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Author: Subject: Baja Mining Confirms Robust Economics at Boleo
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[*] posted on 1-15-2010 at 04:55 PM
Baja Mining Confirms Robust Economics at Boleo


http://www.benzinga.com/pressreleases/m89060/baja-confirms-r...

01/15/10
(Press Release)

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 15, 2010) - Baja Mining Corp. today announced that an updated capital cost estimate and economic model have confirmed that its 70%-owned Boleo deposit in Baja California Sur, Mexico, can be developed economically at an after-tax internal rate of return (IRR) of 25.6% based on 100% equity. The project, which has a minimum scheduled mine life of 23 years, has a NPV of $1.306 billion using an eight percent discount rate and an average life of mine cash cost of negative $0.29/lb for copper, net of by-product credits. All dollar amounts are stated in U.S. dollars and are on an equity basis (i.e. assume no debt or related finance charges).

Highlights of Boleo project update

- Proven and probable reserves for minimum 23-year mine life.
- Negative $0.29/lb for copper average life of mine cash cost, net of by-product credits.
- Remaining estimated capital costs of $889 million (including $92.3 million contingency).
- Average annual production, for the first six years of full production:

- Copper cathode: 56,697 tonnes
- Cobalt cathode: 1,708 tonnes
- Zinc sulphate monohydrate: 25,364 tonnes

- 265 million tonnes of measured and indicated resources grading 1.50% copper equivalent.
- 159 million tonnes of inferred resources grading 1.15% copper equivalent.
- After-tax IRR of 25.6% using SEC guidelines, or 27.9% at current market prices.
- After-tax NPV (at 8% discount rate) of $1.306 billion using SEC guidelines or $1.473 billion at current market prices.

"We are pleased that the updated capital and operating cost estimates confirm the robust economics of the Boleo project," says Baja President and CEO John Greenslade. "This update now provides a strong foundation for completing construction financing and recommencing construction of the mine and processing facility in order to move to production as soon as possible."

Mr. Greenslade says "there is also significant upside potential for Boleo which is endowed with a rich resource of manganese. We will shortly commence a feasibility study to quantify this potential which could substantially add to the project's value."

The current update incorporates plant capital cost estimates prepared by ICA Fluor Daniel, S. de R.L. de C.V., operating cost estimates prepared by the Company and reviewed by ICA Fluor, and owner's costs prepared by the Company. A revised geological model, in accordance with NI 43-101, has been prepared by Wardrop, A Tetra Tech Company and used by Agapito Associates, Inc. (AAI) to prepare the current mine plan. The initial capital cost for the mine was prepared by AAI, however mine sustaining capital and operating costs were prepared by the Company. The Company utilized these cost estimates to prepare the financial projections. In doing so, the capital and operating costs were adjusted to reflect leasing of certain equipment, and to capture costs incurred in the fourth quarter of 2009. An updated NI 43-101 compliant technical report (the "Technical Report") will be filed within 45 days of today's date.

Capital Cost Estimate

The total project cost remaining, including Engineering, Procurement, Indirects, Construction Management, Owner's Costs, and an 11.6 % overall Contingency, but excluding leased equipment, is $889 Million. A summary of estimated capital costs is listed below:

--------------------------------------------------------------------------
Capital Cost Breakdown Total Capital to be Spent ($'000)
--------------------------------------------------------------------------
Mining & Tailings 68,914
Process Plant 321,033
Site Services & Infrastructure 84,022
Buildings 9,072
--------------------------------
Total direct costs 483,041
Construction Indirects & Freight 70,029
EPCM 52,391
Contingency 92,297
--------------------------------
Total Construction Costs 697,758
--------------------------------
Owner's Costs & Pre-development Costs 141,101
--------------------------------
Total Cost Before W/C and Financing 838,859
--------------------------------
First Fills, Reagents, Spares and
Working Capital 50,616
--------------------------------
Total Estimated Capital Costs 889,474
--------------------------------------------------------------------------
Costs, all dollars are third quarter 2009.


