in their Report, so we don't think this needs to be stricken.

PRESIDENT TERCIER: Okay. The Arbitral Tribunal will decide and we will go further.

Mr. Guarnera, indeed, if you can avoid eliciting that, we would be very grateful.

THE WITNESS: (Mr. Guarnera) I will do that, sir.

RMGC stopped acquiring necessary properties in 2008 and must still acquire further properties.

RMGC could and should have proposed a new Tailings Management Facility design due to a possible threat to the downstream village of Abrud.

Next slide, please.

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[Page 499]

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Thank you.

PRESIDENT TERCIER: Mr. Guarnera?

THE WITNESS: (Mr. Guarnera) I'll have Mr. Jorgensen address that, if possible.

PRESIDENT TERCIER: Mr. Jorgensen.

THE WITNESS: (Mr. Jorgensen) Thank you. We reference BD-2, Section 1.7.

MR. POLASEK: And where specifically is this statement made in that section? I'm asking because this seems to be referring to the Zlatna facility, and I'm just not seeing that opinion in your Written

[Page 500]

Reports.

THE WITNESS: (Mr. Jorgensen) Yes. Right. We further reference cyanide-handling--this actually--

THE WITNESS: (Mr. Guarnera) You mentioned it under the environmental--

MS. de GERMINY: Mr. President, we object to this question. Counsel will have opportunity to ask questions about this on cross-examination. The Experts discuss certainly cyanide and costs. I'm looking at Paragraph 71 of their Second Report. There are references throughout their Reports to cyanide questions and to Zlatna. So, this is an inappropriate objection.

PRESIDENT TERCIER: Okay. Thank you.

I would invite counsel for Claimants to take note of the passages where they consider there are reference to passages--there are no reference to issues of fact that have not been dealt with in the Report and to come to it in the cross-examination so that we can have a fluid presentation.

Please, Mr. Guarnera.

[Page 501]

THE WITNESS: (Mr. Guarnera) Most importantly--

MR. POLAŠEK: Mr. President, I apologize for another interruption. We actually reviewed the presentation, and we have a couple of other points like this. The concern on our side is not that we would not have an opportunity to cross-examine on the presentation, but that there is new evidence provided for the first time in this presentation, and that is not permitted. This is not--that that evidence is not within the scope of the permitted rebuttal. That is the only time that new evidence is permitted, and this goes beyond that.

So, I am afraid that cross-examination is not the tool to address the deficiency. It needs to be addressed now. I don't see how else we could proceed.

And, on this particular point, if we look at Paragraph 71 of the Behre Dolbear's Second Report, it does not mention an increase in costs in connection with the cyanide-handling. This, in my understanding, is a reference to the Zlatna facility. This is just

[Page 502]

not mentioned in Behre Dolbear's Report, so it is in the Opening. That is not permissible.

And we, unfortunately, do not have citations in Behre Dolbear's presentation, so we don't know where these statements are coming from, but for this particular one, we are unable to trace it to the Reports.

Thank you.

PRESIDENT TERCIER: A question to you: Do you have many passages to which you have objections like this one?

MR. POLAŠEK: So, let me just--

PRESIDENT TERCIER: That was a general question. Do you have a lot of--

(Overlapping speakers.)

MR. POLAŠEK: Well, I would say about five or six. I don't know whether that qualifies as "a lot," but I am afraid that I will need to continue interrupting.

PRESIDENT TERCIER: That will be another question, whether the Tribunal will accept it, but now we know the problem.

[Page 503]

On your side, a comment, Ms. de Germiny?

MS. de GERMINY: Yes. Mr. President.

The Experts discussed the Zlatna Cyanide Storage Facility in several instances in their Reports, including Paragraph 34 and 121 of their Second Report, as well as Paragraph 71 that I referred to previously.

This is not new evidence, and we don't know what other objections the Claimants have, but there is nothing objectionable to what has been stated.

PRESIDENT TERCIER: Okay. I--

MR. POLAŠEK: Mr. President, may I just have one last brief opportunity on this point?

We do not dispute that the Zlatna facility is addressed at these paragraphs; that is correct.

But what is not there is that the Zlatna facility is a significant item relating to the capital and operating costs of the Project. That is not there.

PRESIDENT TERCIER: Okay.

(Overlapping speakers.)

MS. de GERMINY: Mr. President, this is something that can be asked about during

[Page 504]

cross-examination. This is not new evidence.

PRESIDENT TERCIER: Okay. I would like now to discuss it with my co-Arbitrators. May I invite my co-Arbitrators to go now on the session of the Tribunal, please.

(Pause.)

PRESIDENT TERCIER: Okay. Sorry for taking so much time to deliberate, but we can begin again.

The Tribunal has considered both Parties' objections and responses to objections. It is clear that the direct should be in conformity with the PO and the (drop in audio) in particular.

(Pause.)

PRESIDENT TERCIER: So, the Arbitral Tribunal considers, of course, that the presentation by the Expert should be in compliance with the Procedural Order concerning the content of the direct. Therefore, he didn't give instruction to the Experts to avoid any mention of an element that had not been specially elaborated or mentioned in their Report.

But in order to avoid to have too many interruptions and to have difficulties to follow the

[Page 505]

presentation, we invite counsel for Claimant to take notes of the passages where they consider that the presentation is not in compliance with the rule and to start in their cross-examination in asking the Experts where they have taken their information and to discuss it at the beginning of the cross-examination so that we have a clear presentation. So two points for experts, first, to avoid any comment outside of the reports, and for counsel for Respondent preparing the list of the passages where they consider there is a violation of the rules.

Is it clear to you, Mr. Guarnera?

THE WITNESS: (Mr. Guarnera) Yes, sir. I will try to abide by that.

MR. POLAŠEK: Mr. President, I apologize. I need to intervene again. And for Claimants, we would urge the Tribunal to reconsider this decision because the inadmissible material should not be part of the record, and it's not a remedy to allow cross-examination on it to determine whether it was referenced or not. By that point in time, the Tribunal will have heard the evidence; it will be on

[Page 506]

the record, and this is not permissible. We have the rules that we have; on the Claimants' side we abided by them. You will have seen that SRK's presentation included citations to the sources in the record for the statements that they were making, and Behre Dolbear evidently did not do that here. So, I would suggest that we should have a procedure where these objections are decided as we go along, and I apologize to press this point, but I think it is a due-process issue and needs to be addressed that way.

Thank you.

PRESIDENT TERCIER: The way it could be done is once you have such passage where you consider that there is a violation of the rules, that you intervene to say, "We object to the last affirmation," and we could then decide, if after having heard the position of both Parties, decide afterwards to take it out of the record.

Would this compromise, would be acceptable for you?

MR. POLAŠEK: Yes, Mr. President. That would work just fine.

[Page 507]

I would like to add that the time spent on this is of no making of the Claimants, so it needs to be counted, I suppose, against Respondent's time.

Thank you.

PRESIDENT TERCIER: (drop in audio) we will discuss the rules on these things. I would like really to go on the merit. We are interested in especially that. Due process will be, of course, respected.

DR. HEISKANEN: Mr. President, I have a couple of comments on this, if I may.

PRESIDENT TERCIER: Yes, please.

DR. HEISKANEN: Just to remind the Tribunal and the Claimants' counsel of the context of (sound interference) evidence and what evidence is being presented in the December Hearing and at this Hearing.

As the Tribunal will certainly recall, Claimants were allowed to--I hear some echo. Somebody has to turn off his microphone.

(Pause.)

DR. HEISKANEN: Okay. As the Tribunal will recall, the Tribunal allowed the--I think it is the

[Page 508]

President's microphone that is open.

PRESIDENT TERCIER: Oh, sorry. Yeah, it might be. Sorry. Wait a second. I just--I mute.

DR. HEISKANEN: Okay. As the Tribunal will recall, prior to the December Hearing, there was a ruling that the Claimants were allowed to present new rebuttal evidence at the Hearing so long as the subject matter of that evidence was identified prior to the Hearing.

You will also recall that the Respondent objected to that because the Experts and Witnesses will not be able to respond to evidence on the spot.

The Respondent maintained that objection at the December Hearing; we continue to maintain that objection. Hearing new evidence for the first time at the Hearing is not fair and in accordance with the due process. We are very pleased now to see that the Claimants' counsel agrees with our objection.

But the issue here is that there is no problem with the evidence that the Respondents--there is no issue at all with the admissibility of the evidence that the Respondent's Experts are presenting

[Page 509]

today.

First of all, they should be able to comment and they, indeed, have an obligation to comment, on any evidence that they have heard in the course of this Hearing by SRK or anybody else that will affect their views of the evidence that they have presented. That is their obligation. It is not new evidence. It is certainly a fundamental right of due process for the Respondent and its Experts to comment on the new evidence or any evidence that has been presented at this Hearing.

The Claimants cannot constrain the Respondent's Experts and Witnesses to evidence that they presented in their Expert Reports, if there has been evidence at this Hearing that allows or requires them to modify in any way the evidence that they have presented earlier. This is in anticipation of the further objections that may arise. The issue of principles that are at stake here are important. It is the question of the obligation of the Respondent's Experts to give the evidence that they are required as experts.

[Page 510]

The objections that were raised earlier in relation to the course of the cyanide treatment facilities are of a different nature, and they have no basis in fact, as we have seen.

Thank you very much.

PRESIDENT TERCIER: Thank you.

Mr. Polašek, do you want to comment?

MR. POLAŠEK: Yes, Mr. President.

Ms. Smutny will present further observations.

Thank you.

MS. COHEN SMUTNY: Yes.

Of course, Claimants object entirely to Respondent's arguments. The fact is that the procedure has been very clear that the Respondent's Experts and Witnesses are entitled to present rebuttal direct on the rebuttal subjects. We don't have to, and we should not have to revisit all of the arguments that led us to the procedure relating to this rebuttal, which is all due to the Respondent's submission of an entirely inappropriate Rejoinder. There is absolutely no ground for the Respondent's Experts to expand their testimony in the context of a

[Page 511]

direct presentation. The rules are very clear. They're established for important due-process reasons, and it's--the rules--the exceptions that we have relating to rebuttal are very tightly controlled, and Claimants have been complying with it, and it's entirely unacceptable to allow completely new expert testimony commenting generally on the record or expanding in various ways that is not tied specifically to a permissible rebuttal. Behre Dolbear is permitted to present rebuttal testimony on the rebuttal subjects that SRK presented. There were some limited rebuttal topics, and we see in Behre Dolbear's Report or in the presentation that there are a few slides that are probably intended to be rebuttal. That's fine.

But we can just go ahead, for example, on Slide 40; we're going to get to it. There are a few others before in which Behre Dolbear is commenting on the cross-examination of SRK. That's entirely unacceptable. That's not according to the rules. We have procedures, both Parties need to abide by them, and the notion that an Expert has an obligation to

[Page 512]

present new testimony has no basis. That is not the procedure that we've agreed to, and we strongly object to this.

If the Tribunal is going to change the rule, then we need to have an opportunity to have the same rule, and perhaps have SRK come back and supplement their testimony, and our Experts and Witnesses going forward to abide by the same rule.

Both Parties have to have the same rules that they're following. That's very basic.

PRESIDENT TERCIER: Thank you, Mrs. Cohen.

It's not the intention of the Tribunal to change the rules that we have agreed upon, but I made a proposal a moment ago in order to facilitate a bit and to, on the one side, have the presentation of the report of the Experts. This is, of course, extremely important for us.

And, secondly, also to give Respondent an opportunity to make these objections when it considers it is important to do that.

And my proposal was to give Mr. Polašek or another counsel for Claimant to intervene whenever a

[Page 513]

time that there is a newer fact or a declaration or a mention that is not in compliance with these rules, to mention it and to take it then beginning of the cross-examination, and we can go into them.

It is also for the Tribunal extremely difficult to decide on spot if there are so many incidents and objections. This is a proposal that I've made.

Mr. Polašek, a moment ago you agreed. Are you still of the opinion that this could be a feasible way of dealing with the problems, the issue that we are facing?

MR. POLAŠEK: Yes. So, Mr. President, my understanding is that, following the opportunity to ask--for me or for Claimants' counsel to ask questions on this topic, the Tribunal will decide whether to strike the offending portions of the Experts' testimony from the record. That, to us, is the key thing. How we do it logistically, I think the proposal that the Tribunal has made works just fine.

And my only question, then, would be whether I should identify during the course of the

[Page 514]

presentation where we have an objection. So, for example, when we get to Slide 13, should I say, "We will have an objection," or would you prefer me to wait and just handle everything at once when we begin with the cross-examination? That is one question.

And then the other question I would have is whether I am understanding it correctly that the offending portions of the examination, that is the sections that the Tribunal concludes are new testimony or not permissible, will be stricken from the record?

Thank you.

PRESIDENT TERCIER: Thank you. That's the first comment.

Dr. Heiskanen, you have a comment to what has been said? I will then answer for the Tribunal under the control of my co-Arbitrators.

DR. HEISKANEN: We are happy with the ruling that the Tribunal made earlier.

PRESIDENT TERCIER: Good. In order to make clear, Mr. Polašek, I would suggest that when you have a problem coming, for instance, to Slide 13, just mention, "We have an objection," and then you will

[Page 515]

deal with them at the end or beginning of your cross-examination, and it will be easier for the Tribunal to deal with this. That's okay with you?

MR. POLAŠEK: Yes, yes. Thank you very much, Mr. President.

PRESIDENT TERCIER: Do my co-Arbitrators accept that? Yes? Yes? I'm waiting for Professor Douglas's approval.

ARBITRATOR DOUGLAS: I'm fine with that, Mr. President. I just hope that we can return to having some sort of flow of the presentation because, with the objections coming, I completely understand that they need to be made, but if we get to a point where we hear five minutes and then there is an objection and we start again, it's going to be very difficult to follow. It's quite technical as it is.

That is my only comment.

PRESIDENT TERCIER: Okay. To make things clear with Mr. Polašek, I think you understood. When you come to the slide you say, "We have an objection," that's it, and you don't develop these objections right now. You will do it later on so that we can

[Page 516]

have the flow of the presentation. Otherwise, it will be really very difficult for the Tribunal.

Professor Douglas, you agree with that?

Okay.

So, we come back to the presentation, and Mr. Guarnera and Mr. Jorgensen, you have the floor, and to please avoid to create new incidents. You will see that we are losing a bit of time, and we want to really listen to your presentation.

Please, Mr. Guarnera.

THE WITNESS: (Mr. Guarnera) Thank you, sir.

The fourth point we wish to note in our findings is that the 2006 Feasibility Study is stale; and, in order to assure the Project is technically and economically viable, more importantly, in order to obtain financing, RMGC/Gabriel would need to secure a new Feasibility Study.

Next slide, please.

The SRK's timeline completed in 2012 for construction and operation of the mine failed to take into account the uncertainty of the social climate, relocation issues, and opposition from NGOs.

[Page 517]

Further, the Roșia Montană Project's success is dependent on the acquisition of surface rights, which is uncertain. And again, a new Feasibility Study is required to obtain financing followed by final design work and then construction prior to the Project operation.

In summary, assuming a Building Permit was obtained in April 2018, a five-year period would be required to reach full projected gold production by mid-2023.

Next slide, please.

You will be hearing about Feasibility Studies and Technical Reports, and I think it's very important to try to distinguish between the two. Now, it's not my intent to read this definition.

Succinctly, a Feasibility Study is a comprehensive document which incorporates all of the available information about the Project, every aspect from the technical, geology, to the ore resource and reserve, to the processing, to the mining method, to the markets. That's all, everything including environmental, including social issues. All of these

[Page 518]

studies have to be included in a project.

What's most important is that, at the Roșia Montană property, the 2006 Washington Group Feasibility Study was the last such study produced. And it, in itself, as you will see on a forthcoming slide, was a revision of a prior Feasibility Study.

Next slide, please.

Now, a 43-101 Technical Report is very different. First of all, it is a report that is required of Canadian companies when a material, scientific, or technical information in respect of the property has been found or occurred. The document is not a Feasibility Study and should not be considered. However, the completion of a Feasibility Study is a material event in itself; and, therefore, a public company in Canada is required to file an NI 43-101 Technical Report.

Now, both 43-101 in Canada and the JORC Code in Australia and other similar codes all require a minimum of a Pre-Feasibility Study, which is a lower level of insurance to declare a Mineral Reserve. The 2012 SRK Technical Report is based on prior Technical

[Page 519]

Reports. And due to the numerous technical and other factors that have arisen since 2006, a new Feasibility Study is required to declare a Mineral Reserve for the Project.

Next slide, please.

Now, this is a major report timeline, and I think it's very important to see this.

MR. POLAŠEK: Mr. President, apologies for the interruption. We have an objection to this.

Thank you.

THE WITNESS: (Mr. Guarnera) The first study done was called a "Scoping Study." Most Scoping Studies have a level of accuracy of 50 to 70 percent. I mean, it's just that; it gives you a rough idea.

However, in 2000, PAH prepared a Pre-Feasibility Study based on the RSG document. Now, that Pre-Feasibility Study then triggered a new or a complete Feasibility Study. In 2001, GRD Minproc provided a definitive Feasibility Study based on an 8 million-ton a year Project and a 20 million-ton a year Project.

In 2002 SNC-Lavalin did an optimization

[Page 520]

study of the processing plant and selected a 13 million-ton annual rate of production. In 2003, SNC-Lavalin did an open pit stability design report.

Then, in 2005, RSG did a database review and provided a resource estimate. Now, of importance is that this resource estimate has not been revised since 2005 despite new information, and it was this resource study that IMC, the Independent Mining Consultants, did a mine design and mining cost that led to the Declaration of Reserves in a 2006 Washington Group Feasibility Study. That is the study we say is stale.

Now, Micon, then, even though it shows prior, then filed a 43-101 Technical Report on the Project. That Report, however, is not in the record, and we found that through further digging.

In 2009, Independent Mining Consultants did a new mine design and mining costs only. Again, this study was not in the record. Micon in the same year then did a 43-101 Technical Report.

In 2011, a new mine design Feasibility Study update was produced by independent mining consultants, and it was mine design and mining costs only. And

[Page 521]

then in 2012, you had the SRK's Technical Report, a 43-101 Report, which is based primarily on the Micon and the 2011 study.

Next slide, please.

MR. POLAŠEK: Mr. President, in addition to Slide 13, we have objections to a lot of what was just stated by Behre Dolbear on this topic. And, in light of the extent of the new testimony, it might take a long time before we get to this one. We address this topic at the beginning of the cross-examination.

Thank you.

PRESIDENT TERCIER: Okay. We have taken note. Please, Mr. Guarnera, you go further.

THE WITNESS: (Mr. Guarnera) To people who are not familiar with the mining industry, a reserve is something that they will save for later, and a resource is something that they utilize now. In actuality in the mining industry, it's 180 degrees different. A reserve is a property in which the grades and tons of mineralization that is planned to be mined and processed to produce metals is known.

