KALIMANTAN GOLD CORPORATION LIMITED JELAI DRILLING PROPOSAL

Transcription

1 KALIMANTAN GOLD CORPORATION LIMITED JELAI DRILLING PROPOSAL Jelai Gold Prospect KP Application Area Northeast Kalimantan, Indonesia Kalimantan Gold Corporation Limited Unit Marine Drive White Rock, B.C. V4B 1E6 Canada Phone: Fax: Prepared by: Bradley Wake Consulting Geologist, Exploration Kalimantan Gold Corporation Limited Jalan Teuku Umar 32A Palangkaraya Kalimantan Tengah, Indonesia Phone: +62(536)30632 Fax: +62(536)29187

2 TABLE OF CONTENTS TABLE OF CONTENTS... I INTRODUCTION... 1 GEOGRAPHICAL SETTING...1 GEOLOGICAL SETTING...1 ACCESS...2 REGIONAL GEOLOGY...2 PREVIOUS EXPLORATION...3 DRILLING PROGRAMS...5 SUMMARY...5 INTRODUCTION...5 GEOLOGY...6 GEOLOGICAL MODEL...6 DRILLING RESULTS... 8 MEWET VEIN...8 TABLE NYABI-ADAU VEIN...9 SEMBAWANG VEIN...10 LIPAN VEIN...10 CONCLUSIONS List of Maps and Sections Photo 1 : Fragments of Quartz Photo 2 : Colloform Banded Quartz Photo 3 : Float Sample of Crustiform Banded Quartz Vein Photo 4 : Sample of High Grade Ore Photo 5 : Chalcedonic Quartz Vein Figure 1: Kalimantan Tectonic Setting Map Figure 2: Mewet Jelai Location Map Figure 3: Mewet Jelai Drill Hole Location Map Figure 4: Soil Geochemistry for Au ppb Map Figure 5: Mewet Vein Cross Section N I

3 INTRODUCTION Kalimantan Gold Corporation Limited has an application for a SIPP or a temporary exploration permit covering 13,870 hectares over an area known as the Jelai Mewet Project, in the Bulungan Regency, North Eastern Kalimantan. This area was previously subject to a 6 th Generation Contract of Work (CoW) held by Indochina Gold Fields of Canada who, between 1997 and 2000, intensively explored a region covering a total of 3 million hectares. The Jelai Mewet Project is considered the best of the prospects identified during that period. Geographical Setting Indonesia is an archipelago with more than 13,000 islands extending east to west for approximately 5,400 kilometres and north to south for approximately 1,700 kilometres. Its land area is about 1.2 million square kilometres and its sea area is about 4.7 square kilometresfor a total area of approximately 5.9 million square kilometres. The population is estimated at 200 million, making it the fourth most populous country in the world after China, India and the United States. The major islands of Indonesia are Sumatra, Jawa, Kalimantan (most of Borneo), Sulawesi (Celebes) and Irian Jaya (Western half of New Guinea). The island of Borneo is centrally located within the archipelago. Kalimantan is the Indonesian part of Borneo and comprises approximately two-thirds of the island, with an area of about 330,000 square kilometres. Borneo is divided into the Sultanate of Brunei and Malaysian states of Sabah and Sarawak on the north coast and Indonesia Borneo or Kalimantan to the centre and south of the island. Geological Setting The Indonesian islands lie at the point of collision or three lithospheric plates, the Indo- Australian plate to the south, the Pacific Plate to the east, and the Eurasian Plate to the north and west. At present, the oceanic crust of the Indo Australian Plate is moving northward and subducting under the Sundaland Craton, which is part of the Eurasian Plate. Similarly, the oceanic crust of the Pacific Plate is drifting southward and subducting beneath the Indo- Australian Plate. Prolonged subduction has resulted in the formation of a magmatic arc which constitute the backbone of Sumatra, Java and Sulawesi. Magmatic and volcanic activity has also resulted in the build up of extensive mountain ranges in Irian Jaya and Kalimantan. Local basements in the project area consists of strata of epiclastic sedimentary rocks of Cretaceous age, composed of interbedded to interleaved formations of sandstone, siltstone and shale. The rocks are weakly metamorphosed to a sub greenschist grade. Basement rocks are overlain by a series of Oligocene to Eocene volcanic and related intrusive rocks. These horizontal to shallowly dipping, fine grained dacitic to andesitic tuffs are widespread throughout East Kalimantan. Most commonly, the rocks are weakly to moderately indurated and are therefore susceptible to weathering and typically exhibit moderate to strong clay alteration and recessive weathering characteristics. For this reason, these rocks poorly outcrop, unless they are silicified. This irruptive sequence is intruded by dacitic, commonly Page 1

4 porphyritic plutons, which form prominent topographic highs due to their resistive character. The sequence is also intruded by andesitic to basaltic plutons. Access Exploration at the Jelai-Mewet prospect is managed out of the city of Tarakan which is located on Tarakan Island in northeastern Kalimantan about 93 km south of the Malaysian (Sabah) border. Tarakan Island is one of a number of large low relief island located in the Sebawang Estuary in the Sulawesi Sea. Tarakan is a major regional centre deriving much of its income from the forestry industry. Government administrative offices, banks, communication facilities, hotels and port facilities are established in the city. Tarakan is well served by daily Merpati Airlines flights from Balikpapan, and by Dirgantara Air Services (DAS) via Samarinda, the capital of Kalimantan Timur (East Kalimantan) province. Balikpapan is a major airport with connections to most large cities in Indonesia, including direct daily flights to Jakarta. Tarakan is also serviced by Bali Air which also flies into Tarakan, as well as flights from Kuala Lumpur on Malaysian Airlines via Kota Kinabalu and Tawau. The Mission Aviation Fellowship (MAF) aircraft maintain regular schedules in the area but are also available for charter services. Rapid access to lowland prospect areas of Jelai-Mewet is provided by speedboat along Sungai Sekatak (Sekatak River), one of the numerous inland waterways which dissect the region. Access further up-river, and into narrower streams, is provided by Keting-ting (large canoes powered by HP motors) which may be hired from local settlements on the rivers. Shallow-draft landing barges and tugboats are also available for the transport of heavy equipment on the rivers. Access between villages is provided by motorbike tracks and by logging roads in some areas. The logging roads are for local use only and generally do not connect with the outside highway system. Travel time from Tarakan to the Jelai-Mewet landing point is approximately 1¾ hours by speedboat and about 5 hours by Keting-ting over a distance of about 50 km. From the river landing, the prospect is accessible via old logging roads. Regional Geology The island of Borneo and the more westerly portion of the neighbouring island of Sulawesi comprise an older pre-cenozoic basement assemblage of the metasedimentary rocks which were part of the Eurasian continental plate. To the south and east, a broad shallow sea developed into which were deposited clastic sediments derived from continental plate as well as marine limestones. The sediments are now exploited as sources of oil, gas and coal. During the late Mesozoic, dacitic to andesitic volcanic deposits and associated volcanogenic sediments were deposited on the pre-cenozoic platform. During the middle Eocene (40 Ma), the South East Asia region was dominated by northward movement of the Indian oceanic plate and similar movement, though not as rapid, of the Australian continental plate, with both plates subducting beneath the Eurasian Plate. At this Page 2

