GARNEX GOLD CORPORATION A Nevada Corporation
Confidential Overview
Mine Development and Exploration of the
Garnet District
June 2020
Table of Contents
Section 1.0 Executive Overview
Section 2.0 Background
Section 3.0 Asset Purchase Agreement
Section 4.0 CDM Technical Report
Section 5.0 Behre Dolbear Valuation
Section 6.0 Mine Plan GHC 2011
Section 6.1 Mine Plan GGC 2020
Section 6.2 Ore Storage, Transport, and Milling
Section 6.3 Metallurgical Testing
Section 7.0 Geology
Section 8.0 Access and Facilities
Section 9.0 Permitting and Community Impact
Section 10.0 Exploration Potential
Appendices
1.0 Executive Summary
Garnet Gold Corporation (“GGC”), is incorporated in the state of Nevada, is authorized to do
business in Montana, and its principle office is in Missoula Montana. GGC has acquired and
controls approximately 4,100 acres of patented and un-patented mining properties in the Garnet
District which are located about 35 miles east of Missoula. The acquisition of the properties is
pursuant to an Asset Purchase Agreement between GGC and the previous owner,
Commonwealth Resources, LLC (“CWR”). This Agreement provides for the acquisition of the
mineral and surface rights of the properties, along with all surface improvements, technical
documentation, and intellectual property. Pursuant to the Agreement, GGC is obligated to make
payments to CWR as outlined in Table 3 in Section 3.0
GGC will, subject to capitalization of $6.643 million USD (Table 1), proceed with its 2020
development and mining plan of the Garnet District. The initial targeted gold bearing resource
(Table 4) is 290,000 tons of ore with an average grade of 0.233 OPT, with an expected yield of
67,000 ounces Au. The mine plan in Section 6.0 discusses the following summary in more
detail.
1. Confirmation core drilling program (4 to 6 drill targets to 300’ below surface) designed to enhance interpretation of mineralization, structure, and reserves, which will be utilized
for the final comprehensive mine plan.
2. Construction of an assay lab in an existing building on the property.
3. Fund bond shortfalls carried over from the previous operator with the Montana DEQ and BLM of approximately $190,000. This will allow GGC to commence mining operations
under an existing Small Miner’s Exclusion Statement (SMES). The SMES allows mining
without restrictions provided the total surface disturbance is limited to 5 acres or less.
4. Complete the partially constructed decline using the existing Nancy Hanks portal constructed by a previous operator in 2011, and commence underground mining
operations of the Nancy Hanks vein system. Target is to mine 200 t/d, 335 days per year,
with an average grade of 0.233 ounces gold per ton, yielding 15,600 ounces Au per year.
5. Transport gold ore to a custom mill located 60 miles to the southeast in Phillipsburg Montana. Custom mill has gravity and flotation circuits. The final product or
concentrate will be both a gravity material that will be processed into dore, and sulfide
concentrate that will be marketed to a smelter or refinery
6. Submit application to the Montana DEQ for an operating permit which will allow GGC to explore and develop all properties without any restriction in regards to surface
disturbance.
Table 1– Capital Requirements, Nancy Hanks Accessible Workings
Schedule is to commence drilling activity in July 2020 and advance/complete the decline by
December 2020. Underground mining of the Nancy Hanks accessible resources shown in Table
4 will commence by January 2021. Included in the capitalization estimate is nearly $1.0 million
USD of operating capital to fund mining operations for the first 75 days. Mining will commence
at approximately 100 t/d and will ramp up to 200 t/d by March 2021. Ore will be stockpiled as
needed and first gold ore will be delivered to the mill in April 2021. First revenue from gold
production is expected to be realized in May 2021. The expected annual output is 15,600 ounces
of gold. The expected mine life of the documented Nancy Hanks accessible resource, category 1
and 2, is 4.0 years. There exists many other exploration and development opportunities that are
detailed in Section 10.0 in this report.
