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Unless otherwise stated, the information that follows relating to the Avlayakan Project is derived from, and in some instances is an extract from, the amended technical report dated December 7, 2007 (the "Avlayakan Technical Report") authored by William J. Lewis P. Geo and Richard Gowans P. Eng. of Micon in respect of the Avlayakan Project. At the time of the preparation of the Avlayakan Technical Report, each of the individuals who contributed to the Avlayakan Technical Report was independent of the Company and was, or was supervised by, a "Qualified Person", as that term is defined in NI 43-101.
Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full text of the Avlayakan Technical Report which has been filed with certain Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review at www.sedar.com. Alternatively, a copy of the Technical Report may be inspected during distribution of the Shares being offered under this Prospectus and for 30 days thereafter during normal business hours at Silver Bear's head office and at the offices of Silver Bear's legal counsel, Cassels Brock & Blackwell LLP.
The Company acquired a 70% equity interest in the Avlayakan Project pursuant to an equity purchase agreement in Avlayakan in June, 2006, with the remaining 30% being held by Silver Bear's joint venture partner Vostok. To date Silver Bear has paid U.S.$5.1 million towards the purchase of its interest in the Avlayakan Project. A remaining installment of U.S.$1.1 million is payable if and when the Mayvachan Kundumi license area achieves commercial production.
Property Description and Location
The Avlayakan Project is located in the Khabarovsk Kray, a territory of the Russian Federation. The Khabarovsk Kray occupies 4.6% of the Russian land mass. In the west it borders on two other Russian states and China, while on the east the shore line is washed by the Sea of Okhotsk. The Tatar Gulf separates it from Sakhalin Island. The territory stretches 1,802 km from north to south; the maximum width from west to east is 750 km, and the minimum, 126 km. The distance between Moscow and the territorial capital (Khabarovsk) is 8,530 km. As of January, 2005, the territory had a population of 1,420,200 people. Over 80% of the population lives in the cities.
The Avlayakan Project is located in volcanic rocks that are largely of intermediate composition which host the steeply dipping gold-bearing veins. The exploration and development program for the project will initially target two previously identified gold deposits (Avlayakan and Kirankan) and the Company will also conduct exploration on the Mayvachan Kundumi license area.
The Avlayakan and Kirankan gold deposits are located along the Avlayakan River and are respectively part of the Ayano Maysky and Tuguro Chuchikansky regions of the Khabarovsk Kray territory of the Russian Federation, approximately 500 km north of the city of Khabarovsk. The Mayvachan Kundumi exploration area is located to the northwest of the Avlayakan and Kirankan gold deposits, and is part of a single combined license (the "Mayvachan Kundumi License"). The latitude and longitude for the Avlayakan Project site range from approximately 55º25' N to 55º40' N and from 134º40' E to 134º44' E.
Avlayakan holds the properties via three mineral licenses covering 276.5 square kilometres (sq km). Vostok transferred the Avlayakan and Kirankan licenses, in 2006, to Avlayakan. The Avlayakan and Kirankan licenses give the holder the right to use the subsoil for the purposes of final exploration and production of hardrock gold and silver on the license areas. The Mayvachan Kundumi License gives the holder the right to use the subsoil for the purposes of geological exploration and production of hardrock gold on the license area.
In accordance with the mineral license requirements, the owner of the licenses has to perform the following principal types of work (among others) within fixed periods after the license registration (the summary of the licenses below is derived from the text of the actual licenses and not the Avlayakan Technical Report):
Kirankan License (KHAB 01968 BE)
- Complete exploration on of before January 1, 2009;
- Present an exploration report on the deposit which is prepared in accordance with the established procedures and estimation of C1 and C2 reserves for a state review on or before May 1, 2010;
- Prepare a technical design plan of development of the license area and have it approved and obtain positive opinions thereon from the state environmental assessment authorities and the state industrial safety and subsoil protection authorities on or before January 1, 2011;
- Commence the construction mining facilities and other infrastructure on or before April 1, 2011;
- Commission a mine, having an annual output of at least 50,000 tonnes of ore on or before January 1, 2013; and
- Prepare a closure plan for the mine and have it approved at least six months prior to the time limit for the development of the deposit.
Avlayakan License (KHAB 01969 BE)
- Complete exploration on or before January 1, 2008;
- Present an exploration report on the deposit which is prepared in accordance with established procedures and estimation of C1 and C2 reserves for a state review on or before May 1, 2009;
- Prepare a technical design plan of development of the license area and have it approved and obtain positive opinions thereon from the state environmental assessment authorities and the state industrial safety and subsoil protection authorities on or before January 1, 2010;
- Commence the construction of mining facilities and other infrastructure on or before April 2010;
- Commission a mine, having an annual output of at least 50,000 tonnes of ore on or before December 1, 2010; and
- Prepare a closure plan for the mine and have it approved at least six months prior to the time limit for the development of the deposit.
Mayvachan - Kundumi License (KHAB 02027 BP)
- Submit an exploration and appraisal plan for the property and submit it for approval by April 1, 2008;
- Commence exploration on the property by September 1, 2008 with the following minimum work requirements:
Year 1 of geological exploration works
1,000 vertical metres of trenching
Year 2 of geological exploration works
1,000 metres of drilling
2,000 vertical metres of trenching
Years 3 to 4 of geological exploration works
2,000 metres of drilling
2,000 vertical metres of trenching
- Completion of exploration and evaluation works on the license area on or before December 31, 2011, and submission of a geological report with a calculation of C2, P1 and P2 reserves and resources for consideration by Dalnedra (territorial department of Federal Agency for Subsoil Use) and submission of the geological report to the territorial and federal funds of geological information;
- Preparation and approval in the prescribed order of a design plan for the final exploration of the deposits revealed as a result of exploration on or before July 1, 2012. The design plan must be reviewed and approved by the state ecological expert;
- Commencement of final exploration works on or before December 31, 2012;
- Completion of final exploration and submission for review to the state expert of the report prepared in the prescribed order regarding the final exploration of the revealed deposits with a calculation of C1 and C2 reserves in accordance with state guidelines relating to the calculation of reserves on or before December 31, 2016;
- Preparation and approval in the prescribed order of a technical design plan regarding the exploitation of the deposits with approved reserves on or before September 1, 2017. The design plan must be approved and receive positive opinions thereon from the state environmental assessment authorities and the state industrial safety and subsoil protection authorities;
- Commencement of construction of the mining plant infrastructure facilities - on or before May 1, 2018;
- Commission a mine with an annual output of not less than 50,000 tons of ore - on or before July 1, 2019; and
- Develop a closure plan for the mine and have it approved at least six months prior to the time limit for the development of the deposits.
There are additional environmental requirements outlined in the licenses. Silver Bear has not been notified of any default under the above licenses and believes Avlayakan is in compliance in all material respects.
The subsoil use payments for the mineral licenses at the Avlayakan Project as prescribed by the government on each property are set forth in each license. All other payments are made in accordance with the legislation of the Russian Federation.
Avlayakan Project Location Map
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The infrastructure in the region is typical of the northern parts of the Khabarovsk Kray territory and reflects the region's economy and lack of resident population in the area. Transportation consists of two railway systems, a network of highways, primarily located in the southern half of the territory, and water transportation for up to half of the year. The port city of Vanino is one of the largest Russian Far Eastern seaports and can handle up to 12.2 million tonnes per year of all types of cargo including bulk ores and coal. The capital of the territory, Khabarovsk, located on the Amur River, is also a port, able to handle large ocean going vessels, and the airport serves international flights.