5 time, a plate underlying the South China Sea began subducting below the island of Borneo, which together with the more westerly portion of Sulawesi, were situated on the southern edge of the Eurasian Plate. These areas were affected by some of the earliest volcanic activity resulting in the Kalimantan and North Sulawesi volcanic arcs. The subduction of the South China Sea plate, which lasted into the late Miocene (10 Ma), resulted in continental volcanic arcs on Borneo, and an accretionary prism landward of the subduction zone. During the latter part of this period, Borneo underwent a counterclockwise rotation which resulted in localized extension and compression along the island s southeastern margin, as well as crustal shortening and accretion on its opposite northwestern side facing the subduction zone. In the present Kalimantan, volcanic arc deposits define a south to southwesterly trending belt which extends from the Malaysian (Sabah) border across Central Kalimantan to the Ketapang area. These deposits include Mt. Muro, Kelian, a second arc parallels the first, generally following the southeastern coastline of Borneo. Arc volcanism in Kalimantan is of continental affinity unlike the island arc volcanism which occurred (and is occurring) along the younger Sunda-Banda arc that extends through Sumatra, Java, Bali, Lombok and eastwards. Previous Exploration Initial exploration into this area was initiated by Recherches Geologigues et Minerals (BRGM) which conducted reconnaissance geochemical exploration during the period Exploration activities in the immediate Mewet area commenced during late 1996 and continued into early Poor outcrop exposure, except along some portions of quartz veins, has impeded ICG s efforts to develop a detailed map of the local geology. Much of the work initially performed comprised the use Landsat TM and RadarSAT imagery to interpret major structural trends, as well as a stream sediments geochemical sampling and prospecting to identify and trace mineralized zones. C-horizons ridge and spur geochemical soil sampling was carried out at 25 m intervals. The analysis of samples for Au, Ag, As, Cu, Pb, Zn, and Sb provided data which led to the identification of broad north south trending Au-As geochemical anomalies in an area of known quartz vein concentrations. Additional exploration was focused on the current prospect area, and specifically on the Mewet and associated veins. Follow-up soil geochemical sampling, geological mapping, trenching and rock chip sampling of anomalies defined the current prospects. Initially, soil samples were collected along three reconnaissance lines which produce peak gold values of 2,260 ppb, 1,958 ppb and 176 ppb from the Mewet Vein. A total of 153 rock chip samples were analysed, these returned average gold assays of 4.1 g Au/t. The highest grade reported, 51.3 g Au/t, was in a sample of the Sembawang Vein. Follow-up systematic soil sampling over a 2 km by 1 km grid was carried out using augers to obtain samples from depths of one metre or more. The peak soil anomaly was 482 ppb whereas rock scree contained maximum precious metal content of 88 g Au/t and 78 g Ag/t. Two areas were anomalous, the first north-trending and measuring some 800 m by 100 m, the second northwest-trending and measuring 750 m by 100 m. Page 3

6 During September, 1998, further geochemical soil, boulder rock chip and BLEG geochemical sampling in an area 300 m south of the Mewet Vein resulted in the discovery of additional gold anomalies. Augered soil samples located across a ridge produce gold anomalies of 98 ppb and 703 ppb. These generally coincided with an area of mixed quartz material including mesocrystalline, massive, vein breccia which contained up to 1.5 ppm Au. The drainage in this area also carried 64 ppb Au and 44 ppb Ag in BLEG samples. Resampling of the Sembawang vein produced gold values of 7.6, 30.8 and 80 ppm in the vicinity of its intersection with the Tosi splay. Additional trenching was carried out bringing the total, as of the end of 1997, to some 52 trenches having a total length of 2,088 m. Trenches were mapped at 1:100 scale. Of the first 43 trenches, the best section was returned from Obi Vein, a 15 m section of which averaged 3.82 g Au/t in quartz breccia near the contact between dacite porphyry and andesitic tuff. The initial reconnaissance that the Jelai-Mewet mineralization conformed generally to the low sulphidation epithermal model was useful in directing exploration. Such systems commonly show strong vertical zonation of quartz habit and mineralization within veins. The textural information provides information which may be useful in estimating the depth at which the vein formed and the relative depth at which most of the mineralization might occur, or alternatively, if mineralization is absent, why so. The most useful mineral phase to indicate this characteristic is quartz because at the higher temperature and pressure at depth, quartz is commonly aphanitic to crystalline. Due to calcite s inverse solubility relationship with temperature, it may also be present in these regimes. As hydrostatic loading is removed, quartz may become strongly brecciated and, near surface, chalcedonic or cockade. In the Jelai area, all of the foregoing features are present, together with indications of higher grading gold values and possible multiphase of hydrothermal activity (and mineralization). The higher values tend to be clustered in areas of particularly complex structure, probably associated with vein intersections where changes in orientation, such as dilational jogs, produce opening favourable of mineralization. After the trenched veins were channel sampled, 18 diamond drill holes were completed for an aggregate length of 2, m. This drilling tested two of the main vein systems, Mewet and Nyabi-Adau. Eight diamond drill holes totaling 1, m were completed on the Mewet vein over a strike of approximately 165 m. The drilling on the Nyabi Vein over a strike of approximately 170 m saw the completion of ten holes with an aggregate length of 1, m. The purpose of this drilling was to investigate the level (elevation) of mineralization and to determine the potential for mineable ore shoots. Page 4

7 DRILLING PROGRAMS Summary The Mewet low sulphidation precious metal system consists of a series of sub-vertical, brecciated, auriferous quartz-rich zones that crop out intermittently within an area of approximately 1.4 x 0.8 kms and have a combined strike length of over five kilometres. The lodes vary from two to eight metres wide but may become considerably thicker at zone intersections. High gold values tend to cluster at certain areas along each vein with intervening areas are of lower tenor. This pattern is also repeated in the soil sample assay results. Detailed rock chip sampling along these veins has returned frequent high gold values (to 63 g/t Au in the Sembawang vein). The clusters of high gold values indicate oreshoot development within the extensive lode system and is a characteristic of low-sulphidation precious metal deposits. Ore shoots with narrow bonanza grades have been confirmed by the drilling campaigns carried out at four widely separated sites (Mewet Vein, Nyabi-Adau junction, Sembawang Vein and the Lipan Vein). Significant gold grades occur over a vertical extent of two hundred metres in the Mewet vein. The present drilling data has shown that characteristics of the quartz veins and alteration are broadly conformable with the low sulphidation geological model used to successfully predict the location of ore shoots in many similar deposits in Australia and New Zealand. Numerous zones occur in the Mewet epithermal system where there are surface indications of ore shoots. Many of these remain untested. The very nature of low sulphidation deposits necessitates persistent and focused exploration. This is exemplified by the Vera Nancy deposit in Australia (± two million ounces Au) where the discovery hole came after ten years of exploration and with the fiftieth hole. Extensive exploration had been carried out continuously within the epithermal field surrounding the Pajingo Mine (366,500 ounces Au). The two metre average width of the vein at the Vera Nancy deposit also demonstrates the importance of persistence in following narrow lode systems. The Mewet lode system is extensive in terms of known low-sulphidation epithermal deposits and has the potential to contain a world class deposit. Such a lode system within the developed world would be subject to extensive and prolonged drilling campaigns. Less than 5% of the five kilometre lode system has been evaluated. A second phase drilling program to target potential ore shoots is proposed and will comprise approximately ten drill holes for a total of 1200 metres. Introduction The Mewet project area occurs within the Central Block COW held by P.T. Borneo Exploration and Mining Indonesia in northeast Kalimantan (Figure 1). The prospects were discovered during reconnaissance mapping of rock float in creek beds and eventually led to limited diamond drilling. This drilling program was terminated when the Seruyung Prospect in the North Block became a higher priority target. Page 5

