Current Work & Next Steps: PC Gold

Current Work & Next Steps

A major exploration and development program commenced on the Property late in 2007, and was accelerated subsequent to the Company’s IPO in May 2008. The principal objectives of the exploration program are to quantify what remains within or in close proximity to the mine workings and to extend known gold zones, and make new discoveries, both lateral to the historical workings and at depth below the old mine. To oversee this effort, the Company has contracted Fladgate Exploration Consulting Corporation of Thunder Bay, Ontario (www.fladgateexploration.com).

Following extensive upgrades to roads, bridges, accommodations and on-site exploration facilities, the Pickle Crow Property is now a turn-key site capable of sustaining year-round exploration activities in all weather conditions.

Historical Data Digitization and 3D Mine Model Development

A key objective of the Company’s exploration effort has been to assemble and digitize the enormous body of historical data sets from the earliest days of exploration on the Property through the mine’s active years and up to the present time. These historical data sets constitute one of the Company’s most important assets, providing hard data to support quantification to current standards of what remains within or close to the mine, the planning of new exploration drilling programs, and a possible future renewal of mining operations on the Property.

Drilling

The Company’s exploration program currently comprises year-round drilling of shallow, intermediate and deep targets located lateral to and below the historical workings in the Property’s core mine trend. Seasonally, when cold winter weather allows for access, drilling of mostly swamp and muskeg-covered regional targets located away from the core mine trend also takes place. Four drills are presently active on the Property. In the nine months from July 1, 2009 to March 31, 2010, 17,249 metres of shallow-intermediate drilling in 50 holes was accomplished, in addition to 3,671 metres in 8 deep wedge holes (and hole extensions), for a grand total of 20,921 metres drilled year to date.

Shallow-Intermediate Drilling

In mid June 2009 a Phase II drill program got underway with a single shallow-intermediate drill capable of drilling to depths of approximately 1,000 metres vertically from surface. Drilling through the summer months focused on following up on promising intercepts made in the Albany Shaft area during the Fall 2008 Phase I drill program, along with exploration of areas to the south/southwest of the No. 3 Shaft. These early fiscal 2010 drilling efforts generated the following significant discoveries:

A substantial, previously unrecognized, sedimentary basin between Shafts 1 and 3, including a thick unit of conglomerate with gold in cross-cutting structures (for example, 1.45 g/t gold over 16.70 metres (hole PC-09-030)) (press release - August 10, 2009);
A zone of low grade disseminated gold bearing sulphides overlying the Pickle Crow – Confederation contact to the southwest of the No. 3 Shaft (for example, 0.54 g/t gold over 30 metres (hole PC-09-034)) (press release - August 10, 2009);
The first high grade gold bearing veins to the south of the Pickle Crow – Confederation contact in the Confederation rocks proper (for example, 24.89 g/t gold over 0.40 metres (hole PC-09-033)) (press release – August 10, 2009); and
The new Conduit Zone discovery at the Albany Shaft (for example, 3.17 g/t over 35.6 metres including 9.53 g/t over 10.1 metres (hole PC-09-036)) (press release - September 28, 2009).

Of these discoveries, the Conduit Zone find was deemed the most significant. Accordingly, shallow-intermediate drilling was concentrated on it throughout the second quarter, resulting in the expansion of the Conduit Zone discovery from a single, roughly rod-shaped body to three (press release – November 4, 2009).

By mid December 2009, drilling of the accessible portions of the three Conduit Zone bodies had been wrapped up, and the shallow-intermediate drill moved to the southwestern end of the Property to provide an initial test of the potential for new veins in the area between the southwestern property boundary and the Shaft 1 workings. An initial drill hole into the southwest property boundary target area, which had historically been covered by the Pickle Crow town site, resulted early in the new year in the discovery (press release – January 21, 2010) of the new No. 20 vein, which returned 20.96 g/t gold over 0.50 metres from 125.5 to 126.1 metres in hole PC-10-057. Follow-up drilling of this new discovery succeeded in expanding the known area of the No. 20 vein structure, and further work on it is planned.

Late in January the single drill active on the No. 20 vein discovery was taken off that target and, taking advantage of the winter cold-weather window, was moved north to test newly-identified targets along the mostly swamp and muskeg-covered Cohen-MacArthur structure. Concurrently, a second shallow-intermediate drill was added to the exploration program and also assigned to testing targets along the Cohen-MacArthur. Drilling of the Cohen-MacArthur targets continued with the two drills through the month of February and into early March. However, a rapid spring thaw necessitated the removal (March 13^th) of both drills an estimated five weeks earlier than planned. In consequence, only approximately a third of the holes slated for winter drilling at Cohen-MacArthur were actually completed. Further work for this area is planned for winter 2010-2011.

