1. June 2013 Environmental Update for SLEMA Board June 2013 Environmental Update for SLEMA Board Zhong Liu June 30, 2013

2. Outline 1. Mine Update 2. Inspection Update 3. Regulators’ Update 4. Aboriginal Update 5. Stakeholders’ Update 6. Agency’s Activities 7. SLEMA Reviews

3. Acronyms  AANDC – Aboriginal Affairs and Northern Development Canada (previous INAC – India and Northern Affairs Canada)  AEMP – Aquatic Effects Monitoring Program  ARD – Acid Rock Drainage  DFO – Fisheries and Oceans Canada  EC – Environment Canada  ENR – Department of Environment and Natural Resources, GNWT  GNWT – Government of the Northwest Territories  MVLWB – Mackenzie Valley Land and Water Board  PK – Processed Kimberlite  SLEMA – Snap Lake Environmental Monitoring Agency  SNP – Surveillance Network Program  TDS – Total Dissolved Solids  WEMP – Wildlife Effects Monitoring Program  WTP – Water Treatment Plant  WMP – Water Management Pond

4. 1.1 Mine Update – May 2013  Production rate: 100.4 % of its capacity (98,003 tonnes of kimberlite processed)  3,293 m 3 of water withdrawn from Snap Lake  1,046,774 m 3 of treated water discharged into Snap Lake  84,327 tonnes of coarse reject and 65,465 m 3 of slimes deposited in the North Pile  6 spills (3 reportable)  Water sampled in 15 monitoring stations The monthly average for all parameters met compliance The monthly average for all parameters met compliance

5. 1.2 SNP 02-17B and SNP 02-20 in May 2013 ParameterSNP 02-20 (d)SNP 02-20 (e) SNP 02-20 (f)WQO TDS, mg/L297293299350 Chloride, mg/L132 134120 Fluoride, mg/L0.16 0.030.12 Monthly average concentration of Chloride in SNP 02-17B (treated effluent) in May 2013 is 254 mg/L, lower than that in April (303 mg/L) and the Water Licence limit (310 mg/L) Chloride levels at the end of the mixing zone (SNP 02-20) are still above the Water Quality Objective (CCME Guideline – 120 mg/L)

6. 1.3 Starter Cell Raise  Dated June 3, 2013 Titled “North Pile Starter Cell Phase IV Embankments Design Report” Titled “North Pile Starter Cell Phase IV Embankments Design Report” De Beers plans to raise the height of the Starter Cell by 3.5 metersDe Beers plans to raise the height of the Starter Cell by 3.5 meters During the Environmental Assessment De Beers committed to the North Pile facility to be no higher than the hills in the surrounding landscape (within the Zone of Influence) and this commitment will be upheldDuring the Environmental Assessment De Beers committed to the North Pile facility to be no higher than the hills in the surrounding landscape (within the Zone of Influence) and this commitment will be upheld

7. 1.4 Summary of Difference between Water Licence MV2011L2-0004 and the 2013 AEMP Design Plan  Dated June 4, 2013 There are differences between the 2013 approved AEMP Design Plan and the Water Licence. As such, there is potential for non- compliance with the Water Licence as some of the Water Licence requirements were based on the 2005 AEMP design There are differences between the 2013 approved AEMP Design Plan and the Water Licence. As such, there is potential for non- compliance with the Water Licence as some of the Water Licence requirements were based on the 2005 AEMP design

8. 1.5 Strontium Response Plan Requirement  Request submitted on June 10, 2013 The MVLWB to remove the Strontium Response Plan require under the Water Licence, to be replaced by a suggested Benchmark to be monitored under the AEMP The MVLWB to remove the Strontium Response Plan require under the Water Licence, to be replaced by a suggested Benchmark to be monitored under the AEMP 14,130 µg/L for the chronic effects benchmark (CEB)14,130 µg/L for the chronic effects benchmark (CEB) Attached a report titled Development of Strontium Benchmark for Aquatic Life for the Snap Lake Mine Attached a report titled Development of Strontium Benchmark for Aquatic Life for the Snap Lake Mine

