Summary
DNI Metals Inc. holds a 2,720 sq km (272,000 ha) land position in northeast Alberta, 120km north of Fort McMurray, over polymetallic black shales which are locally enriched in Molybdenum, Nickel, Uranium, Vanadium, Zinc, Copper, Cobalt, Silver, Gold, Lithium, Specialty Metals (eg:Sc,Th) and Rare Earth Elements (REE). The Alberta land position was assembled during 2007-2009.

DNI’s focus is on exploring and developing bulk mineable mineralized zones and it has identified six polymetallic 100-300 sq km systems on the Property, which collectively represent six distinct sub-properties whose size is appropriate for hosting the type of flatlying near-surface bulk mineable polymetallic enrichment zones sought by DNI. The polymetallic zones are envisaged to extend over 50 sq km, or larger, areas each. The six polymetallic systems are contiguous and collectively comprise DNI's Alberta SBH Property package.

DNI has actively explored the Property since its acquisition, and has advanced one of the mineralized systems, the Buckton Mineralized Zone*, to an initial NI-43-101 classified inferred mineral resource representing 250 million short tons of mineralized black shale over a small portion of one of the systems hosted in the Second White Speckled Shale Formation. The resources contain Mo-Ni-U-V-Zn-Cu-Co-Li as well as Specialty Metals Sc+Th and Rare Earth Elements.This resource is open and it is believed that it can be readily expanded and upgraded with additional drilling.

Polymetallic black shales are a novel deposit type which has gained recognition over the past decade as a potential host to immense deposits as a long term source to metals. Milestone advances during the past decade in application of industrial scale bioleaching (bioheapleaching) to extraction of metals from polymetallic black shales significantly enhances prominence of this deposit type worldwide, especially when considering the demonstrated favourable capital and operating cost requirements, favourable environmental profile and lesser energy dependence of bioleaching techniques when compared to traditional smelting and refining processes. The Alberta black shales share many similarities with other well known metal bearing black shales from elsewhere in the world.

The Property’s location in a mature mining district, in a well organized regulatory, jurisdictional and permitting framework tailored to the development of laterally extensive deposits, provides significant logistical and infrastructural advantages rarely available elsewhere. The local availability of many processing reagents is an added benefit. The local availability of Sulphur, as a waste product from surrounding oil sands operations, is also an added benefit to any Sulphur consuming leaching methods which might ultimately be applied for the recovery of metals from the shale.

General Overview - Alberta SBH Property Package
DNI's Alberta SBH Property package comprises 2,720 sq km (272,000 ha) land position, all of which area is underlain by the targeted black shales. This contiguous Property is located approximately 120 kilometers north of Fort McMurray, and is held 100% by DNI under Metallic and Industrial Mineral Permits. DNI commenced land assembly in late 2007, and expanded it in 2008 and 2009, to secure projected extensions of polymetallic zones identified by review and analysis of historic third-party work from the Property.

Based on extensive regional oil/gas drilling public databases, the entire Property is underlain by the targeted black shales which are part of the flat-lying layer-cake arrangement of sedimentary formations of the Western Canada Sedimentary Basin.

Of interest to DNI, are two flat-lying near-surface black shale Formations which are beneath the surface across all of DNI’s Property, and which carry elevated organic carbon locally accompanied by enrichment in Mo-Ni-U-V-Zn-Cu-Co-Ag-Au-Li, Specialty Metals (eg:Sc,Th) and rare earth elements (REE). These are, the Second White Speckled Shale and the underlying Shaftesbury Formation, both of which are mid-Cretaceous Formations which outcrop in river valleys across the eastern parts of the Property, but are elsewhere under up to 150m of overburden cover. Other black shales overlying the foregoing two Formations are devoid of base metals but were demonstrated by DNI’s analytical testwork to be mineralized with specialty metals and REEs. The significance of discovering recoverable mineralization of value in overburden cover rocks previously considered to be “waste” rocks overlying DNI’s principal prospective polymetallic targets was only recently recognized and is being actively evaluated by DNI

Of the two prospective shale Formations targeted by DNI, the Second White Speckled Shale Formation is nearer the surface and is the better enriched with metals. It is typically a 20m-40m thick “blanket” which is exposed, or is under thin cover, throughout the eastern parts of the Property and represents DNI’s primary target. This Shale Formation consists primarily of black shale interbedded with bentonitic seams, and carries 3%-29% organic carbon, accompanied by up to 20% fine sulfides (mostly FeS species).