8 Geology The Mewet lode system consists of a series of sub-vertical, brecciated, quartz-rich zones that crop out intermittently within an area approximately 1.4 x 0.8 kms and have a combined strike length of over 5 kms (Figure 2). The zones include the Mewet, Nyabi, Adau, Obi, Cabang, Sembawang, Tigalima, Semang, Taman, Lipan, Salam, Ibay, Saki and Kecil Veins. They generally vary from <3 to 8 m wide but may become considerably thicker at zone intersections. The zones trend predominantly north-south and northeast-southwest with a subsidiary northwest-southeast direction. The lodes characteristically are highly brecciated containing fragments of altered (kaolinised to sericitised) rock and fragments of quartz which exhibit a considerable variety of quartz textures. The quartz textures include saccharoidal, chalcedonic, banded, cockade, crystalline and bladed (after calcite) which are all cemented by silica. The banded chalcedonic quartz may contain varying amounts of adularia which has a white or light orange colour. Surface exposure of the lodes shows a porous vughy character which appears to be due to the leaching and removal of rock fragments. Late fine crystalline quartz forms thin veins and locally infills the voids. Sulphides, mainly pyrite, occurs as disseminations, clots and very infrequently in bands. Weak iron and manganese staining are common in surficial exposures. The lodes are hosted in andesitic tuffs and dacite porphyry. Detailed rock chip sampling along these veins has returned frequent high gold values (to 63 g/t Au in the Sembawang vein). The high gold values tend to cluster at certain areas along each vein with intervening areas are of lower tenor. This pattern is also repeated in the soil sample assay results (Figure 3). Geological Model Much of the Mewet prospect area is covered by thick vegetation and outcrop is generally poor. This, together with low topographic relief, requires the detailed assessment of available outcrop and modelling of the vein features in order to target potentially economic sections of the vein. In many epithermal deposits there is often a consistent pattern of quartz textures (and in some deposits, adularia) which can be used to define a vertical zonation (Figure 4, Morrison et al., 1991). This zonation can be used to indicate the most likely positions for the locus of gold mineralization (ore shoots). In broad terms the zonation from top to bottom in an ideal epithermal system is the chalcedonic superzone followed by the crustiform-colloform superzone and finally by the crystalline superzone. These are in turn separated into sub zones as shown in Figure 4. Such a model can be rationalized in terms of fluid evolution in a boiling geothermal system and, therefore, can be directly compared to the model of Buchanan (Figure 4). The quartz textures can also be interpreted by the kinetics of quartz, chalcedony and amorphous silica in hydrothermal solutions. This model is most applicable in simple vein systems but it can be used successfully in the more complex systems, such as Mewet, by careful recognition of type of textures, relative abundance and the paragenesis. In the complex systems a clear distinction must be made between clasts and matrix within the lode. In the Mewet prospects there is no topographic relief to form a real zonation model. However, the wide range of textural features in the clasts indicate that the zoning model of Morrison et al. (1991) is likely to be valid and can be used to evaluate this particular system. Page 6

9 Rock chip sampling has clearly indicated economic concentrations of gold. Boiling is one of the main causes of deposition of metals (including gold) and the unequivocal indications of boiling in the prospects (bladed calcite, adularia in the veins, quartz banding, co-existing fluid rich and vapour rich fluid inclusions) would further point to the validity in the use of the model. The multiple episodes of brecciation and vein deposition evident at the Mewet Vein is a positive economic indicator as precious metal mineralization is continually upgraded with each gold-bearing fluid pulse. Although the presence of a wide variety of siliceous fragments exhibiting different textural characteristics is evident in hand specimens, it can be quite difficult to ascertain the actual matrix. It is inferred that overpressuring, possibly due to high level silica sealing, was subsequently relieved by fracturing along the main structure and that the consequent pressure drop resulted in brecciation and upward migration of fragments causing sub-rounding of some of the fragments. The last phase of crystalline quartz is out of equilibrium with the other textures and it is inferred that the main boiling zone lies at depth. From the textural characteristics the present erosion level is inferred to be in the upper section of the precious metal interval and the middle-upper section of the crustiform-colloform superzone (Figure 4). At this level, gold would be expected at the surface but the gold may be clast-specific and the grade may depend on the amount of a certain clast type within the breccia. As a consequence a high degree of grade variation is likely. The dynamic conditions illustrated by the textural variation also increases the potential vertical extent of the deposit due to fluctuation in the boiling level and consequent overprinting. The extensive leaching in the lodes and the absence of significant secondary iron (which renders gold essentially immobile), even in pyrite moulds, would suggest there may be surficial gold depletion. A change in the mineralization and the grade between the andesitic tuff host and the postulated underlying Mentarang Sediments is a possibility. In the Sekatak project area, approximately 25 kms northeast of the Mewet lode system (Figure 1), zones of silicification up to 5 m wide with quartz-galena-sphalerite-chalcopyrite-bornite veins, occur within the Mentarang sediments. This assemblage is typical of deep level epithermal to mesothermal quartz-base metal mineralization. Assays from the zones at Sekatak are generally gold anomalous with values generally between 0.2 and 1 ppm and occasional values up to 4 ppm. This style of mineralization could be expected at depth beneath the quartz rich lodes in the Mewet area. The depth relationship between epithermal deposits and basement unconformities is noted in a number of epithermal deposits worldwide. The bonanza Hishikari deposit in Japan has similarities to the Mewet setting and mineralization style. In the Hishikari deposit, Pleistocene andesitic pyroclastics overlie the metasedimentary Shimanto basement. Both these lithologies favourably host the quartzadularia veins. The pyroclastic rocks host the low grade veins (25 ppm Au average grade) whilst the Shimanto sequence hosts the high grade veins (63 ppm Au average). The extremely high grade zone occurs near the unconformity between the basement sediments and overlying pyroclastic volcanic rocks. The cluster of high gold values in rock chip samples and in soils along particular sections of the veins and the intervening areas of lower tenor, observed in the Mewet prospect area, is a phenomenon that is repeated in low sulphidation deposits worldwide. The high values indicate the presence of ore shoots within a continuous lode system. These ore shoots are located in specific structural locations which result in the creation of open space such as lode Page 7