The nearest townsite is the Vostok support base at Kiran, which is located at the entry of the Kiran River, on the shore of the Sea of Okhotsk, 100 km from the exploration area. A dirt road suitable for four-wheel drive vehicles connects the exploration area and Kiran support base. Marine vessels at Kiran are unloaded offshore with cargo delivery by beaching barges and vessels at low tide, and off-loading the material onto trucks.
Apart from the Kiran support base, the exploration area is also connected to the townships of Chumikan and Nelkan by winter roads (130 and 300 km, respectively). Vostok also built and maintains, a winter road from the Postyshevo railway station to the Kiran support base, which continues through the project area to the northern areas of the exploration project. The typical operational period of the winter roads is 3.5 to 4 months.
Kiran has an airfield capable of accommodating AN-12, AN-26, AN-28 aircraft and all types of helicopters. Diesel power stations provide fuel and energy supply. There is no available labour force in the region.
The Avlayakan deposit is located in the upper reaches of the Avlayakan River, 5 km above the Left Avlayakan River entry; the Kirankan deposit is located on the right-hand bank of the same river, 35 km above the river entry.
Mountains and plateaus rising 2,500 m above sea level occupy 75% of the Khabarovsk Kray territory. The Avlayakan Project is situated in poorly accessible taiga upland. The main orographic mark is the southwestern tip of the Jugjur ridge that divides the mineral district into two approximately equal parts. The Avlayakan deposit is located on the northwestern, and the Kirankan deposit on the southeastern slopes of the ridge, which also serves as the watershed between the rivers of the Aldan Basin and the Sea of Okhotsk. The absolute watershed marks are 920 to 1,270 m; relative elevations above the bottoms of the valleys are 250 to 500 m. Paraxial elements of the Jugjur ridge are subdued in relief. Peaks are usually dome-shaped and, in some sections, narrow (5 to 10 m) ridges (watersheds) and conical peaks are present. Slope gradients in the area are 20 to 35º and average 27º.
The region has a continental climate but due to the proximity of the Sea of Okhotsk it is also affected by Pacific monsoons. According to the data from the Batomga weather station, the average monthly temperature in winter ranges from --7.4º to --40.2º C, with a January absolute low of --60º C; in summer the average temperature is +13º C, with a July high of +38º C. The average annual temperature is below zero (--11º C) which contributes to the development of permafrost.
The average annual precipitation is 500 mm, mostly in the form of summer and autumn rainfalls and fogs. A stable snow cover sets in from late September to early October, and most snowfalls typically occur in early winter. The spring snow melt usually begins in late May to early June. On the average, snow cover lasts seven months.
Permafrost is omnipresent in the area of the deposits. Its seasonal thawing on the open southern slopes reaches 0.5 to 1.5 m; on the northern and forest covered slopes it is less than 0.4 m and on the average reaches 0.4 m in the area.
History
The first information on the geological structure and metallogenic properties of the Jugjur Ridge was obtained by N.G.Metlitsky (1881) and K.I.Bogdanovich (1889, 1905) who visited the major river valleys, including those of the Avlayakan and Kirankan rivers. The latter established the presence of gold mineralization.
The news of gold mineralization in the area attracted numerous placer mining companies: Verkhne Amursky Gold Mining Company (1914), Gold Exploration Trust (1935-36), Nelkansk Gold Mining Company of Jugjur Gold Trust (1942-44), Aldan Gold Trust (1943-44); the Yuzhno Okhotsk Exploration Crew of Amur Gold Exploration Company (1949-52) (the "Amur Exploration Crew"). The largest and most productive of the exploration programs was carried out by the Yuzhno Okhotsk Exploration Crew which resulted in the discovery of placer gold in the valleys of the Maymakan, Avlayakan and Kirankan rivers. However, due to remoteness and lack of access to the area, mining of the placer gold deposits was terminated when they proved uneconomical.
In 1957, the geologists of the Far East State Technical University began geologic mapping of the Jugjur Ridge area at a scale of 1:200,000 for the first time this work made it possible to single out and study the mixed-aged stratigraphic sequences, to dissect intrusive formations and to establish the main stages of the geological development of the region.
The next stage of the region's geological exploration began in 1966 with a prospecting and exploration program concentrated on identifying placer gold deposits in the region. This program was conducted by the Udsky Crew of the Far East State Technical University and was continued after 1974 by the Ayan-Maysky Crew of the DalGeology Production and Geophysics Association ("DalGeology"). This work resulted in identification of numerous mineable placer gold deposits in the basins of the Maymakan, Avlayakan and Kirankan rivers. Concurrently with prospecting and exploration for placer gold the Avlayakan hard rock gold occurrence was discovered.
Between 1978 and 1979, the geophysical prospecting crew conducted a five-channel 1:25,000 airborne geophysical survey. Based on this and other geological data, an estimate of the region's prospects for hard rock gold was performed and prospective gold and silver targets were identified.
From 1980 to 1983, a mineral evaluation and prospecting program (trenching, drilling and tunnelling was conducted), which resulted in a positive evaluation of the mineability of the Avlayakan property.
Between 1977 and 1982, concurrently with the exploration program, a geological survey at a scale of 1:500,000 was conducted which resulted in identification of new hard rock gold targets (Kirankan I and II sites).
During the period from 1981 to 1983, a 1:10,000 scale exploration program was performed in the Avlayakan area. During this program, trenches were used to study the flanks of the Avlayakan deposit and a detailed geophysical survey covered a surface area of 1.2 sq km.
From 1984 to 1993, the Nizhne Amursky exploration crew of DalGeology performed exploration and evaluation of the Avlayakan and Kirankan deposits and their flanks. These programs resulted in the preliminary exploration of the Central Zone of the Avlayakan deposit and more detailed exploration of the Basovy and Tock zones of the Kirankan deposit.
Between 1993 and 1996, ZAO Dalplaz Gold Mining Company ("ZAO Dalplaz") took over exploration work at the Avlayakan property. Based on this exploration program an economic scale for the Central Zone of the Avlayakan deposit was defined by the Russians and parameters for a resource estimate were determined. The Russian C1 + C2 resource estimate as of January 1, 1999 for the Avlayakan Kirankan deposits was based on temporary quality requirements approved by 1994 Minutes No 370 of the Far East Territorial Natural Resources Committee.
Between 2000 and 2004, Vostok performed a mineral evaluation program within the Northeastern zone of the Avlayakan deposit and over the area of the Basovy and Tock zones of the Kirankan deposit. This program is described below in some detail, as this work is the basis for the agreement between Vostok and Silver Bear.
The exploration programs conducted by Vostok were primarily focused on the Northeastern zone of the Avlayakan deposit. The previously identified mineralized areas of the Northeastern zone (No. 1 to 4) were diamond drilled to study their vertical extent and to the northwest of the previously identified areas of mineralization, a new area was identified. In addition, diamond drilling was conducted on the Basovy and Tock zones, of the Kirankan deposit, which had previously been studied only at surface.