The resource is the initial grade and tons

[Page 522]

of the potentially economic mineralization within a deposit.

Now, the difference that makes it a reserve is the inclusion of Modifying Factors.

Next slide, please.

I think you saw this slide in the SRK document. It's a common exploration of the hierarchy. The hierarchy is one that basically you start with an exploration project, and each level of further information increases the amount of information known and integrity of the statement as well as an increase in value.

So, you go from an exploration result to Mineral Resources. The first Mineral Resource is an Inferred Resource. And, importantly, that is distinct from the other two resources because its degree of assurance is very, very low, okay?

Now, when you get to Indicated and Measured Resources, they can be converted to Probable Reserves--and in the case of Measured Resource, either probable or Proved Reserves--once you can apply all of the 10 Modifying Factors.

[Page 523]

Next slide, please.

Now, the modifying factors--and this is a direct quote from CIM--"are considerations used to convert Mineral Resources to Mineral Reserves. These include, but are not restricted to mining, processing," and that's the method that you use to grind and produce a flotation product or another product; "metallurgical," which is basically, actually the chemical aspects of the minerals in the deposit and the impact they have on the processing; "infrastructure," that's required for the property; "the economics" of the deposit; "marketing," where you were going to sell your product; the "legal" aspects; the "environmental" aspects; the "social" aspects and "governmental factors."

Next slide, please.

The requirement for the modifying factors for a Mineral Reserve is very strict in a sense. I'm going to read this: "Mineral Reserves are those parts of the Mineral Resources which, after the application of all mining factors, result in an estimated tonnage and grade which, in the opinion of the Qualified

[Page 524]

Person or persons making the estimates is the basis of an economically viable project, after taking into account of all relevant modifying factors. Mineral Reserves are inclusive diluting material that will be mined in conjunction with the Mineral Reserves and delivered to the treatment plant or equivalent facility. The term "Mineral Reserve" need not necessarily signify that extraction facilities are in place or operative or that all Governmental approvals have been received. It does signify that there are "reasonable expectations of such approvals."

Next slide, please.

Now, significantly, the Mineral Resource Model that has been used by SRK omits pertinent information, and the 2005 RSG Mineral Resource Model which is used for the Mineral Reserve estimation by SRK does not reflect a significant amount of the information available as of 2012. 1,838 channel samples taken after 2005 are not included in the Resource Model. A channel sample is a sample that is extracted over an extended distance either by power saw or by hammer and chisel to then be assayed to

[Page 525]

determine the grade of the mineralization. It is particularly done in underground mines and probably has been done in the underground tunnels. The mapping of old workings and voids that has been conducted since 2005 has not been incorporated in the Resource Model.

Now, significantly, these have been considered as immaterial, not material issues.

Next slide will show some more not material issues.

The geotechnical drilling and pit slope analyses have been conducted but are not reflected in SRK's reserve estimation.

Now, the change of a pit slope angle changes the amount of ore available for mining. If you have a steeper pit angle, you have more reserves; if you have a flatter pit angle, you have less reserves. Now, again, this has--according to SRK, is not a material issue.

Next slide, please.

Now, in 2012, SRK only considered contact dilution and losses, and I do have to note here that

[Page 526]

they were the first party to recognize that the reserve really did not contain sufficient dilution within it. Normally, there is a dilution and loss estimate encompassed within the reserve numbers, and SRK recognized that.

The contact dilution and losses, that is where--you're using 19-cubic meter shovels here. Now, that shovel is going to be used to load waste and also to load ore. And you can assume that, in loading ore, you're going to have some dirt under it that has no grade at all. That's called "dilution." You're also going to have lower-grade ore inadvertently caught up in some of the high-grade ore. That's "dilution." And inadvertently you're going to get some waste when the shovel is along the contact of the ore deposit with waste.

Now, part of the process that the mine is going to be to stockpile low-grade material for feed later in the mine life, and these stockpiles, when you re-load that ore from it to feed it to the mill, you're going to again get more dilution.

Accordingly, SRK recommended incorporating a

[Page 527]

3 percent contact dilution for the first five years and 1.5 percent thereafter. But they did it by reducing only the gold grade that would go to the mill. They failed to account for the loss of silver. And, as well, since you have lower grade--the recovery of--percentage of recovery of gold and silver from the mill will be, by necessity, lower, so that was not incorporated.

Next slide, please.

So, they have ignored other sources of dilution and losses. Now, again, dilution is something that occurs in the process of sending ore to the mill. Loss is where it's left behind, okay? And so, some of it, the dilution will come from misallocated materials. Mine drivers, mine operators are fallible, and occasionally, all too occasionally, mill grade ore is sent to the low-grade stockpile and even to the waste pile. That's not recoverable. That's just gone. That's dilution and loss.

Ore control, that's common. Ore control is the boundary that we've already talked about between the ore that is going to be shipped to the mill versus

[Page 528]

low-grade ore that's going to be shipped to the stockpile or waste. And that happens quite frequently in a mine, that inadvertently you get more of that.

And then there's overblasting, with excessive back break and throwing and mixing of material when it's done near ore contacts as part of the blasting process.

Now, no mine--there is no single formula for what the dilution is at a mine--each mine has its own dilution--and so, but, based on the experience of our people, we felt that SRK was low in what they did, and we felt that 5.5 percent for the first five years of operation would be more appropriate and 3 percent thereafter.

Now, the significance of all of this is that the increase in dilution and losses results in the loss of 166,000 ounces of gold, or 5,200 kilograms.

Now, at a gold price of $1,200 per ounce, which was used by SRK, that's $200 million that's gone, $200 million of future cash flow.

Next slide, please.

This slide is from our Report. And this is

[Page 529]

about the Chance Finds Protocol, which is an excellent protocol, and RMGC recognized that there were large zones of archaeological risk in Cârnic and at Orlea, which would require supervision pursuant to the Chance Finds Protocol during both construction and mining operations.

Now, the red circles are areas of concern. We have specifically noted those at Orlea up to the northwest and Cârnic, which is basically at the center. But there is significant chance, in our opinion, that these Chance Finds will occur, and they result in a shutdown. If you find a relic, you are shut down. An archaeologist is called, the site is sealed off, no mining can occur there.

And until that issue with that has been resolved--in other words, is it a relic that you can take and put in a museum, or is it something that has to stay in place? If it has to stay in place, you are sterilizing any of the ore that has been incorporated in the Ore reserve from that area. And this is not recognized in the SRK Report.

Next slide, please.

[Page 530]

MR. POLAŠEK: Mr. President, we have an objection to Slide 22 and probably some of what was just said.

Thank you.

THE WITNESS: (Mr. Guarnera) Excuse me while I get a little sip of water.

This is one of the modifying factors, essentially, is the right to mine, land title. A Declaration of Mineral Reserves requires that the rights for use of both the minerals and the surface of the Project, or at least a reasonable expectation of obtaining those rights, exists.

Now, RMGC has been working on their acquisition of surface projects since 2002 and has only obtained 60 percent of the land position required for the Project. They curtailed the acquisition program in 2008 of acquisition of households and public land. Our understanding is a couple of assets were acquired during that period of time. I do not know whether they actually completed the purchase.

Now, the 2012 Technical Report acknowledges that there were at least 155 households that remained

[Page 531]

to be required.

Now, our experience, and I'm sure SRK's experience and every mining company's experience, is that, if you could not get all of the surface rights, you need to redesign the Project or abandon the Project, and even one person, one single person, can kill a mining project.

A very good example is--I'm sure Mr. Jeannes who will be speaking for the Claimants could attest was Glamis Gold's Imperial Valley project in California. At that point in time, a Native American group said that the place where the mine was going to be was Holy Land; and, on that basis, the project was killed.

I would just move on rather than give more examples. I'm prepared to do so, though.

Next slide, please.

MR. POLAŠEK: Mr. President, we will have an objection. Thank you.

PRESIDENT TERCIER: Sorry, objection to what? To what has been said or what will be said?

MR. POLAŠEK: Yes, to what has been said and

[Page 532]

the example in particular.

PRESIDENT TERCIER: Okay.

[Redacted]

I'm now going to ask Mr. Jorgensen to comment on some of these, and he will discuss further

[Page 533]

things at this time.

THE WITNESS: (Mr. Jorgensen) Yes, so thank you--

(Overlapping speakers.)

PRESIDENT TERCIER: Mr. Jorgensen, I just would like to make you aware of the time. You don't--I don't know how much time you have left, you have certainly, but be careful, please.

THE WITNESS: (Mr. Jorgensen) Thank you.

I would like to call your attention to the middle of the chart there. We have Items 7.1, 7.3, 7.5, 7.6 that all talk about risks that were identified pursuant to the Tailings Management Facility. These risks existed in 2001, and, as we've pointed out, they still exist today.

If we could go to the next slide, please.

This is a picture of the Tailings Management Facility. You will see the dam in the middle left center. It's 185 meters high, about two-thirds the height of the Eiffel Tower, very large structure. You see below it the town of Abrud. What is missing in this particular diagram is the solution pound that's

[Page 534]

not shown, but behind the stand there would be a solution pond that would exist. That pond would be full of minor trace amounts of cyanide as well as dissolved minerals and metals, and then further up we see the town of Roșia Montană.

Next slide, please.

World Bank Environment, Health and Safety Guidelines in 1995 stated: "Tailings must be disposed of in a manner that optimizes protection for human safety and environment."

And the United Nations Report on Mine Tailings Safety in 2017 stated: "The approach to Tailings Storage Facilities must place safety first by making environmental and human safety a priority in Management actions and on the ground operations...safety attributes should be evaluated separately from economic consideration, and cost should not be a determining factor."

Next slide, please.

The possibility exists that during operation or during sequential dam construction, pond and dam levels will differ from design. You know that any

[Page 535]

Tailings Facility the proper maintenance is critical.

[Redacted]

Next slide, please.

MR. POLAŠEK: Mr. President, apologies, we might have an objection on Slide 26 that was the Tailings Management Facility and some of what was said there.

Thank you.

THE WITNESS: (Mr. Jorgensen) The Representative of the Ministry of Environment noted during a TAC meeting in November 2011: "Even though the risk is very low, an accidental pollution can't be excluded--very unlikely, an accidental pollution due to a dam failure cannot be excluded." A very large quantity of tailings which could be discharged over Abrud.

So, in as late as 2011, even after all the design had been done, there was still very much real concerns about the tailings dam. The dam aesthetics

[Page 536]

are poor, 185 meters high. And the memories of Baia Mare tailings dam failure--sorry about the pronunciation there--are still very real in the minds of the people of Romania.

Next slide, please.

MR. POLAŠEK: Mr. President, we have an objection to Slide 29 and most what was said in connection with that.

Thank you.

THE WITNESS: (Mr. Jorgensen) In a report by AMEC, commissioned by the International Institute of Environmental Development in 2002, it states: "Development of large capacity, vacuum and pressure-belt filter technology has presented the opportunity for disposing tailings in a dewatered state rather than a conventional slurry...the material can be transported by conveyor or truck, and placed, spread and compacted to form an unsaturated, dense, and stable tailings stack (often termed 'dry stack') requiring no dam retention."

In 2006, RMGC did not choose this technology.

[Page 537]

Dry-stack tailings is being used in various climates, not unlike Roșia Montană.

And assuming that a new Feasibility Study would have been initiated in 2016, the use of dry-stack tailings would have been more prevalent in the mining industry.

Next slide, please.

Advantages of dry-stack tailings override the extra cost. It eliminates the specter of dam failure. It minimizes the discharge of cyanide and dissolved heavy metal. It maintains the aesthetic nature of the community. It eliminates significant seepage. It eliminates a toxic solution pond behind the dam, reducing the risk of wildlife fatality. It reduces water consumption. It lowers reclamation costs. It is more expensive. It increases initial capital costs by 155 million.

Next slide, please.

[Redacted]

[Page 538]

[Redacted]

[Page 539]

[Redacted]

Next slide, please.

During this period--now, this is a very nice graph that was given to us and that we have in our Report, and this Report compares cost overrun percentage on the vertical axis and the time frame that we're talking about from 1980--or 1990 to 2020, we can see different projects. The size of the bubbles represent the capital expenditure, and the placement represents the overrun that occurred. The average cost was budgeted CAPEX at 1.2 billion, and that's actually represented by the red dot in the middle. The actual capital costs came in at 1.6 billion for an average cost overrun of about 37 percent.

And it's interesting to note that, you know, the Roșia Montană capital costs was estimated in the 1.4 to $1.6 billion range.

Next slide, please.

[Page 540]

[Redacted]

MR. POLAŠEK: Mr. President, Slide 36 we will have an objection.

Thank you.

THE WITNESS: (Mr. Guarnera) This slide

[Page 541]

demonstrates our timeline. What we have looked at again--and it is predicated on the Building Permit being granted in April of 2018, so that we have started a Feasibility Study in 2016 to be sure it was complete by the time that the Project was--the Building Permit was issued.

In addition, financing we believe would have started well before the Building Permit was issued, once there was indications on the Parties that permits were going to be granted. And so, we looked at that starting again at the beginning of April in 2017, and it goes on for the first six months. In other words, you do get financing kind of agreed on; and, then, after you have the permits and everything, all the final details are done, and that can take significant time.

We allocated for pre-construction and final design work six months each, and then construction would be for a period of three years.

Our ramp-up--that is the time it takes to reach full production, and this mine was predicted to be a 500,000-ounce a year production, the time it

[Page 542]

would take to reach 500,000 ounces a year production rate was a year for a ramp-up, and then production would go from April of 2023 until 2038, March of 2038. Afterwards, there would be a period of closure.

So, next slide, please.

So, what SRK has, they have a new Feasibility Study. Their tender bid and study completion in 18 months would be typical, in our experience. Our financing and due diligence to evaluate the technical issues by independent parties, such as SRK and Behre Dolbear, and to confirm all permits and surface rights are present. That could take significant period of time. We allotted three years of construction, as per the Washington Group Feasibility Study. I noted that a year of ramp-up was required. And also that year gives you the opportunity to get everything put together that you need, including labor, supply chains and other issues that can take a great deal of time, even though you may have started on them early on.

Next slide, please.

So, in conclusion, the Roșia Montană Project

[Page 543]

has significant technical as well as economic uncertainties. [Redacted]

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A new Feasibility Study is required to incorporate additional information regarding capital and operating costs, cyanide-handling facilities, the missing samples, the current geotechnical drilling and pit slope analysis that has not been incorporated in the model, the underground workings that have not been incorporated in the model, archaeological finds--all of which would result in changes in the Mineral Reserves and Mineral Resource base. Again, assuming the Project had received its Building Permit in April 2018 and that it had secured a new Feasibility Study with positive results by then, and other permits as required, the Project may have been in full

[Page 544]

production in 2023.

Now, the next slide, please.

Yesterday, from SRK's testimony, we learned that something that had--really verifies the concerns that we expressed in our two reports. Based on what was shown, the production levels at the mine will be reduced by as much as 70 percent. In other words, they're looking at 93,000--36 million-ton a year, 98,000-ton a day mine. What you're looking at is something that's 70 percent smaller than that due to the constrictions of the zoning and the blasting.

That means the economics of the Project will correspondingly be reduced, and it also demonstrates why a new Feasibility Study is needed.

Now, the following slides are in response to things that SRK raised about our documents.

MR. POLAŠEK: Mr. President, we will have an objection to Slide 14 and everything that was said in that connection.

Thank you.

THE WITNESS: (Mr. Guarnera) You will note that this Proyecto de Rio Tinto, two slides were

[Page 545]

shown, one was EMD and the other one was El Alita.

And, essentially, SRK omitted the fact that EMD and El Alita are the same company. They just changed the name, and they were trying to demonstrate that there was a stale Feasibility Study. Well, this mine had been operating until recently, up to the time of the Report. There was no new information available to incorporate into the existing Resource Model. Unlike at Roșia Montană where there's plenty of new information that needs to be incorporated. There was none here. Factually, the Project obtained all necessary permits in 2014 and completed construction and achieved full production in 2016.

Similarly, on the next slide, please, they raised the issue at Toromocho, and they said that there was a stale study there, and what we would note was that Behre Dolbear's role is cited here. We did a desktop review of reserves and resources, expedited desktop review of technical documents, a Site Visit and property inspection, and preparation of the independent technical report. This was for a listing on the Hong Kong Exchange by Chinalco, a China mining

[Page 546]

company.

The Report was dated April 2012 and the property began production in the same year.

Dr. Cameron, who was cited as helping in the Roșia Montană, spent approximately 90 hours reviewing the Resource Model here. There was nothing stale about the Feasibility Study. This was a mine that was in construction when we undertook the inspection.

I believe that's all that we have.

PRESIDENT TERCIER: Thank you very much for this presentation. I would like first to ask Respondent whether they have anything to add as direct. I assume the presentation was in lieu of direct. Could you confirm it?

DR. HEISKANEN: No, we have no further follow-up questions to the Experts. I just want to comment on the procedural issues that were raised by the Claimants' counsel earlier.

PRESIDENT TERCIER: Okay. You'll have enough--

DR. HEISKANEN: It says on the timekeeping issue because I didn't have a chance to comment on

[Page 547]

that. There was a suggestion that the time spent by the Claimants in objecting to the presentation should be counted against the Respondent's time. That is obviously not what the Tribunal's rulings say. I just draw the Tribunal's attention to its rulings in PO 25, Paragraph 21, and PO 33, Paragraph 18, which make it very clear that the time should be counted against the time allocated to the objecting Party.

PRESIDENT TERCIER: Okay. I think it will be a good time to have a break, and this will allow the Arbitral Tribunal to have an opportunity to discuss.

But, before that, I would like to give Mr. Polašek an opportunity to make a further comment and especially to explain differences that he will make between real cross-examination and the procedural matters that you would like to discuss. There are nine, if I have taken them, all of them.

Mr. Polašek.

MR. POLAŠEK: Thank you, Mr. President.

So, in light of the scope of the objections that we will have which pertain not only to the

[Page 548]

individual slides but also to a lot of what was said in connection with them, I would like to make an alternative proposal, and that is that, instead of dealing with this on cross-examination, we make a written submission to the Tribunal in which we identify with precision which slides and which parts we consider are outside of the permissible scope.

Same thing for the Transcripts. We can identify that in the Transcripts, pardon me, and mark it. And we would submit that to the Tribunal. I think we can achieve that, in, I would say, maybe by the end of this Hearing, if that would be acceptable.

Of course, it's additional work that is imposed on Claimants by the Respondent's conduct, so that will have implications for costs. But I think if we do it that way, this will save us significant time. I'm concerned that if we proceed with the cross-examination, it is going to take at least an hour or maybe more before we would get through the objections.

Thank you.

PRESIDENT TERCIER: Thank you very much.

[Page 549]

Dr. Heiskanen or Ms. de Germiny?