The daily tonnage of mined ore, and mining cost per ton, are two elements that are well defined
through GGC’s in house and third party resource and cost modeling efforts. Average ore grade
can be accurately predicted from GGC’s vast library of drill and assay data. Grade control will
be at a premium and is more subject to variation. The other variable outside the control of GGC
is the spot price of gold.
Provided below is Table 2 which is a gross profit matrix. The daily tonnage and costs are fixed,
and the gross profit is predicted at varying ore grades and gold prices.
ACTIVITY COST START END
Bonds - DEQ and BLM 195,000.00$ 6/1/2020
Confirmation Drilling 250,000.00$ 7/1/2020 8/1/2020
Payment to CWR 1,250,000.00$ 6/15/2020
Refurbish Portal 75,000.00$ 7/1/2020 8/1/2020
De-water decline - equip and personnel 125,000.00$ 7/1/2020 9/1/2020
Advance decline 1,950' at $1200/ft 2,340,000.00$ 9/1/2020 12/1/2020
Engineering services 250,000.00$ 8/1/2020 12/1/2020
Mine ventilation design and install 275,000.00$ 9/1/2020 12/1/2020
Employee hiring and training 100,000.00$ 11/1/2020 1/1/2021
Mobile equipment 250,000.00$ 11/1/2020
Infrastructure improvements 145,000.00$ 7/1/2020 9/1/2020
Operating Capital (first 75 days of mining @ 100 t/d) 937,500.00$ 1/1/2021 4/1/2021
OH and Contingencies (8%) 450,000.00$
TOTAL 6,642,500.00$
Table 2 – Projected Gross Profit Matrix
2.0 Background
The Garnet property is located in the historic Garnet Mining District of southwest Montana.
There are 23 patented and 188 unpatented claims held by GGC which constitutes approximately
4,100 acres of land controlled in the Garnet District. Figure 1 and Figure 2 show the general
location of the properties, the claim boundaries, area covered by both patented and
unpatented mining claims, and the access to the property.
The Garnet District has a long mining history which includes gold placer and underground
mining. Production from this district occurred between 1865 and 1941, with an estimated
500,000 ounces of placer gold and 150,000 ounces of gold produced from lode deposits. Figure
3 shows the historic mine locations.
The modern era of exploration began with Pegasus Gold Corporation who from 1989 to 1992
identified 14 separate exploration targets. Pegasus drilled 147 reverse circulation exploration
holes and 6 core holes. Grant Hartford Corporation followed Pegasus and during the period
2007 to 2011 drilled 357 reverse circulation holes and 4 core holes. All of the sub surface data
obtained from the above drilling campaigns has been compiled into a database constructed by
Klepfer Mining Services. This data set has been loaded into MapTek-Vulcan modeling software
which provides the basis for the resource estimates and mine modeling. Figure 4 shows the
historic drill hole collar locations.