The unplanned early exit from the Cohen-MacArthur had a silver lining, as the two intermediate capable drills were by mid March required for follow-up on an important new discovery made lateral to the historical workings in the core mine trend, the No. 19 vein. Announced as a new find on February 11, 2010, the No. 19 vein was first intercepted in the upper reaches of deep Shaft 1 area mother hole PC-09-052 (15.95 g/t over 0.7 meters) and its daughter hole PC-09-052A (7.50 g/t gold over 1.50 metres). Repeated attempts to overcome deviation in mother hole 52 and its wedges resulted in successive cuts through the thick Pickle Crow porphyry in which the new vein is hosted and consequently, further intercepts of the No. 19 vein.

By early March, the Company had cut the No. 19 vein with two more wedges, PC-10-052-W01 and W02, both of which returned thick intercepts. As announced at the annual PDAC convention in Toronto on Monday March 8, 2010, hole PC-10-052-W01 returned 8.23 g/t gold over 7.6 metres from 492.50 metres to 500.10 metres down hole, and hole PC-10-052-W02 cut the No. 19 vein zone from 530.42 metres to 531.85 metres with visible gold and then again from 539.51 metres to 543.43 metres with abundant coarse-grained visible gold. Assays were noted as pending for the PC-10-052-W02 intercept. On March 23, 2010, the Company released the assays for W02, which returned:

43.28 g/t gold over 13.13 metres,
including 138.89 g/t gold over 4.00 metres, and
including 201.96 g/t gold over 2.02 metres, and
including 299.10 g/t gold over 0.48 metres

The No. 19 vein as it is presently understood is unquestionably the most significant new discovery to result from the Company’s exploration activities on the Property to date, and the most important since the mine’s closure in 1966. It is important not only for its apparent grade and encouraging thickness, but also for its location about mid-depth and lateral to the workings. Historically, almost all of the drilling by previous operators at Pickle Crow was concentrated within approximately 300 metres of surface and, underground, within about 100 metres of the end of underground workings. The No. 19 vein discovery confirms the potential for major new discoveries in those areas of the Property that lie below about 300 metres from surface and somewhat away, but lateral to and within reach of, the underground workings. The No. 19 vein is estimated to lie about 275 metres from the closest underground working, the 750 foot connector level between Shaft 1 and 3. It is approximately 595 metres from Shaft 1, and 985 metres from Shaft 3.

Recognizing the importance of the No. 19 vein discovery, and the strong market interest in it, at period’s end both shallow-intermediate rigs were focused on the No. 19. The immediate goal of this work is to complete step-outs around the initial cluster of four intercepts, which were confined within an area measuring approximately 25 metres laterally by 50 metres vertically. This initial work will provide a better understanding of the orientation of the No 19 structure, as well as data useful for planning more aggressive step-outs to follow.

Strategically, the Company now sees the exploration of the Pickle Crow porphyry, in which the No. 19 vein was discovered, and nearby lithologies as a key exploration objective. The Pickle Crow porphyry comprises a thick “wall” trending southwest to northeast across the core mine trend, centred on the Property’s No. 2 and No. 3 Shafts, and plunging to depth. Historically only the upper reaches of the central portion of this porphyry body were explored and mined, primarily to extract the prolific No. 2 vein, which was one of the two most important orebodies in the mine. The porphyry is believed to be more brittle than surrounding rock types such that when deformed, it fractured more extensively and provided more open space for the entry of gold-bearing fluids. As with the other gold-bearing structures on the Property, it is likely that the structure which hosts the No. 19 vein cuts across all rock units, including the porphyry and surrounding conglomerate and mafic volcanics. However, the historical evidence from other known high grade veins in the Shaft 3 area suggests that the porphyry may be host to the “sweetest” portions of the No. 19 vein structure.

Going forward, the Company intends to 1) drill off the southwestern arm of the Pickle Crow porphyry to depth below the No. 19 vein discovery, 2) drill off the central portion of the Pickle Crow porphyry to depth below Shaft 3 itself, and 3) drill off to depth the virtually unexplored northeastern arm of the same body.

Deep Drilling

The deep drilling component of the Phase II exploration program on the Property commenced in mid September 2009 with a single deep rig capable of reaching depths of some 2,500 metres vertically from surface. The initial focus of deep drilling efforts was to complete wedge holes lateral to the No. 1 Shaft workings, which had been started during the Fall 2008 Phase I drill program but prematurely shut down due to economic conditions, prior to reaching target. These efforts were successful as, shortly after the drilling re-start, wedge hole PC-08-014AW03 drilled through multiple high grade veins. The results, as announced November 2, 2009, included:

112.15 g/t gold over 1.15 metres in the No. 5 vein
38.77 g/t gold over 0.30 metres in the No. 11 vein
10.99 g/t gold over 1.40 metres in a new vein hosted in iron formation

Following completion of wedge hole PC-08-014AW03, a fourth wedge hole, PC-09-014AW04, was commenced, targeting the No. 5 Banded Iron Formation (BIF) Zone southwest of the lowest level (3,800 feet/1,160 metres) of Shaft 1. During the quarter ending December 31, 2009 wedge hole PC-09-014AW04 was successfully completed, and the deep drill moved to a new site northeast of Shaft 1 where, from a set-up on a very large historical tailings pond, it commenced drilling a deep mother hole, PC-09-052, below the deepest workings of the former mine.