Production and Operating Costs

Start-up of the process plant is scheduled for the second half of 2012, based on funding the project during the first half of 2010, in accordance with the following production schedule:

---------------------------------------------------------------------------
Base Case Production Summary
----------------------------
---------------------------------------------------------------------------
Yrs Yrs Yrs
Yrs 1(1) Yrs 2-7 Yrs 8-10 11-13 14-20 21-23
----- ------- -------- ----- ----- -----
---------------------------------------------------------------------------
Ore Treated 2,174 3,100 3,100 3,100 3,100 3,021
(kt/y)
Grade: % Cu 2.04 2.02 1.74 1.39 0.91 0.61
% Co 0.074 0.071 0.061 0.070 0.074 0.059
% Zn 0.40 0.47 0.52 0.58 0.62 0.81
% Mn 2.45 2.55 2.58 2.93 3.08 4.95

Production (t/y):
Copper 40,221 56,697 49,009 39,161 25,701 17,249
Cobalt 710 1,708 1,481 1,699 1,802 1,398
Zinc Sulphate
Monohydrate 9,027 25,364 28,482 30,469 33,054 36,760
---------------------------------------------------------------------------
(1) Note: year 1 is a ramp-up year and partial year production for cobalt
and zinc sulphate monohydrate estimated at 8 months

---------------------------------------------------------------------------
Unit Operating Costs (expressed in $/tonne of ore treated)
---------------------------------------------------------------------------
Yrs Yrs Yrs
Yrs 1 Yrs 2-7 Yrs 8-10 11-13 14-20 21-23
----- ------- -------- ----- ----- -----
---------------------------------------------------------------------------
Mining 15.36 14.91 11.89 7.90 8.62 7.47
Process 19.36 18.96 17.87 17.63 17.60 18.45
G&A, Sales 9.70 7.54 7.36 7.07 6.66 6.64
Total ($/t) 44.37 41.41 37.12 32.60 32.87 32.56

Cash cost(i) $/lb
of copper 0.49 (0.04) (0.07) (0.43) (0.80) (0.78)
Cash Flow
$000/yr 216,002 316,432 233,539 204,462 148,931 97,749
---------------------------------------------------------------------------
(i) Cash cost/lb of Cu is net of cobalt, zinc and sulphuric acid credits.
Cash flows are after-tax, using Base Case SEC guideline prices of
$2.91/lb Cu, $26.85/lb Co and $1,175/tonne ZnSO4 H2O.


Project Economics

Project economics are presented for three cases: 1) Base Case; 2) Case 2 using lower prices; and 3) January 2010 prices. No manganese production is assumed for any of the cases.

1) Base Case:

Base case project economics use the weighted average three-year trailing price (in accordance with SEC guidelines) of $2.91/lb for copper; $26.85/lb for cobalt; and $1,175/tonne for zinc sulphate monohydrate.

2) Case 2:

$2.25/lb for copper; $20/lb for cobalt; and $1,100/tonne for zinc sulphate monohydrate.

3) January 2010 Price Case:

Prices as of January 8, 2010 were $3.40/lb for copper; $21.17/lb for cobalt; and $1,000/tonne for zinc sulphate monohydrate.

------------------------------------------------------------------
Base Prices Case 2 Prices Jan '10 Prices
----------- ------------- --------------
------------------------------------------------------------------
IRR - Pre-tax 28.7% 23.0% 31.2%
IRR - After tax 25.6% 20.4% 27.9%
NPV(ii) @ 0% $3,749 $2,547 $4,024
NPV @ 5% $1,922 $1,230 $2,122
NPV @ 8% $1,306 $815 $1,473
------------------------------------------------------------------
------------------------------------------------------------------
(ii) Note: all NPVs are after-tax


Sensitivities

The project is most sensitive to four key variables: the copper price, cobalt price, capital costs, and operating costs. The sensitivity of the after-tax IRR and NPV (at an 8% discount rate) relative to the Base Case (without manganese) are shown in the table below to indicate the effect of + or - 10% changes in the key variables.