Provided in Section 4.0 of this overview are resource and cost estimates compiled by CDM
Smith (“CDM”) in their November 2019 Technical Report. CDM is a highly qualified and
Base Assumptions
Tonnage = 200 t/d X 335 days/yr= 67,000 tons of ore/yr
Yield = 67,000 tons ore/yr X Grade
Mining Cost = $262.00/grade = Cost per Oz Au
67,000
262.00$
Grade Mining Cost Yield 1,200.00$ 1,300.00$ 1,400.00$ 1,500.00$ 1,600.00$ 1,700.00$
$/Oz Oz - Au
0.2 1,310.00$ 13400 (1,474,000.00)$ (134,000.00)$ 1,206,000.00$ 2,546,000.00$ 3,886,000.00$ 5,226,000.00$
0.233 1,124.46$ 15611 1,179,200.00$ 2,740,300.00$ 4,301,400.00$ 5,862,500.00$ 7,423,600.00$ 8,984,700.00$
0.25 1,048.00$ 16750 2,546,000.00$ 4,221,000.00$ 5,896,000.00$ 7,571,000.00$ 9,246,000.00$ 10,921,000.00$
0.275 952.73$ 18425 4,556,000.00$ 6,398,500.00$ 8,241,000.00$ 10,083,500.00$ 11,926,000.00$ 13,768,500.00$
0.3 873.33$ 20100 6,566,000.00$ 8,576,000.00$ 10,586,000.00$ 12,596,000.00$ 14,606,000.00$ 16,616,000.00$
0.325 806.15$ 21775 8,576,000.00$ 10,753,500.00$ 12,931,000.00$ 15,108,500.00$ 17,286,000.00$ 19,463,500.00$
0.35 748.57$ 23450 10,586,000.00$ 12,931,000.00$ 15,276,000.00$ 17,621,000.00$ 19,966,000.00$ 22,311,000.00$
0.375 698.67$ 25125 12,596,000.00$ 15,108,500.00$ 17,621,000.00$ 20,133,500.00$ 22,646,000.00$ 25,158,500.00$
0.4 655.00$ 26800 14,606,000.00$ 17,286,000.00$ 19,966,000.00$ 22,646,000.00$ 25,326,000.00$ 28,006,000.00$
independent engineering firm. A property valuation study is cited in Section 5.0, conducted by
Behre Dolbear in September 2019.
3.0 Asset Purchase Agreement
The Asset Purchase Agreement stipulates payments from GGC to CWR over the next 28 months,
or a lump sum payment of $3.75M, before clear property titles are obtained by GGC. The
Agreement allows GGC to explore, develop, and mine the properties as it wishes while title is
held in escrow. The full payment obligations as stipulated in the Agreement are shown in Table
3.
Table 3 – Purchase Agreement Payment Schedule
Amount Due Date Due
$250,000.00 down payment. Paid
$1,250,000.00 June 15, 2020
$500,000.00 January 17, 2021
$1,000,000.00 January 17, 2022
$1,000,000.00 July 31, 2022
Total = $4,000,000.00
4.0 CDM Technical Report (Format 43-101)
A Technical Report (Format 43-101) was completed by CDM, under contract to GGC, in
November 2019. The report uses the SEC classification of mineral resources as inferred,
indicated, and measured mineral resources, in order of increasing confidence based on the level
of underlying geological evidence. For the purposes of this report, the measured resource is
category 1, indicated is category 2, and inferred is category 3.
Table 4: Nancy Hanks Underground Accessible Mineral Resources
AREA CATEGORY TONS OUNCES OZ/TON
Nancy Hanks 1 and 2 178,302 43,509 0.244
Marble 1 and 2 8,667 2,692 0.311
Dewey 1 and 2 12,853 2,042 0.159
Shamrock 1 and 2 34,275 5,704 0.166
Willie 1 and 2 55,874 13,694 0.245
Total 1 and 2 289,971 67,641 0.233
The report further describes the inferred resources (category 3) in all areas shown in Table 4 as
likely resources that would be extracted using underground mining methods. The resources were
generated in Maptek Vulcan using an average grade thickness and contouring mid-point to assess
the various veins encountered in the drilling. This evaluation resulted in an inferred value of
180,000 tons grading at 0.333 ounces per ton. This adds another 60,000 ounces of gold to the
recoverable resource.
The CDM report also includes a detailed underground operating cost model. The model can be
run at different ore grades, tonnage, and gold prices as needed. The base case of operations is
200 t/d @ 0.233 ounces of Au per ton, with a yield of 15,611 ounces of gold annually. The cost
model for the base case of operations as shown in Table 5 predicts the following:
Table 5 – Operating Costs
Mining cost/ton $143.00
Milling cost/ton $68.50
Ore Transport cost/ton $24.50
Cons Transport cost/ton $2.15 per ton of ore milled.
Smelter cost/ton $23.75 per ton of ore milled.