Historic work by third parties, by the Alberta Geological Survey and the Geological Survey of Canada, completed over the past fifteen years has reported metal contents from the Second White Speckled Shale ranging upward to 1.2 lb/t MoO3 (Avg 0.1), 0.9 lb/t Nickel (Avg 0.1), 0.7 lb/t U3O8 (Avg 0.1), 5.2 lb/t V2O5 (Avg 1.0), 1.9 lb/t Zinc (Avg 0.4), 0.4 lb/t Copper (Avg 0.1), and 3.6 g/t Silver, in addition to enrichments in Gold, Cadmium, Cobalt, traces of PGE, REEs and specialty metals (eg: Sc,Th). These results are from extensive regional and outcrop scale surface sampling as well as sampling of drill core, providing overall sample coverage over two-thirds of DNI’s SBH Property.

Although physical recovery of native gold from samples of the Second White Speckled Shale has repeatedly been reported from historic work from many locations on the SBH Property, and grades ranging nil to 3.4g/t have also been reported from extensive fire assay or conventional cyanidation testwork of multiple sample duplicates, the overall average gold grade over the Zone has not been definitively established due to suspected nugget effect and is provisionally regarded by DNI to be nil.

Property NI-43-101 Technical Report (2008)
Details and summary of all historic work results and background information relating to the SBH Property can be found in the Technical Report for the Property dated October 28, 2008, entitled “Technical Report On The Polymetallic Black Shale SBH Property, Birch Mountains, Athabasca Region, Alberta, Canada” (the SBH Technical Report"); prepared for the Company by S.F.Sabag MSc PGeo, of Toronto, Ontario, Canada, its President and Qualified Person. The foregoing report conforms to National Instrument NI-43-101 and was filed with Canadian regulatory authorities in November 2008 (available at www.sedar.com). Independent review and verification of the Technical Report was completed in 2009 by Mr.M.Dufresne PGeo of Apex Geoscience Ltd., Edmonton, and a confirmatory opinion letter corroborating the report, dated May 26, 2009, was filed with Canadian regulatory authorities in June 2009 as an addendum to the Technical Report (available at www.sedar.com). The Technical Report is being revised to harmonize its nomenclature with amendments of NI-43-101 which came into effect June 30, 2011. Unless otherwise specified, the Qualified Person in connection with the Company's projects is S.F.Sabag PGeo, the Company's President.

The SBH Technical Report proposes that the SBH Property consists of six sub-properties centered over polymetallic enrichment domains reported by historic work. The six sub-properties range in size approximately 100-300 square kilometers each and their size is appropriate for hosting flatlying near-surface zones of polymetallic enrichment in black shales being sought by DNI which are envisaged to extend over 5kmx5km, or larger, areas. In addition to hosting confirmed, or suspected, polymetallic enrichment zones in black shale, three of the sub-properties also have potential for containing suspected source(s) to metals and volcanic debris accumulated in the shale, proposed to be nearby exhalative vents with yet untested potential for hosting sedimentary exhalative - SEDEX style - sulfides.

The six sub-properties are at different stages of development, ranging from two areas with reconnaissance level anomalies (McIvor West Property and North Lily Property), through two drill-ready large target areas with considerable historic work (Eaglenest Property and Buckton South Property), to two demonstrably continuous and partly drill tested Mineralized Zones* which are targets for further exploration to advance them toward classified resources (the Asphalt and Buckton Mineralized Zones* at the Asphalt and Buckton Properties, respectively). DNI completed an initial in-fill drilling program over the Buckton Mineralized Zone* during the 2010-2011 winter, and sufficient number of drill holes were cored to enable estimation of an initial resource over a portion of the Zone. The Buckton resource study reported an inferred resource of 250 million short tons from a 5.7 sq km portion of this 26 sq km Zone. Details of the Buckton resource study and its conclusions (announced on Oct24/2011) are outlined in greater detail in a separate section of this website dedicated to the Buckton sub-property and the Buckton Mineralized Zone*.

DNI regards the six sub-properties to be distinct geographic parcels, and intends to explore and develop them as six distinct Properties in their own right. DNI has prioritized the Asphalt and Buckton sub-properties which are the most advanced, with an initial inferred resource identified at the Buckton sub-property in 2011. Details for the six sub-properties are individually described in separate sections on this website.