--------------------------------------------------------------------------
After Tax IRR NPV @ 8% ($Millions)
------------- --------------------
--------------------------------------------------------------------------
-10% Base Case +10% -10% Base Case +10%
----- --------- ----- ------- --------- -------
Copper price 23.2% 25.6% 27.9% $1,111 $1,306 $1,505
Cobalt price 25.0% 25.6% 26.1% $1,246 $1,306 $1,367
Capital cost 27.7% 25.6% 23.7% $1,361 $1,306 $1,250
Operating cost 26.3% 25.6% 24.8% $1,379 $1,306 $1,234
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Project Description

The Boleo Cu-Co-Zn-Mn Project is located on the east coast of Baja California Sur, Mexico, near the town of Santa Rosalia. The deposit contains seven mineralized seams (mantos), stacked within a single formation, all dipping gently to the east towards the Sea of Cortez in a step-like fashion, due to post depositional faulting.

The Project consists of approximately 11,000 hectares of mineral concessions and 7,000 hectares of surface occupancy rights, each assembled as a contiguous titled block. The Project is located within the "buffer zone" of the El Vizcaino Biosphere, a Mexican National environmental reserve. An Environmental Impact Manifest (EIM) was submitted in early 2006, and approved by the Mexican authorities in December 2006. The Company has also received authorization to commence development of the Project within the Biosphere.

The Project is to be developed as a series of underground mines using conventional soft rock mining methods, coupled with several small open-cut mines feeding ore to a processing plant using a two stage leaching circuit followed by solid/liquid separation and solvent extraction - electrowinning steps to produce copper and cobalt metal and crystallization to produce zinc sulphate monohydrate.

Both surface and underground mining operations have been designed by AAI to extract ore for the first 23 years at a full mining rate exceeding 3.1 million dry metric tonnes per annum. Approximately 67 million tonnes of ore will be mined from underground operations and three million tonnes from surface open cuts.

The process plant has been designed to treat 3.1 million dry metric tonnes per annum at maximum head grades of 2.2% copper, 0.1% cobalt and 0.67% zinc through an integrated hydrometallurgical facility to produce LME Grade 'A' copper cathode; high purity (greater than 99.8% Co) cobalt cathode; and zinc sulphate monohydrate.

Resource Model

Since completion of the Definitive Feasibility Study (DFS) in 2007, the Company, in conjunction with Wardrop, has prepared a revised geological model that incorporates drill results not included in the DFS, has added recoveries to the CuEq formula and has placed all geological data into a UTM grid format that is more compatible for long term mine planning. A National Instrument 43-101 geological report is currently being finalized for filing on SEDAR. Total reported Measured, Indicated and Inferred resources, estimated using 3D block models, are based on Copper equivalent (CuEq)(1)(3) cut-off grade of 0.5%.

--------------------------------------------------------------------
Description Tonnes
Block Model (millions) CuEq.% Cu% Co% Zn% Mn%
--------------------------------------------------------------------
Resources
Measured 85.8 1.59 0.82 0.07 0.50 3.04
Indicated 178.9 1.46 0.74 0.05 0.71 3.32

Total M & I 264.7 1.50 0.76 0.06 0.64 3.23

Inferred 159.9 1.15 0.47 0.04 0.70 2.93
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Mn is not considered in the equivalency formula.
(2) Mineral resources are inclusive of mineral reserves. Mineral
resources which are not mineral reserves do not have
demonstrated economic viability (mineral reserves can be found
in a Feasibility Summary Report dated 2007 and filed on SEDAR).
(3) CuEq% equals (Cu% x Cu-Pr. x Cu-Rec. + Co% x Co-Pr. x Co-Rec. +
Zn% x Zn-Pr. x Zn-Rec.) / Cu-Pr. Prices used are $1.50/lb Cu;
$15.00/lb Co; $1.20 /lb Zn; recoveries used are 91.2% Cu, 78.5%
Co, 65.5% Zn


Manganese opportunity

The Boleo deposit is endowed with a rich resource of manganese that can be recovered in the form of manganese carbonate. The majority of demand for manganese follows trends in global steel production and is marketed in a number of different product forms. The market for manganese carbonate is limited but the Company has shown that this material can be further processed into electrolytic manganese metal (EMM) and manganese sulphate monohydrate. Prices and demand for a number of manganese products have recovered following the downturn in the global economy in 2008. Although manganese is not included in the current economic evaluation, the Company continues to assess the future potential of manganese carbonate sales as an intermediate product and further processing potential and anticipates it will commence a feasibility study on manganese production in 2010.

