OIL SANDS SUPPLY

MCW Energy Group has a five year Supply Agreement with Temple Mountain Energy Inc. of Utah which provides MCW with 8,333 tons of oil sands material per month until the year 2016. The terms of this Agreement also includes a process-ready, stockpiled inventory of 100,000 tons of oil sands material which will be instrumental in the start-up of MCW’s 250 bpd pilot plant scheduled for operation in Asphalt Ridge during 3Q-4Q of 2012.

This Agreement which includes the shovel-ready oil sands materials is strategically important as it eliminates any lead time that would be required during the development of MCW’s own oil sands lease which is also located in Asphalt Ridge, Utah. MCW also has the option of two extraction unit locations on the Temple Mountain lease site to further minimize development timeframes as well as reducing oil sands processing costs. MCW has an additional option to purchase the Temple Mountain lease which includes a valid mining permit classified as a “large mine permit” from the state of Utah, one of only two such classified permits granted at this time in the United States.

MCW’s management team feel that this timely arrangement with Temple Mountain will not only save valuable site preparation time, but will also provide an earlier-than-expected revenue flow for the Company. The agreed-upon costs of $ 19.50 USD per ton for the oil sands materials include crushing and delivering from Temple Mountain’s nearby lease location, and these costs fit well within MCW’s projected overall production costs of approximately $ 38.50 USD per barrel.

Temple Mountain Energy has been producing several oil sands products on the site since 2006, with an average of 6% to 15% or more oil by weight, with the balance being sand. Temple Mountain estimates its proven reserves at Asphalt Ridge to be 150 million barrels of oil (prospective reserves), of which approximately 80 million barrels are surface-recoverable. The remaining 70 million barrels could be recovered through in situ extraction methods. Temple Mountain utilizes the surface strip-mining method, avoiding the high-energy-consuming extraction processes such as the SAGD method. Its operation carries a near-zero carbon footprint.

All mined lands at the lease site undergo a thorough reclamation process to ensure that the cleaned sands materials are returned to their original site locations in good environmental condition. Temple has produced asphalt, asphalt binders and crude oil since the commencement of production in 2006. (Yield is 0.4 barrels of crude oil per ton. Upgraded bitumen yields 9 – 15 API gravity, which unenhanced produces a heavy sweet crude oil that can be used as refinery feedstock/blendstock.

Another valuable by-product is cleaned sand which has a wide range of applications from glass-making to hydraulic fracturing for the conventional oil and gas industries. (Price approximately $ 0.10 lb.) Approximately 30% of the sand produced at Asphalt Ridge meets frac sand specifications. The balance of this production can be sold for foundry and construction applications, therefore maximizing all of the mined oil sands properties.