The exploration programs have demonstrated that the gold mineralization in the targeted areas forms steeply dipping linear deposits and is confined to the fault zones.
Exploration Work Completed on the Avlayakan and Kirankan Deposits between 2000 and 2004
Type of
Exploration Work |
Units of
Measurement |
Volume
of Work |
Machine Trenching |
m3 |
17,919.7 |
Manual Cleanup |
m3 |
555.0 |
Core Drilling |
m |
7,168.0 |
Channel Sampling |
m3 |
1,095.1 |
Core Sampling |
m3 |
2,124.5 |
A Russian T-130 bulldozer was used to trench across strike of the mineralized zones and the permafrost and underlying bedrock was left to self-thaw. Overall, 61 trenches were excavated, including 45 and 16 trenches for the Avlayakan and Kirankan deposits, respectively. A total of 2,863 linear metres of trenching was completed (1,756 m and 1,107 m per deposit respectively). On average the trenches were 1.9 m deep, 3.0-3.5 (3.3 m) m wide; total trenching volume amounted to 17,920 m (11,767 m on the Avlayakan property and 6,153 on the Kirankan property). Some trenches required manual re-driving, which resulted in a 0.6 m wide cleanup and a 0.0-0.8 m cut into the bedrock, depending on their physical condition.
All the trenches were logged in journals along with diagrams depicting the bed of the trench and one of the walls (usually the left-hand wall) along strike, at a 1:50 scale. Descriptions of the rock type and mineral textural structural properties, physical composition, hydrothermal metasomatic alterations, veinlet disseminated mineralization, elements of interstitial tectonics, were recorded within the journals.
Diamond drilling was used to study the vertical extent of the mineral deposits and, given the steep dip of the veins, the holes were drilled at a projected angle of 75º to depths ranging from 38.2 m to 228.6 m. The maximum drill hole angle of inclination was determined by the design features of the Russian drilling rig masts, which are designed to drill holes within a narrow range of angles from vertical to minus 70º.
During the drilling program, SKB-4 and SKB-5 Russian drills with hard metal and diamond bits were used. Depending on the section, water, clay slip or a polyacrylamide solution was used as the washing liquid, which made it possible to strengthen the walls of the drill holes and prevent them from caving in. The initial drilling diameter was 132 mm, with 76 mm used as the basic drilling diameter for the mineral zone intercepts. MIR-36 inclinometer readings, conducted at 10 m intervals, were used to control the assigned drilling direction of the holes.
To increase core output, drilling was conducted with OES-73 jet dredges. The OES-73 jet dredges were placed behind the drill bit to redirect water to the core in order to prevent loss of core. On the mineralized zones, typically showing significant fracturing, drilling was performed by cutting down the core runs, which made it possible to ensure good core recovery. Recovery for the zones ranged from 82 to 100% and averaged 97%.
The diamond drilling conducted by Vostok on the Avlayakan and Kirankan deposits totalled 95 drill holes for a total length of 7,618.0 m and averaging a depth of 80.2 m.
Historical Reserve Estimates
The discussions related to the reserve estimates contained in this section refer to historical estimates only. The reserve estimates discussed in this section were conducted according to the accepted Russian reserve classification definitions for the period to which they relate. However, they do not comply with the current Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards and definitions for estimating resources and reserves as required by Canadian NI 43-101 and as such should not be relied upon. The Russian historical reserves discussed below are for information purposes regarding the historical background of the Avlayakan Project only. Investors should review the 2006 CIM compliant mineral reserve estimates discussed under "Mineral Resources" below.
Between 1992 and 1996, ZAO Dalplaz conducted exploration work at the Avlayakan deposit. Based on this exploration work, preliminary provisional quality requirements for estimating reserves were approved in the 1994 Minutes No. 370 of the Far East Territorial Natural Resources Committee of the Russian government. ZAO Dalplaz and V.K. Savin completed a historical reserve estimate according the Russian reserve classification system as of January 1, 1999 for the Avlayakan Kirankan deposits. The reserves were classified as C1 and C2 Booked reserves and C1 Unbooked reserves.
January 1, 1999 Historical Russian Reserve Estimates for the Avlayakan Project
(Non-CIM Compliant Estimate)
| Name of Deposit |
Zone |
Russian
Mineral
Category |
Tonnage
(x1000 t) |
Average
Gold Grade
(g/t) |
Gold
Reserve (kg) |
Average
Silver
Grade (g/t) |
Silver
Reserve (kg) |
Avlayakan |
Central |
C1 Booked |
134.0 |
18.5 |
2,479.0 |
68.8 |
9,219.2 |
C2 Booked |
20.1 |
5.4 |
108.5 |
11.9 |
239.2 |
C1 Unbooked |
22.17 |
6.3 |
140.6 |
11.6 |
257.3 |
Northeastern |
C2 Booked |
113.4 |
12.9 |
1,459.6 |
65.8 |
7,465.1 |
Kirankan |
Basovy |
C2 Booked |
60.0 |
11.2 |
673.4 |
9.9 |
595.8 |
Tock |
C2 Booked |
71.45 |
10.8 |
771.7 |
16.0 |
1,143.2 |
Total Reserves for the
Avlayakan and Kirankan
deposits (Historical
January 1, 1999 estimate) |
C1 Booked |
134.0 |
18.5 |
2,479.0 |
68.8 |
9,219.2 |
C2 Unbooked |
264.95 |
11.4 |
3,013.2 |
35.6 |
9,443.3 |
C1 Unbooked |
22.17 |
6.3 |
140.6 |
11.6 |
257.3 |
The January 1, 1999 historical Russian reserve estimate used the following indices approved by the 1994 Minutes No. 370 of the Far East Territorial Natural Resources Committee.
For open pit mining:
- gold equivalent cut-off grade in the sample, 1.00 g/t.
- minimal economic cut-off of gold equivalent in estimated block, 3.89 g/t.
- minimal width of mineralization, 5.0 m.
- maximum allowable width of waste rock and substandard mineralization, 4.00 m.
- strip ratio limit, 4.66:1
- silver to gold equivalent conversion ratio, 88.90:1
For underground mining:
- gold equivalent cut-off grade in the sample, 2.50 g/t.
- minimal economic cut-off of gold equivalent in estimated block, 5.77 g/t.
- minimal equivalent gold grade at mineralization interceptions, 3.36 g/t.
- minimal width of mineralization, 1.0 m.
- maximum allowable width of waste rock and substandard mineralization, 2.00 m.
- silver to gold equivalent conversion ratio, 88.90.
No historical underground or open pit mine production has occurred on any of the mineral leases which comprise the property, or generally in this region of Russia, due to the remote locations involved and the lack of any major infrastructure to support mining development. However, numerous placer gold deposits in the basins of the Maymakan, Avlayakan and Kirankan rivers have been worked since the 1970's.
Historical gold placer production from the Avlayakan and Kirankan rivers was estimated to have been approximately 5,033.8 kg of gold.
Geological Setting
To date, within the area of the Avlayakan Project two gold deposits (Avlayakan and Kirankan) have been identified.
The Avlayakan Deposit
The Avlayakan deposit contains the following zones: Central, Northeastern, Southwestern I and Southwestern II. Most of the prospecting and surveying on the deposit carried out by Vostok focused on exploring the Northeastern mineralized zone with the remaining area evaluated by a wide-spaced grid of trenching and by sporadic drill holes.