Thomas C. Stubens, M.A.Sc., P.Eng a Senior Geologist with Wardrop at the time the mineral resource model and Technical Report were generated, and a Qualified Person, has reviewed this disclosure and states that it fairly and accurately represents the information in the Technical Report that supports the disclosure. Tim Ross of AAI, a Qualified Person, has reviewed the underground mine plan and production schedule and the disclosure contained herein regarding the same and accepts responsibility for such disclosure. Thomas Gluck, Manager Process Metallurgy for Boleo, a Qualified Person, has reviewed the process plant discussion and the disclosure contained herein regarding the same and accepts responsibility for such disclosure.

ON BEHALF OF THE BOARD OF DIRECTORS OF BAJA MINING CORP.

JOHN W. GREENSLADE, PRESIDENT


Some of the statements contained in this release are forward-looking statements, such as statements that describe the anticipated mine life; the Company's expected NPV and IRR of the project; expected future metal prices; expected timing of start-up; expected timing of a manganese feasibility study; expected timing for construction and other statements. Since forward-looking statements are not statements of historical fact and address future events, conditions and expectations, forward-looking statements by their nature inherently involve unknown risks, uncertainties, assumptions and other factors well beyond the Company's ability to control or predict. Actual results and developments may differ materially from those contemplated by such forward-looking statements. Material factors that could cause actual revenues to differ materially from those contained in such forwarding-looking statements include (i) fluctuations on the prices of copper, cobalt, zinc and manganese, (ii) interpretation of contract terms, (iii) accuracy of the Company's and consultants' projections, (iv) the Company's ability to finance, receive permits for, obtain equipment, construct and develop the El Boleo Project, (v) the effects of weather; operating hazards; adverse geological conditions and global warming, (vi) impact of availability of labor, materials and equipment; and (vii) changes in governmental laws, regulations, economic conditions or shifts in political attitudes or stability.

These forward-looking statements represent the Company's views as of the date of this release. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Readers should not place undue reliance on any forward-looking statements. Cautionary Note to U.S. Investors -The United States Securities and Exchange Commission (SEC) permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms in this press release such as "measured," "indicated," and "inferred" "resources", which the SEC guidelines strictly prohibit U.S. registered companies from including in their filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F which may be secured from us, or from the SEC website at http://www.sec.gov/edgar.shtml.




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[*] posted on 1-15-2010 at 05:40 PM


Boy, I feel better now "Total reported Measured, Indicated and Inferred resources, estimated using 3D block models, are based on Copper equivalent (CuEq)(1)(3) cut-off grade of 0.5%", cuz if they didn't use the "3D block models" boy they would be in trouble....

Coupled with the "forward-looking" statements which can not be relied upon as "they can not predict the future", and the "Qualified Persons" acceptance that the "technical report" supports the "disclosure" and accepts "responsibility" (now what would that be) and that the technical reports have been prepared by the Companies hired Consultant "Terta Tech" who has a sub entity of the parent do the tech work..

Good to see such strong corner stone in place for the advancement of this "project"

By the way, where was Boleo, just my two cents
:):)




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[*] posted on 1-15-2010 at 05:47 PM


They are also counting on mining on Ejido land from what some land owners are telling me. One had them run off after they dug exploratory holes on his property
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[*] posted on 1-15-2010 at 06:15 PM


Now if they would just add a line item in their budget for environmental remediation. For the future mining and from the last go around.
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[*] posted on 1-15-2010 at 06:36 PM


Quote:
Originally posted by tripledigitken
Now if they would just add a line item in their budget for environmental remediation. For the future mining and from the last go around.


Exactly, thank you very much..




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[*] posted on 1-15-2010 at 06:58 PM


Quote:
Originally posted by wessongroup
...

By the way, where was Boleo, just my two cents
:):)


It was the name of the French mining company that developed Santa Rosalia in the late 1800's to about 1956.




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[*] posted on 1-15-2010 at 07:08 PM


Quote:
Originally posted by David K
Quote:
Originally posted by wessongroup
...

