PROJECT SUMMARY DADI SILVER PROJECT FEBRUARY 8, 2008

Transcription

1 PROJECT SUMMARY DADI SILVER PROJECT FEBRUARY 8, 2008

2 Contents 1. Introduction Preamble Sino Top Corporate Facts & Background Sino-Top Properties Yuanlinzi Sn Polymetallic Project Aobaotugounao Ag Polymetallic Project Laopandao Ag Polymetallic Project Shididonggou Ag Polymetallic Project Zhuanxinhu Cu Polymetallic Project Dadi Ag Polymetallic Project Saihanaobao Ag Polymetallic Project Liangdi Ag Polymetallic Project Erbahuo Silver Mine Regional Map With Project Locations Youfangxi Ag Polymetallic Deposit (Not Owned By Silver Dragon) Dajing Ag Polymetallic Deposit (Not Owned By Silver Dragon) Bairendaba Ag Polymetallic Deposit (Not Owned By Silver Dragon) Huanggangliang Fe-Sn Deposit (Not Owned By Silver Dragon) Geology And Mineralization Zones In Dadi Geological Features Of Dadi Geological Setting Stratigraphy West And East Mineralizes Areas. Southeast Part Of The Dadi Area Structure Magma Dadi Geological Map With IP Profiles Dadi Geological Map With Apparent Resistivity Profile Soil Element Anomaly Dadi Geological Map With Ag In Soil Anomaly Dadi Geological Map With Pb In Soil Anomaly Dadi Geological Map With Zn In Soil Anomaly Geological Cross Section Of Dadi Mineralized Areas And Mineralization Zones Distribution of mineralized areas and mineralization zones Dadi Map With West Mineralized Area Dadi Trench Map With East Mineralized Area Trench Versus Shallow Shafts At Dadi Features Of Mineralized Rocks High Energy Induced Polarization Geophysical Survey Results Dadi A - A Comprehensive Geological Section Map Dadi Geological Map With IP Profile Detailed IP Anomaly Distribution Dadi Geological Map With Resistivity Profile Geophysical Sections Of Measuring Line 1-1 In Dadi Geophysical Sections Of Measuring Line 3-3 In Dadi Geophysical Sections Of Measuring Line 2-2 In Dadi Geochemical Survey Results Reports Documenting Historical Work As Well As Work Carried Out By Silver Dragon Exploration History Dadi Silver Dragon Resources Project Summary - Dadi, Northern China ~ 2 ~

3 Table of Figures Figure 1 - Regional Map With Project Location... 8 Figure 2 - Sketch regional geological map of Dadi Figure 3 - Dadi geological map Figure 4 - Dadi Geological Map with IP Profiles Figure 5 - Dadi Geological Map with Apparent Resistivity Profile Figure 6 - Dadi Geological Map with Ag in Soil Anomaly Figure 7 - Dadi Geological Map with Pb in Soil Anomaly Figure 8 - Dadi Geological Map with Zn in Soil Anomaly Figure 9 - Geological Cross Section of Dadi Figure 10 - West and East mineralized areas in Dadi Figure 11 - Dadi map with West mineralized area Figure 12 - Dadi trench map with East mineralized area Figure 13 - Mineralized zone No. II revealed by trench No Figure 14 - Mineralization zone No. XII in shallow shaft DQJ Figure 15 - Mineralization zone No. XIII in trench DTC Figure 16 - High Energy Induced Polarization Figure 17 - Dadi A - A Comprehensive Geological Section Map Figure 18 - Dadi geological map with IP profile Figure 19 - Detailed IP anomaly distribution map in south part of Dadi area Figure 20 - Dadi geological map with resistivity profile Figure 21 - Geophysical sections of measuring line 1-1 in Dadi Figure 22 - Geophysical sections of measuring line 3-3 in Dadi Figure 23 - Geophysical sections of measuring line 2-2 in Dadi Figure 24 - Geophysical sections of measuring line 2-2 in Dadi Figure 25 - Collecting Soil Samples In The Field Silver Dragon Resources Project Summary - Dadi, Northern China ~ 3 ~

4 1. Introduction 1.1 Preamble This document has been prepared in order to provide a detailed review of Silver Dragon Resources Dadi Silver Project in Northern China. This document will cover: 1. Regional Geology map including the location of the operating mines in the area for each of the projects 2. Characteristics (throughput, grade, tonnage, style of mineralization, etc.) of the operating mines in the area 3. Property scale geology map 4. Trench/ Drill hole location map with sample descriptions and showing details of sample locations, results, etc. 5. Explanation of geophysical survey technique and "electrical sounding" 6. General country location and regional area map showing towns, cities, roads, power lines, rail and other infrastructure. 7. Reports documenting historical work as well as work carried out by Silver Dragon on each of the properties 1.2 Sino Top Corporate Facts & Background Sanhe Sino-Top Resources & Technologies, Ltd. ( Sino-Top ) was incorporated in 2003 as a Chinese company wholly owned by Huaguan Industrial Corp. ( HIC ), a subsidiary of state-owned entity North China Geological Exploration Bureau. Sino-Top became an American-Chinese joint venture in Silver Dragon Resources Inc. owns 90% of Sino-Top. The Chinese side led by HIC collectively owns 10%. Sino-Top is headquartered in Yanjiao Development Zone, which is 30 kilometers east of downtown Beijing. Sino-Top s wholly-owned subsidiary, Chifeng Silver Dragon Resources & Technologies, Ltd., is located in Wengniute County, Chifeng City, Inner Mongolia. Sino-Top has a staff of 15, including management, geologists, engineering and financial personnel. The company holds exclusive exploration rights to eight properties and mining rights to one property in northern China, covering a total area of km2. Under the management of its board of directors, Sino-Top s innovative staff has combined their vast ore-finding experience with modern theories and technologies, verified their hypotheses with field projects, and achieved good results, paving the way for future corporate expansion and wealthy growth. When Sino-Top became a U.S.-Chinese joint venture in 2005, its only identified mineralization comprised of t (1.5 million ounces) silver at Erbahuo silver mine (Chinese standard 122b, Table 2) and subsequently a NI Report commissioned by Silver Dragon and prepared by Micromine Australia. In 2005 and 2006, a total of RMB15 million (USD$2,200,000) was invested in nine properties (Table 1), resulting in the identification of new mineralized zones. In 2007, the total Sino-Top expenses were RMB13,385,946 (USD$1,900,000) among which the total exploration expenses were RMB10,072,446 (USD$1,400,000) the Erbahuo pre-mining preparation expenses were RMB1,117,300 (USD$160,000) and the general and administrative expenses were RMB196,200 (USD$28,000). Therefore, the total investment in Sino-Top from 2005 to 2007 would be RMB28,495,544 (USD$3,960,000). (Table 1)Various stages of exploration have been conducted on all the nine properties. New discoveries have been consistently made through general exploration, prospecting and reconnaissance. Up to date, seven industrial-grade Ag polymetallic mineralized zones have been discovered out of the nine properties. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 4 ~