DR. HEISKANEN: We have no objection to the Claimants' proposal to make a written submission instead of dealing with the issue on cross-examination on the understanding that the Respondent will be able to respond. We just want to draw the Tribunal's attention to its prior rulings on the issue of what evidence can be presented at this Hearing, Paragraph 59 of PO 33, in particular, which deals with the new evidence, rebuttal evidence, or any new evidence produced by the Claimants' Experts at this Hearing. PO 33, Paragraph 59 makes it very clear that the Respondent's Experts shall also be afforded the opportunity to respond to this new evidence during the direct testimonies.

So, for instance, the addenda that were attached to the presentation of Behre Dolbear dealt with precisely that type of new rebuttal evidence that was presented by SRK yesterday. This is entirely within the prior rulings of the Tribunal. We are very much at a loss to understand the basis of the other objections because the presentation was strictly based

[Page 550]

on Behre Dolbear's earlier reports.

PRESIDENT TERCIER: Okay. Thank you very much.

So, we have two issues. The first one is, indeed, the question of whether the slides or the comments made by the Experts are admissible. And indeed, we have to take into consideration all rules, including Para 59, and I thank counsel for Claimant for their proposal. It seems to me reasonable, and it has been agreed by counsel for Respondent. It seems to me a good opportunity and a good thing, even if it's true it's more work, but we'll have to do that.

And, really, the advantage that we can today, together with the Experts, really discuss the content of their Report, I will, nevertheless, ask, of course, during the break to my co-Arbitrators whether they can agree also with that.

And the second issue is the question of the timing. It is important that we decide--Dr. Heiskanen has mentioned the rule. Mr. Polašek, do you have a comment to that?

MR. POLAŠEK: Mr. President, if I may, I

[Page 551]

would suggest that I revert at the--that we take a break and I revert at the beginning of the next portion of the Hearing.

PRESIDENT TERCIER: Okay. Good.

If there is no further point, we will introduce right now a 15 minutes' break. It will be a bit more, so that we have a clear timing. We will start again at 15 minutes after 4:00 Swiss time.

I would like to remind all experts that they are under testimony and that, therefore, they have to avoid any contact with counsel or Claimant or Party's representatives. Is that clear, Mr. Guarnera?

THE WITNESS: (Mr. Guarnera) Yes, sir.

PRESIDENT TERCIER: Mr. Jorgensen.

THE WITNESS: (Mr. Jorgensen) Yes.

PRESIDENT TERCIER: Okay. So, may I invite my co-Arbitrators to change the session and to go on the session of the Tribunal. Thank you.

MR. POLAŠEK: Mr. President, I apologize. A timing issue.

So, you mentioned we start after 4:00 p.m. Do we start at 4:15 D.C. time or which specific time

[Page 552]

did the Tribunal have in mind for resuming?

PRESIDENT TERCIER: I see that you are specialized in timing. Probably my expression was wrong. It was really a quarter, 15 minutes after 4:00 Swiss time, it is 4:15 Swiss time and then you make the calculation, and I'm sure you're able to do that.

MR. POLAŠEK: Thank you very much. Thank you.

(Recess.)

PRESIDENT TERCIER: Well, I'm happy to see that our stenographer is ready, what we confirmed that in writing. My co-Arbitrators are ready. Sara is ready, too.

Are counsel for Claimants ready? Claimants? Ms. de Germiny or Dr. Heiskanen?

MS. de GERMINY: We are ready, Mr. President.

PRESIDENT TERCIER: Thank you very much.

Mr. Polašek?

MR. POLAŠEK: For Claimants, we are ready, Mr. President.

PRESIDENT TERCIER: Good.

[Page 553]

So, we will now proceed with the cross-examination. Mr. Polašek, you have the floor.

MR. POLAŠEK: Thank you, Mr. President.

CROSS-EXAMINATION

BY MR. POLAŠEK:

Q. Good morning and good afternoon, everyone. I'm Petr Polašek, counsel for Claimants.

So, first I would like to ask a couple of questions arising out of the direct presentation, and we will display a few of the slides on the screen.

Let's show Slide 21, first, and I direct your attention to the last two lines on this slide where it says that the increase in dilution and losses results in a loss of 166,000 ounces, and that this corresponds to about $200 million.

Do you see that?

A. (Mr. Guarnera) Who are you directing the question to, sir?

Q. Whoever between the two of you is qualified to answer it. My understanding was this would probably be Mr. Guarnera, but up to you.

A. (Mr. Guarnera) oh, That's fine. Yes, I do

[Page 554]

see that.

Q. And that amount, the 200 million, that's not on a Net Present Value basis, is it?

A. (Mr. Guarnera) No, it is not.

Q. Moving on, you make comments about archaeology. There was no archaeologist on the Behre Dolbear team that prepared your Expert Reports, was there?

A. (Mr. Guarnera) Not on the Behre Dolbear team, but we did consult with Mr. Claughton.

Q. Who is not on the Behre Dolbear team; correct?

A. (Mr. Guarnera) That's correct, sir.

Q. So, it is correct that even though you express opinions concerning archaeology, there was not a qualified archaeologist on the Behre Dolbear team that prepared your Reports; right?

A. (Mr. Guarnera) That is correct.

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Q. Do you agree that work was done after the 2001 GRD Minproc Study?

[Page 556]

A. (Mr. Guarnera) Yes.

Q. In your experience, was that work significant? Was it a lot of studies?

A. (Mr. Guarnera) It's important to understand that the 2006 Feasibility Study is an update of the 2001 Study. The principal factor that went into it was the resource estimate that was provided in, I believe it was, 2005. I need to go back to the time check--time chart, Exhibit--I think that's Page 13, by my--

Q. So, let's stop there, and you might be able to elaborate on redirect examination. Let's move on to the next question.

In your First Report, you stated that the validity of a Feasibility Study is typically two years and, at most, three years after which a new study is required.

Do you recall that?

A. (Mr. Guarnera) Yes, that's my experience.

Q. And you stated in your Second Report as one of your conclusions concerning the Roșia Montană Project's 2006 Feasibility Study that the 2006

[Page 557]

Feasibility Study is stale and a new Feasibility Study would be required.

Do you recall that?

A. (Mr. Guarnera) I'd like to look at the exact wording, if I might. Can you direct me to it?

Q. Yes. We will put it right up.

This is your Second Report, Page 4, first bullet. It says: "The 2006 Washington Group Feasibility Study is stale and a new Feasibility Study would be required to achieve financing."

Do you recall that?

A. (Mr. Guarnera) I do. Thank you.

Q. Now, in 2009, a group of specialists, including Micon and others, prepared the 2009 NI 43-101 Report for the Roșia Montană Project, and that Report does not indicate that the 2006 Feasibility Study is "stale," does it?

A. (Mr. Guarnera) It was updating information on the Mine Plan.

May I please see Slide 13 in our presentation?

Q. Well, let me ask you in addition--

[Page 558]

PRESIDENT TERCIER: Mr. Polašek, please, to let the Expert go through, to give the explanation. You can ask your further question.

Please.

MR. POLAŠEK: Certainly, Mr. President.

THE WITNESS: (Mr. Guarnera) Slide 13, please. I think that's the timetable, timeline.

PRESIDENT TERCIER: Yeah.

THE WITNESS: (Mr. Guarnera) Thank you.

PRESIDENT TERCIER: Okay?

THE WITNESS: (Mr. Guarnera) All right, sir.

Now, what is your question again? I thank you for doing this. I appreciate it. Can I--

MR. POLAŠEK: Yes--

(Overlapping speakers.)

PRESIDENT TERCIER: Okay. And, Mr. Polašek, you may ask your question.

MR. POLAŠEK: Yes, thank you, Mr. Guarnera.

BY MR. POLAŠEK:

Q. I just note that this slide is the subject of our standing objection. Nevertheless, my question was: In your recollection, the 2009 NI 43-101

[Page 559]

Technical Report on the Roșia Montană Project did not indicate that the 2006 Feasibility Study was stale, did it?

A. (Mr. Guarnera) I ask you to repeat that question, please. Sorry. I was being--Mr. Jorgensen handed me the slide because you took it off the screen, and I wanted to make sure I knew.

Which document are we talking about now?

Q. Yes.

So, my question relates to Exhibit C-127, which is the 2009 NI 43-101 Technical Report on the Roșia Montană Project prepared by Micon and others. It is referenced in your Expert Reports.

A. (Mr. Guarnera) Right.

Q. And my question to you is: In your recollection, the 2009 NI 43-101 Technical Report did not indicate that the 2006 Feasibility Study was stale, did it?

A. (Mr. Guarnera) Well, the Technical Report was on the mine design and mining costs that IMC did.

Q. Do you have any recollection of the 2009 Technical Report stating that the 2006 Feasibility

[Page 560]

Study was stale?

A. (Mr. Guarnera) The subject of the 2009 Micon document was the update that was done by IMC.

Q. And what is your answer to the question, Dr. Guarnera? Do you recall or do you not recall whether the 2009 Technical Report indicates that the 2006 Feasibility Study was stale?

A. (Mr. Guarnera) I would not recall. I mean, I've read it, but I'd have to see the wording to be sure.

Q. Now, if it did say that the 2006 Feasibility Study was stale, was stale, you would have mentioned that in your Expert Reports, wouldn't you?

A. (Mr. Guarnera) I would have, yes.

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Q. Now, if the 2012 NI 43-101 Technical Report did say that the 2006 Feasibility Study was stale, you would have pointed it out in your Report; correct?

A. (Mr. Guarnera) If it had said that, yes.

Q. Let's move on to 2013. At that point in time the global consultancy AECOM prepared a report on the technical aspects of the Roșia Montană Project for the Romanian Government. This is Exhibit C-2199, and it is mentioned in your Second Report.

A. (Mr. Guarnera) May we see the cover of that document, please?

Q. Yes. We are putting it up.

This is the document.

And I direct your attention to Page 7 of this document, and we will go to the top, and we will zoom in on the section that addresses AECOM'S qualifications and I will read this. It says: "AECOM provides professional technical and administrative support services globally for a wide range of markets, including mining."

Did I read that correctly?

[Page 562]

A. (Mr. Guarnera) Yes.

Q. In your Expert Reports, you do not question AECOM's qualification to opine on matters of mining, do you?

A. (Mr. Guarnera) I would have to review the--what I said. May I go to our Report and read exactly what we said about AECOM?

Q. Well, that might take a long time, so I will ask you on the basis of your recollection.

Do you remember, one way or the other, whether in your Expert Reports--and I should point out this is your Second Report, the most recent one or the more recent one, where you address this--do you recall whether you question AECOM's qualifications?

A. (Mr. Guarnera) I certainly did.

I also questioned their ethics because they failed to note that the Washington Group who prepared the 2006 Feasibility Study was owned by them.

Q. And this is the group that the Romanian Government hired; right?

A. (Mr. Guarnera) Yes.

And I believe it took five days to do the

[Page 563]

Report.

Q. Now, AECOM reviewed the NI 43-101 Report dated 2012, didn't it?

A. (Mr. Guarnera) The SRK Report.

Q. Correct, yes. From 2012.

A. (Mr. Guarnera) Yes.

Q. And it is apparent, isn't it, from the 2012 NI 43-101 Report that the Roșia Montană Project’s Feasibility Study was originally compiled in 2006?

A. (Mr. Guarnera) No. It was originally compiled in 2001 and updated in 2006 by the Washington Group.

Q. And the 2006 update, as you describe it, that is referenced in the NI 43-101 Report from 2012; correct?

A. (Mr. Guarnera) Correct.

Q. In your recollection, did the AECOM Report say that the 2006 Feasibility Study was stale?

A. (Mr. Guarnera) No, I think if I recall, the first nine or 10 pages were telling everybody about how great their Company was, and there was actually six pages of conversation, and it astounded us, in

[Page 564]

fact, that how, in a five-day period they could accomplish all that they did. We dismissed it totally as junk in totality.

Q. Now, if the AECOM Report did say that the 2006 Feasibility Study was stale, you would have mentioned that in your Expert Report; correct?

A. (Mr. Guarnera) Yes.

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A. (Mr. Guarnera) Well, the opinion of AECOM is based upon how poor the report that they prepared was, and the fact that they did not reveal that they owned the Washington Group. They're not about to say that the Washington Group Study is trash.

And we never said that the Washington Group Study was bad. Why it needs to be updated, sir, is

[Page 566]

be--or a new Feasibility Study is required is because of the significant amount of information that has been gathered prior to the completion--after the completion of that study and has not been incorporated into the Resource Model. You do not know what the resource is.

Q. The 2006 Washington Group Feasibility Study was a good study, wasn't it?

A. (Mr. Guarnera) Yes.

We never said it wasn't.

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Q. Dr. Guarnera, you opined on whether the 2006 Feasibility Study and generally whether the Roșia Montană documents would be acceptable to lenders for purposes of project financing; correct?

A. (Mr. Guarnera) we opined that a new Feasibility Study was required for them to obtain financing.

Q. Yes.

And that's repeated in many places in your Reports. You draw this link between financing and the Feasibility Study; correct?

A. (Mr. Guarnera) I'm sorry, there was something that cut you off.

Q. Yes.

My question was simply that this connection between the Feasibility Study and the project financing was made in a couple of places in your Reports; do you agree?

[Page 568]

A. (Mr. Guarnera) Yes.

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Q. Do you agree that there are examples of mining projects that successfully obtained financing without a bankable Feasibility Study?

A. (Mr. Guarnera) I can't agree or disagree. I find it hard to believe that--you know, it depends upon the size of the document or of the size of the Project, and sometimes large mining companies will, on

[Page 570]

their own, if they have a property they're developing, and they have the cash to do it, will do the financing of that property, but I can't--I'm not going to say "yes" or "no" on that.

I am not aware of a major project that has not required some financing from a financial institution.

Q. Let's look at Exhibit KM-18. This is a Client Note by Northcott, and it says--let's zoom in on the language. It might be on the next page. There is text which starts, which says that: "A bankable Feasibility Study was not required to attract finance to fund construction." Let's see if we can Zoom in on that.

A. (Mr. Guarnera) Oh, I'm familiar with the Rubicon Project. In fact, SRK produced it, and I think they produced and said there was 3.1 million ounces of gold there, and it ended up there was 310,000 ounces and a $750 million write-off occurred.

Q. Well, Mr. Guarnera, the last sentence here says: "This approach is not uncommon and indeed has

[Page 571]

been successful in the past."

Did I read that correctly?

A. (Mr. Guarnera) I would tell you this: That Royal Gold was one of the Parties involved in it, and I know the standards that they require.

(Noise.)

A. (Mr. Guarnera) I am sorry, there was--

PRESIDENT TERCIER: Sorry, I'm responsible for that.

MR. POLAŠEK: Okay, thank you, Mr. President. I will move on.

BY MR. POLAŠEK:

Q. In the Second Report at Exhibit 2, you give examples of what you say are projects where the companies chose not to undertake new feasibility studies, and this resulted in cost overruns and credibility issues with capital markets.

Do you recall that?

A. (Mr. Guarnera) That I believe I would have to have Mr. Jorgensen--

A. (Mr. Jorgensen) BD-2.

Q. Yes, that's the Second Report.

[Page 572]

A. (Mr. Jorgensen) Is that BD-2?

Q. It is BD-2. We will be putting these documents on the screen. So it's your Second Report at the end; past your CVs and signatures there is an Exhibit 2, and we will walking through that exhibit.

So, let me ask you first: Did you personally compile and write this section, Mr. Jorgensen?

A. (Mr. Jorgensen) I think we should go there.

Q. Yes. It begins at Paragraph 157.

A. (Mr. Jorgensen) 157.

A. (Mr. Guarnera) Can we see it on the screen, please?

Q. Sure thing.

A. (Mr. Jorgensen) 157.

A. (Mr. Guarnera) On the screen.

A. (Mr. Jorgensen) Okay. This is actually you.

Q. Okay. So, did either of you write this section? I mean, this Exhibit 2.

A. (Mr. Guarnera) That was mine that I wrote.

Q. Okay. And, Mr. Guarnera, did you also compile the exhibits that go or that are cited in this

[Page 573]

section?

A. (Mr. Guarnera) I believe I did.

Q. But you are not sure?

A. (Mr. Guarnera) Well, it's been a while ago, sir, so, please--

(Overlapping speakers.)

Q. And in your recollection--

A. (Mr. Guarnera) If I wrote that, certainly I was the one who got that, yes.

Q. Okay. And, in your recollection, did you review also the actual exhibits that are cited in here?

A. (Mr. Guarnera) I believe I did.

I would like to see it.

Q. Okay. So, let's start with Paragraph 157. This is your description of the Leanora Gold Project in Australia, and you say that "this project experienced very real potential increases in the capital budgets"--let's highlight this as I speak--"in the six months following the completion of the definitive feasibility study."

Do you see that?

[Page 574]

A. (Mr. Guarnera) Yes.

Q. And so, in other words, what happened at Leanora was that its costs diverged from the estimated costs in the feasibility study shortly after the feasibility study was completed.

Do you agree?

A. (Mr. Guarnera) I'd have to read the entire thing again and including the--this is based upon Footnote 143, Exhibit BD-021. So, if I could see that, I think that was the source of the information that I derived.

Q. Well, we will look at that shortly, but for now I direct your attention to the words that are highlighted on the screen, that "there is very real potential increases in the capital budgets," and then it says: "In the six months following the completion of the Definitive Feasibility Study." "Six months following the completion of the Definitive Feasibility Study."

Do you see that?

A. (Mr. Guarnera) Yes.

Q. That implies that the increases happened

[Page 575]

within six months following the completion of the Feasibility Study; correct?

A. (Mr. Guarnera) That's correct.

Q. This is not an instance where five years expired since the completion of the Feasibility Study; right?

A. (Mr. Guarnera) Yes, that's what it says.

Q. Let's look at the exhibit that you cited. It's BD-21. We'll put it on the screen.

Now, this is a copy of the press article, and on the lower right corner we see that the text is partially obstructed by textbooks that says: "Australia is poised for a new era of mining growth."

Do you see that?

A. (Mr. Guarnera) Yes.

Q. Same thing on the next page, let's flip the page.

Now, you did not spot this issue when you were reviewing this exhibit?

VOICE: No.

THE WITNESS: (Mr. Guarnera) You mean spot the fact that there was--Australia is poised for a new

[Page 576]

era of mining growth?

BY MR. POLAŠEK:

Q. Well, that I would assume that you would have been aware of, but the fact that your exhibit is partially obstructed by textbooks and we cannot make what is in the text.

A. (Mr. Guarnera) I don't know that there was text on there. I think it was just the pictures.

(Overlapping speakers.)

Q. Let's zoom in on the bottom part of the page.

A. (Mr. Guarnera) I see this in the first one there.

Q. Right. Do you see the sentence is cut in half, Mr. Guarnera?

A. (Mr. Guarnera) Yes.

Q. Let's move on to the next item, and I direct your attention to Paragraph 159 in your Second Report. You will put it on the screen.

