Kalimantan Gold Corporation Limited

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1 Kalimantan Gold Corporation Limited BAROI PROSPECT Far Eastern Zone High-Grade Copper Silver Gold October 2003

2 Baroi Prospect Far Eastern Zone High-Grade Copper Silver Gold Introduction Today KGC have a 30-man team undertaking an intense scout and exploratory drilling program on its Baroi prospect. Eight holes have been completed and a further 18 holes including six 280 meters holes, are planned for completion by the end of February These will be focused on the exciting Far Eastern Zone (FEZ) where channel sampling has produced exceptional mineralization over an area of 2 x 3 kilometers. Separate site visits by two leading experts on Pacific Basin porphyry systems confirm the highly prospective nature of the FEZ, which displays the key geological signatures associated with major porphyry deposits throughout the world. KGC views Baroi as processing the indicative potential to yield a major economic deposit, with copper, gold and silver being the predominant minerals. This report outlines the geological setting and exploration background, which has lead to the FEZ program. It also outlines the objective of the work to be done and the costs of the program. Prospect Location Kalimantan Gold Corporation Limited has a 75% interest in a 124,000 hectare Contract of Work (CoW) in Central Kalimantan, Indonesia. Baroi is one of its 35 prospects identified within the concession Baroi is located in the Southwest portion of the Contract of Work. The recent completion of logging roads now provides easy access into this previously remote area. Baroi is one full day s travel by speedboat and jeep from the Provincial Capital of Palangka Raya, or 50 minutes by helicopter.

3 Geological Setting Recent work on the Baroi prospect yielded the most extensive and intensive mineralization discovered in the 20 years that KGC has been exploring in this region. No previous prospect has generated such consistent, high-grade assays (gold, copper, silver, lead and zinc) over an area of its size. The Baroi Prospect is presently described by Terry Leach, KGC s consulting geologist and petrologist as a, Gold, Copper, Silver lode extending out to basemetal systems on the margins, above a copper gold porphyry system. This system has hydro thermally altered the country rock over an area of more than 40 square kilometers. Within this area 4 zones of mineralization have been identified. These comprise a Central Copper-Gold- Silver Zone, an East Basemetal Zone, a South Basemetal Zone, and a Far East Copper- Gold-Silver Zone. These zones jointly possess a total size of 6 by 5 kilometers that remains open to the east and south. The Baroi prospect as observed from satellite imagery is in a distinctive circular feature having a diameter of 8 kilometers. The area is thickly vegetated, and the rugged, domelike topography ranges in elevation between 300 to 1,000 meters above sea level. The current program, started in November 2002, was designed to locate the source of boulders, containing high-grade mineralization, that were discovered during early reconnaissance in 1985 and Baroi is transected by ENE-WSW and NW-SE trending regional fault structures. A number of magnetic anomalies, as detected by airborne geophysical surveys, are also located within this area. The mineralization that has been identified over 6 X 5 kilometers is located in the southern portion of the Baroi circular feature. Here, at lower elevations, the rocks are chiefly quartz monzonites, andesite porphyries and granodiorite, while tuffaceous sediments are found at the higher elevations, and surrounding low lands. Alteration features are extensive, complex, and vary from silicification, propylitic, subpropyllitic, phyllic and argillic alteration. Pyrite mineralization is ubiquitous throughout the area, while intense arsenopyrite mineralization is locally associated with elevated gold grades. The dominant feature of the mineralization is however, the copper, gold and silver mineralization associated with veining, stockworks and brecciation.