5 1.3 Sino-Top Properties In geographic location sequence from north to south and from west to east: 1 Yuanlinzi 2 Aobaotugounao 3 Laopandao 4 Shididonggou 5 Zhuanxinhu 6 Dadi 7 Saihanaobao 8 Liangdi 9 Erbahuo 1.4 Yuanlinzi Sn Polymetallic Project Exploration Area of Yuanlinzi Sn Polymetallic Property: 51.1km2 Exploration history in 2005 and 2007: m drilling (2 holes) and 1,365 m3 trenching, etc. resulting in the identification of mineralized zones. In 2007, reconnaissance was conducted on this property: 7km2 geological and geochemical survey; 5km induced polarization profile; 1.2km high density electrical resistance profile; 6km high energy electric profile, resulting in the identification of further mineralized zones. 1.5 Aobaotugounao Ag Polymetallic Project Exploration Area of Aobaotugounao Ag Polymetallic Property: km2 Exploration history in 2005: 568m3 trenching. Geochemical anomalies were found to be related with ore-forming conditions. In 2007, reconnaissance was conducted on this property: a 960 m3 trenching project and 7.38km2 geological and geochemical survey, resulting in the identification of mineralized zones. 1.6 Laopandao Ag Polymetallic Project Exploration Area of Laopandao Ag Polymetallic Property: km2 The exploration area comprises three mineralization zones: No.102 Anomalous Zone in the south, No.95 Anomalous Zone in the center and No.104 Anomalous Zone in the north. Exploration efforts so far have been focused on the central zone (No.95 Anomalous Zone). Exploration history in 2005 and 2006: 662.2m drilling (2 holes), 213m tunneling and 3,300m3 trenching, etc. resulting in the identification of mineralized zones. In 2007, prospecting and general exploration were conducted on this property: 2,635.7m drilling (7 holes), 1,064m tunneling, 3,874m3 trenching projects, etc., resulting in the identification of mineralized zones. The most significant discovery, to date, is Ag-Sn-Cu mineralization on the peripheries of a previously identified tin mineralized zone, lending credence to similar discoveries in the future. The mineralization is mainly a continental volcanic-sedimentary rock altered strata-bound mineral type. Micromine is presently completing a NI study at Laopando. This study will define tonnage and grades and allow Silver Dragon to plan an exploration program to further expand the known mineralization. Depending on the exploration success during the coming year Silver Dragon will examine how to best further advance Laopandao towards a production scenario. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 5 ~

6 1.7 Shididonggou Ag Polymetallic Project Exploration Area of Shididonggou Ag Polymetallic Property: 3.11km2. Exploration history in 2005: general geochemical survey which resulted in the discovery of several anomalies believed to be related to mineralization. In 2007, reconnaissance was conducted on this property: follow-up surface exploration within the anomalous zones which lead to the identification of mineralized zones. The most significant discovery was the existence of mineralized granite porphyry zones within massive granite bodies, paving the way for finding porphyritic Ag polymetallic mineralization. 1.8 Zhuanxinhu Cu Polymetallic Project Exploration Area of Zhuanxinhu Cu Polymetallic Property: 6.24km2. Exploration history in 2005 and 2006: 723m drilling (3 holes), 1,000m3 trenching, resulting in the identification of mineralized zones. In 2007, prospecting was conducted on this property: 2km2 geochemical profile, 1.2km geochemical profile, 2km geophysical & geochemical profile, 1.8km high density electrical resistant profile, 32 high energy electric sounding points, resulting in the identification of subsurface anomalies. 1.9 Dadi Ag Polymetallic Project Exploration Area of Dadi Ag Polymetallic Property: km2. Exploration history in 2005 and 2006: 500m3 trenching, resulting in the identification of mineralized zones. In 2007, prospecting was conducted on this property: 5.25km2 geochemical survey, 4.5km2 geophysical survey, 5.15km geophysical & geochemical profile, 1.8km high density electrical resistant profile, 3km high energy profile, 60 high energy electric sounding points, 2,941m3 trenching and 25m shallow shafting, resulting in the identification of mineralized zones. The most significant discovery was the apparent existence of strata bound mineralization zones Saihanaobao Ag Polymetallic Project Exploration area of Saihanaobao Ag Polymetallic Property : km2. Exploration history in 2005 and 2006: m drilling (1 hole), 1,658m3 trenching, resulting in the identification of mineralized zones. In 2007, prospecting was conducted on this property: 2,060 m3 trenching, etc., resulting in the identification of mineralized zones. Several polymetallic (Ag-Pb-Zn) zones were discovered at surface. Follow-up exploration will aim to identifying additional zones of mineralization and overall potential of the project. This will, in time include additional geological, geochemical and geophysical surveys, prior to drilling. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 6 ~

