PT KALIMANTAN SURYA KENCANA NOVEMBER 2009

Transcription

1 Summary and Correlations Between Existing Exploration Data and 3D Inversion of Airborne Magnetics in Relation to Prospects within the KSK Contract of Work PT KALIMANTAN SURYA KENCANA NOVEMBER 2009 This is a management prepared summary of exploration work completed on the KSK COW. All data as disclosed in this summary have been verified by the Company's Qualified Person for the KSK COW project Dr. Peter Pollard.

2 SUMMARY Kalimantan Surya Kencana (KSK) having expended over $16.4m in exploration since 1997 including 40,000 meters of drilling has for some time understood that the widespread alteration and mineralization throughout the Contract of Work (COW) and specifically within many of the prospects where exceptionally high grades occur in near surface quartz veins (e.g. drill hole BF5 returned % Cu, 1.85% Zn, 61g/t Ag, including % Cu, 1.24% Zn 88.5 g/t Ag; and channel samples of % Cu, g/t Ag) are the result of deep mineralizing intrusions. Although two joint ventures were intended to undertake deep drilling they failed to do so. KSK has drilled four 600m holes at the Baroi Far East Zone that targeted IP and the source of the high grade quartz vein mineralization however no porphyry intrusion was encountered. A recent comprehensive review of the KSK COW, including 3D inversion of airborne geophysical data collected in 1998, undertaken by Scientific Computing and Applications ( has produced new insights into the locations of multiple buried magnetic bodies within the COW. Over 100 such anomalies have been identified and while some are known to be barren late Sintang intrusions where mineralization often occurs at the margins, many others are believed to be older intrusions and possess copper-gold porphyry alteration and mineralization signatures. Most notable of these are Mansur, Beruang Kanan, Beruang Tengah, Baroi, Mamuring, Tumbang Huoi and Rinjen. Drill results from shallow levels within several of these porphyry systems have produced 0.2% Cu. Such grades are commonly found in the low grade margins of economic porphyries. The company considers the outcome of this recent work to be extremely significant due to the fact that the locations of some of these magnetic anomalies correlate with the main copper porphyry prospects, and also with widespread mineralization within the COW that has yet to be explored in detail. It highlights that drilling to date has been insufficiently deep to intercept the magnetic bodies and the mineralizing source intrusions they potentially represent. For example, at the Mansur prospect one previous drill hole (CSM04) displaying strong porphyry alteration was not deep enough to intercept the top of a magnetic body whose diameter is greater than 800 meters and vertical depth around 1,000 meters. This 3D inversion geophysics in association with existing geochemical, geological and drilling data now provides the company with an excellent tool for defining a program of deep drill holes at several of the prime prospects plus additional exploration at several locations throughout the COW.

3 TABLE OF CONTENTS SUMMARY...2 TABLE OF CONTENTS...3 LIST OF FIGURES...4 LIST OF PHOTOS...7 GEOLOGICAL SETTING...8 MANSUR PROSPECT...13 Nugget Effect...23 BERUANG PROSPECTS...27 Beruang Tengah...29 Beruang Kanan...32 BAROI PROSPECT...42 MAMURING PROSPECT...53 RINJEN & FOCUS 1 PROSPECTS...57 TUMBANG HUOI & TISOI PROSPECTS

4 LIST OF FIGURES Figure 1. Kalimantan magmatic arc showing the location of significant mines and prospects...8 Figure 2. KSK COW area showing a Global 1 arc-second (approximately 30-m) Digital Elevation Model (GDEM) derived from advanced Spaceborne Thermal Emission and Reflection Radiometer (ASTER) data. Some of the major structures are shown as dashed white lines....9 Figure 3. Radar image of the KSK COW showing the locations of the main prospects Figure 4. Regional geology of the KSK COW highlighting the main prospect areas. 11 Figure 5. 3D magnetic inversion anomalies within the KSK COW (excluding the far northern area). The small blue dots are the locations of previous drill holes...12 Figure 6. Image showing Mansur structural features in relation to other prospects in the western portion of the COW...14 Figure 7. A plan view of the Mansur prospect in relation to other magnetic anomalies in area, including a 6km diameter unexplored magnetic anomaly at the North Mansur prospect...15 Figure 8. The same data as in figure 7 rotated to look to the northwest at a plunge of 38 degrees. Previous drill holes at Mansur are also shown...15 Figure 9. The North Mansur magnetic anomaly looking toward the SW at a plunge of 44. While no exploration has been undertaken at North Mansur rivers draining the raised dome feature are known to contain gold and abundant magnetic concentrates.16 Figure 10. The untested magnetic anomaly at Mansur in relation to previous drill holes...16 Figure 11. Map of the Mansur copper anomaly showing the locations of previous shallow drill holes. The magnetic anomaly lies directly below the geochemical anomaly and remains untested by drilling...17 Figure 12. Geological map of the Mansur prospect showing the location of the magnetic anomaly...18 Figure 13. Alteration map of the Mansur prospect showing the location of the magnetic anomaly Figure 14. Plan view of the original magnetic data which clearly outlines the Mansur diorite porphyry...19 Figure 15. IP line section 81200E at the Mansur prospect...22 Figure 16. Structural interpretation of the area around the Beruang prospects Figure 17. Digital Terrain Map of the Beruang Caldera, looking south east...27 Figure 18. 3D magnetic inversion model of the Beruang prospects looking to the SW and plunging at 69 degrees showing the location of deep magnetic anomalies in relation to existing drill holes Figure 19. Plan view of magnetic anomalies and drill holes at the Beruang prospects Figure 20. Image showing the location of the deep Beruang Tengah magnetic body directly below previous drill holes...30 Figure 21. Map of alteration at Beruang Tengah showing the location of geochemical anomalies, drill holes and the underlying magnetic anomaly