9. 1.6 Follow-up AEMP Technical Meeting with SLEMA  Dated June 13, 2013 De Beers staff, Golder Associates Ltd. staff, SLEMA staff De Beers staff, Golder Associates Ltd. staff, SLEMA staff SLEMA Science Panel (Barry Zajdlik), and DFO consultant (Maggie Squires) via teleconferenceSLEMA Science Panel (Barry Zajdlik), and DFO consultant (Maggie Squires) via teleconference Discussion was focused on SLEMA/DFO’s recommendation on food web model Discussion was focused on SLEMA/DFO’s recommendation on food web model

10. 1.7 Contribution to ENR’s Caribou Research  E-mail dated June 19, 2013 De Beers is looking to contribute $70k to the GNWT/ENR for caribou research in lieu of the aerial survey done annually De Beers is looking to contribute $70k to the GNWT/ENR for caribou research in lieu of the aerial survey done annually In response to ENR’s request on May 4, 2013 – “if De Beers would like to contribute to any of these project as part of their 2013/14 wildlife effects monitoring program for barren-ground caribou at the Snap Lake and proposed Gahcho Kue mine sites”In response to ENR’s request on May 4, 2013 – “if De Beers would like to contribute to any of these project as part of their 2013/14 wildlife effects monitoring program for barren-ground caribou at the Snap Lake and proposed Gahcho Kue mine sites”

11. 1.8 Lake Discharge and Lake Elevation Monitoring Program 2012 Annual Report  Submitted June 24, 2013 Required by the Environmental Agreement for hydrology monitoring Required by the Environmental Agreement for hydrology monitoring

12. 1.9 Vegetation Monitoring Program 2012 Annual Report   Submitted on June 26, 2013 Required by the Environmental Agreement To provide support for the closure and reclamation requirements as outlined in the Water Licence

13. 2. Inspection Update  AANDC Inspector – Patrick Kramers  No Inspection reports received in June 2013

14. 2.1 Letter of Warning in relation to NWT Spills 11-391 and 11-398  Issued by Jason Brennan on April 16, 2013 The AANDC Investigation into the noted seepage events has concluded and is now closed The AANDC Investigation into the noted seepage events has concluded and is now closed The AANDC Inspector presently assigned to the Snap Lake file will be monitoring progress on the Implementation Plan for repairs to be completed at Perimeter Sump #3 (PS3) over the summer of 2013 The AANDC Inspector presently assigned to the Snap Lake file will be monitoring progress on the Implementation Plan for repairs to be completed at Perimeter Sump #3 (PS3) over the summer of 2013

15. Spills 11-391 and 11-398  The release of mine water the receiving environment violated several conditions of Water Licence MV2001L2-0002 3,625,500 litres of mine water entered Snap Lake from the North Pile 3,625,500 litres of mine water entered Snap Lake from the North Pile Subsequent water sampling conducted by AANDC Inspectors revealed that Water Licence criteria for Nitrate, as well as four additional water quality parameters were exceeded during these spill events (TSS, Zinc, Copper and Nitrite) Subsequent water sampling conducted by AANDC Inspectors revealed that Water Licence criteria for Nitrate, as well as four additional water quality parameters were exceeded during these spill events (TSS, Zinc, Copper and Nitrite) A resulting temporary algae bloom was also observed along a section of the Snap Lake shoreline A resulting temporary algae bloom was also observed along a section of the Snap Lake shoreline

16. Investigation of Spills 11-391 and 11-398 (I)  The inadequate water management practises observed during the course of the investigation signify serious environmental management problems, unacceptable risk management practices, poor internal communications and lack of role accountability in some cases at the Snap Lake mine site East Cell perimeter sumps were not being monitored properly East Cell perimeter sumps were not being monitored properly Perimeter Sump #4 was not being operated as per design specifications Perimeter Sump #4 was not being operated as per design specifications