7 1.11 Liangdi Ag Polymetallic Project Exploration Area of Liangdi Ag Polymetallic Property: km2. Exploration history in 2005: 1,015m3 trenching, resulting in the identification of mineralized zones. In 2007, prospecting was conducted on this property: 60m tunneling and 2,038 m3 trenching, etc., resulting in the discovery of 23 Ag polymetallic mineralized zones and more than 10 geochemical anomalies. The most significant discovery was that, besides identified massive galena and sphalerite filling veins both on the surface and underground tunnels, the host rocks, being silicified masses, also contain Ag polymetallic sulfides. Geophysical survey suggests the veins may merger underground into a larger target. Tunneling shows increased thicknesses in the mineralized zones Erbahuo Silver Mine Erbahuo silver mine, with an area of 1.2km2, is currently being brought to production. It has a proven Ag mineralization of t (122b+333), grading g/t and (NI ). Exploration history in 2005 and 2006: m drilling (3 holes), 262m tunneling, 2,965 m3 trenching, resulting in the identification of t silver equivalent mineralization (122b+333), bringing the total mineralization to t (122b+333), grading g/t.. An NI report completed by Micromine in July 2007 estimates Erbahuo s mineralization to be 5.3 million ounces of silver (166t Ag). In 2007, prospecting was conducted on this property: 6 km geological, geophysical & geochemical profile and high energy survey, resulting in the identification of further mineralized zones. Erbahuo used to be considered a Ag-Mn mine in a fracture zone. In recent years, however, the features of strata bound Ag deposits have been discovered suggesting the potential for further discovery. A metallurgic test has been recently completed. The ore treatment process in the test is: Mn leached out by SO2 Ag leached out by cyanide, resulting in a silver recovery rate of 89.2% and a manganese recovery rate of 59.69%. In 2008 further study will be conducted on the economics of the deposit, with the goal to identify more mineralization and ultimately bring the project into production. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 7 ~

8 2. Regional Map With Project Locations Figure 1 - Regional Map With Project Location The Regional Project Locations map shows the locations of the Northern China properties of Silver Dragon (please notice the number in the yellow box showing each property s location), and also presents adjacent properties such as Youfangxi, Bairendaba and Dajing Silver Mines which are not owned by Silver Dragon Resources Inc. Relevant characteristics of these adjacent properties are as follows: Silver Dragon Resources Project Summary - Dadi, Northern China ~ 8 ~

9 2.1 Youfangxi Ag Polymetallic Deposit (Not Owned By Silver Dragon) Youfangxi Ag Polymetallic Deposit is an Ag-Cu-Mo-Pb-Zn deposit with associated Au; located 5 kilometers away to the south of Erbahuo silver mine (see Figure 1). Youfangxi is on the same geological belt with volcanic rock and mineralization. The deposit is closely associated with latent volcanic hypabyssal intrusions. Mineralization is mainly associated with sericitization, pyritization, silicification, and carbonatation. The main fracture zones or hidden broken breccia bodies contain mineralization of silver, lead, zinc, copper, etc. The wider identified mineralization belt is 4,000 meters long and 600 meters wide, composed of three parallel mineralized belts. The estimated mineralization ( ) of I-1, I-2, I-3, and I-4 ore bodies in the No. 1 mineralized belt are respectively: Ag t (average grading 171.4g/t), Pb 14,709.24t (average grading 1.69%), Zn 26,947.62t (average grading 2.15%), Cu 3,265.48t (average grading 0.71%), Mo t (average grading 0.11%). 2.2 Dajing Ag Polymetallic Deposit (Not Owned By Silver Dragon) The Dajing Ag polymetallic deposit is located in the Linxi-Keyouqi anticline (see Figure 1). The south-eastern side of the anticline is comprised of the Huangganliang - Ganzhuermiao anticline, on one side of which is a secondary syncline, the Linxi-Taohaiyingzi reversed syncline, where Dajing mine is situated. The strata mainly consist of clastic rock formed by land and sea interactions during the Permian period (P2). Various sized anticlines striking NE and related faults developed in the mine area. Mineralization mainly occurs in the south-eastern side of the Sangmugou-Guandi reversed syncline. No sign of developed igneous rock is seen in the area. The mine area can be divided into four stratum (P2L11-P2L4), comprising mainly siltstone; then clay siltstone; fine to mediumgrained greywacke; and intermittently marlstone. The strata are 2,238 meters thick. The strata lithology and lithofacies control the mineralization. The fine sandstone and the siltstone that contain fine sand are silicified with copper, tin and silver alterations. The siltstone and clay siltstone mainly contain lead, zinc, and silver mineralization. Alterations are mainly carbonate and chloritization. The ore bodies occur in the fracture zones between the strata. The ore bodies strike at , dipping at angles (predominantly ). A total of 240 potentially economic ore lodes have been identified in the mine area of 5km2. The ore zone is meters long and over 600 meters deep; depth of the ore zone exceeds the strike length. Multiple-vein ore bodies are common and single-vein-dissemination-type ore bodies are rare. The ore exists in the form of sulphides. Silver exists in the form of independent silver ore, and isomorphically with small amounts of microscopically dispersed chalcopyrite, galena, pyrite and sphalerite. The ore is made up of primarily chalcopyrite, pyrite, cassiterite, marmatite, galena and various silver minerals, and the host rock consist ofs quartz, carbonate minerals, chlorite, sericite, etc. The ore structures are mainly automorphic-semi-automorphic, xenomorphic, melt and solid separation, and fragmentation filling. Remnant crystals and colloidal textures are common. The ore formations are mainly veins, ribbons, and blocks. Exploration of the Dajing mine area began in the 1950s. General exploration from 1983 to 1993 focused on an area of 6.2km2, and detailed exploration was conducted in the eastern part of the area. The work included drilling 20,652 meters, tunneling over 1,000 meters, trenching 11,853m3, and laboratory analysis of 7,499 samples. Standard D (superseded Chinese classification system) mineralization is 42,237,000t ore, for 176,000t, of 2.55%; for 80,000t of 0.38%; for 183,700t 2.01%; for 1,018,300t 3.66%; for 1,452.36t 128g/t; and gold grading 0.11g/t. In ore treatment tests, the recovery rates for lead, zinc and silver are 87.55%, 89.14% and 86.2%, respectively. The ore comprises sulfides, which are easy to process with integrated recovery. According to Chinese nomenclature Dajing is a super-sized Ag-Cu-Sn polymetallic deposit. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 9 ~