The Central zone is located in the central part of the Avlayakan deposit and is represented by an extensive bedding plane from 5 m to 40 m wide filled by contiguous quartz, quartz carbonate veins, and zones of pervasive and pervasive metasomatic silicification within a halo of hydrothermally altered rocks. The Central zone strikes northwest and dips to the northeast at 60º to 80º.
The mineralized channels range in width from 0.1 to 10 m and frequently have lenses which branch out, and, less frequently, alternate with veins along strike. The contacts with the host rocks are sharp, steep, sometimes complicated by apophyses. Host andesite, its tuffs and tuffs of dacite are intensely propylitized, while rhyodacite and its tuffs underwent silicon potassic metasomatosis.
The Central zone is broken into blocks of various lengths by near-north south tectonic dislocations. Faults are filled either by shear zones and zones of mylonitization or by dykes of varying composition. The faults are largely throw and strike-slip types with horizontal offsets ranging between 0.5 m and 30 m. Some of the faults may be interpreted as synmineral with subsequent rejuvenations occurring during the deposition of the mineralization.
The basic mineral for the vein formations and metasomatites is quartz, with calcite, sericite, chalcedony, hydromica, chlorite, amphiboles, adular, fluorite and kaolinite being less common. Potentially economic minerals are not abundant, amounting to about 1% with only fine pyrite impregnation visually observed in the veins.
Gold is fine-grained (78% is less than 0.07 mm) and rarely reaches 2 mm. Morphologically large gold grains have a veinlet lamellar, arborescent appearance with isometric and scaly shapes predominating in fine gold grains.
Various mineral forms of silver have been found in the mineral zones: free silver - 50%, electrum - 20%, argentite - 28%, pyrargyrite and fahlore - about 2%. Free silver is typically fine (95% less than 0.07 mm).
Against the background of generally poor gold-bearing veins in the central section of the Central zone a mineralized zone was delineated. Laterally, a number of close spaced trenches explored the mineralized zone while vertically the zone has been explored by a number of drill holes and by the No. 1 adit. The adit was driven along strike on the 920 m horizon, and accessed a quartz vein with a width from 1 to 7 m; sampling results, however, proved that the vein was barren. Gold grade in most samples does not exceed 0.2 g/t and in single instances reaches 1 g/t. The highest gold grade consisting of 5 g/t over a width of 2 m was observed in crosscut No. 2.
As indicated by the drilling data, the Central zone on the 880 m and 890 m horizons and quartz and quartz carbonate bodies sitting subparallel to the basic structure are also barren.
In the Avlayakan River valley six lines of drill holes have studied the Central zone. Only one hole (No 6, on drill line 1) has revealed a gold grade of 9.3 g/t over a width of 2 m.
The mineralized section identified within the Central zone extends for over 250 m and ranges in width from 1.0 m to 24 m. Sampling has indicated that gold grades range in value from tenths of a g/t up to 551 g/t and silver grades range up to 2,376 g/t. Distribution of gold and silver is very variable and the mineralized sections are delineated only from the assay results generated by sampling the zone. The gold-to-silver ratio in the deposit is relatively consistent, varying from 0.21 to 0.46.
The gold grade in the mineralized zone is low overall but some intervals of up to 20 m in strike length reveal a grade of over 100 g/t gold. Similar intervals have been traced down dip for 20 m to 25 m, which makes it possible to assume an undulated distribution of gold in the wide portion of the deposit.
Tectonic deformation breaks down the mineralized zone of the Central zone into three blocks, which are significantly different in size.
In the western block of the Central zone, which extends over a strike length of 85 m, the width of the zone ranged from 1.3 to 9.1 m and averaged 4.6 m. The gold grades varied between 1.4 g/t and 18.4 g/t with an average grade of 6.5 g/t throughout the mineralized zone.
The eastern block of the mineralized zone is divided, in turn, into two unequal parts. The smaller part of the block on the footwall contact of the fault is comparable in grade and width with the western block, while the eastern part in the hanging wall contact sharply differs in parameters and contains the best mineralization within the Central zone. This part of the mineralized zone has been studied in more detail both from the surface and down dip at depth. The zone here has a simple structure: the central section is filled by a quartz vein 1.5 m to 4.5 m wide with the remaining portion of the zone comprised largely of quartz metasomatites with quartz veinlets. The total width of the zone here ranges from 6 m to10 m. Further to the west the width of the vein increases and breaks down into two branches, with the space between them intensely saturated by diversely oriented quartz veins. The total width of the zone in this western area reaches 30 m and, in the section where the faults join it, reaches up to 40 m. Gold mineralization in the area of this bulge is considerably higher than in the other parts of the zone. High gold and silver grades in the bulge are encountered both in the quartz veins and in the metasomatites containing vein-reticulated silicification. The average visible width of the mineralized zone in the bulge is 19.0 m, while average gold grades in the exploration trenches and drill holes over this interval range from 5.1 to 61.1 g/t.
The eastern and western flanks of the Central zone have been traced on the surface by trenches spaced at distances ranging between 20 m and 140 m and at depth by a number of individual drill holes. However, no assay results for the trenches have survived and the few assays from the preliminary exploration drilling which have survived indicate that the gold grade for the eastern and western flanks of the Central zone varies around 1 to 2 g/t.
The Northeastern zone is located in the northeastern area of the deposit, 400 m northeast of the Central zone. To date, the zone has been traced over a distance greater than 3 km by exploration trenches and the width of the zone ranges from 50 m to 120 m.
Host rocks of the Northeastern zone include andesite and its tuffs of the Magueysky and Motarinsky Suites. The Northeastern zone is represented by a series of 2-3 subparallel quartz and quartz carbonate veins, separated by sections of hydrothermally altered rocks, often veined and metasomatically silicified. Within the zone the veins are complicated by numerous apophyses which branch out and are connected between themselves by diagonal and oblique intersecting veins. Sometimes veins alternate along strike with zones of pervasive silicification. The width of the veins varies from 0.5 m to 10 m and the contacts with the host rocks are sharp, rectilinear and steeply dipping. Frequently the veins in the inside chill margins are sheared and from the surface are transformed into argillaceous tophaceous material, containing large round inclusions of vein material of up to 0.6 m in size and impregnated by iron hydromica.
In the central part of the Northeastern zone, located between Quartz Creek (left tributary of the Avlayakan River) and Blue Creek (right tributary of the Left Avlayakan River), three veins numbered No.1 to No.3 represent the zone. Of interest is vein No. 1, with the mineralization located in the extreme southwest of this series of veins. The main distinction between vein No.1 and veins No. 2 and No. 3, which are either poor in gold or barren, is its northeast dip at 55º to 80º, while veins 2 and 3 are sub-vertical. No direct relationship among the veins was observed and their age remains in question.
The veins are usually saturated (20% to 50%) by fragments of intensely altered host rocks and have a zonal structure. Their near-contact sections are usually composed of confluent fine-grained quartz, saturated, by fragments of the host rocks, up to the formation of breccia with a quartz cement. In the central sections the quartz is more coarse grained and vugs occur which are filled by coarse grained drusy quartz, carbonate and adular.