Okay. So, this concerns Las Bambas. And right in the first line you say that this: "Although not a gold project or smaller in stature, Las Bambas,

[Page 577]

in Peru, is a very contemporary example of an advanced project which did not review, change course, or modify the latest feasibility documents."

Do you see that?

A. (Mr. Guarnera) Yes.

Q. Now, Dr. Guarnera, the Las Bambas property was not a project. It was an operating mine.

Do you agree?

A. (Mr. Guarnera) Yes.

Q. Now, you say further down that: Villagers blockaded the main concentrate haul road to Las Bambas. Let's highlight that. Right there.

Do you see that?

A. (Mr. Guarnera) Right.

Q. Now, you did research the most current status of the Las Bambas mine before you submitted your Expert Report in this Arbitration, didn't you?

A. (Mr. Guarnera) I can't say I did or didn't.

Q. You didn't look?

A. (Mr. Guarnera) For anything about Las Bambas subsequent to this?

Q. Well, not anything, but where Las Bambas was

[Page 578]

at the time that you submitted your Report.

A. (Mr. Guarnera) I know the property very well. We did--we did a major study on it.

Q. Okay. And so it would not surprise you if I told you that, on April 15th, which is one month prior to your Second Expert Report where you discussed Las Bambas, Mining.com reported that the Las Bambas community signed an accord with the company and the Government, the blockade was lifted, and the copper produced by Las Bambas is going into the markets again.

A. (Mr. Guarnera) Yes.

Are you aware that it's been shut down again by the same people?

Q. That was not my question.

A. (Mr. Guarnera) Well, I think it's relevant because it displays the continuing problems with social issues, whether it's a valid issue or not, and that's--the Chinese have failed to work with the people, and they are paying the price for it.

Q. Let's move to the next project. This is at the bottom of the page, the Maricunga project.

[Page 579]

A. (Mr. Guarnera) Yes.

Q. And the way you describe it is that: "The plant design that was constructed did not follow the detailed engineering."

Do you see that?

A. (Mr. Guarnera) Yes, it was built on the wrong side of the mountain.

Q. And you do not opine in your Reports in this Arbitration that the Roșia Montană plant would be built on the wrong side of the mountain, do you?

A. (Mr. Guarnera) Well, what they had to do was totally dismantle the processing plant that was up and put it on the right side of the mountain.

You see, the engineering firm failed to recognize that they were in the Southern Hemisphere, and the sun shown from the North and not from the South. And, to keep the plant open year-round, they tried to put it where the sun would shine.

Q. Yes, but my question is you did not opine in your Expert Reports that any of these problems would arise at Roșia Montană, did you?

A. (Mr. Guarnera) Well, it hasn't been put into

[Page 580]

production yet, has it?

Q. That's correct.

Let's go back to Paragraph 158, a little further up, and this relates to the Angangueo project, which is a polymetallic underground mine; correct?

A. (Mr. Guarnera) Yes, it is.

Q. And the Roșia Montană is not polymetallic, and it is not underground, is it?

A. (Mr. Guarnera) No, it is not.

Q. Now, what this says, and let's highlight that, is that in 2014 a feasibility study was prepared, and it had "disappointing results."

Do you see that?

A. (Mr. Guarnera) Yes.

Q. And it goes on to say that, in 2017, a new feasibility study was completed.

Do you see that?

A. (Mr. Guarnera) Yes.

Q. Now, you did not indicate that the results of the 2006 Feasibility Study for the Roșia Montană Project were disappointing, I think, did you?

A. (Mr. Guarnera) No. The 2006 Feasibility

[Page 581]

Study, there is nothing wrong with it.

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Q. Doctor--

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A. (Mr. Guarnera) I'm sure you don't want to hear about it. That's fine.

Q. Well, it's a time issue, and the rules that we have governing this examination. I'm sure that if you are--if you wish to elaborate on that point, the opportunity to do that will be on redirect examination. That's just how the rules work here.

A. (Mr. Guarnera) Suffice it to say, it's still not in operation.

Q. You mentioned when you said that--you know,

[Page 582]

when you just described what, in your view, was happening with Roșia Montană since 2006, you mentioned not only Mineral Reserves but also Mineral Resources; right? Did I hear you correctly?

A. (Mr. Guarnera) Yes, because the reserve is--comes from the resource.

Q. Okay. So, let's take a look at an example of how Behre Dolbear approaches the issue of pre-existing studies in its own projects. Let's put on the screen Exhibit C-2588, and we will go to Page 38.

Let's zoom in on the center--no, no, this is it. Let's zoom in so that you can see what this is.

Does this look familiar to you?

A. (Mr. Guarnera) I remember it, yes.

Q. You were personally involved in authoring this Report, weren't you?

A. (Mr. Guarnera) Yes--I think parts of it.

Q. And the parts that you authored dealt with valuation; is that right?

A. (Mr. Guarnera) I don't recall.

Q. Okay. We will get to it.

[Page 583]

So, this document was prepared by Behre Dolbear in 2005, as we can see in the middle of the screen, and it concerned Anglo Asian's placement, public placement, of shares relating to its gold and copper project in Azerbaijan.

Does that sound right?

A. (Mr. Guarnera) Yes.

Q. And it's similar to an NI 43-101 Report; would you agree?

A. (Mr. Guarnera) Yes.

Q. It says "Competent Person's Report" at the top.

Do you see that?

A. (Mr. Guarnera) Right.

Q. That's the equivalent of a Qualified Person under NI 43-101; agree?

A. (Mr. Guarnera) Yes.

Q. Let's go to Page 43. And I direct your attention to the bottom of the page section entitled "Behre Dolbear professionals."

A. (Mr. Guarnera) Right.

Q. We will zoom in on that.

[Page 584]

Now, at the bottom. It says: "Valuation specialist, Mr. Bernard J. Guarnera."

See that?

A. (Mr. Guarnera) Yes.

Q. That's you; right?

A. (Mr. Guarnera) Yes.

Q. Now, it also refers to Mr. Mark Anderson in there. It's above the line. We will zoom in on it.

See that?

A. (Mr. Guarnera) Right.

Q. That's the same individual who co-authored your Expert Reports in this Arbitration; correct?

A. (Mr. Guarnera) He was involved in the final edits of it, yes.

Q. In the Second Report that you prepared in this Arbitration, his signature appears in the second place right underneath your signature.

Does that sound right?

A. (Mr. Guarnera) Yeah. I guess it did. Could you demonstrate that? I'm not sure. I can't say "yes" or "no" until I see it.

Q. Okay. You don't recall. Let's move on.

[Page 585]

Let's go to Page 22 of this document. And, here, Anglo Asian describes the approach that it intends to take with respect to the Azerbaijan project, and we will zoom in on it. It says: "The Directors expect to minimize the costs involved in producing bankable feasibility studies through the use of Soviet era technology reports."

Then it goes on and it says that: "These contain, 'inter alia detailed design'--pardon me--'detailed process design, metallurgical testing, leachability testing and reagent consumptions and therefore only differ to standard Western bankable feasibility studies in that they lack economic or financial analysis."

Do you see that?

A. (Mr. Guarnera) Yes.

Q. Let's turn to Behre Dolbear's analysis of the Anglo Asian project. Let's go to Page 45 in these documents--in this document.

And I direct your attention to the bottom of the page. We will put that on the screen, and I quote: "Table 1.1 shows estimate of resources for

[Page 586]

deposits in the three accessible contract areas in the various Soviet-system classifications. These are estimates made in the Soviet period and subsequently by Azeri authorities and are not Behre Dolbear's calculations; however, they are numbers that Behre Dolbear can support as being reasonable based on the evidence."

Did I read that correctly?

A. (Mr. Guarnera) Yes.

Q. And let's continuing reading. I quote: "Behre Dolbear considers them to meet the criteria for Inferred Resources. The table indicates over 2.4 million tons of copper and 7.2 million ounces of gold are present at the properties."

Did I read that correctly?

A. (Mr. Guarnera) You did.

I also want to stress the term "Inferred Resources" as pointed out in our presentation, Inferred Resources are the highest risk.

Q. And they are, nonetheless, resources, aren't they?

A. (Mr. Guarnera) In--under new standards, the

[Page 587]

U.S. stand--the 43-101 standards, you're not allowed to--you have to report them separately and put in a disclaimer. This was not being done for a 43-101. It was being done, I think, for AME.

Q. Well, as we saw at the beginning, this was done for a public offering of shares, and you agreed that this Report was equivalent to an NI 43-101 Report, but let me move on to the next question, which is: It is correct that this Report was prepared in 2005; correct? We saw that on the cover. That's when Behre Dolbear did this study.

A. (Mr. Guarnera) Yes.

And I believe right after that we advised the Company, and it was owned by Frank Timis, if I recall, that we had evidence that the samples that were taken were salted and should be disregarded and that the public should be notified.

Q. That didn't make it into this Report by Behre Dolbear to the investing public, did it?

A. (Mr. Guarnera) It was subsequent to the Report.

Q. Now, would you recall when the Soviet Union

[Page 588]

was dissolved?

A. (Mr. Guarnera) I believe it was finally 1999.

Q. It's 1991. And so, the Soviet-style studies that were prepared by the Soviet engineers that you relied on in this Report were at least 14 years old, weren't they?

A. (Mr. Guarnera) I can't comment on that.

Q. If you add--if you subtract 1991 from 2005, what do you get?

A. (Mr. Guarnera) 1991?

Q. Yes, 2005 minus 1991.

A. (Mr. Guarnera) 2005? That's 14 years.

I believe there are cautionary statements in that Report as well.

Q. Mr. Guarnera, let's move on to the next topic, and that is Roșia Montană's Mineral Reserves.

Now, are you aware that the Romanian National Agency for Mineral Resources, it's abbreviated as "NAMR," rendered a decision in 2013 homologating or approving the Roșia Montană's Mineral Reserves and Mineral Resources?

[Page 589]

A. (Mr. Guarnera) Yeah.

Yes, I am. Can I ask you to pull up Ms.--oh, to--I'm going to mess up her name. She wrote two reports. Can you roll up the First Report, please?

Q. Well, you have answered my question, so I will continue asking questions about--

(Overlapping speakers.)

A. (Mr. Guarnera) I think it's very important that you see she was using the Soviet system, and all she did was add up the numbers from the other reports.

PRESIDENT TERCIER: Mr. Polašek, you can ask the next question.

MR. POLAŠEK: Okay. Okay, Mr. President.

Thank you.

BY MR. POLAŠEK:

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20 Q. All right. Let's move on. Let's turn to

21 Document C-2199. And we saw this document already.

22 This is the AECOM study.

[Page 592]

1 A. (Mr. Guarnera) Yes.

2 Q. And I direct your attention to Page 11, and

3 this again mentions the 10.1 million ounces of gold

4 and 47.6 million ounces of silver.

5 Do you see that?

6 A. (Mr. Guarnera) Yes.

7 Q. Same numbers; right?

8 A. (Mr. Guarnera) Yes.

9 Q. And, there, AECOM also concludes that the

10 Mineral Reserve calculation--I think we need to switch

11 the zoom-in box--and we will highlight the Mineral

12 Reserve calculation: "Has been performed using the

13 best technology in the field."

14 Do you see that?

15 A. (Mr. Guarnera) Yes.

16 Q. And it goes on to say that "the risk

17 associated with reserves is estimated to be low."

18 Do you see that?

19 A. (Mr. Guarnera) Did they independently do a

20 deep-dive of looking at the material? That's the

21 whole thing. This report was put together in five

22 days.

[Page 593]

1 Q. By the people whom the Romanian Government

2 hired to assess the technical aspects of the Project;

3 right?

4 A. (Mr. Guarnera) I'm assuming.

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13 PRESIDENT TERCIER: Mr. Polašek, may I

14 interrupt you one second. If you can look at the

15 time, I think we should soon make a break. We have

16 now been going three hours. Can you tell us when it

17 would be--first, when it would be opportune for you to

18 introduce a break, one-hour break; and, secondly, if

19 you could tell us approximately where you think you

20 are in your examination?

21 MR. POLAŠEK: Thank you, Mr. President. I

22 have three questions which might go quickly.

[Page 596]

1 As regards the second question, I think I'm

2 just under one half into the cross-examination. It's

3 a little hard to predict, but we are--we still have a

4 way to go.

5 PRESIDENT TERCIER: Okay. It was not, of

6 course, any pressure. It was a real question. So it

7 would mean that you need around two hours.

8 MR. POLAŠEK: That sounds about right,

9 Mr. President.

10 PRESIDENT TERCIER: Okay. Right, if you say

11 you are approximately in the middle, we had one hour

12 for the presentation or a little bit more, and there

13 will be a redirect, I assume, Ms. de Germiny or

14 Dr. Heiskanen? Who will be able to answer it?

15 MS. de GERMINY: Well, we will wait until

16 the conclusion of the cross-examination,

17 Mr. President, to determine.

18 PRESIDENT TERCIER: Yeah, but you understand

19 my question. My question, was of course linked to the

20 question whether we should already start with

21 Mr. Cooper this evening. It seems to me very unlikely

22 that we can do it. Yeah?

[Page 597]

1 DR. HEISKANEN: Yes, Mr. President, our

2 preference would be to go according to the schedule

3 and have both Mr. Cooper and Mr. Jeannes tomorrow.

4 PRESIDENT TERCIER: Okay. This seems to me

5 reasonable.

6 (Overlapping speakers.)

7 DR. HEISKANEN: With apologies,

8 Mr. President. As we suggested in the morning, we

9 were hoping that the Tribunal would be in a position

10 to indicate also if they have any questions for the

11 Parties. That would be much appreciated.

12 PRESIDENT TERCIER: Okay. I know that. And

13 we will discuss it in a moment.

14 So, Mr. Polašek, if I understand you have

15 now three questions left before the break.

16 MR. POLAŠEK: Yes, Mr. President.

17 BY MR. POLAŠEK:

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21 Q. Okay.

22 MR. POLAŠEK: This is a good time to break.

[Page 599]

1 Thank you.

2 PRESIDENT TERCIER: Okay. Thank you very

3 much.

4 It is Swiss time 20 past 5:00. We will

5 resume, if I may take five minutes as a "sconsure"

6 (phonetic), we will start again at a quarter past 6:00

7 Swiss time.

8 May I ask my co-Arbitrators to now switch to

9 the Tribunal session just for a while.

10 Thank you very much. We will start in a

11 moment.

12 Oh, sorry, I forgot to remind our experts

13 that they're still under testimony and they have not

14 the right to have any contact with the Parties, with

15 Respondent.

16 THE WITNESS: (Mr. Guarnera) I understand.

17 Thank you.

18 PRESIDENT TERCIER: Thank you.

19 (Recess.)

20 PRESIDENT TERCIER: Okay. I will see

21 whether everybody is on board. My co-Arbitrators are

22 with us. Sara is with us. I heard a moment ago that

[Page 600]

1 David is with us. I see that our Experts already are

2 ready.

3 Do you hear me?

4 THE WITNESS: (Mr. Guarnera) Yes, sir. Can

5 you hear us?

6 PRESIDENT TERCIER: Yes, perfectly. Thank

7 you very much.

8 THE WITNESS: (Mr. Guarnera) Thank you.

9 PRESIDENT TERCIER: On Claimants' side,

10 Mr. Polašek is ready, and I would like to know whether

11 on Respondent's side you are ready?

12 MS. de GERMINY: We are ready,

13 Mr. President.

14 PRESIDENT TERCIER: Thank you very much.

15 So, let's start. And I will start in

16 answering some of the points that have been addressed

17 earlier.

18 First, I have not expressly confirmed that

19 the Arbitral Tribunal agrees with the procedures that

20 have been proposed by Claimant concerning the

21 Declaration made during the Opening or the

22 presentation and the PowerPoints and to the impact it

[Page 601]

1 could have on the Transcript. And, indeed, we will

2 fix a date for Claimant to make its proposal of the

3 nine objections that were raised and we'll give

4 Claimant and Respondent an opportunity to comment.

5 That's Point No. 1.

6 Point No. 2, the question of the timing in

7 connection with the incident, it's important that our

8 experts have had the time to make their presentation

9 within an hour, if that were the case. Our Secretary

10 has taken into account the other time with the

11 Declaration, be it by each Party. This could have an

12 importance at the very end, and so we'll look at it in

13 case there is a problem. I remember the position of

14 the Tribunal in that regard.

15 The third point, and the main important

16 point is the question of the questions, the issue

17 whether the Tribunal will already now ask questions.

18 We have discussed it, and we considered that what is

19 not a surprise for you, that this case is a huge case

20 with an enormous number of documents and issues, and

21 we consider that it would be premature at this stage

22 that you come with questions. We need first to digest

[Page 602]

1 a bit what we have read, what we have heard, and we

2 should have a first deliberation, and we will come to

3 the Parties. In connection with the Post-Hearing

4 Brief, we will decide. We can discuss it still before

5 the end of the Hearing, but the question will be when

6 and how we will ask our questions. And this will also

7 alleviate a bit the work for counsel and partly for

8 the Tribunal during that hearing.

9 Have you a comment to that, Mrs. Cohen? Or

10 Mr. Polašek?

11 MS. COHEN SMUTNY: Claimants do not--this is

12 agreeable for Claimants. Thank you.

13 PRESIDENT TERCIER: Okay. Dr. Heiskanen?

14 DR. HEISKANEN: No comments, Mr. President.

15 PRESIDENT TERCIER: Thank you very much.

16 In that case, Mr. Polašek, you have the

17 floor for the second part of your cross-examination.

18 Please.

19 MR. POLAŠEK: Thank you, Mr. President.

20 BY MR. POLAŠEK:

21 Q. Mr. Guarnera, I would like to go back to a

22 statement you made earlier today about AECOM, and that

[Page 603]

1 is, you said that you questioned their ethics because

2 they failed to note that the Washington Group prepared

3 the--that prepared the 2006 Feasibility Study was

4 owned by them.

5 You recall making that statement?

6 A. (Mr. Guarnera) Yes.

7 Q. So, you suggested essentially that AECOM

8 owned the Washington Group that was the author of the

9 2006 Feasibility Study; right?

10 A. (Mr. Guarnera) Yes.

11 They--the Washington Group was purchased by

12 URS. URS was then acquired by AECOM.

13 Q. So--

14 A. (Mr. Guarnera) That's my understanding.

15 Q. And would it surprise you if I told you that

16 the purchase of the Washington Group International by

17 URS occurred in 2007? Does that sound right?

18 A. (Mr. Guarnera) Yes.

19 Q. And then AECOM purchased URS in 2014;

20 correct?

21 A. (Mr. Guarnera) I'm not aware of the date,

22 sir.

[Page 604]

1 Q. And the date of the AECOM Report is 2013;

2 right?

3 A. (Mr. Guarnera) I believe that's so.

4 Q. Please turn to Paragraph 136 of your Second

5 Report. This is on page 36. And I direct your

6 attention to the top of the page.