10 2.3 Bairendaba Ag Polymetallic Deposit (Not Owned By Silver Dragon) Bairendaba silver polymetallic deposit is located in the ore forming belt of the Great Xinganling Mountains in Keshiketeng County, Inner Mongolia, consisting of Bairendaba mining area and Weilasi mining area (see Figure 1). The Bairendaba mineralized ore body (Ag, Pb and Zn mainly) strikes EW and then NW-W. It occurs in quartz diorite rocks and Proterozoic gneiss that are from Yanshanian granite (Beidashan rock body) external contact. 27 ore bodies have been identified, among which No. I, II and III are larger in scale. No. I ore body is 1400 meters long, meters along dip and meters thick. Silver average grade is 331 g/t, Pb+Zn is 4.69%. No.1 ore deposits are 1,811,800t at present and silver deposits are t. No.II ore body is 690 meters long, 1.77 meters thick on average, where silver averages 25g/t and Pb averages 1.43%. No.III ore body is 270 meters long, 1.94 meters thick on average, where silver averages 125 g/t with lead grading up to 3.25%. In Weilasituo mining area, 3 ore bodies have been identified, among which No. I and III are larger in scale. No. I ore body, indicated by 9 trenches, is 830 meters long, and 1.78 meters thick on average. Metals through this zone average 137 g/t Ag, 0.63% Pb and 0.32% Zn, while Cu mineralization occurs in various areas. No. III ore body, indicated by 2 trenches, is 100 meters long and 1 metre thick. Silver average grade is 97.0 g/t, Pb 0.03% and Zn 0.63%. Currently estimated mineralization of silver in Bairendaba deposit total 1,100t, constituting a large silver mine. 2.4 Huanggangliang Fe-Sn Deposit (Not Owned By Silver Dragon) Iron ore mineralization of 110,000,000 tons and tin metal of 447,000 tons have been identified in Huanggangliang Iron-Tin Deposit, which is the largest Fe-Sn polymetallic deposit north of the Yangtze River. The present production scale of iron mill is 600,000tpy. Currently a processing project of 1,000,000tpy iron ore is under construction, and another processing project of 1,000,000tpy iron ore is in the plan. With 30-50% Fe and % Sn, the deposit is highly economical. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 10 ~

11 3. Geology And Mineralization Zones In Dadi The Dadi Silver Project property is km 2. The exploration work conducted so far included geological mapping; geochemical and geophysical survey; geological, geophysical, and geochemical profiling; and trenching. Up to now, several significant zones Ag-Pb-Zn mineralization has been found by surface trenching. 3.1 Geological Features Of Dadi Geological Setting The Dadi property, of Silver Dragon, is located on the structural join where the north edge of the North China platform (E- W strike) meets with the south edge of the Hercynian fold belt (NE strike) of the Great Xingan (a.k.a. Daxingan) Mountains. These two structural belts are also two major ore-forming belts of China. This entire tectonic setting provides a dynamic geologic environment for the development of mineralizing systems. During Mesozoic epoch, strong continental volcano-magmatic activities took place along NE main structural belt to form huge Butelaqi-Duolun volcanic zone, in which series volcanic fault basins with NE strike developed. The Dadi property is located in southeast margin of a volcanic fault basin, i.e. Toudi-Liudiguo Jurassic volcanic basin (Fig. 2). Figure 2 - Sketch regional geological map of Dadi Q- Quaternary; J 3 S - Upper Jurassic Baiyingaolao Formation third and second member; J 3 Upper Jurassic Baiyingalao Formation first member; P 2 l Upper Permian Lingxi Formation; γ 3 5 Late Yangshanian granite; λπ Rhyolitic porphyry dike Based on the regional geological map, simplified and modified. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 11 ~

12 3.1.2 Stratigraphy The Upper Jurassic volcanic-sedimentary rocks exposed in Dadi is the Baiyingaolao Formation. This formation is trending NE and dipping to NW with dipping angle 50 ~60. It consists of three members (Figure 3 and Table 1). From bottom to top, they are: Figure 3 - Dadi geological map Silver Dragon Resources Project Summary - Dadi, Northern China ~ 12 ~

13 3.1.3 West And East Mineralizes Areas. Southeast Part Of The Dadi Area Fig. 3: West and East mineralizes areas. Southeast part of the Dadi area The West and East mineralized areas are denoted by the red hatched areas in the Figure 3. The geophysical lines are denoted 1-1, 3-3 and 2. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 13 ~