10 intersections, change in strike or dip of lodes, reactivation of faults cross-cutting lodes or where they contact the lode. Throttling, where an initially restricted fluid encounters a structurally prepared dilatant zone, results in boiling due to rapid pressure release. Boiling leads to supersaturation of the metal in the residual liquid and consequent deposition of metals over a relatively restricted area. This also leads to sealing of the fluid channel by gangue material (predominantly quartz and adularia) followed by further build up of pressure which is relieved by further brittle failure. The failure may be induced solely by pressure increase or by reactivation of the structures that created the initial dilatant zone. The dynamic cycling builds up the gold grade with each boiling event and creates ore shoots. In most epithermal systems there are many phases of fluids, each depositing quartz, with only some of these carrying gold. It follows from this scenario that ore shoots will be limited to specific structural sites and have a defined vertical extent which are controlled by boiling levels related to hydrostatic and lithostatic pressure. Consequently only parts of the lode systems will be mineralised even though the actual lode systems will be extensive. DRILLING RESULTS Diamond drilling in the Mewet project area has been carried out at four widely spaced locations along the five kilometres of the epithermal vein system and include the Mewet Vein, Nyabi-Adau junction, Sembawang Vein and the Lipan Vein. Mewet Vein Diamond drilling of the Mewet Vein (Figure 2) encountered mineralization in each hole (Table 1). The highest grades (47.2 g/t Au) occurred within the colloform-crustiform quartz ± adularia sections (Photograph 1) which is consistent with predictions from the quartz textural model. The increase in width, competency and overall grade at depth ( g/t Au in JM018 and g/t Au in JM019, Figure 5) is believed to be significant. It is also consistent with vein texture interpretation in this section that indicates that the gold zone should continue to at least 200 m below surface. Holes drilled below predicted extensions of the lode, where no outcrop occurs, also intersected significant gold grades. The shoot remains open along strike to the north and south and also at depth. The Mewet vein is a classic high level ore zone with consistent high gold and silver grades with a Au:Ag ratio of 1:1 to 1:2, which is again typical of many high level bonanza shoots. High gold grades in texturally favourable subcrop and float (maximum 88 ppm Au, 78 ppm Ag, Photograph 3) along strike from the drilled area are indicative of the excellent potential for the discovery of ore shoots within this lode. The diamond drilling of the Mewet vein has presently only targeted 150 m of a possible strike length of 1500 m. Drilling penetrated to a maximum depth of 200 m. The highly encouraging results necessitate the continuation of drilling. Page 8

11 Table 1. Significant intercepts in the Mewet Vein Drillhole No. Final Depth Significant Intersections JM m m : 6.88 g/t Au JM m m : g/t Au JM m m : g/t Au JM m No significant assay. Hole abandoned before anticipated final depth. JM m m : g/t Au m : g/t Au m : g/t Au JM m m : g/t Au m : g/t Au m : g/t Au m : g/t Au JM m m : g/t Au m : g/t Au m : g/t Au JM m m : g/t Au JM m m : g/t Au m : g/t Au m : g/t Au JM m m : g/t Au m : 1.00 g/t Au m : g/t Au JM m m : g/t Au m : g/t Au JM m m : g/t Au m : g/t Au m : 0.24 m@ 1.40 g/t Au m : g/t Au m : g/t Au m : g/t Au m : g/t Au Nyabi-Adau Vein Drilling of the Nyabi Vein encountered significant values in the first hole ( g/t Au) but failed to intersect similar values in the remaining holes even though the quartz rich lode system (up to 12 m wide) was always intersected. The textural characteristics of the mineralization in the first hole are completely different to those of the main lodes. In the first hole the mineralized zone consists of quartz breccia containing fragments of banded quartz, Page 9

12 platy quartz after calcite and also minor silicified sediment clasts (Photograph 2). This is in marked contrast to the tight quartz stockwork signature of the main lode. The conditions of formation of the quartz breccia and the main lode are totally inconsistent and require different structural and chemical conditions for their formation. This is indicative of ore shoot development. The lodes show increase of width with depth based on drill hole data. In many similar epithermal deposits the size of an ore shoot is dependant on the size of the lode and is complementary (i.e. the wider the lode - the larger the ore shoot). Ore shoots are also indicated in outcrop along the strike of the Nyabi vein. It is necessary to follow these shoots to encounter significant grade. In order to do this, especially in areas of poor outcrop, drill hole information is required in order to understand the structural controls that influence the position of the shoot. Economically negative holes give invaluable information for targeting ore shoots. The present drilling has inadequately tested less than 200 m of a total strike length of 1300 m (Figure 2). Table 2. Significant intercepts in the Nyabi-Adau Vein Hole Number JM001 JM002 JM003 JM004 JM005 JM006 JM007 JM008 JM009 JM010 Bearing (Az.) Dip Hole Length (m) INCLUDES Best Intersection From To Width g Au/t G Ag/t 5.3 < <1.0 < < Sembawang Vein The Sembawang Vein system is over 1200 m long, has significant trench intersections ( ppm Au, 4 5 ppm Au) and has returned the highest gold values from outcrop (up to 63 ppm). In addition, part of the vein occurs along the contact of the dacite porphyry which has shown to be a positive indicator of higher grades. Two widely spaced holes failed to intersect significant mineralization despite high grades at the surface (Figure 2). Lipan Vein Two holes were targeted at a possible ore shoot within the Lipan Vein. One hole (JM024) intersected a quartz rich zone between and m and returned values of g/t Au (from m) and g/t Au (from m). The zone consists of oxidised brecciated quartz with clasts of colloform banded chalcedony and quartz after bladed calcite with strong iron and manganese staining. The lode occurs near the Page 10

13 contact of the dacite porphyry and the andesitic tuff. A section of the core assaying 25.6 g/t Au is illustrated in Photograph 4. The breccia is strongly leached giving rise to a honeycomb texture. The quartz breccia is characteristic of the ore shoots developed elsewhere in the Mewet lode system. A second drill hole (JM026) targeted the down-dip extension of the oreshoot but was terminated before the inferred intersection depth. The Mewet epithermal system remains largely untested with less than 10% of the strike length inadequately drilled. These epithermal systems can only be evaluated by persistent drilling. Comparison of the Mewet lode system with other low sulphidation deposits Longitudinal sections of many established multi-million ounce mines explicitly show ore shoot development. For example, in the Golden Plateau Mine at Cracow in Queensland, Australia, ore shoots form less than 10% of the quartz lode system and are sub-vertical with definite upper and lower limits (Figure 6a). This deposit has produced approximately 25 tonnes of gold. With reference to Figure 4a it can be seen that drilling holes in the western section of the lode, at depths less than 100 m vertical, would encounter a massive lode with uneconomic gold. Drilling in the central zone would encounter high gold grades in the top 100 m but would again encounter quartz lodes with sub-economic gold grades at depths below 100 m. In addition, sub-economic grades occur between ore shoots at all levels. Analysis of drillhole data and subsequent mining in this mine also showed that grades vary within the ore shoots. Three out of eight holes within ore shoots encountered uneconomic gold grades but were able to be mined profitably during underground mining. At the Central Extended Mine approximately 1 km to the northwest of the Golden Plateau Mine an oreshoot had a surface expression 3 m long and less than 1 m wide. This shoot eventually returned over 200,000 ounces of gold. The Comstock mine in Nevada which produced 8 million ounces of gold and 190 million ounces of silver shows similar oreshoot development (Figure 6b). The Gosowong Prospect in Sulawesi, Indonesia is a low sulphidation epithermal vein that contains bonanza grade ore shoots developed over a 400 metre strike length within a lode system extending over 1.5 km (Carlile et al., 1998). Three types of lodes are recognised: 1) quartz-adularia veins and breccia; 2) quartz-chlorite-illite veins and breccias; and 3) crystalline or chalcedonic quartz vein stockworks. The deposit is hosted within andesitic to dacitic submarine lavas and volcaniclastics with minor interbedded tuff. The present inferred resource at Gosowong is 1,000,000 tonnes at 24 g/t Au and 45 g/t Ag. Sections of the deposit clearly indicate the restricted ore shoot development and the dramatic changes in width and grade of economically significant grades within a larger lode system (Figure 3). Holes GSD 40 and GSD 80 (Figure 3) intersected a bonanza grade ore shoot with a vertical extent of less than 30 metres and occurs within a lode that has no significant assays at the surface. The remaining holes on this section would constitute an interesting but subeconomic lode. The section illustrated required eight holes to define the mineralized zone. In contrast only twelve holes have presently been drilled into the entire Mewet Vein. The Vera-Nancy deposit is a low sulphidation epithermal vein consisting of quartz and adularia within a broad halo of silicification and brecciation (Kay and McKay, 1997). Vein thickness varies from 1-10 metres with an average width of 2 metres and occurs within Page 11