5 Figure 22. 3D magnetic inversion of the Beruang Kanan prospect looking to the NW at a plunge of 20 degrees. The untested northern magnetic anomaly extends to the north for more than 2000 meters...33 Figure 23. Copper soil geochemical anomalies in relation to the deep untested magnetic anomaly located at the northwest end of an interpreted upflow zone...34 Figure 24. Table showing summary results of drilling in the Beruang Kanan Main and South Zones...35 Figure 25. IP section 10,550 N showing a deep chargeability anomaly underlying a zone of high resistivity...36 Figure 26. IP line section 10350N showing deep chargeability targets...36 Figure 27. Line 9797N pseudosections showing a large untested (P3 proposed hole) chargeability anomaly at depth within the 2000 meter NW-SE structural zone in the Beruang Kanan Main Zone...37 Figure 28. A comparison of Southwest Oyu Tolgoi and the Beruang Kanan Main Zone as projected on line section 9797N to illustrate the scale of the deposit...38 Figure 29. Beruang Kanan South Zone showing geochemical, IP anomalies and drill holes...39 Figure 30. IP line 8000N at Beruang Kanan showing a deep IP chargeability target..39 Figure 31. 3D inversion model of South Beruang and Beruang Tengah looking to the south west on a plunge of 64 degrees. Previous drill holes are also shown...40 Figure 32. Showing the Low Zone magnetic anomaly looking to the northwest on a plunge of 50 degrees. The long vertical pipe coming off the deep body may represent the untested breccia pipe observed at surface...41 Figure 33. Showing the circular features associated with the Lakapoi, Baroi, Mansur and North Mansur Prospects...42 Figure 34. Geological map of the Baroi prospect showing location of several mineralized zones...44 Figure 35. Locations of veins, drill holes and IP targets at Baroi...46 Figure 36. Selected drill results from Baroi Far East Zone...49 Figure 37. Drill holes on section 30200N in the Far East Zone targeting a deep chargeability anomaly that is likely the result of intense clay pyrite alteration...50 Figure 38. Image showing the deep untested magnetic anomalies in relation to existing drill locations...51 Figure 39. The untested Baroi Central Zone magnetic anomaly in relation to Mansur Figure 40. Geological map of Baroi showing magnetic anomalies and previous drill holes...52 Figure 41. Mamuring alteration, structure and location of the deep magnetic body..53 Figure 42. Map showing the location of skarns, the drill hole and channel sample results in relation to the magnetic anomaly at Mamuring...54 Figure 43. Location of untested magnetic bodies in relation to previous drilling at the Mamuring and Waterfall prospects...56 Figure 45. Image showing the Rinjen and Focus 1 magnetic anomalies Figure 46. Tumbang Huoi satellite image...60 Figure 47. Interpretive geological map of the Tumbang Huoi prospect...62 Figure 48. Tumbang Huoi soil copper anomaly showing eastern boundary of the magnetic anomaly

6 Figure 49. View looking north at a plunge of 63 degrees at Tumbang Huoi showing the untested magnetic anomaly locations of the original shallow drill holes...64 Figure 50. Image showing the large 5km by 2.5 km Tumbang Huoi and 6 km by 4km Tisoi magnetic bodies. View is looking SW on a plunge of 43 degrees...66 Figure 51. Plan view of the untested Tumbang Huoi and Tisoi magnetic anomalies that remain excellent exploration targets...66 OTHER PROSPECTS...67 Figure 52. Lakapoi magnetic features and drill holes. Image looks 319 at a plunge of 38 degrees...67 Figure 53. The same image as in figure 52 but looking 324 degrees at a plunge of 79 degrees