7 And in the morning you discussed the

8 Modifying Factors. These are the Modifying Factors;

9 correct?

10 A. (Mr. Guarnera) They are the Modifying

11 Factors. However, if you note that the official

12 definition says--does not say that it's limited to

13 these.

14 Q. These are the ones that you enumerated in

15 this paragraph; correct?

16 A. (Mr. Guarnera) These are the ones that

17 I--are copied from the actual, I believe it is the

18 CIMM definitions.

19 Q. And the CIM definitions from which you

20 copied these Modifying Factors, and you enumerate them

21 in this manner; right? Do you recall?

22 A. (Mr. Guarnera) Right.

[Page 605]

1 I am looking at--I'm sorry, I'm losing my

2 headset.

3 Q. No problem.

4 And, Mr. Guarnera, if you don't have a

5 recollection, I think--I think we will move on to the

6 next question.

7 I would like to point you next to

8 Paragraph 137.

9 A. (Mr. Guarnera) Okay. Thank you.

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7 Q. Now, at Paragraph 117 of your Second Report,

8 which is on Page 30--we will put it up.

9 You stated that: "Behre Dolbear in its

10 First Report recommended substituting the proposed

11 Tailings Management Facility," abbreviated as

12 "TMF"--"with a filtered price tag." And then you go

13 on to say that: "While this is more expensive, it

14 would" let's highlight that on the screen, "make the

15 Project more acceptable to the local populace and the

16 Government."

17 Do you see that?

18 A. (Mr. Guarnera) I do. But, sir, if we're

19 going to be on that, I would suggest that

20 Mr. Jorgensen be the one who talks. Is that

21 appropriate?

22 Q. That is absolutely fine, and you should

[Page 607]

1 please feel free to answer the questions. Whoever is

2 the more qualified person to answer them should answer

3 the questions.

4 A. (Mr. Guarnera) When it comes to the TMF,

5 that certainly is Mr. Jorgensen.

6 Q. Thank you. Thank you, Mr. Guarnera.

7 So, on this paragraph there seems to be a

8 typo. "Populace" should be "population"; right?

9 A. (Mr. Jorgensen) I don't see the difference.

10 Q. Okay. So--but the point is that, doing the

11 dry-stacked tailings would be more acceptable to the

12 local population and the Government; right?

13 A. (Mr. Jorgensen) Yes.

14 Q. That is the opinion you are expressing here;

15 correct?

16 A. (Mr. Jorgensen) Correct.

17 Q. And you agree that Roșia Montană's TMF

18 design was broadly consistent with regulatory

19 requirements and generally accepted good practice as

20 defined at the time?

21 A. (Mr. Jorgensen) Yes.

22 Q. And you also agree that the adoption of a

[Page 608]

1 clay liner was from a strictly technical viewpoint

2 justifiable?

3 A. (Mr. Jorgensen) From a strictly technical

4 viewpoint. There still were some concerns that were

5 expressed on a technical basis. For instance, a clay

6 liner still leaks. It may leak one times 10 (drop in

7 audio) minus seven centimeters, but it still leaks.

8 Q. Well, in your Second Report, you stated that

9 Behre Dolbear has not asserted that the TMF plant is

10 not technically sound; do you recall that?

11 A. (Mr. Jorgensen) Yes, I do.

12 Q. Do you agree that, in a wet climate,

13 dry-stacking has major environmental disadvantages?

14 A. (Mr. Jorgensen) I disagree with that. I

15 think it can be done in a wet climate, and I believe

16 in our exhibits we show that it could be done in a wet

17 climate.

18 Q. Let's turn to Exhibit C-2962, and this is an

19 excerpt from a document by the Minnesota Department of

20 Natural Resources.

21 A. (Mr. Jorgensen) Right. So this is not a

22 Federal document. This is a state document; is that

[Page 609]

1 correct?

2 Q. Well, I can tell you that it came from the

3 Minnesota Department of Natural Resources.

4 A. (Mr. Jorgensen) So, it would be a state

5 document?

6 Q. Perhaps.

7 A. (Mr. Jorgensen) And is this a formal study?

8 Q. Yes. This is a document that is a,

9 "Findings of Fact, Conclusions and Order of

10 Commissioner dated November 1st, 2018." That's the

11 title of the document.

12 A. (Mr. Jorgensen) As I have read the entire

13 document, I understand that this is in reply to a

14 query by a constituent who said: "why haven't you

15 considered dry-stack tailing?" It's not a formal

16 study, but yet it's a reply to their question.

17 Q. Well, let's see what the Reply to the

18 question says. Let's look at Paragraph 213 in this

19 document. And the second line says that: "In a wet

20 climate, dry-stacking has major environmental

21 disadvantages."

22 Did I read that correctly?

[Page 610]

1 A. (Mr. Jorgensen) You did. However, I would

2 also like to note that this is based on a paper. The

3 crux of this document, if you read a little bit

4 further, is based on a paper by a Dr. Michael Davies

5 published in 2001. That paper has since--the paper

6 has since been superseded by another paper that he

7 wrote in 2011, which is our Exhibit BD-13.

8 Q. Would you agree that, once exposed to rain

9 or snow, the dry-stack becomes wet and most of the

10 benefits of dry-stackings are lost?

11 A. (Mr. Jorgensen) I would not agree to that.

12 Our practice has shown that it can be done in both wet

13 and cold climates. It can be done in dry--it can be

14 done in cold climates, it can be done with snow

15 climates, it can be done in warm climate. It can be

16 done almost anywhere, and that is what is shown by

17 Mr. Davies's updated paper in 2011, which is BD-13.

18 Q. Would you agree with respect to the

19 conditions of the Roșia Montană site--and I'm focusing

20 now on the climate conditions--would you agree that

21 the Project's Tailings Management Facilities outside

22 of the range of any existing sites in operation that

[Page 611]

1 use dry-stack management methods because of the

2 relatively wet climate at the Project site and

3 relatively high production rate?

4 A. (Mr. Jorgensen) We know that dry-stacking

5 tailings has been done in wetter climate. For

6 instance, this particular PolyMet, the rainfall here

7 is about or the moisture is about 750 millimeters. At

8 Roșia Montană, it's about 500 millimeters, the annual

9 precipitation.

10 The temperatures here are similar. It's

11 going to be very cold in the winter, freezing

12 conditions with snow. And in the summer they're going

13 to get rain in the spring. I wouldn't think that

14 would be unlike what's happening at Roșia Montană, but

15 we do know that even wetter climates have been able to

16 have dry-stack tailing, and we do know that there are

17 operations that are within just 5 or 10 percent of the

18 tonnage that we're predicting or that Roșia Montană

19 would have.

20 Q. Let's turn to Mr. Corser's report, his

21 Second Report in this Arbitration, and let's go to

22 Paragraph 14. And we will zoom in on that. Now, his

[Page 612]

1 opinion is that the dry-stack trailings approach would

2 not have been appropriate for the Project because of

3 the relatively high production rate for a dry-stack

4 operation and the wet and very cold conditions at the

5 site, and he goes on to say that: "The Project TMF is

6 outside of the range of any existing sites in

7 operation that use dry-stack management methods

8 because of the relatively wet climate at the Project

9 site and relatively high production rate."

10 Did I read it correctly?

11 A. (Mr. Jorgensen) You did. I would disagree

12 with that statement.

13 Q. And although you provided some comments now,

14 you did not respond to Mr. Corser in your Second

15 Report, did you?

16 A. Well, actually, we cited Mr. Davies's paper

17 wherein we listed the different dry-stack tailings

18 conditions that have been used; that was updated in

19 2011, and he disagrees with Mr. Corser.

20 Q. But you did not refer to Mr. Corser's

21 opinion here in your Second Report, did you?

22 A. (Mr. Jorgensen) No, but I did refer to

[Page 613]

1 Mr. Davies's opinion.

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9 Q. All right. So, we will discuss that in a

10 minute. I just want to go back to the issue of

11 rainfall at Roșia Montană, and I will have a question

12 back to Mr. Jorgensen.

13 Let's take a look at the NI 43-101 from

14 2012. That's Exhibit C-128. It's Page 18 in the PDF.

15 And it states--it's towards the bottom above

16 the bullets--let's zoom in on that: "The climate of

17 the area is designated as continental temperature and

18 is characterized by hot summers, cold winters,

19 significant snowfalls, and annual rainfall averaging

20 745 millimeters."

21 Did I read that correctly?

22 A. (Mr. Jorgensen) Yes, and it does appear that

[Page 615]

1 I did say 500 millimeters. Evidently I was incorrect.

2 It should have been 750 millimeters.

3 The point is, yeah, 750 millimeters, thank

4 you.

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6 Q. Now, SRK stated in their First Report that

7 Tarnita has the potential to be developed as a

8 stand-alone operation; do you recall that?

9 A. (Mr. Guarnera) I do.

10 Q. And you did not express a disagreement with

11 that statement in your Second Report, did you?

12 A. (Mr. Guarnera) No.

13 Q. Now, do you agree that all classes of

14 Mineral Resources that is including Measured,

15 Indicated, and also Inferred have value? This

16 question would be for Mr. Guarnera?

17 A. (Mr. Guarnera) Yes. I absolutely do agree

18 on that.

19 Q. And, in fact, that is what you testified at

20 the public hearing in the ICSID Arbitration of Eco Oro

21 v. Colombia in January of this year. Do you remember

22 that?

[Page 620]

1 A. (Mr. Guarnera) I did.

2 Q. And the deposit at issue in the Eco Oro

3 arbitration had Mineral Resources, but no Mineral

4 Reserves; right?

5 A. (Mr. Guarnera) At one time it did have

6 Mineral Reserves. Unfortunately, the social issues

7 killed it, so now it's just a resource.

8 Q. Well, you did not tell the Eco Oro Tribunal

9 that the resources or the deposit provided little

10 current value to Eco Oro, did you?

11 A. (Mr. Guarnera) No, you know, that--you have

12 to go back to before the date of the action. Before

13 the date of the action, it had significant value.

14 Q. Let's take another look at Exhibit C-2588.

15 And this is the Anglo Asian Competent Person's Report

16 that we discussed earlier.

17 And, as we discussed previously, Behre

18 Dolbear stated in this Report that the Mineral

19 Resources of this project met the criteria for

20 Inferred Resources; do you remember that?

21 A. (Mr. Guarnera) I do.

22 Q. And you concluded a valuation of the Project

[Page 621]

1 on that basis, didn't you?

2 A. (Mr. Guarnera) Exactly.

3 Q. Let's go to Page 10 in the document. And

4 there is a section there called "Valuation." Let's

5 zoom in. And this says, I quote: "Behre Dolbear

6 gives the company a market valuation of 247.5 million

7 on the related transactions basis and 257 million on a

8 market-multiples basis."

9 And then it goes on to say: "Based on the

10 value that would be ascribed to each ounce of Inferred

11 Resources."

12 Do you see that?

13 A. (Mr. Guarnera) Yes.

14 Q. And here, valuation for Anglo Asian was

15 conducted in 2005; right?

16 A. (Mr. Guarnera) I believe so.

17 Q. That is at the time when gold prices were

18 significantly lower than they were in mid-2011;

19 correct?

20 A. (Mr. Guarnera) I believe so.

21 Q. And you did not tell the investing public in

22 your valuation, in your competent report, for Anglo

[Page 622]

1 Asian that its Soviet-certified inferred-only

2 resources provided little value for the company, did

3 you?

4 A. (Mr. Guarnera) No, because our opinion was

5 that they did--we weren't being critical of the Soviet

6 system. What I was saying is that it's a different

7 system in the sense that it excludes some things that

8 now are considered to be essential in declaring a

9 reserve. But, when you have an Inferred Resource,

10 there's almost no difference.

11 Q. Let's go to Page 46 in this document, and

12 there is a table at the top--let's zoom in on it, the

13 whole table.

14 Now, these are the Inferred Mineral

15 Resources that are the subject of your Report; right?

16 A. (Mr. Guarnera) That's correct.

17 Q. And, on the right-hand side, Cu, that's

18 copper?

19 A. (Mr. Guarnera) Yes.

20 Q. Au, that's gold?

21 A. (Mr. Guarnera) Yes.

22 Q. Ag, that's silver?

[Page 623]

1 A. (Mr. Guarnera) That's correct.

2 Q. And at the bottom, we can see that the

3 copper resources were about 2.4 million tons; right?

4 A. (Mr. Guarnera) That's correct.

5 Q. The gold resources were 7.2 million ounces;

6 right?

7 A. (Mr. Guarnera) That's correct.

8 Q. And the silver resources about

9 28 million ounces; right?

10 A. (Mr. Guarnera) Yes.

11 That's cumulative from how many deposits?

12 One, two, three, four, five, six, seven, eight, nine.

13 Q. Right. Scattered across multiple deposits.

14 A. (Mr. Guarnera) No, I apologize, eight.

15 Eight different deposits, sir.

16 Q. Right.

17 A. (Mr. Guarnera) Yeah.

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21 Q. And you also said that the expression

22 "world-class" is often misused; right? That's what

[Page 625]

1 you said in that connection?

2 A. (Mr. Guarnera) It is.

3 Q. Let's turn to Page 85 in this document, and

4 let's zoom in on the two lines at the bottom. This is

5 what you told the investing public in connection with

6 the multiple properties that we saw in the preceding

7 chart. You stated that: "In Behre Dolbear's opinion,

8 the group of properties covered by Anglo Asian's

9 Production Sharing Agreement constitutes a potential

10 source of copper and gold of world-class importance."

11 Did I read that correctly?

12 A. (Mr. Guarnera) You did.

13 Q. Let's turn to Page 92 in this document. And

14 here, you also stated, I quote--it's at the bottom of

15 the page: "The value applied to corporate entities as

16 part of an acquisition will frequently include a

17 'Control Premium' if the acquisition of a part or all

18 of the entity results in effective control of the

19 entity. The Control Premium typically ranges from

20 20 percent to over 50 percent."

21 Did I read it correctly?

22 A. (Mr. Guarnera) You did.

[Page 626]

1 Q. Now, in the Second Report, you also stated

2 that NI 43-101 Technical Reports are only as good as

3 the Qualified Person who takes responsibility for the

4 content. Do you recall that?

5 A. (Mr. Guarnera) Yes.

6 Q. And you also made a reference to--

7 A. (Mr. Guarnera) I'd really like to see that.

8 Q. Yes. We could put that up. It's

9 paragraph--

10 (Overlapping speakers.)

11 A. (Mr. Guarnera) I'm not disputing what you

12 say, but I do want to verify it.

13 Q. This is Paragraph 82 in your Second Report.

14 A. (Mr. Guarnera) Okay.

15 Q. And you cited two studies by the British

16 Columbia Securities Commission and the Ontario

17 Securities Commission; right?

18 A. (Mr. Guarnera) Yes.

19 Q. Those would be state commissions?

20 A. (Mr. Guarnera) They're Provincial, but they

21 basically are the ones that review the documents that

22 are being filed in British Columbia because of the

[Page 627]

1 Vancouver Stock Exchange, and the Ontario Securities

2 Commission because of the Toronto Stock Exchange.

3 Q. And you made the point that these studies

4 have shown that approximately 40 percent of NI 43-101

5 Technical Reports did not meet the Canadian NI 43-101

6 filing requirements; right?

7 A. (Mr. Guarnera) That's what it says, yes.

8 Q. Were any Behre Dolbear NI 43-101 Reports

9 authored NI 43-101 Reports in this category, as far as

10 you know?

11 A. (Mr. Guarnera) As far as I know, none.

12 Q. And you recall that in the Eco Oro

13 arbitration that we mentioned previously, Dr. Cameron,

14 who is the co-author of your Reports in this case,

15 testified with respect to a report of the Respondent's

16 Experts that the other report conflicted with the

17 findings of multiple Qualified Persons over a period

18 of years?

19 A. (Mr. Guarnera) I'd like to see that, please.

20 Q. Do you remember one way or the other?

21 A. (Mr. Guarnera) I don't, sir.

22 Q. And, if I told you that this is what

[Page 628]

1 transpired at the Eco Oro hearing, which you attended,

2 would you be surprised?

3 A. (Mr. Guarnera) No, I would not be surprised.

4 I just--

5 Q. And, to your knowledge, Behre Dolbear did

6 not bring to the attention of the Eco Oro Tribunal the

7 studies by the British Columbia Securities Commission

8 and the Ontario Securities Commission; correct?

9 A. (Mr. Guarnera) I do not recall one way or

10 the other, sir. Sorry.

11 Q. Now, you are qualified to conduct valuation

12 of mining companies and mining properties; correct?

13 A. (Mr. Guarnera) Yes, but that was not my role

14 on this effort, sir, and so I have no--I was not

15 assigned to do that, and I have not.

16 Q. But, generally, you consider yourself a

17 valuation specialist; isn't that fair?

18 A. (Mr. Guarnera) As I said in the

19 introductions, I specialize in assessing the technical

20 and economic viability of mineral projects and what

21 the value of the project is, yes, sir.

22 Q. Let's turn to Exhibit C-2588. Again, this

[Page 629]

1 is Anglo Asian, and we will go to Page 44. And we

2 will zoom in on the text at the top.

3 And, here you are described as Behre

4 Dolbear's Principal Valuator.

5 Do you see that?

6 A. (Mr. Guarnera) Yes.

7 Q. And, in fact, you have served as a quantum

8 expert in investment-treaty arbitrations; right?

9 A. (Mr. Guarnera) I have.

10 Q. And so, for example, you served as the

11 Valuation Expert for the Claimant in Glamis Gold

12 versus United States; right?

13 A. (Mr. Guarnera) That is correct.

14 Q. And you have your own views as to what are

15 the proper ways of valuing mining companies and mining

16 properties; is that fair?

17 A. (Mr. Guarnera) No, unfortunately, that's not

18 because there are valuation--specific mineral

19 valuation codes that generally have to be used.

20 Q. Well, in the context of an investment treaty

21 arbitration, you would have your own views as to what

22 methodologies to use to value the property; right?

[Page 630]

A. (Mr. Guarnera) Yes, I guess I certainly would have. If that's what I was asked to do, I would review the Project, look at the type of project is, what the nature of the mineralization is and come up with an appropriate method of valuation.

Q. And, in this Arbitration, Respondent has not asked you to serve as the quantum expert; right?

A. (Mr. Guarnera) I have not been given that assignment.

Q. Have you discussed it as a possibility with Respondent?

A. (Mr. Guarnera) I have not.

Q. And would you agree that, in the end, fundamental methods estimate value but value is established by markets?

A. (Mr. Guarnera) I'm sorry, sir, I'm not going to state an opinion one way or the other. I was not asked to look at valuations here, and I will not express an opinion.

Q. Let's take--let's turn again to the 2005 Competent Persons Report for Anglo Asian, and we will go to Page 93.

[Page 631]

(Pause.)