14 andesitic to dacitic intrusives, flows and volcaniclastics (Figures 4 and 5). The Vera-Nancy vein system has been traced over three kilometres. The Vera-Nancy deposit occurs within the same epithermal field as the exploited Pajingo Mine that produced 1,353,000 tons at 8.86 g/t Au (366,500 ounces Au) between 1987 and The first hole was drilled into the deposit in 1988 and intersected 3 metres at 2.5 g/t Au. The discovery hole came ten years later and with the 50 th hole, which intersected mineralization at a depth of 250 metres. This intersection was subsequently shown to be the top of an ore shoot. The combined resource figures for the ore shoots, as of June 1998, was 1,840,900 ounces of gold (Figure 6). The discovery has revitalised gold exploration in the Pajingo district with the recognition that gold occurs at deeper levels. Persistence in the drilling campaign was attributed to: there was always at least one high grade intersection persisting at depth the vein was hosted by a major structure with wide silicification and brecciation breccias contained clasts of epithermal vein material believed to form from deeper levels strong support, persistence and commitment from management to exploration and to the field geologists. The geological similarities between the Nancy-Vera deposit and the Mewet Vein are striking. Sections of the Vera-Nancy deposit are shown in Figures 7 and 8 and illustrate the relatively narrow widths of the ore shoots. The widths and grade are comparable to the Mewet Vein (Figure 5) and the ore shoot textural characteristics of the both deposits have strong similarities (compare photographs 1, 3 and 5). The Mewet lode system is, however, more extensive, and exploration success at the Mewet Vein was immediate and nine out of twelve drillholes in the Mewet Vein intercepted significant grade. The majority of low sulphidation epithermal veins contain spatially restricted bonanza ore shoots. Ore shoot development and bonanza grades have been well documented in the Mewet Vein and other veins in the Mewet project area. A persistent and detailed drilling campaign is required in order to evaluate this style of deposit. Successful drilling of such deposits is clearly a challenge and cannot be adequately assessed by limited drilling. CONCLUSIONS The Mewet lode system is presently known to have a combined strike length of over 5 kms which is being constantly extended with further exploration. Ore shoot development is clearly indicated in the Mewet lode system. The present drilling program at the Mewet lode system has tested less than 10% of the known extent of the lode system. Textural characteristics of the lodes indicate good depth potential. Page 12

15 Nine out of twelve drill holes in the Mewet vein have encountered potentially ore grade mineralization. Significant mineralization in the Mewet Vein extends for a vertical distance of greater than 200 m. Evaluation of epithermal deposits requires a thorough understanding of the dynamic structural and chemical settings in order to focus on the most likely loci of gold deposition. Drilling of such deposits must be directed at identifying ore shoots and must be persistent. Pattern drilling is unlikely to be effective. The drill program must be flexible, react to previous drill hole information and will require constant modification as the program continues. The Mewet lode system is extensive in terms of known epithermal deposits and has the potential to host a world class deposit. Page 13

16 TABLE OF CONTENTS SUMMARY INTRODUCTION GEOLOGY PREVIOUS EXPLORATION GEOLOGICAL MODEL COMPARISONS WITH THE VERA-NANCY GOLD DEPOSIT PROPOSED DRILLING PROGRAM CONCLUSIONS REFERENCES LIST OF FIGURES Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Figure 8 Location of the Jelai gold prospect, Northeast Kalimantan Jelai gold prospect Drill hole location plan and geology Jelai gold prospect Gold soil geochemistry Jelai gold prospect Mewet Vein, Cross section 356,450 N Low-sulphidation epithermal gold model Inferred position of the Jelai vein system Vera-Nancy gold deposit Longitudinal section and resources Vera-Nancy gold deposit Cross section 4,540 E Comparison of high-grade vein textures from the Mewet and Vera-Nancy lodes LIST OF TABLES Table 1 Jelai gold prospect, Previous drill hole intersections (ICG) Table 2 Jelai gold prospect, Proposed drilling program (Stage 1) Table 3a Jelai gold prospect, Proposed budget for validation and Stage 1 drilling program Table 3b Jelai gold prospect, Proposed budget for Stage 2 drilling program 2

17 SUMMARY Kalimantan Gold Corporation Limited (KGC) has recently applied for a new exploration tenement over the advanced Jelai gold prospect in Northeast Kalimantan. This prospect was previously held by Indochina Goldfields Limited (ICG). The Jelai gold prospect contains a series of sub-vertical, auriferous quartz-adularia-carbonate veins that crop out intermittently within an area of approximately 2 km 2, and have a combined strike-length of over five kilometres. The lodes vary from two to eight metres wide but may become considerably thicker on vein flexures and intersections. High gold values tend to cluster at certain areas along each vein with intervening areas of lower tenor. This pattern is also repeated in the soil assay results. Previous detailed rock chip sampling along these veins returned bonanza-grade gold values of up to 63 g/t Au on the Sembawang Vein and 87 g/t Au on the Mewet Vein. The clusters of high gold values from soils and rock chips highlight potential for high-grade ore-shoot development within an extensive and under-drilled lode system. The presence of narrow, high gold grades within thicker veins was previously confirmed by ICG who drilled four widely separated sites (the Mewet, Nyabi-Adau, Sembawang and the Lipan Vein). Significant gold grades (5-8 g/t Au) occur over a vertical extent of about 175 m on the Mewet vein. Detailed work completed by ICG demonstrated that the characteristics of the Jelai vein textures and hydrothermal alteration are broadly conformable with the low-sulphidation epithermal gold model used to successfully predict the location of bonanza-grade ore-shoots in other deposits located in similar magmatic arcs world-wide. Furthermore, there are surface indications for potential bonanza-grade ore-shoots at Jelai that remain untested. The very nature of low-sulphidation epithermal gold deposits necessitates persistent and focussed exploration. This is exemplified by the history of discovery of the Vera Nancy deposit (+3 Moz Au) located in North Queensland. Here the discovery hole came after eight years of determined exploration within a known epithermal gold field. The two metre average width of the vein at the Vera Nancy deposit also demonstrates the importance of persistence in following narrow lode systems. The Jelai gold-vein system is extensive in terms of known low-sulphidation epithermal deposits and has the potential to contain a world class deposit. Such a lode system within better developed regions of the world would be subjected to extensive and prolonged drilling campaigns. Less than 10% of the five kilometres of known lode system at Jelai has been evaluated to-date. Once the exploration permit is granted, it is initially proposed to validate the previous work. Following this, the company will further evaluate the Jelai gold prospect by diamond drilling on a series of fences designed to test the veins down to at least 150-m depth, and over at least 2 km cumulative strike-length. This program will help broadly define the potential volume and grade of a large portion of the mineralized vein system. It will also help to target bonanza-grade oreshoots in follow-up drilling programs. 3