7 LIST OF PHOTOS Photo 1. The Schwarner Range up thrust and dipping to the north expressing the Kalimantan Arc. Sintang intrusions occur along the down faulted collision zone Photo 2. Sheeted veins at the Mansur prospect...20 Photo 3. Drill core sample showing potassic altered diorite with chalcopyrite and magnetite veins Photo 4. Helicopter view of extensive alluvial gold workings by locals in the Mansur River that drains the Mansur prospect...26 Photo 5. Aerial view showing the Beruang Tengah Cu-Au-Mo anomaly within the deeply incised circular valley which overlies the magnetic anomaly. The Au anomaly lies along the silicified outer ridge on the western side of the prospect and is located on a major north-south fault Photo 6. Drill core from KBT 4 showing quartz veins containing Cu mineralization at Beruang Tengah...30 Photo 7. Aerial view of the Beruang Kanan prospect looking south west. The large, barren Mangkuliang Sintang intrusion is seen in the background...32 Photo 8. Chalcopyrite mineralization at Beruang Kanan...34 Photo 9. Limonitic stockwork veins in a road cutting at the Low Zone...41 Photo 10. A view looking NE showing the Lakapoi, Baroi and Mansur prospects, plus the late Sintang Riah Janda mountain in the background...43 Photo 11. Surface outcrop of a Baroi Far East Zone quartz vein containing massive base metal mineralization...45 Photo 12. Drill core from BF 5 (Baroi Far East Zone) which returned % Cu, 1.85% Zn, 61g/t Ag, including % Cu, 1.24% Zn and 88.5 g/t Ag...45 Photo 13. Photograph showing local miners at Mamuring...55 Photo 14. Photo looking SE toward the Rinjen prospect showing a large limestone body on the left and a vegetation anomaly on small hill in the center of the photo. Both are coincident to the underlying magnetic anomaly...57 Photo 15. Coarse gold panned from Sungai Putih (white stream) which is located in the western portion of the survey grid. The area is underlain with white quartz sand and clay Photos 16 & 17. Drill core from DDH8 on the eastern margin of the magnetic anomaly showing potassic altered diorite porphyry containing chalcopyrite and magnetite veins...63 Photos 18 & 19. Oblique images showing the location of the large Tumbang Huoi magnetic anomaly. The visible upper section of the river is located approximately on the eastern margin of the anomaly. NE trending structures form deeply incised valleys and silicified ridges that display vegetation anomalies which commonly are the result of high acidity in soils

8 GEOLOGICAL SETTING All economic porphyry copper gold deposits in the South West Pacific display elevated levels of magnetite and it is common that Cu and Au values also increase in magnetite-rich zones. It should also be noted that to date all economic porphyry Cu- Au deposits in Indonesia are located along E-W trending arc s (Batu Hijau and Tombulilato) or E-W trending collision-related settings (Grasberg) and are associated with arc-normal structures. The KSK COW is located in an E-W segment of the Kalimantan volcanic arc. The Central Kalimantan magmatic arc contains a suite of Oligocene-Miocene high level intermediate to felsic calc-alkaline intrusions that intrude late Eocene sediments and tuffs. These intrusions are collectively referred to as the Sintang Intrusives and become progressively more acidic with time, with the younger events dominated by dacite domes and dykes. Intrusive rocks collected within the KSK COW have been dated at ±30Ma. Figure 1. Kalimantan magmatic arc showing the location of significant mines and prospects. 8

9 Figure 2. KSK COW area showing a Global 1 arc-second (approximately 30-m) Digital Elevation Model (GDEM) derived from advanced Spaceborne Thermal Emission and Reflection Radiometer (ASTER) data. Some of the major structures are shown as dashed white lines. NE to NNE and NW to NNW-trending arc normal or transfer features are the most prominent structures in the region; although the SRTM image clearly shows Arcparallel structures (E-W trending) also occur within the COW. There are major NS to NNW structure splays or horsetails into subsidiary NE and NNE to NE fault systems. The NE trending faults are truncated by later NW, NS and EW faults that form the loci for intrusive activity. Numerous prospects including Beruang Kanan and Beruang Tengah lie along the NE structures. A large circular feature is evident in the Landsat and Radar imagery. The Beruang Kanan high-sulphidation deposit is located within a smaller circular feature on the southern margin of this larger circular feature, where it is intersected by NE-striking transfer faults. 9

10 Figure 3. Radar image of the KSK COW showing the locations of the main prospects. 10

11 Photo 1. The Schwarner Range up thrust and dipping to the north expressing the Kalimantan Arc. Sintang intrusions occur along the down faulted collision zone. Figure 4. Regional geology of the KSK COW highlighting the main prospect areas 11

12 Figure 5. 3D magnetic inversion anomalies within the KSK COW (excluding the far northern area). The small blue dots are the locations of previous drill holes. Recent Discoveries : Deep Seated Systems Oyu Tolgoi Discovered 1 st, low grade near surface system. Pebble Scout drilling discovery, using inversion model. Higher grade system, economic Drilling Deep = Discovery: Recent advances is geophysical modeling has identified deep seated geophysical targets near to or below known porphyry systems around the world. Using this new concept & technique, deep drilling at Pebble (Alaska) and Oyu Tolgoi (Mongolia) intersected high grade Cu-Au mineralization east of the near surface lower grade porphyry Cu-Au mineralization. Prior to the discovery of high grade Cu-Au UG resource, both projects were determined to be uneconomic. Now however, the near surface mineralization will help pay for some of the UG development costs and therefore can also be mined. 12