Highlights from the SBH Technical Report include recognition of potential for the existence of sedimentary exhalative - SEDEX style - sulfides at several locations on the Property, and the proposed existence of two polymetallic black shale hosted Mineralized Zones* (under Section 2.3(2) of NI-43-101), one of which (Buckton Mineralized Zone*) comprises 1.2-1.3 billion short tons of mineralized material extending over 26 square kilometers, and the other (Asphalt Mineralized Zone*) comprises 109-132 million short tons of mineralized material extending over 4.5 square kilometers. The polymetallic mineralization of interest consists of Mo-Ni-U-V-Zn-Cu-Co-Ag with approximately 75%-85% of the in-situ value represented by the combined value of Mo-Ni-U-V. Both Mineralized Zones* are partly exposed and are open, and both are the targets of DNI's immediate exploration efforts on the Property.

Analytical work completed by DNI postdating the SBH Technical Report indicates that tonnages outlined in the Report for the Asphalt and Buckton Mineralized Zones* (formerly the Asphalt and Buckton Potential Mineral Deposits*) relying on historic information, may have been understated by 10%-20%, and that the tonnages should be re-stated as 125-152 million short tons and 1.4-1.5 billion short tons of mineralized material for the Asphalt and Buckton Mineralized Zones*, respectively.

Although based on extrapolations of information from drilling and nearby outcrop exposures as outlined in the SBH Technical Report, the Asphalt and Buckton Mineralized Zones* are targets for further exploration, and their dimensions as outlined in the Technical Report are conceptual in nature as there has been insufficient drilling conducted over the two Mineralized Zones* to define a mineral resource over the entirety of the two Zones* as they are delineated in the SBH Technical Report, and it is uncertain whether further drilling will define a mineral resource over the Zones*. DNI completed sufficient drilling over a portion of the Buckton Mineralized Zone* during the 2010-2011 winter, however, to classify an initial portion thereof to an inferred resource relating to base metals and Uranium, with anticipations that further drilling might expand the foregoing resources. The Buckton resource study, launched in June, was completed in October and reported an inferred resource of 250 million short tons from a 5.7 sq km portion of this 26 sq km Zone. Details of the Buckton resource study and its conclusions (announced on Oct24/2011) are outlined in greater detail in a separate section of this website dedicated to the Buckton sub-property and the Buckton Mineralized Zone*. The two Mineralized Zones*, referenced as "Potential Mineral Deposits" in the SBH Property Technical Report (2008), were recently necessarily renamed as two "Mineralized Zones", being conceptual targets for further exploration, to harmonize with amendments to NI-43-101 which came into effect on June 30, 2011.

Other Conclusions From the SBH Technical Report
The Report concluded that the Second White Speckled Shale Formation at the Buckton and Asphalt Zones, and elsewhere over the six sub-properties, holds good potential for hosting base and precious metals, in addition to Uranium; and that the two Zones contain concentrations of metals which represent sufficient in-situ value on a combined basis to warrant a detailed assessment of their economic merits.

The SBH Technical Report recommended future work to advance development of the polymetallic shale targets and known mineralized volumes on the Property, concurrently with work to evaluate the potential for discovery of sedimentary exhalative - SEDEX style - sulfides and related venting on the Property as likely source(s) to the metals accumulated in the shale. The Report noted that ultimate viability of the polymetallic shale targets, and the known mineralized volumes, on the SBH Property is dependant on whether metals can be effectively recovered from the shales; and recommends that work intended to identify additional volumes of shale hosted polymetallic mineralization over the Property, or intended to expand the two proposed Mineralized Zones*, be held in abeyance until the necessary metal recovery testwork has been completed to establish metals recovery parameters.

DNI's Exploration and Development Objectives
DNI has been actively implementing its exploration programs since 2008 pursuant to recommendations of the SBH Technical Report, and continues to make accelerated progress to advance the Property. DNI’s objectives are to advance exploration and development of the Buckton and Asphalt Mineralized Zones* toward delineating mineable and extractable resources for the production of base metals, rare metals, precious metals and uranium. DNI’s near term objectives are to advance the two Mineralized Zones* toward resource classification through additional exploration and testwork. Considering that ultimate viability of the polymetallic shale targets, and the known mineralized volumes, on the SBH Property is dependant on whether metals can be effectively recovered from the shales, DNI prioritized leaching and metals recovery testwork during 2008-2010 and completed a series of initial leaching testwork studies with particular emphasis on bioleaching metals recovery techniques which have become available in the past decade as alternatives to traditional methods.

While some of the leaching testwork was conducted under DNI’s direction at commercial analytical facilities, bioleaching and related R&D work were carried out by Alberta Innovates Technology Futures (formerly the Alberta Research Council - “ARC”) and by the Bureau de Recherches Géologiques et Minières (“BRGM”), France's leading Earth Sciences public institution which is recognized worldwide for its expertise in biohydrometallurgy and the development of innovative processes applied to industrial scale bioleaching of metals from sulphides. The foregoing R&D work comprises iterative studies whose initial stages were concluded by late December 2010. Some of the leaching work launched in October 2009 was expanded during the end of 2009 and early 2010 in response to favourable results.