18 INTRODUCTION The almost doubling of the gold price since 2001 and the gradual return of economic and political stability to the region have highlighted the excellent potential of several undeveloped and underexplored gold projects in Indonesia. New mine developments on epithermal goldsilver deposits during 2006 include Cibaliung in West Java (Austindo Resources NL; +0.6 Moz), Toka Tindung in North Sulawesi (Archipelago Resource PLC; +1 Moz), and the reopening of Mt Muro in Central Kalimantan (Straits Resources Ltd; +0.8 Moz). Kalimantan Gold Corporation Limited (KGC) has advanced a strategy to acquire and develop new gold properties in Kalimantan. This strategy is focused on projects that major mining companies have in the past, spent substantial money exploring but abandoned, not due to the lack of quality, but because of country risk assessments. This has paid off in the identification of the advanced Jelai gold prospect, formerly held by Indochina Goldfields Limited (ICG) of Canada. KCG has applied for a KP (Kuasa Pertambangan) or mining permit covering 10,000 hectares over the area containing the Jelai gold prospect. This prospect was previously covered by a 6 th Generation Contract of Work (CoW) held by ICG, who advanced the prospect to the drilling stage by undertaking detailed and systematic surface exploration. ICG s work considerably advanced the Jelai prospect, and has shown that it displays many of the geological characteristics associated with bonanza-grade, low-sulphidation epithermal gold deposits located in Indonesia (e.g. Gosowong, Gunung Pongkor), Australia (e.g. Vera-Nancy, Cracow), and the USA (e.g. Comstock, Sleeper)(Worsley, 1999a & 1999b). Their previous drilling confirmed the presence of high-grade gold mineralization in the vein system although significantly, less than 10% of the defined vein system has been drill-tested to-date (Crane, 1999; Worsley, 1999c). Although Jelai is an advanced gold prospect, it has perhaps been forgotten by an industry that once considered it to be a very exciting target. It was abandoned largely due to the lowering of the gold price and uncertainties associated with the political and economic upheavals in Indonesia during the late 1990 s. This report summarises the geology of the Jelai vein system and is a preliminary proposal to undertake systematic drilling towards resource definition on this prospect. GEOLOGY Jelai is a lowland gold prospect located about 50 km west of the major regional town, Tarakan, in Northeast Kalimantan and it has relatively rapid access provided by speedboat and 4WD vehicle (Figure 1). The vein system is a series of auriferous quartz-adularia-carbonate veins developed along north-trending shears and along north-easterly trending conjugate shears, which are subparallel to a local fault-bounded basin margin. These generally steeply dipping vein-structures crop out intermittently within about a 2 km 2 area and have a combined strike length of over 5 kms. The veins are hosted in Tertiary andesitic volcanic and volcaniclastic rocks and, to a lesser extent, high-level dacite intrusions that form part of the Central Kalimantan magmatic arc (Carlile and Mitchell, 1994). At least seven major veins and numerous vein splays were identified by ICG. The main veins are Mewet, Nyabi-Adau, Obi, Sembawang, Lipan, Tigalima and Taman (Figure 2). These veins vary in length from about 250 to >1,000 m, and have an average width of between 2 and 8 m, although may become considerably thicker on vein flexures and intersections. The veins show complex textural characteristics, including prominent banding and brecciation, which reflect multiple stages of silica, adularia and carbonate deposition and preservation at relatively high- 4

19 levels within a classic epithermal gold environment. Minor sulphide mineralization, mainly pyrite, occurs as disseminations, clots and very infrequently in bands. Weak iron and manganese staining are common in surficial exposures. PREVIOUS EXPLORATION The region was initially explored for precious and base metal mineralization by the Bureau de Recherches Geologiques et Minieres (BRGM), which conducted reconnaissance exploration during the period Their work identified anomalous drainage geochemistry and was the first to highlight the potential for epithermal gold-silver mineralization in the Jelai area. Despite this potential, no further exploration was undertaken until 1994 when P.T. Mascan Mas Minerindo ( Mascan ) conducted selective reconnaissance work over areas thought to have gold and silver potential based on the BRGM data. A joint venture was formed between Mascan and ICG in Regional reconnaissance exploration activities were started on the broader CoW area under ICG management in Detailed work in the Jelai area commenced in late 1996, and the results of systematic surface geochemical sampling and mapping led them to the discovery of the Jelai vein system. A total of 153 rock chip samples collected from vein outcrops and float boulders in this area returned an average of 4.1 g/t Au, with a peak result of 51.3 g/t Au on the Sembawang vein. Follow-up, systematic auger-soil sampling over a 1.5-km by 2.5-km grid produced coherent +50 ppb gold anomalies associated with several vein segments within the Jelai vein system (Figure 3). Further detailed rock chip sampling along these veins returned occasional bonanza-grade gold values (to 63 g/t Au in the Sembawang vein and 87 g/t Au in the Mewet vein). The high gold values tend to cluster at certain areas along each vein with intervening areas are of lower tenor. This pattern is also repeated in the soil sample assay results. Shallow trenching was completed for an aggregate of 2,088-m in 52 trenches. This produced a best result of 15-m at 3.82 g/t Au on the Obi vein. Diamond drilling was carried out at four widely spaced sites on segments of the Mewet, Nyabi- Adau, Sembawang and Lipan Veins, representing less than 10% of the known vein system. A total of 3,872-m was drilled in 26 inclined holes testing these vein segments to relatively shallow or moderate depths (<200-m). Some of the higher grade gold intersections obtained in this program are summarised in Table 1. Drilling completed on the northern part of the Mewet Vein has demonstrated persistently strong mineralization (5-8 g/t Au) over 2-6 m vein width to about 175 m depth on one section (Figure 4). GEOLOGICAL MODEL The Jelai gold prospect is largely covered by forest and saprolitic soil, therefore outcrop is generally poor and the vein system is poorly exposed. This, together with low topographic relief, requires the careful assessment of available outcrop and modelling of the vein features in order to target potentially economic sections of the veins (Worsley, 1999a). In many epithermal deposits there is often a consistent pattern of vein gangue textures, represented by mainly quartz, chalcedony, adularia and carbonate fill, which can be used to define a vertical zonation and the position of potentially bonanza-grade lodes (Buchanan, 1981; Morrison et al, 1991; Dong et al, 1995). The model presented in Figure 5 is most applicable to simple vein systems but it can be used successfully in the more complex systems, such as Jelai, by careful recognition of the type of vein textures, relative abundance of these textures and the paragenesis of vein deposition (Worsley, 1999a). 5