13 MANSUR PROSPECT The new data show that the Mansur Prospect has a large near surface magnetic anomaly (and inferred mineralizing source) 800 m in diameter and over 1000m in vertical extent which has not been tested by previous drilling. It is located and is coincident with a greater than 1km in diameter copper and gold surface geochemical anomaly, where diorite porphyry and copper, gold and molybdenum mineralization are found. Large amounts of gold have been recovered from the Mansur River which drains the prospect by local miners over the past 10 years. The Mansur diorite porphyry is located within a circular feature that is controlled by major NW and NE trending faults. Highly fractured and strongly siliceous hornfelsed sediments containing pyrite and gold surround the diorite porphyry intrusion. The majority of previous drill holes are located directly above the magnetic anomaly and intersected moderate clay, sericite and silica alteration and a moderately magnetic and potassic altered diorite at depth. A number of chalcopyrite-bearing quartz stockwork zones (1-2% density) were intersected in each hole. Minor molybdenite was also noted, occurring along the selvages of some porphyry style veins. Drill hole CSM 4 drilled to 300 meters was terminated close to the top of the magnetic body and displayed a variety of porphyritic intrusions and breccias plus increasing amounts of silica, fluorite (anhydrite?), pyrite chalcopyrite and magnetite. 13

14 Figure 6. Image showing Mansur structural features in relation to other prospects in the western portion of the COW. 14

15 Figure 7. A plan view of the Mansur prospect in relation to other magnetic anomalies in area, including a 6km diameter unexplored magnetic anomaly at the North Mansur prospect. Figure 8. The same data as in figure 7 rotated to look to the northwest at a plunge of 38 degrees. Previous drill holes at Mansur are also shown. 15

16 Figure 9. The North Mansur magnetic anomaly looking toward the SW at a plunge of 44. While no exploration has been undertaken at North Mansur rivers draining the raised dome feature are known to contain gold and abundant magnetic concentrates. Figure 10. The untested magnetic anomaly at Mansur in relation to previous drill holes. 16

17 Figure 11. Map of the Mansur copper anomaly showing the locations of previous shallow drill holes. The magnetic anomaly lies directly below the geochemical anomaly and remains untested by drilling. 17

18 Figure 12. Geological map of the Mansur prospect showing the location of the magnetic anomaly. Figure 13. Alteration map of the Mansur prospect showing the location of the magnetic anomaly. 18

19 Figure 14. Plan view of the original magnetic data which clearly outlines the Mansur diorite porphyry. 19

20 Photo 2. Sheeted veins at the Mansur prospect. Photo 3. Drill core sample showing potassic altered diorite with chalcopyrite and magnetite veins. 20

21 All exiting drill holes at Mansur are located within or at the margins of the diorite porphyry, with the exception of hole CSM02. Holes SMH 3, SMH 4, SMH 5, and SMH 6 are located at the north/west margin within a shallow, medium chargeability anomaly. Of these holes, SMH 3 and SMH 5 were vertical and returned values of % Cu and 0.24 g/t Au and g/t Au (low Cu) respectively. High mercury (Hg) arsenic (As) and antimony (Sb) values possibly indicating a late epithermal stage where also returned from these holes. The following table shows examples from hole SMH3: Interval (m) Cu As Sb Au Hg N/D N/D N/D There are other samples which did not show this high As and Sb character, i.e. Interval (m) Cu As Sb Au Additionally there are numerous examples of a low-cu, high-au relationship e.g. Hole No. Interval (m) Cu Au SMH SMH SMH SMH SMH SMH CSM CSM N/A 2.43 SMH N/A 3.72 There are also numerous assays that display the reverse, a high-cu, low-au relationship. The Mansur prospect has undergone multiple phases of mineralization. The possible late epithermal event may have considerable potential at the margins of the intrusion, and suggests that the Mansur prospect is exposed at a shallow level. This supports 21

22 the likelihood that the deeper magnetic anomaly may represent the main mineralizing intrusion. It is also possible that the overlying hornfelsed sediments, which are highly siliceous and relatively unfractured, have acted as an impervious cap to mineralization and had the effect of restricting high grade Au-Cu mineralization to dilatational structures at depth. If this is the case, the IP anomaly at E /40135 N at a depth 180 meters, on the southern margins of the Mansur intrusion represents a potential drill target for gold. Figure 15. IP line section 81200E at the Mansur prospect. 22