Q. And this states that: "Behre Dolbear has a database of approximately 400 individual transactions in the precious metals industry, and an additional database--and that the database indicates that, historically, exploration phase precious metal properties trade at an average per-ounce value of approximately 2.5 percent of the current per-ounce gold price."

Do you see that?

A. (Mr. Guarnera) I do.

Q. The current per-ounce gold price, that would be the spot gold price; right?

A. (Mr. Guarnera) Yes.

Q. And then it goes on and it assigns a percentual weight to the ounces of gold.

Do you see that?

A. (Mr. Guarnera) Yes.

Q. And it gives an example at the end; right?

A. (Mr. Guarnera) Yes.

Q. And, on the next page--pardon me, it's Page 99 in the same document. At the top there is a

[Page 632]

section entitled "VALUATION BY RULES OF THUMB."

Do you see that?

A. (Mr. Guarnera) Yes.

Q. And that's where you applied the method that we just saw on the preceding page to the Anglo Asian properties; right?

A. (Mr. Guarnera) That's correct.

Q. And the values that you obtained through this method range from $259.5 million to $310.9 million; right?

A. (Mr. Guarnera) Correct.

Q. And you also applied this "rule of thumb" method in the Glamis Gold arbitration to complete your analysis; is that fair?

A. (Mr. Guarnera) My recollection, it was one of the methods that we used, right. Other methods were used as well.

Q. It was a complementary method; right?

A. (Mr. Guarnera) I really don't recall. That was--God, it must be 15 years ago at least.

I'm sorry, sir. I can't recall.

Q. Now, in this case, in this Arbitration,

[Page 633]

although you did opine that the Bucium properties provide little current value to Roșia Montană, you did not apply this "rule of thumb" methodology?

A. (Mr. Guarnera) I wasn't asked to--sir, that's not in my purview. These were totally--these properties are, in my understanding, under dispute, and so that dispute itself would have a significant impact on the value.

Q. Well, you did express an opinion that the Bucium properties provide little value to the Roșia Montană Project. We saw that--

(Overlapping speakers.)

A. (Mr. Guarnera) Yes.

Q. Is that opinion outside of the purview of what you were asked to do?

A. (Mr. Guarnera) I think it probably was.

Q. Do you wish to withdraw that opinion?

A. (Mr. Guarnera) No.

Q. So, you maintain the opinion?

A. (Mr. Guarnera) I have to maintain it. I've written it.

Q. Well, you can withdraw it, if it was outside

[Page 634]

of the scope of what you were asked to do, as you testified.

A. (Mr. Guarnera) I--it's there, and it's on paper, and that's fine.

Q. You provided no analysis to support that opinion, did you?

A. (Mr. Guarnera) No, I told you that, unless Roșia Montană wanted to go and build a whole new processing plant to handle a porphyry copper deposit, it doesn't add any value. They can't run that stuff through their mill.

Q. But there is no analysis in your Report that would support that conclusion, is there?

A. (Mr. Guarnera) It is--there is, sir. It's called "common sense."

Q. Well, among other things, Mr. Guarnera, you did not apply the "rule of thumb" methodology [Redacted]

A. (Mr. Guarnera) No, I did not.

Q. And you, in fact, did not use any other valuation methodology to assess the Bucium properties, did you?

[Page 635]

A. (Mr. Guarnera) As I said, it was outside my purview.

Q. Now, let's go to your Second Report, and we will be looking at Paragraph 57, Figure 3.1.

A. (Mr. Jorgensen) I would like to take that question.

Q. Sure. So, we will put it on the screen, and we will try to put on the screen at the same time the chart in Paragraph 57.

And you state that, based on this chart, that the average overrun for gold projects was approximately 40 percent. That's at the bottom of the page.

Do you see that?

A. (Mr. Jorgensen) Yes, I do.

Q. And, in the Opening Presentation, you also showed this chart; correct?

A. (Mr. Jorgensen) That is correct.

Q. And you commented that this is a very helpful chart; right?

A. (Mr. Jorgensen) Well, what it does is it allows us to take in context the--what was happening

[Page 636]

in the mining industry at the time.

You will notice that there were very few projects that underran their budget. There were many of them that overran them. And this is average cost overrun of mining project capital costs. It's simply an indicator.

Q. Now, if we were to draw a vertical line where the middle of 2011 is on this timeline, a lot of these bubbles that indicate cost overruns would be to the left of that line; right?

A. (Mr. Jorgensen) There would still be some pretty substantial ones to the right of it.

Q. Do you disagree that there would be substantial ones to the left of it?

A. (Mr. Jorgensen) Well, it is an average over time. It allows us to assess what's going on in in the Project--what's happening with projects at that time. I mean, we can't--we can't say that it's exact. We don't pretend that it's exact. All we're saying is is it's an indication of what was happening in the mining industry at that time.

Q. Right. And it's an indication on a time

[Page 637]

basis; right?

A. (Mr. Jorgensen) Yeah, it's an average overrun during the time period. And if you look at where the bubbles are, I mean, they're going out to 2017 and starting in 1994.

Q. Right.

A. (Mr. Jorgensen) The cluster seems to be around where that little red globe is, and that's about 2009, so it would not be the same as 2011. It would be a little--but it's still an indication. It's not an exact science. We never said it was exact. We say it's an indication of what's happened.

Q. And it is correct, isn't it, that information about such cost overruns, the ones around and to the left of the center of the cluster, as you described it, which was in 2009, would have been available to investors in the gold-mining sector prior to July 2011?

A. (Mr. Jorgensen) I don't know what information they had. That is what information I was able to find. This, I believe, was a paper given at a 2015 presentation, "A lender's perspective."

[Page 638]

Q. And this has cost overruns, let's say, in the middle of the 2000s; right? There are at least two large bubbles in there?

A. (Mr. Jorgensen) Yeah. And again, the large bubbles are the size of the Project. For instance, the bigger around the bubble is, the more billion dollars it is, and the red globe simply represents an average.

Q. Right. And information about these cost overruns, that these projects ran into cost overruns, would have been available to the market prior to July 2011; would you agree?

A. (Mr. Jorgensen) Yes, I would agree. I would think that, as we delve into this, we would see that there are probably--I mean, this is self-explanatory. I'm not sure of the question.

Q. Well, the question is: If we were standing in July 2011 and had a chart like this, we would see bubbles on it above the line; right?

A. (Mr. Jorgensen) That is correct. We would see bubbles to the left.

Q. Now, let's turn to Exhibit BD-17. This is a

[Page 639]

document you submitted, and let's go to Page 12. And I direct your attention to the top of the slide. We will zoom that in. And this says that: "Fewer than 10 percent of all mining projects are completed within budget and schedule."

Do you see that?

A. (Mr. Jorgensen) I do, yes.

Q. And the source for that cited is "Addison, 2007."

Do you see that?

A. (Mr. Jorgensen) I do.

Q. And the next point: "Less than 20 percent achieve the ROI or NPV projected by their Feasibility Study."

Do you see that?

A. (Mr. Jorgensen) Yes.

Q. ROI, is that "Return on Investment"?

A. (Mr. Jorgensen) Yes.

And NPV would be "Net Present Value."

Q. Thank you.

And the source for that is stated as "Bullock, 2011."

[Page 640]

Do you see that?

A. (Mr. Jorgensen) I do.

Q. And studies like this were available to investors in the gold-mining sector prior to July 2011; do you agree?

A. (Mr. Jorgensen) I don't know what would be available to people, but this was given at the IPMI 41st Annual Meeting, so I would assume that it would be available to those who found it or looked for it or attended the conference.

Q. And those might be people interested in investing in the mining sector; would you agree?

A. (Mr. Jorgensen) I would think so, yes. I have no basis for that decision, for saying that, but I'm assuming, as you are that, yeah, this is public information, so it should be available.

Q. Let's turn to your Second Report, and let's take a look at Paragraph 35.

Do you see that?

A. (Mr. Jorgensen) I do.

Q. And there is a statement at the top, and then it is followed by a block quote; right?

[Page 641]

A. (Mr. Jorgensen) Yes.

Q. And the block quote is reproduced verbatim from the source from which it comes; correct?

A. (Mr. Jorgensen) Correct.

Q. And may I ask who prepared this section of the Report?

A. (Mr. Jorgensen) I did.

Q. So, you personally looked at the source and chose this quote; is that fair?

A. (Mr. Jorgensen) Yes.

Q. Okay. And you put it in this paragraph; right?

A. (Mr. Jorgensen) I'm having a tough time remembering, but BD-15 and BD-16--

Q. Okay, well, we will look at the--we will look at this source. For now, let's look at what the quote says. It says: "Broadly speaking, there are three potential causes of systemic (sic) cost overruns for infrastructure projects or for mining projects."

Let's highlight that on the screen.

A. (Mr. Jorgensen) That's correct.

Q. Let's highlight the words "mining projects."

[Page 642]

Do you see that?

A. (Mr. Jorgensen) Yes.

Q. And now, let's just highlight the words "mining projects."

Do you see that?

A. (Mr. Jorgensen) I do, yes.

Q. Now, let's look at the source from which you took this text. This is Exhibit BD-15, and let's show the first page.

That's the source; right?

A. (Mr. Jorgensen) It is, yes.

Q. Now, let's look at the title at the top. Let's zoom that in.

Now, this says "Cost Overruns in Australian Transport Infrastructure Projects."

Did I read that correctly?

A. (Mr. Jorgensen) Yes, that's correct.

Q. Let's go to Page 3 in this document. And let's look at the bottom of the page and we will zoom in on the text that you quote in your Report. And let's close this and just put on the screen the top paragraph.

[Page 643]

This is the text; right?

A. (Mr. Jorgensen) It is, yes.

Q. That's what you're quoting. So, let's read it: "Broadly speaking, there are three potential causes of systemic (sic) cost overruns for transport infrastructure projects."

Did I read that correctly?

A. (Mr. Jorgensen) Yes.

Q. There is no reference to "mining projects" in here, is there?

A. (Mr. Jorgensen) No.

Q. And you did not correct this as part of your errata that we received this morning, did you?

A. (Mr. Jorgensen) I did not.

Q. Did you personally make that alteration to insert the words "mining projects" into that text when you quoted it?

A. (Mr. Jorgensen) Well, we added "or for mining projects."

Q. That was you who added that?

A. (Mr. Jorgensen) I did not add that, no.

Q. Who did?

[Page 644]

A. (Mr. Jorgensen) I don't know.

But, you know, the point here, and I don't think it's--the point here is that infrastructure plays a big part in the mining industry, and--

Q. Mr. Jorgensen, I actually have questions on this topic, so I would suggest that we proceed. My questions will follow--

(Overlapping speakers.)

A. (Mr. Jorgensen) Okay.

Well, I think it's really--it's really important to read Paragraph 36 of our Report--right?--on Page 10. I would like to read that. That answers your question.

Q. Mr. Jorgensen, my question was about the quotation that you chose to use in your Report. You answered that question, and I would like to proceed with my other questions that relate to the topic you just mentioned. So, if you would, please, turn to your First Report and go to Paragraph 57. We will put it up on the screen.

And there, you opine: "Based on the AACE Guidelines and these factors, the limits of the

[Page 645]

accuracy of the 2006 Feasibility Study should be increased to -20 percent to +30 percent."

A. (Mr. Jorgensen) That is correct.

Q. Let's look at Paragraph 58. That's the next paragraph. And there you opine that: "Increasing the upper limit of accuracy from 15 percent to 30 percent would add a minimum of $210 million to the Project budget in initial capital for a total of $420 million."

Did I read it correctly?

A. (Mr. Jorgensen) You did.

Q. And so, you basically took the difference in the two percentages, applied it to the costs, and that's how you got to the $210 million; right?

A. (Mr. Jorgensen) Right.

From the--based on what SRK had produced, they had already added $140 million in there of contingency, so this would be on top of that.

Q. Right.

And the idea that you are implementing here is that if the upper range of the accuracy goes to 30 percent, then we need to increase the budget up to

[Page 646]

that amount; correct?

A. (Mr. Jorgensen) Yes.

You have to read the AACE Guidelines in order to understand what we did. That's an important part of it.

Q. That's what we're going to do now.

A. (Mr. Jorgensen) Great.

Q. So, let's turn to Paragraph 54 of your First Report.

A. (Mr. Jorgensen) Yes, there they are.

Q. And this is an intro paragraph that references to the AACE that references the AACE Guidelines, which are then presented in Table 4.1 on the next page; right?

A. (Mr. Jorgensen) That is correct.

Q. So, let's flip the page, and let's take a look at that Table 4.1.

Do you see that on the screen?

A. (Mr. Jorgensen) I do.

Q. And the source of this table is in Exhibit BD-3 at PDF Page 1. Let's put that on the screen. Exhibit BD-3.

[Page 647]

Okay. Do you see that?

A. (Mr. Jorgensen) I do.

Q. Does this look like this is the exhibit?

A. (Mr. Jorgensen) It is, yes.

Q. Let's turn to Page 5 of this document. And this is the table that's used in your Report; right?

A. (Mr. Jorgensen) It is.

Q. And, at the bottom, it is described as the "Cost estimate classification matrix for process industries"; right?

A. (Mr. Jorgensen) That is correct.

Q. Let's go to Page 4 in this document, and there it states at the top of the page that: "This addendum specifically does not address cost estimate classification in non-process industries such as," and then you see the list.

And then there is another sentence that follows, and it says: "It also does not specifically address estimates for the exploration, production, or transportation of mining or hydrocarbon materials."

Do you see that?

A. (Mr. Jorgensen) Yes. It says "it does not

[Page 648]

specifically address." And when we're dealing with mining and hydrocarbon materials, certainly we have to have some guidelines. The AACE allows us to understand the range of accuracy that we should--that we should embrace. It doesn't say that can't use it. It says, you know, when you use it, please be careful.

And we haven't used these AACE Guidelines as an absolute rule. What we've said in our Report is, look, your accuracy isn't as good as you think. And because it isn't as good, there is more money associated with it that you haven't established. And, for that reason, you need a new Feasibility Study.

None of these numbers are hard numbers. We have never said that they're exact numbers that they need to be applied. We're saying that there's uncertainty, and it needs to be revisited.

Q. And as we just discussed, you, in fact, did apply these numbers numerically by increasing the alleged accuracy of the Roșia Montană Project to 30 percent, and that's how you derived your 210 million in extra costs? It's a simple--

(Overlapping speakers.)

[Page 649]

A. (Mr. Jorgensen) Correct. Could we go back to the AACE Guideline?

Q. We will do so in a minute. I have another question on this for you.

And that is, if there had been guidelines that are specific to mining, that you would have used them in your Report; right?

A. (Mr. Jorgensen) I'm--when we come to guidelines that are specific to the mining industry, I have a lot of experience with this. I mean, I have worked for major engineering companies. I worked for Bechtel as a Project Engineer; I worked for CH2 as a Project Manager. So, the application of contingency is always something that comes into play.

We've never found a really good tool. The AACE Guidelines offer us probably the best opportunity.

But again, because we have a guideline, we're able to say well, does this look right or does it not look right. And we're usually able to explain why we chose the guideline or why we did not choose the guideline. Here, in this case, I've used these

[Page 650]

guidelines, and I've said, look, we need a new Feasibility Study. The accuracy isn't as good, and there's a lot of money at stake here. We should be careful with what we're doing.

Q. Now, would you agree if there were AACE Guidelines specific to mining you would have used those?

A. (Mr. Jorgensen) Yes.

Q. All right. Let's turn to Paragraph 49 in your Second Report. And you recall that SRK testified that the AACE Guidelines that you chose to rely upon are not used in the mining industry; do you recall that?

A. (Mr. Jorgensen) Well, I do recall that. I would disagree with that. For instance, I worked for CH2M Hill, and we used them, and we had a mining division.

Q. That's not--

A. (Mr. Jorgensen) We know that Golder, who is another mining firm, they use the AACE Guidelines. It says right there in the presentation by Alva Kuestermeyer of Golder Associates, guidelines are

[Page 651]

referenced as a means "whereby if followed, an appropriate amount of contingency may be specified mitigating costs overrun."

Q. And the first example you just gave, you say that now but did you not mention that in your Second Report; right?

A. (Mr. Jorgensen) I didn't mention that in the Second Report, but I believe this is cross, and you're asking me questions and I can testify to what I do know; is that correct?

Q. Well, my question was simply that the first example was not included in your Second Report, correct?

A. (Mr. Jorgensen) yeah, it was not.

Q. Mr. Alva Kuestermeyer of Golder Associates who is mentioned here, he's a former associate of Behre Dolbear; right?

A. (Mr. Jorgensen) I did not know that. We could ask Mr. Guarnera.

A. (Mr. Guarnera) He was, yes.

Q. You chose not to mentioned that in your Report; right?

[Page 652]

A. (Mr. Guarnera) Well, if Mr. Jorgensen didn't know that, then it wasn't a choice, sir.

Q. That question was for you, Mr. Guarnera.

A. (Mr. Guarnera) Well, I'm at a loss.

A. (Mr. Jorgensen) Well, I would like to answer that question.

A. (Mr. Guarnera) No--

A. (Mr. Jorgensen) I mean, he may have been an associate, but he was not at the time that we wrote the Report, this Report, an associate of Behre Dolbear, and I don't see what the problem is. I mean, he is simply citing a source. He's saying that the AACE Guidelines are used in a company that he works for.

Q. Let's take a look at Exhibit BD-17--and we are coming to a break soon--this is another of your exhibits, and I direct your attention to Page 25. So, it's a presentation by Golder Associates. This is the presentation that you mentioned in connection with Mr. Kuestermeyer; right?

A. (Mr. Jorgensen) That's correct.

Q. Let's go to Page 25, and this is a slide

[Page 653]

that addresses two topics. One is contingency, and the other is accuracy.

Do you see that?

A. (Mr. Jorgensen) I do.

Q. And then right underneath it, it says: "Capital Cost criteria: AACE."

Do you see that?

A. (Mr. Jorgensen) I do.

Q. And there is small font underneath the table, which we will bring up and zoom in, and hopefully this will be legible.

And I direct your attention to the first footnote. It says: "AACE International recommended practice," and then there is text in quotation marks, and that says: "Cost estimate applied in the mining and mineral processing industries."

Do you see that?

A. (Mr. Jorgensen) I do.

Q. Now, let's look at the third column in this chart, and we will zoom in on that and also the next two columns so that we have the three columns starting with accuracy ranges through contingency.

[Page 654]

A. (Mr. Jorgensen) Yes.

Q. Do you see that?

A. (Mr. Jorgensen) And I think it's really important that we look on the columns to the left. I'm sorry, right there in the center we have "AACE: Percent completion of project definition deliverable."

Q. Yes, well, Mr. Jorgensen, I will direct your attention to the column on the right, but before I do that, let's actually zoom in the whole chart including the descriptions on the left-hand side so that we see the Feasibility Study, basic engineering, and so forth.