Total Costs/ton $261.90
The total cost of $261.90 per ton of ore, based on an average grade of 0.233 ounces of Au per
ton, equates to $1,124.00 per ounce of gold. At 200 t/d, the known resource of the Nancy Hanks
and accessible workings has a 4 year mine life. Gross profit, at a spot price of $1,500 gold, is
estimated at $5.8 million USD annually. (Table 2)
The milling cost/ton of $68.50 is based on contract milling at the nearby Contact Mill in
Phillipsburg Montana. GGC plans, within the next 2-3 years, to construct a mill in close
proximity to the mine site. The estimated cost estimate to build a custom mill is $5.4 million
USD (+20%, -10%). Owning and operating a mill will reduce GGC milling costs by 40% and
transportation costs by 65%. And there is expected to be additional revenue opportunities by
contract milling for others. The decision to build a mill at a future date will be primarily
predicated upon adding more reserves through additional exploration and development work.
5.0 Behre Dolbear Valuation
In September of 2019 the Behre Dolbear group, under contract to GGC, completed a property
valuation study to determine the fair market value of the Garnet properties. The Behre Dolbear
report arrived at a fair market value of $11.5 million USD for the properties. This estimate is
based upon the defined resources having a value of $8.6 million USD, and the mineral potential
of the property’s claims of $2.9 million USD. This valuation assumed a gold price of $1,275 per
ounce, which was the historical 3-year average price at the time of the report.
In Behre Dolbear’s report, they noted that excellent exploration opportunities on bonanza grade
mineralization could be easily reached. They concluded the following for exploration potential:
• Extensions of the known resources down dip and immediately along strike of the Nancy
Hanks vein – short-term potential.
• Discovery of new veins in the hanging wall and footwall of the Nancy Hanks vein system
– long-term potential.
• Strike and down dip extensions of other prominent vein zones such as the Willie, Lead
King, and Grant Hartford – short-term potential.
• Potential for discovery between the Nancy Hanks and Tostman – short-term potential.
• Potential discovery between Tostman and Coloma – long-term potential.
• Deep potential where many district-wide veins would merge down dip – conceptual long-
term potential.
Behre Dolbear “considers all of these as viable targets that could add substantial new resources
to the project in the long term but also could provide high-grade and/or bonanza ores easily
accessible in the short term.”
6.0 Mine Plan - GHC 2011
In 2011, Grant Hartford Corporation (“GHC”), who then held an option from CWR, contracted
with New Millennium Mining to put in a new decline (-15 percent grade) to access drifts, ore
drifts, and stoping of ore to explore and mine the Nancy Hanks and Marble deposits. Both
deposits were to be accessed from the same decline.
An underground mine plan and stope layout was completed by GHC and Small Mine
Development. The mine design was based on the geology block model created by GHC.
There were four phases to the Project that included collaring the portal and developing the main
ramp. The intent was to expand exploration access and to exploit available ore encountered by
the new underground development. The proposed project was estimated to take 18 months to
complete.
The portal was completed and the initial 12’ by 13’ decline was advanced a total of 387 feet. At
that time GHC halted the project due to funding issues and the portal/decline has remained
dormant since that time.
6.1 Mine Plan - Garnex Gold Corporation 2020
The collared portal (adit) constructed by GHC in 2011 was inspected in July 2019 by GGC
personnel and CDM mining engineers. The decline was flooded at that time but the ground in
the upper portion of the back (roof) of the decline that could be seen from the portal appeared to
be holding well.
GGC plans to de-water and re-enter the existing decline, and extend the decline to the bottom of
the known Nancy Hanks resource. The decline will be advanced another 1,400 feet to the top of
the modelled Nancy Hanks and Marble zone deposits where mining will commence. Concurrent
to mining, the decline will be advanced an additional 550 ft to access the underlying ore bodies.