23 Nugget Effect Samples from the Sungai Mansur Prospect suffer from a coarse gold effect making gold assays difficult to reproduce (see table below). This effect is well known at the Kelian mine and other prospects in Kalimantan. At Kelian, these effects eventually led to a 30% increase in gold reserves over the original ore reserve estimates. From existing sample data most notable deviations can be seen in the following assays: Sample No. Interval (m) Au 1 st Repeat 2 nd Repeat 3 rd Repeat 4 th Repeat R SMH SMH SMH N/R N/R N/R SMH SMH N/R SMH SMH N/R N/R SMH In the extreme, this phenomenon could mean that two meter drill core samples with anomalous gold assays (>0.05 g/t Au) in could in fact contain up to several grams per ton gold. Drilling programs will need to take this problem into consideration, and careful treatment of drill core is necessary. Assays may have to be of total core digest using either cyanide leach or full fire screen assay techniques. 23

24 Photo 4. Helicopter view of extensive alluvial gold workings by locals in the Mansur River that drains the Mansur prospect. 24

25 BERUANG PROSPECTS The structural map below shows the Beruang prospects to be located toward the southern margin of a possible caldera 12km in diameter. The prospects include Beruang Tengah, Beruang Kanan and the Low zone. Figure 16. Structural interpretation of the area around the Beruang prospects. Figure 17. Digital Terrain Map of the Beruang Caldera, looking south east. 25

26 Figure 18. 3D magnetic inversion model of the Beruang prospects looking to the SW and plunging at 69 degrees showing the location of deep magnetic anomalies in relation to existing drill holes. Figure 19. Plan view of magnetic anomalies and drill holes at the Beruang prospects. 26

27 Beruang Tengah A large deep magnetic anomaly and inferred mineralizing source 900m wide by 1200m long at Beruang Tengah has not been drill tested. It underlies a 700m in diameter copper, gold, molybdenum rock anomaly defined by > 0.1%Cu and is bounded to the west by a 1300m long >0.1 g/t Au surface geochemical anomaly. Rocks, stockworks, sheeted veins and alteration at Beruang Tengah are classically porphyry style. Photo 5. Aerial view showing the Beruang Tengah Cu-Au-Mo anomaly within the deeply incised circular valley which overlies the magnetic anomaly. The Au anomaly lies along the silicified outer ridge on the western side of the prospect and is located on a major north-south fault. 27

28 Figure 20. Image showing the location of the deep Beruang Tengah magnetic body directly below previous drill holes. Photo 6. Drill core from KBT 4 showing quartz veins containing Cu mineralization at Beruang Tengah. 28

29 Figure 21. Map of alteration at Beruang Tengah showing the location of geochemical anomalies, drill holes and the underlying magnetic anomaly. 29

30 Beruang Kanan A 750m diameter by over 2000 meters long magnetic anomaly in the Beruang Kanan Main Zone is believed to be the source of the widespread (6km by 4km) copper mineralization defined by surface geochemistry and remains untested by drilling. It is located at the northwest end of a structural zone between two deeply incised valleys which likely formed as a result of these NW-SE structures. It is also contained within a surface copper geochemical anomaly and is associated with distal zones of massive base metal mineralization 1-2 km away. Previous drilling within an east dipping 2000 meter long structural zone striking SW from the magnetic anomaly in the Main Zone identified a significant geological resource at 0.5%Cu. The area consists of strongly phyllic and argillic altered, sheared and brecciated volcaniclastic rocks and dacite, containing quartz veins with chalcopyrite, covellite and pyrite mineralization. The proposed drill holes P5 & P6, targeting a deep chargeability/resistivity anomalies on grid lines 10,350 N and 10,350 N respectfully, are located on the southern margins of this deep magnetic anomaly. Massive polymetallic surface mineralization (e.g. 26.2%Pb, 35.9%Zn, 3440 ppb Ag, 2.94% Cu and 1g/t Au) can be found in distal settings east and south of this inferred mineralizing magnetic source anomaly. The deep exploration potential at Beruang Kanan appears to be very good as there are several untested geophysical targets defined by IP chargeability highs (Figures 25-27). Deep-looking surveys could further enhance these drill targets which are designed to test the potential source(s) of the high-level mineralization encountered in previous shallow drilling. Photo 7. Aerial view of the Beruang Kanan prospect looking south west. The large, barren Mangkuliang Sintang intrusion is seen in the background. 30

31 Figure 22. 3D magnetic inversion of the Beruang Kanan prospect looking to the NW at a plunge of 20 degrees. The untested northern magnetic anomaly extends to the north for more than 2000 meters. 31

32 Figure 23. Copper soil geochemical anomalies in relation to the deep untested magnetic anomaly located at the northwest end of an interpreted upflow zone. Photo 8. Chalcopyrite mineralization at Beruang Kanan 32

33 Hole Number Hole Depth Bearing/Dip From-To Meters Copper Grade BK / % BK1 Including % BK / % BK2 Including % BK / % BK / % BK4 Including % BK / % BK5 Including % BK / % BK6 Including % BK / % BK / % BK10 Including % BK / % BK / % BK / % BK / % BK-17B / % BK / % BK-18 Including % KBK / % KBK-21 Including % KBK / % KBK / % including % & 3.30g/tAu Figure 24. Table showing summary results of drilling in the Beruang Kanan Main and South Zones. 33

