Touquoy Gold Project

Environmental Approval

Background

Under an Agreement established in May 2003 with a private local company Atlantic Gold NL (ATV), through its wholly-owned local subsidiary DDV Gold Limited (DDV), now holds 60% interest in the Touquoy Gold Deposit and satellite deposits, located in Nova Scotia on Canada's Atlantic coast. A further 15% interest in the surrounding property can be earned on securing project financing. DDV is the Operator. Under the Agreement DDV receives 100% of all project cashflow until all exploration, pre-development and development expenses, charges and overheads – capital or otherwise – plus interest are recouped, following which it retains 60% share of profits.

ATV has now advanced the Project to the Feasibility Study stage for an open pit mining and processing operation, having now obtained Environmental Approval and completed comprehensive resource delineation and trial grade control drilling along with metallurgical, geotechnical, geohydrological, environmental and other technical investigations. In addition to in-house expertise, ATV has engaged specialist consultants, where appropriate, to assist with these studies.

Location

The Project is located in central Nova Scotia approximately an hour and a quarter by sealed road from Halifax. The region is mostly forested.

Skilled labour services and housing are available in the nearby Musquodoboit Valley, where several long-standing gypsum and limestone open pits are operating. Grid power will be available with connection requiring 5 km of new line and upgrade of 5 km of existing line.
 

Resources

As a result of ATV's resource delineation drilling – 129 diamond holes for 10,480 m – and trial grade control drilling, the resource inventory has now been confidently expanded to 656,000 ounces gold (13.2 million tonnes @ 1.5 g/t), a 60% increase over the 405,000 ounces which had been identified prior to ATV's involvement. The single-pit Touquoy Gold Deposit itself presently contains 11.7 million tonnes @ 1.5 g/t gold for 557,000 ounces to a depth of 140 m with the remainder (1.5 million tonnes @ 2.0 g/t gold for 99,000 ounces) developed in two satellite deposits 2 km away at Touquoy West.

Current resource estimates (April 2008) are as follows:

Underpinned by this resource inventory, the Touquoy Gold Deposit represents an attractive open pit mine development given these further favourable attributes:

• Low waste:ore ratio of 2:1
• Excellent metallurgical recoveries 93%
• High gravity gold recoveries with about 65% expected
• coarse grind permitted (150μm), hence reduced power consumption
• low reagent consumption (0.4 kg/t CN^-)
• grid power available
  
• short residence time (16-24 hours)
• Soft host rocks – Bond work index less than 10
• Excellent cyanide detoxification characteristics
• No acid rock drainage by virtue of calcite in the ore, and low sulphide content
• Favourable location with respect to excellent infrastructure
• On on-site accommodation required
• Keen local and homecoming workforce
• No sovereign risk
• Satellite deposits further west
• Excellent near-mine and regional exploration potential

Feasibility Study

AAusenco Canada Ltd has been engaged to undertake the process engineering for construction of the treatment plant once appropriate used plant has been secured. This will enable completion of the Touquoy Feasibility Study. Used plant has been identified, acquisition of which is subject to suitable financing.Used plant is preferred to avoid expected long lead time for delivery of a new mill, and to reduce capital costs.

Metallurgy

Final comprehensive metallurgical testwork has been undertaken under the guidance of Peter Lewis and Associates. The ore has excellent metallurgical characteristics:

• Very high total recoveries (93%)
  
• Very high gravity recoveries (65%)
  
• Permissible coarse grind (150 microns)
  
• Low reagent consumption
  
• Very short residence time (16-24 hours)

Grindability

Grindability testwork on large diameter (PQ) diamond core samples drilled by ATV in August 2005 has been conducted by SGS Lakefield Research Limited with direction from Perth-based, Orway Mineral Consultants (WA) Pty Ltd. Results confirm the extremely low Bond ball mill work index (average 8.3 kWh/t) for the argillite host rock, which will comprise 85-90% of the mill feed. This result implies low power consumption for the grinding circuit. The preferred comminution circuit option arising from this testwork is a 3-stage crush/Ball mill configuration.

Geotechnical testwork

A review of detailed and specific geotechnical investigations undertaken by ATV on selected resource delineation drillholes under the guidance of Perth-based consultant, Peter O'Bryan and Associates has defined the pit slope parameters used in the Engineering and Cost Study.

Geohydrological testwork

Results of airlift tests on selected resource delineation drillholes and eight monitoring water bores drilled in and around the proposed pit, indicate minimal potential impact on surface water flow characteristics and simple pit dewatering requirements.