17. Investigation of Spills 11-391 and 11-398 (II)  Four root causes of the water management crisis A higher volume or rate of mine water inflow reportedly entering the underground mine workings during the given period A higher volume or rate of mine water inflow reportedly entering the underground mine workings during the given period Insufficient reserve storage capacity available at surface in the Water Management Pond Insufficient reserve storage capacity available at surface in the Water Management Pond Improper use of East Cell perimeter sumps as mine water storage structures Improper use of East Cell perimeter sumps as mine water storage structures The inability of the Water Treatment Plant to treat for nitrate which has led to the need to rely on dilution as a means to meet Effluent Quality Criteria for this specific parameter The inability of the Water Treatment Plant to treat for nitrate which has led to the need to rely on dilution as a means to meet Effluent Quality Criteria for this specific parameter

18. Investigation of Spills 11-391 and 11-398 (III)  It also became evident that De Beers Canada did not initially opt to implement their approved contingency Temporarily drawing down the Water Management Pond and flooding underground workings as an emergency measure to redirect excess surface mine water to the underground during a water balance upset emergency situation Temporarily drawing down the Water Management Pond and flooding underground workings as an emergency measure to redirect excess surface mine water to the underground during a water balance upset emergency situation Hesitation by De Beers Canada to not implement this approved contingency until well after the second mine water seepage event improperly put day to day operational business priorities ahead of protecting the environmental integrity of Snap Lake itself Hesitation by De Beers Canada to not implement this approved contingency until well after the second mine water seepage event improperly put day to day operational business priorities ahead of protecting the environmental integrity of Snap Lake itself

19. Official Warning  “Aboriginal Affairs and Northern Development Canada does not intend to proceed with legal action against De Beers Canada Inc. regarding the release of mine water from the North Pile East Cell at the Snap Lake Diamond Mine that occurred on or prior to October 2nd & 11th, 2011. De Beers Canada Inc., however, is hereby given official warning that any further action or lack of appropriate action that results in future violations of the Water Licence or other statutory obligations may result in legal recourse pursuant to the Northwest Territories Waters Act or other acts as appropriate”

20. CBC Radio News on June 24, 2013  Titled De Beers to be Charged if Another Spill at Snap Lake “The federal government has put De Beers on notice that the company will be charged if it has another spill at the Snap Lake Diamond Mine. Federal inspectors investigated after 3.6 million litres seeped into Snap Lake two years ago, but the company says it’s made major changes since then.” “The federal government has put De Beers on notice that the company will be charged if it has another spill at the Snap Lake Diamond Mine. Federal inspectors investigated after 3.6 million litres seeped into Snap Lake two years ago, but the company says it’s made major changes since then.”

21. 3. Regulators’ Update – MVLWB (I)  Distributed De Beers request for Starter Cell Raise for review on June 6, 2013 The deadline for reviewers to submit comments is Jun 26The deadline for reviewers to submit comments is Jun 26 The deadline for the proponent to submit responses is Jul 03The deadline for the proponent to submit responses is Jul 03  Requested via e-mail on June 7 that De Beers provide update on stability, thermal and seepage analyses, and future plans for the North Pile (i.e. deposition and slurry/paste status) De Beers responded on June 10 that no updates were done on thermal and seepage analysesDe Beers responded on June 10 that no updates were done on thermal and seepage analyses

22. 3. Regulators’ Update – MVLWB (II)   Board staff responded on June 24, 2013 to SLEMA request dated April 26 SLEMA requested the Board “require De Beers to conduct chronic toxicity tests (cladoceran crustacean Ceridaphnia dubia and alga Pseudokirchneriella subcapitata) for SNP02-20 in the following month after a chloride exceedence.” The Board requires further clarification before considering the request “Can SLEMA detail the benefit of increased chronic toxicity testing at SNP02-20, considering that quarterly acute and chronic studies are currently required for full effluent (SNP02- 17B)?”