Besides quartz, adular (up to 5%), hydromica (up to 3%) and epidote and chlorite (up to 5%) have been observed. In the carbonate quartz veins, the material cementing the fragments is represented by quartz and an aggregate of white coarse crystalline calcite. Along the vein, intervals that contain prevalent calcite cement frequently alternate along strike and down-dip with sections containing little or no calcite.
The mineralized vein in the Northeastern zone has been explored vertically by drill holes down to between 50 m to 210 m from the surface. The lower boundary of the geological blocks of the deposit is currently identified as being between the 845 m to 920 m horizons. However, there is the possibility of identifying new areas of mineralization at greater depth. At present, the interval along the vein containing the higher grade gold mineralization has not been delineated along strike and only partially in the down-dip direction.
In the zone, the interval between trenches K-141 and K-507 the deposit is "blind", plunging 25 m down. On the surface, the gold (according to the trenching data) grades range from 0.1 g/t to 1.7 g/t.
Although no obvious regularity in gold distribution in the zone along either strike or down-dip has been noted, the following peculiarities were noted in the Russian reports:
- The highest gold concentrations were observed between the 930 m to 1,030 m horizons; with metal contents decreasing with depth practically over the entire extension of the studied zone interval.
- Mineralized shoots (bonanzas) occured in some sections of the zone, demonstrating consistent high gold grades fixed in two or more exploration workings (drill hole S-26 and S-32; trench K-517 and drill hole S-38).
The gold-to-silver ratio for the Northeastern zone of the Avlayakan deposit in the mineralized intercepts varies from 1:4 to 1:22. Average gold fineness (according to the results of sample analysis performed by Irgiredmet in 2004) is 614 (1,000 fineness being 24 carat gold).
The Southwestern zone I is located 400 m southwest of the Central Zone and has been traced by trenches spaced at 25 m to 300 m intervals over a distance of 2.5 km in the northwestern direction. On the right bank of the Avlayakan River the zone extends for 400 m and is represented by a 5 m wide quartz vein. The quartz vein alternates along strike with zones of pervasive silicification amidst sericite quartz metasomatites, whose width reach 20 m in some sections along the left bank of the Avlayakan River. The central section of the zone (350 m) has been explored from the surface by trenches spaced at intervals of 20 to 40 m and by three sections of drill holes down to 50 m. In the vein, gold in the trenches grades from 0.1 g/t to 1.0 g/t (persistent grades of tenths of gram) and is slightly higher in the drill holes: 0.2 g/t to 1.7 g/t (in drill hole No. 43 gold values are between 0.4 g/t and 1.7 g/t down to between 42 m and 47 m).
The Southwestern zone II is located at the mineralization boundary of the Avlayakan deposit, 250 m south of Southwestern zone I. The Southwestern zone II is represented by lenticular quartz and less frequently by quartz carbonate bodies spatially associated with pervasive silicified metasomatites. The veins are up to 3 m wide.
Gold grade in the trench samples is low, ranging from below 0.5 g/t and peaking at 1.9 g/t, with a maximal silver grade of 2.3 g/t.
The Kirankan Deposit
The Kirankan deposit is located on the right bank of the Kirankan River in the basins of Basovy, Promezhutochny and Tock Creeks. The deposit is confined to the eastern part of the Avlayakan Kirankan volcano tectonic structure, at the contact of the Lower Archean age formations and Cretaceous volcanics.
Numerous, spatially dissociated linear zones of hydrothermally altered rocks have been identified among metamorphic, effusive, subvolcanic and intrusive formations within the area. Overall, more than ten zones of quartz, sericite quartz metasomatites with superimposed veinlet silicification and quartz, quartz carbonate veins and tectonic breccia have been delineated. Metasomatites and quartz are slightly sulphidized. Almost all the zones and veins are controlled by northwest, near-north south and less frequently northeast faults. Northern trending faults dip steeply at 65º to 85º.
Potentially "economic" gold grades were found within two zones, the Basovy and Tock.
The Basovy zone extends over more than 400 m and was traced by trenches over a distance of 330 m. The zone exposed in trenches ranges from 15 m to 70 m wide and in plan resembles a stockwork.
The Basovy zone is confined to the tectonic contact between the dioritic porphyrites of the Jugjursky complex with cover andesite of the Motarinsky complex. The mineralized section of the zone was studied on the surface at 20 m intervals by trenching. Trenches have exposed sericite quartz, quartz metasomatites with minor zones of fine veinlet silicification, quartz (up to 9 m wide) and quartz carbonate (up to 5 m wide) veins with the latter very inconsistent in width.
The gold and silver mineralization in the Basovy zone is manifested in all types of the altered rocks, but the highest grades of gold and silver mineralization were observed in quartz, particularly quartz with sulphide mineralization. The gold grades are distributed extremely unevenly within the zone, ranging from 0.1 g/t to 40.6 g/t. Against the background of quartz veins with generally poor gold occurrences, two deposits with potentially "economic" mineralization were outlined in the middle of the zone.
In plan, deposit No. 1 is diamond shaped, has a 9.4 m by 20.0 m size, and is confined to two lenticular veins of quartz and quartz carbonate composition. The average gold grade on the surface is 15.6 g/t and the average silver grade is 12.6 g/t. The deposit has been traced by one fence of drill holes vertically and has not been delineated on the flanks of the zone. Gold grade in the deposit between the depths of 0.0 m to 47.1 m is extremely inconsistent and varies from 0.0 g/t to 25.0 g/t. At a depth of 71 m to 75 m in the deposit the gold grades are below 1.3 g/t.
Deposit No. 2 extends over a distance of 58 m and is located in the wallrock of the Basovy zone where it is confined to the quartz vein with a near-north south strike extent. The average width of the mineralization is 10.6 m, with an average gold grade of 9.7 g/t and an average silver grade of 9.0 g/t. The mineralization dips eastward at 70º to 80º. Vertically it has been explored by two fences of drill holes. Gold grades in the drill holes do not exceed 3.0 g/t down to between 29.6 m to 39.9 m.
The Tock zone with a length of about 600 m and a width of 150 m (trench length not mineralization) was defined and traced by trenches at 13 locations. The 440-m-long section, where trenches spaced at 10 m to 40 m intervals have defined the zone, is the most studied portion of the zone. Its morphology is similar to that of the Basovy zone but in appearance it resembles a linear stockwork. The zone trends from nearly a north south strike to a northeast strike direction with a steep 60º to 80º dip eastwards.
The host rocks are Archean age gneisses and subvolcanic andesite of the Motarinsky volcanogenic complex.
The Tock zone is comprised of quartz, quartz carbonate veins extending over a distance of 230 m. The width of the veins ranges from less than 1 m up to 7 m. Frequently the veins are accompanied by sections of metasomatites with a width of up to 10 m and a length of up to 80 m. Sericite quartz metasomatites comprise thin (several metre wide) zones along the quartz veins.
Sulphides in the veins are rare and form fine scattered impregnations and less frequently accretions.
Gold is present in all types of altered rocks with the grade varying from 0.1 g/t to 113.3 g/t, while the silver grade ranges from 0.1 g/t to 141.9 g/t. Nonetheless, potentially "economic" gold grades were found only in one interval with a strike length of 200 m (the Tock zone), which has been defined by nine trenches spaced at 10 m to 30 m intervals. The average width of the zone is 3.2 m while the average gold grade is 10.6 g/t and the average silver grade is 16.4 g/t.