14 Quaternary Baiyingaoloa formation Upper Jurassic Member 1 is fluviolacustrine conglomerate (Fig. 3), sandstone and siltstone, covered by crystal-vitro tuff on the top. This tuffaceous layer has a high geochemical background, especially for silver which runs 6 ppm. Lead and Zn are moderately high with background levels of 0.03% for each. Fig. 4 Purplish red polymictic conglomerate (left) and sandstone (right) Member 2 consists of the first volcanic eruption rhythm, i.e. rhyolitic crystal-vitro tuff in the lower and rhyolitic lava in the upper. Member 3 is composed of welded tuff in the lower and dacitic breccia bearing crystal tuff in the upper, being the second rhythm of volcanic eruption. Thickness Rock description Volcanic eruption rhythms Q 0-20 Soil and residue sediments. Upper part J 3 b 3(i) Light gray to black dacitic breccia bearing crystal tuff. II J 3 b 3(f) Dark purple welded tuff. J 3 b 2(l) Light purplish gray or yellowish white rhyolitic lava. I Middle part J 3 b 2(f) Grayish white rhyolitic breccia crystal-vitro tuff. J 3 b 1(t) 52.0 Light gray filsitic crystal-vitro tuff. Lower part J 3 b 1 >300.0 Purplish red polymictic conglomerate, sandstone, tuffaceous sandstone, and argillaceous siltstone. Table 1 - simplified stratigraphy of Upper Jurassic Baiyingaolao Formation in Dadi Silver Dragon Resources Project Summary - Dadi, Northern China ~ 14 ~

15 3.1.4 Structure Occurrence of the Baiyinggaolao formation is a monocline pattern in Dadi area. Faults in the area are divided into two groups. The first group is NE strike and consists of F 1, F 2 and F 3 faults, being parallel to each other (Fig. 3). The NE strike faults are early formed and contemporaneous faults with the formation of Jurassic volcanic fault basin. The second group is NW strike and featured by near vertical structural breccia zone and groups of fractures, being en echelon arrangements. The breccia zone or fracture group is 0.45 ~ 2m wide and 30 ~ 80m long. They have obvious structural planes and associated silicification, limonitization, sericitization, chloridization, and, in some places, epidotization. NW trending structures cut the mineralized volcanic strata. Based on current study, it is believed that they are post-mineralization structure Magma The magmatic rocks are exposed in the west part the Dadi area. Igneous intrusions are Late Yanshanian (Late Mesozonic) coarse granular K-feldspar granite and medium to fine granular K-feldspar granite. The contact zone between granite and Jurassic volcanic strata is composed of hornfels (Fig. 3). Silver Dragon Resources Project Summary - Dadi, Northern China ~ 15 ~

16 3.2 Dadi Geological Map With IP Profiles Figure 4 - Dadi Geological Map with IP Profiles Silver Dragon Resources Project Summary - Dadi, Northern China ~ 16 ~

17 3.3 Dadi Geological Map With Apparent Resistivity Profile Figure 5 - Dadi Geological Map with Apparent Resistivity Profile 3.4 Soil Element Anomaly Figures 7, 8, and 9 show the results of geochemical survey of Ag, Pb, Zn in soil sample respectively, using the original assay results. The background level for silver in the soil is 0.1 ppm. Anomalies of Ag are plotted out by 0.2 ppm, 0.3 ppm, 0.5 ppm and 1.5 ppm isolines (Fig. 7). Two large Ag anomalies, with highest value (>3.5 ppm), are located in the adjacent and north of the mineralized areas. It possibly indicates the NNE direction extension of east and west mineralized areas. Other smaller anomalies may reflect new targets in soil covered areas. The background level of Pb in the soil is 10 ppm, while values as high as 200 ppm were recorded. In figure 8, two Pb anomalies are illustrated, which are coincident with the larger Ag anomalies. Background soil Zn levels is 40 ppm, while values over 200 ppm were obtained from the survey. The distribution pattern of Zn anomalies is more widespread, however, it is coincident with both the Ag and Pb anomalies. Two major anomalies are NE trending and show possible extension lengths of mineralization zones. Metal element anomalies in soil are influenced by topographic features in Dadi property. The whole district is in an intermediate mountainous location with elevation from 1200 to 1600 metres. The relative topographic differences reach 200 ~ 400 metres. Generally, the major anomalies are located within topographic low areas, which may suggest transport. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 17 ~

18 3.5 Dadi Geological Map With Ag In Soil Anomaly Figure 6 - Dadi Geological Map with Ag in Soil Anomaly Silver Dragon Resources Project Summary - Dadi, Northern China ~ 18 ~

19 3.6 Dadi Geological Map With Pb In Soil Anomaly Figure 7 - Dadi Geological Map with Pb in Soil Anomaly Silver Dragon Resources Project Summary - Dadi, Northern China ~ 19 ~

20 3.7 Dadi Geological Map With Zn In Soil Anomaly Figure 8 - Dadi Geological Map with Zn in Soil Anomaly Silver Dragon Resources Project Summary - Dadi, Northern China ~ 20 ~

21 3.8 Geological Cross Section Of Dadi Figure 9 - Geological Cross Section of Dadi The position of this A-A geological cross section is on the Geological Map with Properties. At the right bottom of the map, the west mineralized area and the east mineralized area are labeled. The upper part of the map show the results of geochemical and geophysical profiles, which show that the anomalies coincide with related volcanic strata. The mineralization, identified by trenches and shallow shafts, consist of two mineralized areas, i.e. the west mineralized area, consisting of mineralization zones from No. I to No. IX; and the east mineralized area, containing mineralization zones from No. X to No. XV. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 21 ~