4 Of the 238 rock and 3 meter channel samples collected to date, 218 or 91.6% of these are considered anomalous in at least one of the 8 elements analysed, i.e. Cu > 500 ppm; Pb > 1000 ppm; Zn > 1000 ppm; Ag > 10 ppm; As > 200 ppm; Sb > 20 ppm; and Au > 0.2 ppm. High grade mineralization has been identified throughout the entire mineralized area with some exceptional results. Sample no. Zone Type Length (m) Cu (%) Ag (gpt) Au (gpt) Pb (%) Zn (%) 229 CZ GF FEZ CH FEZ CH FEZ CH CZ CH FEZ CH FEZ CH CZ CH CZ GO CZ CH SZ CH CZ CH SZ CH Note: C2 Central Zone S2 South Zone FEZ Far East Zone CH = Channel; GF = Float; GO = Grab The high-grade silver assays recovered from throughout the prospect, provide exceptional credit value potential, i.e. 80 gram Ag (silver) = approximately 1 gram Au (gold). Drilling at Central Zone In July 2003, KGC purchased a highly portable scout diamond drill rig. The objective of this was to provide field geologists with a tool that allowed them to quickly test select geological features, in what otherwise is an extremely difficult mountainous jungle terrain, where thick clay over-burdens are predominant. Scout drilling commenced at the high elevations (800 meter ASL) of the Central Zone, where 9 holes ranging between 34 to 85 meters have been completed. Select sections of core have been assayed. All holes returned strongly anomalous values in gold, copper, lead zinc and silver. Some of the better values are listed below:

5 Hole no. Zone Length (m) Cu (%) Ag (gpt) Au (gpt) Pb (%) Zn (%) BC-1 CZ BC-1 CZ BC-3 including CZ BC-4 Including CZ BC-7 CZ BB-1 CZ BB-2 CZ These scout holes indicate that the locations tested are high level and/or distal to a copper porphyry intrusion. The quartz vein structure does display some potential for a small gold deposit. The total strike length between holes BC1 and BB2, which have returned anomalous grades, is 2,050 meters. Within this, a zone 350 meters long by 15 meters wide and greater than 110 meters deep has returned values averaging approximately 2 gpt gold equivalent. This zone remains open to the west, and some work will be undertaken to assess this potential. However, at this time the porphyry potential in the Central Zone remains the primary exploration target. Far Eastern Zone During September both Mr. Bob Burke, the man credited with discovering Newmont s Batu Hijau copper gold porphyry deposit in Sumbawa, Indonesia, and Mr. Terry Leach, a world authority on copper porphyry deposits, visited Baroi on separate occasions. These visits confirm that the FEZ presently displays the greatest potential of producing a large copper silver gold porphyry deposit. This is summarized by Mr. Terry Leach s observations about the FEZ. Exploration activity to date in the southern portions of the Baroi prospect has encountered a number of features that are very encouraging for the discovery of a significant porphyry copper-gold system, especially in the Far East Zone. These features include: 1. Intersection of a pronounced circular feature that is intersected by regional structures or Lineaments, i.e. large fault lines (at surface) which reveal the hidden architecture of the rock basement.

6 2. Strong magnetic indications from the aero magnetic data that are common to most copper porphyry deposits. 3. The presence of a diatreme a general term for a volcanic vent or pipe. Diatremes are associated with many porphyry copper systems in the Philippines and Papua New Guinea, as well as at Batu Hijau on Sumbawa Is., Indonesia. 4. The presence of a high level dacite porphyry intrusion. This type of rock commonly hosts economic copper deposits in the region. 5. Silicification and advanced argillic alteration rocks with high silica content indicate the presence of a necessary alteration feature. These characterise the upper margins of economic porphyry copper-gold systems such as Batu Hijau. 6. Metal rich veins are metal rich with the presence of many gossans which are indicative of underlying minerals. These metals are zoned copper-gold-silver to peripheral lead-zinc silver from a centre located in the Far East Zone (FEZ). 7. A vegetation anomaly on the FEZ ridge is similar to that encountered at Beruang, Batu Hijau and Wafi River porphyry system in PNG. 8. Multiple intrusions emplaced at the margin of a large pluton, ie, the mineralizing rocks at Baroi lie at the contact with granodiorite basement, a location common for copper porphyry deposits. Perhaps the most impressive feature of the Far East Zone is the amount of metals produced by the mineralizing system. Veins and structures containing massive mineralization can be found over an area 2000 X 3000 meters. This is quantified by the following channel samples collected from within this area: Length (m) Cu (%) Ag (gpt) Au (gpt) Pb (%) Zn (%)