Vertically the Tock zone has been studied by three fences of drill holes at 75 and 80 m intervals, in which potentially "economic" gold mineralization has been defined down to between 35 m to 40 m below the surface. At depths of 60 m to 80 m only narrow intervals (less than 1.0 m wide) with gold values of 1.6 g/t to 9.6 g/t have been defined in the drill holes. No delineating fences of drill holes have been done on the flanks of the deposit.
The gold-to-silver ratio within the mineralized intersections of the Kirankan deposit ranges from 1.35:1 to 1:3.
Based on geological structural and mineralogical similarity to the Avlayakan deposit, the Kirankan deposit has been classified as a gold and silver geological mining deposit with a Class 3 Complexity according to the classification of the Russian State Reserves Committee. The Class 3 Complexity category is defined as narrow to medium quartz veins with an irregular distribution of metal components.
Mineralization
The study of the mineralization, its composition and its processing characteristics was performed by the laboratory of ZAO Irgiredmet ("Irgiredmet") under agreement 494/15-04 with Vostok.
The purpose of the test program was to determine process technology for the Avlayakan deposit for selection of a suitable flowsheet for pilot testing using a representative mineralized sample and to develop a process flowsheet for the mine and mill design.
A 4.0 t mineralized sample representing the potentially "economic" material from the Northeastern zone of the Avlayakan deposit was delivered to Irgiredmet in Irkutsk. The average grade of this sample, determined by fire assay, was 8.8 g/t and 43.3 g/t for gold and silver, respectively.
Irgiredmet also investigated a 400 kg mineralized sample from the Kirankan deposit. Gold and silver grades in this sample were 25.0 g/t and 33.6 g/t, respectively.
Avlayakan Deposit
The sample of mineralized material was composed of quartz breccias, sometimes with carbonates, andesite breccias in quartz cement, hydromica and chloritic andesites with silicification of various degrees, as well as hydromica argillic loose rock. Pointlike impregnations of sulphides in quartz and andesite were noted, which were sometimes replaced by iron hydroxide. Cavernous cracks with crystal quartz growing on their walls were observed in quartz chips.
For determining chemical composition of the deposit sample, spectral semi-quantitative, X-ray-fluorescence and atomic absorption analyses were conducted. Gold and silver grades were determined by fire assaying.
Chemical Composition of the Avlayakan Deposit Sample
| Component |
Analysis (%) |
Component |
Analysis (%) |
| SiO2 |
79.1 |
Zn |
0.005 |
| AL2O3 |
7.9 |
Pb |
<0.001 |
| MgO |
1.8 |
Zr |
0.015 |
| CaO |
1.2 |
V |
0.008 |
| Na2O |
0.5 |
Ni |
.0040 |
| K2O |
1.0 |
Co |
.0006 |
| TiO2 |
0.32 |
Cr |
0.020 |
| MnO |
0.12 |
Mo |
<0.0010 |
| P2O5 |
0.07 |
Be |
0.0002 |
| FeTotal |
2.00 |
Sn |
0.0001 |
| Feoxide |
1.74 |
Ga |
0.001 |
| STotal |
0.36 |
Y |
0.002 |
| S(S) |
0.30 |
Yb |
0.00015 |
| As |
.0002 |
Ba |
0.015 |
| Sb |
.0007 |
Au, g/t |
7-9 |
| Cu |
<0.01 |
Ag, g/t |
45-49 |
Gold grade in the sample ranged from 7.0 g/t to 9.0 g/t, while the silver grade in the sample ranged from 45 g/t to 49 g/t.
Gold and silver deportment tests were conducted on 1 kg samples.
Gold and silver speciation forms have been allocated into three groups based on compositional petrology of the mineralization, these groups are:
- free (recovered by amalgamation).
- in intergrowths (recovered by cyanidation).
- locked in source material (cyanided after pre-treatment with hydrochloric and nitric acid).
To determine gold recovery, multiphase amalgamation was performed with consecutive decreases of grind size from -2.0 mm to -0.074 mm, with amalgamation performed for each grind size.
Since the sample contained a clayish slime mineral component, a sorbent (resin AM-2B) was added during the cyanidation process.
Only 2.0% of the gold in the sample was not amenable to direct cyanidation. 1.6% was associated with hydrochloric acid-soluble complex of minerals (iron oxides and hydroxides, chlorites, carbonates, and so on), 0.1% with sulphides and 0.3% was locked in source (rock-forming) minerals.
Silver in the sample under study was recovered as a by-product with most of it amenable to direct cyanidation (80.6%).
Gold and Silver Deportment
| Gold and Silver Speciation and Associations |
Distribution |
| |
Gold |
Silver |
| |
g/t |
% |
g/t |
% |
Freegold. |
5.94 |
59.2 |
6.34 |
12.8 |
a) minus 2.0 mm |
2.12 |
21.2 |
2.25 |
4.5 |
b) minus 1.0 mm |
2.11 |
21.0 |
2.04 |
4.2 |
c) minus 0.16 mm |
1.53 |
15.2 |
1.50 |
3.0 |
d) minus 0.074 mm (98%) |
0.18 |
1.8 |
0.55 |
1.1 |
Liberated gold (recovered by cyanidation) |
3.90 |
38.8 |
33.60 |
67.8 |
Total amenable to cyanidation |
9.84 |
98.0 |
39.94 |
80.6 |
Gold associated with iron oxides and hydroxides, chlorites, carbonates, etc. |
0.16 |
1.6 |
5.10 |
10.3 |
Gold associated with sulphides |
0.01 |
0.1 |
0.45 |
0.9 |
Fine locked gold in rock-forming minerals |
0.03 |
0.3 |
4.05 |
8.2 |
Total |
10.04 |
100.0 |
49.54 |
100.0 |
Exploration and Drilling
In June 2006, Avlayakan proposed a one year exploration program with the following objectives:
- conduct in-fill drilling on the Avlayakan and Mayvachan deposits;
- conduct additional resource definition drilling on the Kirankan deposit;
- conduct additional resource definition drilling on the Avlayakan deposits to determine additional potential along strike and at depth; and
- mapping and surface sampling on the Kundumi property
Drilling was targeted to commence during the third quarter of 2006 with a completion date of the fourth quarter of 2007.
The in-fill drilling on the Avlayakan and Mayvachan properties had the dual objectives of acting as a QA/QC check of the data contained in the original Russian databases, as well as upgrade the confidence of mineralization contained within the deposits in order to be able to conduct an economic evaluation of the properties.
The proposed definition drilling on the Kirankan deposit was planned to increase the confidence in the mineralization contained in the deposit and thereby upgrade the resource estimate into a higher category.
Avlayakan proposed a U.S.$3.0 million budget to complete the planned exploration and from June 2006 to October 2007, Avlayakan completed the following exploration work:
Avlayakan 105 drill holes (8,290.5m)
Kirinkan 15 drill holes (754.9 m)
Mayvachan 18 drill holes (1,575.5 m)
Total costs for the work outlined above was U.S.$4.1 million as of October 1, 2007.
As previously noted, the bulk of the drilling planned for 2006 and 2007 was planned as infill drill holes to increase the geological confidence of the estimated resources which have already been reported.