The Pickle Crow Property offers a key exploration advantage for deep drilling efforts in that the principal gold bearing structures on the Property exhibit a so-called “en echelon” (i.e. overlapping) effect. Taking advantage of this structural set-up, and employing deep drilling technology including directional drilling tools and equipment that were not available to historical miners on the Property, individual deep drill holes can be designed to do what was not previously possible, i.e. to cut through multiple gold bearing structures when drilled from northeast to southwest across the core mine trend. Hole PC-09-052 and its subsequent wedges, for example, have been designed to target the down-plunge extensions below the old workings of several of the richest historical ore bodies in the former mine including, in order of expected penetration, the No. 1 vein, No. 1 BIF, Central BIF, No. 9 vein, No. 5 vein, No. 5 BIF, and No. 11 vein.

Such a deep drilling approach also maximizes the favourable lithologies intersected during deep drilling operations, thereby increasing the likelihood of making new discoveries. The chances were therefore considered excellent that deep hole PC-09-052 and its wedges would make new finds, in addition to its primary objective of intercepting the down-plunge extensions of previously mined gold zones. These expectations were confirmed with the discovery of the new No. 19 vein, discussed above, which was first intercepted at approximately the 500 metre vertical level in the upper portion of deep hole PC-09-052.

Drilling deeper, hole PC-09-052 displayed a consistent tendency to deviate to the left of target. When attempts to keep hole PC-09-052 on target proved ineffective, a new wedge hole (PC-09-52A) was started from higher up in the Pickle Crow porphyry unit which was believed to be responsible for causing the deviation. On February 22, 2010, the Company announced that hole PC-09-052A had cut the key No. 1 vein structure approximately 210 metres below the lowest mined level on this vein, and returned the highest grade gold intersection on record for this structure, 134.26 g/t gold over 3.20 metres from 1139.80 metres to 1143.00 metres down hole, including 838.14 g/t gold over 0.50 meters from 1140.30 metres to 1140.80 metres.

Encouraged by the high grade No. 1 vein intercept in PC-09-052A, but still fighting hole deviation, the Company backed off further up hole in the porphyry and commenced another wedge (PC-10-052-W01). This hole also deviated, but managed nonetheless to generate the thickest intercept (7.6 metres) to date of the new No. 19 vein discovery. A fourth attempt was made to establish and maintain a correct dip and azimuth for a new mother hole. Backing off up hole completely out of the problematic Pickle Crow porphyry unit, a new wedge hole PC-10-052-W02 was commenced.

Utilizing a combination of controlled drilling, stabilization tools, and Devico directional drilling equipment, wedge hole W02 was successfully kept on course completely through the porphyry and beyond. At March 31^st this hole, which has become the de facto “new” Shaft 1 mother hole, was at approximately 1,200 metres depth downhole and on course. It is expected that as drilling proceeds, a series of down hole wedges will be used to keep nudging hole W02 and its wedges to the right and through the series of targets assigned to it, namely the No. 1 vein, No. 1 BIF, Central BIF Zone, No. 9 vein, No. 5 vein, No. 5 BIF, and No. 11 vein. Ultimately, wedge hole PC-10-052-W02 or its wedges should bottom out below Shaft 1 at approximately 2,000 metres vertically from surface.

Concurrent with the deep work at Shaft 1, shortly after the end of the period, on April 16^th, 2009, a second deep drill arrived on the Property, capable of drilling to 2,500 metres vertically from surface. This drill has been set up on the northeastern quadrant of the Property, and is in the early stages of drilling a deep hole below Shaft 3. Drilling below Shaft 3 is considered a key strategic objective for the Company, given that historically the greatest concentration of high grade veins on the Property were found in the lower levels of the Shaft 3 workings.

As with the deep holes below Shaft 1, the Shaft 3 hole, designated PC-10-085, has been designed to drill through the lithologies below Shaft 3 from north to south, intercepting in the process what is expected to be as much as 1,000 metres of Pickle Crow porphyry. Ultimately this hole or its wedges is targeted to bottom at approximately 1,800 metres vertically from surface.

To date, inclusive of shallow and deep drilling components, a total of 22,082 metres of NQ-diametre diamond drilling in 61 holes had been completed on the Property by the Company since the commencement of Phase II drilling in mid June 2009.