7 Far Eastern Zone Work Program Objective To identify, as soon as feasible, high grade copper, silver, gold mineralization to depths of 280 meters. If successful results are achieved, a drill program to depths of 600 meters will be designed accordingly. Details of Program A broad, geochemical sampling program is presently under way at both the FEZ and MZ. Wall rock samples will be collected from available outcrops every 100 meters, while high-grade veins will be sampled separately. The objective of this systematic approach is to determine background mineral values that will be used as vectoring data, in targeting the mineralized porphyry intrusions. Existing assays of wall rock material have returned values of 0.33% Cu, 5.0 gpt Ag, 0.06 gpt Au, which are considered most encouraging background values, considering the weathered nature of the rock sampled. Pima samples for alteration analysis will also be collected, to quickly provide an accurate alteration map of the prospects. Detailed analysis of airborne magnetic data and landsat imagery for structure interpretation is presently in progress. A scout drilling program at more than 12 locations, in the FEZ will commence in mid- October. The diatreme, silica cap, silica sand, plus several quartz vein and gossanous zones will be targeted to develop a comprehensive geological model of the FEZ. Based on results of the above work, a drilling program is planned to commence in early January. Six holes using the company s 280 meter, portable diamond drill, will test select locations. Note: Whilst the program is focused on the FEZ, both the Main and South zones are excellent porphyry exploration targets and some surface mapping and sampling will continue at these targets. In addition drill core from the Mansur Prospect will be reassayed. If consistently high gold assays from the core can be established, a follow up

8 drill program will be designed to re-evaluate the Mansur prospect as a gold deposit, instead of a copper porphyry deposit. Mr. Phil Hellman, an expert in the treatment of nugget effect on ore bodies, has provided advice on how to deal with large particles of gold in the Mansur drill core. Original drill core at Mansur produced some extremely erratic gold results, a problem that untill now has not been fully addressed. Budget (in U.S. dollars) Scout Drilling FEZ (12 hole plus) $ 60,000 Diamond Drilling Program FEZ (6 holes) 72,000 Equipment and Spares 45,000 Geological Services (airmag/satellite image interpretation) 15,000 Assays and Pima 15,000 Total 207,000 Main Zone mapping sample 10,000 Canadian overhead 36,000 Contingency 20% 62,000 Grand total $ 304,000 Work Program Schedule Geochemical, Pima Sampling (FEZ, MZ) Geological Mapping netic/ Satellite image interpretation Scout Drilling FEZ 12 hole (plus) Drilling Program FEZ 6 holes Oct Nov Dec Jan Feb

10 LEGEND : Meters Silica Ledge Gossanous Outer Propyllitic Propyllitic - Subpropyllitic Argillic Aeromagnetic Anomaly B3 CENTRAL B2 EAST B4 High Low Mineralization Zone Fault Camp River and Creek FAR EAST B1 SOUTH Low High B5 PT. KALIMANTAN SURYA KENCANA ALTERATION MAP BAROI PROSPECT CENTRAL KALIMANTAN INDONESIA

11 Meters LEGEND : Silica Ledge Gossanous Breccia Volcaniclastic Andesite Andesite Porphyry B3 CENTRAL EAST B2 B4 High Low Dacite Monzonite Sediment Unit (silttone and sandstone tuffaceous and calcareous) Granodiorite Aeromagnetic Anomaly Mineralization Zone B1 SOUTH Low High FAR EAST Fault Camp River and Creek B5 PT. KALIMANTAN SURYA KENCANA GEOLOGY MAP BAROI PROSPECT CENTRAL KALIMANTAN INDONESIA

A FIELD EVALUATION OF THE BAROI PROSPECT, CENTRAL KALIMANTAN PREPARED FOR TERRY LEACH SEPTEMBER 2003

Terry Leach & Co Exploration Geologists, Petrologists and Consultants A FIELD EVALUATION OF THE BAROI PROSPECT, CENTRAL KALIMANTAN PREPARED FOR P. T. K ALIMANTAN SURYA KENCANA BY TERRY LEACH IN SEPTEMBER