Okay. So, we will start on the left at the Feasibility Study-level and proceed to the right. Okay.

So, third column, and that's entitled "accuracy ranges."

Do you see that?

A. (Mr. Jorgensen) I do.

Q. That deals with the accuracy; correct?

A. (Mr. Jorgensen) It is.

Q. And it has a low of -10 percent.

[Page 655]

Do you see that?

A. (Mr. Jorgensen) Um-hmm.

Q. And then on the other extreme in the high range it goes up to 30 percent.

Do you see that?

A. (Mr. Jorgensen) Yes.

Q. And then we have a separate column that addresses contingency.

Do you see that?

A. (Mr. Jorgensen) Yes, I see that.

Q. And that word "contingency," that relates to contingency for costs; right?

A. (Mr. Jorgensen) It does.

Q. And there in that same row for Feasibility Studies, the range is 5 to 20 percent.

Do you see that?

A. (Mr. Jorgensen) I do.

Q. And it does not go up to 30 percent; right?

A. (Mr. Jorgensen) Yes.

If I could speak to that, I would like to talk about that.

Q. Well, the next question is that the average

[Page 656]

contingency stated there is 13 percent.

Do you see that?

A. (Mr. Jorgensen) I do. I would again, like to talk about that.

PRESIDENT TERCIER: Let's first answer the question of Mr. Polašek, and then you will have the possibility to comment.

THE WITNESS: (Mr. Jorgensen) Yes, I did. I answered the question. I said yes, I agree.

MR. POLAŠEK: Okay. I think this would be a good time to take the break. Thank you.

PRESIDENT TERCIER: Thank you.

Do you want to make a comment on your side, Mr. Jorgensen?

THE WITNESS: (Mr. Jorgensen) I would like to go back and discuss the AACE.

PRESIDENT TERCIER: That could be done in the redirect.

THE WITNESS: (Mr. Jorgensen) Correct.

PRESIDENT TERCIER: We will go into the break.

It is at this time 20 minutes to 8:00. We

[Page 657]

will start again at 5 to 8:00.

But Mr. Polašek, can you estimate where you are in your examination?

MR. POLAŠEK: Yes, Mr. President.

Can I be reminded of how much time I have used already?

PRESIDENT TERCIER: Yes. Sara?

SECRETARY MARZAL YETANO: Claimants have a total of 7 hours and 43 minutes and 5 seconds remaining.

PRESIDENT TERCIER: Sorry, I did not get the answer for Mr. Polašek. Can you relate the time he spent?

SECRETARY MARZAL YETANO: Yeah.

I mean, now the Claimants have now 7 hours and 43, but he started the cross-examination--let me see--with seven hours--with 10 hours and 7 minutes left, so he spent about 2 hours and 20 minutes.

PRESIDENT TERCIER: Okay. Now, Mr. Polašek, this is an important question because the day was long, long for everybody, for our experts in particular, and there will certainly be--certainly, I

[Page 658]

don't know, likely, be redirect. How long do you need to finish your cross-examination?

MR. POLAŠEK: Mr. President, I'm hoping it will be about 30 minutes. It might extend slightly beyond that, but certainly not more than another hour.

PRESIDENT TERCIER: Okay. I like the "slightly." Normally half an hour and we will see the slight extension.

A comment on the Respondent's side?

MS. de GERMINY: No comment, Mr. President.

PRESIDENT TERCIER: Thank you very much.

Good. So, as I said now I really used five minutes already of a break, so we will start again at 8:00 Swiss time. Thank you very much.

MR. POLAŠEK: Thank you.

(Recess.)

PRESIDENT TERCIER: Thank you very much.

Mr. Polašek, you have the floor for half an hour or slightly more.

MR. POLAŠEK: Thank you, Mr. President.

BY MR. POLAŠEK:

Q. Let's take a look at document CL-7 and go to

[Page 659]

Paragraph 446.

And this is the Award in the Glamis Gold arbitration; and, as we discussed previously, Mr. Guarnera, you appeared as an expert in that case on behalf of the Claimant; correct?

A. (Mr. Guarnera) That is correct, sir.

Q. And I will read from Paragraph 446. I quote--well, we will highlight it on the screen as well. I quote: "Behre Dolbear explains that it prefers to rely on values developed from 'a large basket of transactions, covering hundreds of transactions from which an average can be developed.'"

Did I read that correctly?

A. (Mr. Guarnera) You did, sir.

Q. And that's what you, in fact, did in the Glamis Gold arbitration; right?

A. (Mr. Guarnera) That is correct.

Q. And you applied this methodology in Glamis Gold because you considered it an appropriate methodology for the valuation of mining properties; right?

A. (Mr. Guarnera) I consider it as one of the

[Page 660]

methods. I tend to look at all of them; and, based on the nature of the property, its status, I will then select a method that I will use.

Q. And, if it were inappropriate to rely on an average of a large basket of hundreds of transactions, then you would not have used that methodology in Glamis Gold, would you?

A. (Mr. Guarnera) I can't say that. I really can't say that I would have used it or wouldn't have used it, sir.

Q. Well, if as a valuation specialist, which you confirmed you were, you considered this methodology inappropriate for mining properties, you would have not presented it with the Glamis Tribunal on behalf of the Claimant; right?

A. (Mr. Guarnera) I would not have used it if I felt it wasn't improper.

Q. Do you use different methodologies depending on whether you are an expert for the Claimant or for the Respondent, Mr. Guarnera?

A. (Mr. Guarnera) No. I use different methods based upon the nature of the property, but I will

[Page 661]

not--I will not change the way I practice and operate.

Q. And so, the method that is described here, using "a large basket of hundreds of transactions" and taking an average of that, there is nothing principally flawed in that; will you agree?

A. (Mr. Guarnera) Well, understand that it's just one of the methods that are available.

Q. Yes. I understand that, and I'm focusing on that method, and my question pertains solely to that method, and my question is: There is nothing principally inappropriate--

MS. de GERMINY: Mr. President, we object. I'm sorry to interrupt, but we object to this line of questioning. Mr. Guarnera has already indicated they're not appearing as quantum experts in this case. This line of questioning is inappropriate.

PRESIDENT TERCIER: It is to the Expert to say whether it is in his confidence in this Arbitration or not, so, Mr. Guarnera, you should answer first this question, and then depending, answer or not the question of Mr. Polašek.

THE WITNESS: (Mr. Guarnera) I was not asked

[Page 662]

to consider the valuation, and I have not considered it in any form or manner.

And in all fairness, sir, I will refuse to endorse any method for a valuation of Roșia Montană. You have an expert--quantum expert group who is doing that.

MR. POLAŠEK: Yes, Mr. President, if I may comment on that.

PRESIDENT TERCIER: Yes.

MR. POLAŠEK: I have two points.

One point is, as we have seen, Mr. Guarnera, in fact did render an opinion that the Rodu-Frasin and Tarnita properties provide little value, little current value to the Roșia Montană Project. These are the words he used. We can look at his Expert Report, so he is opining on value. If that opinion is to stay on the record, I must be allowed to test him on that and ask him about the valuation methodologies that he uses and so forth. That's Point No. 1.

Point No. 2, I refer to Paragraph 60 of PO 33, and that provides that cross-examination will be limited to matters arising out of the direct

[Page 663]

testimony or statement or report, so we fit that box because, again, Mr. Guarnera did opine on the value of the Rodu-Frasin and Tarnita properties.

And then it goes on to say that, beyond that scope, questions may be put to the Expert in relation to matters that such expert or witness has direct knowledge of. And as we have established in this case, Mr. Guarnera has appeared as the quantum expert for the Claimant in Glamis Gold, and so we take that second category as well. We have two grounds why these questions are permissible.

PRESIDENT TERCIER: Okay. May I have on the sub-box the position of my co-Arbitrators, takes less time?

(Pause.)

PRESIDENT TERCIER: Okay. The ruling of the Tribunal is that the Experts should answer the question. It's a general question, but he should not have to ask specific questions about the Roșia Montană.

So, Mr. Guarnera, please answer the question, or Mr. Polašek repeat your question, in this

[Page 664]

limited scope.

MR. POLAŠEK: Okay. Mr. President, so I will repeat my question, and I would ask that if I'm not within the scope of what the Tribunal has in mind, please correct me.

BY MR. POLAŠEK:

Q. And the question is: Mr. Guarnera, there is nothing principally incorrect or improper about valuing mining property based on the average of a large basket of hundreds of transactions; correct?

A. (Mr. Guarnera) In principle, no, so long as that average price that you have is adjusted for specific factors at the property.

Q. And so, you are agreeing with me; right?

A. (Mr. Guarnera) I am saying that it is a method that can be used.

Q. And there is nothing principally incorrect about that method; you agree?

A. (Mr. Guarnera) It is--I can't say whether it's good or bad. It's a method that I've used.

Q. When you served as the Expert for Claimant in Glamis Gold, you did not tell the Glamis Gold

[Page 665]

Tribunal that you cannot tell whether it's good or bad; right?

A. (Mr. Guarnera) That was for a specific property. We're talking about a general property now.

Q. Well, we are talking generally. That's how I phrased my question. My question is that there is nothing principally incorrect in using this method to value mining properties. That's my question.

A. (Mr. Guarnera) I think you will find a lot of people who disagree with it.

Q. Do you disagree with it, Mr. Guarnera?

A. (Mr. Guarnera) I think it's one of--one of the many methods that are appropriate. If you look at the valuation methodologies that are present in the CIMVal Code, the Canadians, they say that the rule of thumb is a secondary method. They do not consider it a primary method. I have seen some who have said it's no good at all.

So, people have a different opinion, and I think those different opinions need to be considered.

Q. And would you please state what your opinion is on this topic?

[Page 666]

A. (Mr. Guarnera) As I said, it's a secondary method.

Q. Okay.

PRESIDENT TERCIER: Sorry, I have a question to the Expert.

Taking the wording of Paragraph 446, "Behre Dolbear explains that it prefers." Can you comment on "prefers"? What do you mean by "prefers"?

THE WITNESS: (Mr. Guarnera) I think when you look at hundreds of transactions of mining companies that you realized that you're looking at valuations based upon companies that are good and companies that are--really have very poor properties, and then there's one that has decent property.

And so, what we like to do is to note that the number of properties tends to allay that disparity. That's basically what we're saying.

PRESIDENT TERCIER: Okay. Mr. Polašek, you have the floor.

MR. POLAŠEK: Thank you, Mr. President.

BY MR. POLAŠEK:

Q. I would like to take Mr. Guarnera back to

[Page 667]

Exhibit C-2588--that is the Anglo Asian document we reviewed previously--and let's go to Page 10. And let's put on the screen the paragraph that starts "Valuation." And again, we looked at this previously.

It says that: "Behre Dolbear gives the Company a market valuation of $247.5 million on a related-transactions basis."

Do you see that, Mr. Guarnera?

A. (Mr. Guarnera) Yes.

Q. There is nothing principally incorrect about using the related-transactions methodology to value mineral properties, is there?

A. (Mr. Guarnera) So long as the properties really are similar, and it's very difficult to find truly similar properties. Again, you have to adjust each property that transaction that you're looking at in that to see the nature of the company.

All of this basically--the political risk that may be present at that company, things like that, so that you are coming up with a rational number.

Q. And what you were looking at in the Anglo Asian case were Soviet studies in Azerbaijan and

[Page 668]

Inferred Mineral Resources that were scattered across seven or eight properties; right?

A. (Mr. Guarnera) I believe so. It's been quite, as I said, quite a while ago.

Q. Yes.

And as we see here, you applied the related-transactions methodology and came up with the value of what? 257 million; right?

A. (Mr. Guarnera) That's what it says.

Q. And it also says that you also applied the market-multiples methodology; right?

A. (Mr. Guarnera) Yes.

Q. And you applied that methodology because there is nothing principally improper in using that methodology to value mineral properties; do you agree?

A. (Mr. Guarnera) So long as it's done properly.

Q. And, in this case, you are looking again at a project that had Soviet studies, was in Azerbaijan, and had Inferred Resources only that were scattered across seven or eight properties; right?

A. (Mr. Guarnera) That's what I recall, yes.

[Page 669]

Q. And that did not prevent you from using the market-multiples methodology to come up with a value of 257 million; correct?

A. (Mr. Guarnera) Apparently. Again, it's been a long time.

Q. Well, it's been a long time, but you are stated as the author of the valuation section of that Report, as we established?

A. (Mr. Guarnera) Yes, I am, and that's what I did.

Q. All right. Let's turn to your Second Report, and let's look at Paragraph 121.

A. (Mr. Jorgensen) I'd be happy to answer those questions.

Q. Okay, thank you, Mr. Jorgensen.

So, this states, I read: "The plan that RMGC has adopted to receive cyanide assumes that a vendor will supply the chemical to the site. Cyanide is manufactured out of country and will be transported by rail to Zlatna Appelum."

Did I read that correctly?

A. (Mr. Jorgensen) Yes.

[Page 670]

Q. Now, let's look at Respondent's opening

slide. We will go to Slide 25.

Do you see that?

A. (Mr. Jorgensen) I do.

Q. It's entitled: "RMGC Did Not Identify the

Cyanide Transportation Route."

Do you see that?

A. (Mr. Jorgensen) Yes, and that would be

information that perhaps we misunderstood. I mean,

we, during our Site Visit, when we were there, we

asked, well, where does cyanide come from, or how does

it get here? And, of course, we took the time to go

to the Zlatna railhead to look at it.

Q. Cyanide is transported by rail, isn't it?

A. (Mr. Jorgensen) It's transmitted many

different ways.

Q. And that includes rail?

A. (Mr. Jorgensen) It does include rail.

Q. Nothing unusual about that?

A. (Mr. Jorgensen) In Romania, that might be a

problem. One of the things that I think was going to

be investigated--and I certainly looked at it--I'm not

[Page 671]

sure that RMGC looked at it, but it comes in in a

container. Then the container goes to the

railhead--you know, well, it's put on a rail, it's put

on a train, and it goes by train to Zlatna. And, from

there, it has to be unloaded and then put into

isotainers. That was the plan that I believe that

RMGC had adopted. Maybe they did not adopt it as much

as I thought they had adopted it, but I certainly was

under--that seemed like the most obvious thing for

them to do, to me.

Q. But it sounds like you're not really sure;

is that fair?

A. (Mr. Jorgensen) Well, I would think--I do

not know of a contract that RMGC entered into. That

would have been one of the things that they should

have finished relatively quickly, you would think. I

mean, it's a very important thing to know how your

cyanide is getting there.

And I know that--I had assumed that that was

what they were going to do. However, I had no

for-sure knowledge that they were going to do that. I

mean, I didn't see a contract from a vendor, I didn't

[Page 672]

see a routing from them. That's all I can--I guess I

can't say anything more about that.

(Pause.)

Q. Okay. Mr. Guarnera, let's zoom in on this

picture, meaning the map that we see on the screen

with the red line on it.

A. (Mr. Jorgensen) Did you want Mr. Guarnera to

take this question or did you want me?

Q. No, no, my apologies. Mr. Jorgensen. The

question is directed to you. I misspoke.

A. (Mr. Jorgensen) Thank you.

Q. Okay. Now, you are not an expert on the

Romanian railway system, are you?

A. (Mr. Jorgensen) No, I am not.

Q. And was Respondent's opening the first time

that you saw this map with this red line drawn on it

in this way?

A. (Mr. Jorgensen) Yes, it was.

Q. They had not provided this map with this

line drawn in this way to you previously; right?

A. (Mr. Jorgensen) They had not.

Q. Let's turn to document C-389, and we will

[Page 673]

first show the first page of that document.

Now, this is the 2007 route survey that was

submitted to the Ministry of Environment as part of

the 2010 update to the EIA Report, Chapter 410,

"Transportation."

Are you familiar with this document?

A. (Mr. Jorgensen) I am not.

Q. Respondent hasn't shown it to you, to your

recollection?

A. (Mr. Jorgensen) They may have. I looked at

a number of different documents. I can't--I don't

think I've seen this one, though. It may have been

in--I'm sorry.

Q. Let's go to Page 20.

Now, there is a map in there.

Do you see that?

A. (Mr. Jorgensen) Um-hmm.

Q. And it has a red line coming from the sea to

Roșia Montană; right?

Do you see that?

A. (Mr. Jorgensen) I do.

Q. The railway route, is that what it is?

[Page 674]

A. (Mr. Jorgensen) I don't know. Is that the

railway route? I can't tell.

Q. Let's put on the screen this map and the

second map next to one another. And let's see if we

can Zoom in so that we can see those maps next to one

another.

Okay. So, the left-hand map comes from

Respondent's opening, and I note that there is no

exhibit number and no other reference as to what is

the source of that map. I believe there is a note

that this might be from Google Maps. Let's see if we

can zoom in on that.

Okay. We can barely make that out, but do

you see--do you see what it says there, Mr. Jorgensen?

Google Maps?

A. (Mr. Jorgensen) I can't see it clearly.

Would you care to read it to me?

Q. Yes. It says Google Earth. Google Earth,

I'm sorry.

A. (Mr. Jorgensen) Can we be sure that it says

Google Earth? I can't really tell if it says Google

Earth or not.

[Page 675]

Q. Well, I believe so. I think everyone can

make their own judgment as to whether it is Google

Earth or something else.

Let's zoom out.

Now, if you look at these two lines, would

you be able to tell me--put them next to one another

again. Would you be able to tell me just visually

which is longer?

A. (Mr. Jorgensen) No, I really have no idea.

Hopefully they're the same scale. I can't be sure of

the same scale.

Q. Would you agree that they are not the same?

A. (Mr. Jorgensen) I would agree that they're

not the same.

MR. POLAŠEK: No further questions. Thank

you.

PRESIDENT TERCIER: Thank you very much,

Mr. Polašek.

Ms. de Germiny, you have the floor for the

redirect, or do you wish to have a short break?

MS. de GERMINY: Thank you, Mr. President.

We're happy to go ahead and proceed.

[Page 676]

PRESIDENT TERCIER: Very well.

REDIRECT EXAMINATION

BY MS. de GERMINY:

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Q. All right. Let's go now to Exhibit C-2588.

You were asked a number of questions about C-2588, a

[Page 678]

report that Behre Dolbear wrote about a deposit in

Azerbaijan held by Anglo Asian.

You were asked earlier on about language at

the bottom of Page 45 to the effect that Behre Dolbear

was looking at resource estimates made in the Soviet

era when it concluded that there were Inferred

Resources. This is in the last paragraph, penultimate

line?

A. (Mr. Guarnera) Okay.

Q. Just refresh your memory on what you were

shown earlier.

I'd like to take you to Page 54 of this

document, fourth paragraph from the top, and could you

please read out loud the last sentence of this

paragraph.

A. (Mr. Guarnera) "Soviet era"--the last

sentence?

Q. The last sentence, yes, it's being

highlighted and shown on the screen.