20 Previous drilling confirmed the occurrence of multiple episodes of brecciation and vein deposition in the Jelai vein system. Worsley (1999a & 1999b) considered this to be a positive indicator for economic gold mineralization at Jelai and provided the following explanation. The textural characteristics of the veins observed at Jelai support an interpretation that the present erosion level is in the upper section of the precious metal interval, and the middle-upper section of the crustiform-colloform superzone, represented in the low-sulphidation epithermal gold model shown in Figure 5. At this level, gold would be expected at the surface, but the gold may be clast-specific and the grade may depend on the amount of a certain clast type within the breccia. As a consequence a high degree of grade variation can be expected in drilling results. Worsley (1999a & 1999b) also suggests that the cluster of high gold values in rock chip samples and in soils along particular sections of the veins, and the intervening areas of lower tenor observed at Jelai, are phenomenon that are repeated in low sulphidation gold deposits worldwide. The high values may indicate the presence of bonanza-grade ore-shoots within a continuous lode system. These ore-shoots are located in specific structural locations which result in the creation of open space such as lode intersections, change in the geometry of the host structures, and the reactivation of faults cross-cutting lodes or where they contact the lode. The consistent conformity in the characterisation of Jelai to the low-sulphidation epithermal gold model confirms the excellent potential for the discovery of gold resources and bonanza-grade ore-shoots in this vein system. COMPARISONS WITH THE VERA-NANCY GOLD DEPOSIT The Vera-Nancy gold deposit, located in northeast Australia, comprises a series of narrow (av. 2 m wide), bonanza grade ore-shoots located along a 2.5 km long, low-sulphidation epithermal quartz-adularia vein system in a package of intermediate, high-level intrusions, lavas and volcaniclastic rocks of Late Devonian to Carboniferous age (Kay and McKay, 1997; Butler et al, 199). The mineral inventory the deposit, as of 2001, was nearly 3 Moz of gold, with an average grade of 13.5 g/t Au (Parks and Robertson, 2005). The bonanza-grade ore-shoots comprising the deposit are largely blind and the tops of which are m beneath the surface (Figure 6). The deposit was discovered after a long period of persistent exploration in a large epithermal gold field containing the outcropping Pajingo gold deposit, which was previously mined and produced 366,500 oz Au. The Vera-Nancy ore-shoots were discovered using a combination of geophysics (detailed magnetics and resistivity surveys), and through the evaluation of vein textures observed in patchy outcrops and during progressive phases of increasingly deeper drilling (Parks and Robertson, 2005). The first hole drilled above one of the Vera-Nancy ore-shoots in 1988 intersected 3 m at 2.5 g/t Au. The discovery of the first bonanza-grade ore-shoot came nearly eight years later and with the 50 th drill hole. Persistence in exploration over this long period, and ultimately the success of these efforts, were driven by a number of key factors (Worsley, 1999a):- The occurrence of at least one high grade intersection in a drilling campaign that persisted at depth. The occurrence of broad zones of lower grade mineralization was known to be associated with brecciation and silicification surrounding the bonanza-grade oreshoots. 6

21 The careful evaluation vein textures, particularly in vein-clasts within breccia zones intersected at shallow levels in the system, was used to vector toward bonanza-grade ore-shoots formed at deeper levels. There was always strong support, persistence and commitment from management to the exploration team. Some of the mineralised widths and grades intersected on the Mewet Vein are comparable to Vera Nancy (Figures 4 and 7). Furthermore, the similarity in vein-textures is particularly striking (Figure 8). Persistent but well-focussed exploration and drilling at Jelai could well be rewarded with substantial successes. PROPOSED DRILLING PROGRAM AT JELAI An aggressive and detailed drilling campaign is required to fully evaluate the potential gold inventory and size of bonanza-grade ore-shoots on the Jelai gold prospect. Prior to drilling, the results of the previous ICG work should be validated during a 4-6 week field inspection. The validation work will include the examination of previous drill holes, re-assaying of remaining half-core by quarter-coring from selected mineralised intervals, and remapping and sampling selected older trenches. Further trenching, mapping, sampling (MMI soil geochemistry) and ground geophysics (magnetics and resistivity surveys) may also be warranted prior to drilling. Initially, it is proposed to drill a series of fences of diamond holes that are designed to test sections of the Jelai vein system down to at least 150-m depth. The program is designed in two stages. The first stage, comprising about 4,000 m of drilling in 32 inclined holes, will test those portions of the Jelai vein system judged to have the most favourable geometry for higher grade mineralization. This has been assessed from the previous drilling, surface mapping (e.g. structural bends, flexures or confluence of veins), soil and rock chip geochemistry. Drill holes proposed for this stage of work are presented in Table 2, but these will probably be modified following the preliminary field inspection and validation stage. Planning of the second stage, comprising another 4,000 m of drilling, remains flexible to accommodate information received from the first stage of drilling. At least 50% of the currently defined cumulative strike-length of the Jelai vein system should be covered by this program. This will help broadly define the potential volume and grade of the mineralised vein system, and will generate important geological information that can be used to target bonanza-grade ore-shoots in follow-up drilling programs. The proposed budgets for Stages 1 and 2 of this program are presented in Tables 3a and 3b, respectively. CONCLUSIONS The Jelai gold prospect is an underexplored, and especially underdrilled, low-sulphidation epithermal gold occurrence displaying many of the features associated with other lowsulphidation epithermal gold deposits that contain bonanza-grade ore-shoots. The Jelai vein system is extensive in terms of known epithermal deposits and has the potential to host a world class gold deposit. Jelai represents a unique opportunity for KGC to evaluate an advanced gold prospect in Indonesia, which is further enhanced by the prevailing high gold price, and has the potential to rapidly advance the company towards gold production and a cash flow. 7

22 REFERENCES Buchanan, L.S., Precious metal deposits associated with volcanic environments in the Southwest. Arizona Geological Society Digest, 14: Butler, I., Murphy, T., and Parks, J., Vera South: Discovery history. Exploration Under Cover 99, Bulletin 28, Australian Institute of Geoscientists, pp Carlile, J.C., and Mitchell, A.H.G., Magmatic arcs and associated gold and copper mineralization in Indonesia. Journal of Geochemical Exploration 50: Crane, D., The Mewet Vein: Deeper drilling programme, Drilling results, Mewet lode system Central Block, Northeast Kalimantan, Indonesia. Technical Report CJM6 (Unpublished), P.T. Borneo Exploration and Mining Indonesia. Dong, G., Morrison, G.W., and Jaireth, S., Quartz textures in epithermal veins, Queensland Classification, origin, and implication. Economic Geology 90: Kay, B., and McKay, K., Vera-Nancy gold discovery: Not just geology. New Generation Gold Mines 97, Case Histories of Discovery, Australian Mineral Foundation, Adelaide, pp Morrison, G.W., Dong, G., and Jaireth, S., Textural zoning in epithermal quartz veins Field Manual. AMIRA Project P247, Gold Research Group, James Cook University of North Queensland, 36p. Parks, J., and Robertson, I.D.M., Pajingo epithermal gold deposits, NE Queensland. In C.R.M. Butt et al (eds.), Regolith Expression of Australian Ore Systems: A compilation of geochemical case histories and conceptual models, CRC LEME 2003, Perth, pp Worsley, M.R., 1999a. The Mewet Vein: A comparison to other quartz-adularia deposits, Central Block, Northeast Kalimantan, Indonesia. Technical Report CJM6 (Unpublished), P.T. Borneo Exploration and Mining Indonesia. Worsley, M.R., 1999b. The Mewet Lode System: Phase 2 Drill Proposal, Central Block, Northeast Kalimantan, Indonesia. Technical Report CJM9 (Unpublished), P.T. Borneo Exploration and Mining Indonesia. Worsley, M.R., Sembawang and Lipan Veins: Drilling results, Mewet lode system, Central Block, Northeast Kalimantan, Indonesia. Technical Report CJM10 (Unpublished), P.T. Borneo Exploration and Mining Indonesia. 8