By the way, where was Boleo, just my two cents
:):)


It was the name of the French mining company that developed Santa Rosalia in the late 1800's to about 1956.


The French company operated until 1954 when the tax payment exemption expired and was shut down due to bankruptcy.
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[*] posted on 1-15-2010 at 07:24 PM


Great story!:bounce:



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[*] posted on 1-15-2010 at 07:28 PM


from the section above titled "Manganese opportunity":


"Thomas C. Stubens, M.A.Sc., P.Eng a Senior Geologist with Wardrop at the time the mineral resource model and Technical Report were generated, and a Qualified Person, has reviewed this disclosure and states that it fairly and accurately represents the information in the Technical Report that supports the disclosure. Tim Ross of AAI, a Qualified Person, has reviewed the underground mine plan and production schedule and the disclosure contained herein regarding the same and accepts responsibility for such disclosure. Thomas Gluck, Manager Process Metallurgy for Boleo, a Qualified Person, has reviewed the process plant discussion and the disclosure contained herein regarding the same and accepts responsibility for such disclosure."


I'm not familiar with the term "Qualified Person". To the best of my knowledge there is no "Qualified Person" status in the United States of America, so maybe it is a Canadian thing. It does appear to be quite weighty and important in the above paragraph.

So what I would like to know is how one goes about becoming a Qualified Person as opposed to a mere qualified person. What might the qualifications be? Is there a board of certification of Qualification? And might I be able to become certified as qualified to be a Qualified Person?:light:

Seriously, I really fear for the future health and economy of the lovely little town of Santa Rosalia, and I'm afraid this project will end in disappointment over the long term.

edited to add one letter d.

[Edited on 1-16-2010 by Paula]
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[*] posted on 1-15-2010 at 07:58 PM


I was curious about the uses of cobalt so did some googling. Turns out it's used in lithium-ion batteries.

Mr. Greenslade says "there is also significant upside potential for Boleo which is endowed with a rich resource of manganese."

Guess what, so is manganese.

http://www.batteryuniversity.com/partone-5A.htm

Electric cars use lithium-ion batteries.

Maybe that's why this mine is again profitable.
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[*] posted on 1-15-2010 at 11:31 PM


Quote:
Seriously, I really fear for the future health and economy of the lovely little town of Santa Rosalia, and I'm afraid this project will end in disappointment over the long term.

edited to add one letter d.

[Edited on 1-16-2010 by Paula]
I think that the inhabitants of that lovely little town who's economy has depended on mining for a couple of hundred years might disagree.
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[*] posted on 1-16-2010 at 12:03 AM


Soon or later it will play out.. what will they have then? Take a good look at ex mining towns and the legacy of the operations..

Google the toxicity of cobalt and manganese and consider this lack of information on the "ramp up"

I'm not fully aware of Mexico's Labor Safety requirements.. it's been a number of years since I worked with them.. but, would venture there are Laws and Regulations on the books, but very weak enforcement for the workers exposed to various harmful materials, not counting the people living in the immediate area

Not saying the people don't need work, would only hope the "project" would encompass ALL parameters, not just financial and that the supporting data be study closely by disinterested third parties to ensure a positive results for all..:):)

[Edited on 1-16-2010 by wessongroup]




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[*] posted on 1-16-2010 at 05:45 AM


Aren't we just the big bag of judgmental people?

Extracting raw materials from the Earth has been going on since Adam (or close to that time). Santa Rosalia exists because of el Boleo. That the city has a boom and bust economy means what? As compared to our current world wide sophisticated economy which relies on the price of gold and oil - extracted from the Earth?

People.

Wise up. This is what happens everyday in the world. If you don't agree with it, leave with the next visit of space aliens in your area.

Hopebama wants a green world with electric cars, Santa Rosalia can dig it!

Would you rather have a prospectus for a poppy field or a meth lab run by El Teo, Ltd?




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[*] posted on 1-16-2010 at 05:56 AM
I AGREE WITH YOU!






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[*] posted on 1-16-2010 at 06:36 AM


Quote:
Originally posted by The Gull
Aren't we just the big bag of judgmental people?