Avlayakan commenced its drilling program in the third quarter of 2006 and it expects to complete the program during the fourth quarter of 2007. Since the program is still continuing and the compilation of the data has not been completed as of the date of the Avlayakan Technical Report only limited information is available in this Prospectus in respect of the results of the 2006 and 2007 exploration programs.
Significant Results from the 2006 and 2007 Drilling Program
| |
Drill Hole Intersection |
| License |
Zone |
Year |
Drill Hole Number |
From (m) |
To (m) |
Length (m) |
Gold (g/t) |
Avlayakan |
Central |
2006 |
C-529 |
72.00 |
77.00 |
5.00 |
7.49 |
Avlayakan |
NE 1-4 |
2006 |
C-420 |
59.30 |
60.40 |
1.10 |
28.18 |
Avlayakan |
NE 1-4 |
2006 |
C-428 |
28.00 |
33.00 |
5.00 |
11.15 |
Avlayakan |
NE 1-4 |
2006 |
C-429 |
68.20 |
73.30 |
5.10 |
11.34 |
Avlayakan |
NE 1-4 |
2006 |
C-523 |
76.40 |
81.20 |
4.80 |
14.21 |
Avlayakan |
NE 1-4 |
2006 |
C-533 |
96.60 |
101.60 |
5.00 |
26.76 |
Avlayakan |
NE 5-7 |
2006 |
C-502 |
34.00 |
41.00 |
7.00 |
79.87 |
Avlayakan |
NE 5-7 |
2007 |
A07-2005 |
56.50 |
58.50 |
2.00 |
5.31 |
Avlayakan |
NE 5-7 |
2007 |
A07-2006 |
45.25 |
47.10 |
1.85 |
53.33 |
Avlayakan |
NE 5-7 |
2007 |
A07-2007 |
63.00 |
68.00 |
5.00 |
14.21 |
Avlayakan |
NE 5-7 |
2007 |
A07-2009 |
45.30 |
50.80 |
5.50 |
11.13 |
Avlayakan |
NE 5-7 |
2007 |
A07-2010 |
68.00 |
69.00 |
1.00 |
12.52 |
Avlayakan |
NE 5-7 |
2007 |
A07-2011 |
43.70 |
44.70 |
1.00 |
6.50 |
Avlayakan |
NE 5-7 |
2007 |
A07-2012 |
39.30 |
40.10 |
0.80 |
28.13 |
Avlayakan |
NE 5-7 |
2007 |
A07-2013 |
71.20 |
71.90 |
0.70 |
26.32 |
Avlayakan |
NE 5-7 |
2007 |
A07-2014 |
85.80 |
87.50 |
1.70 |
8.92 |
Avlayakan |
NE 5-7 |
2007 |
A07-2016 |
57.00 |
58.90 |
1.90 |
13.79 |
Avlayakan |
NE 5-7 |
2007 |
A07-2018 |
80.30 |
82.70 |
2.40 |
38.02 |
Avlayakan |
NE 5-7 |
2007 |
A07-2022 |
63.00 |
64.50 |
1.50 |
15.89 |
Avlayakan |
NE 5-7 |
2007 |
A07-2023 |
73.10 |
74.10 |
1.00 |
62.94 |
Avlayakan |
NE 5-7 |
2007 |
A07-2026 |
59.40 |
61.60 |
2.20 |
38.35 |
Avlayakan |
NE 5-7 |
2007 |
A07-2030 |
12.00 |
13.10 |
1.10 |
9.03 |
Avlayakan |
NE 5-7 |
2007 |
A07-2031 |
14.10 |
14.90 |
0.80 |
12.66 |
Avlayakan |
NE 5-7 |
2007 |
A07-2036 |
29.80 |
30.50 |
0.70 |
12.17 |
Avlayakan |
NE 5-7 |
2007 |
A07-2039 |
66.50 |
70.50 |
4.00 |
32.63 |
Avlayakan |
NE 5-7 |
2007 |
A07-2094 |
122.00 |
124.00 |
2.00 |
20.68 |
Mayvachan |
NE 1-4 |
2007 |
A07-2106 |
79.00 |
79.90 |
0.90 |
27.73 |
Mayvachan |
Mayvachan |
2007 |
M07-38 |
24.50 |
40.50 |
16.00 |
5.33 |
|
|
|
incl |
31.50 |
40.50 |
9.00 |
8.20 |
Mayvachan |
Mayvachan |
2007 |
M07-39 |
37.00 |
54.80 |
17.80 |
3.80 |
|
|
|
incl |
49.00 |
34.90 |
6.80 |
7.40 |
Mayvachan |
Mayvachan |
2007 |
M07-40 |
54.00 |
67.50 |
13.50 |
3.20 |
|
|
|
incl |
54.00 |
62.50 |
8.50 |
4.20 |
Mayvachan |
Mayvachan |
2007 |
M07-41 |
41.60 |
58.20 |
16.60 |
5.20 |
|
|
|
incl |
41.60 |
58.20 |
6.60 |
11.30 |
Mayvachan |
Mayvachan |
2007 |
M07-42 |
25.00 |
47.00 |
22.00 |
5.20 |
|
|
|
incl |
25.00 |
31.00 |
6.00 |
14.50 |
Mayvachan |
Mayvachan |
2007 |
M07-43 |
36.00 |
62.00 |
26.00 |
2.80 |
|
|
|
incl |
36.00 |
42.00 |
6.00 |
7.60 |
Mayvachan |
Mayvachan |
2007 |
M07-44 |
51.60 |
72.20 |
20.60 |
2.60 |
|
|
|
incl |
62.60 |
65.90 |
3.30 |
7.10 |
Mayvachan |
Mayvachan |
2007 |
M07-45 |
34.40 |
52.00 |
17.60 |
2.70 |
|
|
|
incl |
41.40 |
49.40 |
8.00 |
4.70 |
Mayvachan |
Mayvachan |
2007 |
M07-46 |
30.00 |
71.00 |
41.00 |
1.10 |
|
|
|
incl |
62.00 |
71.00 |
9.00 |
1.90 |
Mayvachan |
Mayvachan |
2007 |
M07-47 |
17.40 |
56.90 |
39.50 |
2.70 |
|
|
|
incl |
23.40 |
27.40 |
4.00 |
14.10 |
Table provided by Silver Bear Resources Inc.
The reader is cautioned that the results reported above are incomplete as the data obtained from the 2006 to 2007 drilling program is still in the process of being compiled and entered into a computer database. The complete results of the 2006 and 2007 exploration program will be disclosed when they are available.
Sampling
The following historical summary regarding the sampling methods and approach was taken from the 2005 Exploration and Mineral Evaluation report on the Avlayakan and Kirankan deposits by A.S. Katella et al.
Sampling was conducted on all of the trenches excavated and drill holes undertaken during the course of the exploration program. The main sampling methods were aimed at determinating the grades for gold, silver, and any associated minerals.