Geology

The Touquoy gold deposit is located in the Meguma Group, a sequence of Cambro-Ordovician sandstones and mudstones which underlies about half of the province of Nova Scotia. Since the mid-1800s about sixty underground gold deposits within the Meguma Group have been mined, for an aggregate documented production of about 1.2 million ounces. These deposits evidence the substantial gold potential of the Meguma Group. The Touquoy deposit however is different from most of these deposits in that the gold is disseminated throughout the host sediments and is essentially unrelated to quartz veining.

The very wide drill intersections of gold mineralisation at Touquoy, some in excess of 100 m, therefore set this deposit apart from the typical Meguma Group gold deposits as a substantial, open-pit, bulk mining proposition.
 

Property ownership

Under the 2003 farm-in Agreement, Atlantic Gold:

• has earned a 60% interest in the entire Property by having spent C$2.2 million before 31 December 2005 on exploration, evaluation and development of the Property, and by having made cash payments totalling $200,000 to the property vendors, Moose River Resources Inc (MRRI).
  
• may earn an additional 15% interest in the Exploration Block, which comprises the major part of the property outside the currently defined resource area, upon securing project financing for the Project.
  
• is the operator and manager of the Project and will arrange project financing in respect of MRRI's minority interest, and
  
• receives 100% of all project cashflow until all exploration, pre-development and development expenses, charges and overheads – capital or otherwise – plus interest are recouped, following which it retains 60% share of profits.
  

A significant proportion of surface property rights are held by a number of permanent and part-time residents of the hamlet of Moose River Gold Mines. Access agreements with these residents have been obtained to enable the deposit to be drilled. It is anticipated that property sale and purchase agreements can be negotiated as required.

History

Gold mining began in the area in 1877, and continued intermittently until 1936, with numerous small underground operations and open pits developed around the central part of the project area. About 26,000 ounces of gold are reported to have been recovered from 150,000 tonnes of slate, quartz and glacial overburden material.

The deposit has undergone several exploration campaigns since 1986. These include:

• Seabright Exploration Inc, 1986-87: 143 diamond drill holes for 19,523 metres drilled around the Higgins and Lawlor prospect and eastwards towards Touquoy. Seabright was taken over by Western Mining Corporation in late 1987.
   
• Westminer Canada Limited (a subsidiary of Western Mining Corporation), 1988-89: 129 diamond drill holes for 12,722 metres drilled on the Touquoy zone and surrounds. Mining and processing of a 57,000-tonne bulk sample taken from near-surface mineralisation at the western end of the deposit.
   
• Moose River Resources Inc, 1996: 38 diamond drill holes for 2,669 metres and 37 percussion holes for 1,110 metres.
   
• Aurogin Resources Ltd, 2002: five percussion and one diamond drill holes for 381 metres.
   

Ongoing Investigations

Completion of the Feasibility Study and final regulatory permitting remains the focus of present activities. However additional drilling to extend and detail the Higgins & Lawlor and Stillwater resources at Touquoy West, and to test new positions flagged by previous reconnaissance percussion drilling in this vicinity, and in the eastern sector of the Touquoy property, is yet to be fully undertaken.

At this stage, providing funds are available, no significant non-technical impediments to project development are foreseen.
 

Exploration potential

In addition to developing the Touquoy Gold Project ATV is undertaking extensive exploration, both regional and near-mine, to build its resource base. ATV believes the area is highly prospective for additional Touquoy style deposits (a) elsewhere within the Touquoy property close to the proposed plant site, (b) on the well-located Cochrane Hill property and (c) outside the Touquoy property elsewhere within the Meguma Terrain.

(a) Step-out diamond and percussion drilling indicates the Touquoy host stratigraphy is gold- and arsenic-anomalous for a kilometre eastwards of the Touquoy deposit. This favourable stratigraphy and structure also extends westwards into the area of the historic Higgins & Lawlor and Stillwater deposits of the Touquoy West locale. Both these deposits are open along strike.

(b) Indicated and Inferred Resources of 4.7 million tonnes at 2.5 g/t Au for 373,000 contained ounces have been identified at Cochrane Hill, an advanced gold exploration property located 80 km east of the Touquoy Gold Project and the subject of an option agreement with Scorpio Mining Corporation. Impressive assay results have been returned from recent reconnaissance RC drilling. The nature of the Cochrane Hill mineralisation confirms Atlantic Gold’s belief that this district is highly prospective for bulk-mineable gold reserves similar to that at Touquoy.

(c) Considerable potential along adjacent parallel gold-mineralised belts - the anticlinal axes of pioneer government geologist ER Faribault mapped over a century ago - is recognised beneath the widespread cover of masking glacial till, and a strong local land position has been secured. A customised reconnaissance drilling technique has been employed by ATV to effectively penetrate the cover and explore this terrain and to date over 10,000 m have been drilled to test regional targets. This work is ongoing.

LAST UPDATED: 5 August 2008