Extracting raw materials from the Earth has been going on since Adam (or close to that time). Santa Rosalia exists because of el Boleo. That the city has a boom and bust economy means what? As compared to our current world wide sophisticated economy which relies on the price of gold and oil - extracted from the Earth?

People.

Wise up. This is what happens everyday in the world. If you don't agree with it, leave with the next visit of space aliens in your area.

Hopebama wants a green world with electric cars, Santa Rosalia can dig it!

Would you rather have a prospectus for a poppy field or a meth lab run by El Teo, Ltd?


Of course your right about "how it works".. sadly.. still think we should review what is proposed and review it with a fine tooth comb ...

I would however expect a prospectus to be "well thought out", which this one did not appear to be close too.. as for me.. I would like the horse to make a come back..

On the drug issue.. know it's not good for anyone, but then neither is booze, cigarettes, and a lot of other things.. but still think that individual choice should be allowed..(as long as it does not impact public safety and tax rates to support those who have chosen incorrectly) if you want to drink a half gallon of Wild Turkey a day, it's your business, and throw down a few for me, they had to change their minds on that one and make it legal again after finding they can not control what the "people" want in a free society.. and we are the people.. the Government is in fact US .. it's not a building some place... some times it appears that we are sorely lacking in just plain "common sense".. this stuff isn't all that hard in my book

Which some might want to consider on the whole drug thing.. and yeah, I'm keenly aware what it does to individuals, families and society (I have family which has been impacted) .. perhaps the Government should get out of the "business" of trying to control "adaptive radiation" of our and other species ... and just deal with what we vote for.. not what they think is "BEST" for us.. once in the State and Federal seats of Government... just my two cents

Now start in.... for those of your that can't sleep either

:):)




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[*] posted on 1-16-2010 at 07:05 AM


Wessongroup, your comments about the "reliability" of a Canadian based mining promotion are well founded. Their claims are based on unregulated and undefined terms in a financial and geological sense. The value of the propose operation is based on Blue Sky projections and absurdly skewed assumptions.

TetraTech provided the "Facts" it's client pays for. Sad truth from my direct industry experience in statistical computer modeling for the mining industry.

Major environmental damage can be bequeathed to the residents based on some speculators wild projections and ill conceived gamble.
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[*] posted on 1-16-2010 at 07:09 AM


Can you share a bit about the "computer modeling" would be very interested in someone who uses same.. have no experience nor knowledge.. would be very helpful if it's not a really tough subject to get ones "arms around".. thanks in advance:):)

only modeling I did was with clay...

[Edited on 1-16-2010 by wessongroup]

[Edited on 1-16-2010 by wessongroup]




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[*] posted on 1-16-2010 at 07:19 AM


... I thought you were going to report that your only modeling was done in front of a camera:lol::lol:

If that was the case, your opinions would fit with all the other "stars" who are out to save the world.




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[*] posted on 1-16-2010 at 07:30 AM


This old carcass is not going to close to the front of any camera..:lol::lol::lol:



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[*] posted on 1-16-2010 at 07:35 AM


It's called NIMBY (not in my back yard) Everyone wants computers, cell phones, flat screens, etc. and they don't care where the raw materials come from as long as it's not their neighborhood. If one really wants to save the environment then they should quit using items that depend heavily on the extraction of minerals. Is it better for these minerals to be extracted in a country with environmental laws like the U.S. or Mexico or would you rather they were mined in some third world sh** hole with absolutely no regard for the environment?
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"If it were lush and rich, one could understand the pull, but it is fierce and hostile and sullen. The stone mountains pile up to the sky and there is little fresh water. But we know we must go back if we live, and we don't know why." - Steinbeck, Log from the Sea of Cortez

 

"People don't care how much you know, until they know how much you care." - Theodore Roosevelt

 

"You can easily judge the character of others by how they treat those who they think can do nothing for them or to them." - Malcolm Forbes

 

"Let others lead small lives, but not you. Let others argue over small things, but not you. Let others cry over small hurts, but not you. Let others leave their future in someone else's hands, but not you." - Jim Rohn

 

"The best way to get the right answer on the internet is not to ask a question; it's to post the wrong answer." - Cunningham's Law







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