34 Figure 25. IP section 10,550 N showing a deep chargeability anomaly underlying a zone of high resistivity. Figure 26. IP line section 10350N showing deep chargeability targets. 34

35 Figure 27. Line 9797N pseudosections showing a large untested (P3 proposed hole) chargeability anomaly at depth within the 2000 meter NW-SE structural zone in the Beruang Kanan Main Zone 35

36 Figure 28. A comparison of Southwest Oyu Tolgoi and the Beruang Kanan Main Zone as projected on line section 9797N to illustrate the scale of the deposit. The South Zone copper anomaly where drill hole KBK28 returned % Cu, 0.6 g/t Au, including % Cu, 2.61 g/t Au is potentially the result of a mineralizing source that is located at the margins of the greater barren Makuliang Sintang dacitic intrusion. A strong chargeability/resistivity anomaly underlies hole KBK28 and remains untested (see Figure 29). The deep exploration target at the South Zone (Figure 30) remains completely untested by drilling (proposed hole P1). This large (nearly 1km wide) chargeability anomaly located along the flank of a large resistivity anomaly and is located beneath the geochemical anomaly shown in Figure 29. This is consistent with a classic Lowell and Guilbert model of a chargeability zone (porphyry-related sulfide mineralization) along the margins of a resistive zone (barren central stock). It otherwise may be linked to a large magnetic body which underlies the Low Zone where several 100 meter scale zones of limonitic stockworks are found along road cuttings. Chalcopyrite occurs in quartz veins trending 30 degrees and also within clasts in a milled breccia more than 100 meters wide that displays strong clay alteration. 36

37 Figure 29. Beruang Kanan South Zone showing geochemical, IP anomalies and drill holes. Figure 30. IP line 8000N at Beruang Kanan showing a deep IP chargeability target. 37

38 Figure 31. 3D inversion model of South Beruang and Beruang Tengah looking to the south west on a plunge of 64 degrees. Previous drill holes are also shown. 38

39 Figure 32. Showing the Low Zone magnetic anomaly looking to the northwest on a plunge of 50 degrees. The long vertical pipe coming off the deep body may represent the untested breccia pipe observed at surface. Photo 9. Limonitic stockwork veins in a road cutting at the Low Zone. 39

40 BAROI PROSPECT The Baroi Prospect is described by Terry Leach (RIP), a consulting geologist and petrologist to KGCL as a Gold, copper, silver lode extending out to base metal systems on the margins, above a copper gold porphyry system. Figure 33. Showing the circular features associated with the Lakapoi, Baroi, Mansur and North Mansur Prospects The Baroi prospect as observed from satellite imagery forms a distinct circular dome feature 8 kilometres in diameter with elevations between 300 to 1,000 meters above sea level. It is transected by ENE WSW and NW SE trending regional fault structures. The northern half of Baroi is covered by sediments while the southern half consists of quartz monzonite, andesite porphyry, granodiorite, volcaniclastic rocks and tuffaceous sediments. 40

41 Photo 10. A view looking NE showing the Lakapoi, Baroi and Mansur prospects, plus the late Sintang Riah Janda mountain in the background. The alteration system in the southern portion of Baroi covers an area of more than 40 square kilometers. Four zones of mineralization have been identified. These are the Central copper-gold-silver zone, the East and South base metal zones, and the Far East copper-gold-silver zone. These zones cover a total area of 6 by 5 kilometers that remains open to the east and south. 41

42 Figure 34. Geological map of the Baroi prospect showing location of several mineralized zones. Alteration features include silicic, propylitic, subpropylitic, phyllic and argillic alteration. Pyrite mineralization is ubiquitous throughout the area while intense arsenopyrite mineralization is locally associated with elevated gold grades. However, the dominant mineralization is copper-gold-silver mineralization associated with veining, stockworks and brecciation. Some exceptionally high grades have been recovered from surface samples as shown in the following table: Sample no. Zone Type Length Au Pb Zn Cu (%) Ag (g/t) (m) (g/t) (%) (%) 229 CZ GF CZ GO FEZ CH FEZ CH FEZ CH FEZ CH FEZ CH FEZ CH FEZ CH FEZ CH FEZ CH FEZ CH FEZ CH FEZ CH &1800 FEZ CH

43 Photo 11. Surface outcrop of a Baroi Far East Zone quartz vein containing massive base metal mineralization. Photo 12. Drill core from BF 5 (Baroi Far East Zone) which returned % Cu, 1.85% Zn, 61g/t Ag, including % Cu, 1.24% Zn and 88.5 g/t Ag. 43

44 Figure 35. Locations of veins, drill holes and IP targets at Baroi. Drilling to date has focused on the high grade veins and the search for their inferred porphyry source in the Far East Zone. While 69 drill holes in the greater Baroi area have been completed, most of these where shallow holes ranging between 50 and 300 meters. Four 600 meter holes targeting deep IP targets where completed in the Far East Zone. These continued to intersect veins and intense clay-pyrite alteration at depth but no porphyry intrusions where intercepted. 44