22 4. Mineralized Areas And Mineralization Zones 4.1 Distribution of mineralized areas and mineralization zones Ground prospecting at Dadi identified two areas of significant mineralization. These discoveries were subsequently followed up with additional geochemical and geophysical surveys. These two areas of mineralization are separated approximately 300 m from each other and host multiple near parallel mineralization zones (Figs.11 and 12). Figure 10 - West and East mineralized areas in Dadi The West Area hosts 9 mineralized zones, i.e. from I to IX (Fig 11); and the East Area hosts 6 mineralized zones, i.e. from X to XV (fig. 12). Highlights from the surface discoveries include the following: West Area highlights (surface trench data): 25.3 metres averaging g/t Ag, 2.56% Pb and 0.26% Zn 2.80 metres averaging g/t Ag, 2.50% Pb and 0.58% Zn East Area highlights (surface trench data): Averaging g/t Ag, 5.85% Pb and 0.82% Zn Averaging g/t Ag, 3.11% Pb and 2.03% Zn Within the West Mineralized Area, surface trenches revealed nine (I IX) parallel Ag-Pb-Zn zones with total cumulative thickness of 66.2 metres. This may increase as Zone IX ends in in 465 g/t Ag, 2.7% Pb and 0.40% Zn (see Fig 11). Within the East Mineralized Area, surface trenches revealed six (X XV) parallel Ag-Pb-Zn zones with total cumulative thickness of 20.3 metres. However, the trenches were orientated sub-parallel to the mineralization and thus the cumulative thickness is likely to change when perpendicular trenches are completed. In figure 13, weighted average grades of Ag, Pb, Zn with related sample width of each mineralization zone are presented. Since the trenches completed so far cannot control actual thickness, the width of each mineralization zone is roughly estimated based on trenching sample assay results, occurrence of volcanic strata, surface alteration investigation, distribution patterns of geophysical anomaly and geochemical anomaly. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 22 ~

23 4.2 Dadi Map With West Mineralized Area Figure 11 - Dadi map with West mineralized area Notes: In the assay results table, DTC means ordinary trench and samples were collected at the bottom of trench along main trench line; DQJ means shallow shaft, i. e. deep trenching with 3-5m deep and about 2m in diameter along main trench line, and the samples were collected vertically from near surface to the bottom, in order to test possible un-oxidized mineralization, see table 1-1; DBT means wide trench (about 6 m wide surface soil were moved out), samples were collected sideway, i.e. perpendicular to main trench line, in order to test the trend of mineralization zone. DQJ and DBT samples positions in tables that show the same numbers (from meters to meters) mean sampling along vertical or perpendicular directions. The thickness of each mineralization zone was calculated by sample lengths, being along main trench line. The weighted average grades were calculated by all qualified sample grade data without considering sampling directions. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 23 ~

24 4.3 Dadi Trench Map With East Mineralized Area Figure 12 - Dadi trench map with East mineralized area Note: In assay result table, DQJ means shallow shaft, i. e. deep trenching with 3-5m deep and about 2m in diameter along main trench line, and the samples were collected vertically from near surface to the deep, in order to test possible un-oxidized mineralization. In the map, each mineralized zone has weighted average grade with related sample length; the width of red gridding represents inferred thickness of mineralization zone. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 24 ~

25 4.4 Trench Versus Shallow Shafts At Dadi. Four shallow shafts were dug at Dadi to ascertain the nature of the mineralization and levels of deeper in the system. The image below (fig 12b) illustrates the four deeper shafts at Dadi. In all cases these deeper shafts, which are 2 metre diameter pits between 3 and 5 metres deep, are with the main trench cutting the mineralization. Shaft DQJ01 is located within zone VI Shaft DQJ02 is located within zone VII Shaft DQJ03 is located within zone IX Shaft DQJ05 is located within zone XII Figure 12b. Location of the four shallow shafts at Dadi. Shallow shafts in this case are deeper trenches dug 3-5 metres with a diameter of about 2 metres and within the main trench area. In all cases the deeper dug shafts recorded higher metals values than the trench on average, suggesting the there is potential for higher grades in the subsurface. The table below illustrates the metal levels between the deeper and shallower samples. Table 1-1 Comparison of trench sampling assay results versus shallow shaft sampling assay results Zone Project No. Depth of sampling position Weighted average Ag(g/t) Pb(%) Zn(%) VI DTC011(trench) DQJ01(shallow shaft) VII DTC012(trench) DQJ02(shallow shaft) IX DTC013(trench) DQJ03(shallow shaft) XII DTC024(trench) DQJ05(shallow shaft) Silver Dragon Resources Project Summary - Dadi, Northern China ~ 25 ~

26 Within the mineralized areas, main alterations of host rocks are silicification, sericitization, fluoritization, and limonitization. Limonitization is the most common and well developed alteration (Figs. 14). As illustrated in figure 13 the surface is heavily oxidized and thus, the boundary of mineralized zones is only identified by assaying. Surface rocks exposed in trenches of the West Area are more oxidized than the East mineralized area. Figure 13 - Mineralized zone No. II revealed by trench No Note the trench program sampled relatively shallow surface exposures of highly oxidized material. The deeper shafts, thus, provide a less oxidized sample which is believed to be more representative of the potential in the subsurface. Figure 15 - Mineralization zone No. XIII in trench DTC25-1 Figure 14 - Mineralization zone No. XII in shallow shaft DQJ05 Silver Dragon Resources Project Summary - Dadi, Northern China ~ 26 ~