A. (Mr. Guarnera) Thank you.

"Use of Soviet core drilling results and

resource estimation must be made with appropriate

[Page 679]

caution and in Behre Dolbear's opinion cannot be

relied on exclusively to assign 'C1' or 'measured

status' to a resource."

Q. And what is your understanding of this

statement?

A. (Mr. Guarnera) I think it is why we

downgraded the resource probably to do it to an

Inferred. I can't remember exactly, ma'am. But I

think that we downgraded C1 or measured status to an

Inferred Resource.

Q. Okay. Mr. Jorgensen, you were asked

questions about C-2962, Exhibit C-2962. Yes, this is

the excerpt from the unsigned 2018 report by someone

from the Minnesota Department of Natural Resources

regarding dam and safety permits for a particular

project. You noted that the author of this Report

relies on a 2002 paper by Mr. Mike Davies, and you

testified that Mr. Davies had written an article more

recently in 2011 at BD-13, and I would like to take

you to Behre Dolbear Exhibit 13. Perhaps we could

pull that one up.

I would just like to ask you generally: How

[Page 680]

does this 2011 paper by Mr. Davies update the 2002

paper that is referred to in C-2962?

A. (Mr. Jorgensen) It does quite a bit of

updating. It's actually covered at the very end in

just the conclusions. It's quite concise down there.

Q. We can perhaps go to the conclusions, then,

so you can explain what is the evolution, the update

and thinking of Mr. Davies.

A. (Mr. Jorgensen) Right there, "key lessons

learned from operating dry-stacks."

It talks about how zonation is essential to

pragmatic and efficient tailings dry-stack. It allows

you to place weather in any weather condition, and it

removes many of the constraints that have been placed

on dry-stack development.

He goes on to say it would be an extremely

rare or unique situation that would not benefit and/or

allow for a zoned approach to managing a given

dry-stack tailings.

And it talks about the Pogo Mine in Alaska,

where it's very cold and it's very wet. And they get

a lot of snow and a lot of cold, but they are still

[Page 681]

able to operate dry-stack without any problem.

It goes on to talk about seepage in the next

one, where it says it targets moisture content in the

next bullet point, first line, and it says "seepage is

negligible." Imagine what that would mean to the

residents that are below the dam, for someone to be

able to say that about their tailings dam.

The next bullet point, it says:

"Resaturation," in other words, if it's rained on, it

says, "of properly placed and compacted filtered

tailings is extremely difficult and not the concern

many presume." You have to remember how many tons

that you're actually handing a day. I mean, we're

handling 36,000 tons a day of material. And so, if

you were to rain a 25-millimeter rain or even a

50-millimeter rain on 35,000 tons or 36,000 tons, the

surface area that's available, it just doesn't absorb

that much moisture. It's not that big a deal. Just

by the sure volume. The small amount of water that

falls compared to the large amount of tailings that

are there to absorb it.

If we could go to the next one.

[Page 682]

It talks about diversion ditches. In other

words, you divert the rain water around it that

protects it from erosion.

Next is compaction specifications. It talks

about how that can be achieved in subfreezing

conditions.

This talks about heated bed liners, but I

don't think that would actually have much to do with

Roșia Montană. I mean, these are very large tonnages,

and the opportunity to compact them and place them

while they're not frozen would be something that could

be done.

And if we look down at the fifth bullet

point here, it says: "Carrying on from the point

above, dry-stacks can effectively"--"can be

effectively developed in very wet conditions."

The next bullet point says that, in the DNR

thing that we saw before, it talked about fugitive

dust generations and says that can be considerable in

colder months, but--and that can be a problem due to

freeze drying on the surface of tailing stacks, but

it's something that can be taken care.

[Page 683]

And of course, we look at the last one where

it says "filtration plants have occasional

challenges." I mean, these are big plants, and you

have to operate them properly.

And the final paragraph goes down here, it

says: "Finally, filtered tailing dry stacks are not a

panacea of mine waste management." And it says:

"They should be appropriately viewed as an alternative

form of tailing placement and a part of the overall

tailings continuum of options for today's designer and

operator." And, if we look down here, this next part

is so critical: "There are site conditions, including

regulatory regime, that make the tailings dry-stack

the best choice for certain projects."

And I just can't imagine a better scenario

than Roșia Montană for a dry-stack tailings system.

Q. All right. Mr. Jorgensen, I would like to

switch topics, thank you. I would like to turn to

Paragraph 35 of your Second Report.

It was noted that there was a potential

error in the citation here, and you wished to then

refer but were not given the opportunity to read the

[Page 684]

next paragraph. Could you please read out loud the

first sentence of Paragraph 36.

A. (Mr. Jorgensen) "Behre Dolbear would note

while this observation is from a paper delivered in

Australia at an infrastructure conference and not

specific to mining, the end results they were

attempting to quantify are identical to Behre

Dolbear's experience in evaluating mining project

Feasibility Studies brought to us by our clients."

Q. And you wanted to explain your view as to,

in the context of Paragraphs 35 and 36, and capital

costs why infrastructure is important to mining

projects. Would you like to comment on that?

A. (Mr. Jorgensen) It's been our experience

that, you know, as miners, we do pretty good in

identifying a mine. As process engineers, we put

together a pretty standard process. And then there

come the other things around it such as power, water

availability, and tailings disposals, as we've talked

about already. These logistics actually just getting

the Project constructed, these things--you have to

have an infrastructure to construct a project this

[Page 685]

large. People don't understand what it takes. It

takes an entire town to move into this area. And

although you're employing a lot of local labor, there

is a very large amount of people that are also there,

and everybody needs power and water, and it just seems

that these things always take more than what we

estimate.

I mean, it's just something that we've had

to deal with. Infrastructure is one of our biggest

problems. Everyone would believe that the roads are

fine, the roads are fine, until we start using them as

much as we use them, and we find out that they're not

fine, and they need to be redone.

Power. Everyone says, "oh yeah, we have

power." Until you have a power contract that's signed

by the supplier and then the supplier actually

delivers that power, you really don't have power. I

mean, I've learned that lesson in my career. I

thought I had power on a project, and it turns out

that I didn't.

It's very important to get the

infrastructure right, and it can result in increased

[Page 686]

capital costs.

Q. Okay. I would like to take you now back to

Behre Dolbear Exhibit 17, if we could pull that up.

You were asked a number of questions about this

exhibit, and I would like to take you to the Page 27

and the discussion about the AACE Guidelines. You

were shown this table, and you wished to comment on

the range of the contingency--in talking about

accuracy and contingency, the range of the contingency

for Feasibility Studies. It's the third row. What is

your understanding of this table and of those items?

A. (Mr. Jorgensen) Well, this table actually

does follow the AACE Guidelines as far as I'm

concerned. I mean, if we look at the accuracy ranges,

they're the same, but, in this particular case, the

Class III Feasibility Study has been noted as having

10 to 40 percent of the Project definition

deliverables completed. If you look in the third

column, third thing down, that's 10 to 40 percent.

In my experience, and what I believe is the

case here, is that it's more likely 1 to 15 percent,

and it's even possible, and I believe this is true

[Page 687]

also, that it's 0 to 2 percent, it's of engineering

that is actually completed. This would mean that

there are POs that have been issued. There is vendor

drawings that have been received. There are drawings

that have been issued for construction. That's what

you're talking about when you're talking about 10 to

40 percent complete. And I did not see anything other

than takeoff quantities that would lead--and takeoff

quantities are normally done on--they're done on

"issued for approval" drawings or "issued for study"

drawings. They're nowhere close to the accuracy

associated with the 10 to 40 percent engineering

complete. You know, 10 to 40 percent complete,

flowsheets, process, piping and instrument diagrams, a

number of different layouts, sections, plans. And

then that followed with implementing or actually

inserting the real-sized equipment that's going to be

purchased into that. So, there is no way that this

project was 10 to 40 percent complete. More likely,

it was 1 to 15 percent complete, and I think it was

actually 0 to 2 percent complete. I think there was a

lot of engineering that needed to be done and a lot of

[Page 688]

work that needed to be done.

And this is one of the reasons that we did

see the cost overruns in the mining industry is that

people believe that their engineering is actually

progressed farther than it is. So, my selection of

a -20 to a +30 would match a Class V, which would say

0 to 2 percent complete. If I go down a little bit

more, let's say a -15, to the next one, the Class IV

to a +20 to a +50, the range that I've chosen,

the - 20 to the +30, fits in there exactly. I think

it's a good selection.

So, I believe that this study was not a

Class III study of 10 to 40 percent engineering

complete. It was more like a Class IV of V study with

0 to 15 percent complete. Hence, my choice of--we

actually assigned it as a contingency, but it's a

combination of contingency and accuracy. You know,

the -20/+30.

Q. Okay. And one final question,

Mr. Jorgensen. You were asked questions about

Paragraph 121 of your Second Report and about the

cyanide route, Cyanide Transportation Route.

[Page 689]

A. (Mr. Jorgensen) Yes.

Q. And there was a discussion about the extent

to which this was a set plan, a set route.

And I would like to take you to Exhibit

C-486, if we could pull that up.

Starting with this first page, these are

Meeting Minutes from the TAC of 29 November 2011.

You recognize this type of document and this

document?

A. (Mr. Jorgensen) I actually might have read

this one.

Q. Okay. Let's look at Page 33. And perhaps

could you--actually, let's look at the third

intervention, Mihaela Cristea, MTI. Actually, that's

fine. I'll let you go ahead and perhaps you could

read this, Mr. Jorgensen.

A. (Mr. Jorgensen) "The Ministry of

Transportation had the same observations during the

previous meeting, when we sent out point of view--when

we sent our point of view. It's important for you to

comply with all the legal provisions related to the

transport of hazardous substances and cyanide and to

[Page 690]

have a detailed chapter in your documentation about

how these provisions will be observed. So supplement

the documentation with these provisions and later, of

course, comply with them. As for the route you

selected for cyanide transport, you should clearly

know which route it is."

Q. And MTI, just to be clear, if we go back to

the first page to get the acronym, MTI is Ministry of

Transportation, just for the record, you should see

that I guess about midway through, MTI, Ministry of

Transportation.

So, my question, Mr. Jorgensen, is what is

your understanding of the Ministry of Transportation's

understanding of the cyanide, the possible cyanide,

transportation route at this point in time?

A. (Mr. Jorgensen) That it had not yet been

selected.

Q. Thank you.

MS. de GERMINY: No further questions.

PRESIDENT TERCIER: Thank you very much,

Ms. de Germiny.

I'll ask my co-Arbitrators whether they have

[Page 691]

a question to the Experts.

Professor Grigera Naón? No? Professor

Douglas?

ARBITRATOR DOUGLAS: Just a couple. Here's

where I stretch everyone's patience. I'm sorry about

that. But there's just a few things I would like to

clarify. I'm not sure to whom these questions should

be addressed.

QUESTIONS FROM THE TRIBUNAL

ARBITRATOR DOUGLAS: But it might be helpful

to have your Second Report at around Paragraph 76 and

onwards, that might be helpful. Is someone able to

put that on the screen? Ah, there you are.

So, really, my question is--the questions

concern when the serious work for mineral-resource

estimation takes place in the timeline which you set

out on your Slide 13. So, when this model is prepared

in May 2005, what raw data is that drawing upon? Is

that the 2001 Definitive Feasibility Study, or is it

something else?

THE WITNESS: (Mr. Guarnera) Sir, it would

be that plus any drilling and other type of work that

[Page 692]

was completed up to that point, and they would take

that information; and, from that, they would be able

to derive a Mineral Resource.

ARBITRATOR DOUGLAS: Okay. When you say the

model you received from the Claimants, was the model

generated in May 2005? Presumably that model had been

updated since 2005.

THE WITNESS: (Mr. Guarnera) It has not

been, sir. That is the whole issue here. There is

all sorts of new information that is there. It hasn't

been updated for metal prices. Of course, they vary

all over the map, but as the 2012 SRK Report is still

using the 2005 Model of RS Global, and they ignore all

of these other items that we've enumerated as being

immaterial.

And my simple feeling is, okay, one thing

may be immaterial, another thing may be immaterial, a

third thing may be immaterial, but pretty soon all the

immaterial things add up to something that's material

and that's the case here.

ARBITRATOR DOUGLAS: I thought at the very

least the pricing that's being out there, for example,

[Page 693]

I'm sure I read that somewhere, so is it your case

that--your evidence that some things were updated and

others weren't, and the things that weren't, were, in

your opinion, material, or is it literally the same

model that was produced in 2005 without any

adjustment?

THE WITNESS: (Mr. Guarnera) Well, what has

not taken account of the prices is the Reserve Model

that has been based on the Resource Model.

ARBITRATOR DOUGLAS: I see. You mention in

this part of your Report the 1,838 channel samples.

When were they undertaken, and why were they

undertaken?

THE WITNESS: (Mr. Guarnera) Well,

certainly, they were undertaken to get information up

to the grades of mineralization in the tunnels.

That's probably where they were, sir, and they were

taken that--I'm not sure of the exact date, but it was

post-2005. And so, they were assayed, and we have no

information about whether they're ore grade or not ore

grade, but that needs to be put into the Resource

Model, so a new Reserve Model can be developed.

[Page 694]

ARBITRATOR DOUGLAS: So, when you talk about

what Micon did, I wasn't quite sure whether they had

analyzed the results and decided not to include it, or

had not analyzed the results at all. Do you know

which is correct in relation to what Micon did.

THE WITNESS: (Mr. Guarnera) No, I do not.

But as you noted, they said that they're not

considered to materially impact the resource quantum.

But they do note that the data collected between 2000

and 2008 have not been included.

Now, they say that's not material. All

information is material.

ARBITRATOR DOUGLAS: Well, this is what I

was confused by. Is it not material because they

looked at the results of the sampling and they might

have concluded that it was consistent with what had

previously been done, or they say that the additional

sampling per se is not material? I wasn't quite sure

which one.

THE WITNESS: (Mr. Guarnera) To my

knowledge, sir, they did not give an explanation as to

why it hasn't been incorporated.

[Page 695]

ARBITRATOR DOUGLAS: Somewhere else in your

Report--I'm trying to find it now--I think it's

Paragraph 43. It's just a general issue about when

Feasibility Studies have an expiration date. SRK is

correct, at least in the sense that there is no

regulatory expiration date, is there? For example,

when you're compiling an NI 43-101, you're not

prohibited from using, by the regulations, from using

a Feasibility Study that was done a certain number of

years ago. When you say that there is no expiration

date or there is an expiration date, you're basically

saying that's a matter of judgment in each individual

case.

THE WITNESS: (Mr. Guarnera) It's a matter

of judgment, sir, and it's also a matter of

experience.

Our company, Behre Dolbear, works regularly

with financial groups who are looking at investing in

mineral projects, and we've gotten to know the

requirements of them for what needs to be in a

Feasibility Study and what not, and whether they feel

that they are sufficient.

[Page 696]

One of the things is is that we've always

seen these banks to be skeptical when they see you

take them a study that's over three years. Now, that

doesn't necessarily mean that it's not a good study.

And we've never said that the Washington Group Study

is not a good study.

Our premise here, sir, is again that it's

not--the information that has been gathered in this

property is not in a single place, in a single

document. It's all over the place, and there's

information that is new that's not included.

And, therefore, it is, in our opinion,

outdated. And as we have seen, we think that it's

flawed now because of the lack of inclusion and as we

noted--and I know that it was protested, but the

information dealing with the blasting situation is

going to severely impact now the production rate. In

other words, if this mine does get a permit, instead

of operating for a period of time and then processing

the low grade material for another period of time,

that period of time could be doubled. And that's

going to be significant on the cash flow and on the

[Page 697]

total economics. It changes the nature of the

equipment you need--all of the things like that.

ARBITRATOR DOUGLAS: Okay. Thanks very

much. I have no further questions.

PRESIDENT TERCIER: Thank you very much.

On my side, I have no supplemental

questions. It was quite a long examination. I would

like to thank very warmly our experts for their

presence and their answers. Thank you very much.

(Witnesses step down.)

PRESIDENT TERCIER: Before closing this

Hearing, I have one or two points, easy points.

The first, for our Secretary, can you

give--have you the timing? Sorry, the time spent and

the time left.

SECRETARY MARZAL YETANO: Claimants have 7

hours--

PRESIDENT TERCIER: We don't hear.

SECRETARY MARZAL YETANO: I'm sorry.

Claimants have 7 hours and 18 minutes left,

Respondents 8 hours and 4 minutes left, and the

Tribunal 3 hours and 3 minutes.

[Page 698]

PRESIDENT TERCIER: Okay. A comment on your

side? Claimant?

MR. POLAŠEK: No, Mr. President, and thank

you for your attention.

PRESIDENT TERCIER: Okay. Respondent?

DR. HEISKANEN: No comment. I just wanted

to understand how the time was calculated for the

objections that were raised by the Claimants.

PRESIDENT TERCIER: Ms. Marzal?

SECRETARY MARZAL YETANO: So, when Claimants

at the beginning, when they--in the first interruption

to the presentation, that was obviously discounted,

then the second one as well, then there was an

entire--it was attributed to Claimants' time. Then

there was an entire discussion where the Respondent,

the Claimant, the Tribunal intervened, but I did not

include in any Party, I considered it was a general

procedural discussion. It was not to be assigned to

anyone.

Then, when Respondent's Experts resumed the

presentation, I started counting the time again, and

every time the Claimant objected, those few seconds

[Page 699]

were discounted. That's basically what I have done.

PRESIDENT TERCIER: Okay. Comment to that

on Claimants' side?

MR. POLAŠEK: Mr. President, I think that is

fine. No problem for Claimants. Thank you.

PRESIDENT TERCIER: On Respondent's side?

DR. HEISKANEN: The Respondent position

remains that, in accordance with the Tribunal's prior

rulings, the time spent by a Party raising objections

should be counted against that Party's time.

PRESIDENT TERCIER: Okay. We will look at

it and give you an answer, it doesn't play a role just

now. I think we had a rather long hearing.

I would like to thank everybody. We will

start tomorrow with Mr. Cooper at 2:00 p.m. Swiss

time. I wish you a very pleasant afternoon for those

who are before the afternoon, and an evening or a

night for the others.

Thank you very much, and again bye-bye.

DR. HEISKANEN: Thank you.

(Whereupon, at 3:03 p.m. (EDT), the Hearing

was adjourned until 8:00 a.m. (EDT) the following

[Page 700]

day.)

[Page 701]

CERTIFICATE OF REPORTER

I, David A. Kasdan, RDR-CRR, Court Reporter,

do hereby certify that the foregoing proceedings

were stenographically recorded by me and

thereafter reduced to typewritten form by

computer-assisted transcription under my

direction and supervision; and that the

foregoing transcript is a true and accurate

record of the proceedings.

I further certify that I am neither counsel

for, related to, nor employed by any of the

parties to this action in this proceeding, nor

financially or otherwise interested in the

outcome of this litigation.

Signature

DAVID A. KASDAN