45 Hole From To Meters Cu (%) Pb (%) Zn (%) Ag(g/t) Au(g/t) BF BF Incl Incl BF BF BF28/ Incl BF29/ BF BF Incl Figure 36. Selected drill results from Baroi Far East Zone 45

46 Figure 37. Drill holes on section 30200N in the Far East Zone targeting a deep chargeability anomaly that is likely the result of intense clay pyrite alteration. The source of the high grade veins at Baroi which occur over a strike length of more than degrees has long been a question. The 3D magnetic inversions have identified two potential deep source targets. They are located 8 kilometers apart on a bearing of 130 degrees. One is 850 meters in diameter and located at the center of the Baroi circular feature, 2300m north of drill hole BC4. This area is covered by sediments, however the original discovery float sample returning 16.40% Cu, g/t Ag, and 17.3 g/t Au was found in this vicinity. The second magnetic anomaly is 1,300m by 2200m and is located 2300 meters SE of drill hole BF47, at the junction of NW and NE structures where a circular feature is observed. No exploration has been undertaken in this area. 46

47 Figure 38. Image showing the deep untested magnetic anomalies in relation to existing drill locations. 47

48 Figure 39. The untested Baroi Central Zone magnetic anomaly in relation to Mansur. Figure 40. Geological map of Baroi showing magnetic anomalies and previous drill holes. 48

49 MAMURING PROSPECT The Mamuring prospect is located 15 kilometers north/northeast from the Beruang Tengah prospect on the same major Derajoi splay fault. Andesite and diorite porphyry intrusions at the prospect form a circular mountain known as Tukatoi that is controlled by NNW and NE structures. A 12 meter wide skarn forms a ring feature at high levels around the mountain over a length of 1300 meters. This skarn mineralization is associated with massive magnetite, pyrrhotite, chalcopyrite, pyrite, gold, quartz, and displays K-feldspar-chlorite-actinolite-epidote alteration. Figure 41. Mamuring alteration, structure and location of the deep magnetic body An IP anomaly has been identified down dip and at depth to the skarns and potentially acting as a source to the massive magnetite-copper-gold vein mineralization. In 1998, one exploratory diamond drill hole was completed to test these veins at depth and to acquire a better understanding of the subsurface geology. Select samples from the hole produced an intercept of 9 meters from 64 meters to 73 meters that returned 0.72% copper and 0.41 g/t gold, 1.0 g/t silver and 640 g/t arsenic. Anomalous gold values of 0.39 g/t were also recovered from 90 to 93 meters and 0.2 g/t between 102 to 111 meters. 49

50 Figure 42. Map showing the location of skarns, the drill hole and channel sample results in relation to the magnetic anomaly at Mamuring. 50

51 Photo 13. Photograph showing local miners at Mamuring. In 2002 a local mining operation commenced at Mamuring. Miners dig adits into the 20 to 30 meter wide oxide zone in the hanging wall of the mineralized skarn. Extremely high grades of gold ranging from 50 to 200 g/t per ton are reportedly recovered. The 3D magnetic inversions have provided a new insight as to the potential location of the mineralizing source of these skarns (Figure 43). The Mamuring mineralization is now believed to be sourced from the long, vertical, less intense magnetic body that itself appears to be derived from a deeper body located just west of drill hole MR1 (Figure 43). The new data also identifies a potential source for fluids responsible for brecciated quartz veins containing high grade gold and base metals found at the Waterfall prospect, 2 km NW of Mamuring. The Waterfall veins occur in bedded tuffaceous sandstones located adjacent to a large andesite and diorite porphyry Sintang intrusion (Fig. 43). 51

52 Figure 43. Location of untested magnetic bodies in relation to previous drilling at the Mamuring and Waterfall prospects. 52

53 RINJEN & FOCUS 1 PROSPECTS The Rinjen copper-gold-base metal and the Focus1 gold prospects are located 10 kilometers north of the Beruang Tengah prospect on the same major Derajoi NNWtrending splay structure. The host rocks include argillaceous sediments, limestone, and andesite and dacite porphyries. Hydrothermal brecciation occurs locally. Argillic/phyllic alteration is widespread in association with pervasive pyrite alteration and locally copper and base metal mineralization within an area exceeding 1,600 meters by 1,200 meters. Soil sampling included 496 hand auger samples on 100 meter line spacing with C horizon samples taken every 20 meters. The results demonstrate co-incident copper, lead, zinc and gold anomalies with values up to 780 ppm copper, 2,300 ppm lead, 1,930 ppm zinc and 0.1 g/t gold. Rock chip samples from the same area returned values up to 5.31% copper, 3.77% lead, 15.8 % zinc, 3.15% arsenic, and 4.86g/t gold.. Photo 14. Photo looking SE toward the Rinjen prospect showing a large limestone body on the left and a vegetation anomaly on small hill in the center of the photo. Both are coincident to the underlying magnetic anomaly. 53