23. 4. Aboriginal Update  The NSMA Commented AEMP Design Plan – Chapters 6 and 7 on May 31, 2013  YKDFN commented on Starter Cell Raise on June 26

24. 4.1 NSMA Comments on AEMP Design Plan – Chapters 6 and 7 (I)  Strengthen the language for significance threshold definitions. Take the definitions a step backwards. Definitions should include some of the following: (n)% changes, temporal scale (i.e., reference to closure), spatial scale, or in the least, supplementary information to provide justification and rationale

25. The NSMA’s concern with how its members will perceive the significance threshold The NSMA’s perception of how the Proponent perceives the significance threshold Significance threshold for water: Once the whole lake becomes undrinkable this will be perceived as a catastrophe

26. 4.1 NSMA Comments on AEMP Design Plan – Chapters 6 and 7 (II)  Implement aesthetics objectives for drinking water within the response framework  Implement an independent framework for traditional knowledge. Discuss how this framework will be complementary to the WOE framework

27. How the NSMA perceives the current WOE process How the NSMA would like to see the process

28. 4.2 YKDFN Comments on Starter Cell Raise (I)   At the current time, YKDFN cannot support the request as there seems to be a lack of clarity surrounding the issue From the YKDFN perspective, there is confusion between the final elevation (ASL) for the pile as envisioned in both the EA and the recent closure documents Similarly, there seems to be a lack of clarity with regards to the local height of the waste pile. The preferred closure option seems to include heights of both 34 and 39m If this does move beyond the EA predictions or if closure options are compromised, this is information which should form part of a considered decision rather than occurring as a consequence of a mid-life operational choice based on short term need

29. 4.2 YKDFN Comments on Starter Cell Raise (II)   YKDFN encourages the Developer to engage SLEMA on their recommendation and address conflicting information as stated above. Should the proposed changes be found to contradict EA predictions or alter closure options, YKDFN hopes a considered discussion be held to consider the potential options and residual impacts

30. 5. Stakeholders’ Update  Comments on Starter Cell Raise by AANDC Inspector on June 26, 2013 AANDC Inspector on June 26, 2013 AANDC Water Resources on June 26 AANDC Water Resources on June 26

31. 5.1 AANDC Inspector Comments on Starter Cell Raise (I)   De Beers to provide reasonable assurances that the added weight and volume of the additional slurry/water has been considered and that the existing infrastructure will be able to handle any additional seepage   De Beers to provide reasonable assurances that the added weight and volume of the additional slurry has been considered in relation to water quality and the water treatment plants ability to treat the already higher than predicted mine flows

32. 5.1 AANDC Inspector Comments on Starter Cell Raise (II)   Can De Beers verify that the completion of as-built drawings will in fact be submitted to the board upon completion of the raise (if approved)?   Can De Beers describe what led to the omission of an update for the deposition plan? Will a plan on deposition post raise (if approved) be forthcoming?   This information should be included in the updated mine plan regarding future containment intentions on site   Information relating to stability, thermal and seepage analyses that may be relevant to the proposed raise should be presented (or committed to be presented) prior to authorization

33. 5.2 AANDC Water Resources Comments on Starter Cell Raise (I)   AANDC recommends the Board confirm whether or not the new proposed height conforms to any commitments made during the EAR regarding the height of the North Pile and visibility on the landscape. If not, rationale for any deviations should be explained

34. 5.2 AANDC Water Resources Comments on Starter Cell Raise (II)   AANDC recommends the Board require DeBeers to provide an update on the progress of the paste trials and describe any revisions to the overall design and operation of the North Pile in the event that paste cannot or will not be successfully generated

35. 5.2 AANDC Water Resources Comments on Starter Cell Raise (III)   AANDC recommends the Board confirm the height of the Starter Cell after completing the Phase IV raise   AANDC recommends the Board require DeBeers to provide additional information on the operational conditions and requirements that have led to the need for the raise, as well as any alternatives to a raises that may exist

36. 5.2 AANDC Water Resources Comments on Starter Cell Raise (IV)   AANDC recommends the Board retain the requirement for a 4m cover over PAG material unless DeBeers is able to provide suitable justification for requiring only 3m   AANDC recommends that the Board request updated infiltration and seepage quality/quantity analyses. The Board should consider request the company evaluate a scenario where the entire North Pile is filled with PK slurry

