Cochrane Hill Gold Project

Introduction

Atlantic Gold, through its wholly-owned Canadian subsidiary DDV Gold Limited, entered into an Option Agreement on the Cochrane Hill advanced exploration property with TSX-listed Scorpio Mining Corporation (Scorpio) in May 2007. As an augmentation to Touquoy throughput our preliminary financial assessment of Cochrane Hill, with a current resource inventory of 547,000 ounces gold, indicates that a very attractive profitable return can be realised. As a result, we now have a resource development drilling program underway at Cochrane Hill to determine the most profitable approach to accessing this resource.

Location

The property comprises 53 mineral claims (8.3 square km) and is located 80 km east of ATV's Touquoy Gold Project.
 

Mineral Resources

Following a review by resource estimation specialist Hellman & Schofield Pty Ltd, based on an open pit model and a cut-off grade of 1.0 g/t, the total Indicated and Inferred Resource was upgraded from an existing resource model to 4.7 million tonnes at an average grade of 2.5 g/t, for 373,000 contained ounces of gold. The previous mineral resource estimate conducted for Scorpio in 2004 at an NI43-101 compliance standard was based on underground mining techniques using block modelling of selected wire-framed mineralised vein sets, which resulted in higher average grades but much lower resource levels (534,100 tonnes @ 6.5 g/t). Most of the Cochrane Hill resource extends from the surface to 150 m in depth.

A new resource estimate was prepared by Hellman & Schofield in June 2008, increasing Indicated and Inferred Resources at Cochrane Hill to 10.0 million tonnes at 1.7 g/t, for 547,000 contained ounces of gold. This revised estimate is based on a revised sample data set which includes a substantial amount of additional gold data sourced from Atlantic Gold's sampling and assaying of 3100 m of previously unassayed intervals of historic drill core recovered from storage in the Nova Scotia Department of Natural Resources' core library.

This revised resource figure adds to the 656,000 ounces of contained gold already estimated at Atlantic Gold's Touquoy Gold Project, 80 km west of Cochrane Hill. It lifts the total contained gold controlled by the company in Nova Scotia to 1,202,000 ounces.

Resource summary

Since the original assaying during the 1970s and 1980s had been selective with un-assayed intervals having been ascribed zero grade about 3100 samples of previously un-assayed core have been submitted for gold assay. By simply "filling in the blanks" - no re-assaying of core previously assayed has been conducted - results for the holes tested averaged about a 25% increase in grades to those applied in the above resource estimate.

Notwithstanding the relatively high proportion of Inferred Resources in the total Cochrane Hill resource inventory, a preliminary scoping study using Touquoy mining and plant throughput costs and estimated haulage costs indicates a very attractive return. Refinement of the input parameters from resource delineation and estimation, metallurgical recovery, pit design through to haulage, processing costs and so on is therefore now a key priority.

Excellent results have been received from the first stage of a 5000 m resource development diamond drilling program with shallow open pittable mineralisation intersected over substantial widths, up to 31 m at 2.43 g/t from 19 m depth. These results are a further step towards confirmation that the Cochrane Hill gold deposit, developed in synergy with Touquoy, will be commercially viable with real potential for over 800,000 ounces of gold to be produced from these two deposits.

This program is designed to upgrade the presently outlined resource to Measured and Indicated Resource status, and provide sufficient core for completion of comprehensive metallurgical testwork. It will also establish a basis for reserve definition and determination of the best approach for development. It is likely that processing will use the planned Touquoy processing plant.

Geology

Exploration potential beyond the area of the drilled resource is excellent. The sheared, mineralised sequence is parallel to, and 100 m south of, the axis of the overturned Cochrane Hill anticline (refer to accompanying property plan). This intermittently outcropping shear zone has been traced for 5 km across the property in previous exploration programs, and it hosts several areas of anomalous gold geochemistry in various media. The most notable of these is a trench grading 1.9 g/t gold over 7.6 m about 1.6 km west of the resource. No drilling has been conducted along this mineralised shear zone beyond that central 1200 m length encompassing the identified resource.
 

Exploration drilling

Fourteen fences of staged reconnaissance RC drilling (82 holes for 1246 m) have been drilled to investigate this mineralised shear zone across the property beyond the limits of the main resource - eleven 100 m-spaced fences west of the main resource and three 500 m-spaced fences east of the main resource (see accompanying plan). Gold mineralisation indicative of the target zone has been recorded in all of the fences now drilled west of the main resource with the distinctive Cochrane Hill-style quartz-veined and sulphidic lithologies recognised at two locales. At one of these, impressive results - up to 12.2 g/t over 8 m from 4 m depth - were returned from section 2140E located 600 m west of the main resource.

Eight diamond core holes have now been drilled to follow up these RC results - six around 2140E and two on 1775E. Assay results for the first four of these holes have been received with best return of 1.2 g/t gold over 6 m from 53 m in hole CH-08-006 on 1775E. Best result from the two diamond core holes drilled beneath the high grade RC holes on 2140E was 4.3 g/t over 1 m. Assays from the remaining four diamond core holes are pending.

Grade distribution evident within this extensive mineralised zone suggests the high grade mineralisation on 2140E is disposed as a shallow-plunging high grade shoot, probably one of several, within a halo of lower grade material. Further drilling is required to evaluate this mineralisation and to explore the remainder of this attractive property.

Property ownership

Under the terms of the agreement with Scorpio Mining Corporation, once Atlantic Gold (through its wholly-owned Canadian subsidiary) has completed expenditure of C$4.75 million on exploration and development within 4 years, conditionally extendable for a further 2 years, and has made aggregate cash payments of C$100,000 to Scorpio, then at Scorpio's election Atlantic will have earned either a 60% Joint Venture interest (with Scorpio retaining a 40% contributing Joint Venture interest) or 100% interest subject to a 20% free carried interest retained by Scorpio. Atlantic may withdraw at any time. The property is subject to an underlying 3% production royalty in favour of a third party.

Conclusion

Identification of the Cochrane Hill mineralisation confirms Atlantic Gold's belief that this gold district of Nova Scotia is highly prospective for bulk-mineable gold reserves similar to that at Touquoy. Acquisition of a controlling interest in this advanced prospect, with its demonstrable upside, represents a significant forward step in Atlantic Gold's strategy to develop a commercially viable and environmentally sustainable gold mining industry in Nova Scotia. Atlantic Gold looks forward to advancing this property towards production in the near term.

LAST UPDATED: 5 August 2008