Channel sampling was the main type of trench sampling. Sampling was performed on the entire range of mineralized rock types accessed by the trenches, as well as across the entire width of the wallrock alteration. The mineralized zones and metasomatically altered intervals of various compositions were sampled separately using channel samples ranging from 0.3 m to 1.4 m long. For narrow sections tear sampling was used to sample the veins. Tear sampling is sampling conducted along the strike of a narrow zone (less than 30 cm) in order to acquire enough material to accurately factor the grade over the narrow widths involved. The sections of the trenches, which were channel sampled were 5 cm deep by 10 cm wide, averaged 1.0 m in length and contained an estimated volume of 0.005 m3. The estimated sample weight, with a sample bulk density of 2.5 t/m3, is 12.5 kg. A total of 1,130 channel samples were collected which represented a total sample length of 1,095.1 m, comprised of 642.7 m and 452.4 m for the Avlayakan and Kirankan deposits, respectively.
Channels were sampled on the centre line of the preliminarily evened out and cleaned up bedding for the entire trench length. For the intervals of unaltered and poorly altered rocks, where no channel sampling was conducted, rock chip samples were collected. Sampling interval length in the case of rock chips varied from 1.5 m to 5.0 m, with each lithological type sampled separately. The samples were collected using chisels, pick axes and rock hammers.
The main type of borehole sampling was core drilling. The standard drilling diameter (for over 90% of the samples) was 76 mm (diamond drilling core diameter in this case is 58 mm). For the remaining samples the drilling diameter was 112 mm.
Core samples consisted of half the core that was sawn along the long axis by means of a splitter with a diamond disk. The length of the core sample interval varied from 0.3 m to 1.3 m and each lithological type of either the mineralized rock or altered rock was sampled separately. The average core sample was 1 m in length and, with a bulk density of 2.5 t/m3, weighed approximately 3.3 kg.
The remaining half of the core is stored as a duplicate in the core house at the sample site. A total of 2,202 core samples were collected which totalled a length of 2,124.5 m, including 1,721 samples (1,638.8 m) and 481 samples (485.7 m) for the Avlayakan and Kirankan deposits, respectively.
Samples collected in 2006 and 2007 were tested at a new analytical facility built by Avlayakan Mines for such purpose.
Sample Security and Analysis
The following historical summary regarding the sample preparation, analysis and security procedures was taken from the 2005 Exploration and Mineral Evaluation report on the Avlayakan and Kirankan deposits prepared by A.S. Katella et al.
A metallurgical sample was collected of the mineralization from the Northeastern zone of the Avlayakan deposit, weighing 4.0 t, and forwarded to Irgiredmet. The sample was collected from channel No. 517 over the 29.5 m to 37.4 m interval by tear sampling over the entire bed of the channel.
DalGeoPhysics in Khabarovsk performed the analysis on all of the samples. All the channel, core and chip (geochemical) samples were subjected to spectral semi-quantitative analysis for gold, silver and associated elements: lead, zinc, copper, tungsten, molybdenum, bismuth, arsenic. Spectral analysis (ICP-MS technique) for silver and associated elements was performed, while spectral analysis for gold was conducted with a preliminary chemical concentration.
Samples with gold grading above 0.4 g/t were assayed by DalGeoPhysics using the fire assay method which is the basic technique used for determining the quantitative characteristics of mineralization containing gold and silver.
Internal quality control procedures were monitored and implemented at the laboratory in accordance with generally accepted methods (V.P. Volarovich, 1986). Based on average and control tests for each grade class, a root-mean-squared error for a singular test (S) was calculated. Comparison of calculated values for the relative root-mean-squared error has been carried out using the limiting values referred to in the Instruction of the Russian State Reserve Committee relating to mineral classification of the ores with gold in sulphides and quartz (gold grains up to 0.6 mm in size). According to the Russian reports no significant discrepancies were detected.
Mineral Resources
As discussed in above, some documentation exists for the historical resource estimates on the various properties within the Avlayakan Project. However, as exploration progresses, further economic and technical evaluation of the resources will need to be performed in accordance with the CIM guidelines as referred to in NI 43-101.
Silver Bear has used its access to the original exploration reports and Vostok's database to conduct a re-estimate of the resources for the Avlayakan and Kirankhan deposits.
Silver Bear conducted the resource estimates on the properties within the Avlayakan Project from first principles, using both the historical database and the results of Vostok's 2000 to 2005 exploration programs, to comply with the current CIM standards and definitions for estimating resources and reserves as required by NI 43-101.
Dinara Nussipakynova, a contract geologist employed by Silver Bear, performed the modeling work and block model construction for the Silver Bear resource estimates. The block model and the parameters used in its construction were audited and approved by Mr. William J. Lewis B.Sc., P.Geo., a Senior Geologist with Micon.
Silver Bear has estimated the mineral resources in this report in accordance with the definitions contained in the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines that were prepared by the CIM Standing Committee on Reserve Definitions, adopted by the CIM Council on August 20, 2000 and updated on December 11, 2005. Micon has audited Silver Bear's resource estimate and agrees that the resource estimate was conducted in accordance with the CIM definitions as published.
The mineral resources comprise all blocks that are included within the respective 3-dimensional domain outlines that contained estimated gold values greater than the cut-off grade of 1.0 g/t Au. These mineral resources are exclusive of any internal dilution.
Silver Bear Resource Estimate for the Avlayakan Project
| Property |
Zone |
Category |
Tonnage |
Gold Grade g/t |
Silver Grade g/t |
Avlayakan |
Central |
Indicated |
101,000 |
20.30 |
81.02 |
NE 5 to 7 Blocks |
Indicated |
78,000 |
12.99 |
139.95 |
Total |
|
Indicated |
179,000 |
17.13 |
106.61 |
Avlayakan |
Central |
Inferred |
71,000 |
6.11 |
12.61 |
NE 1 to 4 Blocks |
Inferred |
217,000 |
11.32 |
48.16 |
NE 5 to 7 Blocks |
Inferred |
293,000 |
10.94 |
88.85 |
Kirankan |
Basovy |
Inferred |
50,000 |
6.84 |
8.06 |
Tock |
Inferred |
151,000 |
4.76 |
10.15 |
Mayvachan |
Zhylnaya |
Inferred |
322,000 |
8.29 |
78.66 |
Total |
|
Inferred |
1,104,000 |
8.90 |
58.53 |
Exploration and Development
Silver Bear has acquired all of the available exploration reports and data for the Avlayakan Project and has spent time reviewing and compiling the previous exploration data in order to identify the best targets upon which to base future exploration programs. Silver Bear has also used the Russian database it obtained to undertake a review of the previous Russian resource estimates for the Avlayakan Project with the intent of bringing the estimates into compliance with the CIM standards necessary under NI 43-101 reporting standards.
Silver Bear intends to update the resource estimate in 2008 and initiate a feasibility study on the project to gain a better understanding of project economics. Silver Bear is also budgeting additional exploration in 2008 to identify additional mineralization outside of the currently identified areas.
The table below summarizes the proposed budget for 2008 for the Avlayakan Project (on a 100% basis for both joint venture partners). At this time, Silver Bear is not planning significant investment in the project in 2009.
Avlayakan Project 2008 Budget
| Details |
Units |
Costs |
| 2008 |
| Exploration |
|
$1,800,000 |
| Feasibility Study |
|
$300,000 |
| Metallurgical Studies |
|
$200,000 |
| Resource Estimate |
|
$125,000 |
| Russian Technical Report |
|
$125,000 |
| Total 2008 |
|
$2,550,000 |
|
| |