37. 6. Agency’s Activities  Liaison Meeting held in the SLEMA office on June 3, 2013  Mine Site Visit by Environmental Analyst on June 10 and 11  SLEMA Wildlife Workshop held on June 18 and 19  SLEMA Core Group Meeting held on June 20

38. 6.1 Liaison Meeting (I)  Held on June 3, 2013  Participants Lionel Marcinkoski and Paul Green from AANDC; Bruce Hanna from DFO; Marc Cacas from the MVLWB ; Patrick Clancy from GNWT/ENR Lionel Marcinkoski and Paul Green from AANDC; Bruce Hanna from DFO; Marc Cacas from the MVLWB ; Patrick Clancy from GNWT/ENR Patrick Kramers, AANDC Inspector Patrick Kramers, AANDC Inspector Provided an update on inspections in the past monthsProvided an update on inspections in the past months Tom Bradbury from De Beers Tom Bradbury from De Beers Provided an update of the mine site environmental managementProvided an update of the mine site environmental management Dave White and Zhong Liu from SLEMA Dave White and Zhong Liu from SLEMA Provided an update on Chloride (exceedances of CCME guideline and higher monthly concentration close to effluent discharge criterion in April)Provided an update on Chloride (exceedances of CCME guideline and higher monthly concentration close to effluent discharge criterion in April)

39. 6.1 Liaison Meeting (II)  The discussion focused on Site water management, paste deposition issue, etc.  Recommendations De Beers to send senior people to the Liaison Meeting De Beers to send senior people to the Liaison Meeting A site tour to be scheduled in September for Liaison Meeting A site tour to be scheduled in September for Liaison Meeting

40. 6.2 Environmental Analyst Site Visit  Conducted on June 10 and 11, 2013 Details seen in the following link Details seen in the following link http://www.slema.ca/wp- content/uploads/2013/02/20130610-Site-Visit4.pdf http://www.slema.ca/wp- content/uploads/2013/02/20130610-Site-Visit4.pdf

41. 7. SLEMA Reviews   Starter Cell Raise   North Pile Starter Cell Phase IV Embankments Design Report   Quarterly Toxicity Results for SNP 02-17 in May 2013

42. 7.1 Starter Cell Raise  Paste trials continue within the North Pile Starter Cell, but the Starter Cell Phase III embankments reached a final elevation of 486 meters above sea level (MASL)  Construction of the East Cell is ongoing, but is not at design to receive continuous paste or slurry

43. De Beers Rationale for the 3.5 meter Raise  In order to continue active deposition and processing at the Snap Lake Mine, the Starter Cell will be raised. By raising the Starter Cell to the revised height of 489.5 MASL the Starter Cell and North Pile will remain at permitted heights (503.654 MASL) as referenced by the Zone of Influence (ZOI) which will provide further capacity for deposition and will not expand the land footprint of the North Pile

44. Layout Plan 489.47 MASL 473.65 MASL

45. PK Deposition – Slurry, Paste and Grits  The storage capacity of the Starter Cell Phase IV embankments is about 761,000 m 3  The deposition should be completed in about a year

46. Water Management and Surface Drainage  The Starter Cell is designed to promote surface water drainage from the deposited materials towards the perimeter water control structures. This will also reduce the potential for ice entrapment within the deposited materials  During operations, any ponded water in low-lying areas or on deposited materials should be removed. Some mechanical grading of the deposition surface should be expected during operations to promote surface drainage. Provisions for mobile pumping equipment should be provided to remove any ponded water

47. Dust Control  The surface of the deposited PK dries quickly during summer conditions and is lower than the perimeter embankment crest. Dust generation should be monitored during operations and dust control measures be developed as necessary  During winter conditions, the deposition surface will freeze and snow will cover the surface, reducing dust erosion and the need for dust control. Dusting should be monitored throughout the year to assess the North Pile performance  Dust generation from the North Pile has not been noted to date