The Nancy Hanks and Marble deposits are narrow vein and flat dipping at less than the angle of
repose of the broken ore. The mining method to be implemented is adit entry traditional cut and
fill. Mechanized cut and fill was a consideration but the narrow veins will not allow for
mechanized mining as the dilution rate would be prohibitive. Consequently, the mining method
will include scraping the ore from the footwall and dragging it down to an access level from
which it can be picked up and hauled to the surface using compressed air operated “slushers”.
This mining method was used successfully for many years in the Rio Algom Quirke Mines in the
Elliot Lake area of Ontario, Canada.
Concurrent to the above activities GGC will commence a core drilling program to drill 4-6 holes
into the Nancy Hanks structure for the purpose of confirmation of the structure, resource, and
location of vein extensions. There will also be concurrent work done to build an assay lab and to
make modifications and enhancements to the infrastructure.
6.2 Ore Storage, Transport, and Milling
The broken ore will be brought to the surface and stockpiled on a pad that has already been
constructed and is immediately adjacent to the portal. Ore will then be loaded into haul trucks
for the 3 mile trip down the First Chance Gulch road where it is off-loaded in a staging area.
From this staging area, the ore is loaded into over-the-road haul trucks for the 50 mile journey to
the Contact Mill located in Phillipsburg Montana.
The Contact Mill has a gravity circuit and flotation circuit with optimal operations at 1,000 t/d.
The mill has been used multiple times in previous years by GHC to process Garnet ore.
Historical the combined gravity/flotation mill recoveries were in the 85% to 90% range.
GGC is negotiating a contract to lease the entire Contact Mill and thereby have full control of the
operations. The GGC feed stock of 200 t/d is well below the optimal mill feed. Therefore, it is
GGC’s intent to stockpile ore at the mill site and run production campaigns through the mill at
periodic intervals. Alternatively, GGC, working with owners of the mill, will agree to perform
toll milling for other mine owners in need of milling capacity. The intent is to structure a time
share arrangement whereby feed stock from other mine owners can be run through the mill when
GGC is building mill feed inventory. GGC will still maintain control of all mill operations while
toll milling for others. This arrangement will reduce GGC milling costs significantly and will
result in more efficient use of personnel and equipment.
6.3 Metallurgical Testing
In 2011, Dawson Metallurgical Labs (“DML”) in Salt Lake City were retained by GHC to
perform metallurgical testing on individual samples from the Garnet properties. The goal of the
testing was to provide information to CDM in which to develop a process flowsheet of the
production of gold concentrates.
The testing conducted by DML was exhaustive and too broad to cover in detail in this overview.
The scope of the testing included, but not limited to, the following:
Gravity recoverable gold (“GRG”) tests using a Knelson centrifugal concentrator.
A series of kinetic bulk sulfide flotation tests at seven different grind sizes.
ICP scan on head samples.
Acid-base accounting on head and flotation tailings samples.
Thickening and filtration tests by Dorr Oliver EIMCO.
Bond work index test at a closing size P80=150 microns.
The results of the testing is summarized by the following statements from the DML report:
All Knelson gravity concentrates contained visible free gold in varying amounts and
sizes, along with pyrite and magnetite. Typically, the free gold averaged 50 microns in
size with a top size of 300 microns. In general, the gold was nugget shaped and appeared
to be of high purity.
Recoveries from the combined Knelson gravity/bulk sulfide flotation were 96.6% and
94.7%.
Approximately 40% of the total Au reported to the Knelson concentrate.
Confirming tests on each composite sample using the Knelson gravity/bulk sulfide
flotation scheme show that greater than 94% of the Au was recovered with concentrate
assays on average of 8.5 opt Au.
7.0 Geologic
Historically mined gold deposits in the Garnet District are typically veins that in part have filled
open spaces along fractures or bedding planes. There are five principal veins or vein systems,
identified so far, spaced 150-1250 feet apart. The northernmost vein system is a composite zone
of veins in the granodiorite and comprises a large portion of the Project. From east to west the
historic Shamrock, Dewey, Nancy Hanks, and Cascade mines exploited portions of this zone.
