Overview

Commodity

Metallurgical Coal

Overview

The Trefi Metallurgical Coal deposit comprises 15 coal licenses and 3 license application areas, totaling 9,437 hectares, located approximately 30 kilometres southeast of the town of Chetwynd in northeastern BC. The deposit has been explored previously by Gulf Canada (27 drillholes for 6,332 metres) and by Anglo Pacific (5 drillholes for 1,006 metres).

The deposit has a 43-101-compliant in-situ resource comprising 39.1 million tonnes measured and indicated and 51 million tonnes inferred resources. Geological complexity is classified as moderate. This resource estimate is effective as at March 18, 2010 and is contained in technical report dated March 18, 2010 entitled "Resource Estimate for the Trefi Coal Property" and prepared by Moose Mountain Technical Services of Elkford, B.C. (filed on SEDAR by Anglo Pacific on July 9, 2010) ("Report"). This Report, and the technical information contained therein, has been reviewed by Mr. Keith Henderson, the Company's Executive Vice-President and a qualified person as defined in NI 43-101, on behalf of the Company. To the best of the Company's knowledge, information and belief, there is no new material information that would make the disclosure of the mineral resources contained in the Report inaccurate or misleading.

The Report indicates that a recent coal quality analysis (2009) demonstrates the coal to be medium volatile bituminous coal from which a low-ash (7.3%) product can be produced by washing at 1.6 specific gravity. These qualities, combined with low sulphur (0.25%), high heating value (7855kcal/kg) and a 1.5 FSI, mean that the coal is potentially suited as a metallurgical PCI product.

The deposit is located within 60 kilometres of the Company's flagship metallurgical coal deposit at Carbon Creek (Figure 1) and approximately 65 kilometres from the Company's proposed rail loadout site. In addition, the Company believes that the lower volatility, low FSI and high BTU value of the Trefi coal product would make it well suited for potential blending with the Carbon Creek PCI product. The Trefi coal would not be blended with the hard coking coal or semi-soft coking coal from Carbon Creek which is expected to make up the majority of that deposit's resource.

Ownership

Cardero has entered into a Letter of Intent ("LOI") with Anglo Pacific Group PLC ("Anglo Pacific") to acquire 100% of Trefi Coal Corporation ("Trefi"), a wholly owned subsidiary of Anglo Pacific which owns the Trefi Metallurgical Coal deposit

The Company and Anglo Pacific have entered into a non-binding letter of intent dated November 15, 2011 to confirm the main terms for the proposed acquisition by the Company of Trefi and to confirm the intent of the parties to negotiate legally binding transaction documents. The main terms of the proposed acquisition are as follows:

• In consideration of the payment of CAD 3.5 million, and the issuance of 500,000 common shares of the Company plus warrants to acquire an additional 1,000,000 common shares of the Company at a price of CAD 1.40 per share for a period of 18 months after closing, Cardero will be granted the option ("First Option") to acquire 50% of the issued shares of Trefi.
• In order to exercise the First Option, the Company will be required to deliver a bankable feasibility study ("BFS") with respect to the Trefi Coal project within four years of closing.
• If the BFS delivered by the Company is positive (defined as a BFS which demonstrates an IRR greater than 20%, utilizing a discount rate of 10% and an industry consensus forward looking 4 year price for the coal proposed to be delivered from the project), the Company may acquire the balance of Trefi (50%) by making a production decision, paying Anglo Pacific CAD 5.0 million and issuing CAD 1 million of Cardero shares (valued at the 5 day VWAP price to the date of issuance).
• If the BFS is positive, but the Company does not elect to make a production decision, then Anglo Pacific will have the option to reacquire the 50% of Trefi from the Company by paying the Company 50% of the total expenditures by the Company on the BFS.
• If the BFS is not positive, then the Company will retain its 50% of Trefi and commit to periodic reviews of the BFS. If, after 2 years, the BFS remains not positive and Company has not elected to make a production decision and acquire the balance of Trefi by making the CAD 5.0 million payment and issuing the CAD 1.0 million of Cardero shares, then a buy-sell process may be initiated, by which the party offering to pay the highest price to the other party will be able to purchase the interest of the other party.
• Once in production, Anglo Pacific will be paid a gross revenue royalty of 3% to be priced on an FOB basis, with the obligation for payment of the royalty to be secured.

The foregoing transaction is subject to the settlement and execution of formal documentation and the acceptance for filing thereof by the Toronto Stock Exchange on behalf of Cardero. There can be no assurance that the parties will be successful in the negotiation and execution of the required formal documentation.

Location

The project is located in the Peace River Coal District of northeast British Columbia, Canada