48. SLEMA Communication with De Beers  Request for clarification sent via e-mail on June 20, 2013 North Pile maximum elevation of 503.654 MASL is inconsistent with the number (484 MASL) in the Environmental Assessment Report (page 3-18). Clarification is required North Pile maximum elevation of 503.654 MASL is inconsistent with the number (484 MASL) in the Environmental Assessment Report (page 3-18). Clarification is required

49. De Beers’ Response  De Beers responded on June 24, 2013 The higher value is related to the commitment that the pile will be no higher than the surrounding hills within the ZOI and recent reviews of actual elevations done by a surveyor as opposed to during the EA when it was a paper exercise The higher value is related to the commitment that the pile will be no higher than the surrounding hills within the ZOI and recent reviews of actual elevations done by a surveyor as opposed to during the EA when it was a paper exercise

50. Comments from the Environmental Analyst (I)  In the Environmental Assessment Report (Page 3-18), it is stated that “At the end of operation, the north pile will have a maximum height of approximately 34 m (crest elevation 484 m). At this elevation, the pile will be approximately the same height as the highest point of natural ground in the immediate area of the project site” “At the end of operation, the north pile will have a maximum height of approximately 34 m (crest elevation 484 m). At this elevation, the pile will be approximately the same height as the highest point of natural ground in the immediate area of the project site” The immediate area of the project site should not be referred to the Zone of Influence (with a radius of 35 km) The immediate area of the project site should not be referred to the Zone of Influence (with a radius of 35 km)

51. Comments from the Environmental Analyst (II)  It is noted that the wildlife study area is defined by a circle with a radius of 31 km, centered on the Mine site Two reference lakes (Northeast Lake and Lake 13) and King Lake (KING 01 – downstream water quality station) are also within the circle Two reference lakes (Northeast Lake and Lake 13) and King Lake (KING 01 – downstream water quality station) are also within the circle  The highest point within 35 km (defined by De Beers for ZOI), based on Golder Associate Technical Memorandum dated April 22, 2013, is located north northwest of the North Pile, and appears to be outside the wildlife study area

52. Closure Options and Research Workshop on March 13, 2013, Slide #21 Closure options presented in the 2003 and 2006 ICRPs Size and shape o Short, large footprint o Medium height, medium footprint o Tall, small footprint

53. Comments from the Environmental Analyst (III)  During the Closure Workshop, De Beers did not intend to change the chosen closure option #2, which is consistent with the Environmental Assessment Report commitment  Two concerns are raised Planned Starter Cell raise is not consistent with De Beers commitment during the Environmental Assessment Planned Starter Cell raise is not consistent with De Beers commitment during the Environmental Assessment The approach to arguing a Starter Cell raise is not appropriate The approach to arguing a Starter Cell raise is not appropriate

54. SLEMA Position (I)   SLEMA is disappointed that De Beers is deviating from its original intent to maintain the profile of the North Pile consistent with the surrounding terrain, and is choosing instead to use a prominence, not even visible from Snap Lake as the benchmark elevation. This being said SLEMA prefers an elevation increase to increased footprint and in this regards would like to make the following points. It has been two years since the last update on paste production, SLEMA would like to see a frank discussion following a new update of the paste production, discussing the reasons why this proposed method is not yet a viable alternative, slowing the deposition to the North Pile.

55. SLEMA Position (II) Elders consistently express concern for the increased elevation as a generator of dust. SLEMA acknowledges that De Beers continues to test capping methods and is trying hard to develop a cap that does not have dust generating characteristics. SLEMA encourages De Beers to engage the communities and work hard at educating the stake holders to alleviate these concerns Further increase in height should not be contemplated without comprehensive consultations with all the stake holders taking place

56. 7.2 Quarterly Toxicity Results for SNP 02-17   Submitted on June 28, 2013   Water Treatment Plant (WTP) effluent samples taken on May 20 were tested By HydroQual Laboratories Ltd. (Calgary) during May 2013   Standard biological test methods used   4 analysis reports for each samples submitted Algae – inhibitory effects did not occur Ceriodaphnia – no effect occurred Trout – no effect occurred Daphania – no effect occurred

57. Comments from the Environmental Analyst   No concerns are raised