54 Figure 44. Geochemical map showing copper in soil anomalies and selected rock chip results and limestone occurrence in relation to the untested magnetic body at depth. The recent 3D inversion data has identified a 1200 meter diameter magnetic anomaly underlying the Rinjen prospect and a 1000 meter diameter body underlying the Focus1 prospect. Rinjen and Focus 1 both remain excellent exploration targets for follow up work. Additional mapping and sampling followed by scout drilling need to be conducted to establish the potential for both porphyry deposits at depth and porphyry related massive sulphides or skarn deposits in association with limestone in the area. 54

55 Figure 45. Image showing the Rinjen and Focus 1 magnetic anomalies. 55

56 TUMBANG HUOI & TISOI PROSPECTS The Tumbang Huoi prospect is located in the southwest of the COW within a large circular structure transected by major N and NW trending faults. Mapping and soil sampling within an area 2000 meters by 1600 meters was undertaken in the latter part of 1987 followed by 15 shallow drill holes totaling 922 meters in The primary focus was on gold mineralization as locals had panned the rivers draining the area for many years. Figure 46. Tumbang Huoi satellite image 56

57 . Photo 15. Coarse gold panned from Sungai Putih (white stream) which is located in the western portion of the survey grid. The area is underlain with white quartz sand and clay. The geology at Tumbang Huoi is characteristic of a caldera setting. A 100 meter diameter highly silicified milled breccia containing clasts up to several meters in size is located at the western end of the survey grid. Bedded volcaniclastic rocks and lapilli tuff overlie andesites and dacite in contact with quartz diorite porphyry and granodiorite. Numerous basalt, dacite porphyry and felsic dykes are observed at the western end of the survey area. A north-south trending quartz-rich gossan is located to the north of the survey grid. Copper, gold, molybdenum mineralization is contained within porphyry style quartz veins. Pyrite is ubiquitous throughout the area. Potassic alteration and infill occurs as wispy trails of biotite ± magnetite and veins with K- feldspar ± quartz which are present in several drill holes, while phyllic and argillic alteration assemblages are widespread throughout the prospect. 57

58 Figure 47. Interpretive geological map of the Tumbang Huoi prospect. Figure 48. Tumbang Huoi soil copper anomaly showing eastern boundary of the magnetic anomaly. 58

59 Photos 16 & 17. Drill core from DDH8 on the eastern margin of the magnetic anomaly showing potassic altered diorite porphyry containing chalcopyrite and magnetite veins. 59

60 The 3D inversion of magnetic data has identified a 5000 meter by 2500 meter tear drop shaped magnetic body that is located directly west of the survey area. Drill holes DDH 4, 6, 8 and 10 where drilled above the eastern margin of this body. These holes contained a variety of silicified volcaniclastics and diorite porphyries displaying strong clay alteration with pyrite and magnetite mineralization. Dyke swarms are also observed in this area. Intense magnetite-chalcopyrite mineralization was observed in DDH8 in quartz veins within diorite porphyry, suggesting the magnetic anomaly represents the older mineralized intrusions similar to Mansur and Beruang Tengah rather than the late barren Sintang variety, making this area an excellent drill target. No exploration has been undertaken at Tumbang Huoi since 1992 however local miners continue to recover gold from the rivers in the area using mechanized recovery methods. Tisoi is an unexplored prospect in the extreme SW of the COW. Rivers draining this area contain high quantities of magnetite in pan concentrates. Local miners recover gold from these drainages. Figure 49. View looking north at a plunge of 63 degrees at Tumbang Huoi showing the untested magnetic anomaly locations of the original shallow drill holes. 60

61 Photos 18 & 19. Oblique images showing the location of the large Tumbang Huoi magnetic anomaly. The visible upper section of the river is located approximately on the eastern margin of the anomaly. NE trending structures form deeply incised valleys and silicified ridges that display vegetation anomalies which commonly are the result of high acidity in soils. 61

62 Figure 50. Image showing the large 5km by 2.5 km Tumbang Huoi and 6 km by 4km Tisoi magnetic bodies. View is looking SW on a plunge of 43 degrees. Figure 51. Plan view of the untested Tumbang Huoi and Tisoi magnetic anomalies that remain excellent exploration targets. 62

63 OTHER PROSPECTS Numerous other magnetic anomalies produced from the recent review and 3D inversions display mineralization and alteration at surface that warrants additional exploration. Lakapoi is possibly most notable of these. The following figures show the magnetic anomalies at Lakapoi, 10 km south of Mansur. Drilling in the eastern part of the prospect was within a diatreme breccia where high gold values were recovered from the tuffisite ring. This breccia may have been produced by the deep magnetic anomaly below and south of the drill locations Figure 52. Lakapoi magnetic features and drill holes. Image looks 319 at a plunge of 38 degrees. 63

64 Figure 53. The same image as in figure 52 but looking 324 degrees at a plunge of 79 degrees. 64