DNI’s Work Programs - Past and Current
DNI has been actively implementing its exploration programs since 2008 pursuant to recommendations of the SBH Technical Report, and has made considerable progress to advance the Property since its initial acquisition. Work completed includes: completion of the Technical Report for the Property, ongoing consolidation of historic and current data, launch of several iterative metallurgical and leaching testwork programs, field sampling, a variety of other integrated mineralogical, geological stratigraphic and analytical work programs, an initial in-fill drilling at the Buckton Mineralized Zone* and related resource study.

DNI announced good metals recovery results in March and May 2010 from its leaching and bioleaching testwork, reporting recoveries ranging upward to 90%+. R&D testwork programs collectively demonstrate that metals can be recovered from the shales via leaching and that bioleaching may be a viable option for their ultimate collective recovery. The work has reported metals recoveries as follows: (a) Simple sulphuric acid leaching tests completed under DNI’s direction reported recoveries from 36-hour leaching at 30°C as follows (results from 24-hour leaching at 50°C also shown in brackets): Mo-28% (51%), Ni-89% (70%), U-84% (67%), V-34% (51%), Zn-88% (70%), Cu-53% (57%), Co-86% (69%), Cd-93% (71%), Li-45% (58%); (b) Bioleaching tests, conducted at the Bureau de Recherches Géologiques et Minières (BRGM), France, reported recoveries as follows: Mo-16%, Ni-88%, U-88%, V-6%, Zn-83%, Co-88% (Cu, Cd and Li were not measured); (c) Bioleaching and related testwork completed by the Alberta Research Council reported results similar to those received from the BRGM.

On September 8, 2011, DNI announced consolidated results from a series of bioleaching R&D studies completed during 2009-2010 by Alberta Innovates Technology Futures (AITF, formerly the Alberta Research Council) to specifications formulated by DNI, which tests conclude DNI’s initial testwork on surface samples from the SBH Property. Comparative results for other leaching work previously conducted by the BRGM (press Apr28/2010), and simple sulfuric acid leaching tests conducted under DNI’s direction at Canadian analytical facilities (press Mar4/2010) were also announced. Results from tests carried out by the three facilities are consistent within acceptable parameters, providing results which DNI is relying on for planning purposes, and as a benchmark of interim recoveries which future work will endeavour to enhance. The best metals extractions (recoveries) achieved from the collective of all leaching work conducted to date are: Mo-51%, Ni-89%, U-100%, V-51%, Zn-100%, Cu-66%, Co-91%, Cd-100%. To the extent that all of the leaching testwork completed to date represent initial tests, the recoveries listed above represent minimum recoveries achievable and are initial results to be optimized during future additional testwork.

Encouraged by good metals recoveries confirmed by the leaching testwork, DNI completed an initial in-fill drilling program over the Asphalt and Buckton Mineralized Zones* during the 2010-2011 winter to commence upgrading the two Mineralized Zones* to classified resources with a view to advancing at least one of the Mineralized Zones* to the preliminary economic analysis in 2012. Sufficient holes were completed over the Buckton Mineralized Zone* to enable preparation of the Buckton resource study. Many of the planned holes for the Asphalt Mineralized Zone* were necessarily deferred due to logistical and scheduling constraints. The Asphalt resource study was, accordingly, also deferred.

Although DNI’s focus over the past two years has been on traditional base metals and uranium contained in the Speckled Shale, its leaching testwork also reported successful recoveries of additional metals of value which are incidentally extracted from shale as co-products during leaching. These co-products consist of specialty metals (eg: Li, Sc, Th) and rare earth elements (REE) including critical rare earths (Dy, Y, Tb, Eu and Nd). To the extent that the leaching tests reported good recoveries of most of the foregoing metals, they hold potential to add previously unrecognized value to the mineralized zones identified by DNI at the Property. Average recoveries for the foregoing metals and elements, based on leaching of surface trenching samples are as follows: Ce:72.5%, Dy:92%, Er:90%, Eu:84.5%, Gd:89%, La:68%, Nd:72%, Pr:67%, Sm:87%, Tb:94.5%, Y:91%, Yb:77%, Th:87%, Sc:54%, Li:23.5%.