27 4.5 Features Of Mineralized Rocks (1) Mineralized rocks (Ag-Pb-Zn polymetal ores) in West mineralized zones have massive structure and granular texture. Heavy oxidized rock is featured by limonite with sulfide inclusions. The samples collected from a deep trench show that metal minerals consist of galena, limonite, magnetite, pyrite, minor chalcocite, chalcopyrite; and electrum and native gold fine grains were observed in a few thin sections. Among metal minerals, disseminated anhedral galena grains and assemblage of limonite are common, and magnetite, pyrite, chalcocite and chalcopyrite are minor and occur as inclusions of limonite or in unoxidized gangue minerals. Gangue minerals are quartz and carbonates. Table 2 shows chemical composition of mineralized rocks (ores). Sample SiO 2 Al 2 O 3 Fe 2 O 3 CaO MgO K 2 O Na 2 O MnO TiO 2 FeO P 2 O 5 LOI Total number DQ DQ DQ Table 2 - Chemical composition (wt. %) of mineralized rocks in West mineralized area (2) Mineralized rocks (ore) in East mineralized zones are characterized by galena, sphalerite, limonite, pyrite and minor chalcocite and electrum. Galena and sphalerite are disseminated anhedral grains, in some cased they can consist of very fine veins. Gangue minerals are quartz and chlorite. Sample SiO 2 Al 2 O 3 Fe 2 O 3 CaO MgO K 2 O Na 2 O MnO TiO 2 FeO P 2 O 5 LOI 量 total number DQ Table 3 - Chemical composition (wt. %) of mineralized rocks in East mineralized area From the above analysis, it can be seen that the mineralization is strongly related with Jurassic volcanic rocks. Occurrences of the mineralized zones are coincident with that of volcanic strata. The near surface mineralized rocks (ores) contain primary sulfides of lead, zinc, and silver. The higher grades recorded from samples collected in deep dug trenches, suggests that the potential is there for higher grades in the subsurface. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 27 ~

28 Depth 4.6 High Energy Induced Polarization Distance η S (%) 视极化率 视电阻率 apparent chargiabiality (η s-- %) apparent resistivity ( ρ s - Ω.m) Figure 16 - High Energy Induced Polarization This image depicts the contour section of apparent chargeability (η s-- % ) and apparent resistivity ( ρ s Ω.m) of line a by high energy induced polarization profiling A in Dadi exploration area Y axis --- depth of the profile by altitude ; X axis --- distance of measurement line The results reveal that the deep part of the east mineralization zone contains strong geophysical anomalies, reaching over 700 meters below the surface. The Ag-Pb-Zn mineralization may have great depth and provides the direction for a future drilling program. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 28 ~

29 5. Geophysical Survey Results On the Dadi Silver Property, geophysical work included three aspects: (1) central gradient array induced polarization linear detection; (2) central gradient array induced polarization area detection; and (3) induced polarization sounding (profiling). Combining all geophysical techniques, the size and distribution manner of anomalies, believed to be caused by mineralization, can be revealed. Electrical parameters of different rocks, including volcanic rock series and granite intrusion, were measured in the laboratory and the results are listed in Table 4. Rock name Number of samples ηs(%) ρs(ωm) Max. Min. average Max. Min. average Coarse and medium granular granite hornfels Purplish red polymictic conglomerate, sandstone, tuffaceous sandstone, and argillaceous siltstone Grayish white rhyolitic breccia crystal-vitro tuff Light purplish gray or yellowish white rhyolitic lava Greyish black dacitic crystal tuff Dark purple dacitic welded tuff Light gray felsitic crystal-vitro tuff Table 4 - Electrical parameters of different rocks in Dadi From the measurement results, it can be concluded that the electrical property contrast among different rocks in Dadi is not very big. Each group of rock samples gives pretty large ranges of polarization and resistivity values. However, these data can still provide important information that dark purple dacitic welded tuff, including its altered and mineralized rocks, is characterized by low resistivity (ρs Ωm,averaging 783Ωm) and relatively high polarization (ηs %,averaging 3.04%) ; while light grey felsitic crystal - vitric tuff, including its altered and mineralized rocks, is featured by medium resistivity (ρs Ωm,averaging 1636Ωm) and medium to relatively high polarization (ηs %, averaging 2.22%). Geological prospecting works prove that these two kinds volcanic rocks are major mineralization hosting rocks and their electrical parameters can be used as the fundamentals for further geophysical exploration. Figure 18 shows a geological cross section A-A with results of geochemical and geophysical survey. It can be seen that geophysical anomalies with high chargeability (ηs >2%) and relatively low resistivity ( Ωm> 1000) are coincident with volcanic strata. In addition, the volcanic strata are also featured by obvious Zn, Pb and Ag anomalies. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 29 ~

30 5.1 Dadi A - A Comprehensive Geological Section Map Figure 17 - Dadi A - A Comprehensive Geological Section Map (A-A geological cross section with geochemical (top part) and geophysical (middle part) detection results) From geophysical measurement point no. 70 to 110 (about 260m long), this interval presents high chargeability and low resistivity, and several geochemical samples have high metal contents ( Pb>1000ppm, Zn>1000ppm, Ag> 30ppm). These anomalies are related to the Baiyingaoloa Formation third member, i.e. grayish black and dark purple dacitic welded tuff and rhyolitic tuffaceous lava, in which mineralization zones No. I, II, III, IV are hosted. From geophysical measurement point no. 110 to 120 (about 120 m long), this interval presents medium chargeability and medium resistivity, metal contents change greatly with high values Pb > 1000ppm, Zn> 1000ppm, Ag > 30ppm. The related volcanic rocks are purplish red sandstone and conglomerate with interlayers of light gray crystal vitric ruff, in which mineralization zone No. XII, XIII, IX are hosted. From geophysical measurement point no. 120 to 190 (about 400m long), this interval presents high chargeability, varied resistivity, and many samples show elevated metal contents. The related volcanic strata host mineralization zones of the east mineralized area. Based on these analyses, it can be inferred that the mineralization is related to volcanic activities, and west mineralized area and east mineralized area are identified initially. Area geophysical survey was made to detect the lateral extension of the mineralized areas and the results are shown in Fig. 19 and 20. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 30 ~