The whole zone, which Pardee (1917) referred to as the Nancy Hanks zone of veins, is over
7,500 feet long. It is also up to 400 feet wide in surface expression at the Cascade portion of the
zone.
Four additional vein zones are present approximately 9,500 feet northwest of Garnet. The
central part of this area is called Coloma. Pegasus drilled approximately a dozen holes into three
of these vein zones all of which occur within the granodiorite body.
In reference to the composite Nancy Hanks zone Pardee states that: ‘As a rule the individual
veins that compose the zone do not persist in length or depth more than a few hundred feet. Each
one either ends at a fault or splits into “stringers” to be succeeded by another vein a few feet to
one side or the other.’ This likely represents the second phase of gold mineralization forming
sets of en-echelon gold bearing quartz veins within zones of weakness initiated by shrinkage of
the intrusive body and subsequently formed by continued brittle faulting at moderate depths.
These are veins that would fall into the mesothermal pressure temperature range. Also, even
though as Pardee suggested individual veins do not exhibit significant strikes and dips, overall
these types of systems often persist for significant distances, especially along their dip.
Quartz generally forms 50-90 percent of the vein material. Ankerite is found in many of the
veins, particularly those in quartzite and schist. Calcite occurs in subordinate amounts associated
with the ankerite. Principal ore minerals are pyrite, tetrahedrite, chalcopyrite, and galena. Pyrite
is the most dominate sulfide mineral and is found widely in all the veins. Oxidation or actual
weathering can commonly occur to 75 feet below the surface near natural drainages. Some
locations exhibit weathering as deep as 300 feet below the surface, this is likely due to structural
influence.
The initial mineralizing event was the skarnification of carbonate rocks adjacent to and a result
of the emplacement of the granodiorite stock. This type of mineralization occurs at much higher
temperatures than the en-echelon vein sets from which most of the gold was produced.
Likely because of the discovery and exploitation of the vein systems, the skarn potential has
largely been ignored throughout the history of the district. There has been little to no attention
directed toward discovery or exploitation of a potential gold skarn deposit. Although many
indicators have been noted, at present it remains unknown if an economic gold skarn exists
within the Project area. Figure 5 shows the geology map of the Garnet properties.
8.0 Access and Facilities
Access to the Garnet properties can be achieved via two routes. One can be accessed from the
Interstate 90 frontage road starting in Drummond, MT. Head west to Bear Creek road then north
approximately 9 miles to the ghost town of Garnet, MT.
The alternative route is via U.S. Highway 200 to Garnet Ridge Road which is located
approximately 9 miles west of the intersection of Montana Highway 83 and U.S. Highway 200.
The route is similar in length from Highway 200 as it is from Interstate 90.
There is no power presently to the site but power and other utilities are available along the
Highway 200 corridor. Generators and solar panels provide power for the mine site.
There are several buildings at the site that hold core and include 4 completed cabins and a 5th
cabin which is 50 percent completed, a bath house, generator house, and fully enclosed shop
building. The mine dry is partially completed and a second partially completed shop building.
There is an office, which was used as a mine safety office, which can be used as a cabin as well.
There are senior water rights associated with the properties to provide water. There are three
dewatering wells also present to assist in dewatering the underground workings (Nancy Hank),
and a water infiltration system to dispose of mine water.
9.0 Permitting and Community Impact
The Department of Environmental Quality (“DEQ”) via the Metal Mine Reclamation Act
(“MMRA”) regulates mining activity and mine reclamation under three possible authorities.
The Small Miners Exclusion Statement (“SMES”) allows a miner to exclude himself
from the permitting requirements of the MMRA by certifying that he will disturb not
more than 5 acres at each of two allowable sites, which must be separated by a least one
mile. The DEQ is obliged to regulate and bond the operation, construction, and
reclamation of tailing impoundments associated with small mines.