Despite the general availability of commodity price quotes for specialty metals and REEs, given lack of transparency in their respective commodity markets, assessment of the economic impacts that these metals might have as co-products on future development DNI’s polymetallic shales cannot be determined at this time. The grades and incidental recoverability of these metals are, however, material to any potential production scenario envisaged by DNI for continuing exploration and development of the six mineral systems identified at the Property as a long term source of a variety of metals. The foregoing results have compelled DNI to broaden the scope of its work to actively focus on specialty metals and REEs recoveries alongside the base metals of interest which have so far been DNI’s primary focus.

Current work includes expanded leaching testwork intended to optimize leaching parameters towered enhanced recovery of some of the metals, and broader work intended to evaluate economic significance of REEs and specialty metals content of the targeted polymetallic zones, and the overlying rocks which were previously regarded as “waste”.

DNI envisages that any mineral deposits identified on the SBH Property will ultimately be developed via consortium.

Sustainable Development Opportunities - Sulphur and CO2 Sinks
DNI’s envisaged mining operations to extract metals from its black shales hold potential to consume considerable waste Sulphur produced from neighbouring oil sands mining operations and to provide CO2 sinks and offsets.

DNI considers the Sulphur consumption capacity of its envisaged mining operations a welcome tangible benefit to mitigating the fast growing cache of waste Sulphur which is accumulating in the region from neighbouring oil sands mining operations. The envisaged operations also offer previously untested incidental opportunities to sequester CO2 in “spent” shale mine waste. DNI has been exploring the foregoing opportunities through a series of studies, including R&D testwork being carried out by Alberta Innovates Technology Futures (formerly the Alberta Research Council - "ARC"), focusing on assessment of the potential of the polymetallic black shales as geologic hosts for sequestration of CO2 by its conversion into, and permanent sequestration in, stable mineral matter. The studies have so far concerned themselves primarily with conducting the necessary laboratory testwork to collect baseline information intended to characterize physical and chemical properties of the shales to evaluate their capacity to “capture” and sequester CO2 via mineral processes.

World interest in reducing greenhouse gas emissions has been steadily increasing over the past few years, and large CO2 emitters are increasingly under growing public and regulatory pressure to reduce their emissions. Where companies desiring to reduce their emissions cannot do so by modifying their operations, they may purchase carbon (CO2) offset credits from others who are able to reduce emissions or are capable of sequestering carbon through activities of their own. There are currently a number of active carbon emission reduction credits trading systems in the world, and cost of carbon credits has gradually increased over the past decade.

DNI regards the CO2 mitigation potential of its polymetallic black shale projects to be an integral part of the ultimate value represented by the shales, and also regards any carbon offsets which might be realized from the projects as a commodity which is additional to any metals which might be recovered from the shales.

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*Section 2.3(2) of National Instrument 43-101 (“NI-43-101”), as enacted December 30, 2005, provides for written disclosure of the potential quantity and grade, expressed as ranges, of a "potential mineral deposit that is to be the target of further exploration", provided the disclosure includes a statement that the potential quantity and grade is conceptual in nature, that there has been insufficient exploration to define a mineral resource and that it is uncertain if further exploration will result in the target being delineated as a mineral resource; and provided the disclosure also states the basis on which the disclosed potential quantity and grade has been determined. The Asphalt and Buckton Potential Mineral Deposits* described herein are consistent with the foregoing Section, and the reader is referred to the SBH Technical Report for considerable related details. On June 30, 2011, NI-43-101 was amended, including portions of Section 2.3(2) which were amended to omit reference to "potential mineral deposit". Instead, NI-43-101 as amended provides for written disclosure of the potential quantity and grade, expressed as ranges, of a "target of further exploration", provided the disclosure includes a statement that the potential quantity and grade is conceptual in nature, that there has been insufficient exploration to define a mineral resource and that it is uncertain if further exploration will result in the target being delineated as a mineral resource; and provided the disclosure also states, with equal prominence, the basis on which the disclosed potential quantity and grade has been determined. The SBH Technical Report predates the foregoing amendment and, as such, describes the metallic mineralization blocked out over the Asphalt and Buckton zones at the SBH Property in terms which were consistent with NI-43-101 prior to its June 30, 2011, amendment, and per technical specifications consistent with the Instrument as amended, but the Report makes reference to the foregoing mineralization as "Potential Mineral Deposits" which terminology is not consistent with NI-43-101 as amended. The SBH Technical Report is currently being updated to incorporate and consolidate exploration results accumulated by the Company since 2008, some of which results suggest that tonnages outlined in the Report for the Asphalt and Buckton Potential Mineral Deposits relying on historic information, may have been understated by 10%-20%.