23 TABLE 1 JELAI GOLD PROPERTY, NORTHEAST KALIMANTAN PREVIOUS DRILL-HOLE INTERSECTIONS (ICG) Hole ID From (m) To (m) Length (m) Au g/t Ag g/t JM JM JM JM JM JM JM JM JM Vein Mewet: Weakly limonitic qtz-adu-cal-lim breccia vein Mewet: Weakly limonitic qtz-adu-cal-lim breccia vein Mewet: Weakly limonitic qtz-adu-cal-lim breccia vein Mewet: Weakly limonitic qtz-adu-cal-lim breccia vein Mewet: Weakly limonitic qtz-adu-cal-lim breccia vein Mewet: Weakly pyritic qtz-adu-cal-lim breccia vein Mewet: Weakly pyritic qtz-adu-cal-lim breccia vein Lipan: Weakly limonitic, colloform banded qtz-adu-cal vein Lipan: Weakly limonitic, colloform banded qtz-adu-cal vein TABLE 2 JELAI GOLD PROPERTY, NORTHEAST KALIMANTAN PROPOSED DRILLING PROGRAM (STAGE 1) Hole ID me mn Azimuth (deg.) Dip (deg.) Depth (m) Targets / Comments PSB01 498, , PSB02 498, , PSB03 498, , PSB04 498, , PSB05 498, , PSB06 498, , PSB07 498, , PSB08 498, , PSB09 498, , Sembawang Vein (central): Three fences of holes are planned to test the concave side of a large bend on the central portion of the Sembawang vein. The shape of this structure is similar to the zone of dilation and higher grade mineralisation intersected on the Mewet veinstructuredown to +150-m depth. The planningof these holes assumesa moderately steep, westerly dip on the Sembawang vein-structure. The central portion of the Sembawang vein-structurehas about 500-m strikelength and is coincident with a coherent, arcuate, low-level gold-soil anomaly (50 to 250 ppb Au). The first fence of holes is located near a trenchtrmw23, whichreturned1m at 4.13 g/t Au withina 4-m thick vein (no orientation data). The three planned fences of holes are spaced about m apart and will test about 200-m strike and to about 150- m depth on the vein structure. PSB10 498, , PSB11 498, , PSB12 498, , Sembawang Vein (northern): This fence of holes tests the northernend of the Sembawang vein, which is partly coincident with 200-m long N-S elongated, ppb gold-soil anomaly. The holes will drill under a +6- m wide, moderate-steeplyene-dipping vein exposed in trench TRMW19 that returned7-m at 3.32 g/t Au. A weaker mineralisedstockwork occurs in the hanging-wall of the vein returned 16-m at 0.8 g/t Au. The final positionsof the deeper holes on this fence will depend on the verification of the dip of the lode from the shallow hole. If the vein-intersectionson this fence show encouraging vein-textures and/or favourable assay results, two further step-out fences positioned about m along the strike (north and south) of this vein-structure are will be planned. PLP01 498, , PLP02 498, , PLP03 498, , PLP04 498, , PLP05 498, , PLP06 498, , PLP07 498, , PLP08 498, , Lipan Vein: Initially, two deeper cuts on this vein are planned to test about m and m down-dip, respectively. JM024, a shallow hole on this fence, was previouslydrilled by IndochinaGold and returned 1.28-m at 8.3 g/t Au from m & 0.12-m at 52.7 g/t Au from m on narrow steeplywesterlydipping veins. A subsequenthole designedto test down-dip on this structure failed to reach the target. If the deeper vein-cuts on this fence show encouraging vein-texturesand/or favourable assay results, two further step-out fences located at m and m along strike-southof this +200-m vein-structureare planned. The northernend of the Lipan vein coincides with a 200-m long, lobate, +250 ppb gold-soil anomaly. PMW01 498, , PMW02 498, , PMW03 498, , PMW04 498, , PMW05 498, , PMW06 498, , Mewet Vein (southern): This fence of holes tests for the source of highgrade vein float (Spl A79394; 87.8 g/t Au & 78 g/t Ag), and is drilled beneath a +5-m wide, steeply westerly dipping vein exposed in trench TRMW29 that returned 6-m at 0.58 g/t Au. The vein coincides with a spot 482 ppb gold-soil anomaly. The final positions of the two planned deeper cuts on the vein will depend on the verification of the vein orientationfrom the shallowhole and on the recognitionof favourablevein texturesfor potentialhigh-grademineralisation. A step-out fence of holes is planned about 80-m along strike-north of this fence if vein-textures and/or assay results are sufficiently encouraging. POB01 498, , POB02 498, , POB03 498, , Obi Vein: At least two fences of holes testing for high-grade gold mineralisationon the +250-m long Obi vein, which dips steeplyto the NW & returned 15-m at 3.82 g/t Au in trench TRMW15. POB04 498, , POB05 498, , POB06 498, ,

24 TABLE 3a JELAI GOLD PROPERTY, NORTHEAST KALIMANTAN PROPOSED BUDGET FOR VALIDATION AND STAGE 1 DRILLING PROGRAM BUDGET ITEM CALCULATION AMOUNT (USD) Mapping & Survey 6 weeks $40,000 Office Rent 6 months $2,000 Office Equipment General $15,000 Vehicle Leases 6 months $6,000 Consultant(s) 10 x $750 per day $7,500 Contract Labour 35 x 160 days x $6 per day $33,600 Field Equipment General $15,000 Camp Site General & Repair $20,000 Domestic Airfares 12 x $300 $3,600 International Airfares 1 x $1,500 $1,500 Accommodation 42 x $50 per night $2,100 Sample Freight General $4,000 Transport Boat, taxi, truck, etc. $2,000 Mob/Demob Drill Rig From/To Jakarta $20,000 Helicopter Charter 100 x $1,000 per hour $100,000 Fuel, Lub & Avtur General $35,000 Food Supplies 35 x 160 days x $5 per day $28,000 Field Supplies General $4,000 Drilling Supplies General $25,000 Assaying 4,000 x $20 per sample $80,000 Petrology 25 x $120 per sample $3,000 Drilling Contractor 4,000-m x $90 per metre $360,000 Ground Surveys Contract $30,000 Sub-Total $837,300 Contingency $125,595 Total $962,895 TABLE 3b JELAI GOLD PROPERTY, NORTHEAST KALIMANTAN PROPOSED BUDGET FOR STAGE 2 DRILLING PROGRAM BUDGET ITEM CALCULATION AMOUNT (USD) Office Rent 6 months $2,000 Office Equipment General $15,000 Vehicle Leases 6 months $6,000 Consultant(s) 10 x $750 per day $7,500 Contract Labour 30 x 160 days x $6 per day $28,800 Field Equipment General $15,000 Domestic Airfares 12 x $300 $3,600 International Airfares 1 x $1,500 $1,500 Accommodation 42 x $50 per night $2,100 Sample Freight General $4,000 Transport Boat, taxi, truck, etc. $2,000 Helicopter Charter 100 x $1,000 per hour $100,000 Fuel, Lub & Avtur General $35,000 Food Supplies 30 x 160 days x $5 per day $24,000 Field Supplies General $4,000 Drilling Supplies General $25,000 Assaying 2,000 x $20 per sample $40,000 Petrology 25 x $120 per sample $3,000 Drilling Contractor 4,000-m x $90 per metre $360,000 Sub-Total $678,500 Contingency $101,775 Total $780,275 10

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32 A float sample of crustiform banded quartz ± adularia vein containing sulphide rich bands (now partially replaced by iron oxides). This sample assayed 88 ppm Au and 78 ppm Ag. The sample was collected from the southern extension of the Mewet Vein approximately 750 metres along strike from the area drilled. Sample of high grade ore comprising of colloform banded quartz - adularia from the Vera - Nancy Lode, Queensland, Australia. FIgure 8. Comparison of slabs of high-grade epithermal Vein material from the Mewet and Vera-Nancy lode.