The exploration license (“EL”) permits an operator to conduct surface and underground
mineral exploration. All activities related to mineral exploration that disturb the surface
are regulated and bonded for reclamation under an EL. The EL allows for a 10,000 ton
bulk sample to be mined without the need to file for an SMES or obtain an Operating
Permit.
An Operating Permit (“OP”) authorizes the mining and milling of minerals without
acreage or tonnage restrictions. Smelting and refining are not regulated. All activities
must be permitted and bonded for reclamation.
There exist reclamation bond shortfalls with the DEQ and the BLM related to activities
conducted by the previous operator. The previous operator was conducting mining activities
under two separate SMES(s). GGC will make up the bond shortfall of approximately 190,000
USD. Once the bond shortfall is satisfied, both of the SMES(s) in place will be “reinstated” and
transferred to GGC.
GGC will also apply for an EL in which to conduct exploratory and developmental drilling.
An application for an OP will be submitted at the earliest possible date. Although not crucial to
GGC’s short term mine plans, the OP can take as long as 18 months for approval. It is therefore
prudent to begin that process now.
Granite County Montana is a pro-business and pro-mining county, with a low population density.
A source of new employment, new taxes, and new spending will be welcomed. There are no
known issues with local communities or indigenous peoples. Granite County has a long
exploration and mining history that began in the 1860s. The population and work force of
Granite County and surrounding area would benefit from the potential exploitation of the
resources of the Garnet District.
The proximity of the Garnet Ghost Town is considered a positive to future mining activity.
Experience to date indicates a very high level of cooperation between the BLM (operators of the
ghost town) and Garnex Gold Corporation and their predecessors.
10.0 Exploration Potential
The two distinct types of mineralization exhibit the potential for the further discovery and
exploitation of substantial gold resources. The first part of that potential lies within structural
extensions to the known vein zones. The drilling efforts to date have focused mainly on the
Cascade to Shamrock vein zone. Within the Project area there are at least 8 other vein zones that
hold potential for discovering exploitable gold resources. Some of these zones do have drill
holes within them but by no means are they drilled to their full extents. Most of the zones have
seen historic gold production.
Skarn mineralization is the second type of gold deposit potentially present at the Project.
Characteristics indicating skarn mineralization include hedenburgite and garnet skarn alteration
of the carbonate rocks adjacent to the granodiorite body. Also, the sanded dolomite adjacent to
the intrusive and the presence of tremolite within the carbonates distal to the intrusive are
indicative of skarn. Hornfelsing of the shales is also an indicator. This is expressed as
porphryblasts of cordierite, garnet, epidote and sometimes mica clots formed as “eyes” within the
shaly units.
Many open drill targets still exist on the properties. Most of the drilling to date has been reverse
circulation drilling which has obscured the interpretation of the vein systems. As reported in the
Behre Dolbear report, the reverse circulation data may have provided limited details on veins,
structural controls, contacts, lithology and other important geologic information. It may have
been for this reason that GHC only used grade values from drilling to establish their resource
model and mine plan.
Future programs should mostly, if not entirely, utilize diamond core drilling. This will allow for
better, more concise interpretation of the mineralization as well as better structural interpretations
which in turn will aid in the definition of potential ore shoots. In addition to the known vein
zones geochemical soil sampling by Pegasus contains numerous anomalous areas yet to be
tested. This indicates good potential for discovery of additional zones.
The “blue sky” opportunities consist of the further definition of historically mined vein zones,
the future potential discovery of additional vein zones, and the potential discovery of significant
gold skarn mineralization.
While the direction for exploration of the high-grade vein zones for near-term production is
appropriate, it is, important to incorporate a broader exploration vision on the larger picture of
exploration targets where increases in resources could be significant, especially if gold skarn
mineralization is discovered.
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