31 5.2 Dadi Geological Map With IP Profile Figure 18 - Dadi geological map with IP profile It can be identified that high IP (apparent polarization anomalies), ranging from 2% to 4% (ηs) are well coincident with volcanic strata (Fig. 11 and 12). In general, the IP anomalies are NE trending, which is the same as the volcanic strata. The lateral extension of the IP anomalies reach about 1000 m long and 200m wide (IP-1) in west mineralized area and about 900m long and 320m wide (IP-2) in east mineralized area respectively. This may indicate a potential lateral size of mineralized areas. In addition, the highest chargeability values and larger lateral extension occur in the east mineralized area and may indicate the east mineralized area has stronger mineralization potential than the west mineralization area, even though the current discovery of surface mineralization by limited trenches in east mineralized area is smaller. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 31 ~

32 5.3 Detailed IP Anomaly Distribution IP-2 IP IP IP-4 η s% 0 250m Figure 19 - Detailed IP anomaly distribution map in south part of Dadi area Silver Dragon Resources Project Summary - Dadi, Northern China ~ 32 ~

33 5.4 Dadi Geological Map With Resistivity Profile Figure 20 - Dadi geological map with resistivity profile Figure 21 shows distribution of resistivity anomalies in Dadi area. It should be noticed that in the west mineralized area, an area with low resistivity (< 500 Ωm) is well coincident with the mineralization zones. Like IP anomalies, resistivity anomalies (<1000Ωm) have NE strike and show significant lateral extension. Low resistivity may be caused by mineralization, it is a clue to infer lateral extension of west mineralized area. In contrast, in the east mineralized area, resistivity is relatively high (>1000Ωm), but the polarization anomaly is significant, which is also an important clue to infer lateral extension of mineralized area. To detect possible dipping depth of mineralization zones, three induced polarization sounding lines were carried out. Their positions are illustrated in figure18. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 33 ~

34 5.5 Geophysical Sections Of Measuring Line 1-1 In Dadi 激电测深 1 线视极化率拟断面图 激电测深 1 线视电阻率拟断面图 H AB/ Y: X: H AB/ H AB/ Y: X: H AB/ Figure 21 - Geophysical sections of measuring line 1-1 in Dadi (Left is chargeability profile and right is resistivity profile.) Measurement line 1-1 is along trench TDC021 and 250m long with 14 measuring points. The induced polarization anomalies (ηs>2%) reach about 600 m below the surface, while low resistivity (>1000Ωm) anomalies could reach 400m below the surface. Measurement line 3-3 is along trench TDC013 which perpendicular to 1-1 line and 300m long with 16 measuring points. The induced polarization anomalies (ηs>2%) reach more than 700 m below the surface, while low resistivity (>1000Ωm) anomalies could reach 500m below the surface. These two geophysical measurement lines cover the center part of the west mineralized area and hosted all mineralization zones. The results of these profiles provide important clue that (1) the geophysical anomalies, possibly caused by mineralization, extend to considerable depth; and (2) the high polarization anomaly with low and relatively low resistivity anomaly to depth may be caused by mineralization, and (3) considering the lateral extension of surface geophysical anomalies (Fig. 19), the size of geophysical anomalies are great in three dimensions. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 34 ~

35 5.6 Geophysical Sections Of Measuring Line 3-3 In Dadi 激电测深 3 线视极化率拟断面图 激电测深 3 线视电阻率拟断面图 H AB/3 y: x: H AB/3 H AB/3 y: x: H AB/ ηs % Ωm Figure 22 - Geophysical sections of measuring line 3-3 in Dadi (Left is chargeability profile and right is resistivity profile.) The measurement line 2-2 is located in the east segment of A-A geological cross section (Fig. 19), and crosses the east mineralized areas. It is 580m long and contains 30 measurement points. Figure 24 shows the distribution of induced polarization anomalies in depth. The high induced polarization anomalies have higher intensity (chargeability values reach 4% ηs and more than 4%) than that in line 1-1 and line 3-3 (ηs < 4%), and the anomalies reach 700 m below the surface. The resistivity anomalies (Fig. 21) reach about 400m (for <1000Ωm part) and 500m (for <2000Ωm part). To summarize the analysis mentioned above, geophysical survey provides evidence that geophysical anomalies are related to certain volcanic strata which are known to host the surface mineralizated zones, have the same lateral distribution strike as volcanic strata, and show great extensions both laterally and vertically. The data above shows the geophysical anomalies, if caused by mineralization, have significant size potential. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 35 ~

36 5.7 Geophysical Sections Of Measuring Line 2-2 In Dadi 激电测深 2 线视极化率拟断面图 H AB/3 H AB/ y: x: 低极化区 极化异常区 Figure 23 - Geophysical sections of measuring line 2-2 in Dadi 700 (Induced polarization anomaly profile) 激电测深 2 线视电阻率拟断面图 H AB/3 H AB/ y: x: 高电阻区 Figure 24 - Geophysical sections of measuring line 2-2 in Dadi 700 (Resistivity anomaly profile) Silver Dragon Resources Project Summary - Dadi, Northern China ~ 36 ~

37 6. Geochemical Survey Results The Dadi property is located in the southwest segment of Daxingan mountains, being m elevation. Quaternary sediments cover about 70% of the working area, and the exposed rocks are Jurassic Baiyingaolao Formation avulianlacustic sandstones and conglomerate, and acid-intermediate volcanic rock series. In 2007, systematical geochemical survey carried out in a 5.25km 2 area with four geological, geochemical and geophysical comprehensive measurement lines (5150m). A total of 1005 soil (B level of soil, Fig. 26) and rock samples were collected. Figure 25 - Collecting soil samples in the field All samples were analyzed by emission spectrometer. Statistic work was done to figure out the cutoff value of anomaly of Ag, Pb and Zn for soil and rock samples separately. Silver Dragon Resources Project Summary - Dadi